TaxTMI 
TaxTMI 
2020 (11) TMI 102
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....lead matter. 3. Tax Appeal No.28/2015 was admitted on 30th April, 2015, on the following substantial question of law: Whether, on the facts and circumstances of the case, the learned Commissioner of Income Tax (CIT) could have considered that the assessment order passed by the A.O. under section 143(3) of the Act, for the assessment year 2006-2007, on the issue of claim for deduction allowed to the Appellant under Section 10-B of the Act, was erroneous in so far as it was prejudicial to the interest of the revenue, within the meaning of section 263 of the Act ? 4. The Appellant-Assessee filed its original return of income on 30/11/2006 under Section 139 of the Income Tax Act, 1961 (IT Act) for the Assessment Year 2006-07, declaring income of Rs. 786,78,62,697/- and it is pertinent to note that in filing this original return, the Assessee did not claim any deduction under Section 10B of the IT Act. 5. Thereafter, the Assessee filed revised return of income on 29/3/2008 under Section 139(5) of the IT Act for the same Assessment Year. This time, the Assessee claimed deduction under Section 10B of the IT Act. 6. The Assessing Officer (AO), vide communications dated....
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....ssessment Year 2008-09. He submits that the impugned order dated 18/7/2014, therefore, conflicts with the ITAT's earlier orders dated 8/3/2013 and 17/5/2013 on the same issue, though in respect of different assessment years. He, therefore, submits that the ITAT's impugned order dated 18/7/2014 warrants interference. 14. Mr. Pardiwalla further submits that in this case, the twin requirements for exercising powers under Section 263 of the IT Act were not existent. Therefore, the CIT exceeded the jurisdiction in invoking the provisions of Section 263 of the IT Act. He submits that there was absolutely nothing erroneous in the AO's order dated 23/12/2009, in which the AO after due application of mind, had allowed the Assessee's claim for deduction under Section 10B of the IT Act. He submits that unless an order is both, erroneous and prejudicial to the interests of Revenue, the CIT lacked jurisdiction to exercise the revision powers. He submits that on this ground as well, the CIT's order dated 23/12/2009 and the ITAT's impugned order dated 18/7/2014 confirming the same, warrant interference. 15. Mr. Pardiwalla submits that the AO, by his communications da....
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....o be set aside. 18. Mr. Pardiwalla submits that even, otherwise on merits, there was ample material available on record from which it was evident that the Assessee fulfilled all the prescribed requirements for claim under Section 10B of the IT Act. On the basis of fulfillment of such requirements, the Assessee had in fact been granted such deduction for the subsequent assessment years. Therefore, even on merits, the impugned orders made by the CIT and the ITAT, warrant interference. 19. Ms. Linhares, the learned Standing Counsel defends the impugned orders based on the reasoning reflected therein. She points out that there is absolutely no discussion in the AO's order dated 23/12/2009 for allowing the Assessee's claim for deduction under Section 10B, which claim was belatedly made by the Assessee though filed by revised return. She points out that at least during the relevant assessment year, there was really no material on record to hold that the Assessee fulfilled the prerequisites for claim of deduction under Section 10B of the IT Act. In any case, she points out that there was absolutely no consideration by the AO on this issue and this is not a case of som....
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....e on which the Assessee may rely upon in support of the return filed. It is pertinent to note that at least in this communication dated 16/9/2009, there were no specific queries raised in respect of any deduction claimed either in the original return or in the revised return. 27. The Assessee submitted its response on 28/10/2009. At paragraph 11 of this response, the Assessee referred to Annexure 12 for justification for Section 10B deduction. In Annexure 12, the Assessee did provide some information in support of its claim for deduction under section 10B of the IT Act. 28. The AO addressed yet another communication dated 2/12/2009 to the Assessee. This time raising several queries in relation to the Assessee's claim for deduction under Section 10B of the IT Act. 29. Again the Assessee, vide response dated 7/12/2009, submitted information in relation to the deduction claimed under Section 10B of the IT Act. 30. Based upon the information supplied by the Assessee in its responses dated 28/10/2009 and 7/12/2009, Mr. Pardiwalla contended that not only the AO was conscious of the ingredients of Section 10B of the IT Act, but further, took pains to o....
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...., along with its sub-paragraphs 4.1 to 4.7 deal with disallowance under Section 40(a)(ia) in the context of commission exceeding Rs. 18.00 crore paid by the Assessee during the relevant assessment year, even though the TDS on the commission paid was negligible. Paragraph 5 deals with the expenditure incurred towards research and development. Paragraph 6 deals with the issue of depreciation on UPS. Finally, paragraph 7 deals with computation on the basis of the opinion in paragraphs 4,5 and 6. Thus, on the issue of deduction under Section 10B of the IT Act, there is absolutely no consideration and yet, the AO has allowed such deduction. This is, according to us, is a case of 'no consideration' as opposed to mere 'inadequate consideration'. This is, according to us, a clear case of non-application of mind to the material on record, without even going into the issue whether the material supplied by the Assessee was adequate or inadequate to determine its claim for deduction under Section 10B of the IT Act. In such a situation, the exercise of revision jurisdiction by the CIT under Section 263 of the IT Act, cannot be said to be prohibited even based upon the decisions ....
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....his mind to the case in all perspective and the order passed by him was erroneous. The AO in the said case, accepted an entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. The Hon'ble Apex Court then held that on these facts, the conclusion that the order of the AO was erroneous was irresistible. Therefore, the High Court had rightly upheld that the exercise of the jurisdiction by the Commissioner under Section 263(1) of the IT Act. 38. This decision, according to us, assists the case of the Revenue, since, in the present case as well, there was no inquiry by the AO on the issue of fulfillment of requirements under Section 10B of the IT Act. The mere seeking of information but thereafter, not even looking into the same is not the same thing as inquiring into the matter. Further, the AO has to consider the information so furnished and after applying the mind, arrive at a decision one way or the other on the issue before him, 39. In Gabriel India Ltd. (supra), this Court has held that the decision of the AO cannot be regarded as erroneous simply because the AO did not make an elaborate discus....
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....e to make an inquiry, the order becomes erroneous when such an inquiry had been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. Duggal and Co. vs. Commissioner of Income Tax 220 ITR 456 (Delhi); CIT vs. Pushpa Devi 164 ITR 639 (Pat.) and CIT vs. Pushpa Devi 173 ITR 445 (Pat.). 45. In a case of this nature, it is not sufficient that the AO merely raises queries or poses questions. If such queries are answered, it is the duty of the AO to consider such answers and based thereon, to take further steps to arrive at a reasoned decision. Perusal of the impugned order does not indicate that the AO has even adverted to, much less, considered the responses filed by the Assessee. There is not even finding in the assessment order that the Assessee was entitled to deduction under Section 10B of the IT Act on account of the answers furnished by the Assessee to the queries raised by the AO. In respect of such order, the CIT was entitled to exercise the revision jurisdiction since the order is both, erroneous as well as prejudicial to the interests of the Revenue. 46. Ms. Linhares has quite correctly relied upon Rampyari....