2018 (4) TMI 190 - AT - Income Tax

Disallowance of deduction u/s 80IC - Held that - The assessment year under appeals, the A.O. relied upon the survey conducted in the premises of the assessee prior to assessment year under appeal, which may not be relevant for this year. Further, Inspector has visited the premises of the assessee-company in assessment year under appeals on 29th December, 2010 and A.O. on 26th November, 2011 and gave report against the assessee-company. But, according to the Learned Counsel for the Assessee, such reports were not confronted to the assessee-company and was not given right to challenge the same. Therefore, such report cannot be read in evidence against the assessee-company. The Ld. CIT(A) in the impugned order allowed the carry forward of the business losses which was also allowed by him in A.Y. 2010-2011. It would mean that assessee-company was doing manufacturing/ business activity. Therefore, all these matters clearly support the contention of Learned Counsel for the Assessee that the matter should be re-investigated by the A.O. - Decided in favour of assessee for statistical purposes

Summary

Issues:
Challenging disallowance under section 80IC of the I.T. Act, confirming disallowance of depreciation, and confirming disallowance of manufacturing expenses.

Analysis:
1. The appeals by the assessee were directed against common orders of the Ld. CIT(A), challenging various disallowances. The appeals were time-barred, but the delay was condoned. The assessee, a Private Limited Company engaged in manufacturing, claimed deduction under section 80IC. However, the Assessing Officer (A.O.) found discrepancies during a survey, indicating no manufacturing activity. The A.O. disallowed manufacturing expenses and depreciation claimed on machinery. The A.O. also disallowed carrying forward losses due to lack of manufacturing activity.

2. The assessee challenged these additions before the Ld. CIT(A), providing evidence of manufacturing activities. The Ld. CIT(A) rejected the claims under section 80IC, manufacturing expenses, and depreciation but allowed carry forward of business losses. The assessee cited previous tribunal orders supporting their manufacturing activities.

3. The Learned Counsel for the Assessee argued for a reconsideration, pointing out inconsistencies in the inspection reports and the allowance of losses in previous years. The Ld. CIT(A) allowed carry forward of losses in previous years, indicating manufacturing activity. The matter was deemed to require further investigation by the A.O. in light of previous tribunal orders.

4. The Tribunal set aside the orders of the authorities below and directed the A.O. to re-decide the issues in accordance with the law and previous tribunal orders. The A.O. was instructed to provide a fair opportunity for the assessee to present their case. Ultimately, both appeals of the assessee were allowed for statistical purposes.