9911796707
TMI Blog2007 (6) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... is a partnership firm engaged in the manufacture of lamination blades from steel rolls. The return of income for the assessment year under consideration was filed on 1st Nov., 2004 on nil taxable income after claiming deduction under s. 80-IB of the Act. However, the assessment was completed under s. 143(3) by disallowing the deduction claimed by the assessee under s. 80-IB. In doing so the AO came to the conclusion that the activity engaged by the assessee did not tantamount to manufacture of any article or thing within the meaning of s. 80-IB(2)(iii) and that the assessee had not engaged the requisite number of workers as enjoined under s. 80-IB(2)(iv). It was stated in the assessment order that on an inspection carried out at the given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding opportunity of cross-examination to the assessee. It was contended that in response to notice under s. 143(2), the assessee had produced the books of account, vouchers and bills maintained by it and also furnished the information as required by the AO and the claim under s. 80-IB was rejected on the ground that the assessee did not engage in any manufacturing activity and also did not deploy the minimum level of workers as prescribed in the Act. In this connection, the learned counsel invited our attention to the decision of the Mumbai Tribunal in the case of Asstt. CIT vs. Richa Chadha (2005) 97 TTJ (Mumbai) 910 : (2005) 96 ITD 325 (Mumbai), wherein it was held that the workers used in the activities supporting the main manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls and also be allowed an opportunity of being heard in the matter. It was contended that Shri Kanakaraj is not the manager of the assessee firm as recorded in the statement and it is trite law that when he was examined and statement given by him is used as evidence, then the fact should be made known to the assessee and an opportunity to cross-examine the witness must have been provided to the assessee, which was not done. The learned CIT(A), therefore, erred in allowing the statements of Kanakaraj to be sustained and relied upon, when the opportunity of cross-examination has not been given to the assessee. The learned counsel further challenged the finding of the authorities below that there was not even a power connection to the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the permanent workers count is less than twenty since the assessee does not have power driven production process. As rightly contended by the learned counsel in this case, the orders were passed in violation of the principles of equity and natural justice on various counts without following the mandatory procedures. First of all, Shri Kanakaraj in his statement averred that he was the manager of the undertaking and further the assessee did not employ more than 14 persons at any point of time in the production activity. However, the assessee was never confronted with the said statement and neither it was made available to it nor the assessee was afforded any opportunity to cross-examine Sri Kanakaraj. The AO should have decided this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... araj and he had not examined whether the activity of the assessee amounts to production or manufacture, in the light of evidences and explanations offered by the assessee, we deem it just and proper to remit the issue back to the file of the AO by setting aside the order of the learned CIT(A) with a direction to decide the assessee's claim for deduction under s. 80-IB in the proper perspective and in accordance with law, after affording sufficient opportunity of being heard to the assessee. The assessee should also co-operate with the Department in furnishing the required details and evidences as called for by the AO. While reframing the assessment, the AO shall also consider the issue relating to charging of interest under s. 234B, which g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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