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2016 (9) TMI 455 - ITAT VISAKHAPATNAM

2016 (9) TMI 455 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - Claim of deduction u/s 80IB - Held that:- The assessee has filed complete details along with copy of audit report and also explained how job work charges is eligible for deduction u/s 80IB of the Act. The A.O. after considering the explanations furnished by the assessee and also taken into note of judicial judgments relied upon by the assessee allowed the claim of deduction u/s 80IB of the Act. Therefore, we are of the view that th .....

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available. We find that the A.O. has not doubted the activity of the assessee. But, he is of the opinion that only goods manufactured by the assessee on its own is eligible for deduction, but not job work done for others. We do not agree with the stand taken by the A.O., for the reason that once the assessee is involved in the business of manufacture of goods or articles which is eligible for claiming deduction u/s 80IB of the Act, job work done in the spare capacity available also eligible for .....

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ssessee - I.T.A.No.197/Vizag/2012, I.T.A.No.596/Vizag/2014 - Dated:- 29-7-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri M.Bhupal Reddy, DR ORDER PER G. MANJUNATHA, Accountant Member: These cross appeals filed by the assessee and revenue are directed against separate orders of CIT, Rajahmundry u/s 263 of the Act, dated 22.3.2012 and CIT(A), Visakhapatnam u/s 250 of the Act, dated 27.8.2014 for .....

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ring Nil total 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 .....

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dered 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 deduction u/s 80IB of the Act, without calling for the basic details such as mandatory requirement of submission of audit report in form no.10CCB under provisions of section 80IA(7) of the Act. The CIT, further, observed that the A.O. has allowed the benefit of deduction u/s 80IB of th .....

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nd also failed to examine correctness of payment of fringe benefit tax and applicability of disallowance of expenditure under the provisions of section 40a(ia) of the Act, for non-deduction of tax at source on various expenditures debited to P&L account. The A.O. without examining the above issues, simply accepted the income declared by the assessee, therefore, the assessment order passed by the A.O. u/s 143(3) of the Act, is erroneous in so far as prejudicial to the interest of the revenue. .....

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ment. The assessee further submitted that it has furnished books of accounts and other relevant information at the time of assessment, in response to a show cause notice issued by the A.O. on two occasions i.e. on 16.11.2009 and again on 19.11.2009, furnishing all the information necessary for the purpose of completion of assessment. The A.O., at the time of assessment has called for complete details with regard to the eligibility of deduction claimed u/s 80IB of the Act. Though, it has not file .....

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orts 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 an .....

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his arguments, relied upon certain judicial precedents. Similarly, the assessee further submitted that as regards the other issues pointed out by the CIT, with regard to the reconciliation of gross receipts and tax deducted at source, correctness of fringe benefits tax, initiation of penalty proceedings u/s 271B of the Act and applicability of the provisions of section 40(a)(ia) of the Act, the A.O. has examined all the issues at the time of assessment by calling for the details. Therefore, the .....

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equirement to file the audit report in form no.10CCB for allowing deduction u/s 80IB of the Act, however, the A.O. has failed to obtain the audit report and also failed to verify the claim made by the assessee in respect of job work receipts. The CIT, further, held that the activity undertaken by the assessee is not a manufacturing activity which is eligible for claiming deduction u/s 80IB of the Act. Though, the department has allowed deduction in the earlier years, it is a well settled proposi .....

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allowed by the assessing officer upon making an incorrect claim made by the assessee, the assessing officer is at liberty to re-open the case for that particular year to bring the income escaped to tax. As regards other issues, 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 .....

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le 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 submitted that the CIT was not correct in directing the A.O. to deny the benefit of .....

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d position of law that job work charge is eligible for deduction u/s 80IB of the Act. There is no bar in the provisions of section 80IB of the Act to claim deductions for job work charges. The assessee is into the business of manufacturing of goods and articles, which is eligible activity for the purpose of claiming deduction u/s 80IB of the Act. In addition to manufacturing activity, it has taken up the work of processing of goods for others in view of spare capacity available, therefore, the C .....

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he Act, reconciliation of gross turnover to TDS and fringe benefit tax paid by the assessee. The A.O. having examined the issues satisfied himself and accepted the income declared by the assessee, therefore, the CIT is not correct in coming to the conclusion that there is a lack of enquiry on the part of A.O. in examining the issues as pointed out in the show-cause notice. On the other hand, the Ld. D.R. strongly supported the order of CIT. 7. We have heard both the parties, perused the material .....

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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 w .....

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sment order passed by the A.O. It is the contention of the assessee that the issues raised by the CIT have been examined by the A.O. at the time of completion of assessment. The assessee further contended that the A.O. has called for all the details before allowing deductions u/s 80IB of the Act. Though Act mandates filing of audit report in form no.10CCB, it is not necessary that audit report should be filed along with return of income, it can be filed any time before completion of assessment. .....

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a specific questionnaire dated 19.11.2009 and 27.11.2009. The assessee has filed complete details along with copy of audit report and also explained how job work charges is eligible for deduction u/s 80IB of the Act. The A.O. after considering the explanations furnished by the assessee and also taken into note of judicial judgments relied upon by the assessee allowed the claim of deduction u/s 80IB of the Act. Therefore, we are of the view that the CIT was not correct in coming to the conclusio .....

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the activity of the assessee. But, he is of the opinion that only goods manufactured by the assessee on its own is eligible for deduction, but not job work done for others. We do not agree with the stand taken by the A.O., for the reason that once the assessee is involved in the business of manufacture of goods or articles which is eligible for claiming deduction u/s 80IB of the Act, job work done in the spare capacity available also eligible for deduction u/s 80IB of the Act. We further observ .....

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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 .....

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the show cause notice issued by the A.O. and replies filed by the assessee. On perusal of the details filed by the assessee, we find that the A.O. has issued a specific questionnaire with regard to the issues pointed by the CIT which was addressed by the assessee to the A.O. at the time of completion of assessment. The A.O. after satisfied with the details furnished by the assessee chosen to accept the income declared by the assessee. Therefore, the CIT was not correct in coming to the conclusi .....

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amp;L account. The assessee filed a paper book which contains the details furnished to the A.O. at the time of assessment. On perusal of the paper book filed by the assessee, we find that the A.O. has issued a detailed questionnaire in respect of deduction claimed u/s 80IB of the Act and also other issues pointed out by the CIT in the show cause notice. The A.O. after satisfied with the explanations furnished by the assessee accepted income returned. Therefore, we are of the view that once the i .....

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the issues. 11. The CIT 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 vic .....

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ed 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-filing of income tax returns. In the new system of e-filing of income tax returns, filing of physical copy of any reports or statements is done away with. Similarly, as regards the eligibility of job work charges for claiming deduction u/s 80IB of the Act, which was examined by .....

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e coordinate bench of this Tribunal, after considering the ratio laid down by the Hon ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Limited (2011) 332 ITR 167 held that once the A.O. examined the issues, the CIT cannot assume jurisdiction on the same issues which is already examined by the A.O. by stating that the A.O. has conducted inadequate enquiry or there is a lack of enquiry. The relevant portion of the order is reproduced as under: 10. To invoke the provisions of section 263 of .....

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onditions i.e. (1) the order is erroneous and (2) the same is also prejudicial to the interest of the revenue are not coexists. In the present case, the A.O. has conducted enquiry before allowing deduction towards wages and centering expenses and also examined the points on which the CIT wants further verification. The assessing officer after carefully examined the books of accounts and relevant vouchers furnished by the assessee passed the assessment order as indicated in his order, which is cl .....

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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 ₹ 1,00,000/- under the head wages and centering charges and also partner s capital accounts, where the addition was ₹ 66,825/-.The A.O. had called for explanation and the assessee has furnished .....

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y in the matters which are already examined by the A.O. The Department cannot do fresh assessment in the guise of revision on the matters which are examined and concluded by the A.O. The A.O. being a Quasi Judicial authority, shall have the authority to exercise right judgement and discretion on the basis of information available before him. In the present case on hand, the Assessing Officer after considering vouchers, made an round some addition of ₹ 1,00,000/- which is one of the possibl .....

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