M/S. NEW CHEMI INDUSTRIES PVT.LTD., MUMBAI v. INCOME TAX OFFICER3(2)(5), MUMBAI

ITA 1409/MUM/2009 | 2004-2005
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 140919914 RSA 2009
Assessee PAN AAACN1170D
Bench Mumbai
Appeal Number ITA 1409/MUM/2009
Duration Of Justice 1 year(s) 4 month(s) 28 day(s)
Appellant M/S. NEW CHEMI INDUSTRIES PVT.LTD., MUMBAI
Respondent INCOME TAX OFFICER3(2)(5), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-07-2010
Date Of Final Hearing 17-06-2010
Next Hearing Date 17-06-2010
Assessment Year 2004-2005
Appeal Filed On 02-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER I T A NO: 1409/MUM/2009 (ASSESSMENT YEAR: 2004-05) M/S NEW CHEMI INDUSTRIES PVT. LTD. MUMBAI APPELL ANT (PAN: AAACN1170D) VS INCOME TAX OFFICER 3(2)(3) MUMBAI RESPONDENT APPELLANT BY: MS AARTI VISSANJI RESPONDENT BY: MR S S RANA / MR B K SINGH O R D E R R V EASWAR PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AND IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT ON 23.12.2008 UNDER SEC TION 263 OF THE INCOME TAX ACT 1961. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFAC TURE OF PESTICIDES AND INSECTICIDES. IT FILED A RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 TO WHICH YEAR THIS APPEAL RELATES DECLARING TOTAL INCOME OF RS.2 36 65 790/-. THE RE TURN WAS ACCOMPANIED BY THE COMPUTATION OF INCOME TAX AUDIT REPORT UNDER SECTION 44AB AUDITED STATEMENT OF ACCOUNTS ALONG W ITH THE SCHEDULES THERETO TDS CERTIFICATES ETC. IT WAS F IRST PROCESSED UNDER SECTION 143(1) ACCEPTING THE RETURNED INCOME BUT WAS LATER SELECTED FOR SCRUTINY BY ISSUE OF NOTICE UNDER SECT ION 143(2). AFTER HEARING THE ASSESSEE THE ASSESSMENT WAS COMPLETED U NDER SECTION ITA NO: 1409/MUM/2009 2 143(3) ON A TOTAL INCOME OF RS.2 36 65 790/- WHICH WAS THE SAME AS RETURNED BY THE ASSESSEE. 3. SUBSEQUENTLY THE CIT INITIATED PROCEEDINGS UNDER SECTION 263 OF THE ACT ON THE GROUND THAT THE ASSESSING OF FICER DID NOT APPLY HIS MIND AS TO WHETHER THE CASH SUBSIDY RESER VE OF RS.20.00 LAKHS WHICH WAS NOT ROUTED THROUGH THE PROFIT AND L OSS ACCOUNT BUT WAS TAKEN DIRECTLY TO THE BALANCE SHEET CONSTITUTED THE ASSESSEES INCOME OR NOT. HE WAS OF THE VIEW THAT THERE WAS A N ERROR OF NON APPLICATION OF MIND ON THE PART OF THE AO. THE CIT ALSO WAS OF THE VIEW THAT THE SALES TAX AND EXCISE DUTY COLLECTED B Y THE ASSESSEE SHOULD HAVE BEEN INCLUDED IN THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC AND THA T THIS HAS ALSO ESCAPED THE ATTENTION OF THE AO. HE INVITED T HE ASSESSEES OBJECTIONS TO HIS PROPOSAL TO REVISE THE ASSESSMENT . THE ASSESSEE FILED WRITTEN SUBMISSIONS. AS REGARDS THE CASH SUB SIDY OF RS.20.00 LAKHS IT WAS POINTED OUT THAT IT WAS RECEIVED FROM THE STATE GOVERNMENT OF MAHARASHTRA UNDER THE MAHARASHTRA PAC KAGE SCHEME OF INCENTIVES 1988 FOR SETTING UP A NEW UNIT / EXPANSION OR DIVERSIFICATION OF INDUSTRY IN THE BACKWARD AREA OF TARAPUR THAT IT WAS NOT FOR ASSISTING THE ASSESSEE IN CARRYING OUT ITS OPERATIONAL ACTIVITIES OR TO SUPPLEMENT THE PROFITS AND THEREF ORE THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE TO THE SUBSIDY OF N OT ROUTING THE SAME THROUGH THE PROFIT AND LOSS ACCOUNT WAS PROPER . IN OTHER WORDS THE ASSESSEES SUBMISSION WAS THAT THE SUBSI DY CANNOT BE ASSESSED AS INCOME NOR CAN IT BE REDUCED FROM THE COST OF ASSETS. THE ATTENTION OF THE CIT WAS DRAWN TO THE JUDGMENT OF THE SUPREME ITA NO: 1409/MUM/2009 3 COURT IN CIT VS. P J CHEMICALS LTD. (1994) 210 ITR 830 (SC). AS REGARDS THE DEDUCTION UNDER SECTION 80HHC THE ASSE SSEE POINTED OUT THAT THE SUPREME COURT IN CIT VS. LAXMI MACHINE WORKS (2007) 290 ITR 667 (SC) HAS HELD THAT EXCISE DUTY AND SALE S TAX ARE TO BE EXCLUDED FROM THE TOTAL TURNOVER AND THE ASSESSE E HAS RIGHTLY DONE SO. 4. THE CIT CONSIDERED THE ASSESSEES OBJECTIONS AND IN PARAGRAPH 4 OF HIS IMPUGNED ORDER REMARKED THAT THO UGH THE MATTER WAS FORCEFULLY ARGUED ON MERITS THE ASSESSEE DID N OT OBJECT TO THE INVOKING OF SECTION 263. HAVING SAID SO HE PROCEE DED TO HOLD THAT THE AO WAS SILENT IN THE ASSESSMENT ORDER IN RESPEC T OF THE AFORESAID TWO ISSUES AND THEREFORE THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. HE HELD THAT THE PROVISIONS OF SECTION 263 WERE RIGHTLY INVOKED BUT OBSERVED THAT THE ASSESSEE HAS TO BE HEARD ON MERITS. HE THEREFO RE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO COMPLETE IT AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE AND EXAMI NE AND CONSIDER ALL THE SUBMISSIONS AND EVIDENCE WHICH THE ASSESSEE MAY ADDUCE BEFORE HIM AND THEN DECIDE THE ISSUE ON MERI TS THROUGH A SPEAKING ORDER. 5. IT IS AGAINST THE AFORESAID ORDER OF THE CIT THA T THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. THE SUBMIS SION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE ASSES SMENT SHOULD BE BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INT ERESTS OF REVENUE AND IN THE PRESENT CASE THIS CONDITION WAS NOT SATI SFIED SO AS TO EMPOWER THE CIT TO TAKE PROCEEDINGS TO REVISE THE A SSESSMENT ITA NO: 1409/MUM/2009 4 UNDER SECTION 263 OF THE ACT. IT WAS FURTHER SUBMI TTED THAT THE ISSUE OF CASH SUBSIDY WAS SETTLED BY THE SUPREME COURT IN THE JUDGMENT CITED SUPRA AND THAT ANY INCENTIVE GIVEN BY THE GOV ERNMENTAL AUTHORITIES FOR SETTING UP INDUSTRIES IN A BACKWARD AREA WAS A CAPITAL RECEIPT WHICH CANNOT BE ASSESSED AS INCOME NOR CAN IT BE REDUCED FROM THE COST OF ASSETS FOR THE PURPOSE OF ALLOWANC E OF DEPRECIATION ETC. THE FURTHER SUBMISSION WAS THAT IN ANY CASE T HE VIEW ADOPTED BY THE AO WITH REGARD TO THE CASH SUBSIDY RECEIVED BY THE ASSESSEE WAS A POSSIBLE VIEW AND IN THE LIGHT OF THE JUDGMEN T OF THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC) NO PROCEEDINGS CAN BE TAKEN UNDER SECTION 263 IF TH E AO HAS ADOPTED ONE OF THE MANY POSSIBLE VIEWS ON THE ISSUE . IT WAS SUBMITTED THAT IN SUCH A CASE THE ASSESSMENT CANNOT BE CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THESE ARGUMENTS WERE SOUGHT TO BE FORTIFIED BY PLACING RE LIANCE ON THE FOLLOWING FURTHER AUTHORITIES: - (1) CIT VS. KELVINATOR OF INDIA LTD. (2002) 256 IT R 1 (DEL) (SB) [SINCE AFFIRMED BY THE SUPREME COURT IN (2010 ) 320 ITR 561 (SC)] (2) CIT VS. GREENWORLD CORPORATION (2009) 314 ITR 81 (SC) (3) DCIT VS. RELIANCE INDUSTRIES LTD. (2004) 88 ITD 27 3 (MUM) (SB) 6. ON THE OTHER HAND IT WAS SUBMITTED ON BEHALF OF THE DEPARTMENT THAT THE ASSESSMENT WAS COMPLETED WITHOU T PROPER ENQUIRY INTO THE QUESTION WHETHER THE CASH SUBSIDY WAS ASSESSABLE AS INCOME OR IT WAS A CAPITAL RECEIPT AND THERE IS NOTHING IN THE ASSESSMENT ORDER TO SHOW THAT THE AO HAD APPLIED HI S MIND TO THE NATURE OF THE RECEIPT. IT WAS SUBMITTED THAT THE M ERE OMISSION OF THE AO TO APPLY HIS MIND TO A CRUCIAL QUESTION ARIS ING IN THE COURSE ITA NO: 1409/MUM/2009 5 OF THE ASSESSMENT PROCEEDINGS IN CONNECTION WITH A PARTICULAR ITEM OF RECEIPT ITSELF WOULD CLOTHE THE CIT WITH POWER T O INVOKE SECTION 263 ON THE GROUND THAT THE ASSESSMENT ORDER WAS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IT WAS PO INTED OUT THAT THE CIT HAS NOT REVISED THE ASSESSMENT ON MERITS AND HA S CONSISTENT WITH HIS VIEW THAT THE AO HAS NOT APPLIED HIS MIND TO THE NATURE OF THE CASH SUBSIDY SET ASIDE THE ASSESSMENT WITH DIR ECTIONS TO THE AO TO EXAMINE THE MERITS OF THE ISSUE AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. HE PLEADED THAT THE ORDER OF THE CIT SHOULD BE LEFT UNDISTURBED. IN SUPPORT OF THE SUBMISSIONS THE LEA RNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE FOLLOWING AUTHORITIES: - (1) MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC) (2) CIT VS. ACTIVE TRADERS (P) LTD. (1995) 214 ITR 5 83 (CAL) (3) GEE VEE ENTERPRISES VS. ADDL. CIT (1975) 99 ITR 375 (DEL) (4) SMT RENU GUPTA VS. CIT (2008) 301 ITR 45 (RAJ) (5) SCHENECTADY BECK INDIA LTD. VS. DCIT (2004) 92 TTJ 872 (MUM) (TM) 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IT HAS BEEN HELD WITH REFERENCE TO SECTION 263 THAT THE O RDER PROPOSED TO BE REVISED UNDER THAT SECTION SHOULD BE BOTH ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IT HAS BE EN HELD BY THE DELHI HIGH COURT IN GEE VEE ENTERPRISES VS. ADDL. C IT (1975) 99 ITR 375 (DEL) THAT AN ORDER WHICH SHOWS THAT THE AO HAS NOT CARRIED OUT ANY ENQUIRY OR INVESTIGATION IS AN ORD ER WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. IN THIS CASE IT WAS HELD THAT SINCE THE AO IS NOT ONLY AN ADJUDI CATOR BUT ALSO AN INVESTIGATOR HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIR Y. IT IS THE DUTY OF ITA NO: 1409/MUM/2009 6 THE AO IT WAS OBSERVED TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE S UCH AS TO PROVOKE AN ENQUIRY. A SIMILAR OBSERVATION WAS MADE EARLIER BY THE MADRAS HIGH COURT IN THE CASE OF P R EASWARAN VS.; ITO (1969) 72 ITR 263 (MAD) WHERE IT WAS HELD THAT THE AO AS PR OSPECTOR FOR THE REVENUE IS EXPECTED TO DELVE INTO THE SUBTERRANEAN DETAILS AND EXAMINE THE RETURN IN THAT PERSPECTIVE AND IF HE FA ILS TO DO SO IT MAY INVITE ACTION UNDER SECTION 263. THE KARNATAKA HIG H COURT IN THE CASE OF THALIBAI F JAIN VS. ITO (1975) 101 ITR 1 (K AR) HELD THAT IF THE CIRCUMSTANCES OF THE CASE ARE SUCH THAT THE AO SHOULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE STATEME NTS MADE IN THE RETURN OF INCOME WHICH HE FAILED TO CARRY OUT THE ASSESSMENT CAN BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF REVENUE. THE GUJARAT HIGH COURT IN ADDL CIT VS. MUKUR CORPOR ATION (1978) 111 ITR 312 (GUJ) HELD THAT IF THE AO HAD COMMITTED AN ERROR IN NOT MAKING AN ENQUIRY INTO THE DETAILS REGARDING THE DE DUCTIONS CLAIMED BY THE ASSESSEE HE NOT ONLY COMMITTED AN ERROR IN FAILING TO MAKE AN ENQUIRY BUT THAT THE WANT OF THE ENQUIRY HAD ALS O RESULTED IN PREJUDICE TO THE INTERESTS OF THE REVENUE. THE CAL CUTTA HIGH COURT IN CIT VS. ACTIVE TRADERS (P) LTD. (1995) 214 ITR 5 83 (CAL) HELD THAT IF THE CIT WAS OF THE VIEW THAT THE ASSESSMENT WAS NOT MADE AFTER PROPER AND DETAILED ENQUIRY WHICH SHOULD HAVE BEEN MADE IT CANNOT BE SAID THAT HE WAS WRONG IN HOLDING THAT TH E ASSESSMENT WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. NO JUDGMENT OF THE HONBLE BOMBAY HIGH CO URT TAKING A ITA NO: 1409/MUM/2009 7 CONTRARY VIEW HAS BEEN BROUGHT TO OUR NOTICE ON BEH ALF OF THE ASSESSEE. 8. IN THE LIGHT OF THE ABOVE PRINCIPLES IF WE EXAMI NE THE FACTS OF THE CASE BEFORE US IT IS SEEN THAT IN THE TAX AUDI T REPORT AN EXTRACT FROM WHICH HAS BEEN COMPILED AT PAGE 67 OF THE PAPE R BOOK THE FOLLOWING OBSERVATION APPEARS AS NOTE E) :- E) CAPITAL RECEIPT CASH SUBSIDY RECEIVED DURING THE YEAR CREDITED TO CASH SUBSIDY RESERVE A/C. RS.20 00 000/- INFORMATION GIVEN ABOVE IS IN RELATION TO THE BUSINESS INCOME OF THE ASSESSEE AND IS BASED ON ENTRIES MADE IN BOOKS OF ACCOUNT AND RECORDS MADE AVAILABLE TO US AND ACCORDING TO INFORMATION AND EXPLANATION GIVEN TO US FOR THE PURPOSE OF TAX AUDIT. OUR ATTENTION WAS NOT DRAWN TO ANY OTHER EVIDENCE O R PAPER ADDUCED BEFORE THE AO IN WHICH ANY FURTHER EXPLANAT ION WITH REGARD TO THE CASH SUBSIDY WAS GIVEN. IN THE COURSE OF TH E HEARING BEFORE US WE ASKED THE LEARNED COUNSEL FOR THE ASSESSEE W HETHER ANY QUERY WAS RAISED BY THE AO IN THE COURSE OF THE ASS ESSMENT PROCEEDINGS SPECIFICALLY WITH REGARD TO THE CASH IN CENTIVE. THE LEARNED COUNSEL FOR THE ASSESSEE REPLIED IN THE NEG ATIVE AND AT OUR INSTANCE HAS FILED THE NOTICE ISSUED BY THE AO ON 1 0 TH MAY 2006 ALONG WITH THE QUESTIONNAIRE AND THE ASSESSEES REP LY TO THE SAME. SHE DID NOT POINT OUT FROM THESE PAPERS ANY QUERY O R ASSESSEES STATEMENT WITH REGARD TO THE RECEIPT OF THE CASH IN CENTIVE OR ABOUT ITS TAXABILITY OR OTHERWISE. NO OTHER RECORD WAS P RODUCED BEFORE US FROM WHICH IT CAN BE GATHERED THAT THE AO APPLIED H IS MIND TO THE QUESTION OF TAXABILITY OF THE CASH INCENTIVE RECEIV ED FROM THE GOVERNMENT OF MAHARASHTRA. THE CIT THEREFORE APPEA RS TO US TO BE CORRECT IN SAYING THAT THE AO HAS NOT APPLIED HIS M IND TO THIS ISSUE ITA NO: 1409/MUM/2009 8 AND THE ASSESSMENT IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9. THE CONTENTION OF THE LEARNED COUNSEL FOR THE AS SESSEE BASED ON THE JUDGMENTS OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) AND GREENWORLD CORPORATION (SUPRA) IS THAT THE ASSESSMENT CANNOT BE CONSIDERED TO BE ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IF THE AO HAS ADOPTED ONE OF THE SEVERAL POSSIBLE VIEWS ON TH E QUESTION OF TAXABILITY OF THE CASH INCENTIVE. THE DIFFICULTY I N ACCEPTING THE CONTENTION IN SO FAR AS THE PRESENT CASE IS CONCER NED IS THAT THE AO HAS NOT TAKEN ANY VIEW WITH REGARD TO THE QUESTI ON BECAUSE HE HAS NOT APPLIED HIS MIND TO THE QUESTION AT ALL AND THE QUESTION OF ADOPTING ONE OF THE MANY POSSIBLE VIEWS SIMPLY DOES NOT ARISE. THE RULINGS OF THE SUPREME COURT CITED ABOVE CANNOT THEREFORE BE APPLIED ON THE FACTS OF THE PRESENT CASE. THE OTHE R CONTENTION BASED ON THE JUDGMENT OF THE FULL BENCH OF THE DELH I HIGH COURT IN KELVINATOR OF INDIA LTD. (SUPRA) WHICH HAS SINCE BE EN AFFIRMED BY THE SUPREME COURT (SUPRA) CANNOT ALSO BE ACCEPTED B ECAUSE THOSE DECISIONS WERE CONCERNED WITH THE POWER OF THE AO T O REOPEN THE ASSESSMENT EARLIER MADE UNDER SECTION 143(3). IT W AS HELD BY THE DELHI HIGH COURT THAT EVEN THOUGH AN ISSUE HAS NOT BEEN SPECIFICALLY DISCUSSED IN THE ASSESSMENT ORDER THE AO MUST BE PRESUMED UNDER SECTION 114(E) OF THE EVIDENCE ACT TO HAVE CONSIDERED THE SAME AND TAKEN A DECISION. IT IS NE CESSARY TO APPRECIATE AND KEEP IN MIND THE CONTEXT IN WHICH TH E OBSERVATIONS WERE MADE BY THE DELHI HIGH COURT. THE QUESTION TH ERE WAS ITA NO: 1409/MUM/2009 9 WHETHER THE REOPENING OF THE ASSESSMENT WAS PROMPTE D BY A MERE CHANGE OF OPINION. THE CONTENTION ON BEHALF OF THE REVENUE (LAST PARAGRAPH OF PAGE 19 OF THE JUDGMENT) WAS THAT BECA USE DETAILED REASONS HAVE NOT BEEN RECORDED IN THE ASSESSMENT OR DER AFTER AN ANALYSIS OF THE MATERIALS ON RECORD IT WOULD JUSTI FY PROCEEDINGS UNDER SECTION 147. WHILE REJECTING THIS SUBMISSION OF THE DEPARTMENT THE HIGH COURT POINTED OUT THE DIFFEREN CE BETWEEN SECTION 143(1) AND SECTION 143(3) AND OBSERVED THAT WHEN AN ORDER IS PASSED UNDER SECTION 143(3) A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIN D. THE PROVISIONS OF SECTION 114(E) OF THE EVIDENCE ACT WE RE ALSO APPLIED. THEREAFTER THE HIGH COURT OBSERVED THAT IF IT IS TO BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APP LICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE AO T O REOPEN THE PROCEEDINGS WITHOUT ANYTHING FURTHER THE SAME WOUL D AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI J UDICIAL FUNCTIONS TO TAKE BENEFIT OF ITS OWN WRONG. THESE OBSERVATIO NS MADE IN THE CONTEXT OF SECTION 143(3) VIS--VIS SECTION 147 CA NNOT FIT IN TO THE SCHEME OF SECTION 263. WE HAVE ALREADY REFERRED TO SEVERAL JUDGMENTS IN WHICH IT HAS BEEN HELD THAT NON APPLIC ATION OF MIND AND FAILURE TO CAUSE THE NECESSARY AND RELEVANT ENQ UIRIES BY ITSELF WOULD GIVE JURISDICTION TO THE CIT TO INVOKE SECTIO N 263 ON THE GROUND THAT THE ASSESSMENT IS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. WHEN THE CIT INVOKES SEC TION 263 OF THE ACT IT IS NOT A QUESTION OF THE AO DERIVING BENEFI T FROM HIS OWN WRONG BUT CONSIDERING THE NATURE OF THE JURISDICTI ON OF THE CIT ITA NO: 1409/MUM/2009 10 UNDER SECTION 263 IT IS TO BE UNDERSTOOD AS A POWE R OF SUPERVISION OVER THE ORDERS PASSED BY THE AO. THIS IS BECAUSE THE DEPARTMENT HAS NO RIGHT OF APPEAL AGAINST ANY ORDER PASSED BY THE AO. THEREFORE THE CIT HAS BEEN ENTRUSTED WITH THE POWE RS OF REVISION WHENEVER THERE IS ANY ERRONEOUS ORDER PREJUDICIAL T O THE INTERESTS OF THE REVENUE. FURTHER IN THE PRESENT CASE THERE IS NO SCOPE TO EVEN APPLY THE PRESUMPTION THAT THE AO HAS APPLIED HIS M IND TO THE QUESTION OF TAXABILITY OF THE CASH INCENTIVE BECAUS E THERE WAS NO QUERY RAISED BY HIM WITH REGARD TO THE TAXABILITY O F THE CASH INCENTIVE. IT MAY HAVE BEEN POSSIBLE TO APPLY THE PRESUMPTION OF APPLICATION OF MIND HAD THERE BEEN MATERIAL ON RECO RD REGARDING THE RAISING OF THE QUERY ABOUT THE TAXABILITY OF THE CA SH INCENTIVE. IN THAT CASE IT WAS PERHAPS POSSIBLE FOR THE ASSESSEE TO ARGUE THAT MERELY BECAUSE THE AO HAS NOT DISCUSSED THAT ISSUE IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IT CAN NOT BE SAID THAT HE HAS NOT APPLIED HIS MIND TO THE MATERIAL ON RECORD. BUT WHEN THERE IS NO MATERIAL ON RECORD TO SHOW THAT TH ERE WAS A DISCUSSION OR A QUERY RAISED REGARDING THE TAXABILI TY OF THE CASH INCENTIVE IT CANNOT BE PRESUMED THAT THE AO HAD AP PLIED HIS MIND AND TAKEN A DECISION THAT THE CASH INCENTIVE WAS NO T TAXABLE AS INCOME. IT APPEARS TO US THAT THE OBSERVATIONS OF THE DELHI HIGH COURT (SUPRA) WERE RENDERED IN THE CONTEXT OF A CAS E WHERE THERE WERE MATERIALS ON RECORD ON A PARTICULAR QUESTION B UT THERE WAS NO DISCUSSION IN THE ASSESSMENT ORDER UNDER SECTION 14 3(3) ABOUT THE SAME. IN THE VERY NATURE OF THINGS THE JUDGMENT CA NNOT BE INVOKED WHEN EVEN THE MATERIALS WERE NOT AVAILABLE ON RECOR D IN WHICH ITA NO: 1409/MUM/2009 11 CASE NO PRESUMPTION CAN BE DRAWN THAT THEY WERE LOO KED INTO. THIS APPEARS TO US TO BE THE DIFFERENCE BETWEEN THE CITE D JUDGMENT AND THE CASE BEFORE US. IN THIS CONTEXT WE MAY CLARIFY THAT THE ASSESSEE ITSELF HAS CERTIFIED THAT THE COPY OF THE MAHARASHT RAS PACKAGE SCHEME OF INCENTIVES 1988 AND THE COPY OF THE DISBU RSEMENT LETTER DATED 08.03.2004 FROM DEVELOPMENT CORPORATION OF KO NKAN LTD. FOR GRANT OF SUBSIDY OF RS.20.00 LAKHS UNDER THE AFORES AID SCHEME WERE NOT FILED BEFORE THE AO BUT WERE FILED ONLY BE FORE THE CIT (PLEASE SEE INDEX AND CERTIFICATE IN THE PAPER BOOK NO.2 CONTAINING 89 PAGES). THUS EVEN THE BASIC DOCUMENTS SUCH AS T HE SCHEME UNDER WHICH THE CASH INCENTIVE WAS GRANTED AND WHIC H CONTAINED THE TERMS AND CONDITIONS THEREOF WHICH CONSTITUTE T HE BASIC MATERIAL TO BE CONSIDERED BEFORE ANY DECISION IS TAKEN REGAR DING THE QUESTION OF TAXABILITY OF THE INCENTIVE WERE NOT MA DE AVAILABLE TO THE AO. IN THIS BACKGROUND THE QUESTION OF APPLYING T HE RULE OF PRESUMPTION ON THE BASIS OF THE JUDGMENT OF THE FU LL BENCH OF THE DELHI HIGH COURT (SUPRA) DOES NOT ARISE. 10. FOR THE ABOVE REASONS WE ARE OF THE VIEW THAT T HE ORDER PASSED BY THE CIT UNDER SECTION 263 OF THE ACT REQU IRES NO INTERFERENCE. WE UPHOLD THE SAME AND DISMISS THE A PPEAL FILED BY THE ASSESSEE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY 2010. SD/- SD/- (J SUDHAKAR REDDY) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 30 TH JULY 2010 SALDANHA ITA NO: 1409/MUM/2009 12 COPY TO: 1. M/S NEW CHEMI INDUSTRIES PVT. LTD. 33 3 RD FLOOR MAKER CHAMBERS VI 220 NARIMAN POINT MUMBAI 400 021 2. ITO 3(2)(3) 3. CIT-3 4. CIT(A)- 5. DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI