SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA, MUMBAI V. CIT -3, MUMBAI

ITA 3488/MUM/2012

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7384 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY
• Keywords: Revision of order; Depreciation; Opportunity of being heard; Rule of consistency; Bad and doubtful debts; Provision of bad debts
• Section: 143(3); 142(1); 80HHC; 263; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER I.T.A. NO.3488/MUM/2012 (ASSESSMENT YEAR: 2007-08) I.T.A. NO.3290/MUM/2014 (ASSESSMENT YEAR: 2007-08) I.T.A. NO.3380/MUM/2016 (ASSESSMENT YEAR: 2008-09) I.T.A. NO.4111/MUM/2013 (ASSESSMENT YEAR: 2008-09) M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA, 4 TH FLOOR, CORPORATE ACCOUNTS DEPARTMENT, MSME DEVELOPMENT CENTRE, C- 11, G BLOCK, BANDRA KURLA COMPLEX (EAST), MUMBAI-400051 PAN : AABCS 3480N VS. COMMISSIONER OF INCOME- TAX-3, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 APPELLANT RESPONDENT APPELLANT BY : SHRI RAKESH JOSHI (AR) RESPONDENT BY : SHRI R. MANJUNATHA SWAMY (CIT-DR) DATE OF HEARING : 01.07.2019 DATE OF PRONOUNCEMEN T : 17.07.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER 1. THIS GROUP OF FOUR APPEALS BY ASSESSEE OUT OF WHICH TWO APPEALS CHALLENGING THE ORDER PASSED UNDER SECTION 263 BY LD COMMISSIONER OF INCOME TAX (CIT) FOR ASSESSMENT YEAR (AY) 2007-08 A ND 2008-09 AND REMAINING TWO APPEALS AGAINST THE ORDER GIVING EFFE CT BY ASSESSING OFFICER. IN ALL APPEALS, THE ASSESSEE HAS RAISED CE RTAIN COMMON GROUNDS OF I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 2 APPEAL, THEREFORE, WITH THE CONSENT OF PARTIES ALL APPEALS WERE CLUBBED, HEARD AND ARE DECIDED BY A CONSOLIDATED ORDER. FOR APPRECIATION OF FACTS WE ARE REFEREEING THE FACTS IN ITA NO. 3488/M/2015. 2. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) O N 30.12.2009. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R MADE ADDITION ON ACCOUNT OF BAD-DEBTS OF RS. 15.87 CRORE BESIDES OTH ER ADDITIONS AND DISALLOWANCES. THE LD. PCIT REVISED THE ASSESSMENT ORDER VIDE ORDER DATED 27.03.2012, THE LD. PCIT WHILE REVISING THE A SSESSMENT ORDER NOTED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS. 181,01,8 1,537/- ON ACCOUNT OF BAD-DEBTS WRITTEN OFF DURING THE PREVIOUS YEAR. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER ALLOWED THE CLAI M EXCEPT FOR AN AMOUNT OF RS. 15,87,92,163/- WHICH WAS DISALLOWED O N THE GROUND THAT BAD-DEBTS PERTAINS TO THE PERIOD PRIOR TO 01.04.200 1 WHEN THE INCOME OF ASSESSEE WAS NOT CHARGEABLE TO TAX. THE LD. PCIT FU RTHER TOOK HIS VIEW THAT THE ASSESSEE HAS NOT CONSIDERED BAD-DEBTS ALLO WED AS DEDUCTION WHILE ARRIVING AT THE YEAREND BALANCE. THE DEBIT BALANCE IN THE PROVISIONS FOR BAD-DEBTS AND DOUBTFUL DEBTS ACCOUNT CAN ONLY ARISE WHEN BAD-DEBTS IS MORE THAN THE CREDIT BALANCE, THE ENTIRE BAD-DEBTS WAS ALLOWED AS DEDUCTION TO THE ASSESSEE. THE QUESTION OF HAVING A DEBIT BALANCE IN THE PROVISIONS OF BAD-DEBTS AND DOUBTFUL DEBTS ACCOUNT DOES NOT ARISE AT ALL. THE LD. PCIT TREATED THE ORDER OF ASSESSING OFFICER DATED 30.12.2009 TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE HOLDING THAT I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 3 ASSESSING OFFICER NOT APPLIED HIS MIND ON THE ISSUE . THE LD. PCIT ON THE BASIS OF HIS ABOVE OBSERVATION ISSUED SHOW-CAUSE NO TICE UNDER SECTION 263 ON 07.02.2012 FOR PROPOSING TO REVISE THE ASSES SMENT ON THE SAID ISSUE. 3. THE ASSESSEE CONTESTED THE NOTICE BY FILING REPLY D ATED 21.02.2012. IN THE REPLY, THE LD. AR OF THE ASSESSEE STATED THAT THE A SSESSEE HAS WRITTEN OF BAD-DEBTS OF RS. 181,01,81,537/- AS IRRECOVERABLE I N THE ACCOUNTS AND CLAIMED DEDUCTION UNDER SECTION 36(1)(VII) IN THE R ETURN OF INCOME. THE ASSESSING OFFICER DISALLOWED BAD-DEBTS TO THE EXTEN T OF RS. 15,87,92,163/- ON TAKING VIEW THAT IT PERTAINS TO L OAN WHICH WERE OUTSTANDING PRIOR TO THE PREVIOUS YEAR 2001-02 I.E. DURING WHICH PERIOD, THE ASSESSEE WAS OUTSIDE THE TAX PURVIEW. THE CLAIM OF BAD-DEBT WRITTEN OF RS. 165,13,89,347/- WAS ALLOWED BY ASSESSING OFF ICER AFTER EXAMINING ALL THE CONDITION PRESCRIBED UNDER SECTION 369(1)(V II) R.W.S. 36(2) AND PROVISO TO SECTION 3691)(VII). THE ASSESSEE FURTHER STATED THAT THEY FULFIL ALL THE PRESCRIBED CONDITION UNDER SECTION 36(1)(VI I) R.W.S. 36(2) FOR CLAIMING SUCH DEDUCTION OF BAD-DEBTS WRITTEN OFF WH ICH WERE RIGHTLY ALLOWED. THE ASSESSEE FURTHER STATED THAT ASSESSEE IS PUBLIC FINANCIAL INSTITUTION AND THE ADVANCES WRITTEN OFF IN THE ACC OUNTS REPRESENT OUT OF ADVANCES. THUS, CLAUSE-C OF SECTION 36(1)(VII)(A) I S APPLICABLE TO THE ASSESSEE. THEREFORE , THE CLAIM OF BAD-DEBTS IN THE ASSESSEES CASE IS NO T AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE P ROVISO OF CLAUSE (VII). I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 4 THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONB LE SUPREME COURT IN CATHOLIC SYRIAN BANK LTD. VS. CIT IN (CIVIL APPEAL NO. 1143 OF 2011). IT WAS FURTHER STATED THAT THE PROVISION OF BAD-DEBTS AND DOUBTFUL DEBTS ALLOWED UNDER CLAUSE (VII)(A)(C) TO SECTION 36(1) H AS BEEN REDUCED AND CONSIDERED TO ARRIVE AT NET CREDIT OR DEBIT BALANCE IN THE ACCOUNT. THERE IS NO CREDIT BALANCE IN THE PROVISION FOR BAD-DEBTS AN D DOUBTFUL DEBTS, THEREFORE, THE ENTIRE BAD-DEBTS WRITTEN OFF IS ALLO WABLE AS DEDUCTION UNDER SECTION 36(1)(VII). IN SUPPORT, THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL IN STATE BANK OF TRAVANCORE VS. ADDL. CIT (ITA NOS. 465 & 466/COCH/1998). 4. THE ASSESSEE ALSO STATED IN ITS REPLY, THAT THE AS SESSMENT ORDER WAS PASSED UNDER SECTION 143(3) AFTER CALLING VARIOUS DETAILS INCLUDING DETAILS FOR BAD-DEBTS AND DOUBTFUL DEBTS WRITTEN OFF AND EXPLAI NED AS TO WHY IT SHOULD NOT BE ALLOWED VIDE NOTICE DATED 28.04.2009 UNDER SECTION 142(1). THE ASSESSEE VIDE ITS REPLY DATED 17.07.2009 FURNIS HED THE JUSTIFICATION FOR THE CLAIM OF BAD AND DOUBTFUL DEBTS WRITTEN OFF ALONG WITH THE LIST OF BAD-DEBTS WRITTEN OFF, VOUCHERS EVIDENCING ACTUAL W RITTEN OFF OF SUCH DEBTS AS WELL AS ITS EXPLANATION TO SUPPORT THE CLA IM FOR DEDUCTION IN RESPECT OF PROVISION OF BAD AND DOUBTFUL DEBTS UNDE R SECTION 36(1)(VII)(V) AND BAD DEBTS WRITTEN OFF UNDER SECTION 36(1)(VII). THE ASSESSING OFFICER AFTER EXAMINING THE FACTS, APPLICABILITY OF THE PRO VISION AND PROPER APPLICATION OF MIND ALLOWED THE BAD-DEBTS WRITTEN O FF TO THE EXTENT OF RS. I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 5 165,13,89,374/-. THE ASSESSING OFFICER ACCEPTED THE STAND OF ASSESSEE AFTER EXAMINATION AND SUBMISSION. THEREFORE, IT CAN NOT BE SAID THAT THE ASSESSING OFFICER HAS SUMMARILY ACCEPTED THE CLAIM OF ASSESSEE. THERE IS NO ERROR IN THE ASSESSMENT ORDER AND NO PREJUDICE I S CAUSED TO THE REVENUE AND HENCE, THE PROVISIONS OF SECTION 263 ARE NOT AP PLICABLE. AS THE ASSESSING OFFICER HAS TAKEN JUDICIAL VIEW, JUST BEC AUSE ANOTHER VIEWS IS POSSIBLE IT DOES NOT GIVE JURISDICTION FOR REVISION UNDER SECTION 263. THE ASSESSEE ALSO RELIED UPON THE DECISION OF MALABAR I NDUSTRIAL COMPANY [243 ITR 83(SC)] (SUPRA), CIT VS. GABRIEL INDIA LTD . [203 ITR 109 (SC)], ASHOK MANILAL THAKKAR VS. ACIT [279 ITR (AT) 143 (A HD.)], CIT VS. HONDA SIEL POWER PRODUCTS LTD. [194 TAXMAN 175 (DEL HI) AND CIT VS. VIKAS POLYMERS [194 TAXMAN 57 (DEL.)]. 5. THE ASSESSEE FURTHER STATED THAT AGAINST THE DISALL OWANCE OF BAD DEBTS TO THE EXTENT OF RS. 15.87 CRORE, THE ASSESSEE HAS FIL ED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONSIDERED THE CLAIM OF BAD DEBTS AND VIDE ITS ORDER DATED 10.03.2011 CONSIDERED THE CLAIM OF BAD DEBTS. THEREFORE, THE ORDER OF ASSESSING OFFICER SO FAR AS DEDUCTION CLAI MED OF BAD DEBTS IS CONSIDERED, GET MERGED WITH THE ORDER OF LD. CIT(A) . THEREFORE, THE PRESENT CASE IN TERM OF EXPLANATION (C) TO SECTION 263(1) REVISIONAL JURISDICTION CANNOT BE INVOKED BY EXERCISING POWER UNDER SECTION 263 OF THE ACT. TO SUPPORT HIS CONTENTION, THE ASSESSEE RE LIED ON THE DECISION OF I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 6 HONBLE BOMBAY HIGH COURT IN CIT VS. PAUL BROTHERS [216 ITR 548(BOM.)]. 6. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY LD. PCIT HOLDING THAT ON VERIFICATION OF ASSESSMENT PROCEEDING, IT WAS NOTIC ED BY HIM, THE ONLY ISSUE TO CONSIDER BY ASSESSING OFFICER WAS RELATING TO ALLOWABILITY OF BAD DEBTS PERTAINING TO PRIOR TO 01.04.2001. THE ASSESS ING OFFICER AFTER EXAMINING THE ISSUE AND SUBMISSION OF THE ASSESSEE CONCLUDED THAT BAD DEBTS OF RS. 15,87,92,163/- ARE NOT ALLOWABLE, WHIC H PERTAINS TO PRIOR TO 01.04.2001, WHEN THE INCOME OF ASSESSEE WAS NOT CHA RGEABLE TO TAX. ACCORDINGLY, BAD DEBTS AMOUNTING TO RS. 15,87,92,16 3/- WAS DISALLOWED OUT OF TOTAL CLAIM OF RS. 188.01 CRORE. THE ASSESSI NG OFFICER HAS NOT ENQUIRED INTO, VERIFIED OR MADE ANY ENQUIRY WITH RE GARD TO ALLOWABILITY OF BAD DEBTS UNDER CLAUSE (C) OF SECTION 36(1)(VII)(A) AS CLAIMED BY ASSESSEE BEFORE THE LD. PCIT. THE ASSESSMENT ORDER IS SILENT ON THAT ISSUE AND THAT THE ASSESSING OFFICER MERELY CONSIDERED THE ISSUE R EGARDING ALLOWABILITY OF BAD DEBTS PRIOR TO 01.04.2001. THE LD. PCIT TOOK HIS VIEW THAT ASSESSING OFFICER HAS NOT APPLIED HIS MIND AND HAS INCORRECTLY RESTRICTED THE DISALLOWANCE TOWARDS BAD-DEBTS TO AN AMOUNT OF RS. 15.87 CRORE AND NOT MAKING FURTHER DISALLOWANCE OF RS. 17.91 CRORE. SINCE THE SAME WAS ALREADY ALLOWED AS DEDUCTION IN ASSESSMENT YEAR 200 6-07, HENCE, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. THE LD. PCIT ALSO HELD THAT IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 7 2006-07, THE DEDUCTION OF RS. 17.91 CRORE WAS ALLOW ED UNDER SECTION 36(1)(VII)(A), WHICH AMOUNT IS NOT REDUCED BY ASSES SING OFFICER WHILE ALLOWING DEDUCTION FOR BAD DEBTS IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. PCIT FURTHER CONCLUDED THAT ASSESSING OFFICER HAS NOT RAISED ANY SPECIAL QUERY TO EXAMINE THE CLAIM, THUS, ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E WITHIN THE MEANING OF SECTION 263 AND DIRECTED THE ASSESSING OFFICER TO M AKE FRESH ASSESSMENT AFTER DETAILED VERIFICATION AND SUBMISSION OF ASSES SEE. AGGRIEVED BY THE ORDER OF LD. PCIT, THE ASSESSEE HAS FILED THE PRESE NT APPEAL BEFORE US. THE ASSESSEE HAS RAISED FOLLOWING CONCISE GROUNDS OF AP PEALS: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD COMMISSIONER OF INCOME TAX ERRED IN PASSING THE ORD ER UNDER SECTION 263 OF INCOME TAX ACT. THE APPELLANT PRAYS THAT THE ORDER OF LEARNED CIT PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, MAY BE CAN CELLED BEING VOID AB INITIO AND BAD IN LAW . (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD COMMISSIONER OF INCOME TAX ERRED IN HOLDING THAT TH E LEARNED AO WITHOUT APPLICATION OF MIND HAS INCORRECTLY ALLOWED THE CLA IM FOR BAD DEBTS WRITTEN OFF OF RS. 165,13,89,374/- FOR AY 2007-08 WITHOUT SETTI NG OFF OF RS. 17,91,12,770/- BEING PROVISION OF BAD DEBTS AND DOU BTFUL DEBTS ALLOWED U/S 36(1)(VIIA) IN THE PRECEDING ASSESSMENT YEAR AND TH EREBY ERRED IN SETTING ASIDE THE ASSESSMENT AND DIRECTING THE AO TO MAKE FRESH A SSESSMENT AND REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, AND THE RULE MADE THEREUNDER. 7. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES A ND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW THAT THE ASSISTANCE OF LD. REPRESENTATIVE OF I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 8 THE PARTIES. THE LD. AR OF THE ASSESSEE SUBMITS THA T THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE DETAILED IN VESTIGATION AND RAISED SUFFICIENT ENQUIRY. THE ASSESSING OFFICER VIDE ITS NOTICE UNDER SECTION 142(1) DATED 24.08.2009 RAISED VARIOUS ENQUIRIES IN CLUDING CLAIM OF BAD AND DOUBTFUL DEBTS WRITTEN OFF ALONG WITH THE REASO NS TO SHOW AS TO WHY IT SHOULD BE ALLOWED ALONG WITH THE NECESSARY EVIDENCE AND SO THAT DEBTORS HAVE ACTUALLY BEEN WRITTEN OFF IN THE ACCOUNTS. THE DETAILS OF BAD-DEBTS RECOVERED AND THE ORDER IN WHICH THE CLAIMS HAVE BE EN OFFERED FOR TAXATION AND NO CLAIM AS DEDUCTION UNDER SECTION 36 (1)(VII). THE COPY OF NOTICE DATED 28.04.2009 IS PLACED ON RECORD. THE AS SESSING OFFICER FURTHER VIDE NOTICE DATED 25.06.2009 AGAIN REQUIRED NECESSARY DETAILS REGARDING DEDUCTION UNDER SECTION 36(1)(VII)(A) AN D 36(1)(VIII) THE ASSESSEE VIDE ITS REPLY DATED 02.06.2009 IN RESPONS E TO THE NOTICE UNDER SECTION 142(1) DATED 28.04.2009 FURNISHED THE DETAI LS TO THE ASSESSING OFFICER ALONG WITH NOTE ON THE CLAIM OF BAD DEBTS W RITTEN OFF AND PROVISION FOR BAD AND DOUBTFUL DEBTS ALONG WITH THE LIST OF BAD-DEBTS WRITTEN OFF AND VOUCHERS DATED 31.03.2007 EVIDENCIN G THE ACTUAL WRITE OFF SUCH DEBTS IN THE ACCOUNTS OF ASSESSEE. THE ASSESSI NG OFFICER AFTER CONSIDERING THE DETAILS FURNISHED BY ASSESSEE PASSE D THE ASSESSMENT ORDER. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE DISALLOWANCE OF RS. 15.87 CRORE ON ACCOUNT OF BAD D EBTS UNDER SECTION 36(1)(VIII). AGAINST THE DISALLOWANCE, THE ASSESSEE FILED APPEAL BEFORE THE I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 9 LD. CIT(A) ON THE DISALLOWANCE MADE BY ASSESSEE. TH E ASSESSING OFFICER PASSED THE ASSESSMENT ORDER AFTER FULL SATISFACTION OF THE CASE. AS THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) ON SIMILAR ISSUE, THEREFORE, THE LD. PCIT WAS PRECLUDED FROM REVISING THE ASSESS MENT ORDER. THE LD. AR SUBMITS THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAS TAKEN ONE OF THE POSSIBLE VIEWS. THEREFORE, THE ASSESSMENT ORDER WAS NOT ERRONEOUS. THE TWIN CONDITION AS PROVIDED UNDER SECTION 263 OF THE ACT WHEN THE ORDER IS ERRONEOUS IN SO FAR AS PREJUD ICIAL TO THE INTEREST OF REVENUE ARE NOT SATISFIED. IN SUPPORT OF HIS SUBMIS SION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF MALABAR INDUST RIAL COMPANY LTD. (SUPRA), DECISION OF HONBLE MUMBAI HIGH COURT IN C IT VS. GABRIEL INDIA LTD. (SUPRA). 8. ON THE PRINCIPLE OF MERGER, THE LD. AR OF THE ASSES SEE RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. PA UL BROTHERS (SUPRA), CIT VS K SERA SERA PRODUCTIONS LTD ( 374 ITR 530 BO M) AND GUJARAT HIGH COURT IN CIT VS NIRMA CHEMICALS WORKS P. LTD ( 309ITR 67 GUJ). 9. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LD. PCIT. THE LD. DR SUBMITS THAT THE ASSESSING OFFICER HAS NOT DISCUSSED THE ISSUE IN DE TAILS WHILE PASSING THE ASSESSMENT ORDER AND THAT THE ASSESSING OFFICER AFT ER RECEIVING THE REPLY OF ASSESSEE ALLOWED THE RELIEF TO THE ASSESSEE. THE REFORE, THE ORDER PASSED I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 10 BY ASSESSING OFFICER IS NOT ONLY ERRONEOUS BUT PREJ UDICIAL TO THE INTEREST OF REVENUE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE LD AR FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT AGAINST THE PARTIAL DISAL LOWANCES OF BED DEBTS THE ASSESSEE FILED APPEAL BEFORE FIRST APPELLATE AU THORITY AND THAT IN VIEW OF CLAUSE (C) OF EXPLAINATION-1 OF SECTION 263 THE LD PCIT WAS PRECLUDED TO REVISED THE ASSESSMENT ORDER ON THE SUBJECT MATT ER OF APPEAL. WE HAVE SEEN THAT THE ASSESSEE WHILE FILING THE REPLY TO TH E SHOW CAUSE NOTICE UNDER SECTION 263 HAS SPECIFICALLY BROUGHT THIS FAC T IN THE NOTICE OF LD PCIT, WHICH HAS BEEN DULY RECORDED BY LD PCIT IN HI S ORDER. HOWEVER, THE LD PCIT FAILED TO ADDRESS THE OBJECTION RAISED BY THE ASSESSEE THAT THEIR APPEAL ON THE SIMILAR ISSUE IS PENDING BEFORE LD CIT(A). THIS FACT WAS NOT DISPUTED BY LD. CIT-DR FOR THE REVENUE. THE LD. AR FOR THE ASSESSEE HAS FILED ON RECORD THE COPY OF THE LD. CI T(A) DT. 10.03.2011 (PAGE NO. 56 TO 61 OF PB). 11. FOR APPRECIATION OF THE CONTENTION OF LD AR FOR T HE ASSESSEE, THE RELEVANT PART OF SECTION 263 OF THE ACT AND EXPLANATION (C) THERE UNDER WHICH ARE MATERIAL FOR CONSIDERATION ON THE ISSUE IN THIS APP EAL AND READ AS UNDER ' 263. REVISION OF ORDERS PREJUDICIAL TO REVENUE . (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING U NDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSE SSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTE R MAKING OR CAUSING TO BE I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 11 MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DI RECTING A FRESH ASSESSMENT. EXPLANATION.[1]- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED TH AT, FOR THE PURPOSES OF THIS SUB-SECTION, ****** ( C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT-MATTER OF ANY APPEAL, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.' 12. A CAREFUL READING OF THE PROVISIONS OF SECTION 263 MAKES IT CLEAR THAT THE COMMISSIONER OF INCOME-TAX IS ENTITLED TO REVISE AN ASSESSMENT ORDER INSOFAR AS THE ORDER IS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE, HOWEVER, EXPLANATION (C) PLACES AN EMBARGO ON THE COMMISSIONER OF INCOME-TAX IN CASE OF SUBJECT-MATTE R OF ANY APPEAL WHICH HAS BEEN CONSIDERED AND DECIDED IN SUCH APPEA L. IN OTHER WORDS, BEFORE THE COMMISSIONER OF INCOME-TAX EXERCISES THE JURISDICTION UNDER SECTION 263 OF THE ACT, THE COMMISSIONER OF INCOME- TAX IS REQUIRED TO ASCERTAIN WHETHER THE ORDER REFERRED TO IN SUB-SECT ION (1) OF SECTION 263 OF THE ACT HAD BEEN THE SUBJECT-MATTER OF ANY APPEAL, AND IF YES, THE REVISIONAL POWERS SHALL BE AVAILABLE ONLY IF SUCH S UBJECT-MATTER HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL 13. THE HONBLE BOMBAY HIGH COURT IN CIT VS K SERA SERA PRODUCTIONS LTD ( 374 ITR 530 BOM) HELD WHERE ISSUES OF INCOME OF A SSESSEE FROM PRODUCTION OF FILM AND DEDUCTION OF COST OF PRODUCT ION THERE AGAINST HAD BEEN CONSIDERED AND DECIDED IN APPEAL BY FIRST APPE LLATE AUTHORITY, SAID I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 12 ISSUES COULD NOT BE MADE SUBJECT MATTER OF REVISION UNDER SECTION 263. THE RELEVANT PART OF THE ORDER IS EXTRACTED BELOW: 10. WE FIND THAT DESPITE THIS POSITION EMERGING FROM T HE RECORD AND BEING UNDISPUTED, THE ORDER UNDER SECTION 263 OF THE INCO ME TAX ACT MAKES DETAILED REFERENCE TO THE SHOW CAUSE NOTICE. THE SH OW CAUSE NOTICE AS ALSO THIS ORDER PASSED UNDER SECTION 263 MAKE DETAILED R EFERENCE TO THE CLAIMS OF THE ASSESSEE AND WHICH WERE PART OF THE APPEAL BEFO RE THE COMMISSIONER AND DEALT WITH BY HIM IN HIS ORDER DATED 12TH OCTOBER, 2011. THE ORDER OF THE COMMISSIONER UNDER SECTION 263 DATED 29TH MARCH, 20 12, FROM PARAS 8 ONWARDS, MAKES EXTENSIVE REFERENCE TO THESE ASPECTS . IN THE CIRCUMSTANCES, WHAT FURTHER EMERGES IS THAT NOT ONLY DID THE REVIS IONAL AUTHORITY PURPORT TO REVISE THE ASSESSING OFFICER'S ORDER, BUT HE PURPOR TED TO DEAL WITH THE SAME DIRECTION WHICH WAS ISSUED IN THE ORDER OF THE FIRS T APPELLATE AUTHORITY AND WHICH WAS GIVEN EFFECT TO BY THE ASSESSING OFFICER. MEANING THEREBY, THE CONTENTS OF THE REMAND REPORT, GIVING EFFECT TO THE ORDER OF THE FIRST APPELLATE AUTHORITY, AS SUBMITTED BY THE ASSESSING OFFICER, C AME TO BE RECONSIDERED AND REVISITED. IN ADDITION THERETO, ONE MORE ASPECT OF SALE OF THEATRICAL RIGHTS OF ' DARNA ZAROORI HAI ' TO M/S. RGV ENTERPRISES WAS CONSIDERED. NATURALLY , THEREFORE, THE DOCTRINE OF MERGER WAS INVOKED BY TH E ASSESSEE AND IT WAS APPLIED BY THE TRIBUNAL TO UPHOLD THE OBJECTION RAI SED BY THE ASSESSEE. 11. IN THE ABOVE FACTUAL CIRCUMSTANCES, WE DO NOT FIND THAT THE TRIBUNAL ERRED IN HOLDING THAT CLAUSE (C) OF THE EXPLANATION TO SUB SECTION (1) OF SECTION 263 OF THE INCOME TAX ACT, 1961 CANNOT BE APPLIED. IN T HE PRESENT CASE, THAT HAS NO APPLICATION BECAUSE THE MATTERS WHICH HAVE BEEN CONSIDERED AND DECIDED IN THE APPEAL BY THE FIRST APPELLATE AUTHORITY ARE BEING MADE SUBJECT MATTER OF THE REVISIONAL AUTHORITY'S ORDER. IN OTHER WORDS, T HE POWER TO REVISE, AS CONFERRED BY SECTION 263, IS SOUGHT TO BE EXERCISED SO AS TO DEAL WITH THE SAME MATTERS WHICH HAVE BEEN CONSIDERED AND DECIDED IN T HE APPEAL. WE DO NOT FIND ANY MERIT IN MR. MOHANTY'S SUBMISSION BECAUSE DETAILED REFERENCES HAVE BEEN MADE IN THE FOREGOING PARAGRAPHS TO THE CASE O F THE ASSESSEE BEFORE THE ASSESSING OFFICER, HIS INITIAL ORDER, THE ORDER OF THE FIRST APPELLATE AUTHORITY, THE DIRECTION ISSUED BY THE FIRST APPELLATE AUTHORI TY AND WHICH WAS GIVEN I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 13 EFFECT TO BY THE ASSESSING OFFICER. ALL THESE WOULD DENOTE THAT SOMETHING WHICH WAS VERY MUCH PART AND PARCEL OF THE APPELLAT E AUTHORITY'S ORDER AND DEALT WITH EXTENSIVELY THEREIN IS NOW SOUGHT TO BE REVISED AND REVISITED. FIRSTLY, IF THE INCOME OF THE ASSESSEE FROM THE FIL M IS RS.11,25,00,000/-, THEN, WHETHER THE EXPLANATION OF THE ASSESSEE THAT IT IS NOT SO DESERVES TO BE CONSIDERED OR NOT BY THE ASSESSING OFFICER IS GRIEV ANCE NO. 1/GROUND NO. 1 BEFORE THE FIRST APPELLATE AUTHORITY. SECONDLY, IF THAT IS TAKEN TO BE THE INCOME OF THE ASSESSEE AND WITHOUT ADMITTING IT TO BE SO T HE COST OF PRODUCTION OF THE FILM NEEDS TO BE DEDUCTED BY APPLYING RULE 9A OF TH E INCOME TAX RULES. THUS, THAT IS GROUND NO. 2 IN THE MEMO OF APPEAL BE FORE THE FIRST APPELLATE AUTHORITY AND IN HIS ORDER DATED 12TH OCTOBER, 2011 . BOTH THESE MATTERS ARE VERY MUCH PART OF THE REVISIONAL AUTHORITY'S ORDER DATED 29TH MARCH, 2012. THE ATTEMPT TO REOPEN THEM CANNOT BE SAVED AS CLAUS E (C) OF EXPLANATION BELOW SUB-SECTION (1) OF SECTION 263 OF THE INCOME TAX ACT, 1961 HAD NO APPLICATION. 14. THE HONBLE GUJARAT HIGH COURT IN CIT VS NIRMA CHEM ICALS WORKS P. LTD (309ITR 67 GUJ) HELD THAT THE COMMISSIONER IS E NTITLED TO REVISE AN ASSESSMENT ORDER INSOFAR AS THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, BUT THE EXPLANATION (C) TO SECTION 263 PLACES AN EMBARGO ON THE COMMISSIONER IN CASE OF SUBJECT-MATT ER OF ANY APPEAL WHICH HAD BEEN CONSIDERED AND DECIDED IN SUCH APPEA L. IN OTHER WORDS, BEFORE THE COMMISSIONER EXERCISES THE JURISDICTION UNDER SECTION 263, HE IS REQUIRED TO ASCERTAIN WHETHER THE ORDER REFERRED TO IN SUB-SECTION (1) OF SECTION 263 HAD BEEN THE SUBJECT-MATTER OF ANY APPE AL, AND IF YES, THE REVISIONAL POWERS SHOULD BE AVAILABLE ONLY IF SUCH SUBJECT-MATTER HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 14 15. FURTHER HONBLE BOMBAY HIGH COURT IN SONAL GARMENTS VS JCIT (95 ITD 363 MUM) HELD THAT FROM THE CHRONOLOGY OF EVENTS IT APPEARS THAT COMPUTATION OF DEDUCTION UNDER SECTION 80HHC WAS A SUBJECT-MATTER OF APPEAL BEFORE THE COMMISSIONER (APPEALS). THE COMMI SSIONER (APPEALS) HAD GIVEN SOME FINDINGS ON THE COMPUTATION OF DEDUC TION UNDER SECTION 80HHC. THEREFORE, THE ASSESSMENT ORDER HAD MERGED W ITH THE ORDER OF THE COMMISSIONER (APPEALS). THUS, UNDER EXPLANATION (C) TO SECTION 263(1), SUCH ACTION OF THE COMMISSIONER WAS NOT PER MISSIBLE. THE WORD MATTER IS CERTAINLY A WORD OF WIDE IMPORT AND REP RESENTS A SUBJECT OR SITUATION THAT ONE NEEDS TO THINK ABOUT, DISCUSS OR DEAL WITH. THE HONBLE HIGH COURT ALSO AFTER CONSIDERING THE SIMILAR OBJEC TION OF THE DEPARTMENT HELD THAT IT WAS DIFFICULT TO ACCEPT THE SUBMISSION OF THE DEPARTMENT THAT THE ISSUE OF DEPRECIATION BEING OPTIONAL OR THE ISS UE WHETHER THE ASSESSEE WAS AT ALL ENTITLED TO DEDUCTION UNDER SECTION 80HH C OR NOT, WAS NOT A SUBJECT-MATTER OF APPEAL FILED BY THE ASSESSEE BEFO RE THE COMMISSIONER (APPEALS). A MATTER MIGHT HAVE MANY ASPECTS AND THE ABOVE-MENTIONED TWO FACTORS MIGHT BE THE ASPECTS OF THE MATTER BUT NOT THE ENTIRE MATTER ITSELF. THE MATTER, IN THE INSTANT CASE, WAS DEDU CTION UNDER SECTION 80HHC. THEREFORE, THE ASSESSMENT ORDER, SO FAR AS I T RELATED TO DEDUCTION UNDER SECTION 80HHC, HAD MERGED WITH THE ORDER OF T HE COMMISSIONER (APPEALS) AND, THEREFORE, EXERCISE OF POWER BY THE COMMISSIONER UNDER I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 15 SECTION 263 WAS EVEN NOT AVAILABLE UNDER EXPLANATIO N (C) TO SECTION 263(1). 16. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIONS , THE ORDER PASSED BY LD. PCIT UNDER SECTION 263 WAS NOT A VALID ORDER IN THE EYES OF LAW, WHICH WE QUASHED. CONSIDERING THE FACT THAT WE HAVE QUASH ED THE ORDER OF LD. PCIT ON ONE OF THE LEGAL SUBMISSIONS OF THE LD. AR FOR THE ASSESSEE THEREFORE, THE DISCUSSIONS ON OTHER LEGAL SUBMISSIO NS AND MERIT OF THE CASE HAS BECOME ACADEMIC. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO. 3290/MUM/2014 18. THIS APPEAL RELATES TO THE ORDER PASSED BY ASSESSIN G OFFICER IN ORDER GIVING EFFECT TO THE ORDER OF LD. CIT(A) DATED 27.0 3.2012. SINCE WE HAVE ALLOWED THE APPEAL OF ASSESSEE AND QUASHED THE REVI SION ORDER PASSED UNDER SECTION 263 OF THE ACT. THEREFORE, THE ORDER PASSED BY ASSESSING OFFICER IN ORDER GIVING EFFECT HAS BECOME INVALID. THEREFORE, IN VIEW OF OUR FINDING IN ITA NO. 3488/MUM/2012, THIS APPEAL O F THE ASSESSEE IS ALSO ALLOWED. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 4111/MUM/2013 20. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS RAISED IN ITA NO. 3488/MUM/2012, WHICH WE HAVE ALLOWED, THEREFORE, FO LLOWING THE I.T.A. NO. 3450/M/15, 3290/M/14, 3488/M/12 , 3380/M/16 & 4111/M/13 M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 16 PRINCIPLE OF CONSISTENCY, THE APPEAL FOR THIS YEAR IS ALSO ALLOWED WITH SIMILAR DIRECTION. ITA NO. 3380/MUM/2016 21. THIS APPEAL RELATES TO ORDER GIVING EFFECT OF ORDER PASSED BY LD. PCIT UNDER SECTION 263 DATED 22.01.2016. CONSIDERING THE FACT THAT WE HAVE ALREADY QUASHED/SET-ASIDE THE ORDER DATED 22.01.201 6. THEREFORE, SUBSEQUENT ACTION TAKEN BY LOWER AUTHORITIES IN ORD ER GIVING EFFECT HAS BECOME INVALID. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/07/2019. SD/- SD/- G.MANJUNATHA, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 17.07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI