M/s. Alidhara Texspin Engineers, Dadra V. The CIT, Valsad

ITA 1309/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94543 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SHAH
• Assessee Lawyers: RASESH SHAH
• Keywords: Opportunity of being heard; Period of limitation; Capital expenditure
• Section: 143(3); 80IB; 263

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.1309/AHD/2011 AND ITA NO.192/AHD/2013 / ASSTT. YEAR: 2006-2007 M/S.ALIDHRA TEXSPIN ENGINEERS PLOT NO.2, GROUND FLOOR VAGHDHARA ROAD DADRA. PAN : AAIFA 2434 N VS CIT, VALSAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI RASESH SHAH REVENUE BY : SHRI JAGDISH SHAH, CIT-DR ! / DATE OF HEARING : 13/10/2015 '#$ ! / DATE OF PRONOUNCEMENT: 14/10/2015 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANC E OF THE ASSESSEE. THE ITA NO.1309/AHD/2011 IS AGAINST THE ORDER OF THE LD.CIT DATED 28.3.2011 PASSED U/S.263 FOR THE ASSTT.YEAR 2 006-07, WHEREAS ITA NO.192/AHD/2013 IS AGAINST THE ORDER OF THE CIT (A) DATED 16.10.2012 PASSED IN THE ASSTT.YEAR 2006-07. THIS APPEAL EMERGES OUT FROM AN ASSESSMENT ORDER PASSED UNDER SECTION 143(3 ) ON 22.12.2011 IN PURSUANCE OF THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT PASSED BY THE CIT. FIRST WE TAKE UP THE APPEAL NO.1 309/AHD/2011. ITA NO.1309/AHD/2011 (2 APPEALS) 2 3. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT HAS ERRED IN TAKING COGNIZANCE UNDER SECTION 263 OF THE INCOME T AX ACT, AND THEREBY REVISING THE ASSESSMENT ORDER DATED 26.12.2 008 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS MANUFACTURING TEXTILE MACHINERY. IT HAS FILED ITS R ETURN OF INCOME ON 31.10.2006 DECLARING AN INCOME OF RS.19,35,980/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE H AS RETURNED A TURNOVER OF RS.51,11,51,292/- AND DECLARED A GROSS PROFIT OF RS.20,35,17,154/- WHICH IS 39.82% OF THE TURNOVER. THE ASSESSEE HAS CLAIMED EXEMPTION AT THE RATE OF 100% UNDER SECTION 80IB OF THE INCOME TAX ACT. THE LD.AO WAS OF THE VIEW THAT THE GP RATE DISCLOSED BY THE ASSESSEE AT THE RATE OF 39.82% OF THE TURNOV ER IS NOT IN CONSONANCE WITH THE RESULTS DECLARED BY THE SIMILAR LY SITUATED ASSESSEE IN THIS LINE OF BUSINESS. THEREFORE, HE CONDUCTED AN INQUIRY AND ULTIMATELY ARRIVED AT A CONCLUSION THAT THE GP IN T HE CASE OF THE ASSESSEE, AT THE MOST, CAN BE AT 30%. THE LD.AO HA S NOT DISPUTED THE ADMISSIBILITY OF DEDUCTION UNDER SECTION 80IB OF TH E ACT. HIS ONLY QUARREL WAS WITH REGARD TO THE QUANTIFICATION OF TH E DEDUCTION AFTER CALCULATING THE GP BY ADOPTING THE RATE OF 30%, HE REWORKED OUT THE EXEMPTION ADMISSIBLE TO THE ASSESSEE UNDER SECTION 80IB. THE WORKING OF THE AO NARRATING THE DEDUCTION UNDER SECTION 80I B READS AS UNDER: 30. THEREFORE, DEDUCTION UNDER SECTION 80IB IS CAL CULATED AS UNDER: NET PROFIT AS PER P&L ACCOUNT RS.20,58,48,748 LESS: GP SHOWN BY THE ASSESSEE RS.0,35,17,154 ADD: GP CALCULATED @30% (0.30 X 511131389-TOTAL SALES+LABOUR CHARGES) RS.15,33,39,417/- LESS: BANK FD INTEREST RS. 23,13,322/- ITA NO.1309/AHD/2011 (2 APPEALS) 3 TOTAL RS.15,33,57,689/- ASSESSEE HAS CONCEALED PARTICULARS OF INCOME/FURNIS HED INACCURATE PARTICULARS OF INCOME BY CLAIMING HIGHER DEDUCTION, PENALTY PROCEEDINGS U/S271(1)(C) ARE INITIATED. 31. SUBJECT TO THE ABOVE REMARKS, INCOME OF THE ASS ESSEE IS COMPUTED AS UNDER: NET PROFIT AS PER P&L ACCOUNT RS.20,58,48,748/- LESS: (I) DEDUCTION ADMISSIBLE U/S.40(4) FOR A.Y.2005-06 AS PER ROI RS. 3,77,344/- (II) DEDUCTION U/S.80IB, AS DISCUSSED IN PARA 30 RS.15,33,57,689/- TAXABLE INCOME R S .5,21,13,715/- 5. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE, THE LD.FIRST APPELLATE AUTHORITY HAS UPHELD THE CLAIM O F THE ASSESSEE FOR GRANT OF EXEMPTION UNDER SECTION 80IB AT RS.20,35,1 7,154/-. APPEAL OF THE REVENUE AGAINST THE ORDER OF THE CIT(A) WAS DIS MISSED BY THE ITAT. QUA THIS FACT, THERE WAS NO DISPUTE BETWEEN THE PARTIE S 6. AFTER GOING THROUGH THE RECORD, THE LD.COMMISSIO NER HARBOURED A BELIEF THAT IN THE CLAIM MADE FOR THE PURPOSE OF EX EMPTION UNDER SECTION 80IB, THE ASSESSEE HAS INCLUDED THE FOLLOWI NG ITEMS ON WHICH 80IB IS NOT ADMISSIBLE: I) F.D. (BOB) 16,03,107/- II) DUTY DRAWBACK 36,76,140/- III) FD INTEREST (OTHER BANK) 7,10,215/- TOTAL 59,89,462/- 7. AFTER HEARING THE ASSESSEE, THE LD. COMMISSIONER HAS HELD THAT THE EXEMPTION UNDER SECTION 80IB WILL NOT ADMISSIBL E ON THE DUTY DRAW ITA NO.1309/AHD/2011 (2 APPEALS) 4 BACK INCOME OF RS.36,76,140/- BECAUSE IT WAS NOT DE RIVED FROM UNDERTAKING. SIMILARLY, HE OPINED FOR EXCLUSION OF INTEREST INCOME OF RS.3,77,342/- ALSO, BUT THE LD.COMMISSIONER HAS SET ASIDE THE ASSESSMENT ORDER WITH DIRECTION THAT THESE ISSUES B E RE-ADJUDICATED BY THE AO AS PER THE LAW. 8. THE LD.COUNSEL WHILE IMPUGNING THE ORDER OF THE LD.COMMISSIONER RAISED THREE FOLD SUBMISSIONS. HE CONTENDED THAT N O-DOUBT THE HONBLE SUPREME COURT HAS CONSTRUED IN THE JUDGMENT OF LIBE RTY INDIA VS. CIT, 317 ITR 218 (SC) THE EXPRESSION PROFITS DERIVED FR OM INDUSTRIAL UNDERTAKING AND EXPLAINED THAT DUTY DRAW BACK AND DEPB CANNOT BE TREATED AS DERIVED FROM INDUSTRIAL UNDERTAKING, BEC AUSE THESE ARE THE RECEIPTS WHICH ARE BEING RECEIVED BY THE ASSESSEE U NDER THE INCENTIVE PROVISIONS. THERE IS NO DIRECT NEXUS WITH THE INDU STRIAL UNDERTAKING FOR EARNING THESE RECEIPTS. HE ADMITTED THAT ON MERITS THE ASSESSEE CANNOT CLAIM A DEDUCTION UNDER SECTION 80IB ON THE DUTY DR AW BACK. HOWEVER, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN THE AO HAS DECIDED THIS ISSUE, THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT WAS IN FAVOUR OF THE ASSESSEE, IN THE CASE OF CIT VS. INDI A GELATINE & CHEMICALS LTD., REPORTED IN 275 ITR 284 (GUJ). THE LD.AO HAS ADOPTED ONE OF THE POSSIBLE VIEWS AVAILABLE AT THAT POINT O F TIME. THUS, HE HAS NOT COMMITTED ANY ERROR OF LAW OR ON FACTS, WHEN HE PASSED THE ASSESSMENT ORDER. IN HIS SECOND FOLD OF SUBMISSION S, HE CONTENDED THAT THE AO HAS RESTRICTED THE EXEMPTION ADMISSIBLE UNDE R SECTION 80IB TO RS.15,33,57,689/-. THE ASSESSEE TOOK THIS MATTER I N APPEAL BEFORE THE CIT(A), ON THIS COMMON ISSUE, AND THE LD.FIRST APPE LLATE AUTHORITY HAS APPLIED HIS MIND IMPLIEDLY ON THE COMPLETE ISSUE. THEREFORE, AS PER EXPLANATION (C) OF SECTION 263, THIS ISSUE MERGED WITH THE ORDER OF THE CIT(A). THE LD.CIT WHILE EXERCISING POWER UNDER SE CTION 263 CANNOT TAKE SUCH ISSUE. FOR BUTTRESSING HIS CONTENTIONS, HE RELIED UPON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT R ENDERED IN THE CASE OF CIT VS. SHASHTRI THEATRE PVT. LTD., 248 ITR 126 (GUJ). HE PLACED ON ITA NO.1309/AHD/2011 (2 APPEALS) 5 RECORD A COPY OF THE DECISIONS. ON THE STRENGTH OF THIS DECISION, HE CONTENDED THAT ONCE AN ISSUE MERGES WITH THE ORDER OF THE CIT(A), THE LD.CIT CANNOT TAKE COGNIZANCE UNDER SECTION 263 OF THE INCOME TAX ACT. IN HIS THIRD FOLD OF SUBMISSIONS, HE CONTENDED THAT THE AO HAS APPLIED HIS MIND ON THE ISSUE AND FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT. EXPLAINING THE MEANING OF SECTION 80IB, SUBS EQUENT DECISION OF THE HONBLE SUPREME COURT CANNOT BRAND THE ORDER OF THE AO ERRONEOUS WHICH WOULD CAUSE PREJUDICE TO THE INTEREST OF THE REVENUE. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. G.M. MITTAL STAINLESS STEELS P. LTD.,263 ITR 255 (SC). 9. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE CIT. HE PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF CIT VS. PANNA KNITTING INDUSTRIES AS WELL A S THE ORDER OF THE ITAT IN THE CASE OF INTELLINET TECHNOLOGIES INDIA P . LTD. VS. ITO, 5 ITR (TRIB.) 96 (BANG.). 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. SECTION 263 HAS A DIRECT BEA RING ON THE CONTROVERSY, THEREFORE, IT IS PERTINENT TO TAKE NOT E OF THIS SECTION. IT READS AS UNDER:- 263(1) THE COMMISSIONER MAY CALL FOR AND EXAMINE T HE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, I NCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. [EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION,- ITA NO.1309/AHD/2011 (2 APPEALS) 6 (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE- (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-T AX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY TH E JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXE RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS O F AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTIO N 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAY S TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UND ER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTE R OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTI ON SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXT ENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECI DED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL Y EAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CO NSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATIONAL TAX TRIBU NAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.- IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVI NG AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEED ING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. ITA NO.1309/AHD/2011 (2 APPEALS) 7 11. ON A BARE PERUSAL OF THE SUB SECTION-1 WOULD RE VEAL THAT POWERS OF REVISION GRANTED BY SECTION 263 TO THE LEARNED C OMMISSIONER HAVE FOUR COMPARTMENTS. IN THE FIRST PLACE, THE LEARNED COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT. FOR CALLING OF THE RECORD AND EXAMINATION, THE LEARNED COMMISSIONER WAS NOT REQUIRED TO SHOW ANY REASON. IT IS A PART OF HI S ADMINISTRATIVE CONTROL TO CALL FOR THE RECORDS AND EXAMINE THEM. T HE SECOND FEATURE WOULD COME WHEN HE WILL JUDGE AN ORDER PASSED BY AN ASSESSING OFFICER ON CULMINATION OF ANY PROCEEDINGS OR DURING THE PEN DENCY OF THOSE PROCEEDINGS. ON AN ANALYSIS OF THE RECORD AND OF TH E ORDER PASSED BY THE ASSESSING OFFICER, HE FORMED AN OPINION THAT SU CH AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. BY THIS STAGE THE LEARNED COMMISSIONER WAS NOT REQU IRED THE ASSISTANCE OF THE ASSESSEE. THEREAFTER THE THIRD STAGE WOULD C OME. THE LEARNED COMMISSIONER WOULD ISSUE A SHOW CAUSE NOTICE POINTI NG OUT THE REASONS FOR THE FORMATION OF HIS BELIEF THAT ACTION U/S 263 IS REQUIRED ON A PARTICULAR ORDER OF THE ASSESSING OFFICER. AT THIS STAGE THE OPPORTUNITY TO THE ASSESSEE WOULD BE GIVEN. THE LEARNED COMMISSION ER HAS TO CONDUCT AN INQUIRY AS HE MAY DEEM FIT. AFTER HEARING THE AS SESSEE, HE WILL PASS THE ORDER. THIS IS THE 4TH COMPARTMENT OF THIS SECT ION. THE LEARNED COMMISSIONER MAY ANNUL THE ORDER OF THE ASSESSING O FFICER. HE MAY ENHANCE THE ASSESSED INCOME BY MODIFYING THE ORDER. AT THIS STAGE, BEFORE CONSIDERING THE MULTI-FOLD CONTENTIONS OF TH E LD. REPRESENTATIVES, WE DEEM IT PERTINENT TO TAKE NOTE OF THE FUNDAMENTA L TESTS PROPOUNDED IN VARIOUS JUDGMENTS RELEVANT FOR JUDGING THE ACTIO N OF THE CIT TAKEN U/S 263. THE ITAT IN THE CASE OF MRS. KHATIZA S. OO MERBHOY VS. ITO, MUMBAI, 101 TTJ 1095, ANALYZED IN DETAIL VARIOUS AU THORITATIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 AND HAS PROPO UNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF CIT TAKEN UNDER SECTION 263. ITA NO.1309/AHD/2011 (2 APPEALS) 8 (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WI LL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJ UDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE AO HAS ADOP TED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE T WO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WI TH WHICH THE CIT DOES NOT AGREE. IF CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UNDER LAW (VI) IF WHILE MAKING THE ASSESSMENT, THE AO EXAMINE S THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER S 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCO ME IN PLACE OF THE INCOME ESTIMATED BY THE AO. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW A ND ARRIVE AT A CONCLUSION, SUCH CONCLUSION CANNOT BE T ERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEE STRATIFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S. 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFA CTION. (IX) IF THE AO HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND T HE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOWS THE CLAIM ON BEING SATISF IED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN T HAT REGARD. ITA NO.1309/AHD/2011 (2 APPEALS) 9 12. APART FROM THE ABOVE PRINCIPLES, WE DEEM IT APP ROPRIATE TO MAKE REFERENCE TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO REPORTED IN 227 CTR 113 REFER RED BY LD. COUNSEL FOR THE ASSESSEE, AND GEE VEE ENTERPRISES LTD VS. A DDL. COMMISSIONER OF INCOME TAX (99 ITR 375). IN THE CASE OF SUN BEA M AUTO, THE HON'BLE HIGH COURT HAS POINTED OUT A DISTINCTION BE TWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE IS A LACK OF ENQUI RY, THEN THE ASSESSMENT ORDER CAN BE BRANDED AS ERRONEOUS. THE F OLLOWING OBSERVATIONS OF THE HON'BLE DELHI HIGH COURT ARE WO RTH TO NOTE: 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE COUNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE FIRST ISSUE THAT ARISES FOR OUR CONSID ERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME-TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPEC IFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESS MENT ORDER WHICH APPARENTLY DOES NOT GIVE ANY REASONS WH ILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDIT URE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE P RINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF M IND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVE NUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RI GHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF, GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UN DER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS DIFFE RENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY, THAT SUCH A COURSE OF ACTION WOULD BE OPEN. 13. IN THE CASE OF GEE VEE ENTERPRISE VS. COMMISSIO NER OF INCOME TAX REPORTED IN 99 ITR PAGE 375, THE HONBLE COURT HAS EXPOUNDED THE APPROACH OF LD. ASSESSING OFFICER WHILE PASSING ASS ESSMENT ORDER. THE ITA NO.1309/AHD/2011 (2 APPEALS) 10 OBSERVATION OF THE HONBLE COURT ON PAGES 386 OF JO URNAL READ AS UNDER:- IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOM E-TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TA X OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE ST ATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. THE POSITION AND FUNCTION O F THE INCOME-TAX OFFICER IS VERY DIFFIDENT FROM THAT OF A CIVIL COUR T. THE STATEMENT MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDE NCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBU TTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME-TAX OFF ICER IS NOT ONLY ON ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLED FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY IT IS BECAUSE IT IS INCUMBENT ON THE INCOM E-TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MADE SUCH AN INQUIRY PRUDENT THAT THE WORD E RRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN EN QUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT B EEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 14. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. NO DOUBT WHEN THE AO HAS PASSED THE ASSESSMEN T ORDER, THE DEDUCTION UNDER SECTION 80IB WAS ADMISSIBLE TO THE ASSESSEE ON THE DUTY DRAW BACK. THE LD.AO HAS ADOPTED ONE OF THE P OSSIBLE VIEWS AVAILABLE AT THAT POINT OF TIME, BUT THE HONBLE SU PREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) DECIDED ON 31.8.2009 HAS CONSTRUED THE MEANING OF EXPRESSION PROFITS DERIVED FROM INDUSTR IAL UNDERTAKING. THE HONBLE SUPREME COURT HAS EXPLAINED THE MEANING OF THIS EXPRESSION AND HELD THAT EXPRESSION DERIVED HAS A NARROW CONNOTATION. THE DUTY DRAW BACK HAS NOT FIRST DEGR EE NEXUS WITH THE INDUSTRIAL UNDERTAKING. THESE ARE BEING RECEIVED A S INCENTIVE BENEFITS UNDER THE INCENTIVE PROVISIONS. THUS, SUCH AMOUNT CANNOT BE TERMED AS DERIVED FROM INDUSTRIAL UNDERTAKING, AND NOT ELIG IBLE FOR DEDUCTION. AS ITA NO.1309/AHD/2011 (2 APPEALS) 11 FAR AS THIS PROPOSITION OF LAW IS CONCERNED, THERE IS NO DISPUTE BETWEEN THE PARTIES. THE DISPUTE IS, WHAT IS IMPACT OF THI S INTERPRETATION GIVEN BY THE SUPREME COURT SUBSEQUENT TO THE PASSING OF T HE ASSESSMENT ? CAN THIS SUBSEQUENT DECLARATION OF LAW WOULD BRAND THE ASSESSMENT ORDER AS ERRONEOUS BEING PASSED AGAINST THE LEGAL P OSITION OF SECTION 80IB ? THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ONCE THE AO HAS DECIDED AN ISSUE AS PER THE EXISTING LAW, THEN HIS PASSING THE ASSESSMENT ORDER CANNOT BE TERMED AS ERRONEOUS ON A SUBSEQUENT DECLARATION OF LAW BY THE HONBLE SUPREME COURT. W E DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE ASSESSEE, BECAUSE A COURT DECIDED A DISPUTE BETWEEN PARTIES. THE CAUSE CAN INVOLVE DECI SION ON FACTS. IT CAN ALSO INVOLVE A DECISION ON A POINT OF LAW. BOTH MAY HAVE BEARING ON THE ULTIMATE RESULT OF THE CASE. WHEN A COURT INTERPRET S A PROVISION, IT DECIDES AS TO WHAT IS THE MEANING AND EFFECT OF THE WORDS USED BY THE LEGISLATURE. IT IS A DECLARATION REGARDING THE STAT UTE. IN OTHER WORDS, THE JUDGMENT DECLARES AS TO WHAT THE LEGISLATURE HAD SA ID AT THE TIME OF THE PROMULGATION OF THE LAW. THE DECLARATION IS - THIS WAS THE LAW. THIS IS THE LAW. THIS IS HOW THE PROVISION SHALL BE CONSTRU ED. FULL BENCH OF THE PUNJAB AND HARYANA HIGH COURT HAS CONSIDERED THIS A SPECT IN THE CASE OF CIT VS. ARUNA LUTHRA REPORTED IN 170 CTR PAGE 73 . THE SUBSEQUENT DECISION OF THE HONBLE SUPREME COURT JUST ONLY EXP LAINS THE POSITION OF EXISTING LAW ON THE DATE WHEN THIS PROVISION WAS EN ACTED. THE HONBLE SUPREME COURT HAS NOT INTRODUCED ANY NEW PROVISION IN THE ACT, MEANING THEREBY, THE LAW CONSTRUED BY THE HONBLE S UPREME COURT WAS THE LAW WHEN THE AO HAS DECIDED THE ISSUE. IF THE ASSESSMENT IS BEING LOOKED WITH THAT ANGLE, THEN CERTAINLY IT IS ERRONE OUS BECAUSE IT IS PASSED AGAINST THE PROVISIONS OF THE LAW. AS FAR A S CONTENTIONS OF THE LD. COUNSEL OF THE ASSESSEE IS CONCERNED, THAT THIS ISSUE TRAVELLED TO THE FILE OF CIT(A), THEREFORE, IT MERGED WITH THE ORDER OF THE CIT(A). WE FIND THAT IN THE DEDUCTION COMPUTED BY THE AO WHILE GRANTING TO THE ASSESSEE THE AMOUNT OF DUTY DRAW BACK WAS EMBEDDED IN THAT AMOUNT. THE ASSESSEE WAS NOT AGGRIEVED WITH THE COMPUTATION TO THE EXTENT OF ITA NO.1309/AHD/2011 (2 APPEALS) 12 DEDUCTION WAS GRANTED. HIS GRIEVANCE WAS QUA THE DIFFERENCE BETWEEN THE DEDUCTION GRANTED AND CLAIMED BY THE ASSESSEE, THEREFORE, THE ISSUE TRAVELLED TO THE CIT(A) WAS THE AMOUNT ON WHICH DED UCTION WAS NOT GRANTED. ON THE STRENGTH OF THE HONBLE GUJARAT H IGH COURT IN THE CASE OF CIT VS. SHASTRI THEATRE P. LTD. (SUPRA), THE LD. COUNSEL HAS RAISED CONTENTIONS THAT ONCE THERE IS A LINK BETWEEN THE I SSUE, THE CIT(A) IMPLIEDLY LOOKED INTO THIS ASPECT ALSO, WE ARE OF T HE VIEW THAT WHEN THE CIT(A) HAS DECIDED THE APPEAL, THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDI (SUPRA) WAS NOT A VAILABLE, THEREFORE, THE LD. FIRST APPELLATE AUTHORITY HAS NO OCCASION T O LOOK INTO THE CASE WITH THAT ANGLE. THE JUDGMENT OF THE HONBLE SUPRE ME COURT CAME ON 31.8.2009 AND CIT HAS DECIDED THE APPEAL ON 21.5.20 09. THEREFORE, THE LD.COUSNEL FOR THE ASSESSEE CANNOT DRAW ANY BEN EFIT FROM THE DECISION OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SHASHTRI THEATRE PVT. LTD. (SUPRA). THE ITAT IN THE CASE OF INTELLINET TECHNOLOGIES INDIA P. LTD. (SUPRA) HAS TAKEN AN IDE NTICAL VIEW THAT ON THE BASIS OF SUBSEQUENT DECISION OF THE HONBLE SUP REME COURT ACTION UNDER SECTION 263 CAN BE TAKEN. 15. AS FAR AS THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF G.M. MITTAL IS CONCERNED, IN THAT CASE, WHEN CIT TO OK ACTION U/S.263 THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT WAS I N EXISTENCE. IT WAS NOT SET ASIDE BY THE HONBLE SUPREME COURT. THUS, THERE WAS NO FOUNDATION FOR THE CIT TO TAKE ACTION U/S.263. IN THE PRESENT CASE, CIT ISSUED NOTICE AFTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY SHOES (SUPRA). 16. ON DUE CONSIDERATION OF ALL THESE FACTS AND CIR CUMSTANCES, WE ARE OF THE VIEW THAT THE LD.COMMISSIONER OF INCOME TAX HAS APPRECIATED THE FACTS IN RIGHT PERSPECTIVE WHILE TAKING COGNIZA NCE UNDER SECTION 263 OF THE INCOME TAX ACT. WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. ACCORDINGLY, IT IS DISMISSED. ITA NO.1309/AHD/2011 (2 APPEALS) 13 17. AS FAR AS ITA NO.192/AHD/2013 IS CONCERNED, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE RE LATES TO DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB ON DUTY DRAW BACK A MOUNTING TO RS.36,76,140/-. THIS ISSUE IS SQUARELY COVERED AGA INST THE ASSESSEE BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA LTD. (SUPRA). HENCE, THIS APPEAL IS ALSO DEVOID OF ANY MERIT, AND HENCE DISMISSED. 18. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 14 TH OCTOBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER