Sesa Goa Limited., Panaji V. Addl. Commissioner of Income tax, Range-1, Panaji

ITA 48/PAN/2012

• Counselvise Citation: 4824114 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 22-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI
• Assessee Lawyers: VIJAY GUPTA VP TAXATION
• Keywords: Gift; Business income; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Additional depreciation; Period of limitation; Difference of opinion; Competent authority; Scheme of amalgamation; Revised return; Reason to believe; Change of opinion
• Section: 92C; 143(3); 142(1); 10B; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 4 8 /PNJ/201 2 : (ASST. YEAR : 200 6 - 0 7 ) SESA GOA LIMITED SESA GHOR, 20, EDC COMPLEX, PATTO, PANAJI GOA 403 001. PAN : AACCS7101B (APPELLANT) VS. COMMISSIONER OF INCOME TAX, RANGE 1, PANAJI, GOA (RESPONDENT) ITA NO. 82 /PNJ/201 2 : (ASST. YEAR : 2007 - 08) SESA GOA LIMITED SESA GHOR, 20, EDC COMPLEX, PATTO, PANAJI GOA 403 001. PAN : AACCS7101B (APPELLANT) VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 1, PANAJI, GOA (RESPONDENT) APPELLANT BY : VINOD KUMAR BINDAL, CA SANJEEV BINDAL, CA & VIJAY GUPTA, VP (TAXATION) RESPONDENT BY : SMT. ASHA DESAI, DR DATE OF HEARING : 12/06/2014 DATE OF PRONOUNCEMENT : 18 /0 7 /2014 O R D E R PER P.K. BANSAL : 1. BOTH THESE APPEALS HA VE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT PASSED U/S 263. THE LD. AR, AT THE OUTSET, STATED THAT BOTH THESE APPEALS CAN BE DISPOSED OFF ON THE BASIS OF THE FACTS FOR THE A.Y 2006 - 07 AS IN BOTH THE YEARS THE CIT INVOKED JURISDICTION U/S 263 PRACTICALLY ON THE SAME BASIS AND THEREFORE HE PREFERRED TO ARGUE THE APPE AL ON THE BASIS OF THE FACTS FOR THE A.Y 2006 - 07 2 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) AND SUBMITTED THAT WHATEVER VIEW THIS TRIBUNAL MAY TAKE IN A.Y 2006 - 07, THE SAME MAY BE FOLLOWED IN THE A.Y 2007 - 08 ALSO. WE, THEREFORE, DECIDED TO DISPOSE OFF BOTH THE APPEALS ON THE BASIS OF THE FACTS REL ATING TO A.Y 2006 - 07. ALTHOUGH IN THE ORIGINAL APPEAL FOR THE A.Y 2006 - 07 FILED BY THE ASSESSEE, THE ASSESSEE HAS TAKEN 4 GROUNDS OF APPEAL THOSE GROUNDS WERE AMENDED BY THE ASSESSEE BY FILING AMENDED GROUNDS OF APPEAL VIDE LETTER DT. 13.8.2012 WHICH READ S AS UNDER : 1. THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER PASSED BY THE A.O., WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE, BECAUSE OF THE A.O. ALLOWING THE APPELLANTS CLAIM FOR DEDUCTION U/S. 10B OF THE ACT OF RS.8 ,59,67,641/ - , IN RESPECT OF ITS ULTRA FINES RECOVERY PLANT, WHICH UNIT ACCORDING TO THE CIT IS NOT ENGAGED IN THE EXTRACTION OF IRON ORE AND THAT NO SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED FOR THIS UNIT; THOUGH THE SAID DEDUCTION HAD BEEN ALLOWED B Y THE A.O. AFTER DULY APPLYING HIS MIND TO THE ASSESSEES CLAIM TO THE JUSTIFICATION PROVIDED THEREOF. 2. THE LEARNED CIT, BASED ON A PRELIMINARY REPORT OF THE SERIOUS FRAUD INVESTIGATION OFFICE (SFIO) OF THE GOVT. OF INDIA; ERRED IN HOLDING THAT THE ORDE R PASSED BY THE A.O., WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE BY REASON OF THE ALLEGED UNDER - INVOICING OF IRON ORE EXPORT BY THE APPELLANT TO THE EXTENT OF RS. 240 CRORE; IGNORING THE FACT THAT THE SAID ORDER WAS PASSED BY THE A.O. AFTER DULY SCRUTINISING THE RELEVANT TRANSACTIONS AND ALSO BY HAVING REGARDS TO THE ORDER OF THE TRANSFER PRICING OFFICER U/S. 92CA(3) OF THE ACT, THERETO. 3. THE LEARNED CIT, BASED ON A PRELIMINARY SFIO REPORT; ERRED IN HOLDING THAT THE ORDE R PASSED BY THE A.O., WAS ERRONEOUS IN SO FAR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE BY THE REASON OF THE ALLEGED OVER - INVOICING OF IMPORTS OF COAL BY THE APPELLANT, TO THE EXTENT OF RS. 6.05 CRORE; IGNORING THE FACT THAT THE SAID ORDER WAS PASS ED BY THE A.O., AFTER DULY SCRUTINISING OF THE RELEVANT TRANSACTIONS AND ALSO BY HAVING REGARDS TO THE ORDER OF THE TRANSFER PRICING OFFICER U/S. 92CA(3) OF THE ACT, THERETO. 4. THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER PASSED BY THE A.O WAS ERRONEO US IN SO FAR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE U/S. 263 OF THE ACT BY REASONS OF THE ALLEGED UNDER - INVOICING OF EXPORTS AND/OR OVER - INVOICING OF IMPORTS, SINCE THE SAID ALLEGATIONS ARE BASED ONLY ON PRELIMINARY FINDINGS OF THE SFIO, WHICH WERE NOT PART OF THE RECORDS RELATING TO ANY PROCEEDINGS UNDER THE ACT. 3 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 5. THE LEARNED CIT ERRED IN SETTING ASIDE THE ASSESSMENT ORDER PURPORTEDLY FOR THE REASON THAT THE COMMISSION AND SERVICE CHARGES PAID TO THE NON - RESIDENT SALE AGENTS IN EXCESS OF RS. 18,60,71,511/ - (AN AMOUNT ALREADY DISALLOWED BY THE A.O), IS ALSO DISALLOWABLE, OVERLOOKING THE FACT THAT THE SAID EXCESS COMMISSION AND SERVICE CHARGES WERE NOT PAID TO THE NON - RESIDENT SALE AGENTS BUT TO THE RESIDENT PARTIES IN INDIA. 6. THE LEARNED CIT ERRED IN SETTING ASIDE THE ASSESSMENT ORDER ON THE MATTER OF PAYMENT OF COMMISSION AND SERVICE CHARGES TO THE NON - RESIDENT SALES AGENTS, INSPITE OF THE FACTS THAT THE MATTER OF COMMISSION TO NON - RESIDENT SALES AGENTS HAS ALREADY BEEN CONSIDERED AND DECIDE D BY THE CIT(A) IN APPEAL, AND THAT THE SAID MATTER WAS BEYOND THE REVISIONARY JURISDICTION OF THE CIT U/S 263 OF THE ACT. 7. THE LEARNED CIT ERRED IN SETTING ASIDE THE ASSESSMENT ORDERS U/S. 263 OF THE ACT FOR THE ALLEGED REASON THAT THE ADDITIONAL DEPRE CIATION U/S. 32(1)(IIA) IN RESPECT OF PLANT AND MACHINERY ALLOWED BY THE A.O. WAS WITHOUT EXAMINING THE RELEVANT CLAIM AND WITHOUT THE APPLICATION OF MIND; BECAUSE IT IS APPARENT THAT THE CIT HIMSELF HAD NOT EXAMINED THE RECORDS OF THE PROCEEDINGS AS REQUI RED U/S. 263 OF THE ACT, AND HENCE THE CIT HAD NO REASON TO CONSIDER THAT THE ASSESSMENT ON THIS ACCOUNT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SIMILARLY, DURING THE A.Y 2007 - 08 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEA L : 1. THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER PASSED BY THE A.O., WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE, BECAUSE OF THE AO ALLOWING THE APPELLANTS CLAIM FOR DEDUCTION U/S. 10B OF THE ACT OF RS.11,30,81,824/ - , IN RESPECT OF ITS ULTRA FINES RECOVERY PLANT, WHICH UNIT ACCORDING TO THE CIT IS NOT ENGAGED IN THE EXTRACTION OF IRON ORE AND THAT NO SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR THIS UNIT; THOUGH THE SAID DEDUCTION HAD BEEN ALLOW ED BY THE A.O. FOR THE CURRENT YEAR AND ALSO FOR THE EARLIER YEARS, AFTER DULY APPLYING HIS MIND TO THE APPELLANTS CLAIM AND TO THE JUSTIFICATION PROVIDED THEREOF. 2. THE LEARNED CIT, BASED ON A PRELIMINARY REPORT OF THE SERIOUS FRAUD INVESTIGATION OFFICE (SFIO) OF THE GOVT. OF INDIA; ERRED IN HOLDING THAT THE ORDER PASSED BY THE A.O., WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE BY REASON OF THE ALLEGED UNDER - INVOICING OF IRON ORE EXPORT BY THE APPELLANT TO THE EXTENT OF R S. 240 CRORE; IGNORING THE FACT THAT THE SAID ORDER WAS PASSED BY THE A.O. AFTER DULY SCRUTINISING THE RELEVANT TRANSACTIONS AND ALSO BY HAVING REGARDS TO THE ORDER OF THE TRANSFER PRICING OFFICER U/S. 92CA(3) OF THE ACT, THERETO. 4 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 3. THE LEARNED CIT, BASE D ON A PRELIMINARY SFIO REPORT; ERRED IN HOLDING THAT THE ORDER PASSED BY THE A.O., WAS ERRONEOUS IN SO FAR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE BY THE REASON OF THE ALLEGED OVER - INVOICING OF IMPORTS OF COAL BY THE APPELLANT, TO THE EXTENT OF RS. 6.05 CRORE; IGNORING THE FACT THAT THE SAID ORDER WAS PASSED BY THE A.O., AFTER DULY SCRUTINIZING OF THE RELEVANT TRANSACTIONS AND ALSO BY HAVING REGARDS TO THE ORDER OF THE TRANSFER PRICING OFFICER U/S. 92CA(3) OF THE ACT, THERETO. 4. THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER PASSED BY THE A.O. WAS ERRONEOUS IN SO FAR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE, U/S. 263 OF THE ACT BY REASONS OF THE ALLEGED UNDER - INVOICING OF EXPORTS AND/OR OVER - INVOICING OF IMPORTS, SINCE THE SAID ALLEGAT IONS ARE BASED ONLY ON PRELIMINARY FINDINGS OF THE SFIO, WHICH WERE NOT PART OF THE RECORDS RELATING TO ANY PROCEEDINGS UNDER THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MINING, PRO DUCTION AND EXPORT OF IRON ORE, MANUFACTURE AND SALE OF METALLURGICAL COKE AND PIG IRON, SHIPPING AND SHIP BUILDING. IT FILED ITS INCOME TAX RETURN ON 30.11.2006 DECLARING AN INCOME OF RS.7,86,78,62,697/ - . THE RETURN WAS REVISED ON 29.3.2008 AT AN INCOME OF RS.7,78,18,95,056/ - . AFTER PROCESSING THE RETURN U/S 143(1) THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 23.12.2009 AFTER REFERRING THE CASE OF THE ASSESSEE U/S 92CA TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE IN RESPECT OF THE INTERNATIONAL TRANSA CTIONS. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.7,98,94,00,435/ - BY MAKING THE FOLLOWING DISALLOWANCE : A) COMMISSION PAID TO FOREIGN SALES AGENTS ABROAD AMOUNTING TO RS . 18,60,71,511/ - PURPORTEDLY FOR NON DEDUCTION OF TDS. B) EXPENDITURE AMOUNTI NG TO RS 2,12,84,086/ - BEING PART OF THE EXPENDITURE CLASSIFIED AS RESEARCH AND DEVELOPMENT IN TH E DIRECTORS REPORT, HOLDING THAT IT CANNOT BE ALLOWED AS EXPENDITURE TOWARDS SCIENTIFIC RESEARCH. C) DEPRECIATION AMOUNTING TO RS. 1,49 , 782/ - ON UPS HOLDI NG THAT UPS ARE NOT INTEGRAL PART OF THE COMPUTER SYSTEM. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) CONFIRMED THE DISALLOWANCE VIDE ORDER DT. 30.8.2013. AGAINST THE SAME, THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. WHILE THE APPEAL WAS PENDING BEFORE THE 5 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) TRIBUNAL, THE CIT ISSUED SHOW CAUSE NOTICE INVOKING THE PROVISIONS OF SEC. 263 DT. 14.2.2012 ON THE BASIS OF THE PROPOSAL SENT BY THE AO ON INFORMATION GATHERED DURING THE SURVEY CONDUCTED IN THE ASSESSEES CODLI MINES AND ITS BENEFICATION PLANT ON 23.12.2011 AND INFORMATION RECEIVED FROM SERIOUS FRAUD INVESTIGATION OFFICE, MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA. THE MAIN ALLEGATION LEVIED B Y CIT WERE AS UNDER : A) ON THE BASIS OF THE SURVEY CONDUCTED U/S 133A(1) ON 23.12.2011 THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S 10 B FOR THE ALLEGED REASONS THAT AT THE ULTRA FINES RECOVERY PLANT OF THE APPELLANT AT CODLI PROCESSES, ONLY THE WASTE GENERATED BY THE OTHER UNITS OF THE APPELLANT ARE PROCESSED AND THE SAID ACTIVITIES CANNOT BE CONSTRUED AS PRODUCTION SINCE THERE IS NO EXTRACTION OF IRON ORE WHEREAS THE SUPREME COURT IN THE APPELLANTS OWN CASE REPORTED IN 271 ITR 331 HAD HELD THAT PROD UCTION IN THE CONTEXT OF IRON ORE SHOULD INVOLVE BOTH ACTIVITIES I.E. EXTRACTION OF IRON ORE AND PROCESSING OF IRON ORE. FURTHER THE APPELLANT ALSO DOES NOT MAINTAIN SEPARATE BOOKS OF ACCOUNTS. B) ON THE BASIS OF THE REPORT OF THE SERIOUS FRAUD INVESTIGA TION OFFICE (SF IO ) GIVEN TO THE MINISTRY OF CORPORATE AFFAIRS(MCA) EXPRESSING ITS VIEWS ON THE INVESTIGATION CARRIED OUT UNDER THE COMPANIES ACT 1956, A COPY OF WHICH HAS UNDERSTANDABLY, BEEN OBTAINED BY THE CIT WHEREIN IT HAS BEEN ALLEGEDLY REPORTED THAT: I. THE APPELLANT HAD UNDER INVOICED THE EXPORTS TO THE EXTENT OF RS. 240 CRORES DURING THE YEAR. II. THE APPELLANT HAD OVER INVOICED THE IMPORT OF RIVERSIDE COKING COAL AMOUNTING TO RS. 6.05 CRORES, PURCHASED FROM BHP AND THE SAID BHP IS AN ASSOCIATED ENTERPRISE OF MITSUI & CO, JAPAN WHICH IS THE ULTIMATE HOLDING COMPANY OF THE APPELLANT. III. THE APPELLANT HAD PAID EXCESS COMMISSION ON SALES TO ITS ASSOCIATED ENTERPRISE MITSUI & CO, JAPAN WHICH IS THE ULTIMATE HOLDING COMPANY OF THE APPELLANT. OUT OF T HE TOTAL AMOUNT OF RS.7.92 CRORES C) THE APPELLANT WAS NOT ENTITLED FOR THE ADDITIONAL DEPRECIATION CLAIMED U/S 32(1) (I I A) OF THE ACT, OF RS. 2,31,81,727/ - IN RESPECT OF ITS MINING DIVISION AND RS.18,74,790/ - IN RESPECT OF ITS MET - COKE DIVISION, TOTALLY AMOUNTING TO RS.2,50,56,517 ON THE PLANT AND MACHINERY ACQUIRED DURING THE YEAR FOR THE ALLEGED REASON THAT PROCESSING OF DUMP OR WASTE MATERIAL IN THE CODLI PLANT AND MET COKE CANNOT BE HELD TO BE PRODUCTION. 6 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) IN REPLY THERETO, THE ASSESSEE VIDE ITS LETT ER DT. 1.3.2012, 15.3.2012 AND 29.3.2012 MADE DETAILED SUBMISSION CHALLENGING THE VALIDITY OF THE ISSUANCE OF THE SHOW CAUSE NOTICE. THE MAIN CONTENTION OF THE ASSESSEE WERE AS UNDER : 2.1.1. AS REGARDS DEDUCTION U/S. 10 - B OF THE ACT, GRANTED B Y THE ASSESSING OFFICER (HEREINAFTER REFE RRED TO AS THE A.O.) PLEASE NOTE THAT THE SAID DEDUCTION HAS BEEN ALLOWED BY THE A.O. AFTER APPLYING HIS MIND TO THE ASSESSEES CLAIMS AND THE JUSTIFICATION PROVIDED IN RESPECT OF THE SAID CLAIMS DURING THE YEAR. I N THIS CONNECTION, WE REQUEST YOU TO PLEASE REFER TO A.O.S LETTER D ATED 16.9.2009 ISSUED IN RELATION TO PROCEEDINGS U/S 143(3) OF THE ACT, WHEREIN, IN ITEM 11 TH EREOF, THE A.O. HAD CALLED FOR THE JUSTIFICATION OF THE SAID CLAIM, WHICH THE ASSESSEE HAD GIV EN VIDE ANNEXURE 12 TO ITS LETTER DATED 28.10.2009 (A COPY OF THE AFORESAID LETTER DATED 16.9.2009 F ROM THE A.O. AND ALSO COPY OF THE ANNEXURE 12 TO THE ASSESSEES AFORESAID LETTER DATED. 28.10.2009, ARE ATTACHED HEREWITH AS ANNEXURE 1 AND 2). FURTHER DURI NG THE ASSESSMENT PROCEEDINGS ON 13.11.2009 THE A.O. RAISED THE FOLLOWING QUERIES IN RESPECT OF THE ASSESSES 10 B CLAIM WHICH WERE REPLIES VIDE ASSESSES LETTER DATED 17.11.2009 COPY ATTACHED AS ANNEXURE 3. A) WHAT IS THE TREATMENT GIVEN TO TAILINGS? WHEN IT IS DISPOSED AND HOW IT IS DISPOSED? IS THERE ANY VALUE ATTACHED? B) DETAILED COMPUTATION OF DEDUCTION U/S 10 B C) DETAILS OF ULTRA FINES PRODUCED MONTH WISE. D) DETAIL OF QUANTITY EXPORTED AND SALES PROCEEDS BROUGHT IN INDIA IN CONVERTIBLE EXCHANGE. VID E LETTER NO. F.NO. SCT/ADDL. CIT / R - 1 / PNJ/09 - 10 DATED 02.12.2009, THE A.O CALLED FOR THE FOLLOWING FURTHER INFORMATION/ DETAILS IN RELATION TO DEDUCTION CLAIM E D U/S 10 B OF THE IT. ACT WHICH WAS PROVIDED VIDE ASSESSES LETTER DATE D 07.12.2009 (A COPY OF THE A FORESAID LETTER DATED 02.12.2009 FROM THE A. O . AND ALSO COPY OF THE ASSESSEES AFORESAID LETTER DATED 07.12.2009, ARE ATTACHED HEREWITH AS ANNEXURE 4 AND 5): --- A) WHETHER THE PROJECT FOR WHICH DEDUCTION U/S 10 B IS BEING CLAIMED HAS BEEN APPROVED BY THE MINISTRY AND IF SO, THE COMPLETE CORRESPONDENCE IN THIS REGARD? B) WHAT WAS THE ASSESSEES APPLICATION MADE TO THE MINISTRY IN THIS REGARD? C) H OW IS THE UNDERTAKING INVOLVED IN THE M ANUFACTURING OF FINES DEFINED? D) WHETHER SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED? E) IS THE PROFIT SHOW ON ACCOUNT OF THE ACTIVITY FOR WHICH DEDUCTION HAS BEEN CLAIMED U/S 10 B COMMENSURATE WITH THE PROFIT SHOWN BY OTHER ENTITIES ENGAGED IN SAME LINE OF BUSINESS. 7 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) F) RATIO OF EXPENDITURE TO THE TURNOVER ALONG WITH THE V OUCHERS FOR THE EXPENSES, THE MANNER ON WHICH VOUCHERS ARE MAINTAINED BETWEEN THE PARENT COMPANY AND THE UNDERTAKING. G) WHETHER ANY AGREEMENT EXISTS FOR EXPENDITURE INCURRED ON LABOUR/MINING OR TRANSPORT AND IF SO, COPIES OF THE AGREEMENTS MAY BE PRODUCED . H) PROOF THAT GOODS WERE ACTUALLY TRANSPORTED MAY ALSO BE PRODUCED. I) DETAIL OF COST OF MACHINERY INVOLVED IN THE PROCESS MAY ALSO BE GIVEN. J) DETAILED NOTE ON THE SPECIAL PROCESS INVOLVED AND THE MANNER IN WHICH ULTRA FINES PRODUCED MAY BE GIVEN. 2.1.2 IN VIEW OF THE FOREGOING FACTUAL POSITIONS THERE WAS NO ERROR IN THE ASSESSMENT ORDER DATED 23.12.2009. THEREFORE, THE ALLEGED ACTION U/S 263 IS BAD IN LAW. SINCE THE A O HAS ALLOWED THE DEDUCTION AFTER THOROUGH EXAMINATION OF THE RELEVANT FACTS AND L EGAL POSITION IN RELATION TO ASSESSEES CLAIM U/S 10 B WITH RESPECT TO THE UFR UNIT. 2.2. THE NEXT THREE ISSUES ON WHICH THE SAID NOTICE U/S. 263 OF THE ACT HAS BEEN ISSUED BY RELYING ON THE REPORT OF THE SERIOUS FRAUDS INVEST I GATION OFFICE (SF IO ). 2.2.1 IN THIS CONNECTION, THE ASSESSEE WOULD LIKE TO STATE THAT THE SAID NOT IC E U/S. 263 HAS BEEN ISSUED BY RELYING ON THE SF IO REPORT. JUST FOR READY REFERENCE, IT IS WORTH MENTION HERE THAT THE BASIS FOR THE SAID REPORT WAS A COMPLAINT BY ONE OF THE DISGRUNTLE D MINORITY SHAREHOLDER OF THE COMPANY, UNDER THE COMPANY LAW. 2.2.2 THE CIT APPEARS TO HAVE CONSIDERED THE ORDER PASSED BY THE A. O . U/S. 143(3) AS ERRONEOUS IS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, MERELY ON THE BASIS OF THE REPORT, WITHOUT EXAMINING THE RECORD IF ANY OF THE PROCEEDINGS UNDER THE ACT. AS YOUR HONOUR WOULD APPRECIATE, THE OBSERVATIONS ARE SUBJECT TO THE INVESTIGATION PROCEEDINGS INITIATED BY THE MINISTRY OF CORPORATE AFFAIRS. THEY ARE PREMATURE AT THIS STAGE SINCE TH E PROCEEDINGS ARE YET TO BE IN A JUDICIAL FORUM (COMPANY LAW BOARD) AND THE FINDINGS IN THE SF IO REPORT ARE YET TO BE CON FIRMED BY GIVING OPPORTUNITY TO THE COMPANY. MERELY ON THE BASIS OF INVESTIGATION FINDINGS, WHICH HAVE NOT RESULTED IN ANY ORDER AGAINS T THE COMPANY, AN ASSESSMENT WHICH HAS BEEN COMPLETED U/S 143(3) OF THE ACT, CANNOT BECOME ERRONEOUS. 2.3 NOTWITHSTANDING AND WITHOUT PREJUDICE TO ABOVE, WE ALSO WISH TO PLACE ON RECORD THAT THE A.O HAS UNDERTAKEN THOROUGH EXAMINATION OF ALL THESE ISSUES AS EXPLAINED BELOW: - 2.3.1 EXPORT SALES : 8 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 2 . 3 .1 .1 A O HAD UNDERTAKEN THOROUGH EXAMINATION OF THE SALES. IN THIS CONNECTION, WE SEEK YOUR KI ND ATTENTION TO THE ABOVE A. O .S LETTER DATED 16.9.2009, WHEREIN IN ITEM 4 THEREOF, THE A. O . HAD CAL LED FOR THE DETAILS OF SALE OF IRON ORE, WHICH WERE DULY PROVIDED VIDE ANNEXURE 9 TO OUR ABOVE LETTER DATED 28.10.2009 A COPY OF THE ANNEXURE 8 TO THE AFORESAID LETTER, IS ATTACHED H EREWITH AS ANNEXURE 6) 2.3.2 COMMISSION TO FOREIGN SALES A G ENTS 2.3.2.1 THE MATTER RELATING TO PAYMENT OF COMMISSION BY THE ASSESSEE TO ITS ASSOCIATED ENTERPISE I.E. MITSUI & CO. LTD., JAPAN HAS BEEN THOROUGHLY EXAMINED BY THE TRANSFER PRICING OFFICER, BANGALORE, PLEASE REFER TO LETTERS NO. TP - 90/TPO - 99 / 08 - 9 DATED 20.11.2008, ISSUED BY TPO - CALLING FOR VARIOUS DETAILS IN THIS CONNECTION, RESPONDED BY THE ASSESSEE VIDE ITS LETTER DATED 09.12.2008 SUBMITTING THE DETAILS CALLED FOR BY TPO, THE ORDER U/S 92CA OF THE ACT DATED 27.10.2009 WHEREIN THE SAID OFFICER HAS CONCLUDED THE DOC UM ENTS CALLED FOR HAVE BEEN FILED . AFTER CAREFULLY CONSIDERING THE MATERIAL ON RECORD, IT IS CONCLUDED THAT NO ADJUSTMENT IS REQUIRED U/S 92CA READ WITH SECTION 92C TO THE ARMS LENGTH PRICE DETERMINED BY THE TAXPAYER, IN RESPECT OF THE INTERNATIONAL TR ANSACTIONS ENTERED INTO WITH ITS ASSOCIATED ENTERPRISES DURING THE YEAR. (A COPY OF THE AFORESAID LETTERS DATED 20.11.2008, 09.12.2008, AND THE ORDER DATED 27.10.20090 ARE ATTACHED HEREWITH AS ANNEXURE 7,8,9). 2.3.2.2 FURTHER THE ASSESSEE ALSO REQUESTS T HE CIT TO PLEASE NOTE THAT THE ORDER OF THE A.O. WHICH HAS BEEN SOUGHT TO BE REVISED, HAD BEEN THE SUBJECT MATTER OF APPEAL BEFORE THE CIT (A), AND THE CIT (A) HAS ALREADY CONSIDERED AND DECIDED THE MATTER OF COMMISSION PAYMENT TO THE NON - RES IDENT AGENTS I N THE SAID APPEAL. HE N CE THE ASSESSEE SUBMITS THAT THE SAID ORDER OF THE A .O DATED 23.12.2009 HAS ALREADY BEEN MERGED WITH THE ORDER OF THE CIT (A) DATED 30.08.2011, AND HENCE THAT CITS NOTICE SEEKING REVISION U/S 263 OF THE ACT, OF THE SAID ORDER OF THE A.O., ON THE MATTER OF COMMISSION PAYMENT TO NON - RESID E NT SALES AGENTS, IS BEYOND THE AUTHORITY OF LAW. SINCE IT IS WELL SETTLED LAW THAT CIT CANNOT EXERCISE ITS POWER U/S 263 IN A MATTER WHICH HAS BEEN ADJUDICATED AND EXAMINED BY THE COMMISSIONER (APPEAL S). 2.3.3. COAL PURCHASE THE A.O. HAS THOROUGHLY EXAMINED ALL THE ASPECTS RELATING TO PURCHASE OF IMPORTED COAL BY THE ASSESSE AS IT IS EVIDENT FROM THE RECORDS. 3. IN VIEW OF ALL THE REASONS STATED ABOVE, IT MAY PLEASE BE APPRECIATED THE PROPOSED ACTION UNDER SECTION 263 IS TOTALLY UNWARRANTED AND BAD IN LAW. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING CASES: - 9 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) (I) COMMISSIONER OF INCOME - TAX VS RATLAM COAL ASH COMPANY 171 ITR 141 (MADHYA PRADESH - HC) 1987 (II) CIT VS MEHROTRA BROTHERS 270 ITR 157 (MADHYA PRADESH - HC) 2003 (III) RAYON SILK MILLS VS CIT 221 ITR 155 (GUJARAT - HC) 1995 (IV) JEEWANLAL (1929) LTD VS AD CIT 108 ITR 407 (CALCUTTA - HC) 1975 (V) COMMISSIONER OF INCOME - TAX VS SHARMA MOTOR SERVICE 235 ITR 89 (MADHYA PRADES H - HC) 1997 IN ALL ABOVE CASES, IT HAS BEEN SETTLED BY THE VARIOUS COURTS THAT IN A SITUATION WHERE THE RELEVANT DEDUCTION/ALLOWANCE IS EXAMINED/ALLOWED BY THE ASSESSING OFFICER AF T ER DUE SCRUTINY & EXAMINATION OF RELEVANT FACTS AND VETTING THE LEGAL POSITION IT IS NOT PROPER FOR THE CIT TO INVOKE ITS POWER UNDER SECTION 263. FURTHER, IT IS ALSO HELD THAT WHERE AN ISSUE IS ADJUDICATED BY THE COMMISSIONER (APPEAL), THERE IS NO POWER GRANTED UNDER SECTION 263 TO CIT TO REVISE AN ORDER PASSED BY THE ASSES SING OFFICER. 4. THEREFORE, WE TRUST THAT BASED UPON ABOVE LEGAL SUBMISSIONS, YOU WOULD BE KIND ENOUGH TO DROP THE INTENDED PROCEEDINGS. SUBSEQUENTLY, DRAWING THE ATTENTION OF CIT IN RESPECT OF THE SFIO REPORT , THE ASSESSEE VIDE LETTER DT. 15.3.2012 SUB MITTED THAT THE RECENT NEWS APPEARING IN THE MAJOR NEWS CHANNEL AND WEBSITE OF THE LEADING NEWSPAPER ON 5.3.2012/6.3.2012 REPORTED THAT THE SFIO HAS SUBMITTED THEIR SECOND REPORT TO THE MINISTRY AND BASED ON THE INFORMATION SUBMITTED TO IT , AFTER RELEASE O F THE FIRST REPORT , IT HAS COME TO THE CONCLUSION THAT THE PERCENTAGE OF THE COMMISSION AND RATES OF INVOICING IN IMPORT OF COKING COAL AND EXPORT OF IRON ORE FOR SALE OF IRON ORE BY SGL WERE NEARLY AT THE SAME LEVEL S ACCORDING TO THE PREVAILING MARKET TRE ND DURING THE PERIOD FROM 2001 - 02 UPT O 2006 - 07. COPY OF THE NOTES WAS FILED BEFORE THE CIT. IT WAS ALSO CONTENDED RELYING ON THE DECISION OF MALABAR INDUSTRIAL CO. LTD. VS. CIT , 243 ITR 83 (SC) THAT THE ORDER PASSED BY THE AO WAS NOT ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SUBMISSIONS WERE ALSO MADE ON MERIT THAT THE ASSESSEES UFR PLANT IS VERY MUCH ENGAGED IN MANUFACTURE AND PRODUCTION. VIDE LETTER DT. 29.3.2012 IT WAS SUBMITTED THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRE CIATION IN RESPECT OF PLANT AND MACHINERY ACQUIRED AND INSTALLED DURING THE YEAR IN THE BUSINESS OF 10 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) MANUFACTURE OR PRODUCTION OF IRON ORE AND METALLURGICAL COKE. IN ALL, TOTAL ADDITIONAL DEPRECIATION OF RS.2,50,56,517/ - WAS CLAIMED. THE ACTIVITIES OF THE COMPANY WERE VERY MUCH PRODUCTION OF ARTICLE OR THING. RELIANCE WAS PLACED ON THE PROVISIONS OF SEC. 2(29BA) INTRODUCED IN THE ACT W.E.F. 1.4.2009 AND ATTENTION WAS DRAWN TO THE HON'BLE SUPREME COURTS DECISION IN ASSESSEES OWN CASE REPORTED IN 271 ITR 331 IN WHICH IT WAS HELD THAT THE EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO PRODUCTION IN RESPECT OF THE CLAIM OF INVESTMENT ALLOWANCE. THUS, IT WAS CONTENDED THAT THE PROCEEDINGS INITIATED U/S 263 BE DROPPED. CIT DID NOT AGREE WITH THE SUBMISSION S OF THE ASSESSEE BUT SET ASIDE THE ASSESSMENT AND DIRECTED THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH. THE RESPECTIVE FINDING IN RESPECT OF EACH ISSUE OF THE CIT ARE RE - PRODUCED AS UNDER : IN RESPECT OF DEDUCTION U/S 10B : I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND ALSO THE 263 PROPOSAL ON THIS ISSUE. CONSEQUENT TO SURVEY, IT HAS BEEN FOUND THAT THE BENEFICATION PLANT IN CODLI MINE DIVISION (ULTRA FINES RECOVERY PLANT AT CODLI) PROCESSES THE WASTE GENERATED BY O THER UNITS TO RETRIEVE IRON ORE. THIS UNIT IS NOT ENGAGED IN THE EXTRACTION OF IRON ORE. NO SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED FOR THIS UNIT, AS WELL AS FOR OTHER NON 10B UNITS. THE SUPREME COURT IN THE ASSESSEES CASE REPORTED IN 271 ITR 33 1 HAS INTERPRETED THE CONCEPT OF PRODUCTION IN THE CONTEXT OF SECTION 32A. THE HON'BLE COURT HAS HELD THAT THE EXTRACTION OF IRON ORE AND PROCESSING OF IRON ORE TOGETHER CONSTITUTE PRODUCTION. IN THE ASSESSEES CASE, IT IS NOT DIRECTLY ENGAGED IN THE E XTRACTION OF IRON ORE AS REVEALED FROM THE SURVEY. THEREFORE THIS UNIT IS NOT ENTITLED FOR DEDUCTION U/S 10B. SINCE THE AO HAS FAILED TO INVESTIGATE THE FACTS BEFORE MAKING ASSESSMENT AND ALLOWED DEDUCTION WITHOUT PROPER ENQUIRY AND APPLICATION OF MIND, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE DELHI ITAT IN AMAN PALACE VS. ITO 33 ITD 697, HAS HELD THAT IF ASSESSMENT WAS COMPLETED WITHOUT PROPER ENQUIRIES WHICH THE FACTS OF THE CASE PROVOKED, THE ASSESSMENT WAS RIGHTLY TREATE D AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IF THE ASSESSING OFFICER FAILS TO INVESTIGATE INTO THE FACTS BEFORE MAKING THE ASSESSMENT, THE ONLY CONCLUSION WOULD BE THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, CIT WAS HELD TO BE RIGHT IN EXERCISING HIS POWERS U/S 263 AND SETTING ASIDE THE ASSESSMENT ORDER SATYA PRASAD SEN VS. ITO 16 ITD 160 (CAL). BESIDES, IN THE CASE OF AMBIKA AGRO SUPPLIERS VS. ITO 95 ITD 326 (PUNE), THE ITAT HAS HELD THAT 11 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) ACCEPTANCE OF EXPLANATION OF THE ASSESSEE WITHOUT ANY ENQUIRY RENDERED THE ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ITAT, BOMBAY IN THE CASE VINAY D VAL I A VS. A D DL. ITO 27 ITD 109 HAS HELD THAT THE FAIL URE OF THE AO TO MAKE NECESSARY ENQUIRY ITSELF WAS SUFFICIENT GROUND FOR COMMISSIONER TO ASSUME JURISDICTION U/S. 263. THE SC IN THE CASE OF MALABAR INDUSTRIES CO. VS. CIT 243 ITR 83 HAS HELD THAT CIT CAN PASS ORDER U/S 263 EVEN ON DEBATABLE ISSUES. HENC E, ASSESSEES CONTENTIONS CANNOT BE ACCEPTED. THEREFORE THE ASSESSMENT ORDER IS SET ASIDE ON THIS ISSUE WITH THE DIRECTION TO THE AO TO CONSIDER THE DISALLOWANCE U/S 10B RELATABLE TO THE ASSESSEES CODLI PLANT (UFR) AFTER CONFRONTING THE ASSESSEE. IN RE SPECT OF UNDER - INVOICING OF EXPORT OF IRON ORE AND OVER - INVOICING OF IMPORT OF COKING COAL : I HAVE CONSIDERED THE AOS PROPOSAL U/S 263, SFIOS REPORT AND ASSESSEES SUBMISSIONS. THE SFIO IN ITS INVESTIGATION REPORT DATED 29.04.2011 HAS CLEARLY INDICATED THAT THE COMPANY, SESA GOA LTD HAS DONE A NUMBER OF IRREGULARITIES IN ITS EXPORTS OF IRON ORE AND IMPORT OF COKE COAL BY WAY OF UNDER - INVOICING AND OVER - INVOICING. T HE ASSESSEES REPRESENTATIVE HAS REFERED TO VARIOUS PRESS REPORTS REGARDING A SECOND REPORT FURNISHED BY SFIO TO THE MINISTRY OF CORPORATE AFFAIRS. THE SECOND REPORT HAS NEITHER BEEN RECEIVED BY THIS OFFICE NOR BY THE ASSESSEE COMPANY. THEREFORE, TILL A COPY OF THE REPORT IS OFFICIALLY RECEIVED, THE ASSESSEES SUBMISSIONS FOR DROPPING OF THE PROCEEDINGS U/S 263 ON THIS TWO ISSUES CANNOT BE ACCEPTED AT THIS STAGE. ON THE BASIS OF THE OFFICIAL REPORT RECEIVED FROM SFIO TILL DATE, THE IRREGULARITIES COMMITT ED BY THE COMPANY BY WAY OF UNDER - INVOICING AND OVER - INVOICING CANNOT BE SAID TO BE UNDONE AND ACCEPTED BY SFIO. SINCE THE FAILURE OF THE AO TO INQUIRE INTO OVER - INVOICING OF IMPORT OF COKE COAL AND UNDER - INVOICING OF THE EXPORTS OF THE IRON ORE HAD CAUSE D LOSS TO THE REVENUE AS REVEALED FROM THE REPORT OF SFIO, THE ASSESSMENT ORDER IS FOUND TO BE PRIMA - FACIE ERRONEOUS AND PREJUDICIAL TO THE INTEREST TO THE REVENUE. THEREFORE, FOLLOWING THE VARIOUS DECISIONS QUOTED IN EARLIER ISSUE, THE ASSESSMENT ORDER U /S 143(3) DATED 23.12.2009 IS SET ASIDE ON THE ABOVE ISSUES TO THE EFFECT THAT THE AO SHOULD VERIFY THESE ISSUES DURING THE FRESH ASSESSMENT. THE AO SHOULD ALSO CONSIDER ASSESSEES SUBMISSION IN THIS REGARD ON RECEIPT OF THE SECOND REPORT OF SFIO WITH REG ARD TO THE UNDER - INVOICING OF EXPORTS AND OVER - INVOICING OF IMPORTS. ACCORDINGLY, THE AO IS DIRECTED TO MAKE FRESH ASSESSMENT ON THE ABOVE ISSUES. IN RESPECT OF EXCESS PAYMENT OF COMMISSION TO ULTIMATE HOLDING COMPANY AND ITS RELATED COMPANIES : I HAVE GONE THROUGH THE ASSESSMENT ORDER, ASSESSEES SUBMISSION ETC. IT IS SEEN THAT THE AO HAS DISALLOWED COMMISSION OF RS.18,60,71,511 U/S 40(A)(IA) FOR NON - DEDUCTION OF TAX AT SOURCE FOR PAYMENT OF COMMISSION TO THE NON - RESIDENCE 12 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) AGENTS. THE SAID DIS ALLOWANCE OF COMMISSION WAS SUBJECT MATTER OF APPEAL BEFORE CIT (APPEAL) AND FOR THE DETAILED REASONS GIVEN, THE SAID DISALLOWANCE HAS BEEN CONFIRMED BY THE CIT (APPEAL) IN THE APPELLATE ORDER. SINCE, AOS ORDERED HAS MERGED WITH THAT OF CIT (APPEAL), THE 263 PROCEEDINGS ARE DROPPED RELATING TO COMMISSION PAYMENT AMOUNT OF RS.18,60,71,511. HOWEVER, IT IS SEEN THAT THE COMPANY HAS DEBITED COMMISSION AND SERVICE CHARGES OF RS. 20.51 CRORES IN THE PROFIT AND LOSS ACCOUNT. AS POINTED OUT BY THE CIT (APPEAL), THE ASSESSEE IS PAYING COMMISSION TO NON - RESIDENCE AGENTS YEAR AFTER YEAR AND SINCE, THE CUSTOMERS ARE ALMOST THE SAME, THERE IS NO BUSINESS REASON TO PAY COMMISSION TO THE AGENTS. THEREFORE THE BALANCE COMMISSION NEEDS TO BE DISALLOWED BY THE AO. THERE FORE, THE ASSESSMENT ORDER ON THIS POINT IS SET ASIDE TO THE LIMITED EXTENT TO DISALLOW THE BALANCE AMOUNT OF COMMISSION DEBITED IN THE PROFIT AND LOSS ACCOUNT. THE AO IS HEREBY DIRECTED TO CALL FOR ASSESSEES EXPLANATION, OFFER OPPORTUNITY TO THE ASSESSE E AND THEN TAKE A PRAGMATIC DECISION REGARDING THE DISALLOWABILITY OF BALANCE COMMISSION DEBITED IN THE PROFIT AND LOSS ACCOUNT DURING THE FRESH ASSESSMENT. IN RESPECT OF ADDITIONAL DEPRECIATION : I HAVE CONSIDERED THE ASSESSEES SUBMISSION. AS DISCUSSED EARLIER, THE PROCESSING OF DUMP OR WASTE MATERIAL IN THE CODLI PLANT CANNOT BE HELD TO BE PRODUCTION AND HENCE THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR DEDUCTION U/S 10B. FOR THE SIMILAR REASONS, THE CLAIM OF ADDITIONAL DEPRECIA TION CANNOT BE ALLOWED IN RESPECT OF PLANT AND MACHINERIES PURCHASED AND USED IN CODLI PLANT. SINCE THE AO HAS NOT EXAMINED THESE CLAIMS IN SCRUTINY ASSESSMENT BUT ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION WITHOUT APPLICATION OF MIND, THE ISSUE IS ALSO SET ASIDE FOR FRESH CONSIDERATION BY THE AO. THE AO IS DIRECTED TO EXAMINE THE CLAIM OF ADDITIONAL DEPRECIATION IN RESPECT OF BOTH CODLI PLANT AND MET - COKE DIVISION AND CONSIDER THE ALLOWABILITY OF THE CLAIM OF DEDUCTION IN ACCORDANCE WITH LAW. 3. THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT IN RESPECT OF EACH AND EVERY ISSUE THE AO MADE PROPER INQUIRY. THE ASSESSEE IN THIS CASE FILED A REVISED RETURN DECLARING TOTAL INCOME OF RS. 778.18 CRORES BY CLAIMING EXEMPTION U/S 10B IN RESPECT OF ITS EOU UNIT. THUS, IT IS APPARENT THAT THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10B WITHSTOOD SCRUTINY OF THE AO IN THE ASSESSMENT MADE U/S 143(3). THE AO MADE VARIOUS QUERIES DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR WHICH THE ASSESSEE MADE SUBMI SSIONS. IN THIS REGARD, ATTENTION WAS DRAWN TOWARDS THE FOLLOWING LETTERS : 13 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) SL. NO. DOCUMENT ITEM/PARA NO. PAGE NO. OF PB 1 LETTER REF. NO. F.NO. 15 - SCR/ADDL. CIT/R - 1/PNJ/09 - 10 DATED 16.09.09 ISSUED BY ACIT, RANGE - 1, PANAJI ITEM 11 17 - 19 2 LETTER DATED 28.10.09 SUBMITTED BY ASSESSEE IN RESPONSE TO ABOVE LETTER OF ACIT PARA 11 20 - 26 3 ANNEXURE 12 TO THE LETTER DATED 28.10.09 SUBMITTED BY THE ASSESSEE - 27 - 28 4 LETTER DATED 17.11.09 SUBMITTED BY ASSESSEE IN RESPONSE TO QUERIES RAISED BY ACIT DURING PER SONAL HEARING ON 13.11.09 ALONG WITH VARIOUS ANNEXURES PARA 2 29 - 30 5 ANNEXURES 1 & 2 APPENDED WITH LETTER DATED 17.11.09 SUBMITTED BY THE ASSESSEE - 31 - 32 6 LETTER REF. NO. F.NO.SCR/ADDL. CIT/R - 1/PNJ/09 - 10 DATED 02.12.09 ISSUED BY ACIT, RANGE - 1, PANAJI PARA 1 35 - 36 7 LETTER DATED 07.12.09 SUBMITTED BY ASSESSEE IN RESPONSE TO ABOVE LETTER OF ACIT PARA 1 38 - 39 OUR ATTENTION WAS ALSO DRAWN TOWARDS THE ANNEXURE ATTACHED TO ORDER SHEET DT. 13.11.2009 AND IT WAS POINTED OUT THAT THE AO HAS SPECIFICAL LY ASKED FOR THE TREATMENT GIVEN TO THE TAILINGS. HE ALSO ASKED FOR DETAILS OF COMPUTATION OF DEDUCTION CLAIMED U/S 10B, DETAILS OF QUANTITY OF TOTAL ULTRA FINES PRODUCED AND QUANTITY EXPORTED IN THE ULTRA FINES RECOVERY PLANT AT CODLI MINES. THUS, IT WA S CONTENDED THAT THE AO HAS DULY EXAMINED THE CLAIM OF THE ASSESSEE MADE U/S 10B. INADEQUACY OF THE INQUIRY MADE BY THE AO IN THE OPINION OF CIT AUTHORISES THE CIT TO RESORT TO SEC. 263. IT MUST BE APPRECIATED THAT INADEQUACY OF THE INQUIRY AND NO INQUIR Y MADE ALTOGETHER ARE DIFFERENT. THE CIT CANNOT EXERCISE HIS POWER U/S 263 WHERE THERE IS INADEQUACY OF INQUIRY. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. VODAFONE ESSA SOUTH LTD., 212 TAXMANN 184. ATTENTION WAS ALSO DRAWN TOWARDS THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. , 332 ITR 167 FOR THE PROPOSITION OF LAW THAT IF THERE IS SOME INQUIRY BY THE AO IN THE ORIGINAL PROCEEDINGS EVEN IF INADEQUATE, THA T CANNOT CLOTHE CIT WITH THE JURISDICTION U/S 263 MERELY BECAUSE HE HAS FORMED 14 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) ANOTHER OPINION. THE AO HAS EXAMINED THE CLAIM OF THE ASSESSEE AND ASKED FOR THE DETAILS. THEREFORE, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AO IN RESPECT OF CLAIM OF D EDUCTION U/S 10B IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. RELIANCE WAS ALSO PLACED IN THIS REGARD ON THE FOLLOWING DECISIONS : SL. NO. TITLE CITATION FORUM PAGE NOS. D1 CIT VS. VODAFONE ESSAR SOUTH LTD. (2013) 212 TAXMAN 184 DELHI HC 66 - 69 D2 ANIL SHAH VS. ACIT (2007) 162 TAXMAN 39 MUM TRIB D3 INFOSYS TECHNOLOGIES LTD. V. JCIT (2006) 287 ITR 211 BANG ITAT 70 - 90 D4 HARYANA COACH BODY BUILDERS VS ITO, WARD - I, ROHTAK 10 SOT 736 ITAT DELHI 91 - 100 D5 NABHA INVESTMENTS PVT. LTD. VS. UNION OF INDIA & OTHERS 246 ITR 41 DEL HC 101 - 110 D6 INDIAN HOTELS CO. LTD. VS. DCIT (1999) 107 TAXMAN 205 ITAT MUM 111 - 115 D7 CIT VS GABRIEL INDIA LTD. (1993) 203 ITR 108 BOM HC 116 - 121 D8 MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 SC THE LD. AR FURTHER SUBMITTED THAT FOR INVOKING JURISDICTION U/S 263 BOTH THE CONDITIONS MUST CO - EXIST TO EMPOWER THE CIT FOR REVISION. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : SL. NO. TITLE CITATION FORUM PAGE NOS. A1 MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 SC 9 - 14 A2 V.G. KRISHNAMURTHY VS. CIT (1985) 152 ITR 683 KAR HC 15 - 17 A3 CIT VS. INTERNATIONAL TRAVEL HOUSE LTD. (2012) 341 ITR 554 DEL HC 18 - 25 HE FURTHER SUBMITTED THAT IF THERE ARE TWO VIEWS POSSIBLE AND THE AO HAS TAKEN ONE OF THE VIEWS, THE ASSESSMENT ORDER PASSED BY HIM CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAIN ABLE IN LAW. FOR THIS, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : 15 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) SL. NO. TITLE CITATION FORUM PAGE NOS. B1 CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 SC 26 - 28 B2 CIT VS. DESIGN & AUTOMOTIVE ENGINEERS (BOM) (P) LTD. 323 ITR 632 BOM. HC 29 - 32 B3 L.J. INTERNATIONAL LTD. VS. ITO (2012) 54 SOT 131 CHENNAI URO 33 - 40 HE FURTHER SUBMITTED THAT POST ASSESSMENT INFORMATION/JUDGEMENT CANNOT FORM BASIS FOR THE INVOCATION OF POWER U/S 263 BY THE CIT. FOR THIS PROPOSITION OF LAW, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : SL. NO. TITLE CITATION FORUM PAGE NOS. C 1 CIT VS. G.M. MITTAL STAINLES STEEL (P) LTD. (2003) 263 ITR 255 SC 41 - 44 C 2 GANGA PROPERTIES VS. ITO (1979) 118 ITR 447 CAL. HC 45 - 48 C 3 PURANLAL AGRAWAL (HUF) VS. CIT (2010) 131 TTJ 78 ITAT NAGPUR 49 - 61 C4 MACHINERY AGENCIES (INDIA) VS. DCIT (2012) 145 TTJ 624 ITAT KOLKATA 62 - 65 SPECIAL ATTENTION WAS DRAWN TOWARDS THE ORDER OF GANGA PROPERTIES VS. ITO, CALCUTTA HIGH COURT, 118 ITR 447 AT PG. 47 OF THE PAPER BOOK. ON THE ISSUE OF UNDE R INVOICING OF IRON ORE EXPORTS, THE LD. AR CONTENDED THAT ALLEGATION HAS BEEN MADE BY CIT AS PER THE REPORT OF SFIO DT. 29.4.2011. IN THIS REGARD, ATTENTION AS DRAWN TOWARDS PG. 318, 319 AND 324 OF THE PAPER BOOK. IT WAS CONTENDED THAT THE CASE OF THE A SSESSEE WAS REFERRED U/S 92CA TO THE TPO FOR DETERMINATION OF ALP IN RESPECT OF INTERNATIONAL TRANSACTIONS REPORTED BY THE ASSESSEE. IT WAS FURTHER MENTIONED THEREIN THAT THE JCIT (TP), BANGALORE VIDE HIS ORDER DT. 27.10.2009 HAS CONCLUDED THAT NO ADJUSTM ENT WAS REQUIRED U/S 92CA R.W.S. 92C TO THE ALP DETERMINED BY THE ASSESSEE IN RESPECT OF ITS INTERNATIONAL TRANSACTIONS. THUS, IT WAS SUBMITTED THAT THE TPO HAD ALREADY CONDUCTED HIS INQUIRIES ON ALL INTERNATIONAL TRANSACTIONS WHICH INCLUDED EXPORTS MADE TO MITSUI & CO., WHICH WAS THE HOLDI NG COMPANY OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR, AND ALSO EXPORT SALES MADE THROUGH MITSUI & CO. TO OTHER PARTIES ON WHICH MITSUI & CO. WAS GIVEN COMMISSION BY THE ASSESSEE AND 16 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) SINCE THE ISSUE HAS ALREADY BEEN EXAMINED BY THE TPO AND THE ORDER O F THE TPO IS BINDING ON THE AO, THEREFORE, THE PROVISIONS OF SEC. 263 CANNOT BE INVOKED IN THIS REGARD. EVEN THE TPO DURING THE COURSE OF THE ORIGINAL ASSESSMENT MADE VARIOUS QUERIES FOR WHICH THE ASSESSEE MADE SUBMISSION. IN THIS REGARD, ATTENTION WAS D RAWN TOWARDS THE FOLLOWING DOCUMENTS : S. NO. DOCUMENT ITEM/PARA NO. PAGE NO. OF PB 1 LETTER REF. NO. F.NO.15 - SCR/ADDL. CIT/R - 1/PNJ/09 - 10 DATED 16.09.09 ISSUED BY ACIT, RANGE - 1, PANAJI ITEM 4 17 - 19 2 LETTER DATED 28.10.09 SUBMITTED BY ASSESSEE IN RESPONSE TO ABOVE LETTER OF ACIT PARA 4 20 - 26 3 ANNEXURE 9 TO THE LETTER DATED 28.10.09 SUBMITTED BY THE ASSESSEE - 87 - 89 4 LETTER DATED 17.11.09 SUBMITTED BY ASSESSEE IN RESPONSE TO QUERIES RAISED BY ACIT DURING PERSONAL HEARING ON 13.11.09 ALONGWITH VARIOUS ANNEXURES PARA 4 29 - 30 5 ANNEXURE 3 TO THE LETTER DATED 17.11.09 SUBMITTED BY THE ASSESSEE - 33 6 LETTER REF. NO. F.NO. SCR/ADDL. CIT/R - 1/PNJ/09 - 10 DATED 02.12.09 ISSUED BY ACIT, RANGE - 1, PANAJI PARA 2 35 - 36 7 LETTER DATED 07.12.09 SUBMITTED BY ASSESSEE IN RESPONSE TO ABOVE LETTER OF ACIT PARA 2 38 - 40 THERE WAS NO OCCASION BEFORE COMPLETION OF THE ASSESSMENT IN DECEMBER, 2009 BEFORE THE AO TO KNOW THAT AN INQUIRY WAS BEING MADE BY SFIO. AT THE BEST, IT COULD BE RELEVANT FOR ACTION U/S 147. ON MERIT IT WAS SUBMITTED THAT SFIO REPORT DT. 29.4.2011 MADE A COMPARISON OF THE EXPORT MADE BY THE ASSESSEE ON LONG TERM BASIS TO M/S. ZHANGDIAN IRON & STEEL (HK) CO. LTD. WITH OTHER IMPORTERS AND ALLEGED LOSS OF RS. 232 CRORES DUE TO UNDER - INVOICING TO THOSE OTHER IMPORTERS. ANOTHER COMPARISON WAS MADE FOR EXPORTS MADE BY THE ASSESSEE TO MITSUI & CO. VIS - - VIS EXPORTS MADE BY MMTC TO THE SAME COMPANY ON SPOT BASIS AND UNDER - INVOICING TO THE EXTENT OF RS. 8 CRORES WAS ALLEGED BY SFIO. IN THIS REGARD, A TTENTION WAS DRAWN TOWARDS PG. 318 - 319 AND 324 OF THE PAPER 17 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) BOOK. ON THE BASIS OF SAID REPORT IT WAS STATED THAT IN THE SAID REPORT AT PG. 324 IT WAS CONCLUDED THAT IT IS EVIDENT THAT THE PRICES CHARGED BY SGL FOR EXPORT OF IRON ORE TO ITS BUYERS, MOSTLY BUYING IT THROUGH MITSUI & CO., JAPAN WERE MUCH LOWER AS COMPARED TO THE PRICES FOR WHICH EXPORT OF IRON ORE WAS MADE TO M/S. ZHANGDIAN IRON & STEEL (HK) CO. LTD. IN RESPECT OF EXPORTS ON LONG TERM BASIS AND AS COM P A R ED TO THE EXPORT PRICE CHARGED BY MMTC IN RESPECT OF EXPORTS ON SPOT BASIS . THE ASSESSEE SUBMITTED TO CIT PHOTOCOPIES OF THE VARIOUS PRESS REPORTS WHICH ARE AVAILABLE AT PG. 119 - 128 OF THE PAPER BOOK THAT THE SFIO HAS SUBMITTED SECOND REPORT TO MCA CONTRADICTING ITS EARLIER REPORT AND CLARIFY ING THAT THE ASSESSEE HAS NOT INDULGED IN ANY CORPORATE IMPROPRIETY. WITH REGARDS TO THE ALLEGATION OF OVER AND UNDER - INVOICING OF THE IMPORTS AND EXPORTS, ATTENTION WAS ALSO DRAWN TOWARDS THE SUPPLEMENTARY REPORT OF SFIO DT. 16.1.2013, COPY OF WHICH WAS GIVEN BY THE ACIT TO THE ASSESSEE . IN THE SAID SUPPLEMENTARY REPORT AT INTERNAL PG. 8 - 9 I.E PG. 412 AND BACK OF THE PAPER BOOK, IT IS MENTIONED THAT SFIO CONDUCTED FURTHER INQUIRIES FROM MMTC AS REGARDS IRON ORE SOLD BY ASSESSEE TO MMTC. ON EXAMINATION OF THE REQUISITE RECORDS PRODUCED BY MMTC IN THIS REGARD, IT WAS OBSERVED THAT THE CONTRACT O F IRON ORE BY ASSESSEE TO MMTC WAS A LONG TERM UNDERSTANDING FOR QUANTITY ONLY. IT WAS NOT A SINGLE ANNUAL PRICE CONTRACT BEFORE 2004 AND SINCE AFTER 2004 PRICES OF SHIPMENT WAS BASED ON THE EXPORT PRICE IN CHINA, IT CANNOT BE COMPARED WITH ANY BENCHMARK PRICE RELATED TO LONG TERM CONTRACT WHICH HAD A SINGLE ANNUAL PRICE FOR ALL THE SHIPMENTS IN THE SPECIFIC YEAR TO THE CUSTOMERS IN JAPAN AND SOUTH KOREA. ULTIMATELY, AT LAST PAGE THE SFIO CONCLUDED AFTER EXAMINING THE AUDITORS ON OATH AND THEIR WORKING PA PERS IN RESPECT OF THE EXPORT OF IRON ORE THAT THE BENCHMARK PRICES USED BY THE ASSESSEE FOR LONG TERM CONTRACT IN CHINA WERE BASED ON THE AUSTRALIAN BENCHMARK WHICH WAS HIGHER THAN THE JAPANESE BENCHMARK BY ALMOST 15 - 20%. THUS, THE MCA HAS GIVEN A CLEAN CHIT TO THE ASSESSEE AND DID NOT FILE ANY PROSECUTION UNDER THE IPC. IN THIS REGARD, ATTENTION WAS DRAWN TO PG. 401 OF THE PAPER BOOK. THUS, IT WAS CONTENDED THAT 18 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) SINCE THE VERY BASIS ON WHICH UNDER - INVOICING OF IRON ORE EXPORTS WAS SUSPECTED WAS ULTIMAT ELY HELD AS TRANSACTION UNDERTAKEN AT PRICE BASED ON INTERNATIONALLY ACCEPTED BENCHMARKS, REVISION U/S 263 ON MERIT CANNOT BE MADE. RELIANCE WAS AGAIN PLACED ON THE DECISION WHICH WAS EARLIER REFERRED TO IN RESPECT OF THE FIRST ISSUE. 3.1 THE LD. AR IN RESPECT OF THE ALLEGATION OF OVER - INVOICING OF COAL IMPORTS SUBMITTED THAT IT IS APPARENT FROM THE ORIGINAL ASSESSMENT ORDER DT. 23.12.2009 THAT THE CASE OF THE ASSESSEE WAS REFERRED U/S 92CA TO THE TPO FOR DETERMINATION OF THE ALP IN RESPECT OF INTERNATI ONAL TRANSACTIONS REPORTED BY THE ASSESSEE. THE TPO DID NOT ASK THE AO TO MAKE ANY ADJUSTMENT. THE TPO HAS MADE HIS INQUIRIES OF ALL INTERNATIONAL TRANSACTIONS INCLUDING IMPORT OF COAL MADE FROM BHP AUSTRALIA IN WHICH MITSUI & CO. AT 20% STAKE AND MITSUI & CO. WAS ALSO HOLDING COMPANY OF THE ASSESSEE IN THAT YEAR. THUS, IT WAS CONCLUDED THAT THE IMPORTS HAD ALREADY BEEN EXAMINED BY THE TPO AND THEREFORE IT WAS NOT A CASE OF NO INQUIRY SO THAT THE CIT COULD INVOKE JURISDICTION U/S 263. AT THE TIME OF FRA MING ASSESSMENT THERE WAS NO OCCASION BEFORE AO TO KNOW ABOUT THE INQUIRY BEING MADE BY SFIO. POST ASSESSMENT INQUIRY CANNOT BE THE BASIS OF THE ASSESSMENT. SFIO SUBMITTED THE SUPPLEMENTARY REPORT IN JANUARY, 2003. IN THE SUPPLEMENTARY REPORT IT IS MENT IONED THAT THE SFIO CONDUCTED FURTHER INQUIRIES FROM BHP BILLITON MARKETING SERVICES INDIA PVT. LTD., NEW DELHI (WHO ARE SOLE REPRESENTATIVES OF THE SELLER AND ARE CONDUCTING BUSINESS IN INDIA UNDER INSTRUCTIONS FROM BHP BILLITON MARKETING AG (BHPB), BM AL LIANCE COAL MARKETING PTY. LTD. (BMA) AND BHP MITSUI COAL PTY. LTD.) TO COMPARE THE RATES OF COKING COAL AS PURCHASED BY THE ASSESSEE, KALYANI STEELS LTD., PUNE AND TATA METALIKS LTD., KOLKATA FROM BHP BILLITON MARKETING SERVICES INDIA PVT. LTD. ON BEHALF OF THE ABOVE STATED SELLERS BY ISSUING LETTERS TO KALYANI STEELS LTD. AND TATA METALIKS LTD. ON THE COMPARATIVE PURCHASE RATS OF THE ABOVE COMPANIES THE SFIO HAS GIVEN A CATEGORICAL FINDING REFERRED TO IN PG. 19 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 427 OF THE PAPER BOOK THAT DURING THE ANALYSI S OF THE ABOVE MENTIONED DOCUMENTS, IT HAS BEEN OBSERVED THAT THE PRICES SETTLED BY SGL FOR COKING COAL IMPORTED FROM BHP MITSUI, BHPB AND BMA WERE SIMILAR TO THE PRICE SETTLED BY KALYANI STEELS LTD., PUNE (KSL) AND TATA METALIKS LTD., KOLKATA (TML) FOR SI MILAR COAL DURING EACH OF THE YEAR 2004 - 05, 2005 - 06, 2006 - 07 AND 2007 - 08. IT WAS FURTHER STATED THAT IT HAS BEEN OBSERVED FROM THE RECORDS RECEIVED FROM TATA METALIKS LTD., KALYANI STEELS LTD. AND BHP BILLITON THAT THE PRICE SETTLEMENT MADE FOR QUANTITY IN ANY PARTICULAR YEAR ARE PERFORMED TILL THE COMPLETION OF THE CONTRACTED QUANTITY IRRESPECTIVE OF WHETHER SHIPMENTS ARE DONE IN THE SAME FINANCIAL YEAR OR ROLLED OVER TO SUBSEQUENT YEARS TILL COMPLETION OF THE CONTRACTED QUANTIT I ES. FOR THIS, ATTENTION WAS DRAWN TO PG. 429 OF THE PAPER BOOK AND ULTIMATELY IN THE SAME PAGE THE SFIO CONCLUDED THAT IT IS PERTINENT TO MENTION THAT THE FINDING OF WRONGFUL LOSS TO SGL IN THE INVESTIGATION REPORT (DATED 29/04/11) WAS ON THE BASIS OF THE RAT ES COMPARED WITH THE RATES COMPILED IN THE MCCLOSKEY COAL REPORT ISSUED IN 206 - MARCH, 20, 2009, WHICH IS AN INTERNATIONAL JOURNAL PUBLISHING THE ESTIMATED MAJOR COKING COAL BENCHMARK SETTLEMENT RANGES (FOB $/T) AND SUCH TABLE HAS A FOOT NOTE INCLUDES ESTIMATED RANGE OF EUROPEAN, KOREAN AND JAPANESE SETTLEMENTS ONLY. HENCE, THE PRICES SO INDICATED ARE NOT FOR THE SETTLEMENTS REACHED FOR SUPPLIES INTO INDIA. 3.2 THUS, THE MCA HAS GIVEN A CLEAN CHIT TO THE ASSESSEE AND DID NOT FILE ANY PROSECUTION UND ER THE IPC. IT WAS SUBMITTED THAT BHP BILLITON IS NOT RELATED TO THE ASSESSEE IN ANY MANNER. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISIONS WHICH HAVE BEEN REFERRED TO EARLIER. IT WAS ALSO SUBMITTED RELYING ON THE DECISION OF THE BOMBAY TRIBUNAL IN THE CA SE OF ESSAR STEEL LTD. VS. ACIT , (2013) 152 TTJ (MUMBAI) 265 THAT THE CIT HAS NO JURISDICTION OVER TPO ADMINISTRATIVELY AND THEREFORE CIT COULD NOT REVISE THE ORDER U/S 92C(3) PASSED BY THE TPO. THE CIT CANNOT INVOKE JURISDICTION U/S 263 FOR SETTIN G ASIDE THE 20 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) ORDER OF THE AO U/S 143(3) WHICH WAS PASSED IN CONSEQUENCE OF THE TPO ORDER DETERMINING THE ARMS LENGTH PRICE FOR CERTAIN TRANSACTIONS. 3.3 IN RESPECT OF COMMISSION PAID TO MITSUI & CO. IT WAS CONTENDED THAT SINCE THE MATTER RELATES TO INTER NATIONAL TRANSACTIONS AND ORIGINAL ASSESSMENT HAS BEEN PASSED IN THE CASE OF THE ASSESSEE BY REFERRING THE CASE U/S 92CA TO THE TPO FOR DETERMINING THE ALP, THEREFORE, CIT DOES NOT HAVE ANY JURISDICTION ON THIS ISSUE U/S 263 AS CIT DOES NOT HAVE ANY ADMINI STRATIVE JURISDICTION OVER TPO. THUS, THIS ISSUE HAS BEEN TAKEN BY CIT ON THE BASIS OF REPORT OF SFIO. THE LD. AR SUBMITTED THAT THE SUPPLEMENTARY REPORT OF THE SFIO WAS NOT CONSIDERED. ON THIS ISSUE ALSO, THE MCA HAS GIVEN A CLEAN CHIT TO THE ASSESSEE AND DID NOT FILE ANY PROSECUTION AGAINST THE ASSESSEE. 3.4 ON THE ISSUE OF ADDITIONAL DEPRECIATION, THE LD. AR VEHEMENTLY CONTENDED THAT THE AO HAS DULY EXAMINED THE ALLOWABILITY OF THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE. HE MADE VARIOUS I NQUIRIES AND IN THIS REGARD, ATTENTION WAS DRAWN TOWARDS THE LETTER OF ACIT DT. 16.9.2009 AND REPLY DT. 28.10.2009 SUBMITTED BY THE ASSESSEE, COPIES OF WHICH ARE AVAILABLE AT PG. 17 - 19, 20 - 26 AND 254 - 265 OF THE PAPER BOOK. CIT TOOK THE VIEW IN THIS REGARD SINCE, IN HIS OPINION, THE CODLI PLANT WAS NOT CARRYING OUT ANY PRODUCTION ACTIVITY, THEREFORE, THE AO DID NOT APPLY HIS MIND ON SAID LINES WHILE ALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION TO THE ASSESSEE. THIS IS MERELY A CHANGE OF OPINION AND DOES N OT FALL WITHIN THE JURISDICTION OF CIT FOR INVOKING POWER U/S 263. RELIANCE WAS PLACED ON THE CASE LAW AS HAS BEEN RELIED ON IN RESPECT OF ISSUE NO. 1. 4. THE LD. DR ON THE OTHER HAND VEHEMENTLY RELIED ON THE ORDER OF CIT AND SUBMITTED THAT IT IS A CASE WHERE NO INQUIRY HAS BEEN MADE BY THE AO WHILE ALLOWING EXEMPTION TO THE ASSESSEE U/S 10B. THE AO ALTHOUGH CALLED FOR 21 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) COMPUTATION OF THE DEDUCTION CLAIMED U/S 10B B UT DID NOT LOOK INTO THE ELIGIBILITY OF THE CLAIM MADE BY THE ASSESSEE U/S 10B; WHETHER THE CONDITION AS STIPULATED U/S 10B HAS BEEN COMPLIED WITH BY THE ASSESSEE OR NOT AND WHETHER THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND PRODUCTION OF AN ARTICLE OR THING. EVEN NO INQUIRY OR QUESTIONNAIRE HAS BEEN ISSUED IN THIS REGARD. NON - EXAMINATION OF THE CLAIM MADE BY THE ASSESSEE TANTAMOUNT TO ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN RESPECT OF THE CASE LAWS RELIED ON BY THE L D. AR, IT WAS CONTENDED THAT NONE OF THE CASE DEALS WITH THE CASE WHERE THE AO HAS NOT EXAMINED THE CLAIM AT ALL. IT IS NOT A CASE OF INADEQUACY OF INQUIRY; IT IS A CASE WHERE NO INQUIRY WHATSOEVER HAS BEEN MADE BY THE AO WHILE ALLOWING THE CLAIM OF THE A SSESSEE. THE LD. DR CARRIED US THROUGH EACH AND EVERY CASE LAW AS RELIED BY THE LD. AR AND ULTIMATELY CONTENDED THAT EVEN IF THE ORDER HAS TO BE UPHELD ON ONE OF THE ISSUES OUT OF THE SEVERAL ISSUES ON THE BASIS OF WHICH THE PROCEEDINGS U/S 263 WAS CARRIE D OUT, THE ORDER PASSED U/S 263 HAS TO BE UPHELD. 5 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE CASE LAWS AS RELIED ON AND THE ORDER OF THE CIT PASSED U/S. 263 OF THE ACT. WE NOTED THAT IN THIS CAS E THE CIT INVOKED JURISDICTION U/S 263 IN RESPECT OF ORDER PASSED BY THE AO U/S 143(3) DT. 23.12.2009. THE MAIN ALLEGATIONS LEVIED BY CIT FOR INVOKING JURISDICTION U/S 263 ARE AS UNDER : A) ON THE BASIS OF THE SURVEY CONDUCTED U/S 133A(1) ON 23.12.2011 THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S 10 B FOR THE ALLEGED REASONS THAT AT THE ULTRA FINES RECOVERY PLANT OF THE APPELLANT AT CODLI PROCESSES, ONLY THE WASTE GENERATED BY THE OTHER UNITS OF THE APPELLANT ARE PROCESSED AND THE SAID ACTIVITIES CANNO T BE CONSTRUED AS PRODUCTION SINCE THERE IS NO EXTRACTION OF IRON ORE WHEREAS THE SUPREME COURT IN THE APPELLANTS OWN CASE REPORTED IN 271 ITR 331 HAD HELD THAT PRODUCTION IN THE CONTEXT OF IRON ORE SHOULD INVOLVE BOTH ACTIVITIES I.E. EXTRACTION OF IRON ORE AND PROCESSING OF IRON ORE. FURTHER THE APPELLANT ALSO DOES NOT MAINTAIN SEPARATE BOOKS OF ACCOUNTS. 22 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) B) ON THE BASIS OF THE REPORT OF THE SERIOUS FRAUD INVESTIGATION OFFICE (SF IO ) GIVEN TO THE MINISTRY OF CORPORATE AFFAIRS(MCA) EXPRESSING ITS VIEWS ON THE INVESTIGATION CARRIED OUT UNDER THE COMPANIES ACT 1956, A COPY OF WHICH HAS UNDERSTANDABLY, BEEN OBTAINED BY THE CIT WHEREIN IT HAS BEEN ALLEGEDLY REPORTED THAT: I. THE APPELLANT HAD UNDER INVOICED THE EXPORTS TO THE EXTENT OF RS. 240 CRORES DURING TH E YEAR. II. THE APPELLANT HAD OVER INVOICED THE IMPORT OF RIVERSIDE COKING COAL AMOUNTING TO RS. 6.05 CRORES, PURCHASED FROM BHP AND THE SAID BHP IS AN ASSOCIATED ENTERPRISE OF MITSUI & CO, JAPAN WHICH IS THE ULTIMATE HOLDING COMPANY OF THE APPELLANT. III. THE APPELLANT HAD PAID EXCESS COMMISSION ON SALES TO ITS ASSOCIATED ENTERPRISE MITSUI & CO, JAPAN WHICH IS THE ULTIMATE HOLDING COMPANY OF THE APPELLANT. OUT OF THE TOTAL AMOUNT OF RS.7.92 CRORES C) THE APPELLANT WAS NOT ENTITLED FOR THE ADDITIONAL DEPRECIATION CLAIMED U/S 32(1) (I I A) OF THE ACT, OF RS. 2,31,81,727/ - IN RESPECT OF ITS MINING DIVISION AND RS.18,74,790/ - IN RESPECT OF ITS MET - COKE DIVISION, TOTALLY AMOUNTING TO RS.2,50,56,517 ON THE PLANT AND MACHINERY ACQUIRED DURING THE YEAR FOR THE ALLEGED REASON THAT PROCESSING OF DUMP OR WASTE MATERIAL IN THE CODLI PLANT AND MET COKE CANNOT BE HELD TO BE PRODUCTION. BEFORE DECIDING THE ISSUE WHETHER THE ORDER PASSED U/S 263 IS VALID OR NOT, IT IS ESSENTIAL TO REFER TO THE RELEVANT PROVISIONS OF S EC. 263. SECTION 263 LAYS DOWN AS UNDER: - 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MA Y, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT , OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB - SECTION, - (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988 BY THE ASSESS ING OFFICER SHALL INCLUDE - 23 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY DIRECTOR OR THE INCOME - TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COM MISSIONER IN EXERCISE OF THE POWER OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIS ED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND AND SHALL BE DEEMED ALWA YS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN OR DER OF THE APPELLATE TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION. - IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB - SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 1 29 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 5 . 1 FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT THERE ARE FOUR MAIN FEATURES OF THE POWER OF REVISION TO BE EXERCISED U/S 263 BY THE COMMISSIONER OF INCOME - TAX. FIRSTLY, THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND FOR THIS PURPOSE HE NEED NOT TO SHOW ANY REASON OR RECORD ANY REASON TO BELIEVE. IT IS A PART OF HIS 24 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) ADMINISTRATIVE POWER TO CALL FOR THE RECORD AND EXAMINE THEM RELATING TO ANY ASSESSEE. SECONDLY, HE MAY CONSIDER ANY ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS IS EXERCISED BY CALL ING FOR AND EXAMINING THE RECORD AVAILABLE AT THIS STAGE. THERE IS NO QUESTION OF THE ASSESSEE TO APPEAR AND MAKE SUBMISSION AT THIS STAGE. THIRDLY, IF AFTER CALLING FOR AND EXAMINING THE RECORDS THE COMMISSIONER CONSIDERS THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE IS BOUND TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE MAY DEEM FIT, PASS SUCH ORDER THEREON AS THE CIRCUM STANCES OF THE CASE MAY JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THIS EMPOWERS THE CIT TO CAUSE OR MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY. FOURTHLY, THE CIT U/S 263 CAN ENHANCE OR MODIFY THE ASSESSMENT AS A RESULT OF ENQUIRY CONDUCTED AND HEARING OF THE ASSESSEE. 5 . 2 FOR INVOKING THE PROVISIONS OF SECTION 263, WE DO AGREE WITH THE LD. A.R BOTH THE CONDITIONS THAT THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND ALSO THAT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE MUST BE SATISFIED. IF ONE OF THEM IS ABSENT, THE PROVISIONS OF SECTION 263 CANNOT BE INVOKED. THE TERM ERRONEOUS HAS NOT BEEN DEFINED UNDER THE INCOME - TAX ACT BUT IT IS WELL SETTLED THAT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A.O. CANNOT BE SAID TO BE AN ERROR. AN ORDER CAN BE SAID TO BE ERRONEOUS IF THERE IS INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW IN THE ORDER BY THE A.O. IF THE A.O. AFTER MAKING THE ENQUIRIES AND EXAMI NING THE RECORDS TAKEN ONE OF THE POSSIBLE VIEW, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE A.O. WAS ERRONEOUS. THIS VIEW HAS BEEN TAKEN BY HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. 243 ITR 83(SC). 25 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 5.3 THE FIRST OF THE ALLEGATIONS IN RESPECT OF WHICH JURISDICTION U/S 263 IS EXERCISED RELATE TO THE ALLOWANCE OF EXEMPTION TO THE ASSESSEE U/S 10B IN RESPECT OF CODLI PLANT. FIRST, WE WOULD DEAL WITH THIS ISSUE. THE RECORD AND THE EVIDENCE PRODUCED BEFORE U S DURING THE COURSE OF HEARING REFLECT APPARENTLY THAT THE A.O. IN THIS CASE DURING THE IMPUGNED A.Y. HAS NOT CARRIED OUT ANY ENQUIRY WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10B. NO DOUBT THE ASSESSING OFFICER VIDE ORDER SHEET DT. NOV.,09, THE C OPY OF WHICH WAS FILED BEFORE US AND WHICH WE PURSUED, DID ASK FOR THE DETAILED COMPUTATION OF DEDUCTION CLAIMED U/S 10B BUT DID NOT RAISE ANY QUERY ABOUT THE ELIGIBILITY OF THE CLAIM OF THE ASSESSEE U/S 10B. NOW THE QUESTION ARISE WHETHER LACK OF ENQUIRY BY THE ASSESSING OFFICER WILL TANTAMOUNT TO BE THE ONE WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE NOTED THAT A SIMILAR ISSUE HAS ARISEN IN THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO.139/PNJ/11 IN THE CASE OF V.M. SALAGOANKER IN WHICH ALSO THE A.O HAS NOT CARRIED OUT ANY ENQUIRY AND THIS TRIBUNAL, VIDE ORDER DATED 25/08/2011 HAS HELD AS UNDER: 12. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND CASE LAWS BROUGHT TO OUR NOTICE. THE APPELLANT DOES NOT DISPUTE THAT HE ALSO IS ENGAGED IN THE BUSINESS OF TRADING OF IRON ORE. THE APPELLANT IN HIS RETURN OF INCOME MADE CLAIM OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.4,42,46,711/ - AND DECLARED INCOME OF RS FROM THE BUSINESS OF IRON ORE MINING, PROCESSING AND EXP ORTING AS REPRODUCED AT PAGE 1 OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SIMPLY ACCEPTED THE AFORESAID CLAIM OF ADDITIONAL DEPRECIATION AS WAS STATED IN THE RETURN OF INCOME AND HAS FAILED TO MAKE ANY ENQUIRY AS TO WHETHER THE CONDITIONS CONTAINED U/S 32(1)(IIA) FOR ALLOWING THE ADDITIONAL DEPRECIATION HAVE ACTUALLY BEEN SATISFIED. EVEN THE APPELLANTS RETURN DID NOT CONTAIN SUCH DETAILS FROM WHICH A CONCLUSION IN ACCORDANCE WITH LAW COULD BE DRAWN. THE IMPLICATION OF THE JUDGMENT BY APEX COURT I N THE CASE OF CIT VS. SESA GOA LTD. 271 ITR 332 (SC) HAS NOT BEEN ANALYZED TO FIND OUT AS TO WHETHER THE NEW MACHINERY ON WHICH ADDITIONAL DEPRECIATION HAS BEEN CLAIMED IS ACQUIRED OR INSTALLED IN THE ASSESSEES BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR THAT IT WAS A MACHINERY INSTALLED IN THE TRADING BUSINESS OR OTHERWISE IN A BUSINESS WHICH DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AS CLARIFIED IN THE SUPREME COURT JUDGMENT IN SESA GOA LTD., SUPRA. NO FIN DINGS OF FACT ARE SHOWN TO HAVE BEEN RECORDED BY THE ASSESSING OFFICER ON THESE ASPECTS. THE NATURE OF BUSINESS MENTIONED AT PAGE NO. 1 OF THE ASSESSMENT ORDER SIMPLY STATES THE EX - FACIE POSITION AS IS NARRATED BY THE ASSESSEE 26 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) IN THE RETURN OF INCOME FILE D BY HIM. THE SAME DOES NOT CONSTITUTE ANY FINDING OF FACT REACHED AFTER MAKING ANY ENQUIRY BY THE ASSESSING OFFICER. IT THUS IS APPARENT THAT THE ASSESSING OFFICER ACCEPTED THE CLAIM ON ITS FACE WITHOUT PERFORMING HIS FUNCTIONS AS ARE REQUIRED OF HIM AS A QUASI JUDICIAL AUTHORITY. THE ASSESSMENT ORDER THUS MADE WAS ERRONEOUS AND UNDER THE CIRCUMSTANCES OF THE CASE, IT WAS NOT NECESSARY FOR THE LEARNED CIT TO MAKE FURTHER ENQUIRIES BEFORE SETTING ASIDE THE ORDER AND FIND OUT HIMSELF ALL SUCH RELEVANT FAC TS IN A MANNER AS ARE REQUIRED TO BE DONE BY THE ASSESSING AUTHORITY. THE ASPECT OF DEDUCTION OF INTEREST PAID ON INCOME TAX WAS NEITHER ENQUIRED NOR SHOWN TO HAVE BEEN VERIFIED BY THE ASSESSING OFFICER AND THUS THE ORDER OF ASSESSMENT IS ERRONEOUS ON THA T COUNT AS WELL. 13. ADMITTEDLY THE ASSESSING OFFICER BEING A QUASI - JUDICIAL AUTHORITY HAD THREE FUNCTIONS (I) TO COLLECT THE MATERIALS AND INFORMATION (II) TO PROCESS THE MATERIALS AND INFORMATION; AND (III) TO ADJUDICATE ON THE CONSIDERATION OF SUCH MA TERIALS AND INFORMATION. IN A CASE LIKE THIS, WHERE THE ASSESSING OFFICER HAS FAILED TO PERFORM HIS DUTIES IN NUMBER (I) AND (II) ABOVE AND PROCEEDS TO ADJUDICATE, SUCH ORDERS ARE TAKEN TO HAVE BEEN PASSED IN A SLIP - SHOD MANNER AND CANNOT BE TAKEN TO BE O RDERS PASSED IN ACCORDANCE WITH LAW. DEFINITELY SUCH ACTIONS OF THE GOVT. FUNCTIONARIES GOES TO EFFECT THE REPUTATION OF REVENUE DEPARTMENT ADVERSELY AND CAUSE PREJUDICE TO THEIR INTERESTS, BESIDES CAUSING LOSS OF REVENUE BY HIS SUCH DECISION. 14. THE APPELLANTS PLEA THAT SIMILAR ISSUE WAS ALSO A SUBJECT MATTER OF ASSESSMENT IN ASSESSMENT YEAR 2008 - 09, NOT AN YEAR IN APPEAL BEFORE US IS OF NO CONSEQUENCE IN CASE OF EXERCISE OF JURISDICTION U/S 263 FOR THE DIFFERENT YEAR. UNDER THE PECULIAR FACTS, THE CASE LAWS REFERRED INCLUDING THOSE ON POSSIBILITY OF TWO VIEWS ON THE ISSUES BEFORE US CANNOT IMPRESS US TO SAY THAT THE EXERCISE OF JURISDICTION U/S 263 OF THE ACT IS INITIATED AS THE OPINION ON THE BASIS OF SUCH CASE LAWS NEEDS TO BE TESTED IN THE CI RCUMSTANCE WHEN ASSESSING OFFICER HIMSELF HAS MADE ENQUIRIES AND TAKEN A POSSIBLE DECISION IN ACCORDANCE WITH LAW. 15. IN THE PRESENT CASE, THE LEARNED CIT IS FOUND SATISFIED THAT THE ASSESSMENT ORDER PASSED IS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE AND THUS THE TWIN CONDITIONS OF SECTION 263 OF THE ACT AS ARE ALSO ENUNCIATED BY APEX COURT IN MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) STAND DULY SATISFIED. THE LEARNED CIT ALSO DIRECTED THE ASSESSING OFFICER TO CA LL FOR INFORMATION ON BOTH THE ISSUES AND EXAMINE IT AND TAKE DECISION AFRESH ON MERITS AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS WOULD CAUSE NO PREJUDICE TO THE ASSESSEE. HAVING REGARD TO THE JUDGMENT RENDERED BY HON'BLE DELHI HIG H COURT IN THE CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [1975] 99 ITR 375 (DEL), HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SMT. RENU GUPTA VS. CIT [2008] 301 ITR 45 (RAJ.) AND HON'BLE MADHYA PRADESH HIGH COURT IN CIT VS. DEEPAK KUMAR GARG [2008] 299 ITR 435 (MP) AND THE FINDINGS REACHED AS AFORESAID, WE FIND NO INFIRMITY IN THE DECISION TAKEN BY LEARNED CIT. THE GROUNDS RAISED IN APPEAL, THEREFORE, STAND REJECTED AND APPEAL IS DISMISSED. 27 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 5 . 4 IN THAT CASE , WE NOTED THAT LEARNED A. R. HAS TAKEN ALL THE SE ARGUMENTS AND HAS ALSO RELIED ON THE DECISION OF I.T.A.T. DELHI IN THE CASE OF SAW PIPES LTD. , 3 SOT 237 FOR THE PURPOSE OF THE LACK OF ENQUIRY. THE LEARNED A. R., BEFORE US, TRIED TO DISTINGUISH THE FACTS OF THE CASE AND VEHEMENTLY RELIED IN RESPECT OF THIS ISSUE WHICH IS THE ONE ON THE BASIS OF WHICH THE PROCEEDINGS U/S 263 WERE INITIATED. 5 . 5 WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 10B . THIS SECTION IS REPRODUCED AS UNDER: 10B. SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISHED HUNDRE D PER CENT. EXPORT - ORIENTED UNDERTAKINGS. (1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT - ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TO TAL INCOME OF THE ASSESSEE : PROVIDED THAT WHERE IN COMPUTING THE TOTAL INCOME OF THE UNDERTAKING FOR ANY ASSESSMENT YEAR, ITS PROFITS AND GAINS HAD NOT BEEN INCLUDED BY APPLICATION OF THE PROVISIONS OF THIS SECTION AS IT STOOD IMMEDIATELY BEFORE ITS SUBS TITUTION BY THE FINANCE ACT, 2000, THE UNDERTAKING SHALL BE ENTITLED TO THE DEDUCTION REFERRED TO IN THIS SUB - SECTION ONLY FOR THE UNEXPIRED PERIOD OF AFORESAID TEN CONSECUTIVE ASSESSMENT YEARS : PROVIDED FURTHER THAT FOR THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2003, THE DEDUCTION UNDER THIS SUB - SECTION SHALL BE NINETY PER CENT OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE : PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTI ON SHALL BE ALLOWED TO ANY UNDERTAKING FOR THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2010 AND SUBSEQUENT YEARS. PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLOWED TO AN ASSESSEE WHO DOES NOT FURNISH A RETURN OF HIS INCOME ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB - SECTION (1) OF SECTION 139. 28 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (I) IT MANUFACTURES OR PRODUCES ANY ARTICLES OR THINGS OR COMPUTER SOFTWARE ; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE - ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION ; (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PR EVIOUSLY USED FOR ANY PURPOSE. EXPLANATION. THE PROVISIONS OF EXPLANATION 1 AND EXPLANATION 2 TO SUB - SECTION (2) OF SECTION 80 - I SHALL APPLY FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB - SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF THAT SUB - SEC TION. (3) THIS SECTION APPLIES TO THE UNDERTAKING, IF THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA ARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR, WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF. EXPLANATION 1. FOR THE PURPOSES OF THIS SUB - SECTION, THE EXPRESSION COMPETENT AUTHORITY MEANS THE RESERVE BANK OF INDIA OR SUCH OTHER AUTHORITY AS IS AUTHORISED UNDER ANY LAW FOR THE TIME BEING IN FORCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANGE. EXPLANATION 2. THE SALE PROCEEDS REFERRED TO IN THIS SUB - SECTION SHALL BE DEEMED TO HAVE BEEN RECEIVED IN INDIA WHERE SUCH SALE PROCEEDS ARE CREDITED TO A SEPARATE ACCOUNT MAINTAINED FOR THE PURPOSE BY THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPROVAL OF THE RESERVE BANK OF INDIA. (4) FOR THE PURPOSES OF SUB - SECTION (1), THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THIN GS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CAR RIED ON BY THE UNDERTAKING. 29 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) (5) THE DEDUCTION UNDER SUB - SECTION (1) SHALL NOT BE ADMISSIBLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY OF APRIL, 2001, UNLESS THE ASSESSEE FURNISHES IN THE PRESCRIBED FORM, ALONG WITH THE RETURN OF INCOME, TH E REPORT OF AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB - SECTION (2) OF SECTION 288, CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. (6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE LAST OF THE RELEVANT ASSESSMENT YEARS 5ENDING BEFORE THE 1ST DAY OF APRIL 2001, OR OF ANY PREVIOUS YEAR, RE LEVANT TO ANY SUBSEQUENT ASSESSMENT YEAR, (I) SECTION 32, SECTION 32A, SECTION 33, SECTION 35 AND CLAUSE (IX) OF SUB - SECTION (1) OF SECTION 36 SHALL APPLY AS IF EVERY ALLOWANCE OR DEDUCTION REFERRED TO THEREIN AND RELATING TO OR ALLOWABLE FOR ANY O F THE RELEVANT ASSESSMENT YEARS, IN RELATION TO ANY BUILDING, MACHINERY, PLANT OR FURNITURE USED FOR THE PURPOSES OF THE BUSINESS OF THE UNDERTAKING IN THE PREVIOUS YEAR RELEVANT TO SUCH ASSESSMENT YEAR OR ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SUCH BUSINESS IN SUCH PREVIOUS YEAR HAD BEEN GIVEN FULL EFFECT TO FOR THAT ASSESSMENT YEAR ITSELF AND ACCORDINGLY SUB - SECTION (2) OF SECTION 32, CLAUSE (II) OF SUB - SECTION (3) OF SECTION 32A, CLAUSE (II) OF SUB - SECTION (2) OF SECTION 33, SUB - SECTION (4) OF SECT ION 35 OR THE SECOND PROVISO TO CLAUSE (IX) OF SUB - SECTION (1) OF SECTION 36, AS THE CASE MAY BE, SHALL NOT APPLY IN RELATION TO ANY SUCH ALLOWANCES OR DEDUCTION. (II) NO LOSS REFERRED TO IN SUB - SECTION (1) OF SECTION 72 OR SUB - SECTION (1) OR SUB - SE CTION (3) OF SECTION 74, IN SO FAR AS SUCH LOSS RELATES TO THE BUSINESS OF THE UNDERTAKING, SHALL BE CARRIED FORWARD OR SET - OFF WHERE SUCH LOSS RELATES TO ANY OF THE RELEVANT ASSESSMENT YEARS ; (III) NO DEDUCTION SHALL BE ALLOWED UNDER SECTION 80HH OR SECTION 80HHA OR SECTION 80 - I OR SECTION 80 - IA OR SECTION 80 - IB IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING ; AND (IV) IN COMPUTING THE DEPRECIATION ALLOWANCE UNDER SECTION 32, THE WRITTEN DOWN VALUE OF ANY ASSET USED FOR THE PURPOSES OF THE BUSINESS OF THE UNDERTAKING SHALL BE COMPUTED AS IF THE ASSESSEE HAD CLAIMED AND BEEN ACTUALLY ALLOWED THE DEDUCTION IN RESPECT OF DEPRECIATION FOR EACH OF THE RELEVANT ASSESSMENT YEAR. (7) THE PROVISIONS OF SUB - SECTION (8) AND SUB - SECTION (10) OF SECTION 80 - IA SHALL, SO FAR AS MAY BE, APPLY IN RELATION TO THE UNDERTAKING REFERRED IN THIS SECTION AS THEY APPLY FOR THE PURPOSES OF THE UNDERTAKING REFERRED TO IN SECTION 80 - IA. 30 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) (7A) WHERE ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTITLED TO THE DEDUCTION UNDER THIS SECTION IS TRANSFERRED, BEFORE THE EXPIRY OF THE PERIOD SPECIFIED IN THIS SECTION, TO ANOTHER INDIAN COMPANY IN A SCHEME OF AMALGAMATION OR DEMERGER (A) NO DEDUCTION SHALL BE ADMISSIBLE UNDER THIS SECTION TO THE AMALGAMATING OR THE D EMERGED COMPANY FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR THE DEMERGER TAKES PLACE ; AND (B) THE PROVISIONS OF THIS SECTION, SHALL AS FAR AS MAY BE APPLY TO THE AMALGAMATED OR RESULTING COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING OR TH E DEMERGED COMPANY IF THE AMALGAMATION OR THE DEMERGER HAD NOT TAKEN PLACE. (8) NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS SECTION, WHERE THE ASSESSEE, BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SUB - SECTION ( 1) OF SECTION 139, FURNISHES TO THE ASSESSING OFFICER A DECLARATION IN WRITING THAT THE PROVISIONS OF THIS SECTION MAY NOT BE MADE APPLICABLE TO HIM, THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO HIM FOR ANY OF THE RELEVANT ASSESSMENT YEARS. (9) AND 4(9A) OMITTED BY FA 2003, WEF. 1 - 4 - 2004. EXPLANATION 1. OMITTED BY FA 2003, WEF. 1 - 4 - 2004. PROVIDED THAT NOTHING CONTAINED IN THIS EXPLANATION SHALL APPLY TO ANY CHANGE IN THE SHAREHOLDING OF THE COMPANY AS A RESULT OF (A) ITS BECOMING A COMPANY IN WHI CH THE PUBLIC ARE SUBSTANTIALLY INTERESTED ; OR (B) DISINVESTMENT OF ITS EQUITY SHARES BY ANY VENTURE CAPITAL COMPANY OR VENTURE CAPITAL FUND. EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, (I) COMPUTER SOFTWARE MEANS, (A) ANY COMPUTER P ROGRAMME RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE ; OR (B) ANY CUSTOMIZED ELECTRONIC DATA OR ANY PRODUCT OR SERVICE OF SIMILAR NATURE, AS MAY BE NOTIFIED BY THE BOARD, WHICH IS TRANSMITTED OR EXPORTED FROM IND IA TO ANY PLACE OUTSIDE INDIA BY ANY MEANS; (II) CONVERTIBLE FOREIGN EXCHANGE MEANS FOREIGN EXCHANGE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF INDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE 31 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) PURPOSES OF THE FOREIGN EXCHANGE REGULATION ACT, 1973 (46 OF 1973), AND ANY RULES MADE THEREUNDER OR ANY OTHER CORRESPONDING LAW FOR THE TIME BEING IN FORCE ; (III) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT 3BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER SOFTWARE RECEI VED IN, OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB - SECTION (3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWA RE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA. (IV) HUNDRED PER CENT. EXPORT - ORIENTED UNDERTAKING MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED AS A HUNDRED PER CENT. EXPORT - ORIENT ED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 (65 OF 1951), AND THE RULES MADE UNDER THAT ACT ; (V) RELEVANT AS SESSMENT YEARS MEANS ANY ASSESSMENT YEAR FALLING WITHIN A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS, REFERRED TO IN THIS SECTION. EXPLANATION 3. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE PROFITS AND GAINS DERIVED FROM ON SITE DEVELOPMENT OF COMPUTER SOFTWARE (INCLUDING SERVICES FOR DEVELOPMENT OF SOFTWARE) OUTSIDE INDIA SHALL BE DEEMED TO BE THE PROFITS AND GAINS DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE OUTSIDE INDIA. EXPLANATION 4. FOR THE PURPOSES OF THIS SECTION, MANUFACTURE OR P RODUCE SHALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMIPRECIOUS STONES. FROM THE PERUSAL OF AFORESAID SECTION, IT IS APPARENT THAT THIS SECTION PROVIDES THAT ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM A 100% EOU SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THIS PROVISION APPLIES TO ANY UNDERTAKING WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING. EXPLANATION (I) TO SEC. 10B PROVIDES THAT THE EXPRESSION 100% EXPORT ORIENTED UNIT MEANS AN UNDERTAKING WHICH HAS BEEN APP ROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFIRMED BY SEC. 14 OF THE INDUSTRIES (DEVELOPMENT ®ULATION) ACT, 1951 AND THE R U LES MADE THERE UNDER. EXPLANATION (III) WHICH WAS THERE AT THE TIME OF THE SAID SEC. 10B DEFINED THE WORD MANUFACTURE FOR THE PURPOSE OF THE SAID SECTION TO INCLUDE ANY (A) 32 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) PROCESS OR (B) ASSEMBLING OR (C) RECORDING OF PROGRAMME ON DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. THUS, PROCESS WAS INCLUDED WITHIN THE WORD MANUFACTURE FOR THE PURPOSE OF SEC. 10B. EXPLANATION (IV) OF THE SAID SEC. 10B FURTHER PROVIDED THAT THE WORD PRODUCE FOR THE PURPOSE OF SAID SECTION, IN RELATION TO ANY ARTICLE OR THING SHALL INCLUDE PRODUCTION OF COMPUTER PROGRAMME. C BDT VIDE ITS CIRCULAR NO. 528 DATED 16/12/1988 176 ITR ST. 154 EXPLAINED THE [PROVISIONS ENACTED BY THE FINANCE ACT, 1988 UNDER PARA 8.2 OF THE CIRCULAR. IN THIS CIRCULAR, CBDT HAD CLEARLY EXPLAINED THAT THE SAID NEW SEC. 10B HAD BEEN INSERTED IN THE STATU TE BOOK WITH A VIEW TO PROVIDE FURTHER INCENTIVE FOR EARNING FOREIGN EXCHANGE SO AS TO SECURE THAT THE INCOME OF A 100% EOU SHALL BE EXEMPT FROM TAX FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS FALLING WITHIN THE BLOCK OF EIGHT ASSESSMENT YEARS. THE E XEMPTION PROVIDED UNDER THIS NEW SECTION WAS SIMILAR TO THE ONE PROVIDED UNDER SEC. 10A OF THE ACT TO INDUSTRIAL UNDERTAKING OPERATING UNDER THE FREE - TRADE ZONE. IT WAS ALSO CLARIFIED THEREIN THAT THE EXPRESSION MANUFACTURE FOR THE PURPOSE OF BOTH SECTIO NS 10A AND 10B OF THE SAID ACT WOULD INCLUDE ANY PROCESSING OR ASSEMBLING OR RECORDING OF PROGRAMME ON DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. THIS DEFINITION OF MANUFACTURE WAS REMOVED WHEN SEC. 10A AND 10B OF THE ACT WERE AMEN DED BY THE FINANCE ACT, 2001 W.E.F. 01/04/2001. SECTIONS 10A AND 10B OF THE ACT WERE FURTHER AMENDED BY THE FINANCE ACT, 2003 W.E.F. 01/04/2004 AND THE DEFINITION OF MANUFACTURE WAS INSERTED AS UNDER: - EXPLANATION (IV) FOR THE PURPOSE OF THIS SECTION , MANUFACTURE OR PRODUCE SHALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI - PRECIOUS STONES. THE EOUS WERE ALLOWED TO SELL 25% PRODUCTION WITHIN THE COUNTRY. WITH A VIEW TO RATIONALIZE THE CONCESSION AND TO PHASE THESE OUT BY THE END OF THE ASSESSMENT YEAR 2009 - 10, THE PROVISIONS OF SEC. 10A AND 10B WERE SUBSTITUTED BY THE NEW PROVISIONS BY THE FI NANCE ACT, 2000. CBDT VIDE CIRCULAR NO. 794 DATED 33 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 09/08/2000 245 ITR ST. 21, 34 - 35 UNDER PARA 15.3 EXPLAINED THAT THE DEDUCTION U/S 10B WOULD BE GRANTED IN RESPECT OF PROFITS AND GAINS DERIVED BY AN UNDERTAKING WHICH MANUFACTURES OR PRODUCES ARTICLE OR THI NGS OR COMPUTER SOFTWARE AND DERIVED PROFITS AND GAINS FROM THE EXPORTS THEREOF. THE SAID EXEMPTION WAS AVAILABLE FOR A PERIOD OF 10 CONSECUTIVE YEARS IN A GRADED MANNER. THE NEW PROVISIONS CONTAINED THE FOLLOWING ADDITIONAL CONDITIONS: I. THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA, SHOULD BE RECEIVED IN OR BROUGHT INTO INDIA WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW SUB - SECTION (3) ; II. THE PROFITS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION, AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLE OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF BUSINESS SUB - SECTION (4); III. THE ASSESSEE MUST FURNISH IN THE PRESCRIBED FORM NO. 56G, ALONG WITH HIS RETURN OF INCOME, THE REPORT OF A CHARTERED ACCOUNTANT CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 10B SUB - SECTION (5); IV. WHERE THE ASSESSEE AVAILS OF THE BENEFITS OF SECTION 10A OR SECTION 10B, IT WILL NOT BE ELIGIBLE FOR OTHER TAX EXEMPTIONS AVAILABLE UNDER OTHER PROVISIONS OF THE ACT DURING THE PERIOD OF 10 YEARS SUB - SECT ION (6); THUS, BEFORE ALLOWING THE CLAIM TO THE ASSESSEE UNDER SEC. 10B THE AO WAS BOUND TO INQUIRE INTO WHETHER THE ASSESSEE COMPLIED WITH THE CONDITIONS AS GIVEN UNDER SEC. 10B OR NOT. THE AO, IN THIS CASE, WE NOTED, EXCEPT ASKING FOR THE DETAILS OF TH E COMPUTATION OF THE DEDUCTION DID NOT EXAMINE WHETHER THE VARIOUS CONDITIONS AS STIPULATED U/S 10B HAS BEEN COMPLIED WITH BY THE ASSESSEE SO AS TO MAKE HIM ELIGIBLE FOR THE CLAIM MADE U/S 10B. IT IS NOT A CASE WHERE THE AO HAS ALLOWED THE DEDUCTION BY TA KING ONE OF THE POSSIBLE VIEWS. IT IS ALSO NOT A CASE OF INADEQUATE INQUIRY BUT A CASE WHERE NO INQUIRY HAS BEEN CONDUCTED BY 34 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) THE AO U/S 10B OF THE INCOME TAX ACT FOR THE ELIGIBILITY OF THE CLAIM OF THE ASSESSEE . 5. 6 WE HAVE GONE THROUGH THE DECISION O F CIT VS. VODAFONE ESSAR SOUTH LTD. 212 TAXMANN 184 (DEL.) ON WHICH THE LD . AR VEHEMENTLY RELIED. WE NOTED THAT THIS DECISION WILL NOT ASSIST THE ASSESSEE. IN THIS DECISION THE HONBLE HIGH COURT RELIED ON THE EARLIER DECISION OF THE HIGH COURT IN THE C ASE OF CIT VS. SUNBEAM AUTO LTD., 332 ITR 167 IN WHICH IT WAS HELD THAT IF THERE IS SOME INQUIRY BY THE AO IN THE ORIGINAL PROCEEDINGS, EVEN IF INADEQUATE, THAT CANNOT CLOTHE THE COMMISSIONER WITH JURISDICTION U/S 263 MERELY BECAUSE HE CAN FORM ANOTHER OPI NION. IN THIS CASE ON THE BASIS OF THIS DECISION, HONBLE HIGH COURT TOOK THE VIEW THAT IF THERE WAS ANY INQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS U/S 263 OF THE ACT MERELY BECAUSE HE HAS A DIFFERE NT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY. IN THIS DECISION UNDER PARA 11 HONBLE HIGH COURT CLEARLY LAID DOWN THAT THAT WAS NOT A CASE OF NO INQUIRY. IN THE CASE OF THE ASSESSEE WE NOTED THE AO HAS NOT MADE ANY INQUIRY WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B OR NOT. WE MAY CLARIFY THAT ELIGIBILITY OF THE CLAIM AND COMPUTATION OF THE CLAIM ARE TWO DIFFERENT THINGS. COMPUTATION ONLY DEALS WITH THE CALCULATION WHILE ELIGIBILITY OF THE CLAIM REQUIRES WHETHER THE ASS ESSEE COMPLIES WITH THE CONDITIONS FOR THE ELIGIBILITY OF THE CLAIM . 5.7 IN THE CASE OF INFOSYS TECHNOLOGIES LTD. VS. JCIT (BANG), 103 ITD 399 WE NOTED THAT THE AO EXAMINED AND CONSIDERED THE RELEVANT FACT AND ONLY AFTER CONSIDERING THOSE FACTS ALLOWED THE DEDUCTION TO THE ASSESSEE AND THEREFORE THE TRIBUNAL TOOK THE VIEW THAT IF THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS, REVISION CANNOT BE RESORTED TO. 35 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) 5.8 IN THE CASE OF HARYANA COACH BODY BUILDERS VS. ITO, 10 SOT 736 WE NOTED THAT THE AO ALLOWED THE CLAIM OF THE ASSESSEE AFTER INQUIRING INTO ALL THE ITEMS CALLED FOR THE IN QUIRY AND THEREFORE THE HONBLE TRIBUNAL TOOK THE VIEW THAT THE AOS BRIEF ORDER INQUIRING INTO ALL THE ITEMS CALLED FOR INQUIRY COULD NOT BE SET ASIDE BY THE CIT ON THE GROUND THAT THE ORDER SHOULD HAVE BEEN MORE ELABORATE OR FURTHER INQUIRIES SHOULD HAVE BEEN MADE. 5.9 IN THE CASE OF NABHA INVESTMENTS PVT. LTD. VS. UNION OF INDIA & ORS. 246 ITR 41 (DEL) WE NOTED THAT QUESTION DOES NOT RELATE TO THE LACK OF INQUIRY. THEREFORE, THIS DECISION WILL NOT ASSIST THE ASSESSEE. 5.10 IN THE CASE OF INDIAN HO TELS LTD. VS. DCIT, ITA NO. 3234/B/92 WE NOTED THE COURT QUASHED THE 263 PROCEEDINGS AS IN THAT CASE INQUIRY HAD BEEN MADE BY THE AO WITH REGARD TO THE QUESTION INVOLVED RELYING ON THE DECISION OF MUMBAI HIGH COURT IN THE CASE OF GABRIEL INDIA, 203 ITR 10 8. 5.11 IN THE CASE OF CIT VS. GABRIEL INDIA, 203 ITR 108 (MUM) THE AO HAD MADE THE INQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE AND ASSESSEE HAD GIVEN DETAILED EXPENDITURE. THE ORDER PASSED BY THE AO WAS HELD NOT TO BE ERRONEOUS S IMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THUS, IN OUR VIEW THE CASE LAW RELIED ON BY THE LD. AR FOR LACK OF INQUIRY/INADEQUATE INQUIRY WILL NOT ASSIST THE ASSESSEE. 5. 12 THE DECISION OF THE COORDINATE BENCH IN THE CASE OF THE V.N. SALGAONCAR IS BINDING ON US AND WE CANNOT TAKE A DIFFERENT VIEW AS SUGGESTED BY LEARNED AR. THIS IS A FACT THAT IN THIS CASE THE ASSESSING OFFICER HAS NOT ISSUED ANY NOTICE OR RAISED ANY QUERY TO THE ASSESSEE IN RESPECT OF ELIGIBILITY OF THE CLAIM OF EXEMPTION U/S 10B FOR CODLI UNIT DURING COURSE OF ASSESSMENT PROCEEDING. EVEN NO SUBMISSIONS WERE ALSO MADE BY THE ASSESSEE EXCEPT FILING THE DETAILS OF COMPUTATION OF CLAIM MADE BY HIM. NO DOUBT, THE ASSESSEE HAS SUBMITTED TH E 36 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) DETAILS OF COMPUTATION OF CLAIM MADE U/S 10B BUT THIS DOES NOT MEAN THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE ELIGIBILITY OF THE CLAIM OF ASSESSEE . HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83, AT PAGE 88 HAS CATEGORICALLY HELD AS UNDER: IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT THE INCOME TAX OFFICER PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE INCOME TAX OFFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO SUP PORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY IN QUIRY . ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE INCOME TAX OFFICER WAS ERRONEOUS IS IRRESISTIBLE. WE, ARE, THEREFORE OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER U/S 263(1) WAS J USTIFIED. THIS ITSELF PROVES NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER AND ALLOWING THE CLAIM U/S 10B TO THE ASSESSEE WITHOUT MAKING AN ENQUIRY WILL TANTAMOUNT THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA) WHILE HOLDING SO HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME - TAX 67 ITR 84(SC). IN THIS CASE THE INCOME TAX OFFIC ER ACCEPTED THE RETURN OF THE ASSESSEE IN RESPECT OF THE INITIAL CAPITAL, GIFT RECEIVED AND SALE OF JEWELLERY, THE INCOME FROM BUSINESS ETC. WITHOUT ANY ENQUIRY OR EVIDENCE WHATSOEVER. FOR THAT REASON THE CIT HELD THE ORDER TO BE ERRONEOUS. IN REVISION, HE CANCELLED THE ORDER AND ORDERED THE INCOME TAX OFFICER TO MAKE FRESH ASSESSMENT. IN HIS ORDER THE COMMISSIONER HAD USED CERTAIN NEW GROUNDS WHICH HAD NOT BEEN DISCLOSED TO THE ASSESSEE IN THE NOTICE GIVEN TO HIM TO SHOW CAUSE WHY THE ORDER OF THE INCOM E TAX OFFICER SHOULD NOT BE REVISED. (THIS IS THE SAME THING WHICH THE LEARNED A. R. ARGUED THAT THE CIT HAS NOT STATED IN THE SHOW CAUSE NOTICE THAT 37 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) THIS IS A CASE OF LACK OF ENQUIRY) BUT, APART FROM THIS NEW GROUND, THE HON'BLE SUPREME COURT OBSERVED AT PAGE 385 AS UNDER: 'THERE WAS AMPLE MATERIAL TO SHOW THAT THE INCOME TAX OFFICER MADE THE ASSESSMENTS IN UNDUE HURRY...THE ASSESSEE MADE A DECLARATION GIVING THE FACTS REGARDING INITIAL CAPITAL, THE ORNAMENTS AND PRESENTS RECEIVED AT THE TIME OF MARRIAGE , OTHER GIFTS RECEIVED FROM HER FATHER IN LAW, ETC., WHICH SHOULD HAVE PUT ANY INCOME TAX OFFICER ON HIS GUARD. BUT THE INCOME TAX OFFICER WITHOUT MAKING ANY INQUIRIES TO SATISFY HIMSELF PASSED THE ASSESSMENT ORDER... A SHORT STEREO TYPED ASSESSMENT ORDER WAS MADE FOR EACH ASSESSMENT YEAR... NO EVIDENCE WHATSOEVER WAS PRODUCED IN RESPECT OF THE MONEY LENDING BUSINESS DONE...NO NAMES WERE GIVEN AS TO THE PARTIES TO WHOM THE LOANS WERE ADVANCED ......' 5. 13 THUS, THE LAW AS MAY BE STATED AFTER GOING THROUGH BOTH THE DECISIONS OF SUPREME COURT IS VERY CLEAR THAT IF THE ASSESSMENT HAS BEEN MADE WITHOUT MAKING THE PROPER ENQUIRY AND APPLICATION OF MIND, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF R EVENUE. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. THE ASSESSING OFFICER CANNOT REMAIN PASSIVE ON THE FACE OF A RETU RN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS THE DUTY OF THE ASSESSING OFFICER TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE ENQUIRY. IF THERE IS FAILURE TO MAKE SUCH ENQUIRY, IN OUR OPINION, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE REVENUE HAS NOT TO PROVE THAT ITS ORDER IS ERRONEOUS AND CIT CAN REVISE IT U/S 263. EVEN THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SWARUP VEGETABL E PRODUCTS INDUSTRIES LTD. (NO. 1) VS. CIT [1991] 187 ITR 412 HAS ALSO TAKEN THE SIMILAR VIEW BY OBSERVING AS UNDER: IT IS BEYOND DISPUTE THAT, UNDER SECTION 263 OF THE I.T. ACT, THE COMMISSIONER HAS POWER TO SET ASIDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT THE ORDER OF INCOME TAX OFFICER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 38 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) HON'BLE DELHI HIGH COURT ALSO IN THE CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [197 5] 99 ITR 375 (DEL) HAS ALSO TAKEN THE SIMILAR VIEW THAT LACK OF PROPER ENQUIRY TANTAMOUNT THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 5. 14 SIMILAR ISSUE HAS ARISEN BEFORE THE SPECIAL BENCH OF I.T.A.T. CHENNAI B BENCH IN THE CASE OF RAJALAKSMI MILLS LTD. VS. INCOME TAX OFFICER [2009] 121 ITD 343 (CHENNAI) (SB). THE FACTS OF THIS CASE WERE THAT THE ASSESSEE ENCLOSED THE BALANCE SHEET ALONG WITH THE RETURN AND IN THE BALANCE SHEET THE ASSESSEE MADE A PROVISION FOR GRATUITY AMO UNTING TO RS.7,85,600/ - . THE ASSESSEE CLAIMED IT AS DEDUCTION IN THE RETURN OF INCOME. THE ASSESSING OFFICER ALLOWED THE SAME WITHOUT MAKING ANY DISCUSSION IN THE ORDER OF ASSESSMENT. THE CIT BY INVOKING THE PROVISION OF SECTION 263 TOOK THE VIEW THAT T HE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE SPECIAL BENCH OF I.T.A.T. UNDER THESE FACTS HAS HELD AS UNDER: IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER ENQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE ASSESSING OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFIC ER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN THE RETURN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMST ANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. THE WORD 'ERRONEOUS' IN THAT SECTION INCLUDES CASES WHERE THERE HAS BEEN FAILURE TO MAKE THE NECESSARY INQUIRI ES. IT IS INCUMBENT ON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES MAKE SUCH AN INQUIRY PRUDENT AND THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BEC AUSE SUCH AN ENQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 39 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) IN THE INSTANT CASE, THE ASSESSING OFFICER FAILED TO MAKE ANY ENQUIRY IN REGARD TO THE ALLOWABILITY OF THE PROVISION FOR GRATUITY. AS SUCH, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE CONDITIONS PRECEDENT FOR ASSUMING JURISDICTION UNDER SECTION 263 DID EXIST IN THE FACTS OF THE INSTANT CASE. 5. 15 WE HAVE ALS O GONE THROUGH THE DECISION OF I.T.A.T. E BENCH NEW DELHI IN I.T.A. NO.1438/DEL/09 IN THE CASE OF N.T.P.C. LIMITED VS. DY. CIT . ON THE CASE OF LACK OF ENQUIRY IN THIS JUDGMENT WHILE DEALING THE ISSUE OF LACK OF ENQUIRY, THE TRIBUNAL, UNDER PARA 14 HAS H ELD AS UNDER: 14. IN THE LIGHT OF ABOVE PROPOSITIONS LET US EXAMINE THE FACTS OF THE PRESENT CASE. ON PAGE NO. 5 OF THE PAPER BOOK, VOLUME - I, THE ASSESSEE HAS PLACED ON RECORD COPY OF THE QUESTIONNAIRE DATED 29/06/2006 ISSUED BY THE ASSESSING OFFICER. IN THIS QUESTIONNAIRE, ASSESSING OFFICER HAS CALLED FOR INFORMATION FROM THE ASSESSEE UNDER SEC. 142(1) ON FIFTEEN COUNTS. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THIS QUESTIONNAIRE CAREFULLY. PERUSAL OF THIS QUESTIONNAIRE RE VEALS THAT ASSESSING OFFICER HAS NOT A SINGLE QUESTION ON BOTH THE ISSUES. THEREFORE, IT SUGGESTS THAT HE HAS NOT CONDUCTED ANY INQUIRY ON THESE TWO ISSUES. THE CONTENTIONS OF THE ASSESSEE IS THAT IT HAS DISCLOSED ALL MATERIAL FACTS FULLY AND TRULY DURING THE ASSESSMENT PROCEEDINGS AND ASSESSMENT HAS BEEN FRAMED UNDER SEC.143(3) OF THE ACT, THEREFORE, IT BE PRESUMED THAT ASSESSING OFFICER MUST HAVE GONE THROUGH ALL THESE DETAILS. HOWEVER, HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES, HON'BLE DEL HI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES AS WELL AS IN THE CASE OF ASHOK LOGANI AND DLF POWER EQUIPMENTS, IT HAS BEEN HELD THAT IF THE ASSESSING OFFICER FAILED TO GO INTO THE ISSUES IN PROPER PERSPECTIVE AND HIS APPROACH IS PERFENTORY THEN THE ORDE R WOULD BE TERMED AS ERRONEOUS WHICH WOULD ULTIMATELY CAUSED A PREJUDICE TO THE ASSESSEE ON ESCAPEMENT OF INCOME FROM TAX. THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ASHOK LOGANI AS WELL AS IN THE CASE OF DLF POWER ARE THE LATEST DECISIONS ON THIS ISSUE. SIMILARLY, LEARNED DR HAS BROUGHT TO OUR NOTICE THE DECISION OF HON'BLE DELHI HIGH COURT DATED 15.2.2002 IN THE CASE OF CIT VS. REGENCY PARK PROPERTY MANAGEMENT SERVICES PVT. LTD. REPORTED IN [2012] TIOL PAGE 75 WHERE IT HAS BEEN HELD THAT IF ASSESSING OFFICER HAD NOT DEALT WITH THE DETAILS AND EXAMINED THE ISSUES THEN THERE WAS AN ERROR ON THE PART OF THE ASSESSING OFFICER UPON WHICH ACTION U/S 263 CAN BE JUSTIFIED. THUS, CONSIDERING ALL THESE ASPECTS, WE ARE OF THE VIEW THAT LEARNED COMM ISSIONER HAS RIGHTLY TAKEN COGNIZANCE U/S 263 OF THE ACT BECAUSE ASSESSING OFFICER HAS NOT CONDUCTED ANY INQUIRY ON THESE TWO ISSUED. 5.1 6 THIS CLEARLY PROVES THAT THE TRIBUNAL HAS ALSO TAKEN THE VIEW THAT LACK OF ENQUIRY WILL TANTAMOUNT TO BE THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE 40 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) INTEREST OF REVENUE. THE CIT HAS ALREADY RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER A ND THE ASSESSING OFFICER, AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE HAS TO RE - DECIDE THE ISSUE WHETHER THE ASSESSEE IS ENTITLED FOR THE ADDITIONAL DEPRECIATION OR NOT. 5.1 7 WE HAVE ALSO LOOKED INTO THE PLEA TAKEN BY LEARNED A. R. THAT THE CIT HAS EXTENDED THE SCOPE OF ENQUIRY. WE HAVE GONE THROUGH THE SHOW CAUSE NOTICE ISSUED U/S 263 AND NOTED THAT IN THE SHOW CAUSE NOTICE, THE CIT HAS GIVEN AN OPPORTUNITY TO THE ASSESSEE IN RESPECT OF THE CLAIM U/ S 10B . ONCE THE CIT HAS ISSUED SHOW CAUSE NOTICE IN RESPECT OF PARTICULAR ISSUE, IN OUR OPINION, ANY MATTER WHICH IS ANCILLARY TO THAT ISSUE, WILL ALSO INCLUDE THEREIN. THE FACT THAT THE ASSESSING OFFICER HAS ALLOWED THE EXEMPTION U/S 10B WITHOUT MAKING ANY ENQUIRY WILL BE WITHIN THE AMBIT THAT THE ASS ESSING OFFICER HAS FOUND ASSESSEE ELIGIBLE FOR EXEMPTION U/S 10B AND THE ORDER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE HAVE ALREADY MENTIONED IN THE PRECEDING PARAGRAPH THAT HON'BLE VARIOUS COURTS HAVE HELD THAT THE LA CK OF ENQUIRY MAKES AN ORDER TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. 5.1 8 IN OUR OPINION SO FAR AS THE CLAIM MADE BY THE ASSESSEE U/S 10B IS CONCERNED, THE CIT HAS INVOKED THE JURISDICTION IN ACCORDANCE WITH LAW AS IT IS A CASE WHERE THE AO HAD NOT MADE ANY INQUIRY AND THEREFORE THE ORDER ON THIS BASIS ITSELF IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS A SETT LED LAW THAT IF AN ORDER IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ONE ISSUE OUT OF SEVERAL ISSUES, THE ORDER PASSED U/S 263 WILL REMAIN VALID. WE, THEREFORE, ARE NOT DEALING WITH THE OTHER ALLEGATIONS LEVIED BY THE CIT WH ILE INVOKING THE JURISDICTION U/S 263 EVEN THOUGH THE LD. AR HAS VEHEMENTLY ARGUED ON THOSE ISSUES AS, IN OUR OPINION, DEALING WITH THOSE ISSUES WILL MERELY BE AN ACADEMIC EXERCISE AND EVEN IF THOSE ISSUES ARE DECIDED 41 ITA NOS. 48 & 82/PNJ/2012 (ASST. YEARS : 2006 - 07 & 2007 - 08) IN FAVOUR OF THE ASSESSEE, THE ORDER P ASSED U/S 263 CANNOT BE QUASHED. THE ORDER PASSED U/S 263 HAS TO BE UPHELD AS, IN OUR OPINION, IT HAS PASSED THROUGH TEST OF FULFILMENT OF BOTH THE CONDITIONS BY THE CIT THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST O F THE REVENUE ON THE ISSUE OF CLAIM OF EXEMPTION ALLOWED TO THE ASSESSEE U/S 10B. WE, THEREFORE, DISMISS THE APPEAL FILED BY THE ASSESSEE BY UPHOLDING THE ORDER PASSED U/S 263. 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE STANDS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 /07/2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI DATED : 1 8 /07/ 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER