2021 (9) TMI 511 - AT - Income Tax

Revision u/s 263 - grant of deduction u/s 80IA(4) of the Act has not been made in accordance with the provisions of the Act - Whether order is erroneous and prejudicial to the interest of revenue? - HELD THAT - Hon ble Supreme Court in Malabar Industrial Company Ltd. 2000 (2) TMI 10 - SUPREME COURT has held that the Commissioner has to satisfy himself of both the conditions i.e. the order is erroneous and prejudicial to the interest of revenue. Assessing Officer has raised only a query before completion of assessment u/s 143 (3) relating to claim of 80IA(4). However, the Assessing Officer has not given any cogent finding. Thus, the observation of the Principal Commissioner of Income Tax that the assessment order is erroneous and prejudicial to the interest of the Revenue does have footing. DR s contention that the activities for which claim u/s 80IA (4) was claimed does not come under the purview of infrastructure project specifically Clause (b) is also correct proposition. Although the assessee has given the details relating to infrastructure projects, these are included in the definition of infrastructure project u/s 80IA of the Act, amended position which come into effect from 01/04/2015. The A.O has not applied the proper interpretation of Section 80IA(4) in consonance with evidence. Thus, the Principal Commissioner of Income Tax has rightly invoked Section 263 - Decided against assessee.

Summary

Issues:
1. Jurisdiction under Section 263 of the Income Tax Act regarding assessment orders for AY 2011-12 & 2012-13.
2. Claim of deduction under Section 80IA(4) based on infrastructure projects.
3. Correct interpretation and application of Section 80IA(4) by the Assessing Officer.
4. Validity of the order passed by the Principal Commissioner of Income Tax under Section 263.

Detailed Analysis:
1. The appeals were filed against orders passed by the Principal Commissioner of Income Tax for AY 2011-12 & 2012-13. The appellant challenged the jurisdiction of the Principal CIT under Section 263, arguing that the original assessment order was not erroneous or prejudicial to revenue. The appellant contended that the claim under Section 80IA(4) was valid and based on facts and legal provisions, emphasizing that there was no lack of enquiry or application of mind by the Assessing Officer. The appellant also highlighted that the Principal CIT's order was merely a change of opinion and not sustainable under the law.

2. The assessee, a State Corporation, claimed deduction under Section 80IA(4) for operating infrastructural projects. The Assessing Officer accepted the claim in the original assessment. However, the Principal CIT issued a show cause notice under Section 263, alleging that the deduction was not in accordance with the law. The Principal CIT held that the grant of deduction was erroneous and prejudicial to revenue. The appellant argued that the Assessing Officer had raised specific queries regarding the claim during assessment proceedings and that the Principal CIT formed a second opinion, which was impermissible under Section 263.

3. The Assessing Officer's failure to give a cogent finding on the claim under Section 80IA(4) led the Principal CIT to invoke Section 263. The Principal CIT correctly pointed out that the activities claimed did not align with the definition of an infrastructure project under Section 80IA(4). The Principal CIT's decision was supported by the fact that the A.O did not interpret Section 80IA(4) correctly in line with the evidence provided. The Principal CIT considered the order to be both erroneous and prejudicial to revenue, meeting the criteria set by the Supreme Court in similar cases.

4. The Tribunal, after hearing both parties, upheld the Principal CIT's order under Section 263. It was noted that the Assessing Officer's failure to properly adjudicate the issue in accordance with the law justified the Principal CIT's invocation of Section 263. The Tribunal dismissed the appeals, affirming the correctness of the Principal CIT's order and emphasizing that it was not a mere correction of an error but a valid exercise of jurisdiction under Section 263.

In conclusion, the Tribunal upheld the order passed by the Principal Commissioner of Income Tax under Section 263, dismissing the appeals filed by the assessee.