Vashisti Detergents Ltd.,(Since Merged Hindustan Unilever Ltd.), Mumbai V. Dy. CIT, Ratnagiri Cir. Ratnagiri, Ratnagiri

ITA 827/PUN/2008

• Counselvise Citation: 82724514 RSA 2008
• Duration Of Justice: 4 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-04-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 05-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 32; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDER KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 827/PN/2008 (ASSTT.YEAR : 2003-04) M/S. VASHISTI DETERGENTS LTD., (SINCE MERGED HINDUSTAN UNILEVER LTD.), 165/166 BACKBAY RECLAMATION, MUMBAI. .. APPELLANT PAN NO. AAACV 4179Q VS. DCIT, RATNAGIRI CIRCLE, RATNAGIRI. .. RESPONDENT ASSESSEE BY : SRI PERCY PARDIWALA & NISHANT THAK KAR RESPONDENT BY : SRI S.K. SINGH DATE OF HEARING : 12-04-2012 DATE OF PRONOUNCEMENT : 08-06-2012 ORDER PER R.K. PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27-03- 2008 PASSED UNDER SECTION 263 BY THE CIT-II, KOLHAP UR RELATING TO ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE IN ITS VARIOUS GROUNDS OF APPEAL HA S CHALLENGED THE ORDER PASSED U/S. 263 BY THE LEARNED CIT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF DETERGENTS AND SOAPS. THE COMPANY FILED ITS RETURN OF INCOME ON 28-11-2003 DECLARING NIL INCOME WHI CH WAS PROCESSED U/S. 143(1) ON 31-03-2004. SUBSEQUENTLY, THE AO IN THE ORDER PASSED U/S. 143(3) ON 16-12-2005 DETERMINED THE INCOME AT NIL AFTER SET TING-OFF BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF THE EARLIER YEARS. IN T HE ASSESSMENT THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE WAS ALSO ALLOWED IN FULL. 2 4. SUBSEQUENTLY, THE LEARNED CIT CALLED FOR THE REC ORDS AND OBSERVED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS. 3,47,65,651/- TOW ARDS LOSS OF FIXED ASSETS SOLD, WRITTEN OFF, DISCARDED, ETC. (NET) UNDER THE HEAD MANUFACTURING AND OTHER EXPENSES. THOUGH THE SAID AMOUNT WAS ADDED BACK WHILE COMPUTING THE TOTAL INCOME, DEPRECIATION AMOUNTING TO RS. 86,86,413/- B EING 25% OF RS. 3,47,45,651/- WAS WRONGLY ALLOWED ON THE SAID ASSETS EVEN THOUGH THEY WERE NOT PUT TO USE. HE THEREFORE ISSUED NOTICE U/S.263 CALLING FOR OBJECTI ONS, IF ANY, FROM THE ASSESSEE SINCE ACCORDING TO HIM THE ORDER PASSED BY THE AO W AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. IN RESPONSE TO THE NOTICE ISSUED U/S. 263 THE AS SESSEE COMPANY FILED DETAILED WRITTEN SUBMISSIONS, A PART OF WHICH HAS BEEN REPRO DUCED BY THE LD. CIT IN HIS ORDER AND WHICH READS AS UNDER : DURING THE FINANCIAL YEAR 2002-03 THE COMPANY HAS WRITTEN OFF SOME OF ITS ASSETS AGGREGATING TO RS. 3,47,45,651/- WHICH IT HA D USED FOR THE PURPOSE OF ITS BUSINESS WHICH WAS DISCLOSED AS LOSS ON FIXED ASSETS SOLD, WRITTEN OFF, DISCARDED. HOWEVER, THE SAME WERE ADDED BACK WHIL E COMPUTING THE TAXABLE INCOME AS PER THE PROVISIONS OF THE ACT. THE COMPANY HAD NOT SOLD OR DISCARDED OR DESTROYED ANY OF THESE ASSETS. A DETAILED PHYSICAL VERIFICATION OF THE FIXED ASSETS REVEALED THAT ASSETS AMOUNTING TO RS. 3,47,45,651/- OF THE NET VALUE WER E NOT PHYSICALLY IDENTIFIABLE DUE TO VARIOUS CHANGES, REPLACEMENTS A ND CONSUMPTION. THE ASSETS WERE USED FOR THE PURPOSE OF BUSINESS. THE DEPRECIATION IS ALLOWED AT FIXED RATE ON THE WRITTEN DOWN VALUE OF THE BLOCK O F ASSETS, WHEREAS ACTUAL USEFUL LIFE OF THE ASSETS MAY VARY FROM ASSET TO AS SET. AN ASSET MAY HAVE NO USEFUL LIFE AND, THEREFORE, MAY HAVE BEEN REPLACED WITH OTHER ASSET OR CONSUMED IN THE PROCESS BUT MAY NOT HAVE BEEN DEPRE CIATED FULLY IN THE INCOME TAX BOOKS BECAUSE OF FIXED RATES OF DEPRECIA TION ON THE WDV OF THE BLOCK OF ASSETS. HOWEVER, AS PER THE ACT IT WILL S TILL BE ELIGIBLE TO BE DEPRECIATED AS PART OF BLOCK OF ASSET. ONLY MONEY PAYABLE IS REQUIRED TO BE REDUCED FOR COMPUTING THE WDV AS PER PROVISION O F THE ACT. 3 6. THE ASSESSEE ALSO CLAIMED THAT PROVISIONS OF SEC TION 32 READ WITH SECTION 43(6)(C) SUPPORT ITS CLAIM THAT THE WRITE OFF OF V ALUES OF THE ASSETS IN THE BOOKS OF ACCOUNTS IS IMMATERIAL FOR THE PURPOSE OF CALCULATI NG DEPRECIATION UNDER SECTION 32 OF THE ACT IN AS MUCH AS DEPRECIATION IS ALLOWABLE ON THE CLOSING WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AS PER THE PROVISION C ONTAINED IN THE INCOME TAX ACT, 1961. IT WAS CLAIMED THAT ONCE AN ASSET BECOME PAR T OF THE BLOCK OF ASSETS THEN IT LOSES ITS INDIVIDUAL IDENTITY AND DEPRECIATION IS A LLOWABLE ON THE ENTIRE BLOCK. THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS ARGUMENTS. 1. G.N. AGRAWAL (1996) 217 ITR 250 (BOMBAY HIGH C OURT). 2. PACKWELL PRINTERS VS. ACIT (1996) 59 ITD 340 ( JABALPUR) 3. NATCO EXPORTS VS. DCIT (2003) 86 ITD 445 (HYD) 4. SOUTH EASTERN COALFIELDS LTD., VS. JCIT (2003) 2 60 ITR (AT) 1(NAGPUR ). 5. DCIT VS. UDAIPUR DISTILLERY CO. LTD., (2002) 74 TTJ 193 (JODHPUR) IT WAS ACCORDINGLY REQUESTED TO DROP THE PROCEEDING S U/S. 263 OF THE ACT STATING THAT THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR P REJUDICIAL TO THE INTEREST OF THE REVENUE. 7. HOWEVER, THE LEARNED CIT WAS NOT SATISFIED WITH THE SUBMISSIONS MADE BY THE ASSESSEE. HE OBSERVED THAT IN THE COMPANYS AU DITED PROFIT AND LOSS ACCOUNT, THE ASSESSEE COMPANY CLAIMED A SUM OF RS. 3,47,45,6 51/- AS LOSS ON FIXED ASSETS SOLD, WRITTEN OFF, DISCARDED ETC., (NET) UNDER THE HEAD MANUFACTURING AND OTHER EXPENSES. IN THE ANNEXURE TO THE AUDITORS REPORT , THE STATUTORY AUDITORS ALSO QUALIFIED THE REPORT ON THE COMPANYS FIXED ASSETS AS FOLLOWS : THE COMPANY HAS MAINTAINED PROPER RECORDS SHOWING FULL PARTICULARS, INCLUDING QUANTITATIVE DETAILS AND SITUATION OF FIX ED ASSETS. THERE IS A PHASED PROGRAMME FOR VERIFICATION OF FIXED ASSETS D ESIGNED TO COVER ALL ASSETS OVER A PERIOD OF THREE YEARS, WHICH IN OUR O PINION IS REASONABLE HAVING REGARD TO THE SIZE OF THE COMPANY AND THE NA TURE OF ITS ASSETS. THE 4 VERIFICATION OF ASSETS AS PER THIS PROGRAMME HAS BE EN CARRIED OUT DURING THE FINANCIAL YEAR. DISCREPANCIES NOTICED ON SUCH VERI FICATION AS COMPARED WITH BOOK RECORDS HAVE BEEN PROPERLY DEALT WITH IN THE F INANCIAL STATEMENTS. 8. SIMILARLY BE OBSERVED THAT THE SCHEDULE OF FIXED ASSETS FORMING PART OF THE AUDITED BALANCE-SHEET ALSO REFLECTED A TOTAL DEDUCT ION OF RS. 6,16,41,151/- FROM THE GROSS BLOCK OF ASSETS TOWARDS PLANT AND MACHINERY ( RS. 5,76,68,302/-) FURNITURE, FIXTURES AND OFFICE EQUIPMENT (RS. 35,37,988/-) AND VEHICLES (RS.4,34,861). DEPRECIATION, UNDER THE COMPANY LAW, ALSO APPEARS T O HAVE BEEN PROVIDED FOR ONLY ON THE BLOCK OF ASSETS, NET OF THE ABOVE ADJUS TMENTS/DEDUCTIONS TO THE ASSETS. 9. THE LD. CIT NOTED THAT THE COST AUDIT REPORT OF THE COMPANY, WHICH FORMED A PART OF THE DOCUMENTS ACCOMPANYING THE RET URN DID NOT CONTAIN ANY QUALIFICATION IN ITS REPORT ON THE SUBJECT OF LOSS, DISCARDING ETC. OF FIXED ASSETS OR THE DEDUCTIONS FROM THE GROSS BLOCK OF ASSETS EVEN AFTER A STUDY OF THE MAINTENANCE OF THE FIXED ASSETS REGISTER AND DEPRECIATION. 10. THE LD. CIT OBSERVED FROM THE STATEMENT SHOWING COMPUTATION OF TOTAL INCOME, ACCOMPANYING THE INCOME TAX RETURN THAT THE ASSESSEE ADDED THE AMOUNT OF RS. 3,47,45,651/- PERTAINING TO THE LOSS ON FIX ED ASSETS, SOLD, WRITTEN OFF, DISCARDED AS IT HAS BEEN TREATED AS AN EXPENDITU RE OF A CAPITAL NATURE IN THE TAX AUDIT REPORT, U/S.44AB. HOWEVER, IN THE DEPRECIATI ON STATEMENT, FILED ALONG WITH THE RETURN, NO REFERENCE WAS MADE TO THE ABOVE AND THE DEPRECIATION WAS CLAIMED ON THE ENTIRE WDV OF THE GROSS BLOCK OF ASSETS. MO REOVER, UNLIKE THE CASE OF THE NEW FIXED ASSETS ADDED DURING THE YEAR FOR WHICH CO MPLETE DETAILS WERE FURNISHED, INCLUDING THEIR LOCATION WITH APPROPRIATE CODE NUMB ERS ON THE BASIS OF THE ASSETS 5 REGISTER, NO SUCH INFORMATION WAS PROVIDED REGARDIN G THE ASSETS THAT WERE SAID TO HAVE BEEN WRITTEN OFF ETC. 11. HE NOTED THAT THE SUBMISSIONS MADE BY THE ASSES SEE COMPANY DURING THE COURSE OF ASSESSMENT AND THE CURRENT PROCEEDINGS RE FLECT THE FOLLOWING : DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSEE HAS FURNISHED A LIST OF THE ASSETS WRITTEN OFF, DISCAR DED AS ANNEXURE-14 TO ITS LETTER DATED 15-11-2005. IN THE SAID LETTER, T HE SAME LIST WAS ONCE AGAIN FURNISHED UNDER THE HEAD DETAILS OF OLD AND OBSOLETE ASSETS WRITTEN OFF/DISCARDED. THE LIST CONTAINED 240 ASS ETS WITH THEIR DATE OF PURCHASE, GROSS BOOK VALUE (GBV) AND THE NET BOOK V ALUE (NBV) TOTALLING TO RS. 5,61,15,127/- AND RS. 3,47,45,651/ -, RESPECTIVELY. SURPRISINGLY, THIS LIST TOO DID NOT INDICATE THE LO CATION OF THESE ASSETS, UNLIKE THE CASE OF THE NEW ASSETS THAT WERE ADDED T O THE FIXED ASSETS DURING THE YEAR WITH PROPER CODED ENTRIES. SUBSEQUENTLY, IN A LETTER DATED 12-12-2005 FURNISHE D BY THE COMPANY, THE ASSESSEE COMPANYS COMMERCIAL OFFICER SHRI MAHE SH SATHE, PENNED A NOTE IN HIS OWN HAND, THE PLANT OF RS. 3, 47,45,615 WAS WRITTEN OFF DURING THE YEAR 2002-03 WHICH IS NOT SO LD TILL DATE AND IS LYING AT THE OFFICE. 12. HE OBSERVED THAT THE ASSESSEE COMPANY TOOK A DI FFERENT STAND BEFORE HIM STATING THAT THE ASSETS WERE NOT PHYSICALLY IDENTIF IABLE DUE TO VARIOUS CHANGES, REPLACEMENTS AND CONSUMPTION. HE, THEREFORE, WAS O F THE OPINION THAT THE CLAIM OF THE ASSESSEE IS FULL OF CONTRADICTIONS AND SUFFERS FROM OBFUSCATION OF MATERIAL FACTS. ACCORDING TO HIM, WHEN THE LIST CONTAINS THE ASSETS WITH LARGE NET BOOK VALUES, IT IS INCONCEIVABLE THAT THE ASSESSEE IS UNABLE TO ACCOUN T FOR EXISTENCE OF THESE ASSETS IN TERMS OF BOTH THEIR LOCATION AND USAGE. ON THE CON TRARY THE COMPANY HAS FURTHER COMPOUNDED THE MYSTERY BY CLAIMING THAT THESE ASSET S ARE LYING IN ITS OFFICE. THE COST AUDIT REPORT ALSO DID NOT COMMENT ON THESE MIS SING ASSETS INSPITE OF THEIR EXAMINING THE FIXED ASSET REGISTER. THESE CONTRADI CTIONS HAVE BEEN ACCEPTED AT FACE VALUE BY THE ASSESSING OFFICE WITHOUT PUTTING THE CLAIMS TO ANY INQUIRY OR VERIFICATION. THE AO FURTHER ACCEPTED THE CONTENTI ON OF THE ASSESSEE THAT THE INDIVIDUAL ASSETS GET SUBSUMED IN THE BLOCK OF ASS ETS FOR THE PURPOSE OF COMPUTATION OF DEPRECIATION AND THAT THE SAME IS AL LOWABLE IRRESPECTIVE OF ANY 6 PROOF THAT SUCH INDIVIDUAL ASSETS HAVE BEEN USED IN THE BUSINESS DURING THE YEAR OR NOT. RELYING ON A COUPLE OF DECISIONS, THE LEARNED CIT HELD THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE IN AS MUCH AS ALL MATERIAL FACTS RELATING TO THE ASSETS OF THE CO MPANY HAVE NOT BEEN PROPERLY VERIFIED AND THE CLAIM OF DEPRECIATION OF THE ABOVE ASSETS HAS BEEN ALLOWED EVEN WITHOUT ASCERTAINING THEIR EXISTENCE OR USE IN THE BUSINESS. HE THEREFORE CANCELLED THE ORDER PASSED BY THE AO BY INVOKING THE JURISDIC TION U/S. 263 AND DIRECTED THE AO TO RE-EXAMINE THE ENTIRE CLAIM OF DEPRECIATION O F THE ASSESSEE COMPANY INCLUDING THE PHYSICAL EXISTENCE AND USAGE OF THE A SSETS IN THE BUSINESS DURING THE YEAR AND RE-DETERMINE THE SAME AS PER LAW AND PASS NECESSARY ORDERS. 12.1 AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT T HE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED CIT ERRED IN PASSING ORDER U/S.263 O F THE ACT. 2. THE LEARNED CIT ERRED IN SETTING ASIDE THE ASSE SSMENT ORDER. 3. THE LEARNED CIT ERRED ON FACTS AND IN LAW IN HOL DING THAT, ORDER OF ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. 4. HE FURTHER ERRED IN DIRECTING THE ASSESSING OFFI CER TO REFRAME FRESH ASSESSMENT AFTER RE-EXAMINING THE ENTIRE CLAIM OF DEPRECIATION . 5. THE LEARNED CIT FAILED TO APPRECIATE THAT, ASSES SING OFFICER AFTER PROPER ENQUIRY IN THIS RESPECT HAD CORRECTLY ACCEPTED DEPRECIATION CLAIM OF APPELLANT AND PASSED THE ORDER U/S.143(23). THUS, THE ORDER PASSED BY A SSESSING OFFICER U/S.143(3) WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE. 13. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31-03-2003, (A COPY OF WHICH IS PLACED AT PAGE 18 OF THE PAPER BOOK) DREW THE ATTENTION OF THE BENCH TO THE MANUFA CTURING AND OTHER EXPENSES SHOWN AT RS. 42,93,90,167/- AS PER SCHEDULE 15. RE FERRING TO THE COPY OF SCHEDULE 15 PLACED AT PAGE NOS. 23 AND 24 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE ITEM LOSS OF FIXED ASSETS SOLD, WRIT TEN OFF, DISCARDED ETC., (NET) RS. 3,47,45,651/- ON ACCOUNT OF LOSS ON FIXED ASSETS S OLD WRITTEN OFF, DISCARDED. 7 REFERRING TO PAGE NO.33 OF THE PAPER BOOK HE SUBMIT TED THAT THE ASSESSEE, IN THE COMPUTATION OF TOTAL INCOME, HAS MADE ADDITION OF R S. 3,47,45,651/-. THEREFORE, THE ASSESSEE HAS NOT CLAIMED AN AMOUNT OF RS. 3,47, 45,651/- AS DEDUCTION. REFERRING TO TAX DEPRECIATION U/S. 32 AS PER COMPUT ATION STATEMENT (PAPER BOOK PAGE 33) HE SUBMITTED THAT THE SAME HAS BEEN SHOWN AT RS. 4,33,24,064/-. REFERRING TO PAGE NO. 34 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE CALCULATION OF DEPRECIATION UNDER I.T. RULES AS ON 31-03-2003 AND SUBMITTED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 4,7 9,861/- TOWARDS SALE PROCEEDS. REFERRING TO PAGE NO. 43 OF THE PAPER BOOK HE SUBMI TTED THAT THE TAX AUDITORS AT CLAUSE 14 OF THE AUDIT REPORT IN FORM NO 3CD HAS GI VEN THE DESCRIPTION OF ASSETS/BLOCK OF ASSETS AS PER ANNEXURE-IV. REFERRI NG TO PAGE NO. 57 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE SAID ANNEXURE-IV WHICH HAS BEEN CERTIFIED BY THE AUDITORS AND WHEREIN SALE PROCEEDS HAVE BEEN SHOWN AT RS. 4,79861/-. 14. REFERRING TO PAGE NO. 73 OF THE PAPER BOOK HE D REW THE ATTENTION OF THE BENCH TO THE NOTICE ISSUED BY AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ACCORDING TO WHICH THE AO AS PER CLAUSE VII OF THE SAID NOTICE HAS ASKED FOR THE DETAILS OF LOSS OF RS. 3.47 CRORES ON SALE OF FIXED ASSETS. REFERRING TO THE REPLY GIVEN BY THE ASSESSEE VIDE LETTER DATED 14-10-2005 (COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 75) HE SUBMITTED THAT THE ASSESSEE VIDE CLAUSE 4 OF THE SAID LETTER HAS GIVEN DETAILS OF ASSETS WRITTEN OFF/DISCARDED A S PER ANNEXURE-IV. REFERRING TO THE SAID ANNEXURE-IV (A COPY OF WHICH IS PLACED AT PAPER BOOK PAGE NOS. 79 TO 84) THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE A TTENTION OF THE BENCH TO THE GROSS BOOK VALUE AND NET BOOK VALUE SHOWN AT RS. 6, 16,41,150/- AND RS. 3,47,45,651/- RESPECTIVELY. REFERRING TO PAGE NO. 20 OF THE PAPER BOOK (WHICH IS THE SCHEDULE OF FIXED ASSETS FOR THE YEAR ENDING 31 -03-2003) HE SUBMITTED THAT AN 8 AMOUNT OF RS. 6,16,41,151/- HAS BEEN DEDUCTED FROM THE GROSS BLOCK. HE SUBMITTED THAT THE NET BOOK VALUE HAS BEEN TAKEN TO THE PROFIT AND LOSS ACCOUNT AND NOT CLAIMED AS DEDUCTION FOR TAX PURPOSE. REFE RRING TO THE REPLY GIVEN BY THE ASSESSEE VIDE LETTER DATED 15-11-2005 ADDRESSED TO THE AO (COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 88) HE SUBMITTED THAT THE ASSESS EE AS PER CLAUSE 7 HAS GIVEN THE DETAILS OF LOSS OF RS. 3.47 CRORES ON SALE OF F IXED ASSETS AS PER ANNEXURE-7. REFERRING TO THE LETTER DATED 06-12-2005 ADDRESSED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS (PAPER BOOK PAGE 89) THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER CLAUSE 1 OF THE SAID LETTER T HE ASSESSEE HAS GIVEN THE DETAILS OF LOSS OF RS. 3.47 CRORES ON SALE OF FIXED ASSETS AS PER ANNEXURE-1. REFERRING TO THE LETTER DATED 06-12-2005 ADDRESSED BY THE AO TO THE ASSESSEE (PAPER BOOK PAGE 90) HE DREW THE ATTENTION OF THE BENCH TO THE SHOW CAUS E NOTICE WHEREIN THE AO CATEGORICALLY HAS ASKED THE ASSESSEE AS PER CLAUSE 1 AND 2 OF THE SAID LETTER WHICH READS AS UNDER : (I) YOU HAVE DEBITED ASSETS OF RS. 3,47,45,615/- ( WRITTEN OFF) TO PROFIT & LOSS ACCOUNT UNDER THE HEAD MANUFACTURE AND OTHER EXPENSES. THESE ARE CAPITAL EXPENSES AND THEREFORE NOT ALLOWA BLE AS REVENUE EXPENSES. SECONDLY, THESE ARE THE DEPRECIABLE ASSE TS. THEREFORE THE SAME REQUIRE TO BE DEDUCTED FROM THE BLOCK OF PLANT & MACHINERY. PLEASE STATE AS TO WHY RS. 3,47,45,615/- SHOULD NOT BE DISALLOWED AND ADDED TO YOUR INCOME. (II) PLEASE STATE AS TO WHY THE SAID AMOUNT RS.3,47 ,45,615/- SHOULD NOT BE REDUCED FROM BLOCK OF PLANT MACHINERY IN WORKING DE PRECIATION?. 15. REFERRING TO THE REPLY GIVEN BY THE ASSESSEE VI DE LETTER DATED 12-12-2005 TO THE AO, A COPY OF WHICH IS PLACED AT PAPER BOOK PAG E 92 THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE EXPLANATION FOR DISALLOWANCE OF LOSS ON FIXED ASSETS SOLD, WRITTEN OFF, DISCARDED A MOUNTING TO RS. 3,47,45,615/- AND SUBMITTED THAT IT WAS BROUGHT TO THE NOTICE OF THE AO (PAPER BOOK PAGE 93) THAT THE ASSESSEE HAD ALREADY CONSIDERED THIS DISALLOWAN CE WHILE COMPUTING THE TOTAL 9 INCOME FOR THE RELEVANT ASSESSMENT YEAR. REFERRING TO ANOTHER LETTER DATED 16-12- 2005 ADDRESSED TO THE AO HE SUBMITTED THAT THE ASSE SSEE HAD STATED BEFORE THE AO THAT AS PER PROVISIONS OF SECTION 43(6)(C)(I)(B) TH E ASSESSEE HAD NOT REDUCED RS. 3,47,45,651/- FROM BLOCK OF PLANT AND MACHINERY WHI LE WORKING DEPRECIATION UNDER THE INCOME TAX ACT. REFERRING TO THE COPY OF THE ASSESSMENT ORDER HE SUBMITTED THAT THE AO HAS ACCEPTED THE VARIOUS SUBM ISSIONS GIVEN BY THE ASSESSEE FROM TIME TO TIME AND PASSES THE ORDER. 16. THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE A TTENTION OF THE BENCH TO PROVISIONS OF SECTION 43(6)(C)(I)(B) AND SUBMITTED THAT THE ABOVE PROVISION DEFINES THE WRITTEN DOWN VALUE IN RESPECT OF ANY BLOCK OF ASSETS BY REDUCTION OF MONEY PAYABLE. HE SUBMITTED THAT THE ASSESSEE HAS NOT RE CEIVED ANYTHING DURING THE YEAR AND HIS CLAIM WAS IN CONSONANCE WITH THE SCHEME OF BLOCK OF ASSETS. HE ACCORDINGLY SUBMITTED THAT NO 263 ACTION COULD HAVE BEEN INVOKED BY THE LD. CIT. 17. REFERRING TO PAGE 98 OF THE PAPER BOOK THE LEAR NED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE SHOW CAUSE N OTICE ISSUED BY THE LD. CIT AND SUBMITTED THAT THERE IS NO ALLEGATION IN THE SA ID NOTICE THAT NO PROPER INQUIRY HAS BEEN MADE BY THE AO. THE ONLY ALLEGATION WAS T HAT DEPRECIATION HAS BEEN WRONGLY ALLOWED. REFERRING TO PAGE 100 OF THE PAPE R BOOK HE DREW THE ATTENTION OF THE BENCH TO THE REPLY GIVEN BY THE ASSESSEE TO THE CIT VIDE LETTER DATED 25-03- 2008. REFERRING TO THE SAID LETTER HE SUBMITTED TH AT THE PROVISIONS OF SECTION 43(6)(C)(I) WERE BROUGHT TO THE NOTICE OF THE LEARN ED CIT AND IT WAS SUBMITTED THAT AS PER THE SAID PROVISION MONIES PAYABLE IS TO BE REDUCED TO ARRIVE AT THE WRITTEN DOWN VALUE FOR THE PURPOSE OF DEPRECIATION AND NOT THE WRITE OFF VALUE. IT WAS EXPLAINED THAT THE COMPANY HAD CORRECTLY NOT REDUCE D THE SAME FROM THE BLOCK OF ASSETS FOR THE PURPOSE OF CLAIMING DEPRECIATION. 10 18. REFERRING TO PARA 6 OF THE 263 ORDER THE LEARNE D COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE OBSERVATIONS OF THE LEARNED CIT WHEREIN HE HAS STATED THAT ALL MATERIAL FACTS RELATING TO THE ASSETS OF THE COMPANY HAVE NOT BEEN PROPERLY VERIFIED AND THE CLAIM OF DEPRECIATION ON THE ABOVE ASSETS HAS BEEN ALLOWED EVEN WITHOUT ASCERTAINING THEIR EXISTENCE O R USE IN THE BUSINESS. HE SUBMITTED THAT THE NOTICE IS ON DIFFERENT FOOTING, WHEREAS THE ORDER SPEAKS OF NO PROPER VERIFICATION AND NO ENQUIRY. REFERRING TO TH E DECISION OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF BAGSU DEVI BAFNA VS. CIT REPORTED IN 62 ITR 506 HE SUBMITTED THAT IF THE ORDER PASSED U/S.263 I S DIFFERENT FROM THE QUERIES IN THE NOTICE THEN THE ORDER PASSED U/S.263 CANNOT BE SUST AINED. 19. HE SUBMITTED THAT IT IS THE ALLEGATION OF THE L EARNED CIT THAT NO DEPRECIATION IS ALLOWABLE SINCE THE ASSETS ARE NOT USED. HE SUB MITTED THAT THE ISSUE AS TO WHETHER DEPRECIATION IS ALLOWABLE ON THESE ASSETS WHICH HAV E ENTERED INTO THE BLOCK OF ASSETS BUT NOT PUT TO USE DURING THE YEAR IS A DEBA TABLE ISSUE. VARIOUS SUBMISSIONS MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMEN T PROCEEDINGS SHOW THAT THE AO MADE ENQUIRY REGARDING THE DEBIT OF ASSETS OF RS . 3,47,45,615/- WHICH IS AS PER THE NOTICE ISSUED BY THE AO AND A COPY OF WHICH IS PLACED AT PAGE 90 OF THE PAPER BOOK. THEREFORE, THE LEARNED CIT IS WRONG IN STATIN G THAT NO ENQUIRY IS MADE. THE FINDING OF THE LEARNED CIT THAT WHY AMOUNT OF RS. 3 ,47,45,615/- HAS NOT BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE IS ALSO C ONTRARY TO RECORDS SINCE THE ASSESSEE HAS ALREADY MADE THE ADDITION IN THE COMPU TATION OF TOTAL INCOME. SO FAR AS THE ALLEGATION OF LEARNED CIT THAT WHY DEPRECIAT ION ON THE SAME SHALL NOT BE DISALLOWED HE SUBMITTED THAT THE ASSESSEE HAS ALREA DY REPLIED TO THE ABOVE. 20. AGAIN REFERRING TO THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF BAGSU DEVI BAFNA VS. CIT (SUPRA) HE DREW TH E ATTENTION OF THE BENCH TO 11 CLAUSE (G) OF THE ORDER AT PAGE 522 SUBMITTED THAT IF THE CIT DISCLOSES ONE OR MORE GROUNDS IN THE NOTICE BUT REVISES THE ORDER ON AN E NTIRELY DIFFERENT GROUND, NOT DISCLOSED TO THE ASSESSEE, THAT ORDER CANNOT BE SUS TAINED. 21. REFERRING TO THE DECISION OF JABALPUR BENCH OF THE TRIBUNAL IN THE CASE OF PACKWELL PRINTERS VS. ACIT REPORTED IN 59 ITD 340 H E SUBMITTED THAT NO DISALLOWANCE OF DEPRECIATION CAN BE MADE WHEN THE A SSETS HAVE ENTERED INTO THE BLOCK OF ASSETS BUT NOT PUT TO USE. 22. REFERRING TO THE DECISION OF THE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF G.R.SHIPPING LTD. VS. DCIT VIDE ITA NO. 822/MUMBAI /2005 ORDER DATED 17-07- 2008 FOR THE ASSESSMENT YEAR 2001-02 HE SUBMITTED T HAT THE TRIBUNAL IN THE SAID DECISION HAS ALLOWED THE CLAIM OF DEPRECIATION OF AN ASSET WHICH WAS INCLUDED IN THE BLOCK OF ASSET BUT IT SUFFERED AN ACCIDENT ON 0 6-03-2000 AND SUNK. ALTHOUGH THE ASSESSEE RETRIEVED THE BARGE BUT IT DID NOT GET IT REPAIRED FINDING IT UNECONOMICAL AND THEREFORE THE SAME WAS SOLD AS ON WHERE IS BASIS IN THE MONTH OF MAY/JUNE 2001. ACCORDING TO THE AO THE BARGE WAS N OT USED FOR BUSINESS DURING THE WHOLE YEAR, I.E. F.Y. 2000-01 RELEVANT TO A.Y. 2001-02 FOR WHICH THE CIT UPHELD THE DISALLOWANCE. HOWEVER, THE TRIBUNAL HEL D THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION AND THE DEPRECIATION WAS ALLOWED FO R THE ASSESSMENT YEAR 2001-02. HE SUBMITTED THAT THE ABOVE DECISION OF THE TRIBUNA L HAS SINCE BEEN UPHELD BY THE HONBLE HIGH COURT AND THE APPEAL FILED BY THE REVE NUE HAS BEEN DISMISSED. 23. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARAT ALUMINIUM CO. LTD. REPORTED IN 187 TAXMANN 1 11 HE SUBMITTED THAT THE EXPRESSION USED FOR THE PURPOSE OF BUSINESS WHEN APPLIED TO BLOCK OF ASSETS WOULD MEAN USE OF BLOCK OF ASSETS AND NOT ANY SPECI FIC BUILDING, MACHINERY, PLANT 12 OR FURNITURE IN THE SAID BLOCK OF ASSETS AS INDIVID UAL ASSETS LOSE THEIR IDENTITY AFTER BECOMING INSEPARABLE PART OF BLOCK OF ASSETS. 24. COMING TO ANOTHER PROPOSITION THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THIS IS NOT A CASE FOR INVOKING PROV ISIONS OF SECTION 263. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT REPORTED IN 243 ITR 83 HE SUBMITTED TH AT HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT WHEN THE ITO ADOPTE D ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE I N LAW. THEREFORE, IN THE LIGHT OF THE ABOVE DECISION HE SUBMITTED THAT WHATEVER BE TH E VIEW INVOKING THE JURISDICTION U/S.263 IS NOT PERMISSIBLE. 25. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY TH E LEARNED CIT HE SUBMITTED THAT THOSE DECISIONS ARE DISTINGUISHABLE AND NOT APPLICA BLE TO THE FACTS OF THE PRESENT CASE. IN THE CASE OF ACIT VS. JADGEESH C. SETHI RE PORTED IN 101 ITD 360 AND RELIED ON BY THE CIT, HE SUBMITTED THAT IN THAT CAS E THE ASSESSEE HAD PURCHASED FOREIGN CARS BUT NOT GIVEN THEM ON HIRE. SINCE NO DEPRECIATION IS ALLOWABLE UNLESS IT IS GIVEN ON HIRE TO TOURISTS DEPRECIATION COULD NOT HAVE BEEN ALLOWED. HOWEVER THE FACTS IN THE INSTANT CASE ARE QUITE DIFFERENT F ROM THAT OF THE CASE RELIED ON BY THE LEARNED CIT. THEREFORE, THE SAME IS DISTINGUISHABL E AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. REFERRING TO THE SAID DECISIO N, HE DREW THE ATTENTION OF THE BENCH TO PARA 7 OF THE ORDER AND SUBMITTED THAT IT RECOGNISES THE CONCEPT OF BLOCK OF ASSETS AND INFACT HELPS THE CASE OF THE ASSESSEE . 13 26. AS REGARDS THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SINGLA AGENCIES VS. ACIT REPORTED IN 60 ITD 410 AND RELIED ON BY THE LEARNED CIT HE SUBMITTED THAT THE SAID DECISION REFERS TO S ECTION 38(2) WHERE IN DISALLOWANCE OF PART OF DEPRECIATION OF CAR USED FO R PERSONAL PURPOSES WAS HELD TO BE JUSTIFIED. THEREFORE, THE SAME CANNOT BE APPLIC ABLE TO THE FACTS OF THE PRESENT CASE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF T HE LEARNED CIT BE SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE BE ALLOWED. 27. THE LEARNED D.R. ON THE OTHER HAND HEAVILY RELI ED ON THE ORDER OF THE CIT. HE SUBMITTED THAT DEPRECIATION CAN BE ALLOWED ONLY WHEN THE ASSETS ARE PUT TO USE. IN THE INSTANT CASE THE ASSESSEE HAS SOLD/DISCARDED AND WRITTEN OFF THE ASSETS AND CLAIMED DEPRECIATION ON SUCH ASSETS WHICH WERE NOT PUT TO USE FOR THE PURPOSE OF BUSINESS. THEREFORE, THE CIT WAS JUSTIFIED IN INVOK ING THE PROVISIONS U/S.263 OF THE I.T. ACT. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT BE UPHELD. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED VARIOUS DECISION S CITED BEFORE US. WE FIND THE NOTICE ISSUED U/S.263 BY THE LEARNED CIT READS AS U NDER : THE ASSESSMENT FOR A.Y. 2003-04 HAS BEEN COMPLETED IN YOUR CASE ON 16-12- 2005 DETERMINING TOTAL INCOME AT RS. NIL AND BOOK P ROFIT OF RS. 5,09,89,141/- U/S.115 JB OF THE ACT. 2. HOWEVER, ON GOING THROUGH THE PROFIT AND LOSS AC COUNT IT IS SEEN THAT MANUFACTURING & OTHER EXPENSES OF RS. 42,93,90,16 7/- INCLUDE AN AMOUNT OF RS. 3,47,45,651/- UNDER THE HEAD OPERATION AND OTHER E XPENSES WITH THE NARRATION LOSS ON FIXED ASSETS SOLD, WRITTEN OFF, DISCARDED ETC.(N ET) WHILE COMPUTING THE TOTAL INCOME YOU HAVE ADDED BACK THIS AMOUNT. 2.1. FURTHER AS PER YOUR SUBMISSION DATED 16-12-200 5 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THE SAID AS SETS WERE NOT REDUCED FROM THE BLOCK OF ASSETS AND DEPRECIATION HAS BEEN CLAIMED ON SUCH AS SETS AS THERE WAS NO SALE OF ASSETS WRITTEN OFF. 3. IN FACT, DEPRECIATION HAS TO BE ALLOWED ON THE A SSETS USED FOR THE PURPOSE OF BUSINESS. IN YOUR CASE THE ASSETS UNDER CONSIDERAT ION ARE SOLD/WRITTEN OFF/DISCARDED. 14 THE CLAIM OF DEPRECIATION OF RS. 86,86,413/- @25% O F RS. 2,47,45,651/- HAS BEEN WRONGLY ALLOWED DURING THE COURSE OF ASSESSMENT. 4. IN THE LIGHT OF THE ABOVE, THE ASSESSMENT FRAMED ON 16-12-2005 IS ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . IT IS, THEREFORE, PROPOSED TO PROCEED U/S.263 OF THE ACT FOR THE ASST. YEAR 2003-04. 5. YOU ARE HEREBY GIVEN AN OPPORTUNITY TO SHOW CAUS E IN WRITING AS TO WHY AN ACTION U/S.263 SHOULD NOT BE TAKEN. YOU ARE, THEREFORE, R EQUESTED TO ATTEND THE OFFICE ON 13-03- 2008 AT 12.15 PM, FAILING WHICH THE MATTER WILL BE DECIDED ON MERITS. 29. WE FIND THE LEARNED CIT REJECTING THE VARIOUS A RGUMENTS ADVANCED BY THE ASSESSEE HELD THAT THE AO ALLOWED DEPRECIATION ON T HE ASSETS WHICH WERE NOT UTILISED FOR BUSINESS PURPOSES DURING THE YEAR. TH E AO HAD NOT PROPERLY VERIFIED ALL MATERIAL FACTS RELATING TO THE ASSETS OF THE CO MPANY AND THE CLAIM OF DEPRECIATION HAVE BEEN ALLOWED WITHOUT ASCERTAINING THEIR ACCEPTANCE OR USE IN THE BUSINESS. 29.1 WE FIND THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS ASKED MORE THAN ONCE REGARDING THE DEBIT OF ASSETS OF RS. 3,47,45,615/- (WRITTEN OFF) TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD MANUFACTURI NG AND OTHER EXPENSES. SIMILARLY WE FIND THE ASSESSEE HAS ALSO REPLIED MOR E THAN ONCE THE EXPLANATION REGARDING SUCH LOSS ON FIXED ASSETS, SOLD, DISCARDE D, WRITTEN OFF AMOUNTING TO RS. 3,47,45,615/-. WE FIND THE SHOW CAUSE NOTICE ISSUE D BY THE LEARNED CIT DOES NOT CONTAIN ANY ALLEGATION THAT NO PROPER ENQUIRY HAS B EEN MADE BY THE AO AND THE ONLY ALLEGATION IS THAT DEPRECIATION HAS BEEN WRONG LY ALLOWED WHEREAS THE ORDER U/S.263 STATES THAT NO PROPER ENQUIRY HAS BEEN MADE BY THE AO. SO FAR AS THE ISSUE OF DEPRECIATION ALLOWED ON ASSETS WHICH HAVE ENTERE D INTO THE BLOCK OF ASSETS BUT NOT USED DURING THE YEAR IS CONCERNED, THE SAME IN OUR OPINION IS A DEBATABLE ISSUE. IN THE CASE OF G.R. SHIPPING LTD. VS. DCIT (SUPRA) THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD THAT ASSESSEE IS ENTITLED TO DEPR ECIATION ON ASSETS WHICH HAVE ENTERED INTO THE BLOCK OF ASSETS BUT NOT USED DURIN G THE RELEVANT ASSESSMENT YEAR. 15 THE ABOVE DECISION OF THE TRIBUNAL HAS SUBSEQUENTLY BEEN UPHELD BY THE JURISDICTIONAL HIGH COURT AND THE APPEAL FILED BY T HE REVENUE HAS BEEN DISMISSED. WE FIND THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARAT ALUMINIUM COMPANY LTD., (SUPRA) HAS HELD THAT EXPRESSION USED FOR TH E PURPOSE OF BUSINESS WHEN APPLIED TO BLOCK OF ASSETS WOULD MEAN USE OF BLOCK OF ASSETS AND NOT ANY SPECIFIC BUILDING, MACHINERY, PLANT OR FURNITURE IN THE SAID BLOCK OF ASSETS AS INDIVIDUAL ASSETS LOSE THEIR IDENTITY AFTER BECOMING INSEPARAB LE PART OF BLOCK OF ASSETS. WE FIND THE JABALPUR BENCH OF THE ITAT IN THE CASE OF PACKWELL PRINTERS (SUPRA) HAS ALSO HELD THAT NO DISALLOWANCE OF DEPRECIATION CAN BE MADE WHEN THE ASSETS HAVE ENTERED INTO THE BLOCK OF ASSETS BUT NOT PUT TO USE . THEREFORE, THE ISSUE OF CLAIM OF DEPRECIATION ON ASSETS WHICH WERE SOLD, DISCARDED O R WRITTEN OFF AND NOT PUT TO USE DURING THE YEAR BUT HAD ENTERED IN THE BLOCK OF ASS ETS IS A HIGHLY DEBATABLE ISSUE. 30. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT I N THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. (SUPRA) THAT WHEN THE AO AD OPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH T HE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. THE ALLEGATION OF THE LD. CIT THAT DEPRECIATION HAS BEEN WRONGLY ALLOWED ON A SSETS WHICH WERE SOLD, DISCARDED OR WRITTEN OFF AND THEREFORE NOT USED IN THE BUSINESS IN OUR OPINION IS A POSSIBLE VIEW. IT HAS BEEN HELD IN A NUMBER OF DEC ISIONS THAT FOR ASSUMING JURISDICTION U/S.263 THE TWIN CONDITIONS NAMELY (I) THE ORDER IS ERRONEOUS AND (II) THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE MUST BE SATISFIED. IN THE INSTANT CASE THE ORDER MAY BE PREJUDICIAL TO THE IN TEREST OF THE REVENUE BECAUSE OF HIGHER ALLOWANCE OF DEPRECIATION BUT CANNOT BE SAID TO BE ERRONEOUS SINCE THE AO HAS TAKEN A POSSIBLE VIEW AS HELD BY US IN THE PREC EEDING PARAGRAPHS. THEREFORE, 16 THE LEARNED CIT IN OUR OPINION IS NOT JUSTIFIED IN ASSUMING JURISDICTION U/S. 263. IN THIS VIEW OF THE MATTER WE SET ASIDE THE ORDER OF T HE CIT AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 31. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 8 TH JUNE 2012. SD/- SD/- (SHAILENDER KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 8 TH JUNE 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT-II, KOLHAPUR 4. CIT CONCERNED 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, PUNE BENCH, PUNE