BHAVANI INDUSTRIES,,RAJKOT-GUJARAT vs. THE ADDL. COMMR. INCOME TAX, RANGE-2,, RAJKOT-GUJARAT
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER
PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
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”.
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The assessee has taken the following grounds of appeal:-
“1. That the learned C.I.T.-2, Rajkot erred and was not justified in invoking provisions of section 263 of the I.T. Act and set aside the assessment order passed by the assessing officer on the facts and circumstances of the case.
That the appellant craves leave and to and/or to add to add/or to substitute to and/or to delete to and/or to amend to all or any of the grounds of appeal upto the hearing of the appeal.”
The brief facts of the case are that the assessee filed return of income for assessment year 2010-11 disclosing total income of Rs. 16,12,21,007/- on 25-09-2010. The case of the assessee was picked up for scrutiny and the assessment was completed on 28-03-2013 at a total income of Rs. 16,15,40,460/-. The assessee is engaged in manufacturing of auto parts. On going through the assessment records, the Pr. CIT observed that in the assessment order, the Assessing Officer had allowed the assessee’s claim of deduction u/s. 80IC of the Act. However, neither in the initial questionnaire nor subsequently any questions were raised by the Assessing Officer with regards to the eligibility of the unit u/s. 80IC of the Act or with the compliance with the conditions laid down u/s. 80IC of the Act by the Assessing Officer. The PCIT was of the view that it was the duty of the Assessing Officer to examine the eligibility for claim of deduction u/s. 80IC of the Act with respect to Rudrapur unit i.e. whether Rudrapur unit was a new unit separate from the assessee and was not an extension of the existing business, whether the Rudrapur unit was not formed by way of splitting or
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reconstitution of business specially when certain percentage of machinery has been transferred from the existing unit to the new unit at Rudrapur, whether conditions of sub-section (5), sub-section (7) and sub-section (12) to section 80IA r.w.s. 80IC (7) of the Act have been complied with. Therefore, as per the PCIT not only was there lack of inquiry but there was complete absence of any scrutiny in respect of the eligibility of the new unit to claim deduction u/s. 80IC of the Act by the Assessing Officer during the course of assessment proceedings. Accordingly, the PCIT was of the view that the Assessing Officer has not formed any opinion nor determined whether the new unit is eligible for deduction u/s. 80IC of the Act. Accordingly, since there is evident lack of inquiry by the Assessing Officer, the assessment order was set aside with the following directions:-
“17) As discussed above, the order is both erroneous and prejudicial to the interest of revenue, and the same is set aside. The Assessing Officer is directed to conduct a proper inquiry and verification of the facts relating to;
i) eligibility of the claim of assessee in respect of profits of Rudrapur unit u/s 80IC and
ii) the correct profits of the two units after proper allocation of costs/arm length price of inter unit transactions and
iii) Allocation of common expenses to the two units.
The assessee should be given a proper opportunity of being heard, before finalization of the assessment.”
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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 ITA No. 108/Rjt/2016 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
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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
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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.
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In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 24-02-2023
Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 24/02/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,
Assistant Registrar, Income Tax Appellate Tribunal, Rajkot
