M/s Himadri Industries Ltd, Kolkata V. C.I.T Central - III,kolkata, Kolkata

ITA 889/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4673 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 19-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Revision of order; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.889/KOL/2013 ASSESSMENT YEAR: 2009-10 M/S. HIMADRI INDUSTRIES LTD. VS. COMMISSIONER OF INCOME-TAX, (PAN:AAACH6475M) CENTRAL-III, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 19.05.2016 DATE OF PRONOUNCEMENT: 01.06.2016 FOR THE APPELLANT: SHRI RAVI TULSIYAN, AR FOR THE RESPONDENT: SHRI NIRAJ KUMAR, CIT, DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT, CENTRAL-III, KOLKATA VIDE M. NO. CIT/C-III/KOL/263 ORDER/12-13/3 518-14 DATED 05.03.2013. ASSESSMENT WAS FRAMED BY DCIT, CC-XX, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE HIS ORDER DATED 31.12.2010. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF A SSESSEE IS AS TO WHETHER THE LD. CIT IS JUSTIFIED IN INVOKING THE REVISIONARY JURISD ICTION U/S. 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF OPERATING COLD STORAGE, BESIDES WHICH IT ALSO EA RNED INCOME BY WAY OF INTEREST AND DIVIDEND. DURING THE PERIOD CORRESPONDING TO AY.200 9-10, IT EARNED DIVIDEND INCOME OF RS.90,58,000/- FROM ONE SISTER COMPANY ONLY VIZ. M/ S HIMADRI CHEMICALS & INDUSTRIES LTD. IN THE RETURN OF INCOME FILED BY THE ASSESSEE COMPANY FOR AY.2009-10, THE ASSESSEE COMPANY OFFERED FOR DISALLOWANCE U/S. 14A OF THE AC T, AN AMOUNT OF RS.22,584/- TOWARDS EARNING OF THE AFORESAID DIVIDEND INCOME. D ETAILED CALCULATIONS TAKING INTO CONSIDERATION THE DIFFERENT ITEMS OF EXPENDITURE AN D THE PROBABLE CONTRIBUTIONS THEREOF TO THE EARNING OF THE DIVIDEND INCOME WERE PROVIDED . THE LD. AO WAS SATISFIED ABOUT THE REASONABLENESS OF THE SAID AMOUNT OF DISALLOWAN CE U/S. 14A OF THE ACT. ACCORDINGLY, 2 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 HE PASSED THE ASSESSMENT ORDER FOR AY.2009-10, U/S 143(3) OF THE ACT, ON 31.12.2010, ACCEPTING THE SAID DISALLOWANCE U/S 14A OF THE ACT AS OFFERED BY THE ASSESSEE COMPANY. THE LD. CIT ISSUED SHOW CAUSE NOTICE U/S. 263 OF TH E ACT AND THE LD. CIT REVISED THE SAID ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT , BY HIS ORDER U/S 263 OF THE ACT PASSED ON 05.03.2013. IN THE SAID REVISION ORDER, T HE LEARNED CIT HELD THAT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A(2) OF THE ACT, IT WAS MANDATORY FOR THE LD. AO TO MAKE DISALLOWANCE U/S. 14A OF THE ACT, BY STRICTLY APPLYING RULE 8D OF THE INCOME TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES. HE HELD THAT FOR NOT DOING SO, THERE HAD BEEN UNDER-ASSESSMENT OF RS.10, 20,594/- AND CONSEQUENT UNDERCHARGE OF RS.3,15,564/-. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE CIT U/S 263 OF THE INCO ME-TAX ACT, 1961, IS ARBITRARY, ERRONEOUS, WITHOUT PROPER REASONS, INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT ERRED IN HOLDING THAT THE ASSESSMENT HAD BEEN COMPLETED BY THE A.O. WITHOUT A PPLICATION OF MIND AND HENCE, THE ASSESSMENT WAS REQUIRED TO BE TREATED AS 'ERRONEOUS' IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT ERRED IN HOLDING THAT THE A.O. I S DUTY-BOUND TO FOLLOW PROVISIONS OF RULE 8D OF THE LT. RULES, 1962 FOR DETERMINATION OF THE AMOUNT OF DISALLOWANCE U/S 14A OF THE I. T. ACT'. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT ERRED IN REVISING THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT; ON THE BASIS OF HIS OWN VIEWS ON THE MATTER OF MAKING DISALLOWANCE U/S 14 A OF THE INCOME-TAX ACT, 1961; AND IN DIRECTING THE A. O. TO RE-COMPUTE THE SAID DISALLOWANCE BY APPLYING RULE 8D OF THE INCOME TAX RULES, 1962. 4. THE LD. AR ARGUED THAT THE ISSUE OF DISALLOWANCE WAS EXAMINED BY THE AO IN ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS. IN SUPPO RT OF HIS CONTENTION, HE REFERRED TO PAGES 1 TO 4 OF THE PAPER BOOK CONTAINING THE DETAI LED QUESTIONNAIRE ISSUED BY THE AO WHEREIN VIDE QUESTION NO. 12 THE FOLLOWING QUERY WA S RAISED BY AO VIDE NOTICE U/S. 142(1) OF THE ACT DATED 18.01.2010: 12. PLEASE SUBMIT DETAILS OF OTHER INCOME, DETAILS OF INSURANCE CLAIM RECEIVED, DETAILS OF STCG WITH EVIDENCES. FURNISH DETAILS OF INTEREST INCOME, FUR NISH DETAILS OF DIVIDEND INCOME & EXPENSES RELATED TO EARNING EXEMPTED INCOME (AS PER SECTION 14A OF I. T . ACT, 1961 READ WITH RULE 8D OF I. T. RULES, 1962. ) THE ASSESSEE REPLIED TO THE SAID QUESTIONNAIRE AND PRESENTED DETAILED WORKINGS OF DISALLOWANCE U/S. 14A OF THE ACT AND OFFERED A SUM OF RS.22,584/- WITH PROPER RATIONALE BY REFERRING TO EACH AND EVERY EXPENSES DEBITED IN THE P&L ACCOUNT. THE SAID WORKINGS ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIE NCE: 3 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 THE LD. AO ACCEPTED THE SAID WORKINGS AND ON BEING SATISFIED WITH THE SAME DISALLOWED A SUM OF RS. 22,584/- IN THE ASSESSMENT. ACCORDING LY, THE LD. AR ARGUED THAT THE ISSUE 4 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 OF DISALLOWANCE U/S. 14A OF THE ACT WAS EXAMINED IN DETAIL BY THE LD. AO. HENCE, HE HAS OBJECTED TO THE EXERCISE OF REVISIONARY JURISDI CTION U/S. 263 OF THE ACT BY THE CIT ON THIS VERY SAME ISSUE. HE ALSO ARGUED THAT LD. CIT HAD ERRONEOUSLY HELD THAT INVOKING THE PROVISIONS OF RULE 8D OF THE RULES IS MANDATORY AND AUTOMATIC FOR MAKING DISALLOWANCE U/S. 14A OF THE ACT. 5. THE LD. DR ARGUED THAT THE AO HAD NOT DISCUSSED ANYTHING ABOUT THE DISALLOWANCE U/S. 14A OF THE ACT IN HIS ORDER EXCEP T MAKING ADDITION IN THE SUM OF RS.22,584/- BY SIMPLY ACCEPTING THE WORKINGS OF THE ASSESSEE BY IGNORING THE MANDATORY PROVISIONS OF RULE 8D OF THE RULES. HE FURTHER ARG UED THAT THE ASSESSEE HAD NOT FILED ANY COVERING LETTER WHILE REPLYING TO THE QUESTIONN AIRE ISSUED ALONG WITH THE NOTICE U/S. 142(1) OF THE ACT DATED 18.01.2010. HENCE, HE ARGU ED THAT THE AO HAD NOT EXAMINED THE ISSUE IN THE LIGHT OF RULE 8D OF THE RULES. HENCE, THE LD. CIT HAS RIGHTLY HELD THE ORDER OF AO IS ERRONEOUS INASMUCH AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE IN COMPLETE AGREEMENT WITH THE ARGUMENTS OF LD. AR THAT ADOPTION OF RULE 8D OF THE RULES FOR DISALLOWANCE U/S. 14A OF THE ACT I S NOT AUTOMATIC AND CANNOT BE MECHANICALLY APPLIED BY THE AO. THE AO IN THE INST ANT CASE WAS SATISFIED WITH THE MANNER OF ASSESSEE MAKING DISALLOWANCE U/S. 14A OF THE ACT WHICH SPECIFICALLY REFERS TO EACH AND EVERY ITEM OF EXPENDITURE DEBITED IN THE P &L ACCOUNT AND ACCORDINGLY, THOUGHT IT FIT NOT TO RESORT TO RULE 8D OF THE RULE S. HE HAD IN FACT MADE DISALLOWANCE U/S. 14A(2) OF THE ACT. FOR THE SAKE OF CONVENIENC E THE PROVISIONS OF SECTION 14A OF THE ACT ARE REPRODUCED HEREINBELOW: 14A [1] FOR THE PURPOSES OF COMPUTING THE TOTAL I NCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL IN COME UNDER THIS ACT.] [(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTA L INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSES SING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 5 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURR ED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS A CT:] 7. WE FIND FROM THE BARE READING OF SECTION 14A OF THE ACT THAT RULE 8D OF THE RULES SHOULD BE APPLIED ONLY AS A LAST RESORT IN TH E EVENT OF AO NOT ABLE TO WORK OUT THE DISALLOWANCE OF EXPENSES INCURRED FOR EARNING INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME ESPECIALLY IN THE CASE OF A COMPOSITE BUSINESS HAVING BOTH TAXABLE AS WELL AS NON-TAXABLE INCOME. WE FIND IN THE INSTANT CASE THAT THE LD. CIT IN 263 PROCEEDINGS HAD ONLY TRIED TO SUBSTITUTE HIS OWN OPINION IN LIE U OF DECISION ALREADY TAKEN BY THE LD. AO. THIS IS STRICTLY PROHIBITED UNDER SECTION 263 PROCEEDINGS AS DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL IN DIA LTD. REPORTED IN (1993) 203 ITR 108 (BOM) , WHEREIN IT WAS HELD AS UNDER: THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION (1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPE CIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REVISI ON UNDER THIS SUB-SECTION, VIZ., ( I ) THE ORDER IS ERRONEOUS; AND ( II ) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTL Y AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. ONE FINDS THAT THE EXPRESSIONS 'ERRONEOUS', 'ERRONEOUS ASSESSMENT' AND 'ERRONEOUS JUDGMENT' HAVE BEEN DEFI NED IN BLACK'S LAW DICTIONARY. ACCORDING TO THE DEFINITION, 'ERRONEOUS' MEANS 'INV OLVING ERROR; DEVIATING FROM THE LAW'. 'ERRONEOUS ASSESSMENT' REFERS TO AN ASSES SMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS A DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, AND DOES NOT REFER TO THE JUDGMENT OF T HE ASSESSING OFFICER IN FIXING THE AMOUNT OF VALUATION OF THE PROPERTY. SIMILARLY, 'ERRONEOUS JUDGMENT' M EANS 'ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF C OURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LA W, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES'. FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NO T IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES A 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 DO ES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDG MENT OF THE COMMISSIONER FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE ITO WH ILE 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 ESTIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMAT E MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SI DE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATE D THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMM ISSIONER WITH POWER TO RE-EXMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QUASI-JUDICIA L POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRI VED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIO NER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF T HE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WI LL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VIZ., THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEO US ORDER CANNOT BE THE SUBJECT-MATTER OF REVISON BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILL ED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NO T BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTE RPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. THEREFORE, IN ORDER TO EXERCISE POWER UNDE R SECTION 263(1) THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO CONSIDER THAT THE ORDER PASSED BY T HE ITO WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL T O THE INTERESTS OF THE REVENUE AND THAT IT MUST BE AN ORDER WHICH IS NOT IN ACCORDANCE WITH THE LAW OR W HICH 6 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 HAS BEEN PASSED BY THE ITO WITHOUT MAKING ANY ENQUI RY IN UNDUE HASTE. AN ORDER CAN BE SAID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF IT I S NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHE REOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN RE ALISED OR CANNOT BE REALISED. THERE MUST BE MATERIA L AVAILABLE ON THE RECORD CALLED FOR BY THE COMMISSIO NER TO SATISFY HIM PRIMA FACIE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWER OF SU MOTU REVISION UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO AR BITRARY EXERCISE OF POWER. IT IS WELL-SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OB JECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER M UST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHALLENGE D BEFORE THE COURT, IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVES WERE AVAILA BLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUC H AUTHORITY. THE ITO IN THIS CASE HAD MADE ENQUIRIES IN REGARD T O THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSSSEE. THE ASSESSEE HAD GIVEN A DETAILED EXPLANAT ION IN THAT REGARD BY A LETTER IN WRITING. ALL THES E WERE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAI M WAS ALLOWED BY THE ITO ON BEING SATISFIED WITH TH E EXPLANATION OF THE ASSESSEE. THIS DECISION OF THE I TO COULD NOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAU SE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION I N THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEED INGS FOR REVISION AND HEARING THE ASSESSEE, COULD N OT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL N ATURE. HE SIMPLY ASKED THE ITO TO RE-EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. HENCE, THE PROVIS IONS OF SECTION 263 WERE NOT APPLICABLE TO THE INST ANT CASE AND, THEREFORE, THE COMMISSIONER WAS NOT JUSTI FIED IN SETTING ASIDE THE ASSESSMENT ORDER. 8. WE ALSO FIND IN THE INSTANT CASE THAT ADEQUATE E NQUIRY HAS BEEN MADE BY THE LD. AO BY TAKING THE ISSUE OF DISALLOWANCE U/S. 14A OF THE ACT TO THE LOGICAL END. HENCE, IT CANNOT BE CONSTRUED AS LACK OF ENQUIRY OR EVEN INAD EQUATE ENQUIRY THOUGH IT IS WELL SETTLED THAT INADEQUATE ENQUIRY WOULD NOT GIVE RISE TO REVISIONARY JURISDICTION U/S. 263 OF THE ACT. THE LD. AO IN THE INSTANT CASE HAD CONDUC TED EXTENSIVE ENQUIRY AND HAD CONCLUDED THE MATTER TO ITS LOGICAL END BY INVOKING THE PROVISIONS OF SECTION 14A(2) OF THE ACT. WE PLACE RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. REPORTED IN (2011) 332 IT R 167 (DEL.) WHEREIN IT WAS HELD AS UNDER: THE SUBMISSION OF THE REVENUE WAS THAT WHILE PASSIN G THE ASSESSMENT ORDER, THE ASSESSING OFFICER DID N OT CONSIDER THE ASPECT SPECIFICALLY WHETHER THE EXPEND ITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITUR E. THAT ARGUMENT PREDICATED ON THE ASSESSMENT ORDER, W HICH APPARENTLY DID NOT GIVE ANY REASON WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDIT URE. HOWEVER, THAT, BY ITSELF, WOULD NOT BE INDICAT IVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPL IED HIS MIND TO THE ISSUE. THERE ARE JUDGMENTS GALO RE LAYING DOWN THE PRINCIPLE THAT THE ASSESSING OFFICE R IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED REASONS IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM T HE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. ONE HAS TO KEEP IN MIND THE DI STINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE , THAT WOULD NOT, BY ITSELF, GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 MEREL Y BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. I T IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A C OURSE OF ACTION WOULD BE OPEN. [PARA 12] IN THE INSTANT CASE, THE ASSESSING OFFICER HAD CALL ED FOR EXPLANATION ON ITEMS IN QUESTION FROM THE AS SESSEE AND THE ASSESSEE HAD FURNISHED HIS EXPLANATION. SAI D FACT WAS EVEN TAKEN NOTE OF BY THE COMMISSIONER HIMSELF IN HIS ORDER. [PARA 13] 7 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 THAT CLEARLY SHOWED THAT THE ASSESSING OFFICER HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REP LACEMENT OF DYES AND TOOLS WAS TO BE TREATED AS REV ENUE EXPENDITURE OR NOT. IT APPEARED THAT SINCE THE ASSE SSING OFFICER WAS SATISFIED WITH THE ASSESSEE'S EXPLANATION, HE ACCEPTED THE SAME. [PARA 14] EVEN THE COMMISSIONER CONCEDED THE POSITION THAT TH E ASSESSING OFFICER MADE THE INQUIRIES, ELICITED REPLIES AND THEREAFTER PASSED THE ASSESSMENT ORDER. THE GRIEVANCE OF THE COMMISSIONER WAS THAT THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRIE S RATHER THAN ACCEPTING THE ASSESSEE'S EXPLANATION. THEREFORE, IT COULD NOT BE SAID THAT IT WAS A CASE OF 'LACK OF INQUIRY'. [PARA 15] THE INSTANT CASE WAS NOT A CASE WHERE THE COMMISSIO NER HAD CONCLUDED THAT THE OPINION OF THE ASSESSING OFFICER WAS CLEARLY ERRONEOUS AND NOT WARRANTED ON THE FACTS BEFORE HIM, VIZ., THE EXPENDITURE INCURRED WAS NOT THE REVENUE EXPENDITURE, BUT SHOULD HAVE BE EN TREATED AS CAPITAL EXPENDITURE. EVEN THE COMMISSIONER IN HIS ORDER PASSED UNDER SECTION 263 WAS NOT CLEAR AS TO WHETHER THE EXPENDITURE COULD B E TREATED AS CAPITAL EXPENDITURE OR IT WAS REVENUE IN NATURE. NO DOUBT, IN CERTAIN CASES IT MAY NOT BE POSSIBLE TO COME TO A DEFINITE FINDING AND, THEREFO RE, IT IS NOT NECESSARY THAT IN ALL CASES THE COMMI SSIONER IS BOUND TO EXPRESS FINAL VIEW, BUT THE LEAST THAT WAS EXPECTED WAS TO RECORD A FINDING THAT ORDER SOU GHT TO BE REVISED WAS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF THE REVENUE. NO BASIS FOR THAT WAS DISCLOS ED. IN SUM AND SUBSTANCE, ACCOUNTING PRACTICE OF THE ASSES SEE WAS QUESTIONED. HOWEVER, THAT BASIS OF THE ORDE R VANISHED IN THIN AIR WHEN IT WAS FOUND THAT VERY AC COUNTING PRACTICE FOLLOWED FOR A NUMBER OF YEARS HA D THE APPROVAL OF THE INCOME-TAX AUTHORITIES. INTERES TINGLY, EVEN FOR FUTURE ASSESSMENT YEARS, THE VERY SAME ACCOUNTING PRACTICE WAS ACCEPTED. [PARA 16] IT WAS IN THAT CONTEXT, THE QUESTION THAT ASSUMED I MPORTANCE WAS AS TO WHETHER POWERS COULD BE EXERCIS ED UNDER SECTION 263 WHEN TWO VIEWS WERE POSSIBLE. [PARA 17] THE MATTER COULD BE LOOKED FROM ANOTHER ANGEL. WHAT WAS THE MATERIAL/ INFORMATION AVAILABLE WITH THE ASSESSING OFFICER ON THE BASIS OF WHICH HE ALLOWED THE EXPENDITURE AS REVENUE? IT WAS DISCLOSED TO THE ASSESSING OFFICER THAT THE ASSESSEE WAS A MANUFACTU RER OF CAR PARTS. IN THE MANUFACTURING PROCESS, DYE S WERE FITTED IN MACHINES BY WHICH THE CAR PARTS WERE MANUFACTURED. THOSE DYES WERE, THUS, THE COMPONENT S OF THE MACHINES. THOSE DYES NEEDED CONSTANT REPLACE MENT, AS THEIR LIFE WAS NOT MORE THAN A YEAR. THE ASSESSEE HAD ALSO EXPLAINED THAT SINCE THOSE PARTS WERE MANUFACTURED FOR THE AUTOMOBILE INDUSTRY, WHIC H HAD TO WORK ACCURATELY AT HIGH SPEED FOR A LONGER P ERIOD, REPLACEMENT OF THOSE PARTS AT SHORT INTERVAL S BECAME IMPERATIVE TO RETAIN ACCURACY. BECAUSE OF TH OSE REASONS, THOSE TOOLS AND DYES HAD A VERY SHORT SPAN OF LIFE AND COULD PRODUCE MAXIMUM ONE LAKH PER MISSIBLE SHORTS. THEREAFTER, THEY HAD TO BE REPLACE D. WITH THE REPLACEMENT OF SUCH TOOLS AND DYES WHICH W ERE THE COMPONENTS OF A MACHINE, NO NEW ASSETS CAME INTO EXISTENCE, NOR WAS THEIR BENEFIT OF AN EN DURING NATURE. IT NEITHER ENHANCED THE LIFE OF EXIS TING MACHINES OF WHICH THESE TOOLS AND DYES WERE ONLY PA RTS, NOR HAD THEIR PRODUCTION CAPACITY INCREASED. IN CIT V. MYSORE SPUN CONCRETE PIPE (P.) LTD. [1992] 194ITR 159 / 60 TAXMAN 170 (KAR.), THE HIGH COURT HELD THAT THE REPLACEMENT OF MOULDS WAS NOT I N THE NATURE OF REPLACEMENT OF A CAPITAL MACHINERY BUT IN THE NATURE OF REPLACEMENT OF A PART OF THE M ACHINERY WHICH, IN TURN, WAS IN THE NATURE OF MAINTENANCE OF MACHINERY INSTALLED IN THE FACTORY. SUCH AN EXPENDITURE WAS TREATED AS REVENUE EXPENDITURE. WITH THIS POSITION IN LAW, IT WAS CLEA R THAT VIEW TAKEN BY THE ASSESSING OFFICER WAS ONE OF THE POSSIBLE VIEWS AND,THEREFORE, THE ASSESSMENT ORDER PASSED BY HIM COULD NOT BE HELD TO BE PREJUDICIAL T O THE REVENUE. SUCH AN ORDER, THUS, HAD RIGHTLY BEEN SET ASIDE BY THE TRIBUNAL. [PARA 18] IN THE INSTANT CASE, THE PURPOSE OF REPLACING THE D YES WAS TO MAINTAIN THE EXISTING ASSETS, VIZ., MACHINES AND NOT TO BRING A NEW ASSET. MOREOVER, CASE AT HAN D WAS ONE OF 'REPAIRS OF MACHINERY'. THE CASE PROCEEDED ON THE CONTROVERSY RIGHT FROM THE ORDER O F THE ASSESSING OFFICER TILL THE TRIBUNAL AS TO WHE THER THE EXPENDITURE WAS REVENUE OR CAPITAL IN NATURE. [PARA 19] LIKEWISE, WHETHER THE COMMISSIONER SHOULD HAVE RECO RDED DEFINITE FINDING OR NOT, MAY NOT BE VERY RELEVANT FACTOR IN THE INSTANT CASE WHERE ON THE FA CTS IT WAS FOUND THAT THE OPINION OF THE ASSESSING OFFICER IN TREATING THE EXPENDITURE AS REVENUE EXPENDITURE WAS PLAUSIBLE AND, THUS, THERE WAS NO MATERIAL BEFO RE THE COMMISSIONER TO VARY THAT OPINION AND ASK FOR F RESH INQUIRY. [PARA 20] THUS, THE CONCLUSION WOULD BE THAT THE ORDER OF THE TRIBUNAL DID NOT CALL FOR ANY INTERFERENCE, AS THE QUESTION OF LAW HAD RIGHTLY BEEN DECIDED. [PARA 21] 8 ITA NO.889/K/2013 HIMADRI INDUSTRIES LTD. AY 2009-10 9. WE FIND THAT THE LD. DR HAD ONLY TRIED TO ARGUE ON FLIMSY GROUND THAT THE LD. AR HAD NOT FURNISHED THE COVERING LETTER BEFORE THE AO WHILE REPLYING TO SECTION 142(1) QUESTIONNAIRE DATED 18.01.2010. IT IS NOT IN DISPU TE THAT THE LD. AO DISALLOWED A SUM OF RS.22,584/- BEING THE DISALLOWANCE OFFERED BY THE A SSESSEE BASED ON WORKINGS GIVEN ABOVE. UNDER THESE CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE REQUIRES TO BE ACCEPTED AND THAT OF REVENUE DESERVES TO BE REJECTED. IN VIEW O F THE AFORESAID FINDINGS AND JUDICIAL PRECEDENTS RELIED ON HEREINABOVE, WE QUASH THE REVI SIONARY PROCEEDINGS U/S. 263 OF THE ACT BY THE LD. CIT AND ALLOW THE GROUND OF APPEAL O F ASSESSEE. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01.06. 2016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 1 ST JUNE, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. HIMADRI INDUSTRIES LTD., 23A, N. S . ROAD, 8 TH FLOOR, ROOM NO. 15, KOLKATA-700 001.. 2 RESPONDENT CIT, CENTRAL-III, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. ACIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .