Hindustan Times Ltd., V. DCIT Co. cir-19,

ITA 2017/DEL/2003

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52619 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 1998-1999
• Appeal Filed On: 24-04-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHANISH VERMA
• Assessee Lawyers: AJAY VOHRA; SHIKHA SHARMA JANPRIYA
• Keywords: Business income; Revision of order; Depreciation; Maximum Marginal Rate; Assessment record; Set aside
• Section: 6; 263; 154; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SHRI A.D. JAIN AND SHRI K.D. RANJAN ITA NOS. 2017/DEL/2003, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 THE HINDUSTAN TIMES LTD., VS. DCIT, CEN. CIRCLE- 19, 18-20, KASTURBA GANDHI MARG, NEW DELHI. NEW DELHI-110001. (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI AJAY VOHRA & MS. SHIKHA SHARMA JANPRIYA RESPONDENT BY: SHRI MOHANISH VERMA DR O R D E R PER A.D. JAIN, J.M : THESE ARE ASSESSEES APPEALS FOR ASSESSMENT YEARS 1 998-99 AND 1999- 2000. ITA NOS. 2017 & 833 ARE APPEALS AGAINST THE O RDERS DATED 27-3-03 AND 1-1-2004 RESPECTIVELY, PASSED BY THE CIT, CENTRAL-I II, NEW DELHI U/S 263 OF THE I.T. ACT, WHEREBY HE HELD ASSESSMENT ORDERS FOR BOTH THE ASSESSMENT YEARS TO BE PREJUDICIAL TO THE INTERESTS OF THE REV ENUE AND DIRECTED THE AO TO RECOMPUTE THE TAXABLE INCOME AND TO LEVY THE TAX CH ARGEABLE AND INTEREST THEREON, AS APPLICABLE. 2. ITA NO. 2966 IS ASSESSEES APPEAL FOR A.Y. 1998- 99 AGAINST CIT(A)- III, NEW DELHIS ORDER DATED 19-4-04, HOLDING, WHI LE DISMISSING THE ASSESSEES APPEAL, THAT THE AO WAS JUSTIFIED IN INV OKING THE PROVISIONS OF SEC. 154 OF THE I.T. ACT TO RECTIFY ITS ORIGINAL AS SESSMENT ORDER DATED 31-3- ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 2 2003 AND IN CHARGING INTEREST U/S 234B OF THE ACT A ND THEREBY GIVING EFFECT TO THE CITS ORDER DATED 27-3-03 (SUPRA) IN THIS RE GARD. ITA NOS. 2017 & 833/DEL/04 : 3. THE FACTS IN BOTH THESE APPEALS ARE, MUTATIS MUT ANDIS, THE SAME. THE ISSUE INVOLVED IS ONE AND THE SAME. THEREFORE, THE FACTS ARE BEING TAKEN FROM ITA 2017, WHICH IS THE APPEAL THAT HAS BEEN ARGUED BY THE PARTIES. 4. THE MODIFIED GROUNDS OF APPEAL READ AS UNDER: 1. THE COMMISSIONER OF INCOME-TAX (CENTRAL)-III, D ELHI (IN SHORT CIT) HAD NO JURISDICTION UNDER SECTION 263 OF THE ACT TO PASS THE ORDER DATED 27-3-2003. NONE OF THE CONDITI ONS PRECEDENT FOR ASSUMPTION OF JURISDICTION UNDER SECT ION 263 OF THE ACT EXISTED AND/OR WERE SATISFIED. THE ORDER PA SSED BY THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDI CIAL TO THE INTEREST OF THE REVENUE. 1.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT ERRED IN EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT, WITHOUT APPRECIATING THAT THE ISSUE OF ALLOWABILITY OF LOSSES OF AOP, VIZ. BIRLA TEXTILE MILLS, IN THE HAN DS OF THE APPELLANT WAS A POSSIBLE VIEW TAKEN BY THE ASSESSIN G OFFICER AND HENCE THE ASSESSMENT ORDER WAS NEITHER ERRONEOUS NO R PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. THE CIT ERRED IN HOLDING THAT THE APPELLANT WAS NOT ENTITLED TO SET OFF ITS SHARE OF LOSS SUFFERED IN T HE ASSOCIATION OF PERSONS BIRLA TEXTILE MILLS AGAINST ITS OTHER INC OME. THE CIT FAILED TO APPRECIATE THAT LOSS RELATING TO BIRLA TE XTILE MILLS HAS TO BE SET OFF AGAINST OTHER INCOME OF THE APPELLANT . 2.1. THE CIT FAILED TO APPRECIATE THAT IN THE ORIGI NAL ASSESSMENT THE LOSS RELATING TO BIRLA TEXTILE MILLS WAS SET OFF AGAINST THE INCOME OF THE APPELLANT UNDER SECTION 6 7A AND OTHER PROVISIONS OF INCOME-TAX ACT. ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 3 2.2. THE CIT ERRED IN HOLDING THAT THE SHARES OF TH E MEMBERS OF THE AOP WERE INDETERMINATE. IN THIS REGARD THE C IT FAILED TO APPRECIATE THAT AT NO POINT OF TIME SHARES OF THE M EMBERS OF THE AOP WERE INDETERMINATE. THE SAID FINDING OF THE CIT IS PERVERSE. 2.3. FOR THE PURPOSES FINDINGS AND OBSERVATIONS IN THE ORDER OF CAIT QUESTIONING THE BONA FIDES OF GENUINENESS OF T HE CONSTITUTION AND/OR SHARES OF MEMBERS OF THE SAID A OP WERE WHOLLY WITHOUT ANY BASIS, PERVERSE AND CONTRARY TO FACTS AND UNJUST. 2.4. THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. SMT. LALITA M. BHATT (234 ITR 319) AND DECI SION OF THE SUPREME COURT IN THE CASE OF ITO VS. C.S. ATCHAIN ( 218 ITR 239) AND SOME OF THE OTHER DECISIONS REFERRED TO IN THE SAID JUDGMENTS ARE TOTALLY DISTINGUISHABLE. THE SAID JUD GMENTS RELATED TO THE PERIOD PRIOR TO 1989-90 WHEN PROVISI ONS OF SECTION 67A OF THE ACT WERE INTRODUCED. 2.5. ON PROPER APPRECIATION OF FACTS OF THE CASE AN D CORRECT CONSTRUCTION OF LAW THE CIT SHOULD HAVE DROPPED THE PROCEEDINGS INITIATED UNDER SECTION 263 OF THE ACT. 5. THE FACTS, AS CANVASSED, ARE THAT THE ASSESSEE C OMPANY IS A MEMBER OF AN AOP, I.E., BIRLA TEXTILE MILLS . THE AOP SUFFERE D A LOSS. THE ASSESSEE CLAIMED ITS SHARE OF LOSS AS A SET OFF AGAINST ITS OTHER INCOME. THE AO, VIDE ORDER DATED 30-3-01 (WRONGLY MENTIONED AS 27-3-01 IN THE OPENING SENTENCE OF THE IMPUGNED ORDERS), U/S 143(3) OF THE I.T. ACT ASSESSED THE ASSESSEE AT AN INCOME OF RS. 54,01,79,834/-. THE LE ARNED COUNSEL CONTENDS THAT THIS IS ONLY THE BUSINESS INCOME, WHEREAS THE AGGREGATE INCOME IS RS. 64 ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 4 CRORES). THE AO ALLOWED SET OFF OF LOSS FROM THE AO P AMOUNTING TO RS. 2,95,49,860/-. 5.1. BY VIRTUE OF THE IMPUGNED ORDER DATED 27-3-03, THE LEARNED CIT SET ASIDE THE ASSESSMENT ORDER U/S 263 OF THE ACT. IT W AS OBSERVED, INTER ALIA, THAT THE ORDER OF THE AO APPEARED TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE, AS THE SET OFF OF THE SHARE OF LOSS OF THE ASSESSEE FROM THE AOP NEEDED TO BE DISALLOWED, SINCE THE LOSS DETERMINED IN THE HANDS OF THE ASSESSEE, WHICH WAS AN AOP, COULD NOT BE SET OFF AG AINST THE INCOME OF ANOTHER ASSESSEE AS PER CIT VS. SMT. LALITA M. BHA TT 234 ITR 319 (BOM.), WHEREIN IT WAS HELD THAT SINCE THE AOP WAS A SEPARA TE ENTITY, ITS LOSS COULD BE SET OFF ONLY AGAINST THE OTHER INCOME OF THE AOP AND NOT AGAINST THE INCOME OF THE INDIVIDUAL MEMBERS; THAT THE PROVISIO NS OF SEC. 67A OF THE ACT DID NOT COME TO THE RESCUE OF THE ASSESSEE, ESPECIA LLY WHEN SECTION 86/167B WAS IN OPERATIVE IN VIEW OF THE FACT THAT THE PARTN ERS OF THE UNREGISTERED FIRM/AOP, NAMELY, M/S BIRLA TEXTILE MILLS HAD BEEN CHANGING VERY FREQUENTLY, WITHOUT ANY GENUINE BUSINESS REASONS, G IVING A CLEAR IDEA THAT THE CHANGE WAS INTENDED FOR MORE SUITABLE ADJUSTMENT OF THE LOSS CREATED IN THE HANDS OF THE AOP RATHER THAN ANY GENUINE BUSINESS I NITIATIVE; THAT THE CONTENTION OF THE ASSESSEE THAT THE DECISION IN SM T. LALITA M. BHATT (SUPRA) PERTAINED TO A.Y. 1978-78 AND THAT SO, THE HONBLE BOMBAY HIGH COURT DID ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 5 NOT HAVE ANY OCCASION TO APPLY THE PROVISIONS OF SE C. 67A OF THE ACT, LAYING DOWN THE PROCEDURE FOR DEALING WITH INCOME OF AN AO P, WAS ONLY PARTLY CREATED, SINCE THE PROVISIONS OF SEC. 67A WERE BROU GHT IN CONSEQUENT TO THE RESTRUCTURING OF THE PROVISIONS RELATING TO TREATME NT TO BE ACCORDED TO INCOME FROM PARTNERSHIP FIRMS W.E.F. 1-4-1989; THAT WHERE THE FIRMS WERE DENIED REGISTRATION/ TREATED AS UNREGISTERED FIRM, THE MOD ALITY OF DEALING WITH THE INCOME AND LOSS HAD TO BE PROVIDED FOR AND IT WAS S O, THAT SEC. 67A WAS INTRODUCED; THAT THE PROVISIONS OF SEC. 67A WOULD C OME INTO PLAY ONLY WHEN THE SHARES OF THE MEMBERS OF THE AOP ARE DETERMINED ; THAT WHERE THE SHARES ARE NOT DETERMINATE, THE METHOD OF TREATMENT TO BE ACCORDED IS GIVEN IN SEC. 167B, WHICH WAS ALSO INTRODUCED W.E.F. 1-4-1989; TH AT THE PROVISIONS OF SEC. 167B SPEAK OF THE TAXATION OF INDETERMINATE SHARES AT THE MAXIMUM MARGINAL RATE, WHICH VARIED BETWEEN 54% TO 51.4% IN DIFFEREN T ASSESSMENT YEARS; THAT FOR THE PURPOSE OF TAXATION AND EXCLUSION THEREOF, WHILE ASSESSING THE MEMBERS OF THE AOP, SEC. 86 IS THERE IN THE ACT; TH AT PROVISO (A) TO SEC. 86 IS CLEAR THAT IN CASE THE AOP IS TAXED AT THE MAXIMUM MARGINAL RATE, THE SHARE OF THE MEMBERS IN ITS TOTAL INCOME CANNOT BE INCLUD ED WHILE COMPUTING THE TOTAL INCOME OF THE MEMBERS; THAT TOTAL INCOME