2013 (5) TMI 496 - AT - Income Tax

Deduction u/s. 80IB - CIT(A) allowed the claim - Held that - As decided in assessee s earlier year cases 2010 (7) TMI 831 - ITAT AHMEDABAD wherein held that there was no evidence with the A.O. through which it could be demonstrated that the machinery was transferred from old unit to new unit. There was no iota of evidence to say that it was a case of splitting up of the old business. The old unit was closed down way back in the year 1998 and the new unit had come up in the year 2002 and an entirely new building was constructed with the deployment of new technology to manufacture new type of telephone instrument. The assessee has successfully demonstrated that the new unit was set up with the substantial investment in plant and machinery. On account of these facts no force in the grounds of the Revenue, hence dismissed. Against revenue. Addition on account of additional income made during the course of survey proceedings U/s. 133A - deduction u/s 80IB disallowed - Held that - A specific question was asked to the assessee with respect to the investments in reply to which the assessee has given the break-up of expenditure under various heads namely furniture, repairing and renovation of factory premises and external shed. The assessee vide his retraction has only retracted its answers to question No.23 and 26 & has not retracted the answers given to all the other questions and thus has made retraction on selective basis. Further nothing has been brought on record by the assessee to substantiate its stand as to how it was prevented in making retraction immediately after survey & the retraction was made after a gap of almost 5 months. The assessee vide its answer to question No.26 has stated the source of investments to be unaccounted income other than his business income. Further since the income is not derived from the business as submitted by assessee the assessee is not entitled to deduction u/s. 80IB on the same. Against assessee.

Summary

Issues Involved:
1. Deduction under Section 80IB of the Income Tax Act.
2. Addition of income based on survey proceedings under Section 133A and retraction of statements.

Issue-wise Detailed Analysis:

1. Deduction under Section 80IB of the Income Tax Act:

The Revenue's appeal for Assessment Year (A.Y.) 2007-08 revolved around the deduction claimed by the assessee under Section 80IB. The Assessing Officer (A.O.) disallowed the deduction on the grounds that the assessee did not meet the conditions laid down in Section 80-IB(2)(ii) read with explanation-2, following the precedent set in earlier years (A.Y. 2002-03 to 2006-07). The CIT (A) granted relief to the assessee, referencing the Tribunal's dismissal of the Department's appeal for A.Y. 2006-07. The Tribunal upheld the CIT (A)'s decision, noting that the facts for A.Y. 2007-08 were identical to those of earlier years, where the assessee had demonstrated substantial investment in new machinery and technology, and there was no evidence of machinery transfer from an old unit or splitting up of the old business. The Tribunal concluded that the new unit was set up independently, thus allowing the deduction under Section 80IB and dismissing the Revenue's appeal.

2. Addition of Income Based on Survey Proceedings under Section 133A and Retraction of Statements:

For A.Y. 2005-06, the assessee's appeal addressed the addition of Rs. 25,05,900/- based on a statement made during survey proceedings under Section 133A. The A.O. added this amount to the assessee's income, citing unaccounted expenditure on renovation and construction, which the assessee admitted was funded by unaccounted income. The assessee retracted this statement later, claiming it was made under duress and in an unstable mental state. The CIT (A) upheld the A.O.'s addition, stating that the retraction was not valid due to the considerable delay and lack of substantiation. The Tribunal agreed with the CIT (A), emphasizing that the retraction was selective and not immediate, and the initial statement detailed specific expenditures based on the assessee's books. The Tribunal also noted that the disclosed income was not derived from business operations, thus not eligible for deduction under Section 80IB. Consequently, the Tribunal dismissed the assessee's appeal.

Conclusion:

The Tribunal dismissed both the Revenue's appeal for A.Y. 2007-08 and the assessee's appeal for A.Y. 2005-06. The key decisions were based on the consistency of facts with prior years regarding the Section 80IB deduction and the validity and timing of the retraction of statements made during survey proceedings. The Tribunal's adherence to legal precedents and detailed examination of the facts led to the dismissal of both appeals.