M/s. Nokha Agro Services, Bikaner V. Pr. CIT, , Bikaner

ITA 171/JODH/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2212 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 11-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C BADHOK
• Assessee Lawyers: ASHOK MUNDRA CAS
• Keywords: Depreciation; Assessment record; Prejudicial to interest; Benefit of exemption; TDS
• Section: 143(3); 40(b); 80IB; 13; 22; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 171/JODH/2018 (ASSESSMENT YEAR-2013-14) M/S NOKHA AGRO SERVICES, 18 KM STONE, NH-15, SRIGANGANAGAR ROAD, BIKANER. VS PR. COMMISSIONER OF INCOME TAX, BIKANER. (APPELLANT) (RESPONDENT) PAN: AAFFN 8164 R ASSESSEE BY SHRI AMIT KOTHARI & ASHOK MUNDRA (CAS) REVENUE BY SHRI K.C. BADHOK CIT - DR DATE OF HEARING 1 6 /03/2020 DATE OF PRONOUNCEMENT 20/03/2020 O R D E R PER SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF LD. PR. CIT, BIKANER DATED 16.03.2018 PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) FOR THE ASSESSMENT YE AR 2013-14. FOLLOWING GROUNDS HAVE BEEN TAKEN: '1. THE ORDER PASSED BY THE LD. PR. CIT, BIKANER U /S 263 IS BAD IN LAW AND BAD ON FACTS. 2. THE LD. CIT HAD ERRED IN OBSERVING THAT ORIGINA L ASSESSMENT MADE U/S 143(3) ON 31ST MARCH, 2O16 WAS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 2 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT 3. THE LD. CIT HAD NO FIRM BELIEF THAT THE ORIGINA L ORDER PASSED WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE , AND HAS ERRED IN SETTING ASIDE THE ORIGINAL ORDER. 4. THE IMPUGNED ORDER U/S 263 IS ILLEGAL AND MOST UNJUSTIFIED, AS THE SAME IS NOT BASED ON ANY VALID MATERIAL OR LEGAL EV IDENCE WHATSOEVER ON RECORDS, BUT THE SAME IS MERELY BASED ON WRONG SUSPICIONS AND BASELESS PRESUMPTIONS. THE IMPUGNED ORDER DESERVES TO BE QUASHED. 5. THE LD. PR. CIT HAS ERRED IN OBSERVING THAT THE INTEREST EXPENSES AND INTEREST PAYMENT HAD NOT BEEN PROPERLY VERIFIED BY THE LD. AO AT THE TIME OF ORIGINAL ASSESSMENT AND PURPOSE OF T HE BUSINESS NEEDS WAS NOT EXAMINED AND ORDER WAS THEREFORE ERRO NEOUS AND PREJUDICIAL. 6. THE LD. PR. CIT HAS ERRED IN OBSERVING THAT THE DEDUCTION U/S 80IB(A) HAD NOT BEEN PROPERLY EXAMINED BY THE LD. A O AS THERE IS PAYMENT OF RENT ALSO. THE LD. PR. CIT HAS ERRED IN OBSERVING THAT THE SAME IS ONLY PARTLY ACCEPTABLE. 7. THE LD. PR. CIT HAS FURTHER ERRED IN MAKING A GENERAL OBSERVATION THAT THE PAYMENT OF MUNICIPAL TAXES AND INSURANCE H AD NOT BEEN PROPERLY EXAMINED. 8. THE LD. PR. CIT HAS FURTHER ERRED IN OBSERVING THAT THE DEDUCTION OF 100% INCOME CLAIMED IN RELATION TO BRANCH OFFICE IN COME HAD NOT BEEN FULLY EXAMINED. 9. THE LD. PR. CIT HAS FURTHER ERRED IN OBSERVING THAT THE LD. AO HAS NOT PROPERLY EXAMINED THE INCOME SHOWN FROM HANDING AND TRANSPORTATION AND WEIGH BRIDGE INCOME. 10. THE LD. PR. CIT HAS FURTHER ERRED IN OBSERVING THAT THE LD. AO HAS NOT PROPERLY EXAMINED THE CLAIM OF DEPRECIATION. 11. THE LD. PR. CIT HAS ERRED IN OBSERVATION THAT THE DUNNAGE MATERIAL EXPENSES CLAIMED HAS NOT BEEN EXAMINED WITH REGARD TO ANY SCRAP REALIZATION OF SUCH MATERIAL. 12. THE LD. PR. CIT HAS ERRED IN OBSERVING THAT NO REMUNERATION TO PARTNERS HAD BEEN PAID AND HIGH INCOME HAD BEEN SHO WN AND IF REMUNERATION WOULD HAVE BEEN PAID THE SAME WOULD HA VE BEEN 3 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT TAXABLE IN THE HANDS OF THE PARTNERS AND SUCH ISSUE HAS NOT BEEN EXAMINED. 13. THE LD. CIT HAS ERRED IN EXPANDING THE SCOPE O F PROCEEDINGS U/S 263 BEYOND THE NOTICE ISSUED AS IF THE FRESH ASSESS MENT PROCEEDINGS WERE BEING CONDUCTED WHICH IS BAD IN LA W AND BAD ON FACTS. 14. THE APPELLANT PRAY FOR SUITABLE COSTS. 15. THE APPELLANT PRAY FOR STAY OF IMPUGNED ORDER. 16. THE APPELLANT CRAVE LIBERTY TO ADD, AMEND, ALT ER, AND MODIFY ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARING BEFOR E YOUR HONOUR.' 2. THE MAIN GRIEVANCE OF THE ASSESSEE RELATES TO PA SSING OF ORDER U/S 263 OF THE ACT BY THE PR.CIT. 3. THE LD AR APPEARING ON BEHALF OF THE ASSESSEE HA S REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LD. PR.CIT AND ALSO FILED WRITTEN SUBMISSIONS. THE MAIN CONTENTS OF THE WRITTEN SUBMI SSIONS FILED BEFORE THE LD PR.CIT WAS REPRODUCED AS UNDER: IT APPEARS FROM THE NOTICE THAT PRESENT PROCEEDING H AVE BEEN INITIATED BY CONSIDERING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASON THAT FOLLOWING FACTS HAVE NOT BEEN ENQUIRED AND INVESTI GATED BEFORE PASSING THE ASSESSMENT ORDER: I) CLAIM OF NET INTEREST RS. 75,81,296/- ALLOWED WITHO UT VERIFICATION OF NATURE OF INTEREST, BUSINESS NEED O F LOANS ON WHICH INTEREST PAID, II) GODOWN RENT ALLOWED RS. 10,15,93,864/- AT HEAD OFFI CE AGAINST DEDUCTION CLAIMED U/S 80IB(11A) IN RESPECT O F WARE HOUSE RECEIPTS WITHOUT VERIFICATION, III) CLAIM OF MUNICIPAL TAX, INSURANCE CHARGES, DEPRECIA TION, DUNNAGE MATERIAL WITHOUT VERIFICATION, 4 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT IV) CLAIM OF DEDUCTION U/S 80IB(11A) ON HANDLING, TRANSP ORTATION AND WEIGH BRIDGE RECEIPT WHILE ASSESSEE HAS NO TRAN SPORT VEHICLE AND WEIGHBRIDGE, V) NO CLAIM OF REMUNERATION TO WORKING PARTNERS WITH A N INTENTION TO GET MAXIMUM BENEFIT OF EXEMPTION U/S 80IB(11A), WE MAY BE PERMITTED TO SUBMIT THAT ON FACTS OF THE CASE AND IN VIEW OF SETTLED LAW ON THE SUBJECT, THE AFORESAID ISSUES NOT WARRANT ANY ACTION U/S 263 OF THE ACT BECAUSE THE ASSESSMENT OR DER PASSED BY THE LEARNED ASSESSING OFFICER HAS BEEN MADE AFTER D ETAILED SCRUTINY OF THE BOOKS OF ACCOUNT, AFTER MAKING ENQUIRIES, VE RIFICATION AND EXAMINATION OF NET INTEREST, GODOWN RENT, MUNICIPAL TAX , INSURANCE CHARGES, DEPRECIATION, DUNNAGE MATERIAL EXPENSES CL AIMED AND CLAIM OF DEDUCTION U/S 80IB (11A) FOR WARE HOUSE RECEIPTS , HANDLING, TRANSPORTATION AND WEIGH BRIDGE RECEIPTS AND NO CLA IM OF REMUNERATION TO WORKING PARTNERS. AS SUCH YOUR VIEW S THAT ASSESSMENT WAS COMPLETED IN UNDUE HASTE AND WITHOUT MAKING INQUIRIES AND INVESTIGATION, SO THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IS NOT CORRECT AND NOT JUSTIFIED. IT SEEMS THAT FULL FACTS HAVE NOT BEEN PLACED BEFORE YOUR GOOD SELF. KINDLY PERMIT US TO ELABORAT E THE SAME. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF A.O. ACTING IN ACCORDANCE WI TH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS E RRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM TH E ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. IN CIT VS GABRIEL INDIA LTD. (1993) 114 CTR (BOMB) 8 1 IT WAS HELD BY THE HIGH COURT THAT ORDER SOUGHT TO BE REVISED M UST BE ERRONEOUS AND ALSO BY VIRTUE OF ITS BEING ERRONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO INTEREST OF THE REVENUE. SEC 263 DOES NOT VISUALISE SUBSTITUTION OF JUDGEMENT OF COMMISSIONER FOR THAT OF A.O. UNLESS THE DECISION IS HELD TO BE PREJUDICIAL WHEN IT HAS CAUSED LOSS OF REVENUE. THERE MUST BE MATERIAL BEFORE THE COMMISSI ONER TO SATISFY HIMSELF PRIMA FACIE THAT TWO REQUISITES ARE PRESENT , POWER CANNOT BE EXERCISED AT THE WHIMS AND CAPRICE OF COMMISSIONER. IN VIDISHA TRACTORS VS ACIT (1995) 53 TTJ (IND) 432 IT WAS HELD BY I.T.A.T. INDORE BENCH THAT MERELY BECAUSE ASSESSING OFFICER DID NOT METICULOUSLY DEALT WITH THE ISSUE OF COMMISSION PAY MENTS AND 5 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT GENUINENESS OF CREDIT ENTRIES IT CANT BE SAID THAT THERE WAS NO APPLICATION OF MIND BY HIM, CIT WAS IN ERROR IN EXE RCISING HIS REVISIONARY POWER, IMPUGNED ORDER QUASHED. WE SUBMIT POINT WISE REPLY IN DETAILS AGAINST YOUR OBSERVATIONS IN THE FOLLOWING PARAS:- (1) EXPLANATION IN RESPECT OF CLAIM OF NET INTEREST RS. 75,81,296/- IN SHOW CAUSE NOTICE YOUR HONOUR HAS STATED THAT FRO M APPRAISAL OF ASSESSMENT RECORD IT IS OBSERVED THAT ASSESSEE FIRM HAS RECEIVED INTEREST INCOME RS. 84,20,153/- A GAINST WHICH INTEREST PAID DURING THE YEAR RS. 1,60,01,449 /- AS SUCH NET INTEREST OF RS. 75,81,296/- CLAIMED AS EXPENDIT URE. THE A.O. HAS NOT ENQUIRED AND VERIFIED THE NATURE OF IN TEREST PAID, NECESSITY OF HEAVY LOAN TAKEN ON INTEREST FOR BUSIN ESS NEED. AS SUCH CLAIM OF NET INTEREST IS NOT ONLY WRONGLY CLAI MED BUT WRONGLY ALLOWED BY THE A.O. WITHOUT ANY ENQUIRY AND VERIFICATION OF THE FACTS. THE PROPOSED REVISION U/S 263 FOR ISSUE OF NON VERI FICATION AND ENQUIRY OF NET INTEREST ALLOWED AS EXPENDITURE IS U NWARRANTED AND UNSUSTAINABLE DUE TO THE FOLLOWING REASONS:- I) DURING THE COURSE OF ASSESSMENT PROCEEDING THE A.O. VIDE QUESTIONNAIRE HAS ASKED THE ASSESSEE TO SUBMIT DETA ILS OF INTEREST RECEIVED AND PAID TOGETHER WITH EXPLANATIO N REGARDING SOURCES OF LOANS ON WHICH INTEREST PAID A ND JUSTIFICATION OF ADVANCE OR INVESTMENTS ON WHICH IN TEREST RECEIVED. IN REPLY TO THE SAID QUESTION ASSESSEE HAS SUBMITTE D DETAILS OF INTEREST PAID RS. 1,60,01,449.00 TO BANK I.E. PUNJAB NATIONAL BANK, DCBL AND ICICI BANK AND UNSECURED LOANS AND INTEREST RECEIVED RS. 84,20,153/- FROM FDR WITH PUNJAB NATIONAL BANK AND DCBL AND INTEREST ON ADVANCES TO PARTIES. THE NET INTEREST OF RS. 75,81,296/- CHARGED TO PROF IT AND LOSS AS EXPENDITURE. IN THE COURSE OF ASSESSMENT PRECEDING THE LEARNED A.O. HAS ACCEPTED THE CLAIM OF INTEREST (NET) ONLY AFTER 6 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT SATISFACTION THAT INTEREST RECEIVED IS OUT OF FDR W ITH PNB AND DCBL MADE FOR THE PURPOSE OF BANK GUARANTEE GIVEN T O THE NCDEX AND OTHER AUTHORITIES. THE INTEREST RECEIVED FROM ADVANCES TO PARTIES FOR SHORT PERIOD FOR PROPER UTI LISATION OF SURPLUS FUND OF THE FIRM. TDS HAS BEEN DEDUCTED BY THE PARTIES ON INTEREST PAID TO THE ASSESSEE FIRM. INTEREST PAID ON TERM LOAN FROM DCBL, OD LIMIT FROM PUNJAB NATIONAL BANK AND ICICI BANK AND UNSECURED LOAN S FROM THE PARTIES. TDS HAS BEEN DEDUCTED ON INTEREST PAID TO UNSECURED LOANS. II) THE A.O. HAS APPRAISED THE CLAIM OF INTEREST PAID O N TERM LOAN, O.D. LIMIT AND UNSECURED LOANS AFTER SATISFYI NG HIMSELF THAT THESE LOANS ARE FOR THE PURPOSE OF WAREHOUSING ACTIVITIES OF THE ASSESSEE BUSINESS. III) WHILE FRAMING THE ASSESSMENT ORDER LEARNED A.O. HAS REVIEWED THE REASON FOR INVESTMENT IN FDR WHERE IN ASSESSEE EARN LOWER INTEREST THAN THE INTEREST PAID ON BORROWED LOANS. THE LEARNED A.O. HAS ACCEPTED NEED OF INVESTMENT ONLY AFTER VERIFICATION THE FACT THAT FD R IS REQUIRED FOR BANK GUARANTEE TO NCDEX AND IT IS ESSE NTIAL AND LEGITIMATE NEED OF THE BUSINESS. LOOKING TO THE ABOVE EXPLANATION, RECORD AND FACTS PLACED ON RECORD IT IS PROVED THAT INTEREST ALLOWED BY THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE IN TEREST OF REVENUE. (2) EXPLANATION FOR GODOWN RENT RS. 10,15,93,864/- ALLOWED IN HEAD OFFICE WHILE DEDUCTION CLAIMED U/S 80IB (11A) AGAINST WARE HOUSE RECEIPT IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT FR OM APPRAISAL OF TRADING, PROFIT AND LOSS ACCOUNT IT IS OBSERVED THAT ASSESSEE HAS CLAIMED GODOWN RENT PAID RS. 10,15,93, 864/- IN HEAD OFFICE ACCOUNT, NEITHER ASSESSMENT RECORD KEPT SUCH DETAILS NOR THE A.O. ASKED AND VERIFIED THE FACTS T HAT ASSESS HAS PAID GODOWN RENT WHILE DEDUCTION U/S 80IB(11A) CLAIM ED 7 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT AGAINST WARE HOUSE RECEIPT. AS PER PROVISION OF SEC TION 80IB (11A) DEDUCTION AGAINST WARE HOUSE RECEIPTS ALLOWED ONLY TO THOSE ASSESSEE WHICH HAVE OWN WARE HOUSE. THE PROPOSED DISALLOWANCE OF CLAIM OF GODOWN RENT O F RS. 10,15,93,864/- PAID BY H.O. IS UNWARRANTED AND UNSU STAINABLE DUE TO THE FOLLOWING REASONS:- I) THE LEARNED DCIT CIRCLE 2, BIKANER (A.O.) IN HIS ASSESSMENT ORDER CLEARLY STATED THAT ' DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS STATED ABOVE THE ISSUES FOR ALLOWING CLAIM OF DEDUCTION U/S 801B (11A) WERE ELABORATELY DISCUSSED WITH THE A/R AND DETAILED QUERIES AS STATED BELOW WERE RAISED: IN THIS REGARD, IN CONTINUATION OF ASSESSMENT PROCEEDING YOUR ATTENTION IS DRAWN TOWARDS THE FIRST QUESTIONNAIRE ISSUED BY THE UNDERSIGNED DATED 25.01.2016 WHEREBY IT WAS POINTED OUT IN QUERY NO. 18 THAT FOR CLAIMING DEDUCTION U/S 80IB, IT IS MANDATORY THAT AS PER RULE 18BBB OF IT RULES, A REPORT OF AUDIT IN FORM NO. 10CCB IS APPENDED WITH TAX AUDIT REPORT GIVEN IN THE FORM 3CD/CB BUT IN THE AUDIT REPORT SUBMITTED THE SAME WAS NOT FOUND ENCLOSED THEREWITH, AND IN REPLY TO THAT VIDE YOUR REPLY DATED 03.02.2016 YOU HAVE NOT COMMENTED ANYTHING BUT NOW SUBMITTED A COPY OF SAID REPORT IN 10CCB WHICH WAS UPLOADED ELECTRONICALLY IN THE DEPARTMENTAL SITE ON 02.10.2013. PERUSAL OF THIS REPORT REVEALS THAT THIS HAS BEEN FILED IN RESPECT OF YOUR UNIT AT BIKANER SITUATED AT 18KM. STONE, NH- 15, KHARA. NOW FROM THIS REPORT AS WELL AS THE AUDI T REPORT SUBMITTED IN FORM 3CD EARLIER RAISES SOME MORE QUERIES WHICH ARE MENTIONED AS UNDER: 1. YOU ARE CLAIMING THREE INDEPENDENT UNDERTAKINGS AS ACCORDING TO YOU INITIAL ASSESSMENT YEAR OF COMMENCEMENT OF OPERATION OF EACH OF THE UNIT IS DIFFERENT BUT THE ONLINE SUBMISSION OF THE AUDIT REPORT IN FORM 10CCB IS ONLY IN RESPECT OF IST UNIT AT KHARA AND NO MENTIONING OF OTHER UNITS SITUATED AT BORANADA( JODHPUR) AND NOKHA IS DONE THEREIN. IT 8 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT IS NOT UNDERSTANDABLE THAT HOW YOU HAVE MADE A CONSOLIDATED CLAIM OF 80IB IN YOUR COMPUTATION OF RS. 2,11,31,163/-. 2. SINCE IT IS AN ESTABLISHED FACT THAT NO SEPARATE AU DIT REPORT IN FORM 10CCB HAVE BEEN UPLOADED ELECTRONICALLY BY THE FIRM IN RESPECT OF TWO OTHER UNITS WHICH CLAIMED AS YOUR OTHER UNDERTAKINGS DOING ELIGIBLE BUSINESS JUST LIKE THE UNIT AT KHARA , BIKANER AND ENTITLED FOR DEDUCTION ON ACCOUNT OF CLAIM U/S 80IB, BUT THE CONDITIONS FOR CLAIMING DEDUCTION UNDER SECTION 80IB FOR THESE TWO UNITS HAVE NOT BEEN FULFILLED AND PLEASE STATE WHY NOT ANY DEDUCTION OF CLAIM FOR THESE UNITS UNDER SECTIO N 80IB SITUATED AT NOKHA AND JODHPUR, BE DISALLOWED? IN DUE COURSE OF THE ASSESSMENT PROCEEDINGS AT VARIOUS STAGES THE ASSESSEES A/R VIDE HIS DETAILED REPLY QUOTING VARIOUS JUDICIAL PRONOUNCEMENTS. THE RELEVANT PORTIONS OF THE SUBMISSION OF THE A/R IN REGARD TO ALL THE ABOVE THREE POINTS ARE RE- PRODUCED HEREUNDER IN ORDER TO TESTIFY HIS SUBMISSION CRITICALLY: 1&2 IN THE MATTER OF THREE SEPARATE AUDITS REPORT IN FORM NO. 10CCB FOR EACH UNIT: WE WOULD LIKE TO STATE THAT NEW UNITS ESTABLISHED A T BORANADA AND NOKHA WERE COMPLETELY SEPARATE FROM THE UNIT SITUATED AT KHARA. ITS LOCATION, ADMINISTRATION OFFICE, INVOICES, BOOKS OF ACCOUNTS, FINANCIAL STATEMENTS AND OTHER REQUIRED DOCUMENTS WERE MANAGED SEPARATELY. THE YEAR UNDER REVIEW WAS THE FIRST YEAR IN WHICH THE E-FILING OF THE AUD IT REPORT IN FORM 10CCB UNDER SECTION 80IB BECAME MANDATORY. THEREFORE IT WAS CONSTRUED THAT LIKE REPORT U/S 44AB, ONLY ONE REPORT CAN BE E-FILED HENCE, COMPOSITE REPORT COMPRISING OF THE AGGREGATE DEDUCTION WAS ELECTRONICALLY FILED AT THE PORTAL OF THE INCOME TAX DEPARTMENT. AFTER END OF THE YEAR SEPARATE TRIAL BALANCES ARE GENERATED WITH 9 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT REFERENCE TO EACH UNIT AND FINANCIAL STATEMENTS ARE CLUBBED OUT. EVEN INTEREST ON CAPITAL PAID BY THE UNITS SITUATED AT BORANADA AND NOKHA TO ITS KHARA OFFICE AGAINST INVESTMENT OF CAPITAL AT THESE LOCATIONS WHICH IS SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE RESPECTIVE BRANCHES. THE ASSESSEE IS HEREBY FURNISHING SEPARATE REPORTS IN FORM NO. 10CCB U/S 80IB OF THE I.T. ACT IN RELATION TO ALL TH E ELIGIBLE BUSINESS ACTIVITY WHICH QUALIFY FOR DEDUCT ION U/S 80IB (11A). THE ASSESSEE HAVE MADE A CONSOLIDATED CLAIM OF THE 80IB IN HIS COMPUTATION IS RS. 21131163.00. STATEMENT SHOWING HOW THE ASSESSEES HAVE CALCULATED THE AMOUNT OF CLAIM U/S 80IB IS ENCLOSED WITH THE LETTER. THE LEARNED A.O. IN HIS ORDER STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A/R OF THE ASSESSEE WAS QUERIED REGARDING WORKING AND JUSTIFICATION OF THE AMOUNT OF THE CLAIM MADE U/S 80IB BY THE FIRM AS THE WORKING GIVEN BY HIM IN REPLY TO THE SPECIFIC QUERY MADE IN THE QUESTIONNAIRE IN THIS REGARD. HE HAS FURNISHED THE CALCULATION OF NET PROFIT REGARDING RENTAL INCOME AND INFRASTRUCTURAL INCOME IN RESPECT OF HEAD OFFICE AS WELL AS BRANCH OFFICES. THIS YEAR THE ASSESSEE FIRM HAS CLAIMED 25% OF DEDUCTION U/S 80IB (11A) ON ITS FIRST UNIT STARTED COMMENCING BUSINESS AT 18 TH KM STONE, NH-15, KHARA FORM AY 2008-09, BEING THE SIXTH YEAR OF THE CLAIM AND IN RESPECT OF OTHER TWO UNDERTAKINGS SITUATED AT NOKHA (YEAR OF COMMENCEMENT OF BUSINESS AY 2012-13) AND BORANADA, JODHPUR (YEAR OF COMMENCEMENT OF BUSINESS AY2009-10), THE FIRM HAS CLAIMED 100% OF DEDUCTION U/S 80IB . ON PERUSAL OF THE DETAILS FURNISHED BY THE A/R AS WELL AS ON THE EXAMINATION OF BOOKS OF ACCOUNTS IT WAS FOUND THAT THERE IS DISPROPORTIONATE CLAIM OF EXPENSES UNDER VARIOUS HEADS KEEPING IN VIEW THE NATURE AND SCALE OF BUSINESS ACTIVITIES SHOWN BY TH E ASSESSEE UNDER THE HEAD OF RENTAL AND INFRASTRUCTURAL INCOME. COMPUTATION OF NET PROFIT WORKED OUT OR CLAIMING DEDUCTION U/S 80IB REVEALS 10 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT THAT GROSS RECEIPTS IN RESPECT OF BRANCH OFFICE HAS BEEN SHOWN UNDER THE HEAD OF RENTAL AND INFRASTRUCTURE TO THE TUNE OF RS. NIL AND RS. 3,16,61,031/- RESPECTIVELY AND IN RESPECT OF HEAD OFFICE THE SAME IS SHOWN AT RS. 16,10,13,701/- (0+16,10,13,701/-) AND THE GROSS RECEIPT OF INFRASTRUCTURE COME AT RS. 4,70,33,779/- (1,53,72,748+3,16,61,031) AND THE RATIO BETWEEN RENTAL INCOME AND INFRASTRUCTURE INCOME COMES AS 77.44:22.60. HOWEVER ON COMPARISON OF FOLLOWING EXPENSES AFTER BIFURCATION BETWEEN RENTAL AND INFRASTRUCTURE RECEIPTS THE DIFFERENT RATIOS ARE BEING NOTICED AS PER THE FOLLOWING WORKING:- 1. FUMIGATION CHARGES AGAINST RENTAL RECEIPTS - RS.20,07,559/- AGAINST INFRASTRUCTURE RECEIPT - RS.6,48,483/- RATIO BETWEEN THE ABOVE TWO - 76:24 2. GODOWN EXPENSES AGAINST RENTAL RECEIPTS - RS.24,99,789/- AGAINST INFRASTRUCTURE RECEIPT - RS.4,43,613/- RATIO BETWEEN THE ABOVE TWO - 85:15 3. GODOWN SALARY AGAINST RENTAL RECEIPTS - RS.37,62,531/- AGAINST INFRASTRUCTURE RECEIPT - RS.7,48,813/- RATIO BETWEEN THE ABOVE TWO - 83:17 4. BARDANA EXPENSES AGAINST RENTAL RECEIPTS - RS.5,93,185/- AGAINST INFRASTRUCTURE RECEIPT - RS.98,327/- RATIO BETWEEN THE ABOVE TWO - 86:14 5. NCDEX CHARGES AGAINST RENTAL RECEIPTS - RS.30,91,044/- AGAINST INFRASTRUCTURE RECEIPT - RS.7,00,863/- RATIO BETWEEN THE ABOVE TWO - 82:18 6. TRAVELLING EXPENSES AGAINST RENTAL RECEIPTS - RS.2,82,208/- AGAINST INFRASTRUCTURE RECEIPT - RS.29,481/- 11 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT RATIO BETWEEN THE ABOVE TWO - 91:9 THUS, THERE IS DISPROPORTIONATE CLAIM OF EXPENSES O UT OF GROSS RECEIPTS OF RENTAL INCOME AND INFRASTRUCTU RAL INCOME. SINCE DEDUCTION U/S 80IB IS ONLY GRANTED ON INFRASTRUCTURAL INCOME, HENCE VARIATION IN CLAIM OF EXPENSES DEFINITELY EFFECTS THE COMPUTATION OF ALLOWABLE DEDUCTION. DURING THE ASSESSMENT PROCEEDINGS, THE A/R OF THE ASSESSEE WHEN CONFRONTE D WITH THIS ASPECT FAIRLY ADMITTED THE EFFECT OF THIS DISPROPORTION IN THE CLAIM OF DEDUCTION U/S 80IB MAD E BY THE FIRM. CONSIDERING THIS FACT A LUMP SUM ADDIT ION OF RS. 5,50,000/- IS MADE TO COVER UP EXCESSIVE CLA IM OF EXPENSES OUT OF RENTAL INCOME. ACCORDINGLY, A SU M OF RS. 5,50,000/- IS ADDED TO THE TOTAL INCOME OF T HE ASSESSEE FIRM. HENCE YOUR VIEW THAT A.O. HAS NOT VERIFIED AND INVESTIGATE THE CLAIM OF GODOWN RENT PAID AGAINST W ARE HOUSE RECEIPTS ELIGIBLE FOR DEDUCTION U/S 80IB (11A ) IS NOT CORRECT AND NOT TENABLE IN EYE OF LAW. II) WE BEG TO DRAW YOUR KIND ATTENTION THAT ASSESSEE HAS SUBMITTED STATEMENT OF CALCULATION OF NET PROFIT FOR DEDUCTION U/S 80IB OF HEAD OFFICE FOR THE YEAR ENDED 31 ST MARCH, 2013 THE SAME STATEMENT IS KEPT ON ASSESSMENT RECORD. ON PERUSAL OF THE SAID STATEMENT IT MAY BE OBSERVED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB (11A) @25% ON H.O. INFRASTRUCTURAL RECEIPTS ONLY AND NOT ON RENTAL RECEIPTS. FROM THE SAID STATEMENT IT MAY BE OBSERVED THAT DURING THE FINANCIAL YEAR 2012-13 ASSESSEE HAS RECEIVED RENTAL WAREHOUSE RECEIPTS OF RS. 16,03,99,154.82 AGAINST WHICH GODOWN RENT PAID RS. 10,15,93,864.61 AND TOTAL EXPENSES CLAIMED RS. 14,37,77,947.95 SO NET PROFIT REMAINS IN RENTAL ACCOUNT RS. 1,72,35,753.18 ON WHICH ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S 80IB(11A). YOUR VIEW THAT ASSESSEE HAS WRONGLY CLAIMED DEDUCTION U/S 80IB (11A) ON WAREHOUSE INCOME 12 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT WHICH WAS TAKEN ON RENT FROM THIRD PARTIES AND FURTHER LET OUT THESE WAREHOUSES. HENCE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION U/S 80IB (11A) ON THOSE WAREHOUSES WHICH ARE NOT OWNED BY THE ASSESSEE. YOUR VIEW THAT A.O. HAS NOT VERIFIED AND INVESTIGATE THE GODOWN RENT PAID AT H.O. RS. 10,15,93,864/- AGAINST WHICH ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB (11A) IS NOT CORRECT BECAUSE ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 80IB(11A) ON THIS RENTAL INCOME. SO YOUR HOLDING THAT ORDER OF A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS NOT CORRECT. (3) EXPLANATION IN RESPECT OF NON VERIFICATION OF MUNICIPAL TAX AND INSURANCE CHARGES RS. 3,29,282/- AND 40,36,507/- RESPECTIVELY. IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT FR OM APPRAISAL OF ASSESSMENT RECORD IT IS OBSERVED THAT ASSESSEE HAS CLAIMED MUNICIPAL TAX AND INSURANCE CHARGES RS. 3,2 9,282/- AND 40,36,507/- RESPECTIVELY. ASSESSMENT RECORDS NE ITHER KEPT ANY DETAILS AND EVIDENCE FOR SUCH PAYMENT NOR ANY E XPLANATION ABOUT THE EXPENDITURE INCURRED FOR WHICH PROPERTIES . THE A.O. HAS NOT VERIFIED THE CLAIM OF EXPENDITURE SO ORDER OF A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE PROPOSED DISALLOWANCES ARE UNWARRANTED AND UNSUSTAINABLE DUE TO THE FOLLOWING REASONS:- I) IN THE COURSE OF ASSESSMENT PROCEEDING LEARNED A.O. HAS SCRUTINISED THE RENTAL INCOME OF H.O. AND EXPEN SES CLAIMED THEIR AGAINST. DURING THE FINANCIAL YEAR 20 12- 13 ASSESSEE HAS PAID MUNCIPAL TAX OF RS. 3,29,282/- FOR WARE HOUSE TAKEN ON RENT AT KADI TO M/S BUILD W ELL CORPORATION AGAINST THE AGREEMENT OF LEASE EXECUTED BETWEEN PARTY AND ASSESSEE. THE SAID MUNICIPAL TAX IS AGAINST RENTAL INCOME AT KADI WARE HOUSE AND FOR WHICH NO DEDUCTION U/S 80IB (11A) HAS BEEN CLAIMED. II) IN THE COURSE OF ASSESSMENT PROCEEDING LEARNED A.O. HAS VERIFIED THE INSURANCE CHARGES OF RS. 40,96,386 .00 CLAIMED BY THE ASSESSEE AT H.O. AGAINST INFRASTRUCT URAL 13 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT RECEIPT AND RENTAL RECEIPT OF WHICH DETAILS ARE AS UNDER: S.NO . INSURANCE CHARGES PAID FOR AMOUNT INSURED PROPERTY I) INFRASTRUCTURAL RECEIPT 3,28,975.32 OWN WAREHOUSE BUILDING AND GOODS STORE ON WARE HOUSE. II) RENTAL RECEIPT 37,07,531.68 GOODS STORED ON RENTED WARE HOUSES. HENCE YOUR VIEW THAT A.O. HAS NOT VERIFIED THE EXPENDITURE CLAIMED IS NEITHER CORRECT NOR PREJUDIC IAL TO THE INTEREST OF REVENUE. (4) EXPLANATION IN RESPECT OF NON VERIFICATION OF DEDUCTION @ 100% OR 25% U/S 80IB(11A) ON WAREHOUSE INCOME OF HEAD OFFICE AND BRANCHES IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT FR OM APPRAISAL OF ASSESSMENT RECORD DETAILS ABOUT WARE H OUSE RECEIPTS ELIGIBLE FOR DEDUCTION OF WAREHOUSE RECEIP TS OF HEAD OFFICE AND BRANCHES ARE NOT AVAILABLE. THERE IS NO EVIDENCE IN ASSESSMENT RECORD WHICH PROVED THAT THE A.O. HAS VE RIFIED THE CLAIM OF 100% DEDUCTION OF WARE HOUSE RECEIPTS OF B RANCHES. THERE IS NO EVIDENCE WHICH CONFIRM THAT THE A.O. HA S VERIFIED THE DATES FOR PURCHASE OF LAND, CONVERSION OF LAND, CONSTRUCTION OF WAREHOUSE AND PUT TO USE OF WAREHOUSE. HENCE A.O . HAVE NOT ENQUIRED AND VERIFIED THE FACTS BEFORE ALLOWING THE CLAIM OF DEDUCTION U/S 80IB (11A). THE PROPOSED REVISION ON ISSUE OF NON VERIFICATION AND ENQUIRY TO CLAIM 100% DEDUCTION BY BRANCHES ON THEIR WAREHO USE RECEIPTS IS UNWARRANTED AND LIABLE TO BE QUASHED DU E TO THE FOLLOWING REASONS:- I) THE LEARNED A.O. IN HIS ASSESSMENT ORDER SPECIFICAL LY STATED THAT ASSESS WAS QUERIED REGARDING WORKING AND JUSTI FICATION OF THE AMOUNT OF THE CLAIM MADE U/S 80IB BY THE FIRM . IN THE ASSESSMENT ORDER A.O. HELD THAT THIS YEAR THE ASSESSEE FIRM HAS CLAIMED 25% OF DEDUCTION U/S 80IB( 11A) ON ITS FIRST UNIT STARED COMMENCING BUSINESS AT 18 TH KM 14 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT STONE, NH-15, KHARA FROM AY 2008-09, BEING THE SIXT H YEAR OF THE CLAIM AND IN RESPECT OF OTHER TWO UNDERTAKIN GS SITUATED AT NOKHA (YEAR OF COMMENCEMENT OF BUSINESS AY 2012-13) AND BORANADA, JODHPUR (YEAR OF COMMENCEMEN T OF BUSINESS AY2009-10), THE FIRM HAS CLAIMED 100% O F DEDUCTION U/S 80IB . II) IN THE ASSESSMENT ORDER LEARNED A.O. HAS SPECIFICALL Y STATED THAT YOU ARE CLAIMING THREE INDEPENDENT UNDERTAKINGS AS ACCORDING TO YOU INITIAL ASSESSMENT YEAR OF COMMENC EMENT OF OPERATION OF EACH OF THE UNIT IS DIFFERENT BUT T HE ONLINE SUBMISSION OF THE AUDIT REPORT IN FORM 10CCB IS ONL Y IN RESPECT OF IST UNIT AT KHARA AND NOT MENTIONING OF O THER UNITS SITUATED AT BORANADA (JODHPUR) AND NOKHA IS D ONE THEREIN. IT IS NOT UNDERSTANDABLE THAT HOW YOU HAVE MADE A CONSOLIDATED CLAIM OF 80IB IN YOUR COMPUTATION OF RS . 2,11,31,163/-. THE ASSESSEE IN HIS REPLY STATED THAT THE YEAR UNDER REVIEW WAS THE FIRST YEAR IN WHICH THE E-FILING OF THE AUDIT REPORT IN FORM 10CCB UNDER SECTION 80IB BECAME MANDATORY. THEREFORE IT WAS CONSTRUED THAT LIKE REP ORT U/S 44AB, ONLY ONE REPORT CAN BE E-FILED HENCE, COMPOSI TE REPORT COMPRISING OF THE AGGREGATE DEDUCTION WAS ELECTRONICALLY FILED AT THE PORTAL OF THE INCOME TA X DEPARTMENT. THE ASSESSEE IS HEREBY FURNISHING SEPAR ATE REPORTS IN FORM NO. 10CCB U/S 80IB OF THE I.T. ACT I N RELATION TO ALL THE ELIGIBLE BUSINESS ACTIVITY WHIC H QUALIFY FOR DEDUCTION U/S 80IB (11A). THE ASSESSEE HAVE MADE A CONSOLIDATED CLAIM OF THE 80IB IN HIS COMPUTATION I S RS. 21131163.00. STATEMENT SHOWING HOW THE ASSESSEES HA VE CALCULATED THE AMOUNT OF CLAIM U/S 80IB IS ENCLOSED WITH THE LETTER. THE ABOVE SUBMISSION OF THE A/R OF THE ASSESSEE IS FOUND TO BE TECHNICALLY CORRECT FOR THE REASON UPLOADING OF FILED ELECTRONICALLY AUDIT REPORT DID NOT HAVE THE FEATUR E OF SEPARATELY FILLING THE SAME IN RESPECT OF EACH OF T HE UNDERTAKING (UNIT) OF THE ASSESSEE AND THAT MADE COMPULSION TO FILED A CONSOLIDATED AUDIT REPORT ELECTRONICALLY. 15 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT HENCE YOUR VIEW THAT A.O. HAS NOT ENQUIRED AND VERI FIED THE CLAIM OF DEDUCTION U/S 80IB (11A) FOR BIKANER H .O. AND OTHER BRANCHES AT DIFFERENT RATES IS NOT CORRECT AN D NOT TENABLE. (5) EXPLANATION IN RESPECT OF NON VERIFICATION OF HANDLING & TRANSPORTATION RECEIPTS OF RS. 13,43,806/- IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT ON APPRAISAL OF ASSESSMENT RECORD IT IS OBSERVED THAT ASSESSEE HAS SHOWN HANDLING AND TRANSPORTATION INCOME OF RS. 13, 43,806/- WHILE ASSESSEE HAS NO TRANSPORT VEHICLE. THE A.O. H AS ACCEPTED THE CLAIM OF DEDUCTION WITHOUT VERIFICATION OF FACT S. AS SUCH CLAIM OF DEDUCTION AS EXEMPTED INCOME IS NOT ONLY W RONGLY CLAIMED BUT WRONGLY ALLOWED BY THE A.O. HENCE ORDER OF A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE PROPOSED DISALLOWANCE OF CLAIM OF DEDUCTION UND ER SECTION 80 IB (11A) FOR INCOME EARNED UNDER HANDLING AND TRANSPORTATION AMOUNTING TO RS. 13,43,806/- IS UNWA RRANTED AND UNSUSTAINABLE DUE TO THE FOLLOWING REASONS:- I. IN THIS CONNECTION WE WOULD LIKE TO STATE THAT LITER AL INTERPRETATION OF WORDS 'INTEGRATED BUSINESS OF HAN DLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS' WILL NOT LEAD TO ANY ABSURDITY OR PRODUCE ANY MANIFESTLY UNJUST RESU LT. THE LEGISLATIVE INTENT IS NOT TO ENCOURAGE TRANSPORTATI ON OR HANDLING OF FOOD GRAINS BUT THE LEGISLATIVE INTENT IS TO ENCOURAGE CONSTRUCTION OF GODOWNS AND WAREHOUSES WI TH A VIEW TO PROVIDING STORAGE OF FOOD GRAINS. IF WE CO NSIDER THE ENTIRE COMBAT OF THE SCHEME RELATING TO THE TAX HOLIDAY PROVIDED BY THE LEGISLATURE, WE FIND THAT THE DEDUC TIONS ARE AVAILABLE UNDER VARIOUS PROVISIONS WHEN THE ASS ESSEE HAS CONTRIBUTED SOMETHING TOWARDS THE INFRASTRUCTUR E DEVELOPMENT OF THE COUNTRY. THE SAME VIEWS WERE EXPRESSED IN THE CASE OF SHANK AR K. BHANAGE, MUMBAI VS DEPARTMENT OF INCOME TAX ON 29 AUGUST, 2012 (INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'J' MUMBAI) 16 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT FURTHER IN THE CASE OF A. P. STATE WAREHOUSING COR PORATION V/S. DY. COMMISSIONER OF INCOME-TAX, HYDERABAD (INCO ME TAX APPELLATE TRIBUNAL HYDERABAD- 24/01/2014) IT WAS HELD THAT: THE INSERTION OF SUB-SECTION (11A) IS INTENDED TO ENCOURAGE BUILDING OF STORAGE CAPACITIES, BY PROVID ING THAT ANY UNDERTAKING ENGAGED IN INTEGRATED BULK HANDLING , STORAGE AND TRANSPORTATION WOULD BE ALLOWED HUNDRED PER CENT DEDUCTION FOR THE FIRST FIVE YEARS AND THIRTY PER CENT DEDUCTION FOR THE NEXT FIVE YEARS. THUS, SEC 80IB ( 11A) IS APPLICABLE TO INCOME DERIVED FROM THE INTEGRATED BU SINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRA INS. A PERUSAL OF THE ACTIVITIES OF THE ASSESSEE IN ASSOCI ATION WITH THE FOOD CORPORATION OF INDIA, AS DEMONSTRATED BY TH E LEARNED COUNSEL FOR THE ASSESSEE IN THE PAPER-BOOK FILED, CLEARLY INDICATES IT IS ENGAGED IN THE INTEGRATED B USINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS . THERE IS NO DISPUTE THAT THE ASSESSEE MAIN BUSINESS IS TO PROVIDE WAREHOUSING FACILITY FOR FOOD GRAINS. THE ASSESSEE HAS BEEN CONSTITUTED UNDER WITH THESE VERY OBJECTS IN V IEW. MERELY BECAUSE THE ASSESSEE HAS ENGAGED OUTSIDERS F OR TRANSPORTATION OR LEASED OUT SOME OF THE GODOWNS FO R STORAGE DOES NOT MEAN THAT THE ASSESSEE IS NOT ENGA GED IN THE INTEGRATED BUSINESS OF HANDLING AND STORAGE OF FOOD GRAINS. IN THE COURSE OF THEIR INTEGRATED BUSINESS, THE ASSESSEE HAD COLLECTED RENTALS FOR STORING FOOD GRA INS AND HAD ENGAGED OUTSIDERS TO TRANSPORT THE FOOD GRAINS. II. IN THE PRESENT CASE ASSESSEE FIRMS MAIN BUSINESS IS PROVIDING STORAGE SERVICES IN RESPECT OF FOOD GRAIN S. HANDLING & TRANSPORTATION SERVICES ARE ALLIED ACTIV ITIES WHICH ARE UNDOUBTEDLY PRESENT THERE. HANDLING & TRANSPORTATION ARE ESSENTIAL FOR MAIN BUSINESS. BECAUSE WITHOUT PROVIDING HANDLING & TRANSPORTATIO N, LOADING-UNLOADING, SHIFTING, REPACKING & CLEANING A CTIVITIES IT IS IMPOSSIBLE TO RUN BUSINESS OF WAREHOUSING / S TORAGE SERVICES. WITHOUT HANDLING AND TRANSPORTATION SERVI CES DEPOSIT AND WITHDRAWAL OF GOODS TO/FROM GODOWNS COU LDNT POSSIBLE. HENCE THIS IS NOT WORTHWHILE TO REACH THE 17 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT CONCLUSION THAT THERE WAS NOT INTEGRATED BUSINESS O F HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS '. IN THE CASE OF A. P. STATE WAREHOUSING CORPORATION V /S. DY. COMMISSIONER OF INCOME-TAX, HYDERABAD (INCOME T AX APPELLATE TRIBUNAL HYDERABAD- 28/08/2014) SAME VI EWS WERE EXPRESSED. MOREOVER ASSESSEE FIRMS PROFIT & LOSS ACCOUNT SHOW S RS. 13,43,806/- TOWARDS INCOME FROM HANDLING & TRANSPORTATION FOR THE YEAR UNDER CONSIDERATION. TH IS IS PROVING THAT ASSESSEE FIRM INVOLVE IN 'INTEGRATED B USINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRA INS'. III. YOUR HONOUR HAS FAILED TO CONSIDER THAT HANDLING AN D TRANSPORTATION FACILITY IS ONE OF THE BASIC REQUIRE MENT TO STORE THE FOOD GRAIN BUT NOWHERE MENTIONED THAT ASSESSEE MUST HAVE TRANSPORT VEHICLE AND TRANSPORTA TION HAS TO BE DONE BY THE ASSESSEE OWN TRUCKS. IN THE CASE OF GENDMAL BHIKULAL BANTHIA, PUNE V/S I TO, WARD-1(4), PARBHANI. (IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE BENCH 'A', PUNE ON DATED- 22/03/2013) THE MAIN REASON FOR REJECTING THE CLAIM OF THE ASSESSEE BY ITO IS THAT THE ASSESSEE IS NOT PRO VIDING FACILITY OF TRANSPORTATION OF FOOD GRAINS. IN THIS CONNECTION AUTHORITY SAID THE WORDINGS TRANSPORTAT ION OF FOOD GRAINS DOES NOT INDICATE THAT TRANSPORTATIO N HAS TO BE DONE BY THE ASSESSEE OWN TRUCKS OR TRANSPORT SYSTEM. THE TRANSPORTATION OF FOOD GRAINS MAY BE THROUGH HIRED VEHICLES AS WELL. THE ASSESSEE SHOULD NOT BE DEPRIVED OF BENEFICIAL PROVISIONS OF SECTION 80IB (11A) OF THE ACT BECAUSE CERTAINLY HE IS ENGAGED IN THE HANDLING, STORAGE AND SOME PART OF TRANSPORTATION O F FOOD GRAINS CANNOT BE RULED OUT. IT WAS HELD THAT TAKING OVER ALL SITUATIONS UNDER CONSIDERATION AND TO ENCOURAGE THE STORAGE OF FOOD GRAINS AT DOORSTEPS OF FARMERS. THE STORAGE OF FOOD GRAINS IN WAREHOUSING AT DOOR STEPS WILL CERTAINLY IMPROVE THE ECONOMIC CONDITIONS OF FARMERS BY ENSUR ING THEM PROPER COST AT PROPER TIME AND THEY WILL ALSO BE SAVED PERPETUAL EXPLOITATION OF MIDDLE MEN. SUCH BENEFICIAL PROVISIONS SHOULD NOT BE SACRIFICED FOR 18 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT TECHNICAL NARROW INTERPRETATION OF RELEVANT PROVISI ONS. EVEN MINOR TRANSPORTATION FACILITY SHOULD HELP ASSE SSEE FOR CLAIMING BENEFIT OF PROVISIONS OF SECTION 80IB (11A) OF THE ACT. IN THE INTEREST OF JUSTICE, WE SE T ASIDE THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE C IT (A). IN THE CASE OF SMT. TARULATA SHYAM AND OTHERS VS. C IT, 108 ITR 345 IT WAS HELD THAT WHILE INTERPRETING A PARTICULAR WORD OR EXPRESSION THE INTENTION OF THE LEGISLATURE BEHIND INSERTION OF THE PARTICULAR PROV ISIONS HAS TO BE KEPT IN MIND. ACCORDING TO HIM WHEN SEC 80IB(11A) IS READ ALONG WITH MEMORANDUM OF EXPLAININ G THE PROVISIONS, IT WOULD EMERGE THAT THE WORD 'HAND LING' IN ITS ORDINARY SENSE AND IN THE CONTEXT OF FOOD GR AINS WOULD COVER WITHIN IT AMBIT THE PROCESS AND ACTIVIT IES RELATING TO CREATION OF FACILITIES FOR CLEANING AND REMOVING OF FOREIGN MATERIAL FROM THE FOOD GRAIN SO AS TO PR EVENT DAMAGE FROM SUCH MATERIAL, FACILITIES FOR DRYING OF FOOD GRAINS TO PREVENT LOSS DURING STORAGE DUE TO EXCESS IVE MOISTURE, PRE STORAGE BULK GRAIN DUMPING AND DRYING FACILITIES, CREATION OF FACILITIES FOR MECHANIZED S AMPLING, WEIGHING AND DETECTION OF LIVE INFECTANTS, MECHANIZ ED RECEIVING AND HANDLING BY STORING IN SILOS EQUIPPED WITH FACILITIES OF AERATION AND FUMIGATION, LOADING AND UNLOADING FACILITIES AND TRAFFIC MANAGEMENT AND DUM PING PITS, CHAIN CONVEYORS, ELEVATORS AND FACILITIES FOR MECHANIZED SHIPMENT SO AS TO INTEGRATE STORAGE WITH QUICK TRANSPORTATION. KEEPING THE OVERALL INTENT OF THIS PARTICULAR PROVISION IT IS CLEAR THAT THE WORD 'HAN DLING' CAN NOT INCLUDE THE MANUFACTURE OR TRANSPORTATION O F FOOD GRAINS BY ANY STRETCH OF IMAGINATION. THE PROV ISIONS OF THE ACT HAVE TO BE INTERPRETED IN A WAY THAT ABS URDITY AND MISCHIEF IS AVOIDED. IN THIS REGARD HE REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN CASE OF KP VARGHESE VS. ITO, 131 ITR 597. IN FACT A PARTICULAR WORD AND EXPRESSION HAS TO BE GIVEN PURPOSIVE CONSTRUCTI ON AND IN THIS REGARD HE REFERRED TO THE DECISION OF H ON'BLE SUPREME COURT IN CASE OF R&B FALCON PVT. LTD, 301 I TR 309. HE ALSO REFERRED TO VARIOUS OTHER DECISIONS WH ERE PRINCIPLES OF INTERPRETATION OF STATUTES HAVE BEEN GIVEN. HE REFERRED TO THE CONTENTION OF THE LD. COUNSEL FO R THE 19 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT ASSESSEE WITH REGARD TO THE CIRCULAR AND CLARIFICAT ION GIVEN BY THE MINISTRY OF FOOD PROCESSING WHEREIN VA RIOUS INCENTIVE PROVISIONS ARE REPRODUCED. DETAIL OF VARI OUS BENEFITS IN FORM OF DUTY AND TAX BENEFITS ARE DISCL OSED AND VARIOUS SECTIONS OF PROCESSING SECTORS HAVE BEE N DEFINED AND CLASSIFIED ON THE BASIS OF A DATA FOR T HE PURPOSE OF CLARITY AND COMPILATION OF DATA. IV. IN CASE OF THE DCIT, CIRCLE-4, AHEMDABAD V/S. MAHADE V PULSES PVT. LTD., KALUPUR (IN THE INCOME TAX APPELLATE TRIBUNAL AHMADABAD, 24/08/2016) IT WAS HELD THAT THE LEGISLATIVE INTENT IS NOT TO ENCOURAG E TRANSPORTATION OR HANDLING OF FOOD GRAINS BUT THE LEGISLATIVE INTENT IS TO ENCOURAGE CONSTRUCTION OF GODOWNS AND WAREHOUSES WITH A VIEW TO PROVIDING STORAGE OF FOOD GRAINS. HENCE IN VIEWS OF ALL THE ABOVE ORDERS AND BUSINESS ACTIVITIES CARRIED BY ASSESSEE FIRM IT IS CLEAR THA T THE PRESENT CASE IS DEFINITELY COVERED UNDER THE ELIGIB ILITY CRITERIA OF SECTION 80IB (11A). V. DURING THE COURSE OF ASSESSMENT PROCEEDING THE A.O. HAS ACCEPTED THE CLAIM OF EXEMPTED INCOME OF HANDLING A ND TRANSPORTATION ONLY AFTER DETAILED SCRUTINY OF RECE IPTS AND EXPENDITURE CLAIMED THEIR AGAINST. VI. YOUR HONOUR HAS FAILED TO CONSIDER THAT H.O. (KHARA ) HAS TRACTOR SHOWN IN FIXED ASSETS SCHEDULE OF WHICH W.D .V. IS RS. 2,47,459.00 USED FOR TRANSPORTATION OF GOODS ST ORED IN WAREHOUSE. VII. YOURS HONOUR HAS NOT CONSIDERED THE FATS THAT BRANC HES HAVE RECEIVED HANDLING AND TRANSPORTATION RECEIPTS OF RS. 6,74,730/- AGAINST WHICH WAGES FOR HANDLING AND TRANSPORTATION CHARGES PAID RS. 1,64,487/-. VIII. HEAD OFFICE (BIKANER) RECEIVED HANDLING AND TRANSPO RTATION RS. 6,69,076/- OUT OF WHICH INFRASTRUCTURAL RECEIPT IS ONLY 54,525/- AGAINST WHICH WAGES FOR HANDLING AND TRANSPORTATION PAID RS. 19,307.51 WHILE BALANCE REC EIPT OF RS. 6,14,547/- IS RENTAL ACCOUNT AGAINST WHICH ASSE SSEE HAS PAID WAGES RS. 2,17,594.49 AND ON RENTAL INCOME ASS ESSEE HAS NOT CLAIMED DEDUCTION U/S 80IB (11A). 