2015 (1) TMI 365 - AT - Income Tax

Revenue's appeal allowed, case sent back for re-adjudication under sec 10(23B)

Asstt. CIT-1 Kanpur Versus M/s Goldmohar Gramudyog Sansthan

The Tribunal allowed the Revenue's appeal, directing the matter to be restored back to the Assessing Officer for re-adjudication of the exemption claim ... Benefit of exemption u/s 10(23B) – existence for development of khadi or village industries or both, and not for purposes of profit, - Whether the certificate issued by the Khadi & Village Industries Commission is in complete violation of rule 46A of the Income-tax Rules – Held that:- The certificate issued by the KVIC was not filed before the AO, as it was not available with the assessee - It was obtained during the course of appellate proceedings and it was filed before the CIT(A) - When new evidence was filed before the CIT(A), the CIT(A) ought to have called a remand report from the AO in this regard, but the CIT(A), instead of calling for a remand report, has allowed exemption under section 10(23B) of the Act having relied upon the certificate issued by the KVIC - the AO has not applied his mind with regard to the exemption claimed u/s 10(23B) of the Act in the light of the KVIC certificate, as it was not filed before him - the claim of exemption of the assessee should be examined in the light of the certificate issued by the KVCI, by the AO. Jurisdiction of AO for denial of benefit u/s 10(23B) – Held that:- The AO cannot out rightly deny the benefit of exemption claimed under section 10(23B) of the Act if KVIC certificate is filed before him, unless he reports the matter to the Commissioner, KVIC for cancellation or withdrawal of certificate, if he notice that the activities of the assessee are in contravention of the provisions of section 10(23B) of the Act - But it does not mean that the Assessing Officer is debarred from making necessary enquiries with regard to the activities of the assessee while allowing exemption under section 10(23B) of the Act if KVIC certificate is filed before him - Since KVIC certificate was filed for the first time before the CIT(A), the AO has not applied his mind to the activities of the assessee, therefore, the matter may be restored back to the file of the AO with a direction to re-adjudicate the issue of exemption claimed u/s 10(23B)of the Act in the light of certificate issued by the KVIC – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for re-adjudication – Decided in favour of revenue. Issues:1. Admission of fresh evidence in violation of Rule 46 A of I.T. Rules.2. Allowing benefit of section 10(23B) based on certificate not produced before Assessing Officer.3. Granting claim of exemption u/s 10(23B) without producing certificate before Assessing Officer.4. Quashing order of Ld. CIT (A) and restoring Assessing Officer's order.Issue 1: Admission of Fresh EvidenceThe appeal was against the order of the ld. CIT(A) regarding the admission of fresh evidence in the form of a certificate issued by KVIC. The Revenue contended that the evidence was admitted without giving the Assessing Officer an opportunity to examine it, thus violating Rule 46 A of I.T. Rules.Issue 2: Benefit of Section 10(23B)The ld. CIT(A) allowed the benefit of section 10(23B) based on a certificate from KVIC, which was not presented before the Assessing Officer during the assessment proceedings. The Revenue argued that the ld. CIT(A) erred in granting the benefit without the certificate being produced before the Assessing Officer.Issue 3: Granting Exemption Without CertificateThe ld. CIT(A) granted exemption under section 10(23B) to the assessee based on the KVIC certificate, which was not available during the assessment by the Assessing Officer. The Revenue contended that the claim of exemption should have been rejected due to the absence of the certificate before the Assessing Officer.Issue 4: Quashing Ld. CIT (A) OrderThe Revenue sought to quash the order of the ld. CIT(A) and restore the Assessing Officer's order. The Tribunal noted that the KVIC certificate was not presented before the Assessing Officer, but only before the ld. CIT(A), leading to a lack of examination by the Assessing Officer regarding the exemption claimed under section 10(23B).The Tribunal found that the certificate from KVIC was not available during the assessment by the Assessing Officer but was presented for the first time before the ld. CIT(A). The ld. CIT(A) granted the exemption without calling for a remand report from the Assessing Officer, which was deemed necessary. The Tribunal emphasized that the Assessing Officer should have the opportunity to examine the claim of exemption in light of the KVIC certificate.Regarding the jurisdiction of the Assessing Officer to deny the benefit under section 10(23B), the Tribunal highlighted that while the Assessing Officer cannot outrightly deny the benefit if the KVIC certificate is filed, necessary inquiries should be made to ensure compliance with the provisions. The Tribunal, in line with the provisions of section 143(3) and section 10(23B) of the Act, directed the matter to be restored back to the Assessing Officer for re-adjudication of the exemption claim in the light of the KVIC certificate. As a result, the appeal of the Revenue was allowed for statistical purposes.