TaxTMI 
TaxTMI 
2014 (1) TMI 800
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.... assessment order passed by the AO u/s. 143(3) is erroneous to the extent it is prejudicial to the interest of the Revenue. 3. Facts of the case are that the return of income for the year under consideration was selected for scrutiny assessment and the same was completed u/s. 143(3) of the Act vide order dt. 30.12.2011. The CIT invoking the powers conferred upon him by virtue of provisions of Sec. 263 of the Act issued notice to the assessee. The substance of the said notice is that the AO has failed to verify whether the entire set of pipeline laid was one composite net work at that point of time or were its joint net work. According to the CIT, the AO did not enquire to the claim of depreciation of the assessee u/s. 32 of the Act. Accord....
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....favour from the CIT who was of the opinion that what is under focus is the "allowability of depreciation" and not "setting up of business". According to the CIT for any claim of depreciation, it is necessary that the assessee must have used the asset notwithstanding that the business is set up. Allowance with respect to depreciation is further subject to the condition of the use of the asset. The AO has not made conclusive enquiry and has failed in his duties to scrutinize the case, particularly with respect to collection of complete details of the nature of assets erected by the assessee and secondly about the precise use of these assets. The CIT finally concluded that the order is erroneous because the AO has not done the enquiries expect....
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....ed details of Leasehold and Freedhold land. The same were capitalized in the books of account. It is the say of the Ld. Counsel that it is not possible to supply gas if the pipelines are not completed. Reiterating his reliance on the decision of the Hon'ble Supreme Court Court in the case of CIT VS Max India Ltd. (supra) and also on the decision of the Hon'ble Bombay High Court in the case of CIT Vs Gabriel India Ltd. (supra), the Ld. Counsel argued that the AO has allowed depreciation because the business was set up and the assets were used for the purposes of business. Now the CIT wants to make further enquiries on a possible view taken by the AO therefore the CIT is imposing his view on the view of the AO which is against the canons of t....
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....one of them is absent, recourse cannot be had to Section 263(1) of the Act. For these observations, we draw support from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, reported in (2000) 243 ITR 83 (SC). Further, the error envisaged by Section 263 is not one which depends on possibility or guesswork but it should be actually an error of either of fact or of law. It is not in dispute that the AO has called for the information regarding the claim of depreciation. It is also not in dispute that the assessee has shown business income from transportation of gas. It is also not in dispute that the business income has been accepted by the AO and the CIT has also not controverted to this finding of the....
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....n. The whole thrust of the proceedings u/s. 263 can be summed up from the observations of the CIT at para-10 wherein he has specifically mentioned that what is under focus is the "allowability of depreciation" and not "setting up of business" whereas it is the settled position of law that depreciation and other business expenses are allowed only when the business is set up. The Ld. CIT cannot revise order merely because he disagrees with conclusion arrived at by the ITO (CIT Vs Gabriel India Ltd). The scope of interference u/s. 263 is not to set aside merely unfavourable order and bring to tax some more money to the treasury nor is the section meant to get at sheer escapement of revenue which is taken care of by other provisions in the Act.....