2023 (2) TMI 1065 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80IC - HELD THAT - Since this was the first year of claim of deduction by the assessee with respect to the Rudrapur unit u/s. 80IC of the Act, the Assessing Officer should have enquired into the eligibility of claim of deduction u/s. 80IC of the Act in detail during the course of assessment proceedings. Since this was the first year of claim of deduction, the AO should have enquired whether the Rudrapur unit was a new unit or whether it was merely an extension of existing unit, whether the conditions of splitting up or re-constitution of business have been satisfied etc. We observe that no specific query was made by the AO either by way of notice dated 14-09-2012 nor through any order sheet entry during the course of assessment proceedings with regard to claim of assessee u/s. 80IC - Though, the assessee submitted details relating to purchases, production and sales etc, however, no specific inquiry/investigation was made by the Assessing Officer as to the eligibility to the claim of the assessee in respect of the new unity u/s. 80IC for the Rudrapur unit. Accordingly, we are of the considered view that the AO has not enquired into eligibility of Rudrapur unit to claim deduction u/s. 80IC of the Act. No infirmity in the order of ld. PCIT by holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and directing the Assessing Officer to conduct a proper inquiry and verification relating to the eligibility of the claim of the assessee in respect of profits of Rudrapur unit u/s. 80IC of the Act.Appeal of the assessee is dismissed.

Summary

Issues involved:
Appeal against order invoking section 263 of the Income Tax Act for A.Y. 2010-11.

Analysis:
1. The assessee appealed against the order of the Commissioner of Income Tax-2, Rajkot invoking section 263 of the Income Tax Act for A.Y. 2010-11. The Principal CIT observed that the Assessing Officer failed to properly examine the eligibility of the assessee's claim of deduction under section 80IC of the Act for the Rudrapur unit. The PCIT set aside the assessment order due to lack of inquiry and directed the Assessing Officer to conduct a thorough verification of various aspects related to the claim of deduction. The PCIT found a complete absence of scrutiny regarding the eligibility of the new unit to claim deduction under section 80IC of the Act. The PCIT deemed the assessment order as erroneous and prejudicial to the interest of revenue, leading to the direction for a proper inquiry and verification.

2. The assessee contended that during the assessment proceedings, various details regarding the Rudrapur Unit were submitted, indicating that the Assessing Officer did inquire into the claim of deduction. The assessee argued that all necessary details were provided, including expenses of the Rudrapur unit, and pointed out that the ITAT had allowed the deduction claim for the succeeding assessment year. The counsel highlighted the submission of details in response to a notice by the Assessing Officer and argued that the assessment order was not erroneous or prejudicial. However, the Departmental Representative supported the PCIT's observations in the 263 order.

3. The ITAT analyzed the assessment proceedings and found that the Assessing Officer did not raise specific queries regarding the eligibility of the claim of deduction for the Rudrapur unit under section 80IC of the Act. It was noted that this was the first year of claiming deduction for the Rudrapur unit, and despite submissions by the assessee, no detailed discussion or inquiry was made regarding the claim of deduction. The ITAT observed that while the assessee provided certain details, there was no specific query raised by the Assessing Officer during the assessment proceedings regarding the eligibility of the claim. Consequently, the ITAT concluded that the Assessing Officer did not adequately inquire into the eligibility of the Rudrapur unit to claim deduction under section 80IC of the Act. Therefore, the ITAT upheld the PCIT's decision, considering the assessment order as erroneous and prejudicial to the revenue's interest, and dismissed the appeal.

In conclusion, the ITAT affirmed the PCIT's decision to set aside the assessment order and direct a proper inquiry into the eligibility of the claim of deduction for the Rudrapur unit under section 80IC of the Income Tax Act. The ITAT found that the Assessing Officer failed to conduct a detailed examination of the eligibility criteria, leading to the dismissal of the assessee's appeal.