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2021 (4) TMI 460 - AT - Income TaxRevision u/s 263 - Deduction u/s 80IC allowability - stand of the ld.CIT is that the Asstt.Year 2015-16 is the sixth year, whereas according to the assessee, the company has made substantial expansion in the Asstt.Year 2011-12 and is eligible for the exemption under section 80IC of the Act at the rate of 100% for five years for the Asstt.year 2011-12 - HELD THAT - The Asstt.Year 2015-16 fall in those five years. The next grievance of the ld.Commission is that the AO has not carried out the investigation or verification about the claim of substantial expansion. The ld.CIT failed to take note of the facts that in the Asstt.Year 2011-12, the assessee has made substantial expansion. The assessment order in this assessment year was passed under a scrutiny assessment and the copy of this assessment order has also been placed on record by the assessee. AO has passed an assessment order on 12.3.2014 under section 143(3). The detailed explanations were available in the income-tax record, because the addition of ₹ 1.70 crores in the plant machinery would increase WDV of the assets, and accordingly, depreciation would have also been accounted for. Earlier value of the assets was reported by the assessee at ₹ 1.68 crores. It has made further addition of ₹ 1.70 crores in the gross block of assets. Hon ble Delhi High Court in the case of DG Housing Projects Ltd. 2012 (3) TMI 227 - DELHI HIGH COURT has held that the ld.Commissioner should have not relegated to the point that assessment order is erroneous to the AO himself. The ld.Commissioner, after analyzing the record, ought to have recorded a categorical finding as to how the assessment order is erroneous. In the present case also, when the assessee took a specific plea in its reply that it has made substantial expansion in the Asstt.Year 2011-12, and it has produced those details, then the ld.Commisisoner ought to have considered the same, and should have recorded a categorical finding. Had that been done, then it would have avoided the second round of litigation at the level of the AO - The assessment order was passed under section 143(3) in the Asstt.Year 2011-12. Its claim of depreciation on enhanced value of the asset was not disturbed and therefore it is to be construed that these substantial expansion was in the knowledge of the Department right from the year the expansion was made and when the assessee has claimed the deduction under section 80IC from that year. The assessment year 2011-12 is to be construed as the fresh initial year, in view of the latest decision of the Hon ble Supreme Court SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS 1997 (12) TMI 4 - SUPREME COURT . Therefore, the assessee has rightly claimed exemption under section 80IC and the AO has rightly granted. The ld.Commissioner failed to point out any error for establishing that the assessment order is erroneous, and that the order of the AO cannot be sustained. We quash the impugned order of the ld.CIT under section 263 of the Act and allow the appeal of the assessee.
Issues Involved:
1. Cognizance under section 263 of the Income Tax Act. 2. Time-barred appeal due to COVID-19 lockdown. 3. Eligibility for deduction under section 80IC of the Income Tax Act. 4. Verification of substantial expansion claim. 5. Legal interpretation of "initial assessment year" and substantial expansion under section 80IC. Issue-wise Detailed Analysis: 1. Cognizance under Section 263 of the Income Tax Act: The primary grievance of the assessee was the CIT's decision to take cognizance under section 263 of the Income Tax Act and set aside the assessment order for passing a fresh assessment order. The assessee contended that the order passed by the AO was correct and did not warrant revision. The Tribunal noted that the CIT's power under section 263 involves examining the record and forming an opinion that the AO's order is erroneous and prejudicial to the interests of the revenue. The CIT must provide specific reasons for considering an order erroneous. The Tribunal observed that the CIT failed to provide a categorical finding that the AO's order was erroneous, particularly since the substantial expansion was reported and assessed in the previous years. 2. Time-barred Appeal Due to COVID-19 Lockdown: The appeal filed by the assessee was delayed by six days due to the COVID-19 lockdown. The Tribunal condoned the delay, considering the explanation provided by the assessee regarding logistical challenges during the pandemic. This allowed the Tribunal to proceed with deciding the appeal on its merits. 3. Eligibility for Deduction under Section 80IC of the Income Tax Act: The assessee claimed a deduction under section 80IC at the rate of 100% for the Asstt.Year 2015-16, arguing that substantial expansion was carried out during the Asstt.Year 2011-12. The AO had allowed this deduction. The CIT contended that the exemption was only available at 30% for the sixth year, as the initial claim was made in Asstt.Year 2010-11. The Tribunal referred to the Supreme Court's decision in Aarham Softronics, which clarified that substantial expansion allows for a second initial assessment year, entitling the assessee to 100% deduction for the next five years from the year of expansion. 4. Verification of Substantial Expansion Claim: The CIT argued that the AO did not properly verify the substantial expansion claim. The Tribunal noted that the substantial expansion was reported in the Asstt.Year 2011-12, and the AO had scrutinized and accepted the claim during that year. The Tribunal emphasized that the CIT should have considered the detailed explanations and records provided by the assessee before concluding that the AO's order was erroneous. The Tribunal highlighted the necessity for the CIT to conduct a thorough verification before directing a fresh inquiry. 5. Legal Interpretation of "Initial Assessment Year" and Substantial Expansion under Section 80IC: The Tribunal referred to the Supreme Court's decision in Aarham Softronics, which clarified that substantial expansion within the specified period allows for a second initial assessment year, enabling the assessee to claim 100% deduction for five years from the year of expansion. The Tribunal concluded that the assessee's substantial expansion in Asstt.Year 2011-12 entitled it to claim 100% deduction for the subsequent five years, including Asstt.Year 2015-16. The Tribunal found that the AO's order was consistent with the Supreme Court's interpretation and was not erroneous. Conclusion: The Tribunal quashed the CIT's order under section 263, holding that the AO's assessment was not erroneous and was consistent with the legal interpretation of section 80IC. The appeal of the assessee was allowed, and the Tribunal emphasized the importance of proper verification and consideration of existing records before revising an assessment order.
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