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TMI Blog2018 (8) TMI 1628X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under consideration, accepting fulfillment of this eligibility condition, cannot be construed as erroneous. Going by the above interpretation of the provision, the AO was precluded from examining as to whether the assessee set up its new unit or it was a reorganization of the existing unit in the relevant year. The assessment order not discussing the examination of such a condition cannot be termed as erroneous. Once an assessment order cannot be held as erroneous, the CIT cannot exercise revisional power u/s 263, which requires a cumulative satisfaction of the twin conditions, viz., the erroneous assessment order and the same being prejudicial to the interest of the Revenue. We are confronted with a situation in which the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated on 19.08.2004 and it commenced its operations on 29.03.2010. He further noticed that during the course of assessment proceedings for the subsequent assessment year, namely, 2014-15, it transpired that the assessee was engaged in trading activity from Parwanoo area prior to the setting up of the present manufacturing unit. The assessee was also found to have stated in its reply during the course of assessment proceedings for the A.Y.2014-15 that prior to setting up of new manufacturing unit in the notified area in the State of Himachal Pradesh, it was having a manufacturing unit on a very small scale situated in the premises of a family-owned unit run under the name of BCI Optical Disc Ltd. at Kundli, Haryana. The ld. CIT found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80IC. The ld. CIT has held the assessee to be not eligible for deduction u/s 80IC on the ground that the eligible unit was formed by reconstruction of a business already in existence. Thus, it is apparent that the only raison d etre for the revision of the assessment order is the non-fulfilment of the eligibility condition of not setting up a new business. 4. Recently, the Hon ble Supreme Court has delivered a judgment in DCIT vs. Ace Multi Axes Systems Ltd. (2018) 400 ITR 141 (SC) on the eligibility of deduction u/s 80IBof the Act. The assessee in that case was originally allowed deduction u/s 80-IB, which section contained one of the conditions as the assessee being a small scale industry (SSI). In the relevant year under consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as employment of particular number of workers as per sub-clause 4(i) of Clause 2 in an assessment year. For industrial undertakings other than small scale industrial undertakings, not manufacturing or producing an article or things specified in 8th Schedule is a requirement of continuing nature. This is how, the Hon ble Supreme Court laid down that an incentive meant for small scale industrial undertakings cannot be availed by industrial undertakings which do not continue as small scale industrial undertakings during the relevant period. Thus, it is graphically clear from the judgment that there are two types of conditions, which need to be examined. First are the conditions, which need to be examined only in the initial year, such as, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an article specified in the Thirteenth Schedule or (b) any article or thing specified in the Fourteenth Schedule, needs to be fulfilled on year to year basis. However, the condition of not formed by splitting up, or the reconstruction of a business already in existence or by the transfer to a new business of machinery or plant previously used for any purpose, are required to be established in the initial year alone. 6. Adverting to the facts of the instant case, we find that the initial year of the assessee for the purposes of deduction u/s 80IC is A.Y. 2010-11. Deduction was actually claimed for the first time in A.Y. 2011-12 and then in A.Y. 2012-13. Such a deduction was allowed by the Revenue albeit without making a regular assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had passed such order for the `initial year without making relevant enquiry. Extantly, we are confronted with a situation in which the assessment year under consideration is the third year of the claim of deduction u/s 80IC of the Act. Having allowed such deduction in the immediately preceding two assessment years, the AO was not supposed to re-examine the eligibility condition of the new unit having been set up in the current year as well. In this view of the matter, the impugned order setting aside such an assessment order on the ground that the AO did not examine such eligibility condition in the third year, which ought to have been examined in the initial year, cannot be sustained. We, therefore, set aside the impugned order. 8. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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