FO R THE PURPOSE OF INCOME- TAX ACT, HAS BEEN DEFINED U/S 2(45) OF THE ACT AND WOULD INCLUDE THE LOSS COMPUTED THEREOF AS PER THE PROVISIONS OF THE ACT; THAT THEREFORE, THE SHARE ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 6 OF LOSS FROM AN AOP CANNOT BE SET OFF AGAINST THE O THER INCOME OF THE MEMBERS; THAT FURTHER, AS PER SEC. 167B, IN THE CAS ES OF THE INDIVIDUAL SHARES OF THE MEMBERS OF AN AOP OR BODY OF INDIVIDUALS, T HE WHOLE OR ANY PART OF INCOME SHALL BE DEEMED TO BE INDETERMINATE OR UNKNO WN, IF SUCH SHARES ARE INDETERMINATE OR UNKNOWN ON THE DATE OF FORMATION O F SUCH ASSOCIATION OR BODY. OR AT ANY TIME THEREAFTER; THAT THE PROVISION S INVOLVED IN THE PRESENT CASE WERE INTRODUCED BY THE DIRECT TAX LAWS AMENDME NT ACT, 1989, FOR DOING AWAY WITH THE AMENDMENTS PERTAINING TO THE NE W SCHEME OF TAXATION OF FIRMS AND THEIR PARTNERS; THAT THIS WAS DONE IN A COMPOSITE MANNER BY INTRODUCING SECS. 40(BA), SEC. 67A AND SEC. 167B AN D BY SUBSTITUTING SEC. 86(V); THAT AS PER CBDT CIRCULAR NO. 551 DATED 23-1 -1990, THE METHOD OF COMPUTING A MEMBERS SHARE OF INCOME IN THE AOP, WH EREIN THE SHARES OF THE MEMBERS ARE DETERMINATE IN THE SAME MANNER AS P ROVIDED IN SEC. 67A FOR COMPUTING THE PARTNERS SHARE IN THE INCOME OF THE FIRM, IT DOES NOT INCLUDE SEC. 67(4), WHICH DEALS WITH SET OFF OR CARRY FORWA RD OF SHARE OF LOSS OF A PARTNER IN A REGISTERED FIRM WITH SIMILAR PROVISION S IN SEC. 67A; THAT, THEREFORE, THE SET OFF OF LOSS OF THE AOP IN THE HA NDS OF THE ASSESSEE WAS CLEARLY NOT AVAILABLE, EVEN IF IT HAD COMPLIED WITH THE PROVISIONS OF SEC. 67A; THAT, BESIDES, THE SHARES OF THE MEMBERS OF THE AOP WERE NOT DETERMINATE IN CASE OF BIRLA TEXTILE MILLS; THAT EXCEPT FOR CERTAI N BOARD RESOLUTIONS OF THE ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 7 MEMBERS OF THE AOP, THE ASSESSEE HAD NOT PRODUCED A NY COMPOSITE AGREEMENT BETWEEN THE PARTICIPATING MEMBERS OF THE AOP ON THE MODALITY OF SHARING THE INCOME; THAT IN FACT, THE INITIAL REJEC TION OF REGISTRATION OF THE FIRM AROSE OUT OF THE FAILURE OF THE ASSESSEE TO CO MPLY WITH THE PROVISIONS OF SECS. 184(3) AND 184(4); THAT THE PROVISIONS OF SEC . 167B CLEARLY MENTION THAT THE SHARES OF THE MEMBERS SHOULD HAVE BEEN DET ERMINED EITHER AT THE TIME OF THE FORMATION OF SUCH ASSOCIATION OR AT ANY TIME THEREAFTER; THAT IN THE ASSESSEES CASE, THE FREQUENT VARIATION IN THE PART ICIPATING MEMBERS OF THE AOP AND THE SHARES THEREOF, CLEARLY SHOWED THAT THE SHARES OF THE MEMBERS OF THE AOP WERE INDETERMINATE; THAT BIRLA TEXTILE M ILLS WAS A PART OF THE UNIT OF TEXMCO, A COMPANY BELONGING TO THE GROUP AN D FOUR OTHER COMPANIES DECIDED TO FORM A PARTNERSHIP AND TAKE OV ER THE SPINNING AND PROCESSING UNITS AT DELHI AND FOUR GINNING UNITS AN D PRESSING FACTORY OF TEXMCO FOR A CONSIDERATION OF RS. 2 CRORES, WHICH WAS LATER REDUCED TO RS. 1 CRORE; THAT DIFFERENT MEMBERS OF THE GROUP AT DIFFERENT TIMES WERE MADE PARTNERS (AOP), INCLUDING TEXMCO; THAT CUMULATIVELY , SUBSTANTIAL LOSS IN THE HANDS OF BIRLA TEXTILE MILLS HAD BEEN ABSORBED BY THE ASSESSEE COMPANY; THAT THE ASSESSEE COMPANY FOR THE REASON OF FORM ATION OF THE AOP AND THE CLAIM OF SET OFF OF LOSSES, THEREFORE, RAISED DOUBT S ABOUT THE NATURE OF THE AOP; THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRODUCE ANY MATERIAL TO SHOW ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 8 THAT IT HAD ANY SPECIAL SKILL AND/ OR IT HAD OTHERW ISE CONTRIBUTED FOR THE INFRASTRUCTURAL EFFICIENT FUNCTIONING OF THE BIRLA TEXTILE MILLS OWNED BY ONE OF THE OCCASIONAL PARTNERS, NAMELY, TEX MCO; THAT E VEN ON LEGAL GROUNDS, THE ASSESSEE COULD NOT SET OFF THE LOSS INCURRED IN THE AOP AGAINST ITS PROFITS AND/ OR MERGED WITH THE LOSS OF THE COMPANY AND THEN CAR RY FORWARD AND SET OFF THE LOSS OF THE AOP IN FUTURE YEARS; THAT THEREFORE , SINCE THRE WAS NO PROVISION TO CARRY FORWARD OR SET OFF THE LOSS OF THE AOP AGAINST THE INCOME OF ITS MEMBERS AND ALSO BECAUSE THE SHARES WERE IND ETERMINATE IN THE CASE OF BIRLA TEXTILE MILLS, THE ASSESSMENT NEEDED TO BE DO NE UNDER THE PROVISIONS OF SEC. 167B IN RESPECT OF THE INCOME OF BIRLA TEXTILE MILLS AND NEITHER THE INCOME, NOR THE LOSS THEREOF COULD BE TAXED OR ALLO WED AS DEDUCTION IN THE HANDS OF THE PARTNERS, INCLUDING THE ASSESSEE COMPA NY; AND THAT THEREFORE, THE ASSESSMENT ORDER REQUIRED TO BE MODIFIED SO AS TO ENSURE THAT THE SHARE OF LOSS IN THE AOP CLAIMED BY THE ASSESSEE COMPANY AS ITS LOSS, WAS DISALLOWED AS A DEDUCTION OUT OF THE BUSINESS INCOME OF THE AS SESSEE COMPANY. 6. CHALLENGING THE IMPUGNED ORDER, THE LEARNED COUN SEL FOR THE ASSESSEE HAS CONTENDED THAT THE LEGAL POSITION IS THAT THE D ECISION IN THE CASE OF SMT. LALITA M. BHATT (SUPRA) IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION BUT IS APPLICABLE TO THE YEAR UNDER CONSIDERATION I NVOLVED THEREIN I.E. A.Y. 1978-79; THAT THE SCHEME OF THE ACT HAS SINCE CHANG ED; THAT THE TAXATION OF ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 9 AOPS IS NOW GOVERNED BY SECTIONS 67, 86 AND 167B OF THE ACT; BROUGHT ABOUT BY THE DIRECT TAX LAWS AMENDMENT ACT, 1989, W .E.F. 1-4-1989; THAT SEC. 67A(1)(2) OF THE ACT PROVIDED FOR THE SCHEME O F SUCH TAX; THAT AS PER SEC. 86, THE AOP AND NOT THE MEMBER IS CHARGEABLE T O TAX; THAT, HOWEVER, IT IS THE SECOND PROVISO TO SEC. 86, WHICH COVERS THE ASSESSEES CASE ALONG WITH SEC. 67 AND AS PER THE SECOND PROVISO TO SEC. 86, W HERE NO TAX IS CHARGEABLE ON THE TOTAL INCOME OF THE AOP, THE SHARE OF A MEMB ER SHALL BE CHARGEABLE TO TAX AS PART OF HIS TAXABLE INCOME AND NOTHING CONTA INED IN SEC. 86 SHALL APPLY TO THE CASE; THAT THESE FACTS WERE BEFORE THE AO; T HAT IN PASSING THE ASSESSMENT ORDER, THE AO TOOK A VIEW WHICH WAS A PO SSIBLE VIEW; THAT IT IS WELL SETTLED IN THE CASES OF MALABAR INDUSTRIAL CO . LTD. VS. CIT 243 ITR 83 (SC), AND CIT V. MAX INDIA LTD. 295 ITR 282(SC), THAT DEBATABLE ISSUES ARE OUTSIDE THE REALM OF SEC. 263 OF THE ACT; THAT THE DEPARTMENTS STAND IS THAT WHEN THE AO TOOK THE VIEW IN THE ASSESSMENT OR DER, NO JUDGMENT WAS AVAILABLE AND SO THE SAID VIEW WAS NOT A POSSIBLE V IEW; THAT IN CIT VS. MAX INDIA LTD. 268 ITR 128 (P&H), IT HAS BEEN HELD THA T THE VIEW EXPRESSED BY THE AO WAS IN CONFORMITY WITH THE VIEW SUBSEQUENTLY EXPRESSED BY THE VARIOUS BENCHES OF THE TRIBUNAL; THAT THE VIEW EXPR ESSED BY THE AO WAS A POSSIBLE VIEW; AND THAT SINCE THE AO HAD TAKEN A PO SSIBLE VIEW, THE CIT HAD NO JURISDICTION TO INTERFERE BY EXERCISING HIS POWE RS U/S 263 OF THE ACT; THAT ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 10 THE AO WAS CONSCIOUS AT THE TIME OF THE PASSING OF THE ASSESSMENT ORDER, THAT THE ASSESSEE WAS CLAIMING THE SET OFF, IN VIEW OF THE COMPUTATION OF INCOME AS PLACED AT PAGE 21 OF THE ASSESSEES PAPER BOOK (APB, IN SHORT), DATED 12-12-06, READ WITH PAGE 24 THEREOF; THAT IN THE ACCOUNTS ALSO, AS PRODUCED BY THE ASSESSEE BEFORE THE AO, A COMPLETE DISCLOSURE WAS MADE, AS AVAILABLE AT APB DATED 12-12-06 AT PAGES 44 & 49; T HAT IN THE COMPUTATION PART, THE AO HAS NOTED THE INCOME FROM BUSINESS SH OWN AT RS. 54,01,79,834; THAT IN THE IMPUGNED ORDER, THE LEARN ED CIT HAS NOWHERE EXPRESSED THAT THERE WAS ANY LACK OF INQUIRY ON THE PART OF THE AO WHILE PASSING THE ASSESSMENT ORDER; THAT RATHER, THE LEAR NED CIT HAS SAID THAT THE LOSS WAS NOT ALLOWABLE TO THE ASSESSEE; THAT AS SUC H, THE LD. CIT HAS ONLY TAKEN A VIEW WHICH WAS DIFFERENT FROM THAT HELD BY THE AO; THAT THE APB DATED 8-5-09 FILED BEFORE US, CONTAINS PAPERS OF TH E AOP TO SHOW THAT THE AOP DID NOT SEEK TO CARRY FORWARD LOSSES; THAT THES E PAPERS WERE ALSO DULY FILED BY THE ASSESSEE BEFORE THE AO; THAT THERE ARE JUDGMENTS BOTH WAYS APROPOS THE MERITS OF THE CONTROVERSY, COPIES WHERE OF HAVE BEEN FILED BEFORE US; THAT MAHINDRA HOLDINGS & FINANCE LTD. VS. DCIT 23 SOT 215 (MUM.)(T.M) [COPY AT PAGE 127 OF THE CASE LAWS PAPE R BOOK CLPB IN SHORT, FILED BY THE ASSESSEE BEFORE US], IS IN FAVO UR OF THE ASSESSEE. ; THAT BIRLA TYRES VS. JCIT 88 ITD 1 (CAL.)(T.M) , COPY AT CLPB 8 TO 25, IS IN ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 11 FAVOUR OF THE DEPARTMENT; THAT METRO EXPORTS P. LT D. VS. DCIT 3 SOT 566 (MUM.), COPY AT APB DATED 18-12-08 PAGES 29-30, IS IN FAVOUR OF THE DEPARTMENT; THAT SUTLEJ INDUSTRIES LTD. VS. ACIT, A DECISION OF THE B BENCH OF THE DELHI TRIBUNAL, DATED 24-4-09, IN ITA NO. 2387/DEL/2003, FOR A.Y. 1998-99, IS IN FAVOUR OF THE DEPARTMENT; THAT FURTHER, THE REASON GIVEN IN THE ORDER UNDER APPEAL IS NO WHERE CONTAINED IN THE NOTICE ISSUED U/S 263 OF THE ACT(COPY AT APB DATED 12-12-06, AT PAGES 8-9 ); THAT AS PER CIT VS. JAGADHRI ELECTRIC SUPPLY & INDUSTRIAL CO. 140 ITR 490 (P&H), THE CIT CANNOT SUBSTITUTE HIS THINKING FOR THAT OF THE AO; THAT ACCORDING TO CIT VS. ASHISH RAJPAL 320 ITR 674 (DEL.), WHERE THE ORDER PASSED U/S 263 OF THE ACT IS ON ISSUES NOT MENTIONED IN THE NOTICE U/S 2 63, THE ORDER OF REVISION IS NOT VALID; THAT WHILE COMPUTING THE INCOME IN THE A SSESSMENT ORDER, THE AO HAS EXPRESSED HIS VIEW, WHICH IS IN ACCORDANCE WITH CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1 (DEL.) (FB); THAT AS TO HOW T HE ASSESSMENT ORDER IS WRITTEN, IS BEYOND THE ASSESSEES CONTROL, AS HELD IN HARI IRON TRADING CO. VS. CIT 263 ITR 437 (P&H), WHICH WAS FOLLOWED IN CIT VS. EICHER LTD. 294 ITR 310 (DEL.) AND APPROVED BY THE HONBLE SUPR EME COURT IN CIT VS. KELVINATOR OF INDIA LTD. & EICHER LTD. 320 ITR 561 (SC); AND THAT , THEREFORE, THE ORDER OF THE LD. CIT IS NOT MAINTAIN ABLE AND THE SAME BE ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 12 CANCELLED BY REVIVING THAT PASSED BY THE AO BY ALL OWING THE ASSESSEES APPEAL. 7. THE LEARNED DR, ON THE OTHER HAND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. WRITTEN SUBMISSIONS HAVE BEEN FILED . IT HAS BEEN CONTENDED THAT IN THIS CASE THE JUDGMENT IN MAHINDRA HOLDING S & FINANCE LTD. (SUPRA), WHICH IN FAVOUR OF THE ASSESSEE, AND BIRL A TYRES (SUPRA) & SUTLEJ INDUSTRIES LTD. (SUPRA), BOTH OF WHICH HAVE GONE I N FAVOUR OF THE DEPARTMENT, WERE NOT AVAILABLE ON THE DATE OF THE P ASSING OF THE IMPUGNED ORDER ON 27-3-03; THAT AS SUCH, AT THAT TIME THERE WAS NO QUESTION OF TWO OPINIONS EXISTING ON THE ISSUE; THAT THE AO HAVING ERRONEOUSLY ALLOWED THE LOSS SHARE OF THE ASSESSEE, SET OFF AGAINST ITS OWN INCOME IN VIOLATION OF THE PROVISIONS OF THE ACT, THE LD. CIT WAS WELL JUSTIFI ED IN INVOKING THE PROVISIONS OF SEC. 263 OF THE ACT; THAT IN THE ORDE R UNDER APPEAL, THE LD. CIT HAS ELABORATELY DISCUSSED AS TO WHY THE ASSESSEE CO ULD NOT HAVE CLAIMED THE SET OFF OF LOSS FROM THE AOP AGAINST INDIVIDUAL INC OME; THAT AS POINTED OUT BY THE LD. CIT, IN VIEW OF THE PROVISIONS OF SEC. 6 7A, THE SHARES OF THE MEMBERS OF THE AOP MUST BE DETERMINATE, SO AS TO EN ABLE THE CLAIM OF SET OFF OF LOSSES; THAT, HOWEVER, AS CORRECTLY OBSERVED BY THE LD. CIT, IN ASSESSEES CASE, THE SHARES OF THE MEMBERS OF THE A OP HAD BEEN CHANGING VERY FREQUENTLY, WHICH CHANGE WAS INTENDED FOR SET TING OFF OF THE LOSSES ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 13 AGAINST THE INCOME AS REQUIRED FROM YEAR TO YEAR; T HAT SEC. 67A OF THE ACT UNDOUBTEDLY APPLIES, AS ALSO OBSERVED IN THE IMPUGN ED ORDER, ONLY WHEN THE SHARES OF THE MEMBERS OF THE AOP ARE DETERMINATE; T HAT FURTHERMORE, UNDENIABLY, THE ASSESSEE REMAINED UNABLE TO JUSTIFY THE FORMATION OF THE AOP; THAT THE LD. CIT HAS SPECIFICALLY FOUND THAT T HERE ARE NO PROVISIONS IN THE ACT TO CARRY FORWARD OR SET OFF OF THE LOSS OF THE AOP AND THAT APROPOS THE INCOME OF THE AOP, THE PROVISIONS OF SEC. 167B OF THE ACT WOULD APPLY, THE SHARES BEING INDETERMINATE; THAT MOREOVER, THE AOP WAS HAVING REGULAR LOSSES, FROM WHICH, IT IS CLEAR THAT THE INTENTION OF THE MEMBERS WAS TO SET OFF THE LOSS AGAINST THE INCOME OF THE MEMBERS; THAT IT WAS ONLY THEREFORE, THAT THE SHARES OF THE MEMBERS WERE ALTERED FROM YEAR TO YEAR ACCORDINGLY IT IS SEEN THAT SHARES WERE NOT DETERMINATE, DUE TO WHICH , THE PROVISIONS OF SEC. 167B BECAME APPLICABLE; THAT THIS APART, IN THE APP ORTIONMENT OF BUSINESS LOSS, AS PER PAGE 4 OF THE APB DATED 8-5-09, DEPREC IATION HAS ALSO BEEN INCLUDED, WHEREAS AS PER THE PROVISIONS OF SEC. 32( 2) OF THE ACT, THE SHARE OF DEPRECIATION INCLUDED IN THE LOSSES CANNOT BE CARRI ED OVER IN THE HANDS OF THE MEMBERS AND IT IS TO BE CARRIED FORWARD BY THE AOP; THAT, THEREFORE, THE LD. CIT CORRECTLY INVOKED THE PROVISIONS OF SEC. 263 OF THE ACT, THE PROVISIONS OF LAW, AS ABOVE, BEING CLEAR; THAT THE AO ERRED IN NO T APPLYING THE SAID PROVISIONS OF THE ACT, RESULTING IN THE ASSESSMENT ORDER BEING PREJUDICIAL TO ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 14 THE INTERESTS OF THE REVENUE; THAT UNDER SIMILAR CI RCUMSTANCES, ACTION U/S 263 OF THE ACT HAS BEEN UPHELD IN THE FOLLOWING CASES: - GEE VEE ENTERPRISES 99 ITR 375 (DEL); - DUGGAL & CO. 220 ITR 456 (DEL); - MALABAR INDL. CO. 243 ITR 83 (SC); - TOYATA MOTORS 306 ITR 49 (SC); - RALSON INDUSTRIES LTD. 288 ITR 322 (SC); AND - SOUTH INDIA SHIPPING CORPORATION 233 ITR 546 (MAD.) 7.1. IN THE FACTS AND CIRCUMSTANCES, WHEN NO INQUIR Y WHAT-SO-EVER, WAS CARRIED OUT BY THE AO, THE ORDER OF THE LD. CIT IS FULLY SUSTAINABLE IN LAW AND THE SAME BE MAINTAINED BY DISMISSING THE APPEAL FIL ED BY THE ASSESSEE. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE ISSUE IS AS TO WHETHER THE LD. CIT HAS NOT CORR ECTLY EXERCISED HIS JURISDICTION U/S 263 OF THE I.T. ACT. UNDISPUTEDLY, THE AO ALLOWED THE LOSS CLAIMED BY THE ASSESSEE IN THE COMPUTATION OF INCOM E AS MADE IN THE ASSESSMENT ORDERS. IT WOULD BE APPOSITE AT THIS STA GE TO REPRODUCE THE NOTICE DATED 13-3-03 ISSUED BY THE LD. CIT TO THE ASSESSEE U/S 263 OF THE ACT (COPY AT APB 12-12-06 PAGE 8-9): F.NO. CIT(C)-III/263/027/02-03/2118 DT. 13.3.2003 TO THE PRINCIPAL OFFICER, M/S HINDUSTAN TIMES LTD., 18-20, K.G. MARG, CONTT. PLACE, NEW DELHI-110001. SUB: SHOW CAUSE NOTICE U/S 263 OF THE IT ACT, 1961. I HAD CALLED FOR AND EXAMINED THE ASSESSMENT RECORD IN THE CASE OF M/S HINDUSTAN TIMES LTD. FOR A.Y. 1998-99. THE A SSTT. ORDER FOR THE SAID ASSTT. YEAR HAS BEEN PASSED U/S 143(3) VIDE ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 15 ORDER DATED 27.3.01 BY ACIT, CC-19, NEW DELHI. IT I S SEEN THAT THE ASSESSING OFFICER, HAS WHILE FRAMING THE ORDER, ALLOWED YOU DEDUCTION IN RESPECT OF LOSS PURPORTED TO HAVE BEEN MADE BY THE COMPANY IN ITS ROLE AS A MEMBER OF AOP IN BIRLA TEX T6ILE MILLS WHICH APPEARS TO BE ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF THE FOLLOWING REA SONS: THE SET OFF OF SHARE OF LOSS FROM THE AOP M/S BIRLA TEXTILE MILLS NEEDS TO BE DISALLOWED SINCE TH E LOSS DETERMINED IN THE HANDS OF AN ASSESSEE WHICH IS AN AOP CANNOT BE SET OFF AGAINST THE INCOME OF ANOTHER ASSESSEE AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. LALITA M. BHATT (1998) 234 ITR 319 (BOM). SINCE THE AOP IS A SEPARATE ENTITY, ITS LOSS CAN BE SET OFF ONLY AGAINST THE OTHER INCOME OF THE AOP AND NOT AGAINST THE INCOME OF INDIVIDUAL MEMBERS THE PROVISIONS OF SECTION 67-A DOES NOT APPEAR TO B E AVAILABLE TO AOP WHICH HAS VARYING SHARE RATIO. FURTHER, THIS APPEARS TO BE DELIBERATE AND WILLFUL ATTEMPTS TO REDUCE YOUR I NCOME BY ENTERING INTO THE AOP AGREEMENT, YEAR AFTER YEAR ON LY WITH A VIEW TO ABSORB THE LOSS POSTED BY BIRLA TEXTILE MIL LS AGAINST PROFITS OF YOUR COMPANY WITHOUT ANY BASIS WHICH CAN NOT BE PERMISSIBLE AS PER PROVISION OF THE INCOME TAX ACT. IN VIEW OF THE ABOVE, THE ASSTT. ORDER PASSED BY TH E AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. YOU ARE, THEREFORE, GIVEN AN OPPORTUNITY OF BEING H EARD TO SHOW CAUSE AS TO WHY NOT:- THE SET OFF OF SHARE OF LOSS FROM AOP NAMELY, M/S BIRLA TEXTILE MILLS BE DISALLOWED AND IS ADDED BACK IN YOU TOTAL INCOME. THE DATE OF HEARING FOR THE ABOVE CASE IS FIXED FOR 17 TH MARCH, 2003 AT 11 AM SHARP IN ROOM NO. 503, 5 TH FLOOR, MAYUR BHAWAN, CONTT. CIRCUS, NEW DELHI. PLEASE NOTE THAT IN THE ABSENCE OF COMPLIANCE OF THE NOTICE, AS ABOVE, THE DECISION SHALL BE TAKEN ON MERITS ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS AVAILABLE ON RECORD. ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 16 SD/- (K. VASUDEVAN) CIT(CENTRAL)-III, NEW DELHI. 13/3/03. 8.1. THE ASSESSMENT ORDER, UNDISPUTEDLY WAS PASSED U/S 143(3) OF THE I.T. ACT UNDER SCRUTINY. IT ALSO REMAINS UNCHALLENGED TH AT ALL THE NECESSARY PARTICULARS, NOT ONLY WITH REGARD TO THE ASSESSEE, BUT ALSO CONCERNING THE AOP, M/S BIRLA TEXTILE MILLS, WERE FILED BEFORE THE AO. IT CANNOT, THEREFORE, BE SAID THAT THE AO PASSED THE ASSESSMENT ORDER IN THE ABSENCE OF DETAILS. IT REMAINS LEGALLY SETTLED THAT IT IS BEYOND THE CONTR OL OF THE ASSESSEE AS TO HOW THE ASSESSMENT ORDER IS FRAMED. MOREOVER, NOWHERE I N THE ORDER UNDER APPEAL HAS THE LD. CIT OBSERVED THAT THERE WAS ANY LACK OF INQUIRY IN THE MATTER BY THE AO. THE NOTICE ISSUED U/S 263 (SUPRA) ALSO DOES NOT CONTAIN ANY SUCH COMMENT/ OBSERVATION BY THE LD. CIT. 8.2. THE LD. CIT HAS PASSED THE ORDERS IN THE LIGHT OF SMT. LALITA M. BHATT (SUPRA), WHEREIN UNDISPUTEDLY, THE ASSESSMENT YEAR INVOLVED WAS 1978-79. IT IS ALSO PATENT THAT THE SCHEME OF TAXATION OF AOPS IS NOW GOVERNED BY THE PROVISIONS OF SECS. 67, 86 AND 167B OF THE I.T. ACT . THESE PROVISIONS WERE BROUGHT IN BY THE DIRECT TAX LAWS AMENDMENT ACT, 19 89 W.E.F. 1-4-1989. THE ASSESSMENT YEARS UNDER CONSIDERATION ARE A.Y. 1 998-99 AND 1999-2000. THE PROVISIONS OF SEC. 67, 86 AND 167B ARE, THEREFO RE, APPLICABLE. SMT. LALITA M. BHATT (SUPRA), ON THE CONTRARY, PER E, I S NOT APPLICABLE. AS PER THE ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 17 SECOND PROVISO TO SEC. 86 OF THE ACT, WHERE NO INCO ME TAX IS CHARGEABLE ON THE TOTAL INCOME OF THE AOP, THE SHARE OF A MEMBER, COMPUTED AS PER THE PROVISIONS OF SEC. 86 READ WITH SEC. 67A,SHALL BE C HARGEABLE TO TAX AS PART OF HIS TOTAL INCOME AND NOTHING CONTAINED IN SEC. 86 S HALL APPLY TO THE CASE. AS PER THE MAIN PROVISIONS OF SEC. 86, WHERE THE ASSES SEE IS A MEMBER OF AN AOP, INCOME TAX SHALL NOT BE PAYABLE BY THE ASSESSE E IN RESPECT OF HIS SHARE IN THE INCOME OF THE AOP, COMPUTED IN THE MANNER PR OVIDED IN SEC. 67A OF THE ACT. THE AFORESAID SECOND PROVISO TO SEC. 86 OF THE ACT CARVES OUT AN EXCEPTION TO THE SAID MAIN PROVISION OF SEC. 86. IN THE PRESENT CASE, THERE BEING A LOSS, NO INCOME WAS CHARGEABLE TO TAX ON TH E TOTAL INCOME OF THE AOP AND THAT BEING SO, IT IS THE SECOND PROVISO TO SEC. 86, WHICH IS APPLICABLE. THE AO, IN THE ABOVE FACTS, CLEARLY TOO K A VIEW WHICH WAS A POSSIBLE VIEW. 8.3. IT HAS BEEN ESTABLISHED ON RECORD BEFORE US, B Y PLACING COPIES OF JUDGMENTS, AS ABOVE, THAT THERE ARE DECISIONS BOTH FOR AND AGAINST THE ASSESSEE ON THE ISSUE. IN MALABAR INDUSTRIAL CO. (SUPRA), IT HAS BEEN HELD, INTER ALIA, THAT WHERE TWO VIEWS ARE POSSIBLE AND T HE INCOME-TAX OFFICER HAS TAKEN ONE SUCH POSSIBLE H THE CIT DOES NOT AGREE, I T CANNOT BE TREATED AS AN ERRONEOUS ORDER, PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 18 8.4. IN THE PRESENT CASE, AS ABOVE, TWO VIEWS ARE P OSSIBLE. THE AO TOOK ONE SUCH POSSIBLE VIEW. IT WAS JUST THAT THE CIT DI D NOT AGREE WITH THE SAME. AS SUCH, IN KEEPING WITH MALABAR INDUSTRIAL CO. ( SUPRA), THE ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOUS INASMUCH AS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. IT HAS NOT BEEN SHOWN, THAT THE VIE W TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. 8.5. IN MAX INDIA LTD. (SUPRA), THE HONBLE PUNJA B & HARYANA HIGH COURT HELD, INTER ALIA, THAT THE VIEW EXPRESSED BY THE AO WAS IN CONFORMITY WITH THE VIEW SUBSEQUENTLY EXPRESSED BY VARIOUS BEN CHES OF THE TRIBUNAL; THAT THE VIEW EXPRESSED BY THE AO WAS A POSSIBLE VI EW; AND THAT SINCE THE AO HAD TAKEN A POSSIBLE VIEW, THE LD. CIT HAD NO JU RISDICTION TO INTERFERE BY WAY OF INVOKING THE PROVISIONS OF SEC. 263 OF THE A CT. 8.5.1. MAX INDIA LTD. (SUPRA), RENDERED BY HONBL E P&H HIGH COURT, WAS AFFIRMED BY THE HONBLE SUPREME COURT IN CIT VS. M AX INDIA LTD. 295 ITR 282 (SC)(SUPRA), HOLDING TO THE EFFECT THAT DEB ATABLE ISSUES ARE OUTSIDE THE REALM OF SEC. 263 OF THE ACT. 8.5.2. THE CONTENTION ON BEHALF OF THE DEPARTMENT T O THE EFFECT THAT AT THE TIME OF PASSING OF THE ASSESSMENT ORDER, NO JUDGMEN T ON THE ISSUE WAS AVAILABLE AND THAT SO,THE VIEW TAKEN BY THE AO WAS NOT A POSSIBLE VIEW, ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 19 STANDS DEALT WITH BY THE HONBLE PUNJAB & HARYANA H IGH COURT IN MAX INDIA LTD. 268 ITR 128 (SUPRA), AS UPHELD BY THE HONBLE SUPREME COURT. 8.6. FURTHER, IT HAS NOT BEEN REFUTED THAT THE ASSE SSEE HAD MADE A COMPLETE DISCLOSURE IN THE DETAILS/ DOCUMENTS FILED BEFORE THE AO. THESE DOCUMENTS RELATED NOT ONLY TO THE ASSESSEE, BUT ALSO TO THE AOP M/S BIRLA TEXTILE MILLS, SHOWING THAT THE AOP DID NOT SEEK TO CARRY FORWARD THE LOSS ITSELF. 8.7. COMING TO THE CASE LAWS CITED ON BEHALF OF THE DEPARTMENT, IN GEE VEE ENTERPRISES (SUPRA), JURISDICTION U/S 263 HAD BEEN INVOKED FOR FAILURE ON THE PART OF THE AO TO MAKE INQUIRIES. IN DUGGAL & CO. (SUPRA) (DISCUSSED ELSEWHERE ALSO HEREINABOVE), THERE WAS FAILURE ON T HE PART OF AO TO INVESTIGATE THE FACTS. IN MALABAR INDUSTRIAL CO. (SUPRA), THE ITO HAD FAILED TO ASSESS THE AMOUNT RECEIVED AS COMPENSATION FOR D ELAY IN PAYMENT FOR RUBBER PLANTATION. THE CIT WAS HELD JUSTIFIED IN PA SSING THE ORDER U/S 263 OF THE ACT. WHILE DOING SO, THE LD. CIT NOTED THAT THE AO HAD PASSED THE ORDER WITHOUT APPLICATION OF MIND. IT WAS SEEN THAT THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE ASSESSEE THAT THE AMOUNT R EPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME AND THE AO ACCEPTED THE ENTRY IN THE STATEMENT OF FACT FILED BY THE ASSESSEE IN THE ABSE NCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 20 8.7.1. IN CIT VS. TOYOTA MOTOR CORPORATION (SUPRA ), THE AO DROPPED PENALTY PROCEEDINGS U/S 271C. THE RESORTING TO SEC . 263, SET ASIDE THE AOS ORDER BY OBSERVING THAT THE AO HAD FAILED TO VERIFY SEVERAL ISSUES & FACTS AND DID NOT CARRY OUT NECESSARY INVESTIGATIONS, RES ULTING IN AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. THE HONBLE HIGH COURT MAINTAINED THE REVISONARY ORDER OF THE CIT BY OBSERVING THAT THE CIT WAS JUSTIFIED IN SETTING ASIDE THE CRYPTIC ORDER OF AO BY PASSING THE ORDER U/S 263. 8.7.2. IN RALSON INDUSTRIES LTD. (SUPRA), THE ASS ESSMENT ORDER WAS SUBJECTED TO RECTIFICATION BY THE AO SUBSEQUENTLY. IT WAS HELD THAT THE CIT STILL HAD JURISDICTION TO REVISE THE ASSESSMENT OR DER. 8.7.3. IN CIT VS. SUNBEAM AUTO LTD. 189 TAXMAN 43 6 (DEL.), THE POWER EXERCISED U/S 263 WAS UPHELD ON THE GROUND THAT TH E AO HAD ALLOWED THE EXPENDITURE WITHOUT MAKING PROPER INQUIRY. 8.7.4. IN SMT. TARA DEVI AGGARWAL V. CIT 88 ITR 3 23 (SC), IT WAS HELD THAT INCOME ASSESSED IN THE HANDS OF AN ASSESSEE CA N BE CANCELLED IN REVISION OF THE GROUND THAT SOME OTHER PERSON WAS LIABLE TO TAX ON IT. 8.7.5. IN SOUTH INDIA SHIPPING CORPN. (SUPRA), TH E ITO ALLOWED THE CLAIM FOR WEIGHTED DEDUCTION WITHOUT VERIFYING THE NATURE OF THE EXPENSES AND AS TO UNDER WHICH SUB-CLAUSE OF SEC. 35B(1)(B) OF THE ACT, THE CLAIM WOULD FALL. ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 21 THE CIT CAME TO A PRIMA FACIE CONCLUSION THAT THE O RDER OF THE ITO WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT WAS HELD THAT THE CIT WAS NOT DEBARRED FROM EXERCISING HIS REVISIONAL JURISDICTI ON IN THE ABSENCE OF HIS FINAL CONCLUSION IN THE MATTER. 8.7.6. APROPOS THE ABOVE CASE LAWS, IT IS SEEN THAT THEY ARE NOT HELPFUL TO THE CAUSE OF THE DEPARTMENT, SINCE IN ALL THESE CASES, THE REASON FOR THE CIT TO INVOKE SECTION 263 OF THE ACT WAS LACK OF INQUIRY O N THE PART OF AO, WHICH IS NOT THE CASE HEREIN, AS DISCUSSED HEREINABOVE. 8.8. IN VIEW OF THE ABOVE, WE FIND THE GRIEVANCE OF THE ASSESSEE TO BE JUSTIFIED. THE SAME IS ACCEPTED AS SUCH. ACCORDINGL Y, BOTH THE ORDERS OF THE LEARNED CIT ARE CANCELLED. ITA NO. 2966/DEL/04 : 9. THIS APPEAL IS CONSEQUENTIAL TO OUR ABOVE FINDIN GS AS PERTAINING TO ITA NO. 2017/DEL/03. 10. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26-8-2011. SD/- SD/- ( K.D. RANJAN ) ( A.D. JAIN ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26-8-2011. MP COPY TO : (1) ASSESSEE ITA 2017, 2966 & 833/DEL/2004 ASSTT. YRS: 1998-99 & 1999-2000 22 (2) AO (3) CIT (4) CIT(A) (5) DR, ITAT.