2017 (8) TMI 1482 - HC - Income Tax

High Court rules for assessee, rejects department's appeal on Section 10BA deduction. CIT's order under Section 263 cancelled.

The High Court ruled in favor of the assessee, dismissing the department's appeal challenging the tribunal's decision regarding the deduction under ... Revision u/s 263 - as per CIT-A deduction u/s 10BA was erroneous and prejudicial to the interest of the Revenue for having been made without proper verification - Held that:- CIT has not recorded a finding that the assessee has not employed 20 or more workers. The Ld.CIT in his order held that the A.O. has allowed the claim of deduction u/s 10BA without proper verification. There is no finding as to what proper verification has not been done. The conditions as mentioned in section 10BA(2) hve been fulfilled and there is no iota of finding by the Ld. CIT that deduction is not allowable. The A.O. has considered all the necessary details and came to a conclusion that deduction u/s 10BA is allowable. The article which the assessee was exporting are covered by eligible article or things. - Decided in favour of assessee. Issues involved:Challenge to tribunal's order dismissing department's appeal regarding deduction under Section 10BA of the Income Tax Act.Detailed Analysis:The High Court considered the substantial question of law framed, which questioned the Tribunal's decision to set aside the CIT's order under Section 263 of the Income Tax Act. The CIT had deemed the assessment order erroneous and prejudicial to the Revenue due to lack of proper verification regarding the deduction under Section 10BA. The Court heard arguments from both parties.The respondent's counsel referred to the Tribunal's order, highlighting that the CIT did not provide a finding that the assessee did not meet the requirement of employing 20 or more workers. The Tribunal noted that the CIT's objection was based on the lack of proper verification by the Assessing Officer (AO) regarding the deduction under Section 10BA. However, the AO had considered all necessary details and concluded that the deduction was allowable. The Tribunal cited a relevant decision and emphasized that the AO had taken a possible view entitling the assessee to the deduction. It was noted that the CIT's concerns about inadequate expenses for manufacturing artistic articles were not part of the show cause notice, and there was no finding that expenses were made outside the books of account.The High Court further discussed the jurisdiction of the CIT under Section 263, emphasizing that lack of enquiry may justify action but does not make the order erroneous. Citing various decisions, the Court highlighted the distinction between lack of enquiry and inadequate enquiry. It was noted that if the AO had made queries and considered the replies, it indicated the application of mind. The Court referred to precedents to establish that the order must be both erroneous and prejudicial to the revenue for Section 263 to apply.Based on the analysis of the facts and legal principles, the High Court concluded that the CIT was not justified in directing the AO to pass a fresh order. The Court found that the order was not erroneous, leading to the allowance of the assessee's appeal and the cancellation of the CIT's order under Section 263.In the final decision, the High Court ruled in favor of the assessee, dismissing the department's appeal challenging the tribunal's decision regarding the deduction under Section 10BA of the Income Tax Act.