TaxTMI 
TaxTMI 
2010 (12) TMI 708
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.... 263 of the Income Tax Act and thereby setting aside the well reasoned order of the AO. The Ld. Commissioner further erred in directing the AO to readjudicate the two issues i.e grant of depreciation on the computers @ 60% instead of 25% and were not making any disallowance u/s 14A in respect of the expenses relatable to earning of dividend income. 2. The brief facts of the case are that assessee has filed its return of income on 25th October, 2005 declaring an income of Rs.4,42,56,640/-. The assessee company at the relevant time was mainly engaged in Information Technology related activities with special emphasis on data processing/software development with the use of CRS in India. The case of the assessee was referred to the TPO a....
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.... the AO after taking into consideration the total investment ought to have made disallowance @ 0.5% as per Rule 8D of the Income Tax Rules 1962. Had this been carried out by the AO? Then there would have been disallowance of Rs.12,18,278/-. The second reason assigned by the Ld. Commissioner is that assessee has acquired computer software, printers, hubs, printers, routers and scanners amounting to Rs.2,49,60,633/-. It has claimed depreciation @ 60%. According to the Ld. Commissioner certain items were used for more than 180 days and certain items were used less than 180 days. The depreciation ought to have been granted @ 15% and not at 60%. Thus in his opinion assessee has overcharged the depreciation. Ld. Commissioner further observed that....
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....ax Act. It has an income of Rs.59,31,57,552/-. This income qualifies for deduction/exemption u/s 10A. There was no dispute on this issue. Thus even if these disallowances are made then it will give rise to the total income of assessee and it would claim deduction u/s 10A, the net result will be NIL. Ld. Commissioner rejected the contention of assessee and held that the AO has not conducted inquiry. Therefore his order is erroneous and it is prejudicial to the interest of revenue. He set aside the asstt. order and directed the AO to re consider both these issues in a fresh assessment. 5. Ld. Counsel for the assessee has reiterated his contention as were raised before the Ld. Commissioner. He took us through show cause notice u/s 263 ....
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.... 7. We have duly considered the rival contentions and gone through the record carefully. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 as well as Hon'ble Bombay High Court rendered in the case of Gabriel India Ltd. and has propounded the following broader principle to judge the action of CIT taken under section 263. "The fundamental principle which emerge from the above cases may be summarized below" (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditi....
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....st have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 8. In the light of above preposition let us examine the facts of the present case. Ld. AO has issued a show cause notice u/s 142 of the Income Tax Act and called for a number of information. For the purpose of this appeal the information called at Sl. No.9 is relevant which read as....