AMBUJA CEMENT LTD, MUMBAI V. CIT LTU, MUMBAI

ITA 3563/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8402 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Reopening of assessment; Opportunity of being heard; Tax effect
• Section: 143(3); 115JB; 148; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI G S PANNU, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.3563/MUM/2016 ASSESSMENT YEAR : 2010-11 AMBUJA CEMENT S LIMITED (FORMERLY KNOWN AS GUJARAT AMBUJA CEMENT LIMITED), ELEGANT BUSINESS PARK, MIDC CROSS ROAD B, ANDHERI (E), MUMBAI 400 059. PAN AACG0569P VS. CIT LTU , MUMBAI. (APPELLANT) RESPONDENT) APPELLANT BY : SHRI SOUMEN ADAK RESPONDENT BY : SHRI R P MEENA DATE OF HEARING : 05 .0 9 .201 7 DATE OF PRONOUNCEMENT : 10 .11 . 201 7 O R D E R PER G S PANNU, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(LTU) [IN SHORT THE COMMISSIONER], MUMBAI, DATED 29.03.2016, HOLDING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/ S. 143(3) OF THE ACT, DATED 28.02.2014, AS ERRONEOUS IN SO FAR AS IT WAS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE U/S. 263 OF THE INCOME TAX ACT, 1961(HEREIN AFTER REFERRED TO AS THE ACT) 2. THE APPELLANT BEFORE US IS A COMPANY INCORPORAT ED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF CEMENT MANUFACTURING, ETC. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE RETURN OF ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 2 INCOME FILED BY IT WAS SUBJECT TO SCRUTINY ASSESSME NT U/S. 143(3) OF THE ACT, DATED 28.02.2014, WHEREIN THE TOTAL INCOME WAS ASSESSED A T ` 9,94,52,94,305/- UNDER THE NORMAL PROVISIONS OF THE ACT AND THE BOOK PROFIT U/ S. 115JB OF THE ACT WAS DETERMINED AT ` 19,13,21,89,572/-. SUBSEQUENTLY, THE COMMISSIONER INVOKED HIS REVISIONARY JURISDICTION AND ISSUED A NOTICE U/S. 2 63 OF THE ACT, DATED 26.02.2016, PROPOSING THAT THE ASSESSMENT ORDER, DATED 28.02.20 14 (SUPRA), WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, IN AS MUCH AS INCORRECT ALLOWANCE OF PROVISION FOR SLOW MOVING INVENTORIES OF SPARES AMOUNTING TO ` 52.80 CORES HAD LED TO UNDER ASSESSMENT OF INCOME. IN TH IS CONTEXT, THE RELEVANT DISCUSSION BY THE COMMISSIONER SHOWS THAT HIS EXAMI NATION OF RECORD SHOWED THAT THE ASSESSEE HAD DEBITED IN THE PROFIT & LOSS ACCOU NT A SUM OF ` 52.80 CRORES AS A PROVISION FOR SLOW MOVING INVENTORY AND READ WITH NOTE 18 OF THE NOTES FORMING PART OF THE ACCOUNTS, IT REFLECTED THAT SUCH A PROV ISION WAS MADE FOR SLOW MOVING INVENTORIES BASED ON THE AGE OF THE INVENTORY AND I T WAS CONSEQUENT TO A CHANGE IN POLICY OF RECOGNIZING PROVISIONS FOR SLOW MOVING IN VENTORIES OF SPARES. THE COMMISSIONER FURTHER NOTICED THAT THIS PROVISION WA S CREATED FOR THE FIRST TIME AND WAS MEANT FOR TEMPORARY DIMINUTION IN THE VALUE OF SPARES MEANT FOR PLANT AND MACHINERY AND, HENCE, RELATED TO CAPITAL IN NATURE. THUS, ACCORDING TO THE COMMISSIONER, IT WAS AN INCORRECT ALLOWANCE MADE IN THE ASSESSMENT ORDER DATED 28.02.2014 (SUPRA). 3. IN REPLY TO THE SHOW CAUSE NOTICE, A COPY OF WHI CH HAS BEEN PLACED IN THE PAPER-BOOK AT PAGE 64, THE ASSESSEE RESISTED THE AC TION OF THE COMMISSIONER AND, INTER ALIA, FURNISHED WRITTEN SUBMISSIONS DATED 14. 03.2016, COPY OF WHICH HAS BEEN ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 3 PLACED IN THE PAPER-BOOK AT PAGES 65 TO 69. THE AP PELLANT COMPANY RESISTED THE ACTION OF THE COMMISSIONER BOTH ON THE POINT OF ASS UMPTION OF JURISDICTION AS WELL AS ON THE MERITS OF THE ISSUE. IN PARAS 2 TO 3.3 O F HIS ORDER, THE COMMISSIONER HAS BRIEFLY NOTED THE SUBMISSIONS PUT-FORTH BY THE ASSE SSEE. HOWEVER, THE COMMISSIONER WAS NOT SATISFIED WITH THE SUBMISSIONS PUT-FORTH AND HELD THAT THE REQUISITE CONDITIONS PRESCRIBED FOR INVOKING SECTIO N 263 OF THE ACT WERE FULFILLED IN THE PRESENT CASE AND HE JUSTIFIED THE INVOKING OF S ECTION 263 OF THE ACT. 4. IN SO FAR AS THE MERITS OF THE ISSUE WAS CONCERN ED, THE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE ALLO WANCE OF SUCH PROVISION AND HIS RELEVANT DISCUSSION IS CONTAINED IN PARA 5 OF HIS O RDER, WHICH WE WOULD REPRODUCE AND REFER TO IT IN DETAIL LATER IN THIS ORDER. 5. IN CONCLUSION, THE COMMISSIONER HELD THE ASSESSM ENT ORDER, DATED 24.02.2014, TO BE PREJUDICIAL TO THE INTERESTS OF T HE REVENUE TO THE ABOVE EXTENT AND DIRECTED THE ASSESSING OFFICER TO MODIFY THE AS SESSMENT ORDER. 6. AGAINST SUCH A DECISION ASSESSEE IS IN APPEAL BE FORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS MADE VARIOUS SUBMISSIONS, BUT A PERTINENT POINT HAS BEEN RAISED, WHICH IS BASED ON THE RATIO OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. AMITABH BACHCHAN [384 ITR 200]. IT IS SOUGHT TO BE EMPHASIZED THAT THE BASIS ON WHICH THE COMMISSIONER HAS FOUND THE ASSESSMENT ORDER TO BE E RRONEOUS IN HIS ORDER IS QUITE DIFFERENT FROM THE POINT RAISED IN THE SHOW CAUSE N OTICED ISSUED U/S. 263 OF THE ACT, AND THAT IN FACT THE ERROR FINALLY ESTABLISHED IN T HE IMPUGNED ORDER WAS NOT PUT TO ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 4 THE ASSESSEE AT ALL. ON THIS BASIS, IT HAS BEEN AR GUED THAT THE ORDER OF THE COMMISSIONER IS UNTENABLE IN LAW. IN SUPPORT OF HI S PROPOSITION, HE HAS RELIED UPON THE FOLLOWING DISCUSSION IN PARA 11 OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. AMITABH BACHCHAN (SUPRA) 11. IT MAY BE THAT IN A GIVEN CASE AND IN MOST CAS ES IT IS SO DONE A NOTICE PROPOSING THE REVISIONAL EXERCISE IS GIVEN T O THE ASSESSEE INDICATING THEREIN BROADLY OR EVEN SPECIFICALLY THE GROUNDS ON WHICH THE EXERCISE IS FELT NECESSARY. BUT THERE IS NOTHING IN THE SECTION (SECTION 263) TO RAISE THE SAID NOTICE TO THE STATUS OF A MANDATO RY SHOW-CAUSE NOTICE AFFECTING THE INITIATION OF THE EXERCISE IN THE ABS ENCE THEREOF OR TO REQUIRE THE COMMISSIONER OF INCOME-TAX TO CONFINE HIMSELF T O THE TERMS OF THE NOTICE AND FORECLOSING CONSIDERATION OF ANY OTHER I SSUE OR QUESTION OF FACT. THIS IS NOT THE PURPORT OF SECTION 263. OF CO URSE, THERE CAN BE NO DISPUTE THAT WHILE THE COMMISSIONER OF INCOME-TAX I S FREE TO EXERCISE HIS JURISDICTION ON CONSIDERATION OF ALL RELEVANT FACTS , A FULL OPPORTUNITY TO CONTROVERT THE SAME AND TO EXPLAIN THE CIRCUMSTANCE S SURROUNDING SUCH FACTS, AS MAY BE CONSIDERED RELEVANT BY THE ASSESSE E, MUST BE AFFORDED TO HIM BY THE COMMISSIONER OF INCOME-TAX PRIOR TO T HE FINALISATION OF THE DECISION. 7. IN ORDER TO APPRECIATE THE POINT SOUGHT TO BE RA ISED BY THE ASSESSEE, WE MAY REFER TO THE RELEVANT CONTENTS OF THE SHOW CAUSE NO TICE DATED 26.02.2016, AS UNDER: 2. VERIFICATION OF RECORDS REVEALED THAT THE ASS ESSEE HAD DEBITED A PROVISION OF ` 52.80 CRORE FOR SLOW MOVING INVENTORIES. VIDE SCH EDULE P READ WITH NOTES 18 TO THE ACCOUNTS, IT IS STATED TH AT CONSEQUENT OF CHANGE IN POLICY OF RECOGNIZING, PROVISIONS FOR SLO W MOVING INVENTORIES OF SPARES, BASED ON THE AGE OF INVENTORIES, THE COMPAN Y HAS MADE A PROVISION OF RS.52.80 CRORE FOR SLOW MOVING INVENTO RIES. THIS PROVISION WAS CREATED FOR THE FIRST TIME HAVING EFFECT ON PRO FIT FOR RELEVANT ASSESSMENT YEAR. FURTHER, THE PROVISION IS MEANT F OR TEMPORARY DIMINUTION IN THE VALUE OF SPARES MEANT FOR PLANT A ND MACHINERY AND RELATED TO CAPITAL IN NATURE. THE SAME WAS ALLOWED BY THE ASSESSING OFFICER IN THE ORDER UNDER REFERENCE. THE INCORREC T ALLOWANCE OF THIS PROVISION LED TO UNDER ASSESSMENT OF INCOME OF RS.5 2.80 CRORE, INVOLVING TAX EFFECT OF RS .17.95 CRORE. AS A RESULT, THE ORDER PASSED BY THE A.O., SEEMS TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF REVENUE. ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 5 IN TERMS OF THE AFORESAID, WHAT THE COMMISSIONER HA S SOUGHT TO MAKE OUT IS THAT THE PROVISION FOR SLOW MOVING INVENTORIES OF SPARES IS CAPITAL IN NATURE AND, THEREFORE, IT HAS BEEN INCORRECTLY ALLOWED BY THE A SSESSING OFFICER IN THE ASSESSMENT ORDER DATED 28.02.2014 (SUPRA). THUS, IN THE SHOW CAUSE NOTICE, THE COMMISSIONER HAD FOUND THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE AFORESAID REASON. 8. NOW, WE MAY TOUCH UPON THE MANNER IN WHICH THE C OMMISSIONER HAS JUSTIFIED THE FULFILMENT OF CONDITIONS PRESCRIBED I N SECTION 263 OF THE ACT IN HIS ORDER. PERTINENTLY, AND AS HAS ALSO BEEN EXPLAINED BY THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. CIT [243 ITR 83], I NVOKING OF SECTION 263 OF THE ACT CAN BE JUSTIFIED ONLY ON SATISFACTION OF TWIN CONDI TIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS TRITE POSITION OF LAW THAT EVEN IF ONE OF THE AFORESAID CONDITIONS IS ABSENT IN A GIVEN CASE, THEN INVOKING OF SECTION 263 OF THE ACT WOULD BE UNTENABLE IN LAW. IN THIS BACKGROUND, WE MAY NO W EXAMINE THE MANNER IN WHICH THE COMMISSIONER HAS DEALT WITH THE CONDITION S PRESCRIBED U/S. 263 OF THE ACT IN HIS ORDER. THE RELEVANT DISCUSSION IS CONTAINED IN PARA 4 & 5 OF HIS ORDER, WHICH READS AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE ISSUE AND PERUS ED THE RECORDS. THE ALLEGATION OF THE AR THAT REVISITING THE INVENTORY FOR ITS CATEGORIZATION AMOUNTS TO TAKING ALTERNATIVE VIEW, IS ILL FOUNDED. UNLIKE REOPENING OF ASSESSMENT U/S 148 BEYOND 4 YEARS, THERE IS NO REQU IREMENT U/S 263 THAT THE ITEM SHOULD NOT HAVE BEEN IN PLACE BEFORE THE A O IN ORIGINAL ASSESSMENT PROCEEDINGS. THERE IS NO DOUBT THAT THE PROVISION IS WRONGLY MADE FOR INVENTORY AND THE SAME IS ACCEPTED BY THE AO, RESULTING IN PREJUDICE CAUSED TO THE REVENUE. THE CONDITIONS FOR SECTION 263 ARE FULFILLED AND THE SAME IS RIGHTLY INVOKED. ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 6 5. COMING TO THE MERITS OF THE CASE, IT IS SEEN THA T THE ASSESSES PLACES RELIANCE ON DR. ASWATH N. RAO'S CASE TO SAY THAT SP ARE PARTS PURCHASE FOR EXISTING MACHINERIES HAS TO BE TREATED AS REVENUE E XPENDITURE AS THESE SPARE PARTS ARE PURCHASED FOR MAINTENANCE OF EXISTI NG EQUIPMENTS. BUT AT THE SAME TIME, PART OF SPARE PARTS ARE CAPITALIZED AND IN THE NAME SLOW MOVING INVENTORY, PROVISION OF 30%, 50% OR 80% IS M ADE. THE ASSESSEE DOES NOT HAVE ANY SCIENTIFIC BASIS FOR FIXING THE P ERCENTAGE OF WHICH PROVISION IS MADE. SUCH PROVISIONING IS NOT SUPPORT ED BY ACCOUNTING STANDARD, AND HENCE DESERVES TO BE DISALLOWED, THE AO IS DIRECTED TO WITHDRAW THE ALLOWANCE OF SUCH PROVISIONS. OSTENSIBLY, IN PARA 4, THE COMMISSIONER CONCLUDES T HAT THE PROVISION HAS BEEN WRONGLY ACCEPTED BY THE ASSESSING OFFICER AND THE R EASON ADVANCED IS THAT THERE IS NO DOUBT THAT THE PROVISION IS WRONGLY MADE FOR INV ENTORY AND THE SAME IS ACCEPTED BY THE AO, RESULTING IN PREJUDICE CAUSED TO THE REV ENUE. IN SO FAR AS DISCUSSION IN PARA 5 IS CONCERNED, HE REFERS TO THE JUDGMENT OF H ONBLE KARNATAKA HIGH COURT RELIED UPON BY THE ASSESSEE BEFORE HIM IN THE CASE OF DR ASWATH N RAO VS. ACIT [326 ITR 188]. THE ASSESSEE HAD RELIED UPON THE SA ID JUDGMENT FOR THE PROPOSITION THAT THE COST OF SPARE PARTS PROCURED FOR THE MAINT ENANCE OF THE EXISTING MACHINERIES WERE TO BE TREATED AS REVENUE EXPENDITU RE. THE COMMISSIONER NOTES THAT PART OF THE SPARES ARE CAPITALIZED AND THAT AS SESSEE WAS ALSO MAKING THE PROVISION FOR SLOW MOVING INVENTORIES OF SPARES, WH ICH WERE BEING DEBITED TO THE PROFIT & LOSS ACCOUNT. THE COMMISSIONER CONCLUDES THAT THERE IS NO SCIENTIFIC BASIS FOR FIXING THE PERCENTAGE ON WHICH THE PROVISION HA S BEEN MADE AND, THEREFORE, HE INFERRED THAT THE PROVISION DESERVES TO BE DISALLOW ED. IT IS THIS FINDING OF THE COMMISSIONER, WHICH HAS FORMED THE BASIS FOR THE LE ARNED REPRESENTATIVE TO ARGUE BEFORE US THAT SUCH A BASIS FOR TREATING THE ASSESS MENT ORDER AS ERRONEOUS WAS NOT PUT TO THE ASSESSEE AND, THEREFORE, NO OPPORTUNITY WAS ALLOWED TO THE ASSESSEE TO ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 7 EXPLAIN THE CIRCUMSTANCES IN WHICH THE ASSESSMENT H AS BEEN HELD TO BE ERRONEOUS IN SO FAR IT WAS PREJUDICIAL TO THE INTERESTS OF THE R EVENUE ULTIMATELY. 9. WHEN THE AFORESAID WAS PUT ACROSS TO THE LEARNED CIT-DR, AT THE TIME OF HEARING, HIS ONLY PLEA WAS THAT THE SAID ASPECT WAS VERY MUCH EMERGING FROM THE SHOW CAUSE NOTICE U/S. 263 DATED 26.02.2016 (SUPRA) , AND, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT MADE AWARE ABOUT SUC H A POINT. THE AFORESAID PLEA OF THE LEARNED DR, IN OUR VIEW, IS QUITE CONTRARY T O THE FACTUAL SITUATION IN AS MUCH AS THE NON-SATISFACTION OF THE COMMISSIONER ABOUT T HE SCIENTIFIC BASIS OF CREATING THE PROVISION, HAS NOT BEEN REFERRED TO IN THE NOTICE, DATED 26.02.2016, AT ALL, WHOSE RELEVANT PORTION HAS BEEN REPRODUCED BY US IN THE E ARLIER PART OF THE ORDER. THEREFORE, THE PRELIMINARY POINT WHICH IS SOUGHT TO BE RAISED BY THE ASSESSEE BASED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CAS E OF AMITABH BACHCHAN (SUPRA) IS VERY MUCH APPLICABLE IN THE GIVEN FACTS OF THE P RESENT CASE. NOTABLY, SECTION 263(1) OF THE ACT OBLIGATES THE COMMISSIONER TO GIV E THE ASSESSEE AN OPPORTUNITY OF BEING HEARD BEFORE PASSING OF HIS ORDER. NO DOUBT THE COMMISSIONER IS NOT DISENTITLED TO CONSIDER A POINT WHICH IS NOT STATED IN THE NOTICE SO ISSUED. HOWEVER, THE OBLIGATION TO GIVEN AN OPPORTUNITY TO THE ASSES SEE OF BEING HEARD ON THE POINT ON THE BASIS OF WHICH HE FINDS IT EXPEDIENT TO TREA T THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IS DEFINITELY CAST ON THE COMMISSIONER, AS OPINED BY THE HONBLE SUPREME COUR T IN THE CASE OF AMITABH BACHCHAN (SUPRA). CONSIDERING THE AFORESAID, IN OU R VIEW, IN THE PRESENT CASE THE BASIS ON WHICH THE COMMISSIONER HAS FOUND THE ASSES SMENT ORDER AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, NAMELY, ABSENCE OF ANY ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 8 SCIENTIFIC BASIS FOR FIXING THE PERCENTAGE TO MAKE THE PROVISION FOR SLOW MOVING INVENTORIES OF SPARES, DOES NOT APPEAR TO HAVE BEEN PUT TO THE ASSESSEE, AS IS EMERGING FROM THE MATERIAL BEFORE US. THUS, ON THI S POINT ITSELF, WE FIND THE IMPUGNED ORDER OF THE COMMISSIONER TO BE UNTENABLE IN THE EYES OF LAW. 10. THE AFORESAID PROPOSITION CAN ALSO BE UNDERSTOO D IN THE PRESENT CASE FROM A DIFFERENT ANGLE. AS OBSERVED BY US EARLIER, IN THE SHOW CAUSE NOTICE THE COMMISSIONER CONSIDERED THE ASSESSMENT TO BE ERRONE OUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE GROUND THAT THE PROVISION IN QUESTION WAS CAPITAL IN NATURE AND, THUS, THE SAME WAS INCORRECTLY ALLOWED IN THE ASSESSMENT ORDER, DATED 28.02.2014. NOTABLY, WHILE PASSING THE IMPUGNED ORDER, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE COMMISSIONER FIND FAULTS WITH THE ALLOWANCE OF PROVISION BECAUSE ACCORDING TO HIM THERE WAS NO SCIENTIFIC BASIS FOR FIXING THE PERCENTAGE FOR MAKING THE PROVISION. NO TABLY, HIS EARLIER STAND IN THE SHOW CAUSE NOTICE OF THE PROVISION BEING CAPITAL IN NATURE HAS BEEN IMPLIEDLY GIVEN A GO-BY. OSTENSIBLY, THE COMMISSIONER FOUND FAULT WITH THE QUANTIFICATION/BASIS OF MAKING THE PROVISION, WHICH IMPLIEDLY CONVEYS THAT HE ACCEPTED THE PLEA OF THE ASSESSEE OF THE PROVISION BEING IN THE NATURE OF RE VENUE ITEM CHARGED TO THE PROFIT & LOSS ACCOUNT. OF COURSE, THE COMMISSIONER IS FRE E TO EXERCISE HIS REVISIONARY POWER U/S. 263 OF THE ACT ON ANY GROUND BUT WHAT IS OF ESSENCE IS THAT THE ASSESSEE OUGHT TO HAVE BEEN ALLOWED AN OPPORTUNITY TO EXPLAI N THE CIRCUMSTANCES ON THE GROUND FORMULATED BY THE COMMISSIONER TO TREAT THE ASSESSMENT BEING ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. THE CHANGE IN THE STAND OF THE COMMISSIONER FROM THAT PUT TO THE ASSESSEE I N THE SHOW CAUSE NOTICE AND THE ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 9 BASIS WHICH HE HAS ULTIMATELY ADOPTED TO TREAT THE ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HAS NO T BEEN PUT TO THE ASSESSEE AND, THUS, IT IS INCONSISTENT WITH THE UNDERSTANDING PLA CED ON SECTION 263 OF THE ACT BY HONBLE SUPREME COURT IN THE CASE OF AMITABH BACHCH AN (SUPRA), AS DETAILED ABOVE. THEREFORE, THE IMPUGNED ORDER OF THE COMMISSIONER I S UNTENABLE IN THE EYES OF LAW. 11. BEFORE PARTING, WE MAY ALSO REFER TO THE MERIT OF THE DISPUTE IN SLIGHT DETAIL BECAUSE THE COMMISSIONER HAS DECIDED THE ISSUE ON M ERITS AND HELD THAT THE SAID PROVISION IS DISALLOWABLE. IN THIS CONTEXT, THE RE LEVANT FACTS ARE THAT THE APPELLANT IS ENGAGED IN THE MANUFACTURE OF CEMENT. IN ITS SUBMI SSIONS BEFORE THE COMMISSIONER, THE ASSESSEE EXPLAINED THAT IN ITS LI NE OF BUSINESS STRICT SUPERVISION OF QUALITY WAS REQUIRED AND, THEREFORE, FOR REGULAR UP GRADATION OF MACHINERIES USED IN THE PROCESS OF PRODUCTION, THE ASSESSEE EFFECTED PURCHASE OF SPARES, WHICH WERE OF TWO KINDS. FIRSTLY THE STORES AND SPARES WHICH ARE MEANT FOR REGULAR UP-KEEP OF PLANT AND MACHINERY AND NOT RELATABLE TO ANY SPECIF IC PLANT AND MACHINERY, FOR INSTANCE, NUTS BOLTS, CABLES, WASHER, SCREWS, FILTE RS, TUBES, ELECTRODES, SPRING ETC. SUCH STORES AND SPARES, WHENEVER ISSUED WERE TREATE D AS REVENUE IN NATURE AND CHARGED TO PROFIT & LOSS ACCOUNT. WITH REGARD TO T HE INVENTORIES OF SUCH TYPE OF SPARES, IT MADE A PROVISION OF 30%, 50% AND 80% DEP ENDING UPON THE ITEM OF INVENTORY, WHICH IS LYING UNUSED FOR MORE THAN ONE, TWO AND THREE YEARS RESPECTIVELY. IT IS THIS PROVISION, WHICH IS THE S UBJECT MATTER OF DISPUTE. THE SECOND KIND OF SPARES WERE THOSE WHICH WERE SPECIFIC TO PA RTICULAR PLANT & MACHINERY AND THEIR USE WAS EXPECTED TO BE IRREGULAR AND ASSESSEE HAD CAPITALIZED THE PURCHASE OF SUCH SPARES. IN SO FAR AS THE LATTER TYPE OF SPARE S IS CONCERNED, THERE IS NO DISPUTE ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 10 AND THE ONLY CONTROVERSY IS WITH REGARD TO THE STOR ES AND SPARES, WHICH ARE NOT CAPITALIZED BUT ARE TREATED AS PART OF THE INVENTOR IES AND CHARGED TO PROFIT & LOSS ACCOUNT. THE RELEVANT DISCUSSION IN THE ORDER OF T HE COMMISSIONER REVEALS THAT HE HAS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY THE ASSESSEE BUT HAS SOUGHT TO DENY THE DEDUCTION ONLY BECAUSE, IN HIS OPINION, TH ERE WAS NO SCIENTIFIC BASIS FOR FIXING THE PERCENTAGE OF PROVISION. THE OBJECTION OF THE COMMISSIONER, IN OUR VIEW, IS QUITE UNTENABLE IN AS MUCH AS THE BASIS FO R MAKING THE PROVISION WAS EXPLAINED BY THE ASSESSEE TO BE THE AGING ANALYSIS OF THE SPARES LYING IN THE INVENTORY. WHY AND HOW THE COMMISSIONER DOES NOT F IND IT TO BE A SCIENTIFIC BASIS IS NOT ELABORATED. IN FACT, IT IS A CASE WHERE THE BA SIS PUT FORTH BY THE ASSESSEE HAS BEEN GIVEN A COMPLETE GO-BY WITHOUT ANY COGENT REAS ONING. THEREFORE, IN OUR OPINION, EVEN THE REASON ADVANCED BY THE COMMISSION ER TO TREAT THE ASSESSMENT ORDER AS ERRONEOUS IS DEVOID OF MERIT AND DOES NOT DESERVE TO BE AFFIRMED. WE HOLD SO. 12. BEFORE PARTING, WE MAY ALSO REFER TO AN ARGUMEN T PUT-FORTH BY THE LEARNED CIT-DR BASED ON THE JUDGMENT OF HONBLE GAUHATI HIG H COURT IN THE CASE OF CIT VS. SHRI JAWAHAR BHATTACHARJEE IN ITA NO.2 OF 2009 AND THE ORDER OF MUMBAI BENCH OF THE TRIBUNAL, DATED 05.12.2012, IN THE CASE ALKA RA JESH AGARWAL VS. CIT IN ITA NO.5007/MUM/2009 FOR ASSESSMENT YEAR 2005-06. ACCO RDING TO THE CIT-DR THERE WAS NO INQUIRY MADE BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS ON THE POINTS RAISED BY THE COMMISSIONE R AND, THEREFORE, INVOKING OF SECTION 263 WAS QUITE JUSTIFIED. ON THIS POINT, WE FIND ENOUGH POTENCY IN THE REBUTTAL PROVIDED BY THE LEARNED REPRESENTATIVE WHI CH WAS TO THE EFFECT THAT THE LACK ITA NO.3563/MUM/2016 M/S. AMBUJA CEMENTS LIMITED. 11 OF INQUIRY BY THE ASSESSING OFFICER WAS NOT THE BAS IS FORMULATED BY THE COMMISSIONER TO INVOKE THE JURISDICTION U/S. 263 OF THE ACT. THEREFORE, IN OUR VIEW, THE PLEA OF THE LEARNED CIT-DR DOES NOT HELP THE CA SE OF THE REVENUE IN AS MUCH AS WHAT IS REQUIRED TO BE EXAMINED, AT THIS STAGE IS T HE VALIDITY OF ASSUMPTION OF JURISDICTION BY THE COMMISSIONER U/S. 263 OF THE AC T ON THE BASIS OF THE ERROR AND PREJUDICE BROUGHT OUT BY HIM. THE EFFICACY OF THE ACTION OF THE COMMISSIONER HAS TO BE TESTED ONLY WITH RESPECT TO THE BASIS ADOPTED BY HIM AND CANNOT BE FURTHER SUPPLEMENTED BY THE REVENUE ON ANY OTHER NEW POINT. THUS, WE FIND NO MERIT IN THE SUBMISSIONS PUT FORTH BY THE LEARNED CIT-DR, WH ICH IS HEREBY REJECTED. 13. RESULTANTLY, WE SET ASIDE THE ORDER OF THE COMM ISSIONER AND RESTORE THE ASSESSMENT ORDER, DATED 28.02.2014 (SUPRA), QUA THE ISSUE RELATING TO THE PROVISION FOR SLOW MOVING INVENTORIES. APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 0 TH NOVEMBER, 2017. SD/- SD/- (RAM LAL NEGI) (G S PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 10 TH NOVEMBER, 2017. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T , MUMBAI. 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI