APT Packaging ltd., Pune V. Commissioner of Income-tax - 1,

ITA 627/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9251 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-10-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Assessee Lawyers: RAJEEV THAKKAR
• Keywords: Depreciation; Opportunity of being heard; Bad and doubtful debts; Assessment record
• Section: 143(3); 263; 32

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.627/PUN/2015 / ASSESSMENT YEAR : 2010-11 APT PACKAGING LIMITED, MZSK & ASSOCIATES, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESELY ROAD, PUNE 411 001. PAN : ABPPT1716N. . / APPELLANT V/S COMMISSIONER OF INCOME TAX, AURANGABAD. . / RESPONDENT ASSESSEE BY : SHRI RAJEEV THAKKAR REVENUE BY : SMT. NIRUPAMA KOTRU / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) - I, AURANGABAD DT. 05.03.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- / DATE OF HEARING : 07.12.2017 / DATE OF PRONOUNCEMENT: 05.03.2018 2 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING OF CO-EXTRUDED TUBES AND GARMENTS. AS SESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 13.10.2010 DECLARING LOSS OF RS.1,66,42,358/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRA MED U/S 143(3) OF THE ACT VIDE ORDER DT.05.03.2013 AND THE TOTAL LOSS WAS DETERMINED AT RS.84,27,078/-. SUBSEQUENTLY, LD.CIT CALLED FOR ASSESSMENT RECORDS OF THE ASSESSEE. ON EXAMINATION OF THE RECO RDS OF THE ASSESSMENT, HE WAS OF THE VIEW THAT THE ORDER PA SSED BY AO U/S 143(3) OF THE ACT DT.05.03.2013 WAS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE FOR TWO REASONS. THE FIRST RE ASON ACCORDING TO LD.CIT WAS THAT ASSESSEE HAD CLAIMED DEDU CTION OF RS.1,11,42,549/- DEBITED UNDER THE HEAD PROVISION FOR BAD AND DOUBTFUL DEBTS BEING THE INTER CORPORATE DEPOSIT AS BE ING NOT RECOVERABLE. ACCORDING TO LD.CIT PROVISION FOR BAD AND DOUBTFUL DEBTS WAS NOT ALLOWABLE BUT WAS ALLOWED BY THE AO. THE SECOND REASON FOR THE ORDER PASSED BY AO TO BE ERRENEOUS AC CORDING TO LD.CIT WAS THAT THE ASSESSEE HAD CLAIMED DEPRECIATION O F RS.2,29,45,580/- U/S 32 OF THE ACT WHEREAS IN THE TAR (C LAUSE 15 ANNEXURE 3), DEPRECIATION U/S 32 OF THE ACT WAS CALCULATED AT RS.1,23,30,392/- WHICH WAS ONLY ALLOWABLE TO THE ASSESSEE. ACCORDINGLY, THE EXCESS AMOUNT OF DEPRECIATION OF RS.1,06,1 5,188/- CLAIMED BY ASSESSEE AND ALLOWED BY AO WAS THEREFORE NOT ALLOWABLE. HE WAS THEREFORE OF THE VIEW THAT THE AFORESAID ORDER PASSED BY THE AO WAS ON THE BASIS OF INCORRECT ASSUMPT ION OF FACTS AND WITHOUT APPLICATION OF MIND AND WAS PASSED MERELY ON THE BASIS OF WRITTEN SUBMISSIONS AND DETAILS SUBMITTED BY THE ASSESSEE 3 AND THEREFORE THE ORDER PASSED BY AO WAS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. HE ACCORDINGLY ISS UED NOTICE U/S 263 OF THE ACT DT.27.01.2015 AND CALLED UPON THE ASS ESSEE TO SHOW CAUSE AS TO WHY ORDER U/S 263 OF THE ACT NOT B E PASSED. IN RESPONSE TO SHOW CAUSE NOTICE, ASSESSEE INTER-ALIA OBJEC TED TO THE INITIATION OF PROCEEDINGS U/S 263 OF THE ACT. ON THE MER ITS OF THE OBJECTION RAISED BY THE LD.CIT ON THE ISSUE OF CLAIM OF BA D DEBTS, ASSESSEE INTER-ALIA SUBMITTED THAT ASSESSEE HAD GIVEN A LOAN OF RS.1 CRORE TO M/S. SACHIT PLASTIC PRIVATE LIMITED VIDE CH EQUE NO.095844 DT.05.01.1995. M/S. SACHIT PLASTIC PRIVATE LIMITED MADE PART PAYMENTS AGGREGATING TO RS.30 LACS IN EARLIER Y EARS AND THEREAFTER NO PAYMENT WAS MADE BY IT TO THE ASSESSEE . THE INTEREST INCOME THAT WAS RECEIVED WAS ACCOUNTED FOR BY THE ASSESSEE TILL 31.03.1997. THEREAFTER, NO INTEREST INCOME WAS RECEIVED AND HENCE, NOT ACCOUNTED FOR. IT WAS FURTHER SUBMITTED THAT SINCE THERE WAS NO RECOVERY, ASSESSEE FILED A CIVIL SU IT IN AURANGABAD IN 2001. IT WAS FURTHER SUBMITTED THAT AS PER THE LATEST AUDITED BALANCE-SHEET OF M/S. SACHIT PLASTIC PRIV ATE LIMITED AS ON 31.03.1997, ITS NET WORTH IS NEGATIVE, THE TO TAL VALUE OF ASSETS WERE RS.5.82 LACS AS ON 31.03.2009 AND THE A MOUNT DUE BY IT TO THE ASSESSEE WAS RS.111.43 LACS. CONSIDERING TH E FINANCIAL POSITION OF M/S. SACHIT PLASTIC PRIVATE LIMITED, THE AMOUNT W AS WRITTEN OFF AS BAD DOUBTFUL DEBTS THOUGH THE NOMENCLATUR E USED IN THE PROFIT AND LOSS ACCOUNT WAS PROVISION OF BAD AND DOUBTFUL DEBTS. WITH RESPECT TO THE 2 ND ISSUE BEING THE CLAIM OF DEPRECIATION, IT WAS SUBMITTED THAT THERE ARE TWO PAGES OF ANNEXURE OF DEPRECIATION ONE FOR EXISTING ASSETS AND SEC OND FOR 4 NEW SET UP AT HARIDWAR. THE SECOND SCHEDULE OF NEW A SSET REMAINED TO BE ANNEXED TO TAX AUDIT REPORT DUE TO OV ERSIGHT. IT WAS SUBMITTED THAT THE ASSESSEE HAD RIGHTLY CLAIMED DE PRECIATION. IT WAS THEREFORE SUBMITTED THAT THERE WAS NO NEED TO INITIATE PROCEEDINGS U/S SEC.263 OF THE ACT. THE SUBMISSIONS OF TH E ASSESSEE WERE NOT FOUND FULLY ACCEPTABLE TO LD.CIT. AS FAR AS THE WRITING OF BAD AND DOUBTFUL DEBTS WERE CONCERNED, HE WAS OF THE VIEW THAT TO CLAIM THE EXPENDITURE AS BAD AND DOUBTFUL DE BTS, THE DEBT MUST BE A TRADING DEBT. HE WAS FURTHER OF THE VIE W THAT U/S 36(1)(VII) OF THE ACT, ONLY BAD AND DOUBTFUL DEBTS WRITTEN OFF IS ALLOWABLE AND NOT PROVISION FOR BAD AND DOUBTFUL DEBTS. HE FURTHER NOTED THAT IN THE ASSESSEES CASE THE INTER CORPORAT E DEPOSIT WERE NEVER TAKEN INTO ACCOUNT WHILE CALCULATING THE INCOME AND THEREFORE THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING SUCH D EBTS AS BAD AND DOUBTFUL DEBTS. AS FAR AS THE CLAIM OF DEPRECIATIO N IS CONCERNED, HE FOUND THE ASSESSEES CONTENTION TO BE A CCEPTABLE. HE THEREFORE VIDE ORDER DT.05.03.2015 PASSED U/S 263 OF T HE ACT DIRECTED THE AO TO DISALLOW THE CLAIM OF BAD AND DOUBTFUL D EBTS. AGGRIEVED BY THE ORDER OF LD.CIT, ASSESSEE IS NOW IN APP EAL BEFORE US. 3. BEFORE US, THE LD. A.R. SUBMITTED THAT IN THE PRESENT C ASE THE PRE-REQUISITE CONDITIONS SPECIFIED U/S 263 OF THE ACT WERE NOT SATISFIED AND THEREFORE THE PROCEEDINGS INITIATED U/S 263 O F THE ACT LACKS JURISDICTION AND ARE BAD IN LAW. HE SUBMITTED THAT U/ S 263 OF THE ACT, THE LD. CIT CAN REVISE AN ORDER PASSED BY T HE AO ONLY ON THE SATISFACTION OF TWIN CONDITIONS NAMELY (I) THE ORDER IS ER RONEOUS 5 AND (II) IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IF ONE OF THEM IS ABSENT I.E. IF EITHER THE ORDER OF THE REVENUE IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE OR IF IT IS NOT E RRONEOUS BUT IS PREJUDICIAL TO THE INTEREST OF REVENUE RECOURSE CANNOT BE HAD TO SEC.263(1). HE FURTHER SUBMITTED THAT THE ERROR ENVISAGED BY SEC.263 IS NOT ONE WHICH DEPENDS ON POSSIBILITY OR GUESSW ORK BUT IT SHOULD BE AN ACTUAL ERROR EITHER OF FACTS OR OF LAW. HE FURTHER SUBMITTED THAT WHEN TWO VIEWS ARE POSSIBLE AND THE AO H AS TAKEN ONE VIEW WITH WHICH THE LD. CIT DOES NOT AGREE, THE ORD ER OF THE AO CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIA L TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE A O IS UNSUSTAINABLE IN LAW AND FOR THE AFORESAID PROPOSITION, HE RE LIED ON THE DECISION IN THE CASE OF MALABAR INDUSTRIAL CO., LTD., VS. C IT (2000) 243 ITR 83 (SC). THE LD AR FURTHER PLACING RELIANCE O N THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABR IEL INDIA LTD (1993) 203 ITR 108 (BOM) SUBMITTED THAT HONBLE BOMBAY HIGH COURT HAS HELD THAT AN ORDER CANNOT BE TERMED AS E RRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. THE SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISS IONER FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DE CISION IS HELD TO BE ERRONEOUS. HE FURTHER SUBMITTED THAT THE HO NBLE HIGH COURT HAS HELD THAT WHEN THE ITO HAS EXERCISED THE QU ASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO B E ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEE L SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUD ICIAL TO 6 THE INTEREST OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISIO N BECAUSE THE FIRST REQUIREMENT, NAMELY, THE ORDER IS ERRON EOUS, IS ABSENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT PREJU DICIAL TO THE INTEREST OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS O RDER CANNOT BE SUBJECT-MATTER OF REVISION BECAUSE THE SECON D REQUIREMENT ALSO MUST BE FULFILLED. 4. WITH RESPECT TO THE ISSUE OF CLAIM OF BAD AND DOUBTFUL DEBTS, LD.A.R. SUBMITTED THAT ASSESSEE HAD ADVANCED AN INTER C ORPORATE LOAN OF RS. 1 CRORE TO M/S. SACHIT PLASTIC PRIVATE LIMITED IN 1995. M/S. SACHIT PLASTIC PRIVATE LIMITED HAD REPAID RS.30 LACS TILL THE YEAR 2000 AND THEREAFTER NO PAYMENTS WERE RECEIVED BY THE ASSESSEE. HE SUBMITTED THAT THE INTEREST INCOME THAT WAS RECEIVED TILL 1997 WAS ACCOUNTED BY THE ASSESSEE AND WAS OFFERED TO TAX. THEREAFTER SINCE NO INTEREST WAS RECEIVED BY ASSESSEE , INTEREST INCOME WAS NOT ACCOUNTED FOR BY THE ASSESSEE. HE FURTH ER SUBMITTED THAT AS PER THE AUDITED BALANCE-SHEET OF M/S . SACHIT PLASTIC PRIVATE LIMITED AS ON 31.03.2009, IT HAD NEGATIVE NE T WORTH AND THE VALUE OF THE TOTAL ASSETS WAS RS.5.82 LACS AS AGA INST THE AMOUNT DUE BY IT TO THE ASSESSEE OF RS.111.43 LACS. CON SIDERING THE FINANCIAL POSITION OF THE COMPANY AND THE LOW PROBABILIT Y OF RECOVERY, IN A.Y. 2009-10, THE OUTSTANDING BALANCE OF RS.1,11,42,549/- WAS WRITTEN OFF. HE THEREAFTER POINTED TO T HE PAGES 66 TO 72 OF THE PAPER BOOK BEING THE SCHEDULE O F PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2010 AND SUBMITT ED THAT 7 THOUGH THE NOMENCLATURE USED WHILE WRITING OFF THE AMOUNT WAS PROVISION FOR BAD AND DOUBTFUL DEBTS BUT ACTUALLY IT IS W RITING OFF BAD AND DOUBTFUL DEBTS. IN SUPPORT OF HIS CONTENTION TH AT THE AMOUNT HAS BEEN WRITTEN OFF, HE POINTED TO THE SCHEDULE OF BALANCE-SHEET AS ON 31.03.2011 PLACED AT PAGE 114 OF TH E PAPER BOOK AND POINTED THAT HAD THE AMOUNT BEEN CONSIDERED AS PROVISION, THE AMOUNT WOULD HAVE RECORDED IN THE SCHEDULE OF LOANS AND ADVANCES. SINCE THE AMOUNT THAT ALREADY BEE N WRITTEN OFF IN THE YEAR 2010 AND THE AMOUNT WAS NOT SHOWN AS OUTSTANDING IN THE SCHEDULE OF LOANS AND ADVANCES. HE ALS O PLACED ON RECORD THE COPY OF THE AUDITORS CERTIFICATE WHEREIN IT WAS CERTIFIED BY THE AUDITOR THAT THOUGH THE AMOUNT HAS BE EN WRITTEN OFF AS BAD AND DOUBTFUL DEBTS UNDER PROVISION FOR BAD AND DOUBTFUL DEBTS BUT ACTUALLY IT IS A CASE OF WRITTEN OFF OF B AD AND DOUBTFUL DEBTS AND NOT A CASE OF PROVISION FOR BAD DEBTS. HE FURTHER SUBMITTED THAT WHEN THE INTEREST INCOME ARISING O UT OF THE INTER CORPORATE DEPOSIT WAS OFFERED TO TAX IN EARLIER YEAR S, THEN THE ASSESSEE HAS SATISFIED THE CONDITION TO CLAIM DEDUCTION OF BAD AND DOUBTFUL DEBTS IN SUBSEQUENT YEARS AND FOR THIS PROPOSIT ION, HE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUDUMJEE PULP AND PAPER MILLS OF BOMBAY REPORTE D IN (2015) 63 TAXMANN.COM 283 (BOM). HE FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF BAD DEBTS WAS ALLOWED BY THE AO AFTER BEING SATISFIED BY THE CLAIM OF THE ASSESSEE AND THEREFORE THERE WAS PROPER APPLICATION OF MIND BY THE AO AND THEREFORE PROCEE DINGS U/S 263 OF THE ACT CANNOT BE INITIATED FOR MERE CHANGE O F OPINION. 8 HE THEREFORE SUBMITTED THAT THE ORDER OF LD.CIT BE SET ASIDE. THE LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF LD.CIT . SHE SUBMITTED THAT ON THE ISSUE OF CLAIM OF BAD AND DOUBTFUL DE BTS, THE EXPENDITURE OF BAD AND DOUBTFUL DEBTS IS ONLY ALLOWABLE WHE N THE AMOUNT IS WRITTEN OFF IN THE BOOKS AS BAD AND DOUBTFUL DE BTS AND NOT WHEN A PROVISION FOR BAD AND DOUBTFUL DEBTS IS MADE B Y THE ASSESSEE. SHE SUBMITTED THAT IN THE PRESENT CASE, SINCE THE ASSESSEE HAD MADE A PROVISION, THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE BUT THE CLAIM WAS ALLOWED BY THE AO. SHE THEREFOR E SUBMITTED THAT LD.CIT HAS RIGHTLY HELD THAT THE ORDER OF AO TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND SHE THUS SUPPORTED THE ORDER OF LD.CIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABO UT THE INVOKING OF PROVISIONS OF SECTION 263 BY LD CIT. SEC. 263(1) OF THE ACT, THE POWERS UNDER WHICH LD CIT HAS ASSUMED POWER FOR REVISION READS AS UNDER: THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT A NY ORDER PASSED THEREIN BY THE ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFT ER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANC ES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYIN G 9 THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTIN G A FRESH ASSESSMENT. 6. THE READING OF THE ABOVE PROVISION MAKES IT VERY CLEAR THAT THE POWER OF SUO MOTU REVISION U/S 263(1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED O NLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MU ST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REV ISION U/S 263, NAMELY (I) THE ORDER IS ERRONEOUS (II) BY VIRTUE OF BEING ERRONEOUS, PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. 7. HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO ., LTD., VS CIT REPORTED IN (2000) 243 ITR 83 (SC) HAS HELD T HAT CIT HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER O F THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE O RDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVE NUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUERECOUR SE CANNOT BE HAD TO SEC.263(1). IT WAS FURTHER HELD THAT THE PROVIS ION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE AO; WHEN AN ITO ADOPTED ONE OF THE CO URSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; O R WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW W ITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ER RONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIE W TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. 10 8. IN THE CASE OF CIT VS. GABRIEL INDIA LTD REPORTED IN (1993) 203 ITR 108 (BOM), THE HONBLE BOMBAY HIGH COURT HAS HE LD AS UNDER: AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS N OT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY . THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISSIONER FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRON EOUS. CASES MAY BE VISUALISED WHERE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND, LEFT TO THE COMMISSIONER, HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE- EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QU ASI- JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE 11 TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDIC IAL TO THE INTEREST OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONE OUS ORDER CANNOT BE SUBJECT-MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. 9. IN THE PRESENT CASE, WE FIND THAT LD.CIT HAS INVOKED THE PROVISIONS OF SEC.263 OF THE ACT AND HELD THAT THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT IS TO BE ERRONEO US AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE REASON T HAT THE CLAIM OF BAD AND DOUBTFUL DEBTS WAS ALLOWED BY THE AO EVEN TH OUGH THE ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS. 10. BEFORE US, LD.A.R. HAS SUBMITTED THAT THE AMOUNT WAS ADVANCED TO M/S. SACHIT PLASTIC PRIVATE LIMITED AS INTER C ORPORATE DEPOSITS AND THE ASSESSEE HAD RECEIVED THE INTEREST ON SUCH INTER CORPORATE DEPOSITS TILL 31.03.1997 AND WHICH WAS OFFERED AS INCOME BY THE ASSESSEE. IT IS ASSESSEES CONTENTION TH AT THE FINANCIAL POSITION OF M/S. SACHIT PLASTIC PRIVATE LIMITED IS BAD , IT HAS A NEGATIVE NET WORTH OF RS.0.88 LACS AND THE VALUE OF THE TOTAL 12 ASSETS AS ON 31.03.2009 IS RS.5.82 LACS AS AGAINST THE AMO UNT DUE BY IT TO THE ASSESSEE AT RS.111.43 LACS AND THE ASSESSE E HAS ALSO FILED CIVIL SUIT FOR RECOVERY. THE AFORESAID SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN FOUND TO BE INCORRECT. ON POIN TING TO THE SCHEDULE OF PROFIT AND LOSS ACCOUNT, IT IS ASSESSEES CONT ENTION THAT THOUGH NOMENCLATURE USED IS PROVISION FOR BAD AND DOUB TFUL DEBTS BUT THE AMOUNT HAS ACTUALLY BEEN WRITTEN OFF BA D AND DOUBTFUL DEBTS AND FOR WHICH ASSESSEE HAS ALSO PLACED ON RECORD THE COPY OF THE AUDITORS CERTIFICATE, WHEREIN IT WAS CERTIFIED THAT THE AMOUNT IN REALITY HAS BEEN WRITTEN OFF AS BAD AND DO UBTFUL DEBTS AND IT IS NOT A CASE OF PROVISION. ON THE OBSERVAT ION OF LD.CIT ISSUE THAT THE AMOUNT HAS NOT BEEN CONSIDERED AS INCOME BY THE ASSESSEE IN EARLIER YEARS, IT IS ASSESSEES CONTEN TION THAT THE INTEREST AMOUNT WAS OFFERED TO TAX IN THE PAST. THE SUB MISSIONS OF THE ASSESSEE HAVE ALSO NOT BEEN FOUND TO BE INCORRECT. WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PU DUMJEE PULP AND PAPER MILLS (SUPRA) HAS HELD THAT WHEN A PART O F DEBT WAS OFFERED TO TAX IN EARLIER ASSESSMENT YEARS, THE COND ITIONS OF SEC.36(1)(VII) ARE SATISFIED AND IT WOULD THEREFORE SATISFY THE CONDITIONS FOR CLAIMING THE DEDUCTION U/S 36(1)(VII) R.W.S. 36(2)(I) OF THE ACT. BEFORE US, REVENUE HAS NOT PLACED ANY CONTR ARY BINDING DECISION IN ITS SUPPORT. FURTHER BEFORE US, REVENUE HAS N OT BROUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THAT TH E VIEW TAKEN BY THE AO WAS AN IMPERMISSIBLE VIEW OR WAS CONTRARY TO LAW OR WAS UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES NECESSITAT ING THE EXERCISING OF REVISIONARY POWERS U/S 263 OF THE ACT. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, WE ARE OF T HE VIEW 13 THAT IN THE PRESENT CASE THE CONDITION PRECEDENT FOR AS SUMING THE JURISDICTION U/S 263 OF THE ACT DID NOT EXIST AND THEREFOR E THE LD. CIT WAS NOT JUSTIFIED IN RESORTING TO THE REVISIONARY POWE RS U/S 263 OF THE ACT. WE THEREFORE SET ASIDE THE ORDERS OF LD. CIT WHEREBY HE HAS DIRECTED THE AO TO DISALLOW THE CLAIM OF BAD AND DOUBT FUL DEBTS. THUS, THE GROUND THE OF ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED ORDER PRONOUNCED ON 5 TH DAY OF MARCH, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 5 TH MARCH, 2018. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. JCIT, RANGE-1, AURANGABAD. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.