AI Drafter 
TaxTMI 
TaxTMI 
2017 (1) TMI 1591
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....t the provision made for loss on assets held for disposal should be added to the book profit u/s.115JB of the Act. He ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the appellant's case, though the term used as "provision", in fact it is the actual diminution in the value of the assets which is being recognized in form of extended depreciation and hence even on merits, there is absolutely no warrant/justification for initiating the proceedings u/s.263 of the Act. 3. Without prejudice, in law and in the facts and the circumstances of the appellant's case, the Ld.CIT has grossly erred in initiating the proceedings u/s.263 of the Act so as to make addition to net profit while calculating book profit u/s.115JB in view of retrospective amendment by Finance (No.2) Act, 2009 with regard to "provision for diminution in value of asset". He ought to have appreciated, inter alia, that assessment has been finalized taking into account the law prevailing on the first day of the concerned assessment year, and any retrospective amendment under section 115JB will not render the original assessment erroneous. 4. Without prejudice, in law and in ....
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.... 263 of the Act and set aside the assessment order in respect of the aforesaid issue for reframing the assessment. The relevant para of the order of the CIT is reproduced hereunder: '4. The facts of the case and the submissions of AR have been carefully considered. It is a settled legal position that any order passed by the AO without proper inquiry and investigation is erroneous and prejudicial to the interest of revenue. The Following judicial pronouncements endorse the above contention: * The Hon'ble Madras High Court in the case of CIT v. Seshasayee paper 7 Boards ltd. [2000] 242 ITR 490 (Madras) has held that failure of the A.O to make an inquiry before granting deduction would render the assessment erroneous and prejudicial to the interest of revenue. * The Hon'ble Madras High Court, in the case of CIT v. South India Shipping Corporation Ltd.,[1998] 233 ITR 546 (Mad) has held that the order of the A.O may be erroneous in law or in fact. It may be erroneous in the sense that the A.O had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was ag....
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....s it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee. Mere allegation that the AO had taken a view in the matter would not put the matter beyond the purview of section 263, unless the view taken by the AO was a judicial view consciously based upon proper enquiries and appreciation of all relevant factual and legal aspects of the case. The orders passed on an incorrect assumption of facts or incorrect application of law or without applying principle of natural justice or without application of mind or without making requisite enquiries would satisfy the requirement of the order being erroneous and prejudicial to the interest of revenue within the meaning of section 263. * The Delhi Court in the case of UGee Vee Enterprises v Addl. CIT (99 ITR 375) had held that - " The position and function of the ITO is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The Civil Court is neutral. It simply gives the decision on the basis of pleading and evidence wh....
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.... fixed asset schedule as "provision" for the year under column "depreciation". He thereafter submitted that the assets lying with the assessee-company which were intended to be sold are to be valued at their realizable value and so while preparing the books of accounts, the selling value is estimated by discounting the future cash flows to their present value and difference of such discounted value and book value is booked as impairment loss. It was contended that provisions of section 115JB of the Act requires that the P&L Account should be prepared in accordance with the provisions of Part-II and III of Schedule-VI of the Companies Act, 1956 and thereby follow all the applicable accounting standards as well. Therefore, the assessee-company in compliance with the Accounting Standard-28 as issued by the Institute of Chartered Accountant of India recognized the impairment loss on the asset. The Ld.AR submitted that the aforesaid amount is actual diminution in the value of assets which is being recognized and not mere provision of possible losses. The Ld.AR thereafter submitted that para-3 of "clause 2.3 of Schedue-21 to Notes to accounts" makes reference to impairment policy adopted....
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....ion" in its books in its own wisdom. No enquiry about the nature of provision was made at all in the course of assessment proceedings as can be seen from the enquiry letter referred to by the ld.AR. Therefore, justifying the correctness of claim before the CIT on merits is not of any avail in the absence of any enquiry in this regard. He therefore submitted that the action of the CIT is in accordance with law and cannot be interfere with. 6. We have carefully considered rival submissions and perused the orders of the CIT and material relied upon in the course of hearing. 7. The assessee in the present case has agitated the action of the CIT in invoking revisional power vested under section 263 of the Act towards alleged under statement of book profit under section 115JB of the Act. It is the case of the assessee that the provision for loss of assets held for disposal amounting to Rs. 40,08,000/- represents actual loss towards impairment and is not in the nature of provision. It is further case of the assessee that the power under section 263 of the Act cannot be invoked for the reasons narrated in its arguments before the CIT. In this regard, at the outset, we refer to the fi....