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2013 (11) TMI 1337 - AT - Income TaxInvocation of section 263 by CIT Held that - Reliance has been placed upon the judgment in the case of CIT v. Honda Siel Power Products Ltd reported in 2010 (7) TMI 38 - HIGH COURT OF DELHI , wherein it has been held that CIT cannot exercise his powers under s. 263 to differ with the view of the AO even if there has been as loss of revenue - CIT can exercise his powers under s. 263 where a loss of revenue results as a consequence of the view adopted by the AO. While passing an order under s. 263, the CIT has to examine not only the assessment order, but the entire record of the profits. Since the assessee no control over the way an assessment order is drafted and since, generally, the issues which are accepted by the AO do not find mention in the assessment order and only those points are taken note of on which the asseessee s explanations are rejected and additions/disallowances are made In the present case, in an overall consideration of the facts and circumstances of issue and in conformity with the ratio laid down by the various judiciary including the Co-ordinate Bench of this Tribunal in the case of Infosys Technologies Ltd 2012 (1) TMI 76 - KARNATAKA HIGH COURT , it has been held that CIT was not justified in coming to a conclusion that the order passed by the AO under section 147 r. w. s. 143(3) of the Act was erroneous and prejudicial to the interest of revenue thereby invoking the provisions of section 263 of the Act and directing the AO to withdraw the deduction allowed u/s 80IB (10) of the Act Invocation of section 263 is not sustainable Decided in favor of Assessee.
Issues Involved:
1. Whether the CIT was justified in holding that the assessment order u/s 147 r.w.s. 143(3) was erroneous and prejudicial to the interest of the Revenue concerning the deduction u/s 80IB. 2. Whether the provisions of section 80AC regarding the time limit for filing the return of income are mandatory or directory. Issue-Wise Detailed Analysis: 1. Justification of CIT's Order: The primary issue in this case was whether the CIT was justified in invoking section 263 of the Income Tax Act, claiming that the assessment order was erroneous and prejudicial to the interests of the Revenue by allowing the deduction u/s 80IB. The CIT argued that the deduction was wrongly allowed, resulting in under-assessment of income, as the return was filed beyond the due date specified u/s 139(1). The CIT also noted that Form No.10CCB was not furnished along with the return. The assessee contended that section 263 does not permit the inference that the order of the assessment was erroneous and prejudicial to the interests of the Revenue. The assessee argued that the jurisdiction u/s 263 can only be invoked if the order passed by the AO was erroneous and prejudicial to the interests of the Revenue, citing the Supreme Court ruling in Malabar Industrial Company v. CIT. The assessee further argued that the AO adopted one of the permissible courses under the law, and the mere disagreement of the CIT does not make the order erroneous or prejudicial. The tribunal concluded that the AO had indeed scrutinized the details furnished by the assessee and concluded the assessment after thorough examination. The tribunal observed that the AO's action could not be termed erroneous or prejudicial to the interests of the Revenue. The tribunal cited the ruling of the Hon'ble Delhi High Court in CIT v. Kelvinator of India Limited, which stated that a presumption can be raised that an order passed on application of mind by the AO is not erroneous. The tribunal also referred to the Hon'ble Delhi High Court's ruling in CIT v. Honda Siel Power Products Ltd, which held that if the AO adopts one of the possible views, the CIT cannot exercise his powers under section 263 merely because he does not agree with the AO's view. 2. Nature of Section 80AC Provisions: The second issue was whether the provisions of section 80AC, which require the return of income to be filed on or before the due date specified u/s 139(1) for claiming deduction u/s 80IB, are mandatory or directory. The CIT argued that the provisions are mandatory, and failure to comply disentitles the assessee from claiming the deduction. The assessee contended that the provisions of section 80AC are directory and not mandatory, citing various judicial decisions and statutory provisions permitting relaxation of the time limit for filing the return. The assessee argued that the time limit for filing the return is neither inflexible nor inelastic and that the deduction should be allowed if the assessee is otherwise eligible. The tribunal referred to the Rajkot Special Bench ruling in Saffire Garments v. ITO, which held that the requirement of filing the return of income within the due date prescribed u/s 139(1) is mandatory and not procedural. The tribunal also cited the Amritsar Bench ruling in Bal Kishan Dhawan HUF v. ITO, which held that the provisions of section 80AC are mandatory, and failure to furnish the return before the due date specified u/s 139(1) disentitles the assessee from claiming the deduction. The tribunal concluded that section 80AC prohibits deduction u/s 80IB if the return is not furnished on or before the due date specified u/s 139(1). However, the tribunal also observed that the AO had scrutinized the details and allowed the deduction after thorough examination, and the CIT's invocation of section 263 was not justified. Conclusion: The tribunal allowed the assessee's appeal, holding that the CIT was not justified in invoking section 263 and directing the AO to withdraw the deduction allowed u/s 80IB. The tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interests of the Revenue, and the provisions of section 80AC are mandatory, but the AO had applied his mind and allowed the deduction after thorough examination.
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