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TMI Blog2023 (9) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... ,98,776/- is disallowable u/s. 80IA r.w. Rule 18BBE of the IT Rules. 3. It is therefore prayed that above order passed by Pr. CIT u/s 263 may please be quashed. 4. Appellate craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 3. The facts of the case which can be stated quite shortly are as follows: Before us, the assessee is a Private Limited company and filed its return of income for assessment year (A.Y.) 2018-19 on 25/09/2018, declaring total income at Rs.15,69,53,860/-. The assessee`s case was selected for Complete Scrutiny under E-Assessrnent Scheme 2019, to verify the issues of (i) Duty Drawback and (ii) Deduction Claimed for industrial Undertaking under section 80IA / 80IAB / 80IAC /IB / IC/ IBA / 80ID / 80IE / 10A / 10AA of the Act. The Scrutiny assessment under section 143(3) r.w.s. 143(3A) & 143(3B) of the Act, 1961 was completed on 04.03.2021 at assessed income of Rs.15,93,16,342/-. 4. Later on, Learned Principal Commissioner of Income Tax, Valsad [in short 'the Ld. PCIT'], has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On verification of the records, it was observed by ld P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h supporting cogent documents. With respect to the deduction claimed u/s 80IA, the assessee was categorically requested to submit the Profit & Loss account, Balance sheet & Tax audit report for the year under consideration. In compliance with the show cause notice, the assessee vide reply dated 27.11.2020 furnished form 10CCB with respect to all the six wind mill units and requested twice for adjournments for further submission, which were given to the assessee. On 04.12.2020, the assessee furnished agreement copy for transfer of wind power supply with Gujarat energy Transmission Corporation Ltd. In spite of availing ample opportunities of being heard, the assessee failed to furnish separate balance sheets for each of the six wind mills, which is required for availing deduction u/s 80IA of the Act as per Rule 18BBB(2) of the I.T. Rules, 1962. The Assessing Officer has allowed deduction of Rs.3,10,98,776/- u/s 80IA, despite the fact that the assesses has failed to submit separate balance sheets in respect of each of the six mills, thereby not fulfilling the condition laid down in Rule 188BBB of the Income Tax Rules for claiming deduction u/s 80IA of the Act. Thus, the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .10CCB under the Income Tax Rules. The assessee also submitted the combined Balance sheet of these units during the assessment proceedings. Apart from this, the assessee also submitted unit-wise balance sheets of these units, which were uploaded by the assessee, on the site of Income Tax Department, however the assessing officer could not able to download the same. The ld. Counsel for the assessee, invited our attention towards page no.122 of paper book and stated that the Assessing Officer has issued the notice under section 142(1) of the Act, which is placed at page nos.121 to 125 of paper book. The ld. Counsel also stated that the query has been raised by the Assessing Officer by way of notice under section 142(1) of the Act, which is mentioned at page no.122 of paper book. The assessee has submitted its reply against the notice issued by the Assessing Officer under section 142(1) of the Act, which is placed at page no.126 of paper book. Therefore, ld. Counsel contended that issue raised by the ld. PCIT under section 263 of the Act has been thoroughly examined by the Assessing Officer. The ld. Counsel also submitted that before the Assessing Officer, the assessee has explained e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 263 of the Act solely on the issue that assessee has failed to submit Unit wise balance sheets of all the six wind mill units. The relevant observations of ld PCIT is reproduced below for ready reference below: "In spite of availing ample opportunities of being heard, the assessee failed to furnish separate balance sheets for each of the six wind mills, which is required for availing deduction u/s 80IA of the Act as per Rule 18BBB(2) of the I.T. Rules, 1962." 13. We note that ld Counsel submitted before the Bench, the screen shot wherein it is claimed that unit-wise balance sheets were also submitted before the assessing officer, however, the assessing officer was unable to download the same due to technical error. Therefore, as per assessee everything was submitted before the assessing officer. Therefore, ld Counsel contended that order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue. 14. We note that in compliance with the show cause notice of the assessing officer, the assessee vide reply dated 27.11.2020, furnished form 10CCB with respect to all the six wind mill units, unit-wise profit and loss account, Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st furnish along with his return of income the report of such audit in the prescribed form duly signed and verified by such accountant and as the assessee had not furnished the report of such audit in the prescribed form duly signed and verified by the accountant, it was not entitled to relief under section 80J. The assessee sought permission to furnish Form No. 10-D but the Commissioner rejected the request. The Tribunal dismissed the assessee's appeal. On reference: HELD From a perusal of sub-section (6A) of section 80J, it is apparent that compliance with two things is necessary. The first requirement is that the statement of accounts for the previous year relevant to the assessment year for which deduction is claimed must have been audited by an accountant and the second part is that the assessee must furnish along with his return of income the report of such audit in the prescribed form duly signed and verified by such accountant. It can be stated without fear of contradiction that the former is the requirement which furnishes substantial foundation for claiming allowance and the latter is the requirement of furnishing proof that foundation for claiming such de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without affording opportunity to do so. It may be noted that in a given case, the assessee's return having a claim of deduction under section 80J may be accepted by the ITO without holding an inquiry, though it may not have been accompanied with proof of accounts being audited in the manner prescribed. The question of furnishing proof of such audited accounts in the prescribed form at a later stage arises only when the matter is being actively considered for disallowance by the concerned authority. If the assessee does not offer to furnish proof even at the stage when it is pointed out to him that requirements of law are not fulfilled to sustain the claim made by him and he fails to fulfil the requirements of law at that stage, it can be said that the assessee had failed to rectify the defect at the earliest opportunity offered to him. It is an inherent part of section 143(3) that where the Assessing Officer is not inclined to accept the return submitted by the assessee and if he wants to modify the assessment from the return a show-cause notice is required to be given to the assessee. Giving of this opportunity will include opportunity to erase procedural defect, if any, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he finding on the facts that the said funding of the AO can be termed as sustainable in law. We find that vide notice issued u/s. 142(1) dated 13.10.2015 placed at Page No. 1 of Paper Book shows the AO vide item no.(iii) has asked the information regarding details of unsecured loan outstanding as on 31.03.2013 and the loans were squared up amounts in the format prescribed therein. In compliance to thereof, the assessee has furnished complete details of the unsecured loans outstanding / squared up vide para 3 of his letter dated 02.11.2015 placed as Annexure 2 at page 4 of paper book. The assessee has also furnished details consisting of copy of ledger account, copy of acknowledgment of income filed for A.Y. 201213 and 201314 and copy of bank statement reflecting the payment received was paid during the financial year 201213 relevant to assessment year 2013-14 which are placed at paper book, page 9 to 49 in respect of GTPL as well as PAFPL. This indicate that the assessee has furnished account confirmation of the depositor, acknowledgment of income of the parties, audited balanced sheet and profit and loss account of the parties and bank pass book and bank statement of the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted the claim of the assessee after detailed enquiries." "15 The Pr.CIT had observed that Explanation 2 of Section 263 of the Act is clearly applicable and it is clear that the Assessing Officer has passed the assessment order after making enquiries for verification which ought to have been made in this case. However, we find that the Pr. CIT has not mentioned in the show-cause notice issued under section 263 that he is going to invoke the Explanation 2 to 263 hence, invocation of Explanation in the order without confronting the assessee is not appropriate and sustainable in law in support of this contention, the ld. Counsel has placed reliance on the following decision: CIT v/s Amir Corporation 81 CCH 0069 (Guj.), CIT Mehrotra Brothem 270 ITR 0157 (MP,CIT v/s. Ganpet Ram Bishnoi 296 ITR 0292 (Raj.), Cadila healthcare Ltd. Vs. Cl 7, Ahmedabadh 1 [ITA no. 1096/Ahd/2013 & 910/Ahd/2014], Sri Saí Contractors Vs. ITO [ITO no. 109/Vizag/2002] and Pyare Lal Jaiswal Vs. CIT, Vamnesi [(201 4) 41 texmann.com 27&(AII Trib.)]. It was contended by the Learned Counsel that Clause (a) & (b) of Explanation 2 of Section 263 are not applicable as the Assessing Officer has made enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions contained in subsection (1) of section 263 of the Income tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. 53.2 The interpretation of expression "erroneous in so far as it is prejudicial to the interests of the revenue" has been a contentious one. In order to provide clarity on the issue, section 263 of the Income tax Act has been amended to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner. (a) the order is passed without making inquiries or verification which, should have been made; (b) the order is passed allowing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, we are of the considered view that the AO had made detailed enquiries and after applying his mind and accepted the genuineness of loans received from GTPL and PAFPL, which is also plausible view. Therefore, we find that twin conditions were not satisfied for invoking the jurisdiction under section 263 of the Act. The case laws relied by the ld. CIT(D.R.) are distinguishable on facts and in law hence, by the ld. Counsel as well and we concur the same hence not applicable to present facts of the case. Therefore, in absence of the same, the ld. CIT ought to have not exercised his jurisdiction under section 263 of the Act. Therefore, we cancel the impugned order under section 263 of the Act, allowing all grounds of appeal of the Assessee." 5. The Tribunal has found that in the order passed by the PCIT, Explanation 2 of Section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of Section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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