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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
PER MAHAVIR PRASAD, JUDICIAL MEMBER
This appeal filed by the Revenue is directed against the order of the Ld. CIT(A)-2, Vadodara dated 19.09.2017 pertaining to A.Y. 2011-12 and following grounds have been taken:
2 . A.Y. 2011-12 1.1 That in the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in allowing the assessee's claim for deduction under section 10B even though the required conditions are not satisfied. 1.2 That in the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in allowing claim for deduction under section 10B without duly considering the remand report submitted by the: Assessing Officer, and the A.O.'s finding that the assessee had failed to demonstrate that it had received approval from the Board appointed in this behalf by the Central Government, for the period under consideration, and was not eligible for deduction u/s 10B considering the decision of the Hon'ble High Court in Regency Creations Ltd. 353 ITR 326 (Delhi).
2. The appellant craves leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.
Relief claimed in appeal It is prayed that the order of the CIT (Appeals) be set aside on the above issue and that of the Assessing Officer be restored.
Briefly stating the facts of the case are that the assessee company filed its Return of Income on 27.09.2011 declaring total income at Rs.6,52,36,611/- after claiming deduction u/s. 10B at Rs.13,48,60,195/-. The assessment u/s. 143(3) was also completed on 21.10.2013 after allowing deduction claimed u/s. 10B. Subsequently, Pr. CIT-2, Vadodara noticed that 100% Export Oriented Unit of the assessee located at Nasik although was approved by the Development Commissioner, SEEPZ Special Economic Zone, Mumbai vide letter File No. PER:82(2005)/SEEPZ/EOUT/75/2004-05/1411 dated 09.02.2005, but the approval was not ratified by the Board of Approval on behalf of Central Government. Accordingly, after relying upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Regency Creations Ltd.
3 . A.Y. 2011-12 reported in 27 taxmann.com 332 (Del.), the Pr.CIT-2, Vadodara passed an order u/s. 263 dated 02.02.2016 directing the Assessing Officer to pass assessment order a fresh keeping in view the following observations:- "11. Even though ample of opportunity been given the assessee failed to comply with the notice/requirement to substantiate the claim of exemption u/s.10B of the Act of Rs.13,48,60,195/- in respect of its unit at Nasik. The facts of the case have been carefully considered. Given the facts of the case as said herein above, specially wherein the AO allowed the claim of exemption so put forward by assessee without examining the allow-ability, the assessment order so passed was erroneous in so far it is prejudicial to the interest of revenue hence the assessment to the extent thus, is erroneous in so far as prejudicial to the interest of revenue as it stood and is cancelled.
Therefore, it is clear that the assessment order made by the AO u/s 143(3) dtd. 21.10.2013 was without making proper verifications, investigation, examination and taking facts on record, therefore the assessment order so passed is erroneous in so far as it is prejudicial to the interest of the revenue. After considering the facts of the case, I am of the view that assessment order u/s. 143(3) of the Act dtd. 21.10.2013, is therefore, held to be erroneous in so far as it is prejudicial to the interest of the revenue and the same is set aside. The Assessing Officer is directed to examine the above issues of claim of exemption u/s. 10B of the Act and reframe the "assessment afresh in view of aforesaid averments" in the light of show cause as is in paras above and while doing so ensure that reasonable and sufficient opportunity of being heard in the matter is afforded to the assessee. The assessment is set-aside for the limited purpose only"
In view of the above order passed u/s. 263, the Assessing Officer issued a show cause notice dated 22.03.2016 fixing the date of compliance on 28.03.2016. The show cause notice has been reproduced by the Assessing 4 . A.Y. 2011-12 Officer in para-2 of the assessment order. On the date of compliance i.e. 28.03.2016, the assessee filed a letter in the DAK requesting the Assessing Officer to adjourn hearing till first week of June, 2016 since the Development Commissioner, though has been requested, has not provided copy of order ratifying the approval. However, the Assessing Officer passed an order u/s. 143(3) r.w.s. 263 on 31.03.2016 after disallowing the claim made u/s. 10B of the Act. The findings recorded by the Assessing Officer in this regard in para-5 of the assessment order, are reproduced as under:- "5. In nutshell, the assessee could not substantiate its claim for deduction u/s. 10B during the course of proceedings u/s. 263 of the Act, by producing the ratification of the approval granted by the Development Commissioner at the level of Board of Approval for EOU Scheme. Further, before the undersigned also, the assessee could not place on record, the approval granted by the Development Commissioner to its Nasik Unit, being ratified by the Board of Approval for EOU Scheme. On the other hand, the law is very clear in so far as, allowability of deduction u/s. 10B of the Act with regards to fulfillment of the stipulated conditions. The CBDT's instruction No. 2 of 2009 dated 09.03.2009, as referred to above in the show cause notice as well as the decision of the Hon'ble Delhi High Court in the case of CIT V/s. Regency Creations Ltd. 27 Taxmann.com 332, makes it mandatory that, the stipulated and enacted procedure has to be followed as per the intention of the Parliament. Secondly, the CBDT Instruction has also made it mandatory that the powers delegated by the Ministry of Commerce and Industries to the Development Commissioner for approval of 100% EOU status to any unit shall have to be ratified by the Board of Approvals. Under the circumstances, it is crystal clear that assessee's EOU approval of Nasik unit has not been ratified by the Board of Approval. Secondly, the assessee has nowhere denied the fact that, it was not obligatory on it to obtain such ratificatipn. The only contention raised by the assessee even during the course of proceedings u/s. 263 of the Act was that, the records are very old and more time is required to 5 . A.Y. 2011-12 deal with the issue. Now, it is clear on record, that the assessee has got time of about 14 to 15 months after the proceedings u/s. 263 of the act and despite that, the assessee has not been able to place on record the ratification being granted by the Board of Approval. Under the circumstances, I hold that, the assessee has violated the principal condition covering the intention of the law makers that, the approval by Development Commissioner to be ratified by Board of Approval. Under the circumstances, I further hold that, the assessee is not eligible for deduction u/s. 10B of the act for its Nasik unit and accordingly, the same is disallowed. Accordingly, an amount of Rs.13,48,60,195/-being attributable to such Nasik EOU unit is added to the total income of the assessee. I also hold that, the assessee has furnished inaccurate particulars of its income and accordingly, I initiate penalty proceedings u/s. 271(l)(c) of the Act."
In pursuant to the order of the 263, ld. A.O. passed an order u/s. 143(3) r.ws. 143 and disallowed an amount of Rs. 134860195/-.
Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) who granted relief to the assessee by holding that disallowance of deduction claimed u/s. 10B on the ground that ratification of approval granted by Development Commissioner was not obtained from the Board of Approvals.
And further held that during the course of appellate proceedings as well as preparation of Remand Report by the Assessing Officer, the appellant has filed a letter dated 24.05.2016 of Dy. Development Commissioner, SEEPZ, SEZ communicating to the appellate approval of Board of Approvals and copy of the said letter was filed and same is part of the order of the ld. CIT(A).
6 . A.Y. 2011-12 7. Now Revenue has come before us and stated that compliance of requirement concerned has duly been complied with and necessary approval of the Board was filed before the lower authority. Dated 24.05.2016. Since Board approval has been filed by the assessee before the lower authority so nothing against the assessee is left. Therefore in our considered opinion relief should be granted to the assessee. Hence, we do not see any error in the order of ld. CIT(A) granting relief to the assessee. We thus decline to interfere.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 22 - 10- 2019