TaxTMI 
TaxTMI 
2019 (12) TMI 1033
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....n exercise of his powers u/s 263 with respect to issues set out in the SCN without dealing on merits with the submissions made before him which proved that the assessment order u/s. 143(3) for the A.Y. 2014-15 was neither erroneous nor prejudicial to the interest of the revenue and further the CIT himself having not recorded any specific finding as to in what manner he found the AO's order to be erroneous in so far as it was prejudicial to the interest of the revenue; he was not justified in setting it aside and directing AO to pass the order afresh. 3) For that on the facts and in the circumstances of the case, the CIT erred in considering the assessment to be erroneous on account of alleged mismatch in turnover even though both before the AO as well as before the CIT cogent explanations were furnished explaining that there was no alleged mismatch for which the assessment order u/s 143(3) could be held to be erroneous & prejudicial to the revenue's interest. 4) For that on the facts and in the circumstances of the case, for the reasons set out in Para 2(a) of the SCN, the CIT was unjustified in treating the assessment order to be erroneous without establishing in any s....
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.... building which did not require execution of Conveyance. 11) For that on the facts and in the circumstances of the case, the CIT failed to understand that as per the applicable legal provision sale of Factory building did not require execution of registered Sale Deed, requiring stamp duty payment and further there being no material brought on record which proved that stamp duty value of the factory building was higher than the declared sale consideration the CIT was unjustified in considering the assessment order to be erroneous on the issue of not making reference to the Registered Valuer for determining value of factory building. 12) For that on the facts and in the circumstances of the case, the CIT was unjustified in considering the assessment order to be erroneous for not referring the valuation of the building and assets situated therein to the Registered Valuer even though there was no statutory provision in terms of which the reference was permissible to the Registered Valuer by the AO. 13) For that on the facts and in the circumstances of the case, the CIT was unjustified in law and on facts in considering the assessment order to be erroneous for, reasons set out in ....
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....eciation claimed 7. Large value sale of consideration of property in ITR is less than sale consideration of property reported in TDS return under section 194IA 8. Mismatch in sales turnover reported in Audit Report and ITR 9. Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR 4. After conducting enquiries with reference to the foregoing issues and after verification of details furnished by the assessee the AO completed the assessment u/s 143(3) of the Act on 29.12.2016 at a total income of Rs. 12,15,42,352/-. Subsequent to completion of the assessment, the Pr. CIT issued two identically worded show cause notices (hereinafter 'SCN') u/s 263 of the Act dated 16.05.2017 and 19.07.2017 proposing to interfere with the assessment order since he found fault with the AO's order dated 29.12.2016 for the following reasons : "Subsequently, the assessment records of the assesse were called for & on the basis of the verification of the material available on records, it was found that the order of assessment was erroneous so far as it is prejudicial to the interest of revenue on the following grounds:- (a) One of the reasons for selection of scru....
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....ponse to the later SCN, the assessee submitted its reply dated 29.08.2017 along with several documents in support of its averments and which was made available to us at Pages 3 to 79 of the paper book. Although explanations were furnished in August 2017, the Ld. Pr. CIT passed the impugned order only on 26/02/2019, wherein he held the AO's order to be erroneous in so far as it was prejudicial to the interests of the Revenue with reference to all the issues set out in clauses (a) to (g) of SCN. In the impugned order, the Ld. Pr. CIT set aside the AO's order with respect to all the seven points inter alia directing AO to make a reference to the TPO, after obtaining the approval of the Ld. Pr. CIT, if considered necessary. Aggrieved by the order of the Ld. Pr. CIT the assessee is now before us challenging the exercise of revisionary jurisdiction by the Pr. CIT u/s 263 of the Act. 6. Assailing the decision of the Ld. Pr. CIT, to exercise his power of revision through Ground Nos. 1 & 2, the Ld. AR, Sh. Dilip S Damle argued that the assumption of jurisdiction by the ld. Pr. CIT and consequent order passed u/s 263 of the Act was bad in law because the conditions precedent for invoking th....
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....order was erroneous and therefore liable for revision u/s 263 of the Act. The said findings of the Ld Pr. CIT have been seriously contested by the appellant in Gr. Nos. 1&2. In the circumstances therefore before adjudicating the issues arising from the impugned order, we have to first examine the scope of revisional jurisdiction u/s. 263 of the Act. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the ld. CIT. The twin conditions which need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and(ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed ....
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....e interests of the Revenue. It is true that the courts have held that an order of assessment can be considered to be erroneous if there was lack or total absence of enquiry with regard to an issue which has material bearing on the assessment of total income for the relevant year. However in such a case the CIT has to first demonstrate that no enquiry at all was conducted and consequent to which not only the order became erroneous but such an error also caused prejudice to the revenue. In our considered view one also has understand the difference between "lack of inquiry" and "inadequate inquiry" and when it can be termed as erroneous for usurpation of jurisdiction u/s 263 of the Act. For better understanding of this aspect, we can take help of the judgment of the Hon'ble jurisdictional Calcutta High Court in the case of CIT Vs J.L. Morrison (I) Ltd (366 ITR 593), wherein their Lordships explained the difference between the two as follows:- "86. Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of ....
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....din is evidently based on an erroneous impression that "the proceedings before the Assessing Officer are judicial proceedings". This impression, which is patently contrary to the views expressed by Apex Court in the case of S.S. Gadgill (supra), was responsible for the views taken by the Tribunal. When the premise is wrong, the conclusion is bound to be wrong. 92. The judgment in the case of Infosys Technologies Ltd. (supra) is distinguishable on facts. The step taken by the CIT under Section 263 in that case was justified because the Income Tax records produced before him did not show that the assessing officer had considered the double taxation avoidance agreement on the basis whereof the claims were made by the assessee. Therefore, that was a clear case to show that the assessment order was passed without considering the relevant pieces of evidence. 93. The judgment in the case of Anusayaban. A. Doshi (supra) does not apply because the High Court in that case was dealing with the need on the part of the learned Tribunal to give reasons in support of its order. 94. The judgment in the case of Hindusthan Tin Works Ltd. (supra) also does not apply because there the Delhi ....
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....own to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. The third question is, for the reasons discussed above, answered in the negative." 10. This aspect was also explained by the Hon'ble Delhi High Court in its judgment in the case of CIT Vs Sunbeam Auto Ltd (332 ITR 167). The relevant extracts of the judgment is as follows: 12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. 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....
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....am Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ****** From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the C....
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....ave the matching effect the cost of the dies has been claimed as a revenue expenditure." 14. This clearly shows that the Assessing Officer had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dyes and tools is to be treated as revenue expenditure or not. It appears that since the Assessing Officer was satisfied with the aforesaid explanation, he accepted the same. The CIT in his impugned order even accepts this in the following words : "Assessing Officer accepted the explanation without raising any further questions, and as stated earlier, completed the assessment at the returned income." 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'. 11. Before us the ld. CIT, DR supported the invocation of revisionary jurisdiction by the Ld. Pr. CIT u/s 263 of the Act, by relying on the amendment to ....
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....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 [Principal Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matterof any appeal [filed on or before or after the 1st 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 appeal.] [Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issue....
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.... passed by the Assessing Officer is without inquiry or verification, (b) the Assessing Officer allowed a claim without enquiry, (c) the Assessing Officer passed the order which is not in accordance with any order, directions or instructions issued by the CBDT u/s 119 of the Act, (d) the Assessing Officer passed the order which is not in accordance to the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court, which is prejudicial to the assessee, which is rendered either in the assessee's case or any other person. 14. The amendment brought by the Finance Act, 2015, by way of insertion of Explanation-2, can come to the aid of the ld. Pr. CIT or ld. CIT only when any one or more of the four conditions, is satisfied and a clear finding of fact to that effect is recorded by the Ld. CIT. It is only after the CIT records a clear finding of fact bringing the assessee's case within the ambit of any one or more condition specified in the explanation, only then the legal consequence envisaged in the explanation can be deemed or else it cannot be deemed. Only in the case where the CIT records a clear finding of fact establishing any of the four conditions postu....
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.... read as to harmonize with and clear up any ambiguity in the main section and should not be so construed as to widen the ambit of the section conferring powers or authority larger than what is envisaged in the principal provision. It is so held by the Hon'ble Supreme Court in Bihta Cooperative Development Cane Marketing Union Ltd. Vs. Bank of Bihar, AIR 1967 SC 389 and M/s. Oblum Electrical Industries Pvt. Ltd., Hyderabad vs. Collector of Customs, Bombay - AIR 1997 SC 3467 at page 3471 and also see Justice G. P. Singh, Principal of Statutory Interpretation 234 Lexus 2016. It has to be kept in mind that while the Commissioner is exercising his revisional jurisdiction over the assessment order, he has to exercise his power in an objective manner and not arbitrarily or subjectively since he is discharging quasijudicial powers vested in him while doing so. Thus according to us, Explanation (2) inserted by the Parliament u/s. 263 cannot override the main section i.e. sec. 263(1) of the Act. The Ld. CIT can exercise his revisional jurisdiction in the event the assessment order is erroneous as well as prejudicial to the interest of the Revenue as discussed above and not otherwise. 16. In....
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.... Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the dec....
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.... find that the assessee's case was selected for scrutiny under CASS inter alia on the ground that there was a mismatch in turnover as per audit report and ITR. We note that this aspect was specifically enquired into by the AO at the time of assessment. The assessee by its letter dated 09.12.2016 [Pages 17 to 21 of paper book] had brought to the AO's attention that in fact there was no mismatch in turnover. The Ld. AR brought to our attention that in Part A of the return of income, the assessee had reported it's Turnover at Rs. 1153.407 crores which matched fully with the net sales/ turnover figure which appeared on Page 37 of the annual printed accounts. From these figures, we note that the CASS reason was examined by the AO and did not find any factual infirmity in the assessee's explanation. Nor any falsity was found by the Ld PCIT in the impugned order 21. We further find that having made a reference to CASS reason the Ld. Pr. CIT's notice proceeded to highlight an alleged mismatch between gross receipts of Rs. 972 lacs reflected in TDS certificates with the amount credited in the P&L A/c under the head 'Other Income', reported at Rs. 873.88 lacs. We find merit in the ld. AR's ....
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....e the assessee's explanations which showed that receipts certified in the TDS Certificates totaling Rs. 972 Lacs were fully accounted in the assessee's books of the relevant year but merely restored the issue for fresh examination by the AO. The order of the Ld. Pr. CIT with reference to issue in clause (a) is therefore set aside. Ground Nos. 3 & 4 are accordingly allowed. 22. In Ground Nos. 5 to 7, the assessee has objected to Ld. Pr. CIT's finding with reference to reasons set out in Clause 3(b) of the SCN which read as follows: "One of the reasons for selection of scrutiny was mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report (Form 3CEB) and ITR. However, the case was not referred to TPO. As per para 3.2 of CBDT's. Instruction No. 3 of 2016, the instant case had to be mandatorily referred to the TPO (the Transfer Pricing Officer) by the A.O after obtaining the approval of Principle CIT. However, the A.O has completed assessment u/s 143(3) of the Act on 29-12-2016 without referring the matter to Transfer Pricing Officer." 23. We find that the assessee's case was selected under CASS inter alia on the parameter that "Mismatch in amount paid to ....
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....fore completion of assessment reference to TPO on transfer pricing risk parameter was mandatory in terms of Para 3.2 of the CBDT Instruction No. 3 of 2016. 25. Having considered rival submissions we find merit in the ld. AR's primary contention that the SCN proceeded on the wrong presumption that the assessee's case was selected on a transfer pricing risk parameter. We note that the parameter for selection was as follows: "Mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report and ITR" 26. It is thus noted that nowhere the CASS reason stated the selection of the assessee's case was on the ground of there being "large value of specified domestic transactions" or "large value of international transactions" so as to warrant an inference that the case was selected on transfer pricing risk parameter. On the contrary, the CASS reason merely claimed that there was mismatch in the amount paid to related persons u/s 40A(2)(b) of the Act reported in Audit report and ITR. From plain reading of the said CASS reason, we are of the view that no prudent person properly instructed in law would have inferred that the aforesaid parameter constituted 'transfer pricing....
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.... 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT). The fact that a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are invariably available with the jurisdictional AO. Thus, if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: (a) where the AO comes to know that the taxpayer has entered into international transactions or specified domesti....
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....e Revenue. 29. Even with regard to CIT's allegation that in complete scrutiny case, the AO did not conduct any enquiries whatsoever with regard to transactions referred to in Section 40A(2)(b) as well as Section 92CA of the Act, we find that prior to completion of assessment the AO had indeed conducted enquiries with regard to CASS reason as also the assessee's international transactions with the AEs. We note that before completion of assessment, the assessee was asked to provide explanation even with regard to its international transactions with its associated enterprises. By its letter dated 16.12.2016 [Pages 87 to 89 of paper book], the assessee had furnished its explanation in respect of its international transactions. In the said letter it was particularly brought to the AO's attention that based on the Transfer Pricing Audit report in Form 3CEB, wherein the auditors had certified ALP of international transactions, the assessee had suo moto offered adjustments in the computation of income on account of corporate guarantee fees and interest on loan to AEs which were not actually charged. We therefore find that it was not even a case where the order of the AO suffered from the ....
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....xisted in the statute as on the date of order. The Ld. Pr. CIT's direction requiring the AO to consider making a reference to the TPO in the set aside proceedings is also contrary to the view expressed in the foregoing decision of the coordinate bench(supra). For all the foregoing reasons therefore, we hold that the AO's order did not suffer from any error for the reason that he did not make reference to the TPO. Accordingly the Ld. Pr. CIT's order for the reason setout in clause 3(b) of the SCN and for the entirely new set of reasons contained in the impugned order, is set aside. Ground Nos. 5 to 7 are accordingly allowed. 32. In Ground Nos. 8 & 9 the assessee objected to Ld. Pr. CIT's finding with reference to reasons set out in Para 3(c) of the SCN which read as follows: "Disallowance u/s 14A of the Act was not made by the A.O keeping in view the circular No. 5/2014 (F.No. 225/182/2013-ITA.II) dated 11-02-2014 as well as provisions laid down in the Act." 33. From the assessment order as also from the facts on record it appeared that during the relevant year the appellant did not earn any dividend from it's investments made in shares of other bodies corporate. We also note t....
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.... of the Act. However, large value sale of consideration of property reported in TDS return under section 194IA was one of the criteria for selection of the case in scrutiny. The same was not properly verified by the A.O." 36. In the impugned order the Ld. Pr. CIT considered the assessment to be erroneous for AO's failure to refer the valuation of the factory building and related assets to the registered valuer for determination of their fair market value. According to the Ld. Pr. CIT, in terms of Section 17 of the Registration Act, 1908; the sale of factory building was liable to be evidenced by a registered deed and for that purpose determination of stamp duty value was mandatory. In Ld. Pr. CIT's opinion in absence of the valuation of the factory building, the AO could not have computed the income arising from it's sale. He further opined that the AO's order lacked enquiry as also lacked interpretation of facts because the AO summarily accepted the explanations filed by the assessee and did not dwell into the matter as per the criteria for selection of scrutiny under CASS. 37. It is noted from the CASS reasons that assessee's case was selected for scrutiny on the ground that 'l....
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.... in TDS return u/s 194IA fully reconciled and the CASS reason was factually incorrect. He therefore submitted that the AO had accepted the assesse's explanations after verifying the relevant agreement for sale, report of the valuer, fixed asset and depreciation schedule certified by the tax auditor as also the TDS certificate issued in Form 16B by the purchaser of the packet tea factory. The ld. AR therefore submitted that it was factually incorrect on the Ld. Pr. CIT's part to hold that the AO had not conducted any enquiry with reference to CASS reason before completion of assessment. The ld. CIT, DR was unable to controvert these facts which are borne out from the documents on record. We therefore hold that for the reasons set out in the clause 3(d) of SCN, the AO's order cannot be said to be erroneous and prejudicial to the interests of the Revenue. 39. As regards the Ld. Pr. CIT's finding in the impugned order holding the order as erroneous for not making reference to the registered valuer, for determination of the market value of factory building, the ld. AR submitted that the impugned order is silent with regard to the relevant provision of the Act in terms of which referen....
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....een relevant if income arising from sale of assets was assessed or assessable under the head 'Capital Gains'. Section 50C of the Income-tax Act, 1961 contains a deeming fiction whereunder, the AO is permitted to treat the market value adopted by the stamp duty authorities to be the full value of consideration 'for the purposes of Section 48 of the Act'. Since Section 50C is a deeming provision of the Act, it has to be construed strictly and its application can only made in the cases where the income under the head capital gain is assessed or assessable in accordance with the provisions of Section 48 of the Act. On the contrary however, we find that in the present case no income arising from sale of fixed assets of packet tea factory was assessed under the head 'Capital Gains'. We note that in terms of Section 32, 43(6)(c) read with Section 41(4) of the Act, the consideration received on transfer of depreciable assets was reduced from the opening WDV of the respective block of assets. After such reduction, none of the blocks ceased to exist and therefore only with reference to the resultant reduced WDV, the assessee was granted depreciation u/s 32 of the Act. In particular, our atte....
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....ed value apparently did not have any relevance for determination of total income of the assessee for the relevant year. We therefore have no hesitation in holding that for the reasons set out in the Para 4.3 of the impugned order, the AO's order could not be said to be held as erroneous and prejudicial to the interests of the Revenue. Accordingly we set aside the Ld. Pr. CIT's order on this issue and allow Ground Nos. 10 to 12 of the appeal. 41. In Ground Nos. 13 & 14 the assessee has objected to Ld. Pr. CIT's finding with reference to reasons set out in Para 3(e) of the SCN which read as follows: "It is further seen that write off of fixed asset of Rs. 42,93,049/- as per clause 21(a) of TAR was not added back by the A.O during the course of assessment." 42. In the impugned order the Ld. Pr. CIT admitted that the assessee had filed explanations to counter these reasons but in his opinion order was erroneous on the ground of non-enquiry because the issue in question was not raised by the AO and assessee did not furnish the explanation in the course of assessment. On the other hand, in the course of hearing, the ld. AR of the assessee drew our attention to the audited accounts fo....
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....e on sale of other fixed assets and the net gain of Rs. 7,44,52,592/- was separately credited under the head 'Other Operating Income, and this was separately considered in the computation of income. No factual infirmity or falsity was shown by the Ld. Pr. CIT in the explanations put forth which was supported by corroborative evidence. Applying the ratio laid down in the decisions of the Hon'ble Delhi High Court in the case of ITO vs DG Housing Projects Ltd (supra) & DIT vs Jyoti Foundation (supra), we therefore hold that the order of the ld. Pr. CIT merely setting aside the AO's order without independently dealing with merits of the issue was untenable and therefore the same is set aside. Ground Nos. 13 & 14 are accordingly allowed. 44. In Ground Nos. 15 and 16 the assessee has objected to Ld. Pr. CIT's finding with reference to reasons set out in Para 3(f) of the SCN which read as follows: "It is seen that the assesse claimed deduction u/s 801C of the Act on income from other Sources amounting to Rs. 34, 61,750/-. Rationale behind such claim was not verified by the A.O during the course of assessment proceedings." 45. In the impugned order the Ld. Pr. CIT admitted that the as....
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....operations of the industrial undertaking, in the audit report furnished the accountant had considered the said scrap sales as income derived from the operations of the eligible undertaking and the same was included as part of the profits eligible for deduction u/s 80IC of the Act. We also note that in the order u/s 143(3) of the Actthe AO assessed the income by way of scrap sale earned by the eligible undertakings under the head 'Profits & Gains of Business' and such action was not interfered with by the Ld. Pr. CIT in his order u/s 263. In the circumstances we note that no infirmity was committed by the AO when the deduction u/s 80IC was allowed in respect of income derived from scrap sale which the AO had assessed under the head 'Business'. We find that the AO's order allowing deduction u/s 80IC in respect of income from scrap sales is in conformity with the decision of the Hon'ble jurisdictional Calcutta High Court in the case of Reckitt Benckiser India Ltd Vs ACIT (231 Taxman 585). This view is also supported by the judgment of the Hon'ble Madras High Court in the case of Fenner India Ltd Vs ACIT (125 Taxman 386), Hon'ble Delhi High Court in the case of CIT Vs Sadhu Forgings Lt....
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....e AO and the same was submitted before the AO vide assessee's letter dated 09.12.2016, copy whereof is at Pages 17 to 21 of the paper book. It was brought to the AO's attention that the increase in the expenditure debited under the head 'Other Expenses' was much lower than the increase in the turnover and since in none of the past income-tax assessments any disallowances were made out of 'other expenses', the AO had accepted the explanation put forth by the assessee. The ld. AR further pointed out that Miscellaneous Expenses debited in the Profit & Loss Account totaled Rs. 21.56 crores and in response the SCN of the Ld. Pr. CIT the assessee had furnished its complete break-up before him and copy of which is placed at Page 79 of the paper book. The ld. AR argued that having furnished the complete break-up of the expenses debited under the head Miscellaneous Expenses, the Ld. Pr. CIT himself did not point out any specific infirmity nor he was able to point out even one specific instance where the item of expenditure was found disallowable or it was excessive or unreasonable. He further submitted that the appellant was a listed public company having turnover in excess of Rs. 1153 cro....
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....ok. On perusal of the said statement we note that the expenses clubbed under this broad head represented expenses such as annual general meeting expenses, security service expenses, books and periodicals, audit fees etc. which are incurred by any corporate assessee in the ordinary course of its business. Even though the assessee had furnished the break-up of the expenses before the Ld. Pr. CIT, he did not point out any specific instance of the expenditure being excessive or not permissible but simply set aside this issue to the file of the AO. We however find from the chart furnished before us that in fact the expenditure debited under the head Miscellaneous Expenses during the year under consideration was substantially lower than the expenditure incurred in the prior years. This fact can be verified from the following chart: Particulars AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 Turnover as per P&L Account 9504232206 9803015000 10353267000 11534070000 Misc. Expenses as reported in P&L Account 138297344 287340000 327981262 215639429 Net profit / (loss) as per P&L Account before taxation 460931952 (790411000) (7568173) 164908900 Percentage of Mi....