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2017 (9) TMI 848 - AT - Income TaxRevision u/s 263 - admissibility of deduction claimed u/s 80IC was not properly examined during the course of assessment proceedings - order erroneous and prejudicial to the interest of Revenue - Held that - In the instant case in the show cause notice issued, the Ld. CIT raised the fact that eligibility of deduction under section 80IC of the Act remain unexamined at the time of assessment. In our opinion, the audit report under section 10CCB and list of industries to be enclosed with license certificate issued by the drug license and controlling authority was necessary for examination of the claim of deduction under section 80IC of the Act and therefore no new issue has been raised by the CIT other than the issues raised in the show cause notice. The arguments of the Ld. counsel are not accepted and the decision relied upon by the Ld. counsel is not applicable over the facts of the instant case. In view of the above discussion, we are of the opinion that not examining the eligibility of deduction under section 80IC of the Act by the AO in the instant case had rendered the order of the AO not only erroneous but also prejudicial to the interest of Revenue, accordingly, CIT had correctly invoked the provisions of Section 263. Accordingly, the grounds of the appeal are dismissed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income-tax Act, 1961. 2. Examination of Deduction under Section 80IC. 3. Validity of Assessment Order under Section 143(3). 4. Filing of Audit Report in Form No. 10CCB. 5. Principles of Natural Justice. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income-tax Act, 1961: The principal issue was whether the Commissioner of Income Tax (CIT) was justified in assuming jurisdiction under Section 263 of the Income-tax Act, 1961. The CIT believed that the Assessing Officer (AO) did not properly examine the admissibility of the deduction claimed under Section 80IC during the assessment proceedings, making the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal upheld the CIT's jurisdiction under Section 263, noting that the AO failed to make necessary inquiries and verifications regarding the deduction claim. 2. Examination of Deduction under Section 80IC: The CIT observed that the process of drug coating over coronary stents did not amount to manufacturing and hence did not qualify for deduction under Section 80IC. The Tribunal noted that the AO did not carry out sufficient inquiries to verify whether the drug coating process constituted manufacturing as defined under Section 2(29BA) of the Act. The Tribunal agreed with the CIT that the AO's failure to properly examine the deduction claim rendered the assessment order erroneous and prejudicial to the interest of the revenue. 3. Validity of Assessment Order under Section 143(3): The assessee contended that the assessment order was void ab initio due to the lack of jurisdiction by the AO who issued the notice under Section 143(2). The Tribunal found that the notice was issued by the AO having jurisdiction at the relevant time based on the PAN database, and the subsequent transfer of the case to Dehradun was in accordance with the law. Therefore, the assessment order was valid. 4. Filing of Audit Report in Form No. 10CCB: The CIT noted that the assessee did not furnish the audit report in Form No. 10CCB during the assessment proceedings, which was necessary for claiming the deduction under Section 80IC. The Tribunal found no evidence that the audit report was filed along with the return of income or during the assessment proceedings. The Tribunal held that the examination of Form No. 10CCB was crucial for allowing the deduction, and the AO's failure to obtain and examine this report justified the CIT's action under Section 263. 5. Principles of Natural Justice: The assessee argued that the CIT's order violated the principles of natural justice as the issue of non-filing of Form No. 10CCB was not mentioned in the show cause notice. The Tribunal found that the show cause notice did raise the issue of the eligibility of deduction under Section 80IC, and the audit report in Form No. 10CCB was integral to this examination. Therefore, the Tribunal rejected the assessee's argument and held that the CIT's order did not violate the principles of natural justice. Conclusion: The Tribunal dismissed the appeal, upholding the CIT’s jurisdiction under Section 263 and confirming that the AO's failure to properly examine the deduction claim under Section 80IC rendered the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal also validated the assessment order under Section 143(3) and confirmed the necessity of filing the audit report in Form No. 10CCB.
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