2018 (12) TMI 1752 - AT - Income Tax

Tribunal overturns CIT's order denying tax exemption, upholds original assessment, clarifying review limits.

The Tribunal allowed the appeal, setting aside the CIT's order under Section 263 concerning denial of exemption u/s 10A for Assessment Year 2007-08. The ... Revision u/s 263 - deduction u/s 10A - HELD THAT:- From the records, the AO has specifically raised query regarding exemption u/s 10A during the original assessment proceedings and all the details were given by the assessee during the assessment proceedings which is later on deleted by the CIT(A). These facts were present before the CIT while giving show cause notice u/s 263 of the Act. The order passed by the Commissioner in capacity of Section 263 is merely a second opinion and does not fall in the category of prejudicial to the interest of Revenue. Merely taking a second opinion on the issue which is already concluded by the Revenue Authorities cannot be a ground for invoking Section 263 - AO should have done this or that is not a prerogative while invoking Section 263 by the CIT. In the present case, AO has taken cognizance of all the material provided by the Assessee during the Assessment Proceedings and after verifying the same has passed just and proper order. Therefore, in light of the above findings, the order of the Commissioner u/s 263 of the Act is set aside. - Decided in favour of assessee. Issues Involved:Appeal against order passed by CIT(A) under Section 263 of the Income Tax Act, 1961 for Assessment Year 2007-08 regarding denial of exemption u/s 10A and initiation of reassessment proceedings u/s 148.Analysis:Issue 1: Denial of Exemption u/s 10AThe appellant challenged the order of CIT(A) under Section 263, arguing that the original assessment order had already denied exemption u/s 10A. The appellant contended that the CIT(A) lacked the power to review the deduction u/s 10A, which was already under appeal by the department. The appellant highlighted that the TPO and Assessing Officer had extensively considered the issue of deduction u/s 10A during transfer pricing proceedings and original assessment. The appellant relied on various case laws to support their argument that the order was not erroneous. The Tribunal observed that the Assessing Officer had thoroughly examined the details provided by the assessee during the assessment proceedings. The Tribunal held that the CIT's order under Section 263 was merely a second opinion and not prejudicial to the interest of revenue, as the Assessing Officer had considered all relevant material before passing the order. Consequently, the Tribunal set aside the CIT's order under Section 263.Issue 2: Reassessment Proceedings u/s 148The appellant also raised concerns regarding the initiation of reassessment proceedings u/s 148 for revisiting the claim of deduction u/s 10A. The Tribunal did not delve deeply into this issue as the main focus was on the denial of exemption u/s 10A. However, the Tribunal's decision to set aside the CIT's order under Section 263 indirectly addressed the concerns related to the reassessment proceedings, as the denial of exemption u/s 10A was a crucial aspect in the reassessment process.In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the CIT's order under Section 263 was not justified based on the thorough consideration of the deduction u/s 10A during the original assessment. The Tribunal's decision provided clarity on the extent of review permissible under Section 263 and upheld the Assessing Officer's original order.