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2015 (10) TMI 2027 - AT - Income TaxRevision u/s 263 - whether or not the assessee is eligible for deduction u/s 80-IB - Held that - In the present case on hand, the revenue did not brought on record any evidence in support of its claim that the assessee did not commence its production during the financial year 2003-04, despite the fact that the assessee has furnished a copy of registration certificate issued by the Directorate of Industry and Commerce indicating the date of commencement of production, i.e. on 19-3-2004. Simply the CIT alleged that it would not be possible for assessee to organise materials and produce goods within a period of 11 days by bringing hypothetical and probability theory to the case without any material evidence. The profit & loss account filed by the assessee shows that it has made sales during the financial year. It is an undisputed fact that the assessee claims depreciation on plant & machinery which was accepted by the A.O. and affirmed by the CIT. It is also an admitted fact that Department has accepted the claim of deduction u/s 80-IB of the Act for all the years starting from the A.Y. 2004-05 to 2006-07. Once the revenue accepted the deduction in earlier years, it cannot be questioned in subsequent years unless there is a change of facts in the subsequent years. Admittedly, in the present case, there is no change in the facts which are existed in the A.Y. 2004-05 to A.Y. 2006-07. A.O. has rightly allowed deduction u/s 80-IB of the Act after proper enquiry and his order does not warrant any interference by the CIT. The CIT assumes jurisdiction and revised the assessment order u/s 263 of the Act without pointing out any mistakes in the A.O s order with a different opinion, which itself is not a ground for assuming jurisdiction u/s 263 of the Act. Therefore, we quash the CIT s order u/s 263 and restore the assessment order passed by the assessing officer. - Decided in favour of assessee.
Issues Involved:
1. Eligibility for deduction under Section 80-IB of the Income Tax Act, 1961. 2. Validity of the Commissioner of Income Tax's (CIT) revisionary powers under Section 263 of the Income Tax Act, 1961. Detailed Analysis: 1. Eligibility for Deduction under Section 80-IB: The primary issue is whether the assessee qualifies for deduction under Section 80-IB of the Income Tax Act, 1961. The assessee, a partnership firm engaged in manufacturing corrugated boxes, claimed a deduction of Rs. 64,52,987/- under Section 80-IB for the assessment year 2007-08. The Assessing Officer (A.O.) allowed this deduction after scrutiny but disallowed an interest income of Rs. 24,946/-. The CIT issued a show-cause notice proposing to revise the assessment order, arguing that the assessee did not commence production on or before 31.3.2004, a prerequisite for the deduction under Section 80-IB. The CIT contended that the mere possession of a certificate from the Directorate of Industries and Commerce was insufficient proof of commencement of production. The CIT also noted discrepancies in the financial statements and employment records that suggested no manufacturing activity had occurred during the relevant period. The assessee countered that it commenced production on 19.3.2004, as evidenced by the registration certificate, and that the deduction had been consistently allowed in previous years (2004-05 to 2006-07). The assessee argued that the CIT's reliance on a typographical error in the audit report was unjustified. 2. Validity of CIT's Revisionary Powers under Section 263: The CIT's revisionary powers under Section 263 can only be invoked if the order of the A.O. is both erroneous and prejudicial to the interests of the revenue. The CIT argued that the A.O. had not conducted a proper inquiry before allowing the deduction. However, the tribunal noted that the A.O. had indeed conducted an inquiry and had allowed the deduction based on the details provided by the assessee. The tribunal emphasized the distinction between "lack of inquiry" and "inadequate inquiry," stating that the latter does not justify the CIT's intervention under Section 263. The tribunal cited several case laws to support its decision, including: - CIT Vs. Western Outdoor Interactive P. Ltd.: This case established that if a deduction is allowed in the initial assessment year, it cannot be denied in subsequent years unless the initial allowance is withdrawn or there is a change in facts. - CIT Vs. Sunbeam Auto Ltd.: This case highlighted that the A.O. is not required to provide detailed reasons for each deduction in the assessment order, and that the CIT cannot assume jurisdiction under Section 263 merely because of a different opinion. Conclusion: The tribunal concluded that the A.O. had conducted a proper inquiry before allowing the deduction under Section 80-IB and that the CIT's order under Section 263 was unwarranted. The tribunal quashed the CIT's order and restored the assessment order passed by the A.O., allowing the assessee's appeal. Result: The assessee's appeal is allowed. The CIT's order under Section 263 is quashed, and the assessment order passed by the A.O. is restored. Pronounced in the open Court on 11th September, 2015.
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