Seal For Life India Pvt. Ltd., (Formerly known as Berry Plastics Pvt. Ltd.), Vadodara V. The Pr. CIT, Vadodara

ITA 1543/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8590 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition; Assessment record
• Section: 142(1); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.1543/AHD/2015 / ASSTT. YEAR: 2009-2010 SEAL FOR LIFE INDIA P.LTD. (FORMERLY KNOWN AS BERRY PLASTICS PVT. LTD.) PLOT NO.17 GIDC SAVLI, MANJUSAR VADODARA 391 775 PAN : AACCT 3009 K VS PR.COMMISSION E R OF INCOME TAX VADODARA. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI SAUMYA SHETH, AR REVENUE BY : SHRI SURENDRA KUMAR, CIT-DR / DATE OF HEARING : 11/09/2017 / DATE OF PRONOUNCEMENT: 14/09/2017 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE A SSESSEE AGAINST ORDER PASSED BY THE LD.PR.COMMISSIONER OF INCOME TAX, UND ER SECTION 263 (263 ORDER FOR SHORT) OF THE INCOME TAX ACT, 1961 IN TH E ASSTT.YEAR 2009-10. 2. BRIEF ACTS OF THE CASE ARE THAT THE ASSESSEE-COM PANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF JOI NT COATING SYSTEMS COMPRISING OF HEAT SHRINKABLE SLEEVES AND ACCESSORI ES. IT HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 30.9.2009 DECLARING TOT AL INCOME AT RS.11,56,74,030/-. THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY ITA NO.1543/AHD/2015 2 ASSESSMENT, AND ASSESSMENT ORDER UNDER SECTION 143( 3) R.W.S SECTION 144C OF THE INCOME TAX ACT WAS PASSED ON 14.3.2013 WHEREBY THE LD.AO HAS DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS .11,63,17,900/-. ON SCRUTINY OF THE ASSESSMENT RECORD, THE LD.PR.COMMIS SIONER HAS FORMED OPINION THAT THE ASSESSEE HAD UNUTILIZED MODVAT CREDIT AMOU NTING TO RS.52,31,918/- AS PER SECTION 145A OF THE ACT, THIS UNUTILIZED CEN VAT CREDIT SHOULD FORM PART OF CLOSING STOCK. OMISSION AT THE END OF THE AO NOT TO TREAT THIS UNUTILIZED CENVAT CREDIT AS A PART OF CLOSING STOCK RENDERED HIS ORDER ERRONEOUS WHICH IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. 3. SIMILARLY, HE OBSERVED THAT THE ASSESSEE HAD MAD E PAYMENT TO PF, EPF AND SUPERANNUATION GRATUITY FUND AMOUNTING TO RS.15 ,58,850/-. ACCORDING TO THE CIT THIS CONTRIBUTION WAS NOT MADE TOWARDS AN A PPROVED GRATUITY FUND CREATED BY THE ASSESSEE, AND THEREFORE, IT OUGHT TO HAVE BEEN DISALLOWED. OMISSION ON THE PART OF THE AO NOT TO CONDUCT AN IN QUIRY AND ALLOWING THESE AMOUNT HAS RESULTED HIS ORDER AS ERRONEOUS, WHICH I S PREJUDICIAL TO THE INTEREST OF THE REVENUE. ARMED WITH THESE TWO REASONS, THE LD.COMMISSIONER HAD ISSUED A SHOW CAUSE NOTICE UNDER SECTION 263 OF THE INCOME TAX ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAS MADE AN ELABORATE SUBMISSIONS WHICH HAS BEEN REPRODUCED BY THE LD.COM MISIONER ON PAGE NOS.2 TO 10 OF THE IMPUGNED ORDER. THE LD.CIT FORMED AN OPINION THAT SINCE INQUIRIES WERE NOT CONDUCTED BY THE AO, THEREFORE, HIS ORDER DESERVES TO BE SET ASIDE TO THIS EXTENT. HE RELEGATED THESE ISSUE S TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 4. WHILE IMPUGNING ORDER OF THE LD.CIT, THE LD.COUN SEL FOR THE ASSESSEE HAS RAISED TWO FOLD OF SUBMISSIONS. HE POINTED OUT THAT ACTION UNDER SECTION 263 SHOULD BE TAKEN IF AN ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS IT ITA NO.1543/AHD/2015 3 CAUSED SOME PREJUDICE TO THE REVENUE. HE CONCEDED THAT AS FAR AS FIRST CONTENTION IS CONCERNED, THERE MAY NOT BE MUCH DISP UTE, BECAUSE THE AO HAS NOT ISSUED SHOW CAUSE NOTICE UNDER SECTION 142(1) F OR INQUIRING THESE TWO ISSUES. BUT THE SECOND CONTENTION IS NOT AVAILABLE . THERE IS NO PREJUDICE TO THE REVENUE FOR NON-CONSIDERATION OF THIS ISSUE. H IGHLIGHTING HIS PROPOSITION, HE SUBMITTED THAT AS FAR AS ISSUE REGARDING CENVAT CREDIT IS CONCERNED, THE LD.COMMISISONER SOUGHT EXPLANATION OF THE ASSESSEE QUA A SUM OF RS.52,31,918/-. THE ASSESSEE HAS MADE ELABORATE EX PLANATION ABOUT THIS ISSUE WHICH HAS BEEN REPRODUCED BY THE LD.CIT. HE TOOK U S THROUGH PARA 18 TO 22, WHICH READS AS UNDER: 18. FURTHER WITH RESPECT TO CLOSING BALANCE OF CEN VAT OF RS. 52,31,918/- [ RS. 35,59,038/- + RS.16,72,880/-. W E SUBMIT THAT THE SUM OF RS. 16,72,88Q/-IS WITH RESPECT TO SERVICE TA X CREDIT CHARGED ON VARIOUS INPUT EXPENDITURES. THE SOME CAN BE USED ON PAYMENT OF EXCISE DUTY AS WELL AS SERVICE TAX LIABILITY IF ANY. THE A SSESSES HAS THEREFORE DEBITED SUCH EXPENDITURE NET OF SERVICE TAX I.E. AF TER REDUCING AMOUNT OF SERVICE TAX. SUCH SERVICE TAX IS THEREFORE NOT CLAI MED AS DEDUCTION UNDER THE ACT. ACCORDINGLY UNUTILIZED SERVICE TAX C REDIT WAS ALREADY TAXED UNDER THE ACT. THE ASSESSES HAS ALREADY PAID TAX ON RS 16,72.880/ ON SUCH AMOUNT. WE THEREFORE SUBMIT THAT THE SAME IS THEREFORE NOT REQUIRED TO HE ADDED HACK TO THE CRED IT SIDE OF DOSING STOCK. FURTHER SERVICE TAX IS NOT RELATING TO GOODS AND THEREFORE NOT REQUIRED TO BE ADDED TO VALUE OF CLOSING STOCK. SIN CE SERVICE TAX CREDIT IS NOT DEBITED PROFIT AND LOSS ACCOUNT THE SAME IS NOT REQUIRED TO BE ADDED BACK TO THE CREDIT SIDE OF CLOSING STOCK, IN CASE YOUR OFFICE PROPOSED TO ADD THE SAME TO THE CREDIT SIDE, YOUR O FFICE IS ALSO REQUIRED TO DEBIT SUCH AMOUNT TO THE PROFIT AND LOSS ACCOUNT (BY INCREASE THE VALUE OF EXPENDITURE.) HAVING NO IMPACT ON THE NET PROFIT OF THE ASSESSEE COMPANY. 19. WITH RESPECT TO UNUTILIZED CENVAT CREDIT OF RS. 35,59,038/-, WE SUBMIT THAT THE ASSESSES COMPANY IS FOLLOWING THE E XCLUSIVE METHOD OF ACCOUNTING FOR ACCOUNTING OF CENVAT CREDIT IN ITS B OOKS OF ACCOUNTS. THE CENVAT DUTY PAID ON PURCHASES OF RAW MATERIAL I S DEBITED TO CENVAT CREDIT RECEIVABLE (INPUTS) ACCOUNT, AS AND W HEN THE CENVAT ITA NO.1543/AHD/2015 4 CREDIT IS ACTUALLY UTILIZED AGAINST THE PAYMENT OF EXCISE DUTY ACCOUNT AND CENVAT CREDIT RECEIVABLE ACCOUNT IS CREDITED. T HE PURCHASE COST OF INPUTS IS NET OF SPECIFIED DUTY ON INPUTS. THERE FORE INPUTS CONSUMED AND THE INVENTORIES OF INPUTS ARE VALUED ON THE BAS IS OF PURCHASE COST NET OF SPECIFIED DULY ON INPUTS. THE DEBIT BALANCE IN CENVAT CREDIT RECEIVABLE (INPUTS) ACCOUNT IS SHOWN ON THE ASSET S IDE UNDER THE HEAD ADVANCES. 20. FURTHER WE SUBMIT THAT THE ASSESSES HAS ALREAD Y OFFERED THE UNUTILIZED CENVAT CREDIT OF RS. 35,59,038/- TO TAX BY REDUCING THE SAID AMOUNT FROM THE COST OF TOTAL PURCHASE AND SERVICES DEBITED TO PROFIT AND LOSS ACCOUNT. ACCORDINGLY THE UNUTILIZED CENVAT CREDIT OF RS.35,59,038/- WAS ALREADY TAXED UNDER THE ACT. YOU R OFFICE MAY NOTE THAT PURCHASES AND SERVICES ARE ACCOUNTED NET OF CB NVAT CREDIT IN THE HOOKS OF ACCOUNTS. WHITE DEBITED THE COST OF PURCHA SE THE ASSESSES HAS ONLY DEBITED THE COST NET OF CENVAT CREDIT OF PROFI T AND LOSS ACCOUNT AND CENVAT CREDIT IS SEPARATELY DEBITED TO ASSET AC COUNT. WE THEREFORE SUBMIT THAT THE COST OF PURCHASE WAS DEBI TED TO PROFIT AND LOSS ACCOUNT AFTER REDUCING THE CENVAT CREDIT AVAILABLE ON SUCH PURCHASE, 2 1 , BASED UPON THE ABOVE- WE SUBMIT THAT THE ASSE SSEE FOLLOWS EXCLUSIVE METHOD OF ACCOUNTING THE CENVAT. ACCORDIN GLY, WHEN THE MATERIAL IS PURCHASED THE SAME IS DEBITED TO PROFIT AND LOSS ACCOUNT WITHOUT INCLUDING ' THEREIN THE AMOUNT OF CENVAT AV AILABLE AS CREDIT. THIS AMOUNT IS THEREFORE NOT CLAIMED AS DEDUCTION A S PART OF THE PURCHASE PRICES IT IS SEPARATELY DEBITED TO THE CEN VAT CREDIT RECEIVABLE ACCOUNT (PART OF THE CURRENT ASSETS). AS YOUR OFFICE WILL APPRECIATE THAT THE FUNCTION OF CLOSING STOCK IS TO NULLIFY THE: EFFECT OF DEBIT MADE 1O THE PROFIT AND LOSS ACCOUNT ON ACCOUN T OF PURCHASES OF RAW MATERIAL BY CREDITING THE AMOUNT OF THE CLOSING STOCK, TO THE EXTENT THE MATERIAL IS NOT UTILIZED DURING THE YEAR THEREF ORE IF MATERIAL WORTH OF RS. 100 IS PURCHASED. RS. 100 IS DEBITED TO PROF IT AND TO.SS ACCOUNT. OUT OF THE SAID, SUM OF RS30 IS NOT SOLD/ UTILISED AT THE END OF THE YEAR, THEN RS.30 IS CREDITED TO PROFIT AND LOSS ACCOUNT S O THAT THE NET EFFECT OF DEBITING RS.70 BEING THE COST OF MATERIAL SOLD/ CON SUMED DURING THE YEAR. THEREFORE, IF THE AMOUNT OF CENVAT IS NOT INC LUDED IN RS. 100 DEBITED TO PROFIT AND LOSS ACCOUNT, THE QUESTION OF INCLUDING THE SAME IN THE CLOSING STOCK DOES NOT ARISE. SECTION 145A PRES CRIBES THAT THE ASSESSEE OUGHT TO FOLLOW THE INCLUSIVE METHOD OF AC COUNTING FOR CENVAT WHEREIN THE AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT AND CONSEQUENTLY THE STOCK ETC. SHOULD HE INCLUSIVE OF CENVAT. ITA NO.1543/AHD/2015 5 22. WE FURTHER SUBMIT THAT THE VALUATION OF STOCK O F RAW MATERIALS IS MADE EXCLUDING THE VALUE OF CENVAT CREDIT IN VIEW O F THE ACCOUNTING STANDARD 2 ISSUED BY INSTITUTE OF CHARTED ACCOUNTAN TS OF INDIA. PURCHASES ARE ACCOUNTED NET OF CENVAT SINCE THE CRE DIT OF THE CENVAT IS AVAILABLE AGAINST THE PAYMENT OF EXCISE D UTY ON SALES. 5. HE FURTHER CONTENDED THAT IN PURSUANCE OF ORDER UNDER SECTION 263, THE ASSESSMENT FRAMED BY THE AO, WHEREIN HE MADE ADDITI ON. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) W HO HAS DECIDED THE APPEAL VIDE ORDER DATED 29.12.2016. HE PLACED ON RECORD C OPY OF THE CIT(A)S ORDER. HE POINTED OUT THAT THE LD.CIT(A) HAS FOLLO WED ORDER PASSED BY HIS PREDECESSOR IN THE ASSTT.YEAR 2010-11, AND DIRECTED THE AO TO CARRY OUT SAME EXERCISE AS WAS DIRECTED IN THE ASSTT.YEAR 2010-11. HE POINTED OUT THAT THE APPEAL FOR THE ASSTT.YEAR 2010-11 WAS DECIDED VIDE ORDER DATED 1.12.2014 I.E. MUCH PRIOR TO THE ACTION TAKEN BY THE LD.COMMISSION ER UNDER SECTION 263. THIS ORDER WAS ALSO BROUGHT TO THE NOTICE OF THE LD .COMMISSIONER AND HE WAS APPRAISED THAT THERE WAS NO PREJUDICE TO THE REVENUE ON THIS ISSUE. SIMILARLY, HE POINTED OUT THAT AS FAR AS SECOND POINT IS CONCE RNED, THE ASSESSEE HAS POINTED OUT TO THE LD.COMMSSIONER THAT OUT OF TOTAL SUM OF RS.15,58,850/- ONLY RS.1,88,670.0 WAS CONTRIBUTED TOWARDS GRATUITY FUND. DIRECTION HAS BEEN ISSUED BY THE LD.COMMISSIONER FOR RECONSIDERATION O F THE ISSUES QUA THIS AMOUNT. SIMILAR ISSUE AROSE IN THE ASSTT.YEAR 2010 -11 WHEREIN A SUM OF RS.1,56,612/- WAS DISALLOWED BY THE LD. AO ON ACCOU NT OF PAYMENT MADE BY THE ASSESSEE TOWARDS UNAPPROVED GRATUITY FUNDS. TH E LD.COMMISISONER HAS HELD THAT THE CONTRIBUTION GIVEN TO LIC WHICH WAS A RECOGNIZED GRATUITY FUND, AND IT COULD NOT BE DISALLOWED. THIS ORDER OF THE LD.CIT(A) HAS BECOME FINAL ON BOTH THESE ISSUES, BECAUSE NONE HAS CHALLENGED I T. IN SPITE OF APPRAISING THIS DECISION, THE LD.COMMSISOINER DID NOT CONSIDER BOTH THE ISSUE ON MERIT, AND SET ASIDE THE ASSESSMENT FOR FURTHER INQUIRY. THE LD.COMMISSIONER OUGHT ITA NO.1543/AHD/2015 6 TO HAVE CONSIDERED THESE ISSUES, AND THEREFORE, OUG HT TO HAVE DROPPED 263 PROCEEDINGS. 6. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT ADMI TTEDLY, THE AO HAS NOT CARRIED OUT ANY INVESTIGATION. HE HAS NOT TOUCHED BOTH THESE ISSUES. THIS ORDER PASSED BY THE AO IS AN ERRONEOUS ORDER. UNLE SS SOMEBODY CARRIED OUT AN EXERCISE, THEN HOW IT COULD BE SAID THAT PREJUDI CE HAS BEEN CAUSED TO THE REVENUE OR NOT. IN OTHER WORDS, ACCORDING TO THE L D.CIT FOR DETERMINING THE ESCAPMENT OF INCOME FROM TAX, NET AN INQUIRY IS A M UST. IN THE ABSENCE OF ANY INQUIRY, IT IS NOT PRACTICALLY POSSIBLE TO FIND THE PREJUDICE CAUSED TO THE REVENUE. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. BEFORE ADVERTING TO THE FACTS OF THE PRESE NT CASE, WE DEEM IT PERTINENT TO TAKE NOTE OF FUNDAMENTAL TESTS PROPOUNDED IN VAR IOUS JUDGMENTS RELEVANT FOR JUDGING THE ACTION OF THE CIT TAKEN UNDER SECTI ON 263 OF THE ACT. IT IS ALSO PERTINENT TO OBSERVE THAT THE LD.COUNSEL FOR THE AS SESSEE HAS FILED A PAPER BOOK CONTAINING 20 JUDGMENTS. THE ITAT IN THE CASE OF M RS.KHATIZA S. OOMERBHOY VS. ITO, MUMBAI, 101 TTJ 1095 ANALYSED IN DETAILS VARIOUS AUTHORITATIVE PRONOUNCEMENTS INCLUDING DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES, 243 ITR 83 AND HAS PROPOUNDED THE FOLLOWING BROADER PROPOSITION TO JUDGE ACTION OF CI T TAKEN UNDER SECTION 263: (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 EVER Y TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTIO N WILL BE ATTRACTED. ITA NO.1543/AHD/2015 7 (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 ERRONEOU S ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDIC IAL 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 DOES NOT AGREE. IF CANN OT 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 AND DETERMINE T HE 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 L AW 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 ARRIVE 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 BE ING SATISFIED 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 THAT REGARD. 8. APART FROM THE ABOVE, WE WOULD LIKE TO TAKE NOTE OF OBSERVATION OF THE HONBLE DELHI HIGH COURT I THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD., 343 ITR 329 (DEL). THE RELEVANT PART OF THE JUDGME NT READ AS UNDER: ITA NO.1543/AHD/2015 8 18 . THIS DISTINCTION MUST BE KEPT IN MIND BY THE COMMIS SIONER OF INCOME-TAX WHILE EXERCISING JURISDICTION UNDER SECT ION 263 OF THE ACT AND IN THE ABSENCE OF THE FINDING THAT THE ORDE R IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCIS E OF JURISDICTION UNDER THE SAID SECTION IS NOT SUSTAINABLE. IN MOST CASES OF ALLEGED INADEQUATE INVESTIGATION, IT WILL BE DIFFICULT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER, WHO HAD CONDUCTED ENQUIRI ES AND HAD ACTED AS AN INVESTIGATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. THE ORDER OF THE ASSESSING OF FICER MAY BE OR MAY NOT BE WRONG. CIT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE ORDER IS ERRONEOUS. AN ORD ER OF REMIT CANNOT BE PASSED BY THE CIT TO ASK THE ASSESSING OF FICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECO ME ERRONEOUS BECAUSE ON REMIT, THE ASSESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT MUST AFTER RECORDING RE ASONS HOLD THAT THE ORDER IS ERRONEOUS. THE JURISDICTIONAL PRE CONDITION STIPULATED IS THAT THE CIT MUST COME TO THE CONCLUS ION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NOTICE THAT THE MATERIAL WHICH THE CIT CAN RELY INCLUDES N OT ONLY THE RECORD AS IT STANDS AT THE TIME WHEN THE ORDER IN Q UESTION WAS PASSED BY THE ASSESSING OFFICER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINATION BY THE CIT [SEE CIT VS. SHR EE MANJUNATHESWARE PACKING PRODUCTS, 231 ITR 53 (SC)]. NOTHING BARS/PROHIBITS THE CIT FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MATERIAL/EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. 9. IN THE LIGHT OF THE ABOVE, LET US EXAMINE FACTS OF THE PRESENT CASE. THE ASSESSEE HAS DEMONSTRATED BEFORE THE LD.COMMISSIONE R THAT IN THE ALLEGED AMOUNT OF UNUTILISED CENVAT CREDIT OF RS.52,31,918/ - A SUM OF RS.16,72,880/- REPRESENTING SERVICE TAX CREDIT CHAR GED ON VARIOUS INPUT EXPENDITURE. THIS AMOUNT WAS NOT CLAIMED AS DEDUCT ION. THE ASSESSEE ALREADY PAID TAX ON THIS AMOUNT. THE LD.COMMISSION ER DID NOT DISPUTE IT. WITH REGARD TO THE BALANCE RS.35,59,038/-, IT WAS C ONTENDED BY THE ASSESSEE THAT WHEN IT HAD PURCHASED RAW-MATERIAL, THE SAME I S DEBITED TO PROFIT & LOSS ACCOUNT WITHOUT INCLUDING THEREIN THE AMOUNT CENVAT AVAILABLE AS CREDIT. ITA NO.1543/AHD/2015 9 THUS, ACCORDING TO THE ASSESSEE, IT HAS NOT CLAIMED AS DEDUCTION AS A PART OF PURCHASES. IT IS SEPARATELY DEBITED TO CENVAT CRED IT RECEIVABLE ACCOUNT. IF THAT WAS THE SITUATION, WHICH HAS BEEN VERIFIED IN THE ASSTT.YEAR 2010-11 BY THE LD.CIT(A) VIDE ORDER DATED 1.12.2014 WHAT WAS T HE OCCASION FOR THE LD.COMMISSIONER TO RELEGATE THIS ISSUE TO THE AO WI THOUT VERIFYING THE DETAILS ON MERIT. THE AO HAS PASSED THE ASSESSMENT ORDER I N PURSUANCE OF 263 ORDER WHICH WAS CHALLENGED IN APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) HAS FOLLOWED ORDER OF THE PREDECESSOR IN THE ASSTT.YEAR 2010-11 DATED 1.12.2014. HAD THE LD.COMMISSIONER APPLIED HIS MIND AND LOOKED INTO THE ISSUE ON MERIT, ATLEAST THIS UNNECESSARY EXERCISE SHOULD HAVE BEEN AVOIDED. AS FAR AS SECOND ISSUE IS CONCERNED, A CONCLUSIVE FINDING HAVE BEEN RECORDED BY THE LD.CIT(A) IN THE ASSTT.YEAR 2010-11 BEFORE THE ORDER PASSED U NDER SECTION 263 THAT PAYMENT OF ALLEGED GRATUITY WAS TOWARDS A APPROVED FUND. THIS ORDER WAS NOT CHALLENGED. THE FINDING RECORDED BY THE LD.CIT(A) IN THE ASSTT.YEAR 2010-11 ON THIS ISSUE READS AS UNDER: 4.2 THE REASONS AS MENTIONED BY THE AO FOR MAKING DISALLOWANCE OF CONTRIBUTION OF RS.1,56,612/- AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS ABOVE SUBMISSION OF AR OF THE APPELLANT HAVE BEEN CONSIDERED. ON THIS ISSUE, THE SUBMISSION OF AR OF THE APPELLANT AS REPRODUCED ABOVE IS FOUND TO BE TENABL E. THE APPELLANT HAS MADE PAYMENT TO UC'S RECOGNIZED GROUP GRATUITY FUND BASED ON THE ACTUARIAL VALUATION DONE BY THE UC. FURTHER THE SCHEME IS FORMULATED IN COMPLIANCE WITH PART C OF THE SCHEDUL E - IV OF THE ACT AND TAX BENEFITS ARE AVAILABLE AS PROVIDED IN INCOM E TAX RULES.' THE APPELLANT HAS DULY DISCLOSED IN 'SCHEDULE 20 SIGNIF ICANT ACCOUNTING POLICIES AND NOTE'S FORMING PART OF ACCOUNTS' THAT IN RESPECT OF GRATUITY, CONTRIBUTIONS ARE MADE TO LIC'S RECOGNIZE D GROUP GRATUITY SCHEME BASED ON AMOUNT DEMANDED BY LIC OF INDIA. TH US, THE APPELLANT HAS MADE PAYMENT TO AN APPROVED GRATUITY FUND AND THEREFORE PAYMENT MADE IS ALLOWABLE AS DEDUCTION U/ S.36(1)(V) OF THE ACT. IN VIEW OF THESE FACTS, THE ABOVE ADDITION OF RS.1,56,612/- IS HEREBY DELETED. THUS, THE GROUND OF APPEAL NO.4 OF THE APPELLANT IS ALLOWED. ITA NO.1543/AHD/2015 10 10. AFTER TAKING INTO ALL THESE FACTORS, WE ARE OF THE VIEW THAT NO CASE IS MADE OUT FOR TAKING ACTION UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. WE ALLOW THE APPEAL OF THE ASSESSEE AND QUASH THE O RDER PASSED UNDER SECTION 263 OF THE ACT BY THE LD.PR.COMMISSIONER. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 14 TH SEPTEMBER, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER