M/S CHEEMA BOILERS LTD.,,MOHALI vs. PR. CIT-2, MOHALI
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आदेश/Order
Per Krinwant Sahay, A.M.:
The appeal in this case has been filed by the Assessee against the order passed u/s 263 of the Income Tax Act, 1961 (in short 'the Act') dated 27.03.2018 of the ld. Principal Commissioner of Income Tax (PCIT)-2, Chandigarh.
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 2 2. Grounds of appeal are as under:-
That the Ld. Pr. CIT-2, Chandigarh has erred in Law in invoking the provisions of section 263 of the Act. Order passed by the Dy. Commissioner of Income Tax Circle 6, Mohali is not erroneous & prejudicial of the interest of revenue.
That the order of the Ld. Pr. CIT-2, Ludhiana invoking the provisions of section 263 of the Act, is illegal, arbitrary and against the facts of the case.
That assessee craves the right to add/amend/delete any ground/s of appeal before adjudication.
The only issue involved in this case is against the order passed by the ld. PCIT-2 Chandigarh u/s 263 of the Income Tax Act, 1961 (in short 'the Act').
The brief facts of the case are that return of income was filed by the assessee on 29.09.2013 declaring income of Rs.2,22,78,260/- for the A.Y. 2013-14 and the assessment was made u/s 143(3) of the Income tax Act, 1961 the Dy. Commissioner of Income Tax, Circle- 6(1), vide order dated 2015 at an income of Rs.2,25,23,830/-. The assessee company is engaged in the business of manufacture of
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 3 high-pressure Boilers which requires core engineering. The case was selected for scrutiny under CASS to examine the following reasons: 1) High ratio of refund to TDS. 2) Large other expenses claimed in P & L Account Thereafter, an order u/s 263 was passed by the ld. Pr. CIT-2 Chandigarh on 27.03.2018 on two issues i.e., Firstly, on the issue of wrong claim of depreciation. As the capital subsidy was not reduced from the cost of capital for calculating depreciation with the direction to the Assessing officer to complete assessment afresh in accordance with law keeping in view the show cause notice dated 23.10.2017, after allowing opportunity of being heard to the Assessee.
During the proceedings before ld. PCIT, the Assessee filed its reply on this issue as under:-
“The amount of depreciation allowance available to the assessee company, u/s 32 of the Act, for the assessment year 2013-14 was Rs.4,09,22,644/-. However, during the course of assessment proceedings before the assessing officer, the assessee company had submitted tax audit report which included depreciation chart with wrong opening WDV of fixed assets. But this mistake was
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 4 righty rectified by the assessee company at the time of filing online tax audit report for the assessment year under consideration. The copy of complete ITR for the assessment year 2012-13 and 2013-14 and tax audit report for the assessment year 2013-14, downloaded from income tax site, is also attached herewith for your ready refence.”
On the second issue, raised by the PCIT-2, in respect of expenditure of Rs. 15,73,434/- towards gratuity, retirement benefits etc., the ld. PCIT gave his findings as under:- “It has been held by Courts that the provision for gratuity / retirement benefits made on an actuarial basis or calculated on a scientific and actuarial method accrues each year, but the express bar set by the provisions of section 36(l)(v) and section 40 read together with the Rules requires actual payment. The AO has not examined the actual payment of 15,73,473/- which has been claimed as an expenditure during the current year (Refer Annexure-3 computation filed with Return) or whether this was provisioned and allowed as a deduction in earlier years and was thus inadmissible in terms of explanation to S 40A(7)(b). Claim has been allowed, by AO without making enquiries or verification which should have been made and has resulted in a claim being allowed without enquiring into it.
3.4 The queries raised during revision proceeding u/s 263 of the I.T. Act, 1961 remain unverified and that the order was passed by AO without making enquiries or verification which should have been
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 5 made and has resulted in a claim being allowed without enquiring into it. Failure to make proper enquiries to arrive at the correct and complete facts and to apply the correct law makes the assessment order erroneous and prejudicial to the interest of revenue as held by the Hon'ble Courts in the following cases:
i) 4. Hon'ble Supreme Court in Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC), has held that:
"where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue".
The Assessee filed its reply as under:- “The assessee company, as per the requirements of Accounting Standard 15 had got its retirement benefits towards its employees evaluated from the approved Actuarial. The Actuarial on the basis of information supplied by the assessee company, like the number of employees in the company, their length of service, their pay scale, the number of employees left during the year and the amount of retirement benefits paid to them by the company, had assessed that the assessee company was required to maintain less fund towards its retirement benefit liability, vis-a-vis last year, by Rs. 15,73,473/-. Since, the provision of retirement
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 6 benefits was added back, while calculating its taxable income during the earlier years, this has rightly been claimed as expenditure in Schedule BP at point number 29 of the income tax return. So, the assessee company had rightly claimed the deduction u/s 40 of the Act towards the retirement benefits of the employees. The copy of computation of income for the earlier assessment year and the copy of actuarial valuation certificate for the assessment years 2012-13 and 2013-14 is also attached herein for your ready reference.”
The ld. PCIT considered the submissions filed by the Assessee and gave her findings on both the issues as under:- “ii) I have carefully examined the written submissions and the case laws relied upon by the taxpayer. From the perusal of the sanction order at Annexure-1, it is clear that the subsidy has been granted on the fixed capital investment. Sanction Order clearly highlights that the State Level Committee constituted under Central Capital Investment Subsidy Scheme 2003 of the Govt of India in its 33rd meeting held on 05/05/2012 approved and sanctioned 15% Central Investment Subsidy amount in favour of the units as per the following details: S.NO Name and address Amount of . of the unit subsidy on Fixed Capital Investment as approved by the Committee (Amount in Rs.)
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 7 1 M/s Enviro 1084000 Solutions Village Dhang Nichli (Jagat Khana) Tehsil Nalagarh, Distt. Solan, H.P
Perusal of the above will show that the amount of subsidy is to meet a portion of fixed capital investment.
iii) It is important also to highlight that the subsidy has been received under a scheme of Central Government entitled "Central Capital Investment Subsidy Scheme, (Copy of notification placed at Annexure -2) which itself explains its character. The Scheme is applicable to all industrial units in the Growth Centers approved for Uttaranchal and Himachal Pradesh and also to the new industrial units or existing units, on their substantial expansion”
…… “As discussed wrt the provisions of the scheme and its various clauses, the subsidy meets a % of the total fixed capital/additional fixed capital likely to be invested by them in the plant and machinery of their unit. Thus, in terms of the Supreme Court decision in CIT Hyderabad V PJ Chemicals Limited, this case is distinguishable on facts in as much as, it is evident that the character and nature of the subsidy was to subsidise the cost of capital and was for the specific purpose of meeting a portion of the cost of such assets, although after the introduction of Explanation 10 of Section 43(1) the cited decision is perhaps not applicable.
vii) This also meets the requirement laid down in the decision of Chennai Tribunal in the case of Tamilnadu
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 8 Foodgrains Marketing Yard vs. DCIT, where it was held that subsidy or other grant given to offset the cost of an asset, such payment/grant would fall within the expression 'met'. Excess claim of depreciation has been allowed, since the order was passed by AO without making enquiries or verification which should have been made and has resulted in a claim being allowed without enquiring into it.”
During the proceedings before us, the Assessee submitted written submissions on these issues on the line of its submissions made before the authorities below:
The DR relied on the order of the PCIT.
We have considered the submissions filed by the ld. Counsel of the Assessee and the arguments made by him during the proceedings before us. We have also considered the finding given by the ld. PCIT in her order passed u/s 263 of the Act and the arguments made by the ld. DR.
We find that in the assessment order passed by the Assessing Officer nothing has been mentioned regarding any enquiry or investigation made regarding the two issue flagged by the PCIT in her order u/s 263, therefore, there is no denying that the A.O. in the assessment passed on 31.12.2015 has simply accepted the version of the Assessee without making any inquiry / verification
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 9 on/ investigation regarding them. Therefore, the ld. PCIT’s findings that the order passed by the Assessing Officer on the basis of the two issues is without making any inquiry or verification which should have been made during the assessment proceedings . The ld. PCIT has also brought on record many case laws such as the case of the Rampyari Devi Saraogi vs CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT (1973) 88 ITR 232 (SC) .
We have considered all these judgements particularly the judgement of the Hon'ble Supreme Court in the case of ‘Rampyari Devi Saraogi vs. CIT’ (supra) vs. CIT and ‘’Tara Devi Aggarwal vs. CIT (supra) and we are of this considered view that the order passed u/s 263 by the ld. PCIT is well within the ambit of section 263 and we find no infirmity in this order. Accordingly, Assessee’ appeal on this issue is dismissed. 14. In the result, the appeal is dismissed Order pronounced on 24 .09.2024.
Sd/- Sd/- (PARESH M. JOSHI) (DR KRINWANT SAHAY) Judicial Member Accountant Member “आर.के.” आदेश क� ��त�ल�प अ�े�षत / Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent
748-Chd-2018 – M/s Cheema Boilers Limited, Mohali 10 3. आयकर आयु�त/ CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order,
सहायक पंजीकार/ Assistant Registrar
