M/s Regma Paper Products, Yanam V. The CIT, Rajahmundry, Rajahmundry

ITA 140/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0302 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Keywords: Revision of order; Depreciation; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA , ACCOUNTANT MEMBER ITA NO.140/VIZAG/2012 ASSESSMENT YEAR : 2007-08 REGMA PAPER PRODUCTS YANAM VS. CIT RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AAHFR 7339C ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI TH. LUCAS PETER, CIT(DR) DATE OF HEARING : 07.09.2015 DATE OF PRONOUNCEMENT : 11.09.2015 ORDER PER SHRI G. MANJUNATHA, ACCOUNTANT MEMBER:- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT, RAJAHMUNDRY DATED 22.3.2012 U/S 263 OF THE INCOME-T AX ACT, 1961 (HEREINAFTER CALLED ACT) FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED AS MANY AS FOUR GROUNDS AND THE ISSUE EVOLVE D FROM THESE GROUNDS OF APPEAL IS WHETHER OR NOT THE ASSESSEE IS ELIGIBLE F OR DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING C ORRUGATED BOXES, FILED RETURN OF INCOME, FOR THE ASSESSMENT YEAR 2007-08 D ECLARING TOTAL INCOME OF RS. NIL AFTER CLAIMING DEDUCTION U/S 80-IB OF THE AC T OF RS.64,52,987/-. THE ASSESSEE IS A SMALL SCALE INDUSTRIAL UNIT SITUATED IN THE BACKWARD AREA OF YANAM, OBTAINED A REGISTRATION CERTIFICATE FROM DIR ECTORATE OF INDUSTRIES AND COMMERCE, GOVERNMENT OF PONDICHERRY VIDE CERTIFICAT E NO.1- 13/IND/104/3631/A5/2004 DATED 21.6.2004 AND AS PER T HE SAID CERTIFICATE, ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 2 THE DATE OF COMMENCEMENT OF PRODUCTION WAS FROM 19. 3.2004. THE CASE WAS SELECTED FOR SCRUTINY AS PER THE BOARD GUIDELINES. IN RESPONSE TO THE NOTICE ISSUED U/S 143(2) OF THE ACT, THE ASSESSEES A.R. S HRI K. BALAJI, ACA APPEARED AND FILED THE DETAILS AS PER THE QUESTIONNAIRE ISSU ED BY THE ASSESSING OFFICER. AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AND ACCEPTS THE CLAIM OF DEDUCTION U/S 80-IB OF THE ACT, WHILE DOING SO, THE A.O. DISALLOWED INTEREST INCOME OF RS.24,946/- AS IT IS NOT ELIGIBLE FOR DED UCTION U/S 80-IB OF THE ACT. 3. THE CIT, RAJAHMUNDRY HAS ISSUED A SHOW-CAUSE NOT ICE U/S 263 OF THE ACT DATED 2.2.2012 PROPOSING REVISION OF ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) DATED 30.12.2009. THE CIT PROPOSED TO REVISE THE ASSESSMENT ORDER, ON THE SOLE REASON THAT THE A .O. HAS ALLOWED DEDUCTION U/S 80-IB OF THE ACT, WHICH WAS OTHERWISE NOT ALLOWA BLE AS PER THE PROVISIONS OF THE ACT. THE CIT WAS OF THE OPINION THAT THE AS SESSEE HAS NOT COMMENCED THE PRODUCTION ON OR BEFORE 31.3.2004 AS STIPULATED U/S 80-IB OF THE ACT, WHICH WAS NOT EXAMINED BY THE A.O., BEFORE ALLOWING DEDUCTION U/S 80-IB OF THE ACT. THE CIT FURTHER OBSERVED THAT MERE PRODUC TION OF A CERTIFICATE FROM ANOTHER GOVERNMENT AGENCY INDICATING THE DATE OF CO MMENCEMENT OF PRODUCTION WOULD NOT BE SUFFICIENT EVIDENCE TO SHOW THAT THE ASSESSEE HAS ACTUALLY COMMENCED PRODUCTION OF GOODS. HE FURTHER OBSERVED THAT ON VERIFICATION OF THE FINANCIAL STATEMENT FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 2004-05, IT APPEARS THAT THERE ARE NO JOB WORK CHARGES EARNED BY THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR AND ASSESSEE ONLY DONE SOME TRADING ACTIVITY WHICH IS EVIDENCED FROM THE PROFIT & LOSS ACCOUNT FILED ALONG WITH RETURN OF INCOME. HE FURTHER, OBS ERVED THAT CLAUSE (IV) OF SUB-SECTION 2 OF SECTION 80-IB OF THE ACT SPECIFIES THAT IN CASE WHERE THE INDUSTRIAL UNDERTAKING MANUFACTURING OR PRODUCING AR TICLES OR THINGS, THE UNDERTAKING EMPLOYS 10 OR MORE WORKERS IN THE MANUF ACTURING PROCESS CARRIED ON WITH THE AID OF POWER OR EMPLOYS 20 OR M ORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITHOUT THE AID OF THE POWER. HOWEVER, ON VERIFICATION OF THE RECORDS FURNISHED BY THE ASSESS EE, IT IS NOTICED THAT THOUGH THE ASSESSEE FURNISHED LIST OF 10 EMPLOYEES, THE CO RRESPONDING SALARY ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 3 EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT, I T APPEARS THAT THERE WAS NO MANUFACTURING ACTIVITY CARRIED ON DURING THE RELEVA NT PERIOD AS SALARY EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT WAS ME AGER. THEREFORE, THE CIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSED U/ S 143(3) DATED 30.12.2009 IS ERRONEOUS ON THE AFOREMENTIONED COUNT S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN TERMS OF THE PROVISIONS OF SECTION 263 OF THE ACT. HENCE, AFTER CONSIDERING THE RELEV ANT SUBMISSIONS MADE BY THE ASSESSEE, THE CIT HAS REVISED THE ASSESSMENT OR DER AND DIRECTED THE ASSESSING OFFICER TO DISALLOW THE CLAIM U/S 80-IB OF THE ACT AND PASS FRESH ASSESSMENT ORDER. AGGRIEVED BY THE CITS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE AUTHORISED REPRESENTATIVE OF THE ASSESSE, SU BMITS BEFORE US THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URE OF CORRUGATED BOXES AND ALSO A SMALL SCALE INDUSTRIAL UNIT(SSI), REGIST ERED WITH DIRECTORATE OF INDUSTRIES AND COMMERCE, GOVERNMENT OF PONDICHERRY V IDE CERTIFICATE MENTIONED HERE ABOVE(SUPRA). THE A.R. FURTHER SUBM ITS THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAS ISS UED A DETAILED QUESTIONNAIRE ABOUT THE CLAIM OF DEDUCTION U/S 80-I B OF THE ACT AND IN RESPONSE TO THE SAID QUESTIONNAIRE, ASSESSE HAS SUB MITTED DETAILED NOTE ON HOW THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE ACT. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSE, THE A.O . HAS ALLOWED THE CLAIM OF DEDUCTION U/S 80-IB OF THE ACT, WHICH IS EVIDENT FRO M THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. FURTHER, THE ASSE SSE SUBMITTED THAT THE DEPARTMENT HAS ACCEPTED THE CLAIM OF DEDUCTION FOR ALL THE THREE ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 2004-05 TO 2006 -07, THEREFORE, THE CIT CANNOT DENY THE BENEFIT OF DEDUCTION FOR THE CURREN T ASSESSMENT YEAR UNDER THE SAME SET OF FACTS. FURTHER, THE ASSESSE SUBMIT S THAT THOUGH THERE IS A MENTIONING OF YEAR OF COMMENCEMENT OF PRODUCTION IS 2004-05 IN THE AUDIT REPORT ISSUED BY THE AUDITOR WHO CONDUCTED THE AUDI T U/S 80-IB OF THE ACT, IT MEANS THAT THE ASSESSMENT YEAR 2004-05. THEREFORE, BASED ON THAT TYPOGRAPHICAL ERROR, THE CIT IS NOT JUSTIFIED IN DI SALLOWING THE CLAIM OF THE ASSESSEE. ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 4 THE A.R. PLACED HIS RELIANCE ON THE FOLLOWING CASES IN SUPPORT OF HIS ARGUMENTS. 1.HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V S. WESTERN OUTDOOR INTERACTIVE P. LTD., (2012) 349 ITR 309(BOM). 2. HONBLE BOMBAY HIGH COURT, NAGPUR BENCH, IN THE CASE OF CIT VS. PAUL BROTHERS (1995) 216 ITR 548(NAG). 3. COORDINATE BENCH DECISION IN THE CASE OF SMT. SU SHEELA DAVI BOTHRA JAIN, SHREE CARRYING CORPORATION VS. ITO WARD-1, RAJAHMUN DRY IN ITA 279/VIZ/2014. THEREFORE, HE REQUESTED THE BENCH TO RESTORE THE OR DER PASSED BY THE ASSESSING OFFICER AND DISMISS THE ORDER PASSED BY T HE LD. CIT. 5. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTATI VE STRONGLY SUPPORTS THE ORDER OF THE CIT. HE FURTHER, ARGUED THAT IF Y OU GO THROUGH THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSE, THERE WAS NO MAN UFACTURING EXPENDITURE INCURRED BY THE ASSESSE DURING THE FINANCIAL YEAR A ND ALSO IT IS ONLY INVOLVED IN TRADING OF GOODS WHICH IS EVIDENCED FROM THE FINANC IAL STATEMENT FILED BY THE ASSESSEE. HE FURTHER, SUBMITS THAT MERE PRODUCTION OF A CERTIFICATE FROM THE DIRECTORATE OF INDUSTRY & COMMERCE WOULD NOT SUFFIC IENT EVIDENCE TO PROVE THAT THE ASSESSEE HAS CARRIED OUT MANUFACTURING ACT IVITY FOR THE RELEVANT PERIOD UNDER CONSIDERATION. THE DR, PLACED HIS RELI ANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF GUJARAT, IN THE CASE OF CIT V S JOLLY POLYMERS (2012) 342 ITR 87 (GUJ). FOR THE REASONS STATED ABOVE, HE URGED TO CONFIRM THE ORDER OF CIT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. WE ALSO CONSIDERED THE CASE LAWS CITED BY EITHER OF THE PARTIES. THE BASIC ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE ASSESSEE QUALIFIES FOR DEDUCTION U/S 80-IB OF THE ACT OR NOT. THE CIT INVO KED THE REVISIONAL POWERS ON THE SOLE REASON THAT THE A.O. HAS WRONGLY ALLOWE D THE DEDUCTION U/S 80-IB OF THE ACT, WHICH WAS OTHERWISE NOT ALLOWABLE TO TH E ASSESSEE. THE CIT WAS OF THE VIEW THAT THE ASSESSEE HAS NOT COMMENCED PRO DUCTION OF GOODS ON OR ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 5 BEFORE 31.3.2004 AS ENVISAGED IN SECTION 80-IB OF T HE ACT, THEREFORE, IT IS NOT ELIGIBLE FOR DEDUCTION. THE CIT FURTHER OBSERVED T HAT THE ASSESSEE HIMSELF ADMITS IN ITS RECORDS THAT IT HAS COMMENCED PRODUCT ION DURING THE YEAR 2004- 05, WHICH IS RELEVANT TO THE ASSESSMENT YEAR 2005-0 6 WHICH IS EVIDENT FROM THE AUDIT REPORT FILED IN FORM NO.10CCB. ON THE OT HER HAND, THE ASSESSEE ARGUES THAT IT HAS COMMENCED ITS COMMERCIAL PRODUCT ION ON 19.3.2004, THEREFORE, IT QUALIFIES FOR DEDUCTION U/S 80-IB OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. 7. IT IS PERTINENT TO MENTION HERE THAT, TO QUALIFY FOR DEDUCTION U/S 80-IB OF THE ACT, ONE OF THE ESSENTIAL CONDITION IS THAT THE ASSESSEE CONCERN SHOULD HAVE BEGUN MANUFACTURE OR PRODUCE GOODS ON OR BEFOR E 31.3.2004. ON VERIFICATION OF RECORDS FURNISHED BY THE ASSESSEE, IT IS PROVED THAT THE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION AFTER E XAMINATION OF DETAILS FILED BY THE ASSESSEE. IT IS ALSO UNDISPUTED FACT THAT TH E DEPARTMENT HAS ALLOWED THE CLAIM OF THE ASSESSEE RIGHT FROM THE A.Y. 2004 -05 TO A.Y. 2006-07, IT IS ONLY IN THE A.Y. 2007-08, THE CIT HAS DENIED THE BE NEFIT U/S 80-IB OF THE ACT. 8. TO INVOKE PROVISIONS U/S 263 OF THE ACT, THE TWI N CONDITIONS MUST BE SATISFIED I.E. THE ORDER OF THE ASSESSING OFFICER I S ERRONEOUS AND FURTHER IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNL ESS BOTH CONDITIONS ARE SATISFIED, THE CIT CANNOT ASSUME JURISDICTION TO PA SS ORDER U/S 263 OF THE ACT. IT IS NOT NECESSARY THAT EVERY ORDER WHICH IS PREJUD ICIAL TO THE INTEREST OF REVENUE IS ALSO ERRONEOUS. UNLESS THE A.OS ORDER I S NOT ERRONEOUS, NO ACTION CAN BE TAKEN BY THE CIT U/S 263 OF THE ACT, THIS IS BECAUSE THE TWIN CONDITIONS I.E. (1) THE ORDER IS ERRONEOUS AND (2) THE SAME IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE NOT CO-EXISTS. IN THE PRESENT CASE, THE A.O. HAS CONDUCTED ENQUIRY BEFORE ALLOWING THE DEDUCTION U/S 80-IB OF THE ACT WHICH IS CLEARLY EVIDENT FROM THE ASSESSMENT ORDER. THE CONTENTION OF THE CIT WAS THAT THE A.O. HAS NOT CONDUCTED PROPER ENQU IRY AND ALSO NOT APPLIED HIS MIND BEFORE ALLOWING THE DEDUCTION. WE DO NOT AGREE WITH THE CIT FOR THE REASON THAT THERE IS A DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IF THERE IS AN INADEQUATE ENQUIRY THAT WOU LD NOT BY ITSELF GIVE ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 6 OCCASION TO THE CIT TO ASSUME JURISDICTION U/S 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. THE CIT CAN DO THIS ONLY, WHEN THERE IS A LACK OF ENQUIRY BY THE ASSESSING OFFICER . IN THE PRESENT CASE, THE ASSESSMENT ORDER IS NOT DETAILED ONE BUT, THE A.O. HAS PASSED A REMARK IN THE ASSESSMENT ORDER BEFORE ALLOWING DEDUCTION U/S 80-IB OF THE ACT, WHICH CLEARLY SHOWS THAT HE HAS MADE AN ENQUIRY BEFORE AL LOWING DEDUCTION U/S 80- IB OF THE ACT. THE A.O. IS NOT REQUIRED TO GIVE DET AILED REASON FOR EACH AND EVERY ITEM OF DEDUCTION IN THE ASSESSMENT ORDER. A .O. HAD CALLED FOR EXPLANATION AND THE ASSESSEE HAS FURNISHED ITS EXPL ANATION. THIS FACT HAD NOT BEEN DISPUTED BY THE REVENUE. THUS, IT CANNOT BE S AID THAT IT IS A CASE OF LACK OF ENQUIRY. 9. NOW, IT IS RELEVANT TO CONSIDER THE CASE LAWS RE LIED ON BY THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . WESTERN OUTDOOR INTERACTIVE P. LTD. (SUPRA) HAS CONSIDERED THE SIMIL AR ISSUE AND HELD AS UNDER: WE HAVE CONSIDERED THE SUBMISSIONS. WE FIND THAT T HE SUBMISSIONS MADE BY MR. PARDIWALLA ON THE BASIS OF THE DECISION OF THIS COURT IN THE MATTER OF PAUL BROTHERS (SUPRA) AND DIRECTOR OF INFORMATION PVT. LTD. (SUPRA) MERITS ACCEPTANCE. THEREFORE, IN THIS CASE, IT IS NOT NECE SSARY FOR US TO DECIDE WHETHER SEEPZ UNIT WAS SET UP/FORMED B Y SPLITTING UP OF THE FIRST UNIT. IN BOTH THE ABOVE D ECISIONS, THIS COURT HAS HELD THAT WHERE A BENEFIT OF DEDUCTION IS AVAILABLE FOR A PARTICULAR NUMBER OF YEARS ON SATISFACTION OF CERTAIN CONDITIONS UNDER THE PROVISIONS OF THE INCOME TAX A CT, THEN UNLESS RELIEF GRANTED FOR THE FIRST ASSESSMENT YEAR IN WHICH THE CLAIM WAS MADE AND ACCEPTED IS WITHDRAWN OR SET ASIDE, THE INCOME TAX OFFICER CANNOT WITHDRAW THE RELIEF F OR SUBSEQUENT EARS. MORE PARTICULARLY SO, WHEN THE REV ENUE HAS NOT EVEN SUGGESTED THAT THERE WAS ANY CHANGE IN THE FACTS WARRANTING A DIFFERENT VIEW FOR SUBSEQUENT YE ARS. IN THIS CASE FOR THE ASSESSMENT YEARS 2000-01 AND 2001 -02 THE RELIEF GRANTED UNDER SECTION 10A OF THE ACT TO SEEPZ UNIT HAS NOT BEEN WITHDRAWN. THERE IS NO CHANGE IN THE FACTS WHICH WERE IN EXISTENCE DURING THE ASSESSMENT YEAR 2000-01 VIS A VIS THE CLAIM TO EXEMPTION UNDER SECTION 10A OF THE ACT. THEREFORE, IT IS NOT OPEN TO THE DEPARTMENT TO DENY THE BENEFIT OF SECTION 10A FOR SUBSEQUENT ASSESSMENT YEARS I.E. ASSESSMENT YEARS 200203 AND 2003-04 AND 2004-05. BE SIDES THAT, ON CONSIDERATION OF THE FACTS INVOLVED BOTH T HE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUN AL HAVE RECORDED A FINDING OF FACT THAT THE SEEPZ UNIT IS N OT FORMED BY SPLITTING UP OF THE FIRST UNIT. ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 7 10. IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LT D., (2013) 354 ITR 35, THE HONBLE A.P. HIGH COURT HAS CULLED OUT PRINCIPL ES LAID DOWN BY THE HONBLE SUPREME COURT AND ALSO VARIOUS HIGH COURTS ON THE I SSUE OF EXERCISE OF JURISDICTION BY THE CIT U/S 263 OF THE ACT. IT REA DS AS FOLLOWS: '(A) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN C ONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORDER OF T HE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECT/ON 263(1) OF THE ACT. (B) EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICE R ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULT ED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INC OME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIO NER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER P REJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. (C) TO INVOKE THE SUO MOTU REVISIONAL POWERS TO REOPEN A CONCLUDED ASSESSMENT UNDER SECTION 263, THE COMMISSIONER MUST GIVE REASONS; THAT A BARE REITERATION BY HIM THAT THE ORDER OF TH E INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, WILL NOT SUFFICE; THAT THE REASONS MUS T BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE AS SESSMENT OR CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLED FOR, AND MUST IRRESISTIBLY L EAD TO THE CONCLUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTERESTS OF T HE REVENUE. THUS, WHILE THE INCOME-TAX OFFICER IS NOT CALLED UPON TO W RITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE COMMISSIONER NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLE SS SUPPORTED BY ADEQUATE REASONS FOR DOING SO; THAT IF A QUERY IS R AISED DURING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WH ICH WAS ANSWERED TO THE SATISFACTION OF THE ASSESSING OFFIC ER, BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSE SSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THA T THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVIS ION. (E) THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WI TH A VIEW TO START FISHING AND ROVING INQUIRIES IN MATTERS OR ORDERS W HICH ARE ALREADY CONCLUDED , THAT THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON F ACTS OR NEW ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 8 VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE TH E INFERENCE OR PROPER INFERENCE EITHER OF THE FACTS DISCLOSED OR T HE WEIGHT OF THE CIRCUMSTANCE; THAT IF THIS IS PERMITTED, LITIGATION WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. (F) WHETHER THERE WAS APPLICATION OF MIND BEFORE AL LOWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN; THAT IF THE RE WAS AN INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF G IVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 M ERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER; THAT IT I S ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN; THAT AN ASSESSMENT ORDER MADE BY THE INCOME-TAX OFFICER CANN OT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BEC AUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTE N MORE ELABORATELY, THERE MUST BE SOME PRIMA FADE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY EXIGIBLE HAS N OT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT W AS JUST, HAS BEEN IMPOSED. (G) THE POWER OF THE COMMISSIONER UNDER SECTION 263 (1) IS NOT LIMITED ONLY TO THE MATER/AL WHICH WAS AVAILABLE BE FORE THE AO AND, IN ORDER TO PROTECT THE INTERESTS OF THE REVENUE, T HE COMMISSIONER IS ENTITLED TO EXAMINE ANY OTHER RECORD WHICH ARE A VAILABLE AT THE TIME OF EXAMINATION BY HIM AND TO TAKE INTO CONSIDE RATION EVEN THOSE EVENTS WHICH AROSE SUBSEQUENT TO THE ORDER OF ASSESSMENT.' -. 11. A SIMILAR ISSUE HAS CAME BEFORE THE HONBLE HIG H COURT OF DELHI IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. REPORTED IN (2011 ) 332 ITR 167, WHEREIN THE HONBLE HIGH COURT HELD AS FOLLOWS: 'THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER, THE AO DID NOT CONSID ER THE ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUES TION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDI CATES ON THE ASSESSMENT ORDER, WHICH APPARENTLY DOES NOT GIV E ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS RE VENUE EXPENDITURE. HOWEVER, THAT BY ITSELF 'WOULD NOT BE INDICATIVE OF THE FACT THAT THE AD HAD NOT APPLIED HIS MIND ON TH E ISSUE. THE AD IN THE ASSESSING ORDER IS NOT REQUIRED TO GIVE DETA ILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. T HEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. THE COUNSEL FOR THE ASSESSE E IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 9 OCCASION TO THE CIT TO PASS ORDERS UNDER S. 263, ME RELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF AC TION WOULD BE OPEN. THE AD HAD CALLED FOR EXPLANATION ON THIS VER Y ITEM FROM THE ASSESSEE AND THE ASSESSEE HAD FURNISHED HI S EXPLANATION VIDE LETTER DT. 26TH SEPT., 2002, THIS FACT IS EVEN TAKEN NOTE OF BY THE CIT HIMSELF IN PARA 3 OF HIS O RDER. THIS CLEARLY SHOWS THAT THE AD HAD UNDERTAKEN THE EXERCI SE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DYES AND TOOLS IS TO BE TREATED AS REVENUE EXPENDITURE OR NOT. IT APPEARS THAT SINC E THE AD WAS SATISFIED WITH THE AFORESAID EXPLANATION, HE ACCEPT ED THE SAME. THE CIT IN HIS IMPUGNED ORDER EVEN ACCEPTS TH IS. THUS, EVEN THE CIT CONCEDED THE POSITION THAT THE AD MADE THE INQUIRIES, ELICITED REPLIES AND THEREAFTER PASSED T HE ASSESSMENT ORDER. THE GRIEVANCE OF THE CIT WAS THAT THE AD SHO ULD HAVE MADE FURTHER INQUIRIES RATHER THAN ACCEPTING THE EX PLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF ' LACK OF INQUIRY.-CIT VS. GABRIAL INDIA LTD. (1993)114 CTR ( BORN) 81: (1993) 203 ITR 108 (BORN) RELIED ON. EVEN THE CIT IN HIS ORDER, PASSED UNDER S. 263, IS NOT CLEAR AS TO WHETHER THE EXPENDITURE CAN BE TREATED AS CAPITAL E XPENDITURE OR IT IS REVENUE IN NATURE. NO DOUBT 1 IN CERTAIN CASES, IT MAY NOT BE POSSIBLE TO COME TO A DEFINITE FINDING AND THERE FORE, IT IS NOT NECESSARY THAT IN ALL CASES THE CIT IS BOUND TO EXP RESS FINAL VIEW. BUT, THE LEAST THAT WAS EXPECTED WAS TO RECOR D A FINDING THAT ORDER SOUGHT TO BE REVISED WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. NO BASIS FOR THIS I S DISCLOSED. IN SUM AND SUBSTANCE, ACCOUNTING PRACTICE OF THE ASSES SEE IS QUESTIONED. HOWEVER, THAT BASIS OF THE ORDER VANISH ES IN THIN AIR WHEN THIS VERY ACCOUNTING PRACTICE, FOLLOWED FO R NUMBER OF YEARS, HAD THE APPROVAL OF THE IT AUTHORITIES. INTE RESTINGLY, EVEN FOR FUTURE ASSESSMENT YEARS, THE SAME VERY ACC OUNTING PRACTICE IS ACCEPTED. THE ASSESSEE IS A MANUFACTURE R OF CAR PARTS. IN THE MANUFACTURING PROCESS, DYES ARE F ITTED IN MACHINES BY WHICH THE CAR PARTS ARE MANUFACTURED. T HESE DYES ARE THUS THE COMPONENTS OF THE MACHINES. THESE DYES NEED CONSTANT REPLACEMENT, AS THEIR LIFE IS NOT MOR E THAN A YEAR. THE ASSESSEE HAD ALSO EXPLAINED THAT SINCE THESE PA RTS ARE MANUFACTURED FOR THE AUTOMOBILE INDUSTRY, WHICH HAV E TO WORK ON COMPLETE ACCURACY AT HIGH SPEED FOR A LONGER PER IOD, REPLACEMENT OF THESE PARTS AT SHORT INTERVALS BECOM ES IMPERATIVE TO RETAIN ACCURACY. BECAUSE OF THESE REA SONS, THESE TOOLS AND DYES HAVE A VERY SHORT SPAN OF LIFE AND I T COULD PRODUCE MAXIMUM ONE LAKH PERMISSIBLE SHORTS. THEREA FTER, THEY HAVE TO BE REPLACED. WITH THE REPLACEMENT OF SUCH T OOLS AND 'DYES, WHICH ARE THE COMPONENTS OF A MACHINE, NO NE W ASSET COMES INTO EXISTENCE, NOR IS THERE BENEFIT OF ENDUR ING NATURE. IT DOES NOT EVEN ENHANCE THE LIFE OF EXISTING MACHIN E OF WHICH THESE TOOLS AND DYES ARE ONLY PARTS. NO PRODUCTION CAPACITY OF THE ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 10 EXISTING MACHINES IS INCREASED EITHER. IT IS CLEAR T HAT VIEW TAKEN BY THE AD WAS ONE OF THE POSSIBLE VIEWS AND THEREFORE, THE ASSESSMENT ORDER PASSED BY THE AD COULD NOT BE HELD TO BE PREJUDICIAL TO THE REVENUE. THUS, FROM WHATEVER ANG LE THE MATTER IS TO BE LOOKED INTO, THE CONCLUSION WOULD B E THAT THE ORDER OF THE TRIBUNAL DOES NOT CALL FOR ANY INTERFERENCE AS THE QUESTION OF LAW HAS RIGHTLY BEEN DECIDED,-SUNBEAM AUTO LTD. VS. CIT (2006) 100 TT3 (DEL) 209 AFFIRMED; CIT VS. SARAVANA SPINNING MILLS (P) LTD. (2007) 211 CTR (SC) 281 : (2007) 293 ITR 201 (SC) DISTINGUISHED.' 12. WE, ALSO CONSIDERED THE JUDGMENT OF HONBLE GUJ ARAT HIGH COURT, REPORTED IN 342 ITR 87 (SUPRA), CITED BY THE DEPART MENTAL REPRESENTATIVE, IN THE LIGHT OF THE FACTS OF THIS CASE AND COME TO A C ONCLUSION THAT THE CASE RELIED ON BY THE DEPARTMENT IS NOT APPLICABLE TO TH E FACTS OF THE PRESENT CASE. 13. IN THE PRESENT CASE ON HAND, THE REVENUE DID NOT BROUGHT ON RECORD ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE ASSES SEE DID NOT COMMENCE ITS PRODUCTION DURING THE FINANCIAL YEAR 2003-04, DESPI TE THE FACT THAT THE ASSESSEE HAS FURNISHED A COPY OF REGISTRATION CERTI FICATE ISSUED BY THE DIRECTORATE OF INDUSTRY AND COMMERCE INDICATING THE DATE OF COMMENCEMENT OF PRODUCTION, I.E. ON 19-3-2004. SIMPLY THE CIT A LLEGED THAT IT WOULD NOT BE POSSIBLE FOR ASSESSEE TO ORGANISE MATERIALS AND PRO DUCE GOODS WITHIN A PERIOD OF 11 DAYS BY BRINGING HYPOTHETICAL AND PROBABILITY THEORY TO THE CASE WITHOUT ANY MATERIAL EVIDENCE. THE PROFIT & LOSS ACCOUNT F ILED BY THE ASSESSEE SHOWS THAT IT HAS MADE SALES DURING THE FINANCIAL YEAR. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE CLAIMS DEPRECIATION ON PLANT & MACHINE RY WHICH WAS ACCEPTED BY THE A.O. AND AFFIRMED BY THE CIT. IT IS ALSO AN ADMITTED FACT THAT DEPARTMENT HAS ACCEPTED THE CLAIM OF DEDUCTION U/S 80-IB OF THE ACT FOR ALL THE YEARS STARTING FROM THE A.Y. 2004-05 TO 2006-07 . ONCE THE REVENUE ACCEPTED THE DEDUCTION IN EARLIER YEARS, IT CANNOT BE QUESTIONED IN SUBSEQUENT YEARS UNLESS THERE IS A CHANGE OF FACTS IN THE SUBSEQUENT YEARS. ADMITTEDLY, IN THE PRESENT CASE, THERE IS NO CHANGE IN THE FACTS WHICH ARE EXISTED IN THE A.Y. 2004-05 TO A.Y. 2006-07. 14. IN VIEW OF THE ABOVE AND ALSO CONSIDERING THE RA TIOS OF THE JUDGMENTS REFERRED BY THE COUNSELS, WE ARE OF THE OPINION THA T THE A.O. HAS RIGHTLY ITA NO.140/VIZ/2012 REGMA PAPER PRODUCTS, YANAM 11 ALLOWED DEDUCTION U/S 80-IB OF THE ACT AFTER PROPER ENQUIRY AND HIS ORDER DOES NOT WARRANT ANY INTERFERENCE BY THE CIT. THE CIT ASSUMES JURISDICTION AND REVISED THE ASSESSMENT ORDER U/S 263 OF THE ACT WITHOUT POINTING OUT ANY MISTAKES IN THE A.OS ORDER WITH A DIFFERENT OPINIO N, WHICH ITSELF IS NOT A GROUND FOR ASSUMING JURISDICTION U/S 263 OF THE ACT . THEREFORE, WE QUASH THE CITS ORDER U/S 263 AND RESTORE THE ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER. 15. IN THE RESULT, THE ASSESSES APPEAL IS ALLOWED. PR ONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2015. SD/- SD/- (V. DURGA RAO) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM, DATED 11 TH SEPTEMBER, 2015 VG/SPS COPY TO 1 M/S. REGMA PAPER PRODUCTS, METTACUR ROAD, METTACU R, YANAM-533 464. 2 THE CIT, RAJAHMUNDRY 3 THE CIT(A), RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM