Commissioner of Income Tax vs New Delhi Television Ltd.

Sanjiv Khanna, J.—By order dt. 23rd Nov., 2011, two substantial questions of law were admitted for hearing in this appeal, which pertain to asst. yr. 2002-03:

(1) Whether the Tribunal was right in setting aside the order dt. 29th March, 2007 passed by the CIT under s. 263 of the IT Act, 1961?

(2) Whether the AO during the course of the original assessment proceedings had examined and considered that the assessee New Delhi Television Ltd. was owner of the copyright or the software in form of television programme which were sent/transmitted to Hong Kong?

Return for the said year was made subject-matter of scrutiny assessment under s. 143(3) of the IT Act. 1961 (''Act'' for short) vide assessment order dt. 31st Jan., 2005. Returned income of Rs. 10,13,38,953 was substantially accepted except for disallowance of interest of Rs. 1,83,503. The respondent had claimed deduction under s. 80HHF of Rs. 14,73,12,763 which was specifically mentioned and allowed in the assessment order.

The CIT issued show-cause notice under s. 263 of the Act dt. 19th March, 2007 observing:

On perusal of assessment record of asst. yr. 2002-03, it is seen that order under s. 143(3) was finalized on 31st Jan., 2005 allowing deduction claimed under s. 80HHF of Rs. 14,73,12,763. Essential conditions for allowing deduction under s. 80HHF include export or transfer of any film software, television software, music software, telephone news software including telecast rights. There is nothing on the record to suggest that eligible items were actually exported/transferred outside the India at the relevant time. It was necessary on the part of AO to examine/verify that eligible items have actually been exported outside the country. This has not been done by AO.

From the agreement between the NDTV and M/s. Star TV it is seen that there was no mention of specific item to be exported. It merely stipulates that NDTV Ltd. will produce programmes/footage/tapes to be exported to the Star TV. It is also seen the worldwide copyrights of all the material produced by the NDTV Ltd. shall remain with M/s. NDTV Ltd. only. These aspects of whether the items produced and claimed to have been exported constituted eligible item in terms of s. 80HHF of IT Act and the admissibility of the deduction under s. 80HHF in view of copyright and ownership being continued with M/s. NDTV were not examined by the AO.

Above mentioned failures on the part of AO have resulted in an assessment order which is erroneous in so far as prejudicial to the interest of Revenue.

(Emphasis, italicised in print, supplied)

The respondent objected and contested the show-cause notice. Eligibility and justification of the claim under s. 80HHF was expressly examined by the AO, who had sought and was furnished a detailed reply. Documents were filed and oral submissions were addressed and on due consideration, the claim was allowed by the AO. The aforesaid submissions were recorded in the order dt. 29th March, 2007, passed by the CIT, in the following words:

It was contended that allowability/justification of claim under s. 80HHF was specifically examined by the AO who duly considered the detailed replies, oral submission and the documents filed during the assessment proceedings. As regards, items exported it was stated that NDTV has produced and exported television software related to news and current affairs to Star TV as per agreement between assessee company and Star TV, Hang Kong through INTEL SAT Satellite from its facility at New Delhi. Satellite space and uplinking facility have been contracted from VSNL on NDTV. Transmission from NDTV studio to Star TV Hong Kong was made on point to point basis without any physical or electronic interference. It was claimed that before the AO assessee furnished large number of documents like export invoices to Star TV, copy of bank certificate of export and realization, copy of foreign inward remittance issued by the bank. During the course of proceedings under s. 263 assessee company further furnished the documents like copy of bill raised by VSNL, copy of certificate from VSNL stating that satellite space segment was leased to NDTV for uplinking news signal from India to be down linked at Hong Kong and a one copy of software export declaration (Softex) from certified by official of Software Technology Park of India (STPI) to show the item exported.

The CIT thereafter recorded and has given following findings:

I have considered the facts of this case, submission of the assessee''s counsel and the evidences furnished before the AO as well as before the undersigned in support of the claim that news items were actually exported through VSNL to Star TV, Hong Kong. It is seen that evidences filed during the course of assessment proceeding merely proved that foreign exchange was received from Star TV, Hong Kong against the invoices of export. These did not clearly establish the actual export of eligible item for the purposes of s. 80HHF. The AO accepted the claim of the assessee without any enquiry/verification. The evidences furnished during the course of this proceeding like certificate from VSNL and Softex in respect of one invoice were never furnished before the AO. In respect of other Invoices no such evidences were furnished before me as well as on the ground of paucity of time. As regards, the issue of admissibility of deduction under s. 80HHF in view of worldwide copyrights continued to remain with NDTV, it was contended there is no mention in s. 80HHF explicitly or implicitly that in such cases deduction would not be available. It was submitted that section envisages deduction for export/transfer of limited rights such as telecast rights. In support of the claim decision of Mumbai Bench of Tribunal in case of (2006) 102 ITD 426 was also filed in which it was held that the s. 80HHF applies to an assessee who is engaged in the business of export or transfer by any means out of India of any film software, television software, music software, television news software including telecasting rights. As a corollary to the facts that the scope of section covers not only the software but also the software rights, the expression television software includes television rights as well. In this connection, it is pertinent to note that facts of that case were different and decision of Mumbai Tribunal in the above-referred case has not been accepted by the Department.

As discussed above, evidences to prove actual export of eligible item and eligibility of deduction under s. 80HHF in case of export of limited rights were not examined. In the case of Gee Vee Enterprise Vs. Additional Commissioner of Income Tax, , the jurisdictional High Court has categorically held that failure of the AO to conduct the required enquiry and accepting the statement of the assessee without due verification renders the order erroneous in as much as prejudicial to the interest of Revenue.

In a more recent judgment rendered by the Allahabad High Court in the case of Jagdish Kumar Gulati Vs. Commissioner of Income Tax, , the Hon''ble Court considering various judicial pronouncements passed earlier viz. Duggal and Co. Vs. Commissioner of Income Tax, , K.A. Ramaswamy Chettiar and Another Vs. Commissioner of Income Tax, etc. held that absence of proper enquiry in a matter renders an order erroneous as well as prejudicial to the interest of the Revenue. In view of above, assessment order is held to be erroneous insofar as prejudicial to the interest of Revenue.

Aggrieved, the respondent preferred an appeal and succeeded before the Tribunal. CIT''s order dt. 29th March, 2007 in exercise of power under s. 263 of the Act has been set aside. Revenue has impugned and challenged the findings recorded in the order passed by Tribunal dt. 31st March, 2008, by raising the aforesaid two substantial questions of law. Tribunal has exhaustively referred to the replies of the respondent dt. 25th Nov., 2004, 21st Dec, 2004 and 20th Jan., 2005, submitted before the AO. The written replies are quoted in the impugned order. It was evident that the AO had asked the respondent to justify deduction under s. 80HHF on export/transfer of software programme to 24 hours news channel Star TV, Hong Kong. The respondent had filed and relied on agreement dt. 21st Feb., 1997 between them and Star TV, Hong Kong, under which, the news software was exported and payments received in foreign exchange through banking channels etc. We shall refer to one of the replies given by the respondent subsequently. In para 12 of the impugned order Tribunal concluded that the AO had after detailed verification accepted deduction under s. 80HHF as claimed. The said claim under s. 80HHF was also accepted from asst. yr. 1999-2000 till asst. yr. 2003-04. Actual proof of export of software was duly furnished and accepted by the AO. The CIT had erred in exercising power under s. 263 on mere suspicion and for reexamination of; correctness of the claim. They disagreed with the observation of the CIT that the AO had not thoroughly examined and verified the claim under s. 80HHF.

Learned counsel for the Revenue has submitted that it is a case of non-examination of the relevant facts at the time of assessment. AO did not specifically consider whether the software was exported from India, a mandatory pre-requirement or condition under s. 80HHF. Further, requirement of transfer of rights to the foreign party was not examined by the AO. Reliance was placed upon Gee Vee Enterprise Vs. Additional Commissioner of Income Tax, , MALABAR INDUSTRIAL CO. LTD. Vs. COMMISSIONER OF INCOME TAX, , Commissioner of Income Tax Vs. G.M. Mittal Stainless Steel (P) Ltd., and Commissioner of Income Tax Vs. Ashok Logani, and that two decisions of the Delhi High Court in Commissioner of Income Tax Vs. Sunbeam Auto Ltd., and Income Tax Officer Vs. DG Housing Projects Ltd., , in fact, support the case of the Revenue. Our attention was also drawn to the decisions in Commissioner of Income Tax Vs. DLF Power Ltd., and Commissioner of Income Tax-V Vs. Nagesh Knitwears (P.) Ltd., .

Learned counsel for the respondent has contested and stated that the judgments relied upon by the Revenue support and affirm the ratio and reasoning in the impugned order. Decision of the Delhi High Court in the case of Ashok Logani (supra) was clearly distinguishable and was a peculiar case which has been decided on its facts. He relied upon para 10 of the judgment in the case of Ashok Logani (supra).

The scope and ambit of s. 263 has been examined and elucidated in several decisions. Sec. 263 enables the CIT to exercise the power of revision for correcting orders passed by the AO when the two cumulative conditions are satisfied. Firstly, the order should be erroneous and secondly, the order should also be prejudicial to the interest of the Revenue. An order is erroneous, when it is unsustainable, wrong or an incorrect decision deviating from law and the expression prejudicial to the interest of the Revenue is of wide import and is not confined to mere loss of tax.

In Gee Vee Enterprises (supra) failure on the part of the AO to conduct inquiry it was held, makes the order of the AO erroneous. This is because an AO is an investigator-cum-adjudicator. Failure to carry out any investigation, makes the order erroneous because the AO errs and commits an error in not examining the subject-matter/issue which ought to have been verified. It is incumbent upon the AO to investigate and verify facts, deductions, income etc. Thus failure to make any inquiry results in an erroneous order. The said view of the Delhi High Court is a reiteration of the law expounded in Rampyari Devi Saraogi Vs. Commissioner of Income Tax, West Bengal and Others, and Smt. Tara Devi Aggarwal Vs. Commissioner of Income Tax, West Bengal, Calcutta, . After referring to these two decisions in D.G. Housing Projects Ltd. (supra), it has been observed:

These two decisions show that it is not necessary for the CIT to make further inquiries before cancelling the assessment order of the ITO. The CIT can regard the order as erroneous on the ground that in the circumstances of the case the ITO should have made further inquiries before accepting the statements made by the assessee in his return.

The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the AO had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or verification. These cases have to be distinguished from other cases (i) where there is enquiry but the findings are incorrect/erroneous; and (ii) where there is failure to make proper or full verification or enquiry.

In such cases, the order becomes erroneous because enquiry or verification has not been made and not because wrong order has been passed on merits. A wrong order passed on merits will be erroneous if the CIT adjudicates and holds that there is an error which is unsustainable in law and not because enquiry was not made by the AO. The two situations stand on different footings and different parameters are applied to determine whether the order is erroneous or not.

The finding recorded by the Tribunal in the present case is that this is not a case of ''no inquiry''. The said finding is a finding of fact and is not perverse. Tribunal in the impugned order has referred to three replies submitted by the respondent to the queries raised during the course of the original assessment proceedings to justify deduction under s. 80HHF. The respondent had submitted evidence in support of export/transmission of software to Hong Kong, consideration received in foreign exchange and within the time-limit prescribed. Details filed included export invoices, bank certificate of export and realization and forward inward remittance certificate issued by the bank etc. We would like to reproduce reply dt. 20th Jan., 2005, which has been quoted in the impugned order of the Tribunal and the same reads:

C. Reply dt 20th Jan., 2005

(1) Initially an agreement was executed on 29th Feb., 1997 ("first agreement") between NDTV and NTVI (a Star TVs Group company). It may be noted that this was more than one year prior to the commencement of the financial year under consideration and the launch of the actual channel on 1st April, 1998.

(2) On 21st March, 1998 proximate to the channel launch, there was a new agreement ("second agreement") signed between NDTV, Star TV of Hong Kong and NTVL. Subsequently, an agreement dated November finality of "second agreement" (of 21st March, 1998). All agreements have been placed on record. These agreements are valid through the year relevant to the assessment year commencing from asst. yr. 1999-2000 upto asst. yr. 2003-04, and applicable to asst. yr. 2002-03 (subject year).

(3) It is submitted that once the second agreement was signed, the first agreement stood novated, altered and replaced to the effect that:

(a) The principal agreement was now between Star TV of Hong Kong and NDTV.

(b) NTVI had no legal role to play in fulfilling, executing or enforcing any terms and conditions of the contract.

The above position is absolutely clear not only from the combined reading of the two agreements but also from the conduct of the parties and the manner in which the transactions, pursuant to the contract(s) were carried out.

(4) The following facts may also be noted;

(a) The software produced by NDTV is transmitted from Delhi to Star TV, Hong Kong, by NDTV through "Intelsat Satellite" (8 Mhz, C-Bank capacity on IS-804 at 64oE Satellite) directly from its facilities at New Delhi.

(b) The satellite space and the uplinking facilities to uplink the signals to the satellite have been contracted directly by NDTV from VSNL on lease basis, which fact is self-evident from the bills raised by BSNL on NDTV.

(c) NDTV pays VSNL for the uplink charges and the lease from the satellite transponder.

(d) The satellite and the uplink are contracted with VSNL on a "point to point basis" from Delhi to Hong Kong. This means that the signal cannot be transmitted, diverted or delivered to any other place from Delhi except Hong Kong.

(e) At Hong Kong the software is received by Star TV through its arrangements to down link from the satellite, and after adding any other relevant material/advertisement etc. to is Star TV then further uplinks and sends the same through another satellite to its ultimate viewer.

(f) Payment from export of software is made by Star TV as per the rates agreed to in second agreement of 21st March, 1998.

(5) In summary:

(a) NDTV transmits/exports directly to STAR TV on principal to principal basis, and all transmission arrangements are contracted directly by NDTV.

(b) The export/transmission/delivery reaches Hong Kong directly from NDTV studio on a "point to point basis" without any physical or electronic inference being possible.

(c) Star TV pays NDTV directly in foreign exchange through normal banking channels.

(d) All requirements of s. 80HHF are fully satisfied.

(6) All aspects of these agreements and manner of export/transmission have been discussed in earlier years viz. asst. yrs. 1999-2000, 2000-01 and 2001-02 and deduction under s. 80HHF allowed to the assessee. It is retreated that all facts and circumstances remain exactly the same as in earlier years.

The deduction under s. 80HHF may kindly be allowed for asst. yr. 2002-03 as claimed.

It is not disputed that the reply was furnished to the AO. The assessment order records that the case was discussed. In para 4 of the impugned order dt. 29th March, 2007, the CIT has referred to this contention of the assessee. He has not controverted or denied the said contention in paras 5 and 6 of the order passed by him. In para 5, CIT has observed that evidences were furnished before the AO as well as before him to show/establish news items were actually exported through VSNL to STAR TV, Hong Kong but these did not clearly establish actual export of eligible items. But why and for what reason there was a doubt in the mind of the CIT is not elucidated. Silence or word "clear" does not show that the order was erroneous. CIT has thereafter mentioned that certain evidences were also filed before him in support but these were not furnished before the AO. Thereafter, s. 80HHF is referred to and stated that the worldwide copyright continued to remain with the respondent. CIT duly referred to the contention of the respondent that the section envisaged export or transfer of limited rights such as telecasting rights. Reliance was placed on decision of Mumbai Bench of the Tribunal in (2006) 102 ITD 426 , relied upon by the respondent. This decision, CIT notes supports the contention of the respondent that they were engaged in the business of export of news items and s. 80HHF would include limited transfer or export of the said rights in the copyright. The CIT after referring to the contentions and legal submissions has not given any opinion or finding in para 5 or 6 but has merely noted that the decision of Mumbai Tribunal had not been accepted by the Department. Abruptly the CIT concluded that further inquiry or examination was required by the AO and thus the order passed by the AO was erroneous and prejudicial to the interest of the Revenue.

In the light of the facts in the present case, we feel that the aforesaid findings recorded by the CIT in the order dt. 29th March, 2007, do not meet the requirements of s. 263. Undeniably, power under s. 263 is wide and broad but it can be exercised only when twin conditions mentioned in s. 263 are satisfied. There is difference between purported incomplete or inadequate verification or no verification whatsoever by the AO. This distinction for the purpose of exercise of powers under s. 263 of the Act was noticed by the Delhi High Court in Sunbeam Auto Ltd. (supra), wherein it has been held:

We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the CIT under s. 263 of the IT Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the AO did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between ''lack of inquiry'' and ''inadequate inquiry''. If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of ''lack of inquiry'' that such a course of action would be open. In Gabrial India Ltd. (supra), law on this aspect was discussed in the following manner:

. . . From a reading of sub-s. (1) of s. 263, it is clear that the power of suo motu revision can be exercised by the CIT only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the ITO is ''erroneous insofar as it is prejudicial to the interests of the Revenue''. It is not an arbitrary or un-chartered power. It can be exercised only on fulfillment of the requirements laid down in sub-s. (1). The consideration of the CIT as to whether an order is erroneous insofar as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the CIT acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The CIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce, repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity [See Parashuram Pottery Works Co. Ltd. Vs. Income Tax Officer, Circle I, Ward A, Rajkot, ]...

From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the CIT simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the CIT for that of the ITO, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the CIT he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the CIT with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion . . .

There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed ...

In the present case, the claim of the assessee was allowed by the AO on being satisfied with the explanation furnished and evidence produced. AO was satisfied that the export was made and consideration was received in foreign exchange within the stipulated time. The reply dt. 20th Jan., 2005 sets out the mode and manner in which software was exported. In D.G. Housing Projects Ltd. (supra) after referring to the decision in Sunbeam Auto Ltd. (supra), it was observed:

Thus, in cases of wrong opinion or finding on the merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the AO will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The CIT cannot remand the matter to the AO to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the AO, making the order unsustainable in law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the AO had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the AO to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the AO would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the AO to decide the aspect/question.

This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interests of the Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged ''inadequate investigation'', it will be difficult to hold that the order of the AO, who had conducted enquiries and had acted as an investigator, is erroneous, without the CIT conducting verification/inquiry. The order of the AO may be or may not be wrong. The CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the AO may decide that the order is erroneous. Therefore, the CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the AO but also the record as it stands at the time of examination by the CIT [see Commissioner of Income Tax, Bangalore Vs. Shree Manjunatheaware Packing Products and Camphor Works, ]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the AO is erroneous.

The said decision refers to the decision of the Supreme Court in Malabar Industrial Co. Ltd. (supra), that where the AO has adopted one of the two courses permissible and available to him and this has resulted in loss of revenue or two views were possible and the AO had taken one view with which the CIT may not agree, the said order cannot be treated as an erroneous order and prejudicial to the interest of the Revenue unless the view taken by the AO is unsustainable in law and therefore renders the order erroneous. The CIT must also show that prejudice is caused to the interest of the Revenue.

Ashok Logani (supra) case is distinguishable and would fall within the exception carved out in D.G. Housing Projects Ltd. (supra) that there may be cases, though rarely, where the CIT can show and establish that the facts on record or inference from the facts per se justified and mandated further inquiry or investigation but the AO had erroneously not undertaken the same. Ashok Logani (supra) case would fall under the said rare category. In the said case, substantial cash of Rs. 62,30,300 was found during the course of search but the AO did not make any addition and accepted the claim of the assessee and no reason was discernible from the assessment order. Para 10 of the said judgment records that respondent had surrendered a sum of Rs. 61,30,000 but in the return of income, Rs. 21,00,000 was offered for taxation. Para 10 of the said judgment records peculiar facts.

The present case does not fall in the category of exception. The CIT in his order dt. 29th March, 2007 was uncertain and ambiguous, if not perceptibly reluctant and unable to meet the contention, facts and legal position put forth. He has accepted that evidences were furnished before the AO with regard to the claim that news items were exported from VSNL to Star TV, Hong Kong but observed that this was not clearly established without elucidating. Conspicuously he did not record that evidences were incorrect or false, or why and for what reasons the assessment was erroneous in accepting export was made. Mere ipse dixit is not sufficient to establish that the assessment was erroneous. Even with regard to the eligibility under s. 80HHF, no finding has been recorded except recording that decision of Mumbai Bench of the Tribunal in K.R. Films (P) Ltd. (supra) has not been accepted by the Revenue. Why and for what reason, s. 80HHF should be interpreted differently, is not stated or elucidated. The section itself is not examined and interpreted. Without recording the said finding, the CIT could not have stated or averred that the claim allowed under s. 80HHF was erroneous.

In the present case, jurisdictional preconditions stipulated in s. 263 of the Act are not satisfied. The AO did conduct investigation and accepted the claim under s. 80HHF on being satisfied that the conditions stipulated in the said section are satisfied, is not the case of "no investigation". It is also not a case where per se further investigation was required. CIT in his order, as noticed above, has been tentative and hesitant and did not decide whether the claim under s. 80HHF has been rightly allowed by the AO. He has noted the stand of the respondent before him and before the AO, but refrained from forming any opinion as to whether the acceptance of the claim by the AO was erroneous or not. Power of review under s. 263 of the Act can be invoked only if the order is erroneous and for this the CIT must record the reason that the order was erroneous and the claim under s. 80HHF was wrongly allowed. Once the said claim was considered and examined by the AO, CIT cannot set aside the order without recording contrary finding. This will be contrary to s. 263 of the Act. In para 6 of the order dt. 29th March, 2007, the CIT uses the expression ''erroneous and prejudicial to the interest of Revenue'' but did not cite any reason or ground for the said conclusion. Use of the words without elucidation indicates, that the said observations are presumptive or a suspicion and mere repetition of words but this does not satisfy the requirements under s. 263 of the Act. Order under s. 263 must be clear and must set out logical ground and reason as to why the assessment is erroneous and prejudicial to the interest of the Revenue. Decision in Gee Vee Enterprises (supra) is not applicable as enquiry was conducted by the AO and he formed an affirmative opinion accepting the claim of the respondent.

In DLF Power Ltd. (supra), a similar reasoning and ratio was given and reference was made to the decision of a Full Bench of Delhi High Court in Commissioner of Income Tax Vs. Kalvinator of India Ltd., . In the said case, order of remand to the CIT for fresh decision was passed after noticing that the Tribunal had considered the question of bifurcation of interest income with reference to the deduction under s. 80IA. It was recorded that this bifurcation and the nature of income was accepted by the Tribunal though the CIT had only given a tentative opinion that some elements of income may be eligible. Tribunal had given its own factual finding without there being verification or full and proper rebuttal. In these circumstances, it was observed that where an AO does not carry out investigation which was per se required, there would be an error in the sense that the AO has failed to curry out the requisite inquiry. This was again a case falling under the exception carved out and mentioned in the case of D.G. Housing Projects Ltd. (supra).

In view of the aforesaid discussion, question No. 2 has to be answered against the Revenue and in favour of the respondent assessee and it has to be held that the AO during the course of original assessment proceedings, had delved deep into the question of deduction under s. 80HHF and was satisfied that the deductions made were as per law. Question No. 1 is also answered in favour of the respondent assessee and against the Revenue.

Tribunal was right in setting aside the order dt. 29th March, 2007, passed by the CIT under s. 263 of the Act. The appeal is disposed of with no order as to costs.