M/s SEL Manufacturing Co. Ltd., Ludhiana V. Addl. CIT, Ludhiana

ITA 409/CHANDI/2014

• Counselvise Citation: 40921514 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL VERMAN
• Assessee Lawyers: ASHWANI KUMAR
• Keywords: Depreciation; Opportunity of being heard; Audit objection; Additional depreciation; Difference of opinion; Assessment record; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 263; 143(3); 80HHC; 153A; 14A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NOS. 409 & 410/CHD/2014 A.Y: 2009-10 & 2010-11 M/S SEL MFG. CO. LTD., VS THE ADDL. CIT, 273-74, G.T. ROAD, RANGE 1, DHANDARI KALAN LUDHIANA. LUDHIANA. PAN: AAHCS9189E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI SUSHIL VERMAN,CIT-DR DATE OF HEARING : 21.10.2015 DATE OF PRONOUNCEMENT : 18.11.2015 O R D E R PER BHAVNESH SAINI,JM BOTH THE APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (CENTRA L) LUDHIANA DATED 21.03.2014 UNDER SECTION 263 OF THE INCOME TAX ACT FOR ASSESSMENT YEARS 2009-10 AND 2010-11. 2. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS THEREFORE, BOTH APPEALS WERE HEARD TOGETHE R AND WE DISPOSE OF THE SAME THROUGH THIS COMMON CONSOLIDATED ORDER. 2 3. BOTH APPEALS ARE DECIDED AS UNDER. ITA 409/2010 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT ORDER PASSED U/S 263 BY THE LD. CIT (CENTRAL) , LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO HOLD THAT ASSESSMENT ORDER DAT ED 16.12.2011 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT HE WAS NOT JUSTIFIED TO SET ASIDE THE ASSES SMENT ORDER WITH THE DIRECTIONS TO MAKE A FRESH ASSESSMEN T DENOVO AFTER MAKING PROPER ENQUIRY. 3. THAT HE WAS NOT JUSTIFIED TO OBSERVE IN THE ORDER THAT THE APPELLANT WAS NOT ENTITLED TO CLAIM OF DEDUCTION U/S 80 1 C. 4. THAT THE LD. CIT WAS FURTHER NOT JUSTIFIED TO HOL D THAT THE ASSESSING OFFICER FAILED TO APPLY HIS MIND IN WORKIN G OUT DISALLOWANCE UNDER SECTION 14A. 5. THAT HE WAS FURTHER NOT JUSTIFIED TO HOLD THAT TH E APPELLANT WAS NOT ENTITLED TO DEPRECIATION ON ELECTRIC INSTALLATIONS. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT IN THIS C ASE, ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 22.09.2009 SHOWING INCOM E OF RS. 13.85 CR. THE ASSESSMENT WAS COMPLETED UNDE R SECTION 143(3) OF THE ACT VIDE ORDER DATED 16.12.20 11 AT AN INCOME OF RS. 22.06 CR AFTER ALLOWING DEDUCTION OF RS. 15,12,92,003/- UNDER SECTION 80IC OF THE ACT. 6. IN THIS CASE, SHOW CAUSE NOTICE UNDER SECTION 26 3 OF THE INCOME TAX ACT WAS ISSUED ON 05.06.2013. AFT ER SEARCH, THE CASE WAS CENTRALIZED WITH CENTRAL CIRCL E III, 3 LUDHIANA. THE ASSESSEE IN RESPONSE TO THE NOTICE U NDER SECTION 263 SUBMITTED THAT SINCE IN THIS CASE, AS A RESULT OF SEARCH ASSESSMENTS, FOR SIX ASSESSMENT YE ARS, IMMEDIATELY PRECEDING ASSESSMENT YEAR RELEVANT TO T HE PREVIOUS YEAR, IN WHICH SEARCH WAS CONDUCTED, ASSESSMENTS ARE REQUIRED TO BE MADE AS PER PROVISIO NS OF SECTION 153A OF THE INCOME TAX ACT AFRESH, THE ASSESSMENTS MADE EARLIER NO MORE SUBSIST. IT WAS, THEREFORE, PRAYED THAT PRESENT PROCEEDINGS UNDER SE CTION 263 MAY BE FILED. THE LD. CIT, HOWEVER, REJECTED T HE CONTENTION OF THE ASSESSEE BECAUSE THE PROCEEDINGS UNDER SECTION 263 OF THE ACT DO NOT GET ABATED. TH E SHOW CAUSE NOTICE WAS AGAIN ISSUED TO THE ASSESSEE UNDER SECTION 263 OF THE ACT IN WHICH THE LD. CIT N OTED THAT ON EXAMINATION OF THE ASSESSMENT RECORD, IT WA S NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT WHICH WAS SUPPORTED BY AUDI T REPORT AND ASSESSING OFFICER RESTRICTED PART OF THE ADDITION ON THIS ISSUE. IT WAS ALSO FOUND THAT ASS ESSEE HAS MADE SUBSTANTIAL EXPANSION FOR CLAIMING DEDUCTI ON UNDER SECTION 80IC AND ASSESSMENT YEAR 2007-08 WAS THE FIRST YEAR. THE BOOK VALUE OF PLANT AND MACHIN ERY ON 1 ST DAY IN ASSESSMENT YEAR 2007-08 WAS RS.61,71,485/- WHEN SUBSTANTIAL EXPANSION TOOK PLAC E. AS PER THE AUDIT REPORT, THE VALUE OF INCREASE IN P LANT AND MACHINERY, IN THE YEAR OF SUBSTANTIAL EXPANSION WAS RS. 29,86,340/-. AS THE SECOND AMOUNT WAS LESS THA N 50% OF THE FIRST AMOUNT, THE UNIT WAS NOT ELIGIBLE FOR 4 DEDUCTION UNDER SECTION 80IC. IT WAS ALSO NOTED TH AT SINCE ASSESSMENT YEAR 2007-08 WAS THE FIRST YEAR IN WHICH SUBSTANTIAL EXPANSION WAS CLAIMED BUT IT WAS NOT CLARIFIED AS TO ON WHAT BASIS, THE ASSESSEES REPRESENTATIVE STATED THAT GENERATOR AND WEIGHING MACHINES ARE TO BE EXCLUDED FROM PLANT AND MACHINER Y. AS PER CERTIFICATE FROM GENE4RAL MANAGER, DISTRICT INDUSTRY CENTRE, SOLAN, THE UNIT WAS INSPECTED BY OFFICIALS OF HIS OFFICE IN WHICH IT WAS MENTIONED T HAT ASSESSEE HAS MADE SUBSTANTIAL EXPANSION IN THE UNIT AT BADDI. THE ASSESSING OFFICER SIMPLY ACCEPTED THE CONTENTION WITHOUT APPLYING HIS MIND ON THE SAME IN CORRECT PERSPECTIVE WITHOUT CONSIDERING THE PROVISI ONS OF THE INCOME TAX ACT. 6(I) IT WAS ALSO NOTED THAT IT IS NOT CLEAR WHETH ER ASSESSING OFFICER HAS REFERRED TO RECORD OF ASSESSM ENT YEAR 2007-08 WHILE CONSIDERING THE DEDUCTION UNDER SECTION 80IC OF THE ACT IN ASSESSMENT YEAR UNDER APPEAL. IT WAS FURTHER NOTED THAT THE ASSESSEE IN THE REPLY SUBMITTED DURING ASSESSMENT PROCEEDINGS THAT READYMADE GARMENTS AMOUNTING TO RS. 10.92 CR WERE PURCHASED IN THE BADDI UNIT ON WHICH DEDUCTION UNDE R SECTION 80IC IS NOT ALLOWABLE. FURTHER, THE PROFIT RATE, COMBINED FOR ALL THE UNITS AS PER AUDIT REPORT WAS 15.07% AS AGAINST GP RATE OF 38% SHOWN IN BADDI UNI T WHICH WAS FOUND TO BE TOO MUCH DISPROPORTIONATE. I T WAS OBSERVED THAT ALL THE DIRECT AND INDIRECT EXPEN SES 5 HAVE NOT BEEN ALLOCATED UNIFORMLY IN ALL THE UNITS. FOR INSTANCE, DIRECTORS REMUNERATION AND REMUNERATION OF THE AUDITOR HAS NOT BEEN ALLOCATED TO BADDI UNIT FO R THE PURPOSE OF DEDUCTION UNDER SECTION 80IC OF THE ACT WHICH FACT IS NOT VERIFIED BY THE ASSESSING OFFICER . AS PER AUDIT REPORT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IC, ASSESSEE MADE PURCHASES OF RS. 33.89 CR FROM RELATED CONCERNS WHO WERE ENGAGED WITH THE SIM ILAR BUSINESS ACTIVITIES. THE ASSESSING OFFICER WAS REQ UIRED TO CRITICALLY EXAMINE THE PURCHASES WHETHER THESE PURCHASES WERE MADE AT PREVAILING MARKET RATES OR WHETHER ANY SPECIAL CONCESSION WAS EXTENDED TO THIS UNIT ENJOYING DEDUCTION UNDER SECTION 80IC. FAILU RE TO EXAMINE THIS ISSUE WAS CONSIDERED TO BE AN ORDER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 7. IN THE SHOW CAUSE NOTICE ALSO, IT WAS NOTED THAT AUDITOR HAS REFERRED TO INADMISSIBLE DEDUCTION UNDE R SECTION 14A. THE AUDITOR OF THE ASSESSEE COMPANY H AS HIMSELF COMPUTED THE AMOUNT LIABLE TO BE DISALLOWED AT RS. 3.92 CR. HOWEVER, THE ASSESSING OFFICER DID NO T REFER TO THE SAME AND MADE THE CALCULATION OF THE AMOUNT LIABLE TO BE DISALLOWED IN HIS OWN WAY AND ASSESSING OFFICER TOOK THE AMOUNT OF INTEREST AT RS . 9.77 CR WHEREAS THE AMOUNT OF INTEREST PAID BY ASSESSEE TO THE VARIOUS PERSONS AS PER PROFIT & LOSS ACCOUNT OF THE E-RETURN IS RS. 35,60,01,733/-SIMILARLY, AVERAGE VA LUE 6 OF INVESTMENTS AND ASSETS ALSO WERE TAKEN AT WRONG AMOUNTS. IN THIS WAY, THE AMOUNT DISALLOWABLE, WHI CH HAS BEEN COMPUTED BY THE AUDITOR OF THE ASSESSEE COMPANY AT RS. 3,92,79,427/- WAS COMPUTED AT MUCH BELOW THIS FIGURE AT RS. 1,37,29,207/-. THE ORDER OF THE ASSESSING OFFICER WAS ALSO, THEREFORE, CONSIDERED T O BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 8. IT WAS FURTHER OBSERVED THAT DEPRECIATION ON ELECTRONIC INSTALLATION HAS BEEN CLAIMED @ 15% AND ADDITIONAL DEPRECIATION ON NEW INVESTMENT UNDER THI S HEAD HAS ALSO BEEN CLAIMED @ 20%. THE ASSESSING OFFICER DID NOT GO INTO THE CORRECTNESS OF THOSE CL AIMS AND ALLOWED THE SAME WITHOUT MAKING ANY VERIFICATIO N. THE DEPRECIATION ON ELECTRONIC INSTALLATION IS ALLO WABLE @ 10%. FURTHER, SINCE THESE ARE NOT PART OF THE PLA NT AND MACHINERY, NO ADDITIONAL DEPRECIATION WAS ALLOWABLE. THE ASSESSMENT ORDER SO FRAMED WAS THUS TREATED AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO TH E INTEREST OF REVENUE. THE ASSESSEE WAS, THEREFORE, ASKED TO EXPLAIN THE SAME IN THE PROCEEDINGS UNDER SECTIO N 263 OF THE INCOME TAX ACT. THE ASSESSEE FILED SUBMISSIONS BEFORE CIT IN RESPONSE TO THE NOTICE UN DER SECTION 263 OF THE ACT AND IT WAS SUBMITTED THAT PROCEEDINGS UNDER SECTION 263 CAN BE INITIATED ONLY IF TWO CONDITIONS OF AN ORDER PASSED BY THE ASSESSING 7 OFFICER, BEING ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE ARE SATISFIED. 9. WITH REGARD TO THE ISSUE OF DISALLOWANCE UNDER SECTION 80IC, ASSESSEE SUBMITTED THAT WHILE FRAMING THE ASSESSMENT, ASSESSING OFFICER HAD DISCUSSED THE ISS UE OF DEDUCTION UNDER SECTION 80IC IN THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THIS ISSUE WAS EXAMIN ED AT LENGTH BY ASSESSING OFFICER WHILE FRAMING ASSESSMEN T FOR ASSESSMENT YEAR 2007-08. SPECIFIC QUERY ON THE SAME WAS RAISED VIDE LETTER DATED 18/22.12.2009 AND ASSE SSEE HAD FILED REPLIES TO THE SAID QUERIES THROUGH DIFFE RENT LETTERS. IT WAS FURTHER SUBMITTED THAT PLANT AND MACHINERY ADDED WAS OF RS. 29.86 LACS. THE TOTAL V ALUE OF PLANT AND MACHINERY AS ON 31.03.2006 WAS RS. 61. 71 LACS WHICH INCLUDED THE VALUE OF GENERATOR SET OF R S. 2,85,000/-. IF THE VALUE OF THE GENERATOR SET IS E XCLUDED FROM THE TOTAL VALUE OF RS. 61,71,485/- OF THE PLAN T AND MACHINERY, THE BALANCE WORKS OUT AT RS. 58,86,485/- . THE AMOUNT INVESTED IN PLANT AND MACHINERY DURING ASSESSMENT YEAR 2007-08 WAS RS. 29,86,340/- WHICH WAS CERTAINLY MORE THAN 50% OF THE TOTAL VALUE OF T HE PROFIT & LOSS ACCOUNT AS REQUIRED UNDER THE PROVISI ONS OF THE ACT. THE ASSESSEE ALSO REFERRED TO DEFINITI ON OF SMALL SCALE INDUSTRIAL UNDERTAKING AS PER PROVISION S OF SECTION 80IB(14)(G) OF THE ACT AND SECTION 11B OF T HE INDUSTRIES (DEVELOPMENT REGULATION) ACT, 1955. BY REFERRING TO THE SAME, IT WAS SUBMITTED THAT AS PER 8 PROVISIONS OF THE ABOVE ACTS, GENERATOR SET INTER-A LIA DO NOT FORM PART OF THE PLANT AND MACHINERY IN CASE OF SMALL SCALE UNDERTAKING. IF THE VALUE OF GENERATOR SET IS EXCLUDED FROM THE TOTAL VALUE OF PLANT AND MACHI NERY, THE INVESTMENT MADE BY ASSESSEE WAS MORE THAN 50% S O AS TO SATISFY THE RELEVANT PROVISIONS BY MAKING SUBSTANTIAL EXPANSION AND AS SUCH, ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER SECTION 80IC OF THE AC T. 9(I) THE LD. COMMISSIONER OF INCOME TAX, HOWEVER, D ID NOT ACCEPT CONTENTION OF ASSESSEE BECAUSE WHEN PLAN T AND MACHINERY HAVE NOT BEEN DEFINED UNDER SECTION 8 0IC OF THE ACT, THEREFORE, GENERATOR SETS CANNOT BE EXC LUDED FROM PLANT AND MACHINERY. THE LD. CIT ALSO NOTED T HAT ON EXAMINATION OF THE ASSESSMENT RECORD, IT WAS NOT ICED THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 8 0IC AMOUNTING TO RS.15,12,92,003/-, ASSESSING OFFICER, HOWEVER, AFTER EXAMINING CERTAIN ASPECTS OF THE CAS E, RESTRICTED THE ABOVE DEDUCTION TO RS. 8,29,40,761/- . IT WAS NOTED THAT SINCE THE VALUE OF INCREASE IN PLANT AND MACHINERY FOR CLAIMING SUBSTANTIAL EXPANSION IN ASSESSMENT YEAR 2007-08 WAS LESS THAN 50% AS NOTED ABOVE, THEREFORE, DEDUCTION UNDER SECTION 80IC WAS NOT ALLOWABLE TO THE ASSESSEE. IT WAS ALSO NOTED THAT THE ASSESSING OFFICER HAS WRONGLY CONSIDERED THE INSPEC TION MADE BY THE GENERAL MANAGER, DISTRICT INDUSTRY CENT RE, SOLAN AND ITS CERTIFICATE WITHOUT EXAMINING THE ISS UE OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN ASSESSME NT 9 YEAR 2007-08. IT WAS ALSO NOTED THAT ON THE PURCHA SE AND TRADING OF READYMADE GARMENTS, ASSESSEE SIMPLY EXPLAINED THAT AFTER MAKING PURCHASES, SOME JOB WOR K IN THE SHAPE OF EMBROIDERY AND FINISHING WAS DONE IN T HE UNIT AT BADDI BEFORE FINALLY EXPORTING THE SAME IS NOT ACCEPTABLE BECAUSE NO EVIDENCE TO THAT EFFECT HAS B EEN FILED. THE CONTENTION OF ASSESSEE THAT THIS ISSUE WAS RAISED BY THE ASSESSING OFFICER AT ASSESSMENT STAGE AND AFTER EXAMINING THE ISSUE, ALLOWED DEDUCTION TO THE ASSESSEE, WAS NOT ACCEPTED BY THE CIT. THE LD. CIT NOTED THAT SINCE THE EXPORTS INCLUDED TRADING EXPOR TS AND NOT OUT OF MANUFACTURED GOODS, THEREFORE, ASSES SEE WAS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IC O F THE ACT. THE CONTENTION OF THE ASSESSEE THAT SOME JOB W ORK WAS ALSO DONE ON PURCHASE OF READYMADE GARMENTS WAS NOT ACCEPTED BY THE LD. CIT. OTHERWISE ALSO, THIS ISSUE HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. TH E LD. CIT ALSO NOTED THAT THERE IS A VERY HIGH PROFIT RAT E SHOWN IN BADDI UNIT AS COMPARED TO THAT OF ENTIRE ASSESSEE COMPANY AND ALLOCATION OF EXPENSES. THE ASSESSEE SUBMITTED THAT AUDITORS REMUNERATION AND DIRECTORS REMUNERATION ARE THE EXPENSES IN THE NAT URE OF HEAD OF OFFICE EXPENSES AND WERE DIRECTLY DEBI TED TO THE HEAD OFFICE AND NO PART OF THE SAME WAS ALLOCAT ED TO BADDI UNIT. ACCORDING TO THE ASSESSEE, THESE ARE I N THE NATURE OF FIXED EXPENSES AND COULD NOT VARY ACCORDI NG TO SALES. THE ASSESSEE COMPANY IS MAINTAINING SEPARATE BOOKS OF ACCOUNT AND GROSS PROFIT OF ASSESSEE WAS M ORE 10 THAN AS COMPARED TO OTHER UNITS. IT WAS ALSO SUBMI TTED THAT BADDI UNIT IS A GARMENT UNIT AND OTHER UNITS A RE SPINNING UNITS. IN THE CASE OF GARMENT UNIT, MACHI NERY REQUIREMENT IS VERY LESS AND THAT IS WHY IT IS LESS CAPITAL INTENSIVE UNIT AS COMPARED TO SPINNING UNIT AND THEREFORE, PROFITABILITY IS HIGH IN BADDI UNIT. TH E LD. CIT, HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSE SSEE BECAUSE THE EXPENSES HAVE NOT BEEN PROPERLY ALLOCAT ED WHICH RESULTED INTO HIGHER PROFIT IN BADDI UNIT. T HE LD. CIT ALSO NOTED THAT SINCE EXPENSES HAVE NOT BEEN PROPERLY ALLOCATED, THEREFORE, THIS REQUIRES RE- COMPUTATION OF DEDUCTION AS ASSESSING OFFICER HAS F AILED TO CONSIDER THE SAME. THE CONTENTION OF ASSESSEE TH AT SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED WHIC H HAS GIVEN PROPER BOOK RESULTS, WAS ALSO REJECTED. THE CONTENTION OF THE ASSESSEE THAT ASSESSING OFFICER I SSUED DETAILED QUESTIONNAIRE ON THIS ISSUE WAS ALSO REJEC TED BY LD. CIT. IT WAS ALSO NOTED THAT ASSESSING OFFICER HAS FAILED TO CRITICALLY EXAMINE THE PURCHASES MADE FOR THE UNITS AT BADDI IN RESPECT OF WHICH, DEDUCTION UNDER SECTION 80IC HAVE BEEN CLAIMED. THE LD. CIT, THERE FORE, NOTED THAT A NET PROFIT RATE OF BADDI UNIT IS EXCEPTIONALLY HIGH AND THERE IS EVERY LIKELIHOOD TH AT THESE TRANSACTIONS WERE NOT AS PER THE PREVAILING M ARKET RATES. THEREFORE, ASSESSING OFFICER SHOULD HAVE GO NE INTO DEEPER INVESTIGATION FOR MAKING THE ADJUSTMENT TO THE PROFITS BUT ASSESSING OFFICER HAS FAILED TO DO SO. IT WAS, THEREFORE, HELD THAT THE ORDER OF THE ASSESSIN G 11 OFFICER GRANTING DEDUCTION UNDER SECTION 80IC IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 9(II) WITH REGARD TO DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, ASSESSEE SUBMITTED THAT ASSESSI NG OFFICER HAS EXAMINED THIS ISSUE IN DETAIL AT ASSESS MENT STAGE AND WORKED OUT THE DISALLOWANCE ACCORDINGLY. THE LD. CIT, HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE BECAUSE ASSESSEE COMPANY HAS ITSELF COMPUT ED THE AMOUNT LIABLE TO BE DISALLOWED AT RS. 3,92,79,4 27/-. THE ASSESSING OFFICER HAS NOT EVEN REFERRED THIS AM OUNT AND CALCULATION IN THE ASSESSMENT ORDER AND MADE DISALLOWANCE IN HIS OWN WAY. THE ASSESSING OFFICER TOOK THE AMOUNT OF INTEREST AT RS. 9.77 CR WHEREAS THE AMOUNT OF INTEREST PAID BY ASSESSEE TO VARIOUS PERS ONS AS PER E-RETURN WAS RS. 35.60 CR. IT WAS, THEREFOR E, NOTED THAT ASSESSING OFFICER HAS DISALLOWED THE LES SER AMOUNT OF RS. 1.37 CR AND DETAILS GIVEN BY THE ASSESSING OFFICER WERE INCORRECT. THE ORDER WAS, THEREFORE, FOUND TO BE ERRONEOUS IN SO FAR AS PREJU DICIAL TO THE INTEREST OF REVENUE. 9(III) WITH REGARD TO ISSUE OF ALLOWING DEPRECIATIO N @ 15% AND ADDITIONAL DEPRECIATION @ 20% INSTEAD OF 10 %, ASSESSEE HAS SUBMITTED THAT ON ELECTRIC INSTALLATIO N WHICH ARE PART OF MACHINERY, DEPRECIATION HAS BEEN CLAIMED AT THE SAME RATE WHICH IS APPLICABLE TO PLA NT AND MACHINERY. ON THE ELECTRONIC FITTINGS, WHICH A RE NOT PART OF PLANT AND MACHINERY, DEPRECIATION IS CL AIMED 12 @ 10%. THE ASSESSING OFFICER HAS, THEREFORE, EXAMIN ED THIS ISSUE AND IT IS WRONG TO OBSERVE THAT ASSESSIN G OFFICER FAILED TO NOTICE THE ALLEGED CLAIM OF DEPRE CIATION. THE CIT, HOWEVER, DID NOT ACCEPT CONTENTION OF ASSE SSEE AND NOTED THAT ASSESSING OFFICER DID NOT EXAMINE TH E CORRECTNESS OF THE CLAIM OF ASSESSEE AND ACCORDINGL Y ASSESSMENT ORDER WAS ERRONEOUS IN SO FAR AS PREJUDI CIAL TO THE INTEREST OF REVENUE. 10. THE LD. COMMISSIONER OF INCOME TAX RELIED UPON CERTAIN DECISIONS IN WHICH IT WAS HELD THAT ASSESSM ENT COMPLETED WITHOUT NECESSARY ENQUIRY AND APPLICATION OF MIND IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE. THE CIT, THEREFORE, SET ASIDE THE ASSESSM ENT ORDER DATED 16.12.2011 UNDER SECTION 143(3) OF THE INCOME TAX ACT AND DIRECTED THE ASSESSING OFFICER T O PASS THE ASSESSMENT ORDER AFRESH DENOVO AFTER PROPE RLY EXAMINING THE FACTS AND RELEVANT LEGAL PROVISIONS A ND CONDUCTING PROPER ENQUIRY BY GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. THE ASSESSEE IS IN APPEAL ON THE ABOVE GROUNDS. 12. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT. HE HAS SUBMITTED THAT DEDUCTION UNDER SECTION 80IC WAS GRATED IN INI TIAL ASSESSMENT YEAR 2007-08 IN WHICH SUBSTANTIAL EXPANSION HAVE BEEN CARRIED OUT. THE ASSESSING OFF ICER ACCEPTED CLAIM OF ASSESSEE IN ASSESSMENT YEAR 2007- 08. 13 THE ASSESSING OFFICER RAISED QUERY AT ASSESSMENT ST AGE IN ASSESSMENT YEAR 2007-08 VIDE LETTER DATED 18/22.12.2009 (PB-77) AND ENTIRE ISSUE AS HAVE BEEN CONSIDERED BY CIT IN PROCEEDINGS UNDER SECTION 263 WAS EXAMINED BY ASSESSING OFFICER. THE REPLY OF THE ASS ESSEE BEFORE ASSESSING OFFICER IS PB-79 AND PB-83. THE E NTIRE ISSUE OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON CARRYING OUT SUBSTANTIAL EXPANSION WAS ADMITTED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 AND CL AIM OF ASSESSEE HAVE BEEN ACCEPTED. HE HAS SUBMITTED T HAT THE CLAIM OF DEDUCTION UNDER SECTION 80IC IN INITIA L ASSESSMENT YEAR 2007-08 HAS BECOME FINAL. THE ASSESSING OFFICER ISSUED A QUERY LETTER DATED 08.06 .2011 AND ASKED FOR THE COMPLETE DETAILS. COPY OF THIS N OTICE IS PLACED ON RECORD. PB-33 AND 34 IS ANOTHER QUERY LETTER ISSUED BY ASSESSING OFFICER IN ASSESSMENT YE AR UNDER APPEAL ASKED THE COMPLETE DETAILS OF DEDUCTIO N CLAIMED UNDER SECTION 80IC OF THE ACT. PB- 18 AND 1 9 IS THE REPLY FILED BEFORE LD. CIT IN WHICH ENTIRE ISSU E WAS EXPLAINED. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT SINCE DEDUCTION UNDER SECTION 80IC WAS ALLOWED IN INITIAL ASSESSMENT YEAR 2007-08, THEREFORE, UNLESS THE SAME DEDUCTION IS WITHDRAWN IN ASSESSMENT YEAR 2007 - 08, IT CANNOT BE WITHDRAWN IN SUBSEQUENT ASSESSMENT YEARS INCLUDING THE ASSESSMENT YEAR UNDER APPEAL EV EN IN PROCEEDINGS UNDER SECTION 263 OF THE ACT. IN SUP PORT OF HIS CONTENTION, LD. COUNSEL FOR THE ASSESSEE REL IED UPON DECISION OF GUJRAT HIGH COURT IN THE CASE OF 14 SAUARASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V CIT 123 ITR 669, DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT V PAUL BROTHERS 216 ITR 548, DECISION OF BOM BAY HIGH COURT IN THE CASE OF CIT V WESTERN OUTDOOR INTERACTIVE P.LTD. 349 ITR 309 AND DECISION OF DELH I HIGH COURT IN THE CASE OF CIT V DELHI PRESS PATRA PRAKASHAN LTD. 355 ITR 14. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON DECISION OF BOMBAY HIGH C OURT IN THE CASE OF CIT V FATEH GRANITE LTD. 314 ITR 32 IN WHICH IT WAS HELD THAT ACTIVITY OF CUTTING, POLIS HING AND SIZING GRANITES WOULD BE COVERED WITHIN THE MEA NING OF THE EXPRESSION PRODUCTION. THEREFORE, ASSESSEE WAS ENTITLED TO BENEFIT UNDER SECTION 10B OF THE INCOME TAX ACT. PB- 41 TO 43 IS THE REPLY FILED BEFORE ASSES SING OFFICER IN ASSESSMENT YEAR UNDER APPEAL IN WHICH AL SO THE ASSESSEE EXPLAINED THE ISSUE OF DEDUCTION UNDER SECTION 80IC IN DETAIL. 12(I) HE HAS FURTHER SUBMITTED THAT UPTO ASSESSME NT YEAR 2006-07 INCLUDING THE BLOCK PERIOD ENDING 05.02.2003, ITAT CHANDIGARH BENCH HAS ALLOWED THE APPEALS OF THE ASSESSEE IN HIS FAVOUR IN RESPECT OF DISALLOWANCE OF DEDUCTION MADE ON ACCOUNT OF MANUFACTURING CAPACITY AND THE APPEAL OF THE REVENU E WITH REGARD TO RESTRICTING OF MANUFACTURING CAPACIT Y OF THE ASSESSEE HAS BEEN DISMISSED. THE LD. COUNSEL F OR THE ASSESSEE ALSO SUBMITTED THAT THE ISSUE OF PURCH ASE OF READYMADE GARMENTS WAS ALSO EXPLAINED BEFORE 15 ASSESSING OFFICER IN THE REPLY OF THE ASSESSEE AND IT WAS SUBMITTED THAT NO TRADING ACTIVITY HAD BEEN CONDUCT ED IN BADDI UNIT AND AS SUCH TRADING IS NOT REQUIRED F OR BADDI UNIT. PB-20 IS THE REPLY FILED BEFORE LD. CI T IN WHICH ALSO ENTIRE ISSUE OF JOB WORK CONDUCTED BY ASSESSEE, HIGHER GP RATE WAS EXPLAINED BUT IT WAS N OT PROPERLY APPRECIATED BY THE LD. CIT. IT WAS ALSO EXPLAINED THAT FOR BADDI UNIT, SEPARATE BOOKS OF AC COUNT HAVE BEEN MAINTAINED BY ASSESSEE WHICH HAS GIVEN PROPER BOOK RESULTS BUT SAME WAS NOT PROPERLY CONSIDERED BY THE LD. CIT. PB-36 IS THE REPLY BEFO RE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS UNDER APPEAL ON WHICH ON POINT NO. 12, THE DETAILS OF SISTER/RELATED/ASSOCIATED CONCERNS WERE FILED WITH THEIR PARTNERS, PERCENTAGE OF SHARE/SHARE PROFITS, DIRECT ORS ETC. AND COMPLETE BUSINESS DETAILS WERE DISCLOSED T O THE ASSESSING OFFICER. THIS WAS FILED IN REPLY TO THE S PECIFIC QUERY RAISED BY THE ASSESSING OFFICER. HE HAS, THEREFORE, SUBMITTED THAT DEDUCTION UNDER SECTION 8 0IC WAS PROPERLY ENQUIRED INTO AND CONSIDERED BY ASSESS ING OFFICER AT ASSESSMENT STAGE, THEREFORE, INITIATION OF PROCEEDINGS UNDER SECTION 263 ARE NOT JUSTIFIED ON THE SAME ISSUE. 12(II) THE LD. COUNSEL FOR THE ASSESSEE, WITH RE GARD TO DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T REFERRED TO THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT ASSESSING OFFICER HAS EXAMINED THIS 16 ISSUE IN DETAIL WITH REFERENCE TO SEVERAL CASE LAWS AND FACTS AVAILABLE ON RECORD READ WITH RULE 8D OF THE INCOME TAX RULES AND THE ASSESSING OFFICER AS PER R ULES, MADE CALCULATION OF DEDUCTION UNDER SECTION 14A AND DISALLOWED THE SUBSTANTIAL AMOUNT UNDER SECTION 14A , THEREFORE, IT IS NOT A CASE OF EVEN A LACK OF ENQUI RY BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASS ESSEE WITH REGARD TO DEPRECIATION OF ELECTRONIC INSTALLAT ION SUBMITTED THAT THERE WERE DIFFERENT ITEMS ON WHICH DIFFERENT DEPRECIATION HAVE BEEN CLAIMED. WHATEVER ELECTRONIC INSTALLATIONS WAS PART OF THE PLANT AND MACHINERY, DEPRECIATION WAS CLAIMED AS ALLOWABLE ON PLANT AND MACHINERY AND THIS ASPECT WAS CONSIDERED BY ASSESSING OFFICER AND PROPER DEPRECIATION WAS ALLOW ED. PB-22 IS THE REPLY FILED BEFORE LD. CIT EXPLAINING THE ISSUE IN DETAIL BUT SAME WAS NOT APPRECIATED BY THE LD. CIT. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITT ED THAT EVEN ON DEPRECIATION, AUDIT OBJECTION WAS DROP PED AFTER REPLY SUBMITTED BY ASSESSEE. 12(III) THE LD. COUNSEL FOR THE ASSESSEE ALSO REFER RED TO PB-20 WHICH IS THE REPLY FILED BEFORE LD. CIT WI TH REGARD TO ALLOCATION OF EXPENSES AND SALARY PAID TO THE DIRECTORS AND AUDITORS. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT ASSESSING OFFIC ER MADE DETAILED ENQUIRY AT ASSESSMENT STAGE AND ACCEP TED CLAIM OF ASSESSEE, THEREFORE, THE LD. CIT SHOULD NO T SUBSTITUTE THE OPINION OF THE ASSESSING OFFICER IN THE 17 GARB OF PROCEEDINGS UNDER SECTION 263 OF THE ACT. HE HAS RELIED UPON DECISION OF BOMBAY HIGH COURT IN TH E CASE OF CIT V GABRIEL INDIA LTD. 203 ITR 108, DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD. V CIT 243 ITR 83, DECISION OF DELHI HIGH C OURT IN THE CASE OF CIT V ANIL KUMAR SHARMA 335 ITR 83, DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V HINDUSTAN MARKETING & ADVERTISING CO. LTD. 341 ITR 180 AND DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V SUNBEAM AUTO LTD. 332 ITR 167. 12(IV) THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER RAISED AUDIT OBJECTION WITH REGARD TO DEDUCTION UNDER SECTION 80 IC OF THE ACT, GRANT OF ADDITIONAL DEPRECIATION ON ELECTR ONIC INSTALLATION AND DEDUCTION UNDER SECTION 14A. COPI ES OF THE AUDIT OBJECTIONS ARE FILED ON RECORD. HE HAS FU RTHER SUBMITTED THAT ALL THE AUDIT OBJECTIONS ON IDENTICA L ISSUES WERE REPLIED BY ASSESSEE, COPIES OF THE REPL IES ARE FILED ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUDIT OBJECTIONS WERE NOT TAKEN ADVERSE IN NATURE BY THE ASSESSING OFFICER. HOWEVE R, THE LD. CIT ON THE BASIS OF THE AUDIT OBJECTIONS, INITIATED THE PROCEEDINGS UNDER SECTION 263 OF THE ACT AND AS SUCH, SAME IS NOT IN ACCORDANCE WITH LAW AND RELIED UPON DECISION OF HON'BLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF CIT V SOHANA WOOLLEN MILLS 296 ITR 238, IN WHICH IT WAS HELD AS UNDER 18 A REFERENCE TO THE PROVISIONS OF SECTION 263 OF THE INCOME- TAX ACT, 1961, SHOWS THAT JURISDICTION THEREUNDER C AN BE EXERCISED IF THE COMMISSIONER FINDS THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE A MERE AUDIT OBJECTION AND THE FACT THAT A DIFFERENT VIEW COULD BE TAKEN, ARE NOT ENOUGH TO SAY THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. WHETHER SATISFACTION OF THE COMMISSIONER FOR EXERC ISING JURISDICTION WAS CALLED FOR OR NOT, HAS TO BE DECID ED HAVING REGARD TO THE GIVEN FACT SITUATION. 13. ON THE OTHER HAND, LD. DR RELIED UPON IMPUGNED ORDER AND RELIED UPON DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83, DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V RIPPEN AHUJA 49 TAXMAN.COM 261 IN WHICH IT WAS HELD THAT WHEN THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO PROVE GENUINENESS OF THE GI FT, COMMISSIONER HAD RIGHTLY SET ASIDE THE ASSESSMENT. THE LD. DR SUBMITTED THAT IF THE ASSESSING OFFICER DID NOT EXAMINE THE ISSUE IN THE MANNER AS PRESCRIBED, THE ASSESSMENT ORDER WOULD BE PREJUDICIAL TO THE INTERE ST OF REVENUE. HE HAS ALSO RELIED UPON DECISION OF HON'B LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V RA JA INDUSTRIES 340 ITR 344. THE LD. DR FURTHER SUBMITT ED THAT AUDITOR HAS MADE MERE DISALLOWANCE UNDER SECTI ON 14A OF THE ACT THEREFORE, ASSESSING OFFICER SHOULD CONSIDER THIS ISSUE IN DETAIL. HE HAS RELIED UPON DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE 19 CASE OF CIT V ABHISHEK INDUSTRIES LTD. 31 TAXMAN.CO M 77 IN WHICH IT WAS HELD THAT DEDUCTION UNDER SECTIO N 80HHC WAS ALLOWED ON ELIGIBLE PROFITS OF BUSINESS WITHOUT REDUCING PROFITS OF BUSINESS ON WHICH DEDUC TION UNDER SECTION 80IA HAD BEEN ALLOWED. THEREFORE, TH ERE WAS CONTRAVENTION OF SECTION 80IA(A), THEREFORE, RE VISION OF ASSESSMENT ORDER WOULD BE PROPER. 13(I) THE LD. DR ALSO RELIED UPON DECISION OF HON'B LE SUPREME COURT IN THE CASE OF CIT V RALSONS INDUSTRI ES LTD. 288 ITR 322 IN WHICH THE ASSESSING OFFICER DID NOT CONSIDER THE ISSUE OF EXCESS DEDUCTION UNDER SECTIO N 80HH AND 80I, IT WAS HELD THAT JURISDICTION LIES U NDER SECTION 263 OF THE INCOME TAX ACT. THE LD. DR SUBMITTED THAT ASSESSING OFFICER AT ASSESSMENT STAG E ACCEPTED THE CLAIM OF DEDUCTION UNDER SECTION 80IC ON RELYING ON OTHER ACTS OF INDUSTRY. NO DETAILED ENQU IRY HAD BEEN CONDUCTED BY ASSESSING OFFICER. FOR READYMADE GARMENTS, NO MANUFACTURING ACTIVITIES OR JOB WORK HAVE BEEN CONDUCTED. THE JOB WORK IS NOT SUPPORTED BY ANY EVIDENCE. THE ASSESSING OFFICER D ID NOT EXAMINE THE ISSUE OF DISALLOWANCE UNDER SECTION 14A PROPERLY. THE ISSUE OF DEPRECIATION NOT EXAMINED A T ASSESSMENT STAGE. THE LD. DR SUBMITTED THAT AUDIT OBJECTION IS THERE IN THE RECORD OF ASSESSMENT YEAR 2007-08 BUT IT PERTAINS TO THE ASSESSMENT YEAR UNDE R APPEAL I.E. ASSESSMENT YEAR 2009-10. THE LD. CIT M IGHT NOT HAVE SEEN IT IN 263 PROCEEDINGS. THE AUDIT OBJECTION IS FOR SECTION 80IC ONLY AND ON NO OTHER ISSUE. 20 DURING THE COURSE OF ARGUMENTS, LD. DR WAS DIRECTED TO EXPLAIN AS TO HOW THE AUDIT OBJECTION WAS TRANSFERR ED FROM THE RECORD OF ASSESSMENT YEAR 2009-10 TO 2007- 08 BUT NO SATISFACTORY EXPLANATION HAS BEEN GIVEN. 14. THE LD. COUNSEL FOR THE ASSESSEE IN REJOINDER SUBMITTED THAT AUDIT OBJECTION IS RAISED ON ALL THE ISSUES INVOLVED IN THE PRESENT APPEAL I.E. DEDUCTIO N UNDER SECTION 80IC, DEPRECIATION ON ELECTRONIC INSTALLATION AND DEDUCTION UNDER SECTION 14A. COPIE S OF THE AUDIT OBJECTION RAISED BY ASSESSING OFFICER AND REPLIES FILED BY ASSESSEE ARE FILED ON RECORD. HE HAS SUBMITTED THAT ASSESSING OFFICER DID NOT TAKE ANY A CTION AFTER REPLY FILED BY THE ASSESSEE TO THE AUDIT OBJE CTIONS EXCEPT THE LD. CIT INITIATED PROCEEDINGS UNDER SECT ION 263 OF THE INCOME TAX ACT. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN EARLIER YEAR, 80IC DEDUCTION WAS CLAIMED WHICH WAS ALLOWED BY ASSESSIN G OFFICER AFTER EXAMINING AS PER INCOME TAX ACT. THE DEFINITION OF PLANT IS TO BE CONSIDERED AS PER IN DUSTRIES ACT. THE ASSESSING OFFICER IS NO MORE REQUIRED TO DO ANYTHING. THE LD. CIT DID NOT GIVE ANY FINDING ON THE REPLY FILED BY THE ASSESSEE. ACCORDING TO THE CIT, IT MAY BE A CASE OF IMPROPER ENQUIRY WHICH FACT BY ITSELF IS INCORRECT, BECAUSE THE ASSESSING OFFICER HAS EXAMIN ED ALL THE ISSUES INVOLVED IN THE PRESENT APPEAL IN DE TAIL AND AFTER EXAMINING THE ISSUES ON QUERIES RAISED BY THE ASSESSING OFFICER, ACCEPTED THE PART CLAIM OF THE 21 ASSESSEE, THEREFORE, IT IS NOT EVEN A CASE OF INADE QUATE OR IMPROPER ENQUIRY. 15. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT LD. CIT HAS WRONGLY EXERCISED JURISDICTION UNDER SECTION 263 OF THE ACT, THEREFOR E, APPEAL OF THE ASSESSEE MAY BE ALLOWED. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. HON'BLE SUPREME CO URT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V CIT 2 43 ITR 83 HELD AS UNDER : EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 17. HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V GABRIEL INDIA LTD. 203 ITR 108 HELD AS UNDER : HELD, THAT THE INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN A DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE 22 INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THIS DECISION OF THE INCOME-TAX OFFICER COULD NOT BE HELD TO BE ERRONEOU S' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, IN T HE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, 'COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE INCOME-TAX OFFICER TO RE-EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. THE TRIBUNAL WAS JUSTIFIES IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263. 18. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V A NIL KUMAR SHARMA 335 ITR 83 HELD AS UNDER : THERE IS A DISTINCTION BETWEEN 'LACK OF INQUIRY' AN D INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE INCOME-TAX 1961, MERELY BECAUSE HE HAS A DIFFERENT OP INION IN THE MATTER : HELD, DISMISSING THE APPEAL, THAT THE PRESENT CASE WOULD NOT BE ONE OF LACK OF INQUIRY' EVEN IF THE INQUIRY WAS TERMED INADEQUATE. THE TRIBUNAL FOUND THAT COMPLETE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER AND THAT HE APPLIED HIS MIND TO THE RELEVANT MATERIAL AND FACTS, ALTHOUG H SUCH APPLICATION OF MIND WAS NOT DISCERNIBLE FROM THE ASS ESSMENT ORDER. THE TRIBUNAL HELD THAT THE COMMISSIONER IN PROCEE DINGS UNDER SECTION 263 ALSO HAD ALL THESE DETAILS AND MAT ERIAL AVAILABLE BEFORE HIM, BUT HAD NOT BEEN ABLE TO POINT OUT DEFECTS CONCLUSIVELY IN THE MATERIAL FOR ARRIVING A T A 23 CONCLUSION THAT PARTICULAR INCOME HAD ESCAPED ASSE SSMENT ON ACCOUNT OF NON-APPLICATION OF MIND BY THE ASSESS ING OFFICER. THE TRIBUNAL WAS RIGHT AND THE ORDER OF REV ISION WAS NOT VALID. 19. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V HINDUSTAN MARKETING & ADVERTISING CO. LTD. 341 ITR 180 HELD AS UNDER : REVISION POWERS OF COMMISSIONER-ASSESSMENT AFTER ENQUIRY NO ERROR IN ORDER ORDER CANNOT BE REVISED ON GROUND ENQUIRY SHOULD HAVE BEEN MORE DETAILED INCOME-TAX ACT, 1961, S. 263. 20. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V SUNBEAM AUTO LTD. 332 ITR 167 HELD AS UNDER : HELD, DISMISSING THE APPEAL (I) THAT THE ASSESSING OFFICER ALLOWED THE CLAIM ON BEING SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE ASSESSING OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THE ASSESSING OFFICER HAD CALLED FOR EXPLANATION ON THE VERY ITEM FROM THE ASSESSEE AND THE ASSESSEE HAD FURNISHED ITS EXPLANATION. THIS FACT WAS CONCEDED BY THE COM- MISSIONER HIMSELF IN HIS ORDER. THIS SHOWED THAT TH E ASSESSING OFFICER HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DIES AND TOOLS WAS TO BE TREATED AS REVENUE EXPENDITURE OR NOT. THEREFORE, IT COULD NOT BE SAID THAT IT WAS A CASE OF LACK OF INQUIRY. THE ACCOUNTING PRACTICE FOLLOWED F OR A NUMBER OF YEARS HAD THE APPROVAL OF THE INCOME- 24 TAX AUTHORITIES. EVEN FOR FUTURE ASSESSMENT YEARS, THE VERY SAME ACCOUNTING PRACTICE WAS ACCEPTED. (II) THAT THE DIES WERE COMPONENTS OF THE MACHINES. THEY NEEDED CONSTANT REPLACEMENT, AS THEIR LIFE WAS NOT MORE THAN A YEAR. THE ASSESSEE ALSO EXPLAINED THAT SINCE THE PARTS WERE MANUFACTURED FOR THE AUTOMOBILE INDUSTRY, WHICH HAD TO WORK ON COMPLETE ACCURACY AT HIGH SPEED FOR A LONGER PERIOD, REPLACEMENT OF THE PARTS AT SHORT INTERVALS BECOMES IMPERATIVE TO RETAIN THE ACCURACY. WITH THE REPLACEMENT OF TOOLS AND DIES NO NEW ASSET COMES INTO EXISTENCE NOR WAS THEIR BENEFIT OF ENDURING NATURE. THEY DID NOT EVEN ENHANCE THE LIFE OF THE EXISTING MACHINE OF WHICH THE TOOLS AND DIES WERE ONLY PARTS. THEREFORE, THE VIEW TAKEN BY THE ASSESSING OFFICER WAS ONE OF THE POSSIBLE VIEWS AND THE ASSESSMENT ORDER PASSED BY HIM COULD NOT BE HELD TO BE PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. THE OPINION OF THE ASSESSING OFFICER IN TREATING TH E EXPENDITURE AS REVENUE EXPENDITURE WAS PLAUSIBLE AND THUS THERE WAS NO MATERIAL BEFORE THE COMMISSIONER TO VARY THAT OPINION AND ASK FOR FRESH INQUIRY 21. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V DEEPAK MITTAL 324 ITR 411 HELD AS UNDER : CHANGE OF OPINION BY REAPPRAISING THE EVIDENCE IS N OT WITHIN THE PARA-METERS OF REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 263 OF THE : ACT, 1961. HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD FOUN D THAT THE ASSESSING OFFICER HAD GIVEN A CATEGORICAL F INDING THAT THE ASSESSEE WAS ENGAGED IN THE PROCESS OF MANUFACTURING OF PRODUCTS AND ACCORDINGLY HE HAD GRANTED CONCESSION UNDER SECTION 80-IB. THE CLAIM OF T HE 25 ASSESSEE HAD BEEN FOUND TO BE GENUINE. THE ASSESSIN G OFFICER HAD ALSO EXAMINED THE VARIOUS WORKERS OF THE ASSESSEE AND THEN RECORDED THE FINDING. THE ASSESSI NG OFFICER WAS JUSTIFIED IN GRANTING THE SPECIAL DEDUCT ION UNDER SECTION 80-IB. THE ORDER OF REVISION DISALLOWING THE SPECIAL DEDUCTION WAS NOT VALID. 22. HON'BLE GUJRAT HIGH COURT IN THE CASE OF CIT V AMIT CORPORATION 21 TAXMAN.COM 64 HELD, WHERE ASSESSING OFFICER AFTER DETAILED VERIFICATION ON RE CORD AND MAKING ENQUIRIES HAD FRAMED ASSESSMENT, THE CIT COULD NOT REVISE THE SAME UNDER SECTION 263 OF THE INCOME TAX ACT. 23. CONSIDERING THE ABOVE JUDICIAL PRONOUNCEMENTS I N THE LIGHT OF THE FACTS OF THE CASE, WE TAKE UP ALL THE THREE ISSUES. AS REGARDS DEDUCTION UNDER SECTION 8 0IC, IT IS ADMITTED FACT THAT SUBSTANTIAL EXPANSION WAS CARRIED OUT BY THE ASSESSEE IN ASSESSMENT YEAR 2007 -08. THE ASSESSING OFFICER RAISED SPECIFIC QUERY TO THE ASSESSEE IN THAT ASSESSMENT YEAR CALLING FOR COMPLE TE DETAILS WITH REGARD TO SUBSTANTIAL EXPANSION AND ASSESSEE FILED DETAILED REPLY BEFORE ASSESSING OFFI CER IN THE SAME ASSESSMENT YEAR. THE ASSESSING OFFICER ACCEPTED THE CLAIM OF ASSESSEE OF DEDUCTION UNDER SECTION 80IC AFTER SATISFYING HIMSELF ABOUT THE GEN UINE CLAIM OF ASSESSEE UNDER SECTION 80IC OF THE INCOME TAX ACT. THE SAME ISSUE WAS ALSO CONSIDERED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR UNDER APPEAL I N DETAIL AND ASSESSEE FILED COMPLETE DETAILS AND PROD UCED 26 SUFFICIENT MATERIAL BEFORE ASSESSING OFFICER TO SAT ISFY THAT THE ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTIO N 80IC WAS JUSTIFIED. THE ASSESSING OFFICER ALSO ACC EPTED THE EXPLANATION OF THE ASSESSEE AFTER DETAILED ENQU IRY IN ASSESSMENT YEAR UNDER APPEAL AS WELL. IT IS, THERE FORE, CLEAR THAT THE DEDUCTION UNDER SECTION 80IC ON CARR YING OUT SUBSTANTIAL EXPANSION BY ASSESSEE WAS GRANTED I N THE INITIAL ASSESSMENT YEAR 2007-08 AND THE ORDER O F THE ASSESSING OFFICER FOR THAT ASSESSMENT YEAR HAS NOT BEEN WITHDRAWN OR DISTURBED BY THE REVENUE DEPARTMENT. WITHOUT DISTURBING RELIEF GRANTED IN INITIAL ASSESS MENT YEAR, THE ASSESSING OFFICER CANNOT EXAMINE THE SAME QUESTION AGAIN IN SUBSEQUENT YEAR. THE ASSESSING OFFICER CANNOT DECIDE TO WITHDRAW THE RELIEF ALREAD Y GRANTED. UNLESS DEDUCTION GRANTED/ALLOWED UNDER SECTION 80IC IN EARLIER ASSESSMENT YEAR 2007-08 IS WITHDRAWN, SAME COULD NOT BE DENIED IN SUBSEQUENT ASSESSMENT YEAR. WHEN THE ASSESSING OFFICER HIMSEL F CANNOT DO SO, THERE IS NO QUESTION OF TAKING UP THE SIMILAR ISSUE IN THE PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT BECAUSE THE JURISDICTION OF THE CIT UNDER SECTION 263 OF THE INCOME TAX ACT WAS CONFINE D TO THE MATTER IN ISSUE RAISED IN ASSESSMENT YEAR 2009- 10 UNDER APPEAL ONLY. SINCE THE IN THE INITIAL YEAR 2 007- 08, DEDUCTION UNDER SECTION 80IC HAS BEEN GRANTED T O THE ASSESSEE WHICH FOLLOWED IN ASSESSMENT YEAR 2008 - 09, THERE IS NO REASON FOR THE LD. CIT TO DISTURB T HE FINDINGS OF THE ASSESSING OFFICER IN THE 27 PROCEEDINGS UNDER SECTION 263 IN SUBSEQUENT ASSESSMENT YEAR 2009-10. THE DECISIONS RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE CLEARLY SUPPORT OUR VI EW THAT CIT WAS NOT JUSTIFIED IN TAKING SUCH AN ISSUE IN PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT IN RESPECT OF THE MATTER WHICH HAS REACHED FINALITY PERTAINING TO ASSESSMENT YEAR 2007-08. 23(I) IT MAY ALSO BE NOTED HERE THAT THE ASSESSI NG OFFICER EXAMINED THIS ISSUE IN DETAIL AT ASSESSMENT STAGE AFTER CALLING THE EXPLANATION OF THE ASSESSEE WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT AND AFTER DETAILED INVESTIGATION AND EXAMINATIO N OF THE ISSUE, DENIED PART OF THE CLAIM OF DEDUCTION UN DER SECTION 80IC OF THE ACT AT ASSESSMENT STAGE. THE L D. CIT CONSIDERED THE VALUE OF THE PLANT AND MACHINERY AS ON 31.03.2006 WHICH INCLUDED THE VALUE OF GENERATOR SET. IF THE VALUE OF THE GENERATOR SET IS EXCLUDED FROM THE TOTAL VALUE OF THE PLANT AND MACHINERY, THE BAL ANCE WOULD WORK OUT AT RS. 58,86,485/-. THE AMOUNT INVESTED IN PLANT AND MACHINERY DURING ASSESSMENT Y EAR 2007-08 WAS RS. 29,86,340/- WHICH WAS MORE THAN 50% OF THE TOTAL VALUE OF THE PLANT AND MACHINERY AS RE QUIRED UNDER THE PROVISIONS OF THE ACT. THE ASSESSEE ALSO REFERRED TO DEFINITION OF SMALL SCALE INDUSTRIAL UNDERTAKING AS PER PROVISIONS OF SECTION 80IB(14)( G) OF THE ACT AND SECTION 11B OF INDUSTRIES (DEVELOPMENT AND REGULATION ACT), 1951, ACCORDING TO WHICH THE GENER ATOR 28 SET WOULD NOT FORM PART OF THE PLANT AND MACHINERY IN CASE OF SMALL SCALE INDUSTRIAL UNDERTAKING. THE LD . COUNSEL FOR THE ASSESSEE IN SUPPORT OF THE SAME, FI LED THE SYNOPSIS FOR THE SAME WHICH WAS ALSO FILED IN ASSESSMENT YEAR 2007-08, THEREFORE, ONCE THE MATTER IS CONCLUDED IN ASSESSMENT YEAR 2007-08, THERE WAS NO REASON FOR LD. CIT TO TAKE UP THE SAME ISSUE IN ASSESSMENT YEAR 2009-10 WITHOUT DISTURBING THE FIND ING OF FACT RECORDED BY ASSESSING OFFICER IN THE ASSESS MENT ORDER FOR ASSESSMENT YEAR 2007-08. 23(II) FURTHER, SECTION 80IB(14)(G) WHILE DEFINI NG THE SMALL SCALE INDUSTRIAL UNDERTAKING HAS REFERRED TO SECTION 11B OF INDUSTRIES (DEVELOPMENT & REGULATION ) ACT, 1951. THEREFORE, IT FORMS PART OF THE INCOME TAX ALSO AND AS SUCH, THE SAME COULD NOT BE IGNORED AS IS DIRECTED BY THE LD. CIT. THE CIT ALSO DID NOT CONS IDER THE CERTIFICATE ISSUED BY THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, SOLAN WHEREBY THE UNIT WAS INSPECTED BY THE OFFICIAL OF HIS OFFICE AND THE Y HAVE MENTIONED THAT ASSESSEE HAS CONDUCTED SUBSTANTIAL EXPANSION. THE CERTIFICATE ISSUED BY DISTRICT & INDUSTRIES CENTRE WAS IN CONSONANCE WITH THE PROVISIONS OF SECTION 80IC OF THE INCOME TAX AC T BECAUSE THE CONDITIONS OF SECTION 80IC OF THE ACT WERE FOUND SATISFACTORY IN INITIAL ASSESSMENT YEAR 2007-08. THEREFORE, THE ORDER OF THE LD. CIT ON THI S ISSUE WAS WHOLLY UNJUSTIFIED. FURTHER, THE ASSESS EE 29 EXPLAINED THAT IN THE SAME UNIT, ASSESSEE MADE PURCHASES OF READYMADE GARMENTS ON WHICH JOB WORK WAS ALSO CONDUCTED BEFORE FINALLY EXPORTING THE SAM E. IT IS ADMITTED FACT THAT IN THE YEAR UNDER CONSIDERATI ON, ASSESSEE DID NOT CONDUCT ANY TRADING ACTIVITY, THER EFORE, ENTIRE MATERIAL WAS EXPORTED. WHEN ASSESSEE CONDUC TED THE JOB WORK ON THE PURCHASES AND INCLUDED FOR EXPO RTS, THERE WERE NOTHING WRONG IN EXPLANATION OF THE ASSE SSEE. THE CIT WITHOUT CONSIDERING THIS ISSUE IN PROPER PERSPECTIVE, HAS WRONGLY HELD THAT ASSESSEE WAS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IC OF THE AC T. THE LD. CIT WAS ALSO NOT JUSTIFIED IN OBSERVING THA T ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE DESP ITE THE FACT THAT ASSESSING OFFICER EXAMINED THIS ISSUE IN DETAIL NOT ONLY IN ASSESSMENT YEAR UNDER APPEAL BUT ALSO IN INITIAL ASSESSMENT YEAR 207-08. THE LD. CIT ALS O DID NOT APPRECIATED THE EXPLANATION OF THE ASSESSEE WIT H REGARD TO ALLOCATION OF THE EXPENSES WITH REGARD TO AUDITORS REMUNERATION AND DIRECTORS REMUNERATION BECAUSE ASSESSEE MAINTAINED PROPER AND SEPARATE BOO KS OF ACCOUNT FOR UNIT AT BADDI WHICH CLEARLY SATISFY THE REQUIREMENTS OF LAW WHICH ON EXAMINATION BY ASSESSI NG OFFICER WERE FOUND TO BE SATISFACTORY. 23(III) THE CIT FURTHER NOTED THAT THERE IS A HI GHER GP RATE SHOWN IN BADDI UNIT FOR WHICH DEDUCTION UNDER SECTION 80IC HAS BEEN CLAIMED. THE ASSESSEE, HOWEVE R, MAINTAINED THAT EVEN EARLIER THERE WAS HIGHER PROFI T WAS 30 SHOWN AND SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED WHICH HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER AS WELL AS BY THE CIT. THEREFORE , THE FACTS AND CIRCUMSTANCES NOTED ABOVE CLEARLY SHOW TH AT ASSESSING OFFICER MADE DETAILED INVESTIGATION AT ASSESSMENT STAGE AND ALSO MADE DETAILED INVESTIGATI ON IN INITIAL ASSESSMENT YEAR 2007-08 AND GRANTED RELI EF TO THE ASSESSEE UNDER SECTION 80IC OF THE ACT. THE CI T WITHOUT CONSIDERING THE PURCHASES MADE BY ASSESSEE, SIMPLY NOTED THAT PURCHASES HAVE NOT BEEN PROPERLY AND CRITICALLY EXAMINED BY ASSESSING OFFICER. THE ASSE SSEE, HOWEVER, MAINTAINED THAT SPECIFIC QUERY WAS RAISED AT ASSESSMENT STAGE AND ASSESSING OFFICER EXAMINED ALL THE PURCHASES CRITICALLY AND NO DEFECTS ON THE SAME HAV E BEEN POINTED OUT. THE ASSESSEE EXPLAINED THAT PURCHASES WERE MADE AT MARKET PRICE FROM THE SISTER CONCERN, THEREFORE, LD. CIT WAS NOT JUSTIFIED IN TA KING ANY ADVERSE ACTION AGAINST THE ASSESSEE. 24. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT O F THE MATERIAL ON RECORD, IT IS CLEAR THAT ASSESSING OFFICER HAS MADE SPECIFIC AND DETAILED ENQUIRY WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT AT ASSESSMENT STAGE AS WELL AS IN THE INITIAL ASSESSME NT YEAR 2007-08. THE ASSESSING OFFICER RAISED SPECIFI C QUERIES ON THIS ISSUE AND ASSESSEE FILED COMPLETE D ETAILS BEFORE ASSESSING OFFICER. THE ASSESSING OFFICER WA S SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THER EFORE, 31 HIS ORDER COULD NOT BE SAID TO BE ERRONEOUS IN SO F AR AS PREJUDICIAL TO THE INTEREST OF REVENUE. SIMPLY, CI T DID NOT AGREE WITH THE VIEW OF ASSESSING OFFICER CANNOT BE SAID TO BE THE ORDER ERRONEOUS IN SO FAR AS PREJUDI CIAL TO THE INTEREST OF REVENUE. THE ASSESSING OFFICER ADO PTED ONE OF THE POSSIBLE VIEW WITH REGARD TO DEDUCTION U NDER SECTION 80IC AND THE VIEW TAKEN BY THE ASSESSING OF FICER WAS SUSTAINABLE IN LAW. IT MAY ALSO BE NOTED HERE THAT IN EARLIER ASSESSMENT YEAR, THE ITAT HAS CONFIRMED THE ORDERS OF AUTHORITIES BELOW IN GRANTING DEDUCTION U NDER SECTION 80-IB OF THE ACT. THEREFORE, THE FACTS BEIN G SIMILAR, THERE WAS NO JUSTIFICATION FOR LD. CIT TO INITIATE PROCEEDINGS UNDER SECTION 263 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, ON THE BASIS O F THE EVIDENCES AND MATERIAL ON RECORD HAS BEEN ABLE TO DEMONSTRATE THAT THIS ISSUE OF DEDUCTION UNDER SECT ION 80IC WAS EXAMINED IN DETAIL BY THE ASSESSING OFFICE R BEFORE GRANTING PART RELIEF UNDER SECTION 80IC OF T HE INCOME TAX ACT. THEREFORE, THERE WAS NO JUSTIFICAT ION TO INITIATE THE PROCEEDINGS UNDER SECTION 263 OF THE I NCOME TAX ACT ON THIS ISSUE. 24(I) AS REGARDS THE DISALLOWANCE UNDER SECTION 14A IS CONCERNED, THE ASSESSING OFFICER HAS CALLED FOR EXPLANATION OF THE ASSESSEE IN DETAIL AT THE ASSESS MENT STAGE. THE ASSESSING OFFICER ISSUED SPECIFIC QUERI ES TO THE ASSESSEE WHICH WERE PROPERLY REPLIED. THE ASSE SSING OFFICER CONSIDERED THE ISSUE OF DISALLOWANCE UNDER 32 SECTION 14A IN THE LIGHT OF VARIOUS DECISIONS AND I N THE LIGHT OF RULE 8D OF THE IT RULES. THE ASSESSING OF FICER MADE CALCULATION OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D AT THE ASSESSMENT STAGE, WHICH SHOWS T HAT ASSESSING OFFICER IN DETAIL AND CRITICALLY EXAMINED THIS ISSUE AT THE ASSESSMENT STAGE. THE CIT DID NOT POI NT OUT ANY ERROR OR DEFECT IN THE CALCULATION MADE BY THE ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D OF THE IT RULES FOR THE PURPOSE OF MAKING PART DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T. THE CIT MERELY REFERRING TO THE AUDIT REPORT NOTED IN THE IMPUGNED ORDER THAT DISALLOWANCE WAS LESSER/BELOW T HE REQUIRED FIGURE. THE ASSESSMENT ORDER, HOWEVER, SH OWS THAT ASSESSING OFFICER CONSIDERED THE BALANCE SHEET OF THE ASSESSEE AND RAISED SPECIFIC QUERY ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A, THEREFORE, ASSESSIN G OFFICER HAS GONE THROUGH THE AUDITED ACCOUNT REFERR ED TO BY CIT IN THE IMPUGNED ORDER. IT, THEREFORE, APPEA RS THAT CIT IN THE PROCEEDINGS UNDER SECTION 263 OF TH E ACT, DID NOT AGREE WITH THE FINDING OF FACT RECORDE D BY THE ASSESSING OFFICER IN ASSESSMENT ORDER WITHOUT A NY JUSTIFICATION. THEREFORE, INITIATION OF PROCEEDING S UNDER SECTION 263 OF THE ACT ON THIS ISSUE IS WHOLLY UNJUSTIFIED. 25. WITH REGARD TO ISSUE OF ALLOWING DEPRECIATION A ND ADDITIONAL DEPRECIATION, THE ASSESSEE EXPLAINED THA T ON ELECTRONIC INSTALLATION WHICH ARE PART OF THE PLANT AND MACHIN ERY, 33 DEPRECIATION HAS BEEN CLAIMED AT THE SAME RATE WHIC H IS APPLICABLE TO PLANT AND MACHINERY. THE LD. CIT, IN STEAD OF EXAMINING THIS ISSUE IN PROPER PERSPECTIVE, MERE LY STATED THAT THIS ISSUE WAS NOT EXAMINED BY THE ASSESSING OFFICER AT ASSESSMENT STAGE. IT, THEREFO RE, APPEARS THAT REPLY OF THE ASSESSEE IS NOT EXAMINED BY THE LD. CIT, THEREFORE, THE ORDER OF THE CIT COULD NOT BE SUSTAINED IN LAW. 26. CONSIDERING THE ABOVE DISCUSSION, IT IS CLEAR T HAT LD. CIT FELT THAT IT IS A CASE OF INADEQUATE ENQUIR Y BY ASSESSING OFFICER WHICH FACT BY ITSELF IS INCORRECT BECAUSE ASSESSING OFFICER MADE DETAILED ENQUIRY AT THE ASSESSMENT STAGE BEFORE PASSING THE ASSESSMENT ORDE R. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT IT IS NOT EVEN A CASE OF INADEQUATE ENQUIRY AS IS CONSIDERED BY THE CIT. THEREFORE, THE ORDER OF THE LD. CIT IS CLEARLY ABUSE OF THE PROCESS OF LAW BECAUSE LD. CIT WANTED TO SUBSTITUTE HIS VIEWS AS AGAINST THE V IEWS TAKEN BY THE ASSESSING OFFICER AT THE ASSESSMENT ST AGE IN ACCORDANCE WITH FACTS AND LAW. 26(I) IT MAY ALSO BE NOTED HERE THAT THE LD. COUNSE L FOR THE ASSESSEE HAS REFERRED TO AUDIT OBJECTIONS ON AL L THE THREE ISSUES WHICH HAVE BEEN RAISED IN NOTICE UNDER SECTION 263 OF THE INCOME TAX ACT. THE LD. COUNSEL FOR THE ASSESSEE FILED COPIES OF ALL THE AUDIT OBJECTIO NS RAISED BY THE ASSESSING OFFICER ON THE ISSUES OF DEDUCTION UNDER SECTION 80IC, ADDITIONAL DEPRECIATI ON 34 CLAIMED AND DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT. THE COPIES OF AUDIT OBJECTIONS AND REPLIES OF THE ASSESSEE TO THESE AUDIT OBJECTIONS C LEARLY SHOW THAT WHATEVER ISSUES HAVE BEEN RAISED IN PROCEEDINGS UNDER SECTION 263, WERE RAISED IN THE A UDIT OBJECTIONS AND THE SAME WERE PROPERLY REPLIED BY TH E ASSESSEE. THE ASSESSING OFFICER, AFTER FILING THE R EPLIES BY THE ASSESSEE TO THE AUDIT OBJECTIONS, DID NOT TA KE ANY ADVERSE VIEW AGAINST THE ASSESSEE. THE LD. DR, ON GOING THROUGH THE RECORD, SUBMITTED THAT THESE AUDIT OBJECTIONS ARE PART OF THE RECORD BUT THE SAME ARE KEPT IN RECORD OF ASSESSMENT YEAR 2007-08. THE LD. DR, THEREFORE, SUBMITTED THAT THE SAME MIGHT NOT HAVE B EEN SEEN BY THE LD. CIT IN ASSESSMENT YEAR UNDER APPEAL I.E. 2009-10. HOWEVER, ON SPECIFIC QUERY, LD. DR WAS NO T ABLE TO ANSWER SATISFACTORILY AS TO WHY THE AUDIT OBJECTIONS IN ISSUE FOR ASSESSMENT YEAR 2009-10 HAV E BEEN KEPT IN THE FOLDER OF ASSESSMENT YEAR 2007-08. IT, THEREFORE, APPEARS THAT CLEVERLY THE AUDIT OBJECTIO NS AND REPLIES OF THE ASSESSEE HAVE BEEN KEPT AWAY FROM TH E RECORD OF THE ASSESSMENT YEAR 2009-10 DELIBERATELY. OTHERWISE, THERE WERE NO REASONS TO KEEP THE PART O F THE RECORD OF ASSESSMENT YEAR 2009-10 IN THE RECORD OF ASSESSMENT YEAR 2007-08. WE MAY ALSO NOTE HERE THA T THE AUDIT OBJECTIONS SO RAISED BY THE REVENUE DEPARTMENT ON ALL THE ABOVE THREE ISSUES I.E. DEDUC TION UNDER SECTION 80IC, DEDUCTION UNDER SECTION 14A AND DEPRECIATION ARE SAME WHICH HAVE BEEN RAISED IN THE 35 PROCEEDINGS UNDER SECTION 263 OF THE ACT. THEPOINT S RAISED IN THE AUDIT OBJECTIONS HAVE BEEN SIMILARLY WORDED IN THE PROCEEDINGS UNDER SECTION 263. THEREFORE, THESE FACTS CLEARLY SHOW THAT LD. CIT WA S SIMPLY INFLUENCED BY THE AUDIT OBJECTIONS RAISED BY THE REVENUE DEPARTMENT FOR THE PURPOSE OF INITIATING PROCEEDINGS UNDER SECTION 263. SUCH A COURSE IS NOT PERMISSIBLE UNDER THE LAW. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF 296 ITR 238 HELD AS UNDER : A REFERENCE TO THE PROVISIONS OF SECTION 263 OF THE INC OME-TAX ACT, 1961, SHOWS THAT JURISDICTION THEREUNDER CAN B E EXERCISED IF THE COMMISSIONER FINDS THAT THE ORDER OF THE ASS ESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE A MERE AUDIT OBJECTION AND THE FACT THAT A D IFFERENT VIEW COULD BE TAKEN, ARE NOT ENOUGH TO SAY THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WHETHER SATISFACTION OF T HE COMMISSIONER FOR EXERCISING JURISDICTION WAS CALLED F OR OR NOT, HAS TO BE DECIDED HAVING REGARD TO THE GIVEN FACT SITUAT ION. 27. CONSIDERING THE AUDIT OBJECTIONS ON RECORD ON THESE ISSUES UNDER REFERENCE AND REPLIES OF THE ASS ESSEE, CLEARLY SUPPORT THE SUBMISSIONS OF THE ASSESSEE THA T INITIATION OF THE PROCEEDINGS UNDER SECTION 263 WER E BAD IN LAW. WE MAY ALSO NOTE HERE THAT REPLIES OF THE ASSESSEE TO THE AUDIT OBJECTIONS WERE SUPPORTED BY THE COMPLETE DATA SUPPLIED BY ASSESSEE AS WELL AS COMPL ETE DETAILS ON ELECTRONIC INSTALLATION WHICH ARE PART O F THE 36 PLANT AND MACHINERY AND DEDUCTION UNDER SECTION 14A WAS ALSO SUPPORTED BY COMPLETE DETAILS. THEREFORE, THESE FACTS WOULD CLEARLY PROVE THAT WHEN AFTER RAI SING AUDIT OBJECTIONS BY THE REVENUE DEPARTMENT AND REPL IES FILED BY ASSESSEE TO THE SAME COULD NOT BE CONSIDER ED ADVERSE IN NATURE BY THE ASSESSING OFFICER, THE PRE SENT PROCEEDINGS UNDER SECTION 263 HAVE BEEN INITIATED T O THWART THE PROVISIONS OF LAW. CONSIDERING THE ABOV E DISCUSSION, WE ARE OF THE VIEW THAT INITIATION OF PROCEEDINGS UNDER SECTION 263 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WAS WHOLLY UNJUSTIFIED. THE ORDER OF THE ASSESSING OFFICER, THUS, COULD NOT BE SAID TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERE ST OF REVENUE. THE DECISIONS RELIED UPON BY LD. DR WOULD NOT SUPPORT THE CASE OF THE REVENUE. IN VIEW OF THE A BOVE DISCUSSION, WE DO NOT SUBSCRIBE TO THE VIEW OF LD. CIT IN PASSING THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT. 28. WE, ACCORDINGLY, SET ASIDE THE IMPUGNED ORDER UNDER SECTION 2623 OF THE ACT AND QUASH THE SAME. RESULTANTLY, THE ORIGINAL ASSESSMENT ORDER IS RESTO RED. 29. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA 410/CHD/2014 30. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT, CENTRAL, LUDHIANA DATED 21.03.2014 FO R 37 ASSESSMENT YEAR 2010-11 UNDER SECTION 263 OF THE INCOME TAX ACT ON THE FOLLOWING GROUNDS : 1. THAT ORDER PASSED U/S 263 BY THE LD. CIT (CENTRAL), LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO HOLD THA T ASSESSMENT ORDER DATED 17.09.2012 PASSED U/S 143(3) OF THE INCOME TAX CT, 1961 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT HE WAS NOT JUSTIFIED TO SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTIONS TO MAKE A FRES H ASSESSMENT DENOVO AFTER MAKING PROPER ENQUIRY. 3. THAT HE WAS NOT JUSTIFIED TO OBSERVE IN THE ORDE R THAT THE APPELLANT WAS NOT ENTITLED TO CLAIM OF DEDUCTION U/S 80 1C. 4. THAT THE LD. CIT WAS FURTHER NOT JUSTIFIED TO HO LD THAT THE ASSESSING OFFICER FAILED TO APPLY HIS MIND IN WORKING OUT DISALLOWANCE U/S 14A. 5. THAT HE WAS FURTHER NOT JUSTIFIED TO HOLD THAT T HE APPELLANT WAS NOT ENTITLED TO DEPRECIATION ON ELECT RIC INSTALLATIONS. 31. THE LD. CIT FOLLOWED HIS ORDER FOR ASSESSMENT Y EAR 2009-10 FOR THE PURPOSE OF PASSING THE SIMILAR ORDE R UNDER SECTION 263 OF THE ACT. LD. REPRESENTATIVES OF BOTH THE PARTIES SUBMITTED THAT SINCE ISSUE IS SAME AS IS CONSIDERED IN ASSESSMENT YEAR 2009-10, THEREFORE, O RDER IN THAT CASE MAY BE FOLLOWED IN THIS ASSESSMENT YEA R AS WELL. WE FIND THAT ISSUES ARE SAME AS HAVE BEEN 38 CONSIDERED IN ASSESSMENT YEAR 2009-10, THEREFORE, FOLLOWING THE REASONS FOR DECISION IN ASSESSMENT YE AR 2009-10 IN ITA 409/2014, WE SET ASIDE THE IMPUGNED ORDER UNDER SECTION 263 AND QUASH THE SAME. ORIGIN AL ASSESSMENT ORDER IS, THEREFORE, RESTORED. 32. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 33. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH NOV., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD