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TMI Blog2021 (4) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, depreciation would have also been accounted for. Earlier value of the assets was reported by the assessee at ₹ 1.68 crores. It has made further addition of ₹ 1.70 crores in the gross block of assets. Hon ble Delhi High Court in the case of DG Housing Projects Ltd. [ 2012 (3) TMI 227 - DELHI HIGH COURT] has held that the ld.Commissioner should have not relegated to the point that assessment order is erroneous to the AO himself. The ld.Commissioner, after analyzing the record, ought to have recorded a categorical finding as to how the assessment order is erroneous. In the present case also, when the assessee took a specific plea in its reply that it has made substantial expansion in the Asstt.Year 2011-12, and it has produced those details, then the ld.Commisisoner ought to have considered the same, and should have recorded a categorical finding. Had that been done, then it would have avoided the second round of litigation at the level of the AO - The assessment order was passed under section 143(3) in the Asstt.Year 2011-12. Its claim of depreciation on enhanced value of the asset was not disturbed and therefore it is to be construed that these substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80IC of the Act. It has claimed exemption of ₹ 11,02,39,702/- being 100% profit earned from industrial undertaking located at Uttaranchal. The AO has passed an assessment order under section 143(3) and allowed deduction. The ld.Commissioner pursued the record and observed that exemption under section 80IC is admissible at the rate of 100% for initial five years i.e. from the year in which the assessee had commenced commercial production from the unit and claimed deduction. The ld.CIT further observed that the assessee had claimed exemption for the first time in the Asstt.Year 2010-11. Therefore, this exemption was admissible upto the Asstt.Year 2014-15. The present assessment year is Asstt.Year 2015-16, and according to the ld.Commisssioner, exemption at the rate of 100% is not available to the assessee in this year. The ld.Commissioner further observed that exemption at the rate of 100% was claimed at ₹ 11,02,39,702/-. However, being sixth year, it was eligible for exemption of ₹ 3,30,71,911/- at the rate of 30%. Thus, according to him, excess exemption was allowed to the assessee under section 80IC by the AO for the Asstt.Year 2015-16. He issued show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed below: INDUSTRIAL UNDERTAKING IN SPECIAL CATEGORY STATES-SPECIAL DEDUCTION-INITIAL. ASSESSMENT YEARDWEFINITION- UNIT-AVAILING AT 25 PER CENT. FOR NEXT FIVE YEARS- CARRYING OUT SUBSTANTIAL EXPANSION WITHUIN TEBN YEARS PERIOD-YEAR OF SUBSTANTIAL EXPANSION WOULD BE INITIA EAR FOR START OF 100 PER CENT- DEDUCTION-BUT TOTAL PERIOD OF DEDUCTION NOT TO EXCEED TEN YEARS-INCOME TAX ACT, 1961 S.80IC PRECEDENT-SUPREME COURT-DECISION IN CLASSIC BINDING INDUSTRIES' CASE DOES NOT LAW DOW CORRECT LAW. INTERPRETATION OF TAXING STATUTES-INTENTION OF LEGISLATURE TO BE SEEN Therefore the controversy o claiming 100% deduction u/s.80IC in the year of substantial expansion also stand concluded by the decision of Hon'ble Apex Court as quoted above. The question before the Hon'ble Court was as under: Whether on assessee who set up of a new industry of a kind mentioned in sub-section (2) of section 80IC of the Act and starts availing exemption of 100 percent tax under sub-section(3) of Section 80IC (which is admissible for five years) can start claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove and also after gathering and examining other suitable evidence / making field enquiries and verification as necessary on facts of the case and make the assessment denovo. 6. The ld.counsel for the assessee at the outset submitted that the issue in dispute is squarely covered by the latest decision of Hon ble Supreme Court rendered in the case of Aarham Softronics, (2012) 102 taxmann.com 343 (SC). He contended that in this decision, Hon ble Supreme Court has propounded that expression initial year provided in section 80IC is to be read in such a manner that on substantial expansion, the assessee can claim second initial assessment year. In other words, section 80IC can be availed by a eligible unit at the rate of 100% for the five years from the initial year it was claimed, but if an assessee made substantial expansion during the period of those five years, then it can select the second initial year and subsequently thereafter it can claim exemption at the rate of 100% for the next five years. He placed on record copy of this decision. The ld.counsel for the assessee thereafter took us through the ledger and pointed out that in the F.Y.2010-11, the assessee has made a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s up a new industry of a kind mentioned in sub-section (2) of Section 80-IC of the Act and starts availing exemption of 100 per cent tax under sub-section (3) of Section 80-IC (which is admissible for five years) can start claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit? 12. After detailed discussion, the Hon ble Court has laid down the following ratios: 24. The aforesaid discussion leads us to the following conclusions: (a) Judgment dated 20th August, 2018 in Classic Binding Industries case omitted to take note of the definition 'initial assessment year' contained in Section 80-IC itself and instead based its conclusion on the definition contained in Section 80-IB, which does not apply in these cases. The definitions of 'initial assessment year' in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of 'initial assessment year' under Section 80-IC has made all the difference. Therefore, we are of the opinion that the aforesaid judgment does not lay down the correct law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year was passed under a scrutiny assessment and the copy of this assessment order has also been placed on record by the assessee at page no.70 of the paper book. The ld.AO has passed an assessment order on 12.3.2014 under section 143(3). The detailed explanations were available in the income-tax record, because the addition of ₹ 1.70 crores in the plant machinery would increase WDV of the assets, and accordingly, depreciation would have also been accounted for. Earlier value of the assets was reported by the assessee at ₹ 1.68 crores. It has made further addition of ₹ 1.70 crores in the gross block of assets. Hon ble Delhi High Court in the case of DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) has held that the ld.Commissioner should have not relegated to the point that assessment order is erroneous to the AO himself. The ld.Commissioner, after analyzing the record, ought to have recorded a categorical finding as to how the assessment order is erroneous. In the present case also, when the assessee took a specific plea in its reply that it has made substantial expansion in the Asstt.Year 2011-12, and it has produced those details, then the ld.Commisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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