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2015 (8) TMI 1273 - AT - Income TaxRevision u/s 263 - deduction under section 80IB - Held that - Assessing Officer did not make any enquiry or investigation at assessment stage so as to qualify deduction under section 80IB of the Act to the assessee on surrendered income as well as on job charges. The accounts of the assessee revealed that assessee declared income of 6 crores as business advances written off therefore it could not be said to have any nexus with the Industrial Undertaking of the assessee. The surrendered income was therefore undisclosed income from other sources and assessee failed to establish that source of unaccounted income invested in advances which were written off had any nexus with the Industrial Undertaking of the assessee. The assessee during the course of survey as well as assessment proceedings have not filed any documentary evidence to establish that income of 6 crore has been earned through manufacturing activities eligible for deduction under section 80IB of the Act. Thus the Assessing Officer has failed to make any enquiry or investigation on claim of assessee of deduction under section 80IB at the assessment stage on the above surrendered income as well as on job charges It is well settled law that failure by the Assessing Officer to make enquiry at assessment stage would render his order to be erroneous and prejudicial to the interest of revenue and jurisdiction under section 263 of the Act have been properly exercised by the Ld. Commissioner of Income Tax. Considering the totality of the facts and circumstances it is clear that Assessing Officer has passed the assessment order without conducting enquiry and investigation and has allowed claim of assessee under section 80IB of the Act without making any enquiry and investigation. Therefore the order was correctly treated as erroneous and prejudicial to the interest of revenue. The ld. CIT was therefore justified in setting aside the assessment order and directing the Assessing Officer to pass the assessment order afresh denovo by giving opportunity of being heard to the assessee. In this view of the matter no further directions are required to the Ld. Commissioner of Income Tax in the matter as is argued by ld. counsel for the assessee. The appeal of the assessee has thus no merit. The same is accordingly dismissed. - Decided against assessee
Issues Involved:
1. Whether the revision order under section 263 was barred by limitation. 2. Whether the assessee is entitled to deduction under section 80IB on surrendered income. 3. Whether the assessee is entitled to deduction under section 80IB on job work charges. 4. Whether the Assessing Officer conducted proper enquiry and investigation regarding the claims under section 80IB. 5. Additional issues in ITA 680/CHD/2013 related to deduction under section 80IB on interest on FDR, interest from sundry debtors, interest from meter security deposit, excess allowances of depreciation, allowance of bonus payable under section 43B, and disallowance of interest under section 36 (1) (iii). Issue-wise Analysis: 1. Limitation of Revision Order under Section 263: The assessee contended that the revision order was barred by limitation since it was dispatched after the last permissible date. However, the Tribunal held that the order was passed within the statutory period of two years, as mandated by Section 263(2) of the Income Tax Act. The Supreme Court's decision in R.K. Upadhyaya Vs Shanabhai P. Patel was cited to emphasize that the issuance of the order within the limitation period is sufficient, and dispatch or service beyond this period does not invalidate the order. Consequently, this ground of appeal was rejected. 2. Deduction under Section 80IB on Surrendered Income: The Commissioner of Income Tax found that the surrendered income of Rs. 6 crores, declared during a survey under section 133A, was treated as business advances written off. The assessee claimed deduction under section 80IB on this amount, asserting it as business income. However, the Commissioner and Tribunal concluded that the surrendered income did not have a direct nexus with the industrial undertaking's profits and was, therefore, not eligible for deduction under section 80IB. The Tribunal referenced the Punjab & Haryana High Court's decision in National Legguard Works, which held that there could be no presumption that surrendered income represented eligible business income. 3. Deduction under Section 80IB on Job Work Charges: The Commissioner noted that the assessee was allowed a deduction under section 80IB on job work charges without proper enquiry. The Tribunal upheld this finding, emphasizing that the Assessing Officer failed to verify whether the job work charges were derived from manufacturing activities eligible for deduction under section 80IB. The lack of investigation rendered the assessment order erroneous and prejudicial to the interest of revenue. 4. Proper Enquiry and Investigation by the Assessing Officer: The Tribunal found that the Assessing Officer did not conduct any substantial enquiry or investigation regarding the assessee's claims under section 80IB on both the surrendered income and job work charges. This failure to investigate and verify the claims led to the conclusion that the assessment order was erroneous and prejudicial to the revenue. The Tribunal cited several decisions, including those of the Delhi High Court in Gee Vee Enterprises and the Gauhati High Court in Tarzen Tea Company Pvt. Ltd., to support the principle that non-enquiry by the Assessing Officer justifies revision under section 263. 5. Additional Issues in ITA 680/CHD/2013: In the second appeal, the assessee raised additional grounds related to deductions under section 80IB on various items such as interest on FDR, interest from sundry debtors, and others. The Commissioner found that the conditions for claiming these deductions were not satisfied and that the Assessing Officer had not verified these claims. The Tribunal agreed, noting the absence of any enquiry or investigation by the Assessing Officer on these issues. Consequently, the appeal was dismissed based on the same reasoning applied in the first appeal (ITA 679/2013). Conclusion: Both appeals filed by the different assessees were dismissed. The Tribunal upheld the Commissioner's order to set aside the assessment and directed the Assessing Officer to re-assess the claims under section 80IB afresh, ensuring proper enquiry and verification. The appeals were dismissed on the grounds of failure to establish eligibility for deductions under section 80IB and the lack of proper enquiry by the Assessing Officer.
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