2016 (5) TMI 232 - AT - Income Tax

Claim of deduction u/s.80IB(10) - CIT(A) allowed the claim - filing of additional evidence - Held that - Where the signature and verification on the memorandum of appeal was made by any agent of the assessee or for the Revenue and not by the assessee or the Assessing Officer, it cannot be held that the appeal or any application filed is a valid appeal or application. Further, as per the ITAT Rules, 1963, filing of additional grounds equates the procedure for filing of appeal with that of these applications. As far the assessee is concerned, the appeals are to be signed by the assessee and none other than the assessee. Hence, the preliminary objection by the ld. DR is not maintainable. Accordingly, the preliminary objection by the ld. DR is dismissed as non-maintainable and only AO can raise such ground. At the time of assessment proceedings, the assessee made the submissions before the AO, wherein product function, and dues dissimilar is relating to poultry, feed, compound premix was brought out but, the AO ignored all these and proceeded to compare the profit margin of independent companies manufacturing feeds and compound premix, which are dissimilar. The assessee has also furnished price level comparability of an identical product manufactured by an independent party and the same was also ignored by the AO. However, the assessee was produced the same before the CIT(Appeals), who after examining came to the conclusion that marketing price of the assessee is justified in view of the price chart by the comparable cases. As such, in our opinion, the findings given by the CIT(Appeals) in his order is appropriate and does not call for any interference - Decided in favour of assessee

Issues Involved:
1. Restriction on claim of deduction under Section 80IB(10) by the Assessing Officer.
2. Admission of fresh evidence by the CIT(A) without giving an opportunity to the Assessing Officer, violating Rule 46A(3) of the IT Rules 1962.
3. Comparison of market prices of poultry premix products by CIT(A) and deletion of disallowance of excessive claim under Section 80IB.

Issue-wise Detailed Analysis:

1. Restriction on Claim of Deduction under Section 80IB(10):
The Revenue contended that the Assessing Officer (AO) rightly restricted the deduction under Section 80IB(10) because the premix manufactured by the assessee was considered an intermediate product without an independent market. The AO observed that the profit margin of the premix unit was significantly higher compared to the enterprise level, leading to an artificially inflated cost of premix. The AO compared the profit margins of two independent companies manufacturing poultry feed and restricted the deduction to Rs. 2,11,30,061/- from the claimed Rs. 11,86,74,886/-. The CIT(A) countered this by noting that the premix had a market and provided invoices showing purchases from third parties at higher rates than internal transfers, thus justifying the claimed deduction.

2. Admission of Fresh Evidence by CIT(A) Without Opportunity to AO:
The Revenue argued that the CIT(A) admitted fresh evidence without giving the AO an opportunity to examine it, violating Rule 46A(3) of the IT Rules 1962. However, the Tribunal found that the documents considered by the CIT(A) were already before the AO during the assessment proceedings. These included details of the 80IB claim, purchase invoices from third-party suppliers, stock transfer notes, and comparative financial statements. Therefore, there was no violation of Rule 46A, and the CIT(A)'s consideration of these documents was justified.

3. Comparison of Market Prices of Poultry Premix Products by CIT(A):
The CIT(A) compared the internal transfer prices of the premix with third-party purchase prices and concluded that the internal transfer prices were lower, thereby negating the AO's claim of profit inflation. The CIT(A) directed the AO to allow the deduction under Section 80IB, as the AO had not provided any adverse evidence to show that the profit margin was inflated. The Tribunal upheld this finding, noting that the AO's comparison with independent companies manufacturing different products was not appropriate, and the CIT(A)'s comparison with identical products was justified.

Additional Considerations:
The Tribunal addressed the procedural aspect of raising new grounds before it. It emphasized that the Tribunal's jurisdiction is limited to the subject matter of the appeal, and new grounds cannot be entertained if they were not part of the original assessment. The Tribunal rejected the Revenue's preliminary objection, stating that the procedures for filing additional grounds were not followed, and only the AO could raise such grounds.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order allowing the deduction under Section 80IB. The Tribunal found no infirmity in the CIT(A)'s comparison of prices and admission of evidence, and ruled that the procedural requirements for raising new grounds were not met by the Revenue. The order was pronounced on January 14, 2016, in Chennai.

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