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2017 (12) TMI 787 - AT - Income TaxRevision u/s 263 - benefit of deduction u/s 80IA - Held that - In the present case, the local authority is HUDA. Therefore, it is our considered opinion that the assessment order cannot be held erroneous on this count also because the Ld. Pr.CIT had a different view on this issue. Thus, the said assessment orders are not erroneous even if they might be prejudicial to the interest of the revenue and, therefore, they cannot be made a subject matter of revision u/s 263 of the Act. We are of the view that the assessment orders in question on the issue were neither erroneous nor prejudicial to the interest of the revenue and, therefore, the Ld. Pr. CIT was not justified in setting aside the same. Accordingly, we deem it fit to quash the orders passed u/s 263 of the Act by the Ld. Pr. CIT and restore the assessment orders initially framed by the Assessing Officer. - Decided in favour of assessee.
Issues Involved:
1. Validity of the orders passed under section 263 of the Income Tax Act, 1961. 2. Eligibility of the assessee for deduction under section 80IA of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of the orders passed under section 263 of the Income Tax Act, 1961: The appeals challenge the orders passed by the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act, 1961 for the assessment years 2011-12 and 2012-13. The Pr. CIT had issued show cause notices stating that the assessment orders were erroneous and prejudicial to the interest of the revenue. The Pr. CIT argued that the Assessing Officer (AO) had passed the orders in haste and without proper examination of the assessee's claim for deduction under section 80IA. The Pr. CIT proceeded to cancel the assessment orders and directed the AO to make fresh assessments. The ITAT examined whether the AO had made inquiries regarding the claim of deduction under section 80IA. It was found that the AO had indeed issued notices and required the assessee to furnish complete details and documentary evidence regarding the deduction. The AO had noted in the assessment orders that the claim for deduction under section 80IA was examined and found satisfactory. The ITAT held that the AO had made proper inquiries and the Pr. CIT's view that the AO had not conducted an inquiry was incorrect. The ITAT referred to various judicial precedents, including the Delhi High Court's decision in CIT vs Sunbeam Auto Ltd. and Vikas Polymers, which held that if the AO has made inquiries and the assessee has responded, the order cannot be termed erroneous merely because the AO did not elaborate on the issue in the assessment order. The ITAT concluded that the original assessment orders were not erroneous and prejudicial to the interest of the revenue, and the Pr. CIT was not justified in invoking section 263. 2. Eligibility of the assessee for deduction under section 80IA of the Income Tax Act, 1961: The assessee, a joint venture between two companies, was engaged by the Haryana Urban Development Authority (HUDA) for designing, constructing, testing, commissioning, operating, and maintaining water works. The Pr. CIT contended that the assessee was merely a works contractor and not eligible for deduction under section 80IA(4)(i)(b), which is available to enterprises engaged in developing, operating, and maintaining infrastructure facilities. The ITAT examined the nature of the assessee's activities and found that the assessee was involved in developing new infrastructure facilities, including water treatment systems, which qualify as water supply projects under section 80IA. The ITAT noted that the assessee had entered into an agreement with HUDA, a local authority, and procured materials and resources on its own. The ITAT referred to judicial precedents, including the ITAT Mumbai Bench's decision in Patel Engineering Company Ltd. vs. ACIT, which held that a contractor engaged in developing infrastructure facilities is eligible for deduction under section 80IA. The ITAT also noted that the Pr. CIT had relied on an ITAT Mumbai Bench decision in Patil & Sons (B.T) vs. CIT, which was later reversed by the Mumbai High Court. The ITAT concluded that the assessee was eligible for deduction under section 80IA and the assessment orders were not erroneous on this count. Conclusion: The ITAT quashed the orders passed under section 263 by the Pr. CIT and restored the original assessment orders, allowing the assessee's appeals. The ITAT held that the AO had made proper inquiries and the assessee was eligible for deduction under section 80IA. The orders passed by the Pr. CIT were found to be unjustified as the assessment orders were neither erroneous nor prejudicial to the interest of the revenue.
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