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2020 (11) TMI 102 - HC - Income TaxRevision u/s 263 - Assessee's claim for deduction u/s 10B - whether AO actually applies his mind to the information that may be supplied by the Assessee? - distinction between merely calling for information on a particular issue and considering such information with due application of mind - HELD THAT - It is not possible to say that the CIT, in this case, acted under dictation from any extraneous authority. It is true that the CIT, in this case, in invoking revision jurisdiction, made reference to the SFIO report. However, that does not mean that the CIT acted under dictation. Any subsequent and allegedly changed SFIO report would not dent the exercise of jurisdiction by the CIT under Section 263 of the IT Act. AR urged that the as Assessee was indeed involved in manufacture and, therefore, was entitled to deduction under Section 10B but according to us, it was for the AO to examine the matter by due application of mind and, thereafter, decide afresh whether the Assessee was indeed entitled to deduction under Section 10B of the IT Act. The decision of the AO to allow such deduction to the Assessee without making any inquiries whatsoever or rather without addressing the issue in his order, rendered his order quite erroneous and prejudicial to the interests of the Revenue. At this stage, therefore, it will not be appropriate for us to examine the issue as to whether the Assessee indeed fulfilled the requirements of Section 10B of the IT Act during the relevant assessment year. It is for the Appellate Authority to go into the issue of eligibility of the Assessee for deduction under Section 10B of the IT Act during the relevant assessment year. Therefore, it will not be appropriate for us, at this stage and in these proceedings to go into such issues, now that we have held that there was no error in exercise of revision jurisdiction by the CIT for the relevant assessment year. - Decided against assessee.
Issues Involved:
1. Whether the CIT could consider the assessment order under Section 143(3) as erroneous and prejudicial to the revenue under Section 263 of the IT Act. 2. Whether the AO's assessment order lacked adequate consideration or was a case of no consideration regarding the deduction under Section 10B of the IT Act. 3. The relevance of subsequent ITAT orders allowing deductions under Section 10B for different assessment years. 4. The impact of the SFIO report on the exercise of revision jurisdiction by the CIT. Issue-wise Detailed Analysis: 1. CIT's Consideration of the Assessment Order under Section 263: The primary issue was whether the CIT could consider the assessment order passed by the AO under Section 143(3) as erroneous and prejudicial to the interest of the revenue within the meaning of Section 263 of the IT Act. The court noted that the AO's order dated 23/12/2009 did not discuss the claim for deduction under Section 10B of the IT Act, despite the revised return filed by the Assessee. The CIT issued a notice and subsequently set aside the AO's order, directing a fresh assessment. The court held that the CIT was justified in invoking Section 263 as the AO's order lacked any consideration of the Assessee's claim for deduction under Section 10B, making it erroneous and prejudicial to the interests of the revenue. 2. Adequate Consideration vs. No Consideration by the AO: The Assessee argued that the AO had raised specific queries and received responses regarding the deduction under Section 10B, implying adequate consideration. However, the court found that merely raising queries and receiving responses did not suffice. The AO must apply his mind to the information provided and form an opinion on the entitlement to the deduction. The court determined that the AO had not considered the information provided by the Assessee, making it a case of no consideration rather than inadequate consideration. This justified the CIT's exercise of revision jurisdiction under Section 263. 3. Relevance of Subsequent ITAT Orders: The Assessee cited ITAT orders from subsequent years allowing deductions under Section 10B to argue against the CIT's revision jurisdiction. The court clarified that the ITAT orders for different assessment years did not attain finality and were not relevant to the assessment year in question. Each assessment year must be considered independently based on the fulfillment of prerequisites for that year. The court held that the CIT's revision jurisdiction was correctly invoked for the relevant assessment year, irrespective of subsequent ITAT orders. 4. Impact of the SFIO Report: The Assessee contended that the CIT's notice invoking Section 263 was based on an SFIO report, which was later withdrawn. The court acknowledged the reference to the SFIO report but concluded that it did not indicate that the CIT acted under dictation from an extraneous authority. The court emphasized that the CIT's reference to the SFIO report did not invalidate the exercise of revision jurisdiction under Section 263. Conclusion: The court concluded that the substantial question of law was to be answered against the Assessee and in favor of the Revenue. The AO's order was found to be erroneous and prejudicial to the interests of the revenue due to the lack of consideration of the Assessee's claim for deduction under Section 10B. Consequently, the CIT's exercise of revision jurisdiction under Section 263 was upheld, and both appeals were dismissed with no order as to costs.
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