BHAGWATI SPONGE PRIVATE LIMITED,BURDWAN vs. C.I.T,ASANSOL, ASANSOL

The assessee in the present case is a Company, which is engaged in the business of manufacturing sponge iron as well as its trading and commission agent. The return of income for the year under consideration was filed by it on 30.09.2008 declaring total income at ‘nil’. In the assessment completed under section 143(3) vide an order dated 10.12.2010, the total income as declared by the assessee in the return of income at ‘nil’ was accepted by the Assessing Officer. According to the ld. ./2013 Assessment year: 2008-2009 Page 2 of 5 CIT, the said order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of the Revenue. He, therefore, issued a notice under section 263 pointing out such errors to the assessee as under:- "Whereas assessment for the Assessment Year 2008-09 was completed on 10.12.2010 u/s 143(3) of the I. T. Act, 61 accepting the returned income by the AO, ACIT, Circle-1, Asansol. I am of the opinion that because of inadequate investigation and incorrect application of law, error has been crept into the body of assessment order on the ground as mentioned below .-

From the assessment folder pertaining to A. Y. 2008-09, it transpired that the unabsorbed depreciation of Rs.3,69,31,973/- was allowed to be set off with the total income of Rs.95,30,373/- and thus the total income arrived at nil, whereas in the previous assessment year of 2007-08, the whole unabsorbed depredation of Rs.2,82,37,847/- was set off with the business income and tax was levied U/s.115JB. Accordingly, there was no unabsorbed depreciation existed for setting off in the current assessment of A. Y. 2008-09, thereby resulted in underassessment of income of Rs.95,30,373/-.

In response to the notice issued under section 263, a written submission dated 21.03.2013 was filed by the assessee offering its ./2013 Assessment year: 2008-2009 Page 3 of 5 explanation in respect of errors allegedly pointed out by the ld. CIT in the order passed by the Assessing Officer under section 143(3). After considering the submission made by the assessee, the ld. CIT was of the view that the Assessing Officer had not made sufficient enquiry on the issues pointed out by him in the notice issued under section 263 and such lack of proper and sufficient enquiry rendered the assessment order passed under section 143(3) erroneous as well as prejudicial to the interest of the revenue. He, therefore, set aside the order of the Assessing Officer on the issues mentioned in the 263 notice with a direction to the Assessing Officer to make the assessment afresh on the said issues after making further investigation and enquiry as required in the facts and circumstances of the case. Aggrieved by the order of the ld. CIT passed under section 263, the assessee has preferred this appeal before the Tribunal.

The ld. counsel for the assessee submitted that in reply to the notice issued by the ld. CIT under section 263 on the basis of the objections of the audit party, a detailed reply was filed by the assessee in writing offering its explanation in respect of whatever errors allegedly pointed out by the ld. CIT in the assessment order passed by the Assessing Officer. He invited our attention to the impugned order passed by the ld. CIT under section 263 and pointed out that no finding whatsoever has been given by the ld. CIT on the explanation offered by the assessee on merit and he finally revised the assessment order passed by the Assessing Officer on the ground that proper and sufficient enquiry was not conducted by the assessee on the issues raised in the notice issue under section 263. He contended that this approach adopted by the ld. CIT is not permissible in law, especially when he has not even pointed out as to what exactly is the further enquiry that the Assessing Officer was expected to do. He contended that the order passed by the ld. CIT under section 263, therefore, is not sustainable as he has not given specifically any finding about the errors in the assessment order passed by the Assessing Officer before exercising his powers of revision. In support of ./2013 Assessment year: 2008-2009 Page 4 of 5 this contention, he relied on the decision of the Hon’ble Delhi High Court in the case of CIT –vs.- Leisure Wear Exports Limited reported in 341 ITR 166.

The ld. D.R., on the other hand, strongly supported the impugned order passed by the ld. CIT under section 263. He submitted that the errors in the order of the Assessing Officer were clearly and specifically pointed out in the notice under section 263 and since the order of the Assessing Officer as a result of such errors was prejudicial to the interest of the revenue, the ld CIT was fully justified in revising the same by exercising the powers conferred upon him to section 263.

We have considered the rival submissions and perused the relevant material available on record. It is observed that a submission in writing was filed by the assessee in reply to the notice issued by the ld. CIT under section 263 offering its explanation in respect of errors allegedly pointed out by the ld. CIT in the order passed by the Assessing Officer under section 143(3). Although in the impugned order passed under section 263, the ld. CIT has made a reference to the written submission filed by the assessee, he has neither discussed the same nor given any finding thereon so as to point out as to what exactly are the errors in the order of the Assessing officer, which were prejudicial to the interest of the Revenue. He simply brushed aside the submission made by the assessee and held the order of the Assessing Officer to be erroneous and prejudicial to the interest of the revenue on the ground that proper and sufficient enquiry on the issues raised by him in the notice issued under section 263 was not conducted by the assessee. He even did not point out as to how the enquiry made by the Assessing Officer was not sufficient and proper and even failed to point out as to what further enquiry the Assessing Officer was expected to do on the relevant issues. In the case of Leisure Wear Exports Limited (supra) cited by the ld. counsel for the assessee, there was nothing in the revisional order passed by the ld. CIT under section 263 as to how the order of the Assessing Officer was ./2013 Assessment year: 2008-2009 Page 5 of 5