Shri Jayanth Murthy, Ahmedabad V. The Dy.CIT, Circle-9, Ahmedabad

ITA 1234/AHD/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1536 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Revision of order; Opportunity of being heard; Earning of tax free income; Retrospective amendment; Corroborative evidences; Assessment record
• Section: 143(3); 142(1); 10AA; 263

Judgement Text

I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 1 OF 17 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD B BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND KUL BHARAT JM] I.T.A. NO S . : 870 AND 1234/AHD/14 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 JAYANTH MURTHY .APPELLANT 402, ABHISHEK APARTME NTS 72, BHM SOCIETY, OPP JALRAM MANDIR ELLISBRIDGE, AHMEDABAD 380 006 [PAN: AEZPM797B] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 9, AHMEDABAD . RESPONDENT APPEARANCES BY: S N SOPARKAR FOR THE APPELLANT JAGDISH FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : FEBRUARY 23 , 201 6 DATE OF PRONOUNCING THE ORDER : MAY 20 TH , 201 6 O R D E R PER PRAMOD KUMAR , AM : ITA 870/AHD/14 ASSESSMENT YEAR 2009 - 10 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT CALLS INTO QUESTION CORRECTNESS OF THE ORDER DATED 11 TH MARCH 2014 PASSED BY THE LEARNED COMMISSIONER IN THE MATTER OF REVISION UNDER SECTION 263 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. GRIEVANCE OF THE APPELLANT, IN SHORT, I S THAT THE LEARNED COMMISSIONER HAS ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE . HOWEVER, THE GROUNDS OF APPEAL, AS SET OUT IN THE MEMORANDUM OF APPEAL, ARE AS FOLLOWS: I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 2 OF 17 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ERRED IN INITIATING THE PROCEEDINGS U/S.263 OF THE I.T. ACT SOLELY AND ENTIRELY ON THE BASIS OF CERTAIN ARBITRARY FINDINGS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 31.1.2014 FOR THE ASSE SSMENT YEAR 2011 - 12, COMPLETELY IGNORING THE FACTUAL POSITION PREVAILING IN THE ASSESSMENT YEAR 2010 - 11, WHICH RENDERS HIS ASSUMPTION OF JURISDICTION U/S.263 OF THE I.T. ACT BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEAR NED CIT ERRED IN INITIATING PROCEEDINGS U/S.263 OF THE I.T. ACT ON AN INCORRECT ASSUMPTION THAT THERE WAS NON - APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER WHILE MAKING ASSESSMENT FOR THE ASSESSMENT YEAR 2010 - 11 WITH THE RESULT THAT ASSUMPTION O F JURISDICTION U/S.263 OF THE I.T. ACT IS ALSO BAD IN LAW FOR THIS REASON. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ERRED IN ASSUMING HIS JURISDICTION U/S.263 OF THE I.T. ACT, WHEREAS THE MANDATORY CONDITIONS FOR ASSUMI NG SUCH JURISDICTION ARE TOTALLY ABSENT, WITH THE RESULT THAT THE IMPUGNED ORDER PASSED U/S.263 IS BAD IN LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ERRED IN ARRIVING AT A CONCLUSION WITHOUT ANY BASIS WHATSOEVER TO TH E EFFECT THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ERRED IN CANCELLING THE ASSESSMENT ORDER PA SSED BY THE ASSESSING OFFICER ON 30.10.2012 U/S.143(3) OF THE I.T. ACT AND DIRECTING THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM MA TERIAL ON RECORD, ARE LIKE THIS. THE ASSESSEE HAD FILED HIS RETURN OF INCOME ON 26 TH SEPTEMBER 2009 DECLARING, AFTER CLAIMING EXEMPTION OF RS 66,02,994 UN DER SECTION 10A, A TOTAL INCOME OF RS 21,59,890. THIS INCOME TAX RETURN WAS SUBJECTED TO SCRUTINY ASSESSMENT PROCEEDINGS UNDER SECTION 143(2), AND THE RESULTANT ASSESSMENT, UNDER SECTION I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 3 OF 17 143(3), WAS FINALIZED ON 18 TH OCTOBER 2011. THE MATTER, HOWEVER, DID NOT REST THERE. ON 10 TH FEBRUARY, 2014, LEARNED COMMISSIONER ISSUED A NOTICE TO THE ASSESSEE REQUIRING HIM TO SHOW CAUSE AS TO WHY THE ASSESSMENT SO COMPLETED NOT BE SUBJECTED TO REVISION UNDER SECTION 263, AND, ACCORDINGLY EXEMPTION UNDER SECTION 10A AMOU NTING TO RS 66,02,994 NOT BE WITHDRAWN. THIS SHOW CAUSE NOTICE, INTER ALIA , STATED AS FOLLOWS: IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 26/09/2009 DECLARING THEREIN TOTAL INCOME OF RS.21,59,890/ - . THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY UNDE R CASS AND THE ASSESSMENT WAS FINALIZED U/S.143(3) OF THE IT ACT ON 18/10/2011 DETERMINING THE TOTAL INCOME AT RS.21.59.890/ - . THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS CONSULTANCY INCOME, INCOME FROM HOUSE PROPERTY (BOTH SOP AND LET OUT), INCOME FROM C APITAL GAINS & INCOME FROM OTHER SOURCES. IN THE STATEMENT OF TOTAL INCOME THE ASSESSEE HAS CLAIMED EXEMPTED INCOME OF RS,69,55,661/ - INCLUDING EXEMPTION U/S.10AA OF THE ACT OF RS.66,02,994/ - AND DIVIDEND INCOME FROM MUTUAL FUND AND EQUITY SHARES AT RS.3,5 1,667/ - . 2. ASSESSEE IS PROPRIETOR OF M/S. O.S. PROCESS CONSULTING CLAIMED TO BE OPERATING FROM SEZ UNI T NO.9, KIMBERLY HOUSE, SACHIN GIDC, SURAT. IT IS CONTENDED THAT THE SEZ UNIT DERIVES INCOME FROM THE OVERSEAS CONSULTANCY INCOME WHICH IS CLAIMED AS E XEMPT U/S.10AA OF THE I.T. ACT. ON PERUSAL OF THE AUDITED BALANCE SHEET, P&L A/C AND ITS ENCLOSURES, IT IS SEEN THAT AS PER SCHEDULE - 10 OF THE P & L ACCOUNT, THE ASSESSEE'S GROSS RECEIPTS FROM O.S. PROCESS CONSULTING (SURAT SEZ) IS SHOWN AT RS. 77,225,305/ - . IN THE COMPUTATION OF INCOME, ASSESSEE HAS CLAIMED EXEMPTION U/S.10AA OF THE I.T. ACT OF RS.66,02,994/ - AS COMPUTED IN FORM NO.56F FILED BY THE ASSESSEE. HOWEVER, NO OTHER WORKING FOR THE SAME HAS BEEN INCORPORATED IN THE FORM NO.56F AS TO HOW THE ELIG IBLE PROFIT U/S.10AA OF THE ACT WAS COMPUTED. 3. THE ASSESSMENT PROCEEDINGS WERE FINALIZED U/S.143(3) OF THE ACT BY ACCEPTING THE ASSESSEE'S RETURNED INCOME AND THEREBY ASSESSEE'S CLAIM U/S. 10AA OF THE ACT WAS ACCEPTED AS RETURNED. DURING THE COURSE OF SCRUTINY ASSESSMENT IN ASSESSEE'S CASE FOR A.Y. 2011 - 12, THE DETAILED ENQUIRY AND INVESTIGATIONS CARRIED OUT REVEALED THAT THE ASSESSEE IS AN ENGINEER DOING PROFESSIONAL MANAGEMENT CONSULTANCY SERVICES IN THE FIELD OF MANUFACTURING DOMAIN SPECIFICALLY RELA TED TO LEAN MANUFACTURING I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 4 OF 17 MANAGEMENT'. ASSESSEE IS ALSO DIRECTOR IN KAIZEN INSTITUTE - INDIA AND KAIZEN INSTITUTE - AFRICA, OF WHICH HE IS FOUNDING PARTNER. M/S. KAIZEN INSTITUTE IS A GLOBAL MANAGEMENT CONSULTING FIRM, HEADQUARTERED AT SWITZERLAND AND ASSESSEE IS ALSO ONE OF THE CONSULTANTS OF THIS GROUP, M/S. KAIZEN INSTITUTE (I) PVT. LTD. AND KAIZEN INSTITUTE - AFRICA, ARE ALSO PART OF THE KAIZEN INSTITUTE - GLOBAL AND THE ASSESSEE IS THE WHOLE - TIME DIRECTOR OF THE COMPANY KAIZEN INSTITUTE INDIA PVT. LTD. ALONG WITH MR. VINOD GROVER AND MR. HAMILTON COX. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DETAILS WERE COLLECTED IN RESPECT OF EXISTENCE, OPERATION AND FUNCTIONING OF M/S. O.S. PROCESS CONSULTING STATED TO HAVE BEEN RUNNING FROM 9, KIMBERLY H OUSE, SACHIN GIDC, SURAT, WHICH REVEALED THAT, ASSESSEE WAS ALREADY SHOWING INCOME FROM FOREIGN CONSULTANCY DURING THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEARS 2004 - 05 TO 2006 - 07 I.E. PRIOR TO THE SETTING UP OF THE SEZ UNIT AT SURAT. HENCE, THE B USINESS CLAIMED TO HAVE BEEN CONDUCTED AN EARNING INCOME FROM SUCH FOREIGN CONSULTANCY WAS ALREADY IN EXISTENCE AND HENCE SQUARELY COVERED UNDER THE PROVISIONS OF SECTION 10AA(4)(II) OF THE ACT WHICH LAYS DOWN THAT IT APPLIES TO ANY UNDERTAKING BEING UNIT NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE . FURTHER, IT HAS BEEN DETECTED THAT THE CONSULTANCY SERVICES ARE BEING PROVIDED BY ASSESSEE IN HIS PERSONAL CAPACITY WITHOUT INVOLVEMENT OF ANY INFRASTRUCTURE AT THE SURAT SEZ UNIT. SINCE, ASSESSEE DID NOT CARRY OUT ANY MANUFACTURING ACTIVITY NOR PROVIDED THE CONSULTING SERVICES IN THE FIELD OF LEAN MANUFACTURING MANAGEMENT AT HIS SEZ UNIT, THE ALLEGED RECEIPTS AND INCOME OF THE SAID M/S. O.S. PROCESS CONSULTING FROM OVER SEAS CANNOT BE CONSIDERED TO BE FROM ASSESSEE'S UNIT AT SEZ, - SURAT, ON WHICH HE HAS CLAIMED EXEMPTION U/S.10AA OF THE I.T. ACT. 4. THE ASSESSING OFFICER CONCLUDED WHILE FINALIZING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011 - 12 THAT ASSESSEE WA S IN FACT PROVIDING THE CONSULTANCY SERVICES TO ITS OVERSEAS CLIENT FROM AHMEDABAD TO EARN THE FOREIGN EXCHANGE WHICH HAS BEEN CLAIMED AS EXEMPTION U/S.10AA OF THE I.T. ACT UNDER THE GUISE OF INCOME EARNED THROUGH SEZ ZONE ON ACCOUNT OF THE FOLLOWING FACTS & EVIDENCE GATHERED AFTER MAKING DETAILED INQUIRIES FOR A.Y. 2011 - 12. (I) THE UNIT HAS BEEN ESTABLISHED BY SPLITTING/RECONSTRUCTION OF AN EXI S TING BUSINESS. I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 5 OF 17 (II) THE ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITIES FROM THE SEZ UNIT AND NOT TAKEN ANY GOODS OR PROVIDED SERVICES OUT OF INDIA FROM THE SPECIAL ECONOMIC ZONE .. (III) THE INCOME FROM M/S. KAIZEN INSTITUTE - AFRICA, WHEREIN HE IS A FOUNDER PARTNER AND DIRECTOR AND ROUTED THROUGH THE PROPRIETARY CONCERN OS PROCESS CONSULTING AND CLAIMED EXEMPTION U/S.10AA OF THE ACT, WHICH IS NOT AN ELIGIBLE DEDUCTION. 5. FROM THE FACTS NARRATED ABOVE, IT IS EVIDENT THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S.10AA OF THE I.T. ACT IN RESPECT OF ITS INCOME FROM PROPRIETORSHIP M/S. O.S. PROCESS CON SULTING. SINCE, THE ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE REGARDING ELIGIBILITY OF CLAIM OF DEDUCTION U/S. 10AA OF THE ACT IN LIGHT OF CORRECT FACTS AS AVAILABLE IN THE ASSESSMENT RECORD AND ALLOWED THE SAME WITHOUT MAKING ANY INQUIRY AND COLLECTI NG RELEVANT MATERIAL INFORMATION IN THIS REGARD, AND THEREBY, ACCEPTED YOUR LEGALLY AND FACTUALLY INCORRECT CLAIM U/S. 10AA OF THE ACT AMOUNTING TO RS.66,02,994/ - WHILE COMPUTING THE TAXABLE INCOME. THEREFORE, THE ASSESSMENT ORDER HAS BEEN PASSED BY THE AS SESSING OFFICER ON WRONG ASSUMPTION OF FACTS AND INCORRECT APPLICATION OF LAW AS WELL AS WITHOUT DUE APPLICATION OF MIND. HENCE, THE ABOVE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS 'PREJUDICIAL TO THE INTEREST OF REVENUE'. IN THIS REGARD RELIANCE I S PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT(SC) 243 ITR 83. I, THEREFORE, PROPOSE TO REVISE THE SAID ORDER U/S. 263 OF THE ACT. 6. THEREFORE, PLEASE EXPLAIN WHY THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER I.E. DCIT, CIRCLE - 9, AHMEDABAD FOR A.Y 2009 - 10, SHOULD NOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO REVENUE AND MODIFIED TO THE EXTENT THAT YOUR CLAIM OF DEDUCTION U/S.10AA OF THE ACT AMOUNTING TO RS.66,02,994/ - BE DISALLOWED. 7. YO U ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD IN PERSON ALONG WITH DOCUMENTS AND EVIDENCE JUSTIFYING YOUR SUBMISSION. YOU MAY, IF YOU SO DESIRE, SUBMIT YOUR CONTENTIONS IN WRITING OR THROUGH AN AUTHORIZED REPRESENTATIVE ALSO . 3. THE ASSESSEE DID EX PLAIN THAT THE ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE ASSESSEE, I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 6 OF 17 INASMUCH AS THE ASSESSEE HAD GIVEN ALL THE REQUISITE INFOR MA TION AT THE ASSESSMENT STAGE, IN RESPONSE TO THE REQUISI TIONS OF THE ASSESSING OFFICER, AND THAT THE ASSESSING OFFICER HAD DULY EXAMINED THE SAME . IT WAS SUBMITTED THAT THE RETURN FILED BY THE ASSESSEE WAS DULY ACCOMPANIED BY THE COPIES OF AUDITED ACCOUNTS, TAX AUDIT REPORT AND FURTHER AUDIT CERTIFICATE IN FOR M 56F, WHICH IS SPECIFICALLY FOR THE PURPOSES OF EXEMPTION UNDER SECTION 10AA. IT WAS ALSO SUBMITTED THAT WHEN SCRUTINY ASSESSMENT PROCEEDINGS COMMENCED, VIDE POINT NO. 12 OF THE NOTICE DATED 17 TH JANUARY 2011, THE ASSESSEE WAS SPECIFICALLY REQUIRED TO FUR NISH ALL RELEVANT SUPPORTING EVIDENCES IN RESPECT OF DEDUCTIONS AND EXEMPTIONS. THE ASSESSEE DULY COMPLIED WITH THE REQUISITION IT WAS ALSO SUBMITTED THAT FURTHER TO THE DISCUSSIONS, DURING THE COURSE OF HEARING ON 1 ST MARCH 2011, FURTHER DETAILS IN THIS RESPECT WERE REQUISITIONED, AND THE SAME WERE FURNISHED VIDE LETTER DATED 8 TH MARCH 2011. IN THE DETAILS SO FILED, THE ASSESSEE SUBMITTED ANNUAL PERFORMANCE REPORT FROM SEZ UNIT IN RESPECT OF OS PROCESS CONSULTING, PROPRIETORSHIP CONCERN OF THE ASSESSEE. IN THE SUBSEQUENT HEARINGS, MORE DOCUMENTS, AS REQUISITIONED BY THE ASSESSING OFFICER, WERE FILED, AND THESE DOCUMENTS INCLUDED (I) PROPOSAL FROM KAIZEN INSTITUTE, AFRICA; (II) THE BOND CUM LEGAL UNDERTAKING DATED 7 TH JUNE 2006 EXECUTED ON STAMP PAPER BY T HE ASSESSEE, ON BEHALF OF OS PROCESS CONSULTING, TO THE PRESIDENT OF INDIA - THROUGH THE DEVELOPMENT COMMISSIONER, SURAT SPECIAL ECONOMIC ZONE; AND (III) LETTER DATED 26 TH MAY 2006 FROM THE DEVELOPMENT COMMISSIONER, SEZ, SU R AT. THESE DOCUMENTS WERE FILED UN DER ASSESSEE S LETTER DATE 23 RD AUGUST 2011, WHEREIN IT WAS CLARIFIED THAT ALL THE DETAILS WERE FILED, AS REQUIRED DURING THE PERSONAL HEARING, AND THAT DOCUMENTS DEMONSTRATE THAT OS PROCESS CONSULTING IS AN ENTREPRENEUR UNDER SECTION 2(I) OF THE ACT, AND THAT THE SAME IS QUALIFIED FOR EXEMPTION UNDER SECTION 10AA . IN EFFECT THUS, IT WAS SUBMITTED THAT THE DECISION TO ALLOW EXEMPTION UNDER SECTION 10AA WAS AFTER DUE APPLICATION OF MIND THAT IT CANNOT BE SAID THAT THE ASSESSMENT ORDER WAS WANTING IN TERMS O F VERIFYING THE CLAIM OF THE ASSESSEE. THE ASSESSEE THEN REFERRED TO CERTAIN JUDICIAL PRECEDENTS IN SUPPORT OF THE STAND THAT IF THE ASSESSING OFFICER HAS RAISED QUERIES AND THE ASSESSEE HAS GIVEN THE NECESSARY CLARIFICATIONS, IT COULD NOT BE SAID THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS JUST BECAUSE THERE IS NO ELABORATE DISCUSSIONS, IN RESPECT OF THE SAME, IN THE I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 7 OF 17 ASSESSMENT ORDER. THE FACT THAT THE ASSESSING OFFICER HAS TAKEN A DIFFERENT VIEW IN A SUBSEQUENT ASSESSMENT YEAR DOES NOT, BY ITSELF , RENDER THE DECISION OF THE ASSESSING OFFICER FOR THE EARLIER ASSESSMENT YEARS AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE ASSESSEE, NOR DOES IT MEAN THAT THE FACTS FOR ALL THESE ASSESSMENT YEARS MUST BE THE SAME. ON THE BASIS OF THESE SUBMISSIONS , AS ALSO THE SUBMISSIONS ON MERITS, ASSESSEE URGED THE LEARNED COMMISSIONER TO DROP THE REVIS ION PROCEEDINGS UNDER SECTION 26 3, BUT WITHOUT ANY SUCCESS. LEARNED COMMISSIONER PROCEEDED WITH THE REVISION, AND CONCLUDED AS F OLLOWS: 6. THE SUBMISSION FILED D URING THE COURSE OF PROCEEDINGS U/S. 263 OF THE ACT IS CONSIDERED VIS - - VIS FACTS OF ASSESSEE'S CASE FOR THE YEAR UNDER CONSIDERATION & VARIOUS LEGAL PRONOUNCEMENTS TO DECIDE THE ISSUES INVOLVED AS DISCUSSED HEREUNDER: (I) ASSESSEE FILES THE RETURNS OF I NCOME IN INDIVIDUAL CAPACITY AND IS AN ENGINEER DOING PROFESSIONAL MANAGEMENT CONSULTANCY SERVICES IN THE FIELD OF MANUFACTURING DOMAIN SPECIFICALLY RELATED TO 'LEAN MANUFACTURING MANAGEMENT'. HE IS ALSO FOUNDING MEMBER & DIRECTOR (ALONG WITH MR. VINOD GRO VER AND MR. HAMILTON COX) OF M/S. KAIZEN INSTITUTE (INDIA) PVT. LIMITED AND KAIZEN INSTITUTE - AFRICA, THE OTHER FOUNDING MEMBER, M/S. KAIZEN INSTITUTE IS A GLOBAL MANAGEMENT CONSULTING FIRM, HEADQUARTERED AT SWITZERLAND. IT IS ALSO SEEN THAT ASSESSEE IS AL SO PROVIDING CONSULTANCY SERVICES TO THIS GLOBAL ENTITY. (II) IT IS SEEN THAT ASSESSEE HAD CLAIMED THE DEDUCTION U/S 10AA OF THE ACT IN RESPECT OF INCOME OF HIS PROPRIETORSHIP CONCERN IN THE NAME OF M/S O.S. PROCESS CONSULTING CLAIMED TO BE CARRYING ON THE PROFESSIONAL MANAGEMENT CONSULTANCY SERVICES FROM THE UNIT IN SEZ SURAT. (II) DETAILS COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011 - 12 IN RESPECT OF EXISTENCE, OPERATION AND FUNCTIONING OF ASSESSEE'S SEZ UNIT IN THE NAME OF M /S. O.S. PROCESS CONSULTING REVEALED THAT THE SEZ UNIT HAD BEEN GRANTED LETTER OF APPROVAL ON 10.06.2006 FOR PROVIDING TECHNICAL SERVICES/MANUFACTURING MANAGEMENT RELATED CONSULTING SERVICES - BOTH ON - SITE & OFF - SITE TO CLIENTS IN AFRICA, MIDDLE - EAST AS WELL AS USA & EUROPE. FURTHER, IT IS SEEN - THAT ASSESSEE'S PROFESSIONAL MANAGEMENT CONSULTANCY BUSINESS WAS ALREADY IN EXISTENCE AS REVEALED FROM THE ASSESSEE'S RETURNS & COMPUTATIONS OF I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 8 OF 17 INCOME FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEARS 2004 - 05 TO 2006 - 07 DECLARING THEREIN INCOME FROM PROFESSIONAL MANAGEMENT CONSULTANCY (I.E. PRIOR TO THE SETTING UP OF THE SEZ UNIT AT SURAT). THEREFORE, IT IS CLEAR THAT THE BUSINESS CLAIMED TO BE CARRIED ON FROM SEZ UNIT HAD BEEN ESTABLISHED BY SPLITTING/RECONSTRUCTION OF AN EXISTING BUSINESS AND NO NEW ACTIVITY AS SUCH WAS CARRIED OUT AT THE SEZ UNIT. (III) THE INQUIRIES ALSO REVEALED THAT THE CONSULTANCY SERVICES ARE BEING PROVIDED BY ASSESSEE IN HIS PERSONAL CAPACITY WITHOUT INVOLVEMENT OF ANY INFRASTRUCTURE AT THE SURAT SEZ UNIT WAS ALSO DETECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011 - 12, (IV) FURTHER, ASSESSEE WAS ALSO FOUND TO BE PROVIDING THE CONSULTANCY SERVICES FROM AHMEDABAD ONLY TO ITS OVERSEAS CLIENTS INCLUDING M/S. KAIZEN INSTITU TE - AFRICA, WHEREIN HE IS A FOUNDER PARTNER AND DIRECTOR BUT FOREIGN EXCHANGE RECEIPT FROM THEM WAS ROUTED THROUGH HIS THE PROPRIETARY CONCERN OS PROCESS CONSULTING (SEZ UNIT) ON WHICH HE CLAIMED THE EXEMPTION U/S. 10AA OF THE ACT WHEN IN FACT I T WAS REVEALED THAT ASSESSEE DID NOT CARRY OUT ANY ACTIVITIES FROM THE SEZ UNIT AND NOT TAKEN ANY GOODS OR PROVIDED SERVICES OUT OF INDIA FROM THE SPECIAL ECONOMIC ZONE UNIT. SINCE ASSESSEE'S PROFESSIONAL MANAGEMENT CONSULTANCY BUSINESS WAS CARRIED ON IN HIS PERSONAL CAPACITY, IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION THAT ASSESSEE IN HIS PERSONAL CAPACITY PROVIDED PROFESSIONAL MANAGEMENT SERVICES OF SAME NATURE FROM TWO DIFFERENT PLACES BEING AHMEDABAD & SEZ UNIT AT SURAT. 7. COMING TO ASSESSEE' S SPECIFIC CONTENTIONS THAT COMPLETE DETAILS WITH RESPECT TO ASSESSEE'S CLAIM OF DEDUCTION U/S. 10AA OF THE ACT WAS CALLED FOR BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND FILED BY THE ASSESSEE IN COMPLIANCE TO THE QUERIES RAISE D BY THE ASSESSING OFFICER, IT IS SEEN THAT IN THIS CASE, THE FIRST NOTICE U/S. 142(1) WAS ISSUED ON 25/8/2011 WHEREIN THERE IS NO QUERY RAISED WITH RESPECT TO ASSESSEE'S CLAIM OF DEDUCTION U/S. 10AA OF THE ACT. IN RESPONSE TO THE SAME, VIDE REPLY DATED 0 6/09/2011 VIDE SI. NO.7, IT IS SUBMITTED THAT 'DURING THE YEAR, INCREASE IN CAPITAL WAS RS.1,17,99,783/ - INCLUDING PROFIT FOR THE YEAR AMOUNTING TO RS.1,15,13,731/ - . DETAILS GIVEN IN ANNEXURE - 3.' THE SAID ANNEXURE - 3 FILED IS FOUND TO BE CONTAINING DE TAILS OF INCREASE IN CAPITAL DURING THE YEAR AND DOES NOT CONTAIN ANY CLUE AS TO THE EXEMPT INCOME CLAIMED U/S. 10AA OF THE ACT. IN FACT, THE COMPUTATION OF INCOME FILED WITH THIS SUBMISSION UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION' I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 9 OF 17 SHOWS EXEMP T INCOME OF RS.99,24,054/ - FOR WHICH NO OTHER DETAILS ARE AVAILABLE IN THE SAID COMPUTATION, ALTHOUGH THE EXEMPT INCOME UNDER THE HEAD CAPITAL GAIN IS SPECIFICALLY MENTIONED IN THE COMPUTATION OF INCOME. THE NEXT SUBMISSION FILED BY THE ASSESSEE IS DATED 2 0/01/2012 AND WAS IN CONTINUATION OF THEIR SUBMISSION AGAINST NOTICE U/S. 142(1) OF THE ACT DATED 25/08/2011. THIS SUBMISSION CONTAINED ONLY DETAILS OF CAPITAL CREDITED IN ASSESSEE'S CAPITAL ACCOUNT AND CONFIRMATIONS