2016 (5) TMI 717 - AT - Income Tax

Deduction u/s 80IB - claim of assessee was denied due to noncompliance of provisions of Section 80IB(2)(iv) - AO held that the assessee has also failed to establish correctness of deduction u/s 80IB of the Act, that it carried out its manufacturing activity by use of electricity and also not employing twenty or more workers to carry out his business without electricity, hence, deduction u/s 80IB of the Act was denied - Held that - The Tribunal in the first round has clearly indicated that in absence of technical expert opinion and other relevant material on record , it is not able to give finding as to whether the manufacturing process carried on by the assessee is with the aid of power or not. The assessee has not in the first round of litigation produced the technical expert opinion about the reasons and justification for no or low usage of electricity and also whether the manufacturing is carried on with the aid of the power. The assessee has produced these technical expert opinions before the Tribunal in second round of litigation and has explained that in the interest of substantial justice and equity, the same should be admitted and has contended that due to ailments and advanced age of the assessee the same could not be adduced earlier before the authorities below. We are inclined to accept and admit the additional evidences submitted by the assessee in the interest of substantial justice as these evidences are vital and essential for resolving the controversy and go to the root of the matter for resolving the dispute, despite the fact that this is the second round of litigation and the assessee has failed to produce these evidences earlier, due to the various reasons cited by the assessee in its application for admission of additional evidences and also to advance substantial justice in deciding the case of merits vis- -vis technicalities involved in admitting the additional evidences. By admitting these additional evidences, the case will at best be decided on merits instead of rejecting the matter at threshold which in our considered view will not advance justice. But at the same time we are equally conscious of the fact that these additional evidences are to be subjected to verification and scrutiny by the Revenue authorities in accordance with the principles of natural justice which demand that the Revenue need to be accorded an opportunity to verify these additional evidences now submitted by the assessee before the Tribunal in second round of litigation. Thus we set aside the matter to the file of the AO for de-novo determination of the issue after considering the additional evidences submitted by the assessee. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Denial of deduction under Section 80IB of the Income Tax Act, 1961.
2. Whether the manufacturing process was carried out with the aid of power.
3. Employment of twenty or more workers as per Section 80IB(2)(iv) of the Act.
4. Admission of additional evidence in the second round of litigation.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 80IB:
The assessee challenged the CIT(A)'s decision to dismiss the appeal against the AO's order, which denied the deduction under Section 80IB. The AO initially rejected the deduction claim, stating the assessee did not fulfill the conditions stipulated under Section 80IB(2)(iv), particularly regarding the use of power and employment of workers. The CIT(A) initially allowed the deduction, but upon appeal, the Tribunal remanded the case back to the AO for fresh consideration.

2. Use of Power in Manufacturing:
The primary contention was whether the manufacturing process involved the use of power. The AO and CIT(A) concluded that the assessee did not use power, based on minimal electricity consumption and lack of substantial evidence. The assessee argued that the low power consumption was due to limited production in the early business years and faulty electricity meters. The Tribunal noted that the assessee failed to provide expert opinions or technical reports during the initial proceedings but later submitted additional evidence, including technical certifications and expert opinions, which indicated that the machinery used required power.

3. Employment of Twenty or More Workers:
The AO and CIT(A) also denied the deduction on the grounds that the assessee did not employ twenty or more workers, as required by Section 80IB(2)(iv). The assessee's failure to provide adequate evidence to substantiate the employment of the required number of workers contributed to the denial of the deduction.

4. Admission of Additional Evidence:
In the second round of litigation, the assessee submitted additional evidence, including technical expert opinions and certificates, to substantiate the claim of using power in the manufacturing process. The Tribunal admitted these additional evidences, citing the necessity for a fair resolution of the dispute and substantial justice. The Tribunal emphasized that these evidences were vital for resolving the controversy and directed the AO to re-evaluate the case, considering the new evidence.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, admitting the additional evidence and remanding the case to the AO for a de-novo determination. The AO was instructed to re-examine the issue of power usage in the manufacturing process and the employment of workers, providing the assessee with an opportunity to present their case in accordance with the principles of natural justice. The Tribunal's decision aimed to ensure a fair and just resolution by considering all relevant evidence and circumstances.

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