AI Drafter 
TaxTMI 
TaxTMI 
2019 (4) TMI 103
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....dustry situated in the North Eastern Region. The claim to that effect was made in respect of 59 oil wells. The Assessing Officer through his assessment order dated 29.11.2007 rejected the claim seeking for such deduction. The rejection, however, was on the ground that though each oil well is claimed to be an undertaking, a combined Form in 10CCB is filed instead of separate Form in respect of each oil well. Though the issue as to whether the assessee is a mineral based industry, was not specifically analyzed, the Assessment Officer had assumed it to be correct and proceeded further, but rejected the claim on the technical noncompliance of filing separate Forms. 2. The assessee being aggrieved by the said assessment order dated 29.11.2007 filed appeals to the Commissioner of Income Tax (Appeals), for short "CIT (A)", in Appeal Nos.23-24- Dib/2005-2006 and 28-29-Dib/2007-2008. The appeals related to the returns for the year 2005- 2006 and 2006-2007 also. The CIT (A) by the order dated 29.2.2008, on consideration of the appeals, allowed the same and the benefit of deduction under Section 80IC was allowed. When this was the position, the Commissioner of Income Tax (for short "CIT") ....
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....the CIT(A) through the order dated 22.7.2013. Since the issue was common and the consequence of the consideration of the order dated 22.3.2010 under Section 263 of the Act would befall on the subsequent orders passed by CIT(A) dated 22.7.2013, the ITAT clubbed all the appeals and made a common consideration of the same. Though an independent consideration as to whether the assessee is a mineral based industry was not made by the ITAT, the consideration was to the effect as to whether the proceedings under Section 263 of the Act was sustainable. The ITAT has, accordingly, through its order dated 7.5.2015 allowed the appeals filed by the assessee and the order passed under Section 263 of the Act was set aside. The Revenue, therefore, claiming to be aggrieved by the order dated 7.5.2015 has filed these appeals, while the assessee has filed the cross-objections/cross appeals raising the grounds insofar as the aspects that were not adverted to by the ITAT, more particularly with regard to the deductions as claimed under Section 80 IC which would become necessary for consideration if the revision proceedings under Section 263 of the Act is held to be sustainable. 4. In that light, thi....
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....ancel an assessment and direct fresh assessment. Clause (c) to Explanation-1 to sub-section (1) of Section 263 further reads as hereunder :- "(c) Where any order referred to in this sub-section and passed by the Assessing Officer had been subject matter of any appeal filed on or before or after the first day of June, 1988, the powers of the Principal Commissioner or 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 appeals." 9. In the present facts, the provision as contained in Clause (c) would also become relevant since apart from the Commissioner having the power to invoke the jurisdiction under Section 263 of the Act, it is clarified that he can invoke such powers only in respect of erroneous portion of the order of the Assessing Officer causing prejudicial interest to the Revenue and such portion of the order not being a part of the consideration in any appeal, having been filed in respect of such assessment order to the CIT (A) and the matter not being concluded therein. Therefore, in the instant facts, what is also required to be taken note of is whether in t....
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....oducts under Items No.13 and Mineral Based Industry under Item of 16, are mostly spread over the North East Region as well as some part of the India with its Regional Office Situated at Duliajan in the district of Dibrugarh." 10. The Assessing Officer after taking note of the reply and the contention has concluded as hereunder : " It may be true that the assessee's wells are spread over the North Eastern States and that these wells are producing articles of things specified in the Fourteenth Schedule of the I T Act. The issue is whether these wells would qualify as 'undertakings' or 'enterprises' as envisaged in section 80- IC. The assessee has claimed deduction u/s 80-IC in respect of 59 wells by treating each well as a new independent production centre. A single Form 10CCB has been submitted wherein all the profits of these so called independent production centres have been clubbed together. The profits of these wells have been computed by taking the sales value of the output from these wells and reducing therefrom the drilling costs and proportionate production costs. These wells started production on various different dates starting from the year 1997-98 till upto 2....
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....sed by relevant case law on the issues raised. I have gone through the assessment order of the A.O. and put across the revenues point of view as well as the issues involved to the A/R's of the appellant company. They were asked to submit a para-wise rebuttal of the A.O's observations etc. Their written submissions dated 27.2.06 explains the appellant's the appellant's position and clarifies the issues involved. This have been summarized by me above. The arguments of the appellant as well as the case law cited by the A/R's are persuasive and factual and after careful consideration of the merits of both sides I am of the considered opinion that the grounds relating to disallowance of the claim of the Appellant u/s 80IB and 80IC of the Act for the A.Y. 2003-04, 2004-05, 2005- 06, 2006-07 and disallowance of discount allowed by the Appellant on account of under-recovery of the oil marketing company for A.Y. 2005-06 and 2006-07 have been adequately explained by the appellant company and are deserving of relief. In the circumstances, the appellant succeeds on both the above mentioned grounds. The other grounds being withdrawn the appeal is treated as allowed." 12. The learned senior c....
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.... of the Act was not justified as the order of the Assessing Officer had merged in the appellate order. The Gujarat High Court in addition to the question of merger had also kept in view Clause (c) of Explanation to Section 263(1) and has held that Section 263 could not have been invoked. (3) Commissioner of Income-tax Vs.- Mehsana District Co-op. Milk Producers Union Ltd., 263 ITR 645 (Gujarat), wherein the similar issue as to whether powers under Section 263 can be invoked when order sought to be revised was already subjected to appeal was considered and it was held that the power under Section 263 cannot be exercised. 13. The learned senior counsel for the Revenue, on the other hand, has relied on the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Gujarat-I, Ahmedabad -Vs.- Shri Arbuda Mills Ltd., Ahmedabad, (1998) 9 SCC 702, wherein on the issue of merger, it has been held that the powers of the Commissioner under Section 263 of the Act shall extend to such matters as has not been considered and decided in the appeal. In the facts therein, the ITO while making certain additions and disallowances, also accepted the claim of the assess....
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....ies also one of the tests for the purpose of claiming benefit of Section 80 IB and 80 IC. Accordingly, the claim was allowed. 16. In that backdrop, a perusal of the revision proceedings under Section 263 of the Act will disclose that the very issue which was considered by the CIT(A) and concluded was reopened, which is indicative by the observation of CIT, wherein he has stated that the perusal of the record shows that the Assessing Officer had not examined or applied his mind on the basic issue as to whether the assessee is actually a mineral based industry or not. As noticed, the question of considering the wells of the assessee as an undertaking was not accepted by the Assessing Officer though the claim of mineral based industry was not rejected. Whether such acceptance was erroneous and whether the CIT(A) has committed an error in allowing the claim will lose its relevance when it is to be noticed only to the extent of finding out whether the same issue could have been examined in a subsequent revision proceeding under Section 263 of the Act. When in the revision proceedings the CIT accepts during the course of the order that the assessee had claimed deduction under Section ....
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....ercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income Tax Officer is erroneous insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Section 263(1) of the Act. 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. 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. 8. The phrase "prejudicial to the interest of the Revenue" is not an expression of art and is not....