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2015 (10) TMI 2027 - ITAT VISAKHAPATNAM

2015 (10) TMI 2027 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - whether or not the assessee is eligible for deduction u/s 80-IB - Held that:- In the present case on hand, the revenue did not brought on record any evidence in support of its claim that the assessee did not commence its production during the financial year 2003-04, despite the fact that the assessee has furnished a copy of registration certificate issued by the Directorate of Industry and Commerce indicating the date of commence .....

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e CIT. It is also an admitted fact that Department has accepted the claim of deduction u/s 80-IB of the Act for all the years starting from the A.Y. 2004-05 to 2006-07. Once the revenue accepted the deduction in earlier years, it cannot be questioned in subsequent years unless there is a change of facts in the subsequent years. Admittedly, in the present case, there is no change in the facts which are existed in the A.Y. 2004-05 to A.Y. 2006-07.

A.O. has rightly allowed deduction u/s .....

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- Dated:- 11-9-2015 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Assessee by: Shri G.V.N. Hari, Advocate For The Revenue : Shri Th. Lucas Peter, CIT(DR) ORDER Per Shri G. Manjunatha, Accountant Member:- This appeal filed by the assessee is directed against the order of CIT, Rajahmundry dated 22.3.2012 u/s 263 of the Income-Tax Act, 1961 (hereinafter called Act ) for the assessment year 2007-08. The assessee has raised as many as four grounds and the issu .....

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e backward area of Yanam, obtained a registration certificate from Directorate of Industries and Commerce, Government of Pondicherry vide certificate no.1- 13/Ind/104/3631/A5/2004 dated 21.6.2004 and as per the said certificate, the date of commencement of production was from 19.3.2004. The case was selected for scrutiny as per the Board guidelines. In response to the notice issued u/s 143(2) of the Act, the assessee s A.R. Shri K. Balaji, ACA appeared and filed the details as per the questionna .....

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cer u/s 143(3) dated 30.12.2009. The CIT proposed to revise the assessment order, on the sole reason that the A.O. has allowed deduction u/s 80-IB of the Act, which was otherwise not allowable as per the provisions of the Act. The CIT was of the opinion that the assessee has not commenced the production on or before 31.3.2004 as stipulated u/s 80-IB of the Act, which was not examined by the A.O., before allowing deduction u/s 80-IB of the Act. The CIT further observed that mere production of a c .....

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& loss account filed along with return of income. He further, observed that clause (IV) of sub-section 2 of section 80-IB of the Act specifies that in case where the Industrial undertaking manufacturing or producing articles or things, the undertaking employs 10 or more workers in the manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing process carried on without the aid of the power. However, on verification of the records furnished by the .....

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erest of the revenue in terms of the provisions of section 263 of the Act. Hence, after considering the relevant submissions made by the assessee, the CIT has revised the assessment order and directed the assessing officer to disallow the claim u/s 80-IB of the Act and pass fresh assessment order. Aggrieved by the CIT s order, the assessee is in appeal before us. 4. The Authorised representative of the assesse, submits before us that the assessee is engaged in the business of manufacture of corr .....

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ct. After considering the explanation of the assesse, the A.O. has allowed the claim of deduction u/s 80-IB of the Act, which is evident from the assessment order passed by the assessing officer. Further, the assesse submitted that the department has accepted the claim of deduction for all the three assessment years starting from assessment year 2004-05 to 2006-07, therefore, the CIT cannot deny the benefit of deduction for the current assessment year under the same set of facts. Further, the as .....

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ive P. Ltd., (2012) 349 ITR 309(Bom). 2. Hon ble Bombay High Court, Nagpur Bench, in the case of CIT Vs. Paul Brothers (1995) 216 ITR 548(Nag). 3. Coordinate bench decision in the case of Smt. Susheela Davi Bothra Jain, Shree Carrying Corporation Vs. ITO Ward-1, Rajahmundry in ITA 279/Viz/2014. Therefore, he requested the bench to restore the order passed by the assessing officer and dismiss the order passed by the Ld. CIT. 5. On the other hand, the Departmental Representative strongly supports .....

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out manufacturing activity for the relevant period under consideration. The DR, placed his reliance on the judgment of Hon ble High Court of Gujarat, in the case of CIT vs Jolly Polymers (2012) 342 ITR 87 (Guj). For the reasons stated above, he urged to confirm the order of CIT. 6. We have heard both the parties and perused the materials available on record. We also considered the case laws cited by either of the parties. The basic issue involved in this appeal is whether the assessee qualifies .....

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enced production during the year 2004- 05, which is relevant to the assessment year 2005-06 which is evident from the audit report filed in Form No.10CCB. On the other hand, the assessee argues that it has commenced its commercial production on 19.3.2004, therefore, it qualifies for deduction u/s 80-IB of the Act for the assessment year 2004-05. 7. It is pertinent to mention here that, to qualify for deduction u/s 80-IB of the Act, one of the essential condition is that the assessee concern shou .....

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e twin conditions must be satisfied i.e. the order of the assessing officer is erroneous and further it must be prejudicial to the interest of the revenue. Unless both conditions are satisfied, the CIT cannot assume jurisdiction to pass order u/s 263 of the Act. It is not necessary that every order which is prejudicial to the interest of revenue is also erroneous. Unless the A.O s order is not erroneous, no action can be taken by the CIT u/s 263 of the Act, this is because the twin conditions i. .....

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quiry and inadequate enquiry. If there is an inadequate enquiry that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion in the matter. The CIT can do this only, when there is a lack of enquiry by the assessing officer. In the present case, the assessment order is not detailed one but, the A.O. has passed a remark in the assessment order before allowing deduction u/s 80-IB of the Act, which clearly shows that he has ma .....

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Outdoor Interactive P. Ltd. (supra) has considered the similar issue and held as under: We have considered the submissions. We find that the submissions made by Mr. Pardiwalla on the basis of the decision of this Court in the matter of Paul Brothers (supra) and Director of Information Pvt. Ltd. (supra) merits acceptance. Therefore, in this case, it is not necessary for us to decide whether SEEPZ unit was set up/formed by splitting up of the first unit. In both the above decisions, this Court ha .....

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ubsequent years. In this case for the assessment years 2000-01 and 2001-02 the relief granted under Section 10A of the Act to SEEPZ unit has not been withdrawn. There is no change in the facts which were in existence during the assessment year 2000-01 vis a vis the claim to exemption under section 10A of the Act. Therefore, it is not open to the department to deny the benefit of Section 10A for subsequent assessment years i.e. assessment years 200203 and 2003-04 and 2004-05. Besides that, on con .....

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Commissioner has to be satisfied of twin conditions, namely, (I) the order of the Assessing Officer sought to be revised is erroneous; and (ii) It is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue-recourse cannot be had to sect/on 263(1) of the Act. (b) Every loss of revenue as a consequence of an order of the Assessing Of .....

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o motu revisional powers to reopen a concluded assessment under section 263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to .....

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the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. (e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded , that the Department cannot be permitted to begin fresh lit .....

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Commissioner to pass orders under section 263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income-tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately, there must be some prima fade material on record to show that the tax which was lawfully exigible has not been impo .....

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rose subsequent to the order of assessment." -. 11. A similar issue has came before the Hon ble High Court of Delhi in the case of CIT Vs. Sunbeam Auto Ltd. reported in (2011) 332 ITR 167, wherein the Hon ble High Court held as follows: "The submission of the counsel for the revenue was that while passing the assessment order, the AO did not consider the aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessmen .....

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iture. The counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. The AD had called for explanation on this very it .....

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impugned order even accepts this. Thus, even the CIT conceded the position that the AD made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the CIT was that the AD should have made further inquiries rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry.-CIT vs. Gabrial India Ltd. (1993)114 CTR (Born) 81: (1993) 203 ITR 108 (Born) relied on. Even the CIT in his order, passed under s. 263, is not .....

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of the assessee is questioned. However, that basis of the order vanishes in thin air when this very accounting practice, followed for number of years, had the approval of the IT authorities. Interestingly, even for future assessment years, the same very account ing pract ice is accepted. The assessee is a manufacturer of car parts. In the manufacturing process, dyes are fitted in machines by which the car parts are manufactured. These dyes are thus the components of the machines. These dyes nee .....

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th the replacement of such tools and 'dyes, which are the components of a machine, no new asset comes into existence, nor is there benefit of enduring nature. It does not even enhance the life of existing machine of which these tools and dyes are only parts. No production capacity of the existing machines is increased either. It is clear that view taken by the AD was one of the possible views and therefore, the assessment order passed by the AD could not be held to be prejudicial to the Reve .....

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l representative, in the light of the facts of this case and come to a conclusion that the case relied on by the department is not applicable to the facts of the present case. 13. In the present case on hand, the revenue did not brought on record any evidence in support of its claim that the assessee did not commence its production during the financial year 2003-04, despite the fact that the assessee has furnished a copy of registration certificate issued by the Directorate of Industry and Comme .....

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