ORDER
R.P. Rajesh, Accountant Member
1. In all these three appeals filed by the Revenue, common issue is involved. Therefore, these three appeals were heard together and are being disposed of by a common order for the sake of convenience.
2. In all these three appeals, the Revenue is aggrieved by the decision of the CIT(Appeals) to allow deduction Under Section 80I which was denied by the A.O.
3. The D.R. submitted that the Ld. CIT(Appeals) has wrongly come to the conclusion that in the present case, new industrial undertaking which will be entitled for deduction Under Section 80I, started in the assessment year 1990-91. According to the Ld. D.R., initial year of production of the industrial undertaking is the assessment year 1989-90 and not the assessment year 1990-91. The D.R. submitted that in this case the actual production has started in the accounting year relevant to the assessment year 1989-90. The assessee has purchased from 1C1 (India) Ltd. a plant which was installed at Rishra. This plant was manufacturing water treatment chemicals. The installed capacity of the plant was 1070 tons. The cost of the plant & machinery was Rs. 54.55 lakhs and further the assessee purchased new plant & machinery worth Rs. 18,69,000/. This industrial undertaking was located at Rishra. The Ld. D.R. submitted that in the first year, the plant & machinery worth Rs. 54.55 lakhs were second-hand since it was previously used by ICI (India) Ltd. and were acquired in running condition. The fresh addition made by the assessee was only Rs. 18.69 lakhs and, therefore, the cost of old plant & machinery was much higher than 20% of the total cost of the plant & machinery. Accordingly, in terms of Explanation 2 below Section 80I(2), the assessee was not eligible for deduction in the first year. The Ld. D.R. continued his argument and submitted that once the assessee failed the eligibility test in the first year i.e. assessment year 1989-90, no benefit would be available to the assessee in the subsequent years even if in such subsequent years new investment is made by the assessee so as to reduce the value of old assets to below 20%. Once an industrial undertaking is found not eligible for relief in the initial assessment year of manufacture, such benefit is not available to it in the succeeding four years. For this proposition, the Ld. D.R. placed reliance on the decision of the Hon’ble Kerala High Court in the case of Nippon Electronics (India) Pvt. Ltd. reported in 181 ITR 519 (Kar). Thus, as per the clear and unambiguious words of Section 80-I(1A)(i) which, inter alia, states ” an industrial undertaking which begins to manufacture or produce articles or things…”, the relevant facts demonstrate that the initial year in which the assessee began to manufacture articles or things was the assessment year 1989-90.
4. The Ld. D.R. submitted that it is a wrong claim of the assessee that at Rishra water chemical plant acquired from ICI (India) Ltd. stopped production in February, 1990, that the excise licence was surrendered and that the plant was dismantled and taken to a different site at Konnagar, where two more chemicals were produced i.e. oil field chemicals and industrial additives. The assessee has claimed that the production commenced on 29th January, 1990 under a new industrial and excise licence. That does not make any difference so far as the initial year of production is concerned. The Ld. D.R. submitted that the dominant issue in dispute is the determination of initial year of business. The department’s case is that the initial year is the assessment year 1989-90 and there is little doubt about it. The Ld. D.R. submitted that it is an incontrovertible fact that in the assessment year 1989-90, the project at Rishra was not at a construction or setting up stage. The assessee had claimed depreciation on both the old/acquired plant & machinery and new plant & machinery which signifies that all the machineries achieved sales of Rs. 2,67,64,000/- during this financial year leaving no scope for any confusion on the score whether the industrial undertaking was commercially functional or not in the financial year relevant to the assessment year 1989-90. It itself informed the Superintendent of Central Excise, Serampore Division that it had stopped its production activities ( reference Annexure B-8 of the Paper Book ). The Ld. D.R. drew our attention to the licence granted by the Ministry of Industry ( Annexure -A5 of the Paper Book ). The most crucial fact in this document is that the assessee made an application for grant of licence not merely of water treatment chemicals but also of oil field and industrial chemicals (additives) as far back as 10.06.1986 i.e. many months prior to the assessment year 1989-90.
5. He submitted that the licence was granted on 12.09.1988 for manufacturing and sale of all three chemical products. It was further stipulated that in terms of the licence, the project had to be completed within two years. Another significant fact apparent from the aforesaid licence is that the permission was for production at Rishra site as explicitly mentioned therein. It would be incorrect to assert that the assessee started construction of a new project at Konnagar pursuant to the grant of this licence. When the construction of this site began in November 1988, it was not for starting a new industrial undertaking but to relocate the industrial undertaking at Rishra. The Ld. D.R. further submitted that the facts decisively demolished the case of the assessee that there were two distinct industrial undertakings – one at Rishra that manufactured water treatment chemicals and the other at Konnagar that manufactured, additionally, oil field chemicals and industrial additives. The very subject of the industrial licence granted identifies the contours of the industrial undertaking that came into being in the assessment year 1989-90, i.e. an undertaking that manufactures what is generally termed as “Speciality Chemicals” (the assessee itself chooses to describe its manufacturing activities in this fashion in its printed accounts). Thus, the industrial undertaking was for manufacturing several types of industrial chemicals right from the assessment year 1989-90 and there is no change in its nature/mandate in any subsequent year. It would be absurd to hold that an industrial undertaking engaged in the business of manufacturing and sale of speciality chemicals should produce only one licensed sub-product in the first year and if it manufactures another licensed sub-product, it magically transforms into a ‘new’ industrial undertaking. An industrial unit can manufacture a number of allied products. Such an undertaking can choose the timing of commencement of production of one or more related products within the overall limits of licence terms ( in this case, two years from the date of licence).
6. It was further submitted by the Ld. D.R. that just because it started with water chemicals in the first year and added to more related products in a short period thereafter, does not mean that there are two radically different industrial units. The Ld. D.R. submitted that there cannot be two views that the year of birth of the industrial undertaking was the assessment year 1989-90 at Rishra. The only thing that has changed apropos the industrial undertaking is its geographical location, i.e. from Rishra to Konnagar. However, there is no need to concern as to why it shifted, since it is purely an internal, administrative exercise. What is important is to repel the assessee’s unjustified attempts to take advantage of mere shifting to plead that somehow a ‘new’ industrial undertaking came into existence at Konnagar. All that happened at Konnagar in its second year of existence, was that the production items and capacities were scaled up. In this light, the assessment year 1990-91 is of no special significance and there is no change in the essential characteristics, intentions and (government approved) contours of the industrial undertaking except a change, essentially, in its postal address. Therefore, according to the Ld. D.R., the assessment year 1989-90 is quite certainly the first year in the life of the industrial undertaking. The Ld. D.R. submitted that the assessee’s contention that a ‘new’ industrial licence was acquired in 1988 is incorrect and, as mentioned, the assessee had applied in 1986 itself and the same was granted for manufacturing at Rishra. Further, had the assessee continued production at Rishra, there would have been no need for a new excise licence as well.
7. It was submitted by him that a change in the site of an industrial undertaking makes no difference to an ineligible claim of deduction under Section 80I. The Ld. D.R. submitted that it is wholly incorrect on the part of the assessee to contend that the unit at Rishra stopped production. Production did not stop because there was an irreversible cessation of manufacturing and that the company wound up. It was submitted by him that production stopped at Rishra because the assessee decided to relocate at Konnagar where production recommenced. There was no stoppage of production per se but stoppage of production at a particular location only. Further, according to the Ld. D.R., the assessee deliberately calls the plant & machinery at Rishra as ‘old’. The Ld. D.R. further submitted that from the foregoing facts, it is crystal clear that the prefix ‘old’ and ‘new’ applies merely to the factory site and not to machineries. The assessee was manufacturing speciality chemicals at Rishra and it was doing the same thing at Konnagar. To examine the compliance to conditionalities laid down for deduction Under Section 80I of the Act, the inter se percentage of old and new plant & machinery is to be done with respect to corresponding figures for the assessment year 1989-1990 and not the assessment year 1990-91. The fact that the assessee did not claim any deduction for paucity of taxable income, is immaterial. According to the Ld. D.R., if, for argument’s sake, the assessee’s plea that the assessment year 1990-91 is accepted, then there remains an unanswered question about how to describe assessment year 1989-90, because there cannot be a year prior to the first year. Hypothetically, if the assessee decided to relocate to a third place and some new machines were to be added for producing chemicals, it cannot be said that a third industrial undertaking will come into existence and the initial year for deduction Under Section 80I will be the year in which the shift to the third site occurred. There is no dispute that the assessee was in the business of manufacturing speciality chemicals right from the assessment year 1989-90. The Ld. D.R. further continued his argument on the basis of an analysis of annual report and accounts for the year ending 31st March, 1989.
8. The Ld. D.R. submitted that there was only one industrial undertaking in existence at all time and that the initial year was the assessment year 1989-90 and this fact is supported by the audited accounts of the appellant company for the assessment year 1989-90.
9. The Ld. D.R. drew our attention to serial No. 1 of the auditor’s report where it has been stated “since the company is in its first year of operation, the fixed assets…”. Thus, the assessee company itself has declared the first/initial year as assessment year 1989-90.
10. Further, the Ld. D.R. referred to serial No. (II), sub-item (1) of Balance Sheet as at 31.3.1989, under the caption “fixed assets” read with a corresponding debit in the Profit & Loss Account, according to which the claim of depreciation amounting to Rs. l 1,44,000/- is apparent and indicates the use of machinery for full-fledged business purposes.
11. Further, in the fixed asset Schedule No. 3 to the Balance Sheet, the gross block as at 31.3.1989 in respect of plant & machinery has been stated at Rs. 73.24 lakhs on which depreciation of Rs. 2.81 lakhs has been claimed. Item No. 3 of Schedule 12 of the accounts clearly states that the assessee acquired the water treatment chemical business of IEL Ltd., later named [ICI (India) Ltd. ] valued at Rs. 54,55,440/-.
12. The Ld. D.R. submitted that the fact that a new industrial unit has come into being in the period relevant to the assessment year 1989-90 is borne out by the fact that the assessee had made purchases of raw material etc. and incurred other expenditure as reflected in Schedules (11) & (12) of the Profit & Loss Account. The quantitative value of the water treatment chemicals actually produced is at item No. (11) of Schedule (13) to the accounts.
13. The assessee itself states that there was commencement of business at a point of time falling in the previous year relevant to the assessment year 1989-90. In Schedule (13) being notes “forming part of accounts”, at serial No. (6), it has been stated that certain expenses incurred prior to the commencement of the water treatment chemical business has been shown under the accounting head “Capital work-in-progress’, while all other charges after the commencement of water treatment chemical business has been charged to the Profit & Loss Account.
14. The Ld. D.R. has also drawn our attention to item No. (10) of Schedule 13 to the accounts which bears the caption “Licensed and installed capacities and production” and submitted that it can be seen that the assessee itself has mentioned the licensed capacity of all the three different chemicals that the industrial undertaking had the licence for i.e. water treatment chemicals (5000 tonnes), oil field chemicals (4000 tonnes) and industrial additives (2000 tonnes). These capacities are as per the licence dated 12.9.1988 granted to the assessee by the Govt. of India. It is further submitted that the installed capacity of water treatment chemical in the assessment year 1989-90 was 1070 tonnes and the production of this product in the year was 882 tonnes. This installed capacity and production is only of the’ water treatment chemicals plant acquired from IEL Ltd. by the assessee during the year. Thus, it is an admitted fact by the assessee that the installed capacity of 1070 tonnes and production of 882 tonnes in the assessment year 1989-90 for water treatment chemical is part of the licensed capacity of 5000 tonnes of this product as per the Govt. of India licence dated 12.9.1988.
15. Finally, the Ld. D.R. has stated that there is a reference to 3 speciality chemicals in the accounts of industrial undertaking for the assessment year 1989-90. This implies that industrial unit, as it existed in the previous year 1988-89 i.e. the first year of its formation, had the statutory mandate to manufacture all the three chemicals. It also proves that the mere fact that at Konnagar where the industrial unit commenced production of other two items i.e. oil field chemicals and industrial additives, did not make industrial unit as a new industrial unit. The starting of production at Konnagar in the assessment year 1990-91 is only an extension/upgradation of the production of the industrial undertaking which has already commenced in the assessment year 1989-90 and has started production in the assessment year 1989-90 by using the previously used plant of M/s. ICI (India) Ltd.
16. On the other hand, the Ld. A.R. of the assessee Dr. D.Pal, Senior Advocate, argued at length and supported the order of the CIT(Appeals), a copy of which was enclosed. He also referred to the assessment orders in respect of the assessment years 1995-96, 1996-97 & 1997-98, copies of which are enclosed in the Paper Book. The Ld. Counsel has enclosed copy of the order of the I.T.A.T. which cancelled the order Under Section 263 passed by the C.I.T. in respect of the assessment year 1993-94. He has also enclosed the copy of the order of the I.T.A.T. in respect of the appeal filed by the department against consequential order for the assessment year 1993-94. The Ld. Counsel for the assessee has submitted that the assessee’s claim has been allowed consistently for all the years, i.e. assessment years 1995-96, 1996-97 & 1997-98, by the CIT(Appeals). The Ld. Counsel submitted that what the assessee had at Rishra was a water treatment chemical plant acquired from ICI ((India) Ltd. which was dismantled in February, 1990. The excise licence was surrendered. The plant was dismantled and taken to a different site at Konnagar where two more chemicals were produced. He further submitted that the production commenced on 29.1.1990 under a new industrial and excise licence. Thus, according to the Ld. Counsel, the initial year of the industrial undertaking of the appellant company will be the assessment year 1990-91 and not the assessment year 1989-90. The Ld. Counsel for the assessee submitted that the new plant at Konnagar had plant & machinery in excess of Rs. 650 lakhs and, therefore, the value of the old plant & machinery was less than 20% of the total cost of the plant and machinery at Konnagar which made it eligible for deduction Under Section 80I. Thus, as per the Ld. Counsel, for the purpose of deduction Under Section 80I, the initial year in the case of the assessee is the assessment year 1990-91 from the year of setting up of industrial undertaking at Konnagar site. The Ld. Counsel has also filed a written submission which, for the sake of clarity, is reproduced below:-
These appeals relate to assessment years 1995-96, 1996-97 & 1997-98. The discussion can be found in the assessment year 1996-97. Hence the assessment year 1996-97 is taken up for making the written submission. This will also apply to all the other years. The assessee had purchased from ICI India Ltd. a plant which was already installed in Rishra. The said plant was installed by ICI India Ltd. with a capacity of manufacturing water treatment chemicals of 1070 tons. The plant including the business was purchased by the assessee by an agreement dated 23rd December, 1988. The said plant is not a new plant but was already installed by ICI India Ltd. from which the assessee purchased. The plant was purchased at a price of Rs. 220 lakhs and the value of the old plant which was purchased was Rs. 54.55 lakhs. The agreement itself provided that the plant was located in mouza Rishra and Konnagar. Mouza Rishra and Konnagar were adjacent and the total area of the land comprised in the agreement was 5.07 acres. This will also appear from the Director’s Report and the Balance Sheet for the assessment year 1989-90.
The assessee applied for an industrial licence to set up a new plant for the manufacture of Oil Field Chemicals of 4000 tonnes, Water Treatment Chemicals of 5000 tonnes and Industrial Additives of 2000 tonnes i.e. total 11000 tonnes. The said application was made in the year 1986 for an industrial licence under Section 11 of the Industries Development and Regulation Act, 1951. The said licence was granted on 12th September, 1988. The said licence specially provided a condition that the new industrial undertaking shall be completed and commercial production started within the period of two years from the date of issue of this industrial licence. It will appear therefore that the industrial licence could not refer to the old plant which was purchased by the assessee from ICI India Ltd. in 1988. The said industrial licence has been issued under Section 11 of the Industries Development and Regulation Act. Section 11 provides that no person or authority other than the Central Government shall after the commencement of the said Act, establish any new industrial undertaking, except under and in accordance with a licence issued in that behalf by the Central Government. Therefore, when the industrial licence was given it clearly postulates that a new industrial undertaking is to be set up in terms of the said licence. Objection is raised on behalf of the Department that in the licence the setting up of the plant is to be made at Rishra, District – Hooghly. As already pointed out when the licence was given in 1988 as also when the agreement for purchase of the old plant was entered into in 1988 Rishra and Konnagar mouzas were adjacent to each other and the second document viz. the agreement with ICI India Ltd., the land is referred to as within mouza Rishra & Konnagar. In the very same year when the industrial licence was issued the licence referred to setting up of the new plant at Rishra. The entire plot of land covering 5.07 acres of land fall partly within Rishra and partly within Konnagar. The new plant was set up in the land which now fall under mouza Konnagar. It is because of this reason when the factory licence was obtained for setting up of the new factory in the said plot and also when the excise licence was obtained for the commencement of the commercial production, both the licences referred to the new plant set up at Konnagar. This will clearly show that the licence which was issued under the Industries Development and Regulation Act referred to the new industrial undertaking which has been set up at Konnagar. Although the description was made as Rishra because at that time both mouza were referred to in the agreement with ICI Ltd. It is to be noted that the old plant, which was purchased from ICI INDIA LTD, had the capacity of manufacturing water treatment chemicals of 1070 tonnes. The new industrial undertaking for which the industrial licence had been given, had the manufacturing licence of Oil Field Chemicals of 4000 tonnes and Industrial Additives of 2000 tonnes. Therefore, the old unit had no licence for manufacturing two different products viz. Oil Field Chemicals and Industrial Additives. Even the licence for Water Treatment Chemicals has been allowed for 5000 tonnes, which is much higher than what the old unit would manufacture. It also to be noted that the asses see invsted a sum of Rs. 678.04 lakhs of which the plant and machinery was worth Rs. 639.90 lakhs and plant and machinery for scientific research amounted to Rs. 34.57 lakhs. This figure will appear from the depreciation schedule to the assessment order for the assessment year 1990-91 which was the first year when commercial production stared from 9.3.90. The Assessing Officer himself has recorded in the depreciation schedule annexed to the assessment order that the addition of the plant was Rs. 639.90 lakhs. It will also appear from the depreciation schedule for the assessment year 1990-91 that for the old plant which was purchased from ICI India Ltd. depreciation of Rs. 12,46,221/- has been allowed to the said old unit which was purchased from ICI India Ltd. and which was worked up to 28.2.90. When the new industrial undertaking was set up and commercial production started from 9.3.90 the old unit was dismantled and the plant and machinery of the old unit valued at Rs. 54.55 lakhs was transferred to the new industrial undertaking which was set up at Konnagar under the industrial licence and for which also the factory licence and excise licence were obtained.
The assessee never claimed any deduction under Section 80I on the old unit which was installed in the year 1988. The said old unit was dismantled after it worked up to 28.2.90 when the new industrial undertaking was set up and commercial production started from 9.3.90 in the new industrial undertaking. Even according to the Income Tax Officer himself the addition was to the tune of Rs. 639.90 lakhs. The old machinery which was transferred from the old unit purchased from ICI India Ltd. was worth Rs. 54.55 lakhs and therefore it was less than 10% of the total value of the plant and machinery used in the new industrial undertaking. Under Section 80-I(2) of the Income Tax Act, 1961, one of the conditions is that the new industrial undertaking is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation 2 to Section 80-I makes it clear that where in the case of an industrial undertaking any machinery or plant previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed 20% of the total value of the machinery or plant used in the business, then for the purposes of clause (ii) of Section 80-I(2), the condition specified therein shall be deemed to have been complied with. In the present case as the old plant and machinery valued at Rs. 54.55 lakhs has been transferred to the new industrial undertaking where the value of the plant and machinery invested was Rs. 639.90 lakhs the percentage of the plant and machinery transferred is even less than 10% and therefore the condition laid down in Section 80-I(2) (ii) is fully satisfied. This position has been clarified in the order of the CIT(Appeals) for the assessment year 1996-97 where the CIT(A) has categorically stated in para 8 that the cost of old plant and machinery used in the new industrial undertaking is less than 20% of the total cost and therefore the reasons given by the Learned Assessing Officer is not tenable. In view of the said finding of the CIT(A) it is not open to the Department to challenge the said finding as no specific ground has been taken in the grounds of appeal whether the cost of the plant and machinery is less than 20% of the total cost is a question of fact and if any finding of fact arrived at by the CIT(A) is challenged a specific ground is to be taken supported by an affidavit. This has not been done. In any event the correct factual position has been explained in this note and there cannot be any doubt or controversy that the old plant and machinery which was transferred to the new industrial undertaking was less than 10% of the total value of the plant for which a sum of Rs. 639.90 lakhs was invested.
17. We have considered the submissions made from both sides, oral and written. We have also perused carefully the various papers filed in the Paper Book and we have perused the copy of annual report and accounts for the year ending March, 1989. After careful consideration of the entire facts and submissions, we are of the view that the Revenue will succeed. It is an admitted fact that the assessee made an application for grant of licence not merely of water treatment chemicals but also of oil field chemicals as on 10.6.1986, much before the assessment year 1989-90. The licence was granted on 12.9.1988 for manufacturing and sale of all the three chemical products. Therefore it is not correct to say that the assessee has started construction of a new project at Konnagar pursuant to the grant of this licence. When the assessee started work at Konnagar, it was not for starting a new industrial undertaking but to relocate the industrial undertaking at Rishra. It was a kind of shifting the place of industrial undertaking which is very nearby in the same District. An industrial undertaking can manufacture a number of products. As such, an industrial undertaking can choose the timing of commencement of production of one or more related products within the overall limits of licence terms and this is exactly what the assessee has done. It has started water treatment chemical in the first year and subsequently it has added some more products. By merely adding few more products, it cannot be claimed that it is a newly started industrial undertaking. Exactly this is a case of expansion/extension of business. Therefore, we hold that in the case of the appellant, the industrial undertaking came into existence in the assessment year 1989-90 at Rishra which was shifted to Konnagar where some new products were added along with existing product i.e. water treatment chemical. Our view is supported by the facts and figures narrated in the annual reports and accounts for the year ending assessment year 1989-90. The Ld. D.R. has correctly pointed out that in the annual reports at page 10 of the Annexure to the auditor’s report, at serial No. 1, it is clearly stated “The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Since the company is in its first year of operation, the fixed assets have not been physically verified by the management”. Even the report of the Board of Directors clearly states that the Company was incorporated on 16th December, 1987. All approval necessary for installation of the plant with capacity to manufacture 11,000 tonnes of speciality chemicals were received during the year and construction at Rishra site commenced. The company also acquired the water treatment chemical business from IEL Ltd. on 27th September, 1988. Likewise the 3rd Schedule to the Balance Sheet clearly states that the gross block acquired upto 31st March, 1989 was 24,826 ( Rs. ‘000). The plant & machinery itself consists of 7,324 ( Rs. ‘000). Out of this, the old machinery which was purchased, was valued at Rs. 54,55,440/-. So the balance which comes to Rs. 18,69,000/-, was purchased during the accounting year ending March, 1989. Thus, the cost of old plant & machinery is definitely more than 20% of the total cost of the plant & machinery installed and used during the accounting year 1989-90. Item No. (11) of Schedule (13) of the accounts clearly shows the quantitative value of the water treatment chemicals actually produced during the year relevant to the assessment year 1989-90. Thus, from the above facts and figures highlighted by the Ld. D.R. it is clear that the assessee company started its industrial undertaking actually in the year 1989-90. Therefore, the initial year for new industrial undertaking is the assessment year 1989-90 only and since the machinery which was used was old and more than 20% of the total plant & machinery, it clearly violates one of the conditions which is required to be fulfilled to be entitled for deduction Under Section 80I. Accordingly, we hold that the assessee is not entitled for deduction Under Section 80I in any of the three assessment years 1995-96, 1996-97 & 1997-98.
18. We may mention here that the Ld. Counsel has enclosed the copies of the two orders of the I.T.A.T., one canceling the order Under Section 263 passed by the C.I.T. in respect of the assessment year 1993-94 and the other order of the I.T.A.T. dismissing the Revenue’s appeal in respect of the assessment passed consequent to order Under Section 253. In this regard, we may mention that while adjudicating upon the order Under Section 263, the Hon’ble I.T.A.T. has not gone into the merits of the case as it appears from its order in I.T.A. No. 596/Cal/98, the relevant portion of which is reproduced below:-
4. We have heard the rival contentions, perused the orders of the authorities below and duly deliberated upon the factual matrix of the case as also the applicable legal position. The CIT at para 5 of his order states that “there appears to be some confusion regarding the value of transferred plant and machinery used in the business and whether it was above 20% of the total value of the plant & machinery used in the initial year of business “. The above observation of the CIT, by itself, admits the possibility of two opinions one of which has been taken by the A.O.
5. The law is fairly well-settled by the jurisdictional High Court that revisionary powers under Section 263 can only be invoked when the AO has taken an impossible view. Accordingly, when the AO has taken a view, which is a possible even though, strictly speaking, ‘incorrect’ view, the CIT has no power to invoke his jurisdiction Under Section 263 of the Act.
So, the order of the I.T.A.T. has got no bearing on the issue which is before us. The order of the I.T.A.T. in I.T.A. No. 49/Cal/2001 has also got no bearing on the issue before us, and the relevant portion of this order is reproduced below:-
3. We find that a coordinate Bench of the Tribunal vide order dated 10-12-2002 in ITA No. 596/Cal/98 has already vacated the order of the CIT passed under Section 263 dated 30-3-98 leading to the impugned assessment order before us. In this view of the matter and having noted the fact that the revisional order of the CIT, consequent upon which the impugned assessment order was passed, has been vacated by the Tribunal, we see no need to interfere in the matter and decline to go to the merits of the case. Since the order of the CIT in question has been vacated, the AO’s order passed pursuant to the above revisional order of the CIT becomes devoid of any sustainable basis. We, therefore, support the conclusion arrived at by the CIT(A) and decline to interfere in the matter.
19. As a result, all the three appeals by the Revenue are allowed.