ITO, New Delhi V. Shri Ajay Kumar Sharma, New Delhi

ITA 1310/DEL/2013

• Counselvise Citation: 131020114 RSA 2013
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SHALABH JAS ORIA
• Keywords: Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH :A: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 1310/DEL/2013 ASSESSMENT YEAR: 2009- 2010 INCOME TAX OFFICER, WARD 33(1) VS. SHRI AJAY KUMA R SHARMA, 16 TH FLOOR, TOWER : E-2, 181, VIVEKA NAND PURI, DR. S.P. MUKHERJEE CIVIC CENTER, AZAD MARG, NEW DELHI-110 002. NEW DEL HI 100 007. (PAN ARGPS9602P) (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI Y. KAKKAR , DR RESPONDENT BY : SHRI SHALABH JAS ORIA, CA ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLA TE ORDER ON THE FOLLOWING GROUNDS :- 1. THE CIT(A) HAS ERRED IN DELETING DISALLOWANCE O F RS. 70,93,061/- U/S 80IC OF THE IT ACT DESPITE THE FACT THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING OF PLASTIC PR ODUCTS WHICH IS COVERED IN NEGATIVE LIST OF THIRTEENTH SCH EDULE. 2. THE CIT(A) HAS ERRED IN DELETING DISALLOWANCE B Y HOLDING THAT THE ASSESSEE HAS BEEN GRANTED EXEMPTION UNDER THE EXCISE ACT AND THEREFORE NO DISALLOWANCE CAN BE MADE UNDER THE PROVISIONS OF THE I.T. ACT WITHOUT ANY BASIS. 2. THE LD. AR POINTED OUT THAT ISSUE RAISED IN THE GROUND HAS BEEN SETTLED BY THE HONBLE JURISDICTIONAL DELHI HIGH CO URT IN THE CASE OF ASSESSEE ITSELF VIDE JUDGMENT DELIVERED ON 18.2.2013 IN WP ( C) 1987 / 2012 AND ITA NO. 1310/DEL/2013 2 OTHERS. THE LD. AR REFERRED PARA NOS. 9 & 10 OF THE SAID JUDGMENT, COPY OF WHICH HAS BEEN SUPPLIED. 3. LD. DR ON THE OTHER HAND DID NOT DISPUTE T HE ABOVE SUBMISSION MADE ON BEHALF OF THE ASSESEE BUT REQUESTED THE BE NCH THAT ASSESSEE SHOULD BE DIRECTED TO FILE EXCISE RECORD. 4. HAVING GONE THROUGH THE ORDERS OF THE AUT HORITIES BELOW WE FIND THAT THE AO HAD MADE DISALLOWANCE OF CLAIMED DEDUCT ION U/S 80IC OF THE ACT. AMOUNTING TO RS. 7093061/- ON THE BASIS THAT T HE ITEMS MANUFACTURED BY THE ASSESSEE FELL IN THE NEGATIVE LIST OF 13 SCH EDULE TO THE INCOME TAX ACT 1961. HE OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PET BOTTLES, CAPS/JARS ETC. WHERE TH E MAIN RAW MATERIAL USED FOR MANUFACTURING OF THESE PRODUCTS WAS PLASTIC GRA NULES. HE NOTED THAT PLASTICS AND ARTICLES THERE OF WERE COVERED AT SERI AL NO. 20 OF THE 13 SCHEDULE WHICH IS A PART OF THE NEGATIVE LIST ON WH ICH DEDUCTION U/S 80IC CANNOT BE CLAIMED. THE ASSESSEE CONTENDED THAT THE ITEMS I.E. PET BOTTLES, CAPS, JARS ETC. WHICH WAS MANUFACTURED BY THE ASSES SEE WERE COVERED UNDER THE HEADING / CLASSIFICATION NO. 