Ambuja Cements Limited Vs CIT (ITAT Mumbai)

Section 263(1) of the Act obligates the Commissioner to give the assessee an opportunity of being heard before passing of his order. No doubt the Commissioner is not disentitled to consider a point which is not stated in the notice so issued. However, the obligation to given an opportunity to the assessee of being heard on the point on the basis of which he finds it expedient to treat the assessment order erroneous in so far as it is prejudicial to the interests of the Revenue, is definitely cast on the Commissioner, as opined by the Hon’ble Supreme Court in the case of Amitabh Bachchan (supra). Considering the aforesaid, in our view, in the present case the basis on which the Commissioner has found the assessment order as erroneous in so far as it is prejudicial to the interests of the Revenue, namely, absence of any scientific basis for fixing the percentage to make the provision for slow moving inventories of spares, does not appear to have been put to the assessee, as is emerging from the material before us. Thus, on this point itself, we find the impugned order of the Commissioner to be untenable in the eyes of law.

FULL TEXT OF THE ITAT JUDGMENT

This appeal by the assessee is directed against the order passed by the CIT(LTU) [in short the Commissioner], Mumbai, dated 29.03.2016, holding the assessment order passed by the Assessing Officer u/s. 143(3) of the Act, dated 28.02.2014, as erroneous in so far as it was prejudicial to the interests of the Revenue u/s. 263 of the Income tax Act, 1961(hereinafter referred to as “the Act”)

2. The appellant before us is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of cement manufacturing, etc. For the assessment year under consideration the return of income filed by it was subject to scrutiny assessment u/s. 143(3) of the Act, dated 28.02.2014, wherein the total income was assessed at ~ 9,94,52,94,305/- under the normal provisions of the Act and the book profit u/s. 115JB of the Act was determined at ~ 19,13,21,89,572/-. Subsequently, the Commissioner invoked his revisionary jurisdiction and issued a notice u/s. 263 of the Act, dated 26.02.2016, proposing that the assessment order, dated 28.02.20 14 (supra), was erroneous in so far as it was prejudicial to the interests of the Revenue, in as much as incorrect allowance of Provision for slow moving inventories of spares amounting to ~ 52.80 cores had led to under assessment of income. In this context, the relevant discussion by the Commissioner shows that his examination of record showed that the assessee had debited in the Profit & loss Account a sum of ~ 52.80 crores as a ‘Provision for slow moving inventory’ and read with note 18 of the Notes forming part of the Accounts, it reflected that such a provision was made for slow moving inventories based on the age of the inventory and it was consequent to a change in policy of recognizing provisions for slow moving inventories of spares. The Commissioner further noticed that this provision was created for the first time and was meant for temporary diminution in the value of spares meant for plant and machinery and, hence, related to capital in nature. Thus, according to the Commissioner, it was an incorrect allowance made in the assessment order dated 28.02.2014 (supra).

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