2020 (3) TMI 718 - HC - Income Tax

Production of additional evidence before the Tribunal - Mode of taking additional evidence - HELD THAT - Reaching the conclusion to confirm the order of the Assessing Officer, has also done its part by doing some research on Google Study. Admittedly, the research done by ITAT in the form of Google study was not put either to the appellant/assessee Company or to the said Revenue. As already pointed out by this Court in the earlier paragraphs, in the absence of any specific rule including the applicability of the natural justice, it is a well settled position of law that adherence to the principles of natural justice, is implied in any legislation. As rightly pointed out by the learned counsel for the appellant/assessee with regard to the study or research done by ITAT, the appellant/assessee was not put on notice. Hence, on this sole ground, the impugned common order warrants interference. The Substantial Questions of Law Nos.1 and 2 are answered in affirmative and in favour of the appellant/assessee Company.

Summary

Issues:
Claim of depreciation for machineries used for pollution control measures

Analysis:
The case involved an appeal by an assessee company regarding the claim of depreciation for machineries used for pollution control measures. The company filed its return of income for the Assessment Year 2012-13, claiming cent percent depreciation for machineries used for pollution control. However, the Assessing Officer disallowed the claim and restricted the depreciation to 15%. The Commissioner of Income Tax [Appeals] affirmed this decision. Subsequently, the company and the Revenue filed appeals before the Income Tax Appellate Tribunal [ITAT]. The ITAT, in its common order, relied on a Google study to conclude that the machineries in question did not qualify as air pollution control devices entitled to higher depreciation.

The appellant company challenged the ITAT's decision by filing Tax Case Appeals, raising substantial questions of law. The appellant argued that the ITAT's reliance on the Google study without notice to the parties violated principles of natural justice. The appellant contended that the ITAT's decision was unsustainable as it did not afford an opportunity to rebut the new evidence. The appellant cited provisions of the Income Tax Act and relevant rules to support the argument that natural justice principles should have been followed.

On the other hand, the respondent/Revenue argued that the machineries were not exclusively meant for pollution control measures, as evidenced by the Chartered Engineer's report and purchase bills. The respondent contended that the findings of the authorities below and the ITAT were concurrent and there were no substantial questions of law for adjudication.

The Court considered the arguments presented by both parties and examined the relevant provisions of the Income Tax Act and Rules. The Court noted that the ITAT's reliance on the Google study without notifying the parties violated principles of natural justice. Therefore, the Court held in favor of the appellant and set aside the ITAT's order, remanding the appeals for fresh consideration. The Court directed the ITAT to prioritize and dispose of the appeals expeditiously, without awarding costs to either party.