2019 (9) TMI 489 - AT - Income Tax

Disallowance of deduction u/s 80IB(11A) - as alleged assessee is not engaged in the business of integrated bulk handling storage transportation of food grains and in fact the assessee is engaged in dehusking of paddy into rice and such this is not qualified for deduction u/s.80IB(11A) - HELD THAT - Hon ble Madras High Court in the case of M/s Muthuramalingam Modern Rice Mill 2019 (3) TMI 1104 - MADRAS HIGH COURT answered the question in negative i.e against the Revenue and in favour of the assessee by holding that there is no reason to hold that the activity of dehusking of paddy into rice will not amount to manufacture or production and there is no justification to give a narrower meaning to these terms, therefore, the assessee is entitled for claim of deduction u/s.80IB(11A) of the Act. AO was not correct in disallowing the benefit of Section 80IB(11A) to the assessee and, thus, the CIT(A) was not also correct and justified in confirming the disallowance made by the AO. Sole ground of assessee is allowed and the AO is directed to allow the deduction as claimed by the assessee u/s.80IB(11A) Revision u/s 263 - HELD THAT - We failed to understand on which basis the CIT held that the assessment order dated 27.12.2016 is erroneous or prejudicial to the interest of revenue without calling and perusing the relevant assessment records an merely on the basis of proposal for revision sent to him by the ITO, Ward-1, Ranchi. From the assessment order dated 27.12.2016 AO has examined the claim of the assessee u/s.80IB and thereafter held that the assessee is entitled for claim of deduction u/s.80IB(11A) hence, it is not a case of no enquiry. CIT is empowered to revise the assessment order where such assessment order is erroneous or prejudicial to the interest of revenue after calling and examining the relevant assessment records and holding that either there is no enquiry or there is insufficient or inadequate enquiry by the AO on a particular issue but no such exercise has been undertaken by the ld. Pr. CIT while passing the impugned order u/s.263 of the Act either - no hesitation to hold that Pr. CIT has proceeded to revise the scrutiny assessment order and directing the AO to decide the issue afresh i.e. for making rowing enquiry which is not permissible u/s.263 of the Act. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of deduction u/s 80IB(11A) for assessment year 2013-2014.
2. Revision of assessment order for assessment year 2014-2015 under Section 263 of the Act.

Issue 1: Disallowance of deduction u/s 80IB(11A) for assessment year 2013-2014:
The assessee, a ricemill operator, filed appeals against disallowance of deduction u/s 80IB(11A) for the assessment year 2013-2014. The Assessing Officer disallowed the claim, assessing total income at a higher amount. The CIT(A) upheld the disallowance, leading to the appeal before the Tribunal. The Authorized Representative argued that the activity of dehusking paddy into rice qualifies as "manufacture or production," citing a judgment by the Madras High Court. The Departmental Representative contended that the assessee's business did not qualify for the deduction. The Tribunal observed that the assessee was allowed the deduction for the subsequent assessment year and referred to the Madras High Court judgment, concluding that the assessee was entitled to the deduction. The appeal was allowed, directing the AO to allow the deduction claimed by the assessee.

Issue 2: Revision of assessment order for assessment year 2014-2015 under Section 263 of the Act:
The assessee appealed against the order passed by the Principal CIT under Section 263 for the assessment year 2014-2015, setting aside the assessment for fresh assessment. The Authorized Representative argued that the Principal CIT's order lacked proper examination of relevant records and findings. The Departmental Representative supported the Principal CIT's decision, stating that the AO did not adequately consider the claim of the assessee. The Tribunal analyzed the Principal CIT's order and found that it lacked a valid basis for deeming the assessment order erroneous and prejudicial to revenue. The Tribunal noted that the Principal CIT did not conduct a thorough examination of relevant records and did not establish the assessment order's errors. Consequently, the Tribunal quashed the Principal CIT's order and allowed the assessee's appeal.

In conclusion, both appeals of the assessee were allowed by the Tribunal, with detailed reasoning provided for each issue, resulting in a favorable outcome for the assessee in both cases.