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TMI Blog2022 (10) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s. 80JJAA and that the AO has not brought out anything on record to show that he has examined the correctness of the claim for the year under consideration. It is noticed that the PCIT in the show cause notice has also listed out the discrepancies in the claim of deduction u/s.80JJAA which according to the PCIT should have been done by the AO and to that extent the PCIT has found the order of the AO to be erroneous and prejudicial to the interest of the revenue. In view of decision of Infosys Technologies Ltd. [ 2012 (1) TMI 76 - KARNATAKA HIGH COURT] and Gee Vee Enterprises [ 1974 (10) TMI 29 - DELHI HIGH COURT] we hold that the PCIT was justified in assuming the jurisdiction u/s 263 of the Act by setting aside the assessment order. Appeals of the assessee are dismissed. - ITA Nos. 346 & 347/Bang/2022 - - - Dated:- 22-8-2022 - SHRI N.V. VASUDEVAN, VICE PRESEIDENT AND SHRI PADMAVATHY S, ACCOUNTANT MEMBER Assessee by: Shri Padamchand Khincha, CA Respondent by: Shri Rajesh Kumar Jha, CIT(DR)(ITAT), Bengaluru. ORDER Per Padmavathy S., Accountant Member These appeals by the assessee are against the separate orders of the Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the submissions made by the Assessee substantiating that the none of the grounds raised in the show cause notice would cause the impugned assessment order to be erroneous in so far as it is prejudicial to the interest of Revenue. 2.9 Without prejudice, the learned PCIT has erred in invoking revisionary powers under section 263 on debatable issues identified in the impugned show cause notice. 2.10 The learned POT has erred in shirking and rejecting the explanations of the Assessee stating that such explanations are not acceptable under 263 proceedings. The learned POT has failed to appreciate that section 263 postulates an enquiry by him before arriving at a conclusion that the order if erroneous in so far as it is prejudicial to the interest of the revenue. 2.11 The learned PCIT has erred in relying on the survey proceedings which is bad in law as: a) the findings in the survey proceedings are tentative; b) the findings, it at all, are of the AO, which if relied on by the POT, would tantamount to borrowed satisfaction; c) the AO has adequate powers to initiate proceedings to effectuate the survey findings, what the PCIT has impugned upon, without awaiting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit 1(2), Bangalore in assessee s case on 8.7.2021 and that during the course of survey proceedings, evidence regarding wrong claim of deduction u/s. 80JJA of the Act by the assessee was found. The PCIT therefore issues a show cause notice to the assessee as to why the order of assessment u/s. 263 of the Act should not be enhanced / modified or the assessment order set aside for fresh assessment. The PCIT raised several points pertaining to claim of deduction u/s. 80JJA of the Act by the assessee in the show cause notice. The assessee provided clarification with regard to the queries raised by the PCIT. The PCIT did not go into the merits of the submissions and proceeded to set aside the order of assessment by invoking clause (a) of Explanation 2 to section 263 of the Act by observing that the AO did not examine the allowability of the claim of assessee u/s. 80JJAA and to that extent the order of the AO was erroneous and prejudicial to the interests of the revenue. The relevant extract of the order of the PCIT for AY 2017-18 is as under:- 5. I have considered the assessee's submissions and have gone through the assessment records. The assessee has made detailed submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse to the aforesaid notice stating that the Assessee has claimed a deduction of Rs. 3,30,26,436 u/s. 80JJAA. It was further submitted that the Assessee is eligible for deduction under section 80JJAA in relation to the additional employee cost incurred during FY 2016-17 over a period of 3 years. A copy of the certificate from auditor in Form 10DA evidencing the claim of deduction under section 80JJAA was duly submitted. (ii) The AO thereafter issued another notice under section 142(1) dated 20.08.2019 seeking the following details in respect of deduction under section 80JJAA:- a) Payroll for the F.Y. 2015-16 and 2016-17. b) Details of Additional employees who had been recruited in the F.Y. 2016-17 along with details of PAN, Amount of payment and mode of Transaction. c) Details of period of employment (no. of days) for the above said employees. d) Details of Pension (or) Provident fund paid to the new employees. (iii) The assessee vide letters dated 23.08.2019 and 29.08.2019 filed its submission, along with evidence supporting the claim of deduction under section 80JJAA which inter alia included the following:- a. Details of additional employees eligible for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR therefore submitted that there is nothing on record to show that the AO has done proper enquiry with regard to the correctness of the claim of deduction u/s.80JJAA and that the AO has not put across any relevant questions to check whether the assessee is eligible to claim deduction u/s. 80JJA. The ld. DR also submitted that nothing explicit is mentioned in the order of the AO with regard to whether any relevant enquiry with regard to the entitlement of the assessee was made and with regard to application of his mind before allowing the deduction u/s. 80JJA of the Act as claimed by the assessee. In this regard the ld DR relied on the decision of the Karnataka High Court in the case of CIT v. Infosys Technologies Ltd., 341 ITR 293 (Kar). 10. We have considered the rival submissions and perused the material on record. We will first look at the provisions of Explanation (2) to section 263 which reads as follows:- Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per computation sheet enclosed. 12. It may be said that the Income Tax Act nowhere provides the exact modalities to be followed to verify a specific claim made by the assessee prerogative of the AO to decide the extent of verification. However, it is necessary for the AO to record the extent of verification carried out by him and to record that he has taken a considered view on the matter by proper application of mind while allowing the claim of the assessee in the matter. 13. We notice that the Hon ble Karnataka High Court in the case of CIT v. Infosys Technologies Ltd. (supra) has considered a similar issue and held that - 21. In the present case, while there is no doubt that the assessee is entitled to claim deduction in terms of Articles 23(3)(a) and 23(4) of the agreements between India with Canada and Thailand respectively. the question is one of what exactly the entitlement? In the absence of any discussion either in the assessment order or in the computation claim, particularly as the extent of relief that can be claimed under these two articles is only after a specific exercise and though Sri Sarangan has very vehemently urged that it is not necessary for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court, in fact, has made reference to the decision of the Supreme Court in the case of Max India Ltd. (supra), with great respect, we are unable to apply the ratio of these two decisions to the present circumstance and we are quite satisfied that the law declared by the Supreme Court not only in the case of Electro House (supra) and also in the case of Malabar Industries Co. (supra) fully covers the situation, no further need to discuss with any greater elaboration on the view expressed by the Bombay and the Delhi High Courts. 24. In the present situation, the Commissioner having only directed the assessing authority to compute it or re-compute it and make it explicit as to the entitlement of the assessee, an order of this nature, in fact, could not have been contended as detrimental to the interest of the assessee, as it was always open to the assessee to justify the claim in terms of the double taxation avoidance agreements. In a situation of this nature, we are also of the opinion that it was not a case which warranted interference by the tribunal, more so for setting aside the order of the commissioner and for ensuring that the order passed by the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing authority, whether or not the assessee had given particulars or details of it. It is the duty of the assessing authority to do that and if the assessing authority had failed in that, more so in extending a tax relief to the assessee, the order definitely constitutes an order not merely erroneous but also prejudicial to the interest of the revenue and therefore while the commissioner was justified in exercising the jurisdiction under Section 263 of the Act, the tribunal was definitely not justified in interfering with this order of the commissioner in its appellate jurisdiction. Therefore, we answer the question posed for our answer in the negative and against the assessee. Both appeals are allowed. Parties to bear their respective cost. 14. We also notice that the Hon ble Delhi High Court in the case of Gee Vee Enterprises v .ACIT [1975] 99 ITR 375 (Del) has held as under The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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