M.P. State Industrial Development Corporation Ltd, Bhopal V. PR CIT-1, Bhopal

ITA 158/Ind/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3800 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 01-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Assessee Lawyers: S GIRISH AGRAWAL; AJAY K
• Keywords: Revision of order; Depreciation; Period of limitation; Bad and doubtful debts; Prejudicial to interest; Tax effect; Provision of bad debts
• Section: 263; 143(3); 142(1); 143(2); 43; 13; 119; 22; 101; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER VIRTUAL HEARING ITA NO.158/IND/2020 ASSESSMENT YEAR: 2015-16 M/S. M.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. BHOPAL PAN:AACCM0327M : APPELLANT V/S PR. CIT -1, BHOPAL : RESPONDENT APPELLANT BY S/SHRI GIRISH AGRAWAL, AJAY K. CHHAJED & MS. NISHA LAHOTI, ARS REVENUE BY SHRI RAJEEB JAIN, CIT-DR DATE OF HEARING 18.08.2021 DATE OF PRONOUNCEMENT 08.10.2021 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE O F THE ASSESSEE FOR ASSESSMENT YEAR 2015-16 IS DIRECTED AG AINST THE ORDER OF LD. PR. COMMISSIONER OF INCOME TAX(APPEALS ) (IN SHORT M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 2 LD. CIT],-1 BHOPAL DATED 13.02.2020. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY THE LD. PR. CIT U/S 26 3 OF THE INCOME TAX ACT IS ILLEGAL AND BAD IN LAW AND IS PRAYED TO BE Q UASHED. 2. THAT THE ORDER PASSED U/S 263 OF THE INCOME TAX ACT DIRECTING THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT IS VAGU E, MECHANICAL AND WITHOUT APPLICATION OF MIND BY THE LD. PR. CIT WHIC H IS BAD IN LAW AND PRAYED TO BE QUASHED. 3. THAT THE LD. PR. CIT GROSSLY ERRED IN PASSING TH E ORDER WHEN NO ISSUE WAS IDENTIFIED IN THE NOTICES ISSUED BY THE PR. CIT , WHEREAS THE NOTICE U/S 263 WAS BASED ON THE INFORMATION AS PER THE AUD IT OBJECTION WHICH THE PR. CIT HAVING ALLEGED THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 4. THAT THE REVISION ORDER PASSED U/S 263 PURSUANT TO THE AMENDMENT MADE W.E.F. 1 ST JUNE 2015 IS BAD IN LAW. 5. THAT THE PR. CIT GROSSLY ERRED IN LAW IN HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS VERY CASUAL AND PASSED IN A HURRIED MANNER DID NOT EXAMINE ALL THE MATERIAL FACTS OF TH E CASE AND WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 6. THAT THE ORDER PASSED U/S 263 WITHOUT GIVING A P ROPER OPPORTUNITY TO THE ASSESSEE AND HAVE NOT APPRECIATED THE ISSUES WH ICH WERE EXPLAINED ON THE VARIOUS ITEMS IDENTIFIED BY THE PR . CIT IN HIS ORDER IS BAD IN LAW AND PRAYED TO BE QUASHED. 7. THE EACH GROUNDS IS DEPENDENT OF AND WITHOUT PRE JUDICE TO THE OTHER GROUNDS RAISED HEREIN 2. THE REGISTRY HAS INFORMED THAT THE PRESENT APPEA L IS DELAYED BY 37 DAYS. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE DELAY IN FILING THE APPEAL IS DUE TO COUNTRY-WIDE LOCKDOWNS IMPOSED BY THE GOVERNMENT IN WAKE OF COVID-19 OUTBREAK. TAKING COGNIZANCE OF THE SAME THE GOVERNMENT HAD INTRODUCED THE TAXAT ION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PRO VISIONS) ACT 2020 IN ORDER TO RELAX/EXTEND THE STATUTORY TIMELIN ES FOR VARIOUS M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 3 COMPLIANCE UNDER VARIOUS LAWS INCLUDING THE INCOME TAX ACT 1961. PRAYER WAS MADE TO CONDONE THE DELAY. LD. DR OPPOSED THE REQUEST. WE HOWEVER UNDER THE GIVEN FACTS AND C IRCUMSTANCES OF THE CASE, ARE SATISFIED WITH THE REASON GIVING R ISE TO DELAY IN FILING THE INSTANT APPEAL. WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION ON MERITS. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE FINANCIAL AS SISTANCE FOR INDUSTRIAL DEVELOPMENT AND INFRASTRUCTURE. IT DECLA RED TOTAL LOSS AT RS.1,55,62,351/- IN THE RETURN FILED ON 30.09.20 15. THE CASE WAS SELECTED FOR LIMITED SCRUTINY THROUGH CASS AND THE NOTICES U/S 143(2) & 142(1) OF THE ACT DULY SERVED UPON THE ASSESSEE, ASSESSED TOTAL LOSS AT RS.1,55,63,351/-. 4. SUBSEQUENTLY, LD. PR. CIT, BHOPAL INVOKED THE PR OVISIONS OF SECTION 263 OF THE ACT AND ISSUED FOLLOWING SHOW CA USE NOTICE TO THE ASSESSEE (RELEVANT EXTRACT IS REPRODUCED BELOW) : PLEASE REFER TO THE ORDER U/S 143(3) OF THE IT ACT , 1961 DATED 18.12.2017 PASSED BY THE ITO -2(1), BHOPAL FOR A.Y. 2015-16, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCIA L ASSISTANCE. ON PERUSAL FOR THE ASSESSMENT ORDER AND CASE RECORD, I T IS NOTICED THAT THE ASSESSEE COMPANY HAD DISCLOSED NET PROFIT FOR RS.18 ,24,66,515/- AND M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 4 CREDITED AN AMOUNT RS.14,87,59,039/- UNDER THE HEAD PROVISION WRITE OFF AND EXTRAORDINARY ITEMS, OUT OF THIS RS.14,75, 00,000/- ( SUCH AMOUNT WAS INCLUDED IN RS.14,87,59,039/-) WAS DEDU CTED IN THE COMPUTATION OF INCOME BUT SUCH AMOUNT WAS NOT WITHD RAWN FROM ANY RESERVE PROVISION. AS PER NOTE NO.15 BELOW SL. NO.3 THE CHARTED ACCOUNTED CERTIFIED THAT THERE IS AN OUTSTANDING OF RS.14376.40 LAKH (PRINCIPAL RS.14214.43 LAKH AND INTEREST OF RS.161. 97 LAKH) UNDER THE ICD PORTFOLIO. THE ENTIRE ICD PORTFOLIO HAS BEEN CL ASSIFIED AS LOSS ASSETS IN ACCORDANCE WITH THE POLICY. DURING THE FINANCIAL YEAR, CORPORATION HAS RECOVERED RS.1475.00 LAKH TOWARDS PRINCIPAL & R S.245.13 LAKH TOWARDS INTEREST. IN VIEW OF SECTION 41(1) OF THE PROVISION OF THE AC T THE RECOVERED AMOUNT OF RS.14,75,00,000/- WHICH WAS CLASSIFIED AS LOSS A SSETS AND SUBSEQUENTLY RECOVERED DURING THE PREVIOUS YEAR WAS REQUIRED TO BE ADDED BACK TO THE ASSESSEES INCOME WHICH WAS NOT D ONE BY THE AO. THE OMISSIONS RESULTED IN UNDER ASSESSMENT OF INCOM E TO THAT EXTENT RESULTED IN NOTIONAL TAX EFFECT OF RS.52,77,406/-. KEEPING IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS CONSIDERED TO BE ERRONEOUS IS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, AND THEREFO RE, I, PROPOSE TO INVOKE POWERS VESTED U/S 263 OF THE INCOME TAX ACT, 1961 I N RESPECT OF THE ORDER REFERRED TO ABOVE. YOU ARE HEREBY GIVEN AN OP PORTUNITY OF BEING HEARD AS PER SECTION 263(1) OF THE INCOME TAX ACT T O PRESENT YOURSELF IN PERSON OR THROUGH AN AUTHORIZED REPRESENTATIVE ON 2 8.01.2020 AT 11:30 AM TO EXPLAIN YOUR CASE. IN CASE NO REPLY IS RECEIV ED BY STIPULATED DATE, IT WILL BE PRESUMED THAT YOU HAVE NOTHING TO SAY IN THE MATER AND A DECISION WILL BE TAKEN ON THE BASIS OF MATERIAL AVA ILABLE IN THIS OFFICE. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L CHALLENGING THE JURISDICTION OF LD. PCIT ASSUMED U /S 263 OF THE ACT. M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 5 6. LD. COUNSEL FOR THE ASSESSEE APART FROM PLACING RELIANCE ON WRITTEN SUBMISSIONS PLACED ON RECORD AND RELEVANT E XTRACT REPRODUCED IN THE SUBSEQUENT PARAS AND ALSO SUBMITT ED THAT PROVISION OF SECTION 41(1) CANNOT BE THE BASIS FOR INITIATING PROCEEDING U/S 263 OF THE ACT AND THE LD. PR. CIT W AS NOT JUSTIFIED IN ALLEGING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE BECAUSE THE LD. AO HAS EXAMINED THE DETAIL S AND APPLIED HIS MIND AND AFTER MAKING DUE VERIFICATION FRAMED THE ASSESSMENT. LD. COUNSEL FOR THE ASSESSEE REFERRED T O THE FOLLOWING ARGUMENTS MENTIONED IN THE WRITTEN SUBMISSIONS: THIS SUBMISSION IS BEING MADE AS THE IMPUGNED ORDER PASSED U/S 263 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERES T OF THE REVENUE. THE ISSUE STATED BY LD. PR.CIT IN THE SHOW CAUSE NOTICE ISSUED U/S 263 ON 13.01.2020 HAS ALREADY BEEN DEALT AND CONSIDERED BY LD. AO WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) ON 18.12.20 17. THE SUBMISSION IS PLACED ON RECORD FOR THE FOLLOWIN G CONTENTIONS RAISED BY THE ASSESSEE IN THE INSTANT APPEAL SR. NO. CONTENTIONS OF THE ASSESSEE CHALLENGING THE ORDER U/S 263 A NON APPLICATION OF MIND BY LD. PR.CIT B ENQUIRY CONDUCTED BY LD. AO NO LACK OF ENQUIRY C APPLICATION OF THE MIND BY LD. AO A. NON APPLICATION OF MIND BY LD. PR.CIT 1. SHOW CAUSE NOTICE U/S 263 WAS ISSUED ON 13.01.2020 WHEREIN LD. PR. CIT STATED THAT IN VIEW OF THE PROVISIONS OF SE CTION 41(1) THE RECOVERED AMOUNT OF RS. 14.75 CR WHICH WAS CLASSIFI ED AS LOSS ASSETS AND SUBSEQUENTLY RECOVERED WAS REQUIRED TO B E ADDED BACK. 2. DURING THE REVISIONARY PROCEEDINGS, ASSESSEE EXPLAI NED THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS ON ICD AND THE INTEREST THEREON WAS MADE IN THE EARLIER YEARS I.E. AY 2002-03 TO 20 04-05. M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 6 3. WHILE COMPUTING THE TOTAL INCOME OF SAID YEARS, THE AMOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS ON ICD AND INT EREST THEREON WAS ADDED BACK TO THE NET PROFIT DEBITED IN THE AUD ITED PROFIT AND ACCOUNT. ALL THE DOCUMENTARY EVIDENCES WERE PLACED ON RECORD. [PB 119-121]IN AY 2002-03 INCOME UNDER THE HEAD PROFIT S AND GAINS FROM BUSINESS OR PROFESSION WAS COMPUTED AS UNDER [PB 89-90] FROM THE ABOVE TABLE IT IS EVIDENT THAT WHILE COMPU TING THE TOTAL INCOME FOR AY 2002-03, AMOUNT OF PROVISION OF BAD D EBTS ON ICD HAS BEEN ADDED BACK TO THE NET PROFIT FOR THE PURPOSE O F COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSIN ESS OR PROFESSION. SINCE IT WAS A CASE OF LOSS, THE LOSS HAS BEEN REDUCED TO THE EXTENT OF ADD BACK. 4. ACCORDINGLY, IN THE IMPUGNED YEAR WHEN THE EXCESS P ROVISION MADE FOR BAD AND DOUBTFUL DEBTS ON ICD WAS WRITTEN BACK, THE SAME WAS DEDUCTED FROM THE NET PROFIT AS PER THE AUDITED FIN ANCIAL STATEMENTS WHILE COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION. IT IS A FACT ON RECORD THA T DURING THE IMPUGNED YEAR, ASSESSEE WAS ENGAGED IN THE PROCESS OF RECOVERY OF LOANS AND INTEREST WHICH WERE GRANTED EARLIER. NO F RESH LENDING WAS DONE. BEFORE THE LD. PR. CIT ALL THE DOCUMENTARY EV IDENCES WERE PLACED ON RECORD. [PB 22 AND 41] 5. THE OPENING BALANCE AS ON 01.04.2014 OF LEDGER INT ER CORPORATE DEPOSITS IS RS. 156,89,42,845. OUT OF THIS, DURING THE IMPUGNED YEAR AN AMOUNT OF RS. 14,75,00,000 WAS RECOVERED FR OM SOM DISTILLERIES LIMITED. THIS RECOVERED AMOUNT HAS BEE N REDUCED FROM NET PROFIT WHILE COMPUTING THE INCOME UNDER THE HEA D PROFITS AND GAINS FROM BUSINESS AND PROFESSION FOR THE IMPUGNE D YEAR. THERE IS NO BENEFIT CLAIMED BY THE ASSESSEE IN TERM S OF SECTION 41(1) IN RESPECT OF THE IMPUGNED AMOUNT. THERE IS NO TAX ADVANTAGE DERIVED BY THE ASSESSEE IN RESPECT OF THE IMPUGNED AMOUNT WHICH IS A BALANCE SHEET TRANSACTION.EXTRACT OF THE RELEVANT LEDGER ACCOUNT REPRODUCED AS UNDER M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 7 6. LD. PR.CIT ERRED IN NOT CONSIDERING ALL THE SUBMISS IONS AND DOCUMENTARY EVIDENCES PLACED ON RECORD IN PROPER PE RSPECTIVE. LD. PR.CIT THEREBY ERRED IN CONCLUDING THAT THE ORDER P ASSED BY LD. AO U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE BY RESORTING TO THE PROVISIONS OF SECTION 41(1). 7. LD. PR.CIT IN THE SHOW CAUSE NOTICE ISSUED ON 13.01 .2020 STATED [PB 01] IN VIEW OF SECTION 41(1) OF THE PROVISION OF THE A CT THE RECOVERED AMOUNT OF RS. 14,75,00,000/- WHICH WAS CLASSIFIED A S LOSS ASSETS AND SUBSEQUENTLY RECOVERED DURING THE PREVIOUS YEAR WAS REQUIRED TO BE ADDED BACK TO THE ASSESSEES INCOME WHICH WAS NOT DONE BY M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 8 THE AO. THE OMISSION RESULTED IN UNDER ASSESSMENT O F INCOME TO THAT EXTENT RESULTED IN NOTIONAL TAX EFFECT OF RS. 52,77 ,406/-. 8. THERE WAS NO CESSATION OR REMISSION OF ANY LIABILIT Y ON THE PART OF ASSESSEE. IN FACT THE AMOUNT OF BAD AND DOUBTFUL DE BTS ON ICD RECOVERED WAS DEDUCTED FROM THE PROVISIONS MADE IN THE EARLIER YEARS. THE CREATION OF PROVISION FOR BAD AND DOUBTF UL DEBTS ON ICD REPRESENTS THAT AN AMOUNT WHICH WAS ACTUALLY DUE TO BE RECEIVED IS NO LONGER RECEIVED. THIS IS NOT A LIABILITY WHICH I S NO LONGER PAYABLE AND IF ANY AMOUNT OF DEDUCTION OR ALLOWANCE WAS CLA IMED FOR THE SAME IN THE COMPUTATION OF INCOME. PROVISIONS OF SE CTION 41(1) ARE NOT APPLICABLE IN THE INSTANT CASE. IN FACT THIS AM OUNT REPRESENTS THE ASSET SIDE OF THE BALANCE SHEET. 9. ASSESSEE SUBMITS THAT PROVISIONS OF SECTION 41(1) A RE ATTRACTED ONLY WHEN ANY ALLOWANCE OR DEDUCTION HAS BEEN CLAIMED IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY AND THE ASSE SSEE HAS OBTAINED IN CASH OR IN ANY OTHER MANNER ANY AMOUNT IN RESPEC T OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. LD. PR.CIT G ROSSLY ERRED IN APPLYING THE PROVISIONS OF SECTION 41(1) IN THE INS TANT CASE. LD. PR.CIT ERRED IN ASSUMING THE JURISDICTION U/S 263 B Y TAKING RECOURSE TO PROVISIONS OF SECTION 41(1) WHICH IN NO SITUATIO N IS APPLICABLE IN THE FACTS OF THE PRESENT CASE. 10. IN THE SHOW CAUSE NOTICE ISSUED U/S 263 DATED 13.01 .2020, LD. PR.CIT STATED THAT THE NOTIONAL TAX EFFECT IS OF RS . 52,77,406. IT IS SUBMITTED THAT UNDER THE INCOME-TAX ACT, TAX IS CHARGED ON THE INCOME EARNED BY THE ASSESSEE I.E. INCOME WHEN IT I S EITHER ACCRUED OR IS RECEIVED BY THE ASSESSEE. THERE IS NO CONCEPT OF NOTIONAL INCOME AND HENCE THERE CANNOT BE NOTIONAL TAX. 11. LD. PR.CIT ERRED IN STATING THAT THERE WAS A NOTION AL TAX EFFECT OF RS. 52,77,406 MAKING THE ORDER PASSED BY LD. AO ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 12. LD. PR.CIT HAS DIRECTED AO TO DECIDE THE ISSUE I.E. AMOUNT RECOVERED OUT OF THE LOSS ASSETS, ON MERITS AND AS PER LAW. NO SPECIFIC FINDING ON MERITS HAS BEEN GIVEN BY LD. PR .CIT ON EXAMINATION OF WRITTEN SUBMISSIONS AND ALL THE DOCU MENTARY EVIDENCES PLACED ON RECORD. NO SPECIFIC ENQUIRY OR INVESTIGATION HAS BEEN MADE BY LD. PR.CIT TO ESTABLISH AND SHOW THE E RROR OR MISTAKE MADE BY THE ASSESSING OFFICER MAKING THE ORDER UNSU STAINABLE IN LAW. RELIANCE IS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF D G HOUSING PROJECTS LTD [2012] 20 TAXMAN N.COM 587. [PB 148] M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 9 B. ENQUIRY CONDUCTED BY LD. AO NO LACK OF ENQUIRY AN D C. APPLICATION OF THE MIND BY LD. AO 1. ASSESSEE IS A GOVERNMENT COMPANY IN WHICH 100% SHAR EHOLDING IS OF THE GOVERNMENT OF MADHYA PRADESH. IT IS ENGAGED IN THE BUSINESS OF FINANCIAL ASSISTANCE FOR INDUSTRIAL DEVELOPMENT AND INFRASTRUCTURE ACTIVITY IN THE STATE OF MADHYA PRADESH. 2. THE COMPLETE CONTROL AND MANAGEMENT IS BY THE BOARD OF DIRECTORS ON THE DIRECTIVES OF GOVERNMENT OF MADHYA PRADESH. CURRENTLY, NO FRESH LENDING HAS BEEN DONE INSTEAD ASSESSEE IS UND ER THE PROCESS OF RECOVERY OF LOANS, INTEREST AND INVESTMENTS WHIC H HAVE BEEN GRANTED EARLIER. 3. ASSESSMENT U/S 143(3) FOR THE IMPUGNED YEAR WAS COM PLETED ON 18.12.2017. VIDE QUESTIONNAIRE ISSUED ON 17.04.2017 , ASSESSEE WAS REQUIRED TO [PB 128] A. EXPLAIN LARGE ANY OTHER DEDUCTION CLAIMED IN SCH. B P CREATING A LOSS WITHOUT ANY INCOME IN PROFIT & LOSS ACCOUNT B. EXPLAIN MISMATCH BETWEEN INCOME/RECEIPT CREDITED TO PROFIT & LOSS ACCOUNT CONSIDERED UNDER OTHER HEADS OF INCOME AND INCOME FROM HEADS OF INCOME OTHER THAN BUSINESS/PROFESSION 4. ASSESSEE SUBMITTED DETAILS IN RESPECT OF AMOUNT SHO WN IN THE RETURN FOR AY 2015-16 AS PER POINT NO. 32 IN BP I.E. COMPU TATION OF INCOME FROM BUSINESS OR PROFESSION. DETAILED ITEM WISE BR EAK UP OF RS. 20,01,58,544 INCLUDES THE FOLLOWING [PB 132 AND 1 21] SR. NO. DETAILS OF THE ITEMS, RELEVANT TO THE ISSUE STATED BY LD. PR.CIT, IN POINT NO. 32 IN BP (COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION) AMOUNT (RS.) 1 WITHDRAWAL OF PROVISION OF INTER CORPORATE DEPOSIT (ICD) 14,75,00,000 2 WITHDRAWAL OF PROVISION OF INTEREST ON ICD 29,64,95 4 TOTAL 15,04,64,954 THESE AMOUNTS WERE CREDITED IN THE PROFIT AND LOSS ACCOUNT. SINCE THESE DO NOT FORM THE PART OF INCOME FROM BUSINESS PROFESSION, THE SAME WERE EXCLUDED FOR COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. 5. LD. AO AFTER PERUSING THE WRITTEN SUBMISSIONS AND T HE DOCUMENTARY EVIDENCES PLACED ON RECORD ACCEPTED THE INCOME RETU RNED BY THE ASSESSEE. INCOME WAS ASSESSED SAME AS RETURNED INCO ME. LD. AO CONDUCTED PROPER ENQUIRY TO VERIFY THE WITHDRAWAL O F PROVISION OF ICD AMOUNTING TO RS. 14,75,00,000. [PB 136-137] M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 10 6. LD. AO ALLOWED THE CLAIM ON BEING SATISFIED WITH TH E DETAILS AND EXPLANATIONS GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, THE DECISION OF LD. AO CANNOT BE HELD TO BE E RRONEOUS. LD. AO HAS APPLIED HIS MIND WHILE CONDUCTING THE ASSESSMEN T PROCEEDINGS. 7. IT IS NOT A CASE OF NON APPLICATION OF MIND BY LD. AO. IT IS ALSO NOT A CASE WHERE LD. AO HAS ALLOWED THE CLAIM WITHOUT ENQ UIRING INTO THE SAME. INVOKING PROVISIONS OF SECTION 263 IS NOT IN ACCORDANCE WITH THE LAW. LD. PR. CIT HAS NOT POINTED OUT ANY SHORTC OMINGS IN THE VERIFICATION SO CONDUCTED BY LD. AO. 8. THE TWIN CONDITIONS REQUIRED TO INVOKE THE PROVISIO NS OF SECTION 263 I.E. ORDER SHOULD BE ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE ARE NOT SATISFIED. 9. BEING ERRONEOUS ALWAYS REFERS TO BEING AN ERROR OF LAW / JURISDICTION I.E. AN INCORRECT APPLICATION OF LAW. AN ORDER PASSED BY AN ASSESSING OFFICER CAN BE TREATED AS ERRONEOUS IF THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. T HUS, WHEN A PLAUSIBLE VIEW SUSTAINABLE IN LAW HAS BEEN TAKEN BY ASSESSING OFFICER THE ORDER SO PASSED CANNOT BE TREATED AS ER RONEOUS. IN THE INSTANT CASE, LD. AO HAS MADE THE ENQUIRIES DURING THE ASSESSMENT PROCEEDINGS ON THE ISSUES RAISED BY LD. PR.CIT IN THE PROCEEDINGS U/S 263. LD. AO HAS ALLOWED THE CLAIM O N BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E. THUS, PLAUSIBLE VIEW TAKEN BY THE LD. AO CANNOT BE HELD TO BE ERRON EOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THIS REGARD. 10. WITHOUT PREJUDICE TO THE ABOVE AND STRICTLY IN ALTE RNATE, THE ASSESSEE HAS UNABSORBED BROUGHT FORWARD LOSS OF RS. 127,77,68,266 WHICH IS AVAILABLE FOR SET OFF. THE T AX LIABILITY ON THE ADDITION, IF ANY, MADE SHALL BE SET OFF AGAINST THE ABOVE REFERRED LOSS. THUS, THERE IS NO LOSS TO THE REVENUE. 11. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRECED ENTS - A. HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIA L CO. LTD. [2000] 243 ITR 83 B. HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF RATLAM COAL ASH CO. [1987] 34 TAXMAN 443 C. HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF MEHROTRA BROTHERS [2004] 270 ITR 157 D. HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF BHANWAR SINGH ITA NO. 659/IND/2019 ORDER DATED 29.07.2021 PARA 24 E. HONBLE JURISDICTIONAL ITAT INDORE BENCH IN THE CAS E OF VINOD BHANDARI ITA 350/IND/2017 & OTHERS, ORDER DATED 2 0.03.2020 PARA 43 TO 46 M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 11 F. HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF NAROTTAM MISHRA [2015] 25 ITJ 206 G. HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF FLEXITUFF INTERNATIONAL LIMITED ITA NO. 282/IND/2 017 ORDER PRONOUNCED ON 14.05.2019 PARA 18 H. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF KRISHNA CAPBOX (P) LTD [2015] 60 TAXMANN.COM 243 I. HONBLE DELHI HIGH COURT IN THE CASE OF VIKAS POLYM ERS [2010] 194 TAXMAN 57 J. HONBLE DELHI HIGH COURT IN THE CASE OF ASHISH RAJP AL [2009] 320 ITR 674 K. HONBLE MUMBAI BENCH OF ITAT IN THE CASE OF ANIL SH AH [2007] 162 TAXMAN 39 CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, SUBMISSIONS MADE, JUDICIAL PRECEDENTS AND DOCUMENTS ON RECORD, APPEAL OF THE ASSESSEE BE ALLOWED, QUASHING THE IMP UGNED ORDER PASSED U/S 263 OF THE ACT. 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED SUPPORTING THE ORDER OF LD. PCIT. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US CAREFULLY GONE THROUGH THE DECISIO NS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. WE OBSERVE THAT T HE ASSESSEE COMPANY IS ENGAGED IN THE FINANCIAL ASSISTANCE FOR INDUSTRIAL DEVELOPMENT AND INFRASTRUCTURE. ASSESSEE IS A GOVER NMENT COMPANY IN WHICH 100% SHAREHOLDING IS OF THE GOVERN MENT OF MADHYA PRADESH AND COMPLETE CONTROL AND MANAGEMENT IS BY THE BOARD OF DIRECTORS ON THE DIRECTIVES OF GOVERNMENT OF MADHYA PRADESH. WE OBSERVE THAT IT IS ON RECORD THAT THE D ETAILS IN RESPECT OF AMOUNT SHOWN IN THE RETURN FOR A.Y. 2015 -16 AS PER POINT NO.32 IN BP I.E. COMPUTATION OF INCOME FROM B USINESS OR M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 12 PROFESSION, ITEM WISE BREAK UP OF RS.20,01,58,544/- WAS GIVEN WHICH INCLUDED WITHDRAWAL OF PROVISION OF INTER COR PORATE DEPOSIT (ICD) AND PROVISION OF INTEREST ON ICD TOTALLING TO RS.15,04,64,954/-. WE FURTHER OBSERVE THAT FROM THE PROFIT AND LOSS ACCOUNT THESE AMOUNTS WERE CREDITED AND SINCE THEY DID NOT FORM PART OF INCOME FROM BUSINESS OR PROFESSION THE SAME WERE EXCLUDED FOR COMPUTATION OF INCOME UNDER THE HEAD I NCOME FROM BUSINESS OR PROFESSION. 9. WE ALSO OBSERVE THAT IN THE COURSE OF REVISIONAR Y PROCEEDINGS ASSESSEE HAD EXPLAINED THAT THE PROVISION FOR BAD A ND DOUBTFUL DEBTS ON ICD AND INTEREST THEREON WAS MADE IN THE E ARLIER YEARS I.E. A.Y. 2002-03 TO 2004-05 WHILE COMPUTING THE TO TAL INCOME OF THESE YEAR. THE AMOUNT OF PROVISION FOR BAD AND DOU BTFUL DEBTS ON ICD AND INTEREST WAS ADDED BACK TO THE NET PROFI T IN THE PROFIT AND LOSS ACCOUNT AND IS EVIDENT FROM THE DOCUMENTAR Y EVIDENCES PLACED ON RECORD IN THE PAPER BOOK WHICH IS SUMMARI ZED IN THE TABLE BELOW: SR. NO. PARTICULARS AMOUNT (RS.) AMOUNT (RS.) 1 NET PROFIT AS PER AUDITED FINANCIAL STATEMENTS (85,69,05,758) 2 ADD: PROVISION OF BAD DEBTS TERM LOAN PROVISION OF BAD DEBTS ICD 1,60,70,000 15,35,66,255 M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 13 DEPRECIATION AS PER BOOKS INTEREST ON TERM LOAN FROM IDBI 39,23,231 18,39,42,917 35,75,02,403 3 [1-2] (49,94,03,355) 4 DEPRECIATION AS PER INCOME TAX (41,52,794) 5 [3-4] (50,35,56,149) 6 INCOME CONSIDERED SEPARATELY DIVIDEND INCOME RENT RECEIVED DIMINUTION IN VALUE OF SHARES 21,91,060 8,65,707 8,90,772 (39,47,539) 7 PROFIT AND GAINS FROM BUSINESS OR PROFESSION [5-6] (50,75,03,688) 10. FROM THE ABOVE TABLE WE OBSERVE THAT SINCE IT W AS A CASE OF LOSS, THE LOSS HAS BEEN REDUCED TO THE EXTENT OF AD D BACK OF PROVISION FOR BAD DEBTS. 11. TO EXAMINE THIS ASPECT WHETHER LD. PCIT WAS JUS TIFIED IN HOLDING THE ORDER OF LD. A.O AS ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF REVENUE, WE WILL FIRST GO THROUGH THE R ELEVANT PROVISION OF SECTION 263 OF THE ACT AND SETTLED JUDICIAL PREC EDENCE:- 263. (1) THE PRINCIPAL COMMISSIONER OR 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 ASSE SSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BE ING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEE MS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT. EXPLANATION 1.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY 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 M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 14 (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-TAX OFFICER ON T HE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN E XERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF A N ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER TH E ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE PRINCIPA L CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL DI RECTOR GENERAL OR DIRECTOR GENERAL OR PRINCIPAL COMMISSIONER OR COMM ISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTI ON 120; (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALW AYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UN DER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE PRINCI PAL COMMISSIONER OR COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTI ON AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF A NY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, T HE POWERS OF THE PRINCIPAL COMMISSIONER OR] COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EX TENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDE D IN SUCH APPEAL. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COM MISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHO UT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WIT H ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119 ; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE W ITH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) A FTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WH ICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT AN Y TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE O F, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN A N 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 OPPORT UNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 15 WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED B Y AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 12. ON A BARE PERUSAL OF THE SUB-SECTION (1) WOULD REVEAL THAT THE POWERS OF REVISION GRANTED BY SECTION 263 TO THE LEARNED COMMISSIONER HAVE FOUR COMPARTMENTS. IN THE FIRST P LACE, THE LEARNED COMMISSIONER MAY CALL FOR AND EXAMINE THE R ECORDS OF ANY PROCEEDINGS UNDER THIS ACT. FOR CALLING OF THE RECORD AND EXAMINATION, THE LEARNED COMMISSIONER WAS NOT REQUI RED TO SHOW ANY REASON. IT IS A PART OF HIS ADMINISTRATIVE CONT ROL TO CALL FOR THE RECORDS AND EXAMINE THEM. THE SECOND FEATURE WOULD COME WHEN HE WILL JUDGE AN ORDER PASSED BY AN ASSESSING OFFIC ER ON CULMINATION OF ANY PROCEEDINGS OR DURING THE PENDEN CY OF THOSE PROCEEDINGS. ON AN ANALYSIS OF THE RECORD AND OF TH E 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 FORMA TION OF HIS BELIEF THAT ACTION UNDER SECTION 263 IS REQUIRED ON A PARTICULAR ORDER OF THE ASSESSING OFFICER. AT THIS STAGE THE O PPORTUNITY TO THE M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 16 ASSESSEE WOULD BE GIVEN. THE LEARNED COMMISSIONER H AS TO CONDUCT AN INQUIRY AS HE MAY DEEM FIT. AFTER HEARIN G THE ASSESSEE, HE WILL PASS THE ORDER. THIS IS THE FOURT H COMPARTMENT OF THIS SECTION. THE LEARNED COMMISSIONER MAY ANNUL THE ORDER OF THE ASSESSING OFFICER. HE MAY ENHANCE THE ASSESSED INCOME BY MODIFYING THE ORDER. 13. IT IS WELL SETTLED LAW THAT FOR INVOKING THE PR OVISIONS OF SECTION 263 OF THE ACT BOTH THE CONDITIONS THAT THE ORDER M UST BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E NEEDS TO BE SATISFIED. THIS RATIO STANDS LAID DOWN BY VARIOUS H ON'BLE COURTS. 14. HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. [2000] 243 ITR 83 ORDER PRONOUNCED ON 10.02.2000 HEAD NOTE 'SECTION 263 OF THE INCOME-TAX ACT, 1961 - REVISION - OF ORDERS PREJUDICIAL TO INTERESTS OF REVENUE - ASSESS MENT YEAR 1983- 84 - WHETHER IN ORDER TO INVOKE SECTION 263 ASSESSI NG OFFICER'S ORDER MUST BE ERRONEOUS AND ALSO PREJUDICIAL TO REV ENUE AND IF ONE OF THEM IS ABSENT, I.E., IF ORDER OF INCOME-TAX OFF ICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO REVENUE OR IF IT IS NOT E RRONEOUS BUT IS PREJUDICIAL TO REVENUE, RECOURSE CANNOT BE HAD TO S ECTION 263(1) - HELD, YES - WHETHER IF DUE TO AN ERRONEOUS ORDER OF ITO, REVENUE IS M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 17 LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CE RTAINLY BE PREJUDICIAL TO INTERESTS OF REVENUE - HELD, YES - A SSESSEE-COMPANY ENTERED INTO AGREEMENT FOR SALE OF ESTATE OF RUBBER PLANTATION - AS PURCHASER COULD NOT PAY INSTALLMENTS AS SCHEDULED I N AGREEMENT, EXTENSION OF TIME FOR PAYMENT OF INSTALLMENTS WAS G IVEN ON CONDITION OF VENDEE PAYING DAMAGES FOR LOSS OF A GRICULTURAL INCOME AND ASSESSEE PASSED RESOLUTION TO THAT EFFEC T - ASSESSEE SHOWED THIS RECEIPT AS AGRICULTURAL INCOME - RESOLU TION PASSED BY ASSESSEE WAS NOT PLACED BEFORE ASSESSING OFFICER - ASSESSING OFFICER ACCEPTED ENTRY IN STATEMENT OF ACCOUNT FILE D BY ASSESSEE AND ACCEPTED SAME - COMMISSIONER UNDER SECTION 263 HELD THAT SAID AMOUNT WAS NOT CONNECTED WITH AGRICULTURAL ACT IVITIES AND WAS LIABLE TO BE TAXED UNDER HEAD 'INCOME FROM OTHE R SOURCES' - WHETHER, WHERE ASSESSING OFFICER HAD ACCEPTED ENTRY IN STATEMENT OF ACCOUNT FILED BY ASSESSEE, IN ABSENCE OF ANY SUP PORTING MATERIAL WITHOUT MAKING ANY ENQUIRY, EXERCISE OF JURISDICTIO N BY COMMISSIONER UNDER SECTION 263(1) WAS JUSTIFIED - H ELD, YES 15. AT THIS STAGE, BEFORE CONSIDERING THE MULTI-FOL D CONTENTIONS OF THE LEARNED REPRESENTATIVES, WE DEEM IT PERTINEN T TO TAKE NOTE OF THE FUNDAMENTAL TESTS PROPOUNDED IN VARIOUS JUDG MENTS RELEVANT FOR JUDGING THE ACTION OF THE COMMISSIONER OF INCOME-TAX M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 18 TAKEN UNDER SECTION 263. THE INCOME-TAX APPELLATE T RIBUNAL IN THE CASE OF MRS. KHAIIZA S. OOMERBHOY V. ITO [2006] 101 TIJ 1095 (MUM), ANALYSED IN DETAIL VARIOUS AUTHORITATIVE PRONOUNCE MENTS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC) AND HAS PROPOUNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF THE COMMISSIONER OF INCOME-TAX TAKEN UNDER SECTION 263. (I) THE COMMISSIONER OF INCOME-TAX MUST RECORD SAT ISFACTION THAT THE ORDER OF THE ASSESSING OFFICER IS ERRON EOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSI NG OFFICER AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCOR RECT 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 O RDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER L AW OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OF FICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER OF IN COME-TAX DOES NOT AGREE. IF CANNOT BE TREATED AS ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTA INABLE UNDER LAW . (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSESSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE A ND DETERMINE THE INCOME, THE COMMISSIONER OF INCOME -TAX, WHILE EXERCISING HIS POWER UNDER SECTION 263 IS NOT PERMITTED TO M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 19 SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISES QUASI-JUDICI AL POWER VESTED IN HIM AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVE AT A CONCLUSION, S UCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER OF INCOME-TAX DOES NOT FEEL SATI SFIED WITH THE CONCLUSION. (VIII) THE COMMISSIONER OF INCOME-TAX, BEFORE EXER CISING HIS JURISDICTION UNDER SECTION 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQUIRIES DURING THE COURSE ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSU ES AND THE ASSESSEE HAS DETAILED EXPLANATION BY A LETTER I N WRITING AND THE ASSESSING ALLOWS THE CLAIM ON BEING SATI SFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CANNOT BE HELD TO BE SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGA RD. 16. AFTER GOING THROUGH THE SETTLED JUDICIAL PRECED ENTS AND THE PRINCIPLES LAID DOWN BY THE HON'BLE COURTS AND EXAM INING THE FACTS OF THE CASE IN LIGHT THEREOF, WE OBSERVE THAT DURING THE IMPUGNED YEAR ASSESSEE WAS ENGAGED IN THE PROCESS O F RECOVERY OF LOANS AND INTEREST WHICH WAS GRANTED EARLIER AND NO FRESH LENDING WAS DONE IN THE IMPUGNED YEAR. THUS, IN THE IMPUGNED YEAR WHEN THE EXCESS PROVISION MADE FOR BAD AND DOU BTFUL DEBTS ON ICD WAS WRITTEN BACK IN RESPECT OF RECOVERY OF I CD OF RS.14,75,00,000/- FROM SOM DISTILLERIES LIMITED, TH E SAME WAS DEDUCTED FROM THE NET PROFIT AS PER THE AUDITED FIN ANCIAL STATEMENTS IN COMPUTING INCOME UNDER THE HEAD PROFI T AND GAINS M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 20 FROM BUSINESS OR PROFESSION. WE FIND THAT THERE IS NO BENEFIT CLAIMED BY THE ASSESSEE IN TERMS OF SECTION 41(1) O F THE ACT IN RESPECT OF THE IMPUGNED AMOUNT. IT IS ALSO EVIDENT THAT THERE IS NO TAX ADVANTAGE DERIVED BY THE ASSESSEE IN RESPECT OF THE IMPUGNED AMOUNT. IT IS WORTH NOTING THAT PROVISIONS OF SECTION 41(1) ARE ATTRACTED ONLY WHEN ANY ALLOWANCE OR DEDU CTION HAS BEEN CLAIMED IN RESPECT OF LOSS, EXPENDITURE OR TRA DING LIABILITY AND THE ASSESSEE HAS OBTAINED IN CASH OR IN ANY OTH ER MANNER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE O R SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. WE FIND THAT LD. PR.CIT HAS GROS SLY ERRED IN APPLYING THE PROVISIONS OF SECTION 41(1) IN THE PR ESENT CASE WHICH IN NO SITUATION IS APPLICABLE IN THE FACTS OF THE PRESENT CASE. 17. WE FURTHER FIND THAT THE LD. PR.CIT HAS DIRECTE D AO TO DECIDE THE ISSUE I.E. AMOUNT RECOVERED OUT OF THE LOSS ASS ETS, ON MERITS AND AS PER LAW BUT NO SPECIFIC FINDING ON MERITS HA S BEEN GIVEN BY LD. PR.CIT ON EXAMINATION OF WRITTEN SUBMISSIONS AND ALL THE DOCUMENTARY EVIDENCES PLACED ON RECORD. NO SPECIFIC ENQUIRY OR INVESTIGATION HAS BEEN MADE BY LD. PR.CIT TO ESTABL ISH AND SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER MAKING THE M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 21 ORDER UNSUSTAINABLE IN LAW. THIS ACTION OF LD. PR. CIT CAN STAND ONLY IF IT IS FOUND THAT THE ASSESSMENT ORDER IS ER RONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AND NO ENQUI RY HAS BEEN CONDUCTED BY THE LD. AO WITH REGARD TO THE ISSUE RA ISED IN THE SHOW CAUSE NOTICE ISSUED U/S 263 OF THE ACT. FOR TH IS PROPOSITION THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE RA TIO LAID DOWN IN THE DECISION PASSED IN THE CASE OF D.G. HOUSING PROJECTS LTD. (2012) 20 TAXMANN.COM 587. 18. ON CONSIDERATION OF ABOVE, WE FIND THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING, THE LD. AO SPECIFICALLY ASKED VIDE QUESTIONNAIRE ISSUED ON 17.04.2017, TO EXPLAIN LARG E ANY OTHER DEDUCTION CLAIMED IN SCH. BP CREATING A LOSS WITHOU T ANY INCOME IN PROFIT & LOSS ACCOUNT AND EXPLAIN MISMATCH BETWE EN INCOME/RECEIPT CREDITED TO PROFIT & LOSS ACCOUNT CO NSIDERED UNDER OTHER HEADS OF INCOME AND INCOME FROM HEADS O F INCOME OTHER THAN BUSINESS/PROFESSION, WHICH WAS REPLIED. WE FIND THAT LD. AO CONDUCTED PROPER ENQUIRY TO VERIFY THE WITHD RAWAL OF PROVISION OF ICD AMOUNTING TO RS.14,75,00,000/- AND ALLOWED THE CLAIM ON BEING SATISFIED WITH THE DETAILS AND EXPLA NATION. THUS, THE DECISION OF LD. AO CANNOT BE HELD TO BE ERRONEO US. WE FIND THAT THE LD. AO HAS APPLIED HIS MIND WHILE CONDUCTI NG THE M/S. M.P. STATE INDUSTRIAL DEVELOPMENT ITA NO.158/IND/2020 22 ASSESSMENT PROCEEDINGS. UNDER THESE CIRCUMSTANCES, WHERE A DETAILED ENQUIRY HAS BEEN CONDUCTED ON PARTICULAR I SSUE AND THE LD. AO HAS MADE PROPER APPLICATION OF MIND ON THE D ETAILS FILED BY THE ASSESSEE AND HAVE CONDUCTED SUFFICIENT ENQUI RY THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. WE ACCORDIN GLY QUASH THE IMPUGNED REVISIONARY ORDER FRAMED U/S 263 OF THE AC T AND RESTORE THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 13.02.2020. 19. IN RESULT, GROUNDS RAISED BY THE ASSESSEE ARE A LLOWED AND APPEAL FILED BY THE ASSESSEE IN ITANO.158/IND/2020 IS ALLOWED. ORDER WAS PRONOUNCED AS PER RULE 34 OF I.T.A.T. RUL ES 1963 ON 08.10.2021. SD/- SD/- (MADHUMITA ROY ) (MANI SH BORAD) JUDICIAL MEMBER ACCOUNTA NT MEMBER / DATED : 08.10. 2021 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE