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2014 (5) TMI 70 - AT - Income TaxValidity of proceedings u/s 263 of the Act Withdrawal of deduction u/s 80IB(10) of the Act Applicability of section 80AC of the Act Held that - The provisions of section 263 of the Income-tax Act, 1961 cannot be invoked only when the order of the AO is erroneous as well as prejudicial to the interest of revenue Relying upon Malabar Industrial Co. Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME Court and CIT vs. Contimeters Electricals P. Ltd. 2008 (12) TMI 4 - HIGH COURT DELHI - The order of Assessing Officer is dated 30.12.2009 - For the purpose of revision u/s 263 of the Act, the legal position at the time of passing the order by the AO is to be considered and not the legal position at the time of filing the return of income or after the finalization of assessment - at the time of passing the assessment order, two views were possible with regard to the claim of deduction u/s 80IB in view of provisions of section 80AC - The AO has adopted one of the courses permissible in law at the relevant time - where two views were possible and AO had taken one view and if CIT do not agree with it then he cannot invoke provisions of section 263 of the Act to revise the AO s order thus, the CIT was not justified in invoking the provisions of section 263 of the Act Decided in favour of Assessee.
Issues Involved:
1. Jurisdiction of the CIT under Section 263 of the Income-tax Act, 1961. 2. Interpretation of Section 80AC of the Income-tax Act, 1961. 3. Validity of the deduction under Section 80IB (10) in a belated return. Issue-Wise Detailed Analysis: 1. Jurisdiction of the CIT under Section 263 of the Income-tax Act, 1961: The pre-requisite for exercising jurisdiction by the CIT under Section 263 is that the order of the Assessing Officer (AO) must be "erroneous" and "prejudicial to the interests of revenue." The CIT must be satisfied with both conditions. If either condition is absent, the CIT has no jurisdiction to initiate proceedings under Section 263. This principle is supported by the Supreme Court judgment in Malabar Industrial Co. Ltd. vs. CIT, which states that the provision cannot be invoked to correct every type of mistake or error committed by the AO. The CIT cannot invoke Section 263 merely because they hold a different opinion from the AO, unless the AO's view is unsustainable in law. In this case, the AO had examined the claim under Section 80IB and allowed it after due consideration, which means the CIT could not invoke Section 263 just because they disagreed with the AO's decision. 2. Interpretation of Section 80AC of the Income-tax Act, 1961: Section 80AC stipulates that no deduction under Sections 80IA, 80IAB, 80IB, 80IC, 80ID, or 80IE shall be allowed unless the return of income is furnished on or before the due date specified under Section 139(1). The CIT treated this provision as mandatory and disallowed the deduction claimed by the assessee for filing the return belatedly. However, the assessee argued that the provision should be considered directory and not mandatory. The ITAT Delhi Bench and other judicial precedents, such as the cases of Dhir Global Industries (P.) Ltd. and Contimeters Electricals P. Ltd., have held that such provisions should be construed liberally, especially when the delay is due to genuine reasons. The Tribunal noted that the AO had considered the claim and allowed it after inquiries, indicating that the AO's decision was not erroneous or prejudicial to the interests of revenue. 3. Validity of the deduction under Section 80IB (10) in a belated return: The assessee claimed a deduction under Section 80IB (10) for the Horizon Project, Greater Noida, which was allowed by the AO despite the return being filed beyond the due date specified under Section 139(1). The CIT disallowed this deduction, invoking Section 80AC. The Tribunal observed that during the relevant period, the interpretation of Section 80AC was debatable, and two views were possible. The AO had taken one of the permissible views, which was sustainable in law at that time. The Tribunal cited various judicial precedents, including the ITAT Bangalore Bench's decision in Vanshee Builders & Developers P. Ltd. and the Hyderabad Tribunal's decision in S Venkataiah, which supported the view that such provisions are directory and not mandatory. The Tribunal concluded that the AO's decision to allow the deduction was valid and that the CIT's invocation of Section 263 was unjustified. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the CIT was not justified in invoking the provisions of Section 263 of the Income-tax Act, 1961. The AO's order was neither erroneous nor prejudicial to the interests of revenue, and the deduction under Section 80IB (10) was valid despite the belated return. The Tribunal emphasized that provisions granting incentives should be construed liberally to advance the purpose of the legislation, and technicalities should not hinder the grant of such incentives.
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