DCIT, Madurai V. M/s. Penguin Garments P Ltd., Madurai

ITA 1280/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1184 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-03-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 11-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI JT
• Keywords: Reopening of assessment; Audit objection; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 80HHC; 80IB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.1278,1279 & 1280/MDS/2012 ASSESSMENT YEARS :2001-02, 2002-03, 2003-04. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I(1), MADURAI VS M/S. PENGUIN GARMENTS P. LTD. PLOT NO.2, MEENAKSHI NAGAR, GST ROAD, PASUMALAI, MADURAI 625 004. PAN AABCP1652M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.BETGIRI, JT.CIT RESPONDENT BY : NONE DATE OF HEARING : 14 -03-2013 DATE OF PRONOUNCEMENT : 21-03-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT(A)-I, MADURAI, DA TED 01.03.2012, PASSED FOR ASSESSMENT YEARS 2001-02, 2002-03 AND 20 03-04. 2. IN I.T.A.NOS.1278/MDS/2012 AND 1279/MDS/2012, THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL: I.T.A.NO.1278 TO 1280/12 :- 2 -: 01. THE ORDER OF THE CIT (A), IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 02. THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DEDUCTING RELIEF U/S. 80IA FROM THE PROFITS AND GAINS OF THE BUSINESS BEFORE COMPUTING RELIEF U/S 80HHC. 03. THE CIT(A) OUGHT TO HAVE SEEN THE DEDUCTION U/S 80H HC CANNOT BE ALLOWED IGNORING THE RESTRICTIVE CLAUSE C ONTAINED IN SECTION 80IA(9). THE RESTRICTIVE CLAUSE IN SECTION 80IA IS CRYSTAL CLEAR THAT WHEREVER DEDUCTION UNDER CHAPTER VIA (C) IS CLAIMED BY THE ASSESSEE, THE COMPUTATION WILL BE SU BJECT TO RESTRICTIONS LAID DOWN IN SECTION 80IA(9). 04. THE DECISION OF THE JURISDICTIONAL HIGH COURT IN T HE CASE OF SCM CREATIONS FOLLOWED BY THE CIT (A) HAS NOT BECOM E FINAL. 05. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT (A) MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY B E RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT YEAR 2001-02, THE ASSESSEE CLAIMED DEDUCTION U/S 80IB OF ` 23,69,741/- AND DEDUCTION OF ` 63,01,983 U/S 80HHC OF THE ACT. THE ASSESSING OFFICER ALLOWED DEDUCTION TO THE ASSESSE E U/S 80HHC OF ` 39,49,569/- AFTER REDUCING THE DEDUCTION ALLOWED U /S 80IB OF ` 23,69,741/- FROM THE DEDUCTION ALLOWABLE U/S 80HHC OF ` 63,01,983/- TO THE ASSESSEE. SIMILARLY, IN ASSESSMENT YEAR 20 02-03 ALSO THE ASSESSEE CLAIMED DEDUCTION OF ` 25,78,909/- U/S 80IB OF THE ACT AND ` 58,39,066/- U/S 80HHC OF THE ACT. THE ASSESSING O FFICER ALLOWED DEDUCTION U/S 80HHC OF THE ACT OF ` 32,55,157/- AFTER REDUCING THE DEDUCTION OF ` 25,78,909/- ALLOWED TO THE ASSESSEE U/S 80IB OF THE I.T.A.NO.1278 TO 1280/12 :- 3 -: ACT FROM THE DEDUCTION OF ` 58,34,066/- ALLOWABLE TO THE ASSESSEE U/S 80HHC OF THE ACT. 4. ON APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A), F OLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN TH E CASE OF SCM CREATIONS VS ACIT, [2008] 304 ITR 319(MAD) WHEREIN IT WAS HELD THAT THE RELIEF UNDER SECTION 80IA OF THE ACT SHOULD NOT BE DEDUCTED FROM PROFITS AND GAINS OF BUSINESS BEFORE COMPUTING RELI EF U/S 80HHC, DIRECTED THE ASSESSING OFFICER NOT TO DEDUCT THE QU ANTUM OF 80IB RELIEF FROM THE GROSS TOTAL INCOME FOR THE PURPOSES OF COM PUTING DEDUCTION U/S 80HHC OF THE ACT. 5. BEING AGGRIEVED, THE REVENUE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 6. THE LD. DR VERY FAIRLY CONCEDED THAT THE PRESENT AP PEALS OF THE REVENUE ARE LIABLE TO BE DISMISSED AS THE LD. C IT(A) HAS ALLOWED THE CLAIM FOR DEDUCTION U/S 80HHC TO THE ASSESSE E WITHOUT DEDUCTING THE AMOUNT ALLOWED AS DEDUCTION U/S 80IB OF THE ACT BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT. 7. NOTICE OF HEARING WAS SENT TO THE RESPONDENT-ASSES SEE WHICH WAS DULY RECEIVED BY IT ON 20.12.2012 AS IS E VIDENT FROM THE I.T.A.NO.1278 TO 1280/12 :- 4 -: ACKNOWLEDGEMENT CARD OF THE POSTAL AUTHORITY PLACED ON RECORD. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE C ASE WAS CALLED FOR HEARING AND NEITHER ANY ADJOURNMENT PETITION WA S FILED. THE BENCH WAS OF THE VIEW THAT THE APPEALS CAN BE DISPOSED OF WITHOUT THE PRESENCE OF THE ASSESSEE, THEREFORE, THE APPEALS W ERE HEARD EX-PARTE QUA THE RESPONDENT- ASSESSEE AND DISPOSED OF AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR AND THE DOCUMENTS AVAILAB LE ON RECORD. 8. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASS ESSEE CLAIMED DEDUCTION IN THE ASSESSMENT YEAR 2001-02 OF ` 23,69,741/- U/S 80IB AND ` 63,01.983/- U/S 80HHC. THE ASSESSING OFFICER ALL OWED DEDUCTION U/S 80HHC TO THE ASSESSEE OF ` 39,49,569/- AFTER REDUCING THE AMOUNT OF ` 23,69,741/- ALLOWED AS DEDUCTION TO THE ASSESSEE U/S 80IB OF THE ACT. SIMILARLY, IN THE ASSESSMENT YEAR 2002-03, THE ASSESSEE CLAIMED DEDUCTION OF ` 25,78,909/- U/S 80IB OF THE ACT AND DEDUCTION OF ` 58,34,066/- U/S 80HHC OF THE ACT. THE ASSESSING OFFICER ALLOWED DEDUCTION U/S 80HHC TO THE ASSESS EE FOR AN AMOUNT OF ` 32,55,157/- AFTER REDUCING THE AMOUNT OF ` 25,78,909/- ALLOWED TO THE ASSESSEE U/S 80IB OF THE ACT. I.T.A.NO.1278 TO 1280/12 :- 5 -: 9. ON APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A), F OLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN TH E CASE OF SCM CREATIONS (SUPRA), DIRECTED THE ASSESSING OFFICER T O ALLOW DEDUCTION U/S 80HHC TO THE ASSESSEE WITHOUT REDUCING THE QUA NTUM OF DEDUCTION ALLOWED TO THE ASSESSEE U/S 80IB OF THE ACT FROM THE GROSS TOTAL INCOME FOR THE PURPOSES OF COMPUTING DEDUCTIO N U/S 80HHC OF THE ACT. 10. THE LD. DR, BEFORE US, HAS FAIRLY CONCEDED THAT THE APPEALS FILED BY THE REVENUE ARE NOT MAINTAINABLE IN VIEW O F THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SCM CR EATIONS FOLLOWED BY THE LD. CIT(A) WHILE ALLOWING THE APPEALS OF THE ASSESSEE. 11. WE, THEREFORE, DISMISS THE GROUNDS OF APPEAL OF THE REVENUE FOR BOTH THE ASSESSMENT YEARS 2001-02 AND 2002-03. 12. IN I.T.A.NO. 1280/MDS/2012, THE REVENUE HAS CHALLEN GED THE ORDER OF THE LD. CIT(A) IN HOLDING THAT REOPENI NG OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS NOT PROPER. 13. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS COMPLETED U/S 143(3) O F THE ACT ON 15.4.2005. THEREAFTER, THE ASSESSING OFFICER REOPE NED THE ASSESSMENT I.T.A.NO.1278 TO 1280/12 :- 6 -: BY ISSUE OF NOTICE U/S 148 OF THE ACT ON 31.3.2008 FOR THE FOLLOWING REASONS: FOR THE RELEVANT ASSESSMENT YEAR, EXCESS DEDUCTION U/S 80HHC AND 80IB(3) IS ALLOWED. SECTION 80IB PROVIDE S THAT WHEN AN AMOUNT OF PROFITS OR GAINS OF AN INDUSTRIAL UNDERTAKING IS CLAIMED AND ALLOWED AS DEDUCTION FOR ANY ASSESSM ENT YEAR U/S 80IB, THE PROFITS TO THAT EXTENT SHALL NOT QUAL IFY FOR DEDUCTION UNDER ANY OTHER PROVISIONS UNDER CHAPTER VIA AND IN NO CASE EXCEED THE ELIGIBLE PROFIT OR INDUSTRIAL UNDERTAKING AS THE CASE MAY BE. YOU ARE REQUESTED TO SHOW CAUS E WHY NOT THE EXCESS DEDUCTION BE DISALLOWED. 14. THE ASSESSEE CHALLENGED THE REOPENING OF THE ASSES SMENT BEFORE THE LD. CIT(A) ON THE GROUND THAT THE REOPEN ING WAS DONE ON A MERE CHANGE OF OPINION. 15. THE LD. CIT(A) OBSERVED THAT THE REOPENING WAS MADE ON ACCOUNT OF CHANGE OF OPINION DUE TO AUDIT OBJECTION AND THAT ON MERITS, THE ISSUE WAS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF SCM CREATIONS (SUPRA). HENCE, HE HELD THAT THE REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2003-04 WAS NOT PROPER. 16. THE LD. DR VERY FAIRLY CONCEDED THAT THE REVENUE HA S NO CASE IN THE PRESENT APPEAL FILED BEFORE THE TRIBUNA L. I.T.A.NO.1278 TO 1280/12 :- 7 -: 17. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT IN THE INSTANT CASE THE ASSESSMENT WAS MADE U/S 143(3) OF THE ACT ON 15.4. 2005. THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S 148 (2) ON 31.3.2008 ON THE GROUND THAT EXCESS DEDUCTION U/S 80HHC AND 80IB WAS ALLOWED TO THE ASSESSEE INASMUCH AS WHEN AN AMOUNT OF PROFITS OR GAINS OF AN INDUSTRIAL UNDERTAKING IS CLAIMED AND A LLOWED AS DEDUCTION FOR AN ASSESSMENT YEAR U/S 80IB, THE PROFITS TO TH AT EXTENT SHALL NOT QUALIFY FOR DEDUCTION UNDER ANY OTHER PROVISIONS UN DER CHAPTER VIA AND IN NO CASE EXCEED THE ELIGIBLE PROFITS OF INDUS TRIAL UNDERTAKING AS THE CASE MAY BE. WE FIND FROM THE ORDER OF THE LD. CIT(A) THAT IN THE ASSESSMENT ORDER DATED 15.4.2005 THE ASSESSING OFFI CER HAS MADE THE FOLLOWING OBSERVATIONS: THE ASSESSEE IS A 100% EXPORTER. THE DETAILS REGARDING THE TOTAL EXPORTS AND ALSO THE CLAIM UNDE R CHAPTER VIA, HAVE BEEN EXAMINED. 18. FROM THE ABOVE, THE LD. CIT(A) HAS CONCLUDED THAT N O DISALLOWANCE OF DEDUCTION UNDER CHAPTER VIA WAS MAD E IN THE ASSESSMENT ORDER AND THAT THE AUDIT OBJECTION SEEME D TO BE THE BASIS FOR REOPENING OF ASSESSMENT. THE LD. CIT(A) HAS FU RTHER OBSERVED THAT THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS BHA NJI LAVJI, [1971] I.T.A.NO.1278 TO 1280/12 :- 8 -: 79 ITR 582(SC), HAS HELD THAT WHEN THE PRIMARY FACT S NECESSARY FOR ASSESSMENT ARE FULLY AND TRULY DISCLOSED, THE ITO W ILL NOT BE ENTITLED ON CHANGE OF OPINION TO COMMENCE PROCEEDINGS FOR RE -ASSESSMENT. SIMILARLY, IF HE HAS RAISED A WRONG LEGAL INFERENCE FROM THE FACTS DISCLOSED, HE WILL NOT, ON THAT ACCOUNT, BE COMPETE NT TO COMMENCE RE- ASSESSMENT PROCEEDINGS. THE LD. CIT(A) HAS ALSO PL ACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF ITO VS NAWAB MIR BARKAT ALI KHAN BAHADUR [1974] 97 ITR 239 (SC) WHEREIN HE HON'BLE SUPREME COURT HAS HELD THAT HAVING SECON D THOUGHTS ON THE SAME MATERIAL, AND OMISSION TO DRAW THE CORRECT LEGAL PRESUMPTION DURING ORIGINAL ASSESSMENT DO NOT WARRANT INITIATIO N OF A PROCEEDINGS U/S 147. HE ALSO OBSERVED THAT THE FULL BENCH OF T HE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS KELVINATOR OF INDI A LTD., 256 ITR 1, HAS HELD THAT THE CONCEPT OF CHANGE OF OPINION MU ST BE TREATED AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY ASSESSING OFFICER AND ASSESSING OFFICER HAS POWER TO RE-OPEN, PROVIDED TH ERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT; REASONS MUST HAVE A LIVE LI NK WITH FORMATION OF BELIEF. THIS DECISION WAS AFFIRMED BY THE HON'B LE SUPREME COURT REPORTED IN 320 ITR 561(SC.) I.T.A.NO.1278 TO 1280/12 :- 9 -: 19. FURTHER IT IS ALSO OBSERVED FROM THE REASONS RECORD ED FOR REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICE R AS QUOTED IN THE ORDER OF THE LD. CIT(A) THAT THE REOPENING WAS DONE ON THE GROUND THAT EXCESS DEDUCTION U/S 80HHC AND 80IB WAS ALLOW ED TO THE ASSESSEE. WE FIND THAT THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ON 15.4.2005 WHEREIN ALL THE PRIM ARY FACTS NECESSARY FOR CLAIM OF DEDUCTION U/S 80IB AND 80HHC WERE DIS CLOSED BY THE ASSESSEE AND EXAMINED AND CONSIDERED BY THE ASSESSI NG OFFICER WHILE FRAMING THE ASSESSMENT. AFTER THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THERE WAS ESCAPE MENT OF INCOME BY THE ASSESSEE. IT IS OBSERVED THAT ON THE VERY SAME FACTS ON WHICH THE ORIGINAL ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON TH E GROUND THAT EXCESS DEDUCTION WAS ALLOWED TO THE ASSESSEE U/S 80HHC AND 80IB OF THE ACT. THIS IS NOT ALLOWABLE IN VIEW OF THE DECI SIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS BHANJI LAVJI(SU PRA), ITO VS NAWAB MIR BARKAT ALI KHAN BAHADUR (SUPRA) AND CIT VS KELV INATOR OF INDIA LTD (SUPRA). WE ALSO OBSERVE THAT ON MERITS THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE MAD RAS HIGH COURT IN THE CASE OF SCM CREATIONS (SUPRA). HENCE, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE RE-OPENING OF I.T.A.NO.1278 TO 1280/12 :- 10 -: ASSESSMENT FOR ASSESSMENT YEAR 2003-04 WAS NOT PROP ER. THEREFORE, THE GROUNDS OF APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2003-04 ARE DISMISSED. 20. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 21 ST OF MARCH, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 21 ST MARCH, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR