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Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: MS. DIVA SINGH, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the assessee is preferred against the order of the Principal Commissioner of Income Tax – 15, New Delhi dated 27.03.2021 pertaining to Assessment Year 2015-16 framed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'].
The solitary grievance of the assessee is that the PCIT erred in invoking the provisions of section 263 of the Act and further erred in remanding the matter back to the Assessing Officer to examine and verify the evidences with regard to quantum of addition u/s 80IC of the Act.
Briefly stated the facts of the case are that the assessment under section 143(3) of the Act was framed by the Assessing Officer vide order dated 30.11.2017.
During the course of scrutiny assessment proceedings, the Assessing Officer verified the claim of deduction u/s 80IC of the Act @ 100 % and after verification and after being convinced with the claim, the Assessing Officer allowed the deduction. Invoking the provisions of Section 263 of the Act, the PCIT issued the following show cause notice: nothing to say and the matter will be decided accordingly.
The assessee filed reply to the notice as under:
Not convinced with the reply of the assessee, the PCIT invoking the powers conferred upon him by provisions of section 263 of the Act, annulled the assessment being erroneous in so far as it is prejudicial to the interest of the revenue and remanded the matter back to the AO to examine and verify evidences afresh especially with regard to quantum of deduction allowable under section 80IC of the Act.
Before us, the ld. counsel for the assessee vehemently stated that the claim of deduction on substantial expansion has been now well settled in favour of the assessee and against the revenue by the decision of the Hon'ble Supreme Court in the case of Arham Softronics (supra).
The counsel further vehemently stated that during the course of assessment proceedings itself the Assessing Officer has examined the claim with supporting evidences which is apparent from para 5 of the assessment order and therefore, the PCIT should not have remanded the matter for verification of same evidences once again.
It is the say of the ld. counsel that even before the PCIT, the assessee had furnished supporting evidences for claim of deduction u/s 80IC of the Act and the PCIT could have himself examined the claim of deduction as held by the Hon’ble High Court of Delhi in the case of DG Housing Project 343 ITR 329.
Per contra the ld. DR strongly supported the findings of the PCIT.
We have given thoughtful consideration to the orders of the authorities below. The undisputed fact is that this is not the first year of claim of 100% deduction on substantial expansion. Substantial expansion was done in Assessment Year 2012 which year became initially Assessment Year for claim of 100% deduction for another five years. In the preceding Assessment Years 2012–13 and 2013-14 assessments were framed under section 143(3) of the Act wherein the claim of 100% deduction was thoroughly examined by the Assessing Officer which is evident from the assessment order placed at pages 101 and 114 of the paper book. It is also not in dispute that the claim was thoroughly examined by the Assessing Officer during the assessment proceedings of the year under consideration.
We find that vide reply exhibited elsewhere, the assessee had brought to the notice of the PCIT claim of deduction with supporting evidences. Therefore, the findings of the Hon’ble Jurisdictional High Court of Delhi in the case of DG Housing Projects [supra] squarely apply wherein the Hon’ble High Court has held that the ld. CIT(A), after analyzing the records, ought to have recorded a categorical finding as to how assessment order is erroneous.
In the present case also, when the assessee took a specific plea in its reply that it has made substantial expansion for Assessment Year 2011– 12 and it has produced these details, then the commissioner ought to have considered the same and should have recorded a categorical finding.
Had that been done, then it would have avoided the second round of litigation at the level of the Assessing Officer.
Further, we find that the impugned quarrel has now been settled by the Hon’ble Supreme Court in the case of Arham Softronics. Relevant findings read as under:
“24. The aforesaid discussion leads us to the following conclusions:
(a) Judgment dated 20th August, 2018 in Classic Binding Industries case omitted to take note of the definition 'initial assessment year' contained in Section 80-IC itself and instead based its conclusion on the definition contained in Section 80-IB, which does not apply in these cases. The definitions of 'initial assessment year' in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of 'initial assessment year' under Section 80-IC has made all the difference. Therefore, we are of the opinion that the foresaid judgment does not lay down the correct law.
(b) An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of Himachal Pradesh of the nature mentioned in clause (ii) of sub-section (2) of Section 80-IC, would be entitled to deduction at the rate of 100% of the profits and gains for five assessment years commencing with the 'initial assessment year'. For the next five years, the admissible deduction would be 25% (or 30% where the assessee is a company) of the profits and gains. (c) However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become 'initial assessment year', and from that assessment year the assessee shall been entitled to 100% deductions of the profits and gains.
(d) Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th ear by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes 'initial assessment year' once again.
However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years.
In view of the aforesaid, we affirm the judgment of the High Court on this issue and dismiss all these appeals of the Revenue. Likewise, appeals filed by the assessees are hereby allowed.”
Considering the facts of the case in hand in light of the decision of the Hon’ble Supreme Court [supra] we set aside the order of the PCIT and restore that of the AO.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 03.12.2021.