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TMI Blog2015 (2) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit for the current year was allowed by the Deputy Commissioner of Income Tax, Circle-8, Ahmedabad ("the AO") without proper verification, despite the fact that the AO during the course of assessment had not only examined the claim but had actually recomputed the eligible profits. 3. The learned CIT erred in fact and in law in holding that the initial assessment year for claim of deduction u/s.80IC is AY 2005-06 and AY 2008-09 cannot be considered as initial assessment year. 4. The learned CIT erred in fact and in law in directing the AO to allow deduction @ 30% (Rs.18,79,22,767) of the profits and gains of the Baddi unit instead of 100% (Rs.62,64,09,223) of the profits and gains of the Baddi Unit claimed by the Appellant and thereby directing the AO to reduce the deduction U/s.80IC by an amount of Rs. 43,84,86,456. 5. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 20/03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble over and above the admissible claim @ 30% of the profit derived from the said Industrial Unit. The ld.CIT erroneously observed that the AO has not examined and cross-verified these issues considering the correct facts in this regard. He submitted that the ld.CIT was not justified in holding that once assessee's 'initial assessment year' is determined to be AY 2005-06, the provisions of section 80IC(3)(ii) of the Act were clearly attracted that the deduction @ 100% of the profit of such undertaking was allowable only for 5 years from the initial assessment year i.e. upto AY 2009-10 only and thereafter @ 30%. He submitted that the ld.CIT has misconstrued the provision. Moreover, he submitted that the AO has applied his mind on the eligibility and entitlement of the assessee in respect of Baddi Unit @ 100%. He submitted that the finding of the CIT is clearly a change of opinion. He submitted that on the basis of change of opinion, the concluded assessment cannot be revised. In support of this contention, he relied upon the judgement of Mumbai High Court rendered in the case of CIT vs. Gabriel India Ltd. reported at 203 ITR 108(Mum.). He further relied on the judgement of Hon'ble M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Further, he contented that the appellant is eligible to claim deduction u/s.80IC of the Act is not disputed. The fact that the period for which deduction is available is not disputed i.e. AYs 2002-03 to 2011-12 (both assessment years are inclusive). The fact that the appellant has undertaken substantial expansion, as defined u/s.80IC of the Act, in the AY 2005-06 and AY2008-09 has been accepted. This fact has been duly examined and verified during the course of regular assessment proceedings u/s.143(3) of the Act. The Department has allowed the claim of deduction @ 100% u/s.80IB(4)/80IC(2) till AY 2010-11. He submitted that under the identical facts the Co-ordinate Bench of this Tribunal has decided the issue in favour of the Assessee in the case of Tirupati LPG Industries Ltd. vs. Dy.CIT(supra). He submitted that the issue is therefore be decided in favour of the assessee since in view of the aforesaid binding precedents, the ld.CIT ought not to have revised its order. 4. On the contrary, ld.CIT-DR submitted that as per the provisions of section 263 of the Act, the CIT is empowered to revise the assessment order passed by the AO. He submitted that in the case in hand, the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds should be added, altered or modified unless it is plainly necessary to do so in order to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute. He submitted that these arguments were not taken before the Coordinate Benches of this Tribunal, hence the submissions of the Revenue were not considered and not decided from this perspective. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. Before adverting to the merits of the case, it would appropriate to examine the conditions envisaged for invoking the provisions of section 263 of the Act. Section 263 of the Act is reproduced as under for ready reference. E.-Revision by the [Principal Commissioner or Commissioner] SECTION 263 Revision of orders prejudicial to revenue. (1) The [Principal Commissioner or Commissioner] may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing Officer] is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso of section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 5.1. A bare reading of the section 263 of the Act, it is evident that the Principal Commissioner or Commissioner may call for and examine the record of any proceeding under the Act, and if he considers that any order passed therein by the Assessing Officer is erroneous as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to make such inquiry as he deemed if necessary, pass such order therein as the circumstances of the case justify. Therefore, for invoking the provisions, twin conditions are to be satisfied that the order passed by the AO is both erroneous and prejudicial to the interests of the revenue. If any of two conditions is not satisfied, the order invoking the provisions of section 263 of the Act becomes bad. The law is well settled by various judicial pronouncements of the Hon'ble Supreme Court and Hon'ble High Courts. The Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trend or pattern for similar assessments, which on a broad reckoning, the CIT might think to be prejudicial to the interests of Revenue administration". In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the contention of the assessee is that the AO has examined this issue. Therefore, the order of the ld.CIT is based upon change of opinion. It is transpired from the records that the AO had issued a specific query with regard to eligibility under Chapter VIA. A notice issued u/s.142(1) of the Act is enclosed at page-133 of the paperbook. As per the said notice, the AO had requested to the assessee to furnish the details of the deduction claimed under Chapter VIA. In response thereto, a letter dated 22/02/2013 was submitted to the AO, wherein a specific explanation was given in respect of the deduction claimed u/s.80IC of the Act. The letter so submitted is enclosed at pageITA 139 of the paper-book. Admittedly, the AO has not given any finding with regard to eligibility of deduction u/s.80IC @ 100% of the eligible profit. The ld.CIT did not accept the explanation of the assessee on the basis that as per 80IC(iii) r.w.s.80IC(vi) of the Act, a Unit would be eligible for claim of deduction for total of ten (10) years only and out of that claim of deduction @100% for the first five (5) years and thereafter five (5) assessment years @ 30%. Further, we find that the ld.CIT at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of ITAT Chandigarh "B" Bench in the case of DCIT vs. M/s.S.R.Paryavaran Engineers Pvt.Ltd.(supra). The Hon'ble Coordinate Bench in ITA No.991/Del/2013, vide its order dated 29/01/2014, under the identical facts, has decided this issue as under:- "10.4. The only dispute that arises for our consideration is the interpretation of the term "initial assessment year" and whether the same comes with any restriction. The Revenue seeks to take the color from the object of introducing Section 80-IC. The A.O. referred to policy of the government for giving incentives to the State of Uttaranchal and Himachal Pradesh. It is well settled that external aids should not be taken for the purpose of interpreting the Statute, when the language of the Section is clear and unambiguous. A plain reading of Sec.80-IC(8)(v) which defines the term "initial assessment year" read with Sec.80-IC(8)(ix) which defines the term "substantial expansion" makes it clear that there is no restriction or bar on more than one substantial expansion being undertaken by an assessee. In our view, a unit can undertake any number of substantial expansions, in the absence of any specific restriction in the Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question, irrespective of the fact whether the deduction is claimed u/s 80-IC or u/s 80-IB or u/s 10C as the case may be. Thus there is no evergreening of the provisions. The assessee cannot claim the said deduction for a total period exceeding 10 years. The deduction could be allowable only for the balance period of 5 years including this Assessment Year 2009-10. Only the rate of deduction goes up. 10.7. The Chandigarh "B" Bench of the Tribunal in the case of M/s S.R.Paryavaran Engineers P.Ltd. (supra) was considering a case where the assessee originally claiming deduction u/s 80 IB(iv) of the Act from the A.Y. 1999-2000. For the first 5 years it had claimed exemption of 100%. Thereafter it undertook substantial expansion and claimed deduction u/s 80 IB(iv). The AO rejected the same and observed that benefit could be availed u/s 80 1C and as the substantial expansion was less than 50% of the value of plant and machinery the claim is to be rejected. The Tribunal observed that the assessee is entitled to deduction u/s 80-IC. It held that mere mention of a wrong Section would not disentitle the assessee to claim the above said deduction. To our mind this case law is not directly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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