OF UNSECURED LOANS AND LOANS AND ADVANC ES GRANTED BY THE ASSESSEE. SUBSEQUENTLY, THE CASE WAS TRANSFERRED TO THE DCIT, CIRCLE - 9, AHMEDABAD AND DUE TO CHANGE OF INCUMBENT, ANOTHER NOTICE U/S. 142(1) OF THE ACT WAS ISSUED ON 24/08/2012, WHEREIN NO SPECIFIC DETAILS HAVE BEEN CALLED FOR BY THE ASSE SSING OFFICER. SUBSEQUENT ORDER SHEET ENTRIES DATED 12/09/2012 & 18/09/2012 STATE THAT ASSESSEE'S REPRESENTATIVE ATTENDED AND FILED REMAINING DETAILS AND CASE DISCUSSED. THE ASSESSING OFFICER ISSUED NOTICE U/S. 142(1) DATED 1/10/2012 WHEREIN HE CALLED FOR 'DETAILS OF CLAIM REGARDING EXEMPT INCOME OF RS.99,24,054/ - WITH EVIDENCE . IN RESPONSE, THE ASSESSEE VIDE WRITTEN SUBMISSION DATED 18/10/2012 CONTAINING THE 'DETAILS OF EXEMPT INCOME IN THE FORWARDING LETTER ITSELF GIVING THE TABLE OF TOTAL EXEMPT INCOME AND ITS CONSTITUENTS. THE ENCLOSURES TO THIS WRITTEN SUBMISSION INCLUDED THE ANNUAL PERFORMANCE REPORT OF O.S. PROCESS CONSULTING FOR THE PERIOD APRIL, 2009 TO MARCH, 2010 ALONG WITH STATEMENT OF BILLING FOR CONSULTANCY FEES. THE ORDER SHEET ENTRY DATED 18 /10/2012 REFLECTS THE ENTRY THAT ASSESSEE HAS BEEN ASKED TO SUBMIT COPY OF BANK ACCOUNT OF CITI BANK AND TO PRODUCE COPY OF BILLS AND VOUCHERS. IN RESPONSE, ASSESSEE VIDE WRITTEN SUBMISSION DATED 29/10/2012 FILED DETAILS REGARDING 'EXPENDITURE IN RELATION TO DIVIDEND INCOME, FOREIGN EXCHANGE LOSS WITH ITS ACCOUNTING PROCEDURE AND EXPENDITURE DEBITED TO P & L ACCOUNT WITH JUSTIFICATION FOR THE SAME.' ASSESSEE ALSO STATED THAT HE WAS SUBMITTING BILLS/VOUCHERS/EVIDENCE FOR EXPENDITURE DEBITED TO P & L ACCOUNT SHOWN UNDER SCHEDULE 12 & 13 OF THE BALANCE SHEET WITH COPY OF RELEVANT DETAILED LEDGERS ENCLOSED TO THE WRITTEN SUBMISSION. THE ASSESSMENT ORDER WAS FINALISED ON 30/10/2012 ACCEPTING THE RETURNED INCOME. 8. FROM THE FACTS NARRATED ABOVE, IT IS EVIDENT T HAT THE ASSESSING OFFICER WHILE FINALIZED THE ASSESSMENT ORDER U/S 143{3) OF THE ACT WITHOUT EXAMINING ASSESSEE'S ELIGIBILITY OF CLAIM OF DEDUCTION U/S. 10AA OF THE ACT FOR THE YEAR UNDER CONSIDERATION NOR CARRIED OUT ANY INQUIRY OR CROSS VERIFICATION REGA RDING GENUINENESS OF ASSESSEE'S CLAIM THAT THE SAID CONSULTANCY SERVICES WERE ACTUALLY PROVIDED FROM THE SEZ, SURAT. THEREFORE, THE ASSESSING OFFICER HAS ALLOWED LEGALLY AND FACTUALLY I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 10 OF 17 INCORRECT AND ELIGIBLE CLAIM OF ASSESSEE U/S.10AA OF THE ACT AMOUNTING T O RS.83,69,721/ - WHILE COMPUTING THE TAXABLE INCOME. 9. THEREFORE, THE ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER WITHOUT CARRYING OUT ANY INQUIRY AND CROSS VERIFICATION AND THEREBY MAKING WRONG ASSUMPTION OF FACTS AND INCORRECT APPLICATIO N OF LAW AS WELL AS WITHOUT DUE APPLICATION OF MIND. HENCE, THE ABOVE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS 'PREJUDICIAL TO THE INTEREST OF REVENUE'. IN THIS REGARD RELIANCE IS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABAR I NDUSTRIAL CO. LTD. VS. CIT(SC) 243 ITR 83. I, THEREFORE, PROPOSE TO REVISE THE SAID ORDER U/S. 263 OF THE ACT. 10. THEREFORE, I SET ASIDE THE ORDER DATED 30/10/2012 PASSED U/S. 143 (3) OF THE ACT BY THE ASSESSING OFFICER DCIT, CIRCLE - 9, AHMEDABAD WITH A DIRECTION TO - (I) MAKE INQUIRIES WITH RESPECT TO ASSESSEE'S ACTIVITIES IN THE SEZ UNIT, TO VERIFY GENUINENESS OF THE CLAIM ON THE POINTS MENTIONED IN PARA 6[I) TO 6(IV) AND TO VERIFY ON CLAIM THAT THE FOREIGN EXCHANGE RECEIPTS PERTAINED TO BUSINESS COND UCTED FROM THE SEZ UNIT DURING THE YEAR UNDER CONSIDERATION. (II) TO DISALLOW THE CLAIM OF THE ASSESSEE U/S.10AA OF THE ACT FOR THE YEAR UNDER CONSIDERATION IN CASE, IT IS FOUND ON INQUIRIES (DIRECTED TO BE CARRIED OUT IN POINT (I) ABOVE) THAT ACTUALLY TH E PROFESSIONAL MANAGEMENT CONSULTANCY WAS CARRIED OUT BY THE ASSESSEE INDIVIDUAL IN HIS PERSONAL CAPACITY WITHOUT ANY INVOLVEMENT OF THE SEZ UNIT AND SERVICES PROVIDED / EXPORTED FROM SEZ, SURAT. 4. THE ASSESSEE IS AGGRIE VED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT IT WAS ONLY ON PERSONAL VISIT BY THE ASSESSING OFFICER, DURING THE COURSE OF HIS SC RUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2011 - 12, AND HIS MAKING LOCAL ENQUIRIES FROM THE SECURITY STAFF POSTED AT THE PREMISES, THAT HE I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 11 OF 17 CAME TO THE CONCLUSION AND THAT HE FORMED THE OPINION THAT THE PREMISES HAS NOT BEEN OPENED FOR A LONG TIME AND GIVES A SHABBY LOOK AT THE DOOR AND THAT FROM THE APPEARANCE OF THE LOCK, IT APPEARED THAT THE P REMISES HAS NOT BEEN OPENED FOR A PRETTY LONG PERIOD . AS REGARDS THE ASSESSING OFFICER S INFERENCE THAT THE ASSESSEE CARRIED OUT THE BUSINESS FROM AHMEDABAD, AND NOT SURAT, HE HAS RELIED UPON A LOT OF MATERIAL FROM THE VIRTUAL WORLD AND ON ASSESSEE S WEBSITE. IT IS IN THIS BACKGROUND THAT THE ASSESSING OFFICER HAS DECLINED EXEMPTION UNDER SECTION 10AA FOR THE ASSESSMENT . WHATEVER BE THE MERITS OF HI S T HIS ACTION, WHICH WE MUST NOT COMMENT UPON ANYWAY, IT IS DIFFICULT TO UNDERSTAND AS TO HOW THE ASSESSING OFFICER S ACCEPTING THIS CLAIM, ON THE BASIS OF EXAMINING EVIDENCES ON RECORD IN HIS CHAMBER, CONSTITUTES SOMETHING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE ASSESSEE. WHAT HAS BEEN GATHERED BY THE ASSESSING OFFICER IN A SUBSEQUENT ASSESSMENT YEAR WILL NOT END UP DECIDING THE FACTS FOR THE EARLIER ASSESSMENT YEARS AS WELL. WHEN HE SAYS THAT THIS VISUAL INSPECTION OF THE LOCK, IN THE END OF 20 13, REVEALED THAT THE PREMISES HAS NOT BEEN OPENED FOR A PRETTY LONG PERIOD THERE IS NOTHING TO S UGGEST THAT HE WAS REFERRED TO A PERIOD AS LONG AS FIVE YEARS. IN OTHER WORDS, THE MERE FACT THAT FIVE YEARS LATER, THE OFFICE WAS NOT IN USE, EVEN IF THAT B E SO, DOES NOT ESSENTIALLY MEAN THAT THE OFFICE WAS CLOSED AT THAT POINT OF TIME AS WELL. AS FOR THE INFORMATION GATHERED FROM WEBSITE, THAT TOO IS AN EXCEPTION RATHER THAN RULE , AND AN ASSESSING OFFICER CANNOT BE SAID TO HAVE ACTED IN MANNER ERRONEOUS WHE N HE DOES NOT DO THE WEB RESEARCH OF THE ASSESSEE OR PERSONALLY VISITS THE OFFICE PREMISES FROM WHICH SERVICES ARE SAID TO HAVE BEEN RENDERED. THE ASSESSING OFFICER MAY OR MAY NOT HAVE REACHED THE RIGHT CONCLUSION BUT T HEN HE CANNOT BE SAID TO HAVE ACTED I N AN INAPPROPRIATE MANNER FOR NOT VISITING ASSESSEE S PREMISES AND NOT DOING WEB RESEARCH ON HIM - WHATEVER MAY BE THE WORTH AND LEGAL IMPLICATIONS OF OUTPUT OF SUCH A RESEARCH EITHER. LETS NOT FORGET THAT RIGHT NOW WE ARE ONLY CONCERNED WITH THE QUESTION A S TO WHETHER THE ASSESSING OFFICER S ACTION OF CONDUCTING THE ADEQUATE INQUIRIES , AND NOT CONCLUSION, WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THAT IS NOT EVEN THE CASE OF THE LEARNED COMMISSIONER THAT THE CONCLUSION WERE INCORRECT. HIS CASE IS CONFINED TO THE ADEQUACY OF INQUIRIES HAVING BEEN CONDUCTED, AS IS EVIDENT FROM THE DIRECTIONS GIVEN BY HIM IN THE REVISION ORDER. OF I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 12 OF 17 COURSE, T HERE CAN BE SITUATIONS IN WHICH ASSESSING OFFICER REMAINS PASSIVE ON FACTS WHICH , ON THE VERY FACE OF I T, MUST CALL FOR FURTHER INQUIRY , AND IN SUCH SITUATION, EVEN INERTIA OF THE ASSESSING OFFICER MAY VITIATE THE ORDER RENDERING IT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THAT, HOWEVER, IS NOT THE CASE HERE. HERE IS A CASE IN WHICH A CLAIM WAS MADE BY THE ASSESSEE, WHICH WAS APPARENTLY IN ORDER, AND THE ASSESSING OFFICER, AFTER USUAL VERIFICATION, ACCEPTED THE SAME. AS FOR THE LEARNED COMMISSIONER S OBSERVATION THAT IT IS EVIDENT THAT THE ASSESSING OFFICER WHILE FINALIZED THE ASSES SMENT ORDER U/S 143{3) OF THE ACT WITHOUT EXAMINING ASSESSEE'S ELIGIBILITY OF CLAIM OF DEDUCTION U/S. 10AA OF THE ACT FOR THE YEAR UNDER CONSIDERATION NOR CARRIED OUT ANY INQUIRY OR CROSS VERIFICATION REGARDING GENUINENESS OF ASSESSEE'S CLAIM THAT THE SAID CONSULTANCY SERVICES WERE ACTUALLY PROVIDED FROM THE SEZ , WE ARE UNABLE TO SEE ANY MERITS IN THIS OBSERVATION. THE MATERIAL REGARDING ELIGIBILITY WAS ON RECORD AND THE ASSESSING OFFICER ACCEPTED THE SAME . EVEN TODAY THE LEARNED COMMISSIONER HAS NOT SHOW N AS HOW THIS MATERIAL WAS PRIMA FACIE UNRELIABLE . THE CROSS VERIFICATIONS AND GENUINENESS AS TO WHETHER SERVICES WERE ACTUALLY RENDERED FROM SURAT SEZ ARE NOT, AS A MATTER OF ROUTINE, REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER IN SUCH GREAT DETAIL . HE IS NOT NECESSARILY REQUIRED TO BE SUSPICIOUS OF EVERYTHING AND ALL AVERMENTS MUST BE PROVED TO THE HILT IN PROCEEDINGS BEFORE HIM. THE CORE QUESTION IS WHETHER THE ASSESSING OFFICER REMAINED UNDULY PASSIVE ON THE FACTS WHICH WOULD TRIGGER FURTHER INQUIR IES BY A REASONABLE MAN IN HIS POSITION. IN OUR CONSIDERED VIEW, THAT S NOT THE CASE. AN ENTERPRISING ASSESSING OFFICER , MOTIVATED BY HIS PASSION AND DEEP COMMITMENT, MAY INDEED HAVE DISCOVERED, EVEN IF THAT BE SO, A TAX MISADVENTURE BY AN ASSESSEE , BUT TH AT FACT, EVEN IF CORRECT, DOES NOT MEAN THAT THOSE ASSESSING OFFICER WHO DID NOT DISCOVER THIS MISADVENTURE WERE ACTING IN A MANNER LEADING TO THEIR ORDERS BEING RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ACTION OF THE ASSESSING OFFICER WAS BONAFIDE AND CORRECT AND THE CONCLUSIONS ARRIVED AT BY HIM WERE APPROPRIATE VIS - - VIS MATERIAL BEFORE HIM. THE FACT THAT HE DID NOT VISIT THE ASSESSEE, THAT HE DID NOT VISUALLY EXAMINE THE LOCK TO FIND OUT WHEN WAS IN USE OR NOT , AND PUT ALL TH E AVERMENTS OF THE ASSESSEE ON SCANNER CANNOT BE PUT AGAINST HIM TODAY. HIS ORDER MAY NOT HAVE DISCUSSED THESE I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 13 OF 17 ASPECTS IN GREAT DETAIL BUT THEN AS IS THE SETTLED LEGAL POSITION THE MERE FACT THAT THE ASSESSING OFFICER HAS NOT WRITTEN A DETAILED ORDER ON AN ISSUE, EVEN THOUGH THE DETAILS HAVE BEEN CALLED FOR AND ARE ON RECORD, THE ORDER CANNOT BE TREATED AS ERRONEOUS FOR THE PURPOSE OF SECTION 263. IN THE CASE OF CIT VS GABRIE L & CO LTD [(1993) 203 ITR 188 (BOM)], IT WAS HELD THAT THE ITO IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE IT O ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE ITO CANNOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD . ONCE ALL THE INFORMATION WAS BEFORE THE ASSESSING OFFI CER, HE DULY CONSIDERED THE SAME AND REACHED A CONCLUSION, WITHOUT POINTING OUT ANY FAULT IN THE ACTION OF THE ASSESSING OFFICER - BEYOND VAGUE OBSERVATIONS ABOUT NOT EXAMINING THE MATTER IN MORE DETAIL, THE ASSESSMENT ORDER CANNOT BE SUBJECT TO REVISION. W E ARE NOT, AND CANNOT BE, SITTING IN JUDGMENT OVER WHAT THE ASSESSING OFFICER HAS DONE IN THE ASSESSMENT YEAR 2011 - 12. SUFFICE TO SAY THAT THESE FINDINGS, WHATEVER BE THEIR WORTH AND LEGAL SUSTAINABILITY, CANNOT BE REASON ENOUGH TO HOLD THAT THE ASSESSMENT FOR OTHER ASSESSMENT YEARS, IN WHICH THESE DETAILED INVESTIGATIONS - WHICH ARE SURELY MORE OF AN EXCEPTION RATHER THAN RULE, WERE NOT CARRIED OUT, ARE REQUIRED TO BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THERE IS, HOWEVER, NO THING MORE THAN THESE FINDINGS FOR THE ASSESSMENT YEARS 2011 - 12 WHICH ARE FOUNDATIONAL FOR THE IMPUGNED REVISION ORDER. IN ANY CASE, AS HELD BY HON BLE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT VS AMIT CORP [ (2012) 21 TAXMANN.64 (GUJ)], WHEN, DURING T HE COURSE OF FRAMING OF THE ASSESSMENT, THE ASSESSING OFFICER HAD ACCESS TO ALL THE RECORDS OF THE ASSESSEE, AFTER PURSUING SUCH RECORD THE ASSESSING OFFICER FRAMED THE ASSESSMENT, SUCH ASSESSMENT COULD NOT HAVE BEEN RE - OPENED IN EXERCISE OF REVISION POWER UNDER SECTION 263 OF THE ACT FOR MAKING FURTHER INQUIRIES . THAT PRECISELY IS THE SITUATION BEFORE US. AS REGARDS THE DECISION OF THE COORDINATE BENCH RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, I.E. IN THE CASE OF CROM PTON GREAVES LTD VS CIT [ITA NOS. 1994/MUM/13 AND 2836/MUM/14; ORDER I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 14 OF 17 DATED 1 ST FEBRUARY 2016 ], WHEREIN IT IS HELD THAT THE AMENDMENTS TO SECTION 263, BY INSERTION OF EXPLANATION 2, BY THE FINANCE ACT 2015 ARE RETROSPECTIVE IN EFFECT, WE MAY POINT OUT THAT THE EXPLANATION 2 TO SE CTION 263, WHICH PROVIDES THAT EVEN WHEN AN ORDER IS PASSED WITHOUT MAKING INQUIRIES AND VERIFICATIONS WHICH SHOULD HAVE BEEN, IN THE OPINION OF REVISIONAL AUTHORITY, WILL BE DEEMED TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE , IS SPECIFICALLY STATED TO BE EFFECTIVE FROM 1 ST JUNE 2015. IT IS CLEARLY A PROVISION ADVERSE TO THE INTERESTS OF THE ASSESSEE AND IS SPECIFICALLY STATED TO BE PROSPECTIVE IN EFFECT. WHILE CONSIDERING RETROSPECTIVE APPLICATION OF THIS PROVISION, IT WILL BE USEFUL TO HAVE THE BENEFIT OF GUIDANCE BY A FIVE JUDGE BENCH OF HON BLE SUPREME COURT, IN THE CASE OF CIT VS VATIKA TOWNSHIPS PVT LTD [(2014) 367 ITR 466 (SC)] WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED THAT, OF THE VARIOUS RULES GUIDING HOW LE GISLATION HAS TO BE INTERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTION APPEARS, LEGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE A RETROSPECTIVE OPERATION. THE IDEA BEHIND THE RULE IS THAT A CURRENT LAW SHOULD GOVERN CURRENT ACTIVITIES . LAW PASSED TODAY CANNOT APPLY TO THE EVENTS OF THE PAST. IF WE DO SOMETHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND NOT TOMORROW S BACKWARD ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BED ROCK THAT EV ERY HUMAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY RELYING ON THE EXISTING LAW AND SHOULD NOT FIND THAT HIS PLANS HAVE BEEN RETROSPECTIVELY UPSET. THIS PRINCIPLE OF LAW IS KNOWN AS LEX PROSPICIT NON RESPICIT : LAW LOOKS FORWARD NOT BACKWARD. AS WAS OBSER VED IN PHILLIPS VS. EYRE3, A RETROSPECTIVE LEGISLATION IS CONTRARY TO THE GENERAL PRINCIPLE THAT LEGISLATION BY WHICH THE CONDUCT OF MANKIND IS TO BE REGULATED WHEN INTRODUCED FOR THE FIRST TIME TO DEAL WITH FUTURE ACTS OUGHT NOT TO CHANGE THE CHARACTER OF PAST TRANSACTIONS CARRIED ON UPON THE FAITH OF THE THEN EXISTING LAW. THE OBVIOUS BASIS OF THE PRINCIPLE AGAINST R ETROSPECTIVITY IS THE PRINCIPLE OF 'FAIRNESS , WHICH MUST BE THE BASIS OF EVERY LEGAL RULE AS WAS OBSERVED IN THE DECISION REPORTED IN L OFFI CE CHERIFIEN DES PHOSPHATES V. YAMASHITA - SHINNIHON STEAMSHIP CO.LTD4. THUS, LEGISLATIONS WHICH MODIFIED ACCRUED RIGHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOSE NEW DUTIES OR ATTACH A NEW I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 15 OF 17 DISABILITY HAVE TO BE TREATED AS PROSPECTIVE UNLESS THE LEGISLATIVE INTE NT IS CLEARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT; UNLESS THE LEGISLATION IS FOR PURPOSE OF SUPPLYING AN OBVIOUS OMISSION IN A FORMER LEGISLATION OR TO EXPLAIN A FORMER LEGISLATION . . A LITTLE LATER, HOWEVER , THEIR LORDSHIPS TOU CHED A DIFFERENT CH ORD WHEN DEALING WITH THE PROVISIONS FAVOURABLE TO THE ASSESSEE, AND OBSERVED THAT I)F A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY, AND WHERE TO CONFER SU CH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECT, THEN THE PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT' SUPREME COURT HAS OBSERVED THAT 'THIS (THE FOREGOING ANA LYSIS) EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PROVISIONS AS RETROSPECTIVE'. THEIR LORDSHIPS THEN FURTHER OBSERVED THAT, 'IN GOVERNMENT OF INDIA V. I NDIAN TOBACCO ASSOCIATION [2005 7 SCC 396 ] THE DOCTRINE OF FAIRNESS WAS HELD TO BE RELEVANT FACTOR TO CONSTRUE A STATUTE CONFERRING A BENEFIT, IN THE CONTEXT OF IT TO BE GIVEN A RETROSPECTIVE OPERATION' AND THAT 'THE SAME DOCTRINE OF FAIRNESS, TO HOLD THAT A STATUTE WAS RETROSPECTIVE IN NATURE, WAS APPLIED IN THE CASE OF VIJAY V. STATE OF MAHARASHTRA [ 2006] 6 SCC 286. IT WAS HELD THAT WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WHOLE, EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTIVE IN NATURE .' THEIR LORDSHIPS ALSO NOTED THAT THIS RETROSPECTIVELY BEING ATTACHED TO BENEFIT THE PERSONS, IS SHARP CONTRAST WITH THE PROVISION IMPOSING SOME BURDEN OR LIABILITY WHERE THE PRESUMPTION ATTACHES TOWARDS PROSPECTIVITY. ANALYSING THE LEGAL POSITION SO LAID DOWN BY HON BLE SUPREME COURT, A COORDINATE BENCH OF THIS TRIBUNAL, I N THE CASE OF TOLL GLOBAL FORWARDING INDIA LTD VS DCIT [(2015) 152 ITD 283 (DEL))] , HAS OBSERVED THAT IT MAY APPEAR TO BE SOME KIND OF A DICHOTOMY IN THE TAX LEGISLATION BUT THE WELL - SETTLED LEGAL POSITION IS THAT WHEN A LEGISLATION CONFERS A BENEFIT ON THE TAXPAYER BY RELAXING THE RIGOUR OF PRE - AMENDMENT LAW, AND WHEN SUCH A BENEFIT APPEARS TO HAVE BEEN THE OBJECTIVE PURSUED BY THE LEGISLATURE, IT WOULD A PURPOSIVE INTERPRETATION GIVING IT A RETROSPECTIVE EFFECT BUT WHEN A TAX LEGISLATION IMPOSES A LIABI LITY OR A BURDEN, THE EFFECT OF SUCH A LEGISLATIVE PROVISION CAN ONLY BE PROSPECTIVE . AS I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 16 OF 17 HELD BY A FULL COURT DECISION OF HON BLE AP HIGH COURT, IN THE CASE OF CIT VS B R CONSTRUCTIONS [( 1993) 202 ITR 222 (AP)] , A JUDICIAL PRECEDENT CEASES TO BE A BINDING PRECEDENT WHEN IT IS PASSED PER I N CURIUM I.E. IN IGNORANCE OF A PREVIO US DECISION OF ITS OWN OR OF A CO - ORDINATE JURI SDICTION WHICH COVERED THE ISSUE. THE AMENDMENTS MADE TO SECTION 263 BY THE FINANCE ACT 2015 WILL , THEREFORE, HOLD GOOD ONLY IN RESPECT OF THE REVISION ORDERS ON OR AFTER 1 ST JUNE 2015, WHEREAS THE IMPUGNED REVISION ORDER WAS PASSED ON 11 TH MARCH 2014. AS FOR THE LAW IN FORCE AT THE RELEVANT POINT OF TIME, FOR THE DETAILED REASONS SET OUT EARLIER, THE CASES OF INADEQUATE INQUIRY, EVEN IF THAT BE SO, WILL CONTINUE TO BE OUTSIDE THE AMBIT OF SCOPE OF SECTION 263. 7. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT IT WAS NOT A FIT CASE FOR THE LEARNED COMMISSIONER TO EXERCISE HIS POWERS UNDER SECTION 263 AND SETTING ASIDE THE ASSESSMENT FOR FRESH INQUIRIES ON THE LINES DIRECTED. AS WE HOLD SO, WE MAKE IT CLEAR THAT NOTHING STATED HEREIN SHOULD BE CONSTRUED AS AN OBSERVATION ON MERIT OR ON CORRECTNESS OF OTHER ALTERNATIVES AVAILABL E TO THE ASSESSEE TO DEAL WITH THE COMPLETED ASSESSMENTS. WE ARE ONLY CONCERNED WITH THE CORRECTNESS OF THE REVISION PROCEEDINGS, AND WE FIND THAT THE ASSESSEE HAS A LEGALLY SUSTAINABLE GRIEVANCE ON THAT ISSUE. THE IMPUGNED REVISION ORDER IS THUS VACATED. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ITA 1234/AHD/14 ASSESSMENT YEAR 2010 - 11 9. AS REGARDS THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11, LEARNED REPRESENTATIVES SUBMIT THAT ALL THE MATERIAL FACTS AND CIRCUMSTANCES OF THIS APPEAL IS THE SAME AS FOR THE ASSESSMENT YEAR 2009 - 10 AND FAIRLY AGREE THAT WHATEVER WE DECIDE FOR THE ASSESSMENT YEAR 2009 - 10 WILL BE EQUALLY APPLICABLE IN THIS CASE AS WELL. I.T.A. NOS.: 870 AND 1234/AHD/14 ASSESSMENT YEARS: 2009 - 10 AND 2010 - 11 PAGE 17 OF 17 10. VIDE OUR ORDER ABOVE, WE HAVE QUASHED THE IMPUGNED REVISION ORDER FOR THE ASSESSMENT YEA R 2009 - 10. THE SAME FATE MUST FOLLOW HERE AS WELL. 11. IN THE RESULT, THE APPEAL IS ALLOWED. TO SUM UP, BOTH THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT TO DAY ON 20 TH DAY OF MAY, 2016. SD/ - SD/ - KUL BHARAT PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 20 TH DAY OF MAY, 2016. COPIES TO : (1) THE APPE LLANT (2) THE RESPONDENT (3) D IT (4) DR P (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD