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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap :- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax, Asansol dated 22.03.2013 passed under section 263 of the Income Tax Act, 1961.
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.
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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/-.
It has been further observed that additional depreciation of Rs.1,54,79,188/- was claimed by the assesse and the same was allowed in the assessment. The assessee's nature of business was Trading & Manufacturing of Sponge Iron and additional depreciation is allowable only on new plant and machinery acquired and installed for the purpose of manufacturing. While going through the records, it was noticed that in the relevant financial year, the assesse has acquired a new plant and machinery valued at Rs.34,79,670/- out of which, plant & machinery valued Rs.5,64;490/- was put into use after 30.09.2007. Accordingly, additional depredation of Rs.4,04,422/- [Rs.1,12,898 + Rs.2,91,524/-] only was allowable. Thus the excess depredation of Rs.1,50,74,766/- was allowed which needed to be revised.
In view of the above, it has caused the order passed by the AO on 10.12.2010 as erroneous and prejudicial to the interest of revenue. I, therefore, propose to revise the order on the above issue. Therefore, please show-cause why the order will not be revised u/s.263 of the I. T. Act, '61. You are therefore requested to appear before the undersigned either personally or through your A.R. on 22/03/2013 at 3:00 p.m. failing which your order will be passed as per merit of the case without giving you further opportunity of being heard."
In response to the notice issued under section 263, a written submission dated 21.03.2013 was filed by the assessee offering its
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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
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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
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erroneous and further as to how it was prejudicial to the interest of the revenue. The ld. Commissioner also had not doubted the statement of finished goods in closing stock furnished by the assessee but only remarked that the Assessing Officer should have made further enquiry by calling for more details. In these facts and circumstances of the said case, which are similar to the facts of the present case, the Hon’ble Delhi High Court upheld the order of the Tribunal setting aside the order of the ld. CIT passed under section 263 observing that the ld. Commissioner had not taken the order to its logically conclusion, which was his prime duty in order to justify exercise of power under section 263. In our opinion, the ratio of this decision of the Hon’ble Delhi High Court in the case of Leisure Wear Exports Limited (supra) is squarely applicable to the facts involved in the present case and respectfully following the same, we set aside the impugned order passed by the ld. CIT under section 263 and restore that the Assessing Officer passed under section 143(3). 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on June 15, 2016. Sd/- Sd/- (S.S. Viswanethra Ravi) (P.M. Jagtap) Judicial Member Accountant Member Kolkata, the 15th day of June, 2016 Copies to : (1) M/s. Bhagwati Sponge Pvt. Limited, P.O. Jamuria Bazar, Dist. Burdwan, W.B. PIN – 713 336 (2) Commissioner of Income Tax, Asansol, Parmar Building, 54, G.T. Road (West), P.O. Asansol-4, Dist. Burdwan (3) Commissioner of Income Tax, Asansol (4) The Departmental Representative (5) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.