Shree Yogi Steels Pvt.Ltd., Ahmedabad V. The Dy.CIT.,(OSD).Circle-8, Ahmedabad

ITA 1430/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89505 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNA KUMAR
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Period of limitation; Retrospective amendment; Question of law; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 143(3); 148; 263; 63; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI RAJPAL YADAV, JUDICIAL MEMBER AND SHR I ANIL CHATURVEDI , ACCOUNTANT MEMBER SHREE YOGI STEELS PV T. LTD, 155 - C, SUNRISE PARK, OPP. DRIV E - IN CINEMA, AHMEDABAD PAN: AADCS8778H (APPELLANT) VS DCIT, (OSD) CIRCLE - 8, AHMEDABAD (RESPONDENT) ASSESSEE BY: SHRI VAR TI K CHOKS I, A.R. REVENUE BY : S H RI T.P. KRISHNAKUMAR, CIT - DR DATE OF HEARING : 27 - 05 - 2 015 DATE OF PRONOUNCEMENT : 10 - 06 - 2 015 / ORDER P ER : RAJPAL YADAV , JUDICIAL ME MBER : - THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF ASSESSEE AGAINST TH E ORDER OF LD. COMMISSIONER DATED 3 1 ST MARCH, 20 11 PASSED U/S. 263 OF THE INCOME T AX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT ) IN ASSESSMENT YEAR 2005 - 06. I T A NO . 1430 / A HD/20 11 A SSESSMENT YEAR 200 5 - 06 I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 2 2. THE GROUND S OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES, THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. 3. IN BRIEF, THE GRIE VANCE OF THE ASSESSEE IS THAT LD. COMMISSIONER HAS ERRED IN TAKING COGNIZANCE U/S. 263 OF THE A CT A ND SETTING ASIDE THE WELL REASONED ORDER OF THE ASSESSING OFFICER. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY W AS ENG AGED IN THE MANUFACTURING OF MS ANGLE CHANNELS ROUND BARS ETC . IT HAS FILED ITS RETURN OF INCOME ON 29 - 10 - 2005 , DECLARI NG A LOSS AT RS. 57,97, 350/ - . THE RETURN WAS PROCESSED U/S. 14 3 (1 ) ON 23 RD MARCH, 2006. THE LD. ASSESSING OFFICER HA S RE - OPENED THE ASSESSMENT BY RECORDING REASONS ON THE GROUND THAT ASSESSEE HAD ADJUSTED DEPRECIATION/INVESTMENT LOSS OF RS . 1,82,62,722/ - AGAINST SHORT TERM CAPITAL GAIN AT RS. 1,14,80,000/ - ACCORDING TO ASSESSING OFFICER , THE INCOME OF SHORTER TERM CAPITAL GAIN COULD NOT BE ADJUST ED AGAINST THE DEPRECIATION / INVESTMENT LOSSES BROUGHT FORWARD BY THE ASSESSEE . HE THEREFORE ISSUED A NOTICE U /S. 148 OF THE INCOME TAX ACT O N 3 RD FEB, 2008 WHICH WAS DULY SERVED UPON THE ASSESSEE ON 26 TH FEBRUARY, 2008. THE ASSESSEE H AS SUBMITTED WRITTEN SUBMISSION WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE 2 TO 4 OF THE ASSESSMENT ORD ER DATED 24 - 10 - 2008 PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT. THE ASSESSING OFFICER HAS DISALLOWED THE SETTING OFF OF CAPITAL GAIN AGAINST BROUGHT FORWARD DEPRECIATION LOSSES. THE DISCUSSION MADE BY THE ASSESSING OFFICER READ S AS UNDER: - I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 3 4. THE ASSESSE E S PLEA THAT T H E CARRIED FORWARD DEPRECATION SHOULD BE TREATED AS CURRENT YEARS DEPRECIATION AND THE SAME SHOULD BE ADJUSTED AGAINST T H E CURRENT YEAR CAPITAL GAIN IS REJECTED ON THE GROUND THAT TH ER E IS NO PROVISIONS UNDER THE ACT WHICH SAYS TO ABSORB THE CARRIED FORWARD DEPRECATION F R O M THE CURRENT YEAR CAPITAL GAIN AND IT IS SEEN THAT THE REPRESENTATION MADE BY THE ASSESSE IS QUITE CONTRARY TO THE FACTS AND LAW. THERE IS NO MENTIONING IN SEC T IO N 71 AND 72 OF THE ACT REGARDING THE UNABSORBED DEPRECATION CARRIED FORWARD FROM THE PREVIOUS ASSESSMENT YEAR SHOULD BE CONSIDERED AS CURRENT YEAR DEPRECATION OF THE YEAR UNDER CONSIDERATION AND THE SAME SHOULD BE ADJUSTED AGAINST THE SHORT TERM CAPITAL GAIN OF THE YEAR UNDER CONSIDERATION. I AM THERE FORE, SATISFI ED THAT T H E ASSESSEE COMPANY HAS WRONGLY ADJUSTED THE CARRIED FORWARD DEPRECIATION LOSSES OF RS. 1,82,62,722/ - AGAINST THE CURRENT YEAR S SHORT TERM CAPITAL GAIN , WHICH COMES TO RS. 1,14,80,000/ - AND AS DISCUSSED, NO SUCH CARRIED FORWARD DEPRECIATION CAN BE ADJUSTED AGAINST THE CURRENT YEAR S SHORT TERM CAPITAL GAIN AND THEREFORE THE INCOME ARISING FROM SHORT TERM CAPITAL GAIN IS LIABLE TO BE TAXED AS UNDER: - BUSINESS LOSS AS PER RETURN RS. 57,97,352( - ) INCOME FROM SHORT TERM CAPITAL GAIN: SALE P ROCEEDS OF WIND MILL RS . 22960000 LESS: COST OF ACQUISITION. RS. 1148000 0 ---------------- RS. 1,14,80,000 NET SHORT TERM CAPITAL GAIN RS. 56,82,648 ______________ 5. ASSESSED U/S. 143(3) READ WITH SECTION 147 OF THE IT ACT. THE TAX O N SHORT TERM CAPITAL GAIN IN THIS CASE WORKS OUT TO R S. 1,14,80,000/ - . PLEASE WORK OUT THE TAX ACCORDINGLY. ISSUED PENALTY NOTICE UNDER SECTION 271(1)(C) THE ACT FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME. GIVE CREDIT FOR TAXES PAID IN ADVANCE IF ANY. CHARGE INTEREST UNDER SECTION 234A/234B/234C AS THE CASE MAY BE. 5. ON PERUSAL OF THE RECORD, LD . COMMISSIONER FOUND THAT ASSES SEE HAD PURCHASED A WIND MILL FOR A SUM OF RS. 2,29,60 , 00 0 / - IN ASSESSMENT YEAR 1997 - 98. THE ASSESSEE HAD SOLD THIS WIND M ILL FOR A SUM OF RS. 2,29,60 , 00 0 / IN THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2005 - 06 . I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 4 IT HAS CLAIMED DEPRECIATION OF RS. 1,14,80,000/ - IN ASSESSMENT YEAR 2002 - 03. THE REMAINING DEPRECIATION OUGHT TO HAVE BEEN CONSIDERED AS CLAIMED BY THE ASSESSEE AFTER 01 - 04 - 2002 , BECAUSE AFTER 01 - 04 - 2002, IT IS MANDATORY TO CLAIM THE DEPRECIATION. THEREFORE, IN ANY CASE, DEPRECATION HAS TO BE T H RUST UPON THE ASSESSEE. THE COMPUTATION OF CAPITAL GAIN AT RS 1,14,80,000/ - IS ERRONEOUS STEP AT THE END OF ASSESSEE AN D LD. ASSESSING OFFICER HAD COMMITTED AN ERROR BY ACCEPTING THIS COMPUTATION. HE ISSUED A SHOW CAUSE NOTICE , THOUGH ON A NUMBER OF ISSUES , BUT THE ULTIMATE ACTION TAKEN U/S. 263 WAS CONFINED TO THIS ISSUE ONLY . A RELEVANT PART OF THE SHOW CAUSE NOTICE RE AD S AS UNDER: - NO.CIT - IV/ABD/SYSPL/U/S.263/A.Y.05 - 06/2010 - 11DATE:28/02/2011 TO, THE PRINCIPAL OFFICER SHREE YOGI STEE L S PVT LTD 155/C, SUNRISE PARK, OPP. DRIVE IN CINEMA ROAD, AHMEDABAD. SIR, SUB: NOTICE U/S. 263 FOR A.Y. 2005 - 06 - REG - X X X X X X (I) AS PER SECTION 50(1) OF THE ACT, WHERE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHIN THE BLOCK OF THE ASSETS DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF THE FOL LOW ING AMOUNT, NAMELY: (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY I N CONNECTION WITH SUCH TRANSFER OR TRANSFERS (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR; AND (III) THE ACTUAL COST OF ANY ASSET FALL ING WITHIN THE BLOCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR. (IV) SUCH EXCESS SHALL BE DEEMED TO BE THE CAPITAL GAIN ARISING FROM TRANSFER OF SHORT TERM CAPITAL ASSETS. SCRUTINY OF RECOR D S REVEALED THAT YOUR COMPANY HAD SOLD A WIND MILL FOR RS . 22960 00 DURING THE F.Y. 2004 - 05. THE ASSESSEE I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 5 COMPANY HAD WORKED OUT THE SHORT TERM CAPITAL GAIN ON SALE OF THIS WILL MILL AT RS . 11480000 I.E. AFTER DEDUCTING RS. 1140000 ON ACCOUNT OF DEPRECIA TION CLAIMED BY THE YOUR COMPANY IN A.Y. 2003 - 04. THE COMPUTATION OF SHORT TERM CAPITAL GAIN WORKED OUT B Y THE COMPANY WAS NOT IN CONSONANCE WITH THE PROVISIONS OF SECTION 50(I) OF THE AC T. FURTHER, SCRUTINY OF RECORDS REVEALED THAT THER E WAS NO BLOCK OF WIND MILL DURING THE PERIOD F.Y. 2004 - 05 . THE ENTIRE BLOCK OF WI NDMILL HAD ALREADY BEEN EXHAUSTED IN F.Y. 2003 - 04. THUS, THE OPENING WDV OF BLOCK OF WINDMILLS W AS NIL. THE ENTIRE RECEI PT WAS CHARGEABLE TO TAX AS SHORT CA PITAL GAIN IN A.Y. 2005 - 06 INSTEA D OF AMOUNT AS WORKED OUT BY THE YOUR COMPANY. (II). X X X X X X X X X X YOURS FAITHFULLY, SD/ - (H.PATIDAR) COMMISSIONER OF INCOME TAX, AHMEDABAD - IV, AHMEDABAD 6. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS CONTENDED BY THE ASSESSEE THAT IT HAS TRANSF ERRED THE FIXED ASSET I.E. WIN D MILL FOR A CONSIDERATION OF . 2,29,60,000/ - . DUE TO HUGE BUSINESS LOSSES, THE DEPRECIATION U/S. 32(1) WAS NOT CLAIMED IN ASSESSMENT YE AR 1997 - 98 WHEN THIS WIND MILL WAS ACQUIRED BY THE ASSESSEE. THE ASS ESSEE HAD NOT CLAIMED DEPRECIATION ON THIS ASSET EVEN IN SUBSEQUENT YEAR UP TO 2001 - 02. THE DEPRECATION AT RS. 1,14,80,000/ - WAS CLAIMED IN ASSESSMENT YEAR 2002 - 03 WHEN IT WAS MADE OBLIGATOR Y FOR THE ASSESSEE TO CLAIM DEPRECAT ION. THUS, THE DEPRECIATION CLAIMED BY THE ASSESSSE E AT RS. 1,14,80,000/ - WAS TREATED AS A CAPITAL GAIN U/S. 50 OF THE ACT (2,29,60,000 - 1,14,80,000) . I T WAS SPECIFICALLY CLA RIFIED THAT THE SHORT TERM CAPITAL GAIN OF I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 6 RS. 1 , 14 ,80,000/ - WAS SHOWN FOR THE REASON THAT THE ASSESSEE HAD CLAIMED DEPRECIATION TO THAT EXTENT ONLY IN THE RETURN OF INCOME FOR EARLIER YEARS. 7. LD. COMMISSIONER WAS NOT SATISFIED WITH THE EXPLANATION OF ASSESSEE. HE RECORDED THAT EXPLANATION 5 TO SECTION 32(1) WAS INSERTED IN FINANCE ACT, 200 1 W.E.F 01 - 04 - 2002 WHICH PROVIDES THAT P ROVISION OF THIS SUB - SECTION WAS TO BE APPLIED , WHETHER OR NOT?, T HE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING THE TOTAL INCOME , MEANING THEREBY THE DEPRECATION HAS TO BE THRUST UPON THE ASSESSEE AFTER 01 - 04 - 2002. THE COMMISS IONER FORMED AN OPINION THAT IT IS TO BE DEEMED THAT ASSESSEE HAD CLAIMED THE DEPRECIATION AND THEREFORE THE TOTAL VALUE OF SALE CONSIDERATION IS TO BE CONSIDERED AS SHORT TERM CAPITAL GAIN IN THE HAND S OF ASSESSEE. HE SET ASIDE THE ASSESSMENT ORDER AND D IRECTED THE ASS ESSING OFFICER TO RECOMPUTE THE SHORT TERM CAPITAL GAIN AS PER LAW AFTER ASCERTAIN ING THE CORRECT COST OF ACQUISITION OF THE WIND MILL AND CORRECT AMOUNT OF DEPREC IATION. 8. BEFORE US, LEARNED C OUNSEL FOR THE ASSESSEE, WHILE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX HAS RAISED THREE FOLD SUBMISSIONS ; (A) THAT LD . ASSESSING OFFICER HAD REOPENED THE ASSE SSMENT BY ISSUANCE OF A NOTICE U/S . 148 IN OR D ER TO FIND OUT , WHETHER ASSESSEE CAN ADJUST THE SHORT TERM CAPITAL GAIN AGAINST DEPRECATI ON/ INVESTMENT LOSSES OF RS . 1,82,62,722/ - . HE HAS EXAMINED THIS ISSUE AND THEREAFTER CONCLUDED TH AT SHORT TERM CAPITAL GAIN OF RS . 1,14,80,000/ - COMPUTED B Y THE ASSESSEE CANNOT BE ALLOWED SET OF F AGAINST BROUGHT FORWARD DEPRECATION LOSSES , MEANING THEREBY THAT ASSESSING OFFICER HAS EXAMINED THE COMPUTATION OF SHORT TERM CAPITAL GAIN AND IT IS ADJUSTABILITY I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 7 AGA INST THE BROUGHT FORWARD DEPRECI ATION LOSSES. ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW ON THE CO M PU T ATION OF SHORT TERM CAPITAL GAIN, THEREFORE, L D. COMMISSIONER IS NOT JUSTIFIED IN TAKING COGNIZANCE U/S. 263 OF THE A CT. (B) THAT THE ISSUE REGARDING COMPUTATION OF SHORT TERM CAPITAL GAIN V IS - A - VIS ITS ADJUSTABILITY/SET OFF AGAINST BROUGHT FORWARD DEPRECIA TION LOSSES WAS SUBJECT MATTER OF THE ASSESSMENT PROCEEDING WHICH WAS TAKEN IN APPEAL BEFORE COMMI SSIONER OF INCOME TAX (APPEALS) . LD. FIRST APPELLATE AUTHORITY WHILE EXAMINING THE ISSUE OF ADJUSTABILITY OF THE SHORT TERM CAPITAL GAIN AGAINST BROUGHT FORWARD DEPRECATION LOSSES COULD HAV E ENHANCED THE CO MPUTATION OF SHORT TERM CAPITAL GAIN , BECAUSE BOTH THESE ISSUES ARE INEXTRICABLY LINKED TO EACH OTHER , THEREFORE , THE INTERDICTION PROVIDED IN EXPLANATION C TO SECTION 263, PUTS AN EMBARGO ON THE POWERS OF LD. COMMISSIONER OF INCOME TAX TO TAKE ACTION ON ANY ISSUE WHICH WAS SUBJECT MATTER OF APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) . (C) ON THE STRENGTH OF COPY OF INCOME TAX RETURNS FI L ED F R O M ASSESS MENT YEAR 1997 - 98 UP - TO 2005 - 06 , LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAD LOSS ES IN EARLIER YEAR S. I N ASSESSMENT YEAR 2005 - 06, IT HAS OFFERED NET LOSS OF RS.95,19,465/ - , IN ASSESSMENT YEAR 2003 - 04, I T HAS OFFERED NET LOSSES OF RS. 1,26,42,731/ - . IN CASE , THE VIEW OF THE LD. COMMISSIONER , EVEN , IF ACCEPTED , THEN , THE SITUATION WO ULD BE THAT DEPRECIATION THRUST UPON THE ASSESSE IN ASSESSMENT YEAR 2003 - 04 AND 2004 - 05 , TO THE EXTENT OF RS. 1,14,80,000/ - ALLEGED TO HAVE NOT BEEN CLAIMED BY THE ASSESSEE WOULD ONLY SWELL THE I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 8 LOSSES IN THOSE TWO YEAR AND ASSESSEE WOULD HAVE A HIGHER FIGU RE OF LOSSES TO BE CARRIED FORWARD TO ASSESSMENT YEAR 2005 - 06. THE NET RESULT WOULD BE NO ADDITION , NO TAX LIABILITY. IN THAT CASE , EVEN IF , ORDER OF ASSESSING OFFICER IS ERRONEOUS , IT IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. LD . COMMISSIONER IS NO T JUSTIFIED TO TAKE ACTION U/S. 263 OF THE INCOME TAX ACT. 9. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). HE CONTENDED THAT A FTER 01 - 04 - 2002 , IT WAS MANDATORY FOR THE ASSESSE E TO CL AIM DEPRECIATION. THE ASSESSEE HAS ALREADY CLAIMED DEPRECIATION OF RS 1,14,80,000/ - IN ASSESSMENT YEAR 2 002 - 03. THE REMAINING AMOUNT OF RS. 1,1 4,80,000/ - IS TO BE CLAIMED IN ASSESSMENT YEAR S 2003 - 04, 2004 - 05 OR OUGHT TO HAVE BEEN CLAIMED STARTING FROM 19 97 - 98. 10. IN REBUTTAL, LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT RETROSPECTIVE AMENDMENT CARRIED OUT IN SECTION 32(1) BY I NSERTION OF THE EXPLANATION WILL NOT BE APPLICABLE ON THE ASSES SEE FROM ASSESSMENT YEAR 1997 - 98 , OTHERWISE IT WOULD HAVE CLAI MED THE DEPRECATION. THE NET BENEFIT IN THE ADJUSTMENT OF THE COST TAKEN BY THE ASSESSEE IS A SUM OF RS. 1,14,80,000/ - ONLY WHICH IS A DEPRECIATION CLAIMED IN ASSESSMENT YEAR 2002 - 03 , THEREFORE , LD. COMM ISSIONER OF INCOME TAX CANNOT AGAIN SET ASIDE THE AS SESSMENT ORDER AND INTERFERE IN THE COMPUTATION OF SHORT TERM CAPITAL GAIN. 11. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. SECTION 263 HAS A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS PERTINENT TO TAKE N OTE OF THIS SECTION. IT READS AS UNDER: - I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 9 263(1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS 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 MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. [EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB - SECTION, - (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 - TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (I I) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTO R GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSI ONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND AN D SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 10 (2) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (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 CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECT ION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATIONAL TAX TRIBUNAL, 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 GIVING AN OPPORTUNITY TO THE ASSESSE E TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 12. ON A BARE PERUSAL OF THE SUB SECTION - 1 WOULD REVEAL THAT POWERS OF REVI SION GRANTED BY SECTION 263 TO THE LEARNED COMMISSIONER 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 COMM ISSIONER WAS NOT REQUIRED TO SHOW ANY REASON. IT IS A PART OF HIS ADMINISTRATIVE CONTROL TO CALL FOR THE RECORDS AND EXAMINE THEM. THE SECOND FEATURE WOULD COME WHEN HE WILL JUDGE AN ORDER PASSED BY AN ASSESSING OFFICER ON CULMINATION OF ANY PROCEEDINGS OR DURING THE PENDENCY OF THOSE PROCEEDINGS. ON AN ANALYSIS OF THE RECORD AND OF THE ORDER PASSED BY THE ASSESSING OFFICER, HE FORMED AN OPINION THAT SUCH AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BY THIS STAGE THE LEARNED COMMISSIONER WAS NOT REQUIRED THE ASSISTANCE OF THE ASSESSEE. THEREAFTER THE THIRD STAGE WOULD COME. THE LEARNED COMMISSIONER WOULD ISSUE A SHOW CAUSE NOTICE POINTING 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 I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 11 OPPORTUNITY TO THE ASSESSEE WOULD BE GIVEN. THE LEARNED COMMISSIONER HAS TO CONDUCT AN INQUIRY AS HE MAY DEEM FIT. AFTER HEARING THE ASSESSEE, HE WILL PASS THE ORDER. THIS IS THE 4 TH COMPART MENT OF THIS SECTION. THE LEARNED COMMISSIONER MAY ANNUL THE ORDER OF THE ASSESSING OFFICER. HE MAY ENHANCE THE ASSESSED INCOME BY MODIFYING THE ORDER. HE MAY SET ASIDE THE ORDER AND DIRECT THE ASSESSING OFFICER TO PASS A FRESH ORDER. EXPLANATION - 1 HAS BEE N SUBSTITUTED BY THE FINANCE ACT 1998 (26 OF 1988). IT THREW A LIGHT TO SOME EXTENT THE SCHEME OF THE ACT. UNDER CLAUSE (A) OF THE EXPLANATION, IT HAS BEEN PROVIDED THAT AN ORDER OF THE ASSESSMENT MADE BY THE INCOME TAX OFFICER ON THE BASIS OF A DIRECTION ISSUED BY THE JT. COMMISSIONER U/S 144A WOULD BE AN ORDER OF THE INCOME TAX OFFICER. IN OTHER WORDS, IF DIRECTIONS OF BINDING NATURE WERE ISSUED BY A HIGHER AUTHORITY TRANSLATED INTO THE ORDER OF THE INCOME TAX OFFICER, THEN THAT ORDER WOULD BE CONSIDERED OF THE ASSESSING OFFICER AND NOT OF THE HIGHER AUTHORITIES. FOR THE PURPOSE OF CONTROVERSY IN HAND, MEANING OF EXPLANATION C IS RELEVANT. THIS EXPLANATION PROVIDES THAT IF AN ORDER PASSED BY THE ASSESSING OFFICER IS SUBJECT MATTER OF AN APPEAL THEN THE ISSUE/MATTER WHICH DID NOT TRAVEL IN APPELLATE PROCEEDINGS, LD. COMMISSIONER OF INCOME TAX WOULD HAVE A JURISDICTION ON THESE ISSUES U/S. 263 OF IT ACT. THEREFORE, BEFORE CONSIDERING THE VARIOUS CONTENTIONS RAISED BY THE LEARNED REPRESENTATIVES, WE DEEM I T PERTINENT TO TAKE NOTE OF THE FUNDAMENTAL TESTS PROPOUNDED IN VARIOUS JUDGMENTS RELEVANT FOR JUDGING THE ACTION OF THE CIT TAKE N U/S 263. THE ITAT IN THE CASE OF MRS. KHATIZA S. OOMERBHOY VS. ITO, MUMBAI, 101 TTJ 1095, ANALYZED IN DETAIL VARIOUS AUTHORITA TIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 AND HAS PROPOUNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF CIT TAKEN UNDER SECTION 263. I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 12 (I) THE CIT MUST RECORD SATISFACTION THAT TH E 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 ERRONEO US THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT 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 ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE AO HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOE S 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 EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE A ND DETERMINE THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER S 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME 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 AND ARRIVE AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED 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 A RRIVE AT A SATISFACTION. (IX) IF THE AO HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOWS THE CLAIM ON BEING SATISFIED I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 13 WITH THE EXPLANAT ION 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 THAT REGARD. 13. APART FROM THE ABOVE PRINCIPLES, WE DEEM IT APPROPRIATE 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 AND GEE VEE ENTERPRISES LTD VS. ADDL. COMMISSIONER OF INCOME TAX (99 ITR 375). IN THE CASE OF SUN BEAM 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 ENQUIRY, THEN THE ASSESSMENT ORDER CAN BE BRANDED AS ERRONEOUS. THE FOLLOWING OBSERVATIONS OF THE HON'BLE DELHI HIGH COURT ARE WORTH 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 CONSIDERATION 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 O F LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMEN T ORDER WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. 