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2024 (12) TMI 381 - AT - Income TaxRevision u/s 263 - non eligibility to claim of deduction u/s 10AA - assessee has opted for VSV scheme, and paid due taxes thereon - HELD THAT - The entire 263 order has been passed on the basis of initial notice issued u/s 263 of the Act and has been passed in total disregard to any of the legal/factual submissions placed on record by the assessee challenging the 263 proceedings. As seen from the contents of the 263 order that Principal CIT has not even discussed/analysed/rebutted any of the arguments taken by the assessee during the course of 263 proceedings, thereby making such proceedings a mere formality, initiated only with a view to take a unilateral call to set aside the assessment order as being erroneous insofar as prejudicial to the interests of the Revenue, without even bothering to discuss the arguments taken by the assessee during the course of 263 proceedings. Accordingly, since the order passed u/s 263 is in gross violations to the principles of natural justice, in our considered view the same is liable to be set aside. Secondly, even otherwise, on merits we observe that the assessee has placed on record several judicial precedents in support of the contention that the case of Liberty 2009 (8) TMI 63 - SUPREME COURT is not applicable for computation of claim of exemption under section 10AA. Further, even on the basis of facts placed on record is seen that the assessing officer had specifically enquired into the aspect of computation of claim of exemption u/s 10AA of the Act and after taking into consideration the written submissions/legal arguments placed by the assessee on record, took a legally plausible view and decided not to disturb the claim of deduction u/s 10AA of the Act. We also observe that several judicial precedents have held that once the assessee has opted for VSV scheme, and paid due taxes thereon, then the tax proceedings for this year would come to a close and thereafter, the same issues cannot be re-agitated by taking recourse to 263 proceedings. In the point to be noted is that this is the 9th year of claim of deduction by the assessee and therefore, even from point of view of principle of consistency, unless any new facts are brought on record, the claim of exemption cannot be disturbed by taking recourse to 263 proceedings. Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act. 2. Applicability of the Liberty India decision to Section 10AA of the Income Tax Act. 3. Consideration of the Vivad Se Vishwas (VSV) Scheme in revision proceedings under Section 263. 4. Assessment order passed in accordance with the directions of the Dispute Resolution Panel (DRP). 5. Principles of natural justice in the proceedings under Section 263. Detailed Analysis: 1. Jurisdiction of Principal Commissioner of Income Tax (PCIT) under Section 263: The assessee challenged the jurisdiction of the PCIT in invoking Section 263, arguing that the original assessment order was neither erroneous nor prejudicial to the interests of the Revenue. The PCIT had set aside the assessment order, directing a fresh assessment, on the grounds that the Assessing Officer (AO) had allowed an excess exemption under Section 10AA of the Income Tax Act. The Tribunal found that the PCIT did not consider the detailed submissions made by the assessee, which highlighted that the AO had duly applied his mind during the original assessment proceedings. The Tribunal held that the order under Section 263 was passed in violation of the principles of natural justice, as the PCIT failed to address the arguments presented by the assessee. 2. Applicability of the Liberty India decision to Section 10AA: The PCIT relied on the Supreme Court's decision in Liberty India, which held that export incentives like Duty Drawback and DEPB licenses are not profits "derived from" the industrial undertaking for deductions under Section 80-IA. The assessee argued that this decision was not applicable to Section 10AA, which has a different framework for deductions. The Tribunal noted that several judicial precedents, including decisions from the Bombay High Court and the Income Tax Appellate Tribunal, have distinguished the Liberty India case in the context of Section 10AA. These precedents support the inclusion of export incentives in the exemption calculation under Section 10AA, thereby affirming the assessee's position. 3. Consideration of the Vivad Se Vishwas (VSV) Scheme: The assessee contended that the matter had been settled under the VSV Scheme, and therefore, no revision proceedings under Section 263 could be initiated. The Tribunal acknowledged that the assessee had received a certificate under the VSV Act, indicating the settlement of the dispute for the relevant assessment year. Citing the Gujarat High Court's ruling, the Tribunal agreed that opting for and finalizing the VSV Scheme closes disputes regarding tax arrears, preventing them from being reopened under Section 263. 4. Assessment order passed in accordance with the directions of the Dispute Resolution Panel (DRP): The assessee argued that the assessment order was passed following the directions of the DRP and therefore could not be revised by the PCIT under Section 263. The Tribunal referred to the decision in Barclays Bank PLC v. CIT, which held that an assessment order passed in accordance with DRP directions cannot be revised under Section 263. The Tribunal found merit in this argument, further supporting the assessee's case. 5. Principles of Natural Justice: The Tribunal observed that the PCIT's order was in gross violation of the principles of natural justice, as it failed to discuss or rebut the arguments presented by the assessee during the proceedings. The order was based solely on the initial notice issued under Section 263, disregarding the legal and factual submissions of the assessee. The Tribunal held that such proceedings were merely a formality and lacked consideration of the assessee's contentions, warranting the setting aside of the order. Conclusion: The Tribunal set aside the order passed by the Principal CIT under Section 263 for both the assessment years 2016-17 and 2017-18, allowing the appeals filed by the assessee. The decision emphasized adherence to the principles of natural justice and the importance of considering all relevant legal and factual arguments in revision proceedings.
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