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M/s. Translumina Therapeutics LLP, C/o- M/s. RRA Taxindia Versus Pr. CIT, Dehradun

2017 (9) TMI 848 - ITAT DELHI

Revision u/s 263 - admissibility of deduction claimed u/s 80IC was not properly examined during the course of assessment proceedings - order erroneous and prejudicial to the interest of Revenue - Held that:- In the instant case in the show cause notice issued, the Ld. CIT raised the fact that eligibility of deduction under section 80IC of the Act remain unexamined at the time of assessment. In our opinion, the audit report under section 10CCB and list of industries to be enclosed with license ce .....

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ility of deduction under section 80IC of the Act by the AO in the instant case had rendered the order of the AO not only erroneous but also prejudicial to the interest of Revenue, accordingly, CIT had correctly invoked the provisions of Section 263. Accordingly, the grounds of the appeal are dismissed. - ITA No.2520/Del/2017 - Dated:- 15-9-2017 - SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Appellant : S/sh. Rakesh Gupta & Somil Agarwal, Advocates For The Res .....

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that the admissibility of deduction claimed u/s 80IC was not properly examined during the course of assessment proceedings and further erred in holding the assessment order dated 18-03-2015 is erroneous in so far as it is prejudicial to the interest of revenue. 2. That having regard to facts & circumstances of the case, Ld. Pr. CIT has erred in law and on facts in assuming jurisdiction u/s 263 and further erred in setting aside the issue to the file of Ld. AO to make assessment afresh and t .....

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t the assessee set up a unit at plot No. 9, Pharma City Selaqui, Uttranchal and commenced business on 22/06/2011. The assessee was engaged in producing drug coated coronary stents and their sterilized packing. The year under consideration was first year of business of the assessee. The assessee filed return of income electronically on 30/09/2012 declaring nil income. In the return filed, the assessee claimed deduction under section 80IC of the Act amounting to ₹ 14,00,880/-. The assessment .....

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the CIT, the Ld. counsel submitted that the Assessing Officer had examined books of accounts and other evidence filed during the course of assessment proceeding and made all necessary enquiries with regard to deduction under section 80IC of the Act, including spot enquiry conducted through the Inspector of the Income Tax, and, thus, the order of the Assessing Officer could not be termed as erroneous. The learned counsel submitted that the drug coating is a complex manufacturing process in which .....

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section 80IC of the Act. 2.1 The Ld. CIT, however, was of the opinion that the process of drug coating does not result in transformation of the article or object into a new object or does not bring into existence a new and distinct object or article and thus the process of coating does not come within the purview of definition of manufacturing as defined in section 2(29BA) of the Act. 2.2 Further, the Ld. CIT observed that the assessee did not furnish audit report required for claiming deductio .....

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ourse of assessment proceeding and accordingly, he set aside the assessment with the direction to make fresh assessment. 2.4 Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. The only effective issue in the present appeal is against the action of the Ld. CIT in assuming jurisdiction under 263 of the Act and holding the assessment order as erroneous insofar as prejudicial to the interest of the Revenue on the ground that admissibility of deductio .....

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oneous and prejudicial to the interest of Revenue and therefore the order passed under section 263 of the Act is liable to be held invalid and deserve to be quashed as held in following judicial decisions: * M/s. Classic Flour & Food Processing (P) Ltd. Vs. CIT, Kol-IV in ITA No. 764-766/Kol/2014 dated 05.04.2017 * Krishan Kumar Saraf Vs. CIT in ITA No. 4562/Del/2011, dated 24.09.2015 6. The learned counsel submitted that the Assessing Officer passed the assessment order dated 18/03/2015 und .....

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circle -16(1), New Delhi. He further referred to page 22 to 23 of the paper book, which is an application under section 124 of the Act addressed to the ACIT, Circle-16(1), New Delhi for transfer of jurisdiction to the DC/ACIT, Dehradun, Uttrakhand. In the said application, the assessee submitted that principal business of the assessee being situated at Dehradun, jurisdiction over the case lies with DCIT/ACT, Dehradun. The Ld. counsel also referred to page 27 of the paper book, which is a letter .....

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(2) of the Act within the limitation period and therefore the assessment passed by him was bad in law and non-est in the eye of law. He submitted that since the assessment order was void ab initio, it cannot be revised. 8. Learned counsel also relied on the decision of the Tribunal dated 27/05/2016 in the case of Micro Spacematrix Solutions Private Limited versus Income tax officer in ITA No. 669/Del/2012 and submitted that even jurisdiction cannot be conferred upon the Assessing Officer by cons .....

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sistant Commissioner of Income- tax New Delhi and on selection of the case for scrutiny, that very Assessing Officer issued notice under section 143(2) of the Act on 16/08/2013 and served within the prescribed period. Further, he submitted that on the request of the assessee to transfer the case from New Delhi to Dehradun as its principal place of business was situated at Dehradun, the Assessing Officer transferred the case following due procedure of law to the Assessing Officer at Dehradun, who .....

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was issued by the jurisdictional Assessing Officer, it is relevant to reproduce contents of letter dated 02/09/2013 submitted by the assessee before the ACIT, 16(1), New Delhi, which is available on page 22 to 23 of assessee s paper book: FACTS OF THE CASE TRANSLUMINA THERAPEUTICS LLP, was incorporated as a Private Limited Company under the Indian Companies Act, 1956. Later, the company was converted into a limited Liability Partnership under the Limited Liability Partnership Act, 2008. [hereina .....

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at 9, Pharma City, Selaqui, Dehradun, Uttarakhand. OUR SUBMISSION In view of the above, we respectfully submit before your goodself the fact that the principal place of business of the assessee is situated at that in the PAN database, the Deputy/Assistant Commissioner of Income Tax, New Delhi has been listed as the assessee firm s assessing officer. However, as mentioned above, the principal place of business within the meaning of section 124 of the Income Tax Act, is situated at Dehradun, Utta .....

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Circle, Dehradun, Uttarakhand. The PAN of the assessee may also be linked with the correct jurisdictional officer. 12. Further, in a subsequent letter filed before the DCIT, Circle 16(1), New Delhi, which is available on page 25 of the assessee s paper book, the assessee also informed that it had filed application before the ACIT, Dehradun for transfer of case from Delhi to Dehradun. 13. The Jurisdiction over a registered firm /LLP is assigned in terms of section 124 of the Act to the Assessing .....

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which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. 14. Further, section 120(5) of the Act has specifically conferred the territorial jurisdiction to the Assessing Officer, which reads as under : 124. (5) Notwithstanding anything contained in this section .....

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made for PAN allotment. During PAN application, the assessee fills up the ward/ circle and code of the jurisdictional Assessing officer after carrying out enquiry on the website of the Income-tax department, for which special tool/facility are provided on website. On perusal of notice under section 143(2) dated 16/08/2013, which is available on page 21 of the assessee s paper book, we find that the notice was generated by the computer system on the basis of PAN database having Delhi address. Th .....

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cessor. For ready reference, section 129 of the Act is reproduced as under: Change of incumbent of an office. 129. Whenever in respect of any proceeding under this Act an income- tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor : Provided that the assessee concerned may demand that before the proceeding .....

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acematrix Solutions Private Limited (supra), the Income Tax Officer who issued notice was not having territorial jurisdiction over the case, whereas in the present case the Income Tax Officer, who issued the notice was having territorial jurisdiction over the case in terms of section 124 of the Act at the relevant period of time and, therefore, the ratio of the said decision is not applicable over the facts of the instant case 17. In our considered opinion, the Assessing Officer at Delhi assumed .....

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n and computation of income for the year under consideration alongwith audit report in form number 10CCB s certifying that the assessee company is eligible for deduction under section 80 IC (ii) PB 3-20: is a copy of Tax Audit Report together on balance sheet and profit and loss account mentioning the nature of business of manufacturing of medical devices and stating the claim of deduction under section 80 IC amounting to ₹ 40, 00, 880/-. (iii) PB 11: is quantitative detail of raw material .....

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by the assessee (vi) PB 25-26: is a copy of assessee s letter dated nil filed to Assessing Officer submitting the copy of return alongwith computation of income and tax audit report (vii) PB 31-33: is a copy of assessee s submission dated nil filed to the Assessing Officer submitting that assessee firm manufactures drug eluting stents (viii) PB 38-65: is a copy of letter under section 133(6) of the Act issued to three buyer parties of the assessee and there replies (ix) PB 65-138: are copy of o .....

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9. The Ld. counsel submitted that in view of the above mentioned pleadings and evidences examined and considered by the Assessing Officer, the claim of deduction under section 80IC of the Act was examined in detail and, therefore, the action of the Ld. CIT in assuming jurisdiction under 263 of the Act deserve to be quashed. In support, the Ld. counsel placed reliance on following judicial precedents: * Jamna Auto Industries Ltd. vs CIT, ITA 495/Chd/2015, Date of order 05-01-2016. (ITAT, Chandiga .....

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rder, directing the AO to revisit the issue and to make further inquiry cannot be held as valid and in this situation, action of the CIT issuing notice and passing impugned order cannot be held as sustainable and valid and the same deserves to be quashed. We order accordingly. Deduction under section 80 HHC - AO having allowed deduction under section 80 HHC in respect of profit on sale of DEPB license and also in respect of export incentive earned on export made through export house in the order .....

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Officer is erroneous or prejudicial to interest of revenue merely because in order, elaborate discussion is not made on certain points - Held, yes - RAM KISHAN PASS V. ITO 149 TAXMAN 55 DEL-(Mag.) * Revision-Order prejudicial to interests of Revenue-Assessing Officer examining and considering issue but not mentioning in assessment order -Order not erroneous-INFOSYS TECHNOLOGIES LTD. V/S JOINT CIT(ASSESSMENT)- VOL.287-ITR-211 (B ANGLOREL (2006) 103 ITD 399 (Bang) 20. The Ld. counsel further witho .....

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bmitted that after insertion of Explanation -2 to section 263 of the Act by Finance Act, 2015 w.e.f. 01/06/2015, now the assessment order passed without making Inquiry or verification which should have been made or passed allowing any relief without enquiring into the claim, shall be deemed to be erroneous insofar as prejudicial to the interest of the Revenue and thus the cases relied upon by the counsel of the assessee are distinguishable and no longer applicable in the facts of the instant cas .....

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2017 which is much after insertion of the Explanation -2 to section 263 of the Act, hence it was very much in operation during relevant period. He submitted that accordingly, not making enquiries by the Assessing Officer to examine the manufacturing activity has rendered the assessment order as erroneous so as to prejudicial to the interest of the revenue and therefore Ld. CIT was justified in setting aside the said order. 22. In the rejoinder, the Ld. counsel of the assessee submitted that Expl .....

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te. We find that Ld. counsel has first argued that assessment was completed after making required enquiries by the Assessing Officer. Then, he argued that even if the enquiries were inadequate or not satisfactory as per the CIT, the assessment cannot be revised in such circumstances. He further argued that the Explanation - 2 to section 263 was not applicable retrospectively in the instant assessment year. 24. We are dealing with the arguments of the Ld. counsel in reverse order. First, we take .....

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passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] (2) .....

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e Court. 26. It is evident from the plain reading of the above explanation that the cases where the Assessing Officer has not done the enquiries, which he ought to have done in the circumstances of the case, the assessment order is deemed to be erroneous and prejudicial to the interest of the revenue. This provision has been inserted by the finance Act 2015 w.e.f. 01/06/2015. Since in the instant case the proceedings under section 263 of the Act have been initiated on 30/01/2017 by the Commissio .....

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annot be applied retrospectively. Before us, the proceeding under section 263 of the Act has been challenged and the Explanation -2 is in respect of the proceedings u/s 263 of the Act and not in respect of assessment proceedings. Since the proceedings u/s 263 have been initiated on 30/01/2017, in our considered opinion, the Explanation -2 of section 263 of the Act is operative in the case of the assessee. 27. In view of the said Explanation to section 263 of the Act, if the Assessing Officer has .....

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ination before us in the case is, whether the Assessing Officer has carried out the enquiry which ought to have been carried out in the circumstances of the case. The learned CIT has held that the process of drug coating over coronary stents carried out by the assessee was not amounted to manufacturing and therefore the deduction under section 80IC of the Act has been wrongly allowed. The Ld. CIT has observed that the assessee even did not file the audit report in prescribed form 10CCB, issued b .....

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basis. 29. In our opinion, the contention of the Ld. counsel that form No. 10CCB was filed alongwith return of income, is not correct. On perusal of page 1 (one) of the paper book, we find that the return of income has been digitally signed and filed electronically by the assessee. During the relevant period, in terms of clause 2 of Rule 12 of the Income Tax Rules, 1962, the taxpayers filing their income tax returns electronically were not required to enclose any papers/documents/reports with th .....

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report in form No. 10CCB. The assessee has also filed copy of submissions made to the Assessing Officer during assessment proceedings. The submissions are available on pages 22 to 23, 25 to 26, 31 to 37, 65 to 79, 80 to 106, 107 to 127 and 128 to 138 of the paper book. We find that most of these submissions claimed to have been filed are not dated and without any acknowledgement from the office of the Assessing Officer. On perusal of these submissions, we find that the assessee has nowhere clai .....

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was without any merit and does not require any consideration of the facts more so in view of the pleadings and evidence already submitted with assessee. 31. It is evident from above arguments of the Ld. counsel that he failed to rebut the factual information of non-filing of list of industries alongwith the copy of license issued by the drug license and controlling authority, before the Assessing Officer. 32. In our considered opinion examination of form No. 10CCB and copy of license certificat .....

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facturing activity as defined under Income-tax Act. Thus in the facts and circumstances of the case, we are of the opinion that Assessing Officer has not carried out the enquiries for examining the manufacturing activity of the assessee and which he ought to have carried out in the circumstances of the case. 33. Thus, we hold that the assessment order is deemed to be erroneous in terms of Explanation-2 to section 263 of the Act. 34. The Ld. counsel further, without prejudice to the earlier argum .....

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ther hand, submitted that form No. 10CCB and copy of license are documents which could justify the claim of deduction under section 80IC of the Act. Accordingly, the Ld. CIT(DR) submitted that no new issue has been raised in the order under section 263 of the Act, other than non-eligibility of deduction under section 80IC of the Act and therefore the contention of the Ld. counsel that form No. 10CCB was not a ground for issuing show cause under section 263 of the Act is not a valid argument. 36. .....

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7 SCC 592 wherein the Supreme Court noted that the department cannot travel beyond the show cause notice. The Tribunal was of the view that the ground that the assessee had not fulfilled the conditions laid down under Section 80-IA did not form part of the show cause notice. The Tribunal accepted the argument of the assessee that the Commissioner of Income Tax did not even call for any explanation on this issue and, therefore, the assessee did not have any opportunity to meet this ground. The Tr .....

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