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2016 (4) TMI 951

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..... mar Mittal, J. 1. Delay in refiling the appeal is condoned. 2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 22.9.2009, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A' Chandigarh (in short, the Tribunal ) in ITA No.491/CHANDI/2009, for the assessment year 2004-05, claiming following substantial questions of law:- (i) Whether on the facts and circumstances of the case, the Hon'ble Income tax Appellate Tribunal is justified in law in holding that the CIT has erred in invoking the provisions of Section 263 of the IT Act, 1961 ignoring the fact that the order of the Assessing Office passed under section 143(3) on 21.4.2006 was erroneous in so far as it was prejudicial to the interest of the revenue? (ii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in observing that the order of CIT does not contain any firm decision as to how the debit of administrative expenses amounting to ₹ 9,77,010/- in the P L account of Unit I has rendered the assessment as erroneous an .....

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..... o noticed by the CIT that administrative expenses amounting ₹ 9,77,010/- pertained to both the units i.e. Unit I and Unit II of the assessee but these were debited to the profit and loss account of Unit I only. No such expenses were debited to Unit II. Thus, this issue was remanded to the Assessing Officer with the direction to ascertain amount of profits as may reasonably deemed to be derived from the industrial undertaking i.e. Unit II as far as administrative expenses of ₹ 9,77,010/- were concerned. It was further observed by the CIT that the assessee company had been doing the business of manufacturing and sale of hosiery goods and section 80IB of the Act clearly laid down that deduction was allowable only on income derived from such industrial undertaking. Accordingly, provisions of section 263 of the Act were invoked in this case. Vide order dated 24.3.2009, Annexure A.2, under section 263 of the Act, the CIT held the assessment framed by the Assessing Officer to be erroneous and prejudicial to the interest of the revenue on both the issues and directed the Assessing Officer to re-compute deduction under Section 80IB of the Act. Aggrieved by the order, the assesse .....

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..... l read thus:- 9. In the above situation, now we may examine the impugned order of the Commissioner dated 24.3.2009. We may consider the second aspect taken by the Commissioner at the outset. According to the Commissioner, the profit and loss account of Unit 1 showed administrative expenses amounting to ₹ 9,77,010/- while no such expenses have been debited in the profit and loss account of Unit II. The Commissioner has further observed that such administrative expenses are on account of administration of the business of the assessee company as a whole i.e. for Unit I as well as Unit II. Therefore, he set aside the issue to the file of the Assessing Officer with the direction to ascertain the amount of profits as may be reasonable deemed to be derived in Unit II as far as the administrative expenses of ₹ 9,77,010/- are concerned. In this regard, we may notice the reply furnished by the assessee to the Commissioner, a copy of which has been placed in the paper book. The assessee contended that whatever expenses were relatable to the activities of Unit II, the same have been debited to the profit and loss account of the said unit and it was further submitted that the ex .....

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..... he erroneous nature of the order was firmly taken, the Tribunal was right in vacating the order. Accordingly, we answer the question in favour of the assessee, that is, in the affirmative, with no order as to costs. 10. Considered in the light of the aforesaid observations of the Hon'ble Punjab and Haryana High Court, the order of the Commissioner on this aspect, in our view,is unsustainable as it does not contain any firm decision as to how the debit of administrative expanses amounting to ₹ 9,77,010/- in the profit and loss account of Unit 1 has rendered the assessment as erroneous and prejudicial to the interests of the revenue within the meaning of section 263 of the Act. Thus, on this aspect, the order of the Commissioner is set aside. 9. The Tribunal had also held the revisional order passed by CIT under Section 263 of the Act to be legally unsustainable with regard to deduction allowed by the Assessing Officer under Section 80IB of the Act of fabrication charges of ₹ 62,28,012/- with the following observations:- 11. In so far as the issue relating to the claim of deduction under section 80IB of fabrication charges of ₹ 62,28,012/- is concern .....

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..... r earning job work charges was not a manufacturing activity. Therefore, under such circumstances, the action of the Assessing Officer in allowing deduction under section 80IB of the Act on fabrication charges as in the past, cannot be said to be erroneous in law. Even if we accept that two views are possible on this aspect, then in the context of the provisions of section 263 of the Act, the impugned action of the Commissioner is rendered unsustainable. Quite clearly, the Hon'ble Supreme Court in the case of Malabar Industrial Co. Limited (supra) has held that where two views are possible and one of possible view has been adopted by the Assessing Officer while framing assessment, such order is not amenable for revision within the meaning of section 263 of the Act. Having regard to the aforesaid discussion, in our considered opinion, even on the aspect of allowability of deduction under section 80IB on fabrication charges, the Commissioner erred in invoking the provisions of section 263 of the Act. Learned counsel for the appellant-revenue has not been able to show any error in the findings recorded by the Tribunal. 10. Further, a Division Bench of this Court (to whic .....

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