M/s. Third Eye Enterprise, Ahmedabad V. The Pr. CIT-3, Ahmedabad

ITA 1214/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3380 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Opportunity of being heard; Principle of natural justice; Competent authority
• Section: 263; 143(3); 10AA; 133(6)

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1214/AHD/2017 ( ASSESSMENT YEAR : 2012-13) M/S. THIRD EYE ENTERPRISE 805, SHAPATH-II, OPP. RAJPATH CLUB, S. G. HIGWAY, AHMEDABAD / VS. PR.CIT-3 4 TH FLOOR, C-WING, PRATYKASH KAR BHAVAN, AMBAWADI, AHMEDABAD ./ ./ PAN/GIR NO. : AAHFT9271J ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, A.R. / RESPONDENT BY : SHRI SURENDRA KUMAR, CIT.D.R. DATE OF HEARING 24/01/2019 !'# / DATE OF PRONOUNCEMENT 26/02/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE RIVISIONAL ORDER OF THE PR. CO MMISSIONER OF INCOME TAX - 3, AHMEDABAD (PR.CIT IN SHORT), DATE D 22.03.2017 PASSED FOR THE AY 2012-13. 2. THE ASSESSEE HAS IMPUGNED THE AFORESAID ACTION O F THE PR.CIT BY WAY OF FOLLOWING GROUNDS OF APPEAL: 1.1 THE ORDER PASSED U/S.263 ON 22-3-2017 FOR A.Y. 2012-13 BY CIT-3, ABAD SETTING ASIDE THE REGULAR ASSESSMENT MA DE ON 10- ITA NO. 1214/AHD/17 [M/S. THIRD EYE ENTERPRISE VS. PR.CIT] A.Y. 2012-13 - 2 - 09-2014 BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAIN ST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN EXERCISING HIS POWERS U/S 263, THOUGH THE REGULAR A SSESSMENT MADE U/S 143(3) ON 10-9-2014 BY AO WAS NEITHER ERRO NEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. TH E LD. CIT HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 2.1 THE LD. CIT HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAD CLAIMED EXEMPTION U/ S 10A WHICH WAS NOT ADMISSIBLE FOR THIS YEAR. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT OUGHT NOT TO HAVE HELD THAT THE AP PELLANT HAD CLAIMED EXEMPTION U/S 10A. 3. BRIEFLY STATED, THE ASSESSEE, A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND IT/ITES SERVIC ES. THE ASSESSEE, A PARTNERSHIP FIRM, FILED ITS RETURN OF INCOME DECL ARING TOTAL INCOME OF RS.NIL AFTER CLAIMING EXEMPTION OF RS.1,10,30,619/- UNDER S. 10AA OF THE INCOME TAX ACT, 1961 (THE ACT). THE RETURN F ILED WAS SUBJECTED TO SCRUTINY ASSESSMENT AND PURSUANT THERETO ASSESSM ENT ORDER WAS PASSED BY THE AO UNDER S.143(3) OF THE ACT DATED 10 .09.2014. SUBSEQUENT TO THE REGULAR ASSESSMENT, ON VERIFICATI ON OF RECORDS, IT WAS FOUND BY THE PR.CIT THAT ASSESSEE HAS FAILED TO SUBMIT A PRESCRIBED FORM NO.56F BEFORE THE AO AS CONTEMPLATE D UNDER S.10AA(8) OF THE ACT R.W. RULE 16D OF THE INCOME TA X RULES. IT WAS ALSO ALLEGED THAT APPROVAL LETTER FROM SEZ AUTHORIT Y WAS NOT FURNISHED BEFORE THE AO TO ENABLE IT TO CLAIM DEDUCTION UNDER S.10AA OF THE ACT. THE PR.CIT ACCORDINGLY ISSUED SHOW CAUSE NOTI CE DATED 18.11.2016 TO THE ASSESSEE ALLEGING THAT THE ASSES SMENT ORDER PASSED BY THE AO UNDER S.143(3) OF THE ACT IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF THE FACT THAT THE DEDUCTION UNDER S.10AA OF THE ACT WAS ALLOWED WITHOUT ENSURING COMP LIANCE OF PRESCRIBED CONDITIONS. PURSUANT TO THE SHOW CAUSE NOTICE, THE ITA NO. 1214/AHD/17 [M/S. THIRD EYE ENTERPRISE VS. PR.CIT] A.Y. 2012-13 - 3 - PROCEEDINGS UNDER S.263 OF THE ACT WERE INITIATED F OR MODIFICATION /CANCELLATION OF THE ASSESSMENT ORDER. THE PR.CIT EVENTUALLY SET ASIDE THE ASSESSMENT ORDER PASSED BY THE AO UNDER S.143(3 ) OF THE ACT FOR AY 2012-13 WITH A DIRECTION TO FRAME THE ORDER AFRE SH AFTER MAKING PROPER VERIFICATION REGARDING ADMISSIBILITY OR OTHE RWISE OR DEDUCTION UNDER S.10AA OF THE ACT CLAIMED BY THE ASSESSEE. T HE RELEVANT OPERATIVE PARA OF THE ORDER OF THE PR.CIT IS REPROD UCED AS UNDER: 5. THE REPLY OF THE ASSESSEE HAS BEEN CAREFULLY CO NSIDERED, KEEPING IN VIEW THE FACTS OF THE CASE, THE EVIDENCE S AVAILABLE ON RECORD. THE CONTENTIONS RAISED BY ASSESSEE ARE NOT ACCEPTABLE DUE TO THE FOLLOWING REASONS. (I) PERUSAL OF THE AUDIT REPORT NOW SUBMITTED BY TH E AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REVEALS T HAT THE REPORT IS GIVEN FOR SECTION 10A OF THE I T ACT, WHEREAS IN THE RETURN OF INCOME AS WELL AS ASSESSME NT ORDER, THE SECTION WHICH HAS BEEN QUOTED IS SECTION 10AA. (II) THE REQUIREMENTS, PURPOSE, CONDITIONS OF BOTH THESE SECTIONS ARE DIFFERENT AND THE ONE CANNOT BE EQUATE D TO ANOTHER, NOR CAN THE REPORT FOR ONE BE ACCEPTABLE I N PLACE OF THE OTHER. (III) THE LAST YEAR IN WHICH DEDUCTION COULD BE CL AIMED UNDER SECTION 10A WAS ASSESSMENT YEAR 2011-12; FROM A.Y 2012-13 ONWARDS NO DEDUCTION UNDER SECTION 10A SHAL L BE ALLOWED TO ANY UNDERTAKING BY VIRTUE OF FOURTH PROVISO BELOW CLAUSE (1) OF SECTION 10A. 6. THUS, THE ORDER U/S 143(3) HAS BEEN PASSED WITHO UT PROPER APPLICATION OF MIND AND WITHOUT THE FULFILLMENT OF STATUTORY REQUIREMENT OF SECTION 10AA, RESULTING IN INCORRECT ASSESSMENT OF TOTAL INCOME OF THE ASSESSEE FIRM. THEREFORE, IT IS CLEAR THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS NOT ONLY ERR ONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. I HEREBY SE T-ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/ S.143(3) FOR A.Y.2012-13 WITH A DIRECTION TO FRAME THE ORDER AFR ESH, AFTER MAKING PROPER VERIFICATION REGARDING ADMISSIBILITY OR OTHE RWISE OF DEDUCTION OF U/S. 10AA CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER IS ALSO DIRECTED TO VERIFY IF THE CORRECT AUDIT REPORT AS R EQUIRED UNDER THE LAW HAS BEEN SUBMITTED BY THE ASSESSEE FIRM, IF THE COMPUTATION OF DEDUCTION UNDER SUCH AUDIT REPORT HAS BEEN CORRECTL Y MADE, AND IF ALL THE CONDITIONS SPECIFIED FOR GRANT OF DEDUCTION U/S .10AA OF THE ACT ARE FULLY SATISFIED. THE ASSESSING OFFICER IS DIRE CTED TO ENSURE THAT ITA NO. 1214/AHD/17 [M/S. THIRD EYE ENTERPRISE VS. PR.CIT] A.Y. 2012-13 - 4 - ADEQUATE AND DUE OPPORTUNITY OF BEING HEARD IS GRAN TED TO THE ASSESSEE. 4. AGGRIEVED BY THE AFORESAID DIRECTION OF THE PR.C IT CANCELLING THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE A CT FOR RE-FRAMING THEREOF, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED AR FOR THE ASSESSEE AT THE OUTSET SU BMITTED THAT THE INGREDIENTS OF SECTION 263 OF THE ACT ARE NOT FULFI LLED AND THEREFORE, THE PR.CIT HAS WRONGLY ASSUMED THE JURISDICTION CON FERRED UNDER S.263 OF THE ACT. THE LEARNED AR SUBMITTED THAT THE ASSE SSMENT ORDER WHICH IS SUBJECT MATTER OF REVISION BY THE PR.CIT IS NEIT HER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LE ARNED AR POINTED OUT THAT THE RELEVANT FORM NO.56F AS WELL AS APPROVAL L ETTER FROM SEZ AUTHORITY WAS PRESENTED IN THE PROCEEDINGS UNDER S. 263 OF THE ACT AND THEREFORE, THE PR.CIT WAS NOT JUSTIFIED IN INTERFER ING WITH THE DEDUCTION ALLOWED BY THE AO IN THE REGULAR ASSESSME NT. THE LEARNED AR ALSO SUBMITTED THAT INFORMATION WAS CALLED FOR U NDER S.133(6) FROM SEZ AUTHORITY (SOFTWARE TECHNOLOGY PARK OF INDIA) B EFORE GRANTING DEDUCTION UNDER S.10AA OF THE ACT AND THEREFORE, IT DOES NOT LIE IN THE MOUTH OF THE PR.CIT TO SAY THAT PROPER INQUIRY WAS NOT CARRIED OUT PRIOR TO GRANT DEDUCTION UNDER S.10AA OF THE ACT. THE LEARNED AR RELIED ON CERTAIN JUDICIAL PRECEDENTS TO PROP UP IT S CASE. THE LEARNED AR REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ZENITH PROCESSING MILLS VS. CIT (1996) 219 ITR 721 (GUJ) FOR THE PROPOSITION THAT FILING OF PRESCRIBED FORM FOR CLAIMING RELIEF IS ONLY DIRECTORY IN NATURE AND IT WILL BE SUFFICIENT IF SUCH REPORT IS FURNISHED BY THE ASSESSEE ON BEING POINTED OUT ABOU T THE DEFECT. THE LEARNED AR ACCORDINGLY SOUGHT REVERSAL OF THE ACTIO N OF THE PR.CIT. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE PR.CIT. ITA NO. 1214/AHD/17 [M/S. THIRD EYE ENTERPRISE VS. PR.CIT] A.Y. 2012-13 - 5 - 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDER OF THE PR.CIT AND MATERIAL RELIED UPON IN THE COURSE OF HEARING. THE ASSESSEE, IN THE PRESENT CASE, HAS AG ITATED THE ACTION OF THE PR.CIT IN INVOKING THE REVISIONARY POWER VESTED UNDER S.263 OF THE ACT TOWARDS ALLEGED NON VERIFICATION OF CONDITIONS FOR ELIGIBILITY OF DEDUCTION UNDER S.10AA OF THE ACT. A BARE READING OF THE ORDER OF THE PR.CIT SHOWS THAT THE AO HAS FAILED TO MAKE INQUIRY INTO THE RELEVANT ASPECTS CONCERNING ELIGIBILITY TOWARDS DEDUCTION UN DER S.10AA OF THE ACT. THE PRESCRIBED FORM REQUIRED FOR THE PURPOSES OF CLAIM OF DEDUCTION UNDER S.10AA OF THE ACT WAS NOT AVAILABLE BEFORE THE AO. THE AO DID NOT MAKE ANY INQUIRY IN THIS REGARD. TH E FORM ULTIMATELY FILED BEFORE THE PR.CIT WAS ALSO FOUND WITH REFEREN CE TO SECTION 10A IN PLACE OF SECTION 10AA OF THE ACT. THUS, THE PRE SCRIBED FORM PRESUMABLY DIRECTORY IN NATURE, AS CLAIMED BY THE A SSESSEE HAS NOT BEEN PLACED ON RECORD TO APPRECIATE THE CORRECTNESS OF DEDUCTION CLAIMED. THE APPROVAL OF THE SEZ AUTHORITY LIKEWIS E WAS ALSO NOT PLACED BEFORE THE AO NOR ASKED FOR. THUS, THE ORDE R OF THE AO UNDER S.143(3) OF THE ACT CLEARLY SUFFERS FROM LACK OF IN QUIRY AND APPLICATION OF MIND. THE AO HAS CLEARLY FAILED TO DISCHARGE IT S QUASI-JUDICIAL FUNCTIONS WHILE FRAMING THE ASSESSMENT ORDER. SUCH AN ASSESSMENT ORDER IS THUS CLEARLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. AT THIS STAGE, WE ALSO TAKE NOTE OF THE REPLY RE CEIVED BY THE AO FROM SEZ AUTHORITY IN RESPONSE TO SECTION 133(6) OF THE ACT. HOWEVER, IT IS SEEN THAT THE REPLY WAS TOWARDS ITS COMPETENCE TO IMPLEMENT EOU SCHEME AND ISSUE OF LETTER OF PERMISS ION OF STP SCHEME IN PLACE OF ITS ISSUANCE BY BOA (BOARD OF AP PROVAL). THUS, THE REPLY WAS MADE TO EXPLAIN THE DELEGATION OF POW ERS TO THE DIRECTORS OF STP SCHEMES AND RATIFICATION OF SUCH A PPROVALS BY THE COMPETENT AUTHORITY. THUS, THE INQUIRY WAS MADE ON ONLY ONE LIMITED ITA NO. 1214/AHD/17 [M/S. THIRD EYE ENTERPRISE VS. PR.CIT] A.Y. 2012-13 - 6 - ASPECT OF THE MATTER LOOSING SIGHT OF THE OTHER CRU CIAL ASPECTS AS NOTICED BY THE PR.CIT. THUS, THE USURPATION OF THE JURISDICTION UNDER S.263 OF THE ACT AND CONCLUSION OF THE PR.CIT THAT THE ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE CANNOT BE FAULTED. CERTAIN DOCUMENTS FURNI SHED AT A LATER STAGE AFTER COMPLETION OF THE ASSESSMENT, THE CORRE CTNESS OF WHICH HAS NOT BEEN TESTED, CANNOT BE SEEN AS SUFFICIENT COMPL IANCE OF DEDUCTION PROVISION. WE THUS DO NOT FIND ANY FORCE IN THE AP PEAL OF THE ASSESSEE AND CONSEQUENTLY, DECLINE TO INTERFERE. 9. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS DISMI SSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 26/02/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 26/02/20 19