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2015 (2) TMI 1121
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.... Act and directing the AO to verify the deduction claimed u/s 10AA of Income Tax Act, 1961. (4) On the facts and in the circumstances of the case, the CIT is not justified in not considering the various case law relied before her and holding that the case laws cited are distinguishable from the facts of this case. 2.1 Brief facts are the assessee is engaged in the business of manufacturing & trading of Gold, Gold ornaments and setted Jewellery. During the year the assessee started a manufacturing unit in SEZ-II, Sitapura, Jaipur for manufacturing and export of Gold Jewellery. The assessee's books of account were audited u/s 44AB of Income Tax Act; separate books of account, separate Profit and Loss account and balance sheet are maintained for SEZ unit which are placed on record. Return of income was E-filed in ITR-5 on 29.09.2009 declaring total income of Rs. 59,61,290/- after claiming exemption u/s 10AA of the I T Act of Rs. 70,55,269/-. The case was selected for scrutiny under CASS and notices u/s 143(2) and 142(1) of the I T Act along with a series of other notices and queries were issued by AO which are claimed to be duly complied with. According to assessee ld. AO ....
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.... evidence of date of registration and commencement of manufacture by the SEZ unit was not furnished by the assessee. Besides no proof of purchasing new plant and machinery for SEZ unit was placed on record. The assessee filed detailed reply to this show cause notice also vide letter dated 05/02/2014 along with the supporting enclosure claiming that as long as a valid claim quoting sec. 10AA was made, mere non mentioning of a sub clause cannot be a detriment for granting the exemption. It was first year of manufacturing for which sub clause (i) to section 10AA only was applicable. The date of registration of unit was mentioned in the registration certificate furnished with AO and the evidence of commencement of manufacture by SEZ unit and export of goods was demonstrated from the books of accounts. These dates along with nature of manufacturing activities and export were examined by AO during the course of assessment proceedings. These aspects were also evident from the report in Form No. 56F from assesses auditors which also is on record and was examined by the ld.AO. Original bills/vouchers of plant & machinery purchased along with photocopies were produced before the AO along wit....
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....rofit was not claimed on exempt unit or all the expenditure claimed (on exempt unit and with respect to regular business) was genuine, therefore, the assessment order dated 28.12.2011is erroneous in so far as it is prejudicial to the interest of the revenue, and is set aside -back to the file of the AO- for necessary verification." 2.5 Aggrieved, assessee is before us. 2.6 Ld. Counsel for the assessee contends that ld AO has passed the assessment order after proper examination of books of account, supporting evidence, hearings on the concerned issues, proper inquiries and after due application of mind. The premises of SEZ unit are separate from regular unit; the maintenance of stock and manufacturing activities are also separate. It is not disputed that assessee maintains separate books of account and bank account for its regular business and SEZ unit; separate manufacturing and P & L A/c, balance sheet and other record are maintained. The books of account of the assessee were audited by Chartered Accountant u/s 44AB of Income Tax Act. The accounts of SEZ unit audited u/s 10AA(8) as provided by the Income Tax Act. The copies of Audit Reports u/s 44AB in Form No 3CD Report u/s....
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....of Income Tax Act for claiming the exemption. There are two sub clauses of section 10AA (1). The sub clause (i) is applicable for the first five years wherein 100% deduction of profit is allowed and for next five years wherein 50% deduction of profit is allowed. The sub -clause (ii) is applicable for five consecutive year. In the case of the assessee, this year is first year and this fact is clear from the audit report in Form No 56F wherein the date of initial registration is mentioned as 03.07.2006 and date of commencement of production is mentioned as 30/07/2008. Therefore, only and only sub clause (i) of section 10AA(1) is applicable in the case of the assessee; ld. CIT in an attempt to willy nilly recourse to revision u/s 263 has created unnecessary confusion in this regard. The exemption u/s 10AA is applicable for the units which commence the production on or after 01-04-2006. The fulfillment of this condition is apparent from the books of accounts and record produced before the AO as well as ld. CIT. It is held by Hon'ble Rajasthan High Court in the case of CIT Vs Rajasthan Fasteners (P) Ltd (2014) 363 ITR 271 that nonmentioning of section or wrong mentioning of section cann....
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....vorable by department. Alternative methods like section 147 exist for the same. Reliance for these propositions is placed on following decisions:- (i) CIT vs Jain Construction Co (2013) 257 CTR (Raj)/ 84 DTR (Raj) 369 Revision u/s 263-Order erroneous and prejudicial to interest of revenue-CIT issued a notice u/s 263 to assessee on ground that assessment order of AO passed u/s 143 (3) was an order erroneous and prejudicial to interest of revenue-Tribunal allowed appeal of assessee-Held, safeguard provided to assessee in section 263 is that mere erroneous orders are not revisable but revisional authority has to further establish with material on record that such erroneous order is also prejudicial to interest of revenue-Twin conditions of assessment order being erroneous and it also being prejudicial to interest of revenue, keeps initial burden on Commissioner, who invokes such jurisdiction-Premise for invoking revisional jurisdiction on the ground that the Assessing Authority made insufficient enquiry or improper enquiry and failed to verify closing stocks in record of assessee, before passing assessment order, falls flat by a bare perusal of assessment order itself-Thus, Trib....
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....d any opinion that assessment order was erroneous and no reasons had been recorded to demonstrate that assessment order was prejudicial to interest of revenue-Held, perusal of Order of ITAT would testify that AO had consciously examined all relevant records in accepting return submitted by Assessee-CIT did not find fault with any findings of AO, culminating in ultimate conclusion that return of Assessee was acceptable-Decision of CIT authenticates that Assessee furnished all relevant records and documents in support of its return accepted by AO-CIT did not reject documents to be irrelevant-CIT only remanded matter to AO observing that documents ought to have been laid before him and examined at time of assessment-Revisional jurisdiction available to Commissioner u/s 263 subject to condition that Order of AO was erroneous and prejudicial to interest of Revenue-Any exercise of revisional jurisdiction, bereft of such satisfaction was impermissible rendering resultant order void-No interference with impugned order of ITAT was warranted-Appeal dismissed (iv) Bongaigaon Refinery & Petrochemicals Ltd. Vs. Union Of India & Ors. (2006) 287 ITR 120 (Gau) Revision-Erroneous and prejudic....
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....does not specify clear prima facie error in the order or approach of the Assessing Officer, it would be beyond the jurisdiction of sec 263. Malabar Industrial Co Ltd Vs CIT (2000) 243 ITR 83 (SC) Revision-Erroneous and prejudicial order-Conditions precedent- CIT can invoke s. 263 if the order of AO is erroneous and it is also prejudicial to interests of the Revenue-Both conditions must coexist- Phrase 'prejudicial to the interests of the Revenue' is of wide import and is not confined to loss of tax-If due to an erroneous order of the AO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue-However, every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of Revenue. (vii) CIT v. ArvindJeweller, 259 ITR 502 (Guj.), Hon'ble Court held that the assessee had produced relevant material and offered explanations in pursuance of the notices issued u/s.142(1) as well as u/s.143(2) of the Act and after considering the materials and explanations, the Income-tax Officer had come to a definite conclusion. Merely because the Income-tax Officer had taken a particular v....
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....it note. (x) CIT Vs Smt. D Valliammal (1998) 230 ITR 695 (Mad). It has been held that setting aside the ITO's order on the ground that verification of account was needed after obtaining clarification from the assessee is not a valid ground for invoking the jurisdiction under section 263. (xi) CIT Vs Hastings Properties (2002) 253 ITR 124 (Cal). It has been held that the assessment order having been made after due verification and all relevant material was collected by the AO, the assessment orders cannot be said to be erroneous and prejudicial to the interest of revenue. (xii) CIT Vs Denso Haryan (P) Ltd (2010) 42 DTR (Del) 187 Held that CIT was not justified in invoking provisions of s.263 to add back sales commission paid by the assessee which was debited in the P & L Account and the P & L account was audited and duly certified by the statutory auditors. (xiii) CIT Vs Max India Ltd (2007) 295 ITR 282 (SC), wherein Hon'ble Apex Court held that when two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the ITO is shown to b....
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....spect of same manufacturing activity assessee has shown more profits from exempt unit. This was possible either because of inflation of such profits or deflation of relevant expenses to yield more tax free income; thus the issues which required proper verification and findings by AO to frame a proper assessment have not been considered. Having not discharged his duties in respect of investigation of these issues as an assessing officer, the order passed by ld. Officer becomes erroneous and prejudicial to the interest of revenue. 2.11 Apropos the audit information, ld CIT DR contends that the power to revise the order u/s 263 is derived by CIT after calling and verification of the record. The record may be called on the basis of information from audit or even by the AO. Reliance for this proposition is placed on Renusagar Power Co. Ltd. 234 ITR 782 (AP). It is pleaded that the impugned order passed by ld. CIT is valid, tenable and satisfies the twin conditions prescribed by sec 263 and deserves to be upheld. 2.12 We have heard the rival contentions and perused the materials available on record. It will be desirable to consider the nature of error in the AOs order which is agit....
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....ure claimed (on exempt unit and with respect to regular business) was genuine, therefore, the assessment order dated 28-12-201 is erroneous in so far as it is prejudicial to the interest of the Revenue and is set aside back to the file of the AO for necessary verifications." 2.13 The errors prejudicial to the interest of the Revenue as per observation of the ld. CIT is as under:- (i) There is no material on record to show that the AO has applied his mind on claim of deduction u/s 10AA of the Act as relevant clause of 10AA has not been submitted with all the proof. (ii) The AO had neither placed any material on record which verifies that inflated profit was not claimed by exempted unit or the expenditure claimed in exempted unit was genuine. 2.14 Apropos first mistake the ld. counsel has draw our attention to the assessment proceedings. "(i) The assessment order in question was passed on 28-12- 2011. The assessee vide letter dated 24-10-2011 gave an explanation regarding claim of deduction u/s 10AA which was by claimed by it u/s 10B by following submissions. "1. Explanation regarding profit claimed exempted u/s 10B of the I.T. Act, 1961. ....
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....39;ble Rajasthan High Court in the case of CIT vs. Rajasthan Fasteners (P) Ltd. (2014) 363 ITR 271 held that non-mentioning of section and wrong mentioning of Section cannot come in the way of allowing claim which is otherwise eligible to the assessee. Since the requisite form does not require mentioning of sub-clause besides the Hon'ble Jurisdictional High Court does not consider it to be a requirement which can disentitle the assessee. Respectfully following Hon'ble jurisdictional High Court judgment we have to overrule this allegation. 2.17 Apropos the inflated profits and expenditure, the ld. Counsel for the assessee has contended that separate books of account for SEZ Unit are maintained along with profit and loss account , expenses vouchers etc. The books of account of the assessee have been upheld by the AO, ld. CIT has not considered upholding of the accounts by AO to be an error. This leads to a very vague situation when the books of account of the assessee are upheld and not challenged at the same time allegations are raised about contents thereof. The ld. CIT while passing the order u/s 263 of the Act has not referred to any other mistake. In consideration of the ....