J.K. INTERNATIONAL TRADERS, MUMBAI V. ACIT 14(1), MUMBAI

ITA 1247/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8053 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 02-02-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 24-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALATHI SRIDHARAN
• Keywords: Reopening of assessment; Reassessment proceedings
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS.1246 & 1247/MUM /2009 (ASSESSMENT YEARS : 1998-1999 & 2002-03) M/S. J.K. INTERNATIONAL TRADERS A-58, GIRIRAJ INDL. ESTATE, MAHAKALI CAVES RD., ANDHERI (E), MUMBAI 400 093. PAN : AAAFJ1516C VS. A.C.I.T.- 14(1) MUMBAI. APPELLANT RESPONDENT APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SMT MALATHI SRIDHARAN O R D E R PER B. RAMAKOTAIAH, A.M. THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDERS DATED 12.12.2008 OF THE CIT(A)-XIV, MUMBAI RELATING TO A SSESSMENT YEARS 1998-99 AND 2002-03. SINCE COMMON ISSUES ARE INVOLVED THEY ARE CONSIDERED TOGETHER AND DISPOSED OF BY THIS COMMON ORDER. BOTH THE APPE ALS WERE ORIGINALLY DISMISSED VIDE ORDER DATED 05.02.2010 AND WERE RECA LLED CONSEQUENT TO M.A. NO. 231/MUM/2010 VIDE ORDER DATED 21.05.2010. ITA NO.1246/MUM /2009 : A.Y. - 1998-1999 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. REOPENING OF ASSESSMENT U/S.147 OF THE ACT BAD -IN-LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT AS VALID THOUGH THE SAME ARE MER ELY REASONS TO SUSPECT OR ARE BASED ON CONJECTURES AND SURMISES W ITHOUT ANY APPLICATION OF MIND YOUR APPELLANT PRAYS THAT THE ENTIRE REASSESSMENT P ROCEEDINGS ARE BAD IN LAW AND SHOULD BE QUASHED. ITA NOS.1246 & 1247/MUM/2009 M/S. J.K. INTERNATIONAL TRADERS 2 2. ASSESSMENT PROCEEDINGS UNDER ACT BAD-IN-LAW A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THAT THE REAS ON FOR REOPENING ASSESSMENT WERE NO MORE REMAINED VALID IN VIEW OF R ETROSPECTIVE AMENDMENT BY THE TAXATION LAWS (AMENDMENT) ACT, 200 5 AS EXPORT TURNOVER OF THE ASSESSEE IS LESS THAN ` 10 CRORES FOR THE PERIOD UNDER CONSIDERATION. B) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN ACCEPTING HE ASSESSMENT AND PASSING OF AN ORDER BY THE LEARNED ASSESSING OFFICER WITHOUT FIRST DISPOSING OFF THE O BJECTIONS RAISED BY THE ASSESSEE BY PASSING A SPEAKING ORDER. YOURS APPELLANT PRAYS THAT THE ENTIRE REASSESSMENT PROCEEDINGS ARE BAD IN LAW AND SHOULD BE QUASHED. 3. ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT-BAD IN LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW AND WITHOUT PREJUDICE TO STAND TAKEN IN GROUND NO.1 & 2 , THE LEARNED CIT(A) ERRED IN CONFIRMING THE PASSING ORDER U/S.143(3) BY THE LEARNED ASSESSING OFFICER WITHOUT SERVING NOTICE U/S.143(2) OF THE I.T. ACT, 1961 IN PROPER FORMAT AS VALID. YOUR APPELLANT PRAYS THAT THE ENTIRE ORDER U/S.143( 3) R.W.S. 147 PASSED WITHOUT ISSUE OF NOTICE U/S.143(2) IS AD IN LAW AND SHOULD BE QUASHED. 4. DENIAL OF DEDUCTION U/S.80HHC ` `` ` 2,23,975/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW AND WITHOUT PREJUDICE TO GROUNDS OF APPEAL 1 TO 3, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DENIAL OF DEDUCTION U/S.80HHC OF THE ACT BY THE ASSESSING OFFICER AND ALSO REJECTION OF CALCULATION OF DEDUCTION U/S.80HHC SUBMITTED TO THE LEARNED CIT(A) IN RESPON SE TO REMAND REPORT BY ADOPTING A MISTAKEN INTERPRETATION OF THE PROVISIONS OF SECTION 28 & 80HHC AS AMENDED BY THE TAXATION LAWS (AMENDME NT) ACT, 2005(NO.55 OF 2005). THE ASSESSEE THEREFORE PRAYS THAT THE ASSESSEE BE A LLOWED DEDUCTION U/S.80HHC OF THE ACT TO THE TUNE OF ` 2,23,975/- AS CLAIMED BY THE ASSESSEE. 3. ASSESSEE RAISED JURISDICTIONAL ISSUES IN GROUND NOS. 1, 2 & 3 WITH REFERENCE TO REOPENING OF THE ASSESSMENT, ISSUE OF NOTICE, ETC. SINCE GROUND NO. 4 IS COVERED IN ITS FAVOUR BY VIRTUE OF THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS 328 ITR 451 THE LEARNED COUNSEL DID NOT PRESS FOR THE GROUNDS STATI NG THAT THE ISSUE ON MERITS CAN BE CONSIDERED WITHOUT CONCEDING THE RIGHT TO CO NTEST ON LEGAL PRINCIPLES, AT ITA NOS.1246 & 1247/MUM/2009 M/S. J.K. INTERNATIONAL TRADERS 3 A LATER STAGE IF SUCH SITUATION ARISES. IN THE LIGH T OF THE FACT THAT THE ISSUE ON MERITS IS IN FAVOUR OF ASSESSE, GROUND NOS. 1, 2 & 3 ARE CONSIDERED NOT PRESSED. 4. GROUND NO. 4 IS WITH REFERENCE TO THE ISSUE OF D EPB ENTITLEMENT FOR DEDUCTION UNDER SECTION 80HHC. DURING THE YEAR THE ASSESSEE INCLUDED IN EXPORT INCENTIVE OF ` 11,03,783/- AN AMOUNT OF ` 3,14,950/- AS DEPB RECEIVABLES. ASSESSEE CLAIMED DEDUCTION ON THIS AMO UNT AS WELL. THE A.O. WAS OF THE OPINION THAT NEWLY INSERTED PROVISIONS OF SE CTION 28(III)(D) PROVIDES FOR DEDUCTION ONLY OF PROFIT ON TRANSFER OF DEPB LICENS ES AND HENCE THE ENTITLEMENT AMOUNT OF ` 3,14,950/- WAS NOT ELIGIBLE FOR DEDUCTION UNDER SEC TION 80HHC. THE SAME WAS BROUGHT TO TAX BY INVOKING SECTION 28( IV) WHILE DENYING DEDUCTION UNDER SECTION 80HHC. THE LEARNED CIT(A), AFTER CONSIDERING THE DETAILED SUBMISSIONS, REMAND REPORT OF THE A.O. ON REVISED WORKING AND DISTINGUISHING THE DECISION IN THE CASE OF M/S. GLE NMARK LABORATORIES LTD BY THE ITAT RELIED UPON BY THE ASSESSEE, REJECTED THE CONTENTIONS AND UPHELD THE ORDER OF AO. 5. AT THE OUTSET BOTH THE LEARNED COUNSEL AND THE L EARNED D.R. AGREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF KALPATARU COLOURS AND CHEMICALS 328 ITR 451. THE HONBLE HIGH COURT HAS HELD THAT DEPB ENTITLEMENTS ARE ALSO TO BE TAXED UNDER SECTION 27(III)(D) AND ACCORDINGLY T HE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80HHC. RESPECTFULLY FOLLOWI NG THE JURISDICTIONAL HIGH COURT JUDGMENT, WE DIRECT THE A.O. TO ALLOW THE DED UCTION ON THE ABOVE AMOUNTS AS CLAIMED. 6. THE ASSESSEE ALSO HAS RAISED THE FOLLOWING ADD ITIONAL GROUND: - 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN NOT DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE AMOUNT OF RS.3,14, 950/- REPRESENTING THE RECEIVABLE DEPB FROM THE CONCEPT O F INCOME AS IT WAS YET TO BE RECEIVED AND SOLD IN THE MARKET. 7. SINCE THE ISSUE IS COVERED BY THE JUDGEMENT OF J URISDICTIONAL HIGH COURT AND DECIDED IN FAVOUR OF THE ASSESSEE IN GROUND NO. 4, THE LEARNED COUNSEL ITA NOS.1246 & 1247/MUM/2009 M/S. J.K. INTERNATIONAL TRADERS 4 ADMITTED THAT THIS ISSUE BECOMES ACADEMIC IN NATURE , THEREFORE THE ALTERNATE GROUND NEED NOT BE CONSIDERED. ACCORDINGLY THE SAME IS REJECTED. 8. APPEAL IS ALLOWED. ITA NO.1247/MUM /2009: A.Y. - 2002-03 9. IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. REOPENING OF ASSESSMENT U/S.147 OF THE ACT-BAD-I N-LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT AS VALID THOUGH THE SAME ARE MER ELY REASONS TO SUSPECT OR ARE BASED ON CONJECTURES AND SURMISES W ITHOUT ANY APPLICATION OF MIND YOUR APPELLANT PRAYS THAT THE ENTIRE REASSESSMENT P ROCEEDINGS ARE BAD IN LAW AND SHOULD BE QUASHED. 2. ASSESSMENT PROCEEDING UNDER THE ACT-BAD-IN-LAW A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND CONSIDERING THE REASONS GIVEN FOR OPENING OF ASSESS MENT U/S.147 OF THE ACT, THE LEARNED CIT(A) ERRED IN NOT ACCEPTI NG THAT 10% OF EXPORT INCENTIVE DEDUCTED FROM INDIRECT COSTS FOR C ALCULATION OF DEDUCTION 80HHC OF THE ACT DOES NOT MADE ANY DIFFER ENCE IN DEDUCTION U/S.80HHC EVEN IF THE SAME IS NOT TAKEN A S THE ASSESSEE IS MIXED EXPORTER AND ALSO THERE IS NO NEG ATIVE JUDICIAL DECISION AGAINST THE CASE OF M/S. SURENDRA ENGINEER ING CO. LTD. BY THE HIGHER JUDICIAL AUTHORITIES AND MANY OTHER J UDICIAL CASE LAWS SUPPORT OF THE APPELLANT WHICH MAKES THE ASSES SMENT PROCEEDINGS UNDER THE ACT INVALID. B) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT( A) ERRED IN ACCEPTING THE ASSESSMENT AND PASSING OF AN ORDER BY THE LEARNED ASSESSING OFFICER, WITHOUT FIRST DISPOSING OFF THE OBJECTION RAISED BY THE ASSESSEE BY PASSING A SPEAKING ORDER. YOUR APPELLANT PRAYS THAT THE ENTIRE REASSESSMENT P ROCEEDINGS ARE BAD IN LAW AND SHOULD BE QUASHED. 3. ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT-BAD IN LAW A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND WITHOUT PREJUDICE TO STAND TAKEN IN GROUND NO.1 & 2 , THE LEARNED CIT(A) ERRED IN CONFIRMING THE PASSING ORDER U/S.14 3(3) BY THE LEARNED ASSESSING OFFICER WITHOUT SERVING NOTICE U/ S.143(2) OF THE I.T. ACT, 1961 IN PROPER FORMAT AS VALID ASSESSMENT . B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND WITHOUT PREJUDICE TO STAND TAKEN IN GROUND NO.3(A), THE LEARNED ITA NOS.1246 & 1247/MUM/2009 M/S. J.K. INTERNATIONAL TRADERS 5 CIT(A) HAS MENTIONED IN PARA 6.1 OF HIS ORDER THAT THE NOTICE U/S.143(2) IS NOT REQUIRED WHEN THE ASSESSEE HAS NO T COMPLIED WITH NOTICE U/S.148 BY NOT FILING RETURN OF INCOME BUT SIMPLY FILED LETTER ON 09.12.2004 REQUESTING TO CONSIDER THE ORI GINAL RETURN OF INCOME FILED ON 29.10.2002 AS THE RETURN FILED IN R ESPONSE TO NOTICE U/S.148, THEN THE ASSESSMENT PASSED BY THE L EARNED ASSESSING OFFICER U/S.143(3) R.W.S.147 BECOME VOID AND BAD IN LAW IS AS THE ASSESSMENT ORDER TO BE PASSED U/S.144 INSTEAD U/S.143(3) OF THE ACT. C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW AND WITHOUT PREJUDICE TO STAND TAKEN IN GROUND NO.3(1) & (B), THE LD CIT(A) ERRED IN APPRECIATING THAT THE PASSING ORDER U/S.143(3) BY THE LD ASSESSING OFFICER WITH SERVING OF LETTER NO. ACIT 14(1)/SCRU.ASST./2005-06 DT.17.02.2006, WHICH IS TO CONSIDERED AS NOTICE U/S.143(2) OF THE ACT, AFTER PERIOD OF 12 MONTHS FROM THE MONTH IN WHICH THE RETURN OF INCOME FILED IS BAD-IN -LAW. 4. DENIAL OF PARTIAL DEDUCTION U/S.80HHC ` `` ` 16,48,488/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW AND WITHOUT PREJUDICE TO GROUNDS OF APPEAL 1 TO 3, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DENIAL OF DEDUCTION U/S.80HHC OF THE ACT BY THE ASSESSING OFFICER AND ALSO REJECTION OF CALCULATION OF DEDUCTION U/S.80HHC SUBMITTED TO THE LD CIT(A) IN RESPONSE TO REMAND REPORT BY ADOPTING A MISTAKEN INTERPRETATION OF THE PROVISION S OF SECTION 28 & 80HHC AS AMENDED BY THE TAXATION LAWS (AMENDMENT) A CT, 2005 (NO.55 OF 2005). THE ASSESSEE RAISED FOLLOWING ADDITIONAL GROUNDS: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN NOT DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE AMOUNT OF ` 26,16, 647/- REPRESENTING THE RECEIVABLE DEPB FROM THE CONCEPT O F INCOME AS IT WAS YET TO BE RECEIVED AND SOLD IN THE MARKET. 2. THE LEARNED CIT(A) OUGHT TO HAVE REVERSED THE ST AND OF THE ASSESSING OFFICER IN REJECTING THE ASSESSEES CALCU LATION OF DEDUCTION U/S.80HHC OF THE ACT WHEREIN THE ASSESSEE HAS REDUCED 10% OF EXPENDITURE INCURRED FROM THE TOTAL INDIRECT COST. 10. ASSESSEE RAISED JURISDICTIONAL ISSUES IN GROUND NOS. 1, 2 & 3 WITH REFERENCE TO REOPENING OF THE ASSESSMENT, ISSUE OF NOTICE, ETC. SINCE GROUND NO. 4 IS COVERED IN ITS FAVOUR BY VIRTUE OF THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS 328 ITR 451 THE LEARNED COUNSEL DID NOT PRESS FOR THE GROUNDS STATI NG THAT THE ISSUE ON MERITS CAN BE CONSIDERED WITHOUT CONCEDING THE RIGHT TO CO NTEST ON LEGAL PRINCIPLES, AT ITA NOS.1246 & 1247/MUM/2009 M/S. J.K. INTERNATIONAL TRADERS 6 A LATER STAGE IF SUCH SITUATION ARISES. IN THE LIGH T OF THE FACT THAT THE ISSUE ON MERITS IS IN FAVOUR OF ASSESSE, GROUND NOS. 1, 2 & 3 ARE CONSIDERED NOT PRESSED. 11. GROUND NO. 4 IS WITH REFERENCE TO THE ISSUE OF DEPB ENTITLEMENT FOR DEDUCTION UNDER SECTION 80HHC. DURING THE YEAR THE ASSESSEE INCLUDED IN EXPORT INCENTIVE OF ` 57,35,396/- AN AMOUNT OF ` 26,16,647/- AS DEPB RECEIVABLES. ASSESSEE CLAIMED DEDUCTION ON THIS AMO UNT AS WELL. THE A.O. WAS OF THE OPINION THAT NEWLY INSERTED PROVISIONS OF SE CTION 28(III)(D) PROVIDES FOR DEDUCTION ONLY OF PROFIT ON TRANSFER ON DEPB LICENS ES AND HENCE THE ENTITLEMENT AMOUNT OF `26 ,16,647/- WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. THE SAME WAS BROUGHT TO TAX BY INVOK ING SECTION 28(IV) WHILE DENYING DEDUCTION UNDER SECTION 80HHC. THE LEARNED CIT(A UPHELD THE ORDER OF AO. 12. THE ISSUE IS GROUND NO. 4 IS SIMILAR TO THE GR OUND NO. 4 DECIDED IN EARLIER APPEAL ITA NO. 1246/MUM/2009 ON THE ISSUE O F DEPB ENTITLEMENTS. AS DECIDED ABOVE IN GROUND NO. 4 IN PARA 5, THE A.O. I S DIRECTED TO TREAT THE DEPB ENTITLEMENT UNDER SECTION 28(III)(D) AND ALLOW DEDU CTION UNDER SECTION 80HHC AS CLAIMED. 13. ADDITIONAL GROUND NO. 1 IS AN ALTERNATE GROUND TO GROUND NO. 4. SINCE GROUND NO. 4 IS ALLOWED IN THE APPEAL IN FAVOUR OF THE ASSESSEE, THERE IS NO NEED TO CONSIDER THE ADDITIONAL GROUND NO. 1. ACCOR DINGLY THE SAME IS REJECTED. 14. THE ISSUE IN ADDITIONAL GROUND NO. 2 IS WITH RE FERENCE TO DEDUCTION OF 10% OF EXPENDITURE INCURRED WHILE CALCULATING THE I NDIRECT COST. THE ASSESSEE HAS REDUCED 10% OF THE EXPORT INCENTIVES FROM INDIR ECT COST TO AN EXTENT OF ` 23,56,963/- WHICH THE A.O. HAS NOT ALLOWED, EVENTHO UGH THE ASSESSEE RELIED ON THE ORDER OF M/S SURENDRA ENGINEERING CORPORATIO N 86 ITD 121 STATING THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION AND AP PEAL WAS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. IT WAS THE SUBMISSIO N OF THE ASSESSEE THAT THIS ISSUE WAS NOT AGITATED BEFORE THE CIT(A) BUT F OLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HERO EXPORTS 2 95 ITR 554 THE ASSESSEE IS ENTITLED FOR CLAIMING THE ABOVE AMOUNT WHILE CAL CULATING THE DEDUCTION ITA NOS.1246 & 1247/MUM/2009 M/S. J.K. INTERNATIONAL TRADERS 7 UNDER SECTION 80HHC. SINCE THIS IS A LEGAL ISSUE AN D AS THE A.O. HAS ALREADY STATED THE FACTS WHILE WORKING OUT THE DEDUCTION UN DER SECTION 80HHC, WE ADMIT THE ADDITIONAL GROUND. THE ISSUE OF 80HHC, PA RTICULARLY DEPB INCENTIVES, IS RESTORED TO THE A.O. FOR CALCULATION PURPOSE AND ACCORDINGLY WHILE WORKING OUT THE DEDUCTION UNDER SECTION 80HHC THE A .O. IS DIRECTED TO EXAMINE ASSESSEES CLAIM OF 10% OF THE COST OF DEPB TOWARDS INDIRECT COST AND WORKOUT THE DEDUCTION AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. THE ISSUE IN ADDITIONAL GROUND NO. 2 IS ACCORDINGLY RESTORED TO THE FILE OF THE A.O. GROUND IS CONSIDERED ALLOWED. APPEAL IS CONSIDERED ALLOWED . 15. IN THE RESULT, BOTH THE APPEALS ARE CONSIDERED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIV, MUMBAI 4. THE CIT XIV, MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.