20 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT HENCE YOUR VIEW THAT ORDER OF THE A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS NOT CORRE CT. (6) EXPLANATION IN RESPECT OF NON VERIFICATION OF WEIGH BRIDGE CHARGES RS. 7,21,105/- IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT ON APPRAISAL OF ASSESSMENT RECORD IT IS OBSERVED THAT IN H.O. BOOKS WEIGH BRIDGE CHARGES IS RS. 6,52,595/- WHILE ASSESSEE HAS NO WEIGH BRIDGE AT HEAD OFFICE. AS SUCH CLAIM O F DEDUCTION AS EXEMPTED INCOME IS NOT ONLY WRONGLY CLAIMED BUT WRONGLY ALLOWED BY THE A.O. HENCE ORDER OF A.O. IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. YOUR HONOUR HAS FAILED TO CONSIDER THAT IN BOOKS OF H.O., H.O. HAS ACQUIRED WEIGH BRIDGE AND CLEANING & GRADING MA CHINE ON 1.10.2007 AT THE COST OF RS. 18,31,710/- HENCE YOUR VIEW THAT ORDER OF A.O. IS ERRONEOUS AND PREJUDICIAL INTEREST OF REVENUE IS NOT CORRECT. (7) EXPLANATION IN RESPECT OF CLAIM OF DEPRECIATION IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT ON APPRAISAL OF DEPRECIATION CHART IT IS OBSERVED THAT YOU HAVE CLAIMED DEPRECIATION ON BRANCHES PROPERTY LIKE DELH I, INDORE, JAIPUR, GUJARAT, KOTA, SRIGANGANAGAR, ANKOLA, SANGL I, MAHARASHTRA. THERE ARE NO DOCUMENTS WHICH SHOWS THE GODOWNS TAKEN AT THESE PLACES ARE WITH OR WITHOUT P LANT AND MACHINERY, AGREEMENT OF LEASE OF SUCH GODOWNS ARE A LSO NOT KEPT ON ASSESSMENT RECORD. IN ABSENCE OF THESE DOCUM ENTS IT IS PROVED THAT A.O. HAS NOT VERIFIED AND INVESTIGAT E THESE FACTS BEFORE ALLOWING THE DEPRECIATION. HENCE ORDER OF A. O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN THIS REGARD WE BEG TO DRAW YOUR KING ATTENTION T HAT ON APPRAISAL OF FIXED ASSETS SCHEDULE MARKED SCHEDULE E OF BALANCE SHEET AS AT 31.03.2013, IT MAY BE OBSERVED THAT FIXED ASSETS SITUATED AT BRANCHES LIKE DELHI, INDORE, JAI PUR , KADI, KOTA, SRI GANGANAGAR, AKOLA, SANGLI INCLUDES ONLY O FFICE EQUIPMENTS (LIKE COMPUTER, FURNITURE, COOLER, FAN, AIR CONDITIONER), VEHICLE, MOBILE, WEIGHING SCALE, LAB EQUIPMENT 21 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT AND FIRE EXTINGUISHER HAVING VERY NOMINAL VALUE RE QUIRED AT WARE HOUSES. ALL THESE FIXED ASSETS ARE OWNED BY THE ASSESSEE AND WHOLLY USED FOR WARE HOUSING BUSINESS SO ASSESSEE I S ENTITLED TO CLAIM DEPRECIATION ON SUCH ASSETS. BALANCE SHEET WITH SCHEDULES, FORM NO 3CD AND ANNEXURE OF DEPRECIATION CLAIMED ARE PART OF ASSESSMENT RECORD SO YOUR VIEW THAT A.O . HAS NOT VERIFIED THE RECORDS BEFORE ALLOWING DEPRECIATION I S NEITHER CORRECT NOR TENABLE IN THE EYES OF LAW. HENCE YOUR HOLDING THAT ORDER OF A.O. IS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF REVENUE IS NOT CORRECT AND NOT JUSTIFIED. (8) EXPLANATION IN RESPECT OF CLAIM OF DUNNAGE MATERIAL IN SHOW CAUSE NOTICE YOUR HONOUR HAVE STATED THAT ON APPRAISAL OF TRADING ACCOUNT ASSESSEE HAS CLAIMED D UNNAGE MATERIAL OF RS. 23,10,287/-, IN SUPPORT OF THE CLAI M NO EVIDENCE IS KEPT ON ASSESSMENT RECORD. DUNNAGE MATERIAL IS C APITAL EXPENDITURE AND NOT CONSUMED OR WASTED IN A YEAR BU T HAVING SOME USEFUL LIFE OVER YEARS. IF PART OF THE DUNNAGE MATERIAL IS DESTROYED SAME IS SALEABLE AS SCRAP. THE A.O. HAS N OT ENQUIRED AND VERIFIED BEFORE ALLOWING THE CLAIM AS EXPENDITU RE. IN THIS CONNECTION WE BEG TO DRAW YOUR KIND ATTENT ION THAT DUNNAGE MATERIAL ARE WASTE FILL FLOORING MATER IAL USED TO PROVIDE MOISTURE FREE AREAS FOR STORING FOOD GRAINS AT WARE HOUSE SO THAT STORED GOODS KEPT SAFELY. DUNNAGE IS IN FORM OF FLOORING SHEETS OF DIFFERENT SIZES. HENCE YOUR VIEW THAT DUNNAGE MATERIAL IS A CAPITA L EXPENDITURE IS NOT CORRECT. DUNNAGE MATERIALS ARE W ASTE MATERIAL STORED ON SURFACES OF FLOOR. AS SUCH IT IS NOT SALEABLE AS SCRAPE. DUNNAGE MATERIALS AT H.O. ARE USED IN RE NTAL WAREHOUSES AND ON RENTAL WAREHOUSING INCOME ASSESSE E HAS NOT CLAIMED ANY DEDUCTION U/S 80IB. HENCE ORDER OF A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. (9) EXPLANATION IN RESPECT OF REMUNERATION TO WORKING PARTNERS NOT CLAIMED 22 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT IN RESPECT OF REMUNERATION TO WORKING PARTNERS YOU A RE OF THE VIEW THAT ASSESSEE FIRM HAS NOT GIVEN REMUNE RATION TO WORKING PARTNERS DESPITE THE FACTS THAT ASSESSEE FI RM EARNED CONSIDERABLE PROFIT. INTENTION OF THE FIRM FOR NOT A LLOWING REMUNERATION TO WORKING PARTNERS WAS TO GET MAXIMUM BENEFIT OF EXEMPTION UNDER SECTION 80IB (11A), IF REMUNERATI ON ALLOWED TO PARTNERS THEY ARE LIABLE TO TAX ON SUCH REMUNERATION. IN THIS RELATION ASSESSING OFFICER HA S NEITHER ASKED QUESTION NOR MADE ANY ENQUIRY OR INVESTIGATIO N. THE A.O. IS REQUIRED TO COMPUTE THE REMUNERATION PAYABL E AS PER PARTNERSHIP DEED AND PROVISIONS OF THE INCOME TAX AC T. THE PROPOSED DISALLOWANCE OF DEDUCTION UNDER SECT ION 80IB (11A) BY MANDATORILY ALLOWING REMUNERATION TO WORKING PARTNERS IS UNWARRANTED AND UNSUSTAINABLE DUE TO TH E FOLLOWING REASONS:- I. THE ACT OF COMPULSORY ALLOWING THE REMUNERATION TO WORKING PARTNERS IS UNJUSTIFIED AND UNLAWFUL. SECTI ON 40(B) OF THE INCOME TAX ACT, 1961 PROVIDES THE MANNER BY WHICH REMUNERATION PAYABLE TO PARTNERS SHALL BE CALCULATED AND ALLOWED BUT NOT EXPRESSLY MENTIONED THAT IT IS ALLOWED MANDATORILY IN ANY SITUATION. IT IS DISCR ETIONARY FOR THE ASSESSEE TO HAVE MADE CLAIM OF REMUNERATION TO WORKING PARTNER. II. YOUR HONOUR HAS NOT CONSIDERED THE PROVISION OF SEC 40(B) WHICH PROVIDES THAT REMUNERATION PAYABLE TO WORKING PARTNER IS ALLOWABLE WHERE THE SAID REMUNERATION IS AUTHORIZED BY AND IS IN ACCORDANCE WITH THE TERMS O F THE PARTNERSHIP DEED. PARTNERSHIP DEED CLAUSE PROVIDES THAT THE PARTNERS SHALL BE ENTITLED TO INCREASE OR REDUC E OR NIL THE ABOVE REMUNERATION AND MAY AGREE TO PAY/ NOT TO PAY REMUNERATION TO WORKING PARTNER OR PARTNERS AS THE CASE MAY BE. III. YOUR HONOUR HAS WRONGLY CONSIDERED THAT PROVISION O F SECTION 40(B)(V) OF THE INCOME TAX ACT, 1961 MANDATO RILY WHILE IT IS DISCRETIONARY FOR THE ASSESSEE TO HAVE MADE SUCH A CLAIM. ALL PARTNERS OF THE FIRM WERE AGREEIN G NOT TO PAY REMUNERATION TO WORKING PARTNERS. 23 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT IV. IN CASE OF TULSA RAM KANHIYALAL & SONS VS. INCOME TAX OFFICER , ITAT, JODHPUR SMC BENCH, ITA NO. 226/JD/2008; ASST. YR. 2005- 06 DECISION GIVEN IN THE FAVOUR OF THE ASSESSEE THAT THE FINDING REACHED BY LEARNED CIT(A) THAT THE ASSESSEE HAS CIRCUMVENTED THE TAX LIABILITY BY NOT CLAIMING THE DEDUCTION ON ACCOUNT OF SALARY AND INTEREST TO PART NERS SO AS TO TAKE BENEFIT OF SET OFF OF BROUGHT FORWARD LO SSES WILL NOT RESULT INTO TAX EVASION BUT WAS MERELY ON LEGIT IMATE TAX PLANNING DONE BY THE APPELLANT. KEEPING IN VIEW THE OVERALL CONSPECTUS OF THE CASE, NO JUSTIFICATION IN THE ACTION OF THE LEARNED CIT (A) IN UPHOLDING THE DECI SION OF LEARNED ASSESSING AUTHORITY IN ENFORCING DEDUCTION OF INTEREST ON CAPITAL AND REMUNERATION TO WORKING PAR TNERS OF THE FIRM WHILE COMPUTING THE ASSESSABLE INCOME F OR THE YEAR UNDER CONSIDERATION . V. AS PER PROVISION OF SECTION 40(B) REMUNERATION MUST BE AUTHORISED AND ACCORDING TO THE TERMS OF PARTNERSHI P DEED. WE BEG TO DRAW YOUR KIND ATTENTION THAT REMUNERATION CLAUSE OF THE PARTNERSHIP DEED DATED 23.03.2006 PROVIDES THAT THE PARTNERS SHALL BE ENT ITLED TO INCREASE OR REDUCE OR NIL THE ABOVE REMUNERATION AN D MAY AGREE TO PAY / NOT TO PAY REMUNERATION TO OTHER WOR KING PARTNER OR PARTNERS AS THE CASE MAY BE. THE PARTIES HERE TO MAY ALSO AGREE TO REVISE THE MODE OF CALCULATION OF THE ABOVE SAID REMUNERATION AS MAY BE AGREE TO BY AND BETWEEN THE PARTNERS FROM TIME TO TIME. HENCE THER E IS NO QUESTION TO MANDATORILY ALLOW REMUNERATION TO WO RKING PARTNER. VI. REMUNERATION TO WORKING PARTNER IS NOT JUSTIFIED D UE TO FOLLOWING REASONS: A) REMUNERATION WAS NOT PROVIDED /PAID IN THE BOOK OF ACCOUNT. B) PARTNERSHIP DEED AUTHORISED THE PARTNERS TO REDUCE OR NIL THE REMUNERATION. C) FIRM PAID A HUGE AMOUNT IN THE ACCOUNT OF SALARY TO ITS STAFF/EMPLOYEES. 24 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT THUS ALLOWING MANDATORILY REMUNERATION IN THE CASE OF ASSESSEE IS UNJUSTIFIED AND UNLAWFUL. VII. DURING THE COURSE OF ASSESSMENT PROCEEDING THE LEAR NED A.O. HAS ENQUIRED AND VERIFIED THAT THE PARTNERS REMUNERATION NOT CLAIMED AS PER TERMS OF PARTNERSHI P DEED. THE DECISION OF THE A.O. CANNOT BE HELD TO BE ERRONEOUS ONLY BECAUSE IN HIS ORDER HE DID NOT MADE AN ELABORATE DISCUSSION IN THIS REGARD. 4. ON THE OTHER HAND, THE LD CIT-DR HAS RELIED ON T HE ORDER OF THE PR.CIT. 5. WE HAVE HEARD THE LD. COUNSELS FOR BOTH THE PART IES AND HAVE ALSO CONSIDERED THE MATERIAL PLACED ON RECORD, ORDER PAS SED BY THE REVENUE AUTHORITIES AS WELL AS JUDGEMENTS RELIED UPON BY TH E PARTIES. FROM THE RECORD, WE NOTICE THAT MAIN ISSUE IN THE PRESENT CO NTROVERSY IS AS TO WHETHER THE ORDER PASSED BY THE A.O. CAN BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. IN CASE THE ORDER PASSED U/S 143(3)/148 OF THE ACT, THE A.O. IS NOT ERRONEOUS TH EN EVENTUALITY THE POWER U/S 263 OF THE ACT CANNOT BE EXERCISED. FROM THE FA CTS, WE NOTICE THAT IN THE REASSESSMENT ORDER PASSED, THE ISSUE HAD BEEN D ULY EXAMINED AND ON THE BASIS OF THE EXAMINATION OF THE RELEVANT RECORD S AND THE APPLICATION OF LAW, ONE OF THE POSSIBLE OPINION HAD BEEN DRAWN BY THE A.O., WHICH CANNOT BE SAID TO BE ERRONEOUS SO FAR AS PREJUDICIAL TO TH E INTEREST OF REVENUE. IN THIS REGARD, WE DRAWN INTEREST FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LD. VS CIT (2000) 243 ITR 83 (SC) WHEREIN THE HONBLE SUPREME COURT HAD OBSERVED THAT SECTION 263 OF 25 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT THE INCOME TAX ACT, 1961, MAKES IT CLEAR THAT THE P REREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSION SUO MOTO UNDER IT, IS THAT THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. EVEN IF ONE OF THEM R ECOURSE CANNOT BE HELD TO SECTION 263(1) OF THE ACT. THE A.O. AFTER GOING THROUGH THE MATERIAL ON RECORD AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, HAD APPLIED HIS MIND. HIS VIEW WAS THAT THE AMENDMENT ARE NOT A PPLICABLE IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WH ICH IS A POSSIBLE VIEW. THE CIT DID NOT AGREE WITH THE CONCLUSION REACHED B Y THE ITO. HOWEVER, SECTION 263 OF THE ACT DOES NOT EMPOWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUSION THAT THE ORDER PASSED B Y THE ITO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SIN CE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY T HE ITO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW C AN BE TAKEN, SHOULD NOT BE THE BASIS FOR AN ACTION U/S 263 OF THE AC AND IT CANNOT BE HELD TO BE JUSTIFIED. 6. THE BASIS FOR AN ACTION U/S 263 OF THE ACT AND I T CANNOT BE HELD TO BE JUSTIFIED. THE ORDER CAN BE SAID TO BE ERRONEOUS AS SESSMENT ONLY IF IT DEVIATES FROM THE LAW AND IF THE AO ACTING IN ACCOR DANCE WITH LAW MAKES A ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER. THE AP HAS EXERCISED THE QUASI-JUDICI AL POWER VESTED IN HIM ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION 26 ITA 171/JOHD/2018 NOKHA AGRO SERVICES VS PCIT CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IN THE PRES ENT CASE IT CANNOT BE SAID THAT THERE IS AN INCORRECT APPLICATION OF LAW SO TH AT THE ORDER BEING ERRONEOUS. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASS ED BY THE ASSESSING OFFICER. IN VIEW OF ABOVE WE FIND THAT THERE IS NO ERROR IN THE CONCLUSION DRAWN BY THE AO WHILE PASSING THE ORDER AND THEREFO RE, THE IMPUGNED ORDER U/S 263 OF THE ACT IS NOT JUSTIFIED AND THE S AME IS HEREBY QUASHED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20/03/2020. SD/- SD/- (R.C.SHARMA) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :. 20/03/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. THE CIT(A) 5. DR, ITAT, JODHPUR 6. GUARD FILE (ITA NO. 171/JODH/2018) ASSISTANT REGISTRAR JODHPUR BENCH