2020 (4) TMI 546 - HC - Income Tax

High Court orders reassessment of deduction under Section 10-A without influence from Tribunal findings

The High Court remanded the case to the Assessing Officer for a fresh evaluation to determine the deduction under Section 10-A accurately. The Tribunal's ... Deduction u/s 10-A read with Section 80IA(10) - ITAT allowed the deduction - Non-consideration of the evidence and the perversity in considering the other evidences led in by the revenue by Tribunal - appeal was partly allowed by holding that the assessee is entitled to an extent of 80% - HELD THAT:- It is not a case wherein a single piece of evidence or material is placed for consideration as additional document before the Tribunal. Substantial material have been produced before the Tribunal by the revenue and the assessee. On going through the entire material, in our considered view, it is not proper for the Tribunal to consider the entire material. When huge and voluminous material is produced by the other side, it is only the Original Authority would have to decide the issue at the first instance. It is not proper for the Tribunal to indulge in such an exercise. It is appropriate to remand the matter to the Assessing Officer for a fresh consideration. Matters stand remanded to the Assessing Officer for a fresh consideration in accordance with law. The Assessing Officer shall consider all the material that is already on record. None of the findings as recorded by the Tribunal will come in the way of the Assessing Officer to decide the matter. The substantial question of laws are accordingly answered. Issues:1. Determination of deduction under Section 10-A of the Income Tax Act for a software development and services business.2. Consideration of additional evidence by the Tribunal.3. Evaluation of material produced by both the revenue and the assessee.4. Remand of the matter to the Assessing Officer for fresh consideration.Analysis:Issue 1: Determination of deduction under Section 10-A of the Income Tax ActThe assessee claimed a profit rate of 94% and deduction under Section 10-A. The Assessing Authority contested this, leading to an order granting a deduction of only 62%. The Commissioner of Income Tax (Appeals) partially allowed the appeal, granting an 80% deduction. Both the revenue and the assessee filed appeals before the Tribunal, which dismissed them. The High Court considered whether the Tribunal's finding that the assessee was entitled to the deduction under Section 10-A was arbitrary and unsustainable. The Court directed the Assessing Officer to reevaluate the material on record to determine the deduction accurately.Issue 2: Consideration of additional evidence by the TribunalThe Tribunal admitted additional evidence from both the revenue and the assessee. The revenue contended that certain documents, like an invoice and a letter from the Inland Revenue Board of Malaysia, raised doubts about the software supply by the assessee. The Tribunal's evaluation of this evidence was challenged by the revenue. The High Court observed that the Tribunal should have remanded the matter to the Assessing Officer for a fresh consideration based on the additional evidence presented.Issue 3: Evaluation of material produced by both partiesThe revenue and the assessee presented substantial material before the Tribunal. The Court noted that the Tribunal's consideration of the vast amount of material was not appropriate. The Court emphasized that in such cases, the Assessing Officer should be the one to decide on the evidence initially. Therefore, the High Court decided to remand the matter to the Assessing Officer for a fresh evaluation of all the material on record.Issue 4: Remand of the matter to the Assessing OfficerIn light of the discrepancies and the need for a fresh evaluation of the evidence, the High Court remanded the matter to the Assessing Officer for a thorough reexamination. The Court directed the Assessing Officer to consider all existing material and make a decision in accordance with the law. The Tribunal's findings were not to influence the Assessing Officer's fresh consideration. The Court concluded by directing the Assessing Officer to complete the process by a specified date.In conclusion, the High Court's judgment focused on the proper evaluation of evidence and the remand of the matter to the Assessing Officer for a fresh consideration to determine the deduction under Section 10-A of the Income Tax Act accurately.