COMMISSIONER OF INCOME TAX Vs. P DAMODARAN

JUDGEMENT

(1.) THE present appeals are filed under Section 260a of the income Tax Act, 1961 by the Revenue, in I. T. A. Nos. 1809 and 1810/mds/2000, passed by the Income Tax Appellate Tribunal, Madras ,'b'Bench raising the following substantial question of law. "whether in the facts and circumstances of the case, the Tribunal was right in upholding the assessee's claim for deduction u/s 80ia, when he himself had given a sworn statement to the central excise authorities that he did not have any activity of manufacture in the said premises?"

(2.) THE facts leading to the above question of law are as under: i) THE assessee had claimed deduction under Section 80ia (2) (iv) (c) of the Income Tax Act for manufacturing cable joining kit used in the telecommunication industry at Pondicherry, which is an industrially backward area. THE assessment order originally passed for the Assessment Year 1995-96, was set aside by the Commissioner of Income Tax (Appeals) with a clear direction to the Assessing Officer to examine the claim of the assessee with evidence in support of the return filed by him. THE Assessing Officer thereafter passed an assessment order under Section 143 (3) of the Income Tax act, read with 250 on 30. 03. 2000. For the assessment year 1997-98, the assessing Officer completed the assessment under Section 143 (3) of the Act. THE assessing Officer rejected the assessee's claim for deduction under Section 80ia (2) (iv) (c) relying upon the results of proceedings taken by the Central excise authorities against the assessee, by holding that the assessee did not carry on any manufacturing or production activities, but was indulging in stock transfer and in raising sales invoices from Pondicherry. Finally, the Assessing officer held that the assessee was not able to establish that any manufacturing activity had been commenced for claiming deduction under Section 80ia of the act. ii) Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), and claimed that the Assessing Officer rejected his claim without any independent enquiry and also ignored the real fact that the assessee had indulged in manufacturing activity at Pondicherry, and was therefore entitled for relief under Section 80-IA. After hearing the arguments, the Commissioner of Income tax (Appeals) came to the conclusion that the Assessing Officer, on his own, had not made on-the-spot enquiry so as to ensure the real facts and correctness of the assessee's claim that he had carried on manufacturing activity of cable joining kits at Pondicherry. THE C. I. T. (A) further found that even after the assessment had been set aside for the Assessment Year 1995-96 with a direction to examine the claim of the assessee under Section 80ia denovo, no such enquiries were made by the Assessing Officer. THE C. I. T. (A) finally held that the assessee is entitled to relief under Section 80ia of the Act. iii) Aggrieved by the order of the C. I. T. (A), the revenue filed an appeal before the Income Tax Appellate Tribunal. THE Income tax Appellate Tribunal dismissed the appeal filed by the Revenue and confirmed the order of the C. I. T (A ). THE standing counsel appearing for the Revenue submitted that the Tribunal was wrong in allowing the deduction under Section 80ia of the Act and failed to appreciate that the assessee himself had admitted in the statement dated 12. 12. 1996 before the Assistant Commissioner of Central excise (Anti Evation), Trichy, that the premises was used only as godown for packing goods in carton boxes containing the cable joining materials. He also further submitted that the Tribunal had not appreciated the statement recorded on 11. 06. 1997 that the assessee had admitted that he was engaged only in trading activity of buying and selling.