M/s SBEC Sugar Ltd., Baghpat V. ACIT, Meerut

ITA 3590/DEL/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0084 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Assessee Lawyers: PRENJEET KASHY AP
• Keywords: Revision of order; Depreciation; Business expenditure; Opportunity of being heard; Maximum Marginal Rate; Unabsorbed depreciation
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.3590/D/09 ASSESSMENT YEAR: 2005-06 M/S SBEC SUGAR LIMITED, VS. A.C.I.T-2, VILLAGE LOYAN MALLAKPUR, MEERUT BARAUT, DISTRICT, BAGHPAT PAN NO. AAECS 7222B (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI R.K. GUPTA & PRENJEET KASHY AP, CA RESPONDENT BY : SHRI GAJANAND MEENA, CIT - DR ORDER PER K.G. BANSAL: AM: THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED ITS RET URN ON 31.10.2005 DECLARING LOSS OF `3,74,50,320/-. HOWEVER, TAX WAS P AID U/S 115JB ON THE BOOK PROFIT OF `84,14,260/-. THE CASE WAS TAKEN UP FOR SCR UTINY BY ISSUING NOTICE U/S 143(2), WHICH WAS SERVED ON THE ASSESSEE COMPANY. THE ASSESSMENT WAS COMPLETED AT TOTAL LOSS OF `3,66,93,400/-. IN THIS A SSESSMENT, LOSS ON SALE OF STORES AND 50% OF FINANCE BROKERAGE EXPENDITURE, AMOUNTING TO `1,76,385/- AND `5,80,535/- RESPECTIVELY, WERE DEDUCTED FROM THE LOSS DECLAR ED IN THE RETURN. THEREAFTER, THE CIT, MEERUT, ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ON 20.03.2009 AS HE FOUND THE ORDER TO BE ERRONEOUS AND PREJ UDICIAL TO THE ASSESSEE 701/D/2009-ST 2 ON FOUR-COUNTS. AFTER HEARING THE ASSESSEE, HE PASSED THE R EVISIONARY ORDER ON 31.03.2007. IN THIS ORDER, THE ASSESSMENT ORDER WAS REV ISED AS UNDER:- (I) THE MATTER REGARDING THE NEW LOANS WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A VIEW TO DETERMINE IT AGAIN AFTER GIVING DU E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE; II) THE ASSESSING OFFICER WAS DIRECTED TO ASCERTAIN BROUG HT FORWARD LOSSES AND UNABSORBED DEPRECIATION FROM EARLIER YEARS AND SPECIFY /TH E SAME CLEARLY IN THE ORDER; III) THE REASONABLE REMUNERATION PAYABLE TO SHRI U.K. MODI WAS DIRECTED TO BE TAKEN AT `10/- LACS PER ANNUM AGAINST THE ACTUAL PAYMEN T OF `1.10 CRORES, THEREBY DISALLOWING THE REST OF THE REMUNERATION WHILE COMPUTING THE TOTAL INCOME; AND IV) THE BUSINESS EXPENDITURE IN RESPECT OF FOREIGN TRAVELS W AS ESTIMATED AT `10 LACS AGAINST THE ACTUAL EXPENDITURE OF `19.86 LAC DEBITED TO T HE BOOKS OF ACCOUNT, THEREBY DIRECTING THE ASSESSING OFFICER TO ADD A SUM OF ` 9.86 LACS TO THE INCOME RETURNED BY THE ASSESSEE. 2. AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. IT HAS TAKEN UP THREE GROUNDS IN FORM NO.36. GROUND NO.1 IS AGAINST THE FINDING THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF THE REVENUE. GROUND NO.2 IS AGAINST DISALLOWANCE OF A SUM OF `1 C RORES FROM THE PROFESSIONAL 701/D/2009-ST 3 CHARGES PAID TO SHRI U.K. MODI. GROUND NO.3 IS AGAIN ST DISALLOWANCE OF A SUM OF `9,86,827/- FROM THE FOREIGN TRAVELING EXPENDITURE. 2.1 IN THE COURSE OF HEARING BEFORE US, THE ASSESSEE TOOK UP TWO ADDITIONAL GROUNDS, WHICH ARE NOW MARKED AS GROUND NOS. 4 & 5. GROUND NO.4 IS THAT THE FINDING OF THE LEARNED CIT REGARDING THE ASSESSMENT ORDER B EING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND RESTORING THE MA TTER TO THE FILE OF THE ASSESSING OFFICER IS INCORRECT IN LAW AND ON MERITS, AN D GROUND NO.5 IS AGAINST THE FINDING THAT BROUGHT FORWARD LOSSES AND UNABSORBED DEP RECIATION MAY BE QUANTIFIED AND SPECIFIED IN THE ORDER. 3. BEFORE US, THE LEARNED COUNSEL DID NOT PRESS GROUND NO. 4. THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESSED. FURTHER, GROUND NO .1 GETS COVERED WHILE DECIDING OTHER GROUNDS AND, THEREFORE, IT DOES NOT REQUIR E SEPARATE DECISION. 4. IN RESPECT OF GROUND NO.2, THE LEARNED COUNSEL REFERRED TO PAGE NO.316 OF THE PAPER BOOK, WHICH IS A COPY OF NOTICE DATED 20.03. 2009, ISSUED BY THE LEARNED CIT TO THE ASSESSEE COMPANY. IN PARAGRAPH NO.2(I II), IT IS MENTIONED THAT SHRI U.K. MODI, A DIRECTOR AND MAJOR SHAREHOLDER WAS PA ID CONSULTANCY CHARGES OF `1.10 CRORES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, A N AGREEMENT WAS FILED ACCORDING TO WHICH SHRI MODI WAS TO BE PAID FEE OF `10 ,000/- PER HOUR OR `50,000/- PER DAY. THIS WOULD MEAN THAT SHRI MODI PR OVIDED CONSULTANCY FOR AT LEAST 220 DAYS, BEING THE ENTIRE NUMBER OF WORKING DAYS I N THE YEAR. AS SHRI U.K. 701/D/2009-ST 4 MODI IS ASSOCIATED WITH A NUMBER OF CONCERNS, THIS IS HARDLY POSSIBLE. HOWEVER, THIS ASPECT WAS NEVER EXAMINED BY THE ASSESSING OFFICER. T HE CASE OF THE LEARNED COUNSEL IS THAT THE OBSERVATIONS MADE IN THE SHOW CAUSE N OTICE ARE WRONG. IN THIS CONNECTION, OUR ATTENTION IS DRAWN TO PAGE NO.317 OF THE PAPER BOOK, BEING A PART OF ORDER SHEET NOTING MADE BY THE ASSESSING OFFICER. IN I TEM NO.3 OF ON 14.03.2007, THE ASSESSING OFFICER HAD REQUESTED THE ASSESSE E TO FURNISH JUSTIFICATION/REASONABLENESS OF PAYMENT U/S 40A(2)(B). FURTHER, OUR ATTENTION HAS BEEN DRAWN ON PAGE NOS. 320 AND 321, BEING A PART OF SU BMISSIONS MADE BEFORE THE ASSESSING OFFICER CONTAINING JUSTIFICATION OF THE P AYMENT. THE JUSTIFICATION IS CONTAINED IN PARAGRAPH NO.5(C) OF THE REPLY, WHICH READ S AS UNDER:- (C) CONSULTANCY CHARGES PAID TO MR. U.K. MODI. MR. U.K. MODI IS A CHEMICAL ENGINEER BY PROFESSION AND IS HAVING EXPERT KNOW LEDGE OF SUGAR INDUSTRY AND HE IS WELL VERSED WITH THE VARIOUS A SPECTS OF MANUFACTURING AND RUNNING OF BUSINESS. THE GOVERNMENT OF INDIA HAD DULY ACCORDED THE PERMISSION U/S 309(1) OF THE COMPANIES ACT, 1956 VIDE LETTER NO.6/10/202-CL.VII DATED 05-06-2002 TO PROV IDE PROFESSIONAL SERVICES. THE ABOVE CHARGES WERE ALSO APPROVED IN THE AGM HELD ON 30.09.2002. THE COPY OF APPROVAL FROM RO C, COPY OF BOARD MEETING MINUTES, CONTRACT ENTERED BETWEEN ASSESSEE AN D MR. U.K. MODI ARE ENCLOSED HEREWITH FOR YOUR KIND PERUSA L. THE EXPENSES OF DIRECTORS DEBITED TO PROFIT AND LOSS ACCOU NT APART FROM CONSULTANCY CHARGES PAID TO MR. U.K. MODI IS ON ACCOUNT OF DIRECTORS SITTING FEE, WHICH IS PAID TO THEM FOR ATTENDI NG THE BOARD MEETINGS, AND NO OTHER PERQUISITES HAVE BEEN PAID TO THE DIR ECTORS. 4.1 OUR ATTENTION HAS ALSO BEEN DRAWN TO PAGE NO.327 O F THE PAPER BOOK, WHICH ARE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY 701/D/2009-ST 5 HELD ON 02.09.2002, IN WHICH IT WAS RESOLVED THAT SUBJ ECT TO THE APPROVAL OF THE SHAREHOLDERS IN THE GENERAL MEETING IN TERMS OF SECTION 314 (1)(A) AND ANY OTHER APPLICABLE PROVISIONS, IF ANY, OF THE COMPANY ACT, 19 56, THE CONSENT OF THE BOARD OF DIRECTOR BE AND IS HEREBY ACCORDED FOR HOLDING AN OF FICE OF PROFIT UNDER THE COMPANY BY MR. UMESH K. MODI, CHAIRMAN AND PRESIDENT, FOR PROVIDING PROFESSIONAL SERVICES WITH EFFECT FROM 30.04.2002. PAGE NO.328 CONTAINS THE EXTRACTS OF THE MINUTES OF THE ANNUAL GENERAL MEETING HELD O N 30.09.2002, IN WHICH IT IS INTER ALIA RESOLVED THAT PURSUANT TO PROVISIONS OF SECTION 314(1)(A) AND OTHER PROVISIONS, IF ANY, OF THE COMPANY ACT, 1956, CONSENT OF THE COMPANY BE AND IS HEREBY ACCORDED FOR HOLDING AN OFFICE OF PROFIT UNDER TH E COMPANY BY MR. UMESH K. MODI, CHAIRMAN AND PRESIDENT OF THE COMPANY, FOR PROVI DING PROFESSIONAL SERVICES WITH EFFECT FROM 30.04.2002. IT WAS ALSO RESOLVED THAT THE AGREEMENT DATED 02.09.2002 BETWEEN SHRI MODI AND THE ASSESSEE COMPANY STAN DS APPROVED. THE AGREEMENT HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NOS.3 29 TO 331, THE RELEVANT CLAUSES OF WHICH ARE REPRODUCED BELOW:- 1. THE COMPANY APPOINTS THE SAID MR. UMESH K. MODI AS THE CONSULTANT. 2. THE COMPANY SHALL PAY TO THE CONSULTANT A FEE FOR P ROFESSIONAL SERVICES RENDERED BY HIM TO THE COMPANY OF `10,000/- (RUP EES TEN THOUSAND) ONLY PER HOUR FOR SUCH ADVICES AS MAY BE SOU GHT BY THE COMPANY. 3. IF THE CONSULTANT IS REQUIRED TO ATTEND TO THE OFFICE OF THE COMPANY OR THE FACTORY OF THE COMPANY FOR ANY DISCUSSIONS ON ANY PROBLEMS, HE WILL BE PAID A SUM OF `50,000/- (RUPEES FIFTY THOUSAND ) ONLY PER 701/D/2009-ST 6 ATTENDANCE AND ALSO HIS TRAVELING CHARGES TO AND FROM T HE OFFICE OR FACTORY OF THE COMPANY, IF NO SEPARATE TRANSPORT IS PR OVIDED BY THE COMPANY FOR THE PURPOSE. IF THE CONSULTANT IS REQUIRED TO ATTEND ANY OTHER PLACE IN THE COUNTRY OR OUTSIDE TO ATTEND ANY CONF ERENCE OR MEETING ON BEHALF OF THE COMPANY IN CONNECTION WITH THE BUSINESS OF THE COMPANY, HE WILL BE PAID HIS TRAVELING AND BOARDING , LODGING EXPENSES FOR THE FIRST CLASS AND ALSO A FEE OF `50,000/- (RUPEES FIFTY THOUSAND ONLY) PER DAY OR PART OF A DAY. PAGE NOS.174 TO 177 CONTAIN THE DETAILS OF CONSULTANCY CHARGES OF SHRI MODI IN TERMS OF DATE, PERSON WITH WHOM MEETING WAS CONDUCTED, TIME SPENT, PURPOSE, CHARGES AND THE PLACE. IT IS SEEN THAT FOR EACH MEETING SHR I MODI WAS PAID `50,000/- AS PER PARAGRAPH NO.3 OF THE AGREEMENT, REPRODU CED ABOVE IN RESPECT OF THE REMUNERATION. 4.2 THE CASE OF THE LEARNED COUNSEL IS THAT THE ASSESSEE HAS INCURRED LOSSES IN THIS YEAR AS WELL AS IN EARLIER YEARS. THE AGREEMENT HAS COME IN TO FORCE WITH EFFECT FROM 02.09.2002. THEREFORE, PAYMENTS ON THE BASIS OF AGREEMENT HAVE BEEN MADE IN EARLIER YEARS ALSO, WHICH WERE ALLOWED. THE PAYMENT HAS N O IMPACT ON THE TAX PAYABLE BY THE ASSESSEE AS NON-PAYMENT WOULD MERELY REDUCE T HE LOSS. ON THE OTHER HAND, SHRI MODI HAS PAID TAX AT MAXIMUM MARGINA L RATE ON THE REMUNERATION RECEIVED BY HIM FROM THE COMPANY. THEREFORE, ALLOWANCE OF THE EXPENDITURE MADE BY THE ASSESSING OFFICER DOES NOT RESULT INTO AN ORDER, W HICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE PAYMENT HAS BEEN MADE AS PER A GREEMENT, WHICH IS DRAWN AS PER THE COMPANY ACT. THE ASSESSING OFFICER HAD RAISED THE QUERY AND ALLOWED THE EXPENDITURE. THEREFORE, THE ORDER IS ALSO NOT ERRONEOUS IN AS MUCH AS 701/D/2009-ST 7 THE PAYMENT IS DEDUCTIBLE IN COMPUTING THE INCOME. THE LEA RNED CIT SUMMARILY ESTIMATED THE REASONABLE REMUNERATION AT `10 LACS WITHOUT JUSTIFYING THE AMOUNT IN ANY MANNER WHATSOEVER. THUS, IT IS CLAIMED THAT NEITHER THE ORDER IS ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE NOR IT IS SUST AINABLE ON MERITS. IN REPLY, THE LEARNED DR RELIED ON THE ORDER OF THE LEARNED CIT. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISS IONS MADE BEFORE US. THE FACTS MAY BE RECAPITULATED IN BRIEF AT THIS JUN CTURE. MR. U.K. MODI IS A CHEMICAL ENGINEER. THE BOARD OF DIRECTORS PASSED A RESOLU TION APPOINTING HIM THE CHAIRMAN OF THE ASSESSEE COMPANY. THE RESOLUTION WAS APP ROVED BY THE COMPANY IN THE ANNUAL GENERAL MEETING. AS A RESULT OF THIS RESOLU TION, AN AGREEMENT WAS ENTERED INTO BETWEEN MR. MODI AND THE COMPANY FIXING THE REM UNERATION. THE DEPARTMENT OF COMPANY AFFAIRS APPROVED THE REMUNERATION W .E.F. 30.04.2002. THE REMUNERATION WAS PAID TO HIM IN EARLIER YEARS AND IT WAS ALLOWED. THE REMUNERATION WAS PAID AS PER THE AGREEMENT IN THIS YEAR A LSO. SINCE THE REMUNERATION HAS BEEN APPROVED UNDER THE COMPANIES ACT BY A STATUTORY AUTHORITY, IT WILL BE DIFFICULT TO COME TO A CONCLUSI ON THAT IT WAS UNREASONABLE OR EXCESSIVE. ALL THESE FACTS WERE AVAILABLE WITH THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, IT IS A FACT THAT HE DID NOT DISCUSS THESE FACTS IN THE ORDER BUT ACCEPTED THE RETURN ON THIS ISSUE. FURTHER, THE ASSESSEE HAS PAID TAX U/S 115JB ON THE BOOK PROFIT, AS COMPUTATION UNDER OT HER PROVISIONS RESULTED IN LOSS. 701/D/2009-ST 8 ON THE OTHER HAND, MR. U.K. MODI HAS BEEN ASSESSED ON THE REMUNERATION AT MAXIMUM MARGINAL RATE. THUS, ON OVERALL APPRECIATION, THE REVENUE HAS NOT SUFFERED ANY LOSS. IN THE BACKGROUND OF THESE FACTS, IT CANNOT BE SAID THAT THE ORDER WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. IN TH E MALABAR INDUSTRIAL COMPANY LIMITED VS. CIT (2000) 243 ITR 83, IT HAS BEEN HELD THAT FOR EXERCISING REVISIONARY POWERS U/S 263, IT MUST BE SHOWN THAT THE O RDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. WE HAVE A LREADY SEEN THAT THE ORDER IS NOT ERRONEOUS BECAUSE OF THE STATUTORY APPROVAL OF TH E REMUNERATION. IT IS ALSO NOT PREJUDICIAL TO THE INTEREST OF REVENUE AS THE NET EFFECT IS THAT TAX HAS BEEN COLLECTED FROM MR. U.K. MODI. EVEN IF IT IS HELD THAT THE ORDER SUFFERS FROM NON-APPLICATION OF MIND, IT IS CLEAR THAT THE LEARNED CIT SHOULD HAVE DROPP ED THE MATTER AFTER CONSIDERING THE FACTS BROUGHT TO HIS NOTICE. INSTEAD O F DOING SO, HE HAS ARBITRARILY FIXED THE REASONABLE REMUNERATION AT `10,00,000/- WITHOU T ANY JUSTIFICATION. IN THIS CONNECTION, THE FACT THAT THE ASSESSEE SUFFERED LOSS IS IM MATERIAL BECAUSE THE REMUNERATION IS TO BE FIXED ON THE BASIS OF BENEFIT ACCRUI NG TO THE ASSESSEE, AS PERCEIVED BY THE ASSESSEE. THE REMUNERATION HAS ALSO BEEN APPR OVED BY A STATUTORY AUTHORITY. ACCORDINGLY, IT IS HELD THAT T HE LEARNED CIT WAS NOT JUSTIFIED IN DISALLOWING ANY PART OF THE REMUNERATION. THUS, GROUN D NO.2 IS ALLOWED. 6. IN REGARD TO PART DISALLOWANCE FROM FOREIGN TRAVEL EX PENSES, IT IS MENTIONED IN THE IMPUGNED ORDER THAT THE DIRECTORS VISITED MANY LOC ATIONS IN EUROPE. SUGAR IS A 701/D/2009-ST 9 GENERIC ITEM, WHICH IS PRODUCED IN MANY COUNTRIES ALL OV ER THE WORLD. IN MOST CASES EXPORT OF SUGAR IS NOT VERY PROFITABLE, THEREFORE, IT WI LL BE FAR FETCHED TO SUGGEST THAT DIRECTORS OF USA BASED COMPANIES WOULD COME TO UK TO MEET DIRECTORS OF ASSESSEE COMPANY, WHICH IS NOT A WELL KNOWN COMPANY. THEREFORE, IT HAS BEEN HELD THAT THEIR VISITS DO NOT APPEAR TO BE FOR BUSINESS PURPOSE ALONE. ACCORDINGLY, A SUM OF `9.86 LACS HAS BEEN DISALLOWED OUT OF THE TOTAL EXPENDITURE OF `19.86 LACS. 6.1 IN THIS CONNECTION, IT IS SUBMITTED THAT THE DETAI LS OF THE EXPENDITURE WERE SUBMITTED TO THE ASSESSING OFFICER, WHICH HAVE BEEN PLACED IN THE PAPER BOOK ON PAGE NOS.353 TO 362. THIS ISSUE WAS NOT EXAMINED BY TH E ASSESSING OFFICER AS NO FURTHER INQUIRY WAS CONDUCTED. HOWEVER, IT IS CONTENDED THAT THE REVISIONARY ORDER IS NOT CORRECT ON MERITS. THE FOREIGN TRAVELS WERE UNDERT AKEN FOR THE PURPOSE OF SALE BUT NO EXPORT ORDER COULD BE PROCURED. NONETHELESS, THE EXP ENDITURE WAS INCURRED IN THE COURSE OF BUSINESS. THE DISALLOWANCE MADE BY THE LEARNED CIT DOES NOT BRING ANY ADDITIONAL REVENUE FOR THE SIMPLE REASON THAT COMPU TATION OF TOTAL INCOME RESULTS IN LOSS EVEN AFTER DISALLOWANCE OF THE EXPENDITURE. 6.2 IN REPLY, THE LEARNED DR SUBMITTED THAT THE ISSUE HAS NOT BEEN EXAMINED AT ALL BY THE ASSESSING OFFICER. ALTHOUGH, THE EXPENDITURE WAS STATEDLY FOR THE PURPOSE OF SALE OF SUGAR, NO EXPORT ORDER HAS BEEN RECEIVED BY THE ASSES SEE. THEREFORE, IT IS ARGUED THAT THE ORDER OF LEARNED CIT MAY BE UPHELD IN THIS MATTER. 701/D/2009-ST 10 6.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMIS SIONS MADE BEFORE US. WE FIND THAT ALTHOUGH THE DETAILS WERE FILED BEFORE TH E ASSESSING OFFICER, THE SAME WERE NOT EXAMINED BY HIM IN ANY MANNER. THUS, THE CA SE OF THE ASSESSEE WAS ACCEPTED WITHOUT DEMUR. THEREFORE, IT RENDERS THE ORDER TO B E ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HOWEVER, IT IS ALSO A FACT THAT IF THE DISALLOWANCE HAD BEEN MADE, THERE WOULD HAVE BEEN NO GAIN TO THE REVENUE. IN OTHER WORDS, OMISSION ON THE PART OF THE ASSESSING OFF ICER MAY NOT LEAD TO THE CONCLUSION OF THE ORDER BEING PREJUDICIAL TO THE INTEREST OF REVENUE, WHICH IS ONE OF THE CONDITIONS TO BE NECESSARILY SATISFIED BEFORE INVOKI NG REVISIONARY JURISDICTION. 6.4 IN THE CASE OF CIT VS. SHRI BHAGWAN DAS, (2005) 272 ITR 367 (ALLD.), IT HAS BEEN HELD THAT WHERE THE CLAIM OF INCOME FROM AGRICULTURE AND POULTRY FARMING WAS NOT EXAMINED AT ALL BUT THE EXEMPTION WAS GRANTED, THE CI T RIGHTLY INVOKED THE PROVISION CONTAINED IN SECTION 263. IN THE CASE OF RAJ LAKSHMI MILL LIMITED VS. INCOME TAX OFFICER (2009) 121 ITD 343, IT HAS BEEN HELD THAT WHERE THE A.O. SHOULD HAVE MADE FURTHER INQUIRY WHEN THE FACTS SO WARRANTED, TH E FAILURE TO DO SO WILL RENDER THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE CASE OF ARVEE INTERNATIONAL VS. ADDL. COMM ISSIONER OF INCOME-TAX (2006) 101 ITD 495 (MUM.), IT HAS BEEN HELD THAT THEORET ICALLY SPEAKING AN EXPORTER CANNOT SUFFER ANY LOSS ON SALE OF LICENSEE OBTAINED FROM THE GOVERNMENT AS 701/D/2009-ST 11 INCENTIVE, THEREFORE, THE ASSESSING OFFICER OUGHT TO HAVE EX AMINED THE MATTER FURTHER. FAILURE TO DO SO RENDERS THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6.5 ON THE OTHER HAND, IT HAS BEEN HELD IN THE CASE OF CI T VS. GABRIEL INDIA LIMITED, (1993) 203 ITR 108, THAT WHERE INQUIRY HAS BEEN MADE AND DETAILED EXPLANATION HAS BEEN TENDERED BY THE ASSESSEE IN A LETTER, THE O RDER WILL NOT BE RENDERED ERRONEOUS SIMPLY BECAUSE AN ELABORATE DISCUSSION IS NOT MADE THEREIN. 6.6 IN THE LIGHT OF AFORESAID DISCUSSION, IT CAN BE SA ID THAT NO ELABORATE DISCUSSION WAS NECESSARY PROVIDED THAT A QUERY HAD BEEN R AISED AND DETAILED EXPLANATION HAD BEEN TENDERED BY THE ASSESSEE. HOWEVER, IN TH IS CASE, ALTHOUGH THE DETAILS OF THE EXPENDITURE HAVE BEEN FURNISHED, NO FURTHER INQUIRY HAS BEEN MADE. THEREFORE, THE ORDER CAN BE SAID TO SUFFER FROM INF IRMITY SO AS TO RENDER IT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. AT THE SAME TIME, IT IS CLEAR THAT THE DETAILS HAVE BEEN FURNISHED BEFORE THE LEARNED CIT. HE DI SALLOWED PART OF THE EXPENDITURE ON AN ESTIMATED BASIS WITHOUT MENTIONING WHIC H PART WAS NOT FOR THE PURPOSE OF THE BUSINESS. IT IS A FACT THAT NOT EXPORT ORDER HAS BEEN RECEIVED. HOWEVER, THE QUESTION IS NOT WHETHER EXPORT HAS BEEN MADE, BU T WHETHER EXPENDITURE IS INCURRED IN THE COURSE OF BUSINESS. IF IT IS LATTER, NO PART THEREOF SHOULD HAVE BEEN ALLOWED. THE ASSESSEE WOULD NOT HAVE PAID ANY ADD ITIONAL TAX EVEN IF 701/D/2009-ST 12 THE AMOUNT, AS COMPUTED BY LEARNED CIT, HAD BEEN DISALLOW ED BY THE ASSESSING OFFICER. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSMENT ORDER WAS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, GROUND NO.3 IS ALSO ALLO WED. 7. GROUND NO.4 WAS NOT PRESSED BY THE LEARNED COUNSEL AS NO ADDITION WAS MADE TO THE INCOME IN THE FOLLOW UP ORDER PASSED BY THE AS SESSING OFFICER. THUS, THIS GROUND IS DISMISSED AS NOT PRESSED. 8. ASCERTAINMENT OF BROUGHT FORWARD LOSSES AND UNABSOR BED DEPRECIATION FROM EARLIER YEARS DOES NOT CAUSE ANY PREJUDICE TO THE ASSESSEE AS NONE OF IT HAS BEEN OR COULD BE ABSORBED AGAINST PROFITS OF THIS YEAR, THE REAS ON BEING THAT THE ASSESSMENT RESULTED IN LOSS. THEREFORE, THIS GROUND BEING ACADEMIC I N NATURE, IS NOT BEING DECIDED BY US. ACCORDINGLY, THIS GROUND IS TREATED AS DISMISSED. 9. IN RESULT, THE APPEAL IS PARTLY ALLOWED AS DISCUSSED ABOVE. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 25.03.2010 . SD/- SD/- ( C.L. SETHI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.25.03.2010. NS 701/D/2009-ST 13 COPY FORWARDED TO:- 1. M/S SBEC SUGAR LTD., VILLAGE LOYAN MALLAKPUR, BARAUT, DISTRICT BAGHPAT. 2. ACIT-2, MEERUT 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).