M/S. Vodafone Essar Ltd., Mumbai V. CIT-1, Chandigarh

ITA 706/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63937 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: ASEEM MOWAR
• Keywords: Depreciation; Transfer pricing; Business expenditure; Principle of natural justice; Rule of consistency; Additional depreciation; Assessment record; Unabsorbed depreciation; Revenue expenditure
• Section: 143(3); 80HHC; 115JB; 80IB; 80G; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.706 /CHD/2010 (ASSESSMENT YEAR : 2005-06) M/S VODAFONE ESSAR LTD., VS. THE C.I.T.-1, MUMBAI. \ CHANDIGARH PAN: AAACH5332B (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH PERCY PARDIWALA, RISHAB SING LA & ASEEM MOWAR RESPONDENT BY : SHRI MANJEET SINGH, DR DATE OF HEARING : 20.06.2012 DATE OF PRONOUNCEMENT: 18.09.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX, DATED 30.3.2010 PASSED U/S 263 OF THE INCOME TAX ACT RELATING TO ASSESSMENT YEAR 2005-06. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX-I, CHANDIGARH (HEREINAFTER REFERRED TO AS THE LEARNED CIT) ERRED IN INITIATING PROCEEDINGS UNDER SECTION 263 OF INCOME-TAX ACT, 1961 (ACT) BY WRONGLY ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT AND HENCE, THE ORDER PASSED BY THE LEARNED CIT UNDER SECTION 263 OF THE ACT IS BAD IN LAW AND VOID AB-INITIO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDER PASSED BY THE LEARNED CIT IS PERVERSE, BA D IN LAW AND VOID AB-INITIO SINCE : 2.1 THE LEARNED CIT HAS ERRED IN PLACING RELIANCE ON THE DRAFT ASSESSMENT ORDER ISSUED BY THE 2 ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 1, CHANDIGARH (LEARNED AO) UNDER SECTION 144C OF THE ACT FOR ASSESSMENT YEAR (AY') 2006- 07 IN THE APPELLANTS CASE, WHICH NEITHER HAS ATTAINED FINALITY, NOR IS BASED ON CORRECT APPRECIATION OF THE FACTS. 2.2 THE LEARNED CIT HAS ERRED IN NOT APPRECIATING AND CONSIDERING THE EVIDENCE PLACED ON RECORD DURING THE REVISIONARY PROCEEDINGS UNDER SECTION 263 OF THE ACT. 2.3 THE LEARNED CIT HAS ERRED IN HOLDING THAT NO ENQUIRIES IN RESPECT OF ALLOWANCE OF DEDUCTION UNDER SECTION 80IA OF THE ACT, WERE CONDUCTED BY THE LEARNED AO AND HENCE, HAS ERRED IN REMANDING THE MATTER BACK TO THE LEARNED AO. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT HAS ERRED IN DISALLOWING DEDUCTION UNDER SECTION 80IA OF THE ACT. 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN CONCLUDING THAT THE APPELLANT HAD SET-UP AND COMMENCED ITS TELECOMMUNICATION OPERATIONS IN THE FINANCIAL YEAR RELEVANT TO THE AY 1995-96. 3.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN NOT APPRECIATING THE FACT THAT ONCE IT WAS HELD BY THE LEARNED AO THAT THE APPELLANT COMMENCED PROVIDING TELECOMMUNICATION SERVICES DURING THE PREVIOUS YEAR RELEVANT TO AY 1996-97 DURING THE ASSESSMENT PROCEEDINGS FOR AY 1995-96, WHICH WAS ALSO ACCEPTED BY THE APPELLANT, THE SAME CANNOT BE RECONSIDERED/RE-EVALUATED IN AY 2005- 06 AND THE PRINCIPLE OF CONSISTENCY NECESSARILY NEEDS TO BE FOLLOWED. 3.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN DISALLOWING 100 PERCENT DEDUCTION CLAIMED BY THE APPELLANT UNDER SECTION 80IA OF THE ACT, BY HOLDING THAT THE APPELLANT IS GOVERNED BY THE ERSTWHILE PROVISIONS OF SECTION 80 IA OF THE ACT, THAT WERE APPLICABLE WHEN THE APPELLANT COMMENCED PROVIDING CELLULAR MOBILE TELEPHONY SERVICES, AND NOT THE NEW SECTION 80IA (INTRODUCED BY FINANCE ACT 2001). 3.4 WITHOUT PREJUDICE TO GROUNDS 3.3 AND IN THE ALTERNATIVE, EVEN IF IT IS PRESUMED THAT THE ERSTWHILE PROVISIONS OF SECTION 80IA OF THE ACT WERE APPLICABLE TO THE APPELLANT, THE LEARNED CIT ERRED IN HOLDING THAT THE APPELLANT IS NECESSARILY REQUIRED TO CLAIM DEDUCTION FOR FULL TEN CONSECUTIVE YEARS UNDER SECTION 80IA OF THE ACT, BEGINNING FROM THE AY IN WHICH THE APPELLANT STARTED PROVIDING TELECOMMUNICATION SERVICES AND THEREBY HOLDING THAT THE APPELLANT IS NOT ELIGIBLE FOR 100% DEDUCTION DURING AY 3 2005-06. 3.5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT ERRED IN HOLDING THAT THE APPELLANT IS NECESSARILY REQUIRED TO CLAIM DEDUCTION FOR FULL TEN CONSECUTIVE YEARS UNDER SECTION 80IA OF THE ACT, BEGINNING FROM THE AY IN WHICH THE APPELLANT STARTED PROVIDING TELECOMMUNICATION SERVICES, IN COMPLETE DISREGARD TO THE NON-OBSTANTE PROVISIONS OF SECTION 80IA(2A) OF THE ACT, WHICH SPECIFICALLY PROVIDE FOR DEDUCTION FOR TEN CONSECUTIVE YEARS COMMENCING AT ANY TIME DURING A BLOCK OF FIFTEEN YEARS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT ERRED IN HOLDING THAT INTEREST INCO ME AMOUNTING TO RS.60,999,174 IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT ERRED IN HOLDING THAT MISCELLANEOUS RECEIPTS AMOUNTING TO RS.49,814,610 IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL . THE ASSESSING OFFICER ACCEPTED THE RETURNED INCOME OF THE ASSESSE E VIDE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT DATED 3.9.2007. TH E ASSESSING OFFICER HOWEVER, MADE ADJUSTMENT OF RS. 30,79,21,638/- TO T HE BOOK PROFITS DETERMINED U/S 115JB OF THE INCOME TAX ACT. THE BO OK PROFITS WERE DETERMINED AT RS. 348.58 CRORES AS AGAINST DECLARED BOOK PROFIT OF RS. 317.78 CRORES. THE CIT ON EXAMINATION OF THE ASSESS MENT RECORDS FOUND THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICE R TO BE A NON SPEAKING ASSESSMENT ORDER, WITHOUT PROPER APPRECIAT ION OF FACTS AND RECORD AND WITHOUT DUE APPLICATION OF MIND. THE CIT WAS OF THE VIEW THAT ASSESSMENT ORDER DATED 3.9.2007 WAS NOT ONLY E RRONEOUS BUT ALSO PRE JUDICIAL TO THE INTEREST OF REVENUE ON SEVERAL ACCO UNTS. 4. THE CIT ISSUED A SHOW CAUSE NOTICE DATED 11.11.2 009 U/S 263(1) OF THE INCOME TAX ACT, WHICH READS AS UNDER:- FROM A PERUSAL OF THE ASSESSMENT RECORD VIS--VIS THE ISSUES DISCUSSED BY THE AO WHILE FRAMING THE ASSESSMENT U/ S 143(3) FOR THE ASSESSMENT YEAR 2005-06, IT IS OBSERVED THA T AS PER P & L ACCOUNT FOR THE YEAR ENDED 31.3.2005, THE COMPA NY HAS SHOWN PROFIT AT RS. 356,98,888/-.AFTER MAKING VARIO US 4 ADJUSTMENTS, THE NET INCOME HAD BEEN SHOWN AT RS. 343,51,89,619/-. AGAINST THIS INCOME THE COMPANY HA S CLAIMED BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE EAR LIER YEARS AMOUNTING TO RS. 35,58,19,560/- AND SHOWN NET ASSES SABLE INCOME AT RS. 307,93,70,059/-. THE COMPANY HAS CLA IMED DEDUCTION U/S 80IA(100%) AMOUNTING TO RS. 307,93,70 ,059/- AND THE TAXABLE INCOME HAS BEEN SHOWN AS NIL, THES E ARE CERTAIN ISSUES WHICH HAVE NOT BEEN EXAMINED BY THE AO. 1. AS PER NOTE GIVEN BELOW THE COMPUTATION SHEET, T HE PROFIT OF THE COMPANY INCLUDES INTEREST INCOME AMOUNTING TO RS. 6,09,99,174/- AND THIS INTEREST IS EARNED ON TEMPORARY DEPLOYING OF SURPLUS FUNDS GENERATED OUT OF THE BUSINESS OF TELECOMMUNICATION SERVICES. THIS INTEREST HAS BEEN REGARDED, FOR THE PURPOSE OF COMPUTATION, AS INCOME DERIVED FROM THE UNDERTAKING CARRYING ON TELECOMMUNICATION BUSINESS AND THEREBY CLAIMED AS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THE AO DID NOT MAKE ANY INQUIRY AS TO WHETHER THE INTEREST EARNED IS DIRECTLY ATTRIBUTABLE TO THE BUS INESS ACTIVITIES OF TELECOMMUNICATION AND AS TO HOW IT PE RTAINS TO THE INVESTMENT ACTIVITIES. AS PER THE DETAILS O N RECORD, THE ASSESSEE SEEMS TO BE NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA OF THE INCOME-TAX ACT. ON THE SAID INTEREST INCOME. BESIDES THE INTEREST INC OME, THE ASSESSEE HAS SHOWN IN THE TOTAL INCOME, OTHER I NCOME OF RS. 110,853,363/- WHICH INCLUDES MISCELLANEOUS RECEIPTS AMOUNTING TO RS. 49,814,610/- ALSO. THE A O DID NOT MAKE ANY INQUIRY ON THIS ISSUE ALSO AS TO H OW THIS INCOME IS ELIGIBLE FOR THE DEDUCTION OF 80IA O F THE INCOME-TAX ACT. AS SUCH THIS ISSUE COULD NOT BE EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. 2. IT HAS FURTHER BEEN OBSERVED THAT THE SR NO. 8 O F FORM NO. 10CCB SUBMITTED BY THE COMPANY REGARDING DATE OF COMMENCEMENT OF OPERATION/ACTIVITY BY THE UNDERTAKI NG OR ENTERPRISES HAS BEEN LEFT BLANK. THE AO FINALI ZED THE ASSESSMENT WITHOUT PLACING ANY DOCUMENT ON RECO RD AS TO WHEN THE BUSINESS HAS BEEN COMMENCED AND FURT HER AS TO WHETHER THE COMPANY FULFILLS THE NECESSARY CONDITIONS LAID DOWN UNDER THE INCOME-TAX ACT FOR CLAIMING DEDUCTION U/S 80IA. HOWEVER THE COMPANY CLAIMED THAT THE UNDERTAKING HAS NOT BEEN FORMED B Y THE SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREAD Y IN EXISTENCE AND THE COMPANY WAS ALREADY IN THE SAME TELECOMMUNICATIONS BUSINESS. BUT THE AO DID NOT VE RIFY AS TO WHETHER ANY NEW BUSINESS WAS ACTUALLY SET UP BY THE COMPANY OR THE DEDUCTION HAS BEEN CLAIMED ON T HE BUSINESS ALREADY IN EXISTENCE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E COMPANY HAS STATED THAT FOR CLAIMING DEDUCTION U/S 80IA OF THE INCOME-TAX ACT IT HAS EXERCISED ITS OPTION F OR CLAIMING DEDUCTION @ 100% FOR THE ASSESSMENT YEAR 2005-06 TO ASSESSMENT YEAR 2009-10 AND 30% FOR ASSESSMENT YEAR 2010-11. IT HAS ALSO BEEN NOTICED THAT THE COMPANY HAS COMMENCED ITS BUSINESS IN THE ASSESSMENT YEAR 1992-93 BUT HAS HOWEVER CLAIMED THA T THE BUSINESS HAS COMMENDED IN THE ASSESSMENT YEAR 1996-97. AS PER INCOME TAX ACT THE DEDUCTION U/S 8 0IA CAN BE CLAIMED BY THE ASSESSEE FOR A BLOCK OF TEN CONSECUTIVE YEARS IN A BLOCK OF 15 YEARS FROM THE Y EAR OF 5 COMMENCEMENT OF ITS BUSINESS. FOR A BLOCK OF 10 CONSECUTIVE YEARS, FOR THE FIRST FIVE YEARS THE DED UCTION IS ALLOWED @ 100% AND FOR THE NEXT FIVE YEARS @ 30% . THEREFORE, THE OPTIONS FOR CLAIMING DEDUCTION GIVE N BY THE ASSESSEE ARE WRONG. 4. IT HAS TO BE KEPT IN MIND THAT IN SO FAR AS THE DETERMINATION OF MATTERS UNDER THE DIRECT TAXES STA TUTES ARE CONCERNED, IT IS SETTLED THAT THE TAXING AUTHOR ITIES ARE ENTITLED TO LOOK INTO THE ENTIRE SURROUNDINGS A ND CIRCUMSTANCES TO FIND OUT THE REALITY OF THE MATTER S BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE PRIN CIPLE HAS BEEN SUCCINCTLY EXPOSITED BY THE APEX COURT IN CIT V. DURGA PRASAD MORE (1971) 82 ITR 540 (S C) AT PAG E 545, 547 AND SUMATI DAYAL V. CIT (1995) 214 ITR 801 (SC). 5. LIKE WISE IT IS ALSO VERY IMPORTANT TO KEEP IN M IND THAT UNLIKE A CIVIL COURT WHICH IS NEUTRAL TO GIVE DECIS IONS ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN AO IS NOT ONLY AN ADJUDICATOR BUT HE IS ALSO AN INVESTIGA TOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT ENDEAVORS FURTHER, FURTH ER INQUIRY. IT IS THE DUTY OF THE AO TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMST ANCES OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. THE MEA NING TO BE GIVEN TO THE WORD ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG IN THE ORDE R IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORR ECT. IT IS WELL SETTLED THAT T5HE COMMISSIONER MAY CONSIDER AN ORDER OF THE AO TO BE ERRONEOUS NOT ONLY IF IT CONT AINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FA CT ON THE FACE OF IT BUT ALSO BECAUSE IT IS A STEREO-TYPE D ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED I N HIS RETURN AND FAILS TO MAKE ENQUIRIES WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. 6. IN VIEW OF THE FACTS STATED ABOVE, IT IS APPAREN T THAT THE ORDER OF ASSESSMENT FRAMED IN YOUR CASE ON 3.9.2007 IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTE REST OF REVENUE, TO THE EXTENT INDICATED IN THE FOREGOING PARAGRAPHS. CONSEQUENTLY, I PROPOSE TO TAKE RECOUR SE TO THE PROVISIONS OF SECTION 263 OF THE INCOME-TAX ACT. YOU ARE THEREFORE, REQUESTED TO SHOW CAUSE AS TO W HY THE AFORESAID ORDER OF ASSESSMENT DATED 18.5.2007 SHOULD NOT BE SET-ASIDE BY RESORTING TO THE PROVISI ONS OF SECTION 263 OF THE ACT. 5. THE ASSESSEE VIDE LETTER DATED 26.11.2009 FILED WRITTEN SUBMISSIONS WHICH ARE INCORPORATED UNDER PARA 5.1 AT PAGES 6 TO 32 OF THE ORDER U/S 263 OF THE INCOME TAX ACT. THE ASSESSEE HAD PRIMARI LY RAISED OBJECTIONS AGAINST THE INITIATION OF PROCEEDINGS U/S 263 OF TH E INCOME TAX ACT. THE ASSESSEE HAD FURTHER MADE ELABORATE SUBMISSIONS IN CONNECTION WITH HIS 6 CLAIM OF DEDUCTION U/S 80IA OF THE ACT. ANOTHER SU BMISSION MADE BY THE ASSESSEE DURING THE PROCEEDINGS U/S 263 OF THE ACT WAS THAT THE COMPANY HAD MISPLACED ITS ASSESSMENT RECORDS IN CONNECTION WITH THE DOCUMENTS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS F OR THE YEAR UNDER CONSIDERATION. IT WAS THUS CONTENDED THAT THE ASSE SSEE COMPANY WAS UNABLE TO COMMENT ON THE FACT THAT THE REQUISITE IN FORMATION PERTAINING TO SECTION 80IA OF THE ACT WAS EXAMINED OR NOT BY T HE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. 6. IN RESPECT OF THE PRELIMINARY OBJECTIONS OF INITIATION OF THE PROCEEDINGS U/S 263 OF THE ACT, I T WAS POINTED OUT BY THE LD. AR FOR THE ASSESSEE COMPANY THAT THE PRE REQUIS ITE FOR INITIATING THE PROCEEDINGS U/S 263 OF THE ACT WAS THAT THE ORDER S HOULD BE ERRONEOUS AND SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENU E AND THE COMMISSIONER SHOULD ARRIVE AT SUCH SATISFACTION OR MUST HAVE REASONS TO BELIEVE THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE CONTENTION OF THE LD. AR FOR THE ASSE SSEE WAS THAT THE SATISFACTION OF THE ABOVE SAID PRE CONDITION WAS MA NDATORY BEFORE THE INITIATION OF THE PROCEEDINGS U/S 263 OF THE ACT. I N RESPECT OF THE SATISFACTION OF THE COMMISSIONER, IT WAS POINTED OU T THAT THE SAME SHOULD OBJECTIVELY BE ARRIVED AND NOT MERELY BASED ON UNPR OVEN ASSERTIONS OF UNSUPPORTED STATEMENTS. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN CIT V G.M. MITTAL STAINLE SS STEEL (P) LTD [263 ITR 255 (SC)]. 7. THE CIT VIDE PARA 6.3 OBSERVED THAT THE PRE REQU ISITE TO EXERCISE THE JURISDICTION BY THE COMMISSIONER SUO MOTTO IS O N SATISFACTION OF TWO CONDITIONS NAMELY (I) THE ORDER OF THE ASSESSING OF FICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE TWIN CONDITIONS HAD TO BE SATISFIED. THE CIT V IDE PARA 6.4 FURTHER OBSERVED THAT IT WAS UNDISPUTED THAT THE PROVISION COULD NOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE 7 ASSESSING OFFICER, IT IS ONLY WHERE ORDER IS ERRONE OUS THAT SECTION WILL BE ATTRACTED. THE CIT HELD AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF ORDER BEING ERRONEOUS . SIMILARLY, ORDERS PASSED WITHOUT APPLYING THE PRINC IPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND ARE ALSO COVERED BEING ERRONEOUS ORDER . THE CIT VIDE PARA 6.5 NOTES THAT THE ASSESSING OFFICER HAD NOT EVEN CALLED FOR THE BASIC FACTS BEF ORE ALLOWING DEDUCTION U/S 80IA OF THE ACT. THE CIT OBSERVED THAT THE DEDUCTION OF RS. 3,07,93,70,059/- U/S 80IA OF THE ACT WAS GRANTED TO THE ASSESSEE COMPANY WITHOUT RAISING A SINGLE QUERY ON THE ORDER SHEET ON THE ISSUE . THE CIT HELD THAT THE ASSESSING OFFICER HAD MECHANI CALLY ALLOWED THE DEDUCTION IN THE SCRUTINY PROCEEDINGS WITHOUT SATIS FYING AS TO WHETHER THE ASSESSEE HAD FULFILLED ALL THE CONDITIONS LAID DOWN U/S 80IA OF THE ACT. THE CIT WAS OF THE VIEW THAT ASSESSING OFFICE R HAD ERRED IN APPLYING WRONG LAW IN RESPECT OF THE ALLOWABLILITY OF DEDUCTION U/S 80IA OF THE ACT I.E. WITHOUT DISCUSSION ON MERITS. THE C IT OBSERVED THAT IN VIEW OF THE VARIOUS JUDICIAL PRECEDENTS THE LOSS OF TAX IS TO BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE, AS THE SCHE ME OF THE ACT IS IT TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT. THE CIT HELD THAT IF DUE TO AN ERRONEOUS ORDER PASSED B Y THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX PAYABLE BY A PER SON, IT WOULD CERTAINLY BE PREJUDICAL TO THE INTEREST OF REVENUE. THE CIT FAIRLY AGREED THAT EVERY LOSS OF REVENUE CONSEQUENT TO THE ORDER OF THE ASSESSING OFFICER WOULD NOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE SPECIALLY IN CASES WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE VIEWS PERMISSIBLE IN LAW, WHERE TWO VIEWS WERE POSS IBLE. THE ASSESSING OFFICER HAVING TAKEN ONE VIEW WITH WHICH THE COMMIS SIONER DOES NOT AGREE, COULD NOT BE TREATED AS ERRONEOUS OR PREJUDI CIAL TO THE INTEREST OF REVENUE, UNLESS THE VIEW TAKEN WAS UNSUSTAINABLE IN LAW. THE CIT WAS OF THE VIEW THAT IN THE PRESENT CASE, THE ORDER OF THE ASSESSING OFFICER WAS NOT SUSTAINABLE IN LAW AT ALL AS EVEN THE BASIC QUERIES REGARDING THE 8 ALLOWABLILITY OF THE DEDUCTION U/S 80IA WERE NOT RA ISED DURING THE PROCEEDINGS. SECONDLY, THE MATERIAL ON RECORD SUGGE STS THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THIRDLY, THE ASSESSING OFFICER HAD NOT APPLIED THE PROVISIONS OF SECTION 80IA CORRECTLY WHILE COMPUTING THE QUANTUM OF DEDUCTION, AS THE ASSESSING OFFICER HAD FAILED TO DETERMINE THE ELIGIBLE AMOUNT OF DEDUCTION, WHETHER 100% OR 30% OR NIL DEDUCTION. AS PER CIT, THE ASSESSING OFFICER HAD FAILED TO APPRECIATE THAT THE DEDUCTION U/S 80IA OF THE ACT WAS NOT ALLOWABLE ON OTHER INCOME LIKE INTEREST AND MISC. INCOME, AS THESE WERE NOT DERIVED FROM THE ELIGIBLE BUSINESS. ACCORDINGLY, THE ORDER PASSED BY THE ASSESSING OFFICER OF NIL ASSESSMENT, WITHOUT APPLICATION OF MIND WAS AS PER CIT NOT ONLY ERRONEOUS BUT TO THAT EXTENT PREJUDICIAL TO THE INTEREST OF REVENUE. RELIANCE WAS PLACED ON MA LABAR INDUSTRIAL COMPANY LTD V CIT [243 ITR 83 (SC)] AND S.V. PRODUC TS IND. LTD. VS. CIT (187 ITR 412 (ALL)). SHOW CAUSE NOTICE WAS THUS ISSUED TO THE ASSESSEE. 8. THE LD. AR FOR THE ASSESSEE MADE ELABORATE SUBMI SSIONS ON THE ISSUE OF ALLOWABLILITY OF DEDUCTION U/S 80IA OF THE ACT. THE FIRST PLANK OF SUBMISSIONS OF THE ASSESSEE WAS THAT THE DEDUCTI ON U/S 80IA OF THE ACT PRESCRIBES FULFILLMENT OF FOLLOWING KEY CONDITI ONS: - CONDITION (1) : AS PER SECTION 80IA(4)(II) OF THE A CT, THE SECTION APPLIES TO ANY UNDERTAKING WHICH HAS STARTED OR STA RTS PROVIDING TELECOMMUNICATION SERVICES, WHETHER BASIC OR CELLU LAR, ON OR AFTER 1.4.1995 BUT ON OR BEFORE 31.3.2005. CONDITION (2) : AS PER SECTION 80IA(3) OF THE ACT, THE SECTION APPLIES TO AN UNDERTAKING PROVIDED IT IS NOT FORMED BY SPLITTING UP OR RE-CONSTRUCTION OF A BUSINESS, ALREADY IN EXISTE NCE; AND NOT FORMED BY TRANSFER TO A NEW BUSINESS OF MACHINERY O R PLANT PREVIOUSLY USED FOR ANY PURPOSE. 9 CONDITION (3): AS PER SECTION 80IA(7) OF THE ACT, T HE DEDUCTION UNDER THE SECTION WAS ADMISSIBLE WHERE THE ACCOUNTS FOR THE FINANCIAL YEAR RELATING TO THE ASSESSMENT YEAR FOR WHICH DEDUCTION WAS CLAIMED HAD BEEN AUDITED BY AN ACCOUNTANT AND T HE ASSESSEE HAD FURNISHED ALONG WITH RETURN OF INCOME, THE REPO RT OF SUCH AUDIT IN FORM NO. 10CB DULY SIGNED AND VERIFIED BY ITS AC COUNTANT. 9. THE ASSESSEE MADE WRITTEN SUBMISSIONS WITH REGAR D TO THE THREE CONDITIONS TO BE SATISFIED FOR ELIGIBILITY OF CLAIM U/S 80IA, WHICH READS AS UNDER:- C. WITH RESPECT TO CONDITION 1, EVEN ASSUMING THAT TH E AO DID NOT VERIFY THE DATE OF COMMENCEMENT OF OPERATIO NS BY VEL DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SUBJECT ASSESSMENT YEAR (IN ABSENCE OF AS T RECORDS AVAILA BLE WITH VEL), WE WISH TO SUBMIT THAT THE ISSUE OF SET-UP AN D COMMENCEMENT OF OEPRATIONS OF VEL WAS DULY EXAMINED BYTHE AO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSM ENT YEAR 1995-96. IN THE RETURN OF INCOME FILED FOR ASSESSM ENT YEAR 1995-96 VEL HAD CLAIMED THAT THE BUSINESS OF VEL HA D SET UP DURING 1992-93 EVEN THOUGH VEL HAD NOT COMMENCE D ITS OPERATIONS IN THE AY 1995-96. THEREFORE, BASIS TH E PRINCIPLE THAT THE MATERIAL DATE FOR CLAIMING DEDUCTION FOR B USINESS EXPENSES IS THE DATE OF SET-UP OF BUSINESS AND N OT THE DATE OF COMMENCEMENT OF OPERATIONS; VEL HAD CLAIMED LDED FOR ALL BUSINESS EXPENSES IN THE RETURN OF INCOME FOR THE A Y 1995-96. HOWEVER AFTER DUE VERIFICATION THE AO HAD HELD THAT THE BUSINESS OF VEL WAS NOT SET-UP DURING THE AY 1995-9 6. ------------------ THOUGH THE RELEVANT CONDITION FOR CLAIMING HOLIDAY UNDER SEC 80IA OF THE ACT IS PROVISION OF TELECOMMUNICATION S ERVICES POST APRIL 1, 1995 IT IS AMPLY EVIDENT FROM THE ASS ESSMENT OR5DER OF 1995-96 THAT THE EXTRACT OF THE ASSESSMEN T ORDER THAT THE BUSINESS FOR VEL WAS BIT SET-UP TILL AY 19 95-96 AND HENCE, THE QUESTION OF COMMENCEMENT PROVISION OF TE LECOM SERVICES PRIOR TO APRIL 1, 1995 DOES NOT ARISE. TH OUGH VEL HAD CONTENDED THAT IT HAD SET-UP ITS OPERATIONS IN AY 1992-93, NO WHERE HAD IT CLAIMED THAT IT HAD COMMENCED ITS T ELECOM OPERATIONS IN AY 1995-96. IN ANY CASE, THE POSITIO N OF SET-UP OF OPERATIONS BY VEL POST AY 1995-96, AS UPHELD BY THE AO WAS DULY ACCEPTED BY VEL AND NOT CONTESTED FURTHER. WITH RESPECT TO CONDITION 2, WE WISH TO SUBMIT THA T WHILE CONDUCTING THE ASSESSMENT PROCEEDINGS FOR THE AY 1995- 96, THE AO HAD EXAMINED THE FACTS OF THE VEL IN DET AILS, INCLUDING REVIEW OF MEMORANDUM AND ARTICLES OF ASSO CIATION, BID/TENDER DOCUMENTS, ETC. IT WAS AMPLY CLEAR AND EVIDENT BEFORE THE AO THAT VEL WAS A NEW COMPANY AND NOT FO RMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREAD Y IN EXISTENCE. THIS FACT IS ALSO EVIDENT FROM THE FACT THAT VEL WAS ONE OF THE PIONEERS IN COMMENCING THE TELECOMMU NICATION SERVICES IN INDIA. FURTHER, THE FACT THAT THE DAT E OF SET-UP OF 10 BUSINESS WAS BEING LITIGATED, ITSELF PROVES THE ST AND THAT VEL WAS A NEW COMPANY. HAD IT BEEN FORMED THROUGH SPLI TTING UP OF AN EXISTING BUSINESS, IT WOULD HAVE BEEN IN A CO NDITION TO COMMENCE ITS OPERATION IMMEDIATELY UPON ITS INCORPO RATION. THEREFORE, SUCH FACTS WERE DULY AVAILABLE WITH THE OFFICE OF THE AO AND HENCE, THESE FACTS MAY NOT HAVE BEEN RE- EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SUBJECT AT. THE ABOVE FACT WAS DULY VERIFIED AND CERTIFIED BY THE AUDITOR IN FORM 10CCB AS WELL, WHICH WAS FILED ALON GWITH THE RETURN OF INCOME FOR SUBJECT AY. WITH RESPECT TO CONDITION 3, WE WISH TO SUBMIT THA T THE ACCOUNTS OF VEL FOR THE FINANCIAL YEAR RELEVANT TO SUBJECT AY WERE DULY AUDITED AND THE AUDIT REPORT IN FORM 10CC B WAS OBTAINED BY VEL. FURTHER THE SAME WERE DULY SUBMIT TED WITH THE AO ALONG WITH THE RETURN OF INCOME FOR SUBJECT AY. HENCE THE ABOVE MENTIONED CONDITION WAS ALSO DULY COMPLIE D WITH THE VEL. THOUGH THE DATE OF COMMENCEMENT OF OPERAT IONS WAS ERRONEOUSLY MISSING IN THE FORM 10CCB, THE SAME DOE S NOT RENDER THE FORM 10CCB INVALID. THEREFORE, IT IS NOT CORRECT TO STATE THAT THE COND ITIONS PRESCRIBED FOR CLAIMING DEDUCTION U/S 80IA OF THE A CT WERE NOT EXAMINED BY THE AO. AS HIGHLIGHTED ABOVE, ALL THE FACTS AND EVIDENCE WAS ALREADY AVAILABLE WITH THE OFFICE OF T HE AO AND HENCE THE NEED TO RE-EXAMINE THE SAME DID NOT ARISE FOR THE SUBJECT AY. THERE HAS, THEREFORE, BEEN NO ERROR O N THE PART OF THE AO IN GRANTING DEDUCTION U/S 80IA OF THE ACT . WITHOUT PREJUDICE TO OUR SUBMISSIONS IN POINT 1 ABO VE, WE ARE FURNISHING OUR SUBMISSION ON EACH OF THE ALLEGATION S MADE BY YOUR OFFICE FOR INITIATING PROCEDINGS U/S 263 OF TH E ACT ON MERITS. 10. THEREAFTER ELABORATE SUBMISSIONS WERE MADE IN C ONNECTION WITH THE AFORESAID CONDITIONS TO BE SATISFIED AND HOW THE SA ME WERE COMPLIED WITH BY THE ASSESSEE COMPANY. THE REPLY OF THE ASS ESSEE IN THIS REGARD IS INCORPORATED AT PAGES 13 TO 28 OF THE ORDER PASS ED U/S 263 OF THE ACT. 11. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E CONDITIONS WERE SATISFIED IN THE CASE OF THE ASSESSEE AND HENCE IT WAS ELIGIBLE FOR DEDUCTION CLAIMED U/S 80IA OF THE ACT. IT WAS ALSO POINTED OUT THAT IT WAS NOT CORRECT TO STATE THAT THE CONDITIONS PRESCR IBED FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT WERE NOT EXAMINED BY THE ASSESSING OFFICER. THE ASSESSEE FURTHER SUBMITTED, THE EVIDE NCE WAS ALREADY AVAILABLE WITH THE OFFICE OF ASSESSING OFFICER AND HENCE, NEED TO RE- EXAMINE THE SAME DID NOT ARISE FOR THE SUBJECT ASSE SSMENT YEAR. 11 12. THE CIT VIDE PARA 8 CONSIDERED THE ADMISSIBILIT Y OF DEDUCTION U/S 80IA OF THE ACT IN VIEW OF THE VARIOUS FACTUAL ASPE CTS POINTED OUT BY THE LD. AR OF THE ASSESSEE AND OBSERVED AS UNDER:- I) FROM THE PERUSAL OF ASSESSMENT RECORD RELATING T O ASSESSMENT YEAR 2005-06, IT WAS NOTED BY THE CIT THAT DATE OF COMMENCING OF OPERATION / ACTIVITY TO THE UNDERTAKEN HAD BEEN LEF T BLANK. II) AS PER THE CIT THE ASSESSING OFFICER HAD FINALI ZED THE ASSESSMENT WITHOUT PLACING ANY DOCUMENT ON RECORD A S TO WHEN THE BUSINESS HAD COMMENCED OR / AND TO WHETHER THE COMP ANY FULFILS THE NECESSARY CONDITION LAID DOWN IN THE INCOME TAX ACT FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT AS PER PARA 8.1 OF THE ORDER OF CIT . THE SAID OBSERVATION THAT THE ISSUE REGARD ING CLAIM OF DEDUCTION U/S 80IA OF THE ACT AND DEDUCTION CLAIMED U/S 80IA ON OTHER INCOME CAME UP FOR CONSIDERATION BEFORE THE A DDL. CIT, RANGE-I, CHANDIGARH FOR ASSESSMENT YEAR 2006-07 IN ASSESSEES OWN CASE. AS PER ORDER DATED 30.12.2009, IT WAS CO NCLUDED AFTER DETAILED DISCUSSION THAT THE ASSESSEE COMPANY WAS N OT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT IN ASSESSMENT YEAR 20 06-07. THE CLAIM OF DEDUCTION U/S 80IA ON OTHER INCOME WAS ALS O REJECTED BY THE ASSESSING OFFICER. THE DRAFT ASSESSMENT ORDER U/S 144C READ WITH SECTION 143(3) HAD BEEN PASSED IN THE CASE AND THE CIT HELD THAT HE WAS IN FULL AGREEMENT WITH THE REASONS ADVA NCED BY THE ADDITIONAL CIT, RANGE-I, CHANDIGARH VIDE HIS ORDER DATED 30.12.2009 THAT THE ASSESSEE WAS NOT ELIGIBLE FOR D EDUCTION U/S 80IA OF THE ACT. THE SAID OBSERVATION WERE HELD TO BE RELEVANT FOR ASSESSMENT YEAR 2005-06 AS WELL. III) THE FACTUAL AND LEGAL POSITION AS DETAILED IN ASSESSMENT YEAR 2006-07 ON VARIOUS ISSUES WERE HELD BY THE CIT TO BE RELEVANT FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF THE FOLL OWING FACTS:- (A) THE ASSESSEE COMPANY HAS CLAIMED DEDUCTED U/S 80IA AMOUNTING TO RS.307,93,70,059/- FOR THE 12 ASSESSMENT YEAR 2005-06. THE ALLOWABILITY OF DEDUCTION U/S 80IA CRUCIALLY DEPENDS UPON THE YEAR IN WHICH THE ASSESSEE STARTED PROVIDING THE TELECOMMUNICATION AND PAGER SERVICES. (B) THE EXAMINATION OF THE STATUTORY AUDIT REPORT F ILED U/S 80IA (7) BY THE ASSESSEE-COMPANY FOR THE ASSESSMENT YEAR 2006-07 WHICH WAS DULY AUDITED BY M/S PRICE WATERHOUSE REVEALED THAT THE DATE OF COMMENCEMENT OF OPERATION/ACTIVITY BY THE UNDERTAKING OR ENTERPRISE WAS GIVEN AS 29 TH NOV, 1994. (C) THE NOTE ATTACHED ALONG WITH THE RETURN OF INCO ME FOR THE ASSESSMENT YEAR 1994-95 REVEALED THAT THE BUSINESS OF THE ASSESSEE-COMPANY WAS ALREADY SET UP ON 31 ST MARCH, 1992 AND THE VARIOUS EXPENSES WERE CLAIMED AS REVENUE EXPENDITURE. FURTHER THE ASSESSEE-COMPANY HAS DURING THE ASSESSMENT YEAR 1995-96 SHOWN INCOME FROM SALE OF HARDWARE AMOUNTING TO RS. 14,50,617/- WHICH REPRESENTED THE PROFIT FROM SALE OF PAGERS. ON THE BASIS OF MATERI AL ON RECORD, IT IS HELD THAT THE ASSESSEE-COMPANY HAS STARTED ITS INFRASTRUCTURE FACILITY DURING THE ASSESSMENT YEAR 1995-96. (D) AS PER THE INFORMATION AVAILABLE ON THE WEB SIT E OF M/S VODAFONE-ESSSAR LTD., WHICH EXISTS ON THE PATH HTTP://WWW.VODAFONE.IN /EXISTINGUSERS/PAGES/ABOUTUS.ASPX, THE ASSESSEE- COMPANY COMMENCED ITS BUSINESS OPERATION IN THE YEAR 1994 IO.E. DURING THE ASSESSMENT YEAR 1995-96. AS PER THE INFORMATION ON THE WEB SITE OF MONEYCONTROL AVAILABLE ON THE PATH HTTP://WWW.MONEYCONTROL.COM/COMPANY- FACTS/MAXINDIA/HISTORY/MI . THE CELLULAR SERVICE WAS STARTED BY THE ASSESSEE-COMPANY IN MUMBAI BY THE NAME MAX TORCH IN THE YEAR 1994. FURTHER IN THE YEAR 1994, 17 PAGING NETWORKS OF THE ASSESSEE- COMPANY WERE COMMISSIONED. THIS CLEARLY REFLECTS THAT THE ASSESSEE-COMPANY HAS COMMENCED ITS BUSINESS ACTIVITIES AND STARTED GIVING SERVICES TO ITS CUSTOMERS IN THE YEAR 1994. (E) FURTHER INFORMATION ON THE WEB REVEALS THAT THE ASSESSEE COMPANY HAS MERGED ITS CELLULAR AND PAGING DIVISIONS, MAX TOUCH AND MAX PAGE. ALSO THE DETAILS FURNISHED DURING THE COURSE OF THE ASST T PROCEEDINGS FOR THE ASSESSMENT YEAR 2006-07 REVEALS THAT THE ASSESSEE-COMPANY HAS FROM THE FINANCIAL YEAR 2001-02 ONWARDS DISCONTINUED THE PAGING BUSINESS. THUS THERE HAS BEEN RECONSTRUCTIONS AND MERGED IN THE CASE OF THE ASSESSEE-COMPANY, SINCE THE COMPANY WAS ORIGINALLY ESTABLISHED IN 1992 AND HENCE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA AS PER THE PROVISIONS CONTAINED IN CLAUSE (I) OF SUB-SEC (3) OF SECTION 80 IA. (F) THE ASSESSEE-COMPANY HAS SIGNED THE ORIGINAL LICENSE AGREEMENT WITH THE DEPARTMENT OF TELECOM 13 (GOVT OF INDIA) ON 29.11.1994 AND FOR THE ASSESSMENT YEAR 1995-96 WAS ALREADY IN A POSITION TO PROVIDE TELECOMMUNICATION SERVICES. FURTHER THE ASSESSEE-COMPANY WAS ALREADY HAVING THE CERTIFICATE OF INCORPORATION/CERTIFICATE OF COMMENCEMENT OF BUSINESS FROM THE REGISTRAR OF COMPANIES. (G) TO DETERMINE THE ALLOWABILITY OF DEDUCTION U/S 80IA, IT IS EXTREMELY IMPORTANT TO REFER TO THE DEFINITIO N OF INITIAL ASSESSMENT YEAR GIVEN IN SUB-SEC 12(C)(4) OF SECTION 80IA ACCORDING TO WHICH INITIAL ASSESSMENT YEAR IS THE ASSESSMENT YEAR IN WHICH THE UNDERTAKING STARTS TO PROVIDE THE TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULAR. IN THIS PARTICULAR CASE, THE ASSESSEE- COMPANY HAS STARTED PROVIDING TELECOMMUNICATION SERVICES FROM THE ASSESSMENT YEAR 1995-96. (H) IT WAS THE FINANCE ACT 1999 THAT PROVIDED THE FACILITY OF OPTION W.E.F. 1.4.2000 (EFFECTIVE FROM ASSESSMENT YEAR 2000-01) TO CHOOSE THE 10 YEARS TAX HOLIDAY OUT OF 15 YEARS COMPUTED FROM THE YEAR OF INITIAL START OF SERVICE. IN A CASE WHERE THE B LOCK PERIOD OF 10 YEARS HAS ALREADY COMMENCED BEFORE ASSESSMENT YEAR 2000-10, THERE IS NO SCOPE OF CHOOSING THE INITIAL ASSESSMENT YEAR. IN THE INSTA NT CASE, THE INITIAL ASSESSMENT YEAR HAS COMMENCED FROM ASSESSMENT YEAR 1995-96 AND TILL ASSESSMENT YEAR 2000-2001 ALREADY A PERIOD OF 5 YEAR OF THE TAX HOLIDAY OUT OF THE TOTAL 10 YEARS HAS EXPIRED. THUS, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80 IA FOR THE FOLLOWING PERIOD ASSESSING AUTHORITY T THE FOLLOWING PERCENTAGE OF THE PROFITS AND GAINS OF TH E UNDERTAKING:- S NO. ASSESSMENT YEAR AMOUNT OF DEDUCTION AS A PERCENTAGE OF PROFITS AND GAINS 1 1995-96 100% 2 1996-97 100% 3 1997-98 100% 4 1998-99 100% 5 1999-2000 100% 6 2000-01 30% 7 2001-02 30% 8 2002-03 30% 9 2003-04 30% 10 2004-05 30% 13. THE CIT CONCLUDED BY HOLDING THAT: 14 TO SUMMARIZE, IT IS HELD THAT THE ASSESSEE-COMPANY IS NOT ELIGIBLE FOR ANY DEDUCTION U/S 80IA AS THE BLOCK PERIOD OF 10 YEARS HAS ALREADY EXPIRED IN ASSESSMENT YEAR 2004-05. ALTERNATIVELY THE DEDUCTION U/S 80IA IS TO BE RESTRICTED TO 30% ONLY AS THE CURRENT ASSESSMENT YEAR 2005-06, FALLS IN TH E LAST 5 YEARS OF THE BLOCK OF 10 YEARS AS PER THE PROVISIONS OF SUB-SECTION (5) OF SECTION 80IA. 14. THE CIT FURTHER NOTED THE ASSESSEE TO HAVE CLAI MED DEDUCTION U/S 80IA OF THE ACT ON THE INTEREST INCOME AND OTHER IN COME. THE INTEREST INCOME OF RS. 6.09 CRORES WAS EARNED ON TEMPORARY D EPLOYMENT OF SURPLUS FUNDS GENERATED OUT OF BUSINESS OF TELECOM MUNICATION SERVICES. THE ASSESSEE HAD RECORDED THE SAID AS INCOME DERIVE D FROM UNDERTAKING CARRYING ON TELECOM BUSINESS BEING ELIGIBLE FOR DED UCTION U/S 80IA OF THE ACT. FURTHER, IN THE OTHER INCOME OF RS. 11.09 CRO RES, THE ASSESSEE HAD INCLUDED THE MISC. RECEIPTS AMOUNTING TO RS. 4.98 C RORES. THE SAID INCOME WAS ALSO HELD NOT TO HAVE BEEN DERIVED FROM OR HAD DIRECT NEXUS WITH THE UNDERTAKING ELIGIBLE FOR DEDUCTION U/S 80I A OF THE ACT. 15. IN VIEW OF FACTS AND LEGAL POSITION EMANATING F ROM THE ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 2006-07, THE CIT W AS OF THE VIEW THAT IT WAS APPARENT FROM THE ASSESSMENT ORDER RELATING TO A.Y. 2005-06 DATED 3.9.2007, THAT THE ORDER PASSED BY THE ASSESSING OF FICER WAS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF R EVENUE. ACCORDINGLY, IN EXERCISE OF THE JURISDICTION CONFERRED U/S 263 O F THE ACT, THE CIT SET ASIDE THE ASSESSMENT ORDER DATED 3.9.2007 AND RESTO RED THE SAME TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE CIT(A) HELD THE ASSESSING OFFICER IS DIRECTED TO PASS A FRESH ASSESSMENT ORDER AFTER CAREFULLY LOOKING INTO AND E XAMINING THE AFORESAID ISSUES RAISED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07. 16. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDE R OF REVISION. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT IN ORDER T O APPRECIATE THE ELIGIBILITY OF THE CLAIM OF THE ASSESSEE U/S 80IA O F THE ACT, A REFERENCE 15 TO CERTAIN FACTUAL ASPECTS IS WARRANTED. THE CONTEN TION OF THE LD. AR WAS THAT THE ASSESSEE COMPANY WAS INCORPORATED IN FEBRU ARY, 1992 AND APPLIED FOR LICENSE TO RENDER CELLULAR SERVICES. TH E GOVT. OF INDIA ENTERED INTO LICENSE AGREEMENT WITH THE ASSESSEE ON 29.11.1994. THE COPY OF THE LICENSE AGREEMENT IS PLACED AT PAGES 11 9 TO 159 OF THE PAPER BOOK. OUR ATTENTION WAS DRAWN TO THE SCHEDULE A OF THE LICENSE AGREEMENT PLACED AT PAGE 125 OF THE PAPER BOOK IN W HICH THE AREA OF SERVICE WAS LOCAL AREA SERVED BY MUMBAI, NEW MUMBAI AND KALYAN TELECOM DISTRICTS. THE SCHEDULE C (PART-I) TO TH E LICENSE AGREEMENT ANNEXED AT PAGES 128 TO 131 OF THE PAPER BOOK IN WH ICH CERTAIN TERMS WERE DEFINED VIS-A-VIS THE CONDITIONS OF THE LICENS E AGREEMENT. AS PER SCHEDULE C PART-III, THE REQUIREMENTS TO PROVIDE THE SERVICE WERE AGREED UPON AND UNDER WHICH IT HAD STIPULATED THAT THE LICENSEE I.E. THE ASSESSEE SHALL INSTALL / RUN APPLICABLE INFRASTRUCT URE WITHIN 12 MONTHS OF THE EFFECTIVE DATES AND THE EFFECTIVE DATE WAS 29.1 1.1994. AS PER PARA 1.3 IT WAS STIPULATED THAT FOR THE PURPOSE OF PROVI DING THE SERVICES, THE LICENSEE WAS TO INSTALL EQUIPMENTS CONFIRMING TO TH E GSM STANDARDS AND TO MEET THE TECHNICAL SPECIFICATIONS TO THE TENDERE D DOCUMENT ISSUED IN THE NAME. A REFERENCE WAS MADE TO THE DEFINITION O F EFFECTIVE DATE VIDE CLAUSE (AD) IN THE SCHEDULE C, PART-I TO THE LICE NSE AGREEMENT WHEREIN THE EFFECTIVE DATE WAS THE DATE BY WHICH THE LICENS E AGREEMENT COMES INTO THE EFFECT I.E. FROM WHICH DATE IT IS SIGNED A ND APPROPRIATE COMPONENT LICENSE FEE IS PAID WHEREAS AS PER PARA 1 .1 OF THE TERMS OF CONDITIONS IN SCHEDULE C, PART-III TO THE LICENSE AGREEMENT AS THE EFFECTIVE DATE WAS 29.11.1994. THE LD. AR POINTED O UT THAT THE ASSESSEE COMMENCED THE OPERATIONS OF PROVIDING CELLULAR SERV ICE ON 16.11.1995, FOR WHICH PROVISIONAL APPROVAL DATED 13.10.1995 WAS RECEIVED ON 20.10.1995 AS PER THE LETTER OF GOVT. OF INDIA PLACED AT PAGE 177 OF THE PAPER BOOK. THUS IT WAS STRESSED THAT THE CELLULAR SERVICES STA TED ON 16.11.1995. A REFERENCE WAS MADE TO THE NOTES TO ACCOUNTS FOR THE PERIOD ENDING 31.3.1996 PLACED AT PAGES 175 AND 176 OF THE PAPER BOOK IN WH ICH UNDER NOTE 5, IT WAS 16 STATED THAT THE COMPANY STARTED COMMERCIAL OPERATIO NS OF PAGER AND CELLULAR SERVICES ON IST MAY, 1995 AND 16 NOVEMBER 1995 RE SPECTIVELY. THE LD. AR FURTHER POINTED OUT THAT A STATUS REPORT OF CELL ULAR, TELECOM SERVICES LICENSE WAS PREPARED ON 30.4.1996 IN WHICH IT IS PR OVIDED THAT DATE OF SIGNING OF LICENSE AGREEMENT WAS 29.11.1994 IN RESP ECT OF MUMBAI AREA AND THE DATE OF START OF INITIAL SERVICES WAS 29.10 .1995. THE SAID STATUS REPORT IS ANNEXED AT PAGES 178 & 179 OF THE PAPER B OOK. THE LD. AR THEREAFTER REFERRED TO THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT RELATING TO ASSESSMENT YEAR 1995-96 IN WHICH IT WAS HELD THAT THE BUSINESS OF THE ASSESSEE WAS NOT SET UP TILL THE CL OSURE OF THE ACCOUNTING YEAR I.E. 31.3.1995. THE EXPENDITURE CLAIMED BY TH E ASSESSEE WAS THUS NOT ALLOWED. THE COPY OF THE ASSESSMENT ORDER RELAT ING TO ASSESSMENT YEAR 1995-96 IS PLACED AT PAGES 160 TO 167 OF THE P APER BOOK. THE LD. AR ELABORATELY TOOK US THROUGH THE OBSERVATION OF T HE ASSESSING OFFICER IN RESPECT OF THE SETTING UP OF THE BUSINESS AND TH E REASONS FOR CONCLUDING THAT THE BUSINESS WAS NOT SET UP UPTO 31 .3.1995. FURTHER, OUR ATTENTION WAS DRAWN TO THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT RELATING TO ASSESSMENT YEAR 1996-97 PLACED AT PAGES 168 TO 171 OF THE PAPER BOOK WHERE THE ASSESSMENT WAS F RAMED ON 29.1.1999. AS PER THE SAID ASSESSMENT ORDER THE BUSINESS OF TH E ASSESSEE HAD COMMENCED IN THE FINANCIAL YEAR WITH CELLULAR SERVI CES HAVING BEEN STARTED ON 16.11.1995 AND THE PAGING SERVICES IN SE VEN CITIES ALSO STARTED IN MAY / JUNE 1995. THE LD. AR FURTHER POINTED OUT THAT IN THE AFORESAID ASSESSMENT ORDER IT WAS OBSERVED THAT THE ISSUE REG ARDING SETTING UP OF BUSINESS HAD ALREADY BEEN DECIDED IN THE CASE OF TH E ASSESSEE COMPANY IN ASSESSMENT YEAR 1995-96 BY PASSING A DETAILED ORDER AND IN THE CAPTIONED YEAR I.E. ASSESSMENT YEAR 1996-97, THE PRE OPERATIV E EXPENSES WERE COMPUTED AND NOT ALLOWED. THE LD. AR POINTED OUT TH AT THE ASSESSEE HAD FILED AN APPEAL AGAINST THE ORDER RELATING TO ASSES SMENT YEAR 1995-96 WHICH WAS LATER WITHDRAWN AND NO APPEAL WAS FILED A GAINST THE ORDER PASSED RELATING TO ASSESSMENT YEAR 1996-97. IN RES PECT OF THE PRESENT 17 YEAR UNDER CONSIDERATION, THE LD. AR POINTED OUT TH AT THE DEDUCTION U/S 80IA OF THE ACT WAS CLAIMED IN ASSESSMENT YEAR 2005 -06. A REFERENCE WAS MADE TO THE AUDIT REPORT AT PAGE 1 OF THE PAPER BOOK AND THE NOTES OF ACCOUNTS PLACED AT PAGES 15 & 16 OF THE PAPER BOOK. AS PER NOTES OF THE FINANCIAL STATEMENT NO.3, IT WAS REPORTED THAT THE COMPANY ENGAGED IN THE BUSINESS OF PROVIDING TELECOM SERVICES HAD STAR TED AVAILING THE SAME W.E.F. FINANCIAL YEAR BEGINNING FROM APRIL 2004. IT WAS FURTHER REPORTED THAT THOUGH THE SECTION ENTITLES THE COMPANY TO 100 % DEDUCTION ON THE PROFIT EARNED ON SUCH BUSINESS, HOWEVER, THE COMPAN Y WAS REQUIRED TO PAY TAX AS UNDER THE MAT PROVISIONS OF THE OF THE A CT. THE LD. AR THEREAFTER POINTED OUT THAT THE AUDIT REPORT PLACED AT PAGE 27 ONWARDS OF THE PAPER BOOK IN WHICH AT PAGE 32, ITEM NO.26, IT WAS REPORTED THAT THE DEDUCTION U/S 80IA OF THE ACT HAD BEEN CLAIMED AT R S. 307.93 CRS. THE ASSESSEE FURTHER POINTED OUT THAT THE FORM NO. 10 C CB FOR CLAIMING THE SAID DEDUCTION U/S 80IA OF THE ACT WAS ALSO FILED B Y THE ASSESSEE THOUGH IN COLUMN NO. 8, THE DATE OF COMMENCEMENT OF OPERAT ION / ACTIVITY BY THE UNDERTAKING HAD INADVERTENTLY REMAINED TO BE TY PED. THE SAID AUDIT REPORT IS PLACED AT PAGES 61 TO 66 OF THE PAPER BOO K. THOUGH IN ITEM NO. 9, IT WAS REPORTED THAT THE INITIAL ASSESSMENT YEAR FROM WHEN THE DEDUCTION WAS BEING CLAIMED WAS ASSESSMENT YEAR 200 5-06 AND ALSO ITEM NO.13, THE ELIGIBLE BUSINESS U/S 80IA WAS REPORTED TO BE ON ACCOUNT OF TELECOM SERVICES AND CELLULAR MOBILE SERVICE. FURT HER, VIDE ITEM 13, THE DEDUCTION CLAIMED U/S 80IA WAS DECLARED AT RS. 307. 93 CRORES. THE LD. AR POINTED OUT THAT THE ASSESSEE HAD FURNISHED FORM NO. 10 CCB IN RESPECT OF CLAIM OF DEDUCTION U/S 80IA RELATING TO ASSESSMENT YEAR 2006- 07 WHICH IS PLACED AT PAGES 180 TO 186 OF THE PAPER BOOK IN WHICH THE COLUMN NO. 8 IN RESPECT OF THE DATE OF COMMENCEMENT OF OPERATION / ACTIVITY BY THE UNDERTAKING OR ENTERPRISE WAS REPOR TED TO BE 19 TH NOVEMBER 1995. THE LD. AR MADE REFERENCE TO THE RE TURN OF INCOME FILED FOR THE CAPTIONED YEAR I.E. ASSESSMENT YEAR 2 005-06, COPY OF WHICH IS PLACED AT PAGES 73 TO 86 OF THE PAPER BOOK ALONG WITH COMPUTATION OF 18 INCOME AT PAGES 87 TO 92 OF THE PAPER BOOK. THE LD. AR POINTED OUT THAT IN THE DEDUCTION CLAIMED UNDER CHAPTER VI-A, THE AS SESSEE HAD REPORTED THE DEDUCTION CLAIMED U/S 80IA IN ADDITION TO THE D EDUCTION CLAIMED U/S 80G OF THE ACT, AS PER THE COLUMN 3 TO SCHEDULE F OF THE RETURN OF INCOME AT PAGE 81 OF THE PAPER BOOK. FURTHER, IN THE COLUMN 15 TO SCHEDULE H, THE ASSESSEE HAD REPORTED THE NATURE OF BUSINESS OF PROVIDING CELLULAR SERVICES IN THE CITY OF MUMBAI, NEW MUMBAI & KALYAN AS EVIDENT FROM PAGE 84 OF THE PAPER BOOK. THE LD. AR REFERRED TO THE COMPUTATION OF INCOME FILD ALONG WITH RETURN OF INCOME UNDER WHICH THE DEDUCTION WAS CLAIMED U/S 80IA OF THE ACT AT RS. 307.93 CRS. THEREAFTER A REFERENCE WAS MADE TO THE NOTES ANNEXE D TO THE SAID COMPUTATION OF INCOME IN WHICH UNDER THE HEAD AMOU NTS TO BE CARRIED FORWARD, NOTE NO.4, IT WAS REPORTED THAT AS PER OR DER U/S 143(3) RELATING TO ASSESSMENT YEAR 1995-96 REGARDING DATE OF SET UP OF BUSINESS, CERTAIN EXPENSES WERE DISALLOWED AND ON WHICH DEPRECIATION WAS NOT CLAIMED BY THE ASSESSEE COMPANY AND THEREAFTER THE SAME WAS CO NSIDERED FOR THE CLAIM OF ADDITIONAL DEPRECIATION, WHICH WAS ALLOWED TO THE ASSESSEE. AS PER NOTE NO.9, THE ASSESSEE MADE THE DECLARATION OF ITS ELIGIBILITY FOR DEDUCTION U/S 80IA OF THE ACT FOR THE YEAR UNDER AP PEAL. IT WAS POINTED OUT THAT THE 15 YEARS PERIOD OF BEING ELIGIBLE TO C LAIM DEDUCTION U/S 80IA STARTED WITH PREVIOUS YEAR ENDING 31.3.1996 UPTO PREVIOUS YEAR 31.3.2010 AS PER SECTION 80IA (2) OF THE ACT. THE SAID DEDUCTION WAS ALLOWABLE TO THE ASSESSEE @ 100% FOR THE FIRST FIVE ASSESSMENT YEAR COMMENCING AT ANY TIME DURING THE PERIOD OF 15 YEAR S AT THE OPTION OF THE ASSESSEE COMPANY AND 30% FOR THE FURTHER FIVE A SSESSMENT YEARS. IT WAS FURTHER REPORTED THAT THE ASSESSEE HAD OPTED FO R THE DEDUCTION U/S 80IA FROM ASSESSMENT YEARS 2005-06 TO 2010-11 AND F OR ASSESSMENT YEARS 2005-06 TO 2009-10, THE ASSESSEE WAS ENTITLED TO DEDUCTION @ 100% AND IN ASSESSMENT YEAR 2010-11 @ 30%. THE LD . AR POINTED OUT THAT IN ORDER TO BE ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA (4) OF THE 19 ACT, THE ASSESSEE SHOULD BE AN ENTITY AND VIDE ORDE R DATED 21.4.2006, THE APPROVAL WAS GRANTED U/S 10(23G) OF THE ACT. 17. REFERRING TO THE PROCEEDINGS INITIATED U/S 263 OF THE ACT, THE LD. AR POINTED OUT THAT SHOW CAUSE NOTICE ISSUED BY THE CIT IS PLACED AT PAGE 93 OF THE PAPER BOOK WITH THE REPLY OF THE ASS ESSEE TO THE SHOW CAUSE NOTICE AT PAGE 97 ONWARDS AND THEREAFTER AT P AGE 189 OF THE PAPER BOOK, WHICH WAS THE REPLY TO THE SECOND LETTER ISSU ED BY THE CIT PLACED AT PAGE 187 OF THE PAPER BOOK. THE LD. AR REFERRING TO THE ORDER PASSED U/S 263 OF THE ACT POINTED OUT THAT THE CIT HAD ISS UED THE SAID SHOW CAUSE NOTICE AS ACCORDING TO HIM NO ENQUIRY WAS MAD E BY THE ASSESSING OFFICER AND THE COMMERCIAL OPERATIONS HAD STARTED I N ASSESSMENT YEAR 1995-96 WHEREAS THE CUT OFF DATE FOR MAKING THE DED UCTION U/S 80IA WAS 1.4.1995 ONWARDS. REFERRING TO PARA 6 AT PAGE 32 O F THE ORDER PASSED U/S 263 OF THE ACT, THE LD. AR TOOK US TO THE OBSERVATI ONS OF THE CIT IN THIS REGARD IN VARIOUS PARAS OF THE ORDER UNDER SECTION 263 OF THE ACT. THE LEARNED. AR POINTED THAT THE AS PER THE CIT, NO ENQ UIRY WAS MADE BY ASSESSING OFFICER. FURTHER CIT OBSERVED THAT WRONG LAW HAS BEEN APPLIED BY ASSESSING OFFICER AND THE ASSESSEE WAS NOT ELIGI BLE FOR SAID DEDUCTION U/S 80IA OF THE ACT AND ALSO NOT ALLOWABLE ON THE I NTEREST INCOME AND OTHER INCOME. 18. IT WAS STRESSED BY THE LEARNED A.R. FOR THE ASS ESSEE THAT THE SAID CLAIM OF DEDUCTION UNDER SECTION 80IA WAS AS CLAIM ED IN RETURN OF INCOME AND AS PER THE AUDIT REPORT OF THE AUDITOR A ND THE ASSESSEE WAS ENTITLED TO THE AFORESAID DEDUCTION. THE LEARNED A .R. FOR THE ASSESSEE POINTED THAT DETAILED ENQUIRIES WERE MADE IN THE YE AR OF CLAIM AND LAW APPLICABLE ON THE FIRST DAY OF FINANCIAL YEAR WAS T O BE APPLIED. IT WAS THE CONTENTION OF THE LEARNED A.R. FOR THE ASSESSEE THAT THE AMENDED PROVISIONS OF THE ACT WERE APPLICABLE AND UNDER SEC TION 80IA(4)(II) OF THE ACT, THE REQUIREMENT IS HAS STARTED OR STARTS AS PER THE LEARNED A.R. FOR THE ASSESSEE, THE SAID PROVISIONS APPLY TO UNDERTAKING WHICH HAD 20 STARTED OR WOULD START OPERATIONS. RELIANCE WAS PL ACED ON THE UNDER MENTIONED DECISIONS: (I) ACIT VS. VODOFONE ESSAR GUJARAT LTD. [38 SOT 51 (AHD)] (II) ITC LTD. KOLKATA VS. DCIT KOLKATA [ITA/475/KOL/2010 & DCIT KOLKATA VS. ITC LTD. KOLKATA [ITA/476/KOL/2010 (III) CIRCULAR NO.5 OF 2005 DATED 15.7.2005 19. IT WAS STRESSED BY THE LEARNED A.R. FOR THE ASS ESSEE THAT COMMISSIONER OF INCOME TAX FINDINGS THAT OLD LAW WA S APPLICABLE WERE INCORRECT. FURTHER PLEA OF THE LEARNED A.R. FOR T HE ASSESSEE WAS THAT THE FINDINGS OF COMMISSIONER OF INCOME TAX WERE ON THE BASIS OF DRAFT ASSESSMENT ORDER RELATING TO ASSESSMENT YEAR 2006-0 7. THE NEXT ASPECT CONSIDERED BY COMMISSIONER OF INCOME TAX WAS INTERE ST INCOME AND OTHER INCOME, ON ADMITTEDLY NO ENQUIRIES WERE MADE BY THE ASSESSING OFFICER. THE CONCLUSION OF COMMISSIONER OF INCOME TAX HOLDING ASSESSEE INELIGIBLE FOR DEDUCTION, AS PER THE LEARN ED A.R. FOR THE ASSESSEE, WERE INCORRECT. 20. THE LEARNED D.R. FOR THE REVENUE POINTED OUT TH AT THE COMMISSIONER OF INCOME TAX PASSED THE ORDER UNDER S ECTION 263 OF THE ACT AS NO ENQUIRIES WERE MADE BY THE ASSESSING OFFI CER. EVEN THE DATE OF COMMENCEMENT OF OPERATION WAS LEFT BLANK IN THE AUDIT REPORT. AS PER THE LEARNED D.R. FOR THE REVENUE, THE ASSESSING OFFICER FAILED TO ENQUIRE WHEN THE BUSINESS COMMENCED OR WHETHER THE ASSESSEE FULFILLS THE NECESSARY CONDITIONS, MAKING IT ELIGIBLE FOR TH E DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSING OFFICER HAD EVEN FAILED TO VERIFY WHETHER ANY NEW BUSINESS HAD ACTUALLY BEEN SET UP. OUR ATTENTION WAS DRAWN TO THE CLAIM OF THE ASSESSEE BEFORE COMMISSIO NER OF INCOME TAX OF THE ASSESSMENT RECORDS BEING LOST AND IT COULD N OT PRODUCE THE EXPLANATION FILED DURING THE ASSESSMENT PROCEEDINGS . THE LEARNED D.R. FOR THE REVENUE REFERRED TO THE CHART PLACED IN THE PAPER BOOK AND 21 POINTED OUT THAT THERE WAS DISPARITY IN THE CLAIM O F HAVING COMMENCED THE BUSINESS. REFERENCE WAS MADE TO OBSERVATIONS O F COMMISSIONER OF INCOME TAX IN PARA 38(B) THAT DATE OF COMMENCEMENT WAS 29.11.1994 AND PARA (E) THAT SALE OF PAGER STARTED IN ASSESSME NT YEAR 1995-96 AND HENCE INFRASTRUCTURE STARTED FACILITY DURING ASSESS MENT YEAR 1995-96. RELIANCE WAS PLACED BY THE LEARNED D.R. FOR THE REV ENUE ON CIT VS. ASSAM TEA HOUSE [344 ITR 507 (P&H). FURTHER RELIAN CE WAS PLACED ON WRITTEN SUBMISSION. 21. THE LEARNED A.R. FOR THE ASSESSEE IN THE REJOIN DER POINTED OUT THAT IN ASSESSMENT YEAR 1995-96, THE CLAIM OF THE ASSESS EE TO HAVE STARTED THE BUSINESS WAS NOT ACCEPTED AND EVEN THE CIT (APPEALS ) HAD HELD THAT THE ASSESSEE DID NOT START ITS BUSINESS IN ASSESSMENT Y EAR 1995-96. THE FIRST YEAR OF START OF BUSINESS OF PAGER AND CELLULAR SER VICES WAS ASSESSMENT YEAR 1996-97 AND THE ASSESSMENT ORDER PASSED IN THE CASE HOLDS SO. IT WAS ALSO SUBMITTED BY THE LEARNED A.R. FOR THE ASSE SSEE THAT IN THE INITIAL YEARS THERE WERE LOSSES TO THE ASSESSEE AND NO CLAI M OF DEDUCTION UNDER SECTION 80IA OF THE ACT WAS MADE IN THE HANDS OF TH E ASSESSEE. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ORIGINAL ASSESSMENT IN THE CASE WAS COMPLETED U/S 1 43(3) OF THE ACT VIDE ORDER DATED 3.9.2007. THE ASSESSING OFFICER HELD AS UNDER:- 2. AS PER P & L ACCOUNT FOR THE YEAR ENDED 31.3.05, THE ASSESSEE COMPANY HAS SHOWN PROFIT AT RS.3,56,98,42,888/-. AFTER MAKING VARIOUS ADJUSTMENTS, THE NET INCOME HAS BEEN SHOWN AT RS.3,43,51,89,619/-. AGAINST THIS INCOME THE ASSESSEE COMPANY HAS CLAIMED BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE EARLIER YEARS AMOUNTING TO RS.35,58,19,560/- AND SHOWN NET ASSESSABLE INCOME AT RS.3,07,93,70,059/- AGAINST WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IA(100%) AMOUNTING TO RS.3,07,93,70,059/- THUS, TAXABLE LE INCOME HAS BEEN SHOWN AT NIL. 23. VIDE PARA 3, THE COMPUTATION OF BOOK PROFITS UN DER SECTION 115JB OF THE ACT WAS WORKED OUT BY THE ASSESSING OFFICER. 22 24. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 801A OF THE ACT AMOUNTING TO RS.3,07,93,70,059/ - WHICH WAS ALLOWED AS PER ORDER PASSED U/ 143(3) OF THE ACT. THE COMMISSIONER OF I NCOME TAX ON PERUSAL OF ASSESSMENT RECORDS NOTED SEVERAL FACTS A S REFERRED TO BY US IN PARAS HEREINABOVE AND PASSED THE ORDER UN DER SECTION 263 OF THE ACT AND OBSERVED THAT THE ASSESSING OFFI CER HAD FAILED TO HAVE CALLED FOR BASIC FACT BEFORE ALLOWIN G THE DEDUCTION TO THE ASSESSEE COMPANY UNDER SECTION 80IA OF THE ACT. IT WAS OBSERVED BY THE COMMISSIONER OF INCOME TAX VIDE PARA 6.5 THAT THE SAID DEDUCTION WAS GRANTED TO THE ASSESSEE COMPANY WITHOUT RAISING A SINGLE QUERY ON THE ORDER SHEET ON THE ISSUE . THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THE ASSESSING OFFICER HAD NOT AT ALL APPL IED HIS MIND IN DETERMINING THE ELIGIBLE AMOUNT OF DEDUCTION. FURT HER THE ASSESSING OFFICER HAD FAILED TO APPRECIATE THAT DEDUCTION UND ER SECTION 80IA OF THE ACT WAS NOT ALLOWABLE ON OTHER INCOME LIKE INTEREST AND MISCELLANEOUS INCOME AS THESE WERE NOT DERIVED FROM THE ELIGIBLE BUSINESS. THE COMMISSIONER OF INCOME TAX NOTED THE ASSESSING OFFI CER TO HAVE PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND AND CONSEQUENTLY THE ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICE R WAS HELD NOT ONLY ERRONEOUS BUT TO THAT EXTENT PREJUDICIAL TO THE INT EREST OF REVENUE. 25. THE REVERSIONARY POWERS U/S 263 OF THE ACT CAN BE EXERCISED BY THE COMMISSIONER OF INCOME TAX. THE PREREQUISITE TO TH E SAID EXERCISE OF JURISDICTION BY THE COMMISSIONER OF INCOME TAX IS T HAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTEREST OF REVENUE. THE SATISFACTION OF TWIN COND ITIONS IS THE PRE CONDITION FOR THE EXERCISE OF JURISDICTION U/S 263 OF THE ACT. THE HON'BLE SUPREME COURT IN MALABAR INDUSTRIES COMPANY LTD VS CIT (243 ITR 83) (SC) HELD AS UNDER: - THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE 23 ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SA ME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND . THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEF INED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT I S OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE HIGH COURT OF CALCUTTA IN DAWJEE DADABHOY AND CO. V . S. P. JAIN [1957] 31 ITR 872 , THE HIGH COURT OF KARNATAKA IN CIT V. T. NARAYANA PAI [1975] 98 ITR 422 , THE HIGH COURT OF BOMBAY IN CIT V. GABRIEL INDIA LTD. [1993] 203 ITR 108 AND THE HIGH COURT OF GUJARAT IN CIT V. SMT. MINALBEN S. PARIKH [1995] 215 ITR 81 TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKATAKRISHNA RICE COMPANY V. CIT [1987] 163 ITR 129 INTERPRETING 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE.' THE HIGH COURT HELD (PAGE 138) : 'IN THIS CONTEXT, IT MUST B E REGARDED AS INVOLVING A CONCEPTION OF ACTS OR ORDER S WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVEN UE. THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASS ED BY THE INCOME-TAX OFFICER, WHICH MIGHT SET A BAD TR END OR PATTERN FOR SIMILAR ASSESSMENTS, WHICH ON A BROA D RECKONING, THE COMMISSIONER MIGHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRATION.' IN OUR VIEW, THIS INTERPRETATION I S TOO NARROW TO MERIT ACCEPTANCE. THE SCHEME OF THE ACT I S TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME - TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAY ABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. (UNDERLINE SUPPLIED BY U S) 26. FURTHER, THE HON'BLE SUPREME COURT IN MAX IN DIA LTD [295 ITR 282 (SC)] UPHELD THE JUDGMENT OF THE HON'BLE PUNJAB & H ARYANA HIGH COURT. IN THE SAID CASE, IT WAS HELD THAT IF THE VIEW EXPR ESSED BY THE ASSESSING OFFICER WAS A POSSIBLE VIEW, THE CIT WOULD HAVE NO JURISDICTION TO INTERFERE WITH SUCH A VIEW WHILE EXERCISING THE POW ER U/S 263 OF THE ACT. THE HON'BLE SUPREME COURT IN THE SAID CASE FURTHER CLARIFIED THAT WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HA S TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, THE ORDER OF THE ASSE SSING OFFICER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER WAS UNSUSTA INABLE. 24 27. THE HON'BLE DELHI HIGH COURT IN THE CIT VS. HO NDA SIEL POWER PRODUCTS LTD. REPORTED IN [(2010) 41 DTR (DEL) 353] HAD NOTED THE COMMISSIONER OF INCOME TAX TO HAVE EXERCISED HIS JU RISDICTION U/S 263 OF THE ACT IN RESPECT OF DEDUCTION CLAIMED U/S 80HHC O F THE ACT IN RESPECT OF THE PROFITS OF BUSINESS ON WHICH DEDUCTION WAS A LREADY ALLOWED U/S 80IB OF THE ACT. THE HON'BLE HIGH COURT HELD AS UN DER:- 22. FROM THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE REVENUE, IT IS APPARENT THAT FAILURE TO MAKE AN ENQ UIRY ON THE PART OF THE ASSESSING OFFICER WOULD BE A GROUND FOR INVOKING THE POWERS UNDER SECTION 263. THE SUPREME COURT IN MALABAR INDUSTRIAL COMPANY LTD (SUPRA) ALSO NOTED THAT THE CASES WHICH FELL IN THE CATEGORY OF NON-APPLICATION OF TH E PRINCIPLES OF NATURAL JUSTICE OR NON-APPLICATION OF MIND WOULD ALSO SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S AND WOULD, THEREFORE, BE AMENABLE TO CORRECTION UNDER T HE REVISIONAL JURISDICTION OF SECTION 263 OF THE SAID ACT. IN THE CASE OF GEE VEE ENTERPRISES [99 ITR 375 (DEL), THE ASSESSING OFFICER S ORDER WAS HELD TO BE ERRONEOUS BECAUSE THE RELEVA NT ENQUIRY WAS NOT MADE . AGAIN, IN MALABAR INDUSTRIAL COMPANY LTD (SUPRA), THE ASSESSING OFFICER S ORDER WAS HELD TO BE ERRONEOUS BECAUSE IT HAD BEEN MADE WITHOUT APPLICAT ION OF MIND AND THE ASSESSING OFFICER HAD MERELY ACCEPTED THE ENTRIES IN THE STATEMENT OF ACCOUNTS FILED BY THE A SSESSEE IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY ENQUIRY. SIMILARLY, IN DEEPAK KUMAR GARG [299 I TR 435 (MP)] (SUPRA), THE ASSESSING OFFICER ACCEPTED THE VERSION OF THE ASSESSEE AND FOR WANT OF TIME DID NOT CONDUCT A NY PROPER ENQUIRY. ON THESE FACTS, IT WAS FOUND THAT THE ORDE R PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (UNDERLINE PROVIDED BY US) THE HONBLE DELHI HIGH COURT HAD HELD THAT ORDER O F COMMISSIONER OF INCOME TAX TO BE INVALID AS THE ORDER OF THE ASS ESSING OFFICER FOUND TO BE PASSED ON DUE APPLICATION OF MIND. 28. SECTION 263 OF THE ACT IS TO BE INVOKED WHERE T HE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND AN ORDER PAS SED WITHOUT APPLICATION OF MIND WOULD FALL UNDER THE CATEGORY O F ERRONEOUS ORDER. THOUGH EVERY LOSS OF REVENUE CANNOT BE TREATED AS P REJUDICIAL TO THE INTEREST OF REVENUE, HOWEVER, LOSS OF TAX LAWFULLY PAYABLE PURSUANT TO AN ERRONEOUS ORDER PASSED BY THE AUTHORITY HAS BEEN HE LD TO BE PREJUDICIAL TO THE INTEREST OF REVENUE BY THE HON'BLE BOMBAY HI GH COURT IN CIT VS. GABRIAL INDIA LTD (203 ITR 108)(BOM), AND SEVERAL O THER COURTS. WHERE THE ASSESSING OFFICER FAILS TO EXERCISE THE QUASI J UDICIAL POWER VESTED IN 25 HIM AND PASSES AN ORDER WITHOUT APPLICATION OF MIND AND NOT IN ACCORDANCE WITH LAW, AND WITHOUT MAKING PROPER VERI FICATION, THE CONCLUSION DRAWN BY THE ASSESSING OFFICER MAKES THE ORDER ERRONEOUS, OPEN TO EXERCISE OF JURISDICTION OF CIT UNDER SECTI ON 263 OF THE ACT, COUPLED WITH THE FACT THAT SUCH AN ORDER HAD RESULT ED IN LOSS OF TAX, THUS MAKING IT AN ORDER PREJUDICIAL TO THE INTEREST OF R EVENUE. 29. NOW COMING TO THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD MADE A BID FOR THE LICENCE FOR PROVIDING CELLULAR MOBILE S SERVICE, WHICH WAS AWARDED TO THE ASSESSEE FOR PROVIDING THE SERVICE I N MUMBAI METROPOLITAN AREA BY LICENCE AGREEMENT SIGNED WITH THE DEPARTMENT OF TELECOMMUNICATION ON 29.11.1994. THE ASSESSEE C LAIMED TO HAVE SET UP THE NET WORK INFRASTRUCTURE NECESSARY FOR PROVID ING CELLULAR SERVICE THEREAFTER AND COMMENCED PROVIDING THE SERVICE IN N OVEMBER, 1995 AND PAGING SERVICES IN MAY 1995 I.E. IN FINANCIAL YEAR 1995-96. DURING THE ASSESSMENT PROCEEDINGS RELATING TO ASSESSMENT YEAR 1995-96, THE ASSESSING OFFICER HELD THE ASSESSEE NOT TO HAVE SET UP ITS BUSINESS BY 31.3.1995 AND CONSEQUENTLY THE CLAIM OF ALLOWANCE O F BUSINESS EXPENSES WAS REJECTED BY THE ASSESSING OFFICER VIDE ORDER PA SSED UNDER SECTION 143(3) OF THE ACT. THE SETTING UP OF BUSINESS WAS HELD TO BE IN ASSESSMENT YEAR 1996-97 AS PER THE ORDER OF THE AUT HORITIES BELOW RELATING TO ASSESSMENT YEAR 1996-97. THE ASSESSEE IN THE INITIAL YEARS WAS IN LOSSES AND CLAIMED THE DEDUCTION UNDER SECTI ON 80IA OF THE ACT FOR THE FIRST TIME DURING ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER ALLOWED THE SAID CLAIM IN THE ASSESSMENT OR DER SIMPLICITER AS THE ASSESSEE HAD MADE SUCH A CLAIM, WITHOUT ANY ENQUIRY WHATSOEVER. THE ASSESSEE ALSO CLAIMED THE SAID DEDUCTION UNDER SECT ION 80IA OF THE ACT ON THE INTEREST INCOME AND OTHER INCOME ALSO, WHICH WAS ALLOWED BY THE ASSESSING OFFICER. HOWEVER, AS IS APPARENT FROM R ECORD, NO INQUIRY OR INVESTIGATION WAS MADE BY THE ASSESSING OFFICER WHI LE CONSIDERING THE ELIGIBILITY OF CLAIM OF DEDUCTION UNDER SECTION 80I A OF THE ACT IN THE HANDS OF THE ASSESSEE I.E. WHETHER THE ASSESSEE IS ELIGIBLE FOR THE SAID 26 DEDUCTION UNDER SECTION 80IA OF THE ACT. VARIOUS A SPECTS WHICH NEEDED TO BE ADDRESSED BY THE ASSESSING OFFICER I.E. THE F ULFILLMENT OF THE VARIOUS CONDITIONS LAID DOWN UNDER SECTION 80IA OF THE ACT INCLUDING THE PROVISIONS OF SUB-SECTION (2), (2A), (4) (II) OF SE CTION 80IA OF THE ACT, WERE NOT CONSIDERED AND ADJUDICATED UPON BY THE AS SESSING OFFICER. THE LEARNED A.R. FOR THE ASSESSEE ARGUED AT LENGTH ON THE MERITS REGARDING THE ISSUE OF ALLOWABILITY OF DEDUCTION IN THE HANDS OF THE ASSESSEE FOR THE RELEVANT YEAR UNDER APPEAL. HOWEV ER, FOR THE PURPOSE ADJUDICATING THE ISSUE OF EXERCISE OF POWER OF REVI SION UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOME TAX, WE DO NOT DEEM IT NECESSARY TO ADDRESS THE ISSUE ON MERITS OF CLAIM O F DEDUCTION UNDER SECTION 80IA OF THE ACT. WE FIND THAT THE ASSESSIN G OFFICER COMPLETED THE ASSESSMENT WITHOUT LOOKING INTO THE MERITS OF T HE CLAIM OF THE ASSESSEE IN RELATION TO ITS ELIGIBILITY OF DEDUCTIO N AVAILABLE UNDER SECTION 80IA OF THE ACT. THE ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER IS WITHOUT MAKING ANY INVESTIGATION AND WITHOUT APP LICATION OF MIND IN GRANTING THE DEDUCTION UNDER SECTION 80IA OF THE AC T, BOTH ON THE PROFITS OF THE BUSINESS AND ALSO ON THE INTEREST INCOME AND OTHER INCOME EARNED BY THE ASSESSEE. THE ASSESSING OFFICER HAVING FAIL ED TO LOOK INTO THE MERITS OF THE CLAIM OF THE ASSESSEE AND ALSO IT BEI NG ELIGIBLE OR OTHERWISE TO THE SAID CLAIM UNDER SECTION 80IA OF THE ACT, AN D THE ASSESSEE HAVING FAILED TO FURNISH THE REQUISITE INFORMATION PERTAIN ING TO THE DEDUCTION CLAIMED UNDER SECTION 80IA OF THE ACT DURING THE AS SESSMENT PROCEEDINGS, MAKES THE ORDER OF THE ASSESSING OFFIC ER ERRONEOUS. THE ASSESSEE HAD FAILED TO PRODUCE BEFORE US ANY RECORD OR EVIDENCE OF HAVING PRODUCED THE REQUISITE INFORMATION/DOCUMENTS IN RELATION TO ITS CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT, D URING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER . 30. WE FIND THAT THE ASSESSING OFFICER HAD FAILED T O MAKE PROPER INVESTIGATION INTO THE ELIGIBILITY OF THE ASSESSEE IN RELATION TO CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT BOTH ON THE BUSINESS PROFITS, 27 INTEREST INCOME AND OTHER INCOME RECEIVED DURING TH E YEAR. THE ORDER PASSED BY THE ASSESSING OFFICER IS WITHOUT APPLICAT ION OF MIND, IS AN ERRONEOUS ORDER WHICH HAS RESULTED IN LOSS OF TAXES AND HENCE IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS EMPOWERED TO VALIDLY E XERCISED HIS REVERSIONARY JURISDICTION U/S 263 OF THE I.T. ACT. 31. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CIT VS. ASSAM TEA HOUSE (SUPRA) WHERE IN IT HAS BEEN HELD THAT THE COMMISSIONER COULD HAVE PROCEEDED UNDER SECTION 263 OF THE ACT IF THE ASSESSING OFFICER HAD MADE ASSESSMENT WI THOUT APPLICATION OF MIND. THE COMMISSIONER HELD THAT AS PER THE ORDER SHEET NO RECORD WAS PRODUCED WHILE IN THE ORDER A CONTRARY STATEMENT WA S MADE. THE ORDER OF THE ASSESSING OFFICER DID NOT SHOW THE VERIFICAT ION OF CLOSING STOCK, PURCHASES AND TRANSPORTATION AND OTHER ITEMS MENTIO NED ABOVE. THESE REASONS WERE VALID REASONS FOR EXERCISE OF POWER UN DER SECTION 263 OF THE ACT . 32. WE ALSO FIND SUPPORT FROM THE RATIO LAID DOWN B Y THE HON'BLE RAJASTHAN HIGH COURT IN SMT. RENU GUPTA VS CIT (200 8) [301 ITR 45(RAJ) ], WHEREIN IT HAS BEEN HELD AS UNDER:- THE COMMISSIONER OF INCOME TAX MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS NOT ONLY IF THERE IS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT OF THE FACE OF IT BUT ALSO WHEN IT IS A STEREO- TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE INQUIRIES WH ICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. IT IS NOT NECESSARY FOR THE COMMISSIONER OF INCOME TAX TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE ASSESSING OFFICER. 33. CONSIDERING THE FACTS OF THE PRESENT CASE AND R ESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CIT 28 VS. ASSAM TEA HOUSE (SUPRA) AND THE HON'BLE RAJAST HAN HIGH COURT IN SMT. RENU GUPTA VS CIT (SUPRA), WE CONFIRM THE ORDE R OF COMMISSIONER OF INCOME TAX IN SETTING ASIDE AND RESTORING THE M ATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCO RDANCE WITH LAW. HOWEVER, WE FIND THAT THE COMMISSIONER OF INCOME T AX HAD DELIBERATED UPON THE ISSUES AT LENGTH AND HAD DIRECTED THE ASSE SSING OFFICER TO PASS FRESH ASSESSMENT ORDER AFTER CAREFULLY LOOKING INTO AND CRITICALLY EXAMINING ALL THE AFOREMENTIONED ISSUES RAISED IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN MARUTI SUZUKI INDIA LTD. VS. ADDL. CIT, CIVIL APPEAL NO.84 57 OF 2010 ARISING OUT OF SLP (C) NO.2708 OF 2010 - DATE OF JUDGMENT 1.10.2010, WHERE THE MATTER WAS REMITTED BACK TO THE TRANSFER PRICING OF FICER, TO PROCEED WITH THE MATTER IN ACCORDANCE WITH LAW UNINFLUENCED BY T HE OBSERVATIONS/DIRECTIONS GIVEN BY THE HIGH COURT IN THE IMPUGNED JUDGMENT DATED 1 ST JULY, 2010. THE COMMISSIONER OF INCOME TAX WHILE REMITTING THE MATTER TO THE FILE OF ASSESSING OFFIC ER HAD OBSERVED THAT THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF DEDUC TION UNDER SECTION 80IA OF THE ACT. WE UPHOLD THE SATISFACTION RECOR DED BY THE COMMISSIONER OF INCOME TAX IN PASSING THE ORDER U/S 263 OF THE ACT AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE ASSESSE E. HOWEVER, WE MODIFY THE CONCLUSION OF THE COMMISSIONER OF INCOME TAX RECORDED IN THE ORDER PASSED UNDER SECTION 263 OF THE ACT, WHIL E SETTING ASIDE THE ASSESSMENT WITH DIRECTIONS TO THE ASSESSING OFFICER TO DECIDE THE ISSUE UNINFLUENCED BY THE OBSERVATIONS OF THE COMMISSIONE R OF INCOME TAX THAT THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT AND ALSO THE RELIANCE ON THE FINDIN GS IN THE ORDER PASSED UNDER SECTION 143(3) RELATING TO ASSESSMENT YEAR 20 06-07 ARE TO BE IGNORED. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE DE-NOVO IN 29 ACCORDANCE WITH LAW, AFTER AFFORDING REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE. 34. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF SEPTEMBER, 2012. SD/- SD/- (T.R. SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH SEPTEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH