TAJ FIREWORKS INDUSTRIES,SIVAKASI vs. ACIT, MADURAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – II, Madurai, dated 12.09.2014 and pertains to assessment year 2004-05.

Shri K.V. Raman, the Ld. representative for the assessee, submitted that the assessee credited an investment allowance reserve under Section 32A of the Income-tax Act, 1961 (in short 'the Act') at 20% of the value of the machinery acquired during the financial year 1998-99. In the financial year 1994-95, the said amount was transferred to investment allowance utilization reserve, since the reserve was utilized for acquiring machinery for the business. After eight years of creation of reserve, according to the Ld. representative, the reserve was transferred to Partner’s capital account. However, the Assessing Officer made an addition under Section 69 of the Act as undisclosed investment. On appeal by the assessee, the CIT(Appeals), after simply reproducing the remand report submitted by the Assessing Officer, confirmed the addition without any further discussion.

On the contrary, Dr. B. Nischal, the Ld. Departmental Representative, submitted that the Assessing Officer found that the assessee is not eligible for the benefit under Section 32AB of the Act. The assessee also could not substantiate the claim under Section 32A of the Act. The Assessing Officer further found that no portion of investment allowance shall be carried forward for more than eight years immediately succeeding the assessment year relevant to previous year in which the machinery was installed.

We have considered the rival submissions on either side and perused the relevant material on record. We have carefully gone through the order of the CIT(Appeals). The CIT(Appeals), after reproducing the observation made by the Assessing Officer, written submission filed by the assessee and the remand report of the Assessing Officer, has confirmed the addition made by the Assessing Officer without any discussion at all. The CIT(Appeals), being the first appellate authority, is expected to appreciate the material available on record and record his own conclusion and reasons in the order. Unfortunately, the CIT(Appeals) in one line has upheld the order of the Assessing Officer. This Tribunal is of the considered opinion that the CIT(Appeals) has to pass a speaking order by re-appreciating the material available on record and recording his own reasons in the conclusion. Since such an exercise has not been done by the CIT(Appeals), the order of the CIT(Appeals) is set aside and the issue is remitted back to the file of the CIT(Appeals). The CIT(Appeals) shall reconsider the issue afresh in the light of the material available on record and thereafter record his own reasoning for the conclusion reached by him. In other words, the CIT(Appeals) shall apply his mind and pass a speaking order.

With the above observation, the appeal filed by the assessee is allowed for statistical purposes.