Adani Gas Ltd., Ahmedabad V. The Pr. CIT.-1, Ahmedabad

ITA 1252/AHD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9806 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Wholly owned subsidiary; Assessment record; Revised return; Unabsorbed depreciation
• Section: 143(3); 54F; 142(1); 32; 263; 63; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM & SHRI MANISH BORAD, AM. ITA NO. 1252/AHD/2016 ASST. YEAR: 2011-12 ADANI GAS LTD., ADANI HOUSE, NR. MITHAKHALI CIRCLE, NAVRANGPURA, AHMEDABAD. VS. PR. CIT-1, AHMEDABAD. APPELLANT RESPONDENT PAN AAFCA 3788P APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SHRI R. I. PATEL, CIT, DR DATE OF HEARING: 11.11.2016 DATE OF PRONOUNCEMENT: 02/12/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE FOR ASST. YEAR 2011-12 IS DIRECTED AGAINST THE ORDER OF LD. PR.CIT-1, AHMEDABAD, DATED 22/03/2016 ARISING OUT OF ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 30.03.2014 BY DCIT, CIRCLE-1(1)(1), AHMED ABAD. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE IMPUGNED ORDER PASSED BY THE LEARNED PR. CIT U/S. 2 63 OF THE INCOME- TAX ACT, 1961 IS VOID AND DESERVES TO BE CANCELLED, INTER ALIA , FOR THE ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 2 REASON THAT IT HAS BEEN PASSED WITHOUT JURISDICTION AS THE ORIGINAL ASSESSMENT ORDER WHICH IT SOUGHT TO REVISE WAS NEIT HER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LE ARNED PR. CIT OUGHT TO HAVE APPRECIATED, INTER ALIA , (A) THAT IT BEING THE ADMITTED POSITION THAT TH E APPELLANT HAD NEITHER CLAIMED NOR HAD IT BEEN ALLOWED ANY DEPRECIATION ON GOODWILL IN ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10, ITS CLAIM FOR DEPRECIATION IN THE PRESENT ASSESSMENT YEAR ON THE BASIS OF WRITTEN DOWN VALUE ARRIVED AT AFTER CONSIDERING DEPRECIATIO N FOR A.Y. 2010-11 (WHICH WAS THE FIRST YEAR IN WHICH IT HAD CLAIMED D EPRECIATION ON GOODWILL) ALONE HAD BEEN CORRECTLY ALLOWED IN THE O RIGINAL ASSESSMENT ORDER CONSIDERING THAT AS PER THE DEFINITION OF THE EXPRESSION 'WRITTEN DOWN VALUE' CONTAINED IN CLAUSE (G) OF SECTION 43 O NLY SUCH DEPRECIATION AS HAD BEEN ACTUALLY ALLOWED TO AN ASS ESSEE WAS REQUIRED TO BE REDUCED; THAT, THEREFORE, THE ASSESSMENT ORDE R WAS NOT ERRONEOUS AS ASSUMED BY THE LEARNED PR. CIT; (B) THAT HIS PROPOSAL FOR GRANT OF DEPRECIATION ON GOODWILL THIS YEAR ON THE BASIS OF LOWER WRITTEN DOWN VALUE AFTER REDU CING NOTIONAL DEPRECIATION FOR A.Y. 2007-08, 2008-09 AND 2009-10 WAS BOUND TO ENTAIL THE DEPARTMENT HAVING TO ACTUALLY GRANT DEDU CTION FOR DEPRECIATION TO THE APPELLANT IN THE SAID A.Y. 2007 -08, 2008-09 AND 2009-10 WITH A CONSEQUENTIAL REDUCTION IN THE APPEL LANT'S TOTAL INCOME OF THOSE FAR OFF YEARS WITH CORRESPONDING INCREASE IN THE TOTAL INCOME OF THE PRESENT ASSESSMENT YEAR WHICH CANNOT BE IN THE INTERESTS OF THE REVENUE; THAT FURTHER, SINCE UNDER THE SCHEME OF TH E INCOME-TAX ACT, 1961, AGGREGATE DEDUCTION FOR DEPRECIATION CANNOT E XCEED THE COST OF THE ASSET AND ALSO CONSIDERING THE PROVISION OF SEC TION 32(2) FOR CARRY FORWARD OF UNABSORBED DEPRECIATION, EVEN IF FOR THE SAKE OF ARGUMENT ONLY IT WERE ASSUMED THAT THE RATIONALE BEHIND THE LEARNED PR. CIT'S ACTION HAD ANY BASIS FOR REGARDING THE ASSESSMENT O RDER AS ERRONEOUS, IT CANNOT, IN ANY CASE, BE REGARDED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2. WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED PR. CIT HAS GROSSLY ERRED IN ORDERING FOR THE CANCELLATION OF THE ORIGI NAL ASSESSMENT ORDER INSTEAD OF MERELY ISSUING A DIRECTION LIMITED TO RE CONSIDERING ONLY THE APPELLANT'S CLAIM FOR DEPRECIATION ON GOODWILL AS M ADE AND ALLOWED IN THE ORIGINAL ASSESSMENT. ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 3 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND /OR ALTER THE GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING & TRANSP ORTATION OF NATURAL GAS & MANUFACTURING OF COMPRESSED NATURAL G AS (CNG). RETURN OF INCOME WAS FILED ON 19.9.2011 DECLARING T OTAL INCOME OF RS.37.56 CRORES FOLLOWED BY REVISED RETURN FILED ON 25.09.2012 DECLARING TOTAL INCOME AT RS.26.82 CRORES. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. ORDER U/S 143(3) OF THE ACT WA S FRAMED ON 30.3.2014 ASSESSING THE INCOME AT RS.27,33 CRORES. THEREAFTER PRINCIPAL CIT-1, AHMEDABAD INVOKED THE POWERS U/S 2 63 OF THE ACT AND ISSUED NOTICE DATED 7.3.2016 STATING THAT THE A SSESSMENT ORDER U/S 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITH REGARD TO EXCESS DEPRECIATION CLAIMED ON GOODWILL. IN REPLY TO THE NOTICE ASSESSEE SUBMITTED THAT THE ISS UE OF CLAIMING DEPRECIATION ON GOODWILL WAS WELL TAKEN UP BY LD. A SSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND ALL THE DETAILS R ELATING THERETO WERE FURNISHED AND THE CLAIM BY ASSESSEE WAS FOUND TO BE CORRECT BY ASSESSING OFFICER AND THERE WAS FULL APPLICATION OF MIND BY HIM AS HE ADOPTED LEGALLY CORRECT VIEW. 4. HOWEVER, LD. PRINCIPAL CIT DID NOT AGREE TO THE CONTENTIONS OF ASSESSEE AND CANCELLED THE ORDER U/S 143(3) OF THE ACT AND DIRECTED TO MAKE FRESH ASSESSMENT BY OBSERVING AS FOLLOWS :- 3. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE. THE GOODWILL AROSE DUE TO THE DEMERGER OF CITY GAS DIST RIBUTION BUSINESS OF ADANI ENERGY LTD. DEMERGED IN ADANI GAS LTD. (UP) PVT. LTD., AND THE RESULTANT COMPANY I.E. ADANI GAS LTD. PAID CONSIDERATION TO THE DEMERGED COMPANY AND THE DIFFERENCE (RS.33,98,9-0,680/-) BETWEEN ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 4 THE COST OF ASSETS AND THE AMOUNT PAID CONSTITUTED GOODWILL. THE HIGH COURT ORDERED APPOINTED DATE AS 1 ST JANUARY, 2007 WHICH MEANT THAT SCHEME WAS EFFECTIV E FROM APPOINTED DATE, DEPRECIATION ON GOODWILL WAS REQUIRED TO BE A LLOWED FROM A.Y.2007-08 RELEVANT TO PREVIOUS YEAR 2006-07. HOWEVER, THE ASSESSEE CLAIME D DEPRECIATION FROM A.Y.2010-11 WHICH RESULTED IN EXCESS BROUGHT FORWARD OF OPENING WDV O F GOODWILL IN A.Y.2011-12 WITH CONSEQUENT EXCESS ALLOWANCE OF DEPRECIATION. AS DEP RECIATION ALLOWABLE DURING A.Y.2011-12 WAS RS.3,13,66,865/-, HOWEVER, THE ASSESSEE CLAIMED AND WAS ALLOWED DEPRECIATION OF RS.7,43,51,086/- ON GOODWILL, WHICH RESULTED INTO E XCESS ALLOWANCE OF DEPRECIATION OF RS.4,29,84,221/-. APPARENTLY, THE AO HAS FAILED TO APPLY THE PROVISIONS OF THE ACT CORRECTLY AND WITHOUT APPRECIATING FULL FACTS OF THE CASE. HE HAS ALSO FAILED TO EXAMINE AND VERIFY THE CLAIM OF THE ASSESSEE IN THE COURSE OF ASSESSMENT P ROCEEDINGS. LACK OF NECESSARY ENQUIRIES AND VERIFICATION OF FACTS PROPERLY IN ITSELF IS SUF FICIENT TO HOLD THAT THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST S OF THE REVENUE AND IN THE LIGHT OF AMENDED PROVISIONS OF SECTION 263, THE ASSESSMENT ORDER IS LIABLE TO BE CANCELLED/SET-ASIDE. . , . ' :, 4. ACCORDINGLY, IT IS HELD THAT THE ASSESSMENT ORDE R PASSED U/S 143(3) OF THE ACT DATED 30.03.2014 WAS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE. HENCE, THE SAID ASSESSMENT FOR A.Y.2011-12 IS CANCELLED AND THE AO IS DIRECTED TO MAKE FRESH ASSESSMENT OF THE TOTAL INCOME OF THE ASSESSEE AFTER TAKING INTO CONSIDERATION THE ISSUES DISCUSSED ABOVE VIS- A-VIS ALL THE RELEVANT FACTS OF THE CASE FOR THE SA ID ASSESSMENT YEAR AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE AS PER LAW. HE WOULD MA KE NECESSARY VERIFICATION AND ENQUIRIES AS DEEMED FIT, BEFORE COMPLETING THE ASSESSMENT IN THIS CASE. 5. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE VALIEIDITY OF THE ORDER OF PRINCIPA L CIT. 6. LD. AR SUBMITTED THAT IN THE ORIGINAL RETURN OF INCOME FILED ON 19.9.2011 DEPRECIATION WAS CLAIMED AT RS.54,74,19,8 88/-. THEREAFTER THE RETURN WAS REVISED ON 25.09.2012 AND THE FIGURE OF DEPRECIATION INCREASED TO RS.62,17,70,974/-. THIS INCREASE OF DE PRECIATION WAS WITH REGARD TO THE CLAIM OF DEPRECIATION ON W.D.V. OF THE GOODWILL AT RS.29.74 CRORES ON ACCOUNT OF THE JUDGMENT OF HON. SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (2012) 348 ITR 302 (SC)/24 TAXMANN.COM 222 (SC) WHEREIN CLAIM OF ASSESSEE FOR DEPRECIATION ON THE GOODWILL WAS ALLOWED. HEAD NOTE OF THIS JUDGMEN T OF HON. APEX COURT READS AS UNDER :- ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 5 'SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPREDATI ON -ALLOWANCE/RATE OF- ASSESSMENT YEAR 2003-04 - WHETHER 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) - HELD, YES - DURING RELEVANT ASSESSMENT YEAR, ONE 'Y' LTD. AMALGAMATED WITH ASSESSEE-COMPANY - ACCORDING TO ASSESSEE, EXCESS CONSIDERATION PAID BY IT OVER VALUE OF NET ASSETS A CQUIRED OF Y' LTD. AMOUNTED TO GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED -AUTHORITIES BELOW RECORDED A FINDING THAT ASSETS AND LIABILITIES OF T LTD. WERE TRANSFERRED TO ASSESSEE FOR A CONSIDERATION; THAT DIFFERENCE BETWE EN COST OF AN ASSET AND AMOUNT PAID CONSTITUTED GOODWILL AND THAT ASSESSEE- COMPANY IN PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN FORM O F GOODWILL BECAUSE OF WHICH MARKET WORTH OF ASSESSEE-COMPANY STOOD INCREA SED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - WHETHER SINCE REVENUE COULD NOT REBUT FACTUAL FINDINGS RECORDED BY AUTHORITIES BELOW, IMPUGNED OR DER PASSED BY THEM WAS TO BE UPHELD - HELD, YES [PARA 8] [IN FAVOUR OF ASS ESSEE]' 7. ON THE STRENGTH OF THE JUDGMENT OF HON. SUPREME COURT THE ASSESSEE REVISED ITS RETURN OF INCOME ON 25.9.2012 AND CLAIMED DEPRECIATION ON THE W.D.V. OF GOODWILL AS ON 1.4.20 10. THE RETURN WAS REVISED AFTER THE SELECTION OF ASSESSEES CASE FOR SCRUTINY ASSESSMENT VIDE NOTICE U/S 143(2) OF THE ACT DT. 1 ST AUGUST, 2012. 8. LD. AR FURTHER REFERRED TO THE NOTICE U/S 142(1) OF THE ACT DATED 18/10/2013 PLACED AT PAGE NOS.95 TO 97 OF THE PAPE R BOOK IN WHICH AT SL.NO.9 A SPECIFIC QUESTION HAS BEEN ASKED BY AS SESSING OFFICER THAT THIS YEAR, YOU HAVE AMORTIZED GOODWILL. NO SU CH TREATMENT WAS GIVEN LAST YEAR. PL. EXPLAIN THE REASON FOR THIS TR EATMENT DURING THE YEAR. IN REPLY TO THE SAME ASSESSEE SUBMITTED LETT ER DATED 25.12.2013 FILED WITH THE ASSESSING AUTHORITY ON 27 TH DECEMBER, 2013 PLACED AT PAGE 98 OF THE PAPER BOOK WITH A SPECIFIC REPLY ON TREATMENT OF AMORTIZATION OF GOODWILL IN PARA 9 OF THIS LETTE R. FURTHER ASSESSEE VIDE ITS REPLY DATED 1 ST MARCH, 2014 GAVE COMPLETE DETAILS ABOUT THE ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 6 CALCULATION OF DEPRECIATION ON THE GOODWILL IN PARA 13 TO 15 OF THIS LETTER DATED 1 ST MARCH, 2014. LD. AR FURTHER ADDED THAT THE ISSUE O F DEPRECIATION OF GOODWILL HAS BEEN ADJUDICATED BY LD . ASSESSING OFFICER AT LENGTH DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND THERE WAS FULL APPLICATION OF MIND ON HIS PART ON T HIS ISSUE AND HE HAS ADOPTED LEGALLY CORRECT VIEW THAT DEPRECIATION WAS ALLOWABLE WITH REGARD TO THE W.D.V. BROUGHT FORWARD FROM PRECEDING YEAR. IT WAS NOT NECESSARY THAT ALL THE ISSUES WHICH LD. ASSESSING O FFICER DEALT WITH DURING THE COURSE OF ASSESSMENT PROCEEDINGS FIND SO ME DISCUSSION IN THE FINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT. T HEREFORE, LD. PR.CIT HAS ERRED IN INVOKING THE JURISDICTION U/S 263 OF T HE ACT. LD. AR REFERRED AND RELIED THE JUDGMENT OF HON. SUPREME CO URT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CIT 243 ITR 83 AND ALSO THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN THE C ASE OF PR.CIT VS. SHREE PRAKASH BHAGCHAND KHATRI IN TAX APPEAL NOS.17 7 & 178 OF 2016 DATED 29.6.2016. 9. ON THE OTHER HAND, LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDER OF LD. PR.CIT. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. SOLITARY GRIEVANCE OF THE ASSESSE E IS CHALLENGING THE ORDER U/S 263 OF THE ACT PASSED BY LD. PR.CIT B EING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE OBSERVE THAT THE ASSESSEE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF ADANI ENTER PRISE LTD. AND CARRYING ON THE BUSINESS OF CITY GAS DISTRIBUTION(C GD). DURING THE YEAR IT WAS DECIDED THAT THE CGD BUSINESS CARRIED O N BY M/S ADANI ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 7 ENERGY LTD.(A WHOLLY OWNED SUBSIDIARY OF ADANI ENTE RPRISE LTD.) BE DEMERGED AND THE SAME BE VESTED IN THE COMPANY. FOR THIS PURPOSE A SCHEME OF ARRANGEMENT U/S 391 TO 394 OF THE COMPA NIES ACT, 1956 WAS PREPARED AND SUBMITTED TO HON. GUJARAT HIGH COU RT. THE SAME WAS APPROVED BY HON. HIGH COURT ON 19 TH NOVEMBER 2009 AND THE COPY OF THE SAME WAS FILED WITH REGISTRAR OF COMPAN IES ON 10 TH DECEMBER, 2009, THE EFFECTIVE DATE. THE SCHEME OF A RRANGEMENT PROVIDES FOR TRANSFER WITH EFFECT FROM JANUARY 1, 2 007, BEING THE APPOINTED DATE, OF ALL THE ASSETS AND LIABILITIES, THE LEGAL PROCEEDINGS, ALL THE DEPOSITS AND BALANCES, CERTAIN EMPLOYEES AN D RELATED BENEFITS, ALL THE CONTRACTS AND AGREEMENTS IN RELAT ION TO THE GAS DISTRIBUTION BUSINESS TO A DISTINCT IDENTITY TO ADA NI ENERGY (UP) PVT. LTD. NOW KNOWN AS ADANI GAS LTD. THE SCHEME HAS ACC ORDINGLY BEEN GIVEN EFFECT IN BOOKS OF ACCOUNTS. CONSEQUENTLY UPO N GIVING EFFECT TO THE SCHEME AN AMOUNT OF RS.33.99 CRORES WAS PAID TO WARDS GOODWILL WHICH IS DISCLOSED SEPARATELY BUT WAS NOT AMORTIZED IN THE CURRENT FINANCIAL YEAR AS THE ECONOMIC BENEFITS THERE FROM ARE EXPECTED TO ACCRUE OVER A PERIOD OF TIME BASED ON THE FORESEEAB LE LIFE OF THE BUSINESS. FROM THE APPOINTED DATE I.E. 1 ST JANUARY, 2007, ADANI ENERGY LTD. (DEMERGED COMPANY) CONDUCTED THE BUSINE SS OF CGD IN TRUST FOR ADANI GAS LTD. (RESULTING COMPANY) AS PER THE SCHEME AND ACCORDINGLY BALANCES FROM THE APPOINTED DATE TO THE EFFECTIVE DATE WERE TRANSFERRED IN THE RESULTING COMPANY AND THE F IGURES IN THE PREVIOUS YEAR RELEVANT TO THE ASST. YEAR 2010-11 WE RE REGROUPED/READJUSTED. ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 8 11. WE OBSERVE THAT LD. PR. CIT INVOKED HIS POWERS U/S 263 BY ISSUING NOTICE DATED 7.3.2016 STATING FOLLOWING FAC TS :- SCRUTINY OF THE ASSESSMENT RECORDS REVEALED THAT T HE ASSESSEE WHILE FILING ORIGINAL RETURN DID NOT CLAIM DEPRECIATION ON 'GOODWILL', THEREFORE , IT FILE REVISED RETURN AND CLAIMED DEPRECIATION OF RS.7,43,51,086/- ON WDV OF RS.2 9,74,04,345/-. IT WAS FURTHER NOTICED THAT THE GOODWILL AROSE DUE TO THE DEMERGER OF CITY GAS DISTRIBUTION BUSINESS OF ADANI ENERGY LTD. DEMERGED IN ADANI GAS LTD. (UP) PVT. LTD. AS A RESULT OF DEMERG ER, THE RESULTANT COMPANY I.E. ADANI GAS LTD. PAID CONSIDER ATION TO THE DEMERGED COMPANY AND THE DIFFERENCE (RS.33,98,9-0,680/-) BETWEEN THE COS T OF ASSETS AND THE AMOUNT PAID CONSTITUTED GOODWILL. THE ASSESSEE STARTED CLAIMING DEPRECIATION ON GOODWILL AMOUNTING TO RS.33,98,90,680/- FROM A.Y.2010-11 (1/2 OF 25%) AND OPENING WDV IN A.Y.2011-12 WAS WORKED OUT TO RS.29,74,04,345/-. HOWEVER, AS TH E HIGH COURT ORDERED APPOINTED DATED AS I'' JANUARY, 2007 WHICH MEANS THAT SCHEME WAS EFFECTIVE FROM APPOINTED DATE, DEPRECIATION ON GOODWILL WAS REQUIRED TO BE ALLOWED FROM A.Y.2007-08 RELEVANT TO PREVIOUS YEAR 2006-07. HOWEVER, THE ASSESSEE CLAIME D DEPRECIATION FROM A. Y.2010-11 WHICH RESULTED IN EXCESS BROUGHT FORWARD OF OPENING WDV OF GOODWILL IN A.Y.2011-12 WITH CONSEQUENT EXCESS ALLOWANCE OF DEPRECIATION. A S DEPRECIATION ALLOWABLE DURING A.Y.2011-12 WAS RS.3,13,66,865/-, HOWEVER, THE ASSE SSEE CLAIMED AND WAS ALLOWED DEPRECIATION OF RS. 7,43,51,086/- ON GOODWILL, IT R ESULTED INTO EXCESS ALLOWANCE OF DEPRECIATION OFRS.4,29,84,221/-. ' FROM THE ABOVE MENTIONED SHOW CAUSE NOTICE WE OBSER VE THAT LD. PR. CIT WAS OF THE VIEW THAT PURSUANT TO THE DEMERG ER BY HON. JURISDICTIONAL HIGH COURT THE APPOINTED DATE WAS 1. 1.2007. DEPRECIATION ON GOODWILL WAS REQUIRED TO BE ALLOWED FROM ASST. YEAR 2007-08 WHEREAS ASSESSEE STARTED CLAIMING DEPRECIAT ION FROM ASST. YEAR 2010-11 WHICH RESULTED IN EXCESS BROUGHT FORWA RD OF OPENING WDV OF GOODWILL IN ASST. YEAR 2010-11 WITH CONSEQUE NT EXCESS ALLOWANCE OF DEPRECIATION. 12. THE MAIN CONTENTION OF THE ASSESSEE THROUGH THI S APPEAL IS THE VALIDITY OF THE ORDER U/S 263 OF THE ACT. WE FIND T HAT EXPLANATION-2 TO SECTION 263 CONTEMPLATES THAT AN ORDER PASSED BY AS SESSING OFFICER ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 9 SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE IF IN THE OPINION OF PR.CIT/CO MMISSIONER - (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; . (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION, OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WIT H ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY T HE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSE SSEE OR ANY OTHER PERSON. 13. WE FIND THAT CLAUSE (A) OF EXPLANATION-2 TO SEC TION 263 IS RELEVANT TO BE DEALT WITH IN THE GIVEN FACTS OF THE CASE WHICH READS AS TO WHETHER THE ORDER PASSED BY ASSESSING AUTHORITY IS WITHOUT MAKING ANY ENQUIRY OR VERIFICATION RELATING TO ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL. LD. AR HAS SUBMITTED AT LENGTH THAT TH E ISSUE OF CLAIM OF DEPRECIATION ON GOODWILL HAS BEEN EXHAUSTIVELY DEAL T DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE COURSE OF EXAMINATION OF THE FACTS NARRATED BY THE LD. AR WE OBSERVE THAT FO LLOWING EVENTS TOOK PLACE :- A) ORIGINAL RETURN OF INCOME WAS FILED ON 19.9.2011 CLAIMING DEPRECIATION AT RS.54.74 CRORES. B) REVISED RETURN OF INCOME WAS FILED ON 25.9.2012 CLAIMING DEPRECIATION OF RS.62.18 CRORES WHICH INCLUDED DEPR ECIATION OF RS.7,43,51,086/- CLAIMED @ 25% ON THE WDV OF GOODWI LL OF RS.29.74 CRORES. ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 10 C) CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NO TICE U/S 143(2) OF THE ACT WAS ISSUED ON 1.8.2012 FOLLOWED B Y NOTICE U/S 142(1) OF THE ACT WITH QUESTIONNAIRE ON 10.10.2012. DETAILED QUESTIONNAIRE WAS ISSUED ON 18/1-/2013 HAVING 23 QU ESTIONS AND AT QUESTION NO.9 LD. ASSESSING OFFICER HAS ASKE D THAT THIS YEAR YOU HAVE AMORTIZED GOODWILL. NO SUCH TREATMENT WAS GIVEN LAST YEAR. PLEASE EXPLAIN THE REASONS GIVEN I N THIS YEAR. D) REPLY DATED 25.10.2013 WAS SUBMITTED BEFORE DCIT , CIRCLE-1, ON 27.12.2013 AND THE RELEVANT PORTION OF PARA 9 ST ATES AS BELOW:- 9. YOUR GOOD SELF HAS ASKED FOR THE REASON FOR TRE ATMENT OF AMORTIZATION OF GOODWILL AS NO SUCH TREATMENT WAS GIVEN IN THE LAST YEAR. AT THE OUTSET, WE WOULD LIKE TO BRING TO THE NOTICE OF YOUR HONOUR THAT DURING THE YEAR UNDER 2009-10 THE CITY GAS DISTRIBUTION BUSINESS OF ADANI ENERGY LIMITED WAS DEMERGED IN ADANI ENERGY (UP) PVT. LTD AND THERE AFTER NAME OF ADANI ENERGY (UP) PVT. LTD. WAS CHANGED TO ADANI GAS LIMITED. THE ORDER UNDER SECTION 394 OF THE COMPANI ES ACT 1956 WAS PASSED BY THE HON'BLE GUJARAT HIGH COURT ON 9 TH DECEMBER, 2009 WHILE APPOINTED DATE OF ORDER WAS 1 ST JANUARY, 2007. AS RESULT OF THE DEMERGER THE RESULTANT COMPANY I.E. ADANI GAS LTD PAID CONSI DERATION TO THE DEMERGED COMPANY AND THE DIFFERENCE BETWEEN THE COS T OF ASSETS AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT THE ASSESSEE-COMPANY IN THE PROCESS OF DEMERGER HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL. AS PER THE RECENT DECISION OF THE HON'BLE SUPREME C OURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, KOLKATA V. SMIFS SECURI TIES LTD. [2012] 24 TAXMANN.COM 222 (SC) IT WAS HELD AS UNDER- I. SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIATI ON - ALLOWANCE/RATE OF - ASSESSMENT YEAR 2003-04 - WHETH ER 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) - HEL D, YES - DURING RELEVANT ASSESSMENT YEAR, ONE 'V LTD. AMALGAMATED W ITH ASSESSEE- COMPANY - ACCORDING TO ASSESSEE, EXCESS CONSIDERATI ON PAID BY IT OVER VALUE OF NET ASSETS ACQUIRED OF 'Y' LTD. AMOUNTED T O GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED -AUTHORITIES BELOW R ECORDED A FINDING THAT ASSETS AND LIABILITIES OF 'Y' LTD. WERE TRANSF ERRED TO ASSESSEE FOR A CONSIDERATION; THAT DIFFERENCE BETWEEN COST OF AN A SSET AND AMOUNT PAID CONSTITUTED GOODWILL AND THAT ASSESSEE-COMPANY IN P ROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT INFORM OF GOODWILL BECAUSE ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 11 OF WHICH -MARKET WORTH OF ASSESSEE-COMPANY STOOD IN CREASED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - WHETHER SINCE REVENUE, COULD NOT REBUT FACTUAL FINDINGS RECORDED BY AUTHOR ITIES BELOW, IMPUGNED ORDER PASSED BY THEM WAS TO BE UPHELD - HELD, YES [ PARA 8] [IN FAVOUR OF ASSESSEE] II. SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRE CIATION - ALLOWANCE/RATE OF - WHETHER STOCK EXCHANGE MEMBERSH IP CARD IS AN ASSET ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 - HELD, YES [PARA 1] [IN FAVOUR OF ASSESSEE] IN VIEW OF THE ABOVE DECISION, IT HAS TO BE HELD TH AT GOODWILL IS AN ASSET WITHIN THE MEANING OF SECTION 32 AND DEPRECIATION O N 'GOODWILL 1 IS ALLOWABLE UNDER SECTION 32 OF THE IT ACT. BASED ON THE ABOVE DECISION OF THE APEX COURT THE ASSESSEE COMPANY HAS CLAIMED DEP RECIATION ON GOODWILL FOR A.Y. 2011-12 BY WAY OF FILING THE REVISED RETUR N OF INCOME. E) THE REPLY OF ASSESSEE DATED 1.3.2014 IN THE ASSE SSMENT PROCEEDINGS FOR ASST. YEAR 2011-12 ON VARIOUS POINT S, SPECIFICALLY WITH REGARD TO CALCULATION OF DEPRECIA TION ON GOODWILL AS DESIRED BY LD. ASSESSING OFFICER ASSESS EE HAS STATED AS FOLLOWS :- 3. YOUR GOOD SELF HAS ASKED THE ASSESSEE COMPANY T O PROVIDE REASON FOR DIFFERENCE BETWEEN INTANGIBLE ASSETS AS PER AUD IT REPORT AND AS PER REVISED RETURN. IN THIS REGARD, WE WOULD LIKE TO SU BMIT THAT THE DIFFERENCE IS ON ACCOUNT OF INTANGIBLE ASSET BEING GOODWILL. YOUR GOOD SELF WILL OBSERVE THAT GROSS BLOCK OF GOODWILL APPE ARS AT RS.33.99 CRORE IN SCHEDULE 5 OF AUDITED FINANCIAL STATEMENTS. AS P ER REVISED RETURN OF INCOME, OPENING W.D.V. IS SHOWN AT RS.29.74 CRORE. AS STATED IN POINT NO.15 BELOW, GOODWILL V PERTAINS TO AY 2010-11 IN T HE BLOCK OF ADDITIONS AFTER SEPTEMBER I.E. ELIGIBLE FOR DEPRECI ATION AT HALF RATE. ACCORDINGLY, OPENING WDV IS SHOWN AFTER REDUCING DE PRECIATION FOR AY 2010-11 AT THE RATE OF 12.50% (HALF OF 25%). THE SA ME IS REPRODUCED BELOW IN SUMMARISED MANNER FOR YOUR READY REFERENCE . PARTICULARS AMOUNT RS. GROSS BLOCK OF GOODWILL APPEARING IN AUDITED FINANCIAL STATEMENTS 33,98,90,680 DEPRECIATION FOR AY 2010-11 (@ HALF OF 25%) 4,24,86,335 ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 12 OPENING WDV OF INTANGIBLE ASSETS FOR AY 2011-12 29,74,04,345 14. (A) YOUR GOOD SELF HAS SOUGHT DETAILS OF FIXED ASSET SERIAL NO. 605 ALONGWITH EXPLANATION AS TO WHY THE SAME IS ELIGIBL E TO CLAIM DEPRECIATION UNDER THE BLOCK OF ASSETS 'FURNITURE & FIXTURES'. IN THIS REGARD, WE WOULD LIKE TO SUBMIT HEREWITH DETAILS OF FIXED ASSET SERIAL NO. 605 I.E. CANOPY. THE ASSESSEE COMPANY IS ENGAGE D IN THE BUSINESS OF TRADING AND TRANSPORTATION OF NATURAL G AS & MANUFACTURING OF COMPRESSED NATURAL GAS (CNG). AT CNG STATIONS BUILT UP BY THE ASSESSEE COMPANY, CANOPY IS USED AS A ROOF. THE ASS ESSEE COMPANY HAS THEREFORE CONSIDERED THE SAME AS FURNITURE & FI XTURES AND CLAIMED DEPRECIATION @ 10% ON ACTUAL COST. (B) YOUR GOOD SELF HAS SOUGHT PROOF OF SERVICE TAX REVERSAL. IN THIS REGARD, WE WOULD LIKE TO SUBMIT THAT THE ASSESSEE C OMPANY HAS ALREADY SUBMITTED POSTING ENTRIES ALONGWITH NARRATION VIDE POINT 5 OF EARLIER SUBMISSION DATED 25 TH DECEMBER, 2013. (C) YOUR GOOD SELF HAS ASKED THE ASSESSEE COMPANY T O SUBMIT PROOF OF ASSET NO. 474 I.E. DRS (DISTRICT REGULATING STATION ) AT VADAJ AREA IN AHMEDABAD. THE SAID ASSET INCLUDES CAPITAL EXPENDIT URE RELATING TO PERMISSION AND LICENCES EXPENSES FOR LAYING PIPELIN E IN VADAJ AREA, DRS COST, PIPELINE LAYING AND COMMISSIONING OF GAS CONNECTION TO INDUSTRIAL, COMMERCIAL AND RESIDENTIAL CUSTOMERS OF VADAJ AREA, EXPENDITURE DURING CONSTRUCTION PERIOD AND INTEREST ALLOCATION. AS DATA RUNS INTO NUMBER OF PAGES, WE ARE SUBMITTING HEREWI TH THE SAME IN SOFT COPY VIDE ANNEXURE-8. 15. YOUR GOOD SELF HAS SOUGHT EXPLANATION ON ALLOWA BILITY OF DEPRECIATION ON -GOODWILL ALONGWITH REASON WHY THE ENTRY OF THE SAME HAS BEEN PASSED DURING THE YEAR UNDER CONSIDERATION . AT THE OUTSET, WE WOULD LIKE TO SUBMIT THAT IT IS EVIDENT FROM SCHEDU LE 5 OF THE AUDITED FINANCIAL STATEMENTS THAT GOODWILL IS APPEARING AS OPENING BALANCE IN THE BALANCE SHEET AND FURTHER NO ADDITION ON ACCOUN T OF GOODWILL WAS MADE DURING THE YEAR UNDER CONSIDERATION. WE WOULD LIKE TO BRING TO THE NOTICE OF YOUR HONOUR THAT DURING THE ASSESSMENT YE AR 2010-11 THE CITY GAS DISTRIBUTION BUSINESS OF ADANI ENERGY LIMITED W AS DEMERGED IN ADANI ENERGY (UP) PVT. LTD AND THERE AFTER NAME OF ADANI ENERGY (UP) PVT. LTD. WAS CHANGED TO ADANI GAS LIMITED. THE ORD ER UNDER SECTION 394 OF THE COMPANIES ACT 1956 WAS PASSED BY THE HON 'BLE GUJARAT HIGH COURT ON 9 TH DECEMBER, 2009 WHILE APPOINTED DATE OF ORDER WAS 1 ST JANUARY, 2007. AS RESULT OF THE DEMERGER THE RESUL TANT COMPANY I.E. ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 13 ADANI GAS LTD PAID CONSIDERATION TO THE DEMERGED CO MPANY AND THE DIFFERENCE BETWEEN THE COST OF ASSETS AND THE AMOUN T PAID CONSTITUTED GOODWILL AND THAT THE ASSESSEE-COMPANY IN THE PROCE SS OF DEMERGER HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWIL L. THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION ON GOODWILL BY WAY OF REVISING RETURN OF INCOME ON 25 SEPTEMBER, 2012 BASED UPON JUDGEMENT OF APEX COURT IN CASE OF SMIFS SECURITIES LTD [2012] 348 ITR 302 (SC )/24 TAXMANN.COM 222 (SC). HEAD NOTE OF THE SAME READ AS UNDER: 'SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIAT ION - ALLOWANCE/RATE OF -ASSESSMENT YEAR 2003-04 - WHETHE R 'GOODWILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) ~ HEL D, YES - DURING RELEVANT ASSESSMENT YEAR, ONE 'Y' LTD. AMALGAMATED WITH ASSESSEE- COMPANY - ACCORDING TO ASSESSEE, EXCESS CONSIDERATI ON PAID BY IT OVER VALUE OF NET ASSETS ACQUIRED OF 'Y' LTD. AMOUNTED T O GOODWILL ON WHICH DEPRECIATION WAS TO BE ALLOWED - AUTHORITIES BELOW RECORDED A FINDING THAT ASSETS AND LIABILITIES OF 'Y' LTD. WERE TRANSF ERRED TO ASSESSES FOR A CONSIDERATION; THAT DIFFERENCE BETWEEN COST OF AN A SSET AND AMOUNT PAID CONSTITUTED GOODWILL AND THAT ASSESSEE-COMPANY IN PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN FORM O F GOODWILL BECAUSE OF WHICH MARKET WORTH OF ASSESSEE-COMPANY STOOD INC REASED - ACCORDINGLY, ASSESSEE'S CLAIM WAS ALLOWED - WHETHER SINCE REVENUE COULD NOT REBUT FACTUAL FINDINGS RECORDED BY AUTHOR ITIES BELOW, IMPUGNED ORDER PASSED BY THEM WAS TO BE UPHELD - HE LD, YES [PARA 8] [IN FAVOUR OF ASSESSEE]' IN VIEW OF STATED. FACTS AND CASE LAW, CLAIM OF DEP RECIATION ON GOODWILL SHOULD BE ALLOWED. F) ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 30 TH MARCH, 2014. 14. FROM GOING THROUGH THE ABOVE SERIES OF EVENTS F ROM POINT (A) TO (F) PARA-13 ABOVE STARTING FROM FILING OF RETURN TI LL COMPLETION OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, WE OB SERVE THAT ASSESSEE ON THE STRENGTH OF THE JUDGMENT OF HON. AP EX COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (SUPRA), REVI SED ITS RETURN OF INCOME BY CLAIMING DEPRECIATION ON THE WRITTEN DOWN VALUE (WDV) OF GOODWILL PAID TOWARDS ACQUIRING C.G.D. BUSINESS. LD . ASSESSING OFFICER RAISED NECESSARY QUERIES FOR THIS CLAIM AS IT WAS NOT MADE AT ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 14 THE TIME OF FILING OF ORIGINAL RETURN, TO WHICH ASS ESSEE GAVE DETAILED REPLY WITH NECESSARY EVIDENCE. WE ALSO OBSERVE THAT THE ONLY POINT OF LITIGATION BETWEEN THE VIEW TAKEN BY ASSESSING OFFI CER AND THAT OF PR. CIT WAS THAT LD. ASSESSING OFFICER ALLOWED ASSESSEE S CLAIM OF DEPRECIATION ON GOODWILL ON THE WDV CALCULATED BY N OTIONALLY ALLOWING DEPRECIATION FOR ASST. YEAR 2010-11 BECAUS E SCHEME OF DEMERGER WAS APPROVED BY HON. JURISDICTIONAL HIGH C OURT ON 19 TH NOVEMBER, 2009 WHEREAS PR. CIT WAS OF THE VIEW THAT THE SCHEME OF ARRANGEMENT FOR TRANSFER OF ASSETS WAS W.E.F. 1.1.2 007 AND, THEREFORE, WDV OF GOODWILL AS ON 1.4.2011 SHOULD HAVE BEEN CAL CULATED AFTER DEDUCTING NOTIONAL DEPRECIATION FOR ASST. YEAR 2007 -08 TO ASST. YEAR 2010-11 WHICH HAS RESULTED IN EXCESS BROUGHT FORWAR D OF OPENING WDV OF GOODWILL FOR ASST. YEAR 2011-12. WE FIND THA T ASSESSEE HAS BEEN FILING RETURNS FOR LAST MANY YEARS AND EVEN IF FOR THE SAKE OF ARGUMENT IF THE VIEW OF LD. PR.CIT HAD BEEN ADOPTED THEN THE ASSESSEE WOULD HAVE BEEN ABLE TO CLAIM DEPRECIATION IN EARLIER YEARS AND AT THE PLACE OF HIGHER WDV THERE WOULD HAVE BEE N BROUGHT FORWARD LOSS OR THE INCOME OF PREVIOUS ASST. YEARS FROM 2007-08 TO 2010-11 WOULD HAVE BEEN REDUCED BY THE INCREASED DE PRECIATION BUT IN ANY SITUATION IT WOULD NOT HAVE AFFECTED THE REV ENUE ADVERSELY. WE, THEREFORE, FIND THAT AFTER HAVING EXTENSIVE COM MUNICATION ON THIS ASPECT OF CLAIMING DEPRECIATION ON GOODWILL. LD. AS SESSING OFFICER APPLIED HIS MIND AND ACCEPTED ONE OF THE LEGALLY PO SSIBLE VIEWS WHICH WAS ADOPTED UP BY ASSESSEE AND CERTAINLY ONE CANNOT SAY THAT THE ASSESSING OFFICER PASSED THE ORDER WITHOUT MAKI NG ENQUIRIES OR VERIFICATION. ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 15 15. AT THIS JUNCTURE WE FIND IT RELEVANT TO CITE TH E FOLLOWING RATIO OF HON. SUPREME COURT IN THE CASE OF MALABAR INDUSTRIA L COMPANY LTD. VS. CIT (SUPRA) WHICH IN OUR VIEW SQUARELY APPLICAB LE TO THE FACTS OF ASSESSEES CASE:- 'A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICT ION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME- TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS , NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ER RONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIA L TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT . THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAK E OR ERROR COMMITTED BY THE ASSESSING OFFICER; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. 16. FURTHER IN ORDER TO APPRECIATE THE CONTENTIONS OF LD. AR THAT IT IS NOT MANDATORY FOR THE ASSESSING AUTHORITY TO DISCUS S ALL THE ISSUES DEALT DURING THE COURSE OF ASSESSMENT PROCEEDINGS I N HIS ASSESSMENT ORDER THE MATTER WAS DEALT BY HON. JURISDICTIONAL H IGH COURT IN THE CASE OF PR. CIT VS. SHRI PRAKASH BHAGCHAND KHATRI ( SUPRA) WHEREIN HON. HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL QUASHING THE ORDER U/S 263 OF THE ACT BY OBSERVING AS FOLLOWS :- 6. IT CAN THUS BE SEEN THAT THOUGH FINAL ORDER AS SESSMENT WAS SILENT ON THIS ASPECT, THE ASSESSING OFFICE HAD CARRIED OUT INQUIRIES ABOUT THE NATURE OF SALE OF LAND AND ABOUT THE VALIDITY OF TH E ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. LEARNED COU NSEL FOR THE REVENUE HOWEVER SUBMITTED THAT THESE INQUIRIES WERE CONFINE D TO THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT IN THE CONTE XT OF FULFILLING ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 16 CONDITIONS CONTAINED THEREIN AND MAY POSSIBLY HAVE NO RELEVANCE TO THE QUESTION WHETHER THE SALE OF LAND GAVE RISE TO A LO NG TERM CAPITAL GAIN. LOOKING TO THE TENOR OF QUERIES BY THE ASSESSING OF FICE AND DETAILS SUPPLIED BY THE ASSESSEE, WE ARE UNABLE TO ACCEPT S UCH A CONDITION. IN THAT VIEW OF THE MATTER, THE OBSERVATION OF THE TRIBUNAL THAT THE ASSESSING OFFICER HAVING MADE INQUIRIES AND WHEN TWO VIEWS AR E POSSIBLE, REVISIONAL POWERS COULD NOT BE EXERCISED, CALLED FO R NO INTERFERENCE. SINCE WITH RESPECT TO COMPUTATION AND ASSERTIONS OF OTHER ASPECTS OF DEDUCTION UNDER SECTION 54F OF THE ACT, THE TRIBUNAL HAS REMA NDED THE PROCEEDINGS, NOTHING STATED IN THIS ORDER WOULD AFFECT EITHER SI DE IN CONSIDERATIONS OF SUCH CLAIM. 17. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. SUP REME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT (SUPRA) AND THAT OF JURISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS . SHRI PRAKASH BHAGCHAND KHATRI (SUPRA) AND APPRECIATING THE FACTS OF THE CASE WITH SERIES OF EVENTS WHICH TOOK PLACE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS DISCUSSED ABOVE WE ARE OF THE VIEW T HAT AS THE LD. ASSESSING OFFICER HAS ACCEPTED THE ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL ON THE REDUCED W.D.V. AS ON 1/4/2010 AF TER MAKING ENQUIRIES, PROPER VERIFICATION AND APPLICATION OF M IND AND THEREFORE, LD. PR. CIT HAS WRONGLY ASSUMED THE JURISDICTION U/ S 263 OF THE ACT AND THE SAME IS UNCALLED FOR AND UNWARRANTED AND DE SERVES TO BE QUASHED. WE ACCORDINGLY SET ASIDE THE ORDER OF LD. PR. CIT PASSED U/S 263 OF THE ACT AND RESTORE THAT OF THE ASSESSING OF FICER PASSED U/S 143(3) OF THE ACT DATED 30.3.2014. THIS GROUND OF T HE ASSESSEE IS ALLOWED. 21. OTHER GROUNDS ARE OF GENERAL NATURE WHICH NEED NO ADJUDICATION. ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 17 22. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DECEMBER, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 02/12/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1252/ADH/2016 ASST. YEAR 2011-12 18 1. DATE OF DICTATION: 29/11/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 1/12/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 02/12/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: