EAGLE HOME APPLIANCES P. LTD ( FORMERLY M.S, TRDER TEAM LTD), V. CIT-7,

ITA 5419/MUM/2008

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3016 (ITAT-PUNE)
• Duration Of Justice: 9 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-03-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 29-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Difference of opinion; Change of opinion
• Section: 142(1); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NO.5419/MUM/2008 / ASSESSMENT YEAR : 2005-06 M/S. EAGLE HOME APPLIANCES PVT. LTD. (FORMERLY M/S. TRADE TEAM LTD.) 4 TH FLOOR, PARMAR GALLERY, WANOWRIE, PUNE 411 040 PAN :AAACT3316M . /APPELLANT VS. ITO, WARD-7(3)-(2) MUMBAI . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 20.03.2018 / DATE OF PRONOUNCEMENT: 24.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE REVISION OR DER OF CIT-7, MUMBAI, DATED 22-07-2008 U/S.263 OF THE ACT FOR T HE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN TRADING OF THERMO FLASKS & OTHER ITEMS. ASSESSEE FILED THE RETURN DECLARING TOTAL LOSS AT RS.8,10,123/-. IN THE SCRUTINY ASSESSMENT U/S.143(3) OF THE ACT, THE ISSUE OF UNSECURED LOANS AMOUNTING TO RS.16,63,500/- WAS EXAMINED BY THE AO. HOWEVER, AT THE END OF THE ASSESSMENT PROCEEDINGS, THE ASSESSMENT WAS COMPLETED DETERMINING THE TOTAL INCOME AT RS.47,97,160/- WITHOUT MAKIN G ANY ADDITION ON THIS ACCOUNT. HOWEVER, AO MADE A COUPLE OF AD DITIONS ON 2 ACCOUNTS OF (1) SALES PROMOTION EXPENSES RS.50,40,349/- AND (2) FOREIGN TRAVEL EXPENSES. AO DISCUSSED THE ISSUE OF SALES PROMOTION EXPENSES IN A DETAILED MANNER BEFORE DISALLOWING THE ISSUE OF RS.50,40,348/- OUT OF RS.2,42,34,806 RS.5,66,930. THE ASSESS MENT HAS REACHED FINALITY AND THERE IS NO APPEAL BY THE ASSESS EE BEFORE THE CIT(A) ON THESE ADDITIONS. SUBSEQUENTLY, ON 19-05-2008, CIT-7 ISSUED A SHOW CAUSE (SC) NOTICE U/S.263 OF THE ACT WITH THE PROPOSAL TO TREAT TH E SAID ASSESSMENT ORDER AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTE REST OF THE REVENUE. ORIGINALLY, CIT ISSUED SC NOTICE TO THE ASSESSEE LISTING OUR VARIOUS ISSUES ON THE AOS FAILURE TO EXAMINE (1) THE SOURCE OF GENUINENESS OF THE UNSECURED LOANS IN GENERAL AND NEW LOANS AMOUNTING T O RS.5,96,80,600/-; (2) FAILURE TO EXAMINE THE ENTIRE ADVERTISEME NT/SALES PROMOTION EXPENSES OF RS.2.43 CRORES; (3) THE TOTAL EXPEN DITURE OF FOREIGN TRAVEL OF THE DIRECTORS AMOUNTING TO RS.1,03,25,223/ - AND RS.4,79,155; (4) CLAIM OF OFFICE RENT AMOUNTING TO RS.20,87,304/ - AND ; (5) ADDITION TO THE FIXED DEPOSITS AT RS.5,12,423/-. FURTH ER, ANOTHER SET OF ISSUES WERE INTIMATED TO THE ASSESSEE VIDE ANOTHER LETTER DATE D 04-07- 2008 AND THE SAME ARE EXTRACTED HERE AS UNDER : I. THE VALUE OF CLOSING STOCK IS SHOWN AT RS.6.91 CRORES. LIST OF STOCK IS FURNISHED WITHOUT VALUATION AGAINST ANY IT EM (ANNEXURE 10 TO REPLY). THIS WAS NOT EXAMINED WITH REFERENCE TO DE TAILS FILED IN CO.28(A) OF FORM NO.3CD. II. HUGE SALARY AND PERQUISITES APPEAR TO HAVE BEEN ALLOWED TO DIRECTORS. HOWEVER, THIS HAS NOT BEEN COMPARED WIT H THE FBT RETURN, IF ANY FILED BY THE ASSESSEE. III. LEGAL & PROFESSIONAL CHARGES ARE CLAIMED AT RS.16.92 LAKHS AS AGAINST RS.36.67 LAKHS IN THE PRECEDING YEAR. THIS ISSUE WAS ALSO NOT VERIFIED IN DETAIL. IV. AS PER DETAILS OF OTHER LIABILITIES AN AMOUNT OF RS.2.28 CR IS PAYABLE AS CUSTOMS DUTY WHICH IS ALSO DEBITED IN PU RCHASE A/C. THE 3 CLOSING STOCK WAS NOT VERIFIED TO SEE AS TO WHETHER CORRESPONDING AMOUNT ALONGWITH VALUE OF GOODS IMPORTED IS INCLUDED OR NO T. V. SALES TAX PAYABLE IS SHOWN AT RS.55,58,086/-, PROVIDENT FUND PAID AND ESIC PAYABLE ARE SHOWN AT RS.8.99 LAKHS AND RS.99,000/- RESPECTIVELY. IT WAS NOT VERIFIED WHETHER THESE PA YMENTS WERE ACTUALLY MADE. 3. IN RESPONSE TO THE SAME, ASSESSEE FILED WRITTEN SUBMIS SIONS CONTESTING ALL THE PROPOSALS OF THE CIT. AFTER CONSIDERIN G THE SAME, CIT DISCUSSED EACH OF THESE ISSUES IN HIS ORDER DATED 22-07- 2008 FROM PAGES 4 TO 9 AND FINALLY, SET-ASIDE THE AOS ORDER. AT T HE END, THE CIT DIRECTED THE AO TO MAKE A FRESH ASSESSMENT ORDER AFTER CONDUCTING NECESSARY ENQUIRIES. THE PARA NO.7 OF HIS ORDER IS RELEV ANT AND THE SAME IS EXTRACTED AS FOLLOWS : 7. IN VIEW OF THE FOREGOING, THE ASSESSMENT ORDER PASSED U/S.143(3) DATED 31-03-2007 IS HELD TO BE ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE IN SO FAR AS IT RELATES TO THE ISSUES WH ICH WERE RAISED AND ARE PART OF THIS ORDER. THE ASSESSEE ORDER IS, THEREFO RE, SET ASIDE LIMITED TO THESE ISSUES AND THE ASSESSING OFFICER IS DIRECTED TO MAKE A FRESH ASSESSMENT AFTER CALLING FOR ALL REQUISITE DETAILS, SCRUTINIZING THEM PROPERLY AND ALSO AFTER CONDUCTING NECESSARY ENQUIR IES AS MENTIONED ABOVE. THE ASSESSEE SHALL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD. CIT DISCUSSED EACH OF THE AFORESAID ISSUES SEPARATELY AN D FOUND NEED FOR SETTING ASIDE THE ORDER OF THE AO DATED 31-12 -2007. CITS FINDING ON THESE ISSUES IS CULLED OUT IN THE FOLLOWING PARAGRAPH. 4. REGARDING THE CLAIM OF UNSECURED LOANS BALANCE OF RS.5.97 CRORES (ROUNDED OFF), THE CIT OPINED ADVERSELY BASED ON THE IN FORMATION FILED BY THE ASSESSEE BEFORE HIM. ASSESSEE FILED THE LEDGER EX TRACT AND THERE ARE CERTAIN DISCREPANCIES QUA THE BALANCES IN THE BOOKS OF ACCOUNT. M/S. EQUITABLE FINANCE LTD. IS THE CREDITOR. ASSESSEE EXPLA INED THE DISCREPANCY. THE RECONCILIATION FILED BY THE ASSESSEE IN THIS REGARD ON THE MINOR DIFFERENCE IN FIGURES WAS FOUND UNSATISFACTORY TO T HE CIT. 4 SIMILARLY, ON THE ISSUE OF SALES PROMOTION EXPENSES, CIT NOT ED MERE DISALLOWANCE OF RS.50,43,349/- IS NOT ADEQUATE AS CERTAIN OT HER ITEMS OF CAPITAL NATURE REQUIRES CAPITALIZATION OR DISALLOWANCE. FURTH ER, THE CLAIM OF EXPENDITURE OF RS.8,69,336/- IS DEBITED BY THE ASSES SEE ON ACCOUNT OF NEW PRODUCT DEVELOPMENT. ANOTHER AMOUNT OF RS.2.70 LAKHS WAS DEBITED TOWARDS SALTON SERVICE FRANCHISEE CHA RGES. FINALLY, THE CIT HELD THAT THESE EXPENSES INCURRED IN CONNECTION WITH THE DEVELOPMENT OF BRANCH SANJEEV KAPOOR TANDOOR ARE OF CAPITAL IN NATURE. 5. SIMILARLY, IN CONNECTION WITH THE EXPENDITURE OF RS.1,18,05,5 01/- DEBITED TO M/S. SIMRAN INTERNATIONAL PVT. LTD., THE CIT HE LD THAT THE AO FAILED TO OBTAIN DETAILS FROM THE ASSESSEE. THE FACT THAT THE AO ACCEPTED THE CLAIM OF FOREIGN TRAVEL EXPENDITURE/TOUR EXPENSES, TRAVELLING EXPENSES OF THE DIRECTORS AND OTHERS WITHOUT CALLING FOR IN FORMATION, WAS ALSO HELD BY THE CIT, AS THE FAILURE OF THE AO IN CONDU CTING PROPER VERIFICATION OF FACTS. FURTHER, THE FAILURE OF THE AO IN NOT V ERIFYING THE CLAIM OF RENT PAID TO VARIOUS LANDLORDS, FAILURE TO CALL FOR THE PURCHASE BILLS OF THE NEW ASSETS ADDED TO THE DEPRECIATION SCHEDULE , CLOSING STOCK VALUATION DETAILS, SALARY AND PERQUISITE DETAILS OF THE DIRECTO RS, CLAIMS RELATING TO THE PROVISION OF SALES TAX, PF, ESI PAYMENTS, LE GAL AND PROFESSIONAL CHARGES FOR WANT OF CUSTOM DUTY PAYABLE AMOU NTING TO RS.2.28 CRORES ETC., WERE ALSO HIGHLIGHTED BY THE CIT FOR C ONSIDERING THE ORDER OF THE AO AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF THE REVENUE. EVENTUALLY, THE ASSESSMENT ORDER WAS S ET ASIDE ON THESE ACCOUNTS AND THE AO WAS DIRECTED TO MAKE A FRES H ASSESSMENT AFTER CALLING FOR THE REQUISITE DETAILS, PROPER SCRUTINY AFTER CONDUCTING NECESSARY ENQUIRIES ETC. 5 6. AGGRIEVED WITH THE SAID REVISION ORDER OF THE CIT, THE ASSESSEE FILED THE FOLLOWING CONCISE GROUNDS OF APPEAL : GROUNDS OF APPEAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE ORDER PASSED BY LD.CIT-7, MUMBAI U/S.263 IS WITHOUT JURISDICTION INASMUCH AS HE FAILED TO POINT OUT THE EXACT ERROR IN THE ASSESSMENT ORDER OF THE A.O. ONLY OBSERVING WHAT THE ASSESSING OFFICER SHOULD HAVE DONE AND WHAT SHOULD NOT HAVE BEEN DONE AND THE SHO W CAUSE NOTICE REVEALS THAT NO SUCH SATISFACTION IS RECORDED ON WH ICH GROUND THE ACTION U/S.263 IS TAKEN (ORIGINAL GROUND NOS. 1 & 2 &3). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ASSESSMENT ORDER BY THE AO HAS BEEN FINALIZED AS PE R THE POSSIBLE VIEWS AVAILABLE AS LAID DOWN BY JUDICIAL VERDICTS. THE LD.CIT-7 HAS ASSUMED IN HIMSELF THE ROLE OF ASSESSING OFFICER BY PASSING SUCH ORDER U/S.263 OF THE ACT. IN VIEW OF THIS THE ORDER OF L D.CIT IS WITHOUT JURISDICTION AND IT BE QUASHED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND FAILURE OF THE CIT-7, MUMBAI TO CONSIDER OBJECTIVEL Y THE WRITTEN SUBMISSIONS IN RESPONSE TO SHOW CAUSE NOTICE U/S.26 3(1) HAS RESULTED INTO NON-RECORDING OF SATISFACTION THAT ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE ACTION OF THE CIT-7, MUMBAI U/S.263 IS ITSELF ERRONEOUS AND THERE FORE WITHOUT JURISDICTION. IT BE QUASHED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW THE LD.CIT-7, MUMBAI ERRED IN HOLDING THAT ERRONEOUS ORDER MEANS WRONG ORDER BUT FAILED TO TAKE INTO CONSIDERATION THAT ERRONEOUS O RDER MEANS WHICH LACKS PATENT JURISDICTION AND ERROR MUST BE WITH REFERENC E TO JURISDICTION IN THE ABSENCE OF SUCH SATISFACTION RECORDED THE ORDER U/S .263 IS WITHOUT JURISDICTION, ILLEGAL, PERVERSE AND BE QUASHED. 5. THE APPELLANT CRAVES LEAVE TO ADD/AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. FROM THE ABOVE CONCISE GROUNDS, IT IS EVIDENT THAT ALL O F THEM REVOLVES AROUND THE LEGAL ISSUE OF ASSUMING JURISDICTION BY THE CIT U/S.263 OF THE ACT. ACCORDING TO THE ASSESSEE, THE CIT S FAILURE TO PINPOINT THE ERRORS IN THE REGULAR ASSESSMENT ORDER OF THE AO CONTRIBUTES TO THE UNSUSTAINABILITY OF HIS REVISION ORDER PA SSED U/S.263 OF THE ACT. AS PER THE ASSESSEE, THE CIT SHOULD BE SAT ISFIED ABOUT THE EXACT ERRORS IN AOS ORDER LEADING TO THE LOSS OF REVENU E IN THE REGULAR ASSESSMENT ORDER IN AS MUCH AS IT IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE. FURTHER, AS PER THE ASSESSEE, THE CIT SHOULD RESIST FROM 6 THRUSTING HIS VIEWS IN ANY MATTER WHEN THE AO ALREADY T OOK A POSSIBLE VIEW ON THE SAME. ASSESSEE CLAIMS THAT THE CHANGE OF OPINION-BASED REVISION ORDER OF THE CIT IS INVALID AND UNSUSTAINABLE. ACCO RDING TO THE ASSESSEE, FAILURE OF THE CIT IN NOT RECORDING THE SATISFACT ION MAKES HIS ORDER UNSUSTAINABLE IN LAW. 7. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT RAISED SERIES OF ISSUES AS DISCUSSED ABOVE FOR COMING TO T HE CONCLUSION THAT THE REGULAR ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORD ING TO THE LD. COUNSEL FOR THE ASSESSEE, ALL THESE ISSUES WERE SUBJECT M ATTER OF SCRUTINY BY THE AO IN THE REGULAR ASSESSMENT DATED 31 -12-2007. AS PER THE LD. COUNSEL, AO LIKE ANY OTHER AO, PICKED UP CERTAIN C RUCIAL CLAIMS LIKE THE UNSECURED LOAN AND THE SALES PROMOTION EXPENSE S AND NOT ALL THE ITEMS LISTED BY THE CIT. AO EXAMINED THOSE ISSUES AN D MADE THE ADDITIONS AS DISCUSSED ABOVE. IN SUPPORT OF THE SAME, L D. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE PAPER BOOK IN GENERAL AND THE CONTENTS OF PAGES 1 (ASSESSEES LETTER DATED 07-06-200 7), PAGE 10 (ASSESSEE-S LETTER DATED 26-06-2007 AND PAGE 61 (ORDER SHEET ENTRIES, PAGE 62 (ASSESSEES LETTER DATED 26-06-2007, PAGE 63, A SSESSEES LETTER DATED 07-07-2007 AND PAGE 66 (LIST OF ITEMS THROUGH NOTIC E U/S. 142(1) OF THE ACT AND SERVICE OF NOTICE ISSUED U/S.143(2) AND SUBM ITTED THAT ALL THE LIST OF ISSUES DISCUSSED IN THE REVISION ORDER OF THE C IT WERE SCRUTINISED BY THE AO DURING THE REGULAR ASSESSMENT PRO CEEDINGS ITSELF. REFERRING TO THE UNSCRUTINIZED ONES, LD. COUNSEL SUBMITTED THAT THEY ARE NOT UNDER THE LENS OF THE AO. AS SUCH, THE CIT ALSO DID NOT FIND ANY EXACT ERROR IN THE CLAIM OF THE ASSESSEE ON SUCH ISSUES. 7 8. TO ELABORATE THE ABOVE, BRINGING OUR ATTENTION TO THE ISSUE RELATING TO UNSECURED LOANS OF RS.5.97 CRORES (ROUNDED OFF) , LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO ITEM NO.7 OF P AGE 3 AND SUBMITTED THAT THE DETAILS OF LOANS TAKEN WERE FURNISHED BY THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HIS ISSUE WAS UNDISPUTEDLY EXAMINED BUT FOR THE TECHNICAL DEFECTS SUCH AS LACK OF PROPER SIGNATURE, LACK OF PAN NUMBER, ETC. IDENTIFIED BY THE CIT. OTHERWISE, THIS IS A CASE WHERE THE ISSUES WERE EXAMINED AND A VIEW WAS TAKEN BY THE AO. SIMILARLY, REGARDING THE CAPITALISATION OF CERTAIN OTHER EXPENDITURES IN CONJUNCTION WITH DISALLOWANCE OF AMO UNT OF RS.50,40,349/-, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR A TTENTION TO PAGES 27 TO 39 OF THE PAPER BOOK AND SUBMITTED THAT T HE ASSESSEE COMPLIED WITH THE REQUIREMENT OF FILING THE DETAILS DURING THE REGULAR ASSESSMENT PROCEEDINGS. AFTER DUE EXAMINATION OF THE SAM E, THE AO OPINED TO CAPITALISE THE EXPENDITURE ONLY TO THE EXTENT OF RS.50,40,349/-. THEREFORE, AS PER THE LD. COUNSEL, IT IS A CA SE OF THRUSTING THE OPINION OF THE CIT IN PLACE OF VIEW TAKEN BY THE AO. THIS KIND OF DECISION OF CIT IN THE REVISION ORDER IS UNSUSTAINABLE WITHIN THE SCOPE OF SECTION 263 OF THE ACT. SAME IS THE CASE WITH R EST OF THE AREAS IDENTIFIED BY THE CIT IN POINTING OUT THE FAILURE OF THE AO IN VERIFYING THE DETAILS DURING THE REGULAR ASSESSMENT PROCEEDINGS. THERE FORE, RELYING ON THE JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. 203 ITR 108, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT SECTION 263 OF THE ACT OUGHT NOT BE INVOKED IN CAS ES WHERE MULTIPLE VIEWS ARE POSSIBLE ON AN ISSUE AND A VIEW IS ALREAD Y TAKEN BY THE AO IN THE MATTER DURING THE REGULAR ASSESSMENT. 8 9. FURTHER, MERE FAILURE OF THE AO IN COMPLETING CERTAIN PRO CEDURES IN MATTERS OF INVESTIGATION OR ENQUIRY ON AN ISSUE UNDERT AKEN BY THE AO DURING THE REGULAR ASSESSMENT PROCEEDINGS, CANNOT GRAN T THE POWER OF JURISDICTION TO THE CIT U/S.263 OF THE ACT ON THE SAME; M ORESO, WHEN THE CIT HIMSELF FAILED TO INDICATE THE EXACT ERRORS IN THE O RDER OF THE AO WHICH HAS THE EFFECT OF LOSS TO THE REVENUE. FURTHER, REFE RRING TO THE SATISFACTION RELATED ISSUES, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT IN NONE OF THE 9 ISSUES UNDERTAKEN BY THE CIT DURING P ROCEEDINGS U/S.263 OF THE ACT, CIT DID NOT PINPOINT ANY QUANTIFIABLE REV ENUE LOSS AGAINST THE INTEREST OF REVENUE. HE MERELY MENTIONED TH AT THERE IS FAILURE OF VERIFICATION. IN SUCH CASES, AS PER THE ASSESSEE S COUNSEL, THE ORDER U/S.263 OF THE ACT PASSED BY THE CIT IS UNSUSTAINABLE. 10. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEA VILY ON THE ORDER OF THE CIT AND SUGGESTED THAT THE AO FAILED MISERAB LY IN MAKING ANY ENQUIRY TO ITS LOGICAL END. REFERRING TO THE CLAIM OF UNS ECURED LOANS OF RS.5.97 CRORES, LD. DR SUBMITTED THAT AO SHOULD HAVE EX AMINED THE SOLITARY CREDITOR, I.E. M/S. EQUITABLE FINANCE LTD. BY ISSUE O F A NOTICE U/S.131 OF THE ACT. FURTHER, REFERRING TO THE SALES PROM OTION EXPENSES TOO, LD. DR SUBMITTED THAT AO IS CONSERVATIVE IN RESTRICTIN G THE CAPITALISATION TO ONLY RS.50,40,349/- LEAVING OTHER RELATED IT EMS, WHICH ARE OTHERWISE ELIGIBLE FOR CAPITALISATION LEGALLY. 11. DURING REBUTTAL ON THESE ISSUES, LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THESE ISSUES ARE DEBATABLE ONES. AS SUC H, THERE IS NO LAW TO SUPPORT THE FACT THAT SUCH ITEMS REQUIRE DISALLOWA NCE. REFERRING TO THE REST OF THE ISSUES, LD. DR SUBMITTED THAT THERE IS FAILURE ON THE PART OF THE AO IN UNDERTAKING THE DUE VERIFICATION OF VARIOU S CLAIMS OF THE ASSESSEE AS INDICTED BY THE CIT IN HIS REVISION ORDE R. REFERRING TO 9 THE PROVISIONS OF EXPLANATION 2 TO SECTION 263 OF THE ACT, LD. DR SUBMITTED THAT FAILURE TO UNDERTAKE DUE VERIFICATION, WHICH S HOULD HAVE BEEN DONE, MAKES THE ORDER OF THE AO ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THERE IS N O REQUIREMENT FOR IDENTIFYING THE ERRORS AND QUANTIFYING THE LOSS OF REVENUE. 12. ON THIS ARGUMENT, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE PROVISIONS OF THE SAID EXPLANATION 2 TO SECTION 263 OF THE ACT DOES NOT APPLY TO THE ASSESSMENT YEAR UNDER CONSIDERATION, I.E. A.Y. 2005- 06. FURTHER, BRINGING OUR ATTENTION TO THE PAPER BOOK, L D.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE ASSE SSEE FILED THE RETURN OF LOSS AND THE ASSESSED INCOME IS QUANTIFIED AT RS .47,97,160/- BY THE AO IN THE ASSESSMENT MADE U/S.143(3) OF THE ACT. IN THE PROCESS, THE AO ISSUED VARIOUS LETTERS/NOTICES AND CONDU CTED SCRUTINY OF ACCOUNTS AND CLAIMS. ACCORDING TO THE SAME, THE ASSE SSMENT ORDER, WHICH IS MADE AFTER CONSIDERING THE DETAILS, SUBMISSION AND INFORMATION, CANNOT BE REVISED U/S.263 OF THE ACT. RELYING ON THE JUDGMENTS OF JURISDICTIONAL HIGH COURT IN THE CASE CIT VS. GAB RIEL INDIA LTD. 203 ITR 108, CIT VS. DEVELOPMENT CREDIT BANK LTD. 32 3 ITR 206 AND THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN TH E CASE OF RUPALI R. DESAI VS. ACIT 88 ITD 118 (TM), LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THE PRESENT ORDER OF THE CIT IS UNSUSTAINABLE AS THE AO HAS ALREADY EXAMINED THE ISSUES AND FOLLOWED DUE PROCESS OF LAW IN MAKING THE REGULAR ASSESSMENT ORDER. 13. WE HEARD BOTH THE PARTIES ON THE ISSUE RELATING TO VARIOUS ASPECTS AND ARGUMENTS RAISED BY BOTH THE PARTIES. WE HAVE A LSO PERUSED THE PAPER BOOK FILED BEFORE US AND THE DECISIONS RELIED ON BY T HE LD. COUNSEL FOR THE ASSESSEE. 10 AT THE END OF HEARING, WE FIND THE ARGUMENTS BY THE LD. C OUNSEL FOR THE ASSESSEE REVOLVE AROUND (1) THE CHANGE OF OPINION ON CERTAIN ISSUES, (2) THE ABSENCE OF SATISFACTION OF THE CIT ON LOSS OF REVENUE, (3) THE FAILURE OF CIT TO PINPOINT THE EXACT ERRORS IN THE DEC ISIONS OF THE AO, (4) THE FAILURE TO QUANTIFY THE LOSS OF REVENUE/PREJUDICIALITY OF THE DECISION OF THE AO, AND (5) THE LACK OF PROPER VERIFICATION/ENQ UIRY INTO THE LISTED ISSUES BY THE CIT ETC. WE NEED TO ATTEND TO THE SAME AND SHALL TAKE UP THESE OBJECTIONS FOR ADJUDICATION IF THEY ARE SUSTAINABLE LEGALLY. A. REGARDING THE ALLEGATION OF CHANGE OF OPINION, WE FIND THA T THE AO EXAMINED THE CLAIMS RELATING TO THE (1) UNSECURED LOANS OF R S.5.97 CRORES AND ALSO (2) THE ISSUE OF CAPITALIZATION OF CERTAIN PR OMOTION EXPENSES. AO MADE DISALLOWANCE ON THIS ACCOUNT TOO TO T HE EXTENT OF RS.50,43,349/-. THE QUESTIONNAIRES, REPLY FROM THE ASSESSEE , THE DETAILS GATHERED BY THE AO SUPPORTS OUR FINDING. THUS, AO TOOK A VIEW ON THESE ISSUES AND THEREFORE, THE OBSERVATIONS OF THE C IT IN THE REVISION ORDER CONSTITUTE A CASE OF CHANGE OF OPINION ON T HESE ISSUES. CONSEQUENTLY, THE ORDER OF AO NEED NOT BE SET-ASIDE ON ACCOUNT OF THESE ISSUES. AS SUCH, THE FAILURE OF THE AO TO CAPITALIZE SOME MO RE ITEMS OF EXPENDITURE CANNOT BE HELD AS SUSTAINABLE ONE AS SUCH IS SUE SUFFERS FROM THE DEBATABILITY AND MULTIPLE VIEWS ARE POSSIBLE ON THE SAME. THEREFORE, THE SAME IS OUTSIDE THE SCOPE OF SECTION 263 O F THE ACT. WE ORDER AO ACCORDINGLY. B. REGARDING THE OTHER ITEMS PICKED UP BY THE CIT NEVE R VERIFIED BY THE AO, WE FIND THAT IT IS TRUE CERTAIN ITEMS WERE NOT EXA MINED AT ALL BY THE AO, IN THE REGULAR ASSESSMENT ON THESE ISSUES. IN THIS REGARD, WE FIND THAT IT IS NOT THE CASE OF THE CIT THAT THESE ISSUES WERE INITIALLY IDENTIFIED BY THE AO FOR ENQUIRIES IN THE REGULAR ASSESSMENT AND AO 11 FAILED TO EXAMINE THE SAME AT ALL. ON FACTS, THESE ARE THE FRESH ISSUES SHORTLISTED BY THE CIT AND IN HIS OPINION, THEY NEED VERIFIC ATION. IT IS ALSO NOT THE CASE OF THE CIT THAT THESE ITEMS OF CLAIMS IN HIS FRESH LIST BLEED THE TAX CAUSING THE LOSS OF REVENUE IN SO FAR PREJ UDICIAL TO THE INTEREST OF REVENUE. IN FACT, THE CIT FAILED TO PINPOINT THE EXACT ERRORS IN THE CLAIM OF THE ASSESSEE, WHICH HAS THE EFFECT OF ERRONEO US/PREJUDICIAL NATURE OF THE ORDER OF THE AO. THEREFORE, IN OUR VIEW, IT IS THE CASE OF SURMISES, THAT THE CIT PICKED UP THE LIST OF ITEMS FOR PICKIN G THE LACUNA IN THE ORDER OF THE AO. IN OUR VIEW, THE SAME IS OUTSIDE THE SCOPE OF SECTION 263 OF THE ACT. ACCORDINGLY, WE ORDER. FURTHER, ON FAILURE OF AO IN TAKING UP VERIFICATION ON CERTAIN ISSUES, WE FIND MERE ALLEGATION OF FAILURE TO VERIFY CERTAIN CLAIM S AND FAILURE TO COMPLETE THE ENQUIRY PROCESS TO THE LOGICAL END CANNOT MAKE THE ORDER OF THE AO ERRONEOUS WHEN THE ERRORS ARE NO T IDENTIFIED AND PRIMA-FACIE LOSS OF REVENUE IS NOT REASONABLY QUANTIFIED. AS SUCH, THE PRE-AMENDED PROVISIONS OF SECTION 263 OF THE ACT APPLY TO THE FACTS OF THE CASE FOR THE A.Y. 2005-06. THEREFORE, ON THE GROUND O F IMPROPER VERIFICATION, THE ALLEGATIONS OF THE CIT CANNOT BE UPHELD ON OTHER ISSUES RAISED IN THE ORDER OF THE CIT. FURTHER, IF THERE ARE MAN Y CLAIMS MADE BY THE ASSESSEE IN THE RETURN OF INCOME AND COUPLE OF TH EM WERE EXAMINED BY THE AO FOR DEEP SCRUTINY LEAVING REST OF THE M, THE CIT CANNOT PICK UP REST OF THE ISSUES FOR INVOKING THE PROVIS IONS OF SECTION 263 OF THE ACT WITHOUT RECORDING SATISFACTION ABOUT THE LO SS OF REVENUE ON REST OF THE ISSUES. IT IS A SETTLED LEGAL POSITION OF LA W THAT THE CIT IS UNDER OBLIGATION TO GIVE SATISFACTION OR INDICATE THE ERRONE OUS ASSUMPTION OF LAW OR A FACT ON ANY ISSUE PICKED UP OR DISC USSED BY THE CIT IN HIS REVISION ORDER U/S.263 OF THE ACT. IN THIS CAS E, CIT FAILED TO 12 DO SO. THEREFORE, THE LD. COUNSELS ARGUMENTS REVOLVING A ROUND THE ABSENCE OF SATISFACTION OF CIT ABOUT THE ERRONEOUS ASSUM PTION OF LAW OR FACT LEADING TO THE LOSS OF REVENUE, ARE ALLOWED. PER CONTR A, THE ARGUMENTS OF LD. DR FOR THE REVENUE STANDS DISMISSED. A CCORDINGLY, ON THE LEGAL ISSUES, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. CONSEQUENTLY, THE GROUNDS OF ASSESSEE ON MERITS STAND DISMISSED AS ACADEMIC. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MAY, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 24 TH MAY, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT-7, MUMBAI 4. , , A BENCH PUNE; 5. / GUARD FILE.