DCIT, CC-I, CHANDIGARH , CHANDIGARH vs. VALCO INDUSTRIES LTD., , CHANDIGARH

आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “बी” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE "ी िव"म िसंह यादव, लेखा सद" एवं "ी परेश म. जोशी, "ाियक सद" BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ िनधा"रण वष" / Assessment Year : 2013-14 The DCIT बनाम Valco Industries Ltd. CC-1, Chandigarh SR-37, Sector-26, Madhya Marg, Chandigarh- 160019 "ायी लेखा सं./PAN NO: AAACV5195J अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज" की ओर से/ Revenue by : Smt. Kusum Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 01/10/2024 उदघोषणा की तारीख/Date of Pronouncement : 15/10/2024 आदेश/Order PER VIKRAM SINGH YADAV, A.M. :

This is an appeal filed by the Revenue against the order of the Ld. CIT(A)- 3, Gurgaon dt. 27/07/2023 pertaining to Assessment Year 2013-14. 2. In the present appeal, Revenue has raised the following grounds of appeal: i) Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is right in holding that the consequential order passed u/s 147 r.w.s.263 of the Act, by the Assessing Officer in pursuance to order of PCIT(Central) u/s 263 of the IT. Act, 1961 as void ab initio ignoring the facts that the appeal against such order of the Hon'ble ITAT quashing the order u/s 263 is pending before the Hon'ble Punjab & Haryana High Court? ii) Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is right holding such consequential order as void an initio ignoring the facts that order passed by Ld. PCIT (Central), Gurugram u/s 263 has not attained its finality? iii) Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) was right in holding that consequential order passed u/s 147 r.w.s. 263 of the Act as void as initio without giving any liberty to the Revenue to revive the proceedings consequent to any directions or order by the Hon'ble High Court in favour of Revenue on the issue of order passed by Ld. PCIT (Central), Gurugram u/s 263 of the IT. Act

3. Briefly, the facts of the case are that the assessee filed its return of income for the impugned assessment year 2013-14 on 29.09.2013 declaring income of Rs 2,64,39,760/- after claiming deduction u/s 80IC with regard to its industrial undertaking located at Baddi, Himachal Pradesh amounting to Rs 5,87,89,770/-. The assessment thereafter was completed u/s 143(3) of the Income Tax Act on 10/03/2016 at an assessed income of Rs 4,76,40,025/- by making an addition of Rs 2,12,00,625/-, being the assessee’s share of revenue from joint venture which was treated as capital receipt by the assessee.

4. Thereafter, notice u/s 148 was issued on 10/03/2017 and reassessment was completed u/s 147 r/w 143(3) on 27/11/2017 at an income of Rs 8,87,92,864/- wherein the deduction claimed u/s 80IC was restricted to 30% as against 100% claimed by the assessee. On appeal, the disallowance was confirmed by the ld CIT(A), however, on further appeal, the Coordinate Bench vide its order dated 14/06/2019 in deleted the disallowance holding that the assessee was eligible for 100% deduction u/s 80IC having undertaken substantial expansion.

8. In the impugned order, the Id. CIT(A) allowed the appeal filed by the assessee, reversing the consequential assessment order dated 20/01/2022 passed u/s 263 r/w 147 r/w 143(3) deleting the aforesaid disallowance so made by the AO holding that where the order passed u/s 263 has been quashed by the Tribunal, there remains no ground sustaining the order so passed by the AO. Aggrieved with the order so passed by the ld CIT(A), the Revenue is in appeal before us.

9. Challenging the impugned order, the Id. CIT/DR has contended that the Id. CIT(A) has erred on facts and law by not deciding the appeal of the assessee on merits and deciding the Appeal merely on the basis of the order passed by the ITAT. It was submitted that the ld CIT(A) has erred in holding that the consequential order passed u/s 147 r.w.s. 263 of the Act, by the Assessing Officer in pursuance to order of PCIT(Central) u/s 263 of the IT. Act, 1961 as void ab initio ignoring the facts that the appeal against such order of the ITAT quashing the order u/s 263 is pending before the Hon'ble Punjab & Haryana High Court, that order passed by Ld. PCIT (Central), Gurugram u/s 263 has not attained finality and without giving any liberty to the Revenue to revive the proceedings consequent to any directions or order by the Hon'ble High Court in favour of Revenue on the issue of order passed by Ld. PCIT (Central), Gurugram u/s 263 of the IT. Act.

5.0 We have heard the rival submissions and have also perused the material available on record. The main thrust of the assessee's arguments before us is that since the Coordinate Bench of the ITAT, vide order dated 14.06.2019, has in combined orders for assessment years 2010-11 and 2013-14 in & 123/Chd/2019 held that the assessee was eligible for deduction u/s 80IC of the Act @ 100% in view of substantial expansion, an identical issue again could not have been raised by the Ld. Pr.CIT by invoking his powers u/s 263 of the Act as the order of the AO as well as the Ld.CIT(A) in 147 proceedings in subsequent appeal got merged with the order of the ITAT through its order dated 14.06.2019 and, thus, after this merger, since no new issue has been raised by the Ld. Pr.CIT, the revisionary jurisdiction could not have been invoked and the impugned order could not have been passed on 30.03.2021. The Ld. AR has placed on record various orders of the Tribunal in assessee's own case for assessment years 2010-1 1, 201 1-12 and 2013-14 and the common thread which runs through all these orders passed by the Tribunal is the issue of assessee's eligibility for deduction u/s 80IC of the Act on substantial expansion. The order of the ITAT for assessment years 2010- 11 and 2013-14 in ITA Nos.122 & 123/Chd/2019 vide order dated 14.06.2019 specifically accepts the claim of assessee regarding 100% deduction u/s 80IC when assessee came up in appeal before the ITAT after the AO had invoked his powers of reassessment u/s 147 of the Act and the Ld.CIT(A) had dismissed the assessee's appeals. In assessment year 2012-13 also, the ITAT has categorically allowed the assessee's claim for deduction u/s 80IC of the Act @ 100% on account of substantial expansion vide order in ITA No.305/Chd/2021 dated 1 1.05.2022 and, the Coordinate Bench of the ITAT set aside the re- assessment done by the AO on the issue. Thus, it is very much apparent that the issue, which is the subject matter of the appeal in the present case, is not new for the Department or the assessee as this issue has been time and again raked-up by the Department and the same has been the subject matter of different appeals before this Tribunal.

5.1 It has also been rightly pointed out by the Ld. AR that the order of the ITAT for assessment years 2010-11 and 2013-14 bearing & 123/Chd/2019 were accepted by the Department in as much as the Department did not prefer any appeal before the Hon'ble High Court. This order for assessment year 2013-14 was passed by the ITAT on 14.06.2019 whereas the impugned order is dated 30.03.2021, but the Ld. Pr.CIT has chosen to re-ignite the controversy by resorting to his power u/s 263 of the Act which is nothing but arbitrariness and mis- appreciation of facts on the part of the Ld. Pr.CIT. In view of the Doctrine of Merger, as argued by the Ld. AR and as also settled judicial precedents, it is our considered view that the Ld. Pr.CIT should have been cautious while passing the impugned order because, apparently, the Ld. Pr.CIT has not considered the aspect of Doctrine of Merger at all. 5.21 In the case of CIT Vs. Nirma Chemical Works Pvt. Ltd., reported in (2009) 309 ITR 67 (Guj.), the Hon'ble Gujarat High Court had dealt at some length on the principle of merger. It was a case in which the assessee had claimed deduction under Section 801 of the Act which the Assessing Officer allowed partially. The assessee filed an appeal against the disallowance. The Commissioner (Appeals) allowed the appeal. Subsequently the Commissioner, in exercise of powers under Section 263 of the Act, disallowed the claim under Section 801 of the Act on the ground that the assets used by the assessee in new industrial undertaking had formed part of old plant and machinery and the new industrial undertaking was formed by reconstruction or restructuring or splitting up of the old business. In such background, the Court held that the requirement of fulfillment of the conditions stipulated under subsection (2) of Section 801 of the Act were very much subject matter of the appeal in relation to the income which was disallowed by the Assessing Officer. On the ground of merger, the Court held that the Commissioner could not have exercised the revisional powers. The Hon'ble Gujarat High Court further held as under:

17. Thus, the Commissioner of Income-tax is entitled to revise an assessment order in so far as the order is erroneous and prejudicial to the interest of the Revenue, but Explanation (c) places an embargo on the Commissioner of Income-tax in case of subject-matter of any appeal which has been considered and decided in such appeal. In other words, before the Commissioner of Income-tax exercises the jurisdiction under section 263 of the Act, the Commissioner of Income-tax is required to ascertain whether the order referred to in subsection (1) of section 263 of the Act had been the subject-matter of any appeal, and if yes, the revisional powers shall be available only if such subject-matter had not been considered and decided in such appeal. xxx 20. The stand of the revenue that the assessment order was silent as regards eligibility or otherwise of section 80-1 of the Act cannot thus be accepted. As noted hereinbefore the entire section lays down a complete codified scheme in itself for deciding not only the eligibility but also for the computation of the relief to which the assessee is entitled. When the section talks of profits and gains derived from an industrial undertaking the requirement is in relation to the industrial undertaking to which the section applies and which fulfills all the conditions laid down in sub-section (2) of section 80-1 of the Act. It is not possible to read the provisions in any other manner whatsoever. Hence, the contention that the eligibility or otherwise u/s.80-I of the Act was never the subject matter of Appeal requires to be rejected....

5.3 Similar view was held by the Hon'ble High Court of Bombay in the case of CIT(Exemptions), Mumbai Vs. Slum Rehabilitation (2019) 412 ITR 521 (Bom) wherein it was held that when the AO has denied the claim of the assessee for benefit of exemption u/s 11 of the Act and the Commissioner (Appeals) had allowed the said claim, it was a case of merger of assessment order with the order of Commissioner (Appeals) and the Commissioner exercising revisional jurisdiction u/s 263 of the Act could not disallow the assessee's claim of exemption. Similarly, in another judgment in the case of CIT-3 Vs. Sanvijay Rolling & 5.4 Engineering Ltd., reported in (2022) 137 Taxmann.com 123 (Bombay), the Hon'ble Bombay High Court went on to hold that where the Commissioner (Appeals) had allowed deduction claimed by the assessee company u/s 80IA & 80IB of the Act and since there was a merger of order of the Commissioner (Appeals) with the order of the Tribunal which attained finality, the Commissioner could not initiate revisionary provisions u/s 263 of the Act so as to disallow the said deduction. 5.5 Therefore, we are in complete agreement with the Ld. AR that in the present case there was a merger of the order of the lower authorities with the order of the Tribunal for assessment year 2013-14 in 1 9 wherein the Tribunal had ruled in favour of the assessee by holding that the assessee was eligible for deduction @ 100% u/s 80IC vis-a-vis substantial expansion and, therefore, after such merger, the Ld. Pr.CIT could not have legally and validly invoked the provisions of section 263 of the Act to set aside the matter again to the file of the AO for reconsidering the initial assessment year vis- a-vis substantial expansion. Thus, in our considered view, the Ld. Pr.CIT has stepped beyond the power conferred upon him u/s 263 of the Act and we have no option but to hold that these powers were not exercised under correct appreciation of law. We, therefore, quash the proceedings u/s 263 of the Act and allow the grounds raised by the assessee. 5.6 Since we have already quashed the revisionary proceedings u/s 263 of the Act, other grounds raised by the assessee do not require any deliberation or adjudication on our part as they have become academic in nature. 6.0 In the final result, the appeal of the assessee stands allowed.

12. Thus, by virtue of the said Tribunal order, the very basis of the subsequent order passed by the AO u/s section 263 r/w 147(3) r/w 143(3) of the Act dated 20.01.2022, was set aside and quashed by the Tribunal. Therefore, the order dated 20.01.2022 itself no longer survived. The Id. CIT(A) has thus not committed any error in deleting the disallowance so made by the AO in terms of excess deduction u/s 80IC amounting to Rs. 4,11,52,839/-.

"8. It is also clear from the ITR, Computation and 10CCB Report that the assessee has claimed 100% deduction of the profit & gains derived by the undertaking/enterprises (Unit No.-II, Baddi) from the eligible business at Rs. 5,87,89,770/-, whereas as per the above detailed discussion the assessee was eligible for only 30% deduction at Rs. 1,76,36,931/-. Considering the above discussion it is quite clear that the assessee has claimed excessive relief u/s 80IC of the IT. Act, 1961.

9. In view of the above discussion excess deduction claimed at Rs. 4,11,52,839/- u/s 801C of the IT. Act, 1961 are disallowed and added to the returned income of the assessee. I am satisfied that the assessee company has furnished inaccurate particulars of income hence penalty proceedings u/s 271(l)(c) of the I.T. Act, 1961 is being initiated. Subject to above income of the assessee is computed as under:- Last Assessed Income as per order 4,76,40,025/- dated 10.03.2016 Addition as discussed above 4,11,52,839/- Total Income 8,87,92,864/- Income Rounded off u/s 288A 8,87,92,000/- Assessed income Rs.8,87,92,900/- 10. The respondent preferred an appeal before Commissioner (A) against assessment order. The said appeal was dismissed vide order dated 30.11.2018 passed by Commissioner (A), Gurugram. The respondent-assessee preferred appeal before Tribunal against order dated passed by Commissioner (A). The said appeal came to be allowed vide order dated 14.06.2019. The relevant extracts of order dated are produced as below: "10. In view of the above, it is now settled law that even a new undertaking, which has claimed deduction of its eligible profits @ 100% thereof for the first five years, is entitled to claim deduction @ 100% of its profits thereafter on accord of substantial expansion undertaken by it.

Since in the present case the fact that the assessee had undertaken 11. substantial expansion in the impugned year is not disputed, the assessee, we hold, is entitled to claim deduction @ 100% of its eligible profits even if it has already claimed deduction of its profits at the said rate for first five years, in view of the law laid down by the Apex court in this regard in its decision in the case ofM/s Aarham Softronics (supra). We, therefore, set aside the order of the CIT (A) and allow the appeals of 12. the assessee. "

11. From the perusal of order dated 27.11.2017 passed by Assessing Officer and order dated 14.06.2019 passed by Tribunal, it is quite clear and lucid that issue before the Assessing Officer as well as Appellate Authority was whether assessee is entitled to deduction @ 100% or 30% under Section 80IC. Assessing Officer on one or another ground concluded that assessee is entitled to deduction @ 30% and First Appellate Authority confirmed the said order. The Appellate Tribunal set aside order of Assessing Officer and held that assessee is entitled to deduction @ 100%. The Principal Commissioner after adjudication of appeal by Tribunal formed an opinion that assessee has wrongly claimed deduction @ 100% whereas it was entitled @ 30% during assessment year 2013-14.

13. From the perusal of above quoted section, it is evident that Principal Commissioner has power to revise an order if he finds that order passed Assessing Officer is prejudicial to the interest of Revenue.

14. As the matter stand today and in light of the undisputed facts as stated above, we donot see any infirminity in the order so passed by the ld CIT(A) quashing the consequential order so passed by the AO, by following the order passed by the Tribunal whereby it had allowed the assessee’s appeal by quashing the order passed by the ld PCIT u/s 263, which is binding on the ld CIT(A). The order of the Tribunal has since been affirmed by the Hon’ble Punjab and Haryana High Court thereby duly addressing the grievance raised by the Revenue before us.