2019 (1) TMI 403 - AT - Income Tax

Tribunal upholds assessee's deduction eligibility under section 80IA(4)(iv) and rejects Revenue's challenge.

The Tribunal dismissed the Revenue's appeal challenging the eligibility of the assessee for deduction under section 80IA(4)(iv) without setting off ... Denial of deduction u/s.80IA - initial assessment year - eligible for deductionu/s.80IA(4)(iv) on his business profit without setting off his earlier years’ business losses/unabsorbed depreciation which have already been set off against income from other business/sources - Held that:- Referring to case of Poonawal Estate Stud. & Agro Farm Pvt. Ltd. [2010 (9) TMI 1080 - ITAT PUNE] as been held that the provisions of section 80IA(5) are applicable only from the initial assessment year i.e. the assessment year in which deduction u/s.80IA(4) was first claimed by the assessee after exercising its option as per the provisions of section 80IA(2) of the Act. CIT(Appeal) had also referred to the CBDT Circular No.1/2016 dated 15.02.2016 which provides that the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s.80IA. As per section 80IA(5) of the Act, it is evident that the matter regarding initial assessment year has now been clearly settled in favor of the assessee. As per both, the ITAT Co-ordinate Bench decisions,as well as the CBDT Circular, the assessee has an option to choose the initial assessment year for the purposes of deduction u/s.80IA. In the present case,the appellant has chosen the initial assessment year to be assessment year 2009-10 and the present assessment year is the fourth year of the claim under section 80IA.- decided in favour of assessee. Addition on account of generation of scrap out of repairs and maintenance expenses - assessee has not maintained separate details of such expenses - Held that:- Since in the realm of welfare legislation specifically, the Income Tax Act, 1961,the quasi-judicial Authority i.e. Assessing Officer has to pass an order after proper reasons and verification. From the above, it is absolutely clear that there is neither verification nor any evidence brought on record to justify the said additions which therefore, can be safely termed as ad-hoc additions made on guess work and surmises which cannot be sustained. Accordingly,we find no infirmity in the findings of the Ld. CIT(Appeal) in deleting the addition - decided against revenue Issues Involved:1. Eligibility for deduction under section 80IA(4)(iv) without setting off earlier years' business losses/unabsorbed depreciation.2. Addition made on account of generation of scrap from repairs and maintenance expenses.3. Validity of the order of the CIT(A) and the Assessing Officer.Issue 1: Eligibility for Deduction under Section 80IA(4)(iv):The appeal by the Revenue challenged the CIT(A)'s decision regarding the eligibility of the assessee for deduction under section 80IA(4)(iv) without setting off earlier years' business losses/unabsorbed depreciation. The Assessing Officer denied the claim of the assessee based on the provisions of section 80IA(5) of the Income Tax Act, 1961. However, the CIT(A) ruled in favor of the assessee, citing a decision of the Pune Bench of the Tribunal in a similar case. The Tribunal upheld the CIT(A)'s decision, emphasizing that the provisions of section 80IA(5) are applicable only from the initial assessment year in which the deduction was first claimed by the assessee. The CBDT Circular clarified the term 'initial assessment year,' supporting the assessee's position. Therefore, the Tribunal dismissed the Revenue's appeal on this issue.Issue 2: Addition on Account of Generation of Scrap:The second issue pertained to the addition of Rs. 2,00,000 made by the Assessing Officer on account of the generation of scrap from repairs and maintenance expenses. The CIT(A) found that the Assessing Officer's decision lacked specific reasons and evidence to justify the addition. It was noted that the addition was based on suspicion and guesswork without proper verification or examination of the repairs undertaken. The Tribunal concurred with the CIT(A)'s findings, stating that such ad-hoc additions without substantiating evidence are impermissible under tax laws. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing the Revenue's appeal on this issue.Issue 3: Validity of the Order of the CIT(A) and the Assessing Officer:The Tribunal reviewed the overall order of the CIT(A) and the Assessing Officer. It found no infirmity in the CIT(A)'s decision to grant relief to the assessee based on legal precedents and the CBDT Circular. Additionally, the Tribunal upheld the CIT(A)'s deletion of the addition related to scrap generation, emphasizing the necessity for proper reasoning and evidence in tax assessments. The Tribunal dismissed the general nature of the grounds raised by the Revenue in the appeal, affirming the overall decision of the CIT(A). Consequently, the Tribunal dismissed the Revenue's appeal in its entirety, upholding the order pronounced on January 7, 2019.This detailed analysis of the judgment highlights the key issues involved, the legal arguments presented, and the Tribunal's decision on each aspect, ensuring a comprehensive understanding of the case's outcome.