Appeal Details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 9609 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 3 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-04-2016
Appeal Filed By
Assessee
Bench Allotted
A
Next Hearing Date
13-01-2016
Assessment Year
1994-1995
Appeal Filed On
26-12-2013
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 2260/MDS/2013 / ASSESSMENT YEAR : 1994-95 M/S. NEPC INDIA LTD., 1678, TRICHY ROAD, RAMANATHAPURAM, COIMBATORE 641 045. PAN AAACN1567E ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(2), COIMBATORE. RESPONDENT) / APPELLANT BY : SHRI R. SIVARAMAN, ADVOCATE / RESPONDENT BY : SHRI DEBENDRA N. KAR, CIT ! / DATE OF HEARING : 13.01.2016 '# ! / DATE OF PRONOUNCEMENT : 06.04.2016 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 18 .11.2013. - - ITA 2260/13 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I , COIMBATORE DATED 18 . 11.2013 IN I . T . A.NO . 73/2013-14 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW , FACTS , AND IN THE CIRCUMSTANCES OF THE CASE . 2 . THE CIT (APPEALS) ERRED IN SUSTAINING THE DETERMINATION OF/QUANTIFICATION OF DEPRECIATION ON SIX WIND TURBINE GENERATORS WHICH RESULTED IN RESTRICTION OF CLAIM OF SUCH DEPRECIATION IN THE COMPUTATION OF TAXABLE TOT AL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3 . THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE DIRECTIONS CONTAINED IN THE APPELLATE ORDERS WERE N OT FOLLOWED IN PROPER PERSPECTIVE AND OUGHT TO HAVE APPRECIATED THAT THE PRECISE CHALLENGE ON THE NON I MPLEMENTATION OF SUCH DIRECTIONS IN THE ' EFFECT GIVING ' ORDER ON THE SAID I SSUE WAS NOT CONSIDERED AND APPRECIATED EFFECTIVELY BY RECO R DING CRYPTIC FINDING IN PARA 6 OF THE IMPUGNED ORDER . 4 . THE CIT (APPEALS) WENT WRONG IN RECORDING THE FINDI NGS IN THIS REGARD IN PARA 6 OF THE IMPUGNED ORDER WITH OUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 5 . THE CIT (APPEALS) ERRED IN SUSTAINING THE DETERMINATION OF PROFIT ASSESSABLE TO TAX RELATING TO THE TRANSFER/SALE OF 53 WIND TURBINE GENERATORS AT RS . 7,21 , 99,652/- IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 6. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FINDI NGS IN THIS REGA R D IN PARA 9 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION AND OUGH T TO - - ITA 2260/13 3 HAVE APPRECIATED THAT DIRECTIONS CONTAINED IN THE APPELLATE ORDERS WERE NOT COMPLIED WITH IN PROPER PERSPECTIVE . 7. THE CIT (APPEALS) ERRED IN SUSTAINING THE LEVY O F INTEREST U/S 220(2) OF THE ACT AGGREGATING TO RS . 34 , 56 , 08 , 790/- IN RECKONING THE STARTING POINT FROM 1.5.1997 AS AGAINST THE DATE ON WHICH THE DEMAND CREATED AS PER THE FRESH ASSESSMENT ORDER , NAMELY , 28 . 12 . 2010 (THE STARTING POINT SHOULD BE 1.2.2011) IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNI NG PROPER REASONS AND JUSTIFICATION . 8 . T HE CIT (APPEALS) FAILED TO APPRECIATE THAT THE DECI SION TO SUBSTANTIATE THE ABOVE PROPOSITION IN SO FAR AS THE LEVY OF INTEREST U/S 220 ( 2) OF THE ACT CITED IN THE WRITTEN SUBMISSIONS DATED 1 . 11.2013 WOULD FORTIFY THE PLEA FOR ACCEPTANCE OF SUCH LEVY AND OUGHT TO HAVE APP R ECIATED THAT NON CONSIDERATION OF THE BINDING DECISION REPO RTED I N 325 ITR 346 WOULD VITIATE HIS ACTION IN RELATION TH ERETO . 9 . THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE DEC ISION CITED TO SUPPORT THE PLEA FOR REWORKING THE INTERES T U/S 220(2) OF THE ACT WHICH DEC I SION WAS REPORTED IN 48 DTR 167 WAS NOT TAKEN INTO CONSIDERATION AND NOT REFERR ED TO , THEREBY VITIATING HIS ACTION IN RELATION THERETO . 10. THE CIT(APPEALS) WENT WRONG IN RECORDING THE FINDINGS IN THIS REGARD IN PARA 8 OF THE IMPUGNED O RDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 11. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURE JUSTICE IS NULLITY IN LAW. 3. THE FACTS OF THE CASE AS SUBMITTED BY THE LD. A .R. IN PAPER BOOK AT PAGES 1 TO 3 ARE THAT M/S NEPC MICON LTD. IS A - - ITA 2260/13 4 COMPANY CARRYING ON THE BUSINESS OF MANUFACTURE AND SALE OF WIND TURBINE GENERATORS. THE NAME OF THE COMPANY IS SUBSEQUENTLY CHANGED TO M/S NEPC INDIA LTD. FOR THE ASSESSMENT YEAR 1994-95, IT ORIGINALLY FILED THE RE TURN OF INCOME ON 30/11/1994 ADMITTING AN INCOME OF ` 62.94 LAKHS. THIS RETURN WAS PROCESSED UNDER SECTION 143(1) OF T HE ACT ON 30/10/1995 AND A REFUND OF ` 26,06,645/- WAS DETERMINED. THE ASSESSMENT WAS TAKEN UP FOR SCRUTIN Y SUBSEQUENTLY AND THE REGULAR ASSESSMENT UNDER SECTI ON 143(3) OF THE ACT WAS COMPLETED ON 27/3/1997 DETERM INING THE TOTAL INCOME AT ` 26,65,87,990/- DEMANDING ` 23,33,93,982/- AS FURTHER TAX PAYABLE AND A SUM OF ` 3,37,473/- WAS TAKEN AS THE REFUND ALREADY GRANTED FOR THIS YEAR UNDER SECTION 143(1). AN APPEAL WAS FILED AGA INST THE ASSESSMENT AND THE COMMISSIONER OF INCOME-TAX (APPE ALS) HAS CALLED FOR A REMAND REPORT ON 31/12/1997. AFTER RECEIVING THE REMAND REPORT, THE COMMISSIONER OF IN COME- TAX (APPEALS) HAS PARTLY ALLOWED THE APPEAL BY HIS ORDER DATED 22/4/1998. CERTAIN ISSUES WERE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THIS ORD ER WAS - - ITA 2260/13 5 GIVEN EFFECT TO BY THE ASSESSING OFFICER ON 22/6/19 98 AND THE SAME WAS REVISED ON 7/8/1998 AS PER WHICH THE I NCOME WAS DETERMINED AT ` 10,45,24,360/- AND A DEMAND OF ` 5,27,12,347/- WAS DETERMINED. BY ORDER DATED 31/8/1 998 THIS WAS REVISED TO GIVE EFFECT TO THE PAYMENT OF ` 25 LAKHS MADE ON 4/4/1994. AGAINST GIVING EFFECT TO ORDER DA TED 24/8/1998 AN APPEAL WAS FILED BEFORE CIT(A) WHICH W AS DISMISSED ON 29/1/1999, AS THE MISTAKE WAS ALREADY RECTIFIED BY THE ASSESSING OFFICER. BY AN ORDER DAT ED 23/4/1999, TO GIVE EFFECT TO THE ORDER OF THE CIT(A ) DATED 19/3/1999 BASED ON THE MISCELLANEOUS PETITION FILED BY THE ASSESSING OFFICER THAT THE INTEREST UNDER SECTION 2 34B WAS WRONGLY CALCULATED. THE ASSESSING OFFICER HAS TAKEN THE INCOME AT ` 10,45,24,360/- AS PER ORDER U/S 154 REFERRED ABOVE BUT CALCULATED THE TAX PAYABLE AT ` 8,43,46,139/-. THE ORDER DATED 22/6/1998 WAS FURTHER REVISED BY ORDER DATED 21/6/2000 DETERMINING THE TOTAL INCOME AT ` 11,89,99,770/- RAISING A DEMAND OF ` 10,20,50,332/-. THE ASSESSING OFFICER HAS PASSED A FRESH ORDER ON 31/1/2002 U/S 143(3) R/ W SEC.250 TO GIVE EFFECT TO THE ORDER OF THE COMMISSI ONER OF - - ITA 2260/13 6 INCOME-TAX (APPEALS) SETTING ASIDE CERTAIN ISSUES. IN THIS ORDER THE INCOME DETERMINED WAS ` 11,66,45,843/- RAISING A DEMAND OF ` 9,22,50,005/-. THIS DEMAND WAS REDUCED BY ORDER DATED 7/8/2002 TO RS.9,22,28,390/-. THE CIT HAS PASSED AN ORDER DATED 16/8/2002 AGAINST WHICH THE DEPARTMENT FILED AN APPEAL AND THE ITAT BY ITS ORDE R IN ITA NO.1844/MDS/2002 DATED 13/6/2006 FOLLOWING THE ORDE R DATED 9/3/2005 HAS SET ASIDE THE ISSUE OF DEDUCTION U/S 801A. 3.1 AGAINST THE CIT(A)'S ORDER DATED 24/4/1998, BO TH THE ASSESSEE AND THE DEPARTMENT WENT ON APPEAL AND THE ITAT PASSED ORDER IN ITA NOS. 1403 & 14907/MDS/1998 DATED9/3/2005 BY PARTLY ALLOWING BOTH THE APPEALS O F THE DEPARTMENT AND THE ASSESSEE. THIS ORDER OF THE ITAT WAS GIVEN EFFECT TO BY THE ASSESSING OFFICER ON 27/3/20 06 IN WHICH INCOME DETERMINED WAS LOSS OF ` 776.64 LAKHS AND A REFUND OF ` 5,84,90,692/- WAS DETERMINED BY THE ASSESSING OFFICER. THIS ORDER OF THE ASSESSING OFFICER DATED 27/3/2006 WAS SET ASIDE BY THE COMMISSIONER OF INCOME-TAX, CH ENNAI ILL, CHENNAI BY HIS ORDER DATED 25/3/2008 AND AGAIN ST THE - - ITA 2260/13 7 SAID ORDER, AN APPEAL TO THE ITAT WAS FILED ON 23/4/2008. 3.2 THE ORDER OF THE COMMISSIONER OF INCOME-TAX PASSED U/S 263 WAS GIVEN EFFECT TO BY THE ASSESSING OFFICER ON 31/12/2008 AND BY HIS ORDER U/S 143(3) HE HAS DETERMINED THE TOTAL INCOME AT ` 552.67 LAKHS DEMANDING A TAX OF ` 4,62,69,296/-. 3.3 THE ITAT HAS PASSED AN ORDER IN THE APPEAL AGAINST THE ORDER U/S 263 OF THE CIT IN ITA NO. 1041/MDS/20008 ON 19/6/2009 SETTING ASIDE THE ISSUE OF ALLOWING DEPRECIATION ON INTERNALLY TRANSFERRED WTG S TO THE ASSESSING OFFICER. IN OBEDIENCE TO THE ORDER OF THE ITAT, THE ASSESSING OFFICER PASSED FRESH ORDER UNDER SECTION 143(3) R/W 254 ON 29/12/2010 DEMANDING A TAX OF ` 35,24,32,262/- BY DETERMINING THE TOTAL INCOME AT ` 26,43,39,420. THE APPEAL FILED BEFORE THE CIT(APPEALS) AGAINST THE OR DER DATED 29/12/2010 WAS DECIDED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) I, COIMBATORE ON 27/ 7/2011 IN ITA NO. 263/10-11 BY PARTLY ALLOWING THE APPEAL. THE ORDER OF THE CIT(A) WAS GIVEN EFFECT TO BY THE ASSESSING OFFICER ON - - ITA 2260/13 8 30/9/2011 DETERMINING THE TOTAL INCOME AT ` 24,62,67,120/- DEMANDING A TAX OF ` 65,44,47,917/-(ADDL. DEMAND RAISED WAS ` 30,20,15,655/-). APPEAL WAS FILED AGAINST THE ORDER DATED 30/9/2011 BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). THE CIT(A) DECIDED THE MATTER BY HIS ORD ER IN ITA NO.100/11-12 DATED 8/8/2012 BY WHICH THE APPEAL WAS ALLOWED. THE ORDER OF THE CIT(A) DATED 8/8/2012 WAS GIVEN EFFECT TO BY THE ASSESSING OFFICER ON 18/3/2013 DETERMINING THE TOTAL INCOME AT ` 19,47,53,363/-. THE TAX PAYABLE WAS DETERMINED AS ` 18,12,26,267/- AND INTEREST OF ` 34 ,56,08,7901- WAS CHARGED AS INTEREST UNDER SECTION 220(2). THE APPEAL FILED AGAINST THE ASSESSMENT ORD ER DATED 18/3/2013 BEFORE THE CIT(APPEALS) AND THE CIT(APPEA LS) WAS DISMISSED THE APPEAL ON 18/11/2013 IN ITA NO. 73/13- 14. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE U S. 4. THE LD. AR SUBMITTED THAT THE ASSESSEE ORIGINALL Y CLAIMED THAT IT HAS MANUFACTURED 209 WTGS OUT OF WH ICH 159 WTGS WERE SOLD TO OUTSIDERS AND 50 WTGS WERE TRANSFERRED TO ASSESSEES OWN DIVISION. HOWEVER, T HE AO FOUND THAT ASSESSEE HAD PRODUCED ONLY 156 WTGS, OUT OF - - ITA 2260/13 9 THIS, 150 WTGS WERE SOLD TO OUTSIDERS AND 6 WTGS WE RE INSTALLED IN OTHER INTERNAL DIVISION OF THE ASSESSE E. AS SUCH, THE ASSESSEE REQUESTED THE AUTHORITIES THAT S ALE VALUE OF 53 WTGS HAVE TO BE REDUCED FROM TOTAL TURN OVER I.E. SALES AMOUNT AND MANUFACTURED COST OF WTGS TO BE APPORTIONED AMONG 156 WTGS ONLY SO AS TO ARRIVE COR RECT DEPRECATION IN RESPECT INTERNALLY TRANSFERRED 6 WTG S. HOWEVER, THE AO WRONGLY COMPUTED THE COST OF EACH W TG AT ` 52.39 LAKHS BY CONSIDERING THE TOTAL COST OF MANUFACTURE AT ` 1,09,46,41,000/- BY DIVIDING 209 WTGS AND ARRIVED AT THE COST OF 6 WTG OF ` 3,14,25,096/- AND ALLOWED THE DEPRECIATION AT 50% OF SALE WORKED TO ` 1,57,12,548/-. ACCORDING TO LD. AR, CONSIDERING TH E TOTAL MANUFACTURING COST OF ` 1,09,46,41,000/- AND DIVIDED THE SAME BY 209 WTG TO ARRIVE THE COST OF EACH WTG IS N OT CORRECT. SINCE THERE WAS CATEGORICAL FINDING BY THE TRIBUNAL IN ITA NO.1019/MDS/2002 DATED 13.12.2002 FOR THE ASSESSMENT YEAR 1997-98 THAT INTER-DIVISIONAL TRANS FER DOES NOT RESULT IN SALE AND THE ASSESSEE CANNOT BE SAID TO HAVE EARNED ANY PROFIT AND THEREFORE, DIRECTED THE AO TO - - ITA 2260/13 10 REDUCE THE PROFIT AND CORRESPONDING COST THEREBY WH ICH IS EVIDENT FROM PARAGRAPH 54. THE TRIBUNAL VIDE ORDER DATED 30.6.2003 IN ITA NO.1018/MDS/2002 & OTHERS FOR THE ASST. YEARS 1993-94, 1995-96 ETC. HAS HELD THAT INTER-DIV ISIONAL TRANSFERS CANNOT BE TREATED AS SALES AND SALE FIGUR ES SHOULD HAVE BEEN REDUCED. CORRESPONDINGLY THE EXPEN SES OF MANUFACTURING DIVISION WOULD ALSO HAVE TO BE RED UCED TO THE COST OF 34 NUMBERS OF WTG CAPITALISED IN THE YEAR WHICH IS EVIDENT FROM PARAGRAPHS 23 & 24. ACCORDIN G TO THE LD. AR, THESE FINDINGS OF THE TRIBUNAL HAVE REA CHED FINALITY AND THERE IS NO FURTHER APPEAL BY THE REVE NUE ON THIS ISSUE. 4.1 FURTHER, THE TRIBUNAL WHILE DECIDING THE APPEA L FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S.263 OF THE ACT BY THE CIT ON THE SAME ISSUE FOR THE ASST. YEAR 1994- 95 IN ITA NO. 1041/MDS/2008 DATED 19.6.2009 HELD AS FOLLOWS : 6. AFTER CONSIDERING THE RIVAL CONTENTIONS AND TH E MATERIALS ON RECORD, WE NOTE THAT THE ASSESSEE CLAIMED MANUFACTURING OF 209 WIND TURBINE GENERATORS (WTGS) OUT OF WHICH 150 WTGS WERE SOLD TO OUTSIDERS AND 59 WTGS WERE TRANSFERRED - - ITA 2260/13 11 TO THE ASSESSEES OWN POWER DIVISION. BUT IN THE ORIGINAL ASSESSMENT ORDER, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE ACTUALLY MANUFACTURED ONLY 156 WTGS, OUT OF WHICH ONLY 6 WTGS WERE INTERNALLY TRANSFERRED AS AGAINST 59 WTGS CLAIMED BY THE ASSESSEE. WHEN THE MATTER CAME TO THIS TRIBUNAL, THIS TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE NUMBER OF WIND TURBINE GENERATORS THAT WERE ACTUALLY INSTALLED IN THE ASSESSEES WON DIVISION AND THEN ALLOW THE DEPRECIATION PASSED ON THE FACTS THAT THEY WERE COMMISSIONED AND SO CERTIFIED BY THE STATE ELECTRICITY BOARD. IN THE GIVEN EFFECT ORDER, THE ASSESSING OFFICER HAS REDUCED THE SALE PRICE OF 59 WTGS AT ` 3,893.86 LAKHS BUT CORRESPONDING COST HAS BEEN REDUCED ONLY IN RESPECT OF 6 WTGS WHICH IS APPARENT FROM THE ORDER OF THE GIVING EFFECT IN WHICH THE ASSESSING OFFICER HAS REFERRED THE ORIGINAL ASSESSMENT ORDER DATED 27.03.1997 AT PAGE 9. ON OUR DIRECTIONS, THE ASSESSEE FILED THE ORIGINAL ASSESSMENT ORDER BEFORE US DURING THE HEARING ON 12.05.2009. AFTER GOING THROUGH THE ORIGINAL ASSESSMENT ORDER, WE FOUND THAT THE SALE VALUE OF ` 3,893.86 LAKHS PERTAINS TO 59 WIND TURBINE GENERATORS, WHEREAS WHILE GIVING EFFECT ORDER, THE ASSESSING OFFICER HAS TAKEN INTO ACCOUNT ONLY THE COST OF 6 WTGS BUT REDUCED THE SALE VALUE OF 59 WTGS FROM THE SALE PROCEEDS WHICH HAS RESULTED THE NET INCOME AS LOSS. THOUGH, WE ARE NOT CONVINCED WITH THE VIEW OF THE COMMISSIONER OF INCOME TAX THAT THIS TRIBUNAL HAS NOT DIRECTED FOR REDUCTION OF THE SALE VALUE FROM THE SALE OF THE ASSESSEE IN RESPECT OF THE WIND TURBINE GENERATORS WHICH WERE TRANSFERRED TO THE OTHER DIVISION OF THE ASSESSEE BUT IN THE GIVING EFFECT ORDER, THE ASSESSING OFFICER HAS WRONGLY REDUCED THE SALE VALUE OF 59 WIND TURBINE GENERATORS, WHEREAS THE COST HAS BEEN REDUCED ONLY FOR 6 WTGS. THEREFORE, THERE IS AN - - ITA 2260/13 12 APPARENT ERROR IN THE ORDER OF GIVING EFFECT. IT I S THE DUTY OF THE TRIBUNAL TO DO JUSTICE AND PREVENT MISCARRIAGE OF JUSTICE AND IN SUCH A SITUATION, THE TRIBUNAL IS DUTY BOUND TO PASS THE NECESSARY DIRECTIONS AS PER THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLATE AUTHORITY HAS THE JURISDICTION AS WELL AS THE DUTY TO CORRECT THE ERR ORS IN THE PROCEEDINGS UNDER APPEAL AND TO ISSUE IF NECESSARY APPROPRIATE DIRECTIONS TO THE AUTHORITY BELOW WHOSE DECISIONS THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO THAT BY THE STATUTE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF KAPURCHAND SHRIMAL VS. COMMISSIONER OF INCOME TAX, ANDHRA PRADESH REPORTED IN 131 ITR 451. WE ALSO PLACE RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SMT. S. VIJAYALAKSHMI REPORTED IN 242 ITR 46; IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RAMNATH GOENKA (DECD.) AND OTHER REPORTED IN 252 ITR 653. WE FURTHER NOTE THAT THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY WITH RESPECT TO THE ACTUAL NUMBER OF WIND TURBINE GENERATORS COMMISSIONED BY THE ASSESSEE AND CERTIFIED BY THE STATE ELECTRICITY BOARD WHILE PASSING THE GIVEN EFFECT ORDER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO REDO THE GIVEN EFFECT ORDER AS PER THE DIRECTIONS OF THIS TRIBUNAL AFTER CONSIDERING THE ABOVE OBSERVATIONS. 4.2 WHILE GIVING EFFECT TO THIS ORDER OF THE TRIBUN AL, THE REVENUE AUTHORITIES HAVE NOT CONSIDERED THE ABOVE FINDINGS OF THE TRIBUNAL AND THE FINDINGS OF THE LO WER AUTHORITIES, BOTH, THE AO AND THE CIT(APPEALS) WERE DECIDED THE ISSUE - - ITA 2260/13 13 CONTRARY TO THE ABOVE FINDINGS OF THE TRIBUNAL. AC CORDING TO THE LD. AR, THE TOTAL COST OF MANUFACTURE OF WTG TO BE APPORTIONED BETWEEN 156 WTGS ONLY AND CORRESPONDING LY SALES VALUE OF 53 WTGS TO BE REDUCED FROM TOTAL SAL ES. IN OTHER WORDS, INTER-DIVISIONAL TRANSFERS CANNOT BE T REATED AS SALES AND TO THAT EXTENT THE SALE FIGURES WOULD HAV E TO BE REDUCED IN ADDITION TO BOOST UP SALES OF WTG CORRESPONDINGLY THE EXPENSES OF THE MANUFACTURING DIVISION WOULD ALSO HAVE TO BE REDUCED TO THE COST OF THE NUMBER OF WTGS CAPITALISED IN THE YEAR. HOWEVER, T HE LOWER AUTHORITIES ONLY REDUCED FROM PROFIT ELEMENT OF 53 WTGS AND NOT THE SALES VALUE FROM THE SALES WHICH I TSELF IS WRONG AND CONTRARY TO THE DIRECTIONS OF THE TRIB UNAL. ACCORDING TO THE LD. AR, THE AO HAS TO REDUCE THE S ALES VALUE OF 59 WTGS FROM THE TOTAL SALES, THEN HE HAS TO GRANT DEPRECIATION ON 6 INTER-DIVISION TRANSFERRED WTGS ON COST PRICE. FURTHER, THE LD. AR SUBMITTED THAT THE AO HAS TO DETERMINE COST OF 156 WTGS BY APPORTIONING THE T OTAL COST OF MANUFACTURE AND CONSIDER THE COST OF EACH W TG AND, THEREFORE, HE HAS TO DETERMINE THE PROFIT OF T HE - - ITA 2260/13 14 ASSESSEE AND EXCLUDE INTER-DIVISIONAL SALES FROM OU T OF THE NET PROFIT, WHICH HAS NOT DONE IN THIS CASE. THERE FORE, HE PRAYED TO RECTIFY THE MISTAKE. 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE IMPUGNED ORDER OF AO IS THE ORDER DATED 18.3.2013 G IVING EFFECT TO THE ORDER OF CIT(A) DATED 8.8.2012 IN WHI CH IT IS SPECIFICALLY HELD THAT EXCESS DEPRECIATION ALLOWED ON ACCOUNT OF 6 WTGS INTERNALLY TRANSFERRED AMOUNTING TO ` 53.37 LAKHS HAS TO BE REDUCED BY THE AO. IN THE OR DER DATED 30.9.2011, THE AO ALLOWED DEPRECIATION OF ` 2,10,50,700/- WHICH STANDS REDUCED TO ` 1,57,12,548/- IN THE IMPUGNED ORDER I.E. REDUCTION OF ` 53.38 LAKHS. THUS, AO IN THE IMPUGNED ORDER HAS CORRECTLY GIVEN EFFECT TO THE ORDER OF CIT(A) DATED 8.8.2012. 5.1 FURTHER, THE LD. DR SUBMITTED THAT EVEN OTHERWI SE, COST OF ONE WTG ADOPTED BY THE AO IN THE IMPUGNED ORDER IS ` 52.37 LAKHS WHICH VERY MUCH TALLY WITH THE WORKING GIVEN BY THE ASSESSEE ITSELF IN THE APPEAL FILED BEFORE THE CIT(A). THUS, ELIGIBLE DEPRECIATION ON WTGS - - ITA 2260/13 15 WORKED OUT BY THE ASSESSEE ITSELF IS ` 157.14 LAKHS, WHICH THE SAME THING ALLOWED BY THE AO IN THE IMPUGNED OR DER. 5.2 THE LD. DR FURTHER SUBMITTED THAT AGAIN, COST OF EACH WTG WAS HELD AT ` 52.38 LAKHS BY THE CIT(A) IN HIS ORDER DATED 27.7.2011, WHICH WAS ALSO ACCEPTED BY B OTH THE PARTIES. SINCE THE SAID DECISION OF THE CIT(A) HAS REACHED FINALITY AND AO FOLLOWED SUCH DECISION OF T HE CIT(A) TO WORK OUT THE DEPRECIATION IN THE IMPUGNED ORDER, THE APPEAL OF THE ASSESSEE REQUIRES TO BE DISMISSED . THIS BEING THE POSITION AS ADMITTED BY THE ASSESSEE IN A SERIES OF SUBMISSIONS, IT IS NOT KNOWN AS TO WHAT IS THE G RIEVANCE OF THE ASSESSEE. CONSIDERING THE ABOVE, APPEAL OF THE ASSESSEE MAY BE DISMISSED AS THE ASSESSEE IS NOT AGGRIEVED. ACCORDING TO THE LD. DR, THE ONLY DISPU TE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS REG ARDING THE NUMBER OF WTG MANUFACTURED BY IT DURING THE YEA R WHICH IS THE DIVISION TO DETERMINE THE UNIT COST. THIS FACT IS EVIDENCE FROM CL.12 IN SCH.12 OF PRINTED ANNUAL ACC OUNTS FOR FY. 1993-94 I.E. 209 WTGS. - - ITA 2260/13 16 5.3 REGARDING COMPUTATION OF PROFIT ELEMENT OF 53 WTGS, THE LD. DR SUBMITTED THAT ACCORDING TO THE ASSESSEE, PROFIT ELEMENT OF 59 (53+6) WTGS NEEDS TO BE EXCLUDED FROM TAXABLE INCOME. FURTHER, THE LD. DR SUBMITTED THAT THE IMPUGNED ORDER OF THE AO IS GIVI NG EFFECT TO THE ORDER OF THE CIT(A) DATED 8.8.2012, W HICH WAS ACCEPTED BY BOTH THE PARTIES AND REACHED FINALITY A ND IN THE SAID ORDER, THE CIT(APPEALS) HELD THAT THE AO IS DIRECTED TO FOLLOW THE DIRECTIONS AS GIVEN IN PARA 5.5. AND 5.6 OF THE APPELLATE ORDER. THE CIT(A) IN PARA 5. 6 OF THE ORDER DATED 27.7.2011 ARRIVED AT THE PROFIT ELEMENT OF 53 WTGS AT ` 721.74 LAKHS AND PROFIT ELEMENT OF ANOTHER 6 WTGS AT ` 81.73 LAKHS WHICH HAVE TO BE EXCLUDED FROM TAXABLE INCOME SCH.II TO THE IMPUGNED ASSESSMENT OR DER SHOWS THAT AO HAS STRICTLY FOLLOWED THE DIRECTIONS OF THE APPELLATE AUTHORITY AND ADOPTED THE FIGURE OF PROFI T AS GIVEN IN THE APPELLATE ORDER. THIS ORDER OF THE CI T(A) WAS ACCEPTED BY BOTH THE ASSESSEE AND DEPARTMENT AND TH US IT HAS REACHED FINALITY. ACCORDINGLY, THE LD. DR SUBMITTED THAT SINCE THE AO HAS FOLLOWED THE BINDING DIRECTIO N OF THE - - ITA 2260/13 17 CIT(A) WHICH WAS ACCEPTED BY BOTH THE PARTIES, APPE AL OF THE ASSESSEE NEEDS TO BE DISMISSED ON THE ISSUE AS IT HAS NO GRIEVANCE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THIS APPEAL IS WH ETHER TO EXCLUDE THE SALE VALUE OR ELEMENT OF PROFIT FROM 53 WTGS WHICH WAS NOT MANUFACTURED BY THE ASSESSEE TO BE REDUCED FROM THE PROFIT SHOWN BY THE ASSESSEE AND S AID TO BE INFLATED SO AS TO GIVE A ROSY PICTURE OF THE PRO FIT OF THE ASSESSEE. THE OTHER ISSUE IS WITH REGARD TO DETERM INATION OF COST OF 6 WTGS WHICH REPRESENTS INTER-DIVISIONAL TRANSFER AND ALLOWABILITY OF DEPRECIATION ON IT. 6.1 THE CHRONOLOGICAL EVENTS OF THE CASE ARE FOLLO WS : 1. THE ASSESSEE FILED RETURN OF INCOME 30.11.1994 2. THE RETURN WAS SCRUTINIZED AND REGULAR ASSESSMENT WAS COMPLETED U/S.143(3) 27.03.199 7 3. AGGRIEVED BY THAT ORDER, THE ASSESSEE WENT IN APPEAL BEFORE CIT(A), WHO PARTLY ALLOWED THE APPEAL 24.04.1998 4. AGAINST THE CIT(A)S ORDER, THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL IN ITA NO.1403/MDS/1998 09.03.2005 - - ITA 2260/13 18 5. THE ORDER OF THE ITAT WAS GIVEN EFFECT TO BY THE AO 27.03.2006 6. GIVING EFFECT TO THE ORDER OF THE TRIBUNAL WAS SUBJECT MATTER BEFORE CIT U/S.263 25.3.2008 7. CONSEQUENTIAL ORDER WAS PASSED BY AO 31.12.2008 8. IN THE MEANTIME, THE ASSESSEE WENT IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER PASSED BY THE CIT U/S.263 AND THE ORDER WAS PASSED IN ITA NO. 1041/MDS/2008 19.06.2009 9. GIVING EFFECT TO THE ORDER OF THE ITAT PASSED BY AO 29.10.2010 10. ASSESSEE WENT IN APPEAL AGAINST THAT ORDER BEFORE THE CIT(A), WHO PASSED THE ORDER 27.07.2011 11. GIVING EFFECT TO THE ORDER OF THE CIT(A) BY THE AO 30.09.2011 12. AGAIN, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE APPEAL OF THE ASSESSEE 08.08.2012 13. AGAIN, GIVING EFFECT TO THE ORDER OF THE CIT(A) BY THE AO 18.03.2013 14. AGAINST THAT ORDER, THE ASSESSEE ONCE AGAIN WENT IN APPEAL BEFORE CIT(A), WHO DISMISSED THE APPEAL 18.11.2013 NOW, THE ASSESSEE IS IN APPEAL BEFORE US AGAINST TH E ORDER OF THE CIT(APPEALS) DATED 18.11.2013. - - ITA 2260/13 19 6.2 ADMITTEDLY, IN THIS CASE, FOR THE ASST. YEAR 19 94-95, THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL ON THE ISSUE OF ALLOWABILITY OF DEPRECIATION ON WINDMILLS AND OTHER FIXED ASSETS. THE TRIBUNAL, VIDE ORDER DATED 9.3.2 005 IN ITA NO.1403/MDS/1998 FOR THE ASST. YEAR 1994-95 HEL D IN PARA 4 AS UNDER: 4. THE THIRD ISSUE IS WITH REGARD TO DEPRECIATION ON WIND MILLS AND OTHER FIXED ASSETS. THIS ISSUE WAS ALSO CONSIDERED IN THE EARLIER YEARS. IT WAS OBSERVED THAT WIND MILLS THAT ARE SOLD TO OUTSIDE PARTIES ARE NO LONGER THE ASSETS OF THE COMPANY. WIND MILLS THAT WERE TRANSFERRED TO OTHER UNITS AND WHICH WERE COMMISSIONED, WERE DIRECTED TO BE CONSIDERED FOR ALLOWING OF DEPRECIATION BASED ON THE FACT THAT THEY WERE COMMISSIONED AND SO CERTIFIED BY THE STATE ELECTRICITY BOARD AND WE DIRECT ACCORDINGLY. LIKEWISE IN RESPECT OF ASSET FIXED ASSETS ALSO WHICH ARE OWNED BY THE ASSESSEE FOR WHICH INFORMATION IS AVAILABLE, THE ASSESSING OFFICER SHALL EXAMINE AND ALLOW DEPRECIATION. WHILE DECIDING THIS ISSUE, THE TRIBUNAL HAS TAKEN N OTE OF EARLIER ORDER OF THE TRIBUNAL DATED 30.6.2003 IN IT A NOS.1666/MDS/2000, 1017/MDS/2002, 1018/MDS/2002, 1667/MDS/2000, 1238/MDS/2002, 1239/MDS/2002 & 1021/MDS/2002 FOR THE ASST. YEARS 1993-94, 1995-96, 1996- - - ITA 2260/13 20 97, 1997-98, 1997-98, 1997-98 & 1997-98 RESPECTIVEL Y, WHEREIN IT WAS OBSERVED IN PARAS 23 & 24 AS FOLLOW S: 23. THE NEXT ISSUE IS WITH REGARD TO THE AMOUNT RELATING TO WIND TURBINE GENERATORS (WTG FOR SHORT) OF 68 NUMBERS, WHICH THE ASSESSEE HAD SHOWN AS SALES BUT REQUIRED TO BE REDUCED FROM THE EXPENDITURE BECAUSE IT RELATED TO CAPITALISATION OF WTG. THE WTGS WERE TRANSFERRED TO THE POWER DIVISION AND ACCORDINGLY THE ASSESSEE CLAIMED DEPRECIATION ON THE SAID WTGS. 24. THE ASSESSEE APPARENTLY PURCHASED 371 WTGS OF WHICH 34 NUMBERS WERE CAPITALISED BY IT FOR ITS OWN PURPOSE IN THE POWER UNIT OR POWER DIVISION. THE ASSESSEE SHOWED THE TRANSFER OF 34 NUMBERS OF WTGS FROM THE MANUFACTURING UNIT TO THE POWER DIVISION UNIT AS SALES IN THE MANUFACTURING UNIT. THIS WAS AN ISSUE THAT CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1997-98. IN THAT YEAR AT THE INSTANCE OF THE REGISTRAR OF THE COMPANY LAW BOARD, THE ASSESSEE CARRIED OUT A CORRECT BY REMOVING THE AMOUNT SHOWN AS SALES WITH REGARD TO THE TRANSFER OF 24 WTGS TO THE POWER DIVISION AND HAD SHOWN IT SEPARATELY AS INTER DIVISIONAL ARRANGEMENT. THUS THE INTER DIVISIONAL ARRANGEMENT / TRANSFER DOES NOT RESULT IN A SALE AND THE ASSESSEE CANNOT BE SAID TO HAVE EARNED ANY PROFIT. IN THAT CASE THE A.O. WAS DIRECTED TO VERIFY THE COST OF MANUFACTURE AND THAT SUCH COST OF MANUFACTURE SHOULD BE REDUCED FROM THE COST OR EXPENDITURE AS CLAIMED BY THE MANUFACTURING UNIT AND SUCH COST WOULD HAVE TO BE TREATED AS CAPITAL COST FOR THE 24 WTGS. IN M.P.NO.13/MDS/03 ARISING OUT OF ITA NO.1019/MDS/02(A.Y.1997-98), CONSEQUENT TO - - ITA 2260/13 21 THE OMISSION TO CONSIDER THE ADDITIONAL GROUNDS RAISED IN ITS ORDER DT. 13-12-02 WITH REGARD TO DEPRECIATION ON 24 WTGS USED BY THE POWER DIVISION, THE TRIBUNAL DIRECTED THE A.O. TO EXAMINE THE DATE OF COMPLETION OF INSTALLATION OF THE WTGS AND THEIR BEING PUT TO USE BY VERIFYING THE CERTIFICATE ISSUED BY THE STATE ELECTRICITY BOARD AUTHORITIES. ALL THAT WE NEED TO OBSERVE HERE IS THAT INTER DIVISIONAL TRANSFERS CANNOT BE TREATED AS SALES AND TO THAT EXTENT THE SALE FIGURES WOULD HAVE TO BE REDUCED. CORRESPONDINGLY THE EXPENDITURE OF THE MANUFACTURING DIVISION WOULD ALSO HAVE TO BE REDUCED TO THE COST OF 34 NUMBERS OF WTGS CAPITALISED IN THE YEAR. THE VALUE AT WHICH THEY HAVE TO BE CAPITALISED IS IN THE SAME FASHION AS HAS BEEN DIRECTED TO BE DETERMINED BY THE TRIBUNAL IN ITS ORDER DT. 13-12-03 IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1997-98 TO WHICH REFERENCE IS MADE ABOVE. THE A.O. WILL CARRY OUT THE SAME EXERCISE IN RESPECT OF THE PRESENT ASSESSMENT YEAR ALSO. THE A.O. FURTHER WOULD CONSIDER THE CLAIM OF DEPRECIATION BY KEEPING IN MIND THE DIRECTIONS OF THE TRIBUNAL AS MADE IN ITS ORDER IN M.P.NO.13/MDS/03. (EMPHASIZE APPLIED) 6.3 WHILE PASSING THE CONSEQUENTIAL ORDER TO THE OR DER OF THE TRIBUNAL IN ITA NO.1403/MDS/98 DATED 9.3.2005, THE AO VIDE ORDER DATED 27.3.2006 RECOMPUTED THE DEPRECIAT ION BY OBSERVING IN PARA 3 AS FOLLOWS : 3. DEPRECIATION: 3.1 DURING THE YEAR (A.Y. 94-95), THE ASSESSEE CLAIMED TO HAVE MANUFACTURED 209 - - ITA 2260/13 22 WTGS. OUT OF WHICH IT WAS CLAIMED THAT 150WTGS WERE SOLD TO OUTSIDERS AND 50 WERE TRANSFERRED TO ASSESSEES OWN POWER DIVISION. THE ASSESSING OFFICER, IN THE ORIGINAL ASSESSMENT ORDER CLEARLY PROVED THAT THE ASSESSEE COULD NOT HAVE PRODUCED 209 WTGS AND HELD THAT ONLY 156 WTGS WERE ACTUALLY MANUFACTURED BY THE ASSESSEE, OUT OF WHICH ONLY 6 WTGS WERE INTERNALLY TRANSFERRED AS AGAINST 59 CLAIMED BY ASSESSEE. THE A.O. CONDUCTED ENQUIRIES WITH TNEB, GUJARAT ENERGY DEVELOPMENT AUTHORITY AND CORRELATED THE DETAILS WITH DETAILS OF CONSUMPTION OF IRON & STEEL, CRITICAL PARTS USED FOR MANUFACTUR E OF WTGS. BASED ON THE ENQUIRIES AND ANALYSIS OF DETAILS FURNISHED BY THE ASSESSEE, THE AO HELD THAT THE ASSESSEE COULD HAVE MANUFACTURED ONLY 156 WTGS DURING THE YEAR. THE A.O. ALSO RESTRICTED THE DEPRECIATION ON WTGS TO 6 WTGS. THE VIEW OF THE ASSESSING OFFICER WAS UPHELD BY CIT(A). THE HONBLE ITAT HELD THAT THE ISSUE WAS CONSIDERED IN THE EARLIER YEARS AND DIRECTED THE ASSESSING OFFICER TO CONSIDER ALLOWING DEPRECIATION BASED ON THE FACT THAT THEY WERE COMMISSIONED AND SO CERTIFIED BY THE STATE EBS. THE HONBLE ITAT CONSIDERED THE SAME ISSUE FOR A.Y. 95-96 AND IN ITS ORDER DATED 30.6.003, HELD THAT INTER-DIVISIONAL TRANSFERS CANNOT BE TREATED A S SALES AND TO THAT EXTENT THE SALES FIGURES WOULD HAVE TO BE REDUCED CORRESPONDINGLY THE EXPENSES OF MANUFACTURING DIVISION WOULD ALSO HAVE TO BE REDUCED TO THE COST OF NUMBER OF WTGS CAPITALIZED IN THAT YEAR. 6.4 HOWEVER, THE CIT HAS NOT ACCEPTED THE CONSEQUENTIAL ORDER OF THE AO AND HE INVOKED THE - - ITA 2260/13 23 JURISDICTION U/S.263 OF THE ACT. VIDE ORDER DATED 25.3.2008, INTER ALIA, THE CIT OBSERVED AS FOLLOWS : THE THIRD ISSUE IS WITH REGARD TO DEPRECIATION ON WINDMILLS AND OTHER FIXED ASSETS. THIS ISSUE WAS ALSO CONSIDERED IN THE EARLIER YEARS. IT WAS OBSERVED THAT WINDMILLS THAT ARE SOLD TO OUTSIDE PARTIES ARE NO LONGER THE ASSETS OF THE COMPANY. WINDMILLS THAT WERE TRANSFERRED TO OTHER UNITS AND WHICH WERE COMMISSIONED WERE DIRECTED TO BE CONSIDERED FOR ALLOWING OF DEPRECIATION BASED ON THE FACT THAT THEY WERE COMMISSIONED AND SO CERTIFIED BY THE STATE ELECTRICITY BOARD AND WE DIRECT ACCORDINGLY. LIKEWISE, IN RESPECT OF OTHER FIXED ASSETS ALSO, WHICH ARE OWNED BY THE ASSESSEE FOR WHICH INFORMATION IS AVAILABLE, THE AO HAS TO EXAMINE AND ALLOW DEPRECIATION. A PLAIN READING OF THE ABOVE OBSERVATIONS MAKE IT CLEAR THAT THE TRIBUNAL WAS ONLY CONCERNED WITH THE QUESTION OF ALLOWANCE OF DEPRECIATION ON WINDMILLS THAT WERE TRANSFERRED TO OTHER UNITS AND WHICH WERE COMMISSIONED. THE TRIBUNAL IN THE ABOVE PART OF THE ORDER HAS DIRECTED THE AO TO EXAMINE WHETHER THE WINDMILLS THAT WERE TRANSFERRED TO OTHER UNITS WERE COMMISSIONED AS CERTIFIED BY THE STATE ELECTRICITY BOARD AND TO ALL OW DEPRECIATION BASED ON THE SAID FACT. IT IS ALSO CLEAR THAT THERE IS NOTHING IN THE ABOVE DIRECTIONS OF THE TRIBUNAL WHICH HAS THE EFFECT OF DIRECTING THE AO TO ALLOW DEDUCTION OF INTER DIVISIONAL SALES . IN FACT, THE ITAT IN ITS ORDER UNDER CONSIDERATION NEVER TALKED ABOUT THE ISSUE OF INTER DIVISIONAL SALES AND RELIEF TO THE ASSESSEE UNDER THIS HEAD. MOREOVER, THE ITAT HAS ALSO NOT REFERRED TO THE ORDERS OF SUBSEQUENT YEARS FOR ALLOWING THE RELIEF TO THE ASSESSEE. IT IS THEREFORE CRYSTAL CLEAR THA T THE AO WHILE GIVING EFFECT TO THE DIRECTIONS OF THE ITAT HAS ERRONEOUSLY ALLOWED THE DEDUCTION IN - - ITA 2260/13 24 RESPECT OF INTER DIVISIONAL SALES OF WINDMILLS. HA D THIS DEDUCTION IN RESPECT OF INTER DIVISIONAL SALES NOT BEEN GIVEN, THE RESULTANT TOTAL INCOME WOULD HAVE BEEN A POSITIVE FIGURE AS AGAINST THE LOSS DETERMINED IN THE ORDER DATED 27.3.06. IT IS AXIOMATIC THAT, WHILE GIVING EFFECT TO THE DIRECTIO NS OF THE TRIBUNAL U/S.254, THE AO SHOULD STRICTLY ABIDE BY THE FINDINGS/DIRECTIONS OF THE TRIBUNAL AND SHOULD NOT DEVIATE FROM THEM. HENCE, THE ORDER DATED 27.3.06 PASSED BY THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. I THEREFORE DEEM IT FIT TO S ET ASIDE THE ABOVE ORDER WITH A DIRECTION TO THE AO TO PROCEED AFRESH TO GIVE EFFECT TO THE TRIBUNALS DIRECTIONS CONTAINED IN ITS ORDER DATED 9.3.05 CORRECTLY AND STRICTLY IN ACCORDANCE WITH THE DIRECTIONS. 6.5 THE ASSESSEE WENT IN APPEAL BEFORE THE TRIBUN AL IN ITA NO.1041/MDS/2008 DATED 19.6.2009 AND THE OBSERVATION OF THE TRIBUNAL IS REPRODUCED IN PARA 4 .1 OF THIS ORDER. 6.6 THE AO ONCE AGAIN PASSED CONSEQUENTIAL ORDER DATED 29.12.2010, WHEREIN THE AO OBSERVED AS UNDER: BASED ON THE ABOVE EVIDENCES AND FINDINGS THE UNDERSIGNED TO REDUCE THE PROFIT ELEMENT OF 6 INTERNALLY TRANSFERRED WTGS ONLY FROM THE TOTAL INCOME. FURTHER, DURING THIS SET ASIDE ASSESSMENT PROCEEDINGS, IN REPLY TO THE HEARING NOTICE DATED 06/08/2009 FROM ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(4), CHENNAI THE ASSESSEE HAD FILED A WRITTEN SUBMISSION DATED NIL - - ITA 2260/13 25 (COPY ENCLOSED AS ANNEXURE-IV TO THIS ASSESSMENT ORDER). VIDE THIS SUBMISSION THE ASSESSEES AUTHORIZED REPRESENTATIVE HAD ALREADY SUBMITTED THAT HE IS NOT DISPUTING THE FINDINGS OF THE ASSESSING OFFICER AT THE TIME OF ORIGINAL SCRUTINY ASSESSMENT THAT ASSESSEE HAD INTERNALLY TRANSFERRED ONLY 6 WTGS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1994-95. IN THE SAME SUBMISSION DATED NIL THE ASSESSEES AUTHORIZED REPRESENTATIVE HAD FURTHER SUBMITTED THAT THE COST OF 53 WTGS (I.E. 59-6) HAD TO BE REDUCED FROM THE TOTAL INCOME OF THE ASSESSEE COMPANY. IN THIS REGARD, IT IS BETTER TO DRAW OUR ATTENTION TO PAGE NO.13 (PARA 9.11) AND 19 OF THE ORIGINAL SCRUTINY ASSESSMENT ORDER U/S.143(3) DATED 27/03/1997 WHEREIN THE PROFIT ELEMENT ON THESE 53 NOT MANUFACTURED WTGS AMOUNTING TO ` 1,98,62,236/- IS ALREADY STANDS REDUCED FROM THE TAXABLE INCOME OF THE ASSESSEE. TO ARRIVE AT THE CORRECT TAXABLE INCOME, EITHER THE COST OF THESE 53 NOT MANUFACTURED WTGS SHALL REDUCE FROM TOTAL SALES OR THE PROFIT ELEMENT ON THESE 53 MANUFACTURED SHALL REDUCE FROM TAXABLE INCOME. IN EITHER CASE THE RESULT WILL BE THE SAME. IN SUC H A SITUATION, IN THE ORIGINAL SCRUTINY ASSESSMENT ORDER DATED 27/03/1997 THE ASSESSING OFFICER HAD CHOSEN TO REDUCE THE PROFIT ELEMENT ON THESE 53 NOT MANUFACTURED WTGS FROM THE ASSESSEES TAXABLE INCOME. THE SAME POSITION WAS INCORPORATED IN THE SUBSEQUENT ORDERS. IN VIEW OF THIS, THE UNDERSIGNED CONCLUDES THAT ONCE AGAIN THERE IS NO NEED OF REDUCING THE COST OF THESE 53 NOT MANUFACTURED WTGS FROM ASSESSEES TOTAL INCOME FOR AY 1994-95. 6.7 ONCE AGAIN, THE ASSESSEE AGGRIEVED BY THE ABO VE ORDER OF THE AO, FILED THE APPEAL BEFORE THE CIT(AP PEALS). - - ITA 2260/13 26 VIDE ORDER DATED 27.7.2011, THE CIT(APPEALS) BY GIV ING THE FOLLOWING OBSERVATION, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE: 5.3 I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT REGARDING OTHER GROUNDS OF APPEAL . I HAVE ALSO GONE THROUGH THE ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS) DATED 24 . 4 . 1998 AGAINST THE ORIGINAL ORDER OF THE ASSESSING OFFICER U/S 143(3) DATED 27 .3.1997 . THE APPELLANT IN THIS ORDER HAS NOT CONTESTED THE FINDING OF THE ASSESSING OFFICER THAT ONLY 156 WTGS COULD HAVE BEEN MANUFACTURED BY THE APPELLANT . THE ISSUE WAS NOT ADJUDICATED UPON EVEN BY THE HON'BIE ITAT IN THE ORDER DATED 9.3 . 2005 FOR THE ASSESSMENT YEAR 1994 - 95 . THE APPELLANT RELIED ON NARA 26 OF THE ORDER DATED 13 . 12 . 2003 OF HON'BLE ITAT IN RESPECT OF ASSESSMENT YEAR 1997-98 , THE BACKGROUND OF WHICH THE HON ' BLE ITAT HAS GIVEN THE FINDING IS ON ACCOUNT OF ADDITION MADE FOR INFLATION OF PURCHASES . THE HON'BLE ITAT COMMENTED THAT THE ADDITION FOR INFLATION ON PURCHASES WAS MADE ON A VERY CRUDE WAY OF WORKING FOR THE ASSESSMENT YEAR 1997 - 98 . HENCE, THE HON'BLE ITAT OPINED THAT THE COST OF MANUFACTURE COMPRISE O F RAW MATERIAL COST, DIRECT OR INDIRECT MANUFACTURING EXPENSES, OPERATING EXPENSES BOTH DIRECT AND INDIRE CT L . E . , ALLOCATED AND OTHER EXPENSES THAT ARE ALLOCABLE TO TH E COST OF MANUFACTURE . 5 . 4 ' THE ASSESSING OFFICER INSTEAD OF GOING BY TH I S PROPOSITION, HAS ESTIMATED THE OPERATING EXPENSES O N ON ESTIMATE AND GIVING NO BASIS FOR SUCH DERIVATION . BASED ON AN ASSUMED EXPENSES SHARE, THE INFLATION ON PURCHASES HAS BEEN ARRIVED AT WHICH, IN OUR OPINION, COULD NOT BE AI/OWED TO STAND AND HENCE IT IS DELETED' . THE OBSERVATIONS OF THE HON'BLE ITAT IN MY OPINION, HAS NO BEARING ON THE DETERMINATION OF THE COST OF WTGS FOR THE ASSESSMENT YEAR 1994-95 . IN - - ITA 2260/13 27 THE ORIGINAL ASSESSMENT ORDER FOR THE ASSESSMENT YE AR 1994-95, THE ASSESSING OFFICER ARRIVED AT COST OF EACH WTG BASING ON THE ENQUIRIES MADE WITH OTHER MANUFACTURERS OF THE SAME PRODUCT. REGARDING THE SELLING PRICE OF EACH WTG, THE ASSES SI NG OFFICER RELIED ON THE VALUE OF WTG SOLD TO TNPL DURING THE PREVIOU S YEAR BY THE ASSESSEE COMPANY . 5.5 THE FINDINGS OF THE ASSESSING OFFICER FOR THE ASSESSM E NT YEAR 1994 - 95 ON THE COST PRICE AND SALE PRICE HAVE NOT BEEN CONTESTED BY THE AS S ESSEE AT TH E APPELLATE FORM . HOWEVER, TAKING INTO CONSIDERATION THE DIRECTION OF THE HONBLE ITA T IN ITS ORDER DATED 19.6.2009, THE VALUE AT WHICH WTG HAS TO BE CAPITALIZED HAS TO BE IN THE SAME FASHION AS HAS BEEN DIRECTED TO BE DETERMINED BY THE TRIBUNAL IN ITS ORDER DATED 13.12.2003 IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1997-98 TO WHICH REFERENCE IS MADE ABOVE. THE ASSESSING OFFICER WILL CARRY OUT THE SAME EXERCISE IN RESPECT OF PRESENT ASSESSMENT YEAR ALSO. 5 . 6 RESP E CTFULLY FOLLOWING THE DIRECTIO N S OF HON'BLE HON ' BLE ITAT, THE A SSE S S ING OFFI CE R H AS TO WORK OUT THE COST OF WTGS TAKING THE RAW MATERIAL S AS PER THE SCH E DULE ADDIN G TH E MANU F ACTURI NG E XPENS ES AND R E STRICTING THE WORK IN PROGRES S . THE AS SES SIN G OFFI CE R MAY EXA M I N E TH E W O RK I NG OF THE CO S T OF WTGS IN THE A S SESSIN G OFFICER ORD E R D A T E D 3 1 . 5 . 2 0 07 GI VING EFFEC T T O T HE O RD E R OF TH E HON ' BLE ITAT DATED 2 7.3 . 2006 . BAS E D O N T HIS, TH E PR O FI T E L EMEN T AL S O NE ED S TO B E WO RKE D OUT AND I A M HEREWITH SHOWING TH E WORK I N G GIVEN BY TH E A R DURIN G TH E C OURS E O F APPEL L AT E PROCEEDIN GS . BASED ON THE DIRECTIONS OF THE ITA THE PROFIT ELEMENT COULD BE WORKED OUT AS FOLLOWS : ` IN LAKHS INTER DIVISIONAL SALES OF 59 WTGS (ASS PER PARA 9 OF ORDER DT.27.3.1997) 3893.86 - - ITA 2260/13 28 INTERDIVISIONAL SALES OF 53 WTGS 3497.88 INTERDIVISIONAL SALES OF 6 WTGS 395.98 TOTAL 3893.86 COST OF WTGS: (AS WORKED OUT IN ORDER DT. 312.05.2007 GIVING EFFECT TO ORDER OF ITAT DT. 27.03.2006) RAW MATERIALS AS PER SCHEDULE 11 ADD: MANUFACTURING EXPENSES 10566.29 880.13 TOTAL 11446.42 LESS : WORK IN PROGRESS 500.01 COST OF WTGS. 10946.41 COST OF 1 WTG (10946.41/209)(BASED ON THE ASSUMPTION THAT THE TOTAL COST IS FOR MANU- 52.38 FACTURING OF 209 WTGS WHICH IS NOT AGREEABLE TO ASSESSEE COST OF 53 WTGS (52.38 * 53) 2776.14 PROFIT ELEMENT ON 53 WTGS NOT PRODUCED AND INSTALLED (3497.88 2776.14) 721.74 COST OF 6 WTGS INTERNALLY TRANSFERRED (52.38 * ) 314.28 PROFIT ELEMENT ON 6 WTGS TRANSFERRED INTERNALLY (395.98-314.28) 81.73 THE DEPRECIATION ON ACCOUNT OF 6 WTGS INTERNALLY TRANSFERRED HAS TO BE WORKED OUT BY THE ASSESSING OFFICER ON THE COST WHICH SHOULD BE CAPITALIZED AS PER HONBLE ITAT DIRECTION. THERE WOULD BE REDUCTION IN THE DEPRECIATION ON THIS ACCOUNT. THE ASSESSING OFFICER TO VERIFY ALL THE FACTS AND WORK OUT THE COST OF THE WTGS AS PER THE SPECIFIC DIRECTIONS GIVEN BY THE HONBLE ITAT IN ITS ORDER DATED 19.6.2009 REFERRING TO THE ORDER DATED 13.12.2003 IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1997-98. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 6.8. THE AO PASSED CONSEQUENTIAL ORDER TO THE ORDER OF THE CIT(APPEALS) AND HE OBSERVED VIDE ORDER DATED 20.9.2011 AS FOLLOWS : - - ITA 2260/13 29 THE COST OF WTGS ARE BEING WORKED OUT BY TAKING THE RAW MATERIALS AS PER THE SCHEDULE OF PROFIT AND LOSS ACCOUNT, ADDING THE MANUFACTURING EXPENSES AND RESTRICTING THE WORK IN PROGRESS. DIRECTIONS GIVEN BY HONBLE ITAT IN ITS ORDER DATED 19.6.2009 IS ALSO FOLLOWED. ASSESSEE ACTUALLY MANUFACTURED ONLY 156 WTGS OUT OF WHICH 6 WERE INTERNALLY TRANSFERRED, WHEN THE HONBLE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO VERIFY NUMBER OF WTGS THAT WERE ACTUALLY INSTALLED IN THE ASSESSEES OWN DIVISION AND THEN ALLOW THE DEPRECIATION BASED ON THE FACTS. AS PER PHOTO COPIES OF INVOICES REFERRED IN THE ORIGINAL ASSESSMENT ONLY 6WTGS WERE TRANSFERRED TO ITS OWN POWER DIVISION. THE ASSESSEE HAD NOT CONTESTED THAT ONLY 156 WTGS WERE MANUFACTURED. OUT OF 156 WTGS ONLY 6 WERE TRANSFERRED TO ITS OWN POWER DIVISION. BASED ON DIRECTIONS OF ITAT TH PROFIT ELEMENT AND DEPRECIATION ON ACCOUNT OF 6 WTGS INTERNALLY TRANSFERRED COULD BE WORKED OUT. AND THE AO COMPUTED THE TOTAL COST FOR MANUFACTURIN G AT ` 1,09,46,41,000/- AND HE APPORTIONED THE SAME AMONG 156 WTGS ON EACH AT COST OF ` 70.169 LAKHS. ONCE AGAIN, REGARDING WRONG COMPUTATION OF DEPRECIATION, THE AS SESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS), WHO VIDE OR DER DATED 8.8.2012 OBSERVED AS FOLLOWS: 5 . I HAD P E RU SE D THE S UBM I SS I ON S M A D E BY TH E A PP E L L A NT A ND A L SO TH E O R D E R OF THE A SSESS I N G OFF I C E R. TH E A SSESS I N G OFFI CE R I N TH E OR I G I N A L ASSESS M E NT ORD E R DA T E D 27 . 03 . 1997 V I DE PAR AS 9 TO 9 . 10 H E LD THAT TH E - - ITA 2260/13 30 ASSE S SEE COU L D H AVE M A NUF A CTUR E D ONLY 1 56 W TG S WHICH I S R E ITERATED BY TH E A SSESS IN G OFFI CE R I N H I S O R D E R D A T E D 29.1 2.2 010 . I N THI S CO N TEX T, TH E D IR ECTIO N OF TH E I TAT AS CIT E D I N PARA 24 OF I TS ORD E R D A T E D 3 0.0 6 .200 3 A ND P A R A 26 OF OR D E R DATED 1 3. 12 . 200 3 H AS TO B E FO L LOW E D BY TH E A SSESS IN G OFFI CER . TH E ASSESS IN G O FF I CE R WAS SPE C IF ICALLY DIRECTED I N T H E APP E LL A T E ORD E R TO FIND OUT THE PROFIT E L E M E NT ON 5 3 W T G S NOT M AN UF ACT UR ED A ND INSTA LL ED AND AL S O TO F I ND OUT TH E CO S T OF 6 WTG S INT E RNAL L Y TR A N S F ER R E D A N D T O FIN D OUT T H E DEPRECIATION ON T H EM . TH E D E PR E CIAT I ON ON AC C OUNT OF 6 WT GS INT E RN A LLY T R A N S FE RR E D HAS TO B E WORK E D OUT BY THE A S S ESS I N G OFF I CE R ON TH E CO S T WH I C H S HOU L D B E CA PIT A LI ZED AS PER I TAT D I R E CT I ON . TH E R E WOU L D B E A REDUCT I ON I N THE D E PR EC I AT I ON ON THI S ACC OUN T . A BRI E F WO RK ING WA S A LSO MENTIONED I N T H E APP E LL AT E ORD E R. BA S ED ON TH E DIR EC TI O N S OF TH E IT A T IN IT S O RD E R D A T ED 19 . 06 . 2009 R E FERRIN G TO TH E O R D E R DAT E D 13.12. 2 00 3 I N TH E CA SE OF TH E ASSESSEE F O R TH E A S S ESS ME N T YE A R 1997 - 9 8 . AS P E R T H E WORK I N G G I V EN IN TH E A PP E L L A T E O R DE R , TH E EXCES S D E PR EC I A T I ON A LL OW E D ON A CC OUNT OF 6 . WT GS B E I N G I NT E RN A L L Y TR A N SFE RR E D I S R S .53 . 37 L AK H S W HI C H H AS TO BE REDUC E D BY TH E A SSESS I N G OFFICER. TH E A SSESS I N G OFFI CE R I S DIR EC T E D T O L OOK INT O T H E D E T A I L S I N THE OR I G I N A L A SSESS ME N T ORD E R DAT E D 27 . 3.1997 W H E R E A BR EA KUP O F TH E TOTA L SAL E S B E TW EE N T H OSE MANUFACTUR E D A ND T H E N NOT MANUF AC TUR E AND THO SE IN TE RN A LLY TR A N S F E RR E D H AVE B EE N E LABORATED . T H E S E L LI N G PR I C E P E R WTG OUT OF 5 3 INT E RN A LLY TR A N S F E RR E D H AS B E E N DI SC U SS E D BY TH E AS SES SING OFF I CE R I N H I S O R D E R D A T E D 2 7. 3 . 1997 . TH E A SSESS I N G OFFI C E R I S D IR EC T E D TO F OL L OW TH E DIRECT I ON S AS G I VEN I N P A RA 5 . 5 A ND 5 . 6 OF TH E AP PE L L A T E ORD E R . TH E SE G R O UND S O F APPEA L ARE ALLOWED. 6.9. THE AO VIDE ORDER DATED 18.3.2013, WHILE GIV ING EFFECT TO THE ORDER OF THE CIT(APPEALS) DATED 8.8.2 012 - - ITA 2260/13 31 APPORTIONED THE TOTAL COST OF MANUFACTURING OF ` 1,09,46,41,000/- BY 209 WTGS. THUS, WORKED OUT COS T OF EACH WTG AT ` 52,37,516/-, THEREBY WORKED OUT THE COST OF 6 WTG AT ` 3,14,25,096/- AND RESTRICTED THE DEPRECIATION AT 50% OF IT (SINCE USED FOR LESS THAN 180 DAYS AT 1,5 7,12, 548/-). AGAINST THIS, THE ASSESSEE WENT TIN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) CONSIDERED THE ORDER OF THE A.O. DATED 18.3.2013. 7. FROM THE ABOVE FACTS, THERE IS A CLEAR CUT FINDI NG BY THE TRIBUNAL IN THE ORDER DATED 9.3.2005 IN ITA NO.1403/MDS/98 FOR THE ASSESSMENT YEAR 94-95 DIRECT ED THE AO, TO FOLLOW THE ORDER OF THE TRIBUNAL IN EARL IER YEARS I.E. ITA NOS.1666/MDS/2000 & OTHERS DATED 30.6.2003 AS REPRODUCED IN EARLIER PARA AND THIS WAS CONFIRMED B Y THE TRIBUNAL ON VARIOUS OCCASIONS. SPECIFICALLY FOR THE ASSESSMENT YEAR 1994-95 WHEN THE ASSESSEE WENT IN APPEAL AGAINST THE ORDER PASSED BY THE CIT U/S.263 OF THE ACT DATED 25.3.2008, THE TRIBUNAL IN ITS ORDER DATE D 19.6.2009 IN ITA NO.1041/MDS/2008 RELYING ON THE EA RLIER ORDERS HELD THAT THE FINDING OF THOSE ORDERS HAVE R EACHED - - ITA 2260/13 32 FINALITY. THE DEPRECIATION HAS TO BE COMPUTED IN T ERMS OF THOSE ORDERS. THE AO AND THE CIT(APPEALS) CANNOT S IT OVER THE JUDGMENT OF THE TRIBUNAL. ONCE THE TRIBUNAL HA S SET ASIDE THE IMPUGNED ORDERS PASSED BY THE LOWER AUTHO RITIES BEFORE IT ON THE COMPUTATION OF DEPRECIATION TO THE FILE OF THE AO OR CIT(APPEALS), THEY ARE DUTY BOUND TO PASS ORD ERS GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. THE FI NDINGS OF THE TRIBUNAL EXTRACTED ABOVE ARE UNAMBIGUOUSLY CLEAR AN D CATEGORICAL IN AS MUCH AS IT IS SPECIFICALLY DIRECT ED THAT MANUFACTURING COST TO BE CONSIDERED AT 156 WTGS ONL Y AND THERE IS NO DISPUTE THAT THE ASSESSEE HAS MANUFACTU RED ONLY 156 WTGS AND OUT OF THIS, THE ASSESSEE SOLD 15 0 WTGS TO THE OUTSIDERS AND SIX WERE TRANSFERRED TO ASSESSEES OWN DIVISION. THIS WAS CONFIRMED BY THE MANAGING DIRECTOR OF THE COMPANY ON VARIOUS OCCASIO NS AND THERE IS NO DISPUTE. BEFORE THE LOWER AUTHORIT Y VIDE AN AFFIDAVIT FILED BY THE ASSESSEE, STATED THAT IN ORD ER TO GIVE ROSY PICTURE TO THE SHARES HOLDERS, THEY HAVE SHOWN SALE OF 209 WTGS AND ADMITTED THAT THEY HAVE ONLY MANUFACTU RED 156 WTGS. AS SUCH, THE TRIBUNAL HAS GIVEN A FINDIN G THAT - - ITA 2260/13 33 INTER DIVISIONAL TRANSFERS CANNOT BE TREATED AS SAL ES TO THAT EXTENT THE SALE FIGURES WOULD HAVE TO BE REDUCED AN D CONSEQUENTIALLY TOTAL EXPENDITURE HAVE TO BE APPORT IONED BETWEEN 156 WTGS. IN OTHER WORDS, THE SALES AS WEL L AS COST INCURRED ON 156 WTGS TO BE CONSIDERED AND THIS IS THE FINDING OF THE TRIBUNAL IN ITA NO.1666/MDS/2000 & O THERS DATED 30.6.2003. THE SAME VIEW WAS FOLLOWED IN SUBSEQUENT ORDERS OF THE TRIBUNAL FOR THE ASSESSMEN T YEAR 1994-95 IN ITA NO.1403/MDS/98 DATED 9.3.2005 AND TH E SAME VIEW WAS TAKEN BY THE TRIBUNAL WHILE DECIDING THE APPEAL AGAINST U/S.263 ORDER PASSED BY THE CIT FOR THE ASST. YEAR 2004-05. FURTHER, IT IS ALSO ACCEPTED F OR THE ASST. YEAR 1997-98 IN ITA NO.1019/2002 DATED 13.12.2002 A ND THE TRIBUNAL HELD IN PARAGRAPHS 26 & 27 THAT INTER DIVISIONAL TRANSFER WAS INCLUDED IN THE SALES AT SALE PRICE AN D THIS HAS BEEN CORRECTED BY REMOVING IT FROM THE SALES ACCOUN T AND THE TRANSFER HAS BEEN ACCOUNTED FOR COST WHICH IS I N ACCORDANCE WITH THE ACCOUNTING STANDARDS. ACCORDIN GLY, THE DIRECTORS DO NOT MAKE A WRONG STATEMENT TO THE SHAREHOLDERS THAT INTER DIVISIONAL TRANSFER WAS SHO WN ON - - ITA 2260/13 34 SALE PRICE. THE TRIBUNAL REQUIRED THE AO TO RE-EXA MINE THE MATTER. IN OTHER WORDS, IT WAS HELD BY THE TRIBUNA L THAT INTER-DIVISIONAL TRANSFER DOES NOT RESULT IN A SALE AND THE ASSESSEE CANNOT BE SAID TO HAVE EARNED ANY PROFIT A ND THEREFORE, DIRECTED TO REDUCE THE PROFIT AND CORRES PONDING COST THEREON. 7.1 NOW, COMING TO THE RECOMPUTATION OF THE AO BY APPORTIONING TOTAL COST OF MANUFACTURE BETWEEN 209 WTG, SINCE THERE IS A FINDING OF THE TRIBUNAL IN EARLIER ORDERS THAT THE ASSESSEE MANUFACTURED ONLY 156 WTGS AND TO ARRI VE AT THE COST OF ONE WTGS, THE TOTAL COST OF MANUFACTURE TO BE APPORTIONED BETWEEN 156 WTGS ONLY. THEREAFTER THE ASSESSING OFFICER HAS TO ARRIVE AT COST OF ONE WTG SO AS TO DETERMINE DEPRECIATION ON INTER-DIVISIONAL TRANSFER . IN OTHER WORDS, THE AO HAS TO FOLLOW THE EARLIER ORDER OF TH E TRIBUNAL DATED 13.12.2002 IN ITA NO.1019/MDS/2002 FOR THE AS ST. YEAR 1997-98, 1018/MDS/2002 DATED 30.6.2003 AND 1043/MDS/2008 DATED 19.6.2009 FOR THE ASST. YEAR 19 94-95. IN OUR OPINION, THE LOWER AUTHORITIES HAVE NOT UNDE RSTOOD THESE ORDERS OF THE TRIBUNAL IN TRUE PERSPECTIVE AN D THE - - ITA 2260/13 35 SAME HAS BEEN TOO WIDELY INTERPRETED. THERE APPEAR S MISCONCEPTIONS ABOUT THE NATURE AND BINDING EFFECT OF THE ORDER OF THE TRIBUNAL. IT IS APPROPRIATE TO POINT OUT THAT THE LOWER AUTHORITIES ARE BOUND TO FOLLOW THE ORDER OF THE TRIBUNAL. THESE TRIBUNAL ORDERS WERE ACCEPTED BY TH E DEPARTMENT AND NO FURTHER APPEALS WERE FILED AS PER RECORDS BROUGHT BEFORE US. HENCE, IT IS TO BE FOLL OWED THE AUTHORITIES. 8. FOR DECIDING WHOSE DECISION IS BINDING ON WHOM, IT IS NECESSARY TO KNOW THE HIERARCHY OF THE COURTS. IN I NDIA, THE SUPREME COURT IS THE HIGHEST COURT OF THE COUNTRY. THAT BEING SO, SO FAR AS THE DECISIONS OF THE SUPREME COURT ARE CO NCERNED, IT HAS BEEN STATED IN ARTICLE 141 OF THE CONSTITUTION ITSELF THAT : 'THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL COURTS WITHIN THE TERRITORY OF INDIA .' 9. IN THAT VIEW OF THE MATTER, ALL COURTS IN INDIA ARE BOUND TO FOLLOW THE DECISIONS OF THE SUPREME COURT. 10. THOUGH THERE IS NO PROVISION LIKE ARTICLE 141 WHICH SPECIFICALLY LAYS DOWNS THE BINDING NATURE OF THE D ECISIONS OF THE HIGH COURTS, IT IS A WELL ACCEPTED LEGAL POSITION T HAT A SINGLE - - ITA 2260/13 36 JUDGE OF A HIGH COURT IS ORDINARILY BOUND TO ACCEPT AS CORRECT JUDGMENTS OF COURTS OF CO-ORDINATE JURISDICTION AND OF THE DIVISION BENCHES AND OF THE FULL BENCHES OF HIS COURT AND OF THE SUPREME COURT. EQUALLY WELL SETTLED IS THE POSITION THAT WHEN A DIVISION BENCH OF THE HIGH COURT GIVES A DECISION O N A QUESTION OF LAW, IT SHOULD GENERALLY BE FOLLOWED BY A COORDI NATE BENCH IN THE SUBSEQUENT CASE WANTS THE EARLIER DECISION TO B E RECONSIDERED, IT SHOULD REFER THE QUESTION AT ISSUE TO A LARGER BENCH. 11. IT IS EQUALLY WELL SETTLED THAT THE DECISION O F ONE HIGH COURT IS NOT A BINDING PRECEDENT ON ANOTHER HIGH CO URT. THE SUPREME COURT IN VALLIAMA CHAMPAKA PILLAI V. SIVATH ANU PILLAI(AIR 1979 1937), DEALING WITH THE CONTROVERSY WHETHER A DECISION OF THE ERSTWHILE TRAVANCORE HIGH COURT CAN BE MADE A BINDING PRECEDENT ON THE MADRAS HIGH COURT ON THE B ASIS OF THE PRINCIPLE OF STARE DECISIS, CLEARLYHELD THAT SUCH A DECISION CAN AT BEST HAVE PERSUASIVE EFFECT AND NOT THE FORCE OF BI NDING PRECEDENT ON THE MADRAS HIGH COURT. REFERRING TO TH E STATES REORGANISATION ACT, IT WAS OBSERVED THAT THERE WAS NOTHING IN THE SAID ACT OR ANY OTHER LAW WHICH EXALTS THE RATIO OF THOSE - - ITA 2260/13 37 DECISIONS TO THE STATUS OF A BINDING LAW NOR COULD THE RATIO DECIDENDI OF THOSE DECISIONS BE PERPETUATED BY INVO KING THE DOCTRINE OF STARE DECISIS. THE DOCTRINE OF STARE DE CISIS CANNOT BE STRETCHED THAT FAR AS TO MAKE THE DECISION OF ONE H IGH COURT A BINDING PRECEDENT FOR THE OTHER. THIS DOCTRINE IS A PPLICABLE ONLY TO DIFFERENT BENCHES OF THE SAME HIGH COURT. 12. IT IS ALSO WELL-SETTLED THAT THOUGH THERE IS N O SPECIFIC PROVISION MAKING THE LAW DECLARED BY THE HIGH COURT BINDING ON SUBORDINATE COURTS, IT IS IMPLICIT IN THE POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THAT THE TRIBUNALS SUBJECT TO ITS SUPERVISION WOULD CONFIRM TO THE LAW LAID DOWN BY I T. IT IS IN THAT VIEW OF THE MATTER THAT THE SUPREME COURT IN EAST I NDIA COMMERCIAL CO. LTD. V. COLLECTOR OF CUSTOMS (AIR 19 62(SC) 1893 (AT P. 1905) : 'WE, THEREFORE, HOLD THAT THE LAW DECLARED BY THE HIGHEST COURT IN THE STATE IS BINDING ON AUTHORITIE S OR TRIBUNALS UNDER ITS SUPERINTENDENCE, AND THEY CANNO T IGNORE IT..' 13. THIS POSITION HAS BEEN VERY APTLY SUMMED UP BY THE SUPREME COURT IN MAHADEOLAL KANODIA V. ADMINISTRATO R GENERAL OF WEST BENGAL(AIR 1960 SC 936) (AT P.941) : - - ITA 2260/13 38 'JUDICIAL DECORUM NO LESS THAN LEGAL PROPRIETY FORM S THE BASIS OF JUDICIAL PROCEDURE. IF ONE THING IS MO RE NECESSARY IN LAW THAN ANY OTHER THING, IT IS THE QU ALITY OF CERTAINTY. THAT QUALITY WOULD TOTALLY DISAPPEAR IF JUDGES OF CO-ORDINATE JURISDICTION IN A HIGH COURT START OVERRULING ONE ANOTHER'S DECISIONS. IF ONE DIVISION BENCH OF A HIGH COURT IS UNABLE TO DISTINGUISH A PREVIOUS DECISION OF ANOTHER DIVISION BENCH, AND HOLDING THE VIEW THAT THE EARLIER DECISION IS WRONG , ITSELF GIVES EFFECT TO THAT VIEW, THE RESULT WOULD BE UTTER CONFUSION. THE POSITION WOULD BE EQUALLY BAD WHERE A JUDGE SITTING SINGLY IN THE HIGH COURT IS OF OPINIO N THAT THE PREVIOUS DECISION OF ANOTHER SINGLE JUDGE ON A QUESTION OF LAW IS WRONG AND GIVES EFFECT TO THAT V IEW INSTEAD OF REFERRING THE MATTER TO A LARGER BENCH.' 14. THE ABOVE DECISION WAS FOLLOWED BY THE SUPREME COURT IN BARADAKANTA MISHRA V. BHIMSEN DIXIT (AIR 1972 SC 2466), WHEREIN THE LEGAL POSITION WAS REITERATED IN THE FO LLOWING WORDS (AT PAGE 2469): 'IT WOULD BE ANOMALOUS TO SUGGEST THAT A TRIBUNAL O VER WHICH THE HIGH COURT HAS SUPERINTENDENCE CAN IGNORE THE LAW DECLARED BY THAT COURT AND START PROCEEDING S IN DIRECT VIOLATION OF IT. IF A TRIBUNAL CAN DO SO, AL L THE SUBORDINATE COURTS CAN EQUALLY DO SO, FOR THERE IS NO SPECIFIC PROVISION, JUST LIKE IN THE CASE OF SUPREM E COURT, MAKING THE LAW DECLARED BY THE HIGH COURT BINDING ON SUBORDINATE COURTS. IT IS IMPLICIT IN TH E POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THA T ALL THE TRIBUNAL SUBJECT TO ITS SUPERVISION SHOULD CONF ORM TO THE LAW LAID DOWN BY IT. SUCH OBEDIENCE WOULD AL SO BE CONDUCIVE TO THEIR SMOOTH WORKING; OTHERWISE THE RE WOULD BE CONFUSION IN THE ADMINISTRATION OF LAW AND RESPECT FOR LAW WOULD IRRETRIEVABLY SUFFER. - - ITA 2260/13 39 15. HAVING DECIDED WHOSE DECISION BINDS WHOM, WE M AY NEXT EXAMINE WHAT IS BINDING. IT IS WELL SETTLED TH AT IT IS ONLY THE RATIO DECIDENDI THAT HAS A PRECEDENT VALUE. AS OBS ERVED BY THE SUPREME COURT IN S. P. GUPTA V. PRESIDENT OF INDIA (AIR 1982 SC 149) (AT P.231) : 'IT IS ELEMENTARY THAT WHAT I S BINDING ON THE COURT IN A SUBSEQUENT CASE IS NOT THE CONCLUSION AR RIVED AT IN A PREVIOUS DECISION, BUT THE RATIO OF THAT DECISION, FOR IT IS THE RATIO WHICH BINDS AS A PRECEDENT AND NOT THE CONCLUSION.' A CASE IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FOLLOW LOGICALLY FROM IT. JUDGMENTS OF COUR TS ARE NOT TO BE CONSTRUED AS STATUTES (SEE AMAR NATH OM PARKASH V. STATE OF PUNJAB (1985) 1 SCC 345). WHILE FOLLOWING PRECEDENT S, THE COURT SHOULD KEEP IN MIND THE FOLLOWING OBSERVATIONS IN M UMBAI KAMGAR SABHA V. ABDULBHAI FAIZULLABHAI (AIR 1976 SC 1455 ) (AT P.1467-68) : 'IT IS TRITE, GOING BY ANGLOPHONIC PRINCIPLES, THAT A RULING OF A SUPERIOR COURT IS BINDING LAW. IT IS NOT OF SC RIPTURAL SANCTITY BUTIS OF RATIO-WISE LUMINOSITY WITHIN THE EDIFICE OF FACTS WHERE THE JUDICIAL LAMP PLAYS THE LEGAL FL AME. BEYOND THOSE WALLS AND DE HORS THE MILIEU WE CANNOT IMPART ETERNAL VERNAL VALUE TO THE DECISION, EXALTI NG THE DOCTRINE OF PRECEDENTS INTO A PRISON- HOUSE OF BIGO TRY, REGARDLESS OF VARYING CIRCUMSTANCES AND MYRIAD DEVELOPMENTS. REALISM DICTATES THAT A JUDGMENT HAS TO - - ITA 2260/13 40 BE READ, SUBJECT TO THE FACTS DIRECTLY PRESENTED FO R CONSIDERATION AND NOT AFFECTING THOSE MATTERS WHICH MAY LURK IN THE RECORD. WHATEVER BE THE POSITION OF A SUBORDINATE COURT'S CASUAL OBSERVATIONS, GENERALISATIONS AND SUBSILENTIO DETERMINATIONS MUST BE JUDICIOUSLY READ BY COURTS OF COORDINATE JURISDICTION.' 16. DECISION ON A POINT NOT NECESSARY FOR THE PURP OSE OF THE DECISION OR WHICH DOES NOT FALL TO BE DETERMINED IN THAT DECISION BECOMES AN OBITER DICTUM. SO ALSO, OPINIONS ON QUES TIONS WHICH ARE NOT NECESSARY FOR DETERMINING OR RESOLVING THE ACTUAL CONTROVERSY ARISING IN THE CASE PARTAKE OF THE CHAR ACTER OF OBITER. OBITER OBSERVATIONS, AS SAID BY BHAGWATI J. (AS HIS LORDSHIP THEN WAS) IN ADDL. DISTRICT MAGISTRATE, JABALPUR V. SHIV AKANT SHUKLA(AIR 1976 SC 1207), WOULD UNDOUBTEDLY BE ENTI TLED TO GREAT WEIGHT, BUT 'AN OBITER CANNOT TAKE THE PLACE OF THE RATIO. JUDGES ARE NOT ORACLES.' SUCH OBSERVATIONS DO NOT H AVE ANY BINDING EFFECT AND THEY CANNOT BE REGARDED AS CONCL USIVE. AS OBSERVED BY THE PRIVY COUNCIL IN BAKER V. THE QUEEN (1975) 3 ALL ER 55 (AT PAGE 64), THE COURT'S AUTHORITATIVE O PINION MUST BE DISTINGUISHED FROM PROPOSITIONS ASSUMED BY THE COUR T TO BE CORRECT FOR THE PURPOSE OF DISPOSING OF THE PARTICU LAR CASE. THIS POSITION HAS BEEN MADE FURTHER CLEAR BY THE SUPREME COURT IN A - - ITA 2260/13 41 RECENT DECISION IN CIT V. SUN ENGINEERING WORKS P. LTD. (1992) 198 ITR 297, AT PAGE 320, WHERE IT WAS OBSERVED : 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ A S A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHIC H WERE BEFORE THIS COURT. A DECISION OF THIS COURT TA KES ITS COLOUR FROM THE QUESTION INVOLVED IN THE CASE IN WH ICH IT IS RENDERED AND,WHILE APPLYING THE DECISION TO A LATER CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN TH E TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT A ND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASO NING.' 17. IN THE ABOVE DECISION, THE SUPREME COURT, ALSO QUOTED WITH APPROVAL, THE FOLLOWING NOTE OF CAUTION GIVEN BY IT EARLIER IN (AIR 1971 SC 530) (AT 578) : 'IT IS NOT PROPER TO REGARD A WORD, A CLAUSE OR A SENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COURT, DIVORCED FROM ITS CONTEXT, AS CONTAINING A F ULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTI ON DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT.' IT IS THUS CLEAR THAT IT IS ONLY THE RATIO DECIDEND I OF A CASE WHICH CAN BE BINDING - NOT OBITER DICTUM. OBITER, AT BEST , MAY HAVE SOME PERSUASIVE EFFICACY. - - ITA 2260/13 42 18. FROM THE FOREGOING DISCUSSION, THE FOLLOWING P ROPOSITIONS EMERGE: (A) THE LAW DECLARED BY THE SUPREME COURT BEING BIN DING ON ALL COURTS IN INDIA, THE DECISIONS OF THE SUPREME COURT ARE BINDING ON ALL COURTS, EXCEPT, HOWEVER, THE SUPREME COURT I TSELF WHICH IS FREE TO REVIEW THE SAME AND DEPART FROM ITS EARLIER OPINION IF THE SITUATION SO WARRANTS. WHAT IS BINDING IS, OF COURS E, THE RATIO OF THE DECISION AND NOT EVERY EXPRESSION FOUND THEREIN . (B) THE DECISIONS OF THE HIGH COURT ARE BINDING ON THE SUBORDINATE COURTS AND AUTHORITIES OR TRIBUNALS UND ER ITS SUPERINTENDENCE THROUGHOUT THE TERRITORIES IN RELAT ION TO WHICH IT EXERCISES JURISDICTION. IT DOES NOT EXTEND BEYOND I TS TERRITORIAL JURISDICTION. (C) THE POSITION IN REGARD TO THE BINDING NATURE OF THE DECISIONS OF A HIGH COURT ON DIFFERENT BENCHES OF THE SAME CO URT MAY BE SUMMED UP AS FOLLOWS : (I) A SINGLE JUDGE OF A HIGH COURT IS BOUND BY THE DECISION OF ANOTHER SINGLE JUDGE OR A DIVISION BENCH OF THE SAM E HIGH COURT. - - ITA 2260/13 43 IT WOULD BE JUDICIAL IMPROPRIETY TO IGNORE THAT DEC ISION. JUDICIAL COMITY DEMANDS THAT A BINDING DECISION TO WHICH HIS ATTENTION HAD BEEN DRAWN SHOULD NEITHER BE IGNORED NOR OVERLO OKED. IF HE DOES NOT FIND HIMSELF IN AGREEMENT WITH THE SAME, T HE PROPER PROCEDURE IS TO REFER THE BINDING DECISION AND DIRE CT THE PAPERS TO BE PLACED BEFORE THE CHIEF JUSTICE TO ENABLE HIM TO CONSTITUTE A LARGER BENCH TO EXAMINE THE QUESTION (SEE FOOD CO RPORATION OF INDIA V. YADAV ENGINEER AND CONTRACTOR(AIR 1982 SC 1302). (II) A DIVISION BENCH OF A HIGH COURT SHOULD FOLLOW THE DECISION OF ANOTHER DIVISION BENCH OF EQUAL STRENGTH OR A FULL BENCH OF THE SAME HIGH COURT. IF ONE DIVISION BENCH DIFFERS FROM ANOTHER DIVISION BENCH OF THE SAME HIGH COURT, IT SHOULD RE FER THE CASE TO A LARGER BENCH. (III) WHERE THERE ARE CONFLICTING DECISIONS OF COUR TS OF CO-ORDINATE JURISDICTION, THE LATER DECISION IS TO BE PREFERRED IT REACHED AFTER FULL CONSIDERATION OF THE EARLIER DECISIONS. (D) THE DECISION OF ONE HIGH COURT IS NEITHER BINDI NG PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OUTSIDE ITS OWN TERRITORIAL JURISDICTION. IT IS WELL SETTLED THAT T HE DECISION OF A HIGH - - ITA 2260/13 44 COURT WILL HAVE THE FORCE OF BINDING PRECEDENT ONLY IN THE STATE OR TERRITORIES ON WHICH THE COURT HAS JURISDICTION. IN OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIGH C OURT IT MAY, ATBEST, HAVE ONLY PERSUASIVE EFFECT. BY NO AMOUNT OF STRETC HING OF THE DOCTRINE OF STARE DECISIS, CAN JUDGMENTS OF ONE HIG H COURT BE GIVEN THE STATUS OF A BINDING PRECEDENT SO FAR AS O THER HIGH COURTS OR TRIBUNAL WITHIN THEIR TERRITORIAL JURISDI CTION ARE CONCERNED. ANY SUCH ATTEMPT WILL GO COUNTER TO THE VERY DOCTRINE OF STARE DECISIS AND ALSO THE VARIOUS DECISIONS OF THE SUPREME COURT WHICH HAVE INTERPRETED THE SCOPE AND AMBIT TH EREOF. THE FACT THAT THERE IS ONLY ONE DECISION OF ANY ONE HIG H COURT ON A PARTICULAR POINT OR THAT A NUMBER OF DIFFERENT HIGH COURTS HAVE TAKEN IDENTICAL VIEWS IN THAT REGARD IS NOT AT ALL RELEVANT FOR THAT PURPOSE. WHATEVER MAY BE THE CONCLUSION, THE DECISI ONS CANNOT HAVE THE FORCE OF BINDING PRECEDENT ON OTHER HIGH C OURTS OR ON ANY SUBORDINATE COURTS OR TRIBUNALS WITHIN THEIR JU RISDICTION. THAT STATUS IS RESERVED ONLY FOR THE DECISIONS OF THE SU PREME COURT WHICH ARE BINDING ON ALL COURTS IN THE COUNTRY BY V IRTUE OF ARTICLE 141 OF THE CONSTITUTION. - - ITA 2260/13 45 19. IN THE LIGHT OF THE FOREGOING DISCUSSION, THE DECISION OF THE TRIBUNAL IS BINDING ON THE ASSESSING OFFICER AN D HE CANNOT PICK UP A WORD OR SENTENCE FROM THE ORDER OF THE TR IBUNAL DE HORS THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND CONSTRUE IT TO BE COMPLETE LAW DECLARED BY THE TRIBUNAL. A JUDGMEN T MUST BE READ AS A WHOLE. BEING SO, THE ASSESSING OFFICER CA NNOT SIT IN JUDGMENT OVER THE ORDER OF THE TRIBUNAL, AND HE IS REQUIRED TO GIVE JUST EFFECT TO THE ORDER OF THE TRIBUNAL. IF H E HAS ANY GRIEVANCE, HE IS AT LIBERTY TO APPEAL AGAINST THAT ORDER OF THE TRIBUNAL BEFORE HIGHER FORUM. 20. IT IS NEEDLESS TO SAY THAT THE INCOME-TAX AUTH ORITIES ARE REQUIRED TO EXERCISE THEIR POWERS IN ACCORDANCE WIT H LAW, AS PER THE POWER GIVEN TO THEM IN SPECIFIC SECTIONS. IF TH E POWERS CONFERRED ON A PARTICULAR AUTHORITY ARE EXERCISED B Y ANOTHER AUTHORITY WITHOUT MANDATE OF LAW, IT WOULD CREATE C HAOS IN THE ADMINISTRATION OF LAW AND HIERARCHY OF ADMINISTRATI ON WOULD MEAN NOTHING. JUDGMENT OF A HIGHER FORUM CANNOT BE SUBST ITUTED BY THE DECISIONS OF THE LOWER AUTHORITIES. JUDICIAL DI SCIPLINE REQUIRES THAT THERE CANNOT BE ANY AMOUNT OF DISREGARD TO THE SUPERIOR AUTHORITY IN THE HIERARCHY BY THE ASSESSING OFFICER . WHEN ONCE - - ITA 2260/13 46 THE TRIBUNAL DECIDES AN ISSUE IN ONE WAY, THE ONLY COURSE AVAILABLE TO THE ASSESSING OFFICER IS TO FOLLOW THE ORDER OF THE TRIBUNAL IN TRUE SPIRITS, AND IT IS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO TAKE A DIFFERENT VIEW, OR TO SIT IN JUDG MENT OVER THE ORDER OF THE TRIBUNAL BY INTERPRETING THE SAME IN T HE MANNER HE WANTED. 21. IN THE CASE OF WINTER MISRA DIAMOND TOOLS LTD. V/S.COLLECTOR OF CENTRAL EXCISE (1996) 83 ELT 670 T RI DEL, CONSIDERING THE ROLE OF A SUBORDINATE AUTHORITY WHI LE IMPLEMENTING THE ORDERS OF THE SUPERIOR APPELLATE/J UDICIAL AUTHORITIES, FOLLOWING THE DECISION OF THE APEX COU RT IN THE CASE OF UNION OF INDIA V/S. KAMALAKSHI FINANCE CORPORATI ON LTD. (1991) 55 ELT 433(SC), IT WAS HELD AS FOLLOWS- '45. AT THE SAME TIME, THE APPELLANTS ARE CORRECT I N POINTING OUT THAT ONCE THE ASSISTANT COLLECTOR HAS PASSED AN ORDER AND IT IS CONFIRMED BY THE COLLECTO R (APPEALS) AND NO APPEAL IS FILED AGAINST THE ORDER OF THE COLLECTOR (APPEALS), THE ORDER ATTAINS FINALITY . THEREFORE, THE DEPARTMENT WAS BOUND TO FOLLOW THE ASSISTANT COLLECTOR'S ORDER OF 17/4/1989 AS CONFIRM ED BY THE COLLECTOR (APPEALS)' ORDER DATED 28-8-1991 A ND FINALISE ALL THE PENDING MATTERS IN THE LIGHT OF TH ESE ORDERS. THESE WILL INCLUDE CASES IN WHICH THE ASSESSMENT WAS MADE PROVISIONAL AS WELL AS THOSE IN WHICH CASES DEMAND/SHOW CAUSE NOTICES HAD BEEN - - ITA 2260/13 47 ISSUED BUT NOT DISPOSED OF TILL THEN AS ALL THE SUBORDINATE AUTHORITIES WERE BOUND BY THE ORDERS OF THE SUPERIOR APPELLATE/JUDICIAL AUTHORITIES IN VIEW OF THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF UNI ON OF INDIA V. KAMLAKSHI FINANCE CORPORATION LTD. REPORTED IN 1991 (55) E.L.T. 433 (S.C.). HOWEVER, W E NEED NOT LABOUR THIS POINT ANY FURTHER IN VIEW OF O UR FINDINGS ON MERITS RECORDED ABOVE.' 22. IT IS TRITE THAT WHEN A STATUTE REQUIRES AN AC T TO BE DONE IN A SPECIFIC MANNER, IT HAS TO BE DONE IN THAT MANNER ONLY. THE ASSESSING OFFICER COULD NOT EXPECT IT BEING DONE IN SOME OTHER MANNER. IT IS ALSO TRITE PRINCIPLE OF LAW THAT IF A PARTICULAR AUTHORITY HAS BEEN DESIGNATED TO DO PARTICULAR ACT, JUST IT I S THAT AUTHORITY ALONE WOULD COULD APPLY HIS/HER INDEPENDENT MIND TO DISCHARGE HIS DUTIES AND FURTHER, A LOWER AUTHORITY CANNOT SI T IN JUDGMENT OVER THE DECISION OF A SUPERIOR FORUM. BEING SO, IN OUR OPINION, WHEN THE TRIBUNAL ON EARLIER OCCASION IN ITS ORDER CITED SUPRA, HAS GIVEN DIRECTION TO THE ASSESSING OFFICER TO CON SIDER THE MANUFACTURE OF 156 WTGS AND SALE OF 150 WTGS AND IN TER- DIVISIONAL TRANSFER OF 6 WTGS. THUS, IT IS THE DUT Y OF THE ASSESSING OFFICER TO CONSIDER THE SAME. 23. IT IS NEEDLESS TO SAY THAT THE TRIBUNAL HAS NO T REJECTED THE CLAIM OF THE ASSESSEE. REGARDING THE - - ITA 2260/13 48 DEPRECIATION, AGAIN AND AGAIN, IT WAS HELD BY THE T RIBUNAL THAT THE DEPRECIATION HAS TO BE RECOMPUTED CONSIDER ING THAT THE ASSESSEE HAS MANUFACTURED 156 WTGS AND REMITTED BACK TO THE FILE OF THE AO AGAIN AND AGAIN FOR RECONSIDERATION. IF THE AO HAS NOT PROPERLY UNDERS TOOD THE DIRECTIONS OF THE TRIBUNAL, HE CAN APPROACH THE TRI BUNAL BY FILING A MISC. APPLICATION OR IF HE DID NOT AGREE W ITH THE FINDING OF THE TRIBUNAL, HE CAN EXPLORE AND PURSUE THE REMEDY AVAILABLE UNDER THE LAW, OTHERWISE, HE IS DU TY BOUND TO PASS CONSEQUENTIAL ORDERS IN CONFORMITY WI TH THE FINDING OF THE TRIBUNAL CITED SUPRA AND HE HAS NO APPREHENSION OR CHOICE TO OVERLOOK THE FINDING OF T HE TRIBUNAL, WHICH IS A HIGHER FORUM. 24. FOR THIS PURPOSE, WE PLACE RELIANCE ON THE JUDG MENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF STA TE OF ANDHRA PRADESH V. COMMERCIAL TAX OFFICER & ANOTHER (169 ITR 564), WHEREIN IT WAS HELD THAT : 'THE TRIBUNAL'S FUNCTIONING WITHIN THE JURISDICTION OF A PARTICULAR HIGH COURT IN RESPECT OF WHOM THE HIGH COURT HAS THE POWER OF SUPERINTENDENCE UNDER ARTICL E 227 ARE BOUND TO FOLLOW THE DECISIONS OF THE HIGH - - ITA 2260/13 49 COURT UNLESS, ON AN APPEAL TO THE SUPREME COURT, TH E OPERATION OF THE JUDGMENT IS SUSPENDED. IT IS NOT PERMISSIBLE FOR THE AUTHORITIES AND THE TRIBUNALS T O IGNORE THE DECISIONS OF THE HIGH COURT OR TO REFUSE TO FOLLOW THE DECISIONS OF THE HIGH COURT ON THE PRETE XT THAT AN APPEAL HAS BEEN FILED IN THE SUPREME COURT WHICH IS PENDING OR THAT STEPS ARE BEING TAKEN TO F ILE AN APPEAL. IF ANY AUTHORITY OR THE TRIBUNAL REFUSES TO FOLLOW ANY DECISION OF THE HIGH COURT ON THE ABOVE GROUNDS, IT WOULD BE CLEARLY GUILTY OF COMMITTING CONTEMPT OF THE HIGH COURT AND IS LIABLE TO BE PROCEEDED AGAINST.' ACCORDINGLY, WE DIRECT THE AO TO STRICTLY CONSIDER THAT THE ASSESSEE HAS ONLY MANUFACTURED 156 WTGS AND INTER DIVISIONAL TRANSFER CANNOT BE TREATED AS SALES AND THE SAME HAS TO BE REDUCED FROM THE TOTAL SALES AND HE HAS T O ARRIVE THE COST OF 1 WTG BY DIVIDING THE TOTAL COST OF MA NUFACTURE BY 156 WTGS AND CORRESPONDINGLY RECOMPUTE THE SALE TURNOVER AND GRANT DEPRECIATION ON 6 WTGS AT APPLIC ABLE RATE WHICH WERE INTER-DIVISIONAL TRANSFERS. THIS G ROUND IS ALLOWED. 25. REGARDING THE ISSUE OF LEVY OF INTEREST U/S.220 (2) OF THE ACT, THE LD. AR SUBMITTED THAT THE AO ERRED IN RECKONING THE DUE DATE FOR PAYMENT OF TAX AS ON 1.5.1997 AS A GAINST - - ITA 2260/13 50 THE DEMAND AS PER THE FRESH ASSESSMENT ORDER WAS RA ISED ONLY ON 28.12.2010, WHICH WOULD ONLY BE THE DUE DAT E FOR CHARGING INTEREST U/S.220(2) OF THE ACT. ACCORDING LY, HE PLEADED FOR DETERMINATION OF THE RECKONING OF THE S TARTING POINT FOR THE LEVY OF INTEREST U/S.220(2) OF THE AC T FROM 1.2.2011 AS AGAINST THE WRONG RECKONING OF SUCH DUE DATE AS 1.5.1997. THE LD. AR RELIED ON THE FOLLOWING JU DGMENTS : 1) CIT V. SAMURAI SOFTWARE (P) LTD. (48 DTR 167)[RAJASTHAN] 2) CIT V. RAJESH KUMAR DINESH KUMAR (325 ITR 346) [RAJASTHAN] 3) CIT V. CHIKA OVERSEAS (P) LTD. (66 DTR 398){BOMB AY} 4) M/S. NARAD INVESTMENTS & TRADING PVT. LTD. V. DC IT (ITA NO.3360/MUM/2010 DT. 19.10.2011) 5) CBDT CIRCULAR NO.334 DT. 3 RD APRIL, 1982. 26. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E ASSESSEES RELIANCE ON CBDT CIRCULAR NO.334 DATED 3.4.1982 IS MISPLACED, SINCE THE ORDER OF THE AO WA S NOT SET ASIDE BY ANY APPELLATE AUTHORITY TILL DATE. IN FACT, PARA - - ITA 2260/13 51 2(II) OF THE SAID CIRCULAR IS APPLICABLE, SINCE THE DEMAND CREATED IN THE ORIGINAL ASSESSMENT ORDER STANDS PAR TLY UPHELD BY APPELLATE AUTHORITIES WHICH CULMINATED IN THE IMPUGNED ORDER OF THE A.O. FURTHER, HE RELIED ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF GIR NAR INVESTMENT LTD. V. CIT (340 ITR 529), WHEREIN IT WA S CONSIDERED IN DETAIL THE DECISION OF THE APEX COURT IN THE CASE OF VIKRANT TYRES(247 ITR 821)(SC) AND HELD THA T THE SAME DECISION IS APPLICABLE ONLY IN A CASE WHERE ASSESSEE FULLY PAID TAXES AT ANY POINT OF TIME AND NO DEMAND WAS OUTSTANDING AGAINST THE ASSESSEE AT ANY POINT OF TIME. FURTHER, HE SUBMITTED THAT IN SUPER SPINNING MILLS LTD. VS. CIT & ANR. (224 ITR 814)[MAD], IT WA S HELD: THOUGH ADDITION MADE BY ASSESSING OFFICER WAS DELETED BY CIT(A), IT WAS RESTORED BY THE ORDER OF ITAT THE EFFECT OF THE ORDER OF TRIBUNAL IS THAT THE EARLIER NOTICE OF DEMAND STOOD REVIVED AND BECAME LEGAL, VALID AND ENFORCEABLE IN VIEW OF SEC.3 OF THE TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOVERY PROCEEDINGS) ACT, 1964, THE ORIGINAL NOTICE OF DEMAND CONTINUED TO BE VALID AND OPERATIVE IN THE ABSENCE OF PAYMENT OF ENTIRE DEMAND, INTEREST U/S.220(2) TO BE LEVIED FROM THE DATE OF ORIGINAL ORDER. - - ITA 2260/13 52 IN VIEW OF THE ABOVE, THE LD. DR SUBMITTED THAT THE ORDER OF THE AO MAY BE UPHELD. 27. NOW, COMING TO THE SECOND ISSUE REGARDING LEVY OF INTEREST U/S.220(2) OF THE ACT, THE CONTENTION OF T HE LD. AR IS THAT THE INTEREST HAS TO BE CHARGED FROM THE ASSESS MENT ORDER DATED 28.12.2010 AND NOT FROM THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT ON 27.3.1997. IN ORDER TO APPRECIATE THIS ARGUMENT, I T IS APPROPRIATE TO CONSIDER CIRCULAR NO.334 DATED 3 RD APRIL, 1982, WHICH READS AS FOLLOWS : 1 . DOUBTS HAVE BEEN RAISED AS TO THE QUANTUM OF INTEREST CHARGEABLE UNDER SECTION 220(2) OF THE IT ACT, WHEN THE ORIGINAL ASSESSMENT ORDER PASSED BY THE INCOME-TAX OFFICER IS (I) CANCELLED BY HIM UNDER SECTION 146 OF T HE IT ACT; (II) SET ASIDE/CANCELLED BY AN APPELLATE/REVISIONAL AUTHORITY AND SUCH APPELLATE/REVISIONAL ORDER HAS BECOME FINAL ; OR (III) SET ASIDE BY ONE APPELLATE AUTHORITY BUT, ON FURTHER APPEAL, THE ORDER SETTING ASIDE THE ASSESSMENT IS VARIED B Y THE SECOND APPELLATE AUTHORITY AND THE DEMAND GETS FINALLY DETERMINED. 2. THESE ISSUES WERE COMPREHENSIVELY EXAMINED IN CONSULTATION WITH THE MINISTRY OF LAW AND THE BOARD HAS BEEN ADVISED : - - ITA 2260/13 53 (I). WHERE AN ASSESSMENT ORDER IS CANCELLED UNDER SECTION 146 OR CANCELLED/SET ASIDE BY AN APPELLATE/REVISIONAL AUTHORITY AND THE CANCELLATION/SETTING ASIDE BECOMES FINAL (I.E., IT IS NOT VARIED AS A RESULT OF FURTHER APPEALS/REVISIONS), N O INTEREST UNDER SECTION 220(2) CAN BE CHARGED PURSUA NT TO THE ORIGINAL DEMAND NOTICE. THE NECESSARY COROLL ARY OF THIS POSITION WILL BE THAT EVEN WHEN THE ASSESSM ENT IS REFRAMED, INTEREST CAN BE CHARGED ONLY AFTER THE EX PIRY OF 35 DAYS FROM THE DATE OF SERVICE OF DEMAND NOTIC E PURSUANT TO SUCH FRESH ASSESSMENT ORDER. (II). WHERE THE ASSESSMENT MADE ORIGINALLY BY THE INCOME-TAX OFFICER IS EITHER VARIED OR EVEN SET ASI DE BY ONE APPELLATE AUTHORITY BUT ON FURTHER APPEAL, THE ORIGINAL ORDER OF THE INCOME-TAX OFFICER IS RESTORE D EITHER IN PART OR WHOLLY, THE INTEREST PAYABLE UNDER SECTI ON 220(2) WILL BE COMPUTED WITH REFERENCE TO THE DUE D ATE RECKONED FROM THE ORIGINAL DEMAND NOTICE AND WITH REFERENCE TO THE TAX FINALLY DETERMINED. THE FACT T HAT DURING AN INTERVENING PERIOD, THERE WAS NO TAX PAYA BLE BY THE ASSESSEE UNDER ANY OPERATIVE ORDER WOULD MAK E NO DIFFERENCE TO THIS POSITION. 3. THE FOREGOING LEGAL POSITION WILL APPLY MUTATIS MUTANDIS TO THE PROCEEDINGS UNDER OTHER DIRECT TAX ES ALSO. THESE INSTRUCTIONS MAY BE BROUGHT TO THE NOT ICE OF ALL THE OFFICERS WORKING IN YOUR CHARGE. 28. AFTER GOING THROUGH THE ABOVE CIRCULAR, CLAUSE 2.(II) BECOMES APPLICABLE ONLY IN THE EVENT WHEN THE ORIGI NAL ASSESSMENT ORDER IS VARIED OR SET ASIDE BY ONE APPE LLATE AUTHORITY AND ON FURTHER APPEAL, THE ORIGINAL ORDER OF THE AO - - ITA 2260/13 54 IS RESTORED EITHER WHOLLY OR IN PART. IN THE PRESE NT CASE, IT IS SHOWN THAT THE ORIGINAL ASSESSMENT ORDER WAS NOT AL L RESTORED BY THE TRIBUNAL IN ITA NO.1041/MDS/2008 DA TED 19.6.2009 AND THE CONSEQUENTIAL ORDER WAS PASSED BY THE A.O. ON 28.12.10 AND THIS IS THE ASSESSMENT ORDER P ASSED CONSEQUENT TO THE ORDER OF THE TRIBUNAL. BEING SO, CLAUSE 2 (II) OF THE AFORESAID CIRCULAR IS SQUARELY APPLICAB LE, WHEREIN ASSESSMENT IS CANCELLED OR SET ASIDE BY AN APPELLAT E AUTHORITY BECOMES FINAL, NO INTEREST U/S.220(2) CAN BE CHARGED PURSUANT TO THE ISSUE OF DEMAND NOTICE. IN OTHER WORDS, WHEN THE ASSESSMENT IS REFRAMED, INTEREST U/S.220(2) CAN BE CHARGED ONLY AFTER THE EXPIRY OF 35 DAYS FROM THE DATE OF SERVICE OF DEMAND NOTICE PURSUANT TO THE ASSESSMENT ORDER. THIS VIEW IS SUPPORTED BY THE JU DGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. S AMURAI SOFTWARE (P) LTD. (SUPRA), WHEREIN IT WAS HELD AS U NDER : ONCE THE ASSESSMENT ORDER IS SET ASIDE IN APPEAL AND SUBSEQUENTLY AFFIRMED, INTEREST CANNOT BE LEVIED UNDER S.220(2) TILL DEMAND IS RAISED AFRESH 28.1 FURTHER, IN THE CASE OF CIT V. RAJESH KUMAR D INESH KUMAR (SUPRA), THE RAJASTHAN HIGH COURT HAS HELD TH AT : - - ITA 2260/13 55 SUB-PARA(II) OF PARA 2 OF CIRCULAR NO.334 DR. 3 RD APRIL, 1982 BECOMES APPLICABLE ONLY IN THE EVENTUALITY, WHERE THE ORIGINAL ASSESSMENT ORDER IS VARIED, OR SET ASIDE BY THE APPELLATE AUTHORITY, AND ON FURTHER APPEAL THE ORIGINAL ORDER OF THE AO IS RESTORED, EITHER WHOLLY OR IN PART. IN THE PRES ENT CASE, IT IS NOT SHOWN THAT THE ORIGINAL ASSESSMENT ORDER WAS AT ALL RESTORED ON FURTHER APPEAL AGAINST THE ORDER OF THE TRIBUNAL, WHETHER DT. 31 ST MARCH, 2005, OR THE EARLIER ONE, WHETHER WHOLLY OR IN PART , RATHER UNDISPUTEDLY THAT ORDER OF THE TRIBUNAL BECAME FINAL, AND IT WAS ONLY IN COMPLIANCE OF THE ORDER OF THE TRIBUNAL, THAT FRESH ASSESSMENT ORDER WAS PASSED. IN THAT EVENT, THE MATTER IS SQUARELY COVERED BY THE LATER PART OF SUB-PARA(I) OF THE CIRCULAR, WHICH COMPREHENDS A SITUATION, WHERE EVEN WHEN THE ASSESSMENT IS REFRAMED PURSUANT TO SETTING ASIDE OF THE ORDER BY THE APPELLATE COURT.- VIKRANT TYRES LTD. V. ITO(2001) 166 CTR (SC)1 : (2001) 247 ITR 821 (SC) 2001) 3 SCC 76 APPLIED. 28.2 IT IS ALSO PERTINENT TO NOTE THAT IN THE CASE OF CIT V. CHIKA OVERSEAS (P) LTD. (66 DTR 398), THE BOMBAY H IGH COURT HELD AS FOLLOWS : THE ORIGINAL ASSESSMENT ORDER DT. 28 TH FEB.,1997 WAS SET ASIDE BY THE TRIBUNAL WITH A DIRECTION TO PASS FRESH ASSESSMENT ORDER. ACCORDINGLY, FRESH ASSESSMENT ORDER WAS PASSED ON 24 TH DEC.,2006 AND THE DEMAND NOTICE WAS SERVED ON 24 TH DEC., 2006. AS PER S.220(1), THE ASSESSEE WAS LIABLE TO PAY THE AMOUNT OF DEMAND WITHIN THIRTY DAYS FROM THE SERVICE OF DEMAND NOTICE DT. 24 TH DEC., 2006. IT IS ONLY IF THE ASSESSEE FAILS TO PAY THE AMOUNT DEMANDED, WITHIN THIRTY DAYS OF THE SERVICE OF THE DEMAND NOTICE DT. 24 TH DEC.,2006 AS STIPULATED - - ITA 2260/13 56 UNDER S.220(1), THE ASSESSEE WAS LIABLE TO PAY INTEREST UNDER S.220(2). IF THE LIABILITY TO PAY INTEREST UNDER S.220(2) ARISES AFTER THIRTY DAYS OF THE SERVICE OF THE DEMAND NOTICE DT. 24 TH DEC.,2006, THE QUESTION OF DEMANDING INTEREST FOR THE PERIOD PRIOR TO 24 TH DEC.,2006 DOES NOT ARISE AT ALL. NEITHER THE ASSESSMENT ORDER DT. 24 TH DEC.,2006 NOR THE DEMAND NOTICE DT. 24 TH DEC.,2006 REQUIRED THE ASSESSEE TO PAY INTEREST AFTER THIRTY DAYS FROM THE DATE OF SERVICE OF THE ORIGINAL DEMAND NOTICE DT. 28THY FEB.,1997. SINCE THE DEMAND ITSELF WAS CRYSTALLIZED UNDER THE ASSESSMENT ORDER DT. 24 TH DEC., 2006 AND THE ASSESSEE UNDER S.220(1) HAD TIME TO PAY THAT DEMAND UPTO THIRTY DAYS OF THE SERVICE OF THE DEMAND NOTICE DT. 24 TH DEC., 2006, THE ARGUMENT OF THE REVENUE THAT THE ASSESSEE WAS LIABLE TO PAY INTEREST UNDER S.220(2), FOR THE PERIOD PRIOR T O THE CRYSTALLISATION OF THE DEMAND ON 24 TH DEC.,2006 CANNOT BE SUSTAINED. THEREFORE, IN THE FACTS OF THE PRESENT CASE, THE DECISION OF THE TRIBUNAL IN HOLDING THAT THE ASSESSEE IS LIABLE TO PAY INTEREST UNDER S.220(2) FROM THE END OF THE PERIOD MENTIONED IN S.220(1) I.E. THIRTY DAYS AFTER THE SERVICE OF NOTICE OF DEMAND DT. 24 TH DEC.,2006 TILL THE DATE ON WHICH THE AMOUNT DEMANDED WAS PAID CANNOT BE FAULTED. 28.3 THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT RELIED ON BY THE LD. DR IN THE CASE OF SUPER SPINNI NG MILLS V. CIT (244 ITR 814) CANNOT BE APPLIED, WHEREIN IT WAS HELD THAT THOUGH THE CIT(APPEALS) ALLOWED THE APPEAL, TH E TRIBUNAL REVERSED IT, AS SUCH, THE ORIGINAL DEMAND CONTINUED TO BE VALID AND OPERATES FROM THE DATE OF - - ITA 2260/13 57 ASSESSMENT ORDER. FURTHER, THE DR RELIED ON THE DE CISION OF DELHI HIGH COURT IN THE CASE OF GIRNAR INVESTMEN T LTD. V. CIT(340 ITR 529), WHEREIN IT WAS HELD THAT WHERE AN ASSESSMENT IS RESTORED AND THE ORIGINAL DEMAND GETS REVIVED FROM THE INCEPTION, THE ASSESSEE IS LIABLE TO PAY INTEREST U/S.220(2) FROM THAT DATE ON THE UNPAID AM OUNT AND ANY VARIATION IN THE AMOUNT OF THE DEMAND FAVOURABL E TO THE ASSESSEE, WHICH IS DIRECTED BY ANY OF THE APPELLATE AUTHORITIES IN THE INTERREGNUM HAS NO EFFECT ON THE LIABILITY OF THE ASSESSEE TO PAY THE INTEREST. 28.4 HOWEVER, THERE IS A CONTRADICTORY JUDGMENT BY THE DELHI HIGH COURT IN THE CASE OF BHARAT COMMERCE & INDUSTRIES LTD. V. CIT(210 ITR 13), WHEREIN IT WAS HELD THAT DEMAND CONSEQUENT UPON THE RECTIFICATION ORDER, INT EREST U/S.220(2) CANNOT RECKON THE AO BACK THE DATE OF OR IGINAL ASSESSMENT. 28.5 THE JURISDICTIONAL HIGH COURT IN THE CASE OF SESHSAYEE PAPER & BOARDS LTD. V. CIT (260 ITR 419), IT WAS HELD AS FOLLOWS : - - ITA 2260/13 58 THE VERY FOUNDATION FOR A CLAIM FOR INTEREST UNDER S.220(2) IS THE NOTICE OF DEMAND. WITHOUT IT THERE CAN BE NO SUSTAINABLE CLAIM FOR INTEREST. IN THIS CASE, THE NOTICE OF DEMAND THAT HAD BEEN ISSUED IN 1979 BECAME A DEAD LETTER WHEN THE CONSEQUENTIAL ORDER WAS MADE BY THE AO GIVING EFFECT TO THE APPELLATE ORDER AND THE AMOUNT OF TAX PAYABLE WAS HELD TO BE NIL. THE APPELLATE ORDER PURSUANT TO WHICH THE CONSEQUENTIAL ORDER WAS MADE ITSELF BECAME FINAL, THAT ORDER NOT HAVING BEEN CHALLENGED AND CARRIED UP IN FURTHER APPEAL, THE RECTIFICATIONS MADE TO THAT ORDER EIGHT YEARS LATER ON 30 TH MARCH, 1988, CANNOT BE REGARDED AS HAVING REVIVED A DEAD NOTICE TO THE EXTENT OF THE AMOUNT DETERMINED AS THE TAX PAYABLE. THE AMOUNT DETERMINED BY THAT ORDER AS THE TAX PAYABLE WAS STRAIGHTAWAY ADJUSTED EVEN AT THE TIME OF THE ASSESSMENT OF THE SURTAX REFUND DUE FOR THE ASST. YR. 1975-76. NO QUESTION OF NON- PAYMENT OF ANY OUTSTANDING DEMAND AROSE. THE QUESTION OF ISSUING A NOTICE OF DEMAND ALSO DID NOT ARISE AND NO NOTICE WAS IN FACT ISSUED. THE FURTHER ORDER MADE IN THE YEAR 1990 WAS WHOLLY MISCONCEIVED. THERE WAS NO NOTICE OF DEMAND WHICH HAD REMAINED WITHOUT COMPLIANCE AND OUTSTANDING AS ON THAT DATE. IN FACT, THERE WAS NO SUCH NOTICE OF DEMAND OUTSTANDING EVEN AS OF 1988 WHEN THE AMOUNT OF THE TAX WAS DETERMINED AT ` 1,22,924. THE CONDITION PRECEDENT WHICH COULD ATTRACT S.220(2) WAS ABSENT. THE ADJUSTMENT MADE BY THE REVENUE OF THE AMOUNT DETERMINED BY IT AS INTEREST BY INVOKING S.220 FROM THE REFUND THAT WAS DUE TO THE ASSESSEE AT THAT TIME CANNOT BE REGARDED AS LAWFUL. THERE WAS NO QUESTION OF ANY REVIVAL OF A DEMAND AS THE ORDER MADE BY THE AO ON 16 TH APRIL, 1980, GIVING EFFECT TO THE ORDER IN APPEAL WAS NOT REQUIRED TO BE ALTERED BY REASON OF ANY FURTHER CHALLENGE TO THE APPELLATE ORDER. THAT APPELLATE ORDER ITSELF HAS - - ITA 2260/13 59 BECOME FINAL. SEC.3 OF THE VALIDATION ACT, THEREFORE WOULD NOT HELP TO REVIVE THE NOTICE. VIKRANT TYRES LTD. VS. ITO (2001) 166 CTR (SC) 1(2001) 247 ITR 821 (SC) RELIED ON. 28.6 FURTHER, CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PRECOT MERIDIAN LTD. V. DCIT IN IT A NOS.1562 & 1565/MDS/2012 DATED 8.5.2013 DECIDED THE ISSUE OF LEVY OF INTEREST U/S.220(2) OF THE ACT BY FOLLOWING THE DECISION OF THAT ASSESSEE IN ITA NO.1870/MDS/20 12 DATED 20.2.2013, WHEREIN IT WAS HELD AS UNDER : 5. THE SECOND GROUND RAISED BY THE ASSESSEE IN THE APPEALS RELATES TO LEVY OF INTEREST UNDER SECTI ON 220(2) OF THE ACT. WE FIND THAT THE ISSUE IS ALSO ADJUDICATED IN ASSESSEE'S OWN CASE IN ITA NO.1870/MDS./12 DECIDED ON 20.02.13, THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL DEALING WITH T HIS ISSUE IS REPRODUCED HEREIN BELOW: 12. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO LEVY OF INTEREST UNDER SECTION 220(2) OF THE ACT. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 21.12.2011 HAS LEVIED INTEREST UNDER SECTION 220(2) FOR THE PERIOD OF 35 MONTHS FROM 1.2.2009 T O 31.12.2011. 13. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SINCE THE ORIGINAL ASSESSMENT ORDER WAS SET AS IDE AND THE TRIBUNAL HAD REMANDED THE MATTER BACK TO TH E ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH AFT ER TAKING INTO CONSIDERATION THE JUDGEMENT PASSED BY T HE HONBLE SUPREME COURT OF INDIA, INTEREST UNDER SECT ION - - ITA 2260/13 60 220(2) CANNOT BE LEVIED FROM THE DATE OF ORIGINAL ASSESSMENT ORDER I.E. DATED 30.12.2008. WHEREAS THE LEARNED DR HAS VEHEMENTLY ARGUED THAT LEVY OF INTEREST UNDER SECTION 220(2) CANNOT BE A SUBJECT MATTER OF APPEAL AS THE SAME IS NOT APPELLABLE. TO SUPPORT HIS CONTENTIONS THE DR HAS RELIED ON THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SURESH GOKULDAS (SUPRA) . 14. A PERUSAL OF THE AFORESAID JUDGEMENT WOULD SHOW THAT THE HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE WAS ASKED TO PAY INTEREST UNDER SECTION 220(2) OF THE ACT BY DEMAND NOTICE ISSUED UNDER SECTION 156. NOTICE OF DEMAND ISSUED UNDER SECTION 156 CANNOT BE CONSIDERED TO BE AN ORDER. THEREFORE, IF ANY MISTAKE HAS OCCURRED THEREIN, IT CAN BE CORRECT ED BY AN ADMINISTRATIVE ORDER. ANY ORDER PASSED BY INCOME TAX OFFICER UNDER SECTION 154 FOR RECTIFYING ANY MISTAKE IN THE ORIGINAL DEMAND NOTICE UNDER SECTION 154 IS NON-EST IN THE EYE OF LAW. THEREFORE, NO APPELLATE PROCEEDINGS LIE AGAINST SUCH ORDER. THE R ATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SURESH GOKULDAS (SUPRA) IS NOT APPLICABLE I N THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS SPECIFICALL Y MENTIONED IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 254 OF THE ACT ABO UT THE LEVY OF INTEREST UNDER SECTION 220(2). THERE IS NO BAR FOR ASSAILING ANY ISSUE WHICH IS PART OF THE ASSESSMENT ORDER. THEREFORE, THE CONTENTION OF THE DR THAT INTEREST LEVIED U/S.220(2) IS NOT APPELLABLE I N THE PRESENT CASE IS NOT TENABLE. 15. MOREOVER, IN CIRCULAR NO.334 DATED 3.4.1982 THE DEPARTMENT HAS CLARIFIED THAT WHERE AN ASSESSMENT ORDER IS CANCELLED U/S.146 OR CANCELLED/SET ASIDE BY AN APPELLATE/ REVISIONAL AUTHORITY AND THE CANCELLATION/SETTING ASIDE BECOM ES FINAL, NO INTEREST UNDER SECTION 220(2) CAN BE CHA RGED - - ITA 2260/13 61 PURSUANT TO THE ORIGINAL DEMAND NOTICE. THE NECESSA RY COROLLARY OF THIS POSITION WILL BE THAT EVEN WHEN T HE ASSESSMENT IS REFRAMED, INTEREST CAN BE CHARGED ONL Y AFTER THE EXPIRY OF 35 DAYS FROM THE DATE OF SERVIC E OF DEMAND NOTICE PURSUANT TO SUCH FRESH ASSESSMENT ORDER. 16. THE ASSESSING OFFICER HAS LEVIED INTEREST UNDER THE PROVISIONS OF SECTION 220(2) FROM THE DAT E OF PASSING OF THE ORIGINAL ASSESSMENT ORDER WHEREAS TH E ORIGINAL ASSESSMENT ORDER WAS SET ASIDE BY THE TRIBUNAL AND THE SAME WAS REMITTED BACK TO THE ASSESSING OFFICER FOR DECIDING THE MATTER AFRESH. SINCE A FRESH ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER, THE DEMAND NOTICE PERIOD SPECIFIED UNDER SECTION 220(1) HAS TO BE TAKEN INT O CONSIDERATION FROM THE DATE OF PASSING OF THE FRESH ASSESSMENT ORDER. THE ASSESSEE IS LIABLE TO PAY DEMAND WITHIN THIRTY DAYS FROM THE SERVICE OF THE DEMAND NOTICE IN PURSUANCE OF THE ASSESSMENT ORDER DATED 21.12.2011. IF THE ASSESSEE FAILS TO PAY THE AMOUNT DEMANDED WITHIN THE PERIOD SPECIFIED UNDER SECTION 220(1), THE ASSESSEE IS LIABLE TO PAY INTER EST U/S.220(2) OF THE ACT. ON THIS ISSUE, WE DO NOT AGR EE WITH THE FINDINGS OF CIT(A). OUR VIEW IS FURTHER FO RTIFIED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHIKA OVERSEAS (P) LTD. (SUPRA) AND THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF VIKRANT TYRES LTD. (SUPRA). IN VIEW OF OUR ABOVE FINDING, THIS GROUND OF APPEAL OF THE ASSESSE E IS ALLOWED. THE PERIOD SPECIFIED UNDER SECTION 220(1) HAS TO BE TAKEN INTO CONSIDERATION FROM THE DATE OF PASSING OF THE FRESH ASSESSMENT ORDER AND NOT THE EARLIER ASSESSMENT ORDER, WHICH HAS BEEN SET ASIDE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THIS GROUND OF APPEALS OF ASSESSEE IS ALLOWED. - - ITA 2260/13 62 IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND OF APP EAL OF THE ASSESSEE IS ALLOWED. 29. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 6 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 6 TH APRIL, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.
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