2021 (9) TMI 988 - AT - Income Tax

Tribunal quashes Section 263 order, allowing assessee's appeal.

The Tribunal quashed the revisional order under Section 263, finding no merit in the PCIT's assumptions and directions. The appeal of the assessee was ... Revision u/s 263 - inadequate enquiry v/s lack of enquiry - Incorrect allowance of deduction under s.80IA(4) of the Act & incorrect allowance of depreciation on subsidized capital asset - HELD THAT:- AO has rightly appreciated the peculiar circumstances and ignored the procedural latches and the claim of the deduction under s. 80IA(4) of the Act was allowed after verification in two rounds. The action of the AO being plausible, cannot be regarded as erroneous for taking into account Form 10CCB signed after the date of amalgamation in these peculiar circumstances. The direction of the PCIT on ‘further verifications are required’ in the context of revised Form 10CCB is not intelligible at all. The PCIT himself could have easily verified these obvious facts available on record and pointed out to Revenue. The PCIT has apparently acted without the authority of law asking for some directionless probe on categorical facts and that too after two rounds of assessments on the issue. We also fail to understand the purport of directions to the AO to verify whether assessee has filed amalgamated financial statement alongwith revised return from the effective date of amalgamation. The facts placed on record vouches for the stand of the assessee. Such non- speaking omnibus direction points to fishing expedition and would evoke an apparent unease in the minds of the tax payers. The PCIT on verification of the case records could have verified these facts very easily without any effort and could have come to some meaningful observations. PCIT could have gathered the apparent facts without any exertion to our mind. Inexplicably, the PCIT has rather asked the AO to revisit the facts already placed on record and for the purpose unknown to us. The facts available on record clearly points out to proper verification on aspects of deduction claimed and do not warrant any indulgence. Such act of the PCIT to dislodge a quasi judicial order under s. 263 of the Act cannot be countenanced. The revisional action on the first issue therefore is quashed. Correctness of depreciation on gross value of assets without deduction of subsidy receipt on capital assets obtained from the Government - The highlights of the industrial policy awarding the subsidy was referred to and relied upon. It was thus contended that when under the scheme no payment is made directly or indirectly to meet any portion of the actual cost of acquisition of capital asset and where the release of subsidy itself is determined on the basis of sales tax payment made by the assessee without any reference to the cost of project, Explanation 10 to Section 43(1) has no application. The reliance was placed on the judgment in the case of PCIT vs. M/s. Welspun Steel Ltd. [2019 (3) TMI 397 - BOMBAY HIGH COURT] wherein in the similar facts, the issue was decided in favour of the assessee. It was held therein that the government subsidy which is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, would not be reckoned for the purposes of Explanation (10) to Section 43(1) of the Act. It was pointed out that the PCIT could have easily ascertained the position of law himself. When a point in issue was not raised in the reasons recorded for alleged escapement of income, the AO cannot be compelled in law to start a witch-hunt to examine all peripheral issues. This will tantamount to roving enquiry in the garb of reopening and expand its scope which is not permissible under s. 147 of the Act. The AO thus was not entitled to revisit the impugned issue of depreciation on capital subsidy. Secondly, the issue raised in second round was in relation to Section 80IA(4) of the Act for which no additions were made and therefore no other additions/ disallowances were permissible in law as echoed by several judicial precedents including CIT V. Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY]; Ranbaxy Laboratories Limited [2011 (6) TMI 4 - DELHI HIGH COURT]. Initiation of penalty under s.271B of the Act, if any, relates back to original assessment dated 14. 03. 2014 when the return was filed post amalgamation. Thus, the show cause notice is time barred in so as the impugned direction is concerned. - Decided in favour of assessee. Issues Involved:1. Incorrect allowance of deduction under Section 80IA(4) of the Income Tax Act.2. Incorrect allowance of depreciation on subsidized capital assets.3. Non-initiation of penalty proceedings under Section 271B of the Income Tax Act.Issue-wise Detailed Analysis:1. Incorrect Allowance of Deduction under Section 80IA(4) of the Income Tax Act:The assessee challenged the jurisdiction assumed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The assessee, engaged in manufacturing iron and steel rerolled products and power generation, had filed a revised return post-amalgamation with Shri Bajrang Mettalics & Power Ltd., claiming deductions under Section 80IA(4). The Assessing Officer (AO) had accepted the revised claim after scrutiny and reassessment. However, the PCIT issued a show cause notice under Section 263, alleging incorrect allowance of deduction due to non-maintenance of separate books of accounts, late filing of tax audit report and Form 10CCB, and failure to initiate penalty proceedings under Section 271B. The Tribunal found that the AO had already verified these facts during original and reassessment, and the PCIT's revisional jurisdiction on the same grounds was impermissible. The Tribunal emphasized that the PCIT should have conducted minimal enquiry himself and not directed the AO for further verification on already established facts.2. Incorrect Allowance of Depreciation on Subsidized Capital Assets:The PCIT alleged that depreciation was incorrectly calculated without considering the capital subsidy received from the government. The assessee argued that the subsidy was not intended to meet the cost of specific assets but to encourage industrial development in backward areas, thus not falling under Explanation 10 to Section 43(1). The Tribunal agreed, noting that the AO was not required to revisit this issue during reassessment as it was not part of the reasons for reopening the assessment. The Tribunal also found the assessee's claim plausible and supported by judicial precedents, thus ruling that non-adjustment in depreciation could not be termed erroneous.3. Non-initiation of Penalty Proceedings under Section 271B:The PCIT pointed out the AO's failure to initiate penalty proceedings under Section 271B for non-compliance with Section 44AB. The Tribunal noted that the event of initiation of penalty related back to the original assessment, making the show cause notice time-barred.Conclusion:The Tribunal quashed the revisional order under Section 263, finding no merit in the PCIT's assumptions and directions. The appeal of the assessee was allowed, and the revisional order was set aside.Order Pronouncement:The order was pronounced on 21/09/2021 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule, 1963.