2015 (11) TMI 1677 - AT - Income Tax

Revision u/s 263 - deduction under section 80IC - Held that - AO raised specific queries on this issue and assessee filed complete details before Assessing Officer. AO was satisfied with the explanation of the assessee therefore, his order could not be said to be erroneous in so far as prejudicial to the interest of revenue. Simply, CIT did not agree with the view of Assessing Officer cannot be said to be the order erroneous in so far as prejudicial to the interest of revenue. AO adopted one of the possible view with regard to deduction under section 80IC and the view taken by the AO was sustainable in law. It may also be noted here that in earlier assessment year, the ITAT has confirmed the orders of authorities below in granting deduction under section 80-IB of the Act. Therefore, the facts being similar, there was no justification for Ld. CIT to initiate proceedings under section 263. Assessee, therefore, on the basis of the evidences and material on record has been able to demonstrate that this issue of deduction under section 80IC was examined in detail by the Assessing Officer before granting part relief under section 80IC of the Income Tax Act. Therefore, there was no justification to initiate the proceedings under section 263 of the Income Tax Act on this issue. Addition u/s 14A - Held that - CIT did not point out any error or defect in the calculation made by the Assessing Officer under section 14A read with Rule 8D of the IT Rules for the purpose of making part disallowance under section 14A. The CIT merely referring to the audit report noted in the impugned order that disallowance was lesser/below the required figure. The assessment order, however, shows that Assessing Officer considered the balance sheet of the assessee and raised specific query on the issue of disallowance u/s 14A, therefore, Assessing Officer has gone through the audited account referred to by CIT in the impugned order. It, therefore, appears that CIT in the proceedings under section 263 of the Act, did not agree with the finding of fact recorded by the Assessing Officer in assessment order without any justification. Therefore, initiation of proceedings under section 263 of the Act on this issue is wholly unjustified. Allowing depreciation and additional depreciation - Held that - The assessee explained that on electronic installation which are part of the plant and machinery, depreciation has been claimed at the same rate which is applicable to plant and machinery. The Ld. CIT, instead of examining this issue in proper perspective, merely stated that this issue was not examined by the Assessing Officer at assessment stage. It, therefore, appears that reply of the assessee is not examined by the Ld. CIT, therefore, the order of the CIT could not be sustained in law. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act.
2. Entitlement to claim of deduction under section 80IC.
3. Correctness of disallowance under section 14A.
4. Entitlement to depreciation on electric installations.

Detailed Analysis:

1. Validity of the order passed under section 263 of the Income Tax Act:
The assessee challenged the order passed under section 263, arguing that the assessment order dated 16.12.2011 was neither erroneous nor prejudicial to the interest of revenue. The Tribunal noted that the Assessing Officer (AO) had made detailed inquiries and accepted the assessee's claims after proper examination. The Tribunal cited various judicial precedents, including the Hon'ble Supreme Court's decision in Malabar Industrial Co. Ltd. v CIT, which held that an order cannot be deemed erroneous if the AO adopted a permissible course of action. The Tribunal concluded that the Commissioner of Income Tax (CIT) had overstepped by substituting his opinion for that of the AO without proper justification.

2. Entitlement to claim of deduction under section 80IC:
The assessee claimed a deduction under section 80IC, which was initially allowed by the AO in the assessment year 2007-08 after verifying the substantial expansion carried out by the assessee. The CIT, however, questioned the eligibility of this deduction in subsequent years, including the assessment year 2009-10. The Tribunal emphasized that unless the deduction granted in the initial year is withdrawn, it cannot be denied in subsequent years. The Tribunal found that the AO had conducted a detailed inquiry and accepted the claim after verifying the facts, and thus, the CIT's intervention under section 263 was unwarranted.

3. Correctness of disallowance under section 14A:
The CIT contended that the AO had incorrectly calculated the disallowance under section 14A, which pertains to expenditure incurred in relation to income not includable in total income. The Tribunal noted that the AO had issued specific queries and made calculations as per Rule 8D of the Income Tax Rules, indicating a thorough examination. The CIT's disagreement with the AO's calculation did not justify the invocation of section 263, as the AO's view was one of the possible views permissible under the law.

4. Entitlement to depreciation on electric installations:
The CIT argued that the AO had allowed incorrect rates of depreciation on electric installations. The assessee claimed that the installations were part of the plant and machinery, justifying the claimed rates. The Tribunal observed that the AO had examined this issue and allowed the depreciation accordingly. The Tribunal held that the CIT's disagreement with the AO's conclusion did not make the AO's order erroneous or prejudicial to the revenue.

Conclusion:
The Tribunal set aside the CIT's order under section 263, restoring the original assessment orders for both assessment years 2009-10 and 2010-11. The Tribunal found that the AO had conducted proper inquiries and made decisions based on permissible views, and the CIT's intervention was not justified. The appeals of the assessee were allowed.