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Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH: DEHRADUN
This is an appeal by the assessee against order dated 15.03.2017 passed by learned Principal Commissioner of Income Tax (hereinafter referred to as ‘learned PCIT’), Dehradun, under section 263 of the Income-tax Act, 1961 (in short ‘the Act’), pertaining to assessment year 2012-13.
None appeared on behalf of the assessee. This appeal was filed by the assessee on 06.06.2017. The appeal was firstly fixed for hearing on 26.11.2021, 24.03.2022, 23.06.2022, 26.08.2022, 16.12.2022, 27.04.2023 and 20.06.2023, i.e., today. On none of these occasions, the assessee was present either in person or through his Authorized Representative.
The only issue to be decided in this appeal is as to whether learned PCIT was justified in invoking revisional jurisdiction under section 263 of the Act by cancelling assessment order framed by the learned Assessing Officer and directing him to deny the claim of deduction under section 80IC of the Act in respect of exchange rate fluctuation income, interest income and insurance claim in the facts and circumstances of the instant case.
We have heard learned DR and perused the materials available on record. We find that the assessee is engaged in manufacturing of auto components (break parts). The assessee has shown net profit of Rs.43,48,535/- and claimed deduction at the rate of 100% under 80IC of the Act. This is the second year of claim of deduction under section 80IC of the Act. The learned Assessing Officer completed the assessment, accepting the return of income at Rs. Nil in the assessment framed under section 143(3) of the Act on 30.01.2015. This assessment was sought to be revised by learned PCIT by invoking revisional jurisdiction under section 263 of the Act by treating the order passed by the learned Assessing Officer as erroneous, inasmuch as, it is prejudicial to the interest of the Revenue on the ground that learned AO had erroneously granted deduction under section 80IC of the Act in respect of exchange rate fluctuation of Rs.14,98,970/-; interest income on fixed deposits of Rs.66,616/- and Insurance claim of Rs.65,845/-.
Accordingly, a show-cause notice was issued by leaned PCIT under section 263 of the Act on 22.12.2016 to explain, as to why the assessment order dated 20.01.2015 passed by learned Assessing Officer may not be cancelled. The assessee filed through his Authorized Representative a written submission dated 16.02.2014 by explaining as under:
“i) Exchange rate fluctuation difference:- In this regard he submitted that the assessee concern is engaged in manufacturing of auto components (Brake parts) wherein maximum raw materials are 3 imported from Japan & Korea. The purchases of raw materials at the time of receipt of the materials at factory have been booked by applying the rate of dollar on the date of purchases whereas payment is made after credit period is over by applying the rate of dollar at the time of payment. Therefore, difference in rates of dollar on the date of purchase and on the date of payment arises. The difference so arises has been shown separately as per requirement of Accounting Standard. Therefore, the exchange rate fluctuation difference is part and parcel of cost of purchases which is part of manufacturing activities and is eligible for deduction u/s 80IC. ii) Interest income:- Regarding interest income he stated that to avail Letter of Credit from Bank, 25% margin money in the shape of FDR is placed with the Bank. The interest of Rs. 66,616/- shown in the P & L Account is the interest earned on such FDRs and is therefore, directly related to the manufacturing activities eligible for deduction u/s 80IC. iii) Insurance claim:- Regarding insurance claim of Rs. 65,845/- he stated that the same is against stock and amount has been received from insurance company for stock damaged in transit. Therefore, the same has direct nexus with the production process and is business income of the assessee from manufacturing activities eligible for deduction u/s 80IC.”
Learned PCIT by placing reliance on certain decisions and ignoring the aforesaid contentions of the assessee, proceeded to cancel the assessment dated 20.01.2015 framed by learned Assessing Officer and further proceeded to determine the total income of the assessee by denying deduction under section 80IC of the Act in respect of the aforesaid three receipts. Aggrieved, the assessee is in appeal before us.
At the outset, we find that the impugned order passed under section 263 of the Act by learned PCIT is dated 15.03.2017.
Certainly, the giving effect order to section 263 of the Act should have been passed by learned Assessing Officer by this time. The learned DR before us was not able to provide any details with regard to the fact as to what happened in the giving effect proceedings. The assessee also was not present to explain the status of giving effect proceedings. Hence, in absence of details of the giving effect proceedings before us, we deem it fit and appropriate, in the interest of justice and fair play to modify the revision order passed by learned PCIT by simply setting aside the assessment order dated 20.01.2015, instead of cancelling the same.
In other words, learned Assessing Officer is directed only to examine afresh the eligibility of claim of deduction under section 80IC of the Act in respect of the aforesaid three receipts, uninfluenced by earlier decisions taken by him, if any.
With these directions, the order passed by learned PCIT under section 263 of the Act is modified. Accordingly, grounds raised by the assessee are partly allowed for statistical purposes.
In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in Open Court on 23rd June, 2023