M/s. Fine Line Circuits Company, Baroda V. The CIT-I, Baroda

ITA 198/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9366 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-01-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Business income; Depreciation; Rectification of order; Period of limitation; Time period of passing order; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 10B; 147; 148; 54; 263; 10; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.198/AHD/2013 2. ./ I.T.A.NO.1315/AHD/2013 ( / ASSESSMENT YEARS : 2004-05 & 2005-06) FINE LINE CIRCUITS COMPANY PLOT NO.E-8, GIDC MANJUSAR, SAVLI DIST: BARODA 391 775 / VS. THE COMMISSIONER OF INCOME TAX-I BARODA # ./ ./ PAN/GIR NO. : AAAFF 7253 A ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : SHRI MILIN MEHTA, AR &#%(' / RESPONDENT BY : MS. VIBHA BHALLA, CIT-DR )*(+ / DATE OF HEARING 10/01/2017 ,-./(+ / DATE OF PRONOUNCEMENT 20/01/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: BOTH THESE CAPTIONED APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME T AX(APPEALS)-I, BARODA DATED 28/11/2013 AND 14/03/2013 FOR ASSESSME NT YEARS (AYS) 2004-05 & 2005-06 RESPECTIVELY. ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO.198/AHD/2014 FOR AY 2004-05 READ AS UNDER:- ALL THE GROUNDS OF APPEAL IN THIS APPEAL ARE MUTUAL LY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. 1. THE LEARNED COMMISSIONER OF INCOME TAX-I, BARODA ( THE CIT) ERRED IN FACT AND IN LAW IN REVISING THE ASSESSMENT BY INVOKING POWERS U/S.263 OF THE INCOME TAX ACT, 1961 (THE AC T) DESPITE THE FACT THAT THE CONDITIONS STIPULATED FOR INVOKING SU CH EXTRA-ORDINARY JURISDICTION WERE NOT SATISFIED. 2. THE LEARNED CIT ERRED IN FACT AND IN LAW IN INITIAT ING THE PROCEEDINGS U/S.263 OF THE ACT BEYOND THE PERIOD OF LIMITATION. 3. THE LEARNED CIT ERRED IN FACT AND IN LAW IN COMPUTI NG THE TIME LIMIT FOR INITIATING THE PROCEEDINGS U/S.263 OF THE ACT F ROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER U/S.147 WAS PASSE D AND NOT FROM THE END OF THE FINANCIAL YEAR IN WHICH ORDER U/S.14 3(3) OF THE ACT WAS PASSED. 4. THE LEARNED CIT EARNED IN FACT AND IN LAW CALCULATI NG THE TIME LIMIT FOR PASSING THE ORDER U/S.263 OF THE ACT FROM THE E ND OF THE FINANCIAL YEAR IN WHICH THE ORDER U/S.147 WAS PASSED IGNORING THE FACT THAT THE ISSUE OF INCREMENTAL SUBSIDY AND SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION WAS NOT THERE IN THE REASSE SSMENT PROCEEDINGS U/S.147 AND THERE IS NO DISCUSSION IN T HE REASSESSMENT ORDER ON THESE ISSUES. 5. THE LEARNED CIT ERRED IN FACT AND IN LAW IN PASSING THE ORDER U/S.263 OF THE ACT BEYOND THE PERIOD OF LIMITATION. 6. THE LEARNED CIT ERRED IN FACT AND IN LAW IN SETTING ASIDE THE ORDER PASSED U/S.154 DATED 28.02.2012 DESPITE THE FACT TH AT THE AO HAD CORRECTLY APPLIED THE LAW WHILE PASSING THE SAID OR DER AND THERE WAS NO ERROR IN THE SAME. 7. THE LEARNED CIT ERRED IN FACT AND IN LAW HOLDING TH AT INCREMENTAL SUBSIDY IS NOT ELIGIBLE FOR REDUCTION U/S.10B OF TH E ACT. 8. THE LEARNED CIT ERRED IN FACT AND IN LAW IN NOT ALL OWING THE SET OFF OF BROUGHT FORWARD DEPRECIATION AMOUNTING TO RS.87, 46,089/- ON THE ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 3 - GROUND THAT THE SET OFF OF BROUGHT FORWARD DEPRECIA TION WAS ALLOWED IN AY 2003-04. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO.1315/AHD/2013 FOR AY 2005-06 READ AS UNDER:- ALL THE GROUNDS OF APPEAL IN THIS APPEAL ARE MUTUAL LY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. 1. THE LEARNED COMMISSIONER OF INCOME TAX-III, BARODA (THE CIT) ERRED IN FACT AND IN LAW IN PASSING THE ORDER U/S.263 OF THE INCOME TAX ACT, 1961 (THE ACT) BEYOND THE PERIOD OF LIMITATION. 2. THE LEARNED CIT ERRED IN FACT AND IN LAW IN COMPUTI NG THE PERIOD OF LIMITATION FROM THE PASSING OF ORDER U/S.147 OF THE ACT INSTEAD OF SECTION 143(3) OF THE ACT. 3. WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT ERRED I N FACT AND IN LAW IN REVISING THE ASSESSMENT BY INVOKING POWERS U/S.263 OF THE ACT, WHICH WAS COMPLETED BY WAY OF ASSESSMENT MADE U/S.143(3) R.W. S. 147 OF THE ACT BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, BARODA (THE AO) DESPITE THE FACT THAT THE CONDITIONS STIPULATED FOR INVOKING SUCH EXTRA- ORDINARY JURISDICTION WERE NOT SATISFIED. 4. THE LEARNED CIT ERRED IN FACT AND IN LAW IN NOT DRO PPING THE PROCEEDINGS U/S.263 DESPITE THE FACT THAT THE APPELLANT HAD DUL Y EXPLAINED THE ISSUES RAISED BY THE CIT AND HAD GIVEN FULL EXPLANATION WI TH RESPECT TO THE ISSUES RAISED BY THE CIT. 5. THE LEARNED CIT ERRED IN FACT AND IN LAW IN HOLDING THAT AN AMOUNT OF RS.4,34,121/- IS NOT ELIGIBLE FOR DEDUCTION U/S.10B OF THE ACT AND THEREBY DIRECTING THE AO TO WITHDRAW THE DEDUCTION GRANTED EARLIER. 4. BRIEFLY STATED, THE ASSESSEE-FIRM IS A 100% EXPO RT ORIENTED UNDERTAKING. THE ASSESSMENT WAS ORIGINALLY COMPLET ED UNDER SECTION ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 4 - 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS 'THE ACT') DATED 29/12/2006 WHEREIN CERTAIN ADDITIONS AND DISA LLOWANCES WERE MADE ON THE TOTAL INCOME RETURNED AT RS.19,04,380/- RETU RNED BY THE ASSESSEE. THE CASE WAS THEREAFTER REOPENED BY ISSUANCE OF NOT ICE UNDER SECTION 148 OF THE ACT AND REASSESSMENT ORDER UNDER SECTION 143 (3) R.W.S.147 OF THE ACT WAS PASSED VIDE ORDER DATED 14/12/2011. AS PER THE REASONS RECORDED BY THE AO, THE CASE OF THE ASSESSEE WAS RE OPENED QUESTIONING ELIGIBILITY OF DEDUCTION U/S.10B OF THE ACT ON EXPO RT OF COPPER CLADED GLASS EPOXY LAMINATES/SHEETS (CCGL). WHILE COMPUT ING THE ASSESSED INCOME UNDER SECTION 147 OF THE ACT, THE AO DENIED THE DEDUCTION UNDER SECTION 10B IN RESPECT OF INCREMENTAL TURNOVER SU BSIDY OF RS.42,70,068/-. 5. AGGRIEVED BY THE REDUCTION OF THE INCREMENTAL SU BSIDY FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 1 0B OF THE ACT, THE ASSESSEE MOVED PETITION FOR RECTIFICATION OF THE RE -ASSESSMENT ORDER UNDER SECTION 154 OF THE ACT. THE AO VIDE ORDER UNDER SE CTION 154 DATED 28/02/2012 RECTIFIED THE ALLEGED MISTAKE BY RESTORA TION OF SUBSIDY AMOUNT IN THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF C OMPUTATION OF DEDUCTION UNDER SECTION 10B OF THE ACT. 6. THE COMMISSIONER OF INCOME TAX FOUND THE AFOR ESAID ORDER PASSED UNDER SECTION 147 DATED 14/02/2011AND SUBSEQUENT OR DER UNDER SECTION ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 5 - 154 DATED 28/02/2012 TO BE ERRONEOUS IN SO FAR AS P REJUDICIAL TO THE INTERESTS OF THE REVENUE AND ACCORDINGLY ISSUED SH OW-CAUSE NOTICE UNDER SECTION 263 OF THE ACT DATED 17/10/2013 TO THE ASSE SSEE IN THIS REGARD. THE CIT ALLEGED ERROR ON TWO COUNTS NAMELY (I) SET OFF OF UNABSORBED DEPRECIATION OF RS.87,46,089/- PERTAINING TO AY 200 2-03 WAS WRONGLY ALLOWED IN THE IMPUGNED ASSESSMENT YEAR 2004-05 AND THEREFORE DIRECTED THE AO TO WITHDRAW THE EXCESS ALLOWANCE OF SET OFF TOWARDS IMPUGNED UNABSORBED DEPRECIATION (II) THE CIT ALSO FOUND FAU LT WITH THE AO IN GRANTING RECTIFICATION UNDER SECTION 154 OF THE ACT TOWARDS INCREMENTAL SUBSIDY CLAIM PURPORTEDLY ON THE PREMISE THAT THIS SUBSIDY WAS NOT INTEGRAL TO FOREIGN REMITTANCE AND THEREFORE NOT AM ENABLE TO DEDUCTION UNDER SECTION 10B OF THE ACT. HE ACCORDINGLY, CANC ELLED THE ORDER OF THE AO PASSED UNDER SECTION 154 OF THE ACT AND WITH A DIRECTION TO PASS FRESH ORDER KEEPING IN VIEW THE DIRECTIONS GIVEN IN THE ORDER UNDER SECTION 263 OF THE ACT. THE ORDER UNDER SECTION 14 7 WAS ALSO DIRECTED TO BE MODIFIED FOR WITHDRAWAL OF SET OFF TOWARDS UNAB SORBED DEPRECIATION. 7. AGGRIEVED BY THE ORDER WITH THE CIT, THE ASSESSE E WAS KNOCKED THE DOOR OF THE TRIBUNAL IN SECOND APPEAL. 8. THE LD.AR FOR THE ASSESSEE MR.MILIN MEHTA SUBMIT TED THAT THE EXERCISE OF POWER UNDER SECTION 263 OF THE ACT BY T HE COMMISSIONER IS WITHOUT JURISDICTION. THE LD.AR SUBMITTED THAT THE AO HAD INITIATED ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 6 - PROCEEDINGS UNDER SECTION 147 OF THE ACT FOR THE LI MITED PURPOSE OF DISALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 10 B OF THE ACT IN RESPECT OF EXPORT OF CCGL. HOWEVER, WHILE COMPUTIN G DEDUCTION UNDER SECTION 10B IN REASSESSMENT PROCEEDINGS, THE AO IN ADVERTENTLY REDUCED THE AMOUNT OF INCREMENTAL SUBSIDY IN ADDITION TO TU RNOVER OF CCGL. TO CORRECT THE ERROR, THE RECTIFICATION APPLICATION W AS FILED BY ASSESSEE BEFORE THE AO. SINCE THE ISSUE OF RECTIFICATION OF INCREMENTAL SUBSIDY WAS NEVER RAISED DURING REASSESSMENT PROCEEDINGS, I T IS MISTAKE APPARENT FROM RECORD. RESPONDING TO THE RECTIFICATION APPLI CATION, THE AO RECTIFIED THE ERROR AS POINTED OUT BY PASSING AN O RDER UNDER SECTION 154 OF THE ACT DATED 28/02/2012. THE LD.AR SUBMITTED T HAT THE CIT HAS WRONGLY ASSUMED JURISDICTION UNDER SECTION 263 TO R EVISE THE ORDER PASSED BY THE AO UNDER SECTION 147 OF THE ACT AS WE LL AS UNDER SECTION 154 OF THE ACT WHICH IS IMPERMISSIBLE IN THE CIRCUM STANCES. IT WAS CONTENDED THAT REOPENING OF THE ASSESSMENT WAS DONE TO DISALLOW DEDUCTION UNDER SECTION 10B OF THE ACT ON MANUFACTU RE OF CCGL. THE AO HAS EXAMINED THE ISSUE IN THE REASSESSMENT ORDER AND THEREFORE THERE IS NO ERROR IN THE ORDER OF THE AO PASSED UNDER SEC TION 147 OF THE ACT. IT WAS CONTENDED THAT OWING TO THE FACT THAT THE REOPE NING WAS DONE ON LIMITED ASPECT OF DISALLOWING DEDUCTION UNDER SECTI ON 10B ON MANUFACTURE OF CCGL, THE ISSUE OF INCREMENTAL SUBSI DY CANNOT BE REVIEWED IN PROCEEDINGS UNDER SECTION 263 WITH REF ERENCE TO ORDER UNDER SECTION 147 OF THE ACT. THE LD.AR FOR THE ASSESSEE ALSO TOOK A STAND THAT ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 7 - THE CIT HAS ASSUMED THE JURISDICTION UNDER SECTION 263 OF THE ACT IN CONTRAVENTION OF THE LIMITATION PERIOD PRESCRIBED U NDER SECTION 263(2) OF THE ACT. 9. THE LD.AR SUBMITTED THAT THE CIT HAS COMPUTED TH E PERIOD OF LIMITATION FROM THE DATE OF PASSING OF ORDER UNDER SECTION 147 DATED 14/12/2011 WHEREIN REOPENING WAS DONE ON THE ISSUE OF DISALLOWING CLAIM OF DEDUCTION UNDER SECTION 10B ON MANUFACTURE OF CCGL. AS CAN BE SEEN FROM THE REASONS RENDERED UNDER SECTION 148 (2), THE ISSUE OF INCREMENTAL TURNOVER SUBSIDY WAS NOT SUBJECT MATTER OF REOPENING OF THE ASSESSMENT UNDER SECTION 147. THEREFORE THE TIME L IMIT OUGHT TO HAVE BEEN COMPUTED FROM THE DATE OF PASSING REGULAR ASSE SSMENT ORDER EARLIER UNDER SECTION 143(3). THE REGULAR ASSESSMENT ORDER WAS PASSED ON 29/12/2006, WHEREIN BOTH THE ISSUES; NAMELY, BROUGH T FORWARD DEPRECIATION OF RS.87,46,089/- AS WELL AS INCREMENT AL SUBSIDY WERE EMBEDDED AND WERE PART OF ASSESSMENT PROCESS. THE LD.AR IN ELABORATION SUBMITTED THAT THE IMPUGNED BROUGHT FOR WARD DEPRECIATION OF RS.86,46,089/- WAS DULY CLAIMED IN THE ORIGINAL ASS ESSMENT AND ACCEPTED BY THE AO. TO JUSTIFY THE ASSERTION, HE REFERRED T O THE COMPUTATION OF INCOME PLACED IN THE PAPER-BOOK AND THE ORIGINAL AS SESSMENT ORDER AND SUBMITTED THAT THE BROUGHT FORWARD DEPRECIATION CLA IMED AS SET OFF AGAINST THE CURRENT YEAR BUSINESS INCOME WAS DULY ACCEPTED BY THE AO IN THE ORIGINAL ASSESSMENT IN AS MUCH AS THE TOTAL INCOME DECLARED AT ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 8 - RS.19,04,380/- WAS TAKEN AS A STARTING POINT FOR VA RIOUS ADJUSTMENTS WHILE PROPOSING THE ORIGINAL ASSESSMENT ORDER. SIM ILARLY, WHILE FRAMING THE REASSESSMENT ORDER PURSUANT TO SECTION 147, TH E IDENTICAL FIGURE OF TOTAL INCOME WAS TAKEN AS A BASE FOR RE-COMPUTING T HE ASSESSED INCOME. THERE IS NO WHISPER ABOUT THE ELIGIBILITY OR OTHERW ISE OF SET OFF OF UNABSORBED DEPRECIATION DURING THE YEAR EITHER IN THE REASONS RECORDED OR IN THE RE-ASSESSMENT ORDER. THEREFORE, THE ISSU E IN RELATION TO SET OFF WHICH WAS DECIDED AND ACCEPTED IN THE ORIGINAL ASSE SSMENT ORDER DO NOT STAND MERGED IN THE SUBSEQUENT RE-ASSESSMENT ORDER FOR THE PURPOSE OF COMPUTATION OF LIMITATION PERIOD STIPULATED UNDER S ECTION 263(2) OF THE ACT. THE LD.AR IN SHORT SUBMITTED THAT AS REGARDS, SET OFF OF UNABSORBED DEPRECIATION, THE LIMITATION PERIOD WILL HAVE TO BE NECESSARILY COUNTED FROM THE DATE OF ORIGINAL ORDER. SINCE THE SUBSEQ UENT RE-ASSESSMENT ORDER HAS BEEN RENDERED ON A TOTALLY UNCONNECTED I SSUE, THE LIMITATION PERIOD WILL NOT GET EXTENDED WITH REFERENCE TO REAS SESSMENT ORDER PASSED IN LATER TIME. 10. AS REGARDS, ADJUSTMENTS TOWARDS INCREMENTAL L IABILITY FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 1 0B OF THE ACT, THE LD.AR SIMILARLY SUBMITTED THAT SINCE THE ISSUE INV OLVED IS UNCONNECTED TO THE RE-ASSESSMENT PROCEEDINGS, THE LIMITATION PE RIOD CANNOT BE COUNTED FROM THE RE-ASSESSMENT ORDER BUT WILL HAVE TO BE DE TERMINED WITH REFERENCE TO THE DATE OF ORIGINAL ORDER. THE LD.AR THUS SUBMITTED THAT ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 9 - THE ACTION INITIATED UNDER SECTION 263 OF THE ACT I S VOID AB INITIO OWING TO EMBARGO OF LIMITATION FOR INITIATION OF SUCH ACTION . THE LD.AR FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT VS. GUJARAT FORGING (P) LTD. IN INC OME TAX REFERENCE NO.42 OF 1996, ORDER DATED 02/07/2008 AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASHOKA BUILDCON LTD. VS. ACIT REPORTED IN (2010) 325 ITR 574 (BOM.) TO BUTTRESS HIS POINT THA T IN RESPECT OF ISSUES WHICH ARE NOT SUBJECT MATTER OF REASSESSMENT PROCEE DINGS, PERIOD OF LIMITATION PROVIDED FOR IN SECTION 263(2) WOULD COM MENCE FROM THE DATE OF ORIGINAL ASSESSMENT ORDER AND NOT FROM THE DATE ON WHICH ORDER OF RE- ASSESSMENT HAS BEEN PASSED. 11. THE LD.AR NEXT SUBMITTED THAT NOTWITHSTANDIN G THE ARGUMENTS ADVANCED ON NON-MAINTAINABILITY OF ACTION UNDER SEC TION 263 OF THE ACT DUE TO BAR OF LIMITATION, THE ACTION OF THE CIT CAN NOT BE SUSTAINED IN THE ABSENCE OF ANY ERROR IN ALLOWING DEDUCTION TOWARDS INCREMENTAL SUBSIDY UNDER SECTION 10B OF THE ACT. THE ISSUE OF ELIGIBI LITY OF DEDUCTION ON INCREMENTAL SUBSIDY STANDS SETTLED IN FAVOUR OF ASS ESSEE BY THE CBDT CIRCULAR NO.39/2016, WHEREIN IT HAS BEEN NOTED THAT SUBSIDY IS PART AND PARCEL OF PROFIT AND GAINS OF BUSINESS FOR THE PURP OSE OF DEDUCTION. THE LD.AR ALSO CANVASSED THAT THE AFORESAID ISSUE ON ME RIT HAS TO BE DECIDED IN FAVOUR OF THE ASSESSEE ON MERITS IN VIEW OF THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAW A INDIA LTD. ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 10 - REPORTED IN 341 ITR 385 (KAR.). THE LD.AR IN CONCL USION THAT THE ORDER PASSED UNDER SECTION 147 AND SECTION 154 CANNOT BE REVISED UNDER SECTION 263 OF THE ACT BOTH OWING TO BAR OF LIMITATION AS W ELL AS IN THE ABSENCE OF ANY DEMONSTRABLE ERROR IN THE ORDERS WHICH ARE SUBJ ECT MATTER OF REVISION. 12. THE LD.DR MS.VIBHA BHALLA FOR THE REVENUE RELIE D ON THE ORDER OF THE COMMISSIONER AND IN FURTHERANCE SUBMITTED TH AT THE SET OFF OF DEPRECIATION WAS GRANTED IN THE REASSESSMENT ORDER AS WELL WHICH WAS ADMITTEDLY ALLOWED IN THE EARLIER ASSESSMENT YEARS. THIS WAS RESULTED IN SET OFF OF THE SAME AMOUNT FROM BUSINESS INCOME TWI CE IN TWO DIFFERENT ASSESSMENT YEARS. THUS, THERE WAS AN APPARENT ERRO R IN THE RE-ASSESSMENT ORDER WHICH HAS BEEN RIGHTLY REVISED UNDER SECTION 263 OF THE ACT. THE LD.DR FURTHER SUBMITTED THAT INCREMENTAL SUBSIDY WA S SPECIFICALLY REDUCED IN THE ASSESSMENT ORDER WHICH WAS LATER REV ERSED IN RECTIFICATION PROCEEDINGS UNDER SECTION 154 WITHOUT THERE BEING A NY APPARENT MISTAKE AND THUS ACTION OF THE AO WAS LIABLE FOR REVISION A S DONE BY THE CIT. THE LD.DR SUBMITTED THAT THE SCOPE OF SECTION 147 I S WIDE AND ENCOMPASSES ASSESSMENT OF OTHER INCOME WHICH HAS ES CAPED ASSESSMENT. ADDITIONALLY, THE CASE WAS REOPENED FOR DENIAL OF SECTION 10B ON CCGL, THE INCREMENTAL SUBSIDY FORMING PART OF THE DEDUCTI ON OF SECTION 10B COULD HAVE VERY WELL BEEN TAKEN INTO ACCOUNT IN PRO CEEDINGS UNDER SECTION 147 WHICH WAS DONE BY THE AO. THE AO THUS HAS FELL INTO ERROR IN ACCEPTING THE PLEA OF THE ASSESSEE IN RECTIFICAT ION PETITION AND GRANTING ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 11 - RELIEF IN RECTIFICATION PROCEEDINGS UNDER SECTION 1 54 OF THE ACT. THE LD.DR ACCORDINGLY SUBMITTED THAT WHEN COMPUTED WITH REFERENCE TO DATE OF RE-ASSESSMENT ORDER, THE ACTION OF CIT IS WITHIN THE STATUTORY LIMITATION PERIOD OF TWO YEARS FROM END OF THE RELEVANT FINANC IAL YEAR IN WHICH THE RE-ASSESSMENT ORDER WAS PASSED. IT WAS THUS PLEADE D THAT NO INFERENCE WITH THE ORDER OF CIT UNDER SECTION 263 IS CALLED F OR. 13. WE HAVE PERUSED THE RECORDS PLACED BEFORE US I N THE LIGHT OF SUBMISSIONS ADVANCED BY RESPECTIVE SIDES. IN THE IN STANT CASE, THE ASSESSEE HAS ASSAILED THE ACTION OF THE CIT IN INVO KING SECTION 263 OF THE ACT WITH REFERENCE TO THE RE-ASSESSMENT ORDER IN RE SPECT OF THE ISSUES RAISED ON THE PREMISE THAT THE ALLEGED ERROR WERE NOT SUBJECT MATTER OF REASSESSMENT PROCEEDINGS AT ALL. IT IS THE CASE OF THE ASSESSEE THAT SINCE THE ALLEGED ERRORS POINTED OUT BY THE CIT IN THE RE VISIONAL ORDER ARE TOTALLY UNCONNECTED TO THE REASSESSMENT PROCEEDINGS OR RECTIFICATION THEREON, THE DOCTRINE OF MERGER WILL NOT APPLY. THE REASSESSMENT ORDER PASSED IN SUBSEQUENT PERIOD IS INDEPENDENT OF THE ORIGINAL ASSESSMENT ORDER. THEREFORE, THE PERIOD OF LIMITATION WILL RUN FROM THE DATE OF THE ORIGINAL ASSESSMENT ORDER IN RESPECT OF ISSUES WHIC H EMANATE FROM THAT ORDER AND BAR OF LIMITATION CANNOT THUS BE RECKONED FROM REASSESSMENT ORDER OR RECTIFICATION ORDER FRAMED LATER. THUS, T HE ENTIRE PROCEEDINGS UNDER SECTION 263 OF THE ACT IS VITIATED DUE TO BAR OF LIMITATION. ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 12 - 14. THE CONTENTION OF THE ASSESSEE IS REQUIRED TO BE SEEN IN THE LIGHT OF TWO SET OF ERRORS POINTED OUT BY COMMISSIONER IN AC TION UNDER SECTION 263 OF THE ACT WHICH IS IN CHALLENGE. THE FIRST AL LEGED ERROR IS WRONGFUL SET OFF OF UNABSORBED DEPRECIATION WHILE COMPUTING THE BUSINESS INCOME. WE FIND THAT THE SET OFF WAS DULY CLAIMED IN THE O RIGINAL ASSESSMENT ORDER WAS ADMITTED IN FULL. SIMILAR SET OFF WAS GRANTED IN REPETITION WHILE MAKING THE REVISED COMPUTATION UNDER SECTION 147 OF THE ACT. THE REASONS RECORDED ALSO DO NOT CAST ANY ASPERSIONS O N THE CORRECTNESS OF THE ALLOWABILITY OF SET OFF OF UNABSORBED DEPRECIAT ION CLAIMED. THERE IS NO DISCUSSION ON THE POINT IN THE REASSESSMENT ORDE R EITHER. BESIDES, AS NOTED, THE SET OFF OF UNABSORBED DEPRECIATION HAS B EEN DULY ACCEPTED IN THE ORIGINAL PROCEEDINGS. THUS, THE SET OFF OF UN ABSORBED DEPRECIATION CLAIMED RIGHTLY OR WRONGLY WAS NOT SUBJECT MATTER O F REASSESSMENT AT ALL. HENCE, IT IS MANIFEST THAT CAUSE OF ACTION UNDER SE CTION 263 OF THE ACT WILL ARISE, IF ANY, WITH REFERENCE TO ORIGINAL ASSE SSMENT PROCEEDINGS ONLY. THE SUBSEQUENT RE-ASSESSMENT PROCEEDINGS WILL NOT O BVIATE THE BAR OF LIMITATION PRESCRIBED UNDER SECTION 263(2) OF THE A CT ON AN UNCONNECTED ISSUE. THE LAW IN THIS REGARD IS VERY CLEAR. THE ISSUE AS TO WHEN THE PERIOD OF LIMITATION WOULD COMMENCE FOR AN ORDER UN DER SECTION 263 WAS CONSIDERED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. ALAGENDRAN FINANCE LTD. REPORTED IN (2007) 293 ITR 01 (SC). T HE DECISIONS CITED BY THE ASSESSEE IN GUJARAT FORGING (P) LTD.(SUPRA) AND ASHOKA BUILDCON LTD. (SUPRA) MERELY RESTATE THE AFORESAID RATIO FOLLOWIN G THE DECISION OF ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 13 - HONBLE APEX COURT. THUS, IN SO FAR AS ALLEGED W RONG SET OFF OF UNABSORBED DEPRECIATION AGAINST THE BUSINESS INCOME OF THE CURRENT YEAR IS CONCERNED, THE ISSUE IS CLEARLY TIME BARRED DUE TO LAPSE OF STATUTORY TIME LIMIT WITH REFERENCE TO THE ORIGINAL ASSESSMEN T ORDER HENCE, WE ARE OF THE FIRM OF OPINION THAT THE JURISDICTION OF CIT TO INVOKE THE REVISIONAL POWER IN RESPECT OF CLAIM OF SET OFF IS TIME BARRED AND CANNOT BE SUSTAINED. 15. IN SO FAR AS THE SECOND ALLEGED ERROR NAMELY W RONGLY ACCEPTANCE OF ELIGIBILITY OF INCREMENTAL SUBSIDY FOR THE DETERMIN ATION OF DEDUCTION UNDER SECTION 10B OF THE ACT IS CONCERNED, WHILE WE MAY AGREE IN PRINCIPLE WITH THE CONTENTION OF THE REVENUE THAT T HE RE-ASSESSMENT PROCEEDINGS WERE INITIATED FOR CORRECT DETERMINATIO N OF DEDUCTION UNDER SECTION 10B OF THE ACT AND INCREMENTAL SUBSIDY BEIN G INTEGRAL PART THERETO, THE ACTION OF THE CIT HAS TO BE SEEN WITH REFERENCE TO THE RE- ASSESSMENT ORDER WHICH IS WITHIN THE LIMITATION AND THEREFORE THE ACTION OF THE CIT CANNOT BE ASSAILED ON THE GROUND OF BAR OF LIMITATION; WE ALSO NOTE IN THE SAME VAIN THAT THE CIT HAS TO DEMONSTRA TE THE ERROR IN THE IMPUGNED ORDER WHICH HAS CAUSED PREJUDICE TO THE IN TERESTS OF THE REVENUE. THE AO HAS DENIED THE INCREMENTAL SUBSIDY UNDER SECTION 10B OF THE ACT IN THE RE-ASSESSMENT PROCEEDINGS WHICH W AS REVERSED IN SECTION 154 OF THE ACT. BOTH THESE ORDERS HAVE BEE N SUBJECTED TO REVISION UNDER SECTION 263 OF THE ACT. WHEN THE ISSUE OF ELI GIBILITY OF INCREMENTAL ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 14 - SUBSIDY FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10B IS SEEN IN THE LIGHT OF THE CBDT CIRCULAR (SUPRA) AND THE JUDICIAL PRECEDENT CITED ON THE ISSUE, WE FIND IT DIFFICULT TO HOLD THAT THE AO COM MITTED ERROR PER SE IN ACCEPTING THE STAND OF THE ASSESSEE. IN THE ABSENC E OF ERROR, THE CIT COULD NOT HAVE PROCEEDED UNDER SECTION 263 OF THE A CT. THUS, THE ACTION OF THE CIT UNDER SECTION 263 IS WITHOUT AUTHORITY O F LAW IN SO FAR AS THE SECOND ISSUE IS CONCERNED. 16. THUS, ON BOTH COUNTS, THE ACTION OF THE CIT I S WITHOUT SANCTION OF LAW AND IS LIABLE TO BE SET ASIDE AND CANCELLED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .198/AHD/2013 FOR AY 2004-05 IS ALLOWED AND THE ORDER OF THE CIT PASS ED UNDER SECTION 263 OF THE ACT DATED 28/11/2013 IS QUASHED. ITA NO.1315/AHD/2013 FOR AY 2005-06 18. IN THE CAPTIONED APPEAL RELEVANT TO AY 2005-06 , THE CIT HAS ISSUED SHOW-CAUSE NOTICE UNDER SECTION 263 OF THE A CT FOR WRONGFUL DEDUCTION TOWARDS INCREMENTAL SUBSIDY OF RS.4,34, 121/- WHILE CALCULATING DEDUCTION UNDER SECTION 10B OF THE ACT. 19. AS NOTED IN EARLIER PARAS, THE AFORESAID I SSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE RELEVANT TO ASSESSMENT YEAR 200 4-05. ITA NO.198/AHD/ 2014 AND 1315/AHD/2013 FINE LINE CIRCUITS COMPANY BARODA VS. CIT ASST.YEARS 2004-05 & 2005-06 - 15 - 20. FOR THE PARITY OF REASONING, WE FIND NO ERROR I N THE ORDER PASSED UNDER SECTION 147 OF THE ACT DATED 24/12/2010. ACC ORDINGLY, THE ACTION OF THE CIT UNDER SECTION 263 OF THE ACT CANNOT BE A PPROVED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .1315/AHD/2013 FOR AY 2005-06 IS ALLOWED. 22. IN THE COMBINED RESULT, BOTH THE APPEAL OF THE ASSESSEE ARE ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 20/ 01/2017 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 20/ 01 /2017 3..),.)../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-I, BARODA 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD