M/s. Basant, JODHPUR V. CIT-II, JODHPUR

ITA 131/JODH/2011

• Counselvise Citation: 13123314 RSA 2011
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Section: 143(3); 10B; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH : JODHPUR BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI N.L. KALRA, ACCOUNTANT MEMBER ITA NO.131/JU/2011 ASSTT. YEAR : 2006-07 PAN:AACFB9304J M/S. BASANT, VS. COMMISSIONER OF INCOME TAX-II, E-5, MANDORE INDUSTRIAL AREA, JODHPUR. JODHPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. AMIT KOTHARI, AR RESPONDENT BY : SHRI SUBHASH CHANDRA , CIT (DR) DATE OF HEARING : 15/12/2011 DATE OF PRONOUNCEMENT: 19.01.2012 ORDER PER R.K. GUPTA, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX-II, JODHPUR, DATED 24 TH MARCH, 2011 RELATING TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS OBJECTING TO THE ORDER PASSED UN DER SECTION 263 OF THE INCOME-TAX ACT, 1961 ( IN SHORT, THE ACT) BY THE CIT-II, JODHPUR, ON 24.03.2011. 2.1. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME ON 27.10.2006 DECLARING NIL INCOME AFTER C LAIMING DEDUCTION UNDER 2 SECTION 10B OF THE ACT TO THE TUNE OF RS.1,43,89,61 3/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.12.2008 AT NIL INCOME. 2.2. ON EXAMINATION OF THE CASE RECORDS OF THE ASSE SSEE, THE LD. CIT NOTED THAT THERE ARE CERTAIN OMISSIONS, MISTAKES, IRREGUL ARITIES, SHORTCOMINGS ETC. BESIDES NON VERIFICATION OF CERTAIN FACTS AND LACK OF INQUIRY WHEREAS THE FACTS WARRANTED PROPER AND IN-DEPTH INVESTIGATION A ND INQUIRY. THEREAFTER, THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE DATED 19. 02.2010 THAT AS TO WHY ACTION UNDER SECTION 263 OF THE ACT BE NOT INITIATE D . IN THE SHOW CAUSE NOTICE, THE LD. CIT NOTED THAT WHILE ALLOWING DEDUC TION U/S 10B VARIOUS POINTES WERE NOT CONSIDERED BY THE AO AND NEITHER A NY IN-DEPTH STUDY OF THE DOCUMENTS WAS MADE. IT WAS OBSERVED BY THE LD. CIT THAT CIRCULAR NO.1 OF 2005 OF CBDT WAS WRONGLY CONSIDERED BY THE AO. IT W AS FURTHER OBSERVED THAT THE AO HAS NOT CONSIDERED THE PROVISIONS OF SE CTION 10B(2) WHICH REQUIRES THE ASSESSEE TO FULFILL CERTAIN CONDITIONS TO CLAIM DEDUCTION UNDER SECTION 10B OF THE ACT. IT IS ALSO OBSERVED THAT TH OUGH THE AO ISSUED A QUESTIONNAIRE DATED 08.08.2008 WHEREIN QUERIES IN R ESPECT OF ELIGIBILITY FOR CLAIM OF DEDUCTION U/S 10B WERE RAISED IN THE LIGHT OF THE ADVERSE FINDINGS GIVEN IN THE ASSESSMENT YEAR 2005-06. THE LD. CIT ALSO NOTED THAT IN THE ASSESSMENT YEAR 2005-06, THE CLAIM OF DEDUCTION U/S DISALLOWED BY THE AO BY HOLDING THAT ALL THE THREE MAJOR ELIGIBILITY CON DITIONS ENUMERATED IN SECTION 10B(2)(I), 10B(2)(II) AND 10B(2)(III) WERE NOT FULFILLED. THE LD. CIT 3 NOTED THAT WHILE REPLY FILED BEFORE THE AO IN RESP ONSE TO NOTICE DATED 08.08.2008, THE ASSESSEE HAS REPLIED IN RESPECT OF TWO CONDITIONS ONLY I.E. MENTIONED IN SECTION 10B(2)(I) AND 10B(2)(III) AND OTHER CRUCIAL CONDITION MENTIONED IN SECTION 10B(2)(II) WAS NOT DISCUSSED A ND WAS NOT REPLIED AND AO ALSO FAILED TO NOTICE THE ABOVE OMISSION. ACCORD INGLY, THE LD. CIT, ISSUED SHOW CAUSE NOTICE, AS STATED ABOVE. DETAILED REPLY WAS FILED BY THE ASSESSEE IN RESPONSE TO SHOW CAUSE NOTICE, WHICH IS REPRODUCED IN THE ORDER OF THE LD. CIT AT PAGES 4 TO 7. THEREAFTER, THE LD. CIT EXAMINED THE REPLY AND DISCUSSED BY HIM IN HIS ORDER IN DETAIL AND FOUND T HAT THE AO WAS NOT JUSTIFIED IN ALLOWING CLAIM OF DEDUCTION UNDER SECT ION 10B AS ALL THE THREE CONDITIONS WERE NOT SATISFIED. THE LD. CIT ALSO OBS ERVED THAT THE EXISTING INFRASTRUCTURE HAVE BEEN TAKEN OVER AND PUT TO USE BY THE ASSESSEE. THE TWO CONDITIONS (II) & (III) OF SECTION 10B(2) WERE NOT FULFILLED. ACCORDINGLY, IT WAS HELD THAT THE AO FAILED TO EXAMINE THOROUGHLY T HESE ISSUES AND HELD THAT DEDUCTION ALLOWED U/S 10B WAS ALLOWED WITHOUT EXAMI NATION AND, THEREFORE, HELD THAT ORDER OF THE AO WAS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, HE SET ASIDE THE ORDER OF THE AO AND DIRECTED THE AO TO PASS A FRESH ORDER AFTER EXAMINING THE ISSUE IN THE LIGHT OF HIS OBSERVATION IN HIS ORDER. 3. THE LD. COUNSEL FOR THE ASSESSEE, WHO APPEARED B EFORE THE TRIBUNAL STATED THAT IT IS AN ADMITTED FACT THAT THE AO HAD ISSUED DETAILED 4 QUESTIONNAIRE ON 08.08.2008 BEFORE PASSING ASSESSME NT. THE ASSESSEE FILED THE REPLY AND THEREAFTER AO ALSO SENT HIS REPORT TO THE JCIT FOR HIS APPROVAL, WHO ALSO ISSUED A NOTICE TO HIM TO CONSIDER THE ISS UE IN DETAIL . IN THE MEANTIME, THE ORDER OF THE LD. CIT(A) FOR THE A.Y. 2005-06 WAS ALREADY PRONOUNCED BY WHICH DEDUCTION U/S 10B WAS ALLOWED A FTER ASCERTAINING THE FACTUAL ASPECT THAT ALL THE THREE CONDITIONS ENUMER ATED IN SECTION 10B(2)(I) TO 10B(2)(III) WERE FULFILLED. COPY OF THE ORDER OF TH E CIT(A) WAS FILED BEFORE THE AO. AFTER EXAMINING THE ORDER OF THE LD. CIT(A) THEN ONLY THE AO PASSED HIS ORDER ACCEPTING THE CLAIM OF THE ASSESSE E IN RESPECT TO DEDUCTION CLAIMED U/S 10B OF THE ACT. IT IS ALSO A MATTER OF FACT THAT DEDUCTION U/S 10B WAS DENIED WHILE PASSING ASSESSMENT FOR THE ASSESSM ENT YEAR 2005-06 AND AO HAS ISSUED QUESTIONNAIRE DATED 08.08.2008 TO FIL E THE DETAILS IN THE LIGHT OF THE DECISION FOR THE A.Y. 2005-06, AS THE CLAIM OF THE ASSESSEE WAS DENIED EARLIER. IT MEANS THAT THE AO WAS AWARE OF THE FACT THAT IN EARLIER YEAR THE CLAIM OF DEDUCTION WAS DENIED AND, THEREFORE, HE IS SUED A DETAILED QUESTIONNAIRE. THEREFORE, THE ORDER OF THE AO CANNO T BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS FURTHER SUBMITTED THAT THE ORDER OF THE LD. CIT(A) HAS BEEN AFFIRMED BY TH E TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06. THEREFORE, IN VIEW OF THE ABOVE FACTS AND REASONS ALSO, THE ISSUE IS COVERED BY THE DECISION OF THE T RIBUNAL NOW. IT WAS ALSO SUBMITTED THAT FOR THE ASSESSMENT YEAR 2004-05, DED UCTION CLAIMED BY THE 5 ASSESSEE WAS ALLOWED BY THE ITO HIMSELF WHILE PASSI NG ASSESSMENT ORDER U/S 143(3) OF THE ACT. IT WAS FURTHER EXPLAINED THAT IN FACT, THE ASSESSEE HAS FILED THE PETITION U/S 144A BEFORE THE JCIT IN WHICH IT W AS REQUESTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE/ PRODUCTION AND EXPORT OF HANDICRAFT ARTICLES OF ARTISTIC VALUE, AND ASSESSEE IS 100% EOU AND IS CLAIMING DEDUCTION UNDER SECTION 10B OF THE ACT FOR THE LAST MANY YEARS. IT WAS FURTHER SUBMITTED THAT DEDUCTION U/S 10B FOR TH E ASSESSMENT YEAR 2005- 06 WAS DISALLOWED. THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASS ESSEE. IN THIS BACKGROUND, IT WAS SUBMITTED THAT REPORT SHOULD BE SOUGHT FROM THE AO AS THE AO SEEMS INCLINED TO DISALLOW THE CLAIM OF THE ASSESSEE U/S 10B. COPY OF THIS PETITION IS PLACED AT PAGES 151 & 152 OF TH E ASSESSES PAPER BOOK. IT WAS FURTHER SUBMITTED THAT JCIT VIDE LETTER DATED 1 9.12.2008 ASKED FOR THE REPORT FROM THE AO. THE AO WAS REQUESTED THAT REPOR T SHOULD BE SUBMITTED BY 24.12.2008. IT WAS EXPLAINED HERE BEFORE THE TRI BUNAL THAT IN THESE CIRCUMSTANCES, THE AO SENT HER REPORT TO THE JCIT VIDE LETTER DATED 26.12.2008, COPY OF THE SAME IS PLACED AT PAGES 153 TO 157 OF THE PAPER BOOK. THEREAFTER, JCIT SENT A LETTER TO THE AO BY W HICH IT WAS STATED THAT AFTER TAKING INTO ACCOUNT ASSESSEES PETITION AND YOUR REPORT, THERE REMAINS NO LITIGATION AND CONSEQUENTLY NO REQUIREMENT FOR MY INTERVENTION AS FAR AS THE QUESTION OF TREATING THE ASSESSEE AS MANUFACTUR ER IS CONCERNED. 6 THEREAFTER, THE JCIT SUGGESTED TO VERIFY THE VARIO US OTHER DETAILS WHICH ARE MENTIONED IN PARA (A) & (B) OF HIS REPLY DATED 29.1 2.2008, COPY OF THE SAME IS PLACED AT PAGES 158 TO 160 OF THE PAPER BOOK. C OPY OF THIS REPLY WAS ALSO SENT TO THE ASSESSEE BY JCIT, AS IT IS MENTIONED IN THE LETTER SENT TO THE AO. ACCORDINGLY, IT WAS SUBMITTED THAT THEREAFTER THE AO EXAMINED THOSE VERY DETAILS AS SUGGESTED BY THE JCIT AND TAKING INTO CO NSIDERATION THE ORDER OF THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE AN D THEN ONLY PASSED ORDER U/S 143(3) ON 30.12.2008. ACCORDINGLY, IT WAS SUBMITTED THAT NEITHER THERE WAS ANY LACK OF INQUIRY NOR THE ORDER OF THE AO CAN BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE R EVENUE. IT WAS FURTHER MENTIONED THAT IT IS NOT NECESSARY THAT THE ASSESS MENT SHOULD BE MADE IN ELABORATE MANNER BUT THE SAME SHOULD BE MADE AFTER MAKING INQUIRY. THE AO HAS ALREADY MADE DETAILED INQUIRY AND THEN ONLY HAS ALLOWED THE DEDUCTION TO THE ASSESSEE WHILE PASSING ORDER U/S 1 43(3) OF THE ACT. RELIANCE WAS ALSO PLACED ON THE VARIOUS CASE LAWS MENTIONED IN THE WRITTEN SUBMISSIONS. LIST OF JUDGMENTS IS ALSO PLACED ON RE CORD. ACCORDINGLY, IT WAS SUBMITTED THAT THE ORDER OF THE LD. CIT IS LIABLE T O BE QUASHED. 4. THE LD. CIT(DR), ON THE OTHER HAND, PLACED STRON G RELIANCE ON THE ORDER OF THE CIT. IT WAS FURTHER STATED THAT THE LD . CIT HAS DISCUSSED ALL THE ISSUES IN DETAIL AND FOUND THAT THE ORDER OF THE AO LACKING INQUIRY AND THEREFORE, THE SAME WAS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE 7 REVENUE. THE ATTENTION OF THE BENCH WAS DRAWN TO TH E COPY OF THE ASSESSMENT ORDER PLACED ON RECORD AND STATED THAT THIS IS A SMALL ORDER AND NOT DETAILED ONE, NEITHER THERE IS ANY WHISPER THAT WHAT INQUIRY HAS BEEN MADE BY THE AO WHILE ALLOWING DEDUCTION U/S 10B. I T WAS ALSO SUBMITTED THAT THE DEPARTMENT HAS TO KEEP THE ISSUE ALIVE, TH EREFORE, IT WAS NECESSARY ON THE PART OF THE LD. CIT TO START PROCEEDINGS U/S 263 OF THE ACT, OTHERWISE THE ORDER OF THE AO COULD HAVE REACHED TO ITS FINAL ITY. IT WAS ALSO SUBMITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF T HE TRIBUNAL FOR THE A.Y. 2005-06 AND THEREFORE, DUE TO THIS REASONING ALSO IT WAS NECESSARY TO INITIATE PROCEEDINGS U/S 263 OF THE ACT. EVEN OTHERWISE, AS STATED ABOVE, NO INQUIRY WHATSOEVER WAS MADE BY THE AO WHILE ALLOWING DEDUCT ION U/S 10B OF THE ACT. IT WAS ALSO SUBMITTED THAT EVEN THE DIRECTIONS ISSUED BY THE JCIT WERE NOT MET WITH BY THE AO. THEREFORE, THE ORDER OF TH E AO WAS NOT CORRECT. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND CARE FULLY PERUSING THE RELEVANT MATERIALS AVAILABLE ON RECORD ALONGWITH TH E CASE LAWS CITED BY THE ASSESSEE, WE FOUND THAT THE ORDER OF THE LD. CIT IS LIABLE TO BE QUASHED. THE LD. CIT HIMSELF IN HIS ORDER IS ADMITTING THAT A DE TAILED QUESTIONNAIRE DATED 08.08.2008 WAS ISSUED BY THE AO TO THE ASSESSEE TO FILE THE DETAILS IN THE LIGHT OF ASSESSMENT ORDER PASSED FOR THE A.Y. 2005- 06, WHEREIN DEDUCTION CLAIMED U/S 10B WAS DENIED. FROM THIS FACT ALONE, I T ESTABLISHES THAT THE AO HAS MADE INQUIRY. VARIOUS DETAILS WERE FILED BY THE ASSESSEE. THE AO WAS 8 EXAMINING THOSE DETAILS AND ASSESSEE WAS IN APPREHE NSION THAT THE AO IS GOING TO DISALLOW THE CLAIM OF THE ASSESSEE INSPI TE OF THE ORDER OF THE LD. CIT(A), WHO ALLOWED CLAIM OF DEDUCTION U/S 10B FOR THE A.Y. 2005-06. THEREFORE, PETITION U/S 144A WAS FILED AND REPORT W AS SOUGHT FROM THE AO BY THE JCIT. THE AO HAS ALSO SUBMITTED HER REPORT POINT-WISE ABOUT THE CLAIM OF DEDUCTION AND DETAIL OF DEDUCTION. THEN JC IT WROTE A LETTER TO THE AO THAT THERE IS NO DISPUTE NOW THAT ASSESSEE IS M ANUFACTURER, HOWEVER, HE HAS TO ENSURE SOME VITAL FACTS. THEREAFTER THE AO A FTER TAKING INTO CONSIDERATION THE LETTER OF THE JCIT, SUBMISSIONS O F THE ASSESSEE, ORDER OF THE LD. CIT(A), ALLOWED THE CLAIM OF THE ASSESSEE. THO UGH THE AO HAS NOT MENTIONED ALL THESE FACTS IN HIS ORDER BUT THE AO HAS MENTIONED AT PAGE 2 OF HIS ORDER IN THE FOLLOWING MANNER: THE CLAIM OF THE EXEMPTION U/S 10B OF THE ASSESSEE WAS DEEPLY EXAMINED. BOOKS OF A/C COMPRISING OF CASH BOOK, LED GER, JOURNAL, PURCHASE REGISTER, SALE REGISTER, PURCHASE & SALE B ILLS AND OTHER BILLS & VOUCHERS WERE EXAMINED. AFTER DISCUSSION WI TH THE LD. AR OF THE ASSESSEE, AND THOROUGH EXAMINATION OF RECORDS AND SUBMISSION, INCOME AS SHOWN BY THE ASSESSEE IN ITS RETURN IS AC CEPTED AND THE CLAIM OF EXEMPTION LAID BY THE ASSESSEE U/S 10B IS ALSO FOUND TO BE ACCEPTABLE. 6.1. THESE FINDINGS OF THE AO MAY NOT BE ELABORATE FINDING BUT IT CANNOT BE SAID THAT THE AO HAS NOT EXAMINED THE CASE. THE AO HAS USED THE WORDS CLAIM OF EXEMPTION U/S 10B OF THE ASSESSEE WAS DEE PLY EXAMINED. IT CANNOT BE TAKEN LIGHTLY. IT IS FURTHER SEEN THAT A LL THE CORRESPONDENCE MADE 9 BY THE ASSESSEE WITH JCIT, THEN COMMENTS OF THE AO TO JCIT, THEN LETTER OF THE JCIT TO THE AO AND THEN ORDER OF THE LD. CIT(A ) FOR THE A.Y. 2005-06 BY WHICH DEDUCTION U/S 10B WAS ALLOWED, WERE CONSID ERED BY THE AO AND THEN ONLY THESE FINDINGS WERE GIVEN AND CLAIM OF T HE ASSESSE WAS ACCEPTED. THEREFORE, IN NO WAY, IT CAN BE SAID THAT THE AO HA S NOT MADE ANY INQUIRY. THE HONBLE BOMBAY COURT IN THE CASE OF CIT VS. GAB RIEL INDIA LTD. 203 ITR 108 HAS HELD THAT IT IS NOT NECESSARY THAT THE ORDER SHOULD BE ELABORATE BUT THE SAME SHOULD BE AFTER MAKING PROPER INQUIRY. THE AO HAS ALREADY MADE PROPER INQUIRY AS MENTIONED ABOVE. THEREFORE, IF THE ORDER OF THE AO IS PRECISE AND IN SUMMARY MANNER, IT CANNOT BE SAID THAT THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. VARIOUS OTHER DECISIONS MENTIONED IN THE WRITTEN SUBMISSIONS ARE IN SUPPORT OF THE CASE OF THE ASSESSEE. THEREFORE, WE ARE NOT INCLINED TO DIS CUSS THOSE DECISIONS IN DETAILS AS ON THE FACTS OF THE PRESENT CASE DISCUSS ED ABOVE, IT IS AMPLY PROVED THAT THE AO HAS MADE DETAILED INQUIRY BEFORE ALLOWI NG DEDUCTION U/S 10B OF THE ACT. IT IS WORTH MENTIONING HERE THAT THE ORDER OF THE LD. CIT(A) FOR THE A.Y. 2005-06 HAS BEEN APPROVED BY THE TRIBUNAL. COP Y OF THE TRIBUNALS ORDER DECIDED IN ITA NO.614/JU/2008, FOR THE A.Y. 2 005-06 VIDE ORDER DATED 20.11.2009, IS PLACED IN THE PAPER BOOK AT PA GES 47 TO 63, WHEREIN THE ISSUE HAS BEEN DISCUSSED IN DETAIL AND THEN ONLY THE ORDER OF THE CIT(A) 10 WAS CONFIRMED. THEREFORE, FOR THIS REASON ALSO, IT CANNOT BE SAID THAT THE VIEW ADOPTED BY THE AO WAS INCORRECT . 6.2. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE, WE SET ASIDE THE ORDER OF THE LD. CIT AND RESTORE THE ORDER OF T HE A.O. PASSED ORIGINALLY. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SD/- SD/- (N.L. KALRA) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED : 19/01/2012. /SKR/ COPY FORWARDED TO :- THE ASSESSEE:M/S. BASANT, JODHPUR. THE DCIT, CIR.3, JODHPUR. THE CIT (A), THE CIT-II, JODHPUR. THE D/R, ITAT, JODHPUR. GUARD FILE (ITA NO. 131/JP/2011) BY ORDER,