2015 (10) TMI 319 - AT - Income Tax

Tribunal quashes CIT's order under Section 263, upholds AO's assessment. CBDT's limitations emphasized.

The Tribunal quashed the CIT's order under Section 263, holding that the AO's assessment was neither erroneous nor prejudicial to the interests of ... Revision u/s 263 - assessee’s claim of deduction u/s 80IA(4)(iii) in respect of Capella Industrial Park not considered by AO - Held that:- There is no dispute to the fact that assessee has developed industrial park, which is an eligible business activity u/s 80IA(4)(iii), hence, assessee is entitled to avail deduction in respect of the profit derived from such eligible business. There is also no dispute to the fact that industrial park developed by assessee is in terms with industrial parks scheme, 2002 of the central govt. As per the scheme formulated by central govt. in the Ministry of Commerce and Industry, approval for industrial park can be obtained from the Ministry of Commerce and Industry, Govt. of India through DIPP either under automatic route or non-automatic route. As far as the present assessee is concerned, there is no dispute to the fact that it has sought approval for Capella Industrial Park under non-automatic route. The only rational conclusion would be, Capella industrial park developed by assessee having been approved by Ministry of Commerce and Industry, govt. of India under non-automatic route, the condition imposed under para 4 of CBDT notification stipulating that no single unit should have more than 50% of the allocable industrial area is not applicable to present assessee. Moreover, as held in case of Creative Infocity Ltd. Vs. Under Secretary [2012 (4) TMI 117 - GUJARAT HIGH COURT] Commerce Ministry being the competent authority for granting approval, they only have the power to verify whether conditions of the scheme have been violated and if it is found so, only they can withdraw the benefit. Therefore, for aforesaid reasons, assessee’s claim of deduction u/s 80IA(4)(iii) cannot be rejected. It is very much evident that not only AO enquired into the issue of claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park with reference to the condition imposed in para 4 of CBDT notification, but, assessee also submitted a detailed reply explaining why such condition will not apply to assessee. Thus, AO after conducting necessary enquiry and applying his mind to the issue having taken a decision allowing assessee’s claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park, the decision so taken, cannot be considered to be erroneous and prejudicial to the interests of revenue. In fact, though, ld. CIT accepts the fact that AO did make enquiry with regard to assessee’s claim of deduction u/s 80IA(4)(iii) and assessee also explained its stand before AO, but, he nevertheless contradicts himself by observing that AO did not conduct proper enquiry and verify whether assessee has complied to the condition imposed in para 4 of CBDT’s notification. In our view, such conclusion drawn by ld. CIT is not only contrary to the material on record, but, also does not stand the test of legal scrutiny. Once AO has conducted enquiry on a particular issue and has taken a decision after proper application of mind and if such view taken by AO is one of the possible view, then, even if it is not discussed elaborately in the assessment order, it cannot be said assessment order passed is erroneous and prejudicial to the interests of revenue. Moreover, as could be seen, the coordinate bench in case of L&T Infocity (2015 (1) TMI 1065 - ITAT HYDERABAD) after going through the conditions imposed under automatic and non-automatic route held that the restriction imposed under the automatic approval route stipulating that no single unit shall exceed 50% of the allocable industrial area is not applicable to approval granted under non-automatic route. Therefore, the view taken by AO while accepting assessee’s claim being in consonance with the view expressed by the coordinate bench, as aforesaid, certainly can be considered to be a possible view. That being the case, ld. CIT has no authority to invoke his power u/s 263 of the Act only because he does not agree with the view expressed by AO and wants to substitute his view. - Decided in favour of assessee. Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Merits of the deduction claim under Section 80IA(4)(iii).3. Applicability of conditions under automatic and non-automatic approval routes.4. Validity of the assessment order and whether it was erroneous and prejudicial to the interests of revenue.Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The assessee challenged the jurisdiction of the CIT to revise the assessment order under Section 263. The CIT issued a notice to the assessee, questioning why the assessment order should not be revised or set aside due to the AO's failure to verify whether the assessee complied with the conditions of Section 80IA(4)(iii). The assessee argued that the AO conducted extensive inquiries during the assessment proceedings and that the CIT cannot revise the order merely because he disagrees with the AO's conclusions.2. Merits of the Deduction Claim under Section 80IA(4)(iii):The assessee, engaged in providing infrastructure facilities, claimed a deduction under Section 80IA(4)(iii) for four units in an industrial park. The CIT observed that one unit, CA Computer Association India Pvt. Ltd., occupied more than 50% of the industrial space, violating the conditions of the CBDT notification. The assessee contended that the condition of not occupying more than 50% of the allocable industrial area applies only to approvals under the automatic route, not the non-automatic route under which their approval was obtained.3. Applicability of Conditions under Automatic and Non-Automatic Approval Routes:The conditions for automatic and non-automatic approval routes are different. The automatic route stipulates that no single unit shall occupy more than 50% of the allocable industrial area. However, this condition is absent in the non-automatic route. The assessee's industrial park, Capella, was approved under the non-automatic route, and the DIPP did not impose the 50% condition. The CBDT's role is merely to notify the industrial park after approval by the DIPP, and it cannot impose additional conditions.4. Validity of the Assessment Order:The AO conducted inquiries and accepted the assessee's claim for deduction after proper verification. The CIT's contention that the AO did not conduct proper inquiries is not supported by the record. The AO's view was one of the possible views, and the CIT cannot revise the order merely because he holds a different opinion. Judicial precedents, including decisions by the ITAT Hyderabad Bench and the Hon'ble Gujarat High Court, support the assessee's position that the 50% condition does not apply to non-automatic approvals.Conclusion:The Tribunal quashed the CIT's order under Section 263, holding that the AO's assessment was neither erroneous nor prejudicial to the interests of revenue. The assessee's appeal was allowed, and the original assessment order was restored. The Tribunal emphasized that the CBDT cannot impose additional conditions beyond those stipulated by the DIPP and that the AO's view was a possible and valid interpretation of the law.