TMI Blog2011 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the CIT had not conclusively determined that the year of commencement of the business was Financial Year 1994-95 - Once it is found that the invocation of the provisions of Section 263 of the Act was proper and valid, such an order passed by the CIT could not have been tinkered with by the Tribunal by going into the merits of this issue CIT while exercising powers under Section 263 of the Act, sets aside the order of the AO on merits as well and gives his categorical finding on the issue involved, naturally the Tribunal will be within its right to examine as to whether the decision on the said issue was proper or not and for this purpose, the Tribunal itself would be entitled to examine the issue on merits - where the issue was not examined by the AO and on this ground CIT revised the order without giving his own findings, but directing the AO to do the necessary exercise, it was not proper for the Tribunal to decide the same, converting itself to a Court of first instance and deciding the factual aspect on which neither AO nor CIT(A) had returned any findings - Issue to be decided by AO. - ITA No. 595 of 2011 - - - Dated:- 3-6-2011 - A.K. Sikri and M.L. Mehta, JJ N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction to the assessee to the extent of Rs.3,55,33,360/-. 5. CIT initiated proceedings under Section 263 of the Act observing that the assessee company had commenced its operation in Financial Year 1994-95. On this basis, initial assessment for which deduction was to be claimed under Section 80IB of the Act would be the Assessment Year 1995-96, since the deduction is available for 10 consecutive assessment years. Therefore, the assessee could have claimed deduction upto the Assessment Year 2004-05 only and hence, the assessee would not be entitled for any deduction under Section 80IB of the Act for the assessment year in question, i.e., 2005-06. As we will point out later, though the order of the CIT is not very happily worded, it categorically states that the AO had not applied his mind on the issue as to in which year, the assessee commenced its operation. If it is the Financial Year 1994-95, as viewed by the CIT, then for the instant assessment year, the assessee would not be entitled to deduction as that would be the 11th year. On the other hand, if the assessee commenced its operation in the Financial Year 1995-96, then for the assessment year the assessee would be entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king. It was submitted that by doing so, the Tribunal has exceeded its jurisdiction. 9. We find force in the aforesaid submissions of the learned counsel for the Revenue. Learned counsel for the respondent assessee could not dispute that the AO while framing the assessment had not adverted to this aspect at all. The year of commencement of operation would be relevant to find out as to whether the assessee would be entitled to deduction under Section 80IB of the Act for the Assessment Year 2005-06 as only on that determination, it would be known whether the instant year is the 10th year or the 11th year. Since this issue had not been gone into and without arriving at any finding on this aspect, the AO allowed the exemption, it is clear that twin conditions laid down for exercising revisionary jurisdiction under Section 263 of the Act stood satisfied inasmuch as the lack of inquiry/investigation resulted in allowing the deduction which could be erroneous and prejudicial to the interest of Revenue, if it was the 11th year from the year when the operation commenced. 10. We would like to point out that at one stage, the CIT has remarked that: "On verification of the case rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO for afresh assessment after giving the assessee reasonable opportunity of being heard. In a case like this, the Tribunal could not have gone into the merits which also, according to us, is done in a perfunctory manner as it would be clear from the reading of Para 7. Once it is found that the invocation of the provisions of Section 263 of the Act was proper and valid, such an order passed by the CIT could not have been tinkered with by the Tribunal by going into the merits of this issue. Since these contentions were satisfied and the matter was relegated to the AO to conduct an inquiry, the Tribunal should have limited its discussion focusing on the proprietary of order by the CIT invoking his power under Section 263 of the Act and keeping in view the scope of that provision. 13. In this backdrop, we would like to refer to the judgment of Kerala High Court in the case of V. Kunhikannan vs. Commissioner of Income Tax 219 ITR 235. In the said case, the High Court held that: "It is true that the Explanation was inserted and came into effect from April 1, 1989, that is, after the search was made in this case. But, the Explanation thereunder seeks to clarify the necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee-firm could not be made." 14. Learned counsel for the assessee submitted that the Tribunal was within its jurisdiction to decide the issue on merits as it is the factual finding of fact. For this proposition, he referred to the judgment of the Bombay High Court in the case of Ballarpur Paper and Straw Board Mills Ltd. vs. Commissioner of Income-Tax, Vidarbha and Marathwada, Nagpur [118 ITR 613], wherein it was held as under: "Coming to question No.1 above referred to, the argument of Mr. Joshi, on behalf of the revenue, was that the Tribunal was not justified in going into the merits of the case and determine whether the expenditure relating to guarantee commission, stamp charges and interest formed or did not form part of the actual cost of the plant and machinery for the purpose of claiming depreciation and development rebate. It is not possible for us to accept the contention urged on behalf of the revenue. If the order of the Addl. CIT was subject to appeal, then the Tribunal was fully justified in going into the merits of the decision given by the Addl. CIT as regards the claim for depreciation and development rebate with reference to the amounts of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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