Adani Wilmar Ltd., Ahmedabad V. The DCIT, Circle -1, Ahmedabad

ITA 1654/AHD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1270 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Depreciation; Opportunity of being heard; Additional depreciation; Period of limitation; Question of law; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 32; 263; 63

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.1654/AHD/2015 / ASSTT. YEAR: 2009-2010 ADANI WILMAR LTD. FORTUNE HOUSE NR. NAVRANGPURA RAILWAY CROSSING NAVRANGPURA AHMEDABAD. PAN : AABCA 8056 D VS DCIT, CIR.1 AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR WITH SHRI P.M. MEHTA REVENUE BY : SMT. VIBHA BHALLA, SR.DR ! / DATE OF HEARING : 28/08/2015 '#$ ! / DATE OF PRONOUNCEMENT: 24/09/2015 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME-TAX-1, AHMEDABAD DATED 31.3.2015 PASSED U/S.263 OF THE INC OME TAX ACT, 1961 FOR THE ASSTT.YEAR 2009-10. 2. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT HAS ERRED IN TAKING COGNIZANCE UNDER SECTION 263 OF THE INCOME T AX ACT AND SETTING ASIDE THE ASSESSMENT ORDER FOR FRESH ADJUDICATION. ITA NO.1654/AHD/2015 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 9.9.2009 DECLARING TOTAL INCOME OF RS.72,29,65,644/-. THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE I NCOME TAX ACT WAS ISSUED ON 23.6.8.2010 WHICH WAS DULY SERVED UPON TH E ASSESSEE BY SPEED POST. THE LD.AO HAS PASSED THE ASSESSMENT OR DER UNDER SECTION 143(3) ON 30.3.2013. AFTER GOING THROUGH THE RECOR D, THE LD.COMMISSIONER HAS FORMED AN OPINION THAT ACTION U NDER SECTION 263 DESERVES TO BE TAKEN AGAINST THE ASSESSEE. ACCORDI NGLY, HE ISSUED A SHOW CAUSE NOTICE ON 16.3.2015. A COPY OF THE SHOW CAUSE NOTICE IS AVAILABLE AT PAGE NO.1 OF THE PAPER BOOK, WHICH REA DS AS UNDER: NO.CIT-1/ABD/263/25/AWL/2014-15 DATED : 16.3.2015 TO THE DIRECTOR/PRINCIPAL OFFICER M/S.ADANI WILMAR LTD. FORTUNE HOUSE NR.ADANI HOUSE NR.MITHAKALI SIX ROADS AHMEDABAD. (PAN AABCA8056D) SUB: INITIATION OF PROCEEDINGS U/S.263 OF THE I.T.A T I.T.ACT ADANI WILMAR LTD. A.Y.2009-10 REGARDING. ******* THE UNDERSIGNED CALLED FOR AND EXAMINED THE ASSESS MENT ORDER FOR A.Y.2009-10. THE ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF THE I.T.AT, 1961 ON 30.3.2013 DETERMINING TOTAL INCOME AT RS.72,83,77,916/-. 1. IT IS SEEN THAT THE ASSESSEE HAS CLAIMED DEPRECIATI ON @60% ON COMPUTER EQUIPMENTS, UPS AND SAP INSTEAD OF DEPRECIATION @15% ON COMPUTER EQUIPMENTS & UPS AND 25% ON SAP LICENSE. IT APPEARS THAT THE AO HAS COMPLETED THE ASSESSMENT WITHOUT APPRECIATING THE PROVISIONS OF SECTION 32 OF THE ACT. 2. IT IS FURTHER SEEN THAT THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION OF RS.23.35 LA ON FIRE SAFE TY EQUIPMENTS, WEIGHT SCALE, PRINTER, STORAGE TANK ETC . IT APPEARS THAT THE AO HAS COMPLETED THE ASSESSMENT ITA NO.1654/AHD/2015 3 WITHOUT APPRECIATING THE PROVISIONS OF SECTION 32(1 )(IIA) OF THE ACT. 2. IN VIEW OF THE ABOVE, IT APPEARS TO THE UNDERSIG NED THAT THE ORDER DATED 30.3.2013 PASSED UNDER SECTION 143(3) O F THE I.T.ACT, 1961 BY THE DCIT, CIRCLE-1, AHMEDABAD IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE M EANING OF SECTION 263(1) OF THE I.T.ACT, 1961. 3. YOU ARE, THEREFORE, REQUESTED TO SHOW CAUSE AS T O WHY APPROPRIATE ORDER UNDER SECTION 263(1)OF THE I.T.AC T, 1961 BE NOT PASSED IN YOUR CASE TO ELIMINATE THE ABOVE ERRORS. FOR THIS PURPOSE, THE HEARING IN YOUR CASE IS FIXED ON 20/3/ 2015 AT 3.30PM AT THE ABOVE ADDRESS. YOU MAY ATTEND PERSONALLY OR THROUGH AN AUTHORIZED REPRESENTATIVE ON THE SCHEDULED DATE AND TIME OR SU BMIT YOUR WRITTEN REPLY WITHIN SUPPORTING EVIDENCES. IN CASE NOTHING IS HEARD FROM YOU BY THE SAID DATE, IT SHALL BE PRESUM ED THAT YOU HAVE NOTHING TO STATE IN THIS MATTER WHICH SHALL TH EN BE DECIDED ON MERITS. SD/- (Y.K. BATRA) PR.COMMISSIONER OF INCOME-TAX 1 AHMEDABAD. 4. THE LD.COMMISSIONER HAS PASSED THE ORDER UNDER S ECTION 263 ON 31.3.2015. HE SET ASIDE THE ASSESSMENT ORDER AND D IRECTED THE AO TO MAKE A FRESH ASSESSMENT ORDER OF THE TOTAL INCOME O F THE ASSESSEE FOR THE ASSTT.YEAR 2009-10. 5. THE LD.COUNSEL FOR THE ASSESSEE, WHILE IMPUGNING THE ORDER OF THE LD.COMMISSIONER HAS CONTENDED IN HIS FIRST FOLD OF SUBMISSION THAT THE LD.COMMISSIONER HAS INTENDED TO TAKE COGNIZANCE OF SECTION 263 QUA TWO ISSUES, VIZ. (I) THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AT 60% ON COMPUTER EQUIPMENTS, UPS AND SAP INSTEAD OF DEPR ECIATION AT THE RATE OF 15% ON COMPUTER PERIPHERAL AND AT THE RATE OF 25% ON SAP LICENCE, AND (II) THAT THE ASSESSEE HAS CLAIMED ADD ITIONAL DEPRECIATION OF RS.23.35 LAKHS ON FIRE SAFETY EQUIPMENTS, WEIGH SCA LE, PRINTER, STORAGE TANK ETC. THE LD.COMMSSIONER HAS CANCELLED THE COM PLETE ASSESSMENT ITA NO.1654/AHD/2015 4 AND DIRECTED THE AO TO MAKE FRESH ASSESSMENT ORDER. HE TOOK US THROUGH THE LAST PARAGRAPHS OF THE ORDER PASSED BY THE LD.COMMISSIONER. ACCORDING TO THE LD.COUNSEL OF TH E ASSESSEE, AT THE MOST, THE LD.COMMISSIONER COULD SET ASIDE THE ASSES SMENT ORDER QUA THESE TWO ISSUES, BECAUSE THERE ARE LARGE NUMBER OF OTHER ISSUES IN THE ASSESSMENT ORDER. IN NEXT FOLD OF CONTENTION, HE APPRAISED US THE SCOPE OF SECTION 263 AND WHEN THE LD.COMMISSIONER C AN TAKE ACTION AGAINST THE ASSESSEE. THE AO HAS ISSUED A SHOW CAU SE NOTICE UNDER SECTION 142(1) AND SPECIFICALLY INQUIRED ON THIS IS SUE. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS PAGE NO.21 OF THE PAPER BOOK, WHEREIN COPY OF THE NOTICE DATED 9.12.2012 IS PLACE D ON RECORD. AT SR.NO.5, THE AO HAS CALLED FOLLOWING DETAILS: 5. PL. PROVIDE THE DETAILS OF FIXED ASSETS ACQUIRE D DURING THE YEAR: SR.NO. NAME OF ASSET AMOUNT (RS.) BLOCK DATE OF PURCHASE DATE OF PUT TO USE INVOICE NO. ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE, THE L D.AO HAS CALLED FOR THE DETAILS AND THE ASSESSEE HAS DULY REPLIED THE S HOW CAUSE NOTICE. THE LD.AO HAS TAKEN ONE OF THE POSSIBLE VIEWS WHICH CANNOT BE INTERFERED BY THE LD.COMMISSIONER. ON THE STRENGTH OF THE FOLLOWING DECISIONS, HE CONTENDED THAT THE DEPRECATION ON COM PUTER AND COMPUTER PERIPHERALS IS ADMISSIBLE AT THE RATE OF 6 0%. 2. IN PRESENT CASE, THE ASSESSEE HAS CAPITALIZED S OFTWARE EXPENSES, UPS AND CLAIMED DEPRECIATION @ 60% AS SAM E ARE INTEGRAL PART OF COMPUTER AND CANNOT RUN INDEPENDEN TLY AND/OR INSTALLED TO WORK EFFICIENTLY AND SMOOTHLY. RELIAN CE PLACED ON: SR.NO. NAME OF CASE LAW CITATION RATIO 1. BSES YAMUNA POWER LTD. 358 ITR 47 (DEL.) DEPRECIATION @ 60% ON COMPUTER PERIPHERALS SUCH AS PRINTERS, SCANNERS, ITA NO.1654/AHD/2015 5 SERVERS ETC. 2. NAVNEET PUBLICATIONS (I) LTD ITA # 1137/MUM/2010 DEPRECIATION @ 60% ON SAP SOFTWARE. 3. USHODAYA ENTERPRISES LTD. 41 TAXMANN.COM 304 (HYD.) DEPRECIATION @ 60% ON COMPUTER PERIPHERALS SUCH AS PRINTERS, SCANNERS, SOFTWARE, MODEMS, SWITCHES, HUBS, CABLE/CARDS ETC. 4. MACWBER ENGINEERING SYSTEM (I) (P.) LTD. 33 TAXMANN.COM 587 (MUM.) DEPRECIATION ON UPS AT RATE AT WHICH DEPRECATION WAS ALLOWABLE TO COMPUTERS. 6. ALTERNATIVELY, HE CONTENDED THAT SOFTWARE EXPENS ES INCURRED ON SAP LICENCE OUGHT TO HAVE BEEN ALLOWED AS REVENUE E XPENDITURE. IN SUPPORT OF HIS CONTENTIONS, HE PLACED ON RECORD COP IES THE FOLLOWING DECISIONS: VARINDER AGRO CHEMICALS LTD. : 309 ITR 272 (P&H) ROBER BOSCH INDIA LTD. : 50 TAXMANN.COM 275 (KAR.) KARURU VYSYA BANK LTD. : 54 TAXMANN.COM 324 (MAD.) LUBRIZOL INDIA LTD. : 37 TAXMANN.COM 294 (BOM.) 7. THE LD.COUNSEL OF THE ASSESSEE FURTHER CONTENDED THAT IF THERE IS NO INQUIRY, THEN THE ASSESSMENT CAN BE BRANDED AS E RRONEOUS. BUT INADEQUACY CANNOT BE GROUND FOR TAKING ACTION UNDER SECTION 263 OF THE INCOME TAX ACT. FOR BUTTRESSING THIS CONTENTION, H E RELIED UPON THE FOLLOWING DECISIONS AND PALED ON RECORD COPIES OF T HESE DECISIONS. MAX INDIA LTD. : 295 ITR 282 (SC) AMIT CORPORATION : 21 TAXMANN.COM 64 (GUJ.) SUNBEAM AUTO LTD. : 332 ITR 167 (DEL.) VIKAS POLYMERS : 341 ITR 537 (DEL.) GABRIEL INDIA LTD. : 203 ITR 108 (BOM.) 8. ON THE OTHER HAND, THE LD. DR RELIED UPON THE OR DER OF THE LD.COMMISSIONER. SHE POINTED OUT THAT PRINTERS, UP S CANNOT BE EQUATED ITA NO.1654/AHD/2015 6 WITH THE COMPUTER AND DEPRECIATION CANNOT BE GRANTE D AT THE RATE OF 60% . THE APPROACH OF THE AO BY NOT MAKING DISCUSSION ON THIS ISSUE IS AN ERRONEOUS APPROACH. THE LD.COMMISSIONER HAS RIG HTLY TAKEN ACTION UNDER SECTION 263 OF THE INCOME TAX ACT. SHE FURTH ER CONTENDED THAT ADDITIONAL DEPRECIATION ON THE ASSET, WHICH IS NOT PART OF THE PLANT & MACHINERY INVOLVED IN MANUFACTURING ACTIVITY CANNOT BE GRANTED. FOR THIS PURPOSE, SHE TOOK US THROUGH SECTION 32(1)(IIA ) OF THE INCOME TAX ACT. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REBUTTED THE CONTENTIONS OF THE LD.CIT-DR WITH REGARD TO THIS PR OPOSITION. HE HAS PLACED ON RECORD COPY OF THE DECISION OF THE HONBL E GUJARAT HIGH COURT IN THE CASE OF CIT VS. DIAMINES & CHEMICALS, (2014) 42 TAXMANN.COM 193 (GUJ). HE POINTED OUT THAT IN ORDER TO CLAIM A DDITIONAL DEPRECIATION, THE ONLY REQUIREMENT IS THAT THE ASSESSEE SHOULD BE IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF ANY ARTICLE OR THING, AND IT SHOULD ACQUIRE THE ASSET WITHIN THE TIME FRAME PROVIDED IN SECTION 32(1). THE ASSESSEE FULFILLED THOSE CONDITIONS. IT IS ENGAGED IN THE MANUFACTURING. IT WAS NOT NECESSARY FOR THE ASSESSEE TO USE THOSE PARTICULAR ASSETS ACTIVELY IN THE MANUFACTURING ACTIVITY. 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. SECTION 263 HAS A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS PERTINENT TO TAKE NOTE OF THIS SEC TION. IT READS AS UNDER:- 263(1) THE COMMISSIONER MAY CALL FOR AND EXAMINE T HE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, I NCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. [EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION,- ITA NO.1654/AHD/2015 7 (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE- (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-T AX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY TH E JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXE RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS O F AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTIO N 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAY S TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UND ER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTE R OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTI ON SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXT ENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECI DED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL Y EAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CO NSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATIONAL TAX TRIBU NAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.- IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVI NG AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEED ING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. ITA NO.1654/AHD/2015 8 10. ON A BARE PERUSAL OF THE SUB SECTION-1 WOULD RE VEAL THAT POWERS OF REVISION GRANTED BY SECTION 263 TO THE LEARNED COMM ISSIONER HAVE FOUR COMPARTMENTS. IN THE FIRST PLACE, THE LEARNED COMMI SSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THIS A CT. FOR CALLING OF THE RECORD AND EXAMINATION, THE LEARNED COMMISSIONER WA S 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 CU LMINATION OF ANY PROCEEDINGS OR DURING THE PENDENCY OF THOSE PROCEED INGS. 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 A S 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 C AUSE NOTICE POINTING OUT THE REASONS FOR THE FORMATION OF HIS BELIEF THA T ACTION U/S 263 IS REQUIRED ON A PARTICULAR ORDER OF THE ASSESSING OFFICER. AT THIS STAGE THE OPPORTUNITY TO THE ASSESSEE WOULD BE GIVEN. THE LEARNED COMMISS IONER HAS TO CONDUCT AN INQUIRY AS HE MAY DEEM FIT. AFTER HEARING THE AS SESSEE, HE WILL PASS THE ORDER. THIS IS THE 4 TH COMPARTMENT OF THIS SECTION. THE LEARNED COMMISSIONER MAY ANNUL THE ORDER OF THE ASSESSING O FFICER. HE MAY ENHANCE THE ASSESSED INCOME BY MODIFYING THE ORDER. HE MAY SET ASIDE THE ORDER AND DIRECT THE ASSESSING OFFICER TO PASS A FR ESH ORDER. EXPLANATION-1 HAS BEEN 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 M ADE BY THE INCOME TAX OFFICER ON THE BASIS OF A DIRECTION ISSUED BY T HE JT. COMMISSIONER U/S 144A WOULD BE AN ORDER OF THE INCOME TAX OFFICER. I N OTHER WORDS, IF DIRECTIONS OF BINDING NATURE WERE ISSUED BY A HIGHE R AUTHORITY TRANSLATED INTO THE ORDER OF THE INCOME TAX OFFICER, THEN THAT ORDE R WOULD BE CONSIDERED OF THE ASSESSING OFFICER AND NOT OF THE HIGHER AUTHORI TIES. AT THIS STAGE, BEFORE CONSIDERING THE MULTI-FOLD CONTENTIONS OF THE LD. R EPRESENTATIVES, WE DEEM IT ITA NO.1654/AHD/2015 9 PERTINENT TO TAKE NOTE OF THE FUNDAMENTAL TESTS PRO POUNDED IN VARIOUS JUDGMENTS RELEVANT FOR JUDGING THE ACTION OF THE CI T TAKEN U/S 263. THE ITAT IN THE CASE OF MRS. KHATIZA S. OOMERBHOY VS. ITO, M UMBAI, 101 TTJ 1095, ANALYZED IN DETAIL VARIOUS AUTHORITATIVE PRONOUNCEM ENTS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MA LABAR INDUSTRIES 243 ITR 83 AND HAS PROPOUNDED THE FOLLOWING BROADER PRI NCIPLE TO JUDGE THE ACTION OF CIT 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 EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WI LL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJ UDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE AO HAS ADOP TED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE T WO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WI TH WHICH THE CIT DOES NOT AGREE. IF CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UNDER LAW (VI) IF WHILE MAKING THE ASSESSMENT, THE AO EXAMINE S THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER S 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCO ME IN PLACE OF THE INCOME ESTIMATED BY THE AO. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW A ND ARRIVE AT A CONCLUSION, SUCH CONCLUSION CANNOT BE T ERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEE STRATIFIED WITH THE CONCLUSION. ITA NO.1654/AHD/2015 10 (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S. 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFA CTION. (IX) IF THE AO HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND T HE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOWS THE CLAIM ON BEING SATISF IED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN T HAT REGARD. 11. APART FROM THE ABOVE PRINCIPLES, WE DEEM IT APP ROPRIATE TO MAKE REFERENCE TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO REPORTED IN 227 CTR 113 REFERRED BY LD. COUNSEL FOR THE ASSESSEE, AND GEE VEE ENTERPRISES LTD VS. ADDL. COM MISSIONER OF INCOME TAX (99 ITR 375). IN THE CASE OF SUN BEAM AUTO, TH E HON'BLE HIGH COURT HAS POINTED OUT A DISTINCTION BETWEEN LACK OF INQUI RY 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'BL E 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 CONSID ERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME-TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPEC IFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESS MENT ORDER WHICH APPARENTLY DOES NOT GIVE ANY REASONS WH ILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDIT URE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE P RINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF M IND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVE NUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RI GHT IN HIS ITA NO.1654/AHD/2015 11 SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF, GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UN DER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS DIFFE RENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY, THAT SUCH A COURSE OF ACTION WOULD BE OPEN. 12. IN THE CASE OF GEE VEE ENTERPRISE VS. COMMISSIO NER OF INCOME TAX REPORTED IN 99 ITR PAGE 375, THE HONBLE COURT HAS EXPOUNDED THE APPROACH OF LD. ASSESSING OFFICER WHILE PASSING ASS ESSMENT ORDER. THE OBSERVATION OF THE HONBLE COURT ON PAGES 386 OF JO URNAL READ AS UNDER:- IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOM E-TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TA X OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE ST ATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. THE POSITION AND FUNCTION O F THE INCOME-TAX OFFICER IS VERY DIFFIDENT FROM THAT OF A CIVIL COUR T. THE STATEMENT MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDE NCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBU TTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME-TAX OFF ICER IS NOT ONLY ON ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLED FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY IT IS BECAUSE IT IS INCUMBENT ON THE INCOM E-TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MADE SUCH AN INQUIRY PRUDENT THAT THE WORD E RRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN EN QUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT B EEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 13. THE LIGHT OF THE ABOVE, LET US EXAMINE THE FACT S OF THE PRESENT CASE. AS FAR AS THE FIRST PROPOSITION OF THE LD.CO UNSEL FOR THE ASSESSEE IS CONCERNED, WE FIND MERIT. THE WHOLE ASSESSMENT ORD ER CANNOT BE CANCELLED, BECAUSE IT CONTAINED LARGE NUMBER OF ISS UES. THE LD.CIT ITA NO.1654/AHD/2015 12 SOUGHT TO TAKE ACTION UNDER SECTION 263 QUA TWO ISSUES ONLY, AND TO THAT EXTENT THE ASSESSMENT WOULD ONLY BE SET ASIDE. THEREFORE, SUBJECT TO OVER OVERALL FINDINGS IN THIS APPEAL, WE MODIFY THE ORDER OF THE LD.COMMISSIONER TO THE EXTENT THAT IN CASE THE ORDE R UNDER SECTION 263 IS BEING UPHELD, WHICH WE ARE GOING TO DISCUSS IN S UBSEQUENT PARAGRAPHS, THEN THE ASSESSMENT ORDER IS TO BE CONS IDERED AS SET ASIDE ONLY QUA TWO ISSUES, AND NOT THE COMPLETE ASSESSMENT ORDER. 14. THE LD.AO HAS ISSUED A SHOW CAUSE NOTICE AND IN VITED EXPLANATION OF THE ASSESSEE QUA THE DETAILS OF FIXED ASSETS AND THE DEPRECIATION CLAIMED BY IT ON THIS POINT, MEANING THEREBY, HE HA S APPLIED HIS MIND ON THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE. TH E HONBLE DELHI HIGH COURT IN THE CASE OF BSES YAMUNA POWER LTD. (SUPRA) HAS HELD THAT DEPRECIATION AT THE RATE OF 60% WILL BE ADMISSIBLE ON COMPUTER PERIPHERALS. PRIOR TO THIS DECISION, THERE ARE LAR GE NUMBER OF ORDERS AT THE END OF THE ITAT, AND THE ITAT IS UNANIMOUS IN I TS APPROACH ON THIS ISSUE. THUS, A POSSIBLE VIEW CAN BE TAKEN BY THE A O WITH REGARD TO THE ADMISSIBILITY OF DEPRECIATION ON UPS, SCANNER ETC. AT THE RATE OF 60%. IT IS ONE OF THE POSSIBLE VIEWS, WHICH THE AO HAS TAKE N. AS FAR AS THE DEPRECIATION AT THE RATE OF 60% ALLOWED TO THE ASSE SSEE ON SAP LICENCE IS CONCERNED, WE ARE OF THE VIEW THAT THE AO HAS IN VESTIGATED THE ISSUE AND TOOK AN OPINION THAT IT MIGHT HAVE NOT BEEN REF LECTED SPECIFICALLY IN THE ASSESSMENT ORDER. IF THE LD.COMMISSIONER HAS A DIFFERENT OPINION ON THIS ISSUE, THEN IT WOULD BECOME A DEBATABLE ONE . ACCORDING TO THE ASSESSEE, IN VARIOUS JUDGEMENTS, IT HAS BEEN HELD T HAT THE SOFTWARE EXPENSE IS TO BE ALLOWED AS REVENUE EXPENDITURE. C ONSIDERING THE NATURE OF ITS DEBATABLE-NESS, WE ARE OF THE VIEW TH AT THE ASSESSMENT ORDER CANNOT BE BRANDED AS AN ERRONEOUS ORDER ON TH IS ISSUE. AS FAR AS THIRD PART IS CONCERNED, WE FIND THIS ASPECT IS SQU ARELY COVERED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT. THE OB SERVATION OF THE HONBLE COURT I PARA-3 AND 4 READ AS UNDER: ITA NO.1654/AHD/2015 13 3. HEARD SHRI K.M. PARIKH, LEARNED COUNSEL APPEARI NG ON BEHALF OF THE REVENUE AND PERUSED THE IMPUGNED JUDGMENT AN D ORDER PASSED BY THE ITAT. AT THE OUTSET, IT IS REQUIRED T O BE NOTED THAT THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 32 (1)(IIA) OF THE INCOME-TAX ACT WITH RESPECT TO THE COST INCURRE D BY IT FOR INSTALLATION OF THE WIND ELECTRIC GENERATOR. THE AS SESSING OFFICER DISALLOWED THE SAME AND MADE THE ADDITION OF RS.1,1 7,98,030/- BY OBSERVING THAT AS THE ASSESSEE IS NOT IN THE BUS INESS OF GENERATION AND DISTRIBUTION OF POWER, THE ASSESSEE SHALL NOT BE ENTITLED TO DEDUCTION UNDER SECTION 32(1)(IIA) OF T HE INCOME-TAX ACT OF RS.1,17,98,030/-. THE SAID ADDITION HAS BEEN DELETED BY THE CIT(A) RELYING UPON THE DECISIONS OF THE MADRAS HIGH COURT IN THE CASE OF VTM LTD (SUPRA) AND IN THE CASE OF HI T ECH ARAI LTD. (SUPRA). IN BOTH THE AFORESAID DECISIONS, THE MADRAS HIGH COURT HAD AN OCCASION TO CONSIDER THE SIMILAR ISSUE AND IT IS HELD THAT WHILE CLAIMING THE DEDUCTION UNDER SECTION 32( 1)(IIA) OF THE INCOME-TAX ACT SETTING UP WIND-MILL HAS NOTHING TO DO WITH THE POWER INDUSTRY AND WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM ADDITIONAL DEPRECIATION IS THAT THE SETTING U P OF NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND IN STALLED BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS O F MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANCES AND CONSIDERING T HE RELEVANT PROVISIONS OF SECTION 32(1)(IIA) OF THE INCOME-TAX ACT, WHICH WAS PREVAILING AT THE RELEVANT TIME, I.E. DURING THE YE AR UNDER CONSIDERATION, IT CANNOT BE SAID THAT THE ITAT BY A PPLYING THE RATIO OF DECISION OF THE MADRAS HIGH COURT IN THE CASE OF VTM LTD. (SUPRA) AND IN THE CASE OF HI TECH ARAI LTD. ( SUPRA) HAS COMMITTED ANY ERROR IN DELETING THE ADDITION OF RS. 1,17,98,030/- ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL DEPRECIATI ON OF WIND ELECTRIC GENERATOR. 4. WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE ITAT. NO QUESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT T AX APPEAL. HENCE, THE PRESENT TAX APPEAL DESERVES TO BE DISMIS SED AND IS ACCORDINGLY DISMISSED. 15. THE ASSESSEE AS AN ENTITY OUGHT TO BE ENGAGED I N THE MANUFACTURING ACTIVITY. IT OUGHT TO HAVE INSTALLED PLANT & MACHINERY. IT IS NOT NECESSARY THAT NEW MACHINERY SHOULD BE PART OF THE MANUFACTURING ACTIVITY. THE ADDITIONAL DEPRECATION WILL BE ADMISSIBLE. THIS ALSO TO BE TERMED AS DEBATABLE ISSUE AND THE L D.AO HAS TAKEN A VIEW OF THIS ASPECT, WHICH COULD NOT BE SUBJECT TO ACTION UNDER SECTION ITA NO.1654/AHD/2015 14 263. THE AO HAS INVITED THE EXPLANATION OF THE ASS ESSEE, GONE THROUGH THE DETAILS SUBMITTED BY IT, AND THEREAFTER, ALLOWE D THE DEPRECIATION INCLUDING ADDITIONAL DEPRECIATION AS PER LAW. HIS VIEW MAY NOT GET APPROVAL FROM THE POINT OF VIEW OF THE LD.COMMISSIO NER, BUT, THE OPINION OF THE AO IS ALSO A POSSIBLE VIEW, AND THEREFORE, N O ACTION UNDER SECTION 263 CAN BE JUSTIFIED. ON DUE CONSIDERATION OF THES E FACTS AND CIRCUMSTANCES, WE ALLOW THE APPEAL OF THE ASSESSEE, AND QUASH THE ORDER PASSED BY THE LD.COMMISSIONER UNDER SECTION 2 63 OF THE ACT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 24 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER