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2015 (11) TMI 1268 - AT - Income TaxEligibility of deduction u/s.80lC - CIT(A) allowed the claim - Held that - The profits declared by the assessee on these two proprietary units located in Baddi Himachal Pradesh, which is exempt from taxation u/s 80(IB), is abnormal. The net profits declared for the A.Y. 2003-04, 2004-05 and 2005-06 are 56.96%, 51.75% and 52.88% for the A.Y. 2006-07 and 2007-08, the profits shot up to 79.87% and 78.47%. Such abnormal figures in these years is not explained by the assessee. It is well settled that when the assessee claims an exemption, burden lies on it, to prove that he is entitled to exemption. In this case the burden has not been discharged on the issue of quantum of exemption. The order of the First Appellate Authority, in our view is not well reasoned. The order has not given any reason as to why the A.O. was wrong on each of his conclusions. We set aside the matter to the file of the Ld.CIT(A) with a direction to pass a speaking and reasoned order on each of the observations of the Ld.A.O. - Decided in favour of revenue for statistical purposes.
Issues Involved:
1. Restriction of net profit for deduction under section 80IC of the Income-tax Act, 1961. 2. Disallowance of deduction under section 80IC for M/s MJ Industries based on previous assessment year. 3. General grounds of appeal. Issue 1: Restriction of Net Profit for Deduction under Section 80IC: The case involved an appeal by the Revenue against the order of the Ld.CIT(A) regarding the restriction of net profit for deduction under section 80IC of the Income-tax Act, 1961 for the assessment year 2008-09. The Assessing Officer had restricted the net profit claimed by the appellant from its two proprietary concerns, M/s MJ Packaging and M/s MJ Industries, located in Baddi, Himachal Pradesh, to 50% of the net profit shown by the assessee. The reasons included significant variance in net profit ratios compared to other group concerns, minimal number of employees, purchases for sister concerns showing heavy losses, and other discrepancies. The First Appellate Authority granted relief, emphasizing that the profits were audited, consistently maintained, and not disturbed in previous years. However, the Tribunal found the profits declared by the assessee as abnormal and unexplained, leading to a lack of discharge of the burden of proof for entitlement to exemption. The Tribunal invoked Section 80(IA)(10) to prevent misuse of the exemption claim and remanded the matter to the Ld.CIT(A) for a reasoned order after giving the assessee an opportunity to be heard. Issue 2: Disallowance of Deduction for M/s MJ Industries based on Previous Assessment Year: The second issue pertained to the disallowance of deduction under section 80IC for M/s MJ Industries, which was based on the decision of the Assessing Officer for the assessment year 2006-07 in the assessee's own case. The Revenue contended that the Tribunal had considered the order of the Ld.CIT(A) for the A.Y. 2006-07 and upheld the same. However, the Tribunal noted that the eligibility of the unit for deduction under section 80IC should be examined in the first year of the claim. While the Ld.CIT(A) followed the previous order for the A.Y. 2008-09, which had not attained finality, the Tribunal dismissed the Revenue's ground on this issue. Issue 3: General Grounds of Appeal: The third issue was general in nature and did not involve specific details or arguments. The Tribunal allowed the appeal of the Revenue for statistical purposes without delving into the specifics of this ground. In conclusion, the Tribunal's judgment addressed the issues of restricting net profit for deduction under section 80IC and disallowance of deduction for M/s MJ Industries based on the previous assessment year. The decision highlighted the need for proper justification and examination of eligibility criteria for tax deductions, emphasizing the burden of proof on the assessee. The case underscored the importance of maintaining consistency in financial claims and the necessity for reasoned orders in tax assessments.
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