2018 (5) TMI 506 - AT - Income Tax

Revision u/s 263 - claim of deduction u/s 80IA(4) - Held that - We uphold the contentions of the assessee that order passed u/s 263 of the Act for A.Y.2009-10, 2010-11 and 2011-12 are bad in law as no incriminating material relatable to the claim of deduction u/s 80IA(4) was found during the course of search and as the assessments have not abated and are completed assessments. The Hon ble Madras High Court in the case of M/s Tamilnadu Petro Products Ltd. Vs ACIT 2010 (11) TMI 645 - MADRAS HIGH COURT allowed deduction u/s 80IA where the facility was one of captive consumption. Thus even if the facility was for captive use, deduction u/s 80IA(4) cannot be denied. Thus we hold that, on merits the assessee is entitled to claim deduction u/s 80IA of the Act. Hence we find the orders of the ld. Pr.CIT passed u/s 263 not sustainable on facts as well as in law. Thus we hold that the order of the AO in all the four assessment years 2009-10 to 2012-13, are not erroneous or prejudicial to the interest of the revenue warranting revision by the ld. Pr. CIT u/s 263 of the Act. Hence, we cancel the orders passed by the ld. Pr. CIT u/s 263 of the Act and allow all these four appeals of the assessee.

Issues Involved:

1. Jurisdiction under Section 263 of the Income Tax Act.
2. Deduction under Section 80IA(4) for Private Railway Sidings.
3. Incriminating material found during search operations.
4. Adequacy of Assessing Officer's inquiry.
5. Consistency in allowing deductions across assessment years.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:

The Principal Commissioner of Income Tax (Pr. CIT) issued a show cause notice under Section 263, proposing to revise the assessment orders for the years 2009-10, 2010-11, 2011-12, and 2012-13. The Pr. CIT argued that the Assessing Officer's (AO) orders were erroneous and prejudicial to the interest of the revenue due to the improper allowance of deductions under Section 80IA(4). The Tribunal emphasized that for the Pr. CIT to invoke Section 263, the order must be both erroneous and prejudicial to the revenue. It was held that if the AO adopted one of the permissible views under the law, the order could not be considered erroneous merely because the Pr. CIT disagreed with it.

2. Deduction under Section 80IA(4) for Private Railway Sidings:

The Pr. CIT contended that the private railway sidings did not qualify as infrastructure facilities under Section 80IA(4) because they were not accessible to the general public and were used exclusively for the assessee's benefit. The Tribunal rejected this argument, stating that the statute does not require the infrastructure facility to be for public use. The Tribunal referred to the agreement between the assessee and the railways, which allowed the railways and other entities to use the sidings, thus satisfying the conditions of Section 80IA(4). The Tribunal also cited various case laws, including the judgment of the ITAT Mumbai in the case of JSW Steel Ltd vs PCIT, which supported the view that private usage of infrastructure does not disqualify it from Section 80IA(4) benefits.

3. Incriminating material found during search operations:

The Pr. CIT argued that certain documents found during the search indicated that the assessee was using the railway sidings for its business and claiming deductions under Section 80IA. The Tribunal examined the documents and concluded that they were part of the regular books of accounts and not incriminating material. The Tribunal emphasized that no new material related to the deduction claim was found during the search, and thus, the AO's order could not be revised based on these documents.

4. Adequacy of Assessing Officer's inquiry:

The Pr. CIT held that the AO allowed the deduction without adequate inquiry. The Tribunal countered this by stating that the AO had examined the relevant documents and the assessee's explanations during the assessment proceedings. The Tribunal noted that the AO had previously allowed the deduction in earlier years after proper verification, and there was no lack of inquiry. The Tribunal cited various case laws, including the Delhi High Court's judgment in the case of CIT vs. Sunbeam Auto Ltd., which held that an order could not be revised merely because the inquiry was considered inadequate by the Pr. CIT.

5. Consistency in allowing deductions across assessment years:

The Tribunal highlighted that the AO had allowed the deduction under Section 80IA(4) in the first year of claim (2008-09) and subsequent years without any disallowance. The Tribunal referred to the principle of consistency, stating that once a deduction is allowed in the initial year after due verification, it should not be disturbed in subsequent years unless there are significant changes in facts or law. The Tribunal cited the case of CIT vs. Excel Industries Ltd., where the Supreme Court emphasized the importance of consistency in tax matters.

Conclusion:

The Tribunal quashed the orders passed by the Pr. CIT under Section 263, holding that the AO's orders were neither erroneous nor prejudicial to the interest of the revenue. The Tribunal allowed the assessee's appeals for all the assessment years in question.

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