2017 (4) TMI 1062 - HC - Income Tax

Deduction u/s 80IC - on the basis of material found in search AO held that 100% of the work of the assessee had not been done at Gagret (Himachal Pradesh) thus allowed deduction @ 20% of the profit from manufacturing - CIT(A) allowed deduction @ 100% also confirmed by ITAT - Held that - The entirety of the facts was required to be gone into to test the veracity of the plea taken by the assessee. The order dated 28.12.2012 (Annexure A-III) passed by the Tribunal is not a speaking order giving the detailed reasons dismissing the appeal and affirming the findings of the CIT (A). The Tribunal being final fact finding authority was required to deal with all aspects of factual matrix and then record its conclusions based thereon. Mere concurrence with the view expressed by the CIT(A) is not sufficient and the Tribunal was required to record the reasons for dismissing the appeal. In view of the above, the order of ITAT does not satisfy the requirements of being a reasoned order as enunciated by the Apex Court in M/s Kranti Associates Pvt. Ltd s case (2010 (9) TMI 886 - SUPREME COURT OF INDIA), noticed herein above. Thus, the substantial question of law stands answered accordingly. Consequently, after setting aside the order of the Tribunal the matter is remanded to the Tribunal for fresh adjudication after affording an opportunity of hearing to the parties, in accordance with law.

Summary

Issues:
1. Interpretation of Section 80IC of the Income Tax Act, 1961 for deduction of profits.
2. Requirement of passing a reasoned order by the Tribunal.

Analysis:

Issue 1: Interpretation of Section 80IC of the Income Tax Act, 1961 for deduction of profits:
The case involved a dispute regarding the deduction claimed under Section 80IC of the Income Tax Act, 1961. The appellant, the revenue, contested the Tribunal's decision to allow a 100% deduction of profits under Section 80IC, arguing that the Assessing Officer's findings based on evidence suggested that the assessee did not have sufficient infrastructure and manpower for manufacturing the entire produce at its unit in Himachal Pradesh. The Tribunal had dismissed the appeal by the revenue, upholding the CIT(A)'s decision to allow the full deduction. The revenue contended that the Tribunal's order lacked a detailed reasoning for dismissing the appeal and supporting the CIT(A)'s decision. The court emphasized the importance of a reasoned order by the Tribunal, especially when dealing with substantial questions of law like the interpretation of tax provisions.

Issue 2: Requirement of passing a reasoned order by the Tribunal:
The High Court referred to the precedent set by the Apex Court in M/s Kranti Associates Pvt. Ltd's case, emphasizing the necessity for quasi-judicial authorities to pass reasoned orders. The court highlighted that the Tribunal's order in this case did not provide a detailed rationale for affirming the CIT(A)'s decision, which was essential for transparency, accountability, and judicial review. The court concluded that the Tribunal's order did not meet the standards of a reasoned order as required by law. Consequently, the court set aside the Tribunal's order and remanded the matter back to the Tribunal for fresh adjudication, emphasizing the need for a detailed examination of all factual aspects and recording of reasons for the decision.

In summary, the judgment addressed the issues related to the interpretation of Section 80IC of the Income Tax Act, 1961 for deduction of profits and the requirement of passing a reasoned order by the Tribunal. The court stressed the importance of providing detailed reasons in orders, especially in cases involving significant legal questions. The decision highlighted the need for transparency, accountability, and adherence to legal principles in the judicial process.