LOTUS ENERGY (I) LTD, MUMBAI V. CIT RG 8, MUMBAI

ITA 4355/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1413 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Depreciation; Opportunity of being heard; Audit objection; Additional depreciation; Assessment record
• Section: 143(3); 142(1); 194C; 32; 263; 154

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 4355 /MUM/2011 ( / ASSESSMENT YEAR : 2006-07) M/S LOTUS ENERGY (INDIA) LTD., 409, LAXMI PLAZA, LAXMI INDUSTRIAL ESTATE, ANDHERI (W), MUMBAI -400053. / V. COMMISSIONER OF INCOME TAX- RANGE 8, 2 ND FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI. ./ PAN : AABCL6119K ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI SANJAY PARIKH REVENUE BY : SHRI R.P. MEENA / DATE OF HEARING : 27-09-2016 / DATE OF PRONOUNCEMENT : 14-12-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 4355/MUM/2011, IS DIRECTED AGAINST THE ORDER U/S 263 OF THE INCOME-TA X ACT,1961(HEREINAFTER CALLED THE ACT) DATED 30 TH MARCH, 2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX - 8, MUMBAI (HEREINAFTER CALLED THE CIT ), FOR THE ASSESSMENT YEAR 2006-07 . ITA 4355/MUM/2011 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READS AS UNDER:- 1. A) THE ORDER DIRECTING FRESH ASSESSMENT U/S 263 IS WITHOUT JURISDICTION AND BAD IN LAW. B) THE LEARNED CIT ERRED IN LAW IN DIRECTING FRESH A SSESSMENT U/S. 263 WITHOUT APPRECIATING THE FACT THAT THE ASSESSMENT ORDE R PASSED U/S.143(3) IS NOT ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. C) THE LEARNED CIT ERRED IN FACTS AND LAW IN APPRECI ATING THAT THE ID. ASSESSING OFFICER HAD ALREADY TAKEN A VIEW ON THE ISSUES RAISED IN REVISION PROCEEDINGS AND THEREFORE, THE INITIATION OF R EVISION PROCEEDINGS U/S. 263 ARE INVALID AND BAD IN LAW. 2. YOUR APPELLANT PRAYS THAT- (I) ORDER PASSED U/S. 263 BE TREATED AS INVALID AND BAD IN LAW. (II) ANY OTHER RELIEF, AS DEEMED FIT IN THE MATTER, MAY BE GRANTED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN MANUFACTURE OF LAM COKE. THE A.O. HAD PASSED AN ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07 U/S 143(3) OF THE ACT O N 23 RD DECEMBER, 2008, WHICH WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN THE OPINION OF THE LEARNED CIT FOR VARIO US REASONS AS DETAILED IN THE SHOW CAUSE NOTICE DATED 11 TH MARCH,2011 , WHICH ARE REPRODUCED HERE- UNDER:- PERUSAL OF THE ASSESSMENT RECORDS FOR A.Y. 2006-07 REVEALS THAT THE ASSESSMENT MADE BY THE ACIT 8(3)(OSD) U/S 143(3) DATED 23.12.2008 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE FOR THE FOLLOWING REASONS:- (A) FOR THE RELEVANT FINANCIAL YEAR THE ASSESSEE H AS MADE FOLLOWING PAYMENTS WHICH WERE THE SUBJECT MATTER OF TDS BUT N O TDS HAS BEEN MADE: ITA 4355/MUM/2011 3 S NO. NATURE OF PAYMENT SECTION UNDER WHICH THE TAX WAS DEDUCTIBLE AMOUNT (RS) 1 GROUND RENT PAID TO VISA INDUSTRIES LTD. AND BALAJI COKE INDUSTRIES PVT. LTD. 194I 34,94,512/- 2 WHARFAGE CHARGES VISA INDUSTRIES LTD. AND BALAJI COKE INDUSTRIES PVT. LTD. 194C 5,65,974 3 STEVEDORING CHARGES PAID TO VISA INDUSTRIES LTD. AND BALAJI COKE INDUSTRIES PVT. LTD. 194C 16,68,998/- 4 FREIGHT CHARGES PAID TO ANTAI BALAJI LTD. 194C 36,00,308/- 5 USANCE INTEREST PAID TO FAIR DEALS AND SUPPLIES LTD. 194C 5,75,177/- 6 HANDLING CHARGES TO BALAJI COKE INDUSTRIES P. LTD. 194C 26,83,992/- TOTAL 1,25,88,961/- AS NO TAX WAS DEDUCTED AT SOURCE IN RESPECT OF THE ABOVE PAYMENTS, THE SAME WERE LIABLE TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. AS SUCH DISALLOWANCE U/S 40(A)(IA) HAS NOT BEEN DONE, THE A SSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E TO SUCH EXTENT. B. IT IS OBSERVED THAT THE ASSESSEE HAS PAID INTERE ST OF RS. 8,39,272/- TO THE PARTIES FROM WHOM UNSECURED LOANS WERE OBTAINED . IN THIS REGARD, IT IS OBSERVED THAT THE ASSESEE HAS PAID INTEREST OF R S. 8,39,272/- AND ON THIS INTEREST TDS HAS BEEN DEDUCTED @ 10.20% WHEREA S THE ACTUAL TDS SHOULD HAVE BEEN DEDUCTED @ 22.44%. THUS ON THE PRO -RATA BASIS THE PAYMENT OF INTEREST OF RS. 4,19,636/- WAS ALLOWABLE AND BALANCE PAYMENT OF INTEREST AMOUNTING TO RS. 4,19,636/- WAS DISALLOWABLE U/S. 40(A)(IA) OF THE ACT .AS SUCH DISALLOWANCE U/S. 40( A)(IA) HAS NOT BEEN DONE, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE TO SUCH EXTENT.. C. FROM THE PARTICULARS OF DEPRECIATION ALLOWED U/S . 32 OF THE ACT, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 10% ON LABOUR QUARTERS AMOUNTING TO RS.1,54,318/-. THESE ASSETS A RE RESIDENTIAL BUILDINGS AND THE ALLOWABLE RATE OF DEPRECATION WAS 5% AND THUS THE ALLOWABLE DEPRECIATION WORKS OUT TO RS. 77,069/- TH US, EXCESS DEPRECIATION OF RS. 77,069/- HAS BEEN ALLOWED TO TH E ASSESSEE. IT IS ALSO OBSERVED THAT THE BUNKER SHED HAS BEEN CLASSIFIED A S 'PLANT AND MACHINERY' AND DEPRECIATION HAS BEEN CLAIMED @ 15% AMOUNTING TO RS. ITA 4355/MUM/2011 4 37,22,364/- HOWEVER, THE BUNKER SHED IS 'FACTORY BU ILDING' ELIGIBLE FOR 10% DEPRECIATION. THUS, THE ALLOWABLE DEPRECIATION WORKS OUT TO RS. 24,81,576/-. AS A RESULT, EXCESS DEPRECIATION OF RS . 12,40,788/- HAS BEEN ALLOWED TO THE ASSESSEE. FURTHER, THE FACTORY ELECTRIFICATION HAS BEEN CLASSIFIED AS 'PLANT AND MACHINERY' AND DEPREC IATION HAS BEEN CLAIMED @ 15% AMOUNTING TO RS. 2,13,636/-. HOWEVER, THE FACTORY ELECTRIFICATION FALLS UNDER THE HEAD' FURNITURE AND FIXTURES' ELIGIBLE FOR DEPRECIATION @ 10%. THUS, THE ALLOWABLE DEPRECIATIO N WORKS OUT TO RS. 1,42,424/- . AS A RESULT, EXCESS DEPRECIATION OF RS . 71,212/- HAS BEEN ALLOWED TO THE ASSESSEE. TO SUCH EXTENT, THE ASSESS MENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. FOR THE ABOVE REASONS, AS THE ASSESSMENT COMPLETED BY THE ACIT- 8(3)(OSD) FOR A. YR. 2006-07 ON 23.12.2008 IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, YOU ARE HER EBY GIVEN THIS NOTICE TO SHOW CAUSE AS TO WHY THE ASSESSMENT MADE BY THE A.O . SHOULD NOT BE MODIFIED/CANCELLED AS THE SAME IS ERRONEOUS AND PRE JUDICIAL AS DETAILED ABOVE. YOU ARE, THEREFORE, REQUIRED TO ATTEND BEFOR E THE UNDERSIGNED ON 21.03.2011 AT 3.30 P.M. EITHER IN PERSON OR BY A RE PRESENTATIVE DULY AUTHORIZED IN WRITING IN THIS BEHALF. IF YOU DO NOT WISH TO AVAIL OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUT HORIZED REPRESENTATIVE, YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 263.' IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE ISSUED B Y THE AO, THE ASSESSEE MADE ORAL AND , AS WELL WRITTEN SUBMISSION VIDE LET TER DATED 25 TH MARCH, 2011 BEFORE THE LEARNED CIT WHICH ARE REPRODUCED BELOW:- A TDS NOT DEDUCTED ON THE FOLLOWING PAYMENTS MADE BY THE ASSESSEE WHICH WERE SUBJECT MATTER OF TDS. IN YOUR HONOURS OPINION, ABOVE MENTIONED PAYMENTS ARE TO BE DISALLOWED U/S 40(A(IA) AS THE PAYMENTS MADE ARE SU BJECT MATTER OF TDS AND NO TDS HAS BEEN DEDUCTED BY THE ASSESSEE UN DER SECTION 194C AND 194I. THE DETAILS OF DISALLOWANCE AND NAT URE OF PAYMENTS ARE AS FOLLOWS:- SR NO. NATURE OF PAYMENT SECTION UNDER WHICH THE TAX WAS AMOUNT(RS) NATURE OF PAYMENT ITA 4355/MUM/2011 5 DEDUCTIBLE 1 GROUND RENT PAID TO VISA INDUSTRIES AND BALAJI INDUSTRIES PVT. LTD. 194I 34,94,512 REIMBURSEMENT OF GROUND RENT OF RS. 210,000/- TO VISA IND. LTD. AND RS.1,394,512/- TO BALAJI COKE IND. PVT. LTD. THE TOTAL AMOUNT IS RS. 16,04,512/- AND NOT RS. 34,94,512/- AS ALLEGED. 2 WHARFAGE CHARGES PAID TO VISA INDUSTRIES AND BALAJI INDUSTRIES PVT. LTD. 194C 5,65,974 REIMBURSEMENT OF WHARFAGE CHARGES OF RS. 75,000/- TO VISA IND. LTD. AND RS. 490,974/- TO BALAJI COKE IND. PVT. LTD. 3 STEVEDORING CHARGES PAID TO VISA INDUSTRIES AND BALAJI INDUSTRIES PVT. LTD. 194C 1,668,998/- REIMBURSEMENT OF STEVEDORING CHARGES OF RS. 850,578/-TO VISA IND. LTD. AND RS. 818,290/- TO BALAJI COKE IND. PVT. LTD. 4 FREIGHT CHARGES PAID TO ANTAL BALAJI LTD. 194C 3,600,308 REIMBURSEMENT OF FREIGHT CHARGES OF RS. 3,600,308/- TO ANTAI BALAJI LTD. (SISTER CONCERN OF BALAJI COKE IND. PVT. LTD.) 5 USANCE INTEREST PAID TO FAIR DEALS AND SUPPLIERS 194C 575,177 REIMBURSEMENT TO FAIR DEALS & SUPPLIERS 6 HANDLING CHARGES PAID TO BALAJI INDUSTRIES PVT. LTD. 194C 2,683,992 REIMBURSEMENT OF HANDLING CHARGES OF RS. 2,683,992/- TO BALAJI COKE IND. PVT. LTD. IN RESPECT OF THE ABOVE FACTS, WE WISH TO STATE AS FOLLOWS: ITA 4355/MUM/2011 6 (A) YOUR HONOUR MAY NOTE THAT THE ASSESSEE HAS REIM BURSED A SUM OF RS.16,04,512/- TOWARDS GROUND RENT TO M/S VISA INDU STRIES LTD AND BALAJI COKE INDUSTRY PVT. LTD AND NOT RS. 3,494,512 /- AS MENTIONED. (B) THE ASSESSEE HAD PURCHASE RAW MATERIAL FROM VIS A INDUSTRIES LTD AND IT WAS REQUIRED TO INCUR SOME EXPENSES IN RESPE CT OF THE CLEARANCE & STORAGE OF THE GOODS. IT WAS ALSO AGREED BETWEEN THE PARTIES THAT THE ASSESSEE COMPANY WILL REIMBURSE THE ACTUAL COST INC URRED BY VISA INDUSTRIES LTD TOWARDS GROUND RENT, WHARFAGE CHARGE S AND STEVEDORING CHARGES. M/S GAUTAM FREIGHT PVT. LTD HA S ARRANGED THE FACILITY REQUIRED FOR VISA INDUSTRIES AND VISA INDU STRIES HAVE ACCORDINGLY MADE THE PAYMENT TO GAUTAM FREIGHT. SUB SEQUENTLY THE ASSESSEE COMPANY HAS REIMBURSED THE SAID COST TO VI SA INDUSTRIES BASED ON THE ACTUAL COST INCURRED BY THEM FOR WHICH THEY HAVE RAISED A SEPARATE DEBIT NOTE WITH SUPPORTING FOR ACTUAL COST INCURRED BY IT. SINCE THE ASSESSEE HAS ONLY REIMBURSED THE ACTUAL COST, N O TDS IS LIABLE TO BE DEDUCTED ON SUCH REIMBURSEMENT. FURTHER, YOUR HONOUR WILL NOTICE THAT WHEREVER THE PAYMENT HAS BEEN DIRECTLY MADE TO THE GAUTAM FREIGHT PVT. LTD I.E. S ERVICE PROVIDER, TDS HAS DULY BEEN DEDUCTED ON IT BY YOUR ASSESSEE. (C) THE ASSESSEE HAD PURCHASED THE GOODS FROM BALAJ I COKE INDUSTRY PVT. LTD AND IT WAS REQUIRED TO INCUR ALL THE EXPEN SES IN RESPECT OF THE CLEARANCE & STORAGE OF THE GOODS. IT WAS ALSO AGREE D BETWEEN THE PARTIES THAT THE ASSESSEE COMPANY WILL REIMBURSE THE ACTUAL COST INCURRED BY BALAJI COKE INDUSTRY PVT. LTD TOWARDS GROUND RENT, WHARFAGE CHARGES, STEVEDORING CHARGES, FREIGHT CHARGES AND HANDLING C HARGES. M/S RISHI SHIPPING HAS ARRANGED THE FACILITY REQUIRED FOR BAL AJI COKE INDUSTRY PVT. LTD AND BALAJI COKE INDUSTRY PVT. LTD HAVE ACCORDIN GLY MADE THE PAYMENT TO RISHI SHIPPING. SUBSEQUENTLY, THE ASSES SEE COMPANY HAS REIMBURSED THE SAID COST TO BALAJI COKE INDUSTRY PV T. LTD. BASED ON THE ACTUAL COST INCURRED BY THEM FOR WHICH THEY HAVE RA ISED A SEPARATE DEBIT NOTE ALONG WITH THE SUPPORTING FOR ACTUAL COS T INCURRED BY THEM. SINCE THE ASSESSEE HAS ONLY REIMBURSED THE ACTUAL C OST, NO TDS IS LIABLE TO BE DEDUCTED ON SUCH REIMBURSEMENT. D) YOUR HONOUR MAY ALSO NOTE THAT THE SERVICE PROVI DER HAS ACTUALLY PAID THE EXPENSES TO THE KANDLA PORT, WHICH IS A GO VERNMENT AUTHORITY. (E) YOUR HONOUR MAY FURTHER NOTE THAT THE ASSESSEE HAS REIMBURSED THE ACTUAL COST INCURRED BY THE VISA INDUSTRIES LTD AND BALAJI COKE ITA 4355/MUM/2011 7 INDUSTRY PVT. LTD. THE VISA INDUSTRIES LTD AND BALA JI COKE INDUSTRY PVT. LTD. HAVE NEITHER BOOKED ANY PROFIT NOR TAKEN ANY C OMMISSION ON THE SAME. VISA INDUSTRIES LTD AND BALAJI COKE INDUSTRY PVT. LTD HAVE DEBITED TO THE ASSESSEE THAT SAME RATE AS IS CHARGE D BY THE ULTIMATE SERVICE PROVIDER TO THEM AND RECOVERED ONLY APPROPR IATE AMOUNT FROM THE ASSESSEEE. THE PAYMENT IS PURELY IN THE NATURE OF THE REIMBURSEMENT. (F) THE ASSESSEE HAS ALSO RELIED ON THE Q. NO. 30 O F THE BOARDS CIRCULAR NO. 715 DATED AUGUST 08, 1995, WHEREFROM IT IS CLEA R THAT WHEREVER THE REIMBURSEMENT OF EXPENSES ARE CLAIMED THROUGH A SEP ARATE STATEMENT OR INVOICE THERE WILL NO REQUIREMENT TO DEDUCT TAX AT SOURCE, PROVIDED THE DEDUCTOR IS SATISFIED THAT THE EXPENSES CLAIMED AS REIMBURSEMENT ARE ONLY THE ACTUAL EXPENSES INCURRED. IF THERE IS AN ELEMENT OF PROFIT, THAT IS TO SAY THAT IF THE REIMBURSEMENT IS NOT OF ACTUAL EXPENSES, TAX WILL HAVE TO BE DEDUCTED AT SOURCE EVEN IF THE EXPE NSES CLAIMED THROUGH A SEPARATE STATEMENT. (G) ATTENTION IS ALSO INVITED TO THE JUDGMENT OF DE LHI BENCH OF ITAT IN CASE OF ITO VS. DR. WILLMAR SCHWABE INDIA (P.) LTD (2005) 1 SOT 71/95TTJ53 WHEREIN IT IS HELD THAT REIMBURSEMENT OF EXPENSES FOR WHICH BILL IS SEPARATELY RAISED DID NOT ATTRACT THE PROVISIONS OF TDS. THE SAME VIEW IS ALSO TAKEN BY THE HON'BLE DELHI BE NCH OF ITAT IN UNITED HOTELS LTD VS. INCOME TAX OFFICER (2004) 93T TJ822. (H) YOUR HONOUR SHALL ALSO APPRECIATE THAT THE ASSE SSEE HAS SUBMITTED ALL THE DETAILS AND DEBIT NOTES RELATED TO THE REIM BURSEMENT OF THE EXPENSES DURING THE ASSESSMENT PROCEEDINGS TO ASSES SING OFFICER VIDE POINT NO. 10 & 11 OF OUR SUBMISSION DATED 21/11/200 8. (I) IN RESPECT OF THE ABOVE, WE ARE ENCLOSING HEREW ITH THE COPIES OF DEBIT NOTES RAISED BY M/S VISA INDUSTRIES LTD AND BALAJI COKE INDUSTRY PVT. LTD OR THEIR SISTER CONCERNS ALONG WITH THE RELEVAN T SUPPORTING TO SHOW THAT THE PARTIES HAVE CLAIMED ONLY THE ACTUAL AMOUN T CHARGES TO THEM BY THE ULTIMATE SERVICE PROVIDER. (J) ALSO, YOUR HONOUR WOULD APPRECIATE THAT IN SO F AR AS DEDUCTION U/S.194I IS CONCERNED, THE SAME IS BASED ON THE NAT URE OF INCOME IN THE HANDS OF THE RECIPIENT AND IN CASE OF REIMBURSE MENT OF EXPENSES, THE RECIPIENT IS ACTING ONLY AS A CONDUIT FOR RECEI VING THE PAYMENT. ALSO, AS PER SECTION 194I, THE DEDUCTION IS TO BE MADE BY THE PAYEE OF SUCH SUM WHICH IS INCOME ASSESSABLE AS RENT IN TERMS OF THE SAID SECTION. THUS, AS PER THE PROVISIONS OF SECTION 194I, IT IS THE FINAL PAYER OF THE ITA 4355/MUM/2011 8 AMOUNT TO THE PAYEE WHO IS RECEIVING THE SUM IN FOR M RENT INCOME IS REQUIRED TO DEDUCT THE TAX AND NOT THE PERSON WHO I S REIMBURSING THE SAID AMOUNT. THIS IS RIGHTLY SO BECAUSE, EVEN IN OU R CASE EVEN FOR A MOMENT IT IS ASSUMED THAT TAX WERE DEDUCTED AND A C ERTIFICATE WERE TO BE ISSUED TO THE PARTIES TO WHOM REIMBURSEMENT IS M ADE, THE QUESTIONS WOULD ARISE AS TO HOW THEY WOULD CLAIM CREDIT FOR T HE SAME, BECAUSE AS PER THE PROVISIONS OF CHAPTER XVII ONLY THE PERSON WHO OFFERS THE INCOME CAN CLAIM THE CREDIT FOR THE TAX DEDUCTED AT SOURCE AND THE SUM REIMBURSED IS NEVER THE INCOME OF PERSON WHO IS CLA IMING REIMBURSEMENT AS THE SAID RECEIPT IS NEVER ITS INCO ME IN NATURE OF RENT. (K) EVEN IN SO FAR AS SECTION 194C IS CONCERNED, TH E RESPONSIBILITY IS ON THE PERSON PAYING ANY SUM TO THE CONTRACTOR AND WHE N THE AMOUNT WAS REIMBURSED BY YOUR ASSESSEE IT WAS NOT PAID TO THE CONTRACTOR BUT TO THE PARTY WHO HAD TO MAKE PAYMENT TO THE CONTRACTOR . ALSO, THE PARTIES TO WHOM REIMBURSEMENTS WERE MADE WOULD NOT BE OFFER ING THIS AMOUNTS AS INCOME AND THEREFORE EVEN IF TAX WERE DE DUCTED ON SUM PAID TO THEM, THEY WOULD NOT BE IN POSITION TO CLAI M CREDIT FOR SUCH TAX DEDUCTED FROM AMOUNT REIMBURSED TO THEM. WE WOULD ALSO LIKE YOUR HONOUR TO VISIT SOME OF THE SUPPORTING DOCUMENTS WITH THE DEBIT NOTE. IN MOST OF THE CASES , THE SUPPLIERS HAVE AVAILED SERVICES FOR LARGER QUANTITIES THAN THE AMO UNT DEBITED TO YOUR ASSESSEE. FROM THE SAID LARGER AMOUNT PAYABLE BY TH E SUPPLIERS TO THE SERVICE PROVIDERS, THEY HAVE COLLECTED THE AMOUNT D UE FROM YOUR ASSESSEE ON THE BASIS OF PROPORTION OF QUANTITY SUP PLIED TO IT IN. (L) THUS, IN VIEW OF THE ABOVE FACTS, VIZ.- A. THAT ULTIMATE PAYMENT IN RESPECT OF ALL THE ITEM S ARE IN THE NATURE OF REIMBURSEMENT AND PAYMENT TO THE ULTIMATE SERVICE P ROVIDER/PAYEES HAS BEEN MADE BY THE SUPPLIER OF RAW MATERIAL. B. THAT THE ASSESSEE DOES NOT HAVE ANY CONTRACT/ AG REEMENT/ ARRANGEMENTS DIRECTLY WITH THE CONTRACTORS/PAYEES A ND WHEREVER THE ASSESSEE HAS DIRECTLY ENGAGED ANY SUCH SERVICE PROV IDER DIRECTLY IT HAS DULY DEDUCTED THE TAX THEREON. C. THAT REIMBURSEMENT ARE ON ACTUAL AMOUNTS PAID BY THE SUPPLIER TO THE SERVICE PROVIDERS AND SEPARATE DEBIT NOTE, WITH SUPPORTING ITA 4355/MUM/2011 9 DOCUMENTS FOR RATE CHARGED ARE ALSO SUPPLIED ON WHI CH THERE IS NO PROFIT ELEMENT OF THE SUPPLIER INCLUDED. D. IN MOST OF THE CASE THE SUPPLIERS HAVE MADE PAYM ENT FOR A LARGER QUANTITIES AND TAKEN REIMBURSEMENT OF YOUR ASSESSEE ONLY TO THE EXTENT OF QUANTITIES ACTUALLY SUPPLIED TO THE ASSESSEE. E. THAT EVEN AS PER THE CIRCULAR MENTIONED ABOVE AN D SPECIFIC EXPLANATIONS IN (J) AND (K) ABOVE IN RESPECT OF NAT URE OF DEDUCTIONS U/S. 194I AND S. 194C THERE IS NO LIABILITY ON YOUR ASSE SSEE TO DEDUCT TAX. YOUR ASSESSEE WAS NOT REQUIRED TO DEDUCT ANY TAX ON THE AMOUNTS REIMBURSED AND THEREFORE TO THIS EXTENT THERE IS NO ERROR IN THE ORDER MADE BY THE ASSESSING OFFICER AND THERE CANNOT BE A NY ANNULMENT THEREOF OR REVISION ON THE ABOVE COUNT. B. THE ASSESSEE HAS PAID THE INTEREST ON UNSECURED LOANS OF RS. 839,272/- AND ON THIS INTEREST TDS HAS BEEN DEDUCTE D @ 10.20% WHEREAS THE ACTUAL TDS SHOULD HAVE BEEN DEDUCTED @ 22.44%: A. AS PER YOUR OPINION TDS SHOULD HAVE BEEN DEDUCTE D AT THE RATE OF 22.44% ON THE INTEREST PAID ON UNSECURED LOANS OF R S. 839,272/- AND NOT @ 10.20% WHICH IS DEDUCTED BY THE ASSESSEE ON T HE PAYMENTS OF INTEREST MADE TO THE INDIVIDUALS OF HUFS. IN RESPEC T OF THE ABOVE, WE WISH TO STATE AS FOLLOWS: B. DURING THE FY 2005-06 THE ASSESSEE HAS PAID THE INTEREST OF RS.839,272/- ON UNSECURED LOANS AFTER DEDUCTING THE TDS @ 10.20%. THE PARTY-WISE DETAILS OF THE INTEREST PAYMENT AND TDS DEDUCTED ARE AS FOLLOWS: SR NO NAME OF THE PARTY STATUS AMT. PAID TDS DEDUCTED TDS RATE 1 ABHISHEK AGARWAL INDIVIDUAL 1,56,956 16,010 10.20% 2 ASHO K. AGARWAL INDIVIDUAL 1,73,428 17,690 10.20% 3 ASHOKK. AGARWAL HUF HUF 15,950/- 1,627 10.20% 4 NEETA AGARWAL INDIVIDUAL 153,575 15,665 10.20% 5 SHASHI A AGARWAL INDIVIDUAL 181,281 18,491 10.20% 6 ARUN KUMAR AGARWAL INDIVIDUAL 158,082 16,124 10.20 % TOTAL 839,272 85,607 10.20% ITA 4355/MUM/2011 10 C. FROM THE ABOVE, IT IS CLEAR THAT ALL THE PAYEES ARE INDIVIDUALS OR HUF AND THEREFORE THE ASSESSEE WAS LIABLE TO DEDUCT THE TDS @ 10.20% AND THE ASSESSEE HAS DEDUCTED THE SAME @ 10.20% IN ACCO RDANCE WITH THE APPLICABLE PROVISIONS AS THE PAYEES ARE INDIVIDUALS AND HUF. D. YOUR HONOUR SHALL ALSO APPRECIATE THAT THE ASSES SEE HAS SUBMITTED THE DETAILS AND LEDGER ACCOUNT OF THE INTEREST PAID ON UNSECURED LOANS DURING THE ASSESSMENT PROCEEDINGS TO ASSESSING OFFI CER VIDE POINT NO. 5 OF OUR SUBMISSION DATED 21/11/2008. THE CONFIRMATIO NS AND LEDGER ACCOUNT OF LENDERS ARE ALSO SUBMITTED DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE IT IS CLEAR THAT THERE IS NO E RROR IN DEDUCTING THE TDS ON INTEREST PAID ON UNSECURED LOANS U/S 194A. T HEREFORE, THE ORDER OF ASSESSING OFFICER IN THIS RESPECT CANNOT B E CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. C. DEPRECIATION IN RESPECT OF THE CLAIM OF THE DEPRECIATION, YOU HA VE MADE AN OBSERVATION ON CLASSIFICATION OF SOME OF THE ASSETS , THAT THE SAME ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. IN THIS REGARDS, IN RESPECT OF EACH OF THE OBSERVATIONS, WE HAVE TO SUBMIT AS UNDER- A) YOUR HONOUR HAS OBSERVED THAT LABOUR QUARTERS AR E CLASSIFIED AS FACTORY BUILDINGS AND DEPRECIATION @ 10% HAS BEEN C LAIMED ON THE SAME INSTEAD OF RESIDENTIAL BUILDINGS ON WHICH DEPR ECIATION @ 5% ONLY IS ALLOWABLE. IN THIS REGARDS, WE WISH TO STATE AS FOLLOWS: (I) THE FACTORY OF THE ASSESSEE IS SITUATED AT THE KUTCH (GUJARAT) AND THE ASSESSEE IS MANUFACTURING THE LAM COKE. THE PROCESS OF MANUFACTURING OF LAM COKE REQUIRES RUNNING OF FURNA CE AROUND THE CLOCK AND THE FACTORY OF THE ASSESSEE COMPANY RUNS FOR 24 HOURS. THE LABOURERS ARE REQUIRED TO CONTINUOUSLY WATCH THE PR OCESS AND HENCE THEY HAVE TO PRESENT THERE ALL THE TIME. (II) HENCE, TO EASE THEIR PRESENCE, THE LABOUR QUAR TERS ARE LOCATED INSIDE THE FACTORY PREMISES. THE ASSESSEE HAS PROVIDED QUA RTERS TO THE LABOURS/WORKERS FOR SMOOTH RUNNING OF THE FACTORY I NSIDE THE FACTORY PREMISES ITSELF. HENCE, THE LABOUR QUARTERS ARE NOT RESIDENTIAL QUARTERS ITA 4355/MUM/2011 11 PROVIDED TO THE LABOURS BUT THESE ARE TEMPORARY ACC OMMODATION FOR THE WORKING LABOUR ONLY AND HENCE IT IS IN THE NATURE O F FACTORY PREMISES ONLY. IT MAY BE NOTED THAT FACILITY OF STAYING ARE AVAILABLE FOR ONLY 6 TO 8 LABOURERS AT A TIME AND THAT TOO WITHOUT FAMILY MEM BERS. (III) YOUR HONOUR WILL AGREE THAT THE RESIDENTIAL Q UARTERS ARE GENERALLY SEPARATE FROM OFFICE OR FACTORY PREMISES AND ARE IN THE NATURE OF RESIDENCE FOR THE STAFF/WORKERS ALONGWITH THEIR FAM ILY MEMBERS. IN THE CASE OF THE ASSESSEE COMPANY, THE LABOUR QUARTERS A RE TEMPORARY ACCOMMODATION TO EASE THEIR PRESENCE DURING SLOG HO URS AND FACILITATE CONTINUOUS RUNNING OF PLANT AND TO CONTINUOUSLY MON ITOR THE PROCESS. (IV) YOUR HONOUR WILL ALSO APPRECIATE THAT MERE NOM ENCLATURE OF ANY ASSET CANNOT BE THE BASIS OF DECIDING ITS RATE OF D EPRECIATION. THE FUNCTIONALITY ASPECTS SHOULD ALSO BE EXAMINED BEFOR E DECIDING THE DEPRECIATION BLOCK. THUS, AS PER THE FUNCTIONALITY TEST, THE LABOUR QUARTERS ARE BEING USED AS A PART OF THE FACTORY PR EMISES. THEREFORE, THE STAFF QUARTERS ARE CONSIDERED AS PART OF THE FACTOR Y PREMISES AND ACCORDINGLY DEPRECIATION @ 10% HAS BEEN CLAIMED. (V) IN THIS REGARDS, WE WOULD LIKE TO DRAW YOUR KIN D ATTENTION TO THE DECISION OF MADRAS HC IN CASE OF CIT V. STANDARD MO TOR PRODUCTS OF INDIA LTD. [1983] 142 ITR 877 WHEREIN IT HAS BEEN H ELD THAT WHERE THE ADMINISTRATIVE BLOCK HOUSED THE CHIEF ENGINEER AND RELATED STAFF, THE CANTEEN, THE NEW STORES, AND CO-OPERATIVE STORES BU ILDINGS, WHICH WERE ESSENTIAL ADJUNCTS TO THE FACTORY PREMISES WERE RIG HTLY TREATED AS FACTORY BUILDINGS. THE SAME DECISION IS ALSO FOLLOWED IN TH E CASE OF CIT VS. MOTOR INDUSTRIES CO. LTD [1986]158 ITR 734 (KAR.)/C IT VS. ENGINE VALVES LTD. [1980] 1261TR 347 (MAD.)/ CIT VS. BAJAJ AUTO LTD. [2009]182 TAXMANN 163 (BOM.) WHEREIN IT HAS BEEN HE LD THAT A CANTEEN BUILDING IS, IN THE PROPER SENSE OF THE TER M, A FACTORY BUILDING FOR THE PURPOSE OF DEPRECIATION ALLOWANCE. B) YOUR HONOUR HAS OBSERVED THAT BUNKER SHEDS ARE C LASSIFIED AS PLANT AND MACHINERY AND DEPRECIATION @ 15% HAS BEEN CLAIM ED ON THE SAME INSTEAD OF FACTORY BUILDINGS ON WHICH DEPRECIATION @ 10% ONLY IS ALLOWABLE. IN THIS REGARDS, WE WISH TO STATE AS FOL LOWS: (I) THE PROCESS INVOLVED IN THE MANUFACTURE OF LAM COKE IS A CONTINUOUS PROCESS AND IT IS ALSO POWER INTENSIVE PROCESS. THE BUNKER SHED IS CONSTRUCTED OVER THE FURNACE UNIT AND IS VERY MUCH A PART OF THE WHOLE PLANT IN WHICH THE PROCESS OF MANUFACTURING LAM COK E IS CARRIED OUT. SINCE THE BUNKER SHED IS PART OF THE WHOLE PLANT, S AME IS TAKEN AS PART OF PLANT AND DEPRECIATION IS CLAIMED AT THE RATE AP PLICABLE TO THE PLANT, ITA 4355/MUM/2011 12 WHICH IN THIS CASE IS 15%. ATTENTION OF YOUR HONOUR IS ALSO INVITED TO THE ANNEXURE OF DEPRECIATION ATTACHED TO FORM NO. 3 CD WHERE THE BUNKER SHED HAS BEEN INCLUDED AS PART OF THE PLANT ONLY. (II) THE BUNKER SHED HAS A VERY USEFUL PURPOSE IN K EEPING THE FURNACE RUNNING UNINTERRUPTED CONTINUOUSLY WITHOUT ANY INTE RRUPTION OF THE OUTSIDE NATURAL FORCE. FURTHER, IT IS NOT A BUILDIN G IN THE SENSE THAT ANY HUMAN BEING CAN ENTER IT AS IT LOCATED EXACTLY OVER THE FURNACE. THUS, HAVING REGARDS TO ITS FUNCTION AND ITS PLACEMENT IN OVERALL MANUFACTURING PROCESS, IT HAS TO BE CONSIDERED AS P ART OF THE PLANT AND ACCORDINGLY DEPRECIATION IS ALLOWABLE AT THE SAME R ATE AS PLANT AND MACHINERY. C) YOUR HONOUR HAS OBSERVED THAT FACTORY ELECTRIFIC ATION ARE CLASSIFIED AS PLANT AND MACHINERY AND DEPRECIATION @ 15% HAS B EEN CLAIMED ON THE SAME INSTEAD OF FURNITURE AND FITTINGS ON WHICH DEPRECIATION @ 10% ONLY IS ALLOWABLE. IN THIS REGARDS, WE WISH TO STATE AS FOLLOWS- (I) WE WOULD LIKE TO DRAW YOUR ATTENTION TO THE ANN EXURE TO FORM NO. 3CD IN RESPECT OF WORKING OF DEPRECIATION. ACCORDIN G TO THE SAID SCHEDULE IN THE PLANT AND MACHINERY THE ASSESSEE HA S PROVIDED DETAILS OF ALL THE ITEMS INCLUDED WITHIN PLANT. AS POINTED OUT ABOVE, THE PROCESS INVOLVED IN MANUFACTURING IS HIGHLY POWER INTENSIVE , REQUIRING HIGH VOLTAGE USAGE AND EQUIPMENTS LIKE TRANSFORMERS, SWI TCH GEARS ETC. . THE PROCESS ALSO REQUIRES USE OF MANY MECHANICAL PARTS FOR CRUSHING AND LIFTING OF COAL AS ALL THE PROCESS CANNOT BE CARRIE D OUT MANUALLY, ESPECIALLY SINCE FURNACE CONSUMES HIGHER LEVEL OF V OLTAGE AND IS USED FOR MANUFACTURING LAM COKE. (I) ALL THIS EQUIPMENT CLASSIFIED UNDER PLANT & MAC HINERY UNDER SUB- HEADING FACTORY ELECTRIFICATIONS ARE PART OF THE PL ANT AND USED FOR MANUFACTURING PROCESS ONLY. THUS, INCLUSION OF FACT ORY ELECTRIFICATION IS NATURAL AND ACCORDING TO THE FUNCTIONS INVOLVED. (II) ATTENTION OF YOUR HONOUR IS ALSO INVITED TO AN NEXURE I PRESCRIBING RATES OF DEPRECIATION. IF YOUR HONOUR WOULD SEE TH E ITEM II OF PART A OF THE SAID ANNEXURE RELATING TO FURNITURE & FITTINGS, THE CLASSIFICATIONS THEREIN READS AS FURNITURE AND FITTINGS INCLUDING ELECTRICAL FITTINGS. THUS, AS PER THE SAID CLASSIFICATION, IT IS CLEAR T HAT ONLY THOSE ELECTRICAL FITTINGS, WHICH FORM PART OF THE FURNITURE AND FITT INGS ARE COVERED BY THE SAID ENTRY. WHEREAS, IN THE CASE BEFORE YOUR HONOU R, THE ITEMS INCLUDED IN THE FACTORY ELECTRIFICATION ARE FOR ITE MS WHICH CAN ONLY BE USED IN A PLANT AS THEY ARE OF THE TYPE TRANSFORMER S, SWITCH GEARS ETC. ITA 4355/MUM/2011 13 AND FORM PART OF THE WHOLE PROCESS OF MANUFACTURE A ND AS THEREFORE CORRECTLY CLASSIFIED AS PART OF' THE PLANT & MACHIN ERY. (III) THE ABOVE WAS EXPLAINED DURING THE COURSE OF HEARING TO THE INCUMBENT ASSESSING OFFICER ON 4/12/2008. THUS, IN LIGHT OF THE ABOVE EXPLANATIONS THERE IS N O ERROR IN THE ORDER AND THE SAME IS NEITHER PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN LIGHT OF THE ABOVE FACTS AND IN VIEW OF OUR SUBM ISSIONS HEREINABOVE, IT IS VERY MUCH EVIDENT THAT THERE IS NO ERROR IN T HE ORDER OF THE ASSESSING OFFICER OR EVEN IF THERE IS ERROR, THE SA ME IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ORDER OF ASSESSING OFFICER IS ALSO PASSED WITH THE APPROVAL OF THE JCIT AS PER THE NEW NORMS OF SCRUTINY ASSESSMENTS. WE HOPE THAT YOU WILL FIND THE ABOVE SUBMISSIONS SU FFICIENT AND TO YOUR SATISFACTION ON THE POINTS RAISED BY YOUR HONOUR IN THE SHOW CAUSE NOTICE AND THAT YOU SHALL DROP THE ACTION INITIATED FOR REVISION PROCEEDINGS. SHOULD YOU STILL DECIDE TO PROCEED AHE AD WITH THE REVISION PROCEEDINGS BY HOLDING ANY VIEW CONTRARY TO OUR SUB MISSION, WE REQUEST YOU TO GRANT US FURTHER OPPORTUNITY TO CONT ROVERT THE SAME. SHOULD YOU REQUIRE ANY FURTHER CLARIFICATION, EXPLA NATION OR ELABORATION ON THE ABOVE OR ANY MATTER RELATING TO OUR ASSESSME NT, WE SHALL GLADLY FURNISH THE SAME. 3. VIDE FURTHER SUBMISSIONS DATED 29.03.2011, LD. A RS OF THE ASSESSEE HAVE STATED AS UNDER: 'FURTHER TO THE OUR EARLIER SUBMISSION DATED 25/03/ 2011 AND AS DISCUSSED PERSONALLY WITH YOUR HONOUR ON THE HEARIN G ON 25/03/2011 REGARDING TDS DEDUCTED BY THE ULTIMATE PAYER, WE AR E HEREWITH ENCLOSING THE FOLLOWING DOCUMENTS OF THE FEW OF THE PARTIES WHICH IS SHOWING THAT TDS HAS BEEN DEDUCTED BY THE ULTIMATE PAYER: 1) LEDGER ACCOUNT OF COAL TRANSPORTATION IN THE BOO KS OF ANTAI BALAJI LTD ALONG WITH THE TDS CERTIFICATE OF TDS DEDUCTED ON RISHI SHIPPING. 2) LEDGER ACCOUNT OF RISHI SHIPPING IN THE BOOKS OF ANTAI BALAJI LIMITED SHOWING THE TDS DEDUCTED BY ANTAI BALAJI LTD ON THE PAYMENTS MADE TO RISHI SHIPPING RELATING TO THE COAL TRANSPORTATION CHARGES, STEVEDORING CHARGES AND HANDLING CHARGES. ITA 4355/MUM/2011 14 3) LEDGER ACCOUNT RISHI SHIPPING IN THE BOOKS OF BA LAJI COKE INDUSTRY PVT. LTD SHOWING THE TDS DEDUCTED BY BALAJI COKE ON THE PAYMENT MADE TO RISHI SHIPPING RELATING TO THE GROUND RENT. 4) TDS CERTIFICATES OF RISHI SHIPPING ISSUED BY BAL AJI COKE INDUSTRY PVT. LTD ON THE PAYMENTS MADE FOR GROUND RENT AND C LEARING AND FORWARDING EXPENSES. WE HOPE THAT YOU WILL FIND THE ABOVE SUBMISSIONS SU FFICIENT AND TO YOUR SATISFACTION ON THE POINTS RAISED BY YOUR HONOUR IN THE SHOW CAUSE NOTICE AND THAT YOU SHALL DROP THE ACTION INITIATED FOR REVISION PROCEEDINGS. THE LD. CIT CONSIDERED THE SUBMISSIONS OF THE ASSES SEE AND CAME TO THE FOLLOWING CONCLUSIONS:- 4. I HAVE PERUSED THE RECORDS AND CONSIDERED THE S UBMISSIONS OF THE ASSESSEE. EACH OF THE IMPUGNED ISSUES IS DISCUSSED AS UNDER: (A) AS REGARDS THE ISSUE AT (A) OF THE SHOW CAUSE NOTIC E, IT IS SEEN THAT THE ASSESSEE HAS CLAIMED EXPENDITURE UNDER THE HEAD S GROUND RENT, WHARFAGE CHARGES, STEVEDORING CHARGES, FREIGHT CHAR GES, HANDLING CHARGES, ETC. . ON PERUSAL OF THE DEBIT NOTES RAISE D BY THE PAYEE CONCERNS NAMED THEREIN, IT IS SEEN THAT THE ASSESSE ES ACCOUNT HAS BEEN DEBITED BY THEM FOR PAYMENTS MADE TO VARIOUS O THER CONCERNS BY WAY OF WHARFAGE, HANDLING CHARGES, STEVEDORING C HARGES, GROUND RENT ETC. . THUS, TO SUCH EXTENT, THESE CONCERNS HA VE UNDERTAKEN RECEIPT, STORAGE, TRANSPORTATION, DELIVERY ETC. OF GOODS ON BEHALF OF THE ASSESSEE AND RENDERED SUCH SERVICES ACCORDINGLY TO THE ASSESSEE. THEREFORE, THE PAYMENTS MADE BY THE ASSE SSEE TO THESE PERSONS, THOUGH TERMED AS REIMBURSEMENT, ARE EXPRES SLY FOR THE PURPOSE OF PAYMENT FOR GROUND RENT, LOADING & UNLOA DING, STEVEDORING, WHARFAGE ETC. AS DISTINCT FROM THE COS T OF BARE GOODS. THIS ASPECT OF THE EXPENDITURE CLAIMED BY THE ASSES SEE HAS NOT BEEN LOOKED INTO BY THE A.O. AND THE CONSEQUENT APPLICAB ILITY OF THE PROVISIONS OF SEC.40(A)(IA) HAS NOT BEEN EXAMINED D URING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE'S CONTENTION T HAT THE PAYMENTS MADE BY IT FOR THE ABOVE CHARGES ARE NOT L IABLE TO PROVISIONS OF TDS U/S.194C/194I AS THE PAYMENTS ARE MERELY IN THE NATURE OF REIMBURSEMENT, NEEDS FURTHER PROBING AND FACTUAL FINDING, SINCE THE EXPENSES HAVE BEEN EXPRESSLY DEBITED BY T HE ASSESSEE UNDER THE HEADS OF STEVEDORING, WHARFAGE CHARGES, T RANSPORT CHARGES, ETC., WHICH ARE OTHERWISE COVERED UNDER TH E TDS PROVISIONS ITA 4355/MUM/2011 15 OF THE IT ACT. THE A.O. HAS TO FURTHER EXAMINE THE NATURE OF THE ACTUAL BUSINESS RELATIONSHIP BETWEEN THE ASSESSEE A ND THE PARTIES TO WHOM SUCH PAYMENTS HAVE BEEN MADE AND THE TERMS AND CONDITIONS OF SUCH BUSINESS RELATIONSHIP, TO EXACTL Y FIND OUT IF THE PAYMENTS ARE ACTUALLY CONTRACTUAL IN NATURE OR MERE REIMBURSEMENTS AS CLAIMED BY THE ASSESSEE. SINCE TH E ASSESSMENT ORDER HAS NOT DEALT WITH THE APPLICABILITY OF PROVI SIONS OF SEC.40(A)(IA) IN THE LIGHT OF THE TDS LIABILITY OF THE ASSESSEE ON THE ABOVE PAYMENTS, THE ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE TO THAT EXTENT. THEREFORE, THE MATTER IS SET ASIDE WITH THE DIRECTION TO THE A.O. TO EXAMINE THI S ASPECT AFRESH BY CONSIDERING ALL THE RELEVANT FACTS, SO AS TO DECIDE THE APPLICABILITY OF TDS PROVISIONS AND CONSEQUENTLY THE PROVISIONS OF S EC 40(A)(IA) TO THE AFORESAID PAYMENTS MADE BY THE ASSESSEE TO THE PARTIES MENTIONED ABOVE. (B) IT IS NOTICED FROM THE ASSESSMENT RECORDS THAT THE ASSESSEE HAS PAID INTEREST OF RS.8,39,272/- ON SECURED LOANS ON WHICH TDS HAS BEEN DEDUCTED @ 10.20% AS AGAINST 22.44%. BEFORE ME , THE ASSESSEE HAS SUBMITTED PARTYWISE BREAK UP OF PAYMEN T OF INTEREST AND HAS STATED THEREIN THAT THE RECIPIENTS OF INTER EST ARE INDIVIDUALS AND AS PER THE PROVISIONS OF THE ACT, THE ASSESSEE WAS LIABLE TO DEDUCT TDS @ 10.20%, WHICH HAS BEEN RIGHTLY DEDUCTE D. THE ASSESSEE'S CONTENTION MAY BE EXAMINED IN TERMS OF T HE RATES OF TDS APPLICABLE TO THE YEAR UNDER CONSIDERATION AND NECE SSARY ACTION TAKEN ACCORDINGLY IN TERMS OF SEC.40(A)(IA) OF THE ACT. (C) IN RESPECT OF THE ISSUE OF DEPRECIATION CLAIMED BY THE ASSESSEE, IN THE WRITTEN SUBMISSION, THE ASSESSEE HAS ARGUED THA T DEPRECIATION HAS RIGHTLY BEEN CLAIMED @ 10% AS THE IMPUGNED ASSE TS ARE NOT RESIDENTIAL QUARTERS OF THE LABOURERS, BUT A PART A ND PARCEL OF THE FACTORY PREMISES WHICH ARE LOCATED WITHIN THE FACTO RY ITSELF, SO AS TO ENSURE THAT THE FURNACE IS RUNNING CONTINUOUSLY FOR 24 HOURS AND IS ATTENDED TO BY THE LABOURERS ON CONTINUOUS BASIS. U NDER THE CIRCUMSTANCES, THE SHELTER/ACCOMMODATION PROVIDED W ITHIN THE FACTORY PREMISES FOR THE LABOURERS TO ATTEND TO THE FURNACE, CANNOT BE TREATED AS SEPARATE RESIDENTIAL QUARTERS ON WHIC H DEPRECIATION IS ALLOWABLE AT A LOWER RATE. THE ASSESSEE'S CONTENTIO NS ARE TAKEN NOTE OF. HOWEVER, THIS ISSUE ALSO NEEDS PROPER PHYSICAL VERIFICATION SO THAT APPROPRIATE CONCLUSION CAN BE DRAWN AS TO WHET HER THESE ACCOMMODATIONS PROVIDED TO THE LABOURERS ARE RESIDE NTIAL QUARTERS OR TEMPORARY ACCOMMODATION FOR THE WORKING LABOURER S GIVEN WITHIN THE FACTORY PREMISES FOR RUNNING OF THE FURNACE, RO UND THE CLOCK, AS CLAIMED BY THE ASSESSEE. SINCE THIS ISSUE HAS NOT B EEN EXAMINED BY ITA 4355/MUM/2011 16 THE A.O. DURING THE ASSESSMENT PROCEEDINGS, PREJUDI CE HAS BEEN CAUSED TO THE INTEREST OF REVENUE BY ALLOWING DEPRE CIATION AT A HIGHER RATE, WITHOUT EXAMINING THE ADMISSIBILITY OF THE CLAIM OF THE ASSESSEE. THEREFORE, THE MATTER DESERVES TO BE SET ASIDE AND RESTORED TO THE A.O. FOR FURTHER EXAMINATION AND A FACTUAL F INDING WITH REGARD TO THE CLAIM OF THE ASSESSEE AND TO ALLOW DEPRECIAT ION ACCORDINGLY. 5. THE A.O. IS DIRECTED TO PASS THE ASSESSMENT ORD ER AFRESH AFTER AFFORDING REASONABLE AND ADEQUATE OPPORTUNITY TO THE ASSESSEE. THUS, IN NUTSHELL , THE LD. CIT HELD THAT ASSESSMEN T ORDER DATED 23 RD DECEMBER, 2008 PASSED BY THE A.O. U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 IS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE AND DIRECTIONS WERE ISSUED TO THE A.O. TO PASS ASSESSME NT ORDER AFRESH AFTER AFFORDING REASONABLE AND ADEQUATE OPPORTUNITY TO TH E ASSESSEE, VIDE ORDERS DATED 30-03-2011 PASSED BY LEARNED CIT U/S 263 OF T HE ACT. 4. AGGRIEVED BY THE ORDER DATED 30-03-2011 PASSED B Y THE LD. CIT U/S 263 OF THE ACT, THE ASSESSEE FILED FIRST APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT AND HELD THAT THE ASSESSMENT ORDER PASSED BY THE AO ON 23 RD DECEMBER, 2008 U/S 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS SUBMITTED THAT THE SAID ORDER OF THE LD. CIT PASSED U/S 263 IS NOT SUSTAINA BLE IN LAW AS THE ORDER OF THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE LD. COUNSEL SUBMITTED THAT THE A.O. HAS EXAMINE D THE ISSUES PROPERLY AND DUE INVESTIGATIONS WERE MADE BY THE AO BEFORE F RAMING THE ASSESSMENT ORDER DATED 23.12.2008 PASSED U/S 143(3) OF THE ACT . IT WAS SUBMITTED THAT THE ASSESSEE HAS FACTORY SITUATED AT KUTCH, GUJARAT AND THE ASSESSEE IS MANUFACTURING OF LAM COKE. IT WAS SUBMITTED THAT WI TH RESPECT TO THE FOLLOWING PAYMENTS , THESE ARE REIMBURSEMENTS CHARG ES OF COST TO VARIOUS ITA 4355/MUM/2011 17 PARTIES FOR WHICH DEBIT NOTES WERE ISSUED BY THESE PARTIES IN FAVOUR OF THE ASSESSEE. IT WAS SUBMITTED THAT THESE PARTIES HAVE DEDUCTED TAX AT SOURCE WHILE MAKING PAYMENTS TO THE VENDORS FROM WHOM THE SERVICES WERE AVAILED. IT WAS ALSO SUBMITTED THAT WHERE-EVER THE ASSESSEE MADE DIRECT PAYMENT FOR EXPENSES , THEN THE ASSESSEE HAD DEDUCTED TAX AT SO URCE , WHILE IN CASE OF MERE REIMBURSEMENT OF EXPENSES, NO TDS WAS DEDUCTED . IT WAS SUBMITTED THAT THE COPIES OF LEDGER ACCOUNTS OF THE VENDORS, THE DETAILS OF TAX DEDUCTED AT SOURCE BY THE ENTITIES WHO AVAILED THE SERVICES ARE ALL PLACED IN PAPER BOOK PAGE 97-142, WHICH WERE FILED BEFORE LEARNED CIT VI DE LETTER DATED 29-03- 2011. IT WAS , THUS, SUBMITTED THAT WITH RESPECT TO THE FOLLOWING PAYMENTS , THESE ARE REIMBURSEMENTS CHARGES OF COST TO VARIOUS PARTIES FOR WHICH DEBIT NOTES WERE ISSUED BY THESE PARTIES IN FAVOUR OF THE ASSESSEE AND THESE PARTIES DEDUCTED TAX AT SOURCE WHILE MAKING PAYMENT TO VEND OR RENDERING SERVICES TO THESE PARTIES FOR THE WORK OF THE ASSESSEE. S NO. NATURE OF PAYMENT SECTION UNDER WHICH THE TAX WAS DEDUCTIBLE AMOUNT (RS) 1 GROUND RENT PAID TO VISA INDUSTRIES LTD. AND BALAJI COKE INDUSTRIES PVT. LTD. 194I 34,94,512/- 2 WHARFAGE CHARGES PAID TO VISA INDUSTRIES LTD. AND BALAJI COKE INDUSTRIES PVT. LTD. 194C 5,65,974 3 STEVEDORING CHARGES PAID TO VISA INDUSTRIES LTD. AND BALAJI COKE INDUSTRIES PVT. LTD. 194C 16,68,998/- 4 FREIGHT CHARGES PAID TO ANTAI BALAJI LTD. 194C 36,00,308/- 5 USANCE INTEREST PAID TO FAIR DEALS AND SUPPLIES LTD. 194C 5,75,177/- 6 HANDLING CHARGES TO BALAJI COKE INDUSTRIES P. LTD. 194C 26,83,992/- TOTAL 1,25,88,961/- ITA 4355/MUM/2011 18 IT WAS SUBMITTED THAT THE AO VIDE NOTICES U/S 142(1 ) OF THE ACT DATED 4 TH JULY, 2008 AND 4 TH SEPTEMBER 2008 (PAPER BOOK/PAGE 37-40) CALLED FOR THE DETAIL OF MAJOR EXPENSES WHICH WERE FILED BY THE ASSESSEE VID E REPLIES ON 11 TH NOVEMBER, 2008 AND 21 ST NOVEMBER, 2008 WHICH ARE PLACED IN THE PAPER BOOK /PAGE 42-47. IT WAS SUBMITTED THAT DETAIL EXAMINAT ION WERE MADE BY THE A.O. BEFORE CONCLUDING THAT THESE ARE MERELY REIMBURSEME NT OF EXPENSES HENCE NO TDS WAS REQUIRED TO BE DEDUCTED . IT WAS SUBMITTED THAT ALL THESE EXPENSES WERE ALLOWED BY THE AO IN SCRUTINY ASSESSMENT U/S 1 43(3) OF THE ACT. THE ASSESSEE RELIED UPON SEVERAL CASE LAWS TO CONTEND T HAT NO TDS WAS REQUIRED TO BE DEDUCTED ON MERELY REIMBURSEMENT OF EXPENSES. IT WAS ALSO SUBMITTED THAT THE AO WHILE REPLYING TO AUDIT OBJECTIONS HAS CATEGORICALLY STATED THAT NO TDS IS REQUIRED AS IT IS MERELY REIMBURSEMENT OF EX PENSES AND HENCE THE AO MADE AN INFORMED DECISION THAT KEEPING IN VIEW THAT THESE EXPENSES ARE MERELY REIMBURSEMENT IN NATURE, NO TDS WAS REQUIRED TO BE DEDUCTED. THE LETTER NO. ACIT/CIRCLE-8(3)/AUDIT OBJECTION/2009-10 DATED 19-08-2009 IS PLACED IN FILE. IT WAS SUBMITTED THAT WITH RESPECT TO USANCE INTEREST OF RS. 5,75,177/- , THE AO SOUGHT INITIATION OF RECTIFICAT ION PROCEEDINGS U/S 154 OF ACT IN HIS REPLY TO AUDIT OBJECTION. THUS, IT WAS SUBMITTED THAT THE ASSESSMENT ORDER DATED 23.12.2008 PASSED BY THE AO U/S 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. WITH RESPECT TO PAYMENT OF INTEREST ON UNSECURED LO ANS , IT WAS SUBMITTED THAT THE INTEREST PAYMENTS WERE MADE TO INDIVIDUALS , AND TDS WAS DEDUCTED CORRECTLY @ 10% , HENCE TDS WAS NOT REQUIRED TO B E DEDUCTED AT RATE OF 20%.IT WAS SUBMITTED THAT DETAILS WERE CALLED BY TH E AO VIDE NOTICES U/S 142(1) OF THE ACT DATED 04.07.2008 AND 4 TH SEPTEMBER 2008, WHICH DETAILS WERE DULY FURNISHED BY THE ASSESSEE VIDE LETTER DAT ED 11.11.2008 (PAGE 42- 47/PAPER BOOK). THE ISSUE WAS EXAMINED BY THE AO AN D THERE-AFTER ACCEPTED IN SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT. THUS, IT WAS SUBMITTED THAT THE ITA 4355/MUM/2011 19 ASSESSMENT ORDER DATED 23.12.2008 PASSED BY THE AO U/S 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. IT WAS SUBMITTED THAT ASSESSEE IS MANUFACTURING LAM COKE AND FURNACE IS INSTALLED IN THE FACTORY WHICH RUNS FOR 24 HOURS AT HIGH TEMPERATURE AND HENCE LABOUR ACCOMMODATION ARE PROVIDED WITHIN FACT ORY PREMISES KEEPING IN VIEW REQUIREMENT FOR FURNACE AS THE LABOURERS ARE REQUIRED TO CONTINUOUSLY WATCH THE PROCESS . IT WAS SUBMITTED THAT THERE AR E ONLY TEMPORARY ACCOMMODATION FOR THE WORKING OF LABOUR ONLY WHEREB Y FACILITY OF STAYING IS AVAILABLE TO ONLY 6 TO 8 WORKERS AT A TIME AND THA T TOO WITHOUT FAMILY.IT WAS SUBMITTED THAT IT WAS RIGHTLY CLASSIFIED AS FACTOR Y BUILDING AND DEPRECIATION CLAIMED ACCORDINGLY. WITH RESPECT TO THE DEPRECIATI ON, IT IS SUBMITTED THAT THE ASSESSEE HAS MADE COMPLETE DISCLOSURE IN THE RETURN OF INCOME FILED WITH THE REVENUE AND IN TAX-AUDIT REPORT. THE A.O. HAS EXAM INED AND ANALYSED ALL THE DETAILS SUBMITTED BY THE ASSESSEE VIDE REPLY DA TED 11/11/2008. THE A.O. HAS DISALLOWED THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE VIDE ASSESSMENT ORDERS DATED 23-12-2008 PASSED U/S 143(3 ) OF THE ACT . THE FACTORY RUNS FOR 24 HRS, HENCE, LABOUR IS REQUIRED THROUGHOUT 24 HRS. THE QUARTERS WERE NOT FOR FAMILY BUT ONLY FOR TEMPORARY ACCOMMODATION FOR WORKERS. SINCE IT IS PART OF FACTORY, THE ASSESSEE CORRECTLY CLASSIFIED IT AS FACTORY BUILDING. THE LD. COUNSEL RELIED UPON THE DECISION IN THE CASE OF CIT V. MOTOR INDUSTRIES CO. LTD. (1986) 158 ITR 734(KAR .), AND IN THE CASE OF CIT V. ENGINE VALVES LTD. (1980) 126 ITR 347 (MAD) AND IN THE CASE OF CIT V. BAJAJ AUTO LTD. (2009) 182 TAXMAN 163 (BOM). THUS IT IS SUBMITTED THAT THE CLAIM OF DEPRECIATION WAS EXAMINED BY THE A.O. IN DETAIL AND THEREAFTER ACCEPTED IN SCRUTINY ASSESSMENT, HENCE, IT CANNOT BE SAID THAT THE ORDER OF THE A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IT WAS SUBMITTED THAT SECTION 263 OF THE ACT WAS INVOKED BY LEARNED CIT B ECAUSE OF AUDIT OBJECTIONS. THE A.O. HAS CATEGORICALLY STATED THAT NO ERROR HAD TAKEN PLACE AND THE AUDIT OBJECTIONS WAS DISMISSED BY THE AO. THE REPLY VIDE LETTER NO ITA 4355/MUM/2011 20 ACIT/CIRCLE-8(3)/AUDIT OBJECTION/2009-10 DATED 19.0 8.2009 FROM THE A.O. TO CIT-8, MUMBAI IS PLACED IN FILE. WITH RESPECT TO THE BUNKER, IT IS SUBMITTED THAT T HE ASSESSSEE IS IN THE MANUFACTURE OF LAM COKE WHICH IS A CONTINUOUS PROCE SS AND IS ALSO POWER INTENSIVE PROCESS. BUNKER SHED IS CONSTRUCTED OVER THE FURNACE AND CORRECTLY CLASSIFIED AS PLANT. THE A.O. HAS EXAMINED THE CL AIM OF THE DEPRECIATION ON THE BUNKER SHED AS PLANT AND MACHINERY. IT WAS SU BMITTED THAT CLAIM OF THE ASSESSEE FOR ADDITIONAL DEPRECIATION WAS DISALLOWED BY THE AO. IT WAS SUBMITTED THAT THE ASSESSEE HAS IN TAX-AUDIT REPORT DULY DECLARED THE SAME, HENCE, A.O. HAS EXAMINED THE CLAIM AND ALLOWED THE DEPRECIATION WHICH CANNOT BE CALLED AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. IT WAS SUBMITTED THAT THE AO DISMISSED THE AUDIT OBJEC TION BY HOLDING THAT THE BUNKER SHEDS WERE BUILT BY THE ASSESSEE AS PART OF THE PLANT PROCESS SO THAT THE RAW MATERIAL DOES NOT SPREAD OUT. THE LD. COUN SEL ALSO RELIED ON THE DECISION IN THE CASE OF ADDL. CIT V. MADRAS CEMENT LTD. (1977) 110 ITR 281(MAD.). WITH RESPECT TO THE FACTORY ELECTRIFICATION, IT WA S SUBMITTED THAT THE A.O. HAS PROPERLY EXAMINED THE CLAIM IN DETAIL. IT IS SUBMI TTED THAT DETAILS WERE CALLED BY THE AO VIDE NOTICE DATED 04-07-2008 AND THE ASSE SSEE SUBMITTED DETAILS VIDE LETTER DATED 11 TH NOVEMBER, 2008. IT IS SUBMITTED THAT MANUFACTURIN G PROCESS IS POWER INTENSIVE REQUIRING HIGH VOLTAGE U SAGE AND EQUIPMENTS LIKE TRANSFORMERS, SWITCH GEARS ETC. ELECTRICAL WORKS C ARRIES OUT TO RUN THE PLANT EFFICIENTLY. IT WAS SUBMITTED THAT ELECTRICAL FITT INGS ATTACHED TO THE FURNITURE AND FITTINGS ARE TO BE INCLUDED UNDER THE HEAD FUR NITURE AND FIXTURE AND HENCE CORRECT CLASSIFICATION WAS MADE. THE A.O. HAS DISMISSED THE AUDIT OBJECTION BY STATING THAT THE LIGHT FITTINGS FOR FA CTORY ELECTRIFICATION ARE TO BE TREATED AS PLANT AND MACHINERY AS THE SAME ARE USED IN MULTIPLE SHIFTS AT THE PLANT. THE A.O. HAS DISMISSED THE AUDIT OBJECTION RELYING ON THE DECISION IN ITA 4355/MUM/2011 21 THE CASE OF GEETHA HOTELS PVT. LTD.(2002) 254 ITR 6 49 AND IN THE CASE OF MEWAR OIL & GENERAL MILL LTD. (2008)216 CTR 65(RAJ. ). THE LD. COUNSEL RELIED ON THE DECISION IN THE CASE OF CIT V. TRIVENI TISSU ES LTD. (1994) 206 ITR 92(CAL.) AND IN THE CASE OF CIT V. BHARAT RADIATORS P. LTD., (1999) 239 ITR 608(BOM.). THE LD. COUNSEL SUBMITTED THAT THE ORDE R OF THE A.O. CANNOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON LA RGE NUMBER OF CASE LAWS AS MANY AS 20 CASE LAWS TO SUPPORT HIS CONTENTIONS AS ARE PLACED IN PAPER BOOK- II AND III FILED WITH THE TRIBUNAL, PAGES 152-329. 6. THE LD. D.R. RELIED ON THE ORDER OF THE LD. CIT AND SUBMITTED THAT THE ASSESSMENT ORDER WAS RIGHTLY SET ASIDE BY LEARNED C IT AS THE SAME WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE LD. D.R. RELIED UPON THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CA SE OF VODAFONE SOUTH LTD. V. CIT (2015) 61 TAXMANN. COM 108(CHD. TRIB.) AND I TAT BANGALORE BENCH IN THE CASE OF SOUTHERN FERRO STEELS LTD. V. ITO, (201 6) 69 TAXMANN.COM 196(BANG. TRIB.). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS RELIED UPON. WE HAVE OBSERVED THAT THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE AC T BY THE A.O. ON 23 RD DECEMBER, 2008 AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. HAS MADE NECESSARY ENQUIRIES WITH RESPECT TO THE MA TTERS COVERED BY THE ORDER OF THE CIT U/S 263 OF THE ACT. TAX-AUDIT REP ORT WERE ALSO SUBMITTED BY THE ASSESSEE BEFORE THE AO AND IT CANNOT BE SAID TH AT THE A.O. HAS NOT GONE THROUGH THE TAX AUDIT REPORT AS BEING A STATUTORY D OCUMENT, THE AO IS BOUND TO GO THROUGH THE SAME BEFORE FRAMING ASSESSMENT . ALL THE DETAILS WERE DULY SUBMITTED BEFORE THE A.O. BY THE ASSESSEE AS SET OU T IN PRECEDING PARAS AND THE AO HAS TAKEN A DECISION BASED ON HIS JUDGMENT W HICH IS A PLAUSIBLE VIEW AND IN OUR CONSIDERED VIEW , FINDING OF THE AO WE RE NOT PERVERSE AS RATHER ITA 4355/MUM/2011 22 THE SAME WERE PLAUSIBLE VIEW AFTER CONSIDERING MATE RIAL ON RECORD . THE A.O. HAS ARRIVED AT THE DECISION AFTER EXAMINATION AND E NQUIRY HENCE IT CANNOT BE SAID THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE TO BE CO VERED UNDER THE MANDATE OF SECTION 263 OF THE ACT FOR REVISING THE CONCLUDED A SSESSMENT. IN OUR CONSIDERED VIEW, THE ASSESSMENT ORDER OF THE A.O. I S NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD . CIT HAS INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT BASED UPON THE AUDIT OBJECTION RAISED BY THE INTERNAL AUDIT PARTY TEAM. THE A.O. HAS CATEGO RICALLY REPLIED VIDE LETTER NO. ACIT/CIRCLE-8(3)/AUDIT OBJECTION / 2009-10 DATE D 19-08-2009 TO THE OBJECTIONS RAISED BY THE INTERNAL AUDIT PARTY OBJEC TIONS AND DISMISSED AUDIT OBJECTIONS BY REPLYING ON EACH AND EVERY ISSUE ON M ERIT WHICH CLEARLY REFECTS THAT THE AO HAS GONE THROUGH EVERY ISSUE ON MERITS AND APPLIED HIS MIND BEFORE PASSING ASSESSMENT ORDERS AND THE DECISIONS WAS TAKEN BY THE AO ON MERITS BEFORE PASSING ASSESSMENT ORDER. WITH RESPEC T TO NON-DEDUCTION OF TDS ON USANCE INTEREST , THE AO WHILE REPLYING TO A UDIT OBJECTION HAS SOUGHT PERMISSION TO INVOKE PROVISIONS OF SECTION 154 OF T HE ACT TO RECTIFY THE MISTAKE APPARENT FROM RECORD. THE ASSESSEE IN PR OCEEDINGS BEFORE LEARNED CIT U/S 263 OF THE ACT AND ALSO BEFORE US DULY DEMO NSTRATED THAT ALL THE FACTS WERE BEFORE THE AO AND THE AO HAS TAKEN A CONSCIOUS DECISIONS ON MERITS WHICH IS A PLAUSIBLE DECISIONS WHICH DOES NOT WARRA NT INTERFERENCE U/S 263 OF THE ACT TO REVISE CONCLUDED ASSESSMENT. WE HAVE ALS O CONSIDERED ALL THE REPLIES GIVEN BY THE ASSESSEE ON MERITS BEFORE AO A ND CIT AS WELL BEFORE US WHICH ARE SET OUT IN PRECEDING PARAS AND ARE NOT R EPEATED FOR THE SAKE OF BREVITY , AND WE FIND THAT THE ASSESSEE HAS CONVINC INGLY REPLIED ON ALL ISSUES ON MERITS AND THE VIEW TAKEN BY THE AO BEFORE PASSI NG ASSESSMENT ORDER WAS A PLAUSIBLE VIEW ON MERIT TAKEN AFTER DUE ENQUIRIES AND CANNOT BE CATEGORIZED AS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE SAME DOES NOT WARRANT INTERFERENCE U/S 263 OF THE ACT T O REVISE CONCLUDED ASSESSMENT, AS THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS SO FAR AS ITA 4355/MUM/2011 23 IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. WITH RESPECT TO THE USANCE INTEREST, THE PROCEEDINGS U/S 154 OF THE ACT WAS CONTEMPLATED BY THE AO VIDE REPLY TO AUDIT OBJECTION ON 19-08-2009, WHILE LD. CIT ISSUED SHOW CAUSE NOTICE ONLY ON 11.03.2011 U/S 263 OF THE ACT. THUS, THE RECORD OF PROPOSAL TO TAKE ACTION BY THE AO U/S 154 OF THE ACT WAS BEFORE THE CIT BEF ORE 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 INTEREST OF REVENUE AS THE WO RD RECORDS USED IN SECTION 263 OF THE ACT SHALL ALSO CONTEMPLATE INCLUDING THE RECORD PERTAINING TO PROCEEDINGS U/S 154 OF THE ACT ARISING SUBSEQUENTLY OUT OF THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT , AND SUCH RECORD WAS BEFORE LD CIT BEFORE HE ISSUED NOTICE U/S 263 OF THE ACT ON 1 1.03.2011. THUS, IN OUR CONSIDERED VIEW, THE ASSESSMENT ORDER DATED 23.12.2 008 PASSED BY THE A.O. U/S 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR IT I S PREJUDICIAL TO THE INTEREST OF REVENUE , AND THE LD. CIT HAS NOT CORRECTLY INVO KED 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. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 4355/MUM/2011 FOR THE ASSESSMENT YEAR 2006-07 IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DECEMBER , 2016. # $% &' 14-12-2016 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 14-12-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 4355/MUM/2011 24 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI A BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI