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TMI Blog2020 (1) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order. Considering the aforesaid legal discussion, we are of the considered view that the view taken by the AO in accepting the explanation furnished by assessee in response to the show cause notice dated 18-12-2017 during re-assessment was one of the possible views and the order dated 29-12-2017 is not erroneous though may be prejudicial to the interest of revenue. Thus, the twin conditions as enumerated in section 263 is not fulfilled, hence, the revision of the assessment order is not justified. More over the issue on which the order is revised is debatable issue. Considering the fact that twin conditions as enunciated in section 263 are not satisfied, therefore, the revision order passed u/s 263 dated 25-06-2018 is set aside / quashed. Appeal of the assessee is allowed. - ITA No. 4911/Mum/2018 - - - Dated:- 15-1-2020 - Shri R.C. Sharma (A.M.) Shri Pawan Singh (JM) Appellant by: Shri Madhur Agarwal Advocate Respondent by: Shri A. Mohan CIT-DR ORDER Pawan Singh, JM : 1. This appeal by assessee under section 253 of Income tax Act (Act), is directed against the order of learned Commissioner of Income Tax- Large tax Unit (CIT)(LTU) passed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income and the order passed by AO was erroneous and prejudicial to the interest of revenue. On the basis of aforesaid observation, the Ld. CIT (LTU) issued show cause notice to the assessee u/s 263 vide notice dated 0102-2018. 4. The assessee filed its reply dated 22-02-2018. In the reply the assessee, besides other contentions stated that in the draft assessment order dated 30-05-2014, certain addition / disallowance was proposed which consisted of certain transfer pricing adjustment to the total income. The AO in the draft assessment order held that tax holiday benefit u/s 10B should be restricted to the assessee s gross business income. The AO computed tax holiday benefit u/s 10B of ₹ 69.46 crores (excluding TP adjustment) instead of ₹ 90.21 crores as claimed by the assessee in its return of income. Against the proposed addition, the assessee filed objection before DRP, which was disposed of vide direction dated 09-06-2015. In the said direction, apart from other directions, the DRP directed to allow deduction u/s 10B as claimed by assessee in its return of income. Accordingly, final assessment order dated 27-07-2015 was passed u/s 143(3) r.w.s. 144C (13) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by AO is clearly erroneous and prejudicial to the interest of revenue. The ld. CIT (LTU) further took her view that as per Proviso to section 92C(4), no deduction u/s 10A (or 10AA or 10B or under Chapter VIA) shall be allowed in respect of amount of income by which total income of assessee is enhanced after computation of income under this sub section. The Ld. CIT(LTU) referred the decision of Tribunal in Agiligys I.T. Services India (P) Ltd ( 2015) 58 taxmann.com 284 (Mumbai-Trib.) and Deloitte Consulting India Pvt Ltd.( ITA 157/Mum/2012). On the basis of aforesaid observation, the Ld.CIT (LTU) directed the AO to withdraw the deduction u/s 10B. 6. Aggrieved by the order of CIT(LTU), the assessee has filed the present appeal before this Tribunal, by raising the following grounds of appeal:- Appeal under section 253(1) of the Income-tax Act, 1961 ('Act') against the order dated 25 June 2018 (received by the Appellant on 2 July 2018) passed under section 263 by the Commissioner of Income-Tax, Large Taxpayer Unit, Mumbai ('CIT'). All Grounds of Appeal are independent and without prejudice to the other grounds GROUNDS OF APPEAL 1. Re: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the learned CIT has erred in not passing an order disposing the objections filed by the Appellant against the proceedings under section 263 thereby not granting an opportunity of making submissions on the merits of the case. 7. We have heard the submission of learned authorised representative (Ld.AR) of the assessee and learned departmental representative (Ld. DR) for revenue and perused the material available on record. The Ld. AR of the assessee submits that the re-assessment order dated 2912-2017 passed by AO is not erroneous. The issue raised by Ld. CIT (LTU) in her show cause notice u/s 263 with regard to allowance / disallowance of deduction u/s 10B is a debatable issue. The issue related with the deduction under section 10B was examined by assessing officer while passing the Draft assessment order and certain disallowance, which was objected the assessee by filing objections before DRP. Again this issue was examined by AO in re-assessment order and after considering and examining the fact no additions was made. The ld AR for the assessee submits that the proviso with section 92C(4) is not attracted, when the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to section 94C(4). 11. The Ld.AR of the assessee invited our attention to question No.1 as mentioned in notice dated 08-12-2017, copy of which is placed on record as page 262 of the paper book wherein the AO raised the following quarry:- (i) As per provisions of section 10B of the Act, the profit gains derived by newly established 100% export oriented undertaking from export of article or thing or computer software is eligible for deduction at prescribed rate subject to certain conditions specified therein. Further proviso to section 92C(4) provides that deduction under section 10A / 10B / 10AA is not admissible on income enhanced due to transfer pricing addition. Further, the ITAT K Bench Mumbai vide order dated 15-07-2015 in the case of Deloitte Consulting India Pvt Ltd vs ITO -2(2)(3) Mumbai [ITA No.157/Mum/2012] has held that the suo motu enhancement or adjustment made to arm s length price made by the assessee is not eligible for 10A deduction. 12. The Ld.AR further submits that the assessee filed detailed reply to the show cause notice dated 08-12-2017 vide its reply dated 18-12-2017 and explained that in the draft assessment order, the AO held that tax holi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) and Hon ble Jurisdictional High Court in case of Gabriel India Ltd. (supra) and has laid down the following broader principle to examine the action of CIT taken under section 263: The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. The twin conditions must be fulfilled. Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. If the order is passed without application of mind, such order will fall under the category of erroneous order. Every loss of revenue cannot be treated as prejudicial to the interests of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to all the issue as no addition was made on this issue. We are also of the view that when the Assessing Officer examines the raised issue and made inquiry applies his mind then Learned Commissioner would not be justified to substitute his estimate of income in place the income estimated by the AO. The application of mind at the end of the AO can be ascertained either from the discussion available in the assessment order or from the questionnaire issued by him on the specific issues and replies submitted by the assessee. The explanation submitted by the assessee should be plausible one and in consonance with the query of the Assessing Officer. In the reply the assessee has clearly explained that while passing the draft assessment the AO computed tax holiday benefit u/s 10B of ₹ 69.46 crores instead of ₹ 90.21 crores as claimed by assessee in its return of income, against the suo moto disallowance of the assessee on account of deduction under section 10B. 17. There is no dispute that initially assessment was completed u/s 143(3) r.w.s. 144C13) on 27-07-2015 making various additions / adjustments with regard to the ALP of international transactions reported by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished by the assessee to the show cause notice u/s 263. The Ld.CIT (LTU) simply concluded that the contention of assessee that DRP has considered the issue is incorrect. The DRP has not considered the Proviso to sub section (4) of section 92C. The AO while following the direction of DRP have not taken cognizance of statutory provision of section 92CA(4). 20. It is pertinent to note here that the Ld.CIT(LTU) issued show cause notice for revision of assessment order dated 29-12-2017 passed u/s 143(3) r.w.s. 147. However, at para 6 of the impugned order, the Ld.CIT(LTU) discussed the contents of draft assessment order passed in pursuance of direction of DRP though it was not the subject matter of show cause notice. Before us, the Ld.AR of the assessee vehemently submitted that Hon ble Karnataka High Court in the case of I Gate Global Solutions Ltd (supra) while considering the question of law whether the Tribunal was correct in holding that deduction u/s 10A is allowable in respect of income computed on ALP by ignoring Proviso to section 92C(4) held that the Proviso applied to the cases where ALP was determined by assessing authority. Further, the Delhi Tribunal in A.T. Kearney I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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