2017 (9) TMI 1026 - AT - Income Tax

Reopening of assessment - eligibility deduction under section 80 IB - Held that - CIT(A) has categorically held that assessee s investment in plant and machinery is below the specified limit and therefore it is entitled to deduction under section 80 IB of the income tax act. It was further held by him that in earlier years. The deduction has not been disturbed and therefore the eligibility conditions of the assessee are satisfied. Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT(A) before us with respect to deduction under section 80IB claimed by the assessee. He also could not controvert that investment in plant and machinery of the assessee is higher than the prescribed limit. In view of this we do not find any infirmity in the order of the Ld. CIT(A), in allowing the appeal of the assessee by allowing the relief under section 80 IB On reopening issue Before us no arguments were advance by the Ld. authorised representative. With respect to the same and we have also perused the order of the Ld. CIT(A), wherein this particular argument with respect to the jurisdiction was also not challenged. In view of this we are not inclined to accept the claim of the assessee against the jurisdiction assumed by the assessing officer. In view of this we dismiss the cross objection of the assessee. Validity of assessment under section 144C - TPA - period of limitation - need for draft assessment order - Held that - It is an admitted fact that Ld. Transfer Pricing Officer has not proposed any variation to the arm s length price of the international transactions entered into by the assessee. Therefore, the right course of action for the Ld. assessing officer was to pass an assessment order under section 143(3) of the Income Tax Act and not to pass the draft assessment order. The above issue is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in case of ESPN STAR SPORTS MAURITIUS S. N. C. ET COMPAGNIE(Now Known as Ess Advertising (Mauritius) S. N. C. ET Compagnie) 2016 (4) TMI 45 - DELHI HIGH COURT The final assessment order passed by the Ld. assessing officer is beyond the limitation period which should have been passed on or before 31st. December 2012, but was passed on 16/12/2013. In the result ground No. 1 of the appeal of the assessee is allowed and the assessment order passed by the Ld. assessing officer is quashed.

Issues Involved:
1. Deduction under Section 80IB of the Income Tax Act.
2. Assumption of jurisdiction under Section 147 of the Income Tax Act.
3. Assessment order passed beyond the time limit prescribed under Section 153 of the Income Tax Act.
4. Disallowance of expenses under Section 14A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deduction under Section 80IB of the Income Tax Act:
The Revenue appealed against the CIT(A)'s decision to allow the assessee's claim for deduction under Section 80IB, which had been disallowed by the AO. The AO had disallowed the deduction on the grounds that the assessee was not a small-scale industry and had started production after the sunset date of 31/03/1995. However, the CIT(A) found that the assessee's investment in plant and machinery was below the specified limit for a small-scale industry and that the deduction had been allowed in previous years. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue could not point out any infirmity in the CIT(A)'s order or prove that the investment exceeded the prescribed limit. Therefore, the Revenue's appeal was dismissed.

2. Assumption of jurisdiction under Section 147 of the Income Tax Act:
The assessee filed a cross-objection challenging the AO's assumption of jurisdiction under Section 147. The CIT(A) had noted that this ground was not pressed before it. The Tribunal found that no arguments were advanced by the assessee's representative on this issue, and the CIT(A)'s order was not challenged on this ground. Consequently, the Tribunal dismissed the cross-objection.

3. Assessment order passed beyond the time limit prescribed under Section 153 of the Income Tax Act:
For the assessment year 2009-10, the assessee contended that the final assessment order was passed beyond the time limit prescribed under Section 153. The AO had issued a draft assessment order and referred the case to the Dispute Resolution Panel (DRP), which dismissed the objections on the grounds that there was no variation proposed by the Transfer Pricing Officer (TPO). The Tribunal held that the AO should have passed the assessment order under Section 143(3) and not issued a draft order. Citing the Delhi High Court's decision in ESPN Star Sports, the Tribunal concluded that the final assessment order was beyond the limitation period and quashed it.

4. Disallowance of expenses under Section 14A of the Income Tax Act:
The assessee challenged the AO's disallowance of expenses under Section 14A amounting to ?20,06,906, in addition to ?80,000 disallowed by the assessee in its return. The Tribunal did not address this issue in detail because the assessment order was quashed on the grounds of being time-barred. Hence, this ground became infructuous and was dismissed.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection for the assessment year 2005-06. For the assessment year 2009-10, the Tribunal allowed the assessee's appeal, quashing the assessment order as it was barred by limitation. The issue of disallowance under Section 14A was rendered infructuous due to the quashing of the assessment order.

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