BHAVANI INDUSTRIES,,RAJKOT-GUJARAT vs. THE ADDL. COMMR. INCOME TAX, RANGE-2,, RAJKOT-GUJARAT

This assessee’s appeal for A.Y. 2010-11, arises from order of the Commissioner of Income Tax-2, Rajkot dated 19-01-2015, in proceedings under section 263 of the Income Tax Act, 1961; in short “the Act”.

The assessee has taken the following grounds of appeal:-

The assessee is in appeal against the aforesaid order passed by ld. PCIT. The counsel for the assessee submitted that during the course of assessment proceedings, the assessee submitted various details with regard to the Rudrapur Unit and hence it cannot be concluded that the Assessing Officer had failed to make any inquiry regarding the claim of deduction for the Rudrapur unit. The counsel for the assessee submitted that the Assessing Officer had called for details of all expenses of Rudrapur unit i.e. administrative, interest expenses etc. which were duly submitted during the course of assessment proceedings. The counsel for the assessee also submitted that the Hon’ble ITAT in had allowed the claim of deduction u/s. 80IC of the Act for the succeeding assessment year. Further, the counsel for the assessee drew our attention to page no. 96 of the paper book in which the Assessing Officer vide notice dated 14-09-2012 had called for various details which were replied to by the assessee vide letter dated 01-10-2012. Accordingly, the counsel for the assessee submitted that since the Assessing Officer had enquired into all details during the course of assessment proceedings, the assessment order cannot be held to erroneous and prejudicial to the interest of the Revenue. In response, the Departmental Representative placed reliance on the observations made by the ld. PCIT in the 263 order.

We have heard the rival contentions and perused the material on record. On going through the questionnaire issued by the Assessing Officer dated 14-09-2012, we observe that no specific query had been raised by the Assessing Officer regarding eligibility to the claim of deduction with respect to the Rudrapur unit u/s. 80IC of the Act. We observe that this is the first Page No 5 Bhavani Industries vs. Addl. CIT year of claiming deduction by the assessee with respect to the Rudrapur unit u/s. 80IC of the Act (in the earlier year though the unit was operationalised but it was incurring losses). We have perused the replies filed by the assessee, which have been submitted before us as part of the paper book. On going through the replies filed by the assessee, we observe that there was no discussion either in the questionnaire issued by the Assessing Officer nor the replies filed by the assessee regarding the claim of deduction u/s. 80IC of the Act with respect to the Rudrapur unit. Further, we observe that at page 104 of the paper book filed by the counsel for the assessee the assessee submitted copy of audit report and report in form no. 10CCB with respect to the Rudrapur unit. On being requisitioned as to in response to which questionnaire issued by the Assessing Officer, this reply has been submitted by the assessee, the counsel for the assessee submitted that this response was not filed by the assessee in response to any query made in any questionnaire issued by the Assessing Officer, but it was during the course of assessment proceedings that the Assessing Officer had “verbally” asked the assessee to file the details in connection with the Rudrapur unit. On being further requisitioned whether this response has been filed by the assessee in response to any query noted by the Assessing Officer during the course of assessment proceedings by way of an order sheet entry, the counsel for the assessee submitted that no specific query regarding the claim of deduction u/s. 80IC of the Act with respect to the Rudrapur unit was raised by the Assessing Officer by way of an order sheet entry during the course of assessment proceedings. The counsel for the assessee submitted that specifically no query was raised by the ld. Assessing Officer by way of an order sheet with respect to claim of deduction u/s. 80IC of the Act with Page No 6 Bhavani Industries vs. Addl. CIT respect to Rudrapur unit. In the light of the above facts, we are of the considered view that since this was the first year of claim of deduction by the assessee with respect to the Rudrapur unit u/s. 80IC of the Act, the Assessing Officer should have enquired into the eligibility of claim of deduction u/s. 80IC of the Act in detail during the course of assessment proceedings. Since this was the first year of claim of deduction, the Assessing Officer should have enquired whether the Rudrapur unit was a new unit or whether it was merely an extension of existing unit, whether the conditions of splitting up or re-constitution of business have been satisfied etc. However, we observe that no specific query was made by the Assessing Officer either by way of notice dated 14-09-2012 nor through any order sheet entry during the course of assessment proceedings with regard to claim of assessee u/s. 80IC of the Act. Though, the assessee submitted details relating to purchases, production and sales etc, however, no specific inquiry/investigation was made by the Assessing Officer as to the eligibility to the claim of the assessee in respect of the new unity u/s. 80IC of the Act for the Rudrapur unit. Accordingly, we are of the considered view that the Assessing Officer has not enquired into eligibility of Rudrapur unit to claim deduction u/s. 80IC of the Act. Accordingly, in the light of the instant facts and observations made by us in the preceding paragraphs, we find no infirmity in the order of ld. PCIT by holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and directing the Assessing Officer to conduct a proper inquiry and verification relating to the eligibility of the claim of the assessee in respect of profits of Rudrapur unit u/s. 80IC of the Act.

In the result, the appeal of the assessee is dismissed.