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2015 (4) TMI 676 - AT - Income TaxRevision of assessment order - Deduction u/s 80IC of Income Tax Act,1961 - Deduction already allowed in the immediately preceding assessment year - Sale to related companies at a high margin - Pre-requisite conditions of eligibility of deduction examined in first year itself - Held that:- it is observed that the assessee claimed deduction u/s 80IC for the first time in the immediately preceding assessment year, namely, AY 2005-06 in respect of profit from the manufacturing unit established at Baddi in Himachal Pradesh. The assessment for the AY 2005-06 was taken up by the AO u/s 143(3) and the claim of deduction u/s 80IC was allowed as claimed. A copy of the assessment order for the AY 2005-06 is available on record. This shows that all the pre-requisites for the claim of deduction u/s 80IC were examined by the AO in finalizing the assessment for the earlier year and he got fully satisfied with the eligibility of deduction. The instant year is second year of the claim for deduction u/s 80IC. With the above background in mind, we will take up all the objections raised by the ld. CIT one by one and see if the assessment order can be held to be erroneous and prejudicial to the interest of the Revenue. The first objection of the ld. CIT is that the assessee had not undertaken substantial expansion and, thus, the basic pre-requisite for deduction u/s 80IC was not satisfied.In view of the fact that the pre-requisite conditions can be examined in the first year of the claim, which were duly found to have been fulfilled in the preceding year, we are of the considered opinion that this objection of the ld. CIT that the assessee did not undertake substantial expansion, is bereft of any force. The same is, therefore, dismissed. Objection nos. 3 and 4 of the ld. CIT are that the assessee made sales to its related concerns.As sales to the related companies constituted roughly 80% of the total turnover and there was abnormal profit shown, it was incumbent upon the AO to investigate this aspect of the matter further rather than stopping at the receipt of sales account. In our considered opinion, the ld. CIT was justified in directing the AO to re-examine this aspect of the assessee’s claim for deduction u/s 80IC. We uphold these objections taken by the ld.CIT. Objection no. 7 of the ld. CIT, It is obvious that Kapashera Delhi office was not undertaking any income producing activity and the loss of ₹ 65,326/- was only towards administrative expenses incurred by it, As such, there can be no question of shifting profit from the eligible unit at Baddi to Kapashera Delhi. We, therefore, reject this objection taken by the ld. CIT. The sum and substance of the above discussion is that the order of the ld. CIT is sustainable on objection nos. 3 and 4 and not on the remaining eight. In such a scenario, the entire order cannot be set aside. It goes without saying that if the order passed u/s 263 is sustainable on one of the various objections taken by the ld. CIT and not on others, the order is not vitiated. However, the direction to the AO by the ld. CIT gets restricted to the points on which the order is sustainable. As the impugned order is sustainable in respect of two objections only, we direct the AO to restrict himself only on these issues in the assessment to be finalized u/s 143(3) pursuant to the order u/s 263 of the Act. - Partly allowed in favour of assessee.
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