RAJ IMPEX,THANE vs. PCIT CENTRAL MUMBAI 1, MUMBAI

Briefly stated, the assessee is a partnership firm engaged in the business of production of essential oils and perfumery by processing aromatic herbs. The Factory of the appellant is situated at Khasara No. 3267, VPO Bhadsali, Tehsil and District: Una Himachal Pradesh. In the relevant assessment years, the assessee had claimed deduction u/s 80IC of the Act, since the manufacturing unit is situated in Himachal Pradesh. An action u/s 132 of the Act was conducted on the appellant on 10.03.2021. Accordingly notice u/s 153(A) was issued on 13.01.2022 and served upon the assessee. In response the assessee company filed its return of income on 03.02.2022 declaring total income at Rs. 12,924/-. In the course of proceedings notice u/s 143(2) dated 10.02.2022 and 142(1) on 14.01.2022, 31.01.2022, 16.02.2022 were issued. In compliance various details and information from time to time were filed by the assessee. The submissions of the assessee were considered by the assessing officer, he accepted the returned income of the assessee, and accordingly the assessment was completed without any addition / disallowance.

Subsequently the case of the assessee was picked up of revisionary proceeding by ld. PCIT, Mumbai. Ld. PCIT observed that the assessing officer has allowed deduction u/s 80IC of the Act, whereas the assessee have not produced the goods as required per the list of articles or things or operations specified in the 14th schedule of Income Tax Act, to entitle for claim u/s 80IC. Ld. PCIT further observed certain , 3714,3715,3716, 3717,3718 and 3719/MUM/2025 Raj Impex vs PCIT, Central Mumbai 1, Mumbai discrepancies and accordingly was of the opinion that there was likelihood of under assessment of taxable income for at least Rs. 3,08,26,203/-. The assessee also clarified its position before the Ld. PCIT by rebutting to the queries raised that the subjected claim of deduction u/s 80IC has been consistently allowed by the assessing officers after satisfying that condition laid down in Section 80IC which is duly fulfilled. The assessing officer had not either during the assessment proceeding or the search team during the physical clarification had found any fault in the said claim of the assessee. The judicial ratio in the order of ITAT in the assessee’s case for AY 2014-15 was given on different set of facts and legal position therefore could not be applied for rest of the years. The assessee has provided the list of documents submitted to the department in support of its case that purportedly shows that the products and operations have completely compliant with mandate u/s 80IC of the Act. The Assessee also cited the decision of Hon’ble Supreme Court in the case of PCIT, Central-3 Vs Abhisar Buildwell (P.) Ltd., reported in (2023) 149 taxmann.com 399 and certain other judicial ratios to argue that if no incrementing material was found in the course of search u/s. 132 of the Act, then the assessment of any completed/unabated assessment year could not be carried out and completed by the assessing officer in manner that leads to enhancements to income based on other material / information.

Ld. PCIT referred to the replies to the assessee however was not convinced with the same, thus, had concluded that as per mandate of explanation-2 below subsection (1) of sub-section 263 (inserted by finance Act 2015 w.e.f. 01.06.2015), the requisite enquiries were not made by the Ld. AO, which in the opinion of Ld. PCIT, were necessary to complete the assessment. Finally, the matter is restored back to , 3714,3715,3716, 3717,3718 and 3719/MUM/2025 Raj Impex vs PCIT, Central Mumbai 1, Mumbai the file of Ld. AO for fresh assessment after detailed enquires, verification, analysis and investigation on the issue with reasonable opportunities to the assessee.

The findings of Ld. PCIT are culled out as under: “15. Considering the positions of law and various judicial pronouncements, I hold that the assessment order passed by the assessing officer is erroneous and prejudicial to the interests of Revenue within the meaning of Section 263 of the Act. The impugned facts and particulars applicable in the impugned matters as discussed in detail earlier in this order have not been correctly and comprehensively examined by the Assessing Officer per the applicable statutory mandates. As detailed and evidenced above, inquiries, verifications, analyses, and investigations that were required to be carried out by the Assessing Officer have not been carried out in the manners these were to be carried out thereby attracting squarely the applicability of Explanation 2 of Section 263 of the Act. I therefore, set aside the assessment order passed to the Assessing Officer, with a direction to carry out and complete the assessment afresh, after conducting necessary enquiries as directed above in respect of the impugned matters including that of the underassessment through the non-disallowance of the claim of deduction u/s 80IC of the Act of Rs. 3,08,26,203/- for the AY 2011-12. The Assessing Officer is directed to take necessary actions including the passing of the order of assessment after affording proper opportunity of being heard to the assessee.”

Being aggrieved that the aforesaid order by the Ld. PCIT, the assessee preferred the present appeal challenging the revisionary proceedings in terms of grounds of appeals before us. 5

Apropos, the reliance of department on A.Y. 2014-15 in the case of assessee which was decided against the assessee by ITAT, Ld. AR submitted that, it was on different set of facts, the case for A.Y. 2014-15 pertain to order u/s. 143(3) of the Act which was sought to be revised by the PCIT and such revision has been upheld. The order which is now sought to be revised by the PCIT under section 263 of the Act is an order passed post search by the assessing officer u/s. 153A of the Act, wherein detailed verification qua the assessee’s eligibility u/s 80IC was carried out by the assessing officer during the course of assessment proceedings and the assessee cooperated inspite of the fact that Ld. AO had exceeded his jurisdiction u/s 153A by enquiring on an issue which does not emanated from the search proceedings on account of any incriminating material, whereas for abated assessment years any addition can be made only on the basis of incriminating material found during the course of search.

Ld. AR further raised the question on notice u/s 153A of the Act that such notices for the A.Y. 2011-12, 2012-13 and 2013-14 are issued beyond six years. Therefore, additional conditions of section 153A were required to be fulfilled however, no finding about escaped assessment amount for more than Rs. 50 lacs were given by either Ld. AO or Ld. PCIT in their order. Therefore, the assessment u/s 153A of the Act is void ab initio for the referred years and Ld. PCIT was not justified in revising the assessment for such years.

On merits of the case the assessee submits that the assessee manufactures essential oils and perfumery which is not covered in the negative list as per 13th Schedule of the Act, whereas it is producing the goods specified in the 14th schedule of IT Act. Further the place of manufacture i.e. the address has been confirmed from the panchanama itself. Since the appellant had satisfied all the pre-conditions, the appellant is eligible for deduction u/s. 80IC(2)(a)(ii) of the Act. Also, since the appellant is manufacturing essential oils and perfumery which is made from processing , 3714,3715,3716, 3717,3718 and 3719/MUM/2025 Raj Impex vs PCIT, Central Mumbai 1, Mumbai aromatic herbs the appellant is even eligible for deduction u/s. 80IC(2)(b)(ii) of the Act.

With the aforesaid submission it was prayed by Ld. AR that the order u/s 263 based on improper application of the facts and under misreading of the legal provision of the act cannot sustain in the eyes of the law, the same therefore is liable to be quashed.

Per contra Ld. CIT-DR representing the revenue submitted that as per assessment order the activity of the assessee was manufacturing of Gutka and Tobacco which are not covered in the 14th schedule. It is further explained that the assessee had mentioned different sections in different years while claiming the exemption u/s 80IC. He took us to the relevant pages in the paper book of the assessee and have clarified that for A.Y. 2011-12 and 2012-13 the section mentioned was 80IC only, whereas in AY 2013-14 it was 80IC(2)(b)(ii), for A.Y. 2015-16, 2016- 17 and 2017-18 it was 80IC(2)(A1) and A.Y. 2018-19 it was 80IC(2)(A2), it shows that the assessee is not clear of the provisions of the Act and its applicability to its product. The Ld. AO had also not made any enquiries to such shifting of section by the assessee. Therefore, it is clear case of no enquiry by the Ld. AO and therefore the claim of the assessee u/s 80IC was under wrong presumption by Ld. AO. Ld. DR submitted that the variation in claim of assessee was very much before the Ld. AO but he had not made any effort to verify the same. Ld. DR further submitted that as per form 3CD of the assessee placed in paper book in page No. 343-380, at page No. 351 the assessee mentioned his business or profession as “Manufacturing in sale of , 3714,3715,3716, 3717,3718 and 3719/MUM/2025 Raj Impex vs PCIT, Central Mumbai 1, Mumbai perfume and essential oils”, whereas as per sch. 14th showing list of articles or things or operations in Part C (referred by the Ld. AR) for state of Himachal Pradesh, the activity at item No. 2 is “Medicinal herbs and aromatic herbs, etc. processing”, thus, the assessee is not involved in the said activity. Therefore, the assessee is not entitled to claim u/s 80IC of the Act. Ld. DR further drew out attention to the revisionary order u/s 263 and reiterated the contention raised by the Ld. PCIT that there were no enquiries by Ld. AO about the assessee is claimed u/s 80IC of the Act. Accordingly, the Ld. PCIT had rightly invoked the revisionary powers vested with him u/s 263 of the Act.

We have considered the rival submissions, perused the material available on record and case laws / jurisprudence relied upon by the parties. A search was conducted on 08.02.2021 u/s 132(1) of the Act in the case of JMJ Group of others, wherein the assessee M/s Raj Impex was also a party. Accordingly, the case of assessee was taken up for assessment u/s 153A of the Act. The assessments thereafter were completed with no addition qua the assessee’s claim u/s 80IC of the Act. Subsequently, Ld. PCIT had perused the assessment records of the assessee and find that the assessee is not entitled to claim deduction u/s 80IC of the Act which has been claimed by the assessee for assessment years 2011-12, 2012-13, 2013-14, 2015- 16, 2016-17, 2017-18 and 2018-19. Under such observations, Ld. PCIT invoked the provisions of Section 263 to revise the assessment made u/s 153A / 143(3) of the Act for all the aforesaid years. Show cause notices were issued to the assessee u/s 263 of the Act to which the assessee responded with necessary compliances and have objected to the revisionary proceedings initiate, as elaborated hereinabove. Ld. PCIT , 3714,3715,3716, 3717,3718 and 3719/MUM/2025 Raj Impex vs PCIT, Central Mumbai 1, Mumbai did not find any substance in the submissions of assessee and therefore, had set aside the assessment to the file of Ld. AO to complete the assessment afresh after conducting necessary enquiries as directed in the order u/s 263 of the Act. It was the conviction of Ld. PCIT that the assessment order passed by Ld. AO are erroneous / prejudicial to the interest of revenue therefor, the said assessment needs to be set aside and fresh assessment should be made, examining the issue pertaining to assessee’s claim u/s 80IC of the Act.

Before us, Ld. AR on behalf of the assessee has raised multifold contentions such as whether the assessment u/s 153A which is passed after approval of supervisory authority u/s 153D of Act, can be revised without revising the said approval granted u/s 153D of the Act.

Since the assessment was initiated after Search & Seizure operation 132(1) of the Act for the year under consideration which is an unabated assessment year, can the addition or disallowance be made without any incriminating material found or unearthed during the course of search. Ld. AR placed his reliance on the judgment of PCIT, Central-3 Vs Abhisar Buildwell (P.) Ltd., reported in (2023) 149 taxmann.com 399.

It is also alleged by the Ld. AR there was no decision by the Ld. PCIT, neither any enquiries were conducted by the Ld. PCIT himself to reach at any logical conclusion and the matter was remanded to the file of Ld. AO which is not as per the mandate of Section 263 of the Act. Ld. AR clarifies that the department has placed its , 3714,3715,3716, 3717,3718 and 3719/MUM/2025 Raj Impex vs PCIT, Central Mumbai 1, Mumbai reliance on the statement of Shri Nari Behara recorded during the course of search, whereas as per settled principals the statement of a third party alone cannot be the basis of addition unless some incriminating material corroborating the stated reasons for under assessment / ineligible claims of assessee have been brought on record.

After considering the aforesaid contentions thoroughly, we find that in present case, undoubtedly all the assessment years involved herein are unabated assessment years since the search action was conducted on 08.03.2021, and the prescribed date for issuance of notice u/s 143(2) for the captioned assessment years was already elapsed, further no submissions contrary to this fact have been brought to our attention by the representatives of the revenue, therefore any addition under 153A of the act for an unabated / completed assessment was to be made only on the basis of incriminating material found during the search. Our view is fortified on this issue with the categorical findings of Hon’ble Apex Court in the case of Abhisar Buildwell (supra), the same therefore are extracted as under:

Since the order u/s 263 passed by Ld. PCIT was held as erroneous beyond the scope of provision of section 263 without the mandate of law to invoke such powers on the basis of no incriminating material for unabated assessment year, therefore, we are not dealing with other contention raised by the Ld. AR to deal with on legal aspects or merits of the case. The same, therefore, are rendered as academic only.

In result, the appeal of assessee in for AY 2011-12 is allowed. The remaining appeals in to 3719/MUM/2025 for assessment years 2012-13, 2013-14, 2015-16, 2016-17, 2017-18, 2018-19, since all are raising the same questions, having parity of facts and identical impugned ordered u/s 263, therefore our decisions in ITA No. 3713/MUM/2025 shall apply mutatis mutandis to the remaining appeals also. Accordingly, are rendered as dismissed.

In combined result, in to 3719/MUM/2025 for the assessment years 2011-12, 2012-13, 2013-14, 2015-16, 2016-17, 2017-18, 2018-19 of the assessee’s are allowed in terms of our aforesaid observations.