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2016 (1) TMI 1306 - AT - Income TaxRevision u/s 263 - deduction under section 80IB - Held that - We are dealing with a case where the revisionary powers of the Commissioner of Income Tax are being exercised. The proposition laid down by the Hon ble High Court as to the eligibility conditions being satisfied by the assessee, has to be decided by the Assessing Officer. It was the Assessing Officer who, on whatever enquiry he made, was satisfied that the assessee is eligible to deduction under section 80IB of the Act. Now, under the garb of assuming jurisdiction under section 263 of the Act, the Commissioner of Income Tax cannot impose his own judgment over that of the Assessing Officer. Even the High Court has not held that any surrendered income, in any case, cannot be eligible for deduction under section 80IB of the Act. In this view, we do not find any error in the order of the Assessing Officer. Therefore, we set aside the order passed by the Commissioner of Income Tax under section 263 of the Act and allow the appeal of the assessee.
Issues Involved:
1. Validity of initiation of proceedings under section 263 of the Income Tax Act. 2. Whether the order passed by the Assessing Officer allowing deduction under section 80IB was erroneous and prejudicial to the interest of the Revenue. 3. Relevance of judgments relied upon by the Commissioner of Income Tax in proceedings under section 263. 4. Justification for the Commissioner of Income Tax to set aside the assessment under section 263. 5. Whether the surrendered income during the survey qualifies for deduction under section 80IB. Issue-wise Detailed Analysis: 1. Validity of initiation of proceedings under section 263: The appellant contested the initiation of proceedings under section 263 by the Commissioner of Income Tax (CIT), asserting that the proceedings were against the facts and bad in law. The appellant argued that the CIT failed to demonstrate how the order passed by the Joint Commissioner of Income Tax (JCIT) was erroneous and prejudicial to the interest of the revenue, given that it was passed after due application of mind. 2. Whether the order passed by the Assessing Officer allowing deduction under section 80IB was erroneous and prejudicial to the interest of the Revenue: The facts presented indicate that the assessment under section 143(3) was completed with an income of Rs. 1,07,20,293/-. The CIT later examined the records and issued a show cause notice under section 263, questioning the allowance of deduction under section 80IB on the surrendered income of Rs. 80,50,000/-. The CIT opined that the Assessing Officer (AO) allowed the deduction without proper enquiry, rendering the order erroneous and prejudicial to the interest of the Revenue. The AO had considered the surrendered income as business income and allowed the deduction, which the CIT disputed. 3. Relevance of judgments relied upon by the Commissioner of Income Tax in proceedings under section 263: The CIT relied on several judgments, including Faquir Mohammad Haji Hasan Vs. CIT, M/s Kim Pharma (P) Ltd. Vs. CIT, CIT Vs. Active Traders (P) Ltd., National Legguard Works Vs. CIT, CIT Vs. Sterling Foods, and Home Tex Vs. CIT, to support the view that the surrendered income could not be considered as profits derived from business for the purpose of deduction under section 80IB. The appellant argued that these judgments were irrelevant for deciding the issue in proceedings under section 263. 4. Justification for the Commissioner of Income Tax to set aside the assessment under section 263: The appellant argued that the AO had allowed the deduction under section 80IB based on the material and facts on record, and there was no justification for the CIT to set aside the assessment. The appellant emphasized that the AO had made specific queries regarding the deduction, which were duly replied to, and the surrendered income was treated as business income throughout the proceedings. The appellant also referenced the I.T.A.T., Chandigarh Bench's decision in Miss Mridula Vs. ACIT, which allowed deduction under section 80IB on surrendered income in similar circumstances. 5. Whether the surrendered income during the survey qualifies for deduction under section 80IB: The appellant maintained that the surrendered income of Rs. 80,50,000/- was on account of excess stock of knitted cloth manufactured and processed, and thus qualified as business income eligible for deduction under section 80IB. The AO had accepted this view, and the appellant argued that the CIT could not impose his judgment over the AO's decision. The tribunal noted that the AO was aware of all the facts and had corresponded with the appellant regarding the deduction, indicating that the AO had conducted an enquiry and was satisfied with the appellant's claim. Conclusion: The tribunal concluded that the AO had conducted an enquiry and was satisfied with the appellant's claim that the surrendered income was business income eligible for deduction under section 80IB. The tribunal held that the CIT could not assume jurisdiction under section 263 merely because he disagreed with the AO's view. The tribunal set aside the CIT's order under section 263 and allowed the appeal of the appellant, affirming that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue.
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