3923 OF EXCI SE TARRIFF MANUAL. THE AO DID NOT AGREE AND AS PER HIM ITEM NO. 3923 REFERRED TO THE ARTICLES MADE OF PLASTICS, WHEREAS PLASTICS AND ARTICLES THEREOF WE RE INCLUDED IN THE 13 SCHEDULE. THE AO ALSO MENTIONED THAT THE CLAIM OF T HE ASSESSEE WAS NOT ACCEPTED BY THE DEPARTMENT FROM THE ASSESSMENT YEAR S 2005-06 TO 2008-09 WHEREIN THE REASSESSMENT PROCEEDINGS WERE INITIATED U/S 147 / 148 FOR ITA NO. 1310/DEL/2013 3 THOSE YEARS ON THE BASIS THAT THERE WAS AN OBJECTIO N BY THE AUDIT PARTY THAT THE ASSESEE WAS NOT ELIGIBLE FOR CLAIMING THE DEDUC TION U/S 80IC OF THE ACT. THE SOLE ISSUE INVOLVED IN THE GROUND IS THUS AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IC OF THE ACT OR NOT. 5. THE LD. CIT(A) HAS DELETED THE DISALLOWAN CE IN QUESTION, ON THE BASIS THAT THE AO DID NOT APPRECIATE THE MATERIAL A ND EVIDENCE FURNISHED BY THE ASSESSEE TO DIFFERENTIATE BETWEEN THE RAW MATER IAL AND THE ARTICLES OR THINGS MANUFACTURED BY THE UNIT IN AN INDUSTRIAL A REA. HE HAS REFERRED SCHEDULE 13 OF THE I.T. ACT 1961 WITH THIS FINDING THAT SERIAL NO. 20 OF THE SCHEDULE TALKS ABOUT THE ARTICLES OR THINGS OR ACTI VITY MENTIONED AS PLASTIC AND ARTICLES THEREOF UNDER THE EXCISE CLASSIFICATI ON OR HEADING NOS. 39.09 TO 39.15. AS PER HIM THE LEGAL INTERPRETATION IS THAT THE GOODS MANUFACTURED BY THE ASSESSEE FELL UNDER THE HEADING NOS. 3923.90 A ND 8414.99 OF THE EXCISE CLASSIFICATION. HE HAS ALSO OBSERVED THAT IN THE EXEMPTION CERTIFICATE THAT WAS ISSUED TO THE ASSESSEE IT WAS STATED THAT THE DESCRIPTION OF INPUT USED IN THE MANUFACTURE OF SPECIFIED GOODS ARE MENT IONED AS HDPE, PP, PET GRANULES, BASE PLATE RESISTIBLE, SWITCHES, ETC. THE LD. CIT(A) THEREAFTER HAS OBSERVED THAT THE SCHEDULE 13 DOES NOT TALK ABOUT T HE RAW MATERIAL AND THE RAW MATERIAL USED BY THE ASSESSEE FOR MANUFACTU RE OF SPECIFIED GOODS IS VERY MUCH IN THE APPROVED CLASSIFICATION OF THE EXC ISE DEPARTMENT. AS PER THE CLASSIFICATION OF HEADING NO. 3920 OF THE CENTR AL EXCISE CLASSIFICATION THE GOODS OR ARTICLES MANUFACTURED BY THE ASSESSEE FALL UNDER THE CLASSIFICATION ITA NO. 1310/DEL/2013 4 AS ARTICLES FOR THE CONVEYANCE OR PACKING OF GOODS OF PLASTICS, STOPPERS, LIDS, CAPS AND OTHER CLOSURES. THE OBJECTION OF TH E AO IN ALLOWING THE CLAIM OF THE ASSESSEE WAS THAT THE ASSESSEE HAS USED PLAS TIC GRANULES. THE LD. CIT(A) THEREAFTER HAS ALSO REFERRED APPELLATE ORDER IN THE CASE OF SISTER CONCERN I.E M/S. OM SHREE GEETA INDUSTRIES, WHEREIN THE CENTRAL EXCISE DEPARTMENT HAD DISCUSSED THE MATTER OF MANUFACTURIN G ACTIVITY IN WHICH THE ASSESSEE WAS ENGAGED FOR SIMILAR PRODUCTION OF PET BOTTLES, CAPS, LIDS, JARS ETC. AND HAS GIVEN A FINDING THAT DURING THE PROCES S, THE SCRAP OF PLASTIC WOULD BE GENERATED WHICH FELL IN THE CHAPTER 39 UND ER CLASSIFICATION 39.15, WHICH IS LISTED IN THE ANNEXURE I OF THE NOTIFICATI ON NO. 50/2003 CE DATED 10.6.2003. IT WAS MENTIONED THAT NOTIFICATION NO. 8 9/95 CE DATED 18.5.1995 HAS PROVIDED THE EXEMPTION TO WASTE AND PARINGS ARI SING DURING THE MANUFACTURE OF EXEMPTED GOODS. THE SAID NOTIFICATIO N DATED 10.6.2003 HAS EXEMPTED THE GOODS SPECIFIED IN THE FIRST SCHED ULE AND THE SECOND SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT 1985 (5 OF 1985) OTHER THAN THE GOODS SPECIFIED IN ANNEXURE 1 APPENDED THERETO AN D CLEARED FROM A UNIT LOCATED IN THE INDUSTRIAL GROWTH CENTRE OR INDUSTRI AL INFRASTRUCTURE CENTRE OR EXPORT PROMOTION INDUSTRIAL PARK OR INDUSTRIAL ESTA TE OR INDUSTRIAL AREA ETC. AS THE CASE MAY BE SPECIFIED IN ANNEXURE II APPENDE D THERETO AND EXEMPTED FROM THE WHOLE OF DUTY OF EXCISE OF ADDITI ONAL DUTY OF EXCISE. BY VIRTUE OF THE SAID NOTIFICATION DATED 18.5.1995 WAS TE AND PARING ARISING DURING THE MANUFACTURE OF EXEMPTED GOODS ARE EXEMPT ED FROM THE WHOLE ITA NO. 1310/DEL/2013 5 OF DUTY OF EXCISE LEVIABLE THEREON SPECIFIED IN THE SCHEDULE TO THE CENTRAL EXCISE TARRIFF ACT, 1985. IN THE CASE OF THE SAID SISTER CONCERN OF M/S. OM SHREE GEETA INDUSTRIES, WASTE ARISING FROM THE MANU FACTURE FALLING UNDER THE CHAPTER SUB HEADING 3915 ARISING IN THE MANUFAC TURE OF PET BOTTLES, CAPS PERFORMS, JARS FALLING UNDER THE CHAPTER SUB H EADING 3923.90 AND 8414.90, THE CONCERN HAD OPTED FOR EXEMPTION UNDER NOTIFICATION NO. 50/2003-CE DATED 10.6.2003 AND WAS HELD ENTITLED FOR EXEMPTION UNDER NOTIFICATION NO. 89/95 DATED 18.5.1995. THE LD. CIT (A) HAS OBSERVED FURTHER THAT SECTION 80IC OF THE I.T. ACT HAS BEEN SPECIFICALLY LEGISLATED FOR THE DEVELOPMENT OF BACKWARD AREAS BY GIVING CERTAIN BENEFITS AND EXEMPTION TO THOSE UNITS THAT ARE ENGAGED IN THE BU SINESS AND THOSE FULFILLED THE CONDITIONS FORMULATED ACCORDING TO TH E SCHEME PROPOUNDED BY THE CENTRAL GOVT. WHILE GRANTING EXEMPTION TO SUCH UNIT OF ASSESSEE , SEVERAL DEPARTMENTS OF THE STATE AND THE CENTRAL PL AYED A KEY ROLE IN GRANTING EXEMPTION AS PER THE JURISDICTION GIVEN TO THEM. HE HAS OBSERVED FURTHER THAT THESE UNITS IN A BACKWARD AREA ARE SUB JECT TO PERIODIC CHECKS AND INSPECTIONS. AFTER GOING THROUGH THE PROVISIONS LAID DOWN U/S 80IC OF THE I.T. ACT, SCHEDULE 13 SERIAL NO. 20 OF THE I.T. ACT AS WELL AS THE STATED NOTIFICATIONS DATED 18.5.95 AND 10.6.2003 ISSUED BY CENTRAL EXCISE DEPARTMENT REPRODUCED IN THE FIRST APPELLATE ORDER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ABOVE FINDINGS AND OBS ERVATIONS OF THE LD. CIT(A). BESIDES, THE ISSUE RAISED IN THE GROUNDS, I S FULLY COVERED BY THE ITA NO. 1310/DEL/2013 6 JUDGMENT DATED 18.2.2013 (SUPRA) OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF THE ASSESSEE ITSELF THE RELEVANT PAR A NO. 8,9 AND 10 THEREOF ARE BEING REPRODUCED HEREUNDER :- 8. THE REASONING ADOPTED IN THE TWO YEARS FOR WHICH THE RE-OPENING IS BEING SOUGHT AFTER FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR WAS THAT SINCE THE PETITIONER HAD ANSWERED NOT APP LICABLE WITH REGARD TO SERIAL NO. 14(II)(E) OF FORM 10CCB, THE PETITIONER HAD FAILED TO DISCLOSE FULL AND TRUE MATERIAL FACTS NECESSARY FOR HIS ASSESSMEN T. APART FROM THIS, THE LEARNED COUNSEL FOR THE PETITIONER ALSO DREW OUR AT TENTION TO THE ASSESSMENT ORDER DATED 29.3.2007 PERTAINING TO THE ASSESSMENT YEAR 2005-06 WHEREIN THE ASSESSING WP 1987/12, 2732/12, 2749/12 & 2733/ 2012 PAGE 6 OF 9 OFFICER HAD ALLOWED THE DEDUCTION CLAIMED BY THE PE TITIONER AND HAD SPECIFICALLY NOTED AS UNDER :- THE ASSESSEE HAS FILED NECESSARY EVIDENCES. IT WAS ALSO POINTED OUT BY THE LEARNED COUNSEL THAT PRIOR TO THE COMPLETION OF THE ASSESSMENT, SEVERAL LETTERS INCLU DING THE LETTERS DATED 27.12.2006, 13.3.2007 AND 23.3.2007 HAD BEEN WRITT EN BY THE PETITIONER TO THE ASSESSING OFFICER EXPLAINING, INTER ALIA, THE C LAIM FOR DEDUCTION UNDER SECTION 80-IC. THE LEARNED COUNSEL FOR THE PETITIO NER ALSO DREW OUR ATTENTION TO THE OBJECTIONS WHICH WERE TAKEN BY THE PETITIONER TO THE PURPORTED REASONS FOR RE-OPENING OF THE ASSESSMENT. IN THE OBJECTIONS THE PETITIONER HAD SPECIFICALLY TAKEN THE PLEA THAT THE 13 TH SCHEDULE OF THE SAID ACT AND PARTICULARLY, SERIAL NO. 20 THEREOF HAS BEE N MISREPRESENTED BY THE REVENUE INASMUCH AS IT HAS NOT REALISED THAT THE PR ODUCT MANUFACTURED BY THE PETITIONER FELL WITHIN THE HEADING NO. 39.23 AN D WAS THEREFORE NOT IN THE NEGATIVE LIST WHICH DEALT WITH ARTICLES FALLING WIT HIN HEADINGS 39.09 TO 39.15 OF THE CENTRAL EXCISE CLASSIFICATION. UNFORTUNATELY THIS ASPECT OF THE MATTER HAS NOT BEEN DEALT WITH APPROPRIATELY, IF AT ALL, B Y THE ASSESSING OFFICER IN THE ORDER DATED 17.2.2012 REJECTING THE OBJECTIONS RAISED BY THE PETITIONER. 9. WE HAVE ALSO HEARD THE LEARNED COUNSEL FOR THE RESPONDENT WHO HAS SUPPORTED THE ISSUANCE OF THE NOTICES AS ALSO THE P URPORTED REASONS AND THE ORDER REJECTING THE OBJECTIONS. HOWEVER, WE ARE INC LINED TO AGREE WITH THE WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012 PAGE 7 OF 9 SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE PETITIONER. TH E ENTIRE SUB-STRATUM OF THE NOTICES ISSUED UNDER SECTION 148 OF THE SAID AC T IS THAT THE PETITIONERS PRODUCT NAMELY PET BOTTLES FALL WITHIN THE NEGATIVE LIST STIPULATED IN SERIAL NO. 20 OF THE 13 TH SCHEDULE OF THE SAID ACT. WE HAVE NOTED THE ARGUME NTS OF THE LEARNED COUNSEL FOR THE PETITIONER THAT THE PRODUCT MANUFACTURERRED ITA NO. 1310/DEL/2013 7 BY THEM FALLS UNDER 3923.30.90 OF THE CENTRAL EXCISE CLASSIFICATION WHICH IS NOT WITHIN THE RANGE OF PRODUCTS SPECIFIED IN SERIA L NO. 20 OF THE 13 TH SCHEDULE OF THE SAID ACT, THAT IS, WITHIN HEADINGS 39.09 TO 39.15. THEREFORE CLEARLY, THE SUBMISSION OF THE LEARNED COUNSEL FOR THE PETITIONER IS CORRECT. THE PETITIONERS PRODUCT DOES NOT FALL WITHIN THE N EGATIVE LIST STIPULATED IN THE 13 TH SCHEDULE OF THE SAID ACT. IF THAT BE THE CASE, THE N, THE ANSWER GIVEN BY THE PETITIONER IN SERIAL NO. 14 (II) (E) O F FORM 10 CCB FILED ALONG WITH THE RETURN IS NOT WRONG, FALSE OR INACCURATE. THEREFORE, THE PETITIONER CANNOT BE HELD TO HAVE FAILED TO FULLY AND TRULY DI SCLOSE ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. 10. INSOFAR AS THE OTHER ASSESSMENT YEARS ARE CO NCERNED WHERE THE ISSUE OF LIMITATION OF FOUR YEARS DOES NOT ARISE, THE POS ITION WOULD NOT BE ANY DIFFERENT. THIS WOULD BE SO BECAUSE ON A REASONABLE INTERPRETATION OF THE PROVISIONS OF SECTION 80-IC(2) READ WITH SERIAL NO. 20 OF THE 13 TH SCHEDULE OF THE SAID ACT READ WITH THE FIRST SCHEDULE TO THE C ENTRAL EXCISE TARIFF ACT, 1985, IT WOULD BE CLEAR THAT THE PETITIONERS PRODU CT DOES NOT FALL WITHIN THE NEGATIVE LIST AND WP 1987/12, 2732/12, 2749/12 & 2 733/2012 PAGE 8 OF 9 THEREFORE THE PETITIONER HAD RIGHTLY CLAIMED DEDU CTION UNDER SECTION 80-IC OF THE SAID ACT WHICH THE ASSESSING OFFICER IN THE YEARS IN WHICH THE ASSESSMENT HAD BEEN COMPLETED UNDER SECTION 143(3) HAD ALLOWED AFTER EXAMINING THE NECESSARY EVIDENCE. EVEN IN RESPECT OF THE YEAR IN WHICH THERE WAS NO ASSESSMENT ORDER UNDER SECTION 143(3), THAT IS, THE ASSESSMENT YEAR 2007-08, WE FEEL THAT THE SAME CANN OT BE RE-OPENED BECAUSE NO REASONABLE PERSON CAN BE ATTRIBUTED WITH ANY REASON TO BELIEVE THAT INCOME HADE ESCAPED ASSESSMENT WHEN THE PETITI ONERS PRODUCT CLEARLY DOES NOT FALL WITHIN THE NEGATIVE LIST. THUS, IN VI EW OF THE ESTABLISHED FACTS IN THIS CASE, THE ASSESSING OFFICER COULD NOT EVEN HAVE TAKEN THE PRIMA FACIE VIEW THAT THERE WERE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. CONSEQUENTLY, WE FEEL THAT, IN THE FACT S AND CIRCUMSTANCES OF THIS CASE, THE ISSUANCE OF NOTICES UNDER SECTION