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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRAMOD KUMAR, VP & SHRI ABY T. VARKEY, JM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by revenue against the order of the Ld. Commissioner of Income Tax (Appeals)- 17, Mumbai dated 20.08.2019 for AY. 2009-10.
At the outset, the Ld. AR of the assessee brought to our notice that the Ld. CIT(A) has given relief to the assessee against the action of the AO who passed the re-assessment order dated 26.03.2015 u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter “the Act”). According to the Ld. AR, the AO passed the re-assessment order dated 26.03.2015 pursuant to the order of the Ld. CIT-07, Mumbai passed u/s 263 of the Act dated 24.01.2014 wherein the Ld. CIT found fault with the action of the AO in respect of original assessment framed u/s 143(3) of the Act dated 29.12.2011 wherein the AO
M/s. Navin Flourine International Ltd. assessed the total income of assessee at Rs.71,09,93,779/-. The Ld CIT u/s 263 of the Act found fault with the original assessment on the following four (4) issues: -
“i. MAT credit of Rs.19,88,06,245/- has been allowed as there is no MAT credit remaining to be carried forward from the earlier assessment year. This has been done without making any enquiry. ii. Fixed assets' amounting to Rs.4220.03 lacs has been transferred to /Impairment of Fixed Assets Account". The book depreciation of Rs.469.73 lacs was added back for the purpose of computing the taxable income, and neither any adjustment been carried out in respect of "Impairment of fixed assets" under any block of assets nor has the depreciation attribution to the assets classified as “Impairment of Assets: been added back nor the receipt of ₹ 5550.47 lacs for phasing out the production of CFC in the earlier years which has been treated as out the production of CFC in the earlier years which has been treated as a capital receipt and credited to the capital account was offered for taxation. The depreciation on the impaired assets, if any, claimed and allowed should have been enquired into before being allowed. This has not been done. iii. Deduction of Rs.1,32,86,625/- on account of adjustment u/s. 145A of the Act was made to the value of the closing stock in the earlier year whereas similar claim for immediate proceeding assessment year 2008-09 was disallowed by the Assessing officer. In accordance with the stand taken. assessment year 2008-09, the claim of deduction of Rs. 1,32,86,625/- should have been examined by the Assessing Officer, whereas no enquiry in this regard was conducted.
M/s. Navin Flourine International Ltd. iv. The assessee is consistently following mercantile system of accounting and charging the expenditure of capital nature on scientific research related to the assessee's business transferred to the work-in- progress account till the asset was ready to be put to use, and once the asset is ready to be put to use, the said asset is transferred to the fixed asset account. During the current assessment year, the assessee claimed and have been allowed deduction of the capital expenditure amounting to ₹ 2,58,19,434/- which is pending for completion and was transferred to the fixed asset account. This has been done without making any enquiry prima facie warranted on facts and circumstances of the case.”
And the Ld. CIT-07 passed revisional order u/s 263 of the Act dated 24.01.2014, wherein he had set aside the original assessment order to the AO dated 29.12.2011 u/s 143(3) of the Act, for re- assessment on the aforesaid four (4) issues. This action of the Ld. CIT-07 (passing the revisional order dated 24.01.2014) was challenged before this Tribunal; and the Tribunal found that (other than MAT issue) all the other three (3) issues cannot be held to be erroneous as well as prejudicial to the revenue. So the Tribunal held at para 24 “Hence, on the above three (3) issues, we reverse the revision order passed by CIT under section 263 of the Act but sustain the order on the issue of MAT Credit.” [We further note that AO has passed rectification order u/s 154 of the Act regarding the MAT credit which we are not concerned in this appeal.]
M/s. Navin Flourine International Ltd. 4. Meanwhile, we note that the AO while giving effect to the order of the Ld. CIT-07 passed u/s 263 of the Act dated 24.01.2014 has made addition/disallowance as under: -
“7. Subject to the above the revised total income is computed as under: Total income as per rectification order u/s 154 71,09,93,779 Dated 16.03.2015 Add: As discussed above (i) Disallowance u/s 32 of the Act 38,21,281/- (ii) Disallowance u/s 145A 1,32,86,625/- (iii) Disallowance u/s 35(1)(iv) 2,58,19,534/- Total Income 75,39,21,219/- Rounded off to 75,39,21,220/-
Thus, we note that on the aforesaid three (3) issues, disallowance has been passed by AO. Meaning, on the three (3) issues which has already been reversed by Tribunal vide order dated 10.06.2019 (ITA. No. 1205/Mum/2014), which the Ld. CIT(A) has reproduced in his impugned order. So when the foundation on which the AO has made the re-assessment order itself is not there (i.e. on three (3) issues) as noted (supra), consequent proceedings falls and the legal Maxim “Sublato Fundamento credit opus” is applicable meaning in case foundation is removed, the super-structure falls. In the case of Badarinath Vs. Tamilnadu AIR 2000 (SC) 3243 SC the M/s. Navin Flourine International Ltd. Hon’ble Supreme Court has held that once the basis of proceeding is gone all consequential order and acts would fall on the ground automatically which is applicable to judicial and quasi judicial proceedings. Therefore, we uphold the action of the Ld. CIT(A) on the aforesaid reasons stated by us.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 22/09/2022.