2016 (3) TMI 145 - AT - Income Tax

Revision u/s 263 - reconsider the deduction claimed by the assessee u/s.80-IA - splitting of existing business structure - Held that - If an assessment order is passed by AO without making requisite enquiries or examining the claim of assessee perse an erroneous order and hence, it is amenable to revisionary jurisdiction u/s.263 of the Act; AO having simply accepted the income declared by the assessee and without any application of mind or enquiry, though the assessee company was not granted with the similar deduction in earlier assessment years, therefore, the CIT can exercise his jurisdiction u/s.263 of the Act. But every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. If the AO adopted one view of the course permissible in law and it is resulted in loss to the Revenue, where two views are possible and with which CIT does not agree, it cannot be treated as an erroneous order, prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. In the present case as the facts brought on record suggests that the similar claim of assessee u/s.80-IA for assessment year 2009-10 to held that new unit established by the assessee for manufacturing articles used as intermediate products in the old division, which the assessee was buying from the market earlier, is not reconstruction of business already in existence. To constitute reconstruction, there must be transfer of assets of the existing business to the new industrial undertaking. In our opinion, generation of power unit is separate and distinct undertaking for which separate approval was obtained and it cannot be said that splitting of existing business structure. Therefore, in our considered opinion, the lower authorities are not correct in denying the deduction under section 80IA of the Act - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT).
2. Reconsideration of deduction claimed under Section 80-IA of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT):
The primary issue revolves around the CIT invoking jurisdiction under Section 263 of the Income Tax Act to re-examine the deduction claimed by the assessee under Section 80-IA. The CIT issued notices to the assessee and concluded that the deduction under Section 80-IA, which was previously disallowed for the assessment year 2009-10, required re-examination by the Assessing Officer (AO). The CIT directed the AO to pass an appropriate order based on merit.

The assessee contested this, arguing that the Tribunal had already granted the deduction under Section 80-IA for the assessment year 2009-10, and thus, the CIT could not invoke Section 263 without pointing out any specific error in the assessment order. The Tribunal noted that if an assessment order is passed by the AO without requisite enquiries, it is considered erroneous and amenable to revision under Section 263. However, a mere loss of revenue does not justify revision unless the AO's view is unsustainable in law.

2. Reconsideration of Deduction Claimed under Section 80-IA of the Income Tax Act:
The Tribunal examined the facts and legal position regarding the deduction under Section 80-IA. The assessee had constructed a cogeneration building and invested significantly in new machinery and buildings, maintaining separate books of accounts for the new unit, which started operations in September 2004. The assessee claimed the deduction under Section 80-IA from the assessment year 2008-09 onwards, which was accepted by the department for subsequent years.

The Tribunal referred to its previous order dated 24.07.2015, which held that the new unit was distinct and independent, not formed by splitting up or reconstruction of the existing business. The Tribunal emphasized that the new unit must have a separate physical existence, employ fresh capital, and produce goods independently of the old unit. It concluded that the new power generation unit met these criteria and was eligible for the deduction under Section 80-IA.

The Tribunal found that the CIT's order dated 27.03.2015, which directed re-examination of the deduction, was not sustainable in light of the Tribunal's previous decision favoring the assessee. Therefore, the Tribunal allowed the assessee's appeal, stating that the CIT's order had no leg to stand on.

Conclusion:
The Tribunal concluded that the CIT's invocation of jurisdiction under Section 263 was not justified as the issue of deduction under Section 80-IA was already settled in favor of the assessee by the Tribunal's previous order. The appeal of the assessee was allowed, and the CIT's order was set aside.

Order Pronounced:
The order was pronounced on 15th February 2016 at Chennai, allowing the appeal of the assessee.