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2015 (1) TMI 365 - ITAT LUCKNOWBenefit of exemption u/s 10(23B) – existence for development of khadi or village industries or both, and not for purposes of profit, - Whether the certificate issued by the Khadi & Village Industries Commission is in complete violation of rule 46A of the Income-tax Rules – Held that:- The certificate issued by the KVIC was not filed before the AO, as it was not available with the assessee - It was obtained during the course of appellate proceedings and it was filed before the CIT(A) - When new evidence was filed before the CIT(A), the CIT(A) ought to have called a remand report from the AO in this regard, but the CIT(A), instead of calling for a remand report, has allowed exemption under section 10(23B) of the Act having relied upon the certificate issued by the KVIC - the AO has not applied his mind with regard to the exemption claimed u/s 10(23B) of the Act in the light of the KVIC certificate, as it was not filed before him - the claim of exemption of the assessee should be examined in the light of the certificate issued by the KVCI, by the AO. Jurisdiction of AO for denial of benefit u/s 10(23B) – Held that:- The AO cannot out rightly deny the benefit of exemption claimed under section 10(23B) of the Act if KVIC certificate is filed before him, unless he reports the matter to the Commissioner, KVIC for cancellation or withdrawal of certificate, if he notice that the activities of the assessee are in contravention of the provisions of section 10(23B) of the Act - But it does not mean that the Assessing Officer is debarred from making necessary enquiries with regard to the activities of the assessee while allowing exemption under section 10(23B) of the Act if KVIC certificate is filed before him - Since KVIC certificate was filed for the first time before the CIT(A), the AO has not applied his mind to the activities of the assessee, therefore, the matter may be restored back to the file of the AO with a direction to re-adjudicate the issue of exemption claimed u/s 10(23B)of the Act in the light of certificate issued by the KVIC – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for re-adjudication – Decided in favour of revenue.
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