Sh. Satya Prakash Gupta, Delhi V. ITO, New Delhi

ITA 2730/DEL/2013

• Counselvise Citation: 273020114 RSA 2013
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 21-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDER
• Keywords: Business income; Charitable institution; Audit objection; Principle of natural justice; Earning of tax free income; Difference of opinion; Assessment record
• Section: 143(3); 142(1); 10AA; 10B; 148; 263; 10; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR ITA NO. 2730/DEL/2013 ASSTT. YR: 2008-09 SH. SATYA PRAKASH GUPTA VS. INCOME-TAX OFFICER, 58-A, KAMLA NAGAR, WARD 20(1), NEW DELHI. DELHI-110007. PAN: AAHPG 0717 H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI GAUTAM JAIN ADV. RESPONDENT BY : SHRI RAMESH CHANDER CIT (DR) O R D E R PER R.P. TOLANI, J.M: : THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER PAS SED BY CIT, DELHI VII, DATED 26-3-13 PASSED U/S 263 OF THE I T ACT, V ARIOUS ISSUES ARE RAISED CHALLENGING THE REVISION PROCEEDINGS ON FOLLOWING E FFECTIVE GROUNDS: 1. THAT IMPUGNED ORDER OF LD. CIT -VII, NEW DELHI DATE D 26.03.2013 IS BAD IN LAW IN HOLDING THAT FOLLOWING TWO ISSUES HAVE NOT BEEN CONSIDERED AT THE STAGE OF ASSESSMENT, THEREFO RE THEY ARE SET ASIDE BACK TO THE FILE OF AO FOR RE-EXAMINATION: I. LOSS OF RS. 23,02,984/- CLAIMED BY THE ASSESSEE FRO M ONE OF ITS PROPRIETARY CONCERN M/S STERLING EXPORTS. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 2 II. INTEREST ACCRUED ON FIXED DEPOSITS HAS NOT BEEN ACC OUNTED FOR IN ASSESSEES ANOTHER PROPRIETARY CONCERN M/S S TERLING SECURITIES SERVICE. 2 LD. CIT FAILED TO APPRECIATE THAT HER PREDECESSOR CIT HAD ALREADY DROPPED THE PROCEEDINGS U/S 263 BY SPEC IFICALLY OBSERVING THAT ASSESSEES SUBMISSIONS DATED 12.12.2 011 & 2.2.2012 APPEAR TO BE SATISFACTORY. LD. CIT CANNOT REVIEW THE ORDER OF HER PREDECESSOR; THEREFORE, IMPUGNED ORDER IS CONTRARY TO LAW AND THUS NULLITY. 3. THAT WITHOUT PREJUDICE, LD. CIT, CANNOT INITIATE PROCEEDINGS U/S 263 ON AN AUDIT OBJECTION WHICH STA NDS DULY EXPLAINED BY AO. FURTHER LD. CIT (AUDIT) AFTER CONS IDERING THE RECORD HAD ALREADY RATIFIED DROPPING OF AUDIT OBJEC TION WHILE REPLYING TO PREDECESSOR CITS LETTER IN THIS BEHALF . THUS THE PREDECESSOR CIT HAVING DROPPED THE PROCEEDINGS U/S 263 AFTER DUE VERIFICATION BY CIT(AUDIT); ON THIS COUNT ALSO THE IMPUGNED 263 ORDER IS WITHOUT JURISDICTION. 4 THAT WITHOUT CONSIDERING ASSESSEES EXPLANATION A ND ASSESSMENT PROCEEDINGS, THE FINDING OF THE LD CIT THAT ISSUE OF LOSS OF RS. 23,02,984/- FROM M/S STERLING EXPORTS AND INTEREST ACCRUED ON FIXED DEPOSITS HAS NOT BEEN CONSIDERED A T THE STAGE OF ASSESSMENT IS FACTUALLY INCORRECT AND CONTRARY TO RECORD. AO HAVING ALLOWED THE CLAIMS AFTER MAKING REASONAB LE ENQUIRIES AND FINDING A REASONABLE VIEW ON THE ISSU ES, THE ORDER OF ASSESSMENT CANNOT BE REGARDED AS ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTEREST OF REVENUE MERELY BECAU SE LD. CIT HELD A DIFFERENT OPINION ON THE SCOPE OF SUCH ENQUI RIES. 5 THAT LD. CIT ALSO FAILED TO APPRECIATE THAT, U/ S 263 OF THE ACT, AN ORDER OF ASSESSMENT CANNOT BE SET-ASIDE TO AO TO SIMPLY TO MAKE FURTHER ENQUIRIES AND THEREAFTER PASS FRESH ORDER OF ASSESSMENT. THEREFORE, AND AS SUCH, IMPUGNED ORDE R AND DIRECTIONS ISSUED U/S 263 ARE UNTENABLE, CONTRARY T O LAW UNSUSTAINABLE. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 3 2. BRIEF FACTS ARE: ASSESSEE IS INTO BUSINESS OF CO NSULTANCY IN SECURITY PAPERS AND BANK NOTE PAPERS BY TWO PROPRIETORSHIP C ONCERNS: I. STERLING SECURITY SYSTEMS (SSS FOR SHORT) II. STERLING EXPORTS (SE FOR SHORT) 2.1. BOTH UNITS ARE CARRYING BUSINESS FROM SDF NO. 1, TRADING BLOCK, NOIDA SEZ, NOIDA. THE FIRST UNIT I.E. SSS IS CLAIME D TO BE EXEMPT U/S 10AA. ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNE D YEAR AY 2008-09 ALONG WITH NECESSARY AUDITED STATEMENTS AND CERTIFICATES FOR THIS CLAIM U/S 10AA. BY ORDER U/S 143(3) DATED 16-7-2010 AO- WARD 20(1), ACCEPTED THE INCOME RETURNED BY THE ASSESSE. 2.2. THEREAFTER, BASED ON AUDIT OBJECTION RAISED BY INCOME TAX AUDIT PARTY, LD. CIT-VII, DELHI ISSUED FIRST NOTICE U/S 263 DATE D 12-12-2011 (PB 76-81) RAISING FOLLOWING ERRORS MADE BY AO: 14. IT THUS APPEARS THAT THE ASSESSEE IS NOT ENTIT LED TO DEDUCTION U/S 10AA AND THE SAME WAS WRONGLY ALLOWED TO THE ASSESSEE AND THE SAME RESULTED IN UNDER ASSESSMENT OF INCOME BY RS. 23,42,20,336/-. 15. THE ASSESSEE HAD INVESTED RS. 27,57,91,533/- IN FDRS AS ON 31-03-2008. HOWEVER, HE HAD DECLARED INTEREST IN COME OF RS. 11,852/- ONLY. IT APPEARS THE ASSESSEE HAD NOT DECLARED INTEREST ACCRUED ON THE SAID FIXED DEPOSITS. THE IN COME ARISING ON ACCOUNT OF ACCRUED INTEREST HAS NOT BEEN BROUGHT TO TAX RESULTING IN UNDER ASSESSMENT OF INCOME TO THAT EXT ENT. 16. THE ASSESSMENT ORDER THEREFORE APPEARS TO BE ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN THIS CONNECTION, ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 4 YOU ARE REQUIRED TO SHOW CAUSE AS TO WHY THE ASSESS MENT BE NOT REFRAMED BY MAKING THE ADDITIONS AS SUGGESTED ABOVE . FOR THE PURPOSE YOU CAN APPEAR PERSONALLY OR THROUGH A.R. I N THE OFFICE OF UNDERSIGNED ALONG WITH RECORDS ON 22-12-2011 AT 11.OO A.M. 2.3. ASSESSEE VIDE LETTER DATED 2-2-2012 (PB 82) F ILED NECESSARY REPLIES AND AFTER CONSIDERING THE SAME AND RECORD THE THEN CIT VIDE LETTER DATED 4-3- 2012 (PB 140-142) DROPPED THE AUDIT OBJECTIONS BY F OLLOWING OBSERVATIONS: IN THIS CASE, BASED ON AUDIT OBJECTION, PROCEEDING S U/S 263 OF THE I.T. ACT WERE INITIATED REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY CLAIM OF DEDUCTION U/S 10AA OF THE I.T. ACT BE NOT DISALLOWED. THERE WERE FOLLOWING REASONS FOR THE SA ME: (I) IT WAS NOT CLARIFIED BY THE ASSESSEE AS TO WHAT SERVICES WERE RENDERED BY IT. (II) THE ASSESSEE DID NOT PRODUCE STATEMENT OF ACCO UNT WITH THE ITALIAN CO. AND ALSO DID NOT PROVIDE INFORMATIO N WITH RESPECT TO CONCERN TO WHICH HE WAS INSTRUMENTAL IN SUPPLIES MADE ON BEHALF OF THE ITALIAN CO. (III) THE INTEREST EARNED ON FDRS BY THE ASSESSEE W HICH WERE MADE OUT OF PAYMENTS RECEIVED FROM ITALIAN CO. WAS ALSO CLAIMED AS EXEMPT U/S 10AA AND WAS NOT ALLOWABLE. . 23.2. THE INTEREST INCOME DERIVED BY THE ASSESSEE IS BUSINESS INCOME IN LINE TO HIS BUSINESS AUTHORIZ ATION ISSUED BY THE DEVELOPMENT COMMISSIONER AND IS FROM ONE SEZ INTO TO ANOTHER SEZ UNIT AND IS IN FOREIGN EXCHANGE TILL DATE AND IS THEREFORE INCLUDED IN TH E DECLARED RECEIPTS AS IT QUALIFIES IN TOTALITY TO SE CTION 10AA. 23.3. IT IS SUBMITTED THAT THIS IS OUR PROVISIONAL REPLY FOR WANT OF COPIES OF DOCUMENTS/ INFORMATION WHICH ARE THE ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 5 BASIS OF THE SHOW CAUSE NOTICE LIKE THE DETAILS OF INQUIRIES MADE FROM THE DIFFERENT CUSTOMERS AND, COPIES OF TH EIR REPLIES ETC. HOWEVER, IT IS SUBMITTED THAT SECTION 10-AA IS FULLY COMPLIED AND THERE IS NO SCOPE OF NON GENUINENESS. 5. THE ASSESSEE HAS ALSO CHALLENGED INITIATING OF PROCEEDINGS U/S 263 OF THE I.T. ACT. 6. THE SUBMISSIONS OF THE ASSESSEE APPEAR TO BE SAT ISFACTORY AND IT IS FELT THAT THE AUDIT OBJECTION SHOULD BE D ROPPED. 2.4. THUS ACCORDING TO THE ASSESSE LD. CIT CONCLUDE D THE 263 PROCEEDINGS ON THESE ISSUES AND THE REVISION PROCEEDINGS WERE C LOSED AND RECORD WAS RETURNED TO ASSESSING OFFICER ACCORDINGLY. 2.5. ASSESSEE WAS SURPRISED TO RECEIVE A NOTICE DA TED 31-1-2013 AGAIN ISSUED BY SUCCESSOR CIT, CONTENDING THAT THESE 263 PROCEEDINGS WERE PENDING AND CALLING FOR EXPLANATION ON THE SAME ISS UES, WHICH ACCORDING TO ASSESSEE WERE ALREADY EXPLAINED AND DROPPED. 2.6. ASSESSEE IN REPLY RAISED VARIOUS OBJECTIONS ON JURISDICTION AND MERITS CONTENDING THAT 263 PROCEEDINGS WERE ALREADY CLOSED AND FILED ITS EXPLANATION. LD. CIT BY THE IMPUGNED ORDER ACCEPTED THE ASSESSEES EXPLANATION ON THE FIRST ISSUE I.E. ELIGIBILITY OF SSS TO CLAIM BENEFITS U/S 10 AA. HOWEVER, TWO ISSUES WERE SET ASIDE TO AO FOR R E-VERIFICATION, OUT OF THEM ONLY ONE WAS MENTIONED IN THE SHOW CAUSE NOTI CE. A NEW ISSUE WHICH WAS NOT RAISED IN THE ORIGINAL 263 NOTICE I.E. TH E LOSS INCURRED BY ASSESSE ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 6 FROM STERLING EXPORTS. ASSESSEE OBJECTED TO IT. HOW EVER, IGNORING THE OBJECTIONS, SAME WAS ALSO SET ASIDE BY LD CIT TO A SSESSING OFFICER. 2.7. AGGRIEVED ASSESSEE IS BEFORE US CHALLENGING TH E IMPUGNED SECOND 263 ORDER. 3. LD. COUNSEL FOR THE ASSESSEE SHRI GAUTAM JAIN, A T THE OUTSET CONTENDS THAT: (I) THE ISSUE REGARDING ELIGIBILITY OF STERLING SE CURITY SYSTEM PROFITS U/S 10AA AS A WHOLE UNIT HAS BEEN UPHELD BY LD CIT, WHICH WILL ALSO IMPLIEDLY INCLUDE FDR INTEREST PROFITS WH ICH ARE PART OF THIS UNIT. (II) THE OTHER ISSUE REGARDING THE LOSS OF RS. 23, 02,984/- IN STERLING EXPORTS WAS NEITHER RAISED BY LD. CIT IN 263 NOTICE , NOR REPLIED BY THE ASSESSE, THEREFORE, IT CANNOT BE REVISED. IT IS A SETTLED LAW THAT AN ERROR, WHICH IS NOT MENTIONED IN THE SHOW CAUSE NOTICE ISS UED U/S 263 CANNOT BE REVISED U/S 263 OF THE ACT. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS FOR THE PROPOSITION THAT WHILE PASSING AN ORDER U/S 263, CIT CANNOT TRAVEL BEYOND THE ERRORS MENTIONED IN THE SH OW CAUSE NOTICE ISSUED FOR REVISION: - 317 ITR 249 (DEL) CIT VS. CONTIMETERS ELECTRICALS (P.) LTD. (PAGES 183-185 OF CASE LAW PB AT PAGE 185 PARA 10) FOLLOWING JUDGMENTS OF APEX COURT IN THE CASE OF CC VS. TOHO ENGINEERING INDIA LTD. REPORTED IN 7 SCC 592) - 320 ITR 674 (DEL) CIT VS. ASHISH RAJPAL AT PAGE 6 89 CASE LAW PB AT PAGE 192. - 77 DTR 249 (PUNE)(TRIB) BRAHMA BUILDERS VS. DCIT ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 7 3.1. APROPOS THE REMAINING ISSUE I.E. INTEREST ON F DRS LD. CIT ONLY HAS ALLEGED IN THE 263 SHOW CAUSE NOTICE AS UNDER: 15. THE ASSESSEE HAD INVESTED RS. 27,57,91,533/- I N FDRS AS ON 31.3.2008. HOWEVER, HE HAD DECLARED INTEREST IN COME OF RS. 11,852/- ONLY. IT APPEARS THE ASSESSEE HAD NOT DEC LARED INTEREST ACCRUED ON THE SAID FIXED DEPOSITS. THE INCOME ARI SING ON ACCOUNT OF ACCRUED INTEREST HAS NOT BEEN BROUGHT TO TAX RESULTING IN UNDERASSESSMENT OF INCOME TO THAT EXTE NT. 3.2. THUS THE OBJECTION WAS LIMITED TO REDUCED DECL ARATION OF INTEREST INCOME WHICH IS DROPPED BY CIT HERSELF. 3.3 IT IS CONTENDED THAT THE PROPOSED ERROR MENTION ED IN 263 NOTICE IS BASED ONLY ON AN AUDIT PARTY OBJECTION DATED 31.3.2 011 (PB 56) WHICH READS AS UNDER: (B) THE ASSESSEE HAD INVESTED RS. 27,57,91,533/- I N FDRS AS ON 31.3.2008. HOWEVER, HE HAS ONLY DECLARED INTERE ST INCOME OF RS. 11,852/- ONLY. IT APPEARS THE ASSESSEE HAD NOT DECLARED INTEREST ACCRUED ON THE SAID FIXED DEPOSITS. THE A .O. SHOULD MAKE ENQUIRIES FROM THE BANK TO ASCERTAIN THE AMOUN T OF INTEREST ACCRUED ON THE FDRS AND BROUGHT THE SAME T O TAX. 3.4. THUS THERE IS NO DOUBT THAT THE BASIS OF INITI ATING BOTH 263 PROCEEDINGS IS NOT DUE TO APPLICATION OF INDEPENDENT MIND BY CI T BUT ONLY AUDIT PARTY OBJECTIONS DATED 31-3-2011.THE IMPUGNED NOTICES AN D ORDER PASSED U/S 263 BEING BASED ON THIRD PARTY OPINION ARE BAD IN LAW A ND UNSUSTAINABLE. 3.5. FURTHER THE PROCEEDINGS ARE BAD IN LAW AND UNT ENABLE ON FOLLOWING COUNTS: ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 8 (I) THE ERRORS IN ASSESSMENT ORDER AS ALLEGED IN FI RST 263 NOTICE WERE LIMITED TO: (A) ELIGIBILITY OF CLAIM U/S 10AA; & (B) WHETHER ASSESSEE HAS INCLUDED THE FDR INCOME IN HIS P & L A/C. (II) THERE WAS NO MENTION IN THE SHOW CAUSE NOTICE ABOUT THE LOSS OF STERLING EXPORTS, THUS ABSENCE OF NOTICE ON THE ISSUE OF LOSS CANNOT BE REVISED BY LD. CIT. THE AO DURING THE COURSE OF ASSESSMENT HAD MADE ALL NECESSARY ENQUIRIES IN BEHALF OF ERRORS ME NTIONED IN FIRST NOTICE WHICH IS DEMONSTRATED BY THE PROCEEDING SHEE TS OF ASSESSMENT ORDER. BASED THEREON THE 263 PROCEEDINGS WERE DROPP ED BY PREDECESSOR CIT, THEREFORE, NEITHER THERE IS ANY BA SIS NOR REASON FOR IMPUGNED REVISION PROCEEDINGS. (III) THE ALLEGED ERRORS OF AO AND CONSEQUENT PREJU DICE TO REVENUE ARE NOT FOUND BY A SATISFACTION BASED ON INDEPENDE NT APPLICATION OF MIND BY LD. CIT, AS REQUIRED BY THE I T ACT. THE AU DIT OBJECTIONS ARE RAISED AFTER THE ASSESSMENT IS OVER. AUDIT OBJECTIO NS ARE PROCESSED BY A SET ADMINISTRATIVE MECHANISM I.E. AOS REPLY, CON SIDERATION THEREOF BY AUDIT OFFICER AND FORWARDING OF REPORT TO CIT(AU DIT). BESIDES, AUDIT OBJECTIONS ARE REMEDIED BY RECOURSE TO THE VA RIOUS PROVISIONS OF I.T. ACT LIKE SECS. 154 AND 148 ETC.. SUCH AUDIT O BJECTION CANNOT BE COVERED IN THE SCOPE OF REVISION U/S 263 AS IT REQU IRES INDEPENDENT EXAMINATION OF RECORD AND SATISFACTION BY CIT. BESI DES, THE RECORD AVAILABLE BEFORE THE LD. CIT (SUCCESSOR) DEMONSTRA TED THAT CIT AUDIT AND PREDECESSOR CIT HAD CONSIDERED THE ISSUE AND WE RE SATISFIED ABOUT THE EXPLANATION QUA THE AUDIT OBJECTIONS. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 9 (IV) AO DULY EXPLAINED THE AUDIT OBJECTIONS WHICH IS ACCEPTED BY T(AUDIT) AND BASED THEREON PREDECESSOR CIT RECORDED HIS SATISFACTIONS. THESE VITAL FACTS ON RECORD CANNOT B E IGNORED TO HOLD THAT AOS ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. (V) IN THESE FACTS AND CIRCUMSTANCES ACTION OF SUCC ESSOR CIT IN AGAIN REVISING THE ORDER CLEARLY AMOUNTS TO REVIEW OF PREDECESSORS ORDER, WHICH IS NOT PERMITTED BY THE ACT. (VI) ALTERNATIVELY, THE ACTION OF REVIEWING PREDECE SSOR CITS ORDER CAN AT BEST BE TERMED AS HOLDING A THIRD OPINION BY THE IMPUGNED CIT. DIFFERENCE OF OPINIONS WITH EQUAL RANK OFFICERS CAN NOT TO BE THE BASE FOR REVISING AOS ORDER U/S 263. (VII) CIT WHILE EXERCISING POWERS U/S 263 CAN NOT A CT ON DOUBTS AND ASSUMPTIONS TO DIRECT THE AO TO CONDUCT FURTHER ENQ UIRIES. LD. CIT HAS TO INDEPENDENTLY DECIDE THE EXACT ERROR IN AOS ORDER AND HOW IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. SEC. 263 DO ES NOT ENVISAGE SETTING ASIDE FOR EXPLORING DOUBTS BY FURTHER ENQUI RIES. THUS THE ACTION QUA ISSUE ABOUT NON-INCLUSION OF FDR INTEREST IS NO T ONLY WRONG AS THE INTEREST IS INCLUDED IN THE BOOKS BUT ALSO ARBITRAR Y AND UNSUSTAINABLE. 3.6 LD. COUNSEL PLACED RELIANCE ON THE FOLLOWING JU DICIAL CITATIONS FOR THE PROPOSITIONS THAT REVISION U/S 263 BASED ON AUDIT O BJECTIONS IS WITHOUT APPLICATION OF INDEPENDENT MIND IS UNTENABLE AND UN SUSTAINABLE IN LAW: I) 108 ITR 407 (CAL) JEEWANLAL [1929] LTD. VS. ADDL . CIT (PAGES 217-219 OF JPB) AT PAGE 218, FOLLOWING JUDGMENT OF APEX COURT IN THE CASE OF SIRPUR PAPER MILLS LTD. VS. CWT REPORTE D IN 77 ITR 6. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 10 II) 290 ITR 395 (GAU) B & A PLANTATION & INDUSTRIES LTD. VS. CIT (PAGES 220-232 OF JPB AT PAGE 222 AND PAGE 230) III) 296 ITR 238 (P&H) CIT VS. SOHANA WOOLEN MILLS (PAGES 215- 216 OF JPB) AT PAGE 216 PARA 7 IV) ITA NO. 690/CHD/2010 A.Y. 2005-06 DATED 9.3.201 2 SH. JASWINDER SINGH VS. CIT V) ITA NO. 367/CHD/2012 A.Y. 2007-08 DATED 7.3.2013 AARTI INTERNATIONAL VS. CIT 3.7. IN THESE CASES, IT IS HELD BY COURTS THAT, WHI LE EXERCISING POWER, THE COMMISSIONER MUST HAVE AN UNBIASED MIND AND DECIDE THE DISPUTE ACCORDING TO THE PROCEDURE WHICH IS CONSISTENT WITH THE PRINC IPLES OF NATURAL JUSTICE AND CANNOT PERMIT HIS MIND TO BE INFLUENCED BY THE DICT ATE OF ANOTHER AUTHORITY. 3.8. IT IS PLEADED THAT SEC. 263 CONTEMPLATES CALLI NG FOR THE RECORD AND DUE VERIFICATION THEREOF. LD. CIT FAILED TO CONSIDER TH E FACTS AND MATERIAL ON RECORD THAT EARLIER CIT HAD ALREADY CALLED FOR AND PERUSED THE CASE RECORD AND CLOSED THE PROCEEDINGS. BESIDES SHE OVERLOOKED THE CRUCIAL LETTERS ON RECORD BETWEEN AO, PREDECESSOR CIT AND CIT (AUDIT). VIDE LETTER DATED 21.7.2011, LD. AO (PAGES 58-61 OF PAPER BOOK), COMMUNICATED TO THE LD CIT THAT THIS ISSUE WAS DULY EXAMINED BY HIM IN THE COU RSE OF ASSESSMENT PROCEEDINGS AND QUERIES WERE DULY REPLIED BY ASSES SEE. THE RELEVANT PARA 2 OF THE LETTER PLACED AT PAGES 59-61 OF PAPER BOOK R EADS AS UNDER: 2 AS FAR AS THE OBJECTION REGARDING BRINGING THE I NTEREST TO TAX FROM INVESTMENT IN FIXED DEPOSIT IS CONCERNED, IT IS FOUND THAT THE ASSESSEE HAS TREATED THE INTEREST INCOME O F RS. 11,852/- FROM INVESTMENT IN FIXED DEPOSITS, IN INDIA AND IN INDIAN CURRENCY, AS INCOME FROM SOURCES. WHEREAS INTEREST INCOME OF 99591.19 EURO (EQUIVALENT TO RS. 57,76,89/- @ ESTIM ATED RATE OF RS. 58/-) THROUGH INVESTMENTS IN FIXED DEPOSITS, IN THE PUNJAB NATIONAL BANK, MUMBAI, AN OFFSHORE BANKING U NIT, IT IS ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 11 FOUND THAT THE ASSESSEE HAS TREATED THE SAME AS PAR T OF INCOME QUALIFYING FOR EXEMPTION UNDER SECTION 10AA ON THE FOLLOWING GROUNDS:. THUS, IN CONSIDERATION OF THE ABOVE POSITION OF THE RELEVANT LAW, THE INTEREST INCOME OF RS. 57,76,289/- WAS TREATED BY THE ASSESSEE NOT ONLY AS THE INCOME FROM SERVICE QUALIF YING FOR EXEMPTION UNDER SECTION 10AA, BUT ALSO AS A PART OF CONSIDERATION IN RESPECT OF EXPORT TURNOVER BY THE UNDERTAKING, BEING THE UNIT, OF ARTICLES OR THINGS OR SERVICES R ECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE. (EXPLANATION 1 TO SECTION 10AA).. .. IT IS MOST RESPECTFULLY SUBMITTED THAT THE AUDIT HA S SIMPLY POINTED OUT THAT THE SMALL INTEREST INCOME OF RS. 1 1,852/- SHOWN BY THE ASSESSEE FROM INVESTMENT IN THE FIXED DEPOSI TS IS NOT IN CONSISTENT WITH THE HUGE INVESTMENT OF RS. 27,50,91 ,533/- IN THE FDRS, AND THEREFORE THE AUDIT HAS OPINED IN ROUTINE TO COLLECT THE DETAILS OF INTEREST INCOME ON FDRS FROM THE BAN KS AND TO TAX THE SAME IN VARIOUS RELEVANT ASSESSMENT YEARS, WHICH IS WITHOUT ASSIGNING ANY SPECIFIC AND FORCEFUL REASONS FOR TAXING THE SAME IN CONTRAVENTION OF OTHER RELEVANT PROVISI ONS OF LAW AND DEFINITIONS OF WIDE IMPORT ON VARIOUS TERMS, CONDITIONS AND WORDS USED IN THE RELEVANT LAWS. THE AUDIT HAS ALS O NOT POINTED OUT ANY ACTIVITY WHICH THE ASSESSEE MIGHT HAVE DONE OUTSIDE THE AMBIT OF RELEVANT VARIOUS PROVISIONS OF LAW RENDERI NG HIM DISQUALIFIED FROM AVAILING OF EXEMPTION UNDER SECTI ON 10AA [EMPHASIS SUPPLIED] 3.9. BESIDES BEFORE ISSUING NOTICE U/S 263 LD. CIT OVERLOOKED THE AUDIT REPLY DATED 16.8.2011 SENT BY THE ASSESSING OFFICER TO CIT AUDIT-I, NEW DELHI ( PAGES 63-67 OF PAPER BOOK) WHEREIN AT PAGE 67 IT WA S SPECIFICALLY STATED AS UNDER: IN THE LIGHT OF THE ABOVE FACTS OF THE CASE, THE A UDIT OBJECTION IS NOT ACCEPTABLE. THE ASSESSMENT RECORD OF THE ASSES SEE FOR THE ASSESSMENT YEAR 2008-2009 HAS BEEN SUBMITTED TO THE WORTHY CIT-DELHI-VII, NEW DELHI THROUGH ADDL. CIT-RANGE-20 , NEW ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 12 DELHI VIDE THIS OFFICE LETTER NO. ITO/WARD 20(1)/20 11-12/495 DATED 21.7.2011, AND THE SAME IS LYING WITH THEM. [EMPHASIS SUPPLIED] 3.10. THUS THE 263 NOTICE ISSUED BY SUCCESSOR CIT E XTENDING THE CLOSED 263 PROCEEDINGS IS NOT ONLY BAD IN LAW BUT ALSO AMOUNTS TO REVIEW OF PREDECESSOR CITS ORDER AND IS ALSO CONTRARY TO FACTS ON RECORD , HENCE UNTENABLE. IT DEMONSTRATES NON APPLICATION OF MIND TO THE RELEVA NT FACTS AND MATERIAL PRESENT ON CASE RECORD, WHICH CLEARLY VIOLATES THE MANDATE OF SEC. 263. THEREFORE, THE IMPUGNED ORDER U/S SEC 263 BEING GRO SSLY IN VIOLATION OF STATUTORY PROVISIONS IS VITIATED BY INCURABLE LAPSE S, UNTENABLE AND UNSUSTAINABLE. THE OBSERVATION AND FINDING OF THE LEARNED COMMISSI ONER OF INCOME TAX THAT THE ISSUE OF FDR INTEREST HAS NOT B EEN EXAMINED AT THE ASSESSMENT STAGE IS THUS CONTRARY TO ENTIRE RECORD AVAILABLE BEFORE LD. CIT. 3.11. VIDE ASSESSEES REPLY DATED 2.2.2012 WHICH IS PART OF ASSESSMENT RECORD AND IS PLACED AT PB 82-139, IT WAS OBVIOUS THAT FDR INTEREST INCOME IS INCLUDED IN THE DECLARED RECEIPTS AND QUALIFIES FOR DEDUCTION U/S 10AA OF THE ACT. THUS NOT ONLY THE ISSUE OF INTEREST BUT AL SO THE ISSUE ABOUT ASSESSES ENTITLEMENT TO SEC. 10AA WAS ALSO EXAMINED, CONSIDE RED AND THEN ALLOWED BY LD. AO. BESIDES, CIT HERSELF HAS DROPPED THE ISS UE OF ELIGIBILITY OF 10AA QUA THE UNIT SSS. 3.12. NO ADVERSE INFERENCE WHATSOEVER CAN BE DRAWN ON AN ISSUE WHICH LD. PREDECESSOR CIT BY AN ORDER DATED 4.3.2012 (PLACED AT PB 142) HELD THAT ASSESSEES REPLY ABOUT AUDIT OBJECTION IS SATISFACT ORY IN FOLLOWING TERMS: 6 THE SUBMISSIONS OF THE ASSESSEE APPEAR TO BE SAT ISFACTORY AND IT IS FELT THAT THE AUDIT OBJECTION SHOULD BE D ROPPED. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 13 3.13. IT IS THUS CONTENDED THAT WHEN LD. PREDECESSO R CIT FOUND THE REPLY DATED 2.2.2012 TO BE SATISFACTORY THIS BEING PART O F THE RECORD, IT IS HIGHLY UNJUST AND ARBITRARY ON THE PART OF SUCCESSOR CIT T O REVIEW THE ORDER OF CIT(AUDIT) OF HER EQUAL STATUS. IT IS PLEADED THAT CIT MAY HAVE POWER TO REVISE THE ORDER OF SUBORDINATE OFFICER BUT I.T. AC T DOES NOT CONFER ANY POWER ON HIM TO REVIEW OR REVISE THE ORDER OF HER C OMPATRIOT I.E. PREDECESSOR CIT OF EQUAL STATUS. 3.14. THUS THE IMPUGNED ORDER TO SET ASIDE THE ISS UE OF ELIGIBILITY OF INTEREST ON FDRS U/S 10AA TO THE FILE OF THE AO FOR FURTHER ENQUIRIES, IS NOT ONLY BAD ON THE SPECIFIC COUNTS LIKE NON VERIFICATION OF REC ORD, NOT APPLICATION OF INDEPENDENT MIND BUT IS ALSO VITIATED BY LACK OF AN Y ENABLING POWER IN THIS BEHALF. 3.15. LD. COUNSEL CONTENDS THAT LEGALLY THE REVISIO N PROCEEDINGS INITIATED BY PREDECESSOR CIT-VII, DELHI BY NOTICE DATED 12-12-20 11 WERE FINALIZED BY HIS ORDER DATED 4-3-2012 MENTIONED ABOVE. ONCE 263 ACTION ON THESE ISSUES WAS CONCLUDED, THE SUCCESSOR CIT HAS NO POWERS TO R EVIVE THE CLOSED PROCEEDINGS OR REVIEW THE ORDER OF PREDECESSOR IN THE GARB OF FRESH 263 ORDER ON SAME ISSUE. 3.16. IN THE LIGHT OF THESE FACTS, LD. COUNSEL CONT ENDS AS UNDER: A) THAT PROCEEDINGS U/S 263 INITIATED BY CIT-VII, D ELHI VIDE NOTICE DATED 12.12.2011 STAND CONCLUDED BY AN ORDER DATED 4.3.2012; B) THAT WITHOUT PREJUDICE, THE FRESH PROCEEDINGS IN ITIATED BY VIDE NOTICE DATED 31.01.2013 IN ACCORDANCE WITH LETTER D ATED 8.2.2013 FORM CIT, AUDIT IS LIMITED TO EXAMINATION OF SERVICES RE NDERED IN RESPECT OF CLAIM OF DEDUCTION U/S 10AA AND TO LIMITED ISSUE WH ETHER INTEREST ON ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 14 FDRS IS INCLUDED IN THE BOOKS OF ACCOUNTS OR NOT. B Y THE IMPUGNED ORDER THE ISSUE OF ELIGIBILITY OF UNIT SSS SERVICE U/S 10AA IS UPHELD. (C) THE ISSUE OF LOSS IN STERLING EXPORTS IS NEITHE R RAISED IN 263 NOTICE NOR ASSESSEE IS HEARD ON THAT ISSUE. THEREF ORE THE 263 ORDER SETTING ASIDE THIS LOSS FOR REEXAMINATION BY AO IS VOID AB INITIO. 3.17. ASSESSEE HAS AMPLY DEMONSTRATED THAT INTEREST WAS DULY CREDITED IN BOOKS AND WHAT WAS REFLECTED IN P&L A/C WAS NET EFF ECT OF INTEREST ETC. AUDIT DEPARTMENT AND PREDECESSOR CIT HAVE ACCEPTED THIS FACT AFTER DUE VERIFICATION. THE NEW TWIST TO FINDINGS OF CIT THAT ISSUE OF INTEREST ON FDR WAS NOT PROPERLY INQUIRED FROM 10AA ANGLE AND CONSE QUENT SET ASIDE IS CONTRARY TO THE RECORD AND VIOLATES THE SETTLED POS ITION OF LAW IN THIS BEHALF FOR THE FOLLOWING REASONS: I) THAT REPLIES DATED 21.7.2011 AND 16.8.2011 BY LE ARNED ASSESSING OFFICER TO PREDECESSOR CIT-VII ENDORSE T HE FACT THAT THE ISSUE WAS DULY EXAMINED BY HIM; II) THAT THE PREDECESSOR CIT ON CONSIDERATION OF TH E RECORD AND REPLIES IN THIS BEHALF DATED 2.2.2012 WAS SATISFIED WITH ASSESSEES REPLY CONSEQUENTLY BY AN ORDER DATED 4.3.2012 HIS S ATISFACTION IS REDUCED IN WRITING; (III) THE IMPUGNED CIT HAS GIVEN NO BASIS WHATSOEVER AS T O WHY THE CONTENTS OF A.OS LETTERS DATED 21.7.2011 AND 16.8. 2011 AND THE PREDECESSOR CITS ORDER DATED 4.3.2012 ARE QUESTION ABLE OR INCORRECT. IT IS PLEADED THAT IT AMOUNTS TO REVISING THE ORD ER OF COMMISSIONER OF INCOME TAX DATED 4.3.2012 IN THE GARB OF AN INVALID EXERCISE OF 263 POWER. THERE IS NEITHER PROPER EXAMINATION OF RECO RD NOR APPLICATION OF MIND BY THE SUCCESSOR CIT, THEREFORE, THE ASSUM PTION OF JURISDICTION U/S 263 IS BAD IN LAW. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 15 V) LD. COUNSEL CONTENDS THAT ALL THE ASPECTS WERE EXAMINED BY AO DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) AS IS EVIDENT FROM FOLLOWING: SR. NO. DATE OF NOTICE/ ORDER SHEET ENTRY U/S (PAGE OF PAPER BOOK) DATE OF REPLY (PAGE OF PAPER BOOK) I) 25.09.2009 143(2) DULY COMPLIED WITH I.E. PERSONALLY APPEARED AND EXPLAINED ORALLY THE NATURE OF PROFESSIONAL SERVICES RENDERED BY THE ASSESSEE TO M/S CARTIERE MILIANI FABRIANO, ITALY II) 29.09.2009 143(2) DULY COMPLIED WITH 20.01.2010 142(1) 08.02.2010 14.06.2010 (10-12) 28.06.2010 (13-17) III) 28.05.2010 142(1) AND 143(2) ALONG WITH QUESTIONNAIRE (8-9) 12.07.2010 (18-40C) IV) 12.07.2010 ORDER SHEET ENTRY 14.07.2010 (41-48) VI) APART FROM THE FACT THAT U/S 263 NOTICE WAS ISS UED THAT THE LOSS OF STERLING EXPORT AND INCLUSION OF INTEREST ON FDR IN BOOKS AND ITS ELIGIBILITY U/S 10AA WAS NOT EXAMINED BY A.O. IS FA CTUALLY INCORRECT, AS EVIDENT FROM THE FOLLOWING FACTS AVAILABLE ON RE CORD: SR. NO. ISSUE HOW EXAMINED I) LOSS OF RS. 23,02,984/- ORDER OF ASSESSMENT U/S 143(3) DATED 16.7.2010 ( PAGES (PAGES 49-50 OF ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 16 THE LOSS CLAIMED WAS IN THE COMPUTATION OF INCOME (PAGE 2 OF PAPER BOOK ) AND SUPPORTED BY AUDITED FINANCIAL STATEMENTS FILED WITH RETURNS OF INCOME PAPER BOOK ) AS REGARDS THE SECOND UNIT IN THE NAME OF STERLING EXPORT, IT IS EXPLAINED FROM THE SIDE OF THE ASSESSEE THAT THIS UNIT IS ENGAGED IN LOCAL SALES. AS PER THE P&L ACCOUNT OF THIS UNIT, THE ASSESSEE HAS SHOWN A NET LOSS OF RS. 23,02,984/-. THE DETAILS FILED IN RESPECT OF THIS UNIT IS PLACED ON THE RECORDS. MOREOVER THERE IS NO PREJUDICE TO THE INTEREST OF REVENUE SINCE THE ENTIRE LOSS HAS BEEN SET OFF AGAINST THE EXEMPT INCOME U/S 10AA OF THE ACT, WHICH HAS BEEN FOUND BY THE LEARNED ASSESSING OFFICER AND LEARNED COMMISSIONER OF INCOME TAX TO BE ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10AA OF THE ACT (PAGE 2 OF PAPER BOOK) II) INTEREST ON FDRS I) REPLY DATED 12.7.2010 (PAGES 22- 32 OF PAPER BOOK ) II) REPLY DATED 14.7.2010 ( PAGE 41 OF PAPER BOOK ) III) EVIDENCE AT PAGES 179, 180, 33, 34, 37 TO 41, 47 OF PAPER BOOK ) 3.18. THUS ALL THE RELEVANT ASPECTS OF BOOK ENTRIES , ACCOUNTING, INCLUSION IN ELIGIBLE PROFITS AND SUBMISSION ABOUT 10AA ELIGIBIL ITY WERE NOT ONLY FILED WITH A.O. BUT SUBSEQUENTLY ALSO IT WAS EXAMINED BY AUDIT PARTY, CIT(AUDIT) AND PREDECESSOR CIT. 3.19. WITHOUT PREJUDICE TO ABOVE CONTENTIONS, IT I S THUS SUBMITTED THAT, LD CIT HAS NOT EVEN BOTHERED TO GO THROUGH THE RECORD AND HAS GIVEN PATENTLY CONTRADICTORY OBSERVATIONS. WHEN PROPER INQUIRIES A RE CONDUCTED, THEN MERELY BECAUSE THE ASSESSMENT ORDER DID NOT SPECIFI CALLY MENTION THE QUERIES ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 17 RAISED BY AO AND THE ASSESSES RESPONSE THERETO, IT CANNOT BE ASSUMED BY CIT THAT THERE WAS NO INQUIRY AND THEREFORE, THE AO'S O RDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. RELIANC E IS PLACED ON FOLLOWING CASE LAWS PLACED ON PB: I) 320 ITR 674 (DEL) CIT VS. ASHISH RAJPAL AT PAGE 686 . II) 203 ITR 108 (BOM) CIT VS. GABRIEL INDIA LTD. AT PAG E 114 III) 32 ITR 167 (DEL) CIT VS. SUNBEAM AUTO LTD. AT PAGE 179 ) 3.20. IT IS SETTLED LAW THAT PROCEEDINGS U/S 263 CA N BE INITIATED ONLY WHEN CIT FROM RECORD DEMONSTRATES THAT THERE IS LACK OF ENQUIRY BY AO AND NOT FOR INADEQUATE ENQUIRIES. THE SCOPE OF INQUIRY OR W AY OF WRITING ASSESSMENT ORDER DEPENDS ON PERCEPTION OF DIFFERENT OFFICERS, AO BEING A QUASI JUDICIAL AUTHORITY IS VESTED WITH DISCRETION TO CHOOSE HIS M ETHOD OF ENQUIRY AND WRITING ORDER AS LONG AS IT IS SUSTAINABLE ORDER. A S PER THE LEGISLATIVE SCHEME, CIT CANNOT SUPERIMPOSE HIS PERCEPTION ABOUT METHOD OF ENQUIRIES ON AO. ASSESSEE HAS DEMONSTRATED FROM RECORD THAT REASONAB LE ENQUIRIES ABOUT STERLING EXPORTS LOSS AND INCLUSION OF FDR INTEREST . THUS ON MERITS ALSO ACTION U/S 263 IS UNTENABLE AS CASE OF INADEQUATE ENQUIRY IS DISTINCT FROM THE CASE OF LACK OF INQUIRY. RELIANCE IS PLACED ON: I) 357 ITR 388 (DEL) DIT VS. JYOTI FOUNDATION II) 332 ITR 167 (DEL) CIT VS. SUNBEAM AUTO LTD. AT PAGE S 180- 181. III) 343 ITR 329 (DEL) ITO VS. D.G. HOUSING PROJECTS LTD . AT PAGES 339. IV) 341 ITR 166 (DEL) CIT VS. LEISURE WEAR EXPORTS LTD. V) 212 TAXMAN 184 (DEL) CIT VS. VODAFONE ESSAR SOUTH L TD. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 18 VI) 341 ITR 180 (DEL) CIT VS. HINDUSTAN MARKETING AND ADVERTISING CO. LTD. VII) 262 CTR 604 (DEL) CIT VS. NEW DELHI TELEVISION LTD. VIII) 236 CTR 476 (DEL), CIT VS. VIKAS POLYMERS 3.21. LD. COUNSEL FURTHER CONTENDS THAT IT IS TRITE LAW THAT WHERE MORE THAN ONE VIEWS ARE POSSIBLE ON AN ISSUE AND IF AO HAS A DOPTED ONE OF THE POSSIBLE VIEW ACTION U/S 263 CANNOT BE INVOKED BY C IT. I) 243 ITR 83 (SC) MALABAR INDUSTRIAL CO. LTD. VS. CIT II) 259 ITR 502 (GUJ) CIT VS. ARVIND JEWELLERS III) 332 ITR 167 (DEL) CIT VS. SUNBEAM AUTO LTD. ( PAGES 200-208 OF PB) IV) 329 ITR 289 (DEL) CIT VS. DLF POWER LTD. V) 295 ITR 282 (SC) CIT VS. MAX INDIA LTD. VI) 323 ITR 632 (BOM) CIT VS. DESIGN AND AUTOMATION ENGINEERS (BOMBAY) PVT. LTD. VII) 294 ITR 121 (CHENNAI) CIT VS. MEPCO INDUSTRIES LTD. VIII) 303 ITR 23 (P&H) CIT VS. MUNJAL CASTINGS IX) 321 ITR 92 (BOM) GRASIM INDUSTRIES LTD. VS. CIT X) 325 ITR 343 (P&H) CIT VS. TEK CHAND SAINI XI) 333 ITR 547 (DEL) CIT VS. HONDA SIEL POWER PRO DUCTS LTD. XII) 263 ITR 255 (SC) CIT VS. G.M. MITTAL STAINLES S STEEL LTD. 3.22. IT IS FURTHER PLEADED THAT CIT WITHOUT PROPER LY CONSIDERING THE RECORD AND WITHOUT GIVING DEFINITE FINDINGS ABOUT ERROR CA NNOT REVISE THE ORDER BY SIMPLY ASKING THE ASSESSING OFFICER TO REEXAMINE TH E ISSUE. THE ALLEGED ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 19 ERRORS BY AO SHOULD EMERGE FROM THE PROPER CONSIDER ATION OF ENTIRE RECORD AND FACTS AND NOT ON MERE PART VERIFICATION OF RECO RD, POSSIBILITIES, GUESS WORK OR HOLDING A DIFFERENT OPINION ON THE PART OF LD. CIT. THUS THE IMPUGNED ORDER FAILS TO CONFORM TO THE TERMS AND C ONDITIONS LAID DOWN BY 263 ON PARAMETERS OF LAW AND CONSIDERATION ON MERIT S, RELIANCE IS PLACED ON I. CIT VS. GABRIEL INDIA LTD 203 ITR 108 (BOM) AT PAG E 117 II. CIT VS. TRUSTEES ANUPAM CHARITABLE TRUST 167 IT R 129 (JAIPUR) IT IS ADVOCATED THAT CITS ORDER U/S 263 MERELY SET TING ASIDE THE ORDER OF ASSESSMENT WITHOUT GIVING TENABLE AND COGENT REA SONS IS AN UNSUSTAINABLE ORDER WHICH DESERVE TO BE QUASHED. TH E REVISION PROCEEDINGS ARE NOT ENVISAGED FOR ROVING OR FURTHER ENQUIRIES. RELIANCE IS PLACED ON: (III) 96 ITR 310 (ALL) CIT VS. SUNDER LAL (IV) 111 ITR 326 (ALL) J. P. SRIVASTAVA & SONS LTD. VS. CIT (V) 170 ITR 28 (ALL) CIT VS. KASHI NATH & CO. 3.23. IN VIEW OF THE FOREGOING SUBMISSIONS, FACTS, PROPOSITIONS OF LAW AND JUDICIAL CITATIONS, IT IS PLEADED THAT LD. CIT HAS UTTERLY FAILED TO SATISFY THE TWIN CONDITIONS REQUIRED FOR INVOKING THE PROVISION S OF SECTION 263 OF THE ACT. THE IMPUGNED INSTANT 263 ORDER IS WITHOUT JURI SDICTION, UNTENABLE AND UNSUSTAINABLE. THEREFORE, THE SAME DESERVES TO BE Q UASHED. 4. LD. CIT (DR) SHRI RAMESH CHANDER APART FROM ORAL ARGUMENTS HAS FILED DETAILED WRITTEN SUBMISSIONS. THE GIST OF REL EVANT AND EFFECTIVE SUBMISSIONS ARE AS UNDER: (I) THE NEW ITO INCUMBENT AO (SMT SUSHMA GUPTA) FO UND THAT ASSESSMENT ORDER WAS PASSED WITHOUT PROPER INVESTIG ATION/ENQUIRIES ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 20 BY HER PREDECESSOR AND SHE RIGHTLY PROPOSED THE CAS E FOR ACTION U/S 263. SH. K.C. JAIN, THE PREDECESSOR CIT TO SMT. SAN GEETA GUPTA ( SUCCESSOR CIT) PASSING ORDER U/S 263 SUPPORTING THE AOS ORDER BEFORE THE AUDIT AFTER HAVING RECONSIDERED THOUGHT IT PROPER TO INITIATE PROCEEDINGS U/S 263. THEREAFTER NEW CIT APPLIED HE R INDEPENDENT MIND AND AFTER CONDUCTING INQUIRIES FOUND THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THES E ISSUES. (II) THE CHANGE IN ACCOUNTING SYSTEM (FROM CASH TO MERCANTILE) WAS NOT NOTICED BY AO, WHO FAILED TO PROBE FURTHER WHIC H SHOWS THAT HE WAS IN UNDUE HASTE IN FRAMING THE ASSESSMENT ORDER. ASSESSEE FILED REPLY BEFORE THE AO ONLY ON 16-07-2010 (A REPLY RUN NING INTO MORE THAN 100 PAGES/DOCUMENTS) AND STRANGELY THE VERY SA ME DAY SHOWING HIS CALLOUS ATTITUDE, UNDUE HASTE & UTTER FAILURE T O CONDUCT PROBE OF THE EXPECTED ISSUES AO FINALIZED THE ASSESSMENT. (III) LD. CIT OBSERVED THAT THE APPELLANT HAD HUGE FDR OF 27.57 CR. BUT JUST A NOMINAL INTEREST OF RS.11852/- WAS OFFER ED FOR TAX. THE AO DID NOT MAKE NECESSARY/EXPECTED ENQUIRY FROM THE BA NK AND CIT ALSO NOTICED THE AO TO HAVE FAILED TO DRAW NECESSARY INF ERENCES FROM THE DIFFERENCE BETWEEN THE FIGURE AS APPEARING IN THE F DRS WITH BANK AT 27.51 CRORES AND THE FIGURE AS APPEARING IN BOOKS ( OF STERLING SECURITY SYSTEMS) QUA THE BANK AT 26.97 CRORES WHIC H DIFFERENCE APPARENTLY WAS HELD TO BE DUE TO INTEREST ACCRUED. (IV) THERE IS NO DISPUTE THAT PROCEEDINGS U/S 263 CAN BE INITIATED ONLY FOR LACK OF ENQUIRY. IT IS CLEAR FROM RECORD THAT IT IS A CASE OF NO ENQUIRY BECAUSE AS INDICATED BY THE CIT, ASSESSING OFFICER FAILED TO ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 21 INVESTIGATE/EXAMINE THE MATTER IN THE LIGHT OF APPL ICABLE PROVISIONS OF SEZ RULES/ACT. 4.1. APROPOS THE ASSESSEES CONTENTION THAT IN CASE S OF INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY THE CIT MUST RECORD FINDING THAT ORDER IS ERRONEOUS & HE MUST ESTABLISH THAT ERROR ON MISTAKE BY AO IS UN SUSTAINABLE. IT IS SUBMITTED THAT THIS HAS TO BE REJECTED FOR AS IT IS A CASE OF COMPLETE LACK OF ENQUIRY. 4.2. THE ASSESSES CONTENTION THAT, WHERE TWO VIEWS ARE POSSIBLE NOTICE U/S 263 CANNOT BE INVOKED. IT IS SUBMITTED THAT CITS C ASE IS NOT AS TO WHICH VIEW THE AO MUST TAKE BUT IT IS ABOUT AOS UTTER FA ILURE TO PROBE ISSUES DESPITE THAT FACTS/CIRCUMSTANCES OF THE CASE EXPECT ED HIM TO DO SO. 4.3. APROPOS ASSSEESSEES CONTENTION THAT IT IS NEC ESSARY FOR THE CIT TO POINT OUT THE MATERIAL ON RECORD AS TO HOW THE O RDER OF THE AO IS PREJUDICIAL TO THE INTEREST OF REVENUE--IT IS SUBMI TTED THAT OBSERVATIONS OF THE CIT AS MADE IN THE ORDER SHOW THAT THE CASE WAS CLEARLY PREJUDICIAL TO THE REVENUES INTEREST. 4.4. ABOUT THE ASSESSES PREPOSITION THAT CIT CANNO T SIMPLY ASK THE AO RE- EXAMINE THE MATTER, HE CAN DO SO ONLY AFTER FINDING ORDER OR ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. LD. CIT(DR) CONTENDS THAT IT IS INAPPLICABLE IN THE FACTS OF THE PRESENT CASE BECAUSE HERE THE CIT HAS POINTED OUT AS TO HOW THE ORDER IS PREJUDICIAL TO REVENUES INTEREST AND IS ALSO ERRONEOUS. 4.5. APROPOS ASSESSEES PREPOSITION THAT ERROR SHOUL D BE ONE WHICH DEPENDED ON THE FACTS OR LAW AND NOT MERELY POSSIBI LITY OR GUESS WORK--IT IS POINTED OUT THAT AT HER OWN CIT HAS CONDUCTED ENQUI RY AND ONLY THEREAFTER ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 22 SHE HELD THE ORDER TO BE ERRONEOUS AND HENCE CLEARL Y PRESENT ORDER IS NOT ON GUESS WORK. 4.6. ASSESSEES CONTENTION THAT THE ORDER OF THE CIT MERELY SETTING ASIDE THE ORDER WITHOUT GIVING REASONS IS A VITIATED ORDER, L D CIT(D) COUNTERS THAT FOR REVISING THE ORDER CIT HAS GIVEN DETAILED REASONS W HICH BECOMES APPARENT FROM HER 25 PAGE LONG ORDER WHERE SHE HAS DISCUSSED FULL FACTS AND CIRCUMSTANCES TO ARRIVE AT HER CONCLUSIONS AS AGAIN ST CRYPTIC ORDER PASSED IN UNDUE HASTE BY THE AO. 4.7. APPELLANTS CONTENTION THAT ORDER OF THE CIT F OR REVISION IS NOT SUSTAINABLE IN LAW BECAUSE REVISION HAS INTER ALIA BEEN DONE ON ISSUES I.E. LOSS OF STERLING EXPORTS AND ALSO FOR F.D.R. WH ICH DID NOT FORM PART OF THE SHOW CAUSE NOTICE DATED 12-12-2011. IN THIS CO NNECTION, IT IS SUBMITTED THAT AS FAR AS THE ISSUE OF LOSS (STERLING EXPORTS) IS CONCERNED IT IS NOT THE ONLY ISSUE ON WHICH ORDER HAS BEEN SOUGHT TO BE REV ISED OR WAS REVISED. WHEN THE APPELLANT CLEARLY ADMITS FAILURE OF THE A O TO CONSIDER THIS ISSUE IN ASSESSMENT WHICH HE (AO) OUGHT TO HAVE DONE. THEN A SSESSEE CAN NOT BE ALLOWED TO AGITATE THE REVISION ON OTHER ISSUES. R EGARDING THE FDR ALSO THE ARGUMENT IS NOT MAINTAINABLE WHEN THE CIT HAS REVIS ED THE ASSESSMENT ON THE GROUND OF INTEREST ATTRIBUTABLE TO FDR ONLY WHI CH ENCOMPASSED WITHIN IT NATURALLY THE ASPECT OF FDR ALSO. IN VIEW OF THESE FACTS IT IS CLEAR THAT THE JUDGMENTS RELIED BY THE APPELLANT DO NOT HELP ITS C AUSE. FURTHER, THE CONTENTION OF THE APPELLANT THAT PROCEEDINGS U/S 26 3 INITIATED ON 12-12-2011 STOOD DROPPED IS FACTUALLY INCORRECT & IS UNSUBSTAN TIATED. THERE IS NO EVIDENCE AT ALL THAT PROCEEDINGS INITIATED ON THAT DATE WERE EVER DROPPED LATER. 4.8. AOS LETTER DATED 21-07-2011/16-08-2011 ADDRE SSED TO CIT (AUDIT) REITERATING THE SAME CONTENTS AS MENTIONED IN HIS L ETTER DATED 21-07-2011 ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 23 ADDRESSED TO HIS CIT REFERRED TO ABOVE. THIS LETTE R HAS TO BE IGNORED ADDITIONALLY FOR THE REASON THAT THIS LETTER IS WRI TTEN BEYOND JURISDICTION DIRECTLY TO CIT(AUDIT) WHICH HE CANNOT DO BECAUSE A S PER THE PRESCRIBED PROCEDURE AS PER WHICH HE HAS TO WRITE ONLY TO HIS CIT AND HE IS NOT SUPPOSED TO ENTER INTO ANY CORRESPONDENCE DIRECTLY WITH THE CIT (AUDIT) WHICH POSITION WAS POINTED OUT BY THE CIT (AUDIT) A LSO VIDE PARA 2 OF HIS FOLLOW UP LETTER DATED 02-09-2011 ADDRESSED TO CIT . 4.9. SIMILARLY, ENQUIRIES DONE BY THE CIT OR ANY OT HER OFFICER PRIOR TO THE SHOW CAUSE NOTICE DATED 12-12-2011 FOR 263 ACTION N EED TO BE IGNORED BECAUSE THEY WERE DONE WHEN HIS OFFICE DID NOT EVEN ACQUIRE THE JURISDICTION WHICH HE GOT ONLY ON ISSUE OF NOTICE U/S 263. 4.10. ASSESSEE CANNOT PLACE RELIANCE ON PREDECESSO R CITS (SH. KC JAIN) LETTER DATED 04-03-2012 ADDRESSED TO CIT-AUDIT WHER EBY HE VIEWED OBJECTION TO BE NOT CORRECT. OTHERWISE ALSO THIS I S INTERNAL CORRESPONDENCE NOT UNDERTAKEN BY THE SUCCESSOR CIT. 4.11. REGARDING THE SUBMISSION OF THE APPELLANT THA T THE NOTICE IS BASED ON AUDIT OBJECTION AND NOT ON INDEPENDENT APPLICATION OF MIND IT IS SUBMITTED THAT THERE IS NO SUCH LAW THAT ON THE BASIS OF AUDI T OBJECTION 263 IS NOT POSSIBLE AND IN THIS CONTEXT RELIANCE IS PLACED ON THE DECISION IN MANNESMANN DEMAG {53 ITD 533 DEL } WHERE IT HAS CLEARLY BEEN HELD THAT CIT CAN EXERCISE JURISDICTION ON THE BASIS OF INTER NAL AUDIT OBJECTION PROVIDED HE APPLIES MIND. 4.12. IN SUPPORT OF THE ORDER OF THE CIT PASSED U/S 263 FURTHER RELIANCE IS PLACED BY LD. CIT(DR) ON: ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 24 (A) ON SUPREME COURT JUDGMENT IN RAMPYARI DEVI {67 ITR 84 SC} & TARA DEVI AGGARWAL {88 ITR 323 SC} SAYING THA T IF AN ORDER IS A STEREO-TYPED ONE WHICH SIMPLY ACCEPTS WH AT ASSESSEE STATED IN HIS RETURN & FAILS TO MAKE ENQUIRIES WHIC H ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE ACTION U/S 263 WOULD LIE. (B) ON THE DELHI TRIBUNAL DECISIONS (COPIES GIVEN) IN M/S GARUDA IMAGING & DIAGNOSTICS P. LTD{ITA 5956/DEL/20 10 DATED 23-03-2012} & NAVBHARAT INTERNATIONAL LTD. { ITA NO.1684/DEL/2011 DATED 30-03-2012} INVOLVING IDENTI CAL CIRCUMSTANCES WHERE AFTER ANALYZING VARIOUS DECISIO NS IT WAS HELD THAT ORDER PASSED WITHOUT APPLICATION OF MIND WILL MAKE THE ORDER ERRONEOUS. FURTHER IN THIS VERY DECISION IT WAS HELD THAT IF IT IS NOT DISCERNIBLE THAT AO HAD APPLIED M IND ANALYTICALLY AND LOGICALLY BEFORE TAKING ONE OF THE POSSIBLE VIEWS, THE ORDER CAN BE TREATED AS ERRONEOUS. (C) ON THE DELHI HIGH COURT JUDGMENT IN VEE GEE EN TERPRISES { 99 ITR 373} WHERE IT IS HELD THAT IT IS AOS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN CI RCUMSTANCES SUCH AS TO PROVOKE AN INQUIRY AND THAT IF HE DOES N OT MAKE SUCH INQUIRY THE ORDER SO PASSED BECOMES ERRONEOUS. (D) ON THE DELHI ITAT DECISION IN LAMPA TRADING COM PANY { 39 ITD 534 DEL.} WHERE, INVOLVING SIMILAR FACTS, IT WAS HELD THAT ASSESSMENT MADE IN UNDUE HASTE WOULD JUSTIFY A CTION U/S 263. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 25 (E) ON THE TRIBUNAL DECISION {110 ITD 59 JODH} THAT ACCEPTING CLAIM WITHOUT PEEPING IN CONDITIONS OF SECTION 10B ( QUITE SIMILAR TO APPELLANTS CASE OF 10AA) WILL JUSTIFY A CTION U/S 263. (F) ON THE ITAT DECISION {301 ITR 45 RAJ.}THAT WHER E AO ACCEPTS SUBMISSION OF ASSESSEE WITHOUT NECESSARY EN QUIRIES ACTION 263 WILL LIE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS MENTIONED ABOVE THE ISSUE O F ELIGIBILITY OF SEC 10AA FOR THE UNIT SSS HAS BEEN ACCEPTED BY THE CIT AND I S NOT BEFORE US. APROPOS THE ISSUE OF LOSS INCURRED BY THE ASSESSE IN ANOTH ER PROPRIETY CONCERN I.E. STERLING EXPORTS. IT WAS NOT RAISED IN 263 NOTICE , CONSEQUENTLY ASSESSEE WAS ALSO NOT HEARD ON THIS ISSUE. IN OUR CONSIDERED OPI NION AN ERROR WHICH IS NOT RAISED IN THE 263 NOTICE CANNOT BE RAISED BY THE C IT, OUR VIEW IS SUPPORTED BY HONBLE DELHI COURT JUDGMENT IN THE CASE OF CONT IMETERS ELECTRICALS (SUPRA), HOLDING AS UNDER: THE TRIBUNAL CONSIDERED THE RIVAL CONTENTIONS AND REFERRED TO THE SUPREME COURTS DECISION IN THE CASE OF COMMISS IONER OF CUSTOMS V. TOYO ENGINEERING INDIA LIMITED, 7 SCC 59 2 WHEREIN THE SUPREME COURT NOTED THAT THE DEPARTMENT CANNOT TRAVEL BEYOND THE SHOW CAUSE NOTICE. THE TRIBUNAL W AS OF THE VIEW THAT THE GROUND THAT THE ASSESSEE HAD NOT FULF ILLED THE CONDITIONS LAID DOWN UNDER SECTION 80-IA DID NOT FO RM PART OF THE SHOW CAUSE NOTICE. THE TRIBUNAL ACCEPTED THE AR GUMENT OF THE ASSESSEE THAT THE COMMISSIONER OF INCOME TAX DI D NOT EVEN CALL FOR ANY EXPLANATION ON THIS ISSUE AND, THEREFO RE, THE ASSESSEE DID NOT HAVE ANY OPPORTUNITY TO MEET THIS GROUND. THE TRIBUNAL WAS OF THE VIEW THAT IT WOULD BE AGAINST T HE PRINCIPLES OF NATURAL JUSTICE THAT A PERSON WHO HAS NOT BEEN C ONFRONTED WITH ANY GROUND BE SADDLED WITH THE LIABILITY THERE OF. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 26 CONSEQUENTLY THE TRIBUNAL HELD THAT AS THE SAID ISS UE DID NOT FORM PART OF THE SHOW CAUSE NOTICE AND THE ASSESSEE WAS NOT EVEN CONFRONTED WITH IT, EVEN BEFORE THE CIT, IT CA NNOT FOR THE BASIS FOR REVISION OF THE ASSESSMENT ORDER UNDER SE CTION 263. 5.1. THIS VIEW IS FURTHER SUPPORTED BY HONBLE SUPR EME COURT JUDGMENT IN THE CASE OF TOHO ENG. (SUPRA). IN VIEW OF THESE FAC TS AND CIRCUMSTANCES, THE ISSUE OF SE LOSS HAVING NOT BEEN MENTIONED IN 263 SHOW CAUSE NOTICE, THE SETTING ASIDE ORDER BY CIT IN THIS BEHALF CAN NOT B E SUSTAINED. 5.2. APROPOS THE REMAINING ISSUE I.E. FDR INTEREST IN THE CASE OF SSS LD COUNSEL CONTENDS THAT THE ERROR MENTIONED IN THE 26 3 NOTICE IS LIMITED TO AUDIT PARTIES OBJECTION THAT PERUSAL OF RECORD REVE ALS THAT THOUGH THE FDR INTEREST AMOUNTED TO RS. 27,57,91,533/-, ONLY RS. 1 1,852/- WAS DECLARED IN INTEREST A/C. ACCORDING TO ASSESSEE IT HAS BEEN DEM ONSTRATED FROM THE ASSESSMENT RECORD AND AUDITED STATEMENTS THAT THE E NTIRE INTEREST WAS DULY ENTERED IN THE BOOKS AND THE FINAL BALANCE OF RS. 11,852/-, I.E. THE NET RESULT OF INTEREST A/C WAS REFLECTED IN THE P&L A/C. 5.3. ASSESSEES EXPLANATION WAS VERIFIED FROM RECOR D BY AUDIT PARTY, CIT(PREDECESSOR) AND CIT (AUDIT). THE PROCEEDINGS W ERE CLOSED AFTER SUCH VERIFICATIONS. 5.4. ASSESSEE HAS CHALLENGED THE 263 ACTION ON VARI OUS LEGAL ISSUES AND MERITS: (I) 263 PROCEEDINGS WERE DROPPED BY PREDECESSORS CI T AFTER VERIFICATION OF RECORD, AUDIT RECORD AND ASSESSES E XPLANATION. THE SUCCESSOR CIT CANNOT REVIEW HIS ORDER ON THE SAME I SSUES AND CONSIDER THE CONCLUDED PROCEEDINGS AS PENDING AND T HEN REVIEW THE EARLIER PROCEEDING U/S 263. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 27 (II) THE NOTICE WAS FOR VERIFYING WHETHER THE FDR I NTEREST OF RS. 7,57,91,533/- FROM EXPORT RECEIPT FOR MEETING EXPOR T CONTRACTUAL OBLIGATIONS IN SSS WAS INCLUDED IN INCOME OR NOT; T HERE IS NO SHOW CAUSE TO EXAMINE ABOUT ITS ELIGIBILITY U/S 10AA. TH E INCLUSION OF INCOME IN PROFITS HAS BEEN ACCEPTED, HOWEVER, NOW A DIRECTION IS GIVEN IN 263 ORDER BY SETTING IT ASIDE TO A.O. TO EXAMINE ITS ELIGIBILITY U/S 10AA. THUS AN ISSUE WHICH IS NOT RAISED IN THE 263 SHOW CAUSE NOTICE CANNOT BE SET ASIDE BY CIT. BESIDES ELIGIBI LITY U/S 10AA OF THE SSS UNIT AS A WHOLE HAS ALREADY BEEN DROPPED NOT ON LY BY PREDECESSOR BUT ALSO BY THE SUCCESSOR CIT. SO THIS DIRECTIONS O F SUCCESSOR CIT AND VERIFICATION IS UNTENABLE. (III) THE SUCCESSOR CIT WITHOUT VERIFYING RECORD IS SUED NOTICE TO THE ASSESSEE THAT 263 PROCEEDINGS ARE PENDING AND PASSE D THE IMPUGNED ORDER BY SETTING ASIDE TWO ISSUES FOR RE EXAMINATI ON BY AO. THUS, THE SHOW CAUSE ITSELF IS BAD IN LAW. (IV) THE CONTENTION OF LD. CIT THAT IT IS A CASE OF LACK OF INQUIRY BY A.O. IS NOT SUPPORTED BY RECORD AS ITS PERUSAL REVE ALS THAT NECESSARY EXPLANATIONS WERE ASKED AND FURNISHED BY ASSESSEE. IT EMERGES FROM THE ABOVE CHART OF PROCEEDINGS. 5.5. IT WILL BE DESIRABLE TO ADJUDICATE THE LEGAL ISSUES FIRST. IN THIS CASE THERE ARE TWO INCUMBENT CITS WHO HAVE EXAMINED THE 263 PROCEEDINGS. FIRST INCUMBENT CORRESPONDED WITH AO ; CIT(AUDIT); CONSID ERED RECORD; ASSESSEES EXPLANATION AND AUDIT CORRESPONDENCE. BA SED ON THE ENTIRETY OF FACTS ON RECORD HE HELD THE ASSESSEES EXPLANATION TO BE SATISFACTORY AND THEREAFTER RETURNED THE RECORD TO AO. THIS CLEARLY DEMONSTRATES THAT FIRST CIT CONCLUDED THE 263 PROCEEDINGS REQUIRING NO FURTHER INTERVENTION AND RETURNED THE RECORD ACCORDINGLY. IN OUR CONSIDERED VIEW LD. SUCCESSOR CIT ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 28 CAN NOT TAKE UP THE CLOSED 263 PROCEEDINGS ON THE SAME ISSUES AND REVIEW THE ORDER OF HER PREDECESSOR ON SAME ISSUES. THUS L OOKING AT THE LANGUAGE OF SEC. 263 AND CATENA OF JUDGMENTS CITED, SUCCESSOR CIT BECOMES FUNCTUS OFFICIO IN THIS REGARD AFTER THE EXERCISE CONDUCTED BY PREDECESSOR CIT. . THEREFORE WE HAVE NO HESITATION TO HOLD THAT THE 26 3 ORDER IS NOT SUSTAINABLE ON THESE LEGAL COUNTS. 5.6. ON MERITS ALSO WHEN THE ISSUE IS NOT MENTIONED IN 263 SHOW CAUSE NOTICE, ANY REVISIONAL ORDER IS BAD IN LAW ON THAT ISSUE. APROPOS THE FDR INTEREST ISSUE ALSO THE SHOW CAUSE NOTICE WAS TO VE RIFY WHETHER INTEREST INCOME WAS INCLUDED IN THE BOOKS OR NOT. ASSESSEE HAD DEMONSTRATED THIS ASPECT TO THE SATISFACTION OF AUDIT PARTY, CIT(AUDI T) AND PREDECESSOR CIT. IN THESE CIRCUMSTANCES, THE SET ASIDE FOR A NEW ISSUE I.E. ELIGIBILITY OF FDR INTEREST U/S 10AA CANNOT BE SUSTAINED. 5.7. THERE IS ANOTHER ANGLE TO IT. CIT HAD ISSUED A NOTICE FOR EXAMINING THE ELIGIBILITY OF SEC 10AA OF THE UNIT SSS, WHICH INCL UDES ALL THE ITEMS. THIS ISSUE HAS BEEN EXAMINED BY CIT AND SEC. 10AA ELIGIB ILITY HAS NOT BEEN DISTURBED IN 263 ORDER. THUS THE DIRECTION TO RE-EX AMINE ELIGIBILITY OF 10AA QUA THE FDR INTEREST HAS TO FAIL ON BOTH COUNTS I.E . IT IS NOT RAISED IN SHOW CAUSE NOTICE AND SEC. 10AA HAS BEEN NOT DISTURBED. 5.8. AS LONG AS THE AUDIT CORRESPONDENCE, LETTER OF CIT(AUDIT) AND PREDECESSOR CIT CORRESPONDENCE AND ORDER ARE AVAILA BLE ON RECORD, THEY BECOME PART OF RECORD. SUCCESSOR CIT CANNOT GLOSS O VER THE SAME AS IT IMPLIES NON PERUSAL OF RECORD AND NON APPLICATION O F MIND. THESE OMISSIONS VIOLATE THE 263 PROVISIONS. THEREFORE, WE ARE NOT I MPRESSED BY LD. DRS ARGUMENTS THAT SUCH CORRESPONDENCE HAS NO RELEVANCE TO THE ISSUE IN QUESTION. ITA 2730/DEL/2013 SATYA PRAKASH GUPTA VS. ITO 29 5.9. IN VIEW OF AFOREMENTIONED WE ARE UNABLE TO AGR EE WITH THE CONTENTIONS OF LD CIT(DR). 5.10. SINCE WE ARE QUASHING THE 263 ORDER ON OTHER LEGAL ISSUES AND MERITS, WE OFFER NO COMMENT ON THE ISSUE ABOUT RELEVANCY OF AUDIT OBJECTION IN 263 PROCEEDING, AS THE ISSUE OF RELEVANCE IS CONCLUDED WITH THE CONSIDERATION AND ORDER OF PREDECESSOR CIT. 5.11. WITH ABOVE OBSERVATIONS WE HAVE NO HESITATION TO HOLD THAT THE IMPUGNED 263 ORDER DESERVES TO BE QUASHED ON LAW AS WELL AS ON MERITS. 6. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 07-03-2014. SD/- SD/- ( T.S. KAPOOR ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07-03-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR