2015 (2) TMI 405 - HC - Income Tax

Disallowance of deduction u/S. 10B and 80IB - AO discarded the books of accounts of the assessee and concluded that production shown by the assessee is exceeding the sanction limit and the production data are inflated - ITAT allowed claim - Held that - The Tribunal found that the production data are not found doubtful by any other regulatory authority. The Tribunal has relied upon the fact that the books of accounts which were duly audited. Thus if the Tribunal has recorded ultimate finding of fact that the discarding of books of accounts was not justified, and consequently the working out of the revise claim for deduction by AO, we find that such finding of fact would be outside the scope of judicial scrutiny, more particularly, when nothing is satisfactorily demonstrated before the Court that such finding of fact by the Tribunal can be said as perverse to the record. - Decided in favour of assessee.

Summary

Issues:
- Appeal by Revenue challenging the allowance of deduction u/S. 10B and 80IB of the Income Tax Act, 1961 based on the rejection of books of accounts by AO.
- Tribunal's decision in favor of the assessee regarding the disallowance of deduction and the rejection of books of accounts.

Analysis:
- The Revenue filed an appeal questioning the ITAT's decision to allow the assessee's appeal against the disallowance of deductions under Section 10B and 80IB of the Income Tax Act. The AO had rejected the books of accounts, alleging inflated production data exceeding the sanction limit, leading to a disallowance of a significant amount. The CIT(A) upheld the AO's decision, but the Tribunal disagreed, emphasizing that the assessee had previously claimed and received deductions under these sections, and the production was not doubted by any regulatory authority.

- The Tribunal highlighted that the AO failed to provide evidence supporting the claim that the assessee exceeded the installed capacity, basing the decision on presumption rather than concrete facts. Despite a decrease in Gross Profit and the rejection of books of accounts, the AO did not make any additional adjustments to the total income. The Tribunal found no justification for the AO's revised deduction calculations and overturned the disallowance, citing the lack of evidence and the audited nature of the books of accounts.

- The High Court noted that the Tribunal's factual findings regarding the legitimacy of the books of accounts and the production data, as well as the absence of supporting material from the Revenue, were crucial in determining the validity of the AO's actions. The Court emphasized the importance of testing the genuineness of entries before discarding books of accounts and upheld the Tribunal's decision as not warranting judicial scrutiny. As a result, the Court found no substantial questions of law raised by the Revenue and dismissed the appeal, deeming it meritless.