M.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD,BHOPAL vs. PR CIT-1, BHOPAL

PER MANISH BORAD, A.M

The above captioned appeal filed at the instance of the

Assessee for Assessment Year 2015-16 is directed against the

order of Ld. Pr. Commissioner of Income Tax(Appeals) (in short

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 ‘Ld. CIT],-1 Bhopal dated 13.02.2020. The assessee has raised

following grounds of appeal:

“1. That the order passed by the ld. Pr. CIT u/s 263 of the Income Tax Act is illegal and bad in law and is prayed to be quashed. 2. That the order passed u/s 263 of the Income Tax Act directing the Assessing Officer to reframe the assessment is vague, mechanical and without application of mind by the Ld. Pr. CIT which is bad in law and prayed to be quashed. 3. That the Ld. Pr. CIT grossly erred in passing the order when no issue was identified in the notices issued by the Pr. CIT, whereas the notice u/s 263 was based on the information as per the audit objection which the Pr. CIT having alleged that the order passed by the AO was erroneous and prejudicial to the interest of the revenue. 4. That the revision order passed u/s 263 pursuant to the amendment made w.e.f. 1st June 2015 is bad in law. 5. That the Pr. CIT grossly erred in law in holding that the order passed by the Assessing Officer was very casual and passed in a hurried manner did not examine all the material facts of the case and was erroneous and prejudicial to the interest of revenue. 6. That the order passed u/s 263 without giving a proper opportunity to the assessee and have not appreciated the issues which were explained on the various items identified by the Pr. CIT in his order is bad in law and prayed to be quashed. 7. the each grounds is dependent of and without prejudice to the other grounds raised herein

37 days. Ld. Counsel for the assessee submitted that the delay in

filing the appeal is due to country-wide lockdowns imposed by

the government in wake of Covid-19 outbreak. Taking cognizance

of the same the government had introduced the taxation and

other laws (Relaxation and Amendment of Certain Provisions) Act

2020 in order to relax/extend the statutory timelines for various

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 compliance under various laws including the Income Tax Act

1961. Prayer was made to condone the delay. Ld. DR opposed

the request. We however under the given facts and circumstances

of the case, are satisfied with the reason giving rise to delay in

filing the instant appeal. We condone the delay and admit the

appeal for adjudication on merits.

the assessee company is engaged in the Financial Assistance for

industrial development and infrastructure. It declared total loss

at Rs.1,55,62,351/- in the return filed on 30.09.2015. The case

was selected for limited scrutiny through CASS and the notices

u/s 143(2) & 142(1) of the Act duly served upon the assessee,

assessed total loss at Rs.1,55,63,351/-.

section 263 of the Act and issued following show cause notice to

the assessee (relevant extract is reproduced below):

“Please refer to the order u/s 143(3) of the IT Act, 1961 dated 18.12.2017 passed by the ITO -2(1), Bhopal for A.Y. 2015-16, The assessee is engaged in the business of Financial Assistance. On perusal for the assessment order and case record, it is noticed that the assessee company had disclosed net profit for Rs.18,24,66,515/- and 3

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 credited an amount Rs.14,87,59,039/- under the head “ provision write off and extraordinary items”, out of this Rs.14,75,00,000/- ( such amount was included in Rs.14,87,59,039/-) was deducted in the computation of income but such amount was not withdrawn from any reserve provision. As per note nO.15 below Sl. No.3 the Charted Accounted Certified that there is an outstanding of Rs.14376.40 lakh (Principal Rs.14214.43 lakh and interest of Rs.161.97 lakh) under the ICD portfolio. The entire ICD portfolio has been classified as loss assets in accordance with the policy. During the financial year, Corporation has recovered Rs.1475.00 Lakh towards principal & Rs.245.13 Lakh towards interest.” In view of section 41(1) of the Provision of the Act the recovered amount of Rs.14,75,00,000/- which was classified as loss assets and subsequently recovered during the previous year was required to be added back to the assessee’s income which was not done by the AO. The omissions resulted in under assessment of income to that extent resulted in notional tax effect of Rs.52,77,406/-. Keeping in view of the above, the assessment order passed by the Assessing Officer is considered to be erroneous is so far as it is prejudicial to the interest of revenue, and therefore, I, propose to invoke powers vested u/s 263 of the Income Tax Act, 1961 in respect of the order referred to above. You are hereby given an opportunity of being heard as per section 263(1) of the Income Tax Act to present yourself in person or through an authorized representative on 28.01.2020 at 11:30 AM to explain your case. In case no reply is received by stipulated date, it will be presumed that you have nothing to say in the mater and a decision will be taken on the basis of material available in this office.

challenging the jurisdiction of Ld. PCIT assumed u/s 263 of the

Act. 4

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 6. Ld. Counsel for the assessee apart from placing reliance on

written submissions placed on record and relevant extract

reproduced in the subsequent paras and also submitted that

provision of section 41(1) cannot be the basis for initiating

proceeding u/s 263 of the Act and the Ld. Pr. CIT was not

justified in alleging that the order passed by the Assessing

Officer was erroneous and prejudicial to the interest of the

revenue because the Ld. AO has examined the details and

applied his mind and after making due verification framed the

assessment. Ld. counsel for the assessee referred to the following

arguments mentioned in the written submissions:

This submission is being made as the impugned order passed u/s 263 is neither erroneous nor prejudicial to the interest of the Revenue. The issue stated by Ld. Pr.CIT in the show cause notice issued u/s 263 on 13.01.2020 has already been dealt and considered by Ld. AO while passing the assessment order u/s 143(3) on 18.12.2017. The submission is placed on record for the following contentions raised by the assessee in the instant appeal –

Sr. No. Contentions of the assessee challenging the order u/s 263 A Non application of mind by Ld. Pr.CIT B Enquiry conducted by Ld. AO – no lack of enquiry C Application of the mind by Ld. AO A. Non – application of mind by Ld. Pr.CIT 1. Show cause notice u/s 263 was issued on 13.01.2020 wherein Ld. Pr. CIT stated that in view of the provisions of section 41(1) the recovered amount of Rs. 14.75 cr which was classified as loss assets and subsequently recovered was required to be added back. 2. During the revisionary proceedings, assessee explained that the provision for bad and doubtful debts on ICD and the interest thereon was made in the earlier years i.e. AY 2002-03 to 2004-05. 5

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 3. While computing the total income of said years, the amount of provision for bad and doubtful debts on ICD and interest thereon was added back to the net profit debited in the audited profit and account. All the documentary evidences were placed on record. [PB 119-121]In AY 2002-03 income under the head ‘Profits and Gains from Business or Profession was computed as under – [PB 89-90]

From the above table it is evident that while computing the total income for AY 2002-03, amount of provision of bad debts on ICD has been added back to the net profit for the purpose of computing income under the head ‘Profits and Gains from Business or Profession’. Since it was a case of loss, the loss has been reduced to the extent of add back. 4. Accordingly, in the impugned year when the excess provision made for bad and doubtful debts on ICD was written back, the same was deducted from the net profit as per the audited financial statements while computing income under the head ‘Profits and Gains from Business or Profession’. It is a fact on record that during the impugned year, assessee was engaged in the process of recovery of loans and interest which were granted earlier. No fresh lending was done. Before the Ld. Pr. CIT all the documentary evidences were placed on record. [PB 22 and 41]

M/s. M.P. State Industrial Development ITA No.158/Ind/2020

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 the AO. The omission resulted in under assessment of income to that extent resulted in notional tax effect of Rs. 52,77,406/-.” 8. There was no cessation or remission of any liability on the part of assessee. In fact the amount of bad and doubtful debts on ICD recovered was deducted from the provisions made in the earlier years. The creation of provision for bad and doubtful debts on ICD represents that an amount which was actually due to be received is no longer received. This is not a liability which is no longer payable and if any amount of deduction or allowance was claimed for the same in the computation of income. Provisions of section 41(1) are not applicable in the instant case. In fact this amount represents the ‘asset’ side of the Balance Sheet. 9. Assessee submits that provisions of section 41(1) are attracted only when any allowance or deduction has been claimed in respect of loss, expenditure or trading liability and the assessee has obtained in cash or in any other manner any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. Ld. Pr.CIT grossly erred in applying the provisions of section 41(1) in the instant case. Ld. Pr.CIT erred in assuming the jurisdiction u/s 263 by taking recourse to provisions of section 41(1) which in no situation is applicable in the facts of the present case. 10. In the show cause notice issued u/s 263 dated 13.01.2020, Ld. Pr.CIT stated that the notional tax effect is of Rs. 52,77,406.

It is submitted that under the Income-Tax Act, tax is charged on the income earned by the assessee i.e. income when it is either accrued or is received by the assessee. There is no concept of notional income and hence there cannot be notional tax.

M/s. M.P. State Industrial Development ITA No.158/Ind/2020

B. Enquiry conducted by Ld. AO – no lack of enquiry and C. Application of the mind by Ld. AO 1. Assessee is a Government company in which 100% shareholding is of the Government of Madhya Pradesh. It is engaged in the business of financial assistance for Industrial Development and Infrastructure activity in the state of Madhya Pradesh. 2. The complete control and management is by the Board of Directors on the directives of Government of Madhya Pradesh. Currently, no fresh lending has been done instead assessee is under the process of recovery of loans, interest and investments which have been granted earlier. 3. Assessment u/s 143(3) for the impugned year was completed on 18.12.2017. Vide questionnaire issued on 17.04.2017, assessee was required to – [PB 128]

a. Explain large any other deduction claimed in sch. BP creating a loss without any income in Profit & Loss Account b. Explain mismatch between income/receipt credited to Profit & Loss Account considered under other heads of income and income from heads of income other than business/profession 4. Assessee submitted details in respect of amount shown in the return for AY 2015-16 as per point no. 32 in BP i.e. computation of income from Business or Profession. Detailed item –wise break up of Rs. 20,01,58,544 includes the following – [PB 132 and 121]

Sr. Details of the items, relevant to the issue Amount (Rs.) No. stated by Ld. Pr.CIT, in point no. 32 in BP (Computation of income from business or profession) 1 Withdrawal of provision of Inter Corporate 14,75,00,000 Deposit (ICD) 2 Withdrawal of provision of interest on ICD 29,64,954 TOTAL 15,04,64,954

These amounts were credited in the profit and loss account. Since these do not form the part of income from business profession, the same were excluded for computation of income under the head income from business or profession. 5. Ld. AO after perusing the written submissions and the documentary evidences placed on record accepted the income returned by the assessee. Income was assessed same as returned income. Ld. AO conducted proper enquiry to verify the withdrawal of provision of ICD amounting to Rs. 14,75,00,000. [PB 136-137] 9

M/s. M.P. State Industrial Development ITA No.158/Ind/2020

In the instant case, Ld. AO has made the enquiries during the assessment proceedings on the issues raised by Ld. Pr.CIT in the proceedings u/s 263. Ld. AO has allowed the claim on being satisfied with the explanation given by the assessee. Thus, plausible view taken by the Ld. AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in this regard. 10. Without prejudice to the above and strictly in alternate, the assessee has unabsorbed brought forward loss of Rs. 127,77,68,266 which is available for set off. The tax liability on the addition, if any, made shall be set off against the above referred loss. Thus, there is no loss to the Revenue. 11. Reliance is placed on the following judicial precedents - a. Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. – [2000] 243 ITR 83 b. Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Ratlam Coal Ash Co. – [1987] 34 Taxman 443 c. Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Mehrotra Brothers – [2004] 270 ITR 157 d. Hon’ble Jurisdictional Bench of Indore ITAT in the case of Bhanwar Singh – ITA No. 659/Ind/2019 – order dated 29.07.2021 – Para 24 e. Hon’ble jurisdictional ITAT Indore Bench in the case of Vinod Bhandari – ITA 350/Ind/2017 & others, order dated 20.03.2020 – Para 43 to 46

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 f. Hon’ble Jurisdictional Bench of Indore ITAT in the case of Narottam Mishra – [2015] 25 ITJ 206 g. Hon’ble Jurisdictional Bench of Indore ITAT in the case of Flexituff International Limited – ITA No. 282/Ind/2017 – order pronounced on 14.05.2019 – Para 18 h. Hon’ble Allahabad High Court in the case of Krishna Capbox (P) Ltd – [2015] 60 taxmann.com 243 i. Hon’ble Delhi High Court in the case of Vikas Polymers – [2010] 194 Taxman 57 j. Hon’ble Delhi High Court in the case of Ashish Rajpal – [2009] 320 ITR 674 k. Hon’ble Mumbai Bench of ITAT in the case of Anil Shah – [2007] 162 Taxman 39 Considering the above facts and circumstances of the case, submissions made, judicial precedents and documents on record, appeal of the assessee be allowed, quashing the impugned order passed u/s 263 of the Act. 7. Per contra Ld. Departmental Representative vehemently

argued supporting the order of Ld. PCIT.

placed before us carefully gone through the decisions relied by

the Ld. counsel for the assessee. We observe that the assessee

company is engaged in the Financial Assistance for industrial

development and infrastructure. Assessee is a Government

company in which 100% shareholding is of the government of

Madhya Pradesh and complete control and management is by the

Board of Directors on the directives of Government of Madhya

Pradesh. We observe that it is on record that the details in

respect of amount shown in the return for A.Y. 2015-16 as per

point no.32 in BP i.e. computation of income from Business or

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 profession, item wise break up of Rs.20,01,58,544/- was given

which included withdrawal of provision of Inter Corporate Deposit

(ICD) and provision of interest on ICD totalling to

Rs.15,04,64,954/-. We further observe that from the profit and

loss account these amounts were credited and since they did not

form part of income from business or profession the same were

excluded for computation of income under the head income from

business or profession.

assessee had explained that the provision for bad and doubtful

debts on ICD and interest thereon was made in the earlier years

i.e. A.Y. 2002-03 to 2004-05 while computing the total income of

these year. The amount of provision for bad and doubtful debts

on ICD and interest was added back to the net profit in the Profit

and loss account and is evident from the documentary evidences

placed on record in the paper book which is summarized in the

table below:

Sr. Particulars Amount (Rs.) Amount (Rs.) No. Net profit as per audited financial 1 (85,69,05,758) statements Add: 2 Provision of bad debts – Term Loan 1,60,70,000 Provision of bad debts – ICD 15,35,66,255 12

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 Depreciation as per books 39,23,231 Interest on Term Loan from IDBI 18,39,42,917 35,75,02,403 3 [1-2] (49,94,03,355) Depreciation as per Income Tax 4 (41,52,794) 5 [3-4] (50,35,56,149) Income considered separately 6 Dividend income 21,91,060 Rent received 8,65,707 Diminution in value of shares 8,90,772 (39,47,539) 7 Profit and Gains from Business or (50,75,03,688) Profession [5-6]

loss, the loss has been reduced to the extent of add back of

provision for bad debts.

holding the order of Ld. A.O as erroneous and prejudicial to the

interest of revenue, we will first go through the relevant provision

of Section 263 of the Act and settled judicial precedence:- 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous 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 after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include—

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.—In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during 14

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.

the powers of revision granted by section 263 to the learned

Commissioner have four compartments. In the first place, the

learned Commissioner may call for and examine the records of

any proceedings under this Act. For calling of the record and

examination, the learned Commissioner was not required to show

any reason. It is a part of his administrative control to call for the

records and examine them. The second feature would come when

he will judge an order passed by an Assessing Officer on

culmination of any proceedings or during the pendency of those

proceedings. On an analysis of the record and of the order passed

by the Assessing Officer, he formed an opinion that such an order

is erroneous in so far as it is prejudicial to the interests of the

Revenue. By this stage the learned Commissioner was not

required the assistance of the assessee. Thereafter the third stage

would come. The learned Commissioner would issue a show-

cause notice pointing out the reasons for the formation of his

belief that action under section 263 is required on a particular

order of the Assessing Officer. At this stage the opportunity to the

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 assessee would be given. The learned Commissioner has to

conduct an inquiry as he may deem fit. After hearing the

assessee, he will pass the order. This is the fourth compartment

of this section. The learned Commissioner may annul the order of

the Assessing Officer. He may enhance the assessed income by

modifying the order.

263 of the Act both the conditions that the order must be

erroneous and prejudicial to the interest of revenue needs to be

satisfied. This ratio stands laid down by various Hon'ble Courts.

– [2000] 243 ITR 83 – order pronounced on 10.02.2000 – HEAD

NOTE – "Section 263 of the Income-tax Act, 1961 - Revision - Of

orders prejudicial to interests of revenue - Assessment year 1983-

84 - Whether in order to invoke section 263 Assessing Officer's

order must be erroneous and also prejudicial to revenue and if one

of them is absent, i.e., if order of Income-tax Officer is erroneous

but is not prejudicial to revenue or if it is not erroneous but is

prejudicial to revenue, recourse cannot be had to section 263(1) -

Held, yes - Whether if due to an erroneous order of ITO, revenue is

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 losing tax lawfully payable by a person, it will certainly be

prejudicial to interests of revenue - Held, yes - Assessee-company

entered into agreement for sale of estate of rubber plantation - As

purchaser could not pay installments as scheduled in agreement,

extension of time for payment of installments was given

on condition of vendee paying damages for loss of agricultural

income and assessee passed resolution to that effect - Assessee

showed this receipt as agricultural income - Resolution passed by

assessee was not placed before Assessing Officer - Assessing

Officer accepted entry in statement of account filed by assessee

and accepted same - Commissioner under section 263 held that

said amount was not connected with agricultural activities and

was liable to be taxed under head 'Income from other sources' -

Whether, where Assessing Officer had accepted entry in statement

of account filed by assessee, in absence of any supporting material

without making any enquiry, exercise of jurisdiction by

Commissioner under section 263(1) was justified - Held, yes

of the learned representatives, we deem it pertinent to take note

of the fundamental tests propounded in various judgments

relevant for judging the action of the Commissioner of Income-tax 17

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 taken under section 263. The Income-tax Appellate Tribunal in

the case of Mrs. Khaiiza S. Oomerbhoy v. ITO [2006] 101 TIJ 1095

(Mum), analysed in detail various authoritative pronouncements

including the decision of the Hon'ble Supreme Court in the case

of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and has

propounded the following broader principle to judge the action of

the Commissioner of Income-tax taken under section 263.

(i) The Commissioner of Income-tax must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled.

(ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted.

(iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous.

(iv) If the order is passed without application of mind, such order will fall under the category of erroneous order.

(v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree. If cannot be treated as erroneous order, unless the view taken by the Assessing Officer is unsustainable under law .

(vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 is not permitted to 18

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not feel satisfied with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course assessment proceedings on the relevant issues and the assessee has detailed explanation by a letter in writing and the Assessing allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be simply because in his order he does not make an elaborate discussion in that regard.

principles laid down by the Hon'ble Courts and examining the

facts of the case in light thereof, we observe that during the

impugned year assessee was engaged in the process of recovery

of loans and interest which was granted earlier and no fresh

lending was done in the impugned year. Thus, in the impugned

year when the excess provision made for bad and doubtful debts

on ICD was written back in respect of recovery of ICD of

Rs.14,75,00,000/- from Som Distilleries Limited, the same was

deducted from the net profit as per the audited financial

statements in computing income under the head profit and gains

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 from business or profession. We find that there is no benefit

claimed by the assessee in terms of section 41(1) of the Act in

respect of the impugned amount. It is also evident that there is

no tax advantage derived by the assessee in respect of the

impugned amount. It is worth noting that provisions of section

41(1) are attracted only when any allowance or deduction has

been claimed in respect of loss, expenditure or trading liability

and the assessee has obtained in cash or in any other manner

any amount in respect of such loss or expenditure or some

benefit in respect of such trading liability by way of remission or

cessation thereof. We find that Ld. Pr.CIT has grossly erred in

applying the provisions of section 41(1) in the present case

which in no situation is applicable in the facts of the present

case.

the issue i.e. amount recovered out of the loss assets, on merits

and as per law but no specific finding on merits has been given

by Ld. Pr.CIT on examination of written submissions and all the

documentary evidences placed on record. No specific enquiry or

investigation has been made by Ld. Pr.CIT to establish and show

the error or mistake made by the assessing officer making the 20

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 order unsustainable in law. This action of Ld. Pr. CIT can stand

only if it is found that the assessment order is erroneous so far as

prejudicial to the interest of revenue and no enquiry has been

conducted by the Ld. AO with regard to the issue raised in the

show cause notice issued u/s 263 of the Act. For this proposition

the Ld. counsel for the assessee relied upon the ratio laid down in

the decision passed in the case of D.G. Housing Projects Ltd.

(2012) 20 taxmann.com 587.

the assessment proceeding, the Ld. AO specifically asked Vide

questionnaire issued on 17.04.2017, to explain large any other

deduction claimed in sch. BP creating a loss without any income

in Profit & Loss Account and explain mismatch between

income/receipt credited to Profit & Loss Account considered

under other heads of income and income from heads of income

other than business/profession, which was replied. We find that

Ld. AO conducted proper enquiry to verify the withdrawal of

provision of ICD amounting to Rs.14,75,00,000/- and allowed the

claim on being satisfied with the details and explanation. Thus,

the decision of ld. AO cannot be held to be erroneous. We find

that the ld. AO has applied his mind while conducting the

M/s. M.P. State Industrial Development ITA No.158/Ind/2020 assessment proceedings. Under these circumstances, where a

detailed enquiry has been conducted on particular issue and the

Ld. AO has made proper application of mind on the details filed

by the assessee and have conducted sufficient enquiry the

assessment order cannot be held to be erroneous so far as

prejudicial to the interest of revenue. We accordingly quash the

impugned revisionary order framed u/s 263 of the Act and

restore the assessment order u/s 143(3) of the Act dated

13.02.2020.

appeal filed by the assessee in ITANo.158/Ind/2020 is allowed.

Order was pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 08.10.2021.

Sd/- Sd/-

(MADHUMITA ROY ) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 08.10. 2021 Patel/PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore