TaxTMI 
TaxTMI 
2020 (10) TMI 943
X X X X Extracts X X X X
X X X X Extracts X X X X
....st the order passed by the learned Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 ('the Act' in short) in which the learned Commissioner of Income Tax, invoking Section 263 of the Act, held that the Pre-Operative Expenses of Rs. 3487.18 lakhs as per Schedule-6 to the audited Profit & Loss Account is not covered by Section 35D of the Act and the expenses are required to be capitalised with the block of depreciable assets. The relevant portion of the order of the learned Commissioner of Income Tax is quoted below for ready reference: "4.0 The ARs were heard. The foregoing written submissions were duly considered. The assessee's stand is that, the expenditure in question, i.e, pre-operative expenses are not c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of sale of surplus power to TNEB from captive power plant and distribution of power to Steel Plant from captive power plant for its own use. The said details as given in paragraph No.3.1 are quoted below for ready reference: "At the outset, it is submitted that the brea-up of Rs-3487.18(Rs, in lakhs) is as under: i. Sale of surplus power to TNEB from captive power plant : 282.22 ii. Distribution of power to Steel plant from captive power plant : 1844.50 iii. Transfer of coke to blast furnace from coke oven plant : 1360.46 ___________ Total 3487.18 __________ However, paragraph No.4.1 of the order of the learned Commissioner of Income Tax in the paper book, quoted above, cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed to invoke provisions of the Section-263 of the Act on the 'order under consideration' to remedy loss to the Revenue." 6. Thus, from the show cause notice, it is observed that the proceedings u/s 263 were initiated as in the opinion of the CIT ? 3487.18 lakhs was the income of the assessee assessable to tax for the year consideration which was omitted to be assessed in the assessment order. The CIT, after considering the submissions of the assessee on this issue which was to the effect that out of ?3487.18 lakhs, ?3204.98 lakhs represents inter-divisional transfer of the assessee's units only in which no assessable income element is embedded and the balance amount of ?282.22 lakhs which represented sale of power to TNEB has corr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r ultimately has been passed to verify the expenses of ?3487.18 lakhs to ascertain its liability or otherwise in computing the assessable income for the assessment year 2007-08. 8. Firstly, we find that no show cause notice was issued in respect of expenses of ?3487.18 lakhs. Further, even it is assumed that income of ?3487.18 lakhs referred in show cause notice issued u/s 263 was ordered by the CIT to be verified by the Assessing Officer then also we find that instant order passed u/s 263 is not sustainable as the CIT could not point out any error in the submissions of the assessee in respect thereto. Though the CIT has quoted the submissions of the assessee that no assessable income was established in the receipt of ?3487.18 lakh....