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TMI Blog2024 (12) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Assessing Officer to make a fresh assessment. 2. That the learned PCIT not only failed to appreciate the merits of the contention of the appellant that the original assessment u/s. 143(3), also involving the issue of deduction u/s. 10AA, having been settled under Vivad se Vishwas Act, no Revision Proceedings u/s. 263 can be initiated, but also failed to deal with the same and give any reason as to why the same was not being accepted. In this regard, the appellant had in its reply to the notice u/s. 263, relied upon the direct ratio laid down under the decision of the Hon'ble Gujarat High Court in the case of PCIT v. Mrs. Swatiben Biharilal Parekh (156 taxmann.com 267 (Gujarat), wherein the Hon'ble Court was pleased to hold that "Opting VSV Scheme and finalizing thereof is nothing but closure of disputes in respect of tax arrears which cannot be subsequently reopened by issuing notice under section 263 for revising assessment order." 3. That the learned PCIT, moreover, not only failed to appreciate the submission of the appellant that the Assessment Order passed in accordance with directions issued by DRP cannot be revised by the CIT u/s. 263 but also failed to dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Subsequently, the case was selected for scrutiny, and the assessment was finalized under Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act on April 22, 2021, with the total income assessed at Rs. 1,22,84,03,397. During the examination of the assessment records, Principal CIT observed that the assessee had claimed an exemption of Rs. 59,98,80,918 under Section 10AA of the Income Tax Act. However, upon reviewing the computation of this claim and the relevant Schedules in the Profit & Loss account (Schedules 3.18 and 3.19), Principal CIT was of the view that the assessee had included Revenue from operations and "other income" while calculating the claim under Section 10AA of the Act. The "other income" included export incentives, which were part of government schemes like Duty Drawback and the sale of Duty Entitlement Pass Book (DEPB) licenses. These export incentives, while part of Government Schemes, did not have a direct nexus with the profits derived from the eligible unit of the assessee, established in Special Economic Zones (SEZs). Section 10AA(1)(a) of the Income Tax Act allows for a deduction of 100% of the profits and gains derived from the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal CIT was against the principles of natural justice and did not at all deal with any of the arguments, which were taken by the assessee, by way of three written submissions filed during the course of 263 proceedings. The counsel for the assessee submitted that the assessee had taken various legal and factual contentions before Principal CIT, during the course of 263 proceedings, which were totally ignored at the time of passing of 263 order by Principal CIT. 5. The first argument taken by the assessee before the Principal CIT was that the decision in Liberty India (317 ITR 218) is not applicable to the facts of the assessee's case or under the law. The assessee submitted that method of computation given in section 10AA(7) of the Act differs from the approach considered by the Supreme Court in Liberty India in the context of Section 80-IA of the Act, which dealt with deductions under that section and not Section 10AA. In Liberty India, the Supreme Court held that export incentives such as Duty Drawback and the sale of DEPB licenses are not part of the net profits of the industrial undertaking for the purposes of claiming deductions under Section 80-IA of the Act. However, this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y included in the calculation of profits for the purposes of Section 10AA, and the Assessing Officer did not err in facts and in law in allowing the claim of exemption u/s 10AA of the Act. 6. The second argument taken by the assessee for Principal CIT was that the assessing officer had duly applied his mind on this issue during the course of assessment proceedings and therefore, the assessment order was not erroneous and prejudicial to the interests of the Revenue. During the course of assessment, vide notice dated the 20-09-2019, the assessing officer had sought for elaborate information with regards to claim of exemption under section 10 AA of the Act. The assessee had filed reply dated 20-11-2019 giving a detailed computation of claim of exemption under section 10AA claimed by the assessee. Thereafter, the assessing Officer issued another notice dated 18-12- 2019 in response to which, the assessee filed in the reply dated 23-12-2012 and it was after due consideration of the merits of the replies filed by the assessee that the assessing officer chose not to disturb the claim made by the assessee under section 10AA of the Act. The assessee relied on various decisions in support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Barclays Bank PLC v. CIT (139 taxmann.com 503), where the Tribunal held that when the Assessing Officer passes an order in accordance with the directions of the DRP, such an order cannot be revised by the Commissioner under Section 263. 9. However, it was submitted before us by the counsel for the assessee that Principal CIT did not take into consideration any of the various legal/factual arguments taken by the assessee during the course of 263 proceedings and proceeded to set aside the original assessment order only on the grounds which formed part of the original 263 notice. Therefore, in light of the above facts, the order passed under section 263 of the Act is liable to be set aside. 10. In response, DR placed reliance on the observations made by Principal CIT in the 263 order. 11. We have heard the rival contentions and perused the material on record. On going through the contents of the 263 order passed by Principal CIT, we observe that the said order has been passed in gross violation of the principles of natural justice. The assessee had taken several factual and legal arguments during the course of 263 proceedings, which have been reproduced in the earlier part of ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has placed on record several judicial precedents in support of the contention that the case of Liberty (supra) is not applicable for computation of claim of exemption under section 10AA of the Act. Further, even on the basis of facts placed on record is seen that the assessing officer had specifically enquired into the aspect of computation of claim of exemption under section 10AA of the Act and after taking into consideration the written submissions/legal arguments placed by the assessee on record, took a legally plausible view and decided not to disturb the claim of deduction under section 10AA of the Act. Further, we also observe that several judicial precedents have held that once the assessee has opted for VSV scheme, and paid due taxes thereon, then the tax proceedings for this year would come to a close and thereafter, the same issues cannot be re-agitated by taking recourse to 263 proceedings. In the point to be noted is that this is the 9th year of claim of deduction by the assessee and therefore, even from point of view of principle of consistency, unless any new facts are brought on record, the claim of exemption cannot be disturbed by taking recourse to 263 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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