ULTRAMARINE & PIGMENTS LTD, MUMBAI V. CIT 7, MUMBAI

ITA 2844/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3807 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Opportunity of being heard; Additional depreciation; Prejudicial to interest
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) & SHRI SANDEEP GOSA IN (JM) I.T.A. NO. 2844/MUM/2013 (ASSESSMENT YEAR 2009-10) ULTRAMARINE & PIGMENTS LIMITED THIRUMALAI HOUSE PLOT NO. 101/102 SION MATUNGA ESTATE SCHEME NO. 6 ROAD NO. 29, SION EAST MUMBAI-400 022. VS. ACIT RANGE - 7(3) AAYAKAR BHAVAN 6 TH FLOOR M.K. ROAD NEW MARINE LINES MUMBAI-400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO.AAACU0718Q ASSESSEE BY SHRI HIRO RAI DEPARTMENT BY SHRI G.M. DOSS DATE OF HEARING 4.2 . 201 6 DATE OF PRONOUNCEMENT 10 . 08. 201 6 O R D E R PER SANDEEP GOSAIN, JUDICIAL MEMBER :- THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY LEARNED CIT U/S. 263 OF THE I.T. ACT ON T HE FOLLOWING GROUNDS:- THE GROUNDS OF APPEAL RAISED HEREIN ARE ALL WITHOUT PREJUDICE TO ONE ANOTHER: 1. THE LEARNED CIT WAS NOT JUSTIFIED IN INITIATING RE VISION PROCEEDINGS U/S 263 OF THE ACT. THE INITIATION OF THE REVISION PROC EEDINGS AS ALSO THE ORDER U/S 263 ARE ILLEGAL AND INVALID. 2. THE LEARNED CIT WAS NOT JUSTIFIED IN HOLDING TH AT' ... IT IS CLEAR THAT IF ANY PART OF PLANT/MACHINERY IS NOT USED IN MANUFACTURIN G ACTIVITY, SUCH A PART OF PLANT/MACHINERY DOES NOT QUALIFY FOR ALLOWANCE O F ADDITIONAL DEPRECIATION. HE HAS ALSO ERRED IN HOLDING THAT' .. . PRODUCTION OF POWER DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING FOR THE PURPOSE OF SEE: 32(1)(IIA) WHICH PROVIDES FOR A DDITIONAL DEPRECIATION'. 3. THE LEARNED CIT HAS FAILED TO FULLY APPRECIATE THE SUBMISSIONS MADE BEFORE HIM IN THIS REGARD. HE WAS NOT JUSTIFIED IN HOLDING THAT THE ORDER OF ULTRAMARINE & PIGMENTS LIMITED 2 THE LEARNED AO ALLOWING DEPRECIATION TO THE EXTENT OF RS. 1,65,04,000/- IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER EST OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE INCOME-TAX ACT, 1961. 4. THE LEARNED CIT WAS NOT JUSTIFIED IN HOLDING TH AT CONSIDERING PROFIT OF RS. 1,15,91,571/- FOR COMPUTATION OF INCOME U/S 10A WIT HOUT ENQUIRIES HAS RESULTED IN ERROR WITHIN THE MEANING OF SECTION 263 AND THAT THIS HAS ALSO CAUSED PREJUDICE TO THE REVENUE. HE HAS ERRED IN SE TTING ASIDE THIS ISSUE TO THE FILE OF THE AO. HE HAS GROSSLY ERRED IN NOT CON SIDERING AND NOT EVEN REFERRING TO THE BINDING DECISIONS OF THE JURISDICT IONAL HIGH COURT AND TRIBUNAL WHICH WERE RELIED UPON BEFORE HIM IN THIS REGARD. THE-APPELLANT CRAVES LEAVE TO ADD TO, TO ALTER OR T O AMEND THE ABOVE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF I NCOME SHOWING TOTAL INCOME OF RS. 33,429,990/- WAS FILED ON 26.9.2009. THE RE TURN WAS ACCOMPANIED BY AUDITED BALANCE SHEET AND RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 2.3.2011. SUBSEQUENTLY THE CASE WAS SELECTED UNDER CASS AND NOTICE U/S. 143(2) WAS ISSUED ON 18.8.2010. ULTIMATELY, AFTER C ONSIDERING THE CASE THE ASSESSMENT ORDER U/S. 143(3) WAS PASSED ON 20.12.20 11. LATER ON NOTICE U/S. 263 OF THE ACT WAS ISSUED VIDE SHOW-CAUSE LETTER DA TED 4/2/2013 AND REPLY OF THE ASSESSEE WAS SOUGHT. THE ASSESSEE FILED HIS REP LY BEFORE LEARNED CIT(A) AND LEARNED CIT AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, PASSED ORDER U/S. 263 OF THE ACT ON 15.2.2013. 3. AGGRIEVED BY THE ORDER OF LEARNED CIT U/S. 263 T HE PRESENT APPEAL HAS BEEN FILED BEFORE US ON THE GROUNDS MENTIONED HEREI NABOVE. GROUND NO. 1 4. GROUND NO. 1 RELATES TO THE JURISDICTION AND MAI NTAINABILITY OF THE ORDER U/S. 263 OF THE ACT THEREFORE WE THOUGHT IT FIT TO DECIDE THE SAID ISSUE FIRSTLY. BEFORE US, LEARNED AR REPRESENTING THE ASSESSEE REF ERRED TO THE SHOW CAUSE NOTICE ISSUED BY CIT(A) AND THE OPERATIONAL PORTION OF THE NOTICE DATED 04.02.2013 IS REPRODUCED AS UNDER: A PERUSAL OF RECORDS SHOWS THAT THE ASSESEE HAD CL AIMED AND WAS ALLOWED DEPRECIATION OF RS.11,05,66,720/ - WHICH IN CLUDED ADDITIONAL ULTRAMARINE & PIGMENTS LIMITED 3 DEPRECIATION OF RS.1,65,04,000/- ON 'WINDMILL'. HOW EVER, THIS 'WINDMILL' WAS NOT USED IN ANY MANUFACTURING ACTIVITY. THEREFO RE, THIS DO S NOT QUALIFY FOR ADDITIONAL DEPRECIATION. ALSO, THE AS O E HAD CLAIMED DEDUCTION OF PROFIT DERIVED FROM THE UNIT LAPIZ DIGITAL SERVI CES OF RS.4,74,76,455/- OUT OF WHICH PROFIT OF RS.1,15,91,571/- WAS NOT DER IVED FROM EXPORT OF ARTICLES SUCH AS SUNDRY RECEIPTS OF RS.1,08,68,525/ - AND SUNDRY BALANCE WRITTEN BACK WAS RS.7,23,046/-. THESE RECEIPTS ARE NOT DERIVED FROM EXPORT OF ARTICLE, THINGS OR COMPUTER SOFTWARE. NO DEDUCTION IS ALLOWABLE ON THIS INCOME U/S.10A. 2. HAVING REGARD TO MATERIAL ON RECORD, IT IS CLEAR THAT THE ASSESSMENT ORDER DATED 20.12.2011 PASSED BY THE ASSESSING OFFI CER FOR A.Y. 2009-10 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE BECAUSE INCOME IS UNDER ASSESSED BY AN AMOUNT OF RS.1,15,91,571/-. TH EREFORE, IT IS CLEAR THAT PROVISIONS OF LAW AS CONTAINED U/S 263 OF THE INCOME TAX ACT,1961 ARE CLEARLY ATTRACTED TO THE FACTS OF THIS CASE. 5. LD. AR FURTHER SUBMITTED THAT AFTER RECEIVING TH E AFORE MENTIONED SHOW CAUSE NOTICE, THE ASSESSEE FILED DETAIL REPLY WHICH IS ME NTIONED IN PAGE NO. 03 TO 05 OF THE PAPER BOOK AND THE SAME IS REPRODUCED BELOW FOR REF ERENCE. YOUR HONOUR HAS FIRST RAISED THE ISSUE OF THE ALLO WANCE OF ADDITIONAL DEPRECIATION OF RS. 1,65,04,000/- ON WINDMILL. YOUR HONOUR HAS STATED: HOWEVER, THIS 'WINDMILL' WAS NOT USED IN ANY MANUF ACTURING ACTIVITY. THEREFORE, THIS DOES NOT QUALIFY FOR ADDITIONAL DEP RECIATION'. AT THE OUTSET, YOUR HONOUR'S KIND ATTENTION IS DRAW N TO SECTION 32(1)(IIA) WHICH READS AS FOLLOWS: 'IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER T HAN SHIPS AND AIRCRAFT) ,WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTU RE OR PRODUCTION OF ANY ARTICLE OR THING ... '. IT IS SUBMITTED THAT THE ONLY REQUIREMENT OF THE SE CTION IS THAT THE ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THIS CONDITION IS CLEARLY SATISFI ED BY THE ASSESSEE WHICH IS ENGAGED IN THE MANUFACTURE OF PIGMENTS, HOPE, SURFA CTANTS, ETC. A CLOSE READING OF THE PROVISION BRINGS OUT THAT THERE IS N O REQUIREMENT THAT THE WINDMILL SHOULD BE USED IN ANY MANUFACTURING ACTIVI TY. WITHOUT PREJUDICE, IT IS SUBMITTED THAT THE POWER S ITUATION IN TAMIL NADU IS NOT TOO SATISFACTORY. THIS IS THE REASON WHY THE AS SESSEE HAS COMMISSIONED ITS OWN WINDMILLS SO AS TO BE ABLE TO USE POWER FOR THE PURPOSES OF ITS OWN MANUFACTURING ACTIVITY. LOOKED AT FROM THIS ANGLE, THE WINDMILLS ARE USED IN THE MANUFACTURING ACTIVITY. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTE D THAT A WINDMILL WHICH GENERATES POWER IS ITSELF ENGAGED IN THE MANUFACTUR E OR PRODUCTION OF AN ARTICLE OR THING. ULTRAMARINE & PIGMENTS LIMITED 4 IN THE LIGHT OF THE ABOVE, IT IS SUBMITTED THAT THE ' ASSESSEE CLEARLY SATISFIES THE CONDITIONS OF SECTION 32(1)(IIA) AND IS ENTITLE D TO THE SAID CLAIM OF ADDITIONAL DEPRECIATION IN RESPECT OF WINDMILLS. FURTHER, YOUR HONOUR HAS STATED THAT THE PROFIT OF RS. 1,15,91,5711- COMPRISING OF SUNDRY RECEIPTS OF RS. 1,08,68,525/- AND SUNDRY BALANCES WRITTEN BACK OF RS. 7,23,046/- IS NOT DERIVED FROM EXPORT AND IS THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S 10A. IN THIS REGARD, IT IS SUBMITTED THAT THE SUNDRY REC EIPTS OF RS. 1,08,68,525/- COMPRISE OF THE FOLLOWING 2 ITEMS: 1. EXCHANGE FLUCTUATION GAIN RS. 1,07,60,887/- 2. NOTICE PAY RECOVERED RS. 1,07,638/- RS. 1,08,68,525/- COPIES OF THE LEDGER ACCOUNTS OF THESE 2 ITEMS ARE ENCLOSED AT PAGES 1 TO 19 OF THE PAPER BOOK. SIMILARLY, SUNDRY BALANCES WRITTEN BACK OF RS. 7,23 ,046/- COMPRISE OF PROVISIONS MADE FOR EXPENSES WHICH WERE FOUND TO BE IN EXCESS AND HENCE WRITTEN BACK. THE RELEVANT COPY OF THE LEDGER ACCOU NT IS ENCLOSED AT PAGE 20 OF THE PAPER BOOK. AS FAR AS EXCHANGE FLUCTUATION GAIN IS CONCERNED, I T IS SUBMITTED THAT THIS IS NOTHING BUT AN ACCRETION TO THE SALES MADE BY TH E ASSESSEE. IT IS CLEARLY DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE. IT AT ALL ANY SUPPORT IS REQUIRED IN THIS REGARD, RELIANCE IS PLACED UPON TH E DECISION OF THE BOMBAY HIGH COURT REPORTED IN 330 ITR 175, CIT V GEM PLUS JEWELLERY INDIA LTD. THIS DECISION CLEARLY SAYS THAT FOREIGN EXCHANGE FL UCTUATION IS ENTITLED TO THE DEDUCTION U/S 10A. A COPY OF THE SYNOPSIS OF TH IS DECISION IS ENCLOSED AT PAGES 21 TO 23 OF THE PAPER BOOK. THE OTHER 2 IT EMS OF NOTICE PAY AND SUNDRY BALANCES WRITTEN HACK ARE NOTHING BUT A REDU CTION IN THE EXPENDITURE. THEY ARE THEREFORE, CLEARLY DERIVED FR OM THE EXPORT OF SOFTWARE. IN REGARD TO THE SUNDRY BALANCES WRITTEN BACK, RELIANCE IS PLACED UPON THE DECISION OF THE BOMBAY BENCH OF THE TRIBUN AL IN 19 ITR 361, LARSEN & TOUBRO INFOTECH LTD. V DCIT WHICH HAS HELD THAT PROVISIONS WRITTEN BACK QUALIFY FOR DEDUCTION U/S 10A. A COPY OF THE SYNOPSIS OF THIS DECISION IS ENCLOSED AT PAGES 24 TO 26 OF THE PAPER BOOK. 5. AFTER REFERRING THE AFOREMENTIONED FACTS, LEARNE D AR SUBMITTED THAT IN THE SHOW-CAUSE NOTICE LEARNED CIT HAS MENTIONED THA T THE ASSESSEE HAD CLAIMED AND WAS ALLOWED DEPRECIATION OF RS. 11,05,6 6,720/- WHICH INCLUDES ADDITIONAL DEPRECIATION OF RS. 1,65,04,000/- ON WI NDMILL. HOWEVER AS PER LEARNED CIT THIS WINDMILL WAS NOT USED IN ANY MANUF ACTURING ACTIVITY AND ULTRAMARINE & PIGMENTS LIMITED 5 THEREFORE THIS DOES NOT QUALIFY FOR ADDITIONAL DEPR ECIATION. IN ADDITION IT WAS SUBMITTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION O N PROFIT DERIVED FROM THE UNIT LAPIZ DIGITAL SERVICES OF RS. 4,74,76,455/- OU T OF WHICH PROFIT OF RS. 1,15,91,571/- WAS NOT DERIVED FROM EXPORT OF ARTICL ES SUCH AS SUNDRY RECEIPTS OF RS. 1,08,68,525/- AND SUNDRY BALANCE WRITTEN BAC K WAS RS. 7,23,046/-. THESE RECEIPTS ARE NOT DERIVED FROM EXPORT OF ARTIC LE, THINGS OR COMPUTER SOFTWARE. THEREFORE NO DEDUCTION IS ALLOWABLE ON TH ESE INCOMES U/S. 10A OF THE ACT. WHEREAS, IN THE ORDER PASSED BY LEARNED CIT ON 15.2.2013 IT HAS BEEN MENTIONED THAT NO INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER THEREFORE THE ASSESSING OFFICER WAS DIRECTED TO EXAMINE THE I SSUE WHICH WAS THE SUBJECT MATTER OF NOTICE U/S. 263 AND DIRECTION WAS GIVEN T O CONDUCT THE REQUIRED INQUIRY ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS RESPECT THE LEARNED AR SUBMITTED THAT IN CASE NOTICE IS GIVEN BY LEARNE D CIT ON ONE GROUND AND ORDER PASSED IS BASED ON ANOTHER GROUND THEN THE OR DER PASSED BY LEARNED CIT U/S. 263 IS LIABLE TO BE SET ASIDE AND IN THIS RESP ECT LEARNED AR RELIED UPON THE FOLLOWING JUDGMENTS :- 1. STAR INDIA LTD. VS. ADDITIONAL COMMISSIONER OF I NCOME TAX REVISION --VALIDITY REVISION ON A GROUND DIFFERE NT FROM THE ONE STATED IN NOTICE ASSESSMENT SOUGHT TO BE REVISED ON THE GROU ND THAT WHILE ALLOWING DEDUCTION UNDER S.80HHF THE EXPENSES INCURRED IN FO REIGN CURRENCY FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA HAVE NOT BEEN REDUCED FROM EXPORT TURNOVER AND TOTAL TURNOVER--- HOWEVER, REVISION DO NE ON THE GROUND THAT THE MATTER NEEDS TO BE EXAMINEDIN ANY CASE, THE CIT HA S NOT GIVEN ANY FINDINGS AGAINST THE ASSESSE AT ALL AND YET HE HAS PROCEEDED TO DIRECT THE AO TO EXAMINE THE ISSUE AGAIN REVISION WAS NOT THEREFORE SUSTAIN ABLE. THE SHOW-CAUSE NOTICE IS ISSUED ON THE GROUND THA T THE COMPUTATION IS INCORRECT BUT THE REVISION IS EXERCISED ON THE GROU ND THAT THE MATTER WAS NOT EXAMINED ON MERITS. THE REASON WHICH CAN BE INFERRE D FROM THE REVISION ORDER UNDER SECTION 263 (THAT THE AO HAS NOT VERIFIED THE ISSUE) IS DIFFERENT FROM THE REASON SET OUT IN THE SHOW-CAUSE NOTICE (THAT SUCH EXPENSES CANNOT BE ULTRAMARINE & PIGMENTS LIMITED 6 ALLOWED). IF A GROUND OF REVISION IS NOT MENTIONED IN THE SHOW-CAUSE NOTICE, IT CANNOT BE MADE THE BASIS OF THE ORDER FOR THE REASO N THAT THE ASSESEE WOULD HAVE HEAD NO OPPORTUNITY TO MEET THE POINT. FOR THI S SHORT REASON, THEREFORE, THE REVISION PROCEEDINGS ARE NOT LEGALLY SUSTAINABL E ON THIS ISSUE, I.E., THE NOTICE IS ISSUED ON THE GROUND OF INADMISSIBILITY O F DEDUCTION, AND THE REVISION IS DONE ON THE GROUND THAT HE MATTER NEEDS TO BE EX AMINED EVEN AS THERE ARE NO FINDINGS ABOUT SHORTCOMINGS IN THE PROCEEDINGS B EFORE THE AO. 2. B.S. SANGWAN VS. ITO A REVISIONAL ORDER CAN ONLY BE PASSED ON GROUND ON WHICH ASSESSEE HAS BEEN GIVEN REASONABLE OPPORTUNITY OF BEING HEARD, A ND IT IS NOT OPEN TO COMMISSIONER TO SET OUT ONE REASON FOR REVISING ORD ER BUT ACTUALLY REVISE ORDER ON SOME OTHER GROUND. SECTION 263 OF THE INCOME TAX ACT,1961- REVISION O F ORDER PREJUDICIAL TO INTEREST OF REVENUE (SCOPE OF )- ASSESSMENT YEAR 20 07-08- WHETHER A REVISIONAL ORDER CAN ONLY BE PASSED ON GROUND ON WHICH ASSESSE E HAS BEEN GIVEN REASONABLE OPPORTUNITY OF BEING HEAR, AND IT IS NOT OPEN TO COMMISSIONER TO SET OUT ONE REASON FOR REVISING ORDER BUT ACTUALLY REVISE ORDER ON SOME OTHER GROUND- HELD, YES- WHETHER, THEREFORE, WHERE COMMIS SIONER INITIATED REVISIONAL PROCEEDINGS PROPOSING TO MAKE CERTAIN DISALLOWANCES AND ADDITION, HE COULD NOT PASS IMPUGNED ORDER UNDER SECTION 263 ON GROUND OF LACK OF PROPER ENQUIRIES MADE BY ASSESSING OFFICER IN COURSE OF AS SESSMENT HELD, YES. [PARA 10] [IN FAVOUR OF ASSESSEE] 3. VESUVIUS INDIA LTD. VS. COMMISSIONER OF INCOME TAX SECTION 263 OF THE INCOME TAX ACT,1961-REVISION OF ORDERS PREJUDICIAL TO INTEREST OF REVENUE-ASSESSMENT YEAR 2002-03-WHETHER WHEN REVISION ORDER IS PASSED ON GROUND OTHER THAN GROUNDS FOR WHICH RE VISION PROCEEDINGS ARE INITIATED, SAME IS NOT SUSTAINABLE IN LAW-HELD, YES -COMMISSIONER INVOKED HIS JURISDICTION UNDER SECTION 263 BY ISSUING A SHO W CAUSE NOTICE ON GROUND THAT INCOME ON ACCOUNT OF REPAIRS OF MACHINE RY AND CONTRACT ULTRAMARINE & PIGMENTS LIMITED 7 RECEIPTS WAS REQUIRED TO BE ADDED TO INCOME ASSESSE D IN HANDS OF ASSESSEE- SUBSEQUENTLY HE PASSED A REVISIONAL ORDER ON GROUND THAT ASSESSING OFFICER DID NOT MAKE NECESSARY VERIFICATION ABOUT AFORESAID TRANSACTIONS- WHETHER SINCE THERE WAS CHANGE IN REASONING, HAVING REGARD TO AFORESAID LEGAL POSITION MENTIONED ABOVE, IMPUGNED REVISIONAL ORDER WAS NOT SUSTAINABLE- HELD, YES [IN FAVOUR OF ASSESSEE] THE IMPUGNED REVISION ORDER IS INDEED NOT SUSTAINA BLE IN LAW FOR THE VERY ELEMENTARY REASON THAT THE GROUNDS ON WHICH ORDER W AS SUBJECTED TO REVISION ARE DIFFERENT, VIS--VIS THE GROUNDS ON WH ICH REVISION PROCEEDINGS WERE ACTUALLY INITIATED. A PLAIN READING OF IMPUGNE D REVISION ORDER CLEARLY SHOWS THAT THE CONCLUSIONS DRAWN IN THE REVISION PR OCEEDINGS ARE MATERIALLY DIFFERENT THAN THE REASONS FOR WHICH REVISION PROCE EDINGS WERE INITIATED. 6. ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENT ATIVE RELIED UPON THE ORDER PASSED BY LEARNED CIT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD. AT THE VERY OUTSET WE HAVE ANYALISED THE SHOW-CAUSE NO TICED ISSUED BY LEARNED CIT AND SUBSEQUENTLY ORDER PASSED BY LEARNED CIT WH ICH READS AS UNDER :- IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE AOS O RDER ALLOWING FOR SUCH DEPRECIATION WITHOUT ENQUIRY HAS RESULTED IN ERROR WITHIN THE MEANING OF SECTION 263 OF THE I.T. ACT,1961; THIS ERROR HAS DI FFERENTLY CAUSED PREJUDICE TO THE REVENUE BECAUSE OF ALLOWANCE OF EXCESS DEPRE CIATION TO THE EXTENT OF RS.1,65,04,000/-. ACCORDINGLY, IT IS HELD THAT ORDE R OF THE AO IN THIS REGARD IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE IN TEREST OF REVENUE WITHIN THE MEANING OF SECTION 263 OF I.T. ACT,1961. 7. IN RESPECT OF OTHER ITEMS VIZ. PROFIT OF RS.1,15 ,91,571/-, THE AO HAS ALLOWED DEDUCTION U/S 10A WITHOUT CONDUCTING ANY EN QUIRY. THE ASSESSEES REPLY IN THIS REGARD AS CONTAINED IN THE WRITTEN REPLY DATED 12.2.2013 IS CAREFULLY CONSIDERED. HOWEVER, IT IS A FACT THAT THE AO HAS NOT CONDUCTED ANY ENQUIRY IN RESPECT OF THESE ITEMS BEF ORE ALLOWING DEDUCTION U/S 10A. IN VIEW OF THIS, AFTER HAVING CONSIDERED T HE MATERIAL ON RECORD AND ASSESSEES SUBMISSIONS, I AM OF THE CONSIDERED VIEW THAT THESE ITEMS HAVE BEEN CONSIDERED FOR EXEMPTION U/S 10A BY THE A .O. WITHOUT CONDUCTING THE ENQUIRIES WHICH ARE PRIMA-FACIE WARR ANTED ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. IT IS TRITE LAW THAT LA CK OF ENQUIRY RESULTS IN ERROR WITHIN THE MEANING OF SEC.263 OF THE I.T. ACT ,1961. IT IS A FACT THAT CONSIDERING PROFIT OF RS.1,15,91,571/- FOR COMPUTAT ION OF INCOME U/S.10A WITHOUT ENQUIRIES HAS RESULTED IN ERROR WITHIN THE MEANING OF SECTION 263 ULTRAMARINE & PIGMENTS LIMITED 8 OF THE I.T. ACT,1961. THIS HAS ALSO CAUSED PREJUDIC E TO THE REVENUE INASMUCHAS IT HAS RESULTED IN GRANTING EXEMPTION WI THOUT ENQUIRIES WARRANTED ON FACTS AND CIRCUMSTANCES OF THE CASE. A CCORDINGLY, THE ORDER THE AO IN RESPECT OF PROFIT OF RS.1,15,91,571/- IS ALSO SET ASIDE TO THE FILE OF THE AO. 8. THE AO IS DIRECTED TO EXAMINE ISSUES WHICH ARE S UBJECT MATTER OF NOTICE U/S.263 AND CONDUCT ENQUIRIES REQUIRED ON FA CTS AND CIRCUMSTANCES OF THE CASE. THEREAFTER, THE AO IS DIRECTED TO TAKE THE DECISION AS PER LAW. IN NUTSHELL, THE ORDER PASSED BY THE AO IS SET ASID E TO THE FILE OF THE AO FOR CONSIDERING THE ISSUES WHICH ARE SUBJECT MATTER OF NOTICE U/S.263 AFRESH AND TAKE DECISION AS PER LAW. FROM THE PERUSAL OF BOTH SHOW-CAUSE NOTICE AS WELL AS FINDINGS RECORDED BY LEARNED CIT WHILE PASSING THE ORDER U/S. 263, WE HA VE NOTICED THAT THE GROUNDS TAKEN BY LEARNED CIT WHILE ISSUING SHOW-CAU SE NOTICE IS WITH REGARD TO THE DISALLOWANCE BUT IN THE FINAL ORDER PASSED U /S. 263, THE LEARNED CIT HAS CATEGORICALLY MENTIONED THAT THE ASSESSING OFFICER HAS NOT CARRIED OUT ANY INQUIRY THEREFORE DIRECTION WAS GIVEN TO CARRY OUT NECESSARY INQUIRY IN THIS REGARD. WE FIRST OF ALL REFERRED TO THE JUDGMENT PA SSED BY THE ITAT, MUMBAI BENCH IN THE CASE OF STAR INDIA LTD. (SUPRA), WHERE IN IT HAS BEEN CATEGORICALLY HELD THAT WHEN THE SHOW-CAUSE NOTICE IS ISSUED ON T HE GROUND THAT THE COMPUTATION IS INCORRECT BUT THE REVISION IS EXERCI SED ON THE GROUND THAT THE MATTER WAS NOT EXAMINED ON THE MERITS. THE REASON W HICH CAN BE INFERRED FROM THE REVISION ORDER U/S 263 IS DIFFERENT FROM THE RE ASON SET OUT IN THE SHOW CAUSE NOTICE AND THEREFORE IN THAT CASE IT WAS HELD THAT IF A GROUND OF REVISION IS NOT MENTIONED IN THE SHOW-CAUSE NOTICE, THEN IT CANNOT BE MADE THE BASIS OF THE ORDER FOR THE REASON THAT ASSESSEE WOULD HAVE H AD NO OPPORTUNITY TO MEET THE POINT. HONBLE ITAT DELHI BENCH IN THE CASE OF B.S. SANGWA N VS. ITO (SUPRA) HAS ALSO CATEGORICALLY HELD THAT THE COMMISSIONER S TARTED BY POINTING OUT, THAT HE SAW AS, GLARING ILLEGALITIES IN THE ASSESSMENT O RDER, WHICH WAS SUBJECTED TO REVISION PROCEEDINGS, BUT WHAT HE CONCLUDED WAS THA T THE SAID ASSESSMENT ORDER WAS PASSED WITHOUT MAKING PROPER REQUISITE A ND DESIRED INQUIRIES. THEREFORE, THE HONBLE ITAT HAS HELD IN THE ABOVE C ITED CASE THAT A REVISION ORDER CAN ONLY BE PASSED ON THE GROUND ON WHICH THE ASSESSEE HAS BEEN GIVEN ULTRAMARINE & PIGMENTS LIMITED 9 A REASONABLE OPPORTUNITY OF BEING HEARD, AND IT IS NOT OPEN TO THE COMMISSIONER TO SET OUT ONE REASON GROUND FOR REVIS ING THE ORDER BUT ACTUALLY REVISE THE ORDER ON SOME OTHER GROUND. 8. CONSIDERING THE OTHER JUDGMENTS RELIED UPON BY L EARNED AR, WE FIND THAT THE GROUNDS MENTIONED BY LEARNED CIT IN SHOW-CAUSE NOTICE ARE DIFFERENT AND THE ORDER PASSED BY LEARNED CIT U/S. 263 IS BASED O N ANOTHER GROUND AND THEREFORE THE ASSESSEE COULD NOT GET OPPORTUNITY TO EXPLAIN THE POINT RECORDED AT THE TIME OF PASSING THE FINAL ORDER. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENTS WHICH ARE BASED ON THE FACTS WHICH ARE SI MILAR TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE ORDER PASSED BY LEAR NED CIT U/S. 263 IS BAD IN LAW AND NOT SUSTAINABLE IN LAW. THEREFORE THE SAME IS QUASHED. 9. EVEN, OTHERWISE ON THE MERITS OF THE CASE, THE L D. CIT(A) HAS HELD THAT THIS WINDMILL WAS NOT USED IN ANY MANUFACTURING A CTIVITY. THEREFORE AS PER CIT THIS DOES NOT QUALIFY FOR ADDITIONAL DEPRECIATI ON. IN THIS RESPECT WE ARE OF THE CONSIDERED VIEW THAT AS PER PROVISION OF SECTIO N 32(1)(IIA) WHICH READS AS UNDER: IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER T HAN SHIPS AN AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING... FROM THE AFORE MENTIONED READING WE FIND THAT THE ONLY REQUIREMENT OF SECTION IS THAT THE ASSESSEE SHOULD BE ENGAGED IN T HE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THIS CONDITI ON IS CLEARLY SATISFIED BY THE ASSESSEE WHO IS ENGAGED IN THE MANUFACTURE OF PIGME NTS, HDPE ETC. A CLOSE READING OF THE PROVISION BRINGS OUT THAT THERE IS N O REQUIREMENT THAT THE WINDMILL SHOULD BE USED IN ANY MANUFACTURING ACTIVI TY. HOWEVER, A WINDMILL WHICH GENERATES POWER IS ITSELF ENGAGED IN THE MANU FACTURING OF PRODUCTION OF AN ARTICLE OR THING. WE FOUND SUPPORT FROM THE JUDG EMENT RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED BEARING CO. LTD. VS. ULTRAMARINE & PIGMENTS LIMITED 10 COMMISSIONER OF INCOME-TAX 286 ITR 341(BOM) AND FRO M THE JUDGEMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME TAX VS. ATLAS EXPORT ENTERPRISE 373 ITR 414 (MAD). THEREFOR E, WHILE RELYING UPON THE JUDGEMENT, WE HOLD THAT THE ASSESSEE CLEARLY SATISF IED THE CONDITIONS OF SECTION 31(1)(IIA) AND IS ENTITLED TO THE CLAIM OF ADDITION AL DEPRECIATION IN RESPECT OF WIND MILLS. SINCE WE HAVE DECIDED THE GROUND NO. 1 WHICH WAS ON THE POINT OF JURISDICTION REGARDING PASSING THE ORDER U/S. 263 A ND GIVEN DETAILED FINDINGS THAT THE ORDER U/S. 263 ITSELF IS NOT MAINTAINABLE, THEREFORE THERE IS NO NEED TO DEAL WITH THE OTHER ISSUES. 10. IN THE RESULT NET RESULT, APPEAL IS ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE OPEN COUR T ON 10.8.2016. SD/- SD/- (JASON P. BOAZ) (SANDEEP GOSA IN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 10/8/2016 PS. ASHWINI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI