AI Drafter 
TaxTMI 
TaxTMI 
2021 (7) TMI 684
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....ncome, the assessment was completed by the DCIT, Circle - 1, Pune (hereinafter referred as "the Assessing Officer") vide order dated 31.03.2015 passed u/s 143(3) of the Act at a total income of Rs. 30,17,18,540/- after making the following disallowances : 1) Disallowance of claim of deduction of Rs. 10,90,23,322/- u/s 80IC of the Act. 2) Disallowance of Rs. 12,14,250/- u/s 14A of the Act. 3. While matter stood thus, the ld. PCIT - 1, Pune on verification of the assessment records, found that out of the total claim for deduction of Rs. 21,09,60,407/- u/s 80IC claimed in respect of income from Parwanoo Unit at Haryana, the profits attributed to inter unit sales of Rs. 14.97 crores was alone disallowed, in respect of profits on the sales of Rs. 13.47 crores made to vendors directly from Parwanoo Unit was allowed by the Assessing Officer. According to the ld.PCIT, the action of the Assessing Officer allowing the profits on the sales of Rs. 13.47 crores without causing any necessary enquiries is erroneous as the Assessing Officer himself gave a finding that only 10% of the profit can be attributed to the C.D. writing and packing activities which are done at Parwanoo....
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.... that the assessment order cannot be termed as erroneous and prejudicial to the interest of Revenue and reliance was placed on the following decisions : 1) Malbar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) 2) Bodhisattva Chattopadhyay Vs. CIT ITA No.1304/KOL/2019 (KOL Trib) 3) Magic Landcon LLP Vs. CIT ITA No.4551/Del/2019 (DELHI Trib) 4) CIT Vs. Fine Jewellery (India) Ltd ITA No.296 of 2013. Secondly, it was contested that the explanation 2 of Sec.263 of the Act has no application to the facts of the present case as in the present case, the Assessing Officer had examined the claim during the course of assessment proceedings and took a view that only a part of the claim u/s 80IC is disallowable. Thirdly, it was contested that the original assessment order is appealed against before the ld.CIT(A) and the subject matter of the appeal before ld.PCIT is eligibility of the assessee for claiming deduction u/s 80IC. Therefore, the assessment order got merged with the order of ld.CIT(A) as the power of revision u/s 263 is not available to the ld.PCIT and in this connection, he relied on the following judgments : 1) Sonal Garments (Mum)....
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....ourt in the case of Malbar Industrial Co., Ltd. Vs. CIT reported in 243 ITR 83 (SC) that the power of revision under the provisions of Sec.263 of the Act can be exercised only on satisfaction of twin conditions namely, (i) the order of the Assessing Officer must be erroneous and (ii) it is prejudicial to the interest of revenue. The Hon'ble Supreme Court further held that when a claim made by the assessee is allowed by the Assessing Officer without making any enquiry, then the order of the Assessing Officer to the extent it allowed such claim is erroneous and consequently prejudicial to the interest of Revenue. Therefore, the question that requires to be determined in the present case is whether the AO had examined the claim i.e., eligibility of the profits earned on the sales made to vendors directly from Parwanoo Unit, while allowing deduction u/s 80IC of the Act. 9. In the present case, the amount of profits that were claimed as deduction u/s 80IC of Act comprises of two components, namely, (i) the profit on inter-unit sales of Rs. 14.97 crores (ii) the profits on sales of Rs. 13.47 crores made to vendors directly from Parwanoo Unit. From the perusal of the assessment o....
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...."due verification" would include within its ambit not only inadequate inquiry / verification but also no enquiry / verification. As held by the Hon'ble Supreme Court in the case of Malbar Industrial Co., Ltd. Vs. CIT reported in 243 ITR 83 (SC), non-enquiry before allowing the claim would make the Assessing Officer amenable to jurisdiction u/s 263 of the Act. There is nothing on the record to say that this component for the claim u/s 80IC which is the subject matter of revision is examined or enquired into by the Assessing Officer and took a plausible view, even if one infers that the Assessing Officer took a view, it can be said that mere taking of view of by the Assessing Officer without having subjected the claim to examination would not make a view of the Assessing Officer. A view has necessarily been preceded by the examination and opting to choose one of the possible views. The same view has been taken in the case of K.A. Ramaswamy Chettiar Vs. CIT reported in 220 ITR 657 (Mad) wherein it was held as under : "25. When an officer is expected to make inquiry of a particular item of income and if he does not make any inquiry as expected, that would be a ground to int....
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....le High Court of the Act. The words " due verification" would include within its ambit not only inadequate inquiry / verification but also no enquiry / verification. However, in case the respondent - assessee was of the view that the claim has been examined by the Assessing Officer before allowing it, then respondent-assessee ought to have the statement of case modified/amended so as to bring the aforesaid facts on record, as held by the Apex Court in the case of Calcutta Agency Ltd. (supra). This not being done and now to draw far fetched inference cannot be accepted. It is now settled in view of Malabar Industries (supra) that nonenquiry before allowing the claim would make the order of the Assessing Officer amenable to jurisdiction under Sec.263 of the Act. The non-enquiry by the Assessing Officer gives jurisdiction under Section 263 of the Act. Merely because the issue is debatable, it does not absolve the Assessing Officer from examining the issue and taking a view on the claim after examination. Similarly because the two views are possible and or that there are contrary view of higher forums, does not permit permit non-examination of the claim and taking one of the p....