Txa/27/2015 Of Sesa Sterlite Limited, Erstwhile Sesa Goa Ltd v. Commissioner Of Income Tax

Santosh 1 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEALS NO.27/2015 AND 28/2015 Sesa Starlite Limited, Erstwhile Sesa Goa Ltd. with itsoffice at Sesa Ghor, 20, EDCComplex, Patto, Panaji, Goa ….. Appellant. The Commissioner of Income TaxHaving office at Aayakar Bhavan, Panaji, Goa. ….. Respondent. Mr. P. Pardiwalla, Senior Advocate with Mr. Pranav Kakodkar,Advocate for the Appellant. Ms. Susan Linhares, Standing Counsel for the Respondents. Coram : M.S. Sonak & Dama Seshadri Naidu, JJ. Reserved on : 26[th] October, 2020 Pronounced on : 2[nd] November, 2020. JUDGMENT : - (Per M.S. Sonak, J.) Heard Mr. Pardiwalla, learned Senior Advocate along withMr. Pranav Kakodkar for the Appellant-Assessee in both the Appealsand Ms. Susan Linhares, learned Standing Counsel for the IncomeTax Department for the Respondent in both the Appeals. 2. The learned Counsel for the parties state that both these 2 Appeals can be disposed of by a common Judgment and Order,since the issue involved in both these Appeals is the same, except thatTax Appeal No.28/2015 relates to the Assessment Year 2006-07 andTax Appeal No.27/2015 relates to the Assessment Year 2007-08. Thelearned Counsel for the parties state that Tax Appeal No.28/2015 betreated as the lead matter. 3.Tax Appeal No.28/2015 was admitted on 30[th] April, 2015,on the following substantial question of law: Whether, on the facts and circumstances of the case, thelearned Commissioner of Income Tax (CIT) could haveconsidered that the assessment order passed by the A.O.under section 143(3) of the Act, for the assessment year2006-2007, on the issue of claim for deduction allowed tothe Appellant under Section 10-B of the Act, was erroneousin so far as it was prejudicial to the interest of the revenue,within the meaning of section 263 of the Act ? 4.The Appellant-Assessee filed its original return of income on30/11/2006 under Section 139 of the Income Tax Act, 1961 (IT Act)for the Assessment Year 2006-07, declaring income ofRs.786,78,62,697/- and it is pertinent to note that in filing thisoriginal return, the Assessee did not claim any deduction underSection 10B of the IT Act. 5.Thereafter, the Assessee filed revised return of income on29/3/2008 under Section 139(5) of the IT Act for the same 3 Assessment Year. This time, the Assessee claimed deduction underSection 10B of the IT Act. 6.The Assessing Officer (AO), vide communications dated16/9/2009 and 2/12/2009, called for detailed information from theAssessee, inter alia, relating to the claim for deduction under Section10B of the IT Act in the revised returns. By responses dated28/10/2009 and 7/12/2009, the Assessee responded to the aforesaidcommunications. 7.The AO vide Assessment Order dated 23/12/2009,completed the assessment under Section 143(3) of the IT Act.Although there is no discussion in the assessment order about theclaim for deduction under Section 10B of the IT Act, the AOaccepted the Assessee's claim for deduction under Section 10B of theIT Act in respect of the Assessee's plant at Codli mines. 8. On 14/2/2012, the Commissioner of Income Tax (CIT)issued notice to the Assessee invoking the provisions of Section 263of the IT Act and requiring the Assessee to show cause as to why theAO's order dated 23/12/2009 be not revised on the grounds referredto in the notice. 9.The Assessee filed a response dated 1/3/2012, pointing out 4 that there were errors in the assessment order date 23/12/2009. Thiswas followed by yet another response dated 15/3/2012, in the contextof various issues raised in the CIT's notice dated 14/2/2012,purporting to invoke revision powers under Section 263 of the ITAct. 10.CIT, on 23/3/2012, issued yet another notice under Section263 of the IT Act, mainly relating to the issue of additionaldepreciation. The Assessee responded to this notice on 29/3/2012. 8. On 14/2/2012, the Commissioner of Income Tax (CIT)issued notice to the Assessee invoking the provisions of Section 263of the IT Act and requiring the Assessee to show cause as to why theAO's order dated 23/12/2009 be not revised on the grounds referredto in the notice. 9.The Assessee filed a response dated 1/3/2012, pointing out 4 that there were errors in the assessment order date 23/12/2009. Thiswas followed by yet another response dated 15/3/2012, in the contextof various issues raised in the CIT's notice dated 14/2/2012,purporting to invoke revision powers under Section 263 of the ITAct. 10.CIT, on 23/3/2012, issued yet another notice under Section263 of the IT Act, mainly relating to the issue of additionaldepreciation. The Assessee responded to this notice on 29/3/2012. 11.The CIT, vide order dated 29/3/2012 exercising revisionpowers under Section 263 of the IT Act, set aside the AO's orderdated 23/12/2009 and directed the AO to undertake a freshassessment for the Assessment Year 2006-07. 12.The Assessee, on 17/5/2012, appealed against the CIT'sOrder dated 29/3/2012 to the Income Tax Appellate Tribunal(ITAT). This appeal was dismissed by the ITAT vide impugned orderdated 18/7/2014. Hence the present Appeal. 13.Mr. Pardiwalla, the learned Senior Advocate for theAppellant, at the outset, submitted that even when the Assessee'sAppeal was pending before the CIT in this matter, the ITAT, videorder dated 8/3/2013, upheld the Assessee's claim for deduction 5 under Section 10B of the IT Act for the Assessment Year 2009-10.Similarly, the ITAT, vide yet another order dated 17/5/2013, allowedthe Assessee's claim for deduction under Section 10B for AssessmentYear 2008-09. He submits that the impugned order dated 18/7/2014,therefore, conflicts with the ITAT's earlier orders dated 8/3/2013 and17/5/2013 on the same issue, though in respect of differentassessment years. He, therefore, submits that the ITAT's impugnedorder dated 18/7/2014 warrants interference. 14.Mr. Pardiwalla further submits that in this case, the twinrequirements for exercising powers under Section 263 of the IT Actwere not existent. Therefore, the CIT exceeded the jurisdiction ininvoking the provisions of Section 263 of the IT Act. He submitsthat there was absolutely nothing erroneous in the AO's order dated23/12/2009, in which the AO after due application of mind, hadallowed the Assessee's claim for deduction under Section 10B of theIT Act. He submits that unless an order is both, erroneous andprejudicial to the interests of Revenue, the CIT lacked jurisdiction toexercise the revision powers. He submits that on this ground as well,the CIT's order dated 23/12/2009 and the ITAT's impugned orderdated 18/7/2014 confirming the same, warrant interference. 15.Mr. Pardiwalla submits that the AO, by his communicationsdated 16/9/2009 and 2/12/2009 raised specific queries on the issue of 6 15.Mr. Pardiwalla submits that the AO, by his communicationsdated 16/9/2009 and 2/12/2009 raised specific queries on the issue of 6 claim for deduction under Section 10B of the IT Act. He points outthat the Assessee, vide responses dated 28/10/2009 and 7/12/2009,furnished all the necessary details in support of the claim fordeduction under Section 10B of the IT Act. Thereafter, the AO,after due application of mind to such details, allowed its claim underSection 10B of the IT Act. Thus, this was a case where the AO, afterdue consideration of the material on record, and after due applicationof mind, concluded that the Assessee was entitled to deduction underSection 10B of the IT Act. He submits that this was a correct view or,in any case, a plausible view taken by the AO. The CIT, in such asituation, lacked jurisdiction to style the AO's order dated23/12/2009 as erroneous and interfere with the same by exercisingrevision jurisdiction. He submits that the settled law is that aplausible view of the AO is not interfered with by the CIT in exerciseof powers under Section 263 merely because the Commissioner mayentertain a different view in the matter. He relies on the followingdecisions in support of his contention: (a) Commissioner of Income Tax vs. Max India Ltd.[1;] . (b) CIV vs. Design Automation Engineers (Bom.) (P) Ltd[2] 16.Mr. Pardiwalla contends that even assuming that this is acase of inadequate consideration on the issue of claim under Section10B of the IT Act, the Commissioner still has no jurisdiction under 1295 ITR 282 (SC) 2323 ITR 623 (Bom). 7 Section 263 of the IT Act to interfere with such order. He relies onthe following decisions in support of this contention: (i) CIT vs. Vodafone Essar South Ltd.[3]; (ii) CIT vs. Gabriel India Ltd.[4] (iii) Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax[5] 17.Mr. Pardiwalla contends that the notice dated 14/2/2012purporting to invoke the revision powers under Section 263 of the ITAct was based upon SFIO Report. This itself indicates non-application of mind on the part of the CIT. In any case, the SFIOreport was eventually withdrawn and, therefore, the very basis forissuance of notice dated 14/2/2012 did not survive. He, therefore,submits that the entire proceedings under Section 263 of the IT Actare without jurisdiction and deserve to be set aside. 18. Mr. Pardiwalla submits that even, otherwise on merits, therewas ample material available on record from which it was evident thatthe Assessee fulfilled all the prescribed requirements for claim underSection 10B of the IT Act. On the basis of fulfillment of suchrequirements, the Assessee had in fact been granted such deductionfor the subsequent assessment years. Therefore, even on merits, theimpugned orders made by the CIT and the ITAT, warrantinterference. 32012 Taxman 184 (Delhi) 42003 ITR 108 (Bom). 5243 ITR 83 (SC) 8 19.Ms. Linhares, the learned Standing Counsel defends theimpugned orders based on the reasoning reflected therein. She pointsout that there is absolutely no discussion in the AO's order dated23/12/2009 for allowing the Assessee's claim for deduction underSection 10B, which claim was belatedly made by the Assessee thoughfiled by revised return. She points out that at least during the relevantassessment year, there was really no material on record to hold thatthe Assessee fulfilled the prerequisites for claim of deduction underSection 10B of the IT Act. In any case, she points out that there wasabsolutely no consideration by the AO on this issue and this is not acase of some sort of inadequate consideration as contended on behalfof the Assessee. She points out that even the decisions relied upon bythe Assessee make it clear that the revision powers can be exercisedwhere the AO fails to even consider the relevant and vital issues thatarise in the matter. For these reasons, she submits that the presentAppeals may be dismissed. 20.Ms. Linhares also pointed out that this Court, vide itsJudgment and Order dated 12[th] March, 2020 in Tax AppealNo.24/2011 remanded the matter to the Commissioner of IncomeTax to reconsider the issue of deduction under Section 10B of the ITAct in respect of this very Assessee for the Assessment Year 2005-06.She points out that the claim for deduction has to be considered inrespect of each assessment year, depending upon whether the Assessee 9 fulfills the prerequisites for the relevant assessment year or not. 21.Ms. Linhares also relies on the decision of the Hon'bleSupreme Court in Malabar Industrial Co. Ltd. (supra) to submitthat where the AO accepts any entry in the statement of account ofthe Assessee without any supporting materials and without makingany inquiry, such exercise of jurisdiction by the Commissioner underSection 263(1) is justified. 22.Ms. Linhares also relied upon Rampyari Devi Saraogi vs.CIT [6] to submit that the CIT in this case had merely directed the AOto consider the issue of deduction under Section 10B of the IT Actafresh and, therefore, the Assessee was not prejudiced in any manner.She points out that in similar circumstances, the High Court, as wellas the Supreme Court, had refused to interfere with the exercise ofrevision jurisdiction by the Commissioner. 23.For all the aforesaid reasons, Ms. Linhares submits thatthese Appeals may be dismissed. 24.Rival contentions now fall for our determination. 25.In this matter, records reveal that the Assessee in its originalreturn of income did not claim any deductions under Section 10B ofthe IT Act. However, in the revised returns, filed within the 10 prescribed period of limitation, the claim for deduction underSection 10B of the IT Act was made. 26.The AO, by his communication dated 16/9/2009 requiredthe Assessee to attend his office on 24/9/2009 and to produce orcause to be produced at the said time any documents, accounts andany other evidence on which the Assessee may rely upon in supportof the return filed. It is pertinent to note that at least in thiscommunication dated 16/9/2009, there were no specific queriesraised in respect of any deduction claimed either in the originalreturn or in the revised return. 27.The Assessee submitted its response on 28/10/2009. Atparagraph 11 of this response, the Assessee referred to Annexure 12for justification for Section 10B deduction. In Annexure 12, theAssessee did provide some information in support of its claim fordeduction under section 10B of the IT Act. 28.The AO addressed yet another communication dated2/12/2009 to the Assessee. This time raising several queries inrelation to the Assessee's claim for deduction under Section 10B ofthe IT Act. 29.Again the Assessee, vide response dated 7/12/2009,submitted information in relation to the deduction claimed underSection 10B of the IT Act. 11 30.Based upon the information supplied by the Assessee in itsresponses dated 28/10/2009 and 7/12/2009, Mr. Pardiwallacontended that not only the AO was conscious of the ingredients ofSection 10B of the IT Act, but further, took pains to obtain from theAssessee details on the basis of which, the claim of the Assessee fordeduction under Section 10B could be allowed. He, therefore,contended that this is a case where the AO has allowed the Assessee'sclaim for deduction under Section 10B of the IT Act and, therefore,there was no question of exercise of revision jurisdiction by the CITin such a matter. 29.Again the Assessee, vide response dated 7/12/2009,submitted information in relation to the deduction claimed underSection 10B of the IT Act. 11 30.Based upon the information supplied by the Assessee in itsresponses dated 28/10/2009 and 7/12/2009, Mr. Pardiwallacontended that not only the AO was conscious of the ingredients ofSection 10B of the IT Act, but further, took pains to obtain from theAssessee details on the basis of which, the claim of the Assessee fordeduction under Section 10B could be allowed. He, therefore,contended that this is a case where the AO has allowed the Assessee'sclaim for deduction under Section 10B of the IT Act and, therefore,there was no question of exercise of revision jurisdiction by the CITin such a matter. 31. The material on record does indicate that the AO, in thiscase, sought for information from the Assessee with regard to itsclaim for deduction under Section 10B of the IT Act vide itscommunication dated 2/12/2009. However, according to us, this byitself can never be regarded as sufficient. What is further necessary isthat the AO actually applies his mind to the information that may besupplied by the Assessee and considers such information andthereafter forms an opinion whether the Assessee is actually entitledto deduction under Section 10B of the IT Act for the relevantassessment year. There is a distinction between merely calling forinformation on a particular issue and considering such informationwith due application of mind if and when such information isactually provided by the Assessee. 12 32.Now, if the order dated 23/12/2009 made by the AO isperused, we find merit in the contention of Ms. Linhares that therewas no consideration whatsoever of the information provided by theAssessee in the context of its claim for deduction under Section 10Bof the IT Act. The assessment order dated 23/12/2009 indicates thatthe AO has not even considered, much less, applied his mind to suchinformation before allowing the deduction under Section 10B of theIT Act. On perusal of the assessment order dated 23/12/2009, animpression is created that the AO proceeded on the basis that suchdeduction was allowable without considering whether the same wasactually allowable at all in the context of the various prerequisitesprovided in Section 10B of the IT Act. 33.Analysis of the assessment order dated 23/12/2009 indicatesthat in its first three paragraphs, there is a reference to the nature ofbusiness undertaken by the Assessee and reference of the case of theAssessee under Section 92CA of the IT Act to the Transfer PricingOfficer for determination of arm’s length price in respect ofinternational transactions reported for the relevant assessment year.Then paragraph 4, along with its sub-paragraphs 4.1 to 4.7 deal withdisallowance under Section 40(a)(ia) in the context of commissionexceeding Rs.18.00 crore paid by the Assessee during the relevantassessment year, even though the TDS on the commission paid wasnegligible. Paragraph 5 deals with the expenditure incurred towards 13 research and development. Paragraph 6 deals with the issue ofdepreciation on UPS. Finally, paragraph 7 deals with computation onthe basis of the opinion in paragraphs 4,5 and 6. Thus, on the issueof deduction under Section 10B of the IT Act, there is absolutely noconsideration and yet, the AO has allowed such deduction. This is,according to us, is a case of 'no consideration' as opposed to mere'inadequate consideration'. This is, according to us, a clear case ofnon-application of mind to the material on record, without evengoing into the issue whether the material supplied by the Assessee wasadequate or inadequate to determine its claim for deduction underSection 10B of the IT Act. In such a situation, the exercise of revisionjurisdiction by the CIT under Section 263 of the IT Act, cannot besaid to be prohibited even based upon the decisions relied upon byMr. Pardiwalla, the learned Counsel for the Assessee in this matter. 34.In Vodafone Essar South Ltd. (supra), Delhi High Courthas held that if there is some inquiry by the AO in the originalproceedings, even if inadequate that cannot clothe the Commissionerwith jurisdiction under Section 263 of the IT Act merely because hehas formed another opinion in the matter. This decision is basicallyan authority for the proposition that revision powers under section263 of the IT Act cannot be exercised merely because theCommissioner may have formed another opinion in the matter. Thisdecision is also an authority for the proposition that revisionjurisdiction is not to be exercised merely because the Commissioner is 14 of the opinion that the inquiries made by the AO were inadequate. 35. In the present case, however, whatever status of the queries,it is apparent that the AO did not even bother to look into orconsider the information provided by the Assessee in the context ofthe claim for deduction under Section 10 of the IT Act. Therefore,this is not a case of some inadequate inquiries. This is a case of noinquiries. This is a case of non-consideration and consequently, non-application of mind to the material on record 36.In Malabar Industrial Co. Ltd. (supra), the Hon'bleSupreme Court has held that the revision jurisdiction under Section263 of the IT Act cannot be invoked to correct each and every type ofmistake or error committed by the AO. It is only when an order iserroneous that the section will be attracted. An incorrect assumptionof facts or an incorrect application of law will satisfy the requirementof the order being erroneous. In the same category fall orders passedwithout applying the principles of natural justice or withoutapplication of mind. Further, where the AO adopts one of the coursespermissible in law and it has resulted in loss of revenue, or where twoviews are possible and the AO has taken one view with which theCommissioner does not agree, it cannot be treated as an erroneousorder prejudicial to the interests of the revenue, unless the view takenby the AO is unsustainable in law. 15 37. Further, the Hon'ble Supreme Court noted that the AO inthe case before it, passed the order of nil assessment withoutapplication of mind. The Court also recorded a finding that the AOfailed to apply his mind to the case in all perspective and the orderpassed by him was erroneous. The AO in the said case, accepted anentry in the statement of the account filed by the appellant in theabsence of any supporting material and without making any inquiry.The Hon'ble Apex Court then held that on these facts, theconclusion that the order of the AO was erroneous was irresistible.Therefore, the High Court had rightly upheld that the exercise of thejurisdiction by the Commissioner under Section 263(1) of the ITAct. 38. This decision, according to us, assists the case of theRevenue, since, in the present case as well, there was no inquiry bythe AO on the issue of fulfillment of requirements under Section 10Bof the IT Act. The mere seeking of information but thereafter, noteven looking into the same is not the same thing as inquiring into thematter. Further, the AO has to consider the information so furnishedand after applying the mind, arrive at a decision one way or the otheron the issue before him, 39.In Gabriel India Ltd. (supra), this Court has held that thedecision of the AO cannot be regarded as erroneous simply becausethe AO did not make an elaborate discussion in the order. In our 16 case, as noted earlier, there is no discussion whatsoever, much less anyinadequate discussion. Moreover, in Gabriel India Ltd. (supra), theCommissioner after initiating proceedings for revision, could nothimself say that the allowance of the claim of the Assessee waserroneous and that the expenditure was not revenue expenditure, butan expenditure of capital nature. It is in these circumstances that theexercise of revision jurisdiction was interfered with by this Court. 39.In Gabriel India Ltd. (supra), this Court has held that thedecision of the AO cannot be regarded as erroneous simply becausethe AO did not make an elaborate discussion in the order. In our 16 case, as noted earlier, there is no discussion whatsoever, much less anyinadequate discussion. Moreover, in Gabriel India Ltd. (supra), theCommissioner after initiating proceedings for revision, could nothimself say that the allowance of the claim of the Assessee waserroneous and that the expenditure was not revenue expenditure, butan expenditure of capital nature. It is in these circumstances that theexercise of revision jurisdiction was interfered with by this Court. 40.In Commissioner of Income Tax vs.Nirav Modi[7], this Courtnoted that the AO had not only made detailed inquiries, butrecorded a finding that the Assessee had duly proved the identity,source and creditworthiness of donors. In these circumstances, theCourt held that if two views are possible and the AO has taken one ofthe possible views, no occasion to exercise powers of revision canarise. In this case, this Court has also observed that power of revisioncan be exercised only where there was no inquiry as required underlaw and not where inquiry was held and the same was inadequate. 41.In NTPC Ltd. vs. CIT.[8] it was held that where the viewtaken by the AO is endorsed by law, there was no question of exerciseof revision jurisdiction by the Commissioner. The Court reiteratedthe legal position that as long as the AO's opinion is a plausible one,the exercise of revision powers would be unwarranted. 7[2016] 71 taxmann.com 272 (Bom). 8(2014) 45 Taxman.com 527 (Delhi) 17 42. The principles in Max India Ltd. (supra) and DesignAutomation Engineers (Supra) are of no assistance to the Assesseebecause this is not a case of interference with a plausible view of theAO based on some different opinion held by the Commissioner. 43. In K.A. Ramaswamy Chettiar and anr. vs. CIT, [9] it was heldthat when an officer is expected to make inquiry of a particular itemof income and if he does not make any inquiry as expected, thatwould be a ground to interfere with the order passed by the officer,since such an order passed by the Officer is erroneous and prejudicialto the interests of the Revenue. 44. In several decisions, it has been held that it is incumbent onthe AO to investigate the facts stated in the return when thecircumstance would make such an inquiry prudent and when theword 'erroneous' in Section 263 includes failure to make an inquiry,the order becomes erroneous when such an inquiry had been madeand not because there is anything wrong with the order if all the factsstated therein are assumed to be correct. Duggal and Co. vs.Commissioner of Income Tax[10]; CIT vs. Pushpa Devi[11] and CIT vs. .Pushpa Devi[12] 45.In a case of this nature, it is not sufficient that the AO 9220 ITR 657 (Mad) 10 220 ITR 456 (Delhi) 11 164 ITR 639 (Pat.) 12 173 ITR 445 (Pat.) 18 merely raises queries or poses questions. If such queries are answered,it is the duty of the AO to consider such answers and based thereon,to take further steps to arrive at a reasoned decision. Perusal of theimpugned order does not indicate that the AO has even adverted to,much less, considered the responses filed by the Assessee. There is noteven finding in the assessment order that the Assessee was entitled todeduction under Section 10B of the IT Act on account of the answersfurnished by the Assessee to the queries raised by the AO. In respectof such order, the CIT was entitled to exercise the revisionjurisdiction since the order is both, erroneous as well as prejudicial tothe interests of the Revenue. 10 220 ITR 456 (Delhi) 11 164 ITR 639 (Pat.) 12 173 ITR 445 (Pat.) 18 merely raises queries or poses questions. If such queries are answered,it is the duty of the AO to consider such answers and based thereon,to take further steps to arrive at a reasoned decision. Perusal of theimpugned order does not indicate that the AO has even adverted to,much less, considered the responses filed by the Assessee. There is noteven finding in the assessment order that the Assessee was entitled todeduction under Section 10B of the IT Act on account of the answersfurnished by the Assessee to the queries raised by the AO. In respectof such order, the CIT was entitled to exercise the revisionjurisdiction since the order is both, erroneous as well as prejudicial tothe interests of the Revenue. 46. Ms. Linhares has quite correctly relied upon Rampyari DeviSaraogi (supra), in which the Hon'ble Supreme Court has held thatthe Commissioner can regard the AO's order as erroneous on theground, that in the circumstances of the case, the AO should havemade further inquiries before accepting the statement made by theAssessee in his return. Besides, the Hon'ble Supreme Court, in thefacts of the said case, held that the Assessee had not suffered in anyway from the failure of the Commissioner to indicate results ofinquiries since, the Assessee would have full opportunity of showingthe AO whether he has jurisdiction or not, and whether the incomeassessed in the assessment orders which were originally passed wascorrect or not. 19 47.The circumstance that for certain subsequent assessmentyears the claim of the Assessee for deduction under Section 10B ofthe IT Act was allowed by the ITAT is not strictly speaking relevantto determining whether revision jurisdiction was correctly invoked.Firstly, the view taken by the ITAT has till date, not attained thefinality. Secondly, the view was in the context of the subsequentassessment years. It is possible that for a given assessment year theAssessee does not fulfill the prerequisites for claiming the deductionunder Section 10B of the IT Act, but for the subsequent years suchprerequisites are duly fulfilled. For the assessment year with which weare concerned, the AO, without considering the material on recordand without application of mind to the responses furnished by theAssessee, proceeded on the basis that the Assessee was entitled to thededuction under Section 10B of the IT Act. In these circumstances,it cannot be said that the CIT exceeded the jurisdiction in exercisingpowers under Section 263 of the IT Act. 48. From the material on record, it is not possible to say that theCIT, in this case, acted under dictation from any extraneousauthority. It is true that the CIT, in this case, in invoking revisionjurisdiction, made reference to the SFIO report. However, that doesnot mean that the CIT acted under dictation. Therefore, anysubsequent and allegedly changed SFIO report would not dent theexercise of jurisdiction by the CIT under Section 263 of the IT Act. 20 49.Mr. Pardiwalla did attempt to urge that the Assessee wasindeed involved in manufacture and, therefore, was entitled todeduction under Section 10B of the IT Act. According to us, it wasfor the AO to examine the matter by due application of mind and,thereafter, decide afresh whether the Assessee was indeed entitled todeduction under Section 10B of the IT Act. The decision of the AOto allow such deduction to the Assessee without making any inquirieswhatsoever or rather without addressing the issue in his order,rendered his order quite erroneous and prejudicial to the interests ofthe Revenue. At this stage, therefore, it will not be appropriate for usto examine the issue as to whether the Assessee indeed fulfilled therequirements of Section 10B of the IT Act during the relevantassessment year. 50.Ms. Linhares pointed out that in pursuance of the ordersmade by the CIT and the ITAT, the AO has made a fresh assessmentorder. Mr. Pardiwalla, on instructions, states that said assessmentorder has been appealed and the appeal is pending. Be that as it may,it is for the Appellate Authority to go into the issue of eligibility ofthe Assessee for deduction under Section 10B of the IT Act duringthe relevant assessment year. Therefore, it will not be appropriate forus, at this stage and in these proceedings to go into such issues, nowthat we have held that there was no error in exercise of revisionjurisdiction by the CIT for the relevant assessment year. 21 51.The substantial question of law is, therefore, required to beanswered against the Assessee and in favour of the Revenue. As aconsequence, both these Appeals are liable to be dismissed and arehereby dismissed. There shall be no order as to costs. Dama Seshadri Naidu, J. M.S. Sonak, J.