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TMI Blog2016 (9) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... l income after claiming deduction u/s 80IB of the Income Tax Act, 1961 (hereinafter called as 'the Act'). The return was processed u/s 143(1) of the Act. Subsequently, the case has been selected for scrutiny and accordingly, notice u/s 143(2) & 143(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and produced books of accounts and other details called for. The Assessing Officer, after considering the detailed submissions furnished by the assessee completed the assessment and accepted income declared. 3. The CIT, Rajahmundry issued a show-cause notice dated 13.10.2011 and asked to explain why the assessment order passed u/s 143(3) of the Act dated 20.11.2009 shall not be revised under the provisions of section 263 of the Act. The CIT, proposed to revise the assessment order for the reasons that on examination of assessment records, certain omissions and commissions were noticed, which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. The CIT, in the said show cause notice, observed that the A.O. has allowed the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was considered by the A.O. before allowing deduction u/s 80IB of the Act. The assessee further submitted that even otherwise the requirement of furnishing audit report in form no.10CCB can be filed at any time before completion of assessment. It is not necessarily to file audit report along with return of income in view of the fact that the filing of physical copy of audit reports has been done away, when e-filing of income tax returns has been introduced. As regards job work charges is concerned, the assessee submitted that it is into the business of manufacturing of goods and articles eligible for deduction u/s 80IB of the Act. It was further submitted that the firm has taken up job work of processing of goods for others in addition to its own manufacturing in view of spare capacity available. It was further submitted that section 80IB of the Act, does not place any restriction on job work receipts by stating that the deduction was claimed u/s 80IB of the Act similar to that of the deduction u/s 80I & 80IA of the Act. The assessee further submitted that it has claimed deduction u/s 80IB of the Act for its activity in the past which was accepted by the department in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sues, the CIT observed that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue on account of lack of enquiry on the part of the assessing officer. The A.O. not only examined the issues pointed out in the show cause notice, but failed to apply his mind before completing the assessment. From this, it is very clear that it is a case of lack of enquiry on the part of the A.O. and hence, fit case for assumption of revisionary jurisdiction u/s 263 of the Act. With these observations, set aside the order passed by the A.O. u/s 143(3) of the Act dated 20.11.2009 and direct the A.O. to take up the issue as referred to hereinabove and complete the assessment within the stipulated time frame after affording reasonable opportunity of hearing the assessee. Aggrieved by the CIT order, the assessee is in appeal before us. 6. The Ld. A.R. for the assessee, submitted that the assessment order passed by the A.O. u/s 143(3) of the Act dated 20.11.2009 is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has examined the issues pointed out by the CIT, in the show cause notice. The A.R. further submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous in so far as it is prejudicial to the interest of the revenue. The CIT, revised the assessment order for the reason that the A.O. has allowed the claim of deduction u/s 80IB of the Act without calling for basic details. It was further observed that furnishing of audit report in form no.10CCB is a mandatory requirement under the provisions of section 80IB(7) of the Act. But, the A.O. without obtaining the audit report which is a mandatory requirement for allowing deduction, completed assessment and allowed deduction which is otherwise not allowable to the assessee. The CIT, further, observed that the A.O. has erroneously allowed deductions u/s 80IB towards job work charges, without appreciating the facts that the activity undertaken by the assessee amounts to manufacturing of goods or not. Though, assessee involved in the manufacturing activity, it has done job work charges and claimed deduction towards job work charges on the premises of manufacturing activity. The CIT has pointed out other issues, i.e. reconciliation of TDS to gross receipts, FBT payment and applicability of provisions of section 40(a)(ia) of the Act, which leads to revision of assessment order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city available also eligible for deduction u/s 80IB of the Act. We further observed that the said section does not place any restriction on job work receipts. Once, assessee proves that it is involved in the eligible business i.e. manufacturing of goods or article which is eligible for claiming deduction, it is immaterial whether it manufactures on its own or manufactures for others. So long as it is in the business of manufacturing of goods or articles, it is eligible for deduction u/s 80IB of the Act. 9. Coming to the others issues pointed out by the CIT in the assessment order. The CIT, observed that the A.O. has failed to examine issues with regard to reconciliation of gross turnover and tax deducted at source, correctness of fringe benefit tax estimated by the assessee, initiation of penalty proceedings u/s 271B of the Act and applicability of tax deduction at source in respect of various expenses debited to P&L account and also applicability of disallowance u/s 40(a)(ia) of the Act. The CIT was of the opinion that the A.O. has failed to examine the above issues before completion of assessment. It is the contention of the assessee that all the issues pointed out by the CIT ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has power of revising the assessment order u/s 263 of the Act, but, to invoke the provisions of section 263 of the Act, the twin conditions must be satisfied i.e. the order of the A.O. is erroneous and further it must be prejudicial to the interest of the revenue. Unless both the conditions are satisfied, the CIT cannot assume jurisdiction u/s 263 of the Act. It is not necessary that every order which is erroneous must be prejudicial to the interest of the revenue or vice versa. Unless, the assessment order is erroneous, no action can be taken by the CIT u/s 263 of the Act, this is because the twin conditions, i.e the order is erroneous and the same is prejudicial to the interest of the revenue are co-exist. In the present case on hand, on perusal of the facts available on record, we find that the A.O. has conducted detailed enquiry and also examined the issue of deduction claimed u/s 80IB of the Act and other issues pointed out by the A.O. The assessee explained that though filing of audit report in form no.10CCB is mandatory in nature, it is not necessary to file the same along with return of income in view of the changes in filing of income tax return from paper return to e-fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not applied his mind before allowing the deduction. But, we do not agree with the CIT for the reason that there is a distinction between lack of enquiry 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 detailed one and also, the A.O. has passed a remarks in the assessment order on two issues, on which the CIT assumed jurisdiction, i.e. disallowance of round some expenditure of Rs. 1,00,000/- under the head wages and centering charges and also partner's capital accounts, where the addition was Rs. 66,825/-.The A.O. had called for explanation and the assessee has furnished its explanation. But, the CIT was of the opinion that the assessing officer could have do well to explore the possibility of rejecting the books of accounts and estimate the profit. According to CIT, the assessing officer has conducted enquiry but, in adequate, therefore he wanted further enquiry on the issue on which he assum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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