2020 (4) TMI 487 - AT - Income Tax

Deduction u/s 80IB - manufacturing activities - Proof of commencement of production - HELD THAT - Assessee tried to justify that the production was commenced on 30.03.2012. During the course of hearing, ld. AR drew our attention to the certificate issued by the General Manger, DIC, Kathua on 07.01.2013, scanned copy of which has been incorporated in the assessment order that the General Manager, DIC, Kathua has clearly mentioned that the commencement of production is with effect from 30.03.2012. This has not been controverted by the ld. DR before us. In the month of March, the consumption of electricity was 1536 units and the documents were also placed before the AO and these documents have not been disregarded by the AO and the AO has accepted that the electricity consumption was made in the month of March, 2012. The assessee has also shown in the trading account as on 31.03.2012 wages expenses and the AO could have examined the payment of wages showing in the trading account for the financial year ending as on 31.03.2012. The labour register was produced before the AO, which has not been denied. Even the labour register for the subsequent year has also been placed before the AO. If the AO has doubted the commencement of production, he could have examined the labourers for being satisfied himself, however, he Just strengthened his analysis of the electricity consumption and the date of certificate issued by the General Manager, DIC, Kathua. We consider the date of commencement of production as 30.03.2012, and, therefore, the assessee is eligible for claiming deduction u/s.80IB(4) of the Act on the profit derived from the industrial undertaking as claimed by the assessee.- Decided in favour of assessee. Addition u/s.68 - unexplained investment in purchase of land - As per assessee there are no cash credits which are appearing in the books of account and as such application of wrong provisions of the Act not remotely connected is arbitrary and unjustified - HELD THAT - Submission made by the assessee before the AO and other related documents and considering to the request of ld.AR of the assessee, we restore the issue raised in both the grounds to the file of AO for further verification. The assessee is also directed to appear before the CIT(A) with necessary documents for substantiating his claim as raised before us. Ground raised by the assessee are allowed for statistical purposes.

Summary

Issues involved:
1. Disallowance of deduction claimed under section 80IB
2. Commencement of manufacturing activities for deduction u/s 80IB
3. Addition under Section 68 for unexplained investment in land

Analysis:

Issue 1: Disallowance of deduction claimed under section 80IB
The assessee claimed a deduction under section 80IB of the Income Tax Act, 1961. The Assessing Officer (AO) noted discrepancies regarding the commencement of manufacturing activities for the deduction. The AO added the entire deduction claimed by the assessee to the total income. The CIT(A) upheld the AO's decision. However, the ITAT considered various documents provided by the assessee, including a certificate from the General Manager, DIC, Kathua, stating the production commencement date as 30.03.2012. The ITAT found that the production had indeed commenced on the said date, making the assessee eligible for the deduction u/s 80IB(4). Consequently, ground Nos. 1 & 2 were allowed.

Issue 2: Commencement of manufacturing activities for deduction u/s 80IB
The AO questioned the commencement date of manufacturing activities for the deduction u/s 80IB, leading to the disallowance of the claimed deduction. The ITAT reviewed evidence such as electricity bills, purchase records, and labor registers. It noted that the production had started on 30.03.2012, as supported by various documents and the certificate from the General Manager, DIC, Kathua. The ITAT disagreed with the AO's interpretation and allowed the deduction under section 80IB.

Issue 3: Addition under Section 68 for unexplained investment in land
The AO added an amount under Section 68 for unexplained investment in land. The CIT(A) affirmed this decision. However, the ITAT, after reviewing the submissions and documents, decided to send the matter back to the AO for further verification. The ITAT directed the assessee to cooperate with the AO and appear before the CIT(A) with the necessary documents. Ground Nos. 3 & 4 were allowed for statistical purposes.

In conclusion, the ITAT ruled in favor of the assessee regarding the deduction claimed under section 80IB, finding the commencement of manufacturing activities to be in line with the requirements. The issue of unexplained investment in land was remanded back to the AO for additional verification.