2014 (2) TMI 1378 - AT - Income Tax

Disallowance of deduction u/s.80IA on the profits derived from Trikampura Division - Sole argument of assessee is that the facts are similar to the facts of the Assessment Year 2001-02 and therefore, the arguments advanced for Assessment Year 2001-02 be treated as arguments for the year under consideration. HELD THAT - We find that in the Assessment Year 2001-02, we vide order of even date 2014 (2) TMI 1377 - ITAT AHMEDABAD found that there was no good reason to interfere with the orders of the lower authorities in respect of this issue. Therefore, we decline to interfere with the orders of lower authorities for the year under consideration also. Therefore, this ground of appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Reopening of assessment under Section 147.
2. Confirmation of assessment under Section 143(3) read with Section 147.
3. Initiation of penalty proceedings under Section 271(1)(c).
4. Disallowance of deduction under Section 80IA on profits derived from Trikampura Division.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The assessee contended that the CIT(A) erred in confirming the order of the Assessing Officer (AO) for reopening the completed assessment under Section 147. The assessee argued that there was no escapement of income chargeable to tax due to omission or failure on their part to disclose fully and truly all material facts necessary for the assessment. The proceedings initiated were claimed to be void ab initio. However, this ground was not pressed by the assessee during the hearing and was dismissed for want of prosecution.

2. Confirmation of Assessment under Section 143(3) read with Section 147:
The assessee argued that the reassessment was based on the same facts furnished during the original assessment, amounting to a change of opinion. This ground was also not pressed by the assessee during the hearing and was dismissed for want of prosecution.

3. Initiation of Penalty Proceedings under Section 271(1)(c):
The assessee contended that the CIT(A) erred in not interfering with the initiation of penalty proceedings under Section 271(1)(c). This ground was similarly not pressed by the assessee during the hearing and was dismissed for want of prosecution.

4. Disallowance of Deduction under Section 80IA on Profits Derived from Trikampura Division:
The primary issue in the appeal was the disallowance of deduction under Section 80IA on the profits derived from the Trikampura Division. The AO disallowed the deduction on several grounds, including the cessation of the industrial undertaking status of Trikampura Division from 30-11-1999, the relationship between the job worker and the assessee company, and the nature of the manufacturing activities carried out by the job worker.

The CIT(A) called for a remand report from the AO, which reiterated the findings that the employees of Nirma Ltd. were only involved in quality checking, and the manufacturing activities were primarily manual and controlled by Nisarg Enterprises. The affidavits submitted by the assessee were considered self-serving and not accepted as additional evidence.

The CIT(A) upheld the AO's decision, stating that the reliance on the Special Bench decision of the Delhi ITAT by the assessee was misplaced. The CIT(A) noted that the appellant had no employees in the Trikampura Division and that all significant activities were carried out by the general division of the assessee company. The CIT(A) also cited several judicial precedents, including decisions from the Mumbai High Court, Delhi High Court, and Rajasthan High Court, which supported the AO's stand.

The ITAT, after hearing the rival submissions and perusing the orders of the lower authorities, found no reason to interfere with the orders of the lower authorities. The ITAT noted that the facts were similar to those of the Assessment Year 2001-02, where the issue was decided against the assessee. Therefore, the ITAT dismissed the ground of appeal regarding the disallowance of deduction under Section 80IA.

Conclusion:
The appeal of the assessee was dismissed, with the ITAT upholding the disallowance of deduction under Section 80IA on the profits derived from Trikampura Division. The grounds related to the reopening of assessment, confirmation of assessment, and initiation of penalty proceedings were dismissed for want of prosecution.