2018 (11) TMI 636 - AT - Income Tax

Tribunal invalidates Commissioner's jurisdiction under Income Tax Act, protects assessee's entitlement to deduction.

The Tribunal ruled in favor of the assessee, finding the Commissioner's exercise of jurisdiction under section 263 of the Income Tax Act invalid and ... Revision u/s 263 - claim of deduction u/s 80IA(4) - Reopening of assessment - Held that:- Allowability of deduction which was by earlier order passed under section 143(3) dated 01.06.2012 was not disturbed. Once the said assessment order has become final, then second order passed by AO u/s 143(3) r.w.s. 147 merely dropping re-assessment proceedings cannot be held to have decided the issue of eligibility of claim of deduction under section 80IA(4) of the Act. The said issue stands settled in favour of assessee by earlier order dated 01.06.2012, which has not been disturbed by any of the authorities. The exercise of jurisdiction by Commissioner in such circumstances by issuing show cause notice and holding the assessee to be not eligible for claiming the deduction under section 80IA(4) does not stand. Where the Commissioner had exercised jurisdiction against second assessment order passed i.e. dropping 147/148 proceedings, then the stand of Commissioner in holding that the assessee was not eligible to claim the aforesaid deduction, cannot stand in the eyes of law because the said order does not decide the said issue. Original assessment order was consequent to picking up the issue during CASS of claim of deduction under section 80IA(4) of the Act and even re-assessment proceedings were vis-à-vis aforesaid deduction by assessee, who was the partnership concern. AO has already taken a view in this regard and the same cannot be disturbed by Commissioner on the same grounds as that would amount to change of opinion. Further, in any case, under the provisions of section 80IA(4) an enterprise is entitled to claim the aforesaid deduction and the Commissioner is wrong in proposing that the company is entitled to claim the aforesaid deduction. Even on this ground, the order of Commissioner under section 263 of the Act, fails. Hence, we hold that exercise of jurisdiction by Commissioner under section 263 of the Act is both invalid and bad in law. In respect of balance shown in the Balance Sheet and corresponding interest, no such issue was decided in 148 proceedings neither in reasons recorded for reopening nor in the final assessment order dropping the said proceedings. Hence, the Commissioner has exceeded the jurisdiction vested under section 263 of the Act and the said issue could not form the basis for initiating 263 proceedings against the assessee. Accordingly, even for the second issue, order of Commissioner is both invalid and bad in law. - Decided in favour of assessee. Issues Involved:1. Jurisdiction of the Commissioner under section 263 of the Income Tax Act.2. Validity of the reopening of assessment under section 147/148 of the Income Tax Act.3. Eligibility of deduction under section 80IA(4) of the Income Tax Act for the assessee.4. Verification of bank interest credited to the Profit & Loss Account.Issue-wise Detailed Analysis:1. Jurisdiction of the Commissioner under section 263 of the Income Tax Act:The assessee challenged the exercise of jurisdiction by the Commissioner under section 263 of the Act, arguing that the original assessment order dated 01.06.2012 had become final and could not be revised after the statutory period. The Tribunal noted that the Commissioner issued the show cause notice under section 263 on 08.01.2016, which was beyond the permissible period for revising the original assessment order. The Tribunal emphasized that the Commissioner can exercise jurisdiction under section 263 only if the order is both erroneous and prejudicial to the interests of the Revenue. However, where the Assessing Officer has considered the issue and taken a view, merely because the Commissioner disagrees with that view does not entitle the Commissioner to revise the order under section 263. The Tribunal concluded that the exercise of jurisdiction by the Commissioner was invalid and bad in law.2. Validity of the reopening of assessment under section 147/148 of the Income Tax Act:The Tribunal examined the reasons recorded by the Assessing Officer for reopening the assessment under section 148, which was to verify the deduction claimed under section 80IA(4) on the grounds that it was allowable only to a company and not to a partnership firm. The Tribunal noted that the assessee had objected to the reopening, arguing that the issue had already been considered during the original assessment proceedings and that there was no new material to justify the reopening. The Assessing Officer had dropped the reassessment proceedings after considering the assessee's objections. The Tribunal held that the reassessment proceedings were initiated solely to verify the claim of deduction under section 80IA(4), and since the original assessment order had already become final, the reassessment order merely dropping the proceedings could not be revised by the Commissioner.3. Eligibility of deduction under section 80IA(4) of the Income Tax Act for the assessee:The Tribunal noted that the assessee had been claiming the deduction under section 80IA(4) in preceding and succeeding years, and the claim had been duly verified and allowed by the Assessing Officer in the original assessment order dated 01.06.2012. The Tribunal pointed out that the status of the assessee as a partnership firm remained the same, and the deduction was allowed after verifying that the assessee fulfilled all the criteria under section 80IA(4). The Tribunal emphasized that the Commissioner could not disturb the view taken by the Assessing Officer, especially when the same deduction had been allowed in earlier and subsequent years. The Tribunal concluded that the Commissioner was wrong in proposing that only a company is entitled to the deduction under section 80IA(4), and thus, the order of the Commissioner was invalid and bad in law.4. Verification of bank interest credited to the Profit & Loss Account:The Tribunal observed that the Commissioner had raised an issue regarding the balance shown in the bank as per the Balance Sheet and the corresponding interest not being credited to the Profit & Loss Account. The Tribunal noted that this issue was neither part of the reasons recorded for reopening the assessment nor part of the final assessment order dropping the reassessment proceedings. The Tribunal held that the Commissioner exceeded his jurisdiction under section 263 by including this issue, which was not part of the reassessment proceedings. Therefore, the Tribunal concluded that the order of the Commissioner on this issue was also invalid and bad in law.Conclusion:The Tribunal allowed the appeals of the assessee, holding that the exercise of jurisdiction by the Commissioner under section 263 of the Act was invalid and bad in law for both assessment years 2010-11 and 2011-12. The Tribunal emphasized the principles of consistency and the finality of assessment orders, thereby protecting the assessee's claim for deduction under section 80IA(4) and rejecting the Commissioner's attempt to revise the reassessment orders.