- (1.) Delay in refiling the appeal is condoned.
(2.) This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 22.9.2009, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A' Chandigarh (in short, "the Tribunal") in ITA No.491/CHANDI/2009, for the assessment year 2004-05, claiming following substantial questions of law:- (i) Whether on the facts and circumstances of the case, the Hon'ble Income tax Appellate Tribunal is justified in law in holding that the CIT has erred in invoking the provisions of Section 263 of the IT Act, 1961 ignoring the fact that the order of the Assessing Office passed under section 143(3) on 21.4.2006 was erroneous in so far as it was prejudicial to the interest of the revenue (ii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in observing that the order of CIT does not contain any firm decision as to how the debit of administrative expenses amounting to Rs. 9,77,010/- in the P&L account of Unit I has rendered the assessment as erroneous and prejudicial to the interest of revenue, whereas a firm decision and reasoning on this issue was given in the order passed under section 263 of the IT Act, 1961 (iii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in not appreciating the fact that the assessee is not eligible for deduction under section 80IB on fabrication charges of Rs. 62,28,012/- as these fabrication receipts had no nexus with the business of the industrial undertaking (iv) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in observing that the assessment was framed with due application of mind whereas the Assessing Officer has nowhere discussed these two specific issues during assessment proceedings or in the assessment order
(3.) A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The respondent assessee is a company engaged in the business of manufacturing and sale of hosiery goods. Return of income for the assessment year in question was filed by the assessee on 30.10.2004 showing income of Rs. 8,27,306/- which was processed under section 143(1) of the Act on 14.1.2005. The case was selected for scrutiny and assessment was finalized by the Assessing Officer under section 143(3) of the Act on 21.4.2006, Annexure A.1 at a total income of Rs. 9,77,306/-. While framing the assessment, the Assessing Officer re-computed deduction under section 80IB of the Act which was not allowed to the assessee on miscellaneous income of Rs. 5 lacs surrendered on account of cash during survey under section 133A of the Act conducted at the business premises of the assessee on 19.3.2004. Accordingly, deduction under section 80IB of the Act was allowed at Rs. 8,36,167/- against the claim of Rs. 9,86,167/- made by the assessee. Later on, it was observed by the Commissioner of Income Tax-I, Ludhiana (CIT) that the company had claimed deduction under section 80IB of the Act on the amount of Rs. 62,28,012/- credited on account of inter unit fabrication charges in the Profit and loss account of its Unit II. These fabrication receipts had no nexus with the business of the industrial undertaking and deduction under section 80IB of the Act was not allowable on these receipts. It was also noticed by the CIT that administrative expenses amounting Rs. 9,77,010/- pertained to both the units i.e. Unit I and Unit II of the assessee but these were debited to the profit and loss account of Unit I only. No such expenses were debited to Unit II. Thus, this issue was remanded to the Assessing Officer with the direction to ascertain amount of profits as may reasonably deemed to be derived from the industrial undertaking i.e. Unit II as far as administrative expenses of Rs. 9,77,010/- were concerned. It was further observed by the CIT that the assessee company had been doing the business of manufacturing and sale of hosiery goods and section 80IB of the Act clearly laid down that deduction was allowable only on income derived from such industrial undertaking. Accordingly, provisions of section 263 of the Act were invoked in this case. Vide order dated 24.3.2009, Annexure A.2, under section 263 of the Act, the CIT held the assessment framed by the Assessing Officer to be erroneous and prejudicial to the interest of the revenue on both the issues and directed the Assessing Officer to re-compute deduction under Section 80IB of the Act. Aggrieved by the order, the assessee filed appeal before the Tribunal. Vide order dated 22.9.2009, Annexure A.3, the Tribunal allowed the appeal holding that the CIT erred in invoking the provisions of section 263 of the Act on both the issues. Hence the instant appeal by the revenue.;