M/S. THIRD EYE ENTERPRISE,,AHMEDABAD vs. THE PR. CIT-3,, AHMEDABAD

The assessee has impugned the aforesaid action of the Pr.CIT by way of following grounds of appeal:

Briefly stated, the assessee, a partnership firm, is engaged in the business of software development and IT/ITES services. The assessee, a partnership firm, filed its return of income declaring total income of Rs.Nil after claiming exemption of Rs.1,10,30,619/- under s. 10AA of the Income Tax Act, 1961 (‘the Act’). The return filed was subjected to scrutiny assessment and pursuant thereto assessment order was passed by the AO under s.143(3) of the Act dated 10.09.2014. Subsequent to the regular assessment, on verification of records, it was found by the Pr.CIT that assessee has failed to submit a prescribed form No.56F before the AO as contemplated under s.10AA(8) of the Act r.w. Rule 16D of the Income Tax Rules. It was also alleged that approval letter from SEZ authority was not furnished before the AO to enable it to claim deduction under s.10AA of the Act. The Pr.CIT accordingly issued show cause notice dated 18.11.2016 to the assessee alleging that the assessment order passed by the AO under s.143(3) of the Act is erroneous and prejudicial to the interest of the Revenue on account of the fact that the deduction under s.10AA of the Act was allowed without ensuring compliance of prescribed conditions. Pursuant to the show cause notice, the

Aggrieved by the aforesaid direction of the Pr.CIT cancelling the assessment order passed under s.143(3) of the Act for re-framing thereof, the assessee preferred the appeal before the Tribunal.

The learned AR for the assessee at the outset submitted that the ingredients of Section 263 of the Act are not fulfilled and therefore, the Pr.CIT has wrongly assumed the jurisdiction conferred under s.263 of the Act. The learned AR submitted that the assessment order which is subject matter of revision by the Pr.CIT is neither erroneous nor prejudicial to the interest of the Revenue. The learned AR pointed out that the relevant form no.56F as well as approval letter from SEZ authority was presented in the proceedings under s.263 of the Act and therefore, the Pr.CIT was not justified in interfering with the deduction allowed by the AO in the regular assessment. The learned AR also submitted that information was called for under s.133(6) from SEZ authority (Software Technology Park of India) before granting deduction under s.10AA of the Act and therefore, it does not lie in the mouth of the Pr.CIT to say that proper inquiry was not carried out prior to grant deduction under s.10AA of the Act. The learned AR relied on certain judicial precedents to prop up its case. The learned AR referred to the decision of the Hon’ble Gujarat High Court in the case of Zenith Processing Mills vs. CIT (1996) 219 ITR 721 (Guj) for the proposition that filing of prescribed form for claiming relief is only directory in nature and it will be sufficient if such report is furnished by the assessee on being pointed out about the defect. The learned AR accordingly sought reversal of the action of the Pr.CIT.

The learned DR, on the other hand, relied upon the order of the Pr.CIT.

We have carefully considered the rival submissions and perused the order of the Pr.CIT and material relied upon in the course of hearing. The assessee, in the present case, has agitated the action of the Pr.CIT in invoking the revisionary power vested under s.263 of the Act towards alleged non verification of conditions for eligibility of deduction under s.10AA of the Act. A bare reading of the order of the Pr.CIT shows that the AO has failed to make inquiry into the relevant aspects concerning eligibility towards deduction under s.10AA of the Act. The prescribed form required for the purposes of claim of deduction under s.10AA of the Act was not available before the AO. The AO did not make any inquiry in this regard. The form ultimately filed before the Pr.CIT was also found with reference to Section 10A in place of Section 10AA of the Act. Thus, the prescribed form presumably directory in nature, as claimed by the assessee has not been placed on record to appreciate the correctness of deduction claimed. The approval of the SEZ authority likewise was also not placed before the AO nor asked for. Thus, the order of the AO under s.143(3) of the Act clearly suffers from lack of inquiry and application of mind. The AO has clearly failed to discharge its quasi-judicial functions while framing the assessment order. Such an assessment order is thus clearly erroneous and prejudicial to the interest of the Revenue.

At this stage, we also take note of the reply received by the AO from SEZ authority in response to Section 133(6) of the Act. However, it is seen that the reply was towards its competence to implement EOU Scheme and issue of letter of permission of STP Scheme in place of its issuance by BOA (Board of Approval). Thus, the reply was made to explain the delegation of powers to the Directors of STP Schemes and ratification of such approvals by the competent authority. Thus, the inquiry was made on only one limited

Resultantly, the appeal of the assessee is dismissed.