2014 (12) TMI 1210 - AT - Income Tax

Disallowance of deduction u/s 80IB - part allowance of deduction u/s 80HHC - Held that - We have heard the arguments from either side and have gone through the order of the Hon SC giving clear cut direction to the assessee to demonstrate the process undertaken by the assessee to convert raw diamonds in a superior commodity . In the light of the above, we set aside the order of the CIT(A) and direct the AO to adjudicate and pass fresh order of assessment and adjudicate on the claims as made by the assessee on merits and as an law.

Summary

Issues involved:
Cross appeals filed by the assessee and the department against the order of CIT(A) IX, Mumbai regarding deduction u/s 80IB and part allowance of deduction u/s 80HHC.

Analysis:

1. Deduction u/s 80IB:
- The ITAT sustained the disallowance of deduction u/s 80IB in the assessee's appeal.
- The Hon'ble Bombay High Court dismissed the assessee's appeal u/s 260A following a relevant case law.
- The assessee then approached the Hon'ble Supreme Court via a Special Leave Petition (SLP) under Article 136 of the Constitution of India.
- The Supreme Court observed that the ITAT did not discuss the process undertaken by the assessee to claim benefit under Section 80IB.
- The Supreme Court set aside the orders of the High Court and the ITAT, remitting the matter to the ITAT for fresh consideration.
- The AR submitted that the assessee would prove the genuineness of the claim if given an opportunity to demonstrate the process used to convert raw diamonds into finished jewelry.
- The DR accepted the proposition for the case to be restored to the file of the AO.
- The ITAT set aside the order of the CIT(A) and directed the AO to pass a fresh assessment order considering the claims made by the assessee.

2. Part allowance of deduction u/s 80HHC:
- The issue in the departmental appeal pertained to part allowance of deduction u/s 80HHC.
- The department's appeal was treated as allowed for statistical purposes after setting aside the order of the CIT(A) regarding deduction u/s 80IB.

Conclusion:
The ITAT allowed the assessee's appeal for statistical purposes and the department's appeal was also allowed for statistical purposes. The matter was remitted to the AO for fresh assessment considering the claims made by the assessee and the process used to convert raw diamonds into finished jewelry as directed by the Hon'ble Supreme Court.