JEWELEX INDIA P.LTD, MUMBAI V. DCIT RG 3(2)(1), MUMBAI

CO 81/MUM/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4165 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR
• Keywords: Reason to believe; Set aside
• Section: 143(3); 10AA; 115JB; 10B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AN D SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7240/M/2014 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME TAX, - 3(2)(1), R.NO.674, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. JEWELEX INDIA PVT. LTD., 401, TRADE CENTRE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051 PAN: AABCJ4523H (APPELLANT) (RESPONDENT) CO NO.81/M/2016 (ARISING OUT OF ITA NO.7240/M/2014) ASSESSMENT YEAR: 2008-09 M/S. JEWELEX INDIA PVT. LTD., 401, TRADE CENTRE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051 PAN: AABCJ4523H VS. DY. COMMISSIONER OF INCOME TAX, - 3(2)(1), R.NO.674, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NITESH JOSHI, A.R. SHRI P.P. B HANDARI, A.R. REVENUE BY : SHRI C.W. ANGOLKAR, D.R. DATE OF HEARING : 20.07.2016 DATE OF PRONOUNCEMENT : 20.07.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TILTED APPEAL BY THE REVENUE AND THE CRO SS OBJECTION THERETO BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORD ER DATED 16.09.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008-09. SINCE THE FAC TS AND ISSUES INVOLVED THEREIN ARE IDENTICAL IN NATURE, HENCE THE SAME ARE TAKEN TOGETHER FOR DISPOSAL BY THIS COMMON ORDER. ITA NO.7240/M/2014 & CO NO.81/M/2016 M/S. JEWELEX INDIA PVT. LTD. 2 2. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF JEWELLERY AND EXPORT OF CUT AND POLISHED DIAMONDS. THE JEWELLERY MANUFACTURING UNI TS OF THE COMPANY ARE LOCATED IN SPECIAL ECONOMIC ZONE (SEZ) VIZ. SEEPZ, MUMBAI. ASSESSEE FURNISHED ITS ORIGINAL E-RETURN OF INCOME FOR A.Y. 2008-09 ON 30.09.2008 DECLARING TOTAL INCOME OF RS.12,01,91,883/- UNDER N ORMAL PROVISIONS AND BOOK PROFIT UNDER SECTION 115JB OF THE ACT AT RS.86,553, 072/-. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) COMPLET ED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 30.11.2010 ASSESSING T OTAL INCOME AT RS.12,25,52,060/- UNDER THE NORMAL PROVISIONS. HOW EVER, THE AO NOTICED THAT THE ASSESSEE COMPANY HAD QUANTIFIED TAXABLE PROFIT AT RS.8,65,53,072/- AFTER REDUCING RS.32,04,01,165/- FROM BOOK PROFIT AS INCO ME ATTRIBUTABLE TO WHICH SECTION 10A IS APPLICABLE. THE AO WAS OF THE VIEW THAT WHILE COMPUTING THE BOOK PROFITS, THE ASSESSEE WAS NOT SUPPOSED TO EXCL UDE THE PROFITS OF THE 10A ELIGIBLE UNIT. HE, THEREFORE, REOPENED THE ASSESSM ENT UNDER SECTION 147 OF THE ACT BY WAY OF ISSUING NOTICE DATED 15.03.13 UNDER S ECTION 148 ALONG WITH REASONS FOR REOPENING OF THE ASSESSMENT. THE AO OB SERVED THAT W.E.F. 01.04.2007, ANY AMOUNT OF EXPENDITURE RELATABLE TO ANY INCOME CREDITED TO THE PROFIT AND LOSS ACCOUNT U/S.10A OR SECTION 10B IS N OT ALLOWED AS A DEDUCTION WHILE COMPUTING THE BOOK PROFIT. HE FURTHER OBSERVE D THAT THOUGH THE ASSESSEE HAD HEAVILY RELIED ON SECTION 115JB(6) THAT WAS INS ERTED BY THE SPECIAL ECONOMIC ZONE ACT, 2005 W.E.F. 10.2.2006 WHILE ARGU ING FOR THE APPLICATION OF SECTION 1OA/1OAA FOR ARRIVING AT THE BOOK PROFIT, H OWEVER, IN DOING SO, THE AMENDMENT MADE BY THE FINANCE ACT, 2007 W.E.F. 01.0 4.2008 HAD BEEN OVERLOOKED. THAT THIS AMENDMENT WAS MADE BY THE LEG ISLATURE WITH AN INTENTION TO WIDEN THE SCOPE OF MINIMUM ALTERNATE T AX (MAT) TO INCLUDE INCOME EXEMPT U/S.10A AND 10B OF THE INCOME TAX ACT . HE FURTHER HELD THAT BOARD'S CIRCULAR NO.3/2008 ALSO HOLDS RELEVANCE ON THIS ISSUE WHEREIN IT IS MENTIONED THAT THE INCOME TO WHICH SECTION 10A OR S ECTION 10B APPLIED WILL ALSO BE SUBJECTED TO THE PROVISIONS OF MAT. THE ASS ESSEE HAD ALSO RELIED ON THE ITA NO.7240/M/2014 & CO NO.81/M/2016 M/S. JEWELEX INDIA PVT. LTD. 3 DECISION OF ITAT IN THE CASE OF GENESYS INTERNATIO NAL CORPORATION LTD. V. ACIT IN ITA NOS.6903/M/2011 AND 609/M/2012. HOWEVE R, THE A.O. HELD THAT THE FACTS OF THE ASSESSEES CASE ARE NOT SIMIL AR TO THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. AND AS SUCH THE DECI SION OF ITAT BENCH OF MUMBAI IS NOT APPLICABLE TO THIS CASE. HE FURTHER H ELD THAT WHILE QUANTIFYING BOOK PROFIT, INCOME ATTRIBUTABLE TO WHICH SECTION 1 0A/10AA IS APPLICABLE IS NOT A SPECIFIED ADJUSTMENT, INCOME PERTAINING TO SE Z UNITS CANNOT BE TREATED AS ADJUSTMENT AND REDUCED FROM BOOK PROFIT. THUS, THE ADJUSTMENT OF REDUCING PROFIT OF 10A/10AA AND SEZ FROM BOOK PROFIT IS INCO RRECT AND NOT ALLOWABLE. BEING AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE PR EFERRED APPEAL BEFORE THE LD. CIT(A). 3. THE LD. CIT(A), THOUGH, DECIDED THE ISSUE RELATI NG TO THE VALIDITY OF THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF TH E ACT AGAINST THE ASSESSEE OBSERVING THAT THE NOTICE UNDER SECTION 147 WAS ISS UED AND SERVED WITHIN FOUR YEARS FROM THE RELEVANT ASSESSMENT YEARS AND THAT T HE AO HAD REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSM ENT. HOWEVER, ON MERITS, THE LD. CIT(A), WHILE RELYING UPON THE DECISION OF HIS PREDECESSOR, IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2010-11 ON IDENTICAL FACTS ALLOWED THE CLAIM OF THE ASSESSEE. BEING AGGRIEVED BY THE ABOVE DECISIO N OF THE LD. CIT(A), THE REVENUE HAS COME IN APPEAL BEFORE US RAISING THE FO LLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN EXCLUDING THE PROFITS OF TH E UNDERTAKING OPERATING FROM THE SPECIAL ECONOMIC ZONE (SEZ) FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT EXCLUDING THE SALE OF T HE GOLD DUST. DESIGN CHARGES OF RS.12,66,224/- FROM BUSINESS PROFITS FOR THE PUR POSE OF COMPUTING DEDUCTION ALLOWABLE UNDER SECTION 10AA OF THE ACT. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . ITA NO.7240/M/2014 & CO NO.81/M/2016 M/S. JEWELEX INDIA PVT. LTD. 4 4. THE ASSESSEE, HOWEVER, HAS FILED CROSS OBJECTION AGITATING AGAINST THE FINDINGS OF THE LD. CIT(A) UPHOLDING THE REOPENING OF THE REASSESSMENT ITSELF. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. AT THE OUTSET, THE LD. COUNSEL FOR THE ASS ESSEE HAS STATED THAT THE VERY REOPENING OF THE ASSESSMENT IN THIS CASE WAS BAD IN LAW. HE, IN THIS RESPECT, HAS INVITED OUR ATTENTION TO THE REASONS RECORDED F OR THE REOPENING OF THE ASSESSMENT AS EXTRACTED IN PARA 3.2 OF THE IMPUGNED ORDER WHICH FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER: 'ON PERUSAL OF THE RECORD FOR THE ASSESSMENT YEAR 2 008-09,IT IS OBSERVED THAT THE ASSESSEE COMPANY QUANTIFIED TAXABLE BOOK PROFIT AT RS.8,65,53,072/- AFTER REDUCING RS.32,04,01,165/- FROM BOOK PROFIT AS INCO ME ATTRIBUTABLE TO WHICH SECTION 10A IS APPLICABLE. SINCE THE INCOME RELATAB LE TO SECTION 10A IS NOT SPECIFIED ADJUSTMENT, THE BOOK PROFIT QUANTIFIED AT RS.8,65,53,072/- IS NOT IN ORDER. AS PER PROVISION OF THE I.T. ACT, TAX PAYABLE UNDER NORMAL PROVISION IS LESS THAN TEN PERCENT OF THE BOOK PROFIT IN RESPECT OF A.Y.20 08-09, THEN THE BOOK PROFIT IS TAXABLE AT TEN PERCENT UNDER DEEMED PROVISIONS OF T HE ACT. FURTHER, WHILE QUANTIFYING THE BOOK PROFIT TO WHICH THE PROVISIONS OF SECTION 10A ARE APPLICABLE, IS NOT A SPECIFIED DEDUCTION FROM THE B OOK PROFIT. THIS IS RESULTED INTO UNDER ASSESSMENT OF RS.32,04,01,165/-. 6. HE, FURTHER, INVITING OUR ATTENTION, HAS STATED THAT THE ISSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. V. ACIT (S UPRA) WHICH DECISION WAS ALSO CITED BEFORE THE AO. HOWEVER, THE AO, WITHOUT RECORDING ANY DISTINGUISHING FACT, HAS IGNORED THE SAID DECISION. THE AO, THUS, WAS VERY MUCH AWARE OF THE DECISION OF THE TRIBUNAL DATED 31 .10.2012 (SUPRA) AT THE TIME OF RECORDING REASONS JUSTIFYING FOR REOPENING OF THE ASSESSMENT. THE LD. A.R. HAS FURTHER INVITED OUR ATTENTION TO THE DECIS ION OF THIS TRIBUNAL VIDE ITA NO.1055/M/2013 RELEVANT TO A.Y. 2009-10 IN THE OWN CASE OF THE ASSESSEE VIDE ORDER DATED 27.06.14 VIDE WHICH THE TRIBUNAL WHILE RELYING UPON ITS DECISION IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. V. ACIT (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE OBSERVI NG AS UNDER: ITA NO.7240/M/2014 & CO NO.81/M/2016 M/S. JEWELEX INDIA PVT. LTD. 5 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD, INCLUDING THE DECISION BY THE TRIBUNAL IN THE CASE OF GENEYS INTERNATIONAL CORPORATION LTD. (SUPRA), THIS BEING THE PRINCIPAL ISSUE DECIDED BY THE TRIBUNAL IN THAT CASE. THE TRIBUNAL HAS DISCUSSED THE MATTER IN DETAIL; ITS FI NDINGS BEING CONTAINED AT PARAS 21 AND 22 OF ITS ORDER, WHICH PARAGRAPHS FIND REPRO DUCTION IN THE IMPUGNED ORDER VIDE PARA 6 THEREOF. THE TRIBUNAL HAS CLARIFI ED THAT NOTWITHSTANDING THE OMISSION OF THE REFERENCE TO, INTER A/IA, SECTION 1 0A IN THE RELEVANT ADJUSTMENT CLAUSE, SO THAT THE PROFIT FALLING U/S. 10A IS SUBJ ECT TO BOOK PROFIT TAX U/S.1 15JB, THE SAID PROVISION WOULD NOT, IN VIEW OF THE OVERRI DING CHARACTER OF SUBSECTION (6) THEREOF, APPLY TO ANY UNIT OPERATING IN SEZ, AL SO CLARIFYING THAT THE DEDUCTION U/S.10A IS ALSO APPLICABLE TO UNITS NOT OPERATING I N A SEZ. NO CONTRARY DECISION HAVING BEEN BROUGHT TO OUR NOTICE BY THE REVENUE, R ESPECTFULLY FOLLOWING THE SAME, WE HAVE NO HESITATION IN UPHOLDING THE IMPUGN ED ORDER ON THIS GROUND, DISMISSING THE REVENUE'S GROUND NO. I. WE DECIDE AC CORDINGLY. 7. FROM THE FACTS, IT IS ESTABLISHED THAT THE CASE OF THE ASSESSEE AS ON THE DATE OF REOPENING WAS SQUARELY COVERED BY THE DECIS ION OF THE TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. V. ACIT (SUPRA) AND THUS, THE AO CANNOT BE SAID TO BE HAVING REASONS TO BELIEVE T HAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT IN THE ABSENCE OF A NY CONTRARY DECISION OF ANY HIGHER AUTHORITY. FURTHER THAT THE SAID DECISION W AS APPLICABLE TO THE FACT AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE IS ALSO E STABLISHED, AS THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2009-10 HAS R ELIED UPON THE SAID DECISION WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE REOPENING OF THE ASSESSMENT BY THE AO WAS BAD IN LA W. WE, THEREFORE, SET ASIDE THE REOPENING OF THE ASSESSMENT AND DECIDE TH IS ISSUE RAISED BY THE ASSESSEE BY WAY OF HIS CROSS OBJECTION IN FAVOUR OF THE ASSESSEE. SINCE WE HAVE ALREADY HELD THAT THE REOPENING OF THE ASSESSM ENT WAS BAD IN LAW, HENCE THE CONSEQUENT ADDITIONS, THUS, HAVE NO LEGS TO STA ND AND ARE ACCORDINGLY ORDERED TO BE DELETED. 8. IN VIEW OF OUR ABOVE OBSERVATIONS, THE APPEAL OF THE REVENUE AGITATING THE ADDITIONS ON MERITS HAS BECOME INFRUCTUOUS AS W E HAVE ALREADY UPHELD THE ISSUE REGARDING THE VALIDITY OF REOPENING IN FAVOUR OF THE ASSESSEE. ITA NO.7240/M/2014 & CO NO.81/M/2016 M/S. JEWELEX INDIA PVT. LTD. 6 9. IN THE RESULT, THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE HEREBY ALLOWED WHEREAS THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.07.2016. SD/- SD/- (D. KARUNAKARA RAO) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 20.07.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.