2013 (2) TMI 784 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80IB of the Income-tax Act, 1961.
2. Validity of CIT-II, Jodhpur's order u/s 263 of the Act.
3. Assessment and reassessment proceedings.

Summary:

Issue 1: Deduction u/s 80IB of the Income-tax Act, 1961

The department contended that the CIT(A) erred in accepting the claim of deduction u/s 80IB without verifying if the preconditions were fulfilled. The A.O. disallowed the deduction citing insufficient machinery, low electricity expenses, and use of old machinery. The CIT(A) allowed the deduction, which was contested by the department. The Tribunal found that the assessee fulfilled all conditions of section 80IB(2), including not being formed by splitting or reconstruction, not using previously used machinery, manufacturing a new article, and employing the required number of workers. The Tribunal upheld the CIT(A)'s decision, noting that similar deductions were allowed in previous years and the department failed to show any change in circumstances.

Issue 2: Validity of CIT-II, Jodhpur's order u/s 263 of the Act

The CIT-II, Jodhpur, set aside the original assessment order u/s 263, stating it was erroneous and prejudicial to the interest of the Revenue due to lack of verification by the A.O. The Tribunal observed that the CIT-II's reasons for setting aside the assessment were similar to those in a previous case (ITO, Ward, Balotra Vs. M/s P.T.M. Industries), where the Tribunal had ruled in favor of the assessee. The Tribunal found no merit in the department's appeal against the CIT(A)'s order, which had followed the Tribunal's earlier decision.

Issue 3: Assessment and reassessment proceedings

In the reassessment proceedings, the A.O. disallowed the deduction u/s 80IB, reiterating the CIT-II's findings. The Tribunal noted that the A.O. had accepted the purchase of raw materials and sale of finished goods, and the assessee had provided sufficient explanations for electricity and fuel expenses. The Tribunal emphasized the principle of consistency, as the deduction was allowed in previous years, and there was no change in the assessee's activities. Consequently, the Tribunal dismissed the department's appeals for all assessment years involved.

Conclusion:

The Tribunal upheld the CIT(A)'s orders allowing the deduction u/s 80IB, dismissed the department's appeals, and emphasized the importance of consistency in tax assessments.