King Exports, Ludhiana V. ACIT, Ludhiana

ITA 1005/CHANDI/2011

• Counselvise Citation: 100521514 RSA 2011
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 18-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: ASHOK JUNEJA
• Keywords: Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 147; 148; 143(3); 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1005/CHD/2011 ASSESSMENT YEAR: 2003-04 KING EXPORTS, V ACIT-I, C-1, B-4, SHERPUR, LUDHIANA. FRIENDS IND. COLONY, LUDHIANA-141010. PAN: AADFK-3575F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK JUNEJA DEPARTMENT BY : SMT. JAISHREE SHARMA DATE OF HEARING : 20.12.2011 DATE OF PRONOUNCEMENT : 04.01.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 08.09.2011 BY THE LD. CIT(A ) U/S 143(3) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE AC T'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF LD. CIT(A) HAS WRONGLY UPHELD THE ILLEGAL RE-OPENING OF THE CASE U/S 148 OF THE IT AC T, 1961 BY THE AO AND THE LD. CIT(A) HAS ALSO IGNORED THE F ACT THAT ALL THE MATERIAL AND RELEVANT FACTS WERE ADMIT TEDLY AVAILABLE WITH THE AO AT THE TIME OF MAKING ORIGINA L ASSESSMENT AND ALL THE FACTS WERE DULY CONSIDERED B Y AO AT THAT TIME. AS SUCH, THE ASSESSMENT WAS FINAL AND THEREFORE, THE RE-OPENING ENTIRELY INVALID. 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS A S WELL AS WRONGLY AND ILLEGALLY DECIDED THE APPEAL AG AINST THE APPELLANT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN THE LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ORDE R PASSED BY AO, WHEREIN DEDUCTION U/S 80HHC WAS WRONGLY RECOMPUTED BY REDUCING AN AMOUNT OF RS.78,82,237/- BEING DEDUCTION ALLOWED U/S 80IB. 4. THAT THE APPELLANT PRAYS THAT THE DISALLOWANCE O F RS.38,59,365/- MADE IN DEDUCTION ALLOWABLE AND CLAIMED U/S 80HHC SHOULD BE DELETED. 5. THE LD. CIT(A) HAS NOT CONSIDERED THE FACT THAT THE ASSESSEE HAS RIGHTLY AND CORRECTLY CLAIMED THE DEDUCTION U/S 80HHC AND 80IB OF IT ACT,1961 WHERE THERE ARE TWO RELIEFS, EACH RELIEF UNDER DIFFERENT SECTION, THEN THE RELIEF SHOULD BE CALCULATED INDEPENDENTLY SUBJECT TO THE CONDITION THAT THE AGGREGATE OF BOTH RELIEFS SHOULD NOT EXCEED THE INCOME OF THE UNDERTAKING. 6. THE APPELLANT CARVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE IT IS FINALLY HEARD FOR DISPOSAL. 3. IN GROUND NO.1, THE ASSESSEE CHALLENGED THE VALI DITY OF THE INVOCATION OF THE PROVISIONS OF SECTION 147 REA D WITH SECTION 148 OF THE ACT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, RELEVANT RE CORDS MADE AVAILABLE AND FOUND THAT THE AO INVOKED THE PROVISIONS OF SECTION 148 BY WAY OF ISSUE OF NOTICE DATED 18.03.2010, WHICH WAS SERVED ON THE ASSESSEE ON 19. 3.2000. THE REASONS RECORDED ARE REPRODUCED HEREUNDER : THE ASSESSEE FILED RETURN OF INCOME ON 30.11.2003 AT A RETURN INCOME OF RS.2,96,59,322/-. THE CASE WAS ASSESSED U/S 143(3) VIDE ORDER DATED 28.2.2006 AT A N 3 ASSESSED INCOME OF RS.4,35,32,840/-. A TEST CHECK O F THE ASSESSMENT RECORDS OF THE CASE HAS REVEALED THA T THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB AS WELL AS SECTION 80HHC. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB AMOUNTING TO RS.78,82,237/- BUT WHILE COMPUTING DEDUCTION U/S 80HHC, THE DEDUCTION CLAIME D U/S 80IB HAS NOT BEEN DEDUCTED FROM THE PROFITS AND GAINS OF BUSINESS. SECTION 80IA(9) OF INCOME TAX,1961 STATES THAT WHE RE ANY AMOUNT OF PROFITS AND GAINS OF AN (UNDERTAKING) OR OF AN ENTERPRISE IN THE CASE OF AN ASSESSEE IS CLAI MED AND ALLOWED UNDER THIS SECTION FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND G AINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS OF THIS CHAPTER UNDER THE HEAD C-DEDUCTION IN RESPECT OF CERTAIN INCOME, AND SHALL IN NO CASE EXCEED THE PR OFITS AND GAINS OF SUCH ELIGIBLE BUSINESS OF (UNDERTAKING ) OR ENTERPRISE, AS THE CASE MAY BE. IN VIEW OF THIS PROVISION OF THE INCOME-TAX ACT,196 1 THE AMOUNT OF DEDUCTION CLAIMED U/S 80IB AMOUNTING TORS.78,82,237/- WAS REQUIRED TO BE DEDUCTED FROM PROFITS AND GAINS OF BUSINESS WHILE CALCULATING DEDUCTION U/S 80HHC. THIS HAS RESULTED IN EXCESS ALLOWANCE OF DEDUCTION U/S 80HHC TO THE EXTENT OF RS.38,59,364/-. KEEPING IN VIEW THE ABOVE FACTS, I HAVE REASON TO BELIEVE THAT INCOME AMOUNTING TO RS.38,59,364/- HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2003-04. I A M OF THE OPINION THAT IT IS A FIT CASE FOR ISSUE OF N OTICE U/S 148. 5. THE CONTENTION OF THE ASSESSEE THAT THE EARLIER ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT WHER EIN THE CLAIM MADE BY THE ASSESSEE U/S 80HHC IS NOT TENABLE , AS THERE EXISTS LIVE NEXUS BETWEEN THE REASONS RECORDE D AND THE 4 ESCAPEMENT OF INCOME. FURTHER, THE IMPUGNED CLAIM OF THE ASSESSEE IS CONTRARY TO THE EXPRESS PROVISIONS OF S ECTION 80IA(9)/80IB(13) READ WITH SECTION 80AB OF THE ACT. THERE IS CREDIBLE MATERIAL ON RECORD FOR THE PURPOSE OF F ORMATION OF REASON TO BELIEVE BY THE AO IN THE MATTER. THE CLA IM MADE BY THE ASSESSEE IS INCORRECT AND CONTRAVENES THE PR OVISIONS OF SECTION 80IA(9)/80IB(13) OF THE ACT. LD. CIT(A) UPHELD THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. IT IS NO T THE CASE OF CHANGE OF OPINION AS THE ASSESSEE MADE WRONG CLA IM IN CONTRAVENTION OF THE EXPRESS PROVISIONS OF SECTION 80IA(9)/80IB(13) OF THE ACT. WE DO NOT FIND ANY IN FIRMITY IN THE FINDINGS OF THE LD. CIT(A) IN THE MATTER OF VAL IDITY OF ISSUE OF NOTICE U/S 147 READ WITH SECTION 148 OF TH E ACT. THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 6. GROUND NOS. 2 AND 6, RAISED BY THE ASSESSEE ARE GENERAL IN NATURE, HENCE, NEEDS NO SEPARATE ADJUDIC ATION. 7. IN GROUND NOS. 3, 4 & 5, THE ASSESSEE CONTENDED THAT THE CIT(A), ERRED IN UPHOLDING THE ORDER PASSED BY THE AO WHEREBY DEDUCTION U/S 80HHC WAS WRONGLY COMPUTED BY REDUCING AN AMOUNT OF RS.78,82,237/- BEING DEDUCTIO N ALLOWED U/S 80IB OF THE ACT. THE AO COMPUTED THE DEDUCTION U/S 80HHC OF THE ACT, AFTER REDUCING THE DEDUCTION ALLOWED U/S 80IB OF THE ACT, IN THE LIGHT OF THE PROVISIONS OF SECTION 80IA(9) OF THE ACT. LD. CIT( A) UPHELD THE FINDINGS OF THE AO.THE RELEVANT FINDINGS OF THE CIT(A) ARE 5 REPRODUCED HEREUNDER : 6. I HAVE CONSIDERED THE ISSUE UNDER APPEAL AND IT IS SEEN THAT APART FROM HON'BLE MADRAS HIGH COURT IN T HE CASE OF CIT V SHARON VENCERS (P) LTD., HON'BLE DELH I HIGH COURT IN GREAT EASTER EXPORTS VS. CIT 332 ITR 14 AND HON'BLE KERALA HIGH COURT IN THE CASE OF OLAM EXPORTS INDIA LTD. V CIT, 332 ITR 40, HAVE HELD THA T DEDUCTION U/S 80HHC HAS TO BE CALCULATED AFTER DEDUCTION OF THE RELIEF CLAIMED U/S 80IA. THE PLAI N READING OF SECTION 80IA(9) CLEARLY SHOWS THAT THERE ARE TWO RESTRICTIONS IMPOSED WHILE WORKING OUT THE RELI EF UNDER TWO SEPARATE SECTIONS UNDER THE HEAD C. I) DEDUCTION TO THE EXTENT OF SUCH PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS THIS CHAPTER UNDER THE HEAD C. II) THE DEDUCTION SHALL IN NO CASE EXCEED THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS. THEREFORE, IT BECOMES CLEAR THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 80IA(9) IN ITS ENTIRETY. AS SUCH, THE AO HAS RIGHTLY DISALLOWED DEDUCTION U/S 80HHC TO THE TUNE OF RS.38,59,360/-. IN THE RESULT, THE APPEAL IS DISMISSED. 8. THE ISSUE IN QUESTION IN THESE GROUNDS OF APPEAL ARE SQUARELY COVERED BY THE DECISION OF THE HON'BLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF FRIENDS CASTINGS (P) LTD. V CIT 238 CTR 307. THE RELEVANT QUESTION BEFORE TH E HON'BLE JURISDICTIONAL HIGH COURT WAS (IV)WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE TRIBUNAL WA S JUSTIFIED IN LAW IN HOLDING THAT IN TERMS OF S. 80I A(9) OF THE ACT WHERE TWO DEDUCTIONS UNDER SECTION 80HHC AND 80 IB OF 6 THE ACT ARE AVAILABLE, THEN THE DEDUCTION COMPUTED UNDER SECTION 80IB SHALL BE REDUCED FROM THE BUSINESS PRO FITS TO COMPUTE DEDUCTION UNDER S 80HHC ON THE RESULTANT PR OFITS ? THE HON'BLE JURISDICTIONAL HIGH COURT, AFTER MAKING REFERENCE TO THE SPECIAL BENCH DECISION IN THE CASE OF CIT V ROGINI GARMENTS (2007) 111 TTJ (CEHNNAI)(SB) 274, A ND ANOTHER DECISION OF SPECIAL BENCH IN THE CASE OF AC IT V HINDUSTAN MINT & AGRO PRODUCTS P.LTD. (2009) 123 TT J (DEL)(SB) 577 ADJUDICATED THE ISSUE IN FAVOUR OF TH E REVENUE. THE HON'BLE JURISDICTIONAL COURT HELD THAT RESTRICT ION U/S 80IA(9) IS NOT ONLY THAT TOTAL DEDUCTION SHOULD NOT EXCEED PROFITS AND GAINS, THERE IS FURTHER RESTRICTION THA T DEDUCTION ALLOWED U/S 80IA OR SECTION 80IB WILL BE A BAR TO C LAIM DEDUCTION UNDER ANY OTHER PROVISIONS OF THE CHAPTER . THE RELEVANT AND OPERATIVE PART OF THE DECISION IS REPR ODUCED HEREUNDER : 7. REFERRING TO QUESTION NO. (IV), THE CLAIM OF TH E ASSESSEE IS THAT THE ASSESSEE WAS ENTITLED TO DEDUC TION UNDER S. 80IA AS WELL AS UNDER S. 80HHC ON THE SAME AMOUNT. NECESSARY FACTS MAY BE REFERRED TO. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER S.80HHC AMOUNTING TORS.14,65,802/- IN THE RETURN OF INCOME FILED ON 2 ND NOV.,2000. THE AO HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER S. 80HHC ON THE BALANCE AMOUNT WHICH REMAINED AFTER ALLOWING DEDUCTION UNDE R S. 80IA. ACCORDING TO THE AO SUCH RELIEF WAS IN EX CESS BY RS.1,73,903/-. THIS WAS UPHELD BY THE CIT(A). TH E TRIBUNAL WHILE AFFIRMING THE AFORESAID VIEW HAD RECORDED AS FOLLOWS : 8. AS REGARDS THE ISSUE INVOLVED IN GROUND NOS. 7(I) TO 7(II) AND 8(I) TO 8(II), IN WHICH THE ASSES SEE 7 HAS RAISED THE ISSUE REGARDING CALCULATION OF PROFI T UNDER S. 80HHC AFTER REDUCING THE PROFIT UNDER S. 80IA OF THE ACT, AS STATED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE LD. CIT(A) HAS WRONGLY CALCULATED THE PROFIT UNDER S. 80HHC AT RS. 9,32,480 AGAINST THE CLAIM AS PER AUDIT REPORT AND IGNORING THE MODE OF CALCULATION OF PROFIT UNDER S. 80HHC, THAT IT IS INDEPENDENT AND NOTHING TO DO WITH S. 80IA. THE PLEA OF THE ASSESSEE REGARDING THE PROVISIONS OF LAW IS THAT S.80AB IS CLARIFICATO RY IN NATURE AND SUPERSEDES ALL THE PROVISIONS OF CHAPTER VI-A INCLUDING S. 80IA(9) OF THE ACT. 8.1 AFTER GOING THROUGH THE IMPUGNED ORDERS, WE ARE OF THE CONSIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS DECIDED THE ISSUE IN DISPUTE AGAINST THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL (SB) CHENNAI, IN THE CASE OF ASSTT. CIT V ROGINI GARMENTS (2007) 111 TTJ (CHENNAI)(SB) 274 : (2007) 294 ITR 15 (CHENNAI)(SB)(AT), WHICH IS ON THE SAME ISSUE. IN THE CASE OF ROGINI GARMENTS, THE SPECIAL BENCH HELD THAT THE RESTRICTIVE PROVISIONS OF S. 80IA(9) HAD TO BE GIVEN EFFECT TO, AND THE DEFINITION OF BUSINESS PROFIT AS CONTAINED IN CL. (BAA) BELOW S. 80HHC(4C) HAS TO BE CONSTRUED IN LIGHT OF THESE RESTRICTIONS. THE SPECIAL BENCH HELD THAT RELIEF UNDER S. 80IA SHOULD BE DEDUCTED FROM THE PROFITS AND GAINS OF THE BUSINESS BEFORE COMPUTING THE RELIEF UNDER S. 80HHC. THE LD. FIRST APPELLATE AUTHORITY HAD DECIDED THE ISSUE AGAINST THE ASSESSEE BY DISCUSSING THE ISSUE IN DISPUTE WITH THE SUPPORT OF VARIOUS JUDGMENTS MENTIONED IN THE IMPUGNED ORDERS AT PARAS 3.6 AND 3.7 ON PP.12 AND 13. THE CASE LAW CITED BY THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO BEEN DISCUSSED BY THE LD. FIRST APPELLATE AUTHORITY. WE HAVE ALSO GONE THROUGH THE SAME AND ARE OF THE CONSIDERED 8 OPINION THAT RECENTLY THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL, SPECIAL BENCH C NEW DELHI, IN THE CASE OF ASSTT.CIT V HINDUSTAN MINT & AGRO PRODUCTS (P) LTD. CONSISTING OF FIVE MEMBERS, WHEREIN THEY HAVE DISCUSSED VARIOUS CASE LAWS IN DETAILS AND HELD THAT DEDUCTION IS TO BE ALLOWED UNDER ANY OTHER PROVISION OF CHAPTER VI-A WITH THE HEADING C IS TO BE REDUCED BY AMOUNT OF DEDUCTION ALLOWED UNDER S. 80IB/80IA OF THE ACT AND DECIDED THE ISSUE IN DISPUTE IN FAVOUR OF THE REVENUE VIDE ORDER DT. 23 RD JUNE,2009. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL , SPECIAL BENCH C NEW DELHI, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THUS, RESPECTFULLY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL, SPECIAL BENCH C NEW DELHI, IN THE CASE OF ASSTT.CIT V HINDUSTAN MINT. & AGRO PRODUCTS (P) LTD. PASSED IN ITA NOS. 1537, 1538 AND 1539/DEL/2007 (REPORTED AT (2009) 123 TTJ (DEL)(SB) 577 : (2009) 25 DTR (DEL)(SB) 73-ED.) FOR THE ASSESSMENT YEARS 2001-02, 2003-04, 2004-05 DT. 23 RD JUNE,2009, WE DISMISS GROUND NOS. 7(I) TO 7(III) AND 8(I) TO 8(II) OF THE APPEALS OF THE ASSESSEE. 8. LD. COUNSEL FOR THE ASSESSEE WAS UNABLE TO POINT OUT THAT THE APPROACH OF THE AUTHORITIES BELOW WAS CONTRARY TO ANY STATUTORY PROVISION EXCEPT TO URGE THAT THE VIEW TAKEN BY THE TRIBUNAL IS ERRONEOUS AS UNDE R S. 80IA(9) WHICH IS ALSO APPLICABLE IN VIEW OF S. 80IB (13), THE ONLY RESTRICTION IS THAT DEDUCTION SHOULD NOT E XCEED THE TOTAL PROFITS AND GAINS, AND THE RESTRICTION TH AT DEDUCTION CLAIMED AND ALLOWED UNDER S. 80IA OR S. 8 0IB COULD NOT BE ALLOWED UNDER ANY OTHER PROVISION SHOU LD BE READ IN THE LIGHT OF CONDITION OF DEDUCTION NOT EXCEEDING TOTAL PROFITS AND GAINS. 9 9. WE ARE UNABLE TO ACCEPT THE SUBMISSION. 10. THE RESTRICTION UNDER S. 80IA(9) IS NOT ONLY TH AT THE TOTAL DEDUCTION SHOULD NOT EXCEED PROFITS AND GAINS , THERE IS A FURTHER RESTRICTION THAT DEDUCTION ALLOW ED UNDER S. 80IA OR S. 80IB WILL BE A BAR TO CLAIM DED UCTION UNDER ANY OTHER PROVISION OF THE CHAPTER. 11. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, THESE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. CONSEQUENTLY, THE APPE AL OF THE ASSESSEE IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JAN.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH