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Facts
The assessee, Greenearth Biogas Pvt. Ltd., appealed against the PCIT's order under Section 263 of the Income Tax Act, 1961, which revised its assessment for AY 2017-18. The PCIT found the original assessment erroneous and prejudicial to revenue concerning the dropping of penalty for amortization expenses, full-year depreciation claim despite commercial production starting later, unverified large cash deposits during demonetization, and unexamined income tax expenses. The assessee had also faced a 331-day delay in filing the appeal, for which condonation was sought.
Held
The Tribunal condoned the delay in filing the appeal, attributing it to wrong advice from the tax consultant. On the merits, the Tribunal upheld the PCIT's revisionary order, concluding that the original assessment was indeed erroneous and prejudicial to the revenue due to the AO's failure to properly investigate claims regarding depreciation, cash sales during demonetization, and income tax expenses, aligning with the tax auditor's report and judicial precedents for Section 263.
Key Issues
Whether the AO's assessment order was erroneous and prejudicial to the revenue concerning the allowance of full-year depreciation, treatment of cash deposits during demonetization, and unexamined income tax expenses, thereby justifying the PCIT's revisionary action under Section 263 of the Income Tax Act.
Sections Cited
263, 143(3), 40A(3), 270A(1), 270A(10)(b), 270AA, 36(1)(iii), 43(1), 80JJA, 68, 115BBE, 142(1), 32
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
आदेश / O R D E R Per, Dr. A. L. Saini, AM: By way of this appeal, the assessee has challenged the correctness of the order dated 25.03.2022, passed by the Learned Principal Commissioner of Income- tax (in short “Ld PCIT”), under section 263 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2017-18.
2.Grievances raised by the assessee, which, being interconnected, will be taken up together, are as follows:
(1)On the facts and circumstances of the case as well as on the subject, learned principal commissioner of income tax – 3, Ahmedabad has erred in passing order u/s 263 of the Act for assessment year 2017-18, without considering our detailed submission made in reply to the show cause notice. (2).On the facts and circumstances of the case as well as on the subject, the principal commissioner of Income Tax – 3, Ahmedabad erred in passing order u/s. 263 of the Act when order passed by assessing officer is neither erroneous nor prejudicial to the interest of revenue. (3)It is prayed that order passed by learned principal commissioner may please be quashed. (4)Appellant craves leave to add, alter or delete any grounds either before or in the course of hearing of the appeal.
The appeal filed by the assessee for Assessment Year 2017-18, is barred by limitation by 331 days. The assessee has moved a petition requesting the Bench to condone the delay. Learned Counsel for the assessee, explained the reasons for delay, stating that Tax Consultant of the assessee, who was handling the assessee`s case, did not advise the assessee that order passed by the Ld. PCIT under section 263 of the Act, is appealable order before Income Tax Appellate Tribunal (ITAT) or not. The assessee was not aware, whether order passed under section 263 of the Act is appealable order or not and when the assessee appointed another Counsel, then such another Counsel gave the advice to the assessee that order passed, under section 263 of the Act, is an appealable order before the ITAT (Tribunal). Therefore, because of the mistake of the tax consultant of the assessee, the delay of 331 days in filing the appeal before this Tribunal has caused, for that assessee should not be penalized. Therefore, Ld. Counsel contended that delay of 331 days in filing, the appeal may be condoned.
On the other hand, the Ld. DR for the revenue submitted that mistake of the tax Consultant of the assessee, is not a sufficient cause / reason to condone the delay. Hence, the assessee has failed to explain sufficient cause, therefore, the delay should not be condoned, and appeal of the assessee, should be dismissed on this score only.
We have heard both the parties. We note that mistake of a tax consultant of the assessee, is a sufficient cause to condone the delay, for that reliance is placed on the decision of I.T.A.T., 'C' Bench, Kolkata in the case of M/s. Garg Bros. Pvt. Ltd. & Others vs. DCIT [ITA Nos.2519 to 2521/Kol/2017, order dated 18.04.2018], wherein under similar set of facts and reasons, the Hon'ble Tribunal was pleased to condone the delay of 211 days by holding as under: "3. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the application for condonation of delay, we are of the considered opinion that assessee was under a bona fide belief that the impugned order of Pr. CIT was not appealable before this Tribunal since they were not advised by their Tax Consultants about this legal right. Later on, when a Senior Lawyer advised them to file an appeal, the assessees immediately took steps to file the appeals. Therefore, the delay caused. We note that delay was occurred because of the wrong advice of the Tax Professional for which assessees cannot be penalized. For the ends of justice, we condone the delay and admit the appeal for hearing.
We note that the reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, we are of the considered opinion that in the interest of justice, the delay deserves to be condoned. We, accordingly, condone the delay.
Succinctly, the factual panorama of the case is that assessee before us is a private limited company.The assessee- company had filed return of income for the assessment year (AY) 2017-18, on 13/10/2017, declaring total loss of Rs.2,36,06,293/-. The assessee`s case was selected for Scrutiny through CASS. The assessment was finalized u/s 143(3) of the Act, on 30.09.2019, by reducing loss by Rs.71,02,531/-, after making addition of Rs.31,000/-, u/s 40A(3) of the Act and disallowing amortization expenses claimed of Rs. 70,71, 825/-.
Later on, Learned Principal Commissioner of Income-tax (in short “Ld PCIT”), exercised his jurisdiction under section 263 of the Income-tax Act, 1961. On perusal of the assessment order dated 30.09.2019, it was noticed by the learned PCIT that the assessing officer made the following disallowances:
(i) Disallowance of Rs. 31,000/-, by invoking the provision of section 40A(3) of the Act, being the amount paid in cash by the assessee for buying of petrol and diesel from Vrundavan Petrol Pump, on 13/11/2016, and (ii) Disallowance of amortization expenses of Rs.70,71,825/- claimed, treating the same to be capital expenditure, in view of the provision of section 36(l)(iii) of the Act, read with explanation 8 to section 43(1) of the Act.
With regard to the disallowance of Rs.31,000/- u/s.40A(3) of the Act, the amount paid in cash by the assessee for buying of petrol and diesel from Vrundavan Petrol Pump on 13/11/2016, the Assessing Officer has imposed penalty u/s 270A(1) of the Act. However, Assessing Officer has failed to impose penalty u/s 270A(1) of the Act, in respect of disallowance of preliminary and pre-operative expenses of Rs.70,71,531/-, holding that the penalty u/s 270A(l) not imposable vide order dated 18.10.2019 wherein assessing officer has observed as under : "Considering the submission of the assessee, the penalty proceedings initiated u/s.270A(1) is hereby dropped and penalty is to be levied in respect of cash payment more than Rs.20,000/- as per provision u/s 40A(3) of the Act as agreed by the assessee."
There has been no apparent reason as to why the penalty proceedings in respect of preliminary and pre-operative expenses of Rs.70,71,531/-, have been dropped. The assessee, vide reply dated 16.10.2019 in respect of the penalty proceedings on this addition has summarily contended that there was no loss of revenue. The submission of the assessee was accepted by the assessing officer and penalty proceedings in respect of this addition were dropped.
The Ld. PCIT noticed that even though there was no loss of revenue on account of the disallowance of Rs.70,71,531/-, but the disallowances had impact on the losses to be carried forward. No explanation has been offered for under- reporting of income to the extent of Rs.70,71,531/-, which was prima facie not allowable in view of the provisions of Section 36(l)(iii) r.w Explanation 8 to Section 43(1) of the Act. The dropping of penalty in respect of amortization expenses has resulted into loss to the revenue as the amount of penalty would have positive revenue impact as per the provisions of Section 270A(10b) of the Act, which states that where the total income determined under clause (a) of sub-section (1) of section or assessed, reassessed or recomputed in a preceding order is loss, the amount of tax calculated on the under-reported income as if it were the total income. Hence, non-levy of penalty is an error which is also prejudicial to the interest of revenue. Therefore, Show- Cause Notice for initiation of proceedings u/s 263 of the Act have been initiated on this issue.
On further perusal of the assessment order dated 30.09.2019, it was noticed by the learned PCIT that the company has come into existence on 15/04/2015 and loss disclosed for the A.Y. 2017-18, is to the tune of Rs.2,36,06,293/-, after claiming depreciation amounting to Rs.4,28,20,442/-, which was on account of unabsorbed depreciation. It was noticed by the learned PCIT that the commercial production has commenced after 01/10/2016. In the chart for depreciation, as per Income tax Act, it was found that depreciation had been claimed in respect of newly added assets shown for Rs.73,72,28,858/-, which were acquired prior to 30.09.2016, with the opening WDV of Rs.4,18,04,396/-, on which depreciation of Rs.4,22,83,452/- had been claimed for the first half of the previous year. However, the Tax Auditor himself has reported as under : "Borrowing cost incurred upto the date of commercial productions i.e. 01.10.2016, has been capitalized into the respective assets. Interest after that date of commercial production has been charged to revenue."
Thus, it is evident that the commercial production commenced only on 01.10.2016 but the assessee has claimed depreciation for full year which was allowed by assessing officer as well. The ld PCIT noticed that as per records, the construction of factory shed continued till 09.03.2017, because the purchase of cement of Rs.99,000/- has been debited in the factory plant construction account. Similarly, assessee had continued to purchase Ogant Manure Mixing Plant for Rs.5,10,000/-, on 24.03.2017 and debited this amount in the Digester Plant Account. As per the purchase register, it had been observed that purchase of plant and machinery continued till 20/09/2016 and the first bill for purchase of raw material has been recorded on 01.12.2016, which was raised by Triveni Corp. of Bardoli. The sale register reflects that the first sale bill was issued on 10.10.2016, in favour of Parker Tiles Ltd, for Rs.2,50,000/-, for sale of bio gas. Thus, it is evident that assets/Plant and Machinery were not put to use before 30.09.2016, as production commenced only on 10.10.2016. Considering the above facts, the ld PCIT noticed that all these above mentioned facts and evidences, prima facie reveal that the depreciable assets were "put to use" after 30.09.2016 and not prior to that period and the depreciation was required to be allowed for half year in respect of all the assets. So, the claim of depreciation for full year is not justified. Hence, it is proved that impugned assessment order was erroneous and prejudicial to the interest of revenue on this aspect because the then assessing officer failed to take notice of this aspect and passed the assessment order without any enquiry.
The learned PCIT further noticed that during the year under consideration, huge amount of cash of Rs. 70,00,000/- has been found deposited in the bank account held by the assessee -company with Allahabad Bank on 21/11/2016 (during demonetization period) and on earlier occasions. During the course of assessment proceedings, the assessee contended that as per normal business practice, the cash accumulated in hand due to sale of bio fertilizer, such cash is deposited in bank at the end of each month or in the beginning of the month. Assessee in support of its claim furnished copy of cash book and sales register. On perusal of the cash book, it was noticed that majority of sales are below Rs.20,000/-. Besides this, the sale register also does not provide complete details of the buyers except their names. Thus, the authenticity of the cash sales and the source of cash deposit could not be proved authentic with reference to the production details of the finished goods and sale thereof which commenced only after 12/10/2016.
The learned PCIT further noticed that during the year, income tax expenses have been claimed to the tune of Rs.8,850/-. However, as per the records, it was found that the same has not been added back despite it being an inadmissible item of expense not allowable as per Income Tax Act. Neither the assessee has furnished any explanation nor assessing officer made any enquiry on this issue. On verification of assessment records, it was noticed by the learned PCIT that A.O. had failed to verify the details or called for any supporting documents in respect of the above mentioned issues. Neither the assessee provided any cogent explanation during the assessment proceedings and therefore these issues were remained unexplained. Thus, it is apparent that the assessment order passed u/s 143(3) dated 30.09.2019 is erroneous in so far as it is prejudicial to the interest of revenue.
Therefore, learned PCIT had issued a show cause notice to the assessee, on 19.01.2021, to explain the above transactions, and to furnish the following evidences, before the learned PCIT: (ⅰ) Explanation with documentary evidences in regard to your contention that on account of disallowance of amortization expenses of Rs.70,71,531/-, there has been no loss of revenue since the disallowances had impact on the losses to be carried forward and there has been under reporting of income to such extent. Accordingly, it has resulted into loss to the revenue as the amount of penalty would have positive revenue impact as per the provisions of section 270A(10b) of the Act which state that where the total income determined under clause (a) of sub-section (1) of section or assessed, reassessed or recomputed in a preceding order is loss, the amount of tax calculated on the under- reported income as if it were the total income.
(ii) Explanation along with documentary evidences in regard to the actual date of putting the depreciable assets in use for the purpose of business.
(iii) Explanation along with documentary evidences in regard to the source of cash deposited in bank during demonetization period.
In response to the notice of the learned PCIT, the assessee submitted written submission before the learned PCIT, which, are reproduced below:
“With due respect and after perusal of the above referred show cause notice issued under section 263 of the Income Tax Act, 1961, as revision proceedings, (on review of the assessment order passed by the assessing officer in our case for the assessment year 2017-18 under section 143(3) of the Income Tax Act, 1961 erroneous in so far as it is prejudicial to the interest of revenue), we understood followings (point no.2 to 7of the notice). Sr. Particulars 1. As per provision of section 270A (10) (b) of the I.T. Act, 1961 when income assessed / reassessed or recomputed as loss than the amount of tax will be calculated on the under reported income as it was the total income. This finding is w.r.t. disallowance of Rs.70,71,531/- of preliminary and pre operating expenses charge to revenue before date of assets put to use and dropping out penalty proceedings initiated under section 270(1) of the by the assessing officer.
Depreciation on machinery need to be calculated from date on assets put to use.
3. Likewise depreciation on building also need to be calculated with respect to assets being first put to use.
4. For cash sale made details of buyer need to establish.
5. Expenses by way of income tax of Rs. 8850/- not added as inadmissible item of expenses. 2) For point no.2 to 7, from the referred notice, your good selves have asked wide point no.8 followings explanations : (i) How amortization of expenses of Rs.70,71,531/- and disallowance thereof is not a loss of revenue, read with provision of section 270(10)(b) read with section 270(A)(1) of Income Tax Act, 1961,? (ii) Documentary evidences of putting depreciable assets to use for the purpose of the Business.
(iii)Documentary evidences w.r.t. to source of cash deposited into the bank.
3) Certain facts we would like to put for kind consideration as under before we submit our reply. A. Generation of bio fertilizer and biogas is not a single day production process, whereby on one day raw material inputed/inserted/Feeded and second day finished goods got ready. B. It required at least 5 to 6 months to complete first initial production process, which is explained as under. B(i)In the month of February 2016 two Digester plants got ready each having capacity of 6000000(60 lakhs) liters, which we have started filling (after hydro test) in February 2016 with food waste, Cowden, vegetable waste, Oil waste etc. (into the Digester.)Just to say 60,00,000/- + 60,00,000 liters of waste just collected in morning of 01/10/2016 and feeded into Bio-fertilizer / Bio gas, so what we understand from finding of the referred notice. Literature and details are available in Google for Bio waste fertilizer / gas, how process; we would like to mention that as long as bacteria process quality of fertilizer will be more excellent. B(ii)We mention that as per norms of the Gujarat Pollution Control Board (Regulatory body of the state for control of pollution and waste) every industrial or other establish generating food or vegetable waste(like etc.) need to dispose such waste a mandatorily to certain compost prescribe site which also includes Bio fertilizer / Biogas Plants for composition purpose and converting such waste into bio fertilizer. B(iii) Therefore all food processing establishment manufacturing Potato/ Banana wafers, Rice Mills, Grain foil waste, Fruit processing,(and similar)or likewise in marriage season all catering companies need to dispose their waste to such sites including of ours. B(iv Referred notice says Raw material purchase on 24/03/2017 and Sale on 01/10/2016 is not true story of production start date or assets put to use. Yes, it is true sometimes to charge Digester plants with some Oily contents/some particular type of waste being purchase, it doesn't mean that particular purchase referred is first purchase of raw material, and funnier thing is how raw material purchase date can be later then first sale date. B(v) Digester plants which was ready in month Feb, 2016 (copy of bill enclosed as Annexure) has been tested for hydro test(leakage) in the month of Feb, 2016 and from Feb/March, 2016, we have started filing of Digester plant of each 60,00,000 liters capacity by the things narrated above for fragmentation / bacteria generation and composition process to convert waste narrated above into Bio fertilizer. B(vi) Here we would like to further clarify that commonly if we do same process at our own house by digging hole in land and fill up it by leaves/food waste then it take at least 3 to 4 months for completing the process of composition. B(vii) So in march, 2016 Digester plant has been put to use.
B(viii) We also further strongly retreat that converting of waste fertilizer with initial Digester having capacity of 60,00,000 liters fill it completely for the process of fragmentation / Bacteria."Generation process and composition is not a single day process If we have sold Bio gas in October 2016 month then at least had 6 months backward process having start the activities. B(ix) From April, 2016 second phase of implementation Bio gas filtration and storage plants being imported and install during period April 2016 to June 2016 and put to use with month of June/July 2016 which is also evident by enclosed from ledger of the plant & bank term loan. If your self-see copy of ledger of bank term loan and also copy of machinery plant ledger, bank has disbursed term loan only when machinery got installed. From the ledger of machinery and copy of bill it is well evident Digester plant was ready by 01/02/2016 and bank has also disbursed term loan for that. Likewise rest Biogas filtration storage plant installed start during period April 2016 to June 2016 and bank has also disbursed term loan. B(x) First we have started using Digester plant and having started collection of initial i core 20 lakhs liters waste for fragmentation/ bacteria generation /composition and then went for second portion of plant i.e. Biogas / Biogas filtration and storage plant. Therefore, Digester which were put in use in the month of Feb/March 2016, no depreciation has been claimed for the year 2015-16 however full depreciation has been claimed for the year 2016-17. Likewise for Bio gas plant depreciation has been claimed during the year 2016-17 considering use, for more than 6 months.
Therefore, first sale bill on 1st October, 2016 only date sale after getting Bio gas being tested for quality/calorific value and eligible for use, we have starting selling that doesn't mean at all assets has been put to use on that date. B(xi) We here mention that no entrepreneur would like to keep continue investing money with huge cost and would complete all process then start production, is not correct, a Prudent entrepreneur immediate after completion of part plant would put the same into use for and then will process further, will not keep any investment ideal. B(xii) Therefore we once again respectfully submit that assets has been puts into use and started using by March, 2016 and further by June, 2016 accordingly depreciation has been rightly claimed as per the provisions of Income Tax Act. C. Likewise you good selves have observed certain expenses towards building has been continued (Cement 99000/- 09/03/2017 and mixing plant 510000/- 24/03/2017) is not necessary mean that it has 20 concerned with production • activities, prudent businessmen entrepreneur with first complete work of plant and machinery then certain non-productive item like compound wall, staff worker quarter, security cabin, gardening, leveling, road always taken place slowly and whenever such expenses incurred stand capitalize and based on period of 6 month, depreciation being claimed, so few item of purchase like cement etc. are towards for items narrated here in above have no concern with Digester and Bio gas plant. Moreover purchase of mixture machine of Rs.5,10,000/- 24/03/2017 does not mean at all that Digester plant purchased in Feb 2016 and Biogas plant in April 2016 to Jun 2016, Kept ideal for nine month with investment of additional crores of Rs. just purchase of mixture valuing of Rs.5,10,000/-, we think not at all. We convincingly submit that adding of mixture machine has no concerned with whole production process it is a just additional machinery purchase for more convenience efficiency. D. Details of Primary and Pre-operative expenses charged to Profit and Loss account, details of same are given as under. D(ii) Out of total of P & P expenses charged to the Profit & Loss account Rs.693250/- for initial expense towards company formation till 31/01/2016 and remaining after 01/02/2016 D(iii) We respectfully submit that production activity has been started by Feb, 2016 accordingly these expenses charged to the revenue D(iv) Therefore findings that these are before production is not correct these expense are incurred with the machinery put to use except certain initial expenses of company formation. D(V) Likewise whatever interest on term loan debited to Profit and Loss account later reimbursed by Gujarat State Government by way of term loan interest subsidy and same was considered as interest income when it has been received and credited to the Profit and Loss account of that period. E) With respect to expenses of Rs.8850/- we agree that this remain for disallowance. F) With respect to deposition of cash. F(i) With respect to deposition of cash into bank out of sale proceeds of Bio fertilizer, Bio gas, during assessment proceeding we have submitted all necessary details sought by the assessing officer which includes cash book and bank statement, copies of sale bills, quantity statement etc. F(ii) We submit that Bio fertilizer being sold to farmers / agriculturist they came with their own tractors and fertilizer filled into their tractor they carry the same, as your self is very well aware that all agriculture / farmers etc, from unorganized sector not having banking facility, even suppose they having banking facility, for new customer we would not like to take risk selling against cheque, we would like sale it in cash and in general in cash memo bills we generally mention only name of customer.
F(iii) We further respectfully submit that we are on opinion that cash invoices issued to unregistered person no requirement to mentioned other details except name and our contention is also supported by GST invoice rules 46 of the Central Goods and service Tax rules 2017 where in clause no.5” Name and address of the recipient and delivery address of the consignment, along with the name of the state and state code, in case the recipient is an unregistered person and the value of goods exceeds INR 50,000”And our all sale are almost less than 20000/-.
In. view of the above and in reply to point no,8 of your referred notice latter and as explained above we respectfully submit as under. 4) (i)Preliminary expenses of Rs.70,71,531/- charged to the Profit & Loss account as per the provision of the Income Tax Act (even we were agreed for the disallowance during assessment proceedings) as assets put to use in the month of Feb 2016 (even not carried forwarded that portion). Here/ we would also like to mention that income of Bio fertilizer and Biogas plants completely tax free u/s 8QJJA for five initial assessment 5 years when income is completely tax free why we would like to go for under statement or miss statement of income therefore findings of yourself with respect to our intention and facts of our case are not conceded. We therefore pray kindly except our above submission. (ii)With respect to reply of point no.8 (ii) we have explained very well date of put to use is Feb/Mar 2016, above. (iii)With respect to reply point no. 8 (iii) there is no requirement except to put name of the buyer in invoice and cash only out of sale deposited into the bank all transaction are well recorded in books of accounts. 5) (iv)Penalty can be imposed when assessee being benefited with additional benefit and when it has suppress the facts/ recorded false entry in books, not recorded any investment etc. and passed any wrong entry in books of account with intension of getting additional benefits and acted with "mense-ria" mind (Criminal Act) in our case nothing like that, then for technical things no penalty can be imposed, however after receiving above referred notice it has given great pain to us,
6) technical opinion from the experts, can also be taken with respect to our submission here in above and 7) WE WOULD ALSO LIKE TO REPRESENT OUR CASE IN PERSON IN ADDIITON TO E-SUBMISSION ON E-FILING PORTAL THEREFORE SUCH OPPORTUNITY IS ALSO BEING REQUESTS.”
However, the Learned PCIT rejected the contention of the assessee and issue wise- discussion with reference to query raised and reply filed by the assessee was discussed by ld PCIT, which is reproduced below, as under:
(i) Issue of penalty on disallowance of Preliminary Expenses of Rs.70,71,531/- : During the assessment proceedings, assessing officer found that the assessee has debited a sum of Rs.70,71,531/- under the preliminary and preoperative expenses/amortization expenses. After giving detailed reasoning in para 2 of assessment order, Ld. assessing officer disallowed the expenses and added the said amount of Rs.70,71,531/- to the total income and initiated the penalty proceedings u/s.270A(l) of the Act. However, no penalty was imposed by the assessing officer and proceedings were dropped after considering the submission of the assessee. The Assessing Officer in her report dated 13.07.2020 has confirmed that assessee prima a facie fulfills all the conditions mentioned in Section 270AA of the Act for granting immunity. In its submission, the assessee has contended that Preliminary Expenses of Rs.70,71,531/- were charged to P&L Account as per the provision of income tax albeit agreed for disallowance during assessment proceedings. The assessee has further stated that income of Bio-fertilizer and Biogas plants is totally tax free u/s.80JJA for 5 initial assessment years. Therefore, it is argued that when the entire income is totally tax free, then there cannot be any intention on the part of assessee to make under statement/mis-statement of income. It is further contended that there is no false claim or false entry in books and assessee did not act with 'mens rea' while claiming this expense as deduction. However, learned PCIT after taking into account the submission of the assessee, this is not a valid issue on which revisionary powers u/s.263 of the Act should be exercised against the impugned assessment order passed on 30.09.2019. The ld. PCIT also held that there is no error in the said assessment order wherein penalty has been duly initiated, it is the penalty order by which penalty was dropped. Hence, Show Cause Notice issued on this point of dropping of penalty was dropped by learned PCIT.
(ii) Claim of depreciation on assets for the period prior to start of commercial production : On this issue, department's claim is based on Auditor's remark that commercial production started on 01.10.2016 whereas the assessee has claimed that Digester Plants were ready in the month of February, 2016 and put to use in February /March, 2016. The assessee has explained that assessee is engaged in production of bio-fertilizer and biogas which is not a single day production process which takes at least 5 to 6 months to complete first initial production process. As explained by assessee, in the month of February, 2016, two Digester Plants got ready (each having capacity of 60,00,000 liters) which the assessee started filling in February, 2016 with food waste, cow dung, vegetable waste, oil waste etc. As per mandate given by GPCB (Gujarat Pollution Control Board) every industrial or other establishment generating food or vegetable waste need to dispose such waste material to such sites. With regard to purchase of raw material on 24.03.2017 and sale bill generated on 01.10.2016, it has been explained that due to specific requirement, assessee bought particular raw material/ item but that does not mean that said plant was put to use on that date. As per assessee, Digester Plants were ready in the month of February, 2016 (copy of Bill enclosed) which was tested for hydro test (leakage) in the month of February, 2016 and from February /March, assessee started filling the Digester Plants (60,000 litres capacity) by things /bio- waste material for fragmentation/ bacteria generation and decomposition process to convert waste into bio-fertilizer which takes time and not a single day process. Assessee further explained that from April 2016, second phase of implementation of Bio-gas filtration and storage plant started by importing and installation done during the period April 2016 to June 2016 and the same was put to use in the month of June/ July 2016 which is evident from Ledger A/c. copy of Plant & Machinery.
However, learned PCIT noticed apart from filing Ledger account, Bank Statement and copy of invoices, the assessee has failed to prove that actually the Digester plants and other plants & machinery were actually put to use before 30.09.2016, the onus to bring all the necessary documentary evidences on record is on the assessee who actually has all these evidences in his possession. It is an admitted fact that during the assessment proceedings, the then assessing officer failed to examine this aspect of "put to use" before allowing the claim of depreciation to the assessee. On perusal of Ledger A/c. of "Biogas Plant", it is seen that bills relating to various purchases of plants meant for "Digester Plant" have been bought between 30.09.2016 to 31.03.2017 which creates bona fide doubt about actual date of “put to use” being claimed before 30.09.2016. Assessee himself has admitted the fact of purchase of mixture machine of Rs.5,10,000/- on 24.03.2017. Most importantly, the Tax Auditor has himself certified start of commercial production date as on 01.10.2016, which cannot be ignored. Nonetheless, there are claim and counter claim from both sides which are quite contradictory to each other. This is very much evident from assessment record that proper enquiry/investigation on this issue was not done by the then assessing officer and depreciation as claimed by the assessee was allowed in a summary manner. Although, the assessee has shown loss in the ITR but allowing carry forward of unabsorbed depreciation amounts to notional revenue loss. Hence, ld.PCIT was of the view that the impugned assessment order was not only erroneous in respect of allowing excessive claim of depreciation but also prejudicial to the interest of revenue.
(iii) Cash deposit in Bank Account during demonetization period: On verification of computation of income wherein the details of cash deposited during demonetization period, that is, 09.11.2016 to 30.12.2016, the assessee in details of bank account has stated that in Allahabad Bank, Surendranagar Branch, the assessee had deposited total Rs.70 Lacs. In Notes to Accounts forming part of Financial Statement, vide para 2.16, the auditor has also confirmed the amount of cash deposited during the demonetization period amounting to Rs.70 Lacs (in SBN). On being asked the assessee has simply provided the copy of Cash Book and contended that impugned amount of cash of Rs.70 Lacs was deposited out of cash sales proceeds received during the year. It is seen that these details are simply kept on record and the assessing officer did not investigate the issue any further. On closure scrutiny of the details relating to cash sales, it is revealed that the assessee has shown his entire sales proceeds by way of retail sales of fertilizers each having bill amount less than Rs.20,000/- in each case. On examination of Cash Book, it was seen that the Sale Register/Cash Book does not give complete details of buyers except their names. The assessee did not provide the details of day to day production, day to day sales and stock inventory on day to day basis. During the demonetization period, on a single day, i.e. on 21.11.2016, the assessee has shown cash deposit of Rs.70 Lac in SBN (Specified Bank Notes) in one go. It is difficult for any man of common prudence to keep on accumulating so much cash instead of depositing it regular in the bank account. The theory of cash sales is nothing but a fabricated one. It is improbable that each and every buyer would purchase fertilizer which is less than Rs.20,000/- in each case. The assessee also deposited Rs.40 Lacs on 26.10.2016 and Rs.20 Lacs on 27.10.2016 in Allahabad Bank. Later on, in Allahabad Bank Account on 10.02.2017, Rs.39 Lacs and on 02.03.2017 Rs. 2 lacs and on 22.03.2017 Rs.13 Lacs have been deposited by cash. Similarly, in Axis Bank also cash amount of Rs.15 Lacs and Rs.12 Lacs have been found deposited on 18.03.2017 and 22.03.2017 respectively. Even after many opportunities given to the assessee during current proceedings, the assessee did not furnish corroborative evidences with regard to cash sales which has been claimed as the only source of cash deposit in the bank account with Allahabad Bank and Axis Bank during the entire year. Therefore, ld.PCIT was of the view that this whole story of retail cash sales of fertilizers by issuing bills below Rs.20,000/- is fabricated and an afterthought just to create an alibi to explain the source of cash amount deposited in the bank (in SBN) during demonetization period and also throughout the year.
On verification of copy of Sales Register, it was found that the assessee has claimed total cash sales during the entire year amounting to Rs.2,43,59,735/-, which has been claimed as source to explain cash deposit in the bank account which was in turn used for payment of various liabilities including term loan and towards purchase of Plant & Machinery. This credit amount requires to be added u/s 68 being unaccounted money introduced in the books of account in the garb of cash sales. It is quite evident from the details available on record that the then assessing officer failed to examine this issue and failed to make required addition by carrying out proper investigation in the matter. Therefore, ld.PCIT was of the view that not carrying out any inquiry which assessing officer should have on the issue of cash sales as well as cash deposited in the bank account, amounts to error in the assessment order which is found prejudicial to the interest of revenue. Therefore, invocation of provisions u/s.263 on this issue is fully justified.
(iv) Wrong claim of Income Tax Expenses of Rs.8,850/- : On verification of assessment records, it was found that the assessee has claimed Rs.8,850/-, as Income Tax Expenses. However, the assessee forgot to disallow this amount while computing income and assessing officer also erred in not making addition of this amount to the total income. This being item of Income Tax Expenses, the same is inadmissible as per provision of Income Tax Act and required to be added to the total income. Despite of several opportunities, the assessee has not furnished any explanation with documentary evidence to justify the claim of expenditure. The learned PCIT, therefore, directed the assessing officer to examine the above claim of the assessee. Hence, ld.PCIT was of the view that said expense deserve to be disallowed and added to the total income.
Therefore, learned PCIT held that in view of the Explanation 2(a) of section 263 of the Act, the impugned order passed by the Assessing Officer u/s 143(3) dated 30.09.2019 is erroneous in so far as it is prejudicial to the interest of revenue on the issue of wrong claim of depreciation and cash amount deposited in Bank account during demonetization period and impugned assessment order is required to be revised u/s. 263 of the Act.
Aggrieved by the order of the learned PCIT, the assessee is in appeal before us.
Shri Hardik Vora, Learned Counsel by the assessee, argued that during the assessment proceedings, the assessing officer issued noticed under section 142(1) of the Act which, is placed in the paper book page number 69, wherein the assessing officer had asked the assessee to furnish details and documents. In response to the notice under section 142(1) of the Act, the assessee submitted reply before the assessing officer, (vide paper book page number 73). The Learned Counsel also submitted that the assessing officer again issued notice under section 142(1) of the Act dated 06.09.2019, (vide paper book page number 76) and in response, the assessee replied to the assessing officer, hence adequate enquiry was conducted by the assessing officer, in respect of all the issues raised by the learned PCIT. Therefore, the Ld. Counsel submitted that whatever details asked by the assessing officer, has been furnished before the assessing officer, from time to time. That is, the entire documents and evidences were submitted and in fact assessing officer, having examined the details, has also applied his mind, therefore, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the revenue, hence order of the learned PCIT may be quashed.
On the other hand, Ld. DR for the revenue submitted that the Tax Auditor of the company, in his tax audit report clearly stated that plant was not ready or put to use condition on 30.09.2016. Therefore, the assessee is not eligible for depreciation for 6 months, which started from 1st April 2016 and ends on 30th September 2016. As the assessee`s internal documents, and tax audit report, clearly state that assessee`s plant had not started up to 30th September 2016, hence the assessee is not eligible to claim the depreciation for first six months. About cash deposited during the demonetisation period, on and after 09.11.2026, the Ld. DR submitted that the plant of the assessee had not started production till 30.09.2016, therefore, there is no question to make the cash sales and manufactured the goods. Besides, the assessing officer has not examined, the income tax expense of Rs.8,850/-. Therefore, the assessment order was definitely erroneous and prejudicial to the interest of the revenue, therefore order passed by the learned PCIT may be upheld.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials brought on record. We find merit in the submissions of learned DR for the revenue to the effect that the Tax Auditor of the company, in his tax audit report clearly stated that plant was not ready or put to use condition, as on 30.09.2016, therefore, the assessee is not eligible for depreciation for 6 months, which started from 1st April 2016 and ends on 30th September 2016, as the assessee`s internal documents, and tax audit report, clearly state that assessee`s plant had not started up to 30th September 2016, hence the assessee is not eligible to claim the depreciation for first six Months. About cash deposited during the demonetisation period, on and after 09.11.2026, we find merit in the submission of Ld. DR for the revenue, to the effect that the plant of the assessee had not started production till 30.09.2016, therefore, there is no question to make the cash sales and manufactured the goods, and to sale in the market. Besides, the cash sale was made to each customer in cash below Rs.20,000/- which cannot be accepted as genuine. Besides, the assessing officer has not examined, the income tax expense of Rs.8,850/- at all.
We find that during the assessment proceedings, the assessing officer has asked the questions from the assessee about the claim of the depreciation, and cash deposited during demonetisation period. About income tax expenses of Rs.8,850/-, the assessee has not submitted any reply. We note that just to issue the notice under section 142(1) of the Act and reply by the assessee, in response to that notice, is not sufficient. The view taken by the assessing officer based on the documents and evidences submitted by the assessee should be sustainable in the eye of law. In the assessee`s case under consideration, the view taken by the assessing officer is not sustainable in the eye of law, because the Tax Auditor of the company, in his tax audit report clearly stated that plant was not ready or put to use condition, as on 30.09.2016, therefore, the assessee is not eligible for depreciation for 6 months, which started from 1st April 2016 and ends on 30th September 2016, as the assessee`s internal documents, and tax audit report, clearly state that assessee`s plant had not started up to 30th September 2016. Since the plant has not started production till 30.09.2016, hence question of cash sales below Rs.20,000/-, shown by the assessee and deposited during the demonetisation after 09.11.2016, is nothing but assessee`s unaccounted money. Therefore, the cash sales shown by the assessee, less than Rs.20,000/- to each customer, ( the assessee has not sold the goods, even to a single customer, by cheque) is bogus and therefore the view taken by the assessing officer is not sustainable in the eye of law. Since the plant of the assessee had not started production till 30.09.2016, therefore, there is no question to make the cash sales and manufactured the goods, and to sale in the market, during demonetisation period. The production process shown by the assessee in his written submission is long, therefore, at least, 5 months would be needed after 30-09-2016, to manufacture the goods. Hence, cash sale shown by the assessee for each customer below Rs.20,000/- is fictitious, and no genuine. Considering these facts, we find that order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue. Where Assessing Officer has accepted a particular contention/issue without any enquiry, and has taken the view which is not sustainable in the eye of law, the order is erroneous and prejudicial to the interest of the Revenue.
Let us take the guidance of judicial precedents laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer 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 Assessing Officer is unsustainable in law”. Therefore, considering the assessee’s facts, we are of the considered opinion that assessing officer, has taken the view, (in the assessee`s case under consideration), which is not sustainable in law. As the manufacturing process was not started up to 30-09-2016, hence assessee cannot claim depreciation for first 6 months. Besides, the process of manufacturing explained by the assessee is very long which would take at least 5 months after 30-09-2016, hence cash sale made by assessee during demonetization period is bogus. Besides, income tax expense was not examined by AO, at all.
We note that in appeal effect proceedings under section 143(3) r.w.s.263 of the Act, the assessee was not able to prove his stand. The findings of the appeal effect order, of the assessing officer, under section 143(3) r.w.s.263 of the Act, are reproduced below:
“Conclusion drawn: The submission of the assessee dated 24/01/2023, 09/03/2023, 10/03/2023, 11/03/2023, 21/03/2023. 24/03/2023, 29/03/2023, video conference held on 24/03/2023 at 3.30 PM, assessment order under section 143(3) and revision order u/s 263 of I.T.Act, 1961 are taken into consideration, The para 4.2.1 of the Show Cause notice is as follows: Your submissions with corresponding annexures etc have been perused with due care. On perusal of the documents and your submissions furnished during set-aside assessment proceeding u/s. 263 pending before the Assessing Officer as well as during the course of hearing u/s. 263 before the Ld. PCIT, It is clear that up to 30.09.2017 the Machineries / Digester Plants etc were under construction and for installation-testing process. The certificate by the Ld. Auditor and The Engineer & Contractor further confirms that the Digester Plant was under preoperative/installation stage till 30.09.2017. Hence, it can not be said that the same was actually put to use for the purpose of business or profession' before 01.10.2017 as required under the provisions of section 32 of the Act to calm full year's depreciation. It is also clear that the plant in question was actually put to use for the purpose of business or profession' with its first commercial production, i.e., 01.10.2017. As already certified by the Ld. Auditor that the interest on borrowed capital was capitalized till 30.09.2017, similarly any expenditure or deduction are also subject to capitalization but in any way can not be charged to revenue for the full year. Therefore, apparently the depreciation claimed for the full year against the Machineries/Digester Plants etc is inadmissible. In view of the above and as no new convincing document or fact could be brought into by you during the set-aside assessment proceeding u/s. 263, your claim for full years depreciation on the Machineries /Digester Plants etc is found to be untenable. Accordingly, you are hereby requested to explain why your excess claim of depreciation for Rs.4,22,83,452/- on the Machineries/Digester Plants etc for 01.04.2017 to 30.09.2017 shall not be disallowed and added back to the income of the assessee company. The assessee is requested to read the para 4.2.1 of Show Cause notice as follows: "Your submissions with corresponding annexures etc have been perused with due care. On perusal of the documents and your submissions furnished during set-aside assessment proceeding u/s. 263 pending before the Assessing Officer as well as during the course of hearing u/s. 263 before the Ld. PCIT, it is clear that up to 30.09.2016 the Machineries / Digester Plants etc were under construction and / or installation-testing process. The certificate by the Ld. Auditor and The Engineer & Contractor further confirms that the Digester Plant was under preoperative/installation stage till 30.09.2016. Hence, it can not be said that the same was actually put to use for the purpose of business or profession' before 01.10.2016 as required under the provisions of section 32 of the Act to claim full year's depreciation. It is also clear that the plant in question was actually put to use for the purpose of business or profession' with its first commercial production, i.e., 01.10.2016. As already certified by the Ld. Auditor that the interest on borrowed capital was capitalized till 30.09.2016, similarly any expenditure or deduction are also subject to capitalization but in any way can not be charged to revenue for the full year. Therefore, apparently the depreciation claimed for the full year against the Machineries / Digester Plants etc is inadmissible. In view of the above and as no new convincing document or fact could be brought into by you during the set-aside assessment proceeding u/s. 263, your claim for full years depreciation on the Machineries /Digester Plants etc is found to be untenable. Accordingly, you are hereby requested to explain why your excess claim of depreciation for Rs.4,22,83,452/- on the Machineries/Digester Plants etc for 01.04.2016 to 30.09.2016 shall not be disallowed and added back to the income of the assessee company. It is a clerical mistake which is an error apparent on the record and assessee has been already intimated this fact through letter. The case for the Assessment Year 2017-18 is under revision proceeding u/s 143(3)/263 of the Act. The submission of the assessee dated 21/03/2023 & 24/03/2023 against the Show Cause Notice is also related to the Assessment Year 2017-18. The assessee claimed depreciation amounting to Rs.4,28,20,442/- which was on account of unabsorbed depreciation. It is seen that commercial production has commenced on 01/10/2016. In chart of depreciation as per Income tax Act, 1961 it is found that depreciation has been claimed in respect of newly added assets shown for Rs.73,72,28,858/- which were acquired prior to 30.09.2016 with the opening WDV of Rs.4,18,04,396/-, on which depreciation of Rs.4,22,83,452/- has been claimed for the first half of the previous year which is inadmissible as the depreciable assets were "put to use" after 30.09.2016 and not prior to that period. It is also clear that the plant in question was actually 'put to use for the purpose of business or profession' with its first commercial production, i.e., 01.10.2016. As already certified by the Ld. Auditor that the interest on borrowed capital was capitalized till 30.09.2016. In the same line the Interest part on borrowed capital has been capitalised up to 30.09.2016 and reported by the Auditor. Further revised certificate produced from the Auditor cannot alter the fact of capitalisation of interest upto 30.09.2016. Similarly, it is also observed that electricity consumption has increased substantially after 30.09.2016. This all along with the evidence of first sale from 01.10.2016 substantiate that use of plant for commercial production has been started from 01.10.2016 and evidence supports finding that machines were put to use from 01.10.2016. It is a settled principle that any 'sale' is the culmination of the production through a plant, which may take months before such sale in the process of installation of the plant and production of the desired product. In other words, the first sale date of such product is the date when the basic purpose of business is fulfilled or can be said as start of business or profession for that particular plant or machinery. Any process prior to that is preoperative or preliminary expenditure in nature and may be capitalized with the asset, if the case desired to be so. But in no way it is admissible to be charged as revenue expenditure under the head 'depreciation'.
As there is no specific definition of 'put to use' is defined in the Income Tax Act, from the point of view of a man of ordinary prudence, it has to be linked with the date of generation of revenue which is ultimate purpose of the business and setting-up the whole plant & machinery. In this case even the Ld. Auditor took the 1st date of sale, i.e. 01.10.2016 as the cut-off date to capitalize the interest on borrowed capital. Similarly in my considered view, the date of 'put to use' for depreciation is also to be taken as on 01.10.2016. On perusal of the documents and submissions furnished during set-aside assessment proceeding u/s 253, it is clear that up to 30.09.2016 the Machineries/Digester Plants etc were under construction and/or installation-testing process. The certificate by the Ld. Auditor and The Engineer & Contractor further confirms that the Digester Plant was under preoperative/installation stage till 30.09.2016. Hence, it cannot be said that the same was actually 'put to use for the purpose of business or profession before 01.10.2016 as required under the provisions of section 32 of the Act to claim full year's depreciation as discussed above. In view of the above, it is also clear that the plant in question was actually put to use for the purpose of business or profession with its first commercial production/sale, i.e. 01.10.2016 without prejudice to the fact that the process of installation/production has taken months before such first sale. Therefore, apparently the depreciation claimed for the full year against the Machineries/Digestor Plants etc is inadmissible During whole set-aside assessment proceedings, the assessee in his written as well as in video conference, kept on emphasizing the process or installation of digester plants in question and the production method of bio-gas/fertilizers etc, whereas the crux of the question was always on the cut-off date for determining the date of "put to use of the plants and for which the assessee failed to furnish any convincing explanation. In view of the above discussions and as no new convincing document or fact could be brought into by the Assessee company during the set-aside assessment proceeding u/s. 263, therefore claim for full years depreciation on the Machineries/Digester Plants etc is found to be untenable. Accordingly, excess claim of depreciation for Rs.4,22,83,452/- on the Machineries/Digester Plants etc for 01.04.2016 to 30.09.2016 is disallowed and added back to the income of the assessee company. (Addition of Rs.4,22,83,452/-) On going through cash book, sale bill and the sale register furnished by the assessee during the proceeding uls 143(3)/263 of 1.T. Act, 1961, majority of sales are made in cash and below Rs.20,000/- the assessee only furnished the name of the buyers but did not furnish the address and email of the buyers so that confirmation from the buyer could be obtained from the buyers. Therefore, the assessee could not establish the genuine source of huge cash deposit of Rs.70,00,000/- deposited in the bank account held by the assessee company with Allahabad Bank on 21/11/2016 during demonetization period and on earlier occasions. Hence, the cash deposit to the tune of Rs.70,00,000/- is hereby disallowed and the amount of Rs. 70,00,000/- is added as unexplained cash credit to the income of the assessee company by invoking the provision of section 68 of the Income Tax Act, 1961 and to be taxed under the provisions of section 115BBE of the Income Tax Act, 1961.(Addition u/s 68 of I.T. Act)
The assessee has not furnished any explanation on Income Tax expenses that have been claimed to the tune of Rs.8850/- and debited to the P&L A/c during the year under consideration. It is an inadmissible item of expense not allowable as per Income Tax Act, Therefore, Rs.8850/- is added back to the income of the assessee company. The assessee is also agreed to this addition in his submission dated 09/03/2023.”
It is important to remember that the AO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the AO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in the section 263 includes the failure to make such an inquiry becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. Hence, going by the facts narrated above, the language of the Provisions of Section 263 and the interpretation placed on these provisions by the various Courts, the order of the AO falls within the category of being an order which is erroneous as well as prejudicial to the interest of the revenue. In this interpretation of the provisions of the section 263, we are supported by the decision of the Hon'ble Delhi High Court delivered in the case of Gee Vee Enterprises vs Add.CIT(1975) 99 ITR 375 (Delhi). The same view has also been held by the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd vs. CIT 243 ITR 83 (SC). The relevant portion of this judgment which supports our contention made in this paragraph above is reproduced as under: "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind."
This has also been subsequently upheld/followed by the Hon'ble Himachal Pradesh High Court in the case of CIT vs. Himachal Pradesh Financial Corporation (2010) 186 Taxmann 105(HP). We find, it is worthwhile to mention here that the order u/s. 263 of the I.T. Act, 1961 is valid even if one of the several items dealt with therein is found the prejudicial to the interest of revenue and for this proposition of law, we place reliance on the decision of Hon'ble Madras High Court in the case of Indian Textiles Vs. CIT, 157 ITR 112 (Madras). Further, it is also important to mention here that the provisions of section 263 can be invoked even where full facts are disclosed but the AO has not examined these details as per correct provisions of law. In support of this proposition, we place reliance on the decision of the Hon'ble Rajasthan High Court delivered in the case of CIT Vs. Emery Stone Manufacturing Company, 213 ITR 843 (Rajasthan). Further, the provisions of section 263 can be invoked even where the issue is debatable. For this proposition, we place reliance on the decision of Hon'ble Gujarat High Court delivered in the case of CIT Vs. M. M. Khambhatwala, 198 ITR 144 (Gujarat). Therefore, considering the factual position narrated above, we note that the assessment order of the assessing officer dated 30.09.2019 was rightly set-aside by the ld.PCIT, therefore, we uphold the revision order of learned PCIT and dismiss the appeal of the assessee.