SICOM LTD, MUMBAI V. PR.CIT-3, MUMBAI

ITA 3714/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2994 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: misc
• Appeal Filed On: 28-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B B RAJENDRA PRASAD
• Keywords: Rectification of order; Opportunity of being heard; Audit objection
• Section: 143(3); 115JB; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3714/MUM/2018 ASSESSMENT YEAR: 2013 - 14 SICOM LTD., SOLITAIRE CORPORATE PARK, BUILDING NO. 4, 6 TH FLOOR, GURU HARGOVINDJI ROAD (ANDHERI GHATKOPAR LINK ROAD,), CHAKALA, ANDHERI (EAST) MUMBAI - 400093. VS. PR. COMMISSIONER OF INCOME TAX - 3, 612, AAYAKARBHAVAN, MAHARSHIKARVE ROAD, MUMBAI - 400020. PAN NO. AAACS5524J APPELLANT RESPONDENT ASSESSEE BY : MR. RAJAN VORA , AR REVENUE BY : MR. B.B. RAJENDRA PRASAD , DR DATE OF HEARING : 26/11/2018 DATE OF PRONOUNCEMENT: 21/02/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2013 - 14. THE APPEAL IS DIRECTED AGAINST THE ORDER U/S 263 OF THE INCOME TAX ACT 1961, (THE ACT) PASSED BY THE PR. COMMISSIONER OF INCOME TAX - 3, MUMBAI [IN SHORT PR. CIT]. 2. THE GROUNDS OF A PPEAL FILED BY THE ASSESSEE READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT HAS : 1. ERRED IN INITIATING THE REVISION PROCEEDINGS U/S 263 OF THE ACT WITHOUT APPRECIATING THAT SECTION 263 CANNOT BE INVOKED UNLESS THE CO NJUNCTIVE SICOM LTD. ITA NO. 3714/MUM/2018 2 CONDITIONS THAT ASSESSMENT ORDER PASSED IS ERRONEOUS IN LAW AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, ARE SATISFIED; 2. ERRED IN INITIATING REVISIONARY ASSESSMENT PROCEEDINGS U/S 263 OF THE ACT, WITH A VIEW TO START THE FISHING /ROVING ENQUIRIES IN THE MATTER WITHOUT ESTABLISHING THAT THE ORDER PASSED BY THE AO IS NOT IN ACCORDANCE WITH LAW, THEREFORE THE INITIATION OF REVISIONARY ASSESSMENT PROCEEDINGS IS BAD IN LAW; 3. ERRED IN INITIATING REVISIONARY ASSESSMENT PROCEEDINGS U/S 263 OF THE ACT WITHOUT APPRECIATING THAT SECTION 263 CANNOT BE INVOKED IN CASE WHERE THE VIEW TAKEN BY THE LEARNED CIT IS BASED ON THE PRESUMPTION THAT, INADEQUATE ENQUIRY BEING MADE AT THE TIME OF REGULAR ASSESSMENT PROCEEDINGS, WITHOUT POINTING OUT ANY SPECIFIC ER ROR OR DEFECT TO SHOW THE ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE; 4. ERRED IN PASSING ORDER UNDER SECTION 263 OF THE ACT BASED ON THE AUDIT OBJECTION AND THEREFORE THE PROCEEDINGS UNDER SECTION 263 IS BAD IN LAW AS IT IS NOT BASED UPON ANY INDEPENDENT OPINION FORMED BY CIT; 5. ERRED IN PASSING ORDER UNDER SECTION 263 OF THE ACT WHEREIN ISSUE IS REMANDED WITH A DIRECTION TO AO FOR CONDUCTING FRESH ENQUIRY AND THEREBY ORDER PASSED UNDER SECTION 263 OF THE ACT CANNOT BE SAID TO BE E RRONEOUS/ PREJUDICIAL TO THE INTEREST OF T HE REVENUE, 6. ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION UNDER SECTION 36(1 )(VIII) OF THE ACT, BASED ON INCOME AS PER BOOKS OF ACCOUNTS WITHOUT APPRECIATING THAT DEDUCTION UNDER SECTION 36(1) (VIII) OF THE ACT IS TO BE ALLOWED BASED ON ASSESSED INCOME AS PER INCOME UNDER THE HEAD 'PROFIT & GAINS OF BUSINESS AND PROFESSION'; 7. ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE CLAIM O F DEDUCTION UNDER SECTION 36(1)( VIII) OF T HE ACT, AFTER VERIFYING THE DURATION OF LOAN OF 'ALL THE PARTIES' TO WHOM LOAN WAS PROVIDED AND TREATED AS LONG TERM FINANCE BY APPELLANT, WHEREIN DIRECTION ISSUED BY SICOM LTD. ITA NO. 3714/MUM/2018 3 CIT IS BEYOND THE SHOW CAUSE NOTICE ISSUED BY CIT, WHICH WAS ISSUED QUA ONE PARTY I.E. JP INFRA LTD; 8. WI THOUT PREJUDICE TO THE ABOVE, FAILED TO APPRECIATE THAT, DIRECTIONS FOR REVISION CANNOT BE GIVEN BEYOND ISSUE S OR POINTS MENTIONED IN THE NOTICE, HENCE GENERAL DIRECTIONS FOR ENQUIRY INTO ALL LOANS IS BAD IN LAW. 9. E RRED IN DIRECTING AO TO RECOMPUTE THE CLAI M OF DEDUCTION U/S 36(1)(VIII) OF THE ACT, BY ADOPTING DIFFERENT COMPUTATION MECHANISM WHEREAS COMPUTATION MECHANISM ADOPTED BY THE ASSESSEE IS CONSISTENTLY FOLLOWED AND ACCEPTING BY DEPARTMENT FROM SEVERAL YEARS, WITHOUT PROVIDING ANY VALID REASON FOR THE SAME. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE - COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2013 - 14 ON 29.11.2013 DECLARING TOTAL INCOME AT RS.345,00,71,130/ - UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS.376,02,36,393/ - U/S 115JB OF THE ACT. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 2 2 .03.2016 ASSESSING THE TOTAL INCOME AT RS.362,43,32,307/ - UNDER THE NORMAL PROVISIONS AND BOOK PROFIT AT RS.393,10,34,071/ - U/S 115JB OF THE ACT. THE AO VIDE ORDER U/S 154 OF THE ACT DATED 18.01.2017 OBSERVED THAT IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED A DEDUCTION U/S 36(1)(VIII) ON SPECIAL RESERVE OF RS.5,34,36,006/ - AND IN THE ASSESSMENT ORDER U/S 143(3), THE CLAIM WAS ALLOWED AT RS.5,62,73,832/ - , TAKING INTO CONSIDERATION THE ADDITIONS MADE TO THE TOTAL INCOME. THE AO FOUND THAT THE ASSESSEE HAD TRANSFERRED RS.5,53,01,465/ - TO THE SPECIAL RESERVE ACCOUNT U/S 36(1)(VIII) AND THEREFORE, THE DEDUCTION U/S 36(1)(III) SHOULD HAVE BEEN RESTRICTED TO THE AMOUNT OF SUCH RESERVE BEING LESS SICOM LTD. ITA NO. 3714/MUM/2018 4 THAN THE AMOUNT COMPUTED AS DEDUCTION. ACCORDINGLY, THE AO HELD THAT THE AMOUNT TRANSFERRED TO SPECIAL RESERVE BEING THE LESS, IS ALLOWABLE AS A DEDUCTION U/S 36(1)(VIII) OF THE ACT. THE AO THUS RECTIFIED THE MISTAKE U/S 154 BY ALLOWING THE ASSESSEE DEDUCTION U/S 36(1)(VIII) OF THE ACT AT RS.5,53,01,465/ - . THEREAFTER, THE PR. CIT ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT DATED 04.04.2017 TO THE ASSESSEE TO EXPLAIN THE FOLLOWING : ON VERIFICATION, CERTAIN DISCREPANCIES WERE FOUND IN THE ASSESSMENT ORDER DATED 22.03.2016, WHICH ARE AS UNDER: (I) ASSESSEE IS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR LONG TERM FINANCE ACTIVITIES, THEREFORE, FOR WORKING OF PROFIT FROM LONG TERM FI NANCE, EXPENDITURE INCURRED IN THIS REGARD IS REQUIRED TO BE CALCULATED BY ADOPTING PRO - RATA METHOD (I.E., TOTAL EXPENDITURE/TOTAL INCOME OF THE ASSESSEE EXCLUDING THOSE INCOME FROM WHICH EXPENSES HAVE NOT BEEN INCURRED DURING THE YEAR, MULTIPLIED BY TOTAL INCOME FROM LONG TERM FINANCE ) . (II) THE FINANCIAL STATEMENT SHOW THAT THE ASSESSEE HAD CREDITED INTEREST ON IT REFUND OF RS.1131.05 LAKHS AND DIVIDEND OF RS.270.93 LAKHS AGAINST WHICH NO EXPENSES WERE DEBITED IN PROFIT & LOSS ACCOUNT. FURTHER, THE ASSESS EE HAD OFFERED AMOUNTS WRITTEN OFF EARLIER RECOVERED DURING THE YEAR OF RS.958.42 LAKHS AS ITS INCOME FROM TREASURY OPERATION. IN THE ASSESSMENT ORDER, AN AMOUNT OF RS.14.07 CRORES HAS BEEN COMPUTED AS EXPENDITURE INCURRED FOR EARNING DIVIDEND INCOME U/S 1 4A OF THE ACT, HENCE, THE SAME MAY BE TAKEN INTO ACCOUNT WHILE COMPUTING THE DEDUCTION US/ 36(1)(VIII), WHEREAS THE REMAINING INCOMES SHOULD HAVE BEEN REDUCED FROM THE TOTAL INCOME. (III) IT IS TO SUBMIT THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2014 - 15, THE DETAILS OF LONG TERM FINANCE HAVE BEEN CALLED FOR AND IT IS SEEN THAT THE SICOM LTD. ITA NO. 3714/MUM/2018 5 TERM OF LOAN GIVEN TO J.P. INFRA (MUMBAI) LTD., IS LESS THAN FIVE YEARS AND THUS, THE INCOME DERIVED FROM SAID LOAN IS NOT ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII) OF THE ACT AND THUS WAS REQUIRED TO BE EXCLUDED. TO THE ABOVE SHOW CAUSE THE ASSESSEE FILED A REPLY DATED 23.04.2017 WHICH HAS BEEN EXTRACTED BY THE PR. CIT AT PAGE 2 - 3 OF HIS ORDER DATED 20.03.2018. HOWEVER, THE PR. CIT WAS NOT CONVINCED WITH THE SAID REPL Y OF THE ASSESSEE ON THE GROUND THAT THE AO DID NOT CARRY OUT NECESSARY INQUIRY AND VERIFICATION INTO THE ISSUES DEALT IN THE SHOW CAUSE NOTICE AND THEREBY ALLOWED EXCESS DEDUCTION TO THE ASSESSEE U/S 36(1)(VIII) OF THE ACT. THEREFORE, HOLDING THAT THE ORD ER PASSED BY THE AO DATED 22.03.2016 BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, THE PR. CIT SET ASIDE THE ASSESSMENT MADE U/S 143(3) DATED 22.03.2016 TO BE MADE AS PER THE OBSERVATIONS AND DIRECTIONS GIVEN IN THE IMPUGNED ORDER. FURTHER, HE DIRECTED THE AO TO INQUIRE INTO OTHER SUCH LOANS WHICH HAVE BEEN ADVANCED FOR PERIOD OF LESS THAN FIVE YEARS BUT CONSIDERED AS LONG TERM LOANS BY THE ASSESSEE. FINALLY, THE PR. CIT DIRECTED THE AO TO ALLOW THE ASSESSEE SUFFICIENT OPPORTUNITY OF BEING HEARD AND THEREAFTER, DECIDE THE ISSUE ON MERITS AND COMPLETE THE ASSESSMENT AS PER LAW. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS IN RESPECT OF GROUNDS 1 TO 5 OF THE APPEAL THAT (I) REVISIONARY ASSESSMENT PROCEEDINGS CANNOT BE INITIATE D UNLESS THE CONJUNCTIVE CONDITIONS OF SECTION 263 ARE SATISFIED, (II) REVISIONARY PROCEEDINGS ARE NOT VALID WHERE THE AO HAS ADOPTED ONE OF TWO POSSIBLE VIEWS, (III) REVISIONARY ASSESSMENT CANNOT BE BASED ON AUDIT OBJECTION, (IV) REVISIONARY ASSESSMENT PR OCEEDINGS SICOM LTD. ITA NO. 3714/MUM/2018 6 CANNOT BE INITIATED IN RESPECT OF ORIGINAL ASSESSMENT FOR WHICH AN ORDER OR PROCEEDINGS U/S 154 HAS ALREADY BEEN ISSUED/INITIATED AND (V) REVISIONARY ASSESSMENT PROCEEDINGS CANNOT BE INITIATED IN CASE OF INADEQUATE INQUIRY. RELYING ON THE CASE - LAWS, THE LD. COUNSEL SUBMITS THAT THE REVISIONARY PROCEEDINGS INITIATED BY THE PR. CIT ARE WITHOUT SATISFYING THE CONJUNCTIVE CONDITIONS OF SECTION 263. ALSO IT IS STATED BY HIM THAT IN THE PRESENT CASE, REVISIONARY PROCEEDINGS WERE MADE, EVEN THOUGH THE AO HAS UNDERTAKEN DUE INQUIRY WHILE COMPLETING THE ASSESSMENT, THEREBY LEADING TO A POSSIBLE VIEW WHICH CANNOT BE TERMED AS LACK OF INQUIRY OR ERRONEOUS IN NATURE. THEN REFERRING TO GROUNDS 6 TO 9 OF THE APPEAL, THE LD. COUNSEL SUBMITS THAT (I) CONSISTEN T APPROACH FOLLOWED BY THE ASSESSEE IS DISTURBED BY THE PR. CIT, (II) THE PR. CIT HAS DIRECTED THE AO TO INQUIRE THE TENURE OF LOANS AND ADVANCES GIVEN TO OTHER PARTIES, THOUGH THE NOTICE ISSUED U/S 263 WAS ONLY WITH RESPECT TO JP INFRA, (III) NO METHOD IS PRESCRIBED OR PROVIDED UNDER THE ACT TO COMPUTE THE DEDUCTION U/S 36(1)(VIII) AND (IV) METHOD ADOPTED BY THE PR. CIT IS BASED ON FIGURES FROM BOOKS OF ACCOUNTS WHEREAS THE DEDUCTION SHALL BE GRANTED BASED ON INCOME FROM BUSINESS OR PROFESSION AS PER THE ACT. RELYING ON THE CASE LAWS, THE LD. COUNSEL SUBMITS THAT THE FORMULA ADOPTED BY THE PR. CIT IS INCORRECT AND ACCORDINGLY WORKING DONE BY THE ASSESSEE BE ACCEPTED. SICOM LTD. ITA NO. 3714/MUM/2018 7 5. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE ASSESSEE IS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNTS FOR LONG TERM FINANCE ACTIVITIES, THEREFORE, FOR WORKING OF PROFIT FROM LONG TERM FINANCE, EXPENDITURE INCURRED IN THIS REGARD IS REQUIRED TO BE CALCULATED BY ADOPTING PRO - RATA METHOD I.E. TOTAL EXPENDITURE/TOTAL INCOME OF THE ASSESSEE EX CLUDING THOSE INCOME FOR WHICH EXPENSES HAVE NOT BEEN INCURRED DURING THE YEAR, MULTIPLIED BY TOTAL INCOME FROM LONG TERM FINANCE. THUS THE LD. DR SUPPORTS THE ORDER PASSED BY THE PR. CIT ON THE REASON THAT THE AO HAS FAILED TO CARRY OUT NECESSARY INQUIRY AND VERIFICATION ON THE ABOVE ISSUES AND THEREBY ALLOWED EXCESS DEDUCTION TO THE ASSESSEE U/S 36(1)(VIII) OF THE ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. AS MENTIONED EARLIER, THE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 2 2 .03.2016 ASSESSING THE TOTAL INCOME AT RS.362,43,32,307/ - UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT AT RS.393,10,34,071/ - U/S 115JB OF THE ACT. THEREAFTER, THE AO PASSED AN ORD ER DATED 18.01.2017 U/S 154 BY RESTRICTING THE DISALLOWANCE U/S 36(1)(VIII) TO RS.5,53,01,465/ - . SUBSEQUENTLY, THE PR. CIT ISSUED A SHOW CAUSE NOTICE DATED 04.04.2017 U/S 263 OF THE ACT, WHICH HAS BEEN EXTRACTED AT PARA 3 HEREINBEFORE. ACCORDINGLY, THE PR. CIT PASSED AN ORDER DATED 20.03.2018 U/S 263 IN RESPECT OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 36(1)(VIII) OF THE ACT. SICOM LTD. ITA NO. 3714/MUM/2018 8 AT THIS MOMENT, WE MAY TURN TO THE DECISIONS RELIED ON BY THE LD. COUNSEL IN SUPPORT OF HIS CONTENTIONS THAT THE COMMISSIONER CANNOT EXERCISE HIS POWER OF REVISION U/S 263 IN RESPECT OF ORIGINAL ASSESSMENT ORDER FOR WHICH AN ORDER OR PROCEEDINGS U/S 154 OF THE ACT HAS ALREADY BEEN ISSUED/INITIATED. THE DECISIONS RELIED UPON ARE KALYAN SOLVENT EXTRACTION LTD. [2005] (276 ITR 154) (MP), B & A PLANTATION & INDUSTRIES LTS. & ANR (290 ITR 395) [GAU . ], JEEWANLAL LTD . (108 ITR 407) (CAL . ), SAB MILLER BREWARIES PVT. LTD . (ITA NO. 1176/PUN/2013) DATED 27 FEBRUARY 2015 (PUNE TRIB), R S WAREHOUSING (ITA NO. 310/CHD/2011 ) (CHD . TRIB), LOTUS ENERGY INDIA LTD . (ITA NO. 4355/MUM/2011) DATED 14 DEC 2016 (MUM). IN THE CASE OF KALYAN SOLVENT EXTRACTION LTD. (SUPRA), ON THE DATE 21.03.1989, WHEN CIT SOUGHT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS U/S 263 AGAINST THE ASSESSMEN T ORDER DATED 13.03.1987, THE SAME WAS ALREADY RECTIFIED BY THE AO ON 14.03.1989 U/S 154. THE HONBLE HIGH COURT HELD THAT IN THIS VIEW OF THE MATTER, THE CIT HAD NO JURISDICTION TO SET ASIDE THAT ORDER WHICH STOOD ALREADY RECTIFIED. IN OTHER WORDS, THE CIT COULD AT BEST INVOKE HIS SUO MOTU POWERS U/S 263 AS AGAINST THE ORDER DATED 14.03.1989 PASSED BY THE AO AND NOT THE ONE ALREADY PASSED AND RECTIFIED, I.E. ORIGINAL ASSESSMENT ORDER DATED 13.03.1987. ONCE THE ORIGINAL ORDER STANDS RECTIFIED, THEN IT LOS ES ITS IDENTITY AT LEAST TO THE EXTENT ITS STANDS RECTIFIED. IN SUCH CIRCUMSTANCES, THE CIT SHOULD HAVE INVOKED HIS SUO MOTU POWERS U/S 263 AGAINST THE SUBSEQUENT RECTIFIED ORDER DATED 14.03.1989, IF HE WAS OF THE VIEW THAT THE SAME IS ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE SICOM LTD. ITA NO. 3714/MUM/2018 9 TRIBUNAL MADE NO MISTAKE IN COMING TO A CONCLUSION THAT THE ORDER OF CIT PASSED U/S 263 WHICH HAD THE EFFECT OF SETTING ASIDE OF THE ASSESSMENT ORDER DATED 13.03.1987 IS WITHOUT JURISDICTION. IN THE CASE OF B & A PLANTATION & INDUSTRIES LTS. & ANR (SUPRA), A RECTIFICATION PROCEEDINGS WAS INITIATED BY THE AO U/S 154 AT THE INITIATIVE OF THE AUDIT PARTY. THE AO, AFTER MAKING NECESSARY INQUIRY, DROPPED THE PROCEEDINGS. THE AO WAS SATISFIED THAT THERE WAS NO MISTAKE APPARENT FROM THE RECORD IN ALLOWING THE CLAIM OF DEDUCTION ON ACCOUNT OF BONUS. THE HONBLE HIGH COURT HELD THAT INITIATION OF THE SUO MOTU REVISIONAL PROCEEDINGS IN THE SAME MATTER AMOUNTS TO ENTRENCHING UPON THE POWERS OF THE ASSESSING AUTH ORITY, WHICH HAVE BEEN SPECIFICALLY RESERVE D FOR THE ASSESSING AUTHORITY. SINCE THE CIT HAS INTRUDED INTO THE POWERS OF THE ASSESSING AUTHORITY BY INITIATING THE PROCEEDINGS U/S 263 ON AN ISSUE ALREADY EXAMINED BY THE AO IN EX ERCISE OF POWERS U/S 154, THE RE VISIONAL AUTHORITY MUST BE HELD TO HAVE EXCEEDED THE LIMITS OF SECTION 263 AND, THEREFORE, THE IMPUGNED ORDER PASSED BY THE CIT HAS TO BE TREATED AS AN ORDER WITHOUT JURISDICTION, ARBITRARY, NOT TENABLE IN LAW AND LIABLE TO BE SET ASIDE IN QUASHED. IN M/S SAB MILLER BREWERIES PVT. LTD . (SUPRA), THE TRIBUNAL HELD THAT WHERE THE ISSUE RAISED BY THE COMMISSIONER IN THE SHOW CAUSE NOTICE HAS BEEN CONSIDERED BY THE AO EVEN IN THE PROCEEDINGS U/S 154 OF THE ACT, WHERE THE AO HAS EXPRESSED HIS OPINION IN THIS REGARD, NO PROCEEDINGS U/S 263 OF THE ACT CAN BE INITIATED IN SUCH CASE. THE TRIBUNAL RELIED ON THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE OF R S WAREHOUSING (SUPRA). SICOM LTD. ITA NO. 3714/MUM/2018 10 IN THE CASE OF M/S LOTUS ENERGY (INDIA) LTD. (SUPRA), THE ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) ON 23.12.2008. THE AO CONTEMPLATED PROCEEDINGS U/S 154 VIDE REPLY TO THE AUDIT OBJECTION ON 19.08.2009. THEREAFTER, THE CIT ISSUED SHOW CAUSE NOTICE U/S 263 ON 11.03.2011. THE TRIBUNAL HELD THAT : T HUS THE RECORD OF PROPOSAL TO TAKE ACTION BY THE AO U/S 154 OF THE ACT WAS BEFORE THE CIT BEFORE ISSUING NOTICE U/S 263 OF THE ACT AND HENCE THE ORDER OF THE AO CANNOT BE TERMED AS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENUE AS THE WORD RE CORDS USED IN SECTION 263 OF THE ACT SHALL ALSO CONTEMPLATE INCLUDING THE RECORD PERTAINING TO THE PROCEEDINGS U/S 154 OF THE ACT ARISING SUBSEQUENTLY OUT OF ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT, AND SUCH RECORD WAS BEFORE THE LD. CIT BE FORE HE ISSUED NOTICE U/S 263 OF THE ACT ON 11.03.2011. THUS IN OUR CONSIDERED VIEW, THE ASSESSMENT ORDER DATED 23.12.2008 PASSED BY THE AO U/S 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE, AND THE LD. CIT HAS NOT CORRECTLY INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT, HENCE, THE ORDER OF THE CIT IN OUR CONSIDERED VIEW IS NOT SUSTAINABLE IN LAW AND IS HEREBY ORDERED TO BE QUASHED. WE ORDER ACCORDINGLY. 6.1 TO RECAPITULATE THE RATIO LAID DOWN IN THE DECISIONS D ELINEATED AT PARA 6 ABOVE, ONCE THE ASSESSMENT ORDER WAS RECTIFIED BY THE AO U/S 154, THE ORIGINAL ORDER COULD NOT BE REVISED U/S 263; ONLY THE RECTIFIED ORDER U/S 263 IF IT WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AS MENTIONED EARL IER THE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 2 2 .03.2016. THEN THE AO PASSED A RECTIFICATION ORDER DATED 18.01.2017 IN RESPECT OF CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE ACT. SICOM LTD. ITA NO. 3714/MUM/2018 11 THEREAFTER, THE PR. CIT HAS PASSED AN ORDER DATED 20.03.2018 U/S 263 IN RES PECT OF CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE ACT. IN VIEW OF THE POSITION OF LAW DELINEATED ABOVE, THE ORDER PASSED BY THE PR. CIT IS NOT SUSTAINABLE AND IS HEREBY ORDER TO BE QUASHED. WE DO NOT FEEL THE NECESSITY OF ADVERTING TO THE OTHER GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/02/2019. SD/ - SD/ - (PAWAN SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 21/02/2019. RAHUL SHARMA, SR. P.S. 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI