2018 (9) TMI 294 - HC - Income Tax

Court rules in favor of Assessee in tax dispute over deduction under Section 80-IA

The Commissioner of Income Tax Mumbai City-1 Mumbai Versus M/s. Maharashtra Hybrid Seeds Co. Ltd.

The High Court ruled in favor of the Assessee in a case challenging the Commissioner of Income Tax's order under Section 263 of the Income Tax Act ... Revision u/s 263 - action taken u/s 263 is only on the basis of the audit party's note or report - Held that:- Admittedly, the CIT has not referred to any audit objection but in the light of the note, the Tribunal held that it would be a fair inference that his action under Section 263 was consequent upon the audit objection. This office note clearly shows that the Assessing Officer had taken all explanations and arguments of the Assessee into consideration before allowing deduction. This being the case, the CIT could not have merely substituted his own views for that of the Assessing Officer by invoking Section 263. - Decided in favour of the Assessee and against the Revenue Issues:Challenge to order passed by Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 regarding deduction under Section 80-IA for Assessment Year 1995-1996.Detailed Analysis:1. Background and Appeal: The appeal under Section 260-A of the Income Tax Act, 1961 was filed by the Revenue against the order of the Income Tax Appellate Tribunal Bench, Bombay for Assessment Year 1995-1996. The substantial question of law framed for consideration was whether the ITAT was justified in setting aside the assessment order regarding the deduction under Section 80-IA and directing the assessing officer to reframe the assessment.2. Assessment and CIT's Order: The assessment under Section 143(3) allowed the Assessee's claim for deduction under Section 80-IA. However, the Commissioner of Income Tax issued a notice under Section 263, challenging this deduction. The CIT set aside the assessment order, directing the assessing officer to reframe the assessment after considering all facts and giving the Assessee an opportunity to be heard. The Assessee appealed before the ITAT, challenging the CIT's order on jurisdictional and merit grounds.3. ITAT's Decision: The ITAT set aside the CIT's order, finding that the Assessee was not given an opportunity to address additional grounds not mentioned in the notice issued under Section 263. The ITAT noted that the CIT substituted his views for those of the Assessing Officer, contrary to the ruling in CIT v/s Gabriel India Limited (203 ITR 108). The factual aspects and the Assessing Officer's detailed examination were highlighted.4. Office Note and Tribunal's Finding: An office note appended to the assessment order indicated that the Assessing Officer considered all explanations and arguments of the Assessee before allowing the deduction. The Tribunal concluded that the CIT's action under Section 263 was likely based on an audit objection, but since the Assessing Officer had already considered all aspects, the CIT could not substitute his views without proper justification.5. Final Decision: The High Court found in favor of the Assessee, affirming the substantial question of law against the Revenue. The Appeal was disposed of with no order as to costs, considering the factual backdrop and the lack of proper justification for the CIT's actions under Section 263.This detailed analysis of the judgment highlights the legal issues, the sequence of events, the reasoning behind the decisions, and the ultimate outcome in favor of the Assessee based on the High Court's assessment of the facts and legal principles involved.