TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 707
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.... is manufacturing textile machinery. It has filed its return of income on 31.10.2006 declaring an income of Rs. 19,35,980/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has returned a turnover of Rs. 51,11,51,292/- and declared a gross profit of Rs. 20,35,17,154/- which is 39.82% of the turnover. The assessee has claimed exemption at the rate of 100% under section 80IB of the Income Tax Act. The ld.AO was of the view that the GP rate disclosed by the assessee at the rate of 39.82% of the turnover is not in consonance with the results declared by the similarly situated assessee in this line of business. Therefore, he conducted an inquiry and ultimately arrived at a conclusion that the GP in the case of the assessee, at the most, can be at 30%. The ld.AO has not disputed the admissibility of deduction under section 80IB of the Act. His only quarrel was with regard to the quantification of the deduction after calculating the GP by adopting the rate of 30%, he reworked out the exemption admissible to the assessee under section 8....
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.... and explained that duty draw back and DEPB cannot be treated as derived from industrial undertaking, because these are the receipts which are being received by the assessee under the incentive provisions. There is no direct nexus with the industrial undertaking for earning these receipts. He admitted that on merits the assessee cannot claim a deduction under section 80IB on the duty draw back. However, the ld.counsel for the assessee submitted that when the AO has decided this issue, the decision of the Hon'ble jurisdictional High Court was in favour of the assessee, in the case of CIT Vs. India Gelatine & Chemicals Ltd., reported in 275 ITR 284 (Guj) = . The ld.AO has adopted one of the possible views available at that point of time. Thus, he has not committed any error of law or on facts, when he passed the assessment order. In his second fold of submissions, he contended that the AO has restricted the exemption admissible under section 80IB to Rs. 15,33,57,689/-. The assessee took this matter in appeal before the CIT(A), on this common issue, and the ld.First Appellate Authority has applied his mind impliedly on the complete issue. Therefore, as per Explanation (c) of secti....
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....r of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year....
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....rious judgments relevant for judging the action of the CIT taken u/s 263. 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 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are poss....
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....xpenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open". 13. In the case of Gee Vee Enterprise vs. Commissioner of Income Tax reported in 99 ITR page 375, the Hon....
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....e being received as incentive benefits under the incentive provisions. Thus, such amount cannot be termed as "derived from industrial undertaking", and not eligible for deduction. As far as this proposition of law is concerned, there is no dispute between the parties. The dispute is, what is impact of this interpretation given by the Supreme Court subsequent to the passing of the assessment ? Can this subsequent declaration of law would brand the assessment order as erroneous being passed against the legal position of section 80IB ? The ld.counsel for the assessee submitted that once the AO has decided an issue as per the existing law, then his passing the assessment order cannot be termed as erroneous on a subsequent declaration of law by the Hon'ble Supreme Court. We do not find any merit in this contention of the assessee, because a court decided a dispute between parties. The cause can involve decision on facts. It can also involve a decision on a point of law. Both may have bearing on the ultimate result of the case. When a court interprets a provision, it decides as to what is the meaning and effect of the words used by the Legislature. It is a declaration regarding the s....