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2020 (12) TMI 218 - AT - Income TaxDeduction u/s 80IB - Power to AO to restrict the benefit given to assessee under section 80IB(10) - estimating the average profit for the purpose of partly denial of deduction under section 80IB(10) - AO was of the view that assessee has shown excess profit to claim more deduction under section 80IB(10) therefore, he proceeded to estimate average profit of the assessee without rejecting books of accounts of the assessee - CIT(A) reestimated the assessee’s average profit @38.40% and computed the eligible amount of deduction u/s.80IB(10) - HELD THAT:- AO has not challenged the correctness of the opening stock of the assessee. The closing stock of the previous year of the assessee becomes opening stock in the current year i.e. (assessment year under consideration), which is sold by the assessee during the assessment year under consideration - AO did not find any defect in the opening stock of the assessee. In order to ascertain the veracity of profit declared by the assessee, the assessing officer should have examined the correctness of the opening stock, which is sold by the assessee during the assessment year under consideration. To estimate the average profit, the opening stock plays an important role in assessee`s case, as the profit earned by the assessee is because of selling the opening stock, as explained above. We note that Assessing officer worked out the unreasonable profit without pointing out any defect in the opening stock, which was sold during the year, hence estimation of average profit by the Assessing Officer without having noticed any defect in the opening stock, is not justifiable. As provisions of sub-section 10 of section 80IA should not be used for the purpose of sub-section 10 section 80IB of the Act, unless expressly provided by the statute. The view taken by the Ld.CIT(A) to the effect that ‘section 80IA(10) itself empowers the Assessing Officer to take the amount of profit as may be reasonable deemed to have been derived’ is not acceptable, as the purpose and object of both the sections are different, as explained above. AO has held that assessee is not eligible to claim deduction u/s 80IB(10) and therefore has disallowed the entire deduction claimed by assessee u/s.80IB(10) at ₹ 39,62,791/-. Besides, over and above, without prejudice, the Assessing Officer estimated average profit @16.02% and thus rejected the unreasonable profits from 80IB(10) business at ₹ 28,76,770/-. Assessing Officer has not added ₹ 28,76,770/- to the total income of the assessee. On appeal, the Ld.CIT(A) held that assessee is eligible and entitled to claim deduction u/s.80IB(10) of the Act. -CIT(A) made self-contradictory statement and restricted the deduction under section 80IB of the Act at ₹ 24,00,000/- (38.40% at ₹ 62,50,000/-) by re-computing estimated average profit @38.40%, as against average profit computed by the Assessing Officer @16.02%. Whether Ld.CIT(A) can re-estimate average profit @ 38.40%? - Neither the Assessing Officer nor Ld.CIT(A) has disputed any of the qualifying conditions specified under section 80IB(10) of the Act. The powers given to assessing officer under sub-section 8 of section 80IA or 80IA(10) should not be used to restrict the benefit given to assessee under section 80IB(10) of the Act, as schemes of these sections are different. We also note that the Assessing Officer has estimated the assessee’s average profit @16.02%. On appeal, Ld.CIT(A) reestimated the assessee’s average profit @38.40% and computed the eligible amount of deduction u/s.80IB(10) of the Act, without rejecting books of accounts. Thus this is a case where the Assessing Officer and ld CIT(A) has estimated average profit without any base. Taking a holistic view in the matter on considering both sides, we are of the view that assessee is entitled to take deduction u/s.80IB(10) of the Act. The estimation of average profit by assessing officer and re-estimation of average profit by ld CIT(A) are not in accordance with law, as narrated above, hence we delete the addition - Decided in favour of assessee.
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