TaxTMI 
TaxTMI 
2025 (11) TMI 1763
X X X X Extracts X X X X
X X X X Extracts X X X X
....come Tax on 29-05-2021 is neither erroneous nor prejudicial to the interest of the revenue and none of the conditions as envisaged under Section 263 are fulfilled. 2. Ground No. 2 Issue of claim of deduction under Section 32AC of the Act is neither erroneous nor prejudicial to the interest of revenue: The Ld. PCIT erred in not appreciating the law, ie, difference between the "Installation" and "Put to use and further erred in merely giving direction to conduct inquiries to verify the claim of depreciation under Section 35AC of the Act. Even otherwise, the Ld. PCIT erred in not pointing out any error and the amount prejudicial to the interest of the revenue. Hence, the Ld. PCIT erred in invoking the powers u/s. 263 of the Act on this issue. 3 Ground No. 3 Direction on account of Section 40A(3) is neither error nor prejudicial to the interest of the revenue: The Ld. PCIT erred in directing AO to conduct inquiry of the transaction entered with M/s. Ravi Trading Co. to whom sales has been made and not made any payment in violation to section 40A(3). Hence, the present issue is not fit case under the criteria as envisaged u/s. 263 of the Income Tax Act, 1961. The Ld. P....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... u/s 32AC of the Act from this perspective. ii. The transaction carried out by the assessee with one Shri Ravi, Prop. Of M/s. Ravi Trading Co. amounting to Rs. 1,23,50,000/- which transactions were confirmed by the assessee during assessment proceedings but the AO, as per the Ld. PCIT, was in possession of information that the said transactions were suspicious in nature, since Shri Ravi had been reported to have deposited huge cash amounts in the bank during demonetization. The AO, as per the Ld. PCIT, ought to have disallowed the payments made by the assessee to M/s. Ravi Trading Co. by invoking the provisions of Section 40A(3) of the Act, on account of expenses being incurred in cash beyond the limit specified. And having not examined the issue, the assessment order passed was found to be erroneous and prejudicial to the interest of the Revenue. iii. The grants received by the assessee during the year amounting in all to Rs. 1.49 Crores, which were noted by the Ld. PCIT to have been accounted for by the assessee to the tune of only Rs.1 Crore and there were no details found on record explaining the accounting for the remaining grant of Rs. 49 Lakhs. The AO havin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... other hand, was noted to have claimed deduction u/s.32AC of the Act on account of investment in plant & machinery to the tune of Rs. 144,45,49,407/-. Noting this difference and further finding that the AO had not examined this aspect of the issue while allowing assesses claim of deduction u/s 32AC of the Act, he assumed revisionary jurisdiction u/s.263 of the Act . 9. During the course of hearing before us, it was pointed out that during assessment proceedings, the assessee vide letter dated 19.03.2021 had submitted the working of its claim of deduction u/s. 32AC of the Act of Rs. 21,66,82,411/- pointing out that its total addition to plant and machinery during the year was Rs. 144,45,49,407/- on which it had claimed deduction u/s.32AC of the Act @15% amounting to Rs. 21,66,82,411/-. The assessee had stated the amount to be duly certified and reported in tax audit report by the statutory Auditor and had furnished the working of the same. It was also pointed out to us that vide letter dated 17th February, 2021, the assessee had submitted to the AO the working of claim of deduction u/s.32AC of the Act amounting to Rs. 21.66 Crores. The working was stated to be furnished in 13 pag....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the assessee was not eligible to claim depreciation on the same for which purpose the fixed assets chart was prepared. But the assessee being eligible to claim deduction u/s.32AC of the Act on assets acquired and installed, therefore, deduction u/s.32AC of the Act had been claimed by the assessee on these assets, though depreciation had not been claimed on them. Our attention was drawn to this fact noted by the Ld. PCIT at page no.7 of his order as under: Plant & Machineries Amount Amount Enclosure Addition in Plant & machineries during the year - 816602320 Detailed chart of Plant and machineries filed as Annexure to 3CD Report attached (Pg. no. _ to 1 Plant & machineries of new plant at Chalisgaon acquired and installed - 547619391 Detailed chart of Plant and machineries acquired and installed at Chalisgoan plant attached (Pg. no. _to_ 1 Plant & machineries of new plant acquired and installed: - - - Bio-Utranchal Plant 65064692 - Chart attached (Pg. no. to Bio-Hubli Plant 41207892 - Chart attached (Pg. no. to Bio-Kadi Plant 12076487 - Chart attached (Pg. no. to Bio-HMT Plant 7625966 - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ror in the order of the AO nor any prejudice cause to the interest of the revenue since there was no excess claim of deduction u/s. 32AC of the Act allowed to the assessee. 13. The Ld. PCIT, however we find, has noted that after going through all the replies and evidences filed by the assessee that the assessee, though acquired the new eligible assets but did not install them in the impugned year and the AO having not called for these details for verification, therefore, assessment order was erroneous causing prejudice to the interest of the Revenue. His findings in this regard are contained at page 13 of his order: "If the details as available in the case-records and now furnished are looked into with the applicability of the provisions of section 32AC of the Act, it can be clearly concluded that the assessee- company, though acquired the new eligible assets but did not install them in the previous year ending on 31.03.2017 and therefore, it would not be eligible to claim deduction u/s 32AC(1A) of the Act as the prime condition of installing the eligible plant & machinery has not been fulfilled as per the details now furnished and as discussed above." 14. We have no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no consideration, since identical argument raised before the coordinate Bench of ITAT was rejected in a detailed order of the ITAT Ahmedabad in the case of Nilay kumar & Bros. Jewellers in ITA No. 146/Ahd/2022 order dated 11.1.2023. The findings of the ITAT rejecting the argument are as under: "33. To understand the import of the argument that the invocation of Explanation 2 to section 263 was to be confronted before being applied, it is necessary to see what Explantion-2 to section 263 is all about. For this purpose, provision of section 263(1) of the Act along with the Explanation 2 to the same are reproduced hereunder: 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. The import or object of an Explanation was explained by the Hon'ble apex court in the case of Sundaram Pillai v Pattabiraman AIR 1985 SC 582,593 as : The object of an Explanation has been explained in an earlier case as follows :- (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the notice by the ld. Pr. CIT which dealt with this specific reason or error in the order of the AO of non-conducting of inquiry, therefore, is of no consequence or relevance, since the assessee in very simple words has been confronted with the error. Mentioning of Explanation 2 to sub-clause (a) is therefore only technical addendum to the same. As we mentioned above, the Explanation did not expand the scope of section but only explained the scope of section, and therefore, once the specific section has been invoked, it is not necessary to mention any specific Explanation thereto which has been invoked. Therefore, this contention of the ld. counsel for the assessee is rejected outrightly that the order needs to be set aside for the reason that ld. Pr. CIT did not confront the assessee before invoking Explanation 2 to sub-clause (a) to section 263 of the Act. 37. As for the decision of the jurisdictional High Court in the case of Shreeji Prints (supra), relied upon by the ld. counsel for the assessee in support of this contention, the assessee, we hold, cannot derive any benefit from the same. 38. On going through the decision of the Hon'ble High Court,we f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act, though it passed the order invoking the said section and the Tribunal found the order to be not appropriate and sustainable in law. Para-5, as above, is just a noting by the Hon'ble High Court of the findings of the ITAT while allowing the assesses appeal. We find that it is only on the facts of the case as found by the ITAT that the issues were all duly examined by the AO and the AO had taken plausible view, that Hon'ble Court had upheld order of the Tribunal dismissing the appeal of the Revenue. 42. Thus it is apparent from the above that the decision of the Hon'ble High Court was not to the effect that Expl 2 to section 263 not being confronted to the assessee its invocation was invalid. Neither was the decision rendered in the backdrop of this question before the Hon'ble High Court, nor does the Hon'ble High Court hold so in its order. What is noted in the order to this effect is only its noting of the findings of the ITAT while setting aside the order passed u/s 263 of the Act. Therefore the decision of the Hon'ble jurisdictional High Court cannot be read as holding that order passed u/s 263 of the Act is invalid when Expl to sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act. According to the Ld. PCIT, the entire amount of Rs. 1,23,50,000/- purportedly paid by the assessee to Shri Ravi ought to have been disallowed by the AO by invoking Section 40A(3) of the Act for having incurred expenses in cash exceeding the specified limit. The assessment order, accordingly, was found to be erroneous causing prejudice to the interest of the Revenue on this account. The order of the Ld. PCIT further reveals that the assessee to have explained to the Ld. PCIT during revisionary proceedings that the assessee had not made any payment to Shri Ravi, but in fact had received payment from him on account of having sold goods to him and had also received the entire payment through RTGS. The assessee furnished the copy of ledger account along with sale invoices, weigh bridge receipts and loading slip for each and every bill raised on Shri Ravi and also submitted that it had sold oil to Shri Ravi amounting to Rs. 1,22,98,467/- and received Rs. 1,23,50,000/-. The Ld. PCIT found the contentions of the assessee to be correct after scrutinizing the details furnished by the assessee, and also noted that as per the intimation received from the ITO, Ward-45(1), Delhi, the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ely converse understanding of the transaction by the Ld. PCIT of the same being a sale transaction was not confronted to the assessee. He contended therefore, that his finding of error in the assessment order for the AO having not inquired into the issue was arrived at against all principles of natural justice without seeking assessee's response on the same after confronting it to him. 20. Ld. DR was unable to controvert this factual contention of the Ld. Counsel for the assessee that the reason for which the assessment order was found to be erroneous by the Ld. PCIT vis-à- vis the transaction entered into by the assessee with Shri Ravi, was never confronted to the assessee. The Ld. DR was unable to demonstrate in any way that the Ld. PCIT had confronted to the assessee his changed view on the nature of transaction entered into by the assessee with Shri Ravi. 21. In the light of the same, it is evidently clear that the findings of the Ld. PCIT of the assessment order being erroneous causing prejudicial to the interest of the Revenue on account of the transaction entered into by the assessee with Shri Ravi having not been examined by the AO, has been arrived at with....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... & machinery falling in the block of 100% for which the WDV has been shown at Rs. 99,56,962/- with new addition of Rs. 2,38,00,087/- during the year under consideration (Refer Sr. No.5 of the chart of depreciation provided in item no. 18 of the Tax Audit Report). There has been no reduction of any grant or subsidy in the chart of depreciation for the balance amount of Rs. 49,21,852/- The assessee-company has contended that the grant of Rs. 1,49,21,852/- received from the government against acquisition of capital goods had been reduced in the computation of total income. It has also been stated that the amount of Rs. 1,49,21,852/- was comprising of two amounts. The first amount of Rs. 1,00,00,000/- was received against the installation of Waste based Bio-Methanation Plant and the same was reduced from the cost of such machinery. The second amount of Rs. 49,21,852/- was the duty of export of goods available against the import of capital goods under the Export Promotion Capital Goods(EPCG) Scheme. On the basis of details furnished in the paper-book (pages 146 to 161), it has been contended that the company had received an indirect grant in the form of non-payment of customs d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Officer is directed to carry out the following specific inquiries so as to ascertain as to whether the assessee has considered the amount of Rs. 49, 21, 852/- for reducing the actual cost of plant & machinery and claimed the depreciation on such reduced cost or not: - (i) The Assessing Officer shall call for all the accounts of customs duty paid and the customs duty saved during the preceding three assessment years, i.e. A. Yrs. 2014-15, 2015-16 and 2016- 17 along with the copies of Tax Audit Reports and examine the exact treatment of customs duty paid and customs duty saved in the accounts. (ii) The Assessing Officer shall call for specific details in the form of chart of depreciation for any of the assessment years in which the cost of Rs. 49,21,852/-has been reduced or included in other grants/customs duty saved etc. with reference to the accounts and the chart of depreciation and examine the same in detail. (iii) On conclusion of such inquiry, the Assessing Officer shall pass a speaking assessment order on this issue after giving an opportunity of being heard to the assessee-company before deciding the issue of depreciation on such grants/customs d....