The Commissioner of Income Tax vs Alfa Engineers

K.A. Puj, J.—In compliance with the direction issued by this Court in Reference Application No. 364 of 1999 preferred by the revenue u/s 256(2) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot has drawn a statement of case in Reference Application No. 70/RJT/98 on 05.06.2000, for Assessment Year 1987-88 and referred to the following question of law for the opinion of this Court:

Whether the Appellate Tribunal is right in law and on facts in allowing the assessee''s claim towards production incentive to the extent of Rs. 2,42,476/- when the assessee had failed to produce evidence in support before the Assessing Officer ?

The brief facts giving rise to the present reference are that the respondent '' assessee, namely, M/s. Alfa Engineers, Rajkot, a registered firm, filed its return of income for Assessment Year 1987 -88 on 30.06.1987 declaring a loss of Rs. 6,08,930/-. The Assessing Officer has completed the assessment u/s 143(3) of the Income Tax Act 1961 on 28.02.1990 assessing the total income of Rs. 11,01,728/-, which, inter alia, included disallowance of production incentive amounting to Rs. 2,42,476/-. While disallowing the said production incentive, the Assessing Officer has observed in the assessment order that the assessee has not furnished any details, such as agreement with workers, method of computation and extra amount of production achieved by the workers. He has further observed that similar addition of this item was made in the assessee''s group of case in P.M. Diesels Private Limited for A.Y. 1985 '' 86 which was confirmed by CIT (Appeal) vide his order dated 01.09.1988. Since no details were furnished, the claim of the assessee was not entertained and an addition of Rs. 2,42,476/- was made.

Being aggrieved by the said order of the Assessing Officer, the respondent '' assessee preferred an appeal before the CIT (Appeals), Rajkot who vide his order dated 13.07.1992 confirmed the said addition. It appears that nobody appeared on behalf of the assessee before the CIT (Appeal), Rajkot and hence, CIT (Appeal) has dismissed the appeal after considering the submissions of the assessee as contended in the form of statement of facts and grounds of appeal.

Being further aggrieved by the order of the learned CIT (Appeals), Rajkot, the respondent '' assessee preferred Second Appeal before the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot. The Tribunal vide its order dated 03.08.1998 allowed the appeal on this issue in favour of the assessee after following its earlier decision in the case of M/s. P.M. Diesels (Private) Limited for A.Y. 1985 - 86.

Being aggrieved by the said order of the Tribunal, the revenue preferred reference application u/s 256(1) of the Act before the Tribunal requesting the Tribunal to refer to, inter alia, the above question of law for the opinion of this Court. The Tribunal, however, vide its order dated 05.03.1999 rejected the said reference application on the ground that no referable question of law arose out of the order of the Tribunal.

The revenue thereafter filed Income Tax Application No. 364 of 1999 u/s 256(2) of the Act before this Court and this Court vide its order dated 07.12.1999 directed the Tribunal to draw a statement of case and to refer the above question of law for the opinion of this Court.

Mrs. Mauna M. Bhatt, learned Standing Counsel appearing for the revenue has submitted that no details were furnished before the Assessing Officer during the course of assessment proceedings. Similarly, no one appeared before the Commissioner of Income Tax (Appeals), Rajkot and hence, there is no question of furnishing any details before the learned CIT (Appeal), Ahmedabad. Even before the Tribunal, specific contention was raised by the learned departmental representative that no details were furnished by the assessee in support of its claim of production incentive. Despite this fact, simply on the basis of its own earlier decision in the case of M/s. P.M. Diesels Private Limited, the Tribunal allowed the claim of the assessee. She has, therefore, submitted that the Tribunal has committed an error in law in allowing the claim of the assessee and hence, the Tribunal''s order on this point is required to be reversed and the question of law referred to this Court must be answered in negative and in favour of the revenue and against the assessee.

Despite service of notice, nobody appeared on behalf of the respondent '' assessee.

We have heard learned Standing Counsel appearing for the revenue and we have perused the orders passed by the authorities below. From the assessment order, it clearly appears that the Assessing Officer has rejected the claim of the assessee for production incentive only on the ground that the assessee has not furnished any details such as agreement with workers, method of computation and extra amount of production achieved by workers. Nobody appeared before the learned CIT (Appeal), Rajkot on behalf of the assessee. Even before the Tribunal, the learned departmental representative had contended that the assessee did not furnish the details for its claim of Rs. 2,42,476/-. Without dealing with this submission made on behalf of the learned departmental representative or without calling for the records of the Assessing Officer, the Tribunal straightway allowed the said claim of the assessee after following its earlier decision in the case of M/s. P.M. Diesel (Private) Limited for A.Y. 1985 '' 86. We are, therefore, of the view that even for the purpose of allowing the said claim, requisite details are necessary on the record. In absence of such details, claim cannot be allowed. If there is rival contention amongst the parties with regard to the furnishing of details, the Tribunal being final fact finding authority ought to have ascertained by calling for the records of the Income Tax Officer and if such details were there on record, then only the claim should have been allowed. It appears that the Tribunal has not undertaken this exercise and claim was allowed without ascertaining as to whether details are there on record or not. We are, therefore, allowing this reference for statistical purpose and direct the Tribunal to go into this aspect, while giving effect to this order u/s 260(1) of the Income Tax Act, 1961 as to whether the requisite details are there on record, and whether claim is allowable on the basis of such details.

Subject to the above, we answer the question referred to us in negative i.e. in favour of the revenue and against the assessee.

This reference is accordingly disposed of without any order as to costs.