GUMPRO DRILLING FLUIDS PRIVATE LIMITED,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX - 15, MUMBAI

सुनवाई क" तार"ख / Date of Hearing : 10/10/2018 10/10/2018 आदेश क" तार"ख /Date of Order: आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 19/03/2018 of the Ld. Commissioner of Income Tax, 2 Mumbai, invoking revisional jurisdiction u/s 263 of the Income Tax Act, 1961 (hereinafter the Act).

Dahiya, strongly defended the revisional order by contending that the assessment order is not speaking one by inviting out attention to the factual finding recorded in the impugned order by the Ld. Pr. Commissioner. It was pleaded that the ld. Assessing Officer has not applied his mind and even did not made any whisper in the assessment

order with respect to the issue in hand, consequently, the revisional jurisdiction was invoked. 4 2.2. We have considered the rival submissions and perused the material available on record. Before adverting further, it is our bounded duty to examine section 263 of the Act, which is reproduced hereunder for ready reference and analysis:-

It has been further explained with the insertion of Explanation-2 inserted by the Finance Act, 2015 w.e.f.

01/06/2015. Undisputedly, the Ld. Commissioner served upon the assessee a show cause notice dated 20/06/2017 issued u/s 263 of the Act and served upon the assessee as to why the assessment framed under section 143(3) of the Act should not be revised, cancelled or modified. The assessee vide letter dated 21/08/2017, submitted the details. The assessee also relied upon various case laws.

Before the Ld. Pr. Commissioner, the assessee submitted 7 that the Ld. Assessing Officer duly examined the issue involved, raised appropriate queries, called for relevant details and on examination of such details allowed relief to the assessee. Identical plea was raised before this Tribunal.

2.4. Now, we shall deal with the cases and the ratio laid down therein and also some other cases which are available on the issue in hand, so that we can reach to a justifiable conclusion. The first decision in ACIT vs M.P.

Warehousing and Logistic Corporation Ltd. (2012) 21 taxman.com 322 (Indore), wherein with respect to repairs and insurance of machinery, plant and furniture, it was held that the expenditure must be incurred by the assessee to preserve and maintain existing asset and such expenditure must not bring into existence a new asset. This case also may not help the assessee because the assessee itself in his submissions before the ld. Pr. Commissioner agreed that revenue expenditure of Rs.39.97 lakhs has been made in excess under section 35(2AB) of the Act. The Ld. Assessing Officer has never examined the genuineness of such claim and did not make any mention of the provision 8 of section 35(2AB) of the Act in the assessment order. It is a clear case that the assessment order was framed in a slip shot manner and without application of mind, therefore, the assessment order is erroneous as well as prejudicial to the interest of Revenue.

2.5 In another decision in Narayn Tatu Rane vs Income Tax Officer (2016) 70 taxman.com 227 (Mum. Trib.).

In this case, since, the commissioner had not brought any material on record to substantiate the inference and merely passed the revisional order only to carry out fishing and roving enquiries with objective of substituting his view with that of the Assessing Officer, in that situation the revisional

order was held to be not justified, whereas, it is not so in the present appeal.

2.6. In the case of M/a Amira Enterprises Ltd. vs Pr.

CIT (ITA No.3206/Del./2017), the business of the assessee was trading of rice. It was found by the Tribunal that the principle CIT himself did not take any enquiry to reach to a conclusion that the assessment order is erroneous and 9 prejudicial to the interest of Revenue. In that situation, a particular view was taken, therefore, this decision may not help the assessee.

2.7. Likewise, in the case of M/s Indus Best Hospitality vs Pr. CIT (ITA No.3125/Mum/2017), the bench relied upon the decision from Hon'ble jurisdictional High Court in the case of CIT vs Nirav Modi 390 ITR 292. The issue was whether the Ld. Assessing Officer examined the gift received by the assessee and accepted the same as genuine. No enquiry was caused by the ld. CIT to find out whether the Assessing Officer was satisfied with respect to correctness of the claim of the assessee whether erroneous.

In that situation, the bank took a decision.

2.8. So far as, the case of Metacpas Engineering and Mahendra Construction COMPANY (J.V.) (2017) 86 taxman.com 128 (Mum. ITAT) is concerned, therein the assessee was awarded as civil construction contract of a project. As the assessee had insufficient capital and infrastructure, it sub-contratcted the project to sub- 10 contractor ‘Urja” on back to back basis. The entire responsibility and completion of contract was taken over by the sub-contractor. Revisional jurisdiction was invoked mainly on the ground of excessive expenses on labour payment, etc. In that situation, a particular view was taken.

2.9. There are certain decisions, which favour of the case of the Revenue and one such decision is Arvee International vs Addl. CIT (2006) 8 SOT 452 (Mum. Trib.), wherein, the assessment was framed without application of mind. It was held that mere allegation that Assessing Officer has taken a view in the matter will not put the matter beyond the purview of section 263 unless the view so taken by the Assessing Officer is a judicial view based on proper enquiry and legal aspect.

2.10. vs CIT (ITA No.1593/Mum/2013), wherein, it was clear that there was a lack/absence of enquiry by the Assessing Officer, therefore, the jurisdiction in relation to deduction of the said expenditure was held to be validly assumed. 11 2.11. In the case of CIT vs I.C.I. India Pvt. Ltd. 139 ITR 105 (Cal.), it was held as under:-

“An expenditure may not be an allowable deduction under section 10(2)(v ) of 1922 Act on the ground that the repairs are not current repairs and yet, it may be allowed under section 10(2)(xv) of 1922 Act provided its conditions are fulfilled. In the instant case, merely because some columns and beams were repaired by the company it did not necessarily follow that the expenditure incurred on it was in the nature of a capital expenditure. That apart, it was not the finding of the Tribunal in the instant case that any structural alteration was made. By a mere patch work, the building would have lasted only for 5 to 10 years and the money that would have been spent in it would have been a complete waste. Therefore, plastering of certain portions of the concrete works with cement and some columns and beams by the process of guniting became absolutely essential. No doubt, that process had extended the life of the "building" by many more years, but not exceeding its original life. Further, the repairs had not improved in original condition. It was an admitted fact that the building needed an extensive repair. The company had, no doubt, made extensive repairs by incurring a huge expenditure. But the magnitude of repair went with the magnitude of wear and tear, and not with the question as to whether the expenditure incurred in it was a capital or a revenue expenditure. The quantum of expenditure by itself was also not a determining factor. Where a building needs repair, it is not for the taxing authorities but for its owner to decide how and in which manner, process or appliances it is to be carried out including the extent of its repair and the expenditure to be incurred on it. Even where structural repairs are carried out, the expenditure incurred on it is not necessarily a capital expenditure, for every repair, if properly done, must, as a matter of course, improve the condition of the building. The object and the purpose of every repair is to improve the bad condition of the building, to prevent its further deterioration as far as possible and to keep it wind and water-tight. So long the repair does not bring into existence an additional advantage or benefit of 12 an enduring nature or change the nature, character or the identity of the building itself, the expenditure must be regarded as a revenue expenditure. On the other hand, if it does, it will be in the nature of a capital expenditure. Guniting is nothing but a modern process of plastering by a machine. The company had used this modern process. The process of guniting had not improved the original condition of building nor had extended its original life. The finding of the Tribunal was that the object of the repairs was to maintain and preserve the building. The court also agreed with the finding of the Tribunal, namely, that the process of guniting had not brought into existence any new benefit or advantage of enduring nature to the company. In view of aforesaid, it could be concluded that the entire repair expenditure incurred by the assessee on its office premises (building in question) was revenue expenditure and allowable as deduction. Reference was answered in favour of the assessee. 2.12. In CIT v. Oxford University Press 108 ITR 166 (Bom.), wherein, the Hon'ble High Court held as under:-

“This court held in the case of Gulamhussein Ebrahim Matcheswalla v. CIT [1974] 97 ITR 24 (Bom.), that the expression ‘repair’ must be understood in contradistinction to renewal or restoration and the test to be applied is to see whether as a result of the expenditure what is being done is to preserve and maintain an already existing asset. If the amount is spent for the purpose of bringing into existence a new asset or obtaining a new advantage then such an expenditure would not be revenue expenditure. The mere quantum of expenditure is not by itself decisive of the question whether it is of the nature of revenue or capital. A sum can be allowed as cost of repairs even though the expenditure in a particular year is heavy on account of the fact that it is undertaken to remedy the effect of several years of wear and tear or neglect and also in spite of the fact that such expenditure may not be necessary for several years to come after repairs have been effected. It is thus clear that what the court is required to find out is whether as a result of the expenditure a new asset or a new advantage is being brought into existence. The court will also have regard to the aspect as to whether as a result of the expenditure what is being done is to preserve and maintain an already existing asset. 13 In the instant case, it was clear as to why and in what circumstances the guniting work was undertaken by the assessee in relation to the building. In their letter, the architects of the assessee stated that during the inspection of the building, which was undertaken in January, 1961, it was observed that the reinforcement of the slabs had decayed and cracks were visible underside of the slab and on the floors and some of the steel reinforcement in the slab had little or no cover. Further, that the assessee had been spending good amounts on the repairs of such cracks and plasterings of the slabs on which the reinforcements had disappeared but the amount spent for plaster patch work that was undertaken was a waste and that, therefore, since the plastering by means of an ordinary method was of no use, plastering by the process of guniting was advised. The nature of the guinting process was explained by the assessee. Having regard to the nature of the guniting process that was undertaken for carrying out the plastering and repair work to the building and the reasons and circumstances as to why the guniting process had been employed, it became very clear that by employing this method, which was nothing but an improved method of plastering and repairing work, all that the assessee had done was to preserve and maintain the already existing asset. No new asset or new advantage as such could be said to have been brought into existence by reason of expenditure incurred for doing the guinting work. As a result of guniting work done the assessee had not changed the nature of the asset, viz., the building as a whole, and the same in no way increased the accommodation or earning capacity of the building; in that sense no new advantage of enduring benefit had been brought into existence. The repairs also could not be regarded as heavy structural repairs, for, according to the assessee's architects, what could not be achieved by the ordinary method of plastering was achieved by a sophisticated method of process of guniting. In this view of the matter, it seemed very clear that the expenditure incurred for guniting work done as also the expenditure being the architects' fees paid in connection therewith would have to be regarded as expenditure of a revenue nature. All that the assessee did in the instant case was to undertake the plaster repairing work out by adopting a new method called guniting process, and by incurring the expenditure by adopting such a process the assessee was merely maintaining and preserving an asset which it already possessed and thus though to 14 some extent the life of the asset had been prolonged and the asset was made to give better service then it was doing in the past, the expenditure would have to be regarded as revenue expenditure. II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1963-64 - During relevant assessment year, assessee-company paid certain amount to its deceased employee as gratuity, calculating quantum of 2 years' salary payable to deceased at time of his dealth - ITO disallowed assessee's claim in respect of aforesaid expenditure - AAC finding that gratuity fixed for non-covenanted staff was only 12 months' salary, held that gratuity payment in excess of 12 months' salary was ex-gratia payment - He thus, allowed deduction of amount representing 12 months' salary as legitimate business expenditure and disallowed rest as being in nature of ex-gratia payment - Tribunal confirmed AAC's order - Whether, on facts, Tribunal rightly affirmed AAC's order, and therefore, order passed by Tribunal could not be interfered with - Held, yes FACTS-II During the relevant assessment year, the assessee-company paid certain amount to its deceased employee as and by way of gratuity, roughly calculating the quantum of 2 years' salary payable to the deceased at the time of his death. The assessee claimed the said payment as an allowable expenditure in computing its assessable income. The ITO disallowed the claim on the ground that there was no contractual obligation to pay any gratuity and, therefore, the payment was an ex- gratia payment and not a legitimate business expenditure. On appeal, the AAC held that the gratuity paid to the deceased's heirs was equivalent to approximately 2 years' salary while the gratuity fixed for the non-covenanted staff was only 12 months' salary and in view of this he held that the gratuity payment in excess of 12 months' salary was an ex-gratia payment. In other words, he allowed a deduction of amount representing 12 months' salary as legitimate business expenditure but disallowed the rest as being in the nature of ex-gratia payment. On cross appeals, the Tribunal upheld the order of the AAC. On reference : HELD-II In the instant case the AAC held that since the gratuity fixed for non-covenanted staff was subject to a maximum of 12 months' 15 salary, in respect of covenanted staff the members thereof could at least expect that much gratuity if not more and, having regard to this aspect of the matter, the AAC held that part of the gratuity paid to the heirs of deceased to the extent of Rs. 24,000 being 12 months' salary could be regarded as proper and legitimate business expenditure while that part which was in excess of 12 months' salary was to be regarded as ex gratia payment and he, therefore, disallowed the excess amount. The matter was carried in further appeal to the Tribunal, the Tribunal had confirmed this finding of the AAC. In this view of the matter, it was held that the Tribunal was right in allowing a deduction of the expenditure only to the extent of Rs. 24,000 being the part of the gratuity amount paid by the assessee to the heirs of deceased.”

2.13. The Hon'ble Calcutta High Court in CIT vs J.K.

Industries Pvt. Ltd. 125 ITR 218 (Cal.), held as under:

It had been found by the Tribunal that with the capital borrowed the assessee had acquired a business asset for the purposes of its own business. Further finding was that it was the object of the assessee to house its own office as also the offices of the companies managed by it. The findings of the Tribunal had not been challenged nor was it contended at any stage that the housing of the offices of the managed companies was not a part of the business of the assessee. Had this point been mooted at the proper stage the agreements between the assessee and the managed companies could have been considered to ascertain whether the assessee was in any way liable to arrange for office of the managed companies. Following the decision of the Supreme Court in CIT v. Kirkend Coal Co. [1969] 74 ITR 67 the question which was neither raised nor argued before the Tribunal could not be raised at this stage. Even otherwise, it could not be said that it would not be conducive to the business of the assessee if all the companies managed by it were housed in the same building. It would lead to some economy and greater efficiency in management. In view of aforesaid, it could be concluded that amounts paid as interest and the municipal taxes were allowable as deduction. As regards renovation expenses for the assessment year 1961-62, the expenses in putting up the wooden panelling did not result in any enduring benefit to the assessee and, therefore, was deductible as a revenue expenditure. The revenue did not challenge the other expenses. Hence the entire expenditure on renovation was deductible.

16 2.14. Now, we shall deal with certain other cases, which throws light on the issue in hand so that we can reach to a fair and justifiable conclusion. The Hon'ble Calcutta High Court in Rajmandir Estate Pvt. Ltd. vs Pr. CIT (2016) 70 taxman.com 124 (Calc.) order dated 13/05/2016 and the ratio laid down therein supports the case of the Revenue. It is noteworthy that while coming to a particular conclusion, Hon'ble Calcutta High Court considered following judicial pronouncements:- i. CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8 (SC) (para 3), ii. Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC) (para 4), iii. CIT v. Nova Promoters & Finlease (P.) Ltd. [2012] 342 ITR 169/206 Taxman 207/18 taxmann.com 217 (Delhi) (para 4), iv. CIT v. Durga Prasad More [19711] 82 ITR 540 (SC) (para 6), v. CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (Cal.) (para 6), vi. ITO v. DG Housing Projects Ltd. [2012] 343 ITR 329/212 Taxman 132 (Mag.)/[2012] 20 taxmann.com 587 (Delhi) (para 7), vii. DIT v. Jyoti Foundation [2013] 35 ITR 388/219 Taxman 105/38 taxmann.com 180 (Delhi) (para 7), viii. CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568 (Delhi) (para 8), 17 ix. CIT v. Sophia Finance Ltd. [1994] 205 ITR 98/70 Taxman 69 (Delhi) (FB) (para 8), x. CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi)(para 8), xi. Lotus Capital Financial Services Ltd. v. ITO [IT Appeal No. 479 (Kol.) of 2011] (para 8), xii. CIT v. Lotus Capital Financial Services (P.) Ltd. [ITAT No. 125 of 2012] (para 8), xiii. CIT v. Dataware (P.) Ltd. [ITAT No. 263 of 2011] (para 8), xiv. CIT v. Roseberry Mercantile (P.) Ltd. [G.A. No. 3296 of 2010, dated 10-1-2011] (para 8), xv. CIT v. Sanchati Projects (P.) Ltd. [ITAT No. 140 of 2011] (para 8), xvi. CIT v. Samir Bio-Tech. (P.) Ltd. [2010] 325 ITR 294 (Delhi) (para 8), xvii. CIT v. Kamdhenu Steel & Alloys Ltd. [2014] 361 ITR 220/[2012] 206 Taxman 254/19 taxmann.com 26 (Delhi) (para 8), xviii. CIT v. Dwarkadhish Capital (P.) Ltd. [2011] 330 ITR 298/[2010] 194 Taxman 43 (Delhi) (paras 9, 10), xix. CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296/[2011] 202 Taxman 548/14 taxmann.com 150 (Delhi) (paras 9, 10), xx. Zafa Ahmad & Co. v. CIT [2013] 214 Taxman 440/30 taxmann.com 267 (All.) (paras 9, 10), xxi. Anil Rice Mills v. CIT [2006] 282 ITR 236/[2005] 149 Taxman 313 (All.) (paras 9, 10), xxii. CIT v. Five Vision Promoters (P.) Ltd. [2016] 380 ITR 289/236 Taxman 502/65 taxmann.com 71 (Delhi) (para 11), xxiii. CIT v. Gabriel India Ltd. [1993] 203 ITR 108/71 Taxman 585 (Bom.) (para 12), 18 xxiv. Hari Iron Trading Co. v. CIT [2003] 263 ITR 437/131 Taxman 535 (Punj. & Har.) (para 12), xxv. CIT v. Leisure Wear Exports (P.) Ltd. [2012] 341 ITR 166/[2011] 202 Taxman 130/11 taxmann.com 54 (Delhi) (para 13), xxvi. Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) (para 14), xxvii. Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) (para 14), xxviii. Reliance Jute & Industries Ltd. v. CIT [1979] 120 ITR 921/2 Taxman 417 (SC) (para 15), xxix. Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) (para 15), xxx. CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 (Delhi) (para 16), xxxi. Grindlays Bank Ltd. v. ITO [1978] 115 ITR 799 (Cal.) (para 17), xxxii. Vijay Mallya v. Asstt. CIT [2003] 131 Taxman 477 (Cal.) (para 17), xxxiii. CIT v. J.L. Morrison (India) Ltd. [2014] 366 ITR 593/225 Taxman 17 (Mag.)/46 taxmann.com 215 (Cal.) (para 17), xxxiv. Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC) (para 18), xxxv. CIT v. Max India Ltd. [2007] 295 ITR 282/166 Taxman 188 (SC) (para 18), xxxvi. CIT v. Maithan International [2015] 375 ITR 123/231 Taxman 381/56 taxmann.com 283 (Cal.) (para 20), xxxvii. CIT v. Navodaya Castles (P.) Ltd. [2014] 367 ITR 306/226 Taxman 190/50 taxmann.com 110 (Delhi) (para 20), xxxviii. CIT v. N.R. Portfolio (P.) Ltd. [2013] 214 Taxman 408/29 taxmann.com 291 (Delhi) (para 20), 19 xxxix. CIT v. Active Traders (P.) Ltd. [1995] 214 ITR 583/[1993] 69 Taxman 281 (Cal.) (para 20), xl. CIT v. Jawahar Bhattacharjee [2012] 341 ITR 434/209 Taxman 174/24 taxmann.com 215 (Gau.) (FB) (para 20) and xli. Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) (para 27).

2.15. In CIT vs Fine Jewellery (India) Ltd. and CIT vs Nirav Modi ((supra)), no doubt these cases throw light on the issue but were decided by Hon'ble jurisdictional High Court to the peculiar facts of the case and on the basis of factual finding recorded by the Tribunal.

2.16. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase “prejudicial to the interest of the Revenue” u/s. 263, has to be read in conjunction with the expression “erroneous”

order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, “prejudice” must be prejudice to the Revenue administration. At the same time, if another view is possible, 20 revision is not permissible. Our view is fortified by the decision from Himachal Pradesh Financial Corp. (186 Taxmann 105)(HP), Bismillah Trading Co. (248 ITR 292)(Ker.) and CIT vs. Green World Corpn. (314 ITR 81)(SC).

For invoking revisional jurisdiction u/s. 263 of the Act, the assessment order must contain grievous error which is subversive of the administration of Revenue. Further, exact error must be disclosed by the Commissioner as was held in CIT vs. G.K. Kabra (211 ITR 336)(AP). Section 263 of the Act enables the Commissioner to have a re-look at the orders or proceedings of the lower authority to effect correction, if so needed, particularly, if the order is erroneous and prejudicial to the interest of the Revenue. The object of the provision is to raise revenue for the state and section 263 is enabling provision conferring jurisdiction upon the Commissioner to revise the order. The provision is intended to plug the leakage of the revenue by the erroneous and prejudicial order. Our view find support from the ratio laid down in following decisions:- i. CIT vs Infosys Technologies ltd. (2012) 341 ITR 293 (Karn.), 21 ii. CIT vs Jawahar Bhattacharyaji (2012) 341 ITR 434 (Guwahati) (FB), iii. CIT vs Leisure wear Exports Ltd. (2012) 341 ITR 166 (Del.), iv. CIT vs Triveni Engineering Works Ltd. (2011) 336 ITR 366 (Del.), v. R.A. Himmatsinghka & Company vs CIT (2012) 340 ITR 253 (Pat.) vi. CIT vs Rajeev Agnihotri (2011) 332 ITR 608 (P & H), vii. CIT vs DLF Ltd. (2013) 350 ITR 555 (Del.), viii. CIT vs Gabreal India Ltd. (1993) 203 ITR 108, 114 (Bom.), ix. Malabar Industrial Company Ltd. vs CIT (2000) 243 ITR 83 (SC), x. Nabha Investments Pvt. ltd. vs UOI (2000) 246 ITR 41 (Del.), xi. Bismillah Trading Company Ltd. vs IO (2001) 248 ITR 292, 308 (Kerala), xii. Paul Mathews & Sons vs CIT (2003) 263 ITR 101, 113 (Kerala), xiii. CIT vs Seshasayee Paper & Boards Ltd. (2000) 242 ITR 490, 500 (Mad.), xiv. Rayon Silk Mills vs CIT 221 ITR 155 (Guj.)

2.17. If the aforesaid judicial pronouncements are kept in juxtaposition with the facts of the present appeal and analyzed, the ld. Assessing Officer while framing the assessment made no discussion with the claim of the assessee and simply framed the assessment in a slip shot manner. Such an approach of the Ld. Assessing Officer cannot be appreciated. Thus, it is clear that the 22 assessment order was passed without verification, application of mind, consequently, it is erroneous as well as prejudicial to the interest of the Revenue, consequently, the revisional jurisdiction was rightly invoked.

2.18. Our view is fortified by the decision in Indian Textile vs CIT (157 ITR 112) (Mad.), Gee Vee Enterprises vs Addl. CIT (99 ITR 375)(Del.), Thalibai F Jain vs ITO 101 ITR 1 (Karn.) and CIT vs HPFC 186 Taxman 105 (HP), CIT vs Pushpa Devi 164 ITR 639 (Patna). We are aware that before the Ld. Commissioner invokes the revisional jurisdiction u/s 263 of the Act, he should get satisfied that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Hon’ble Gujarat High Court in CIT vs M. M.Khambatbala 198 ITR 144 (Guj.) even went to the extent that revisional powers can be exercised even if the issue is debatable. The Hon’ble jurisdictional High Court in CIT vs Gabriel India Ltd. (1993)

203 ITR 108 (Bom.) concluded that powers u/s 263 cannot be exercised for starting fishing and roving enquiries. For making a valid order u/s 263(1), it is essential that the 23 Commissioner has to record an express finding that prejudice has been caused to the interest of the Revenue.

Our view find support from the ratio laid down in Bhargwa Engineering Corporation vs CIT (1996) 134 taxation 493, 494 (All.), CIT vs Digvijay Traders (1997) 137 CTR (MP)

224, CIT vs Regional Agro Industrial Development Cooperative Society Ltd. (1998) 143 taxation 293 (Kerala), CIT vs Agarwal Enterprises (1998) 100 taxman 360 (All.) and CIT vs Kailash Apartment Pvt. Ltd. (200) 243 ITR 795 (Del.). Totality of facts, clearly indicates that the assessment order has been framed without full enquiries, therefore, the ld. Commissioner justifiably invoked revisional jurisdiction.

2.19. The Hon'ble Apex Court in Rajmandir Estates Pvt. Ltd. (2017) 77 taxman.com 285 (SC), wherein, there was lack of requisite enquiry into increase of share capital and non-application of mind, the Commissioner was held to be justified in invoking the revisional jurisdiction, which is reproduced hereunder:- 24 “Section 68, read with section 263 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment year 2009- 10 - During relevant year, assessee-company had increased its share capital by issuing 7.93 lakhs shares of Rs.10 each at a premium of Rs.390 - Assessing Officer completed assessment without holding requisite investigation except for calling for records - Commissioner passed order under section 263 and opined that this could be a case of money laundering which went undetected due to lack of requisite enquiry into increase of share capital including premium received by assessee and non- application of mind - High Court by impugned order held that since assessee with an authorised share capital of Rs.1.36 crores raised nearly a sum of Rs.32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees was an important pointer necessitating investigation and thus, Commissioner was justified in treating assessment order erroneous and prejudicial to interest of revenue - Whether special leave petition filed against impugned order was to be dismissed - Held, yes [Para 2] [In favour of revenue]”

2.20. The Hon'ble Apex Court in CIT vs Amitabh Bacchan (2016) 69 taxman.com 170 (SC) (order dated 11/05/2016) is held as under:-

“2. The appellant - Revenue seeks to challenge the order of the High Court dated 7th August, 2008 dismissing the appeal filed by it under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as '"the Act") and affirming the order of the Income Tax Appellate Tribunal, Mumbai Bench ("Tribunal" for short) dated 28th August, 2007 whereby the order dated 20th March, 2006 passed by the Commissioner of Income Tax-1, Mumbai ("C.I.T." for short) under Section 263 of the Act was reversed. The assessment year in question is 2001-2002 and the assessment order is dated 30th March, 2004.

This section unlike Section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice. It is unfortunate that the High Court failed to notice the difference in language between Sections 33-B and 34. For the assumption of jurisdiction to proceed under Section 34, the notice as prescribed in that section is a condition precedent. But no such notice is contemplated by Section 33-B. The jurisdiction of the Commissioner to proceed under Section 33-B is not dependent on the fulfilment of any condition precedent. All that he is required to do before reaching his decision and not before commencing the enquiry, he must give the assessee an opportunity of being heard and make or cause to make such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the Commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner. At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of natural justice. The scope of these appeals is very narrow. All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice and if he was so required what that notice should have contained? Our answer to that question has already been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 33-B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33- B does not in express terms require a notice to be served on the assessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33-B.

(Page 827- 828). [Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961] 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (Section 263) to raise 29 the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision.

order, a show cause notice u/s 263 dated 20/06/2017 was issued to the assessee, however, as is evident from para-5 of the impugned order. The Ld. Assessing Officer mechanically accepted the claim of the assessee and even did not bother to examine the genuineness of the claim. If the revisional

order is examined, the Ld. Pr. CIT in a justifiable manner considered the factual matrix and noted that the assessee itself admitted that excess claim to the tune of Rs.39.97 lakhs has been claimed by the assessee under section 35(2AB) of the Act. However, the Ld. Assessing Officer without making full enquiry with respect to claim under section 35(2AB) framed the assessment. The assessee claimed deduction of Rs.11,26,994/- being 200% of actual capital expenditure incurred of Rs.5,63,497/- and Gumpro has also claimed deduction of Rs.2,75,10,270/- being 200% on actual revenue expenditure incurred of Rs.1,37,55,135/- 36 under section 35(2AB) of the Act. It is further noted that while giving approval of expenses in form 3CL, DSIR (Competent authority) vide its letter dated 13/10/2014 has sanctioned in toto for capital expenditure actually incurred amounting to Rs.5,63,497/- whereas, DSIR sanctioned only Rs.97,58,000/-, thus, DSIR has not sanctioned Rs.39,97,135/- out of Revenue expenditure actually incurred. So far as, the contention of the assessee that full details were filed by the assessee before the Ld. Assessing Officer, is concerned, we are of the view that it is the duty of the Ld. Assessing Officer to examine the details and then decide the issue in accordance with law and the version of the assessee cannot be mechanically accepted. It is further noted that the assessee claimed deduction under section 35(2AB) of the Act @200% i.e. Rs.2,86,37,260/- of the amount of Rs.1,43,18,630/-(revenue expenditure Rs.1,37,55,135 and capital expenditure of Rs.5,63,497/-), however, as per 3CL an amount of Rs.1,03,21,000/- (revenue expenditure of Rs.97,58,000/- and capital expenditure of Rs.5,63,497/-) allowed by the Department of 37 scientific and industrial research. The 200% of Rs.1,03,21,000/- i.e. Rs.2,06,42,300/- only was eligible for deduction under section 35(2AB) of the Act. The decision from Hon'ble Rajasthan High Court in Shri Gyan chand Jain vs CIT (2013) 354 ITR 622 (Raj.) was considered. It is not the case that the Ld. Pr. CIT thrust upon his view to disallow the claim of the assessee. Even otherwise, as per mandate of Article 265 of Constitution of India, only due taxes have to be levied/collected. However, we direct the ld. Assessing Officer to adjudicate the issues afresh in a detailed manner with reasoning. The assessee is directed to furnish the necessary evidence in support of its claim. In view of this factual matrix, in principle, we affirm the stand of the ld. Pr.

Commissioner, however, with a direction to modify the direction contained at last page of the impugned order with a fresh direction that the whole claim of the assessee may be examined afresh, after affording due opportunity of being heard to the assessee. Resultantly, the appeal of the assessee is, therefore, having no merit, consequently, dismissed. 38 Finally, the appeal of the assessee is dismissed.