Income Tax Appellate Tribunal - Bangalore
Income Tax Officer Ward-4(3)(1), ... vs Shri.Rajesh Boda , Bangalore on 24 August, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH : BANGALORE
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.508/Bang/2018
Assessment year : 2013-14
The Income Tax Officer, Vs. Shri Rajesh Boda,
Ward 4(3)(1), No.123/A, 4th Cross, 27th Main,
Bangalore. Sector-1, HSR Layout,
Bangalore - 560 102.
PAN: AIIPB 6255G
APPELLANT RESPONDENT
Appellant by : Shri M. Narasimha Raju, Jt.CIT(DR)(ITAT), Bengaluru.
Respondent by : Shri H. Guruswamy, ITP.
Date of hearing : 01.08.2018
Date of Pronouncement : 24.08.2018
ORDER
Per N.V. Vasudevan, Judicial Member
This is an appeal by the Revenue against the order dated 30.11.2017 of the CIT(Appeals)-4, Bangalore relating to assessment year 2013-14.
2. The grounds of appeal raised by the revenue reads as follows:
"1. The Order of the Ld. CIT (A), in so far as it is prejudicial to the interest of the Revenue, is opposed to law and the fact and circumstances of the case.ITA No. 508/Bang/2018 Page 2 of 8
2. On facts of the case, Whether the Ld CIT(A) is right in allowing the appeal of the assessee on disallowance u/s 80IC based on the evidences produced before the Ld. CIT(A), which was not produced before the AO. In the circumstances, the Ld CIT(A) ought to have given the opportunity to the AO before giving the decision.
3. On facts of the case, the Ld CIT (A) has failed to appreciate that by not giving opportunity to the AO has violated the provision of Rule 46A of the I T Rule.
4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored.
5. The appellant craves leave to add, alter, amend and / or delete any of the grounds that may be urged."
3. The Assessee is an individual. The Assessee claimed deduction of a sum of Rs.65,93,769/- u/s.80IC of the Income Tax Act, 1961 (Act) while computing total income. The claim of the Assessee for deduction was made u/s.80IC(2) of the Act which is as under:-
"(2) This section applies to any undertaking or enterprise,--
(a ) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning--
(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the ITA No. 508/Bang/2018 Page 3 of 8 scheme framed and notified by the Central Government in this regard, in the State of Sikkim; or
(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Inte-
grated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or
(iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Techno-logy Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States;
(b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning--
(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in the State of Sikkim; or
(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or
(iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of the North-Eastern States."
ITA No. 508/Bang/2018 Page 4 of 84. The Assessee's claim was that it manufactured an article or thing specified in 14th Schedule to the Act. The AO rejected the claim of the Assessee for the reason that the product manufactured by the Assessee was in the 13th Schedule to the Act and not 14th Schedule. The following were the relevant observations of the AO:-
"5. According to section 80IC(2)(a), any undertaking or enterprise which has begun or beings to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth schedule and undertakes substantial expansion during the period beginning on the 7th day of January 2003 and ending before the lst day of April 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Central Board in accordance with the scheme framed and notified by the Central Government in this regard, in the.. state of Himachal Pradesh or the State of Uttaranchal, (h) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that schedule, or which manufactures or produces any articles or thing, specified in the-Fourteenth schedule or commences any operation specified in that schedule and undertakes substantial expansion during the period .....' shall be eligible for deduction u/s 801C(3).
6. It is seen that the assessee's product is not covered in the Fourteenth Schedule but is covered in Thirteenth Schedule, under the head insectides, fungicides, herbicides and pesticides (basic manufacture and. formulation) since the assessee is into the business of manufacture of manure even though he claims that his product is Organic manure. The assessee has not brought on record anything to prove that his product falls under Medicinal Herbs and aromatic herbs etc thus becomes ineligible for ITA No. 508/Bang/2018 Page 5 of 8 deduction u/s 801C. In view of the above, assessee's claim of deduction u/s 80IC is disallowed and an amount of Rs. 65,93,769 is added back to the total income."
5. Before CIT(A), the Assessee claimed that he was manufacturing organic manure in the State of Himachal Pradesh and the said article fell within the category of "Medicinal Herbs and aromatic herbs, etc., processing" being item No.2 of 14th Schedule to the Act. The CIT(A) allowed the claim of the Assessee with the following observations:-
• "The assessee has submitted certain additional details in support of its contention that its product has been tested by the department of Agriculture, for pesticide residues, by the Pesticide Residue Testing Laboratory, Pune. It is stated that its samples were tested for 96 broad group pesticides / insecticides and the product was certified to represent "no- residues". It is further submitted that, the Herbs (produced by the appellant) are utilized in Medicinal plant extracts as raw-material and only organic products are made, which are free from chemicals. The appellant is stated to be using foliage, hark, root and tubers etc. of various medical plants / herbs obtained from different locations which are of end- use in Ayurveda, Unani, Homoeopathy, Siddha etc. It is therefore the assessee's contention that, it's processes and production is such that its case is squarely covered under the Schedule-Fourteenth and not Schedule-Thirteenth of the section 80IC of the I.T. Act.
• The AO's impugned-order does not contain any substantial finding of fact to refute the assessee's aforesaid contention based on extensive details submitted during the appeal proceedings.
In background of the above detailed discussion, facts and details placed on record by the appellant and in absence of any evidenciary-justification in the AO's order, the disallowance made in the impugned-order cannot be sustained. The assessee's ground of appeal is therefore allowed."ITA No. 508/Bang/2018 Page 6 of 8
6. Aggrieved by the order of the CIT(A) the revenue has preferred the present appeal before the Tribunal. We have heard the rival submissions. The main grievance of the revenue is that the CIT(A) admitted additional evidence in violation of Rule 46A of the Income Tax Rules, 1962 (Rules). Rule 46A of the Rules reads thus:-
"Production of additional evidence before the Deputy Commissioner (Appeals)and Commissioner (Appeals).
46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :--
(a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or
(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or
(c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or
(d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.
(2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission.
(3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account ITA No. 508/Bang/2018 Page 7 of 8 any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity--
(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or
(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.
(4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271."
7. It was argued on behalf of the Assessee that there was no additional evidence filed by the Assessee before CIT(A), but this contention is contrary to the conclusions of the CIT(A) that additional details were filed before him and based on those details, he was satisfied that the Assessee was manufacturing article specified in Schedule 14 of the Act. Admittedly, these additional details being the basis of the conclusion of the CIT(A) that the Assessee was manufacturing an Article specified in Schedule 14 of the Act, the CIT(A) was duty bound to afford opportunity to the AO to examine these details and obtain evidence contrary to the claim of the Assessee or to substantiate the claim of the Assessee as not correct. The learned AR's argument that under Rule 46A(4) of the Rules, the CIT(A) has inherent powers to examine evidence independently without confronting the same to the AO, cannot be accepted on the facts of the present case, because the required details were not produced at the direction of the CIT(A). For Rule 46A(4) of the Rules to apply, the additional evidence ought to be called for ITA No. 508/Bang/2018 Page 8 of 8 by the CIT(A). Even in such circumstances it is desirable that the CIT(A) confronts the AO with the additional evidence produced before him. The AO being a party to the proceedings should not be denied the opportunity of being heard. We therefore accept the prayer of the revenue for remanding the issue for fresh consideration by the CIT(A) after confronting the additional evidence or details filed by the Assessee before CIT(A).
8. For statistical purpose, the appeal of the revenue is treated as allowed.
Pronounced in the open court on this 24th day of August, 2018.
Sd/- Sd/-
( A.K. GARODIA) ( N.V. VASUDEVAN)
Accountant Member Judicial Member
Bangalore,
Dated, the 24th August, 2018.
/ Desai Smurthy /
Copy to:
1. Appellant 2. Respondent 3. CIT 4. CIT(A)
5. DR, ITAT, Bangalore. 6. Guard file
By order
Senior Private Secretary
ITAT, Bangalore.