By TIOL News Service

SHIMLA, NOV 15, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether the taxpayer is bound by the percentage of deduction claimed by him during preceding years, while making claim for future years. NO IS THE VERDICT.

Facts of the case:

The assessee is an individual. During the course of assessment, the AO found that the assessee had close connection with another concern i.e. M/s Stoneage Industrial Diamond Product which was the partnership concern of assessee and M/s Shree Tools whose sole proprietor was assessee himself. Therefore, by applying the principle of Section 80IA(10), he determined the income of assessee by reducing the net profit by 10%. On appeal, both the CIT(A) as well as the ITAT confirmed the order of AO.

High Court held that,

++ it is not in dispute that the reason assigned by the AO in applying the provisions of Section 80IA(10), is based only on an admission made by assessee in relation to the two preceding assessment years. There cannot be a dispute, that assessment of each year is required to be independently carried out on the basis of material before the AO. It is noticed that the authorities failed to consider compliance of essential ingredients required for invocation of the said provisions. The AO as also other authorities proceeded on the presumption that since in the preceding years the assessee admitted deduction to the extent of 10%, hence, in future also assessee would continue to be bound by the same. This is not a reasonable approach adopted by the authorities, for each case of the assessee has to be considered independent of the each assessment year and not on the basis of assessment carried out in the preceding year. Thus, the orders passed by authorities are quashed and remanded back to the file of AO for consideration afresh.

(See 2018-TIOL-2416-HC-HP-IT)