2022 (8) TMI 1180 - AT - Income Tax

Tribunal overturns Tax Commissioner's order, finds initiation unjustified, and deems section 80IA(12A) inapplicable.

The Tribunal quashed the order passed by the Principal Commissioner of Income Tax under section 263, ruling that the initiation of proceedings was ... Revision u/s 263 - deduction claimed u/s 80IA - as per CIT owing to amalgamation the deduction claimed by the assessee under section 80IA should not be allowed in terms of section 80IA(12A) of the Act as the company is formed by the consequence of amalgamation - HELD THAT:- The appointed date is to be reckoned for the purpose of taking into consideration the transfer of assets and liabilities for the purpose of claim of deduction under section 80IA - From the Certificate of Commissioning of the two eligible Power Undertakings situated at Rajasthan placed on record, admittedly, it is a fact that the two Units were commissioned on 31.03.2012 and 05.01.2013 respectively. Since their commissioning date falls after the appointed date of 01.10.2011, there cannot be any occasion of transfer of these two eligible Power Undertakings under the Scheme of Amalgamation. Further, we also note that these two eligible Power Undertakings situated at Rajasthan do not form part of the schedule of assets referred in scheduled ‘B’ to the Approved Scheme of the Amalgamation. It is also a fact noted from Form 10CCB placed on record that the claim of deduction u/s 80IA has been made for the first time in A.Y. 2015-16 in respect of these two eligible Power Undertakings situated at Rajasthan. We are inclined to find favour with the submissions made assessee to take into consideration the appointed date of 01.10.2011 for the purpose of transfer of assets and liabilities under the Approved Scheme of Amalgamation and, therefore, we are of the considered view that the said Windmill Undertakings situated at Rajasthan were not transferred from the erstwhile IPCL into the assessee under the Scheme of Amalgamation. Accordingly we hold that the provisions of section 80IA(12A) are not attracted in the present set of facts and circumstances. Having so held, the very foundation on which the present proceedings were initiated under section 263 by the ld. Pr. CIT falls apart. We find that in the present facts and circumstances, the legal maxim ‘sublato fundamento cadit opus’ is applicable, meaning thereby – ‘a foundation being removed, the superstructure falls’. Once the basis of a proceeding is gone, the action taken thereon would fall to the ground. Thus, in the absence of such foundation, exercise of a suomotu power is impermissible. It should not be presumed that initiation of power under suomotu revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interests of the revenue. We find that it is an issue, purely on facts which is verifiable from the records of the assessee relating to the approved scheme of amalgamation which contained specifics about the effective date of scheme becoming applicable and the assets and liabilities which existed under the said approved scheme for transfer from the amalgamating company to the amalgamated company. Furthermore, examination and verification of certificate of commissioning of the two windmills undertakings also revealed the correct state of their coming into operations for the purpose of getting eligibility for claim u/s 80IA of the Act. Ld. PCIT and the ld. CIT, DR could not bring any material on record to controvert this verifiable factual position - thus no action u/s 263 of the Act is justifiable - Decided in favour of assessee. Issues Involved:1. Justification for initiating proceedings under section 263 of the Income Tax Act.2. Validity of the order passed under section 263 regarding the issues raised and adjudicated.3. Alleged lack of enquiry/inadequate verification by the Assessing Officer.4. Invocation of provisions under section 80IA(12) without considering the date of commissioning of the eligible undertaking.Issue-wise Detailed Analysis:1. Justification for Initiating Proceedings under Section 263:The Principal Commissioner of Income Tax (Pr. CIT) initiated proceedings under section 263 of the Income Tax Act, alleging that the Assessing Officer (AO) did not conduct adequate verification during the assessment. The assessee argued that the AO had duly considered all materials during the assessment proceedings. The Tribunal noted that the AO had indeed made sufficient enquiry during the assessment, including the submission of the Tax Audit Report and Form No. 10CCB by the assessee. The Tribunal found that there was no justification for the Pr. CIT to invoke section 263 based on the allegation of lack of enquiry or inadequate verification.2. Validity of the Order Passed under Section 263:The Pr. CIT's order under section 263 was challenged on the grounds that it was arbitrary and bad in law. The Tribunal observed that the Pr. CIT's order was based on the incorrect assumption that the deduction under section 80IA should not be allowed due to the amalgamation of India Power Corporation Limited (IPCL) with the assessee company. The Tribunal found that the amalgamation did not involve the transfer of the Rajasthan Windmill Undertakings, which were commissioned after the appointed date of 01.10.2011. Therefore, the provisions of section 80IA(12A) were not applicable, and the Pr. CIT's order was not valid.3. Alleged Lack of Enquiry/Inadequate Verification by the Assessing Officer:The Pr. CIT alleged that the AO did not conduct proper enquiries or verifications, which should have been made. The Tribunal noted that the AO had issued statutory notices and the assessee had complied with them, providing all necessary details, including the Tax Audit Report and Form No. 10CCB. The Tribunal found that the AO had made sufficient enquiry and verification during the assessment proceedings, and the Pr. CIT's allegation of lack of enquiry was not justified.4. Invocation of Provisions under Section 80IA(12) Without Considering the Date of Commissioning of the Eligible Undertaking:The Pr. CIT invoked section 80IA(12A), arguing that the deduction under section 80IA should not be allowed due to the amalgamation. The Tribunal noted that the Rajasthan Windmill Undertakings were commissioned on 31.03.2012 and 05.01.2013, after the appointed date of 01.10.2011. The Tribunal found that the windmill undertakings were not transferred under the Scheme of Amalgamation, and therefore, the provisions of section 80IA(12A) were not applicable. The Tribunal held that the AO had rightly allowed the deduction under section 80IA, and the Pr. CIT's invocation of section 80IA(12A) was not justified.Conclusion:The Tribunal quashed the order passed by the Pr. CIT under section 263, finding that the initiation of proceedings under section 263 was not justified, the order was arbitrary and bad in law, the AO had conducted sufficient enquiry and verification, and the invocation of section 80IA(12A) was not applicable. The appeal of the assessee was allowed.