TaxTMI 
TaxTMI 
2012 (10) TMI 1048
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....ftware/IT enabled services. 4. For the assessment year under consideration, assessee filed its return on 29.10.2007 declaring an income of Rs. Nil after setting off unabsorbed depreciation of Rs. 449/- for assessment year 2006-07 and claiming exemption under section 10A of Rs. 64,60,154. The income was also assessed at Rs. Nil under section 115JB of the Act after setting off unabsorbed depreciation of Rs. 561/- and allowing exemption under section 10A of Rs. 78,93,531/-. The assessment order was made under section 143(3) of the Act dated 24.12.2009. 5. Ld CIT issued notice under section 263 of the Act dated 6.1.2012 stating that while framing the assessment order, the AO allowed exemption under section 10A of Rs. 78,93,531/-. The computation of income under special provision of the Act i.e. 115 JB does not prescribe any methodology for computation of 10A exemption. Hence, assessee's claim under section 10A should have been restricted to Rs. 64,60,154 while computing income under section 115JB. In para 3 of said notice, it is further stated, inter alia, that Assessing Officer has committed the lapse of not applying his mind to the issue discussed above. A copy of the said notice i....
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....t a qualifying condition but only a compliance condition. In the context of above, assessee submitted before ld CIT that deduction/exemption under section 10A should not be restricted to what is computed as per normal provisions of Income tax Act and that there is no error in the order of AO calling for revision or any other amendment. 7. Ld CIT, after considering above submissions of assessee has stated that on consideration of the facts of the case, it is observed that AO has not enquired into this aspect and he has not verified or made any enquiry with regard to assessee's claim of exemption under section 10A while computing the income under the special provision of the Act i.e. 115 JB. Ld CIT has stated that it is seen that AO has not called for any details, nor made any enquiry or verification of the assessee's claim of set off of unabsorbed depreciation of earlier years made in the computation of income. It is relevant to reproduce paras 4.3 and 4.4 of the order of ld CIT which are as under: "4.3 The contention of the assessee is carefully appreciated, however, the same is not acceptable as on a plain reading of the provisions of Section 10A, it is seen that there is no pro....
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....sessment after a detailed verification of submissions given by the assessee in the return and the statements filed. Ld CIT has also stated that while computing the fresh assessment order, AO will give proper opportunity of hearing to the assessee and will examine and consider all the submissions as well as evidence which the assessee may produce before him and thereafter decide this issue on merits on the basis of findings given and as per law. Hence, this appeal by the assessee. 9. During the course of hearing, ld A.R. made his submissions at length and referred letter dated 13.2.2012, copy placed at pages 13 to 21 of PB, the contents of which we have mentioned hereinabove and also the said letter has been reproduced by ld CIT in the impugned order. Ld A.R. referred page 3 of the order of ld CIT and stated that assessee in the said letter stated the computation of profit as per normal provisions and as per the provisions of section 115JB of the Act and as per normal provisions, the claim of deduction u/s.10A comes to Rs. 64,60,154 and whereas as per provisions of section 115JB, it comes to Rs. 78,93,531 and this difference had occurred on account of claim of depreciation. H....
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....direction to pass a fresh assessment order as per provisions of law and, therefore, no prejudice is caused to the ssessee. 11. Ld A.R. in his reply to the submissions of ld D.R. submitted that notice issued by ld CIT u/s.263 discussed the merits of allowing exemption u/s.10A of the Act, u/s.115JB of the Act and not stated that AO did not apply his mind while computing book profit u/s.115JB of the Act. Ld A.R. submitted a compilation of case law. Ld A.R. referred to the decision of Hon'ble A.P. High Court in the case of CIT vs. G.K.Babra, 211 ITR 336 (AP) and submitted that if CIT passed an order on an issue which was not mentioned in the show cause notice, it is violation of natural justice and, therefore, order of ld CIT is invalid. He also referred from the said compilation the case of Hon'ble Apex Court in the case of CIT vs. Max India Ltd, 295 ITR 282(SC) and submitted that assumption of jurisdiction of ld CIT has to be considered on the date when he issued notice u/s.263 of the Act and not on the date when he passed the order. He further submitted that when there are two possible views and the AO has taken one view with which ld Commissioner does not agree, it cannot be treat....
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....6.2012 as also in the case of ACIT vs. M/s. Tata Autocomp Systems Pvt Ltd(I.T.A. No.3602/M/11) by order dated 6.6.2012. He submitted that the impugned order of ld CIT is not valid in law and same should be quashed. 16. We have considered submissions of ld representatives of parties and orders of authorities below. We have also carefully perused the cases cited before us. 17. The short question before us is whether the assessment order, which is subject matter of revision by ld CIT u/s.263 of the Act is erroneous and prejudicial to the interest of revenue as held by ld CIT u/s.263. There is no dispute to the fact that if the assessment order passed by the AO is erroneous and prejudicial to the interest of revenue, ld CIT u/s.263 can set aside/modify/cancel the assessment order. However, ld CIT before exercising his jurisdiction u/s.263 of the Act must satisfy that the assessment order is not only erroneous but is also prejudicial to the interest of revenue. It is also more or less settled that the order cannot be termed as erroneous unless it is not in accordance with law. It is also well settled that section 263 of the Act does not empower ld CIT to substitute his judgment over ....
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....) Expenses disallowed u/s 43 B: 150000 7) Provision for gratuity disallowed u/s 40 A (7): 150000 6536902 14430994 Less: Allowed / exempt 1) Depreciation as per IT Act: 7966238 2) Preliminary expenses allowed u/s 35 D: 4142 7970380 Export profit considered for 10 A deduction: 6460614 Less: Allowed / exempt Deduction u/s. 10A (6460614....
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.....(supra) for the purpose of principles governing the exercise of jurisdiction u/s.263 of the Act. In the case of Malbar Industrial Co.(supra), AO accepted the claim of the assessee without any enquiry. Ld CIT noted in that case that ITO had passed the assessment assessment order without application of mind and the Hon'ble High Court had also recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. In the aforesaid facts and circumstances, the Hon'ble Supreme Court has held that "an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous". In the same category fall orders passed without applying the principles of natural justice or without application of mind. Thus, none-reasoned or non- speaking orders passed by the AO as also the orders passed by him mechanically or without making relevant enquiries in accordance with law or without application of mind would fall in the category or orders passed "without applying the principles of natural justice or without application of mind". 20. In Commissioner of Income-tax v. Pushpa D....
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....emplated by sub-section (1) of section 143. Bulk of the returns filed by the assessees across the country is accepted by the Department under section 143(1) without any scrutiny. Only a few cases are picked up for scrutiny. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed b....
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....n arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows : '35. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances or arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or j....
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.... prejudicial to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case." 21. Therefore, there is no dispute to the fact that if the AO makes an assessment order without making enquiry into the claim of the assessee and accept whatever is stated by the assessee, which the assessee has stated in the return, in that circumstances, ld CIT is justified to exercise his jurisdiction u/s.263 of the Act. The view taken by the AO should not be a mere view in vacuum but a judicial view. It is well settled that AO being a quasi judicial authority cannot take a view, either against or in favour of assessee/revenue, without making proper enquiries and without proper examination of the claim made by the assessee in the light of the applicable law. Therefore, "adopting" or "taking" possible view in law necessarily requires the AO to consciously analyse and evaluate the facts in the light of the relevant law. "Taking" one view where two or more views are possible necessarily imports the requirement of analyzing the facts in the light of the applicable law. This requires the As....