Dhulichand Textile Mills V. Income Tax Department

ITTA/80/2004

AI Insights

The case revolves around the appellant, Dhulichand Textile Mills, who during a search and seizure operation under Section 132(4) of the Income Tax Act, 1961, was found with stocks valued at Rs.6,40,000 and Rs.4,00,000. The appellant claimed these stocks were income from other concerns and sought deductions for these amounts under Sections 80HH and 80I in his tax return for the Assessment Year 1995-96. The Assessing Officer denied these deductions, leading to an appeal that was initially successful but later overturned by the Income Tax Appellate Tribunal. The Tribunal's decision was based on the appellant's failure to substantiate that the income was derived from a qualifying industry as required by Sections 80HH and 80I. The High Court dismissed the appellant's further appeal, agreeing with the Tribunal's findings.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 795971 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 10-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: VENKAT RAM REDDY
• Keywords: Assessment appeal; Deduction claim; Income tax appellate tribunal; Search and seizure; Stock valuation
• Section: 80HH; 260A; 132(4); 80I

Judgement Text

"THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.80 of 2004 JUDGMENT: (per the Hon’ble Sri Justice L.Narasimha Reddy) The appellant is a proprietor of Dhulichand Textile Mills. In the course of search and seizure conducted under Section 132(4) of the Income Tax Act, 1961 (for short ‘the Act’) on 13.07.1994, it was noticed that stock worth Rs.6,40,000/- was found in the business premises of M/s. Venkateswara Balaji Textiles and stock worth Rs.4,00,000/- was found in unmanned godown. The appellant explained that to be the income from other concerns. In compliance with the notice issued under the relevant provisions of the Act, the appellant submitted his return for the Assessment Year 1995-96. However, he claimed deduction of those two amounts under Section 80HH and 80I of the Act. The Assessing Officer did not allow such deductions. Aggrieved by the order of assessment, the appellant approached the Commissioner of Income Tax (Appeals-II), Hyderabad. The appeal was allowed through order dated 23.06.1998. The Revenue challenged the order of the Commissioner by filing I.T.A.No.660/Hyd/1998 before the Hyderabad Bench ‘B’ of the Income Tax Appellate Tribunal. The appeal was allowed through order dated 25.06.2003. Hence, this further appeal under Section 260A of the Act. Heard Sri Venkat Ram Reddy, learned counsel for the appellant and Sri S.R.Ashok, learned counsel for the respondent. It is not in dispute that stocks worth Rs.6,40,000/- and Rs.4,00,000/- were found in the course of search and seizure and the appellant did not disown them. The explanation, however, at the relevant point of time, was that the amount was derived from “other sources”. However, in the return, claim was made for deduction under Sections 80HH and 80I of the Act. No material, as such, was placed before the Assessing Officer to establish that the amount representing the value of the goods has been earned as profit from an industry that qualifies under Sections 80HH and 80I of the Act. In the appeal preferred before the Commissioner, vague and uncertain observation was made to the effect that the ratio of the judgment of the Amritsar Bench of the Income Tax Appellate Tribunal covers the issue. No attempt was made to cover the basic issue as to whether the appellant has proved that it has established an industry in the backward area and other facts mentioned in sub-Section (2) of Section 80 HH of the Act. It is only when the various facets mentioned in sub-Section (2) of Section 80HH of the Act are proved, that the profit derived from such an industry can be allowed for deduction. The Tribunal took note of this glaring deficiency on the part of the appellant and allowed the appeal preferred by the Revenue. We do not find any basis to interfere with the order under appeal. The appeal is accordingly dismissed. There shall be no order as to costs. The miscellaneous petitions filed in this appeal shall also stand disposed of. ___________________________ L.NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date: 10.12.2014 va "