2024 (1) TMI 658 - AT - Income Tax

Revision u/s 263 - Deduction u/s. 80IB(11) - CIT observed that the assessee had claimed and allowed deduction u/s. 80IB(11) of the Act, the undertaking is eligible for such said deduction subject to fulfillment of condition that it begins to operate such facility on or before first day of April, 1999, but before the first day of April, 2004. However, in this case, as per Form No. 10CCB, the date of commencement of operation/activity by the assessee was 01-04-2016 hence the assessee is not eligible for deduction u/s. 80IB(11) - as per CIT AO while completing the assessment has not examined the conditions stipulated in section 80IB(11A) as the assessee is having business of processing, observation and packaging of fruits and vegetables and whether he is eligible for the same deduction or not? - HELD THAT - It is pertinent to note that in the questionnaire asked by the AO, he has totally overlooked that the assessee is not eligible for deduction u/s. 80IB(11). Thus, AO has committed error which amounts to erroneous assessment order without looking into the proper/correct section that of section 80IB(11A) of the Act under which the assessee should have opted for deduction. Thus, this amounts to erroneous order as well as prejudicial to the interest of Revenue. The contention of the ld. A.R. that this is a mistake and it should have been rectified u/s. 154 will also not come in picture because the assessee has claimed deduction under the section which is not applicable to the assessee and has not pointed out this mistake at the assessment proceedings or after the assessment order passed. Once, the invocation of 263 has been done by the Pr. CIT, the assessee cannot state that the same is a mistake and can be rectified u/s. 154 of the Act. This revisionary power was rightly invoked by the PCIT u/s. 263 of the Act and therefore the appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Validity of revisional jurisdiction of Principal Commissioner of Income Tax (PCIT) regarding deduction u/s. 80IB(11) of the Income Tax Act, 1961.

Summary:
The appeal was filed against the order passed by the Principal Commissioner of Income Tax, Rajkot-1 for the assessment year 2017-18. The grounds of appeal mainly challenged the validity of the revisional jurisdiction of the PCIT. The appellant contended that the order passed by the PCIT was bad in law, invalid, and required to be quashed as it pertained to the allowability of deduction claimed u/s. 80IB(11A) of the Act. The appellant argued that the PCIT erred in alleging that the order u/s. 143(3) of the Act was erroneous and prejudicial to the interest of revenue, leading to the setting aside of the assessment order. The appellant also sought leave to amend or withdraw any grounds of appeal before the hearing.

The return of income for the assessment year 2017-18 was filed by the assessee, declaring total income and claiming deduction u/s. 80IB(11). The assessment was completed accepting the returned income and allowing the deduction. However, the PCIT observed that the assessee was not eligible for the deduction as the commencement of operation/activity did not meet the specified conditions. The PCIT issued a show cause notice under section 263 of the Act, directing a re-assessment. The appellant challenged this order, arguing that the assessment order was not erroneous or prejudicial to the revenue's interest.

During the proceedings, the appellant claimed eligibility for deduction u/s. 80IB(11A) but had claimed deduction u/s. 80IB(11) instead. The Assessing Officer had not considered this discrepancy, leading to an erroneous assessment order. The PCIT's revisionary powers were invoked under section 263, as the assessment order was found to be both erroneous and prejudicial to the revenue. The appellant's argument that the mistake could be rectified under section 154 was rejected, and the PCIT's order was upheld. The appeal of the assessee was dismissed, confirming the PCIT's decision.

In conclusion, the appeal challenging the validity of the revisional jurisdiction of the PCIT regarding deduction u/s. 80IB(11) was dismissed, upholding the PCIT's order passed under section 263 of the Income Tax Act, 1961.