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 JUDGMEN TS GALORE LAYING DOWN THE PRINCIPLE 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 APPLICATIO N OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE 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 INQU IRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF, GIVE OCCASION TO I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 14 THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY , THAT SUCH A COURSE OF ACTION WOU LD BE OPEN . 14. IN THE CASE OF GEE VEE ENTERPRISE VS. COMMISSIONER OF INCOME TAX REPORTED IN 99 ITR PAGE 375 , THE HON BLE COURT HAS EXPOUNDED THE APPROACH OF LD. ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER. THE OBSERVATION OF THE HON BLE COURT ON PAGES 38 6 OF JOURNAL READ AS UNDER: - IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOME - TAX OFFICER. THE C OMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRC UMSTANCES OF THE CASE THE INCOME - TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE AS SESS EE IN HIS RETURN. THE REASON IS OBVIOUS . THE POSITION AND FUNCTION OF THE INCOME - TAX OFFICER IS VERY DIFFIDENT FROM THAT OF A CIVIL COURT. THE STATEMENT MADE IN A P LEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON T H E BASIS OF THE PLEADING AND EVIDENCE WHIC H COMES BEFORE IT. THE INCOME - TAX OFFICER IS NO T ONLY ON ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN P ASSIVE IN THE FACE OF THE R ET UR N WHICH IS APP ARENT LY IN ORDER BUT CALLED FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN T HE TRUTH OF THE FA C T S STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE A N INQUIRY IT IS BECAUSE IT IS INCUMBENT ON THE INCOME - TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAD E SUCH AN INQUIRY PRUD E NT THAT T HE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 15 ENQUIRY . THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSU MED TO BE CORRECT. 15 . IN THE LIGHT OF ABOVE , LET US EXAMINE THE FACTS OF THE PRESENT CASE. ACC ORDING TO THE FIRST PROPOSITION OF LEARNED COUNSEL FOR THE ASSESSEE, THE ASSESSING OFFICER HA S RE - OPENED THE ASSESSMENT PROCEEDING IN ORDER TO FIND OUT , WHETH ER SHORT TERM CAPITAL GAIN COMPUTED BY THE A SSESSE CAN BE ADJUSTED AGAINST T H E DEPRE CATION LOSSES BROUGHT FORWARD F R OM EARLIER? NO DOUBT, ASSESSMENT HAS BEEN RE - OPENED ON A LITTLE DIFFERENT REASON BUT BEFORE CONSIDERING ANY ISSUE , WHETHER SET OFF TO BE AL LOWED OR NOT ?, IT IS BUT NATURAL THAT LD. ASSESSING OFFICER WOULD FIRST VERIFY THE AMOUNTS WHICH CAN BE SET OF WITH EACH OTHER. THE COMPUTATION OF SHORT TERM CAPITAL GAIN IS ONE OF THE COMPONENTS FOR VERIFYING THIS FACTOR , THEREFORE , IT SUGGEST S THAT LD. ASSESSING OFFICER HAS APPLIED HIS MIND ON THE FIGURE OF THE SHORT TERM CAPITAL GAIN COMPUTED BY THE ASSESEE. HE HAS EXAMINED THIS AND ONLY THEREAFTER DISALLOWED THIS SET OFF AGAINST BROUGHT FORWARD LOSSES. THE ASSESSING OFFICER HAS APPLIED HIS MIND AND T AKEN A POSSIBLE VIEW AFTER GOING THROUGH RETURN S OF THE ASSESSEE FOR EARLIER YEARS. T HEREFORE , LD. COMMISSIONER IS NOT JUSTIFIED IN TAKING ACTION AGAINST ASSESSMENT ORDER , WHERE LD. ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN LAW. THE LD. COM MISSIONER OUGHT NOT TO HAVE REPLACED THAT POSSIBLE VIEW BY HIS VIEW. 16 . AS FAR AS SECOND PROPOSITION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS CONCERNED, INTERDICTION AVAILABLE IN EXPLANATION C OF SUB - SECTION 1 OF SECTION 263 PUTS AN EMBARGO UPON T H E P OWERS OF THE ASSESSING OFFICER TO TAKE UP A NY ISSUE/MATTER WHICH WAS SUBJECT MATTER OF APPEAL. IN OTHER WORDS, IF AN ISSUE TRAVELLED TO THE COMMISSIONER OF I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 16 INCOME TAX (APPEALS) , THEN , LD. COMMISSIONER HAS BEEN DENUDED FROM HIS POWERS TO TAKE ACTION U/S. 2 63 ON THAT ISSUE. LD. CIT - DEPARTMEN TAL REPRESENTATIVE WOULD CONTEND THAT ISSUE TRAVELLED UP TO COMMISSI ONER OF INCOME TAX (APPEALS) WA S , WHETHER A SET OF THE SHORT TERM CAPITAL GAIN AG AINST BROUGHT FORWARD DEPRECIATION LOSSES CAN BE GRANTED OR NOT . THE C OMPUTATION OF SHORT TERM CAPITAL GAIN WAS NEVER THE SUBJECT MATTER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PROCEEDINGS , T HEREFORE, LD. COMMISSIONER WHILE EXERCISING HIS POWERS U/S. 263 WAS WITHIN HIS REALM OF JURISDICTION TO TAKE ACTION 263. 17 . ON DUE CONSIDERATION OF THIS PROPOSITION, WE ARE OF THE VIEW THAT FOR SETTING OFF OR TELESCOPING OF ANY AMOUNTS THERE WOULD REQUIRE FIRST TWO COMPONENTS OF AMOUNTS , SECTION 251 OF THE INCOME TAX ACT PROVIDES THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) WHILE DISPOSING OF A N APPEAL SHALL HAVE THE FOLLOWING POWERS; NAMELY, HE MAY CONFIRM, REDUCE, ENHA NCE OR ANNUL THE ASSESSMENT. LD. COMMISSIONER SHALL NOT ENHANCE AN ASSESSMENT OR A PENALTY UNLESS HE PROVIDES A REASON ABLE OPPORTUNITY OF SHOWING CAUSE AGAINS T SUCH ENHANCEMENT O R REDUCTION TO THE ASSESSEE. FURTHER THE EXPLANATION APPENDED TO SECT ION 251 AUTHORIZES THE C OMMISSIONER , WHILE DISPOSING OF AN APPEAL TO CONSIDER AND DECIDE ANY MATTER ARISING OUT OF THE PROCEEDING IN WHICH OR D ER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THAT SUCH MATTER WAS NOT RAIS E D BEFORE THE COMMISSIONER BY T H E APPELLANT. THE COMPUTATION OF CAPITAL GAIN IS LINKED WITH T H E ULTIMATE SET OFF, IT IS SAME SOURCE OF INCOME TO BE DETERMINED IN THE HANDS OF ASSESSEE, THEREFORE, HE COUL D HAVE CONSIDER ED THE ULTIMATE AMOUNT REQUIRED TO BE COMPUTED AS A SHORT TERM CAPITAL GAIN. THE SOURCE AND THE ISSUE RELATED TO THAT SOURCE W ERE SUBJECT MATTER OF AN APPEAL AND THEREFORE TO OUR MIND THE INTERDICTION AVAILABLE IN EXPLANATION C APPENDED I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 17 W ITH SECTION 263 SUB - SECTION 1 WOULD COME IN THE WAY OF LD. COMMISSIONER FOR TAKING ACTION U/S. 263 AGAINST THE ASSESSEE. THE IMPUGNED ORDER IS NOT SUSTAINABLE IN VIEW OF THE SECOND PROPOSITION ALSO. 18 . AS FAR AS THE THIRD PROPOSITION IS CONCERNED, LEA RNED COUNSEL OF THE ASSESSEE POINTED OUT THAT ASSESSEE HAD FILED A RETURN DECLARING LOSS FOR RS. 1,26,42,731/ - IN ASSESSMENT YEAR 2003 - 04 AND RS. 95,19,465/ - IN ASSESSMENT YEAR 2004 - 05 . T HE TOTAL LOSSES OF BOTH THESE YEARS COMES TO RS. 2,21,62,196/ - . TH IS AMOUNT WOULD BE FURTHER AMPLIFIED BY THE DEEMED THRUST UPON OF THE DEPRECIATION AMOUNTING TO RS. 1,14,80,000/ - . THUS , TOTAL BROUG HT FORWARD LOSSES WOULD BE MORE THAN 2.29 CRORES THAT IS THE ULTIMATE SALE CONSIDERATION COMPUTED BY THE LD. COMMISSIONER WI TH THE HELP OF SECTION 50(1). THIS AMOUNT OF CAPITAL GAIN WOULD BE ADJUSTED AGAINST THE BROUGHT FORWARD LOSSES WHICH IS TO BE WORKED OUT AFTER MAKING ADDITION OF R S. 1,14,80,000/ - . THE OTHER ANGEL TO THE COMPUTATION IS THAT ASESSEE HAS WORKED OUT BROUGHT FORWARD DEPRECATION LOSSES OF RS. 1,82,62,722/ - . THIS AMOUNT WILL B E INCREASED BY ADDITION OF RS. O F THE DEPRECIATION WHICH IS TO BE THRUST UPON THE ASSESSEE BY A SUM OF RS. 1,14,80,000/ - . THE NET RESULT WILL BE AGAIN ZERO. (RS. 1 , 82 , 62 , 722/ - + RS. 1 , 14 , 80 , 000 DEPRECIATION NOT CLAIMED EARLIER = 2 , 97 , 42 , 722/ - ) . THIS AMOUNT WILL BE AVAILABLE TO THE ASSESSEE AS A BROUGHT FORWARD LOSS ES . IT IS MORE THAN THE SALE PROCEED OF WIND MILL COMPUT ED AT RS . 2,29,60,000/ - . THE NET RESULT WILL BE ZERO. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. D.G. GOPALA GODWA 354 ITR 501 HAS CONSIDERED THIS ASPECT AND HAS OBSERVED AS UNDER: THEREFORE, THE CONDITION PRECEDENT FOR EXERCISING THE REVISIONAL POWER UNDER SECTION 263 OF THE ACT IS T HAT THE ORDER UNDER REVISION SHOULD NOT ONLY BE ERRONEOUS, BUT SUCH ERRONEOUS ORDER SHOULD I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 18 RESULT IN PREJUDICE TO THE INTEREST S OF THE REVENUE. MERE ERROR WOULD NOT CONFER THE JURISDICTION TO EXERCISE THE REVISIONAL POWER UNDER SECTION 263 OF THE ACT. 7. WE HAVE GONE THROUGH THE ORDER PASSED BY THE REVISIONAL AUTHORITY. IT IS A VERY CRYPTIC ORD ER. IT NEITHER POINTS OUT AN ERROR NOR PREJUDICE WHICH HAS CAUSED TO THE REVENUE. AFTER DECLARING THAT THE ORDER IS PREJUDICIAL, IT REFERS TO THE NOTICE BEING IS SUED TO THE ASSESSEE AND THE ASSESSEE FILING REPLY TO THE SAID NOTICE AND THEN THE REVENUE AUTHORITY FEELS THAT IT IS IN A MATTER TO BE READ ADJUDICATED BY THE ASSESSING AUTHORITY AND, THEREFORE, THE MATTER WAS REMANDED FOR FRESH CONSIDERATION. THIS IS NO T THE WAY, THE REVISIONAL AUTHORITY SHOULD EXERCISE THEIR POWER UNDER SECTION 263 OF THE ACT. THE ORDER OF THE REVISIONAL AUTHORITY SHOULD INDICATE THE ERROR COMMITTED BY THE ASSESSING AUTHORITY AND CONSEQUENTIAL PREJUDICE CAUSED TO THE REVENUE BECAUSE OF THE ERRONEOUS ORDER. UNLESS THESE TWO CONDITIONS EXIT, THE REVISIONAL AUTHORITY DOE SOT GET JURISDICTION TO PASS ANY ORDER UNDER SECTION 263 OF THE A CT. ONCE THESE TWO CONDITIONS ARE SET OUT IN THE ORDER, THEN IT IS OPEN TO THE REVISIONAL AUTHORITY TO C ONSIDER THE CASE ON THE MERITS AND PASS FINAL ORDER OR IN HIS VIEWS, REQUIRES SOME ADJUDICATION OR ENQUIRY , THE MATTER CAN BE REMANDED TO THE ASSESSING AUTHORITY . BUT SUCH REMAND SHOULD BE ONLY AFTER SETTING OUT THE FACTS WHICH SHOW ERRONEOUS NATURE OF TH E ORDER AND THE CONSEQUENTIAL PREJUDICE TO THE REVENUE WHICH CONFER JURISDICTION ON THE REVISIONAL AUTHORITY . 8. SEEN FROM THAT ANGLE, IN THE IMPUGNED ORDER THOUGH WE COULD MAKE OUT WHAT IS THE ERROR COMMITTED BY THE REVISIONAL AUTHORITY, CERTAINTY THERE IS NO IOTA OF EVIDENCE TO SHOW HOW IT IS PREJUDICIAL TO I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 19 THE INTEREST OF THE REVENUE. ON THE CONTRARY, IN THE REPLY TO THE NOTICE, THE ASSESSEE HAD FILED A STATEMENT. EVEN IF THE ASSESSMENT IS TO BE MADE SEPA RATELY FOR THE LAND ON LONG - TERM BASIS AND TO THE BUILDING ON SHORT - TERM BASIS. THE ASSESSEE IS NOT LIABLE TO PAY ANY TAX FOR THE BUILDING. THE ASSESSE HAS DEMONSTRATED THAT IN NO EVENT THE ORDER PASSED BY THE ASSESSING OFFICER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THAT ASPECT HAS NOT BEE N CONSIDERED AND THERE IS NO REFERENCE TO THAT ASPECT IN THE ENTIRE ORDER PASSED BY THE REVISIONAL AUTHORITY AND BY A CRYPTIC ORDER, THE MATTER IS REMANDED TO THE ASSESSING AUTHORITY. THOUGH THE TRIBUNAL WAS NOT EXPECTED TO GO INTO THE MERITS OF THE CASE, IN ORDER TO DEMONSTRATE THAT THE ORDER PASSED BY THE ASSESSING AUTHORITY EVEN IF IT IS ERRONEOUS, IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEY HAVE SET OUT COMPUTING OF CAPITAL GAINS AND DEMONSTRATED THAT THE ORDER WAS NOT PREJUDICIAL. THEREF ORE, THE ORDER PASSED BY THE REVISIONAL AUTHORITY IS ILLEGAL AND RIGHTLY IT HAS BEEN SET ASIDE. 9. IN THE LIGHT OF WHAT WE HAVE STATED ABOVE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10. IN THAT VIE W OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL. ACCORDINGLY, THE APPEAL IS DISMISSED. 19 . IN THE CASE IN HAND , EVEN IF FO R THE SAKE OF ARGUMENT, WE ALSO ASSUME THAT LD. ASSESSING OFFICER HAS COMMITTED AN ERROR BY NOT COMPUTING THE TRUE CAPITAL GAIN WITH THE APPLICATION U/S. 50(1) THEN ALSO ULTIMATELY NO PREJUDICE HAS BEEN CAUSED TO THE REVENUE. THEREFORE, THE I.T.A NO.1430 /AHD/20 11 A.Y. 2005 - 06 PAGE NO SHREE YOGI ST EELS PVT. LTD VS. DCIT 20 IMPUGNED ORDER IS NOT SUSTAINABLE IN LAW. WE ALLOW THE APPEAL OF ASSESSEE AND QUASH THE ORDER OF LD. COMMISSIONER . ORDER PR ONOUNCED IN THE OPEN COURT ON 10 - 06 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 10 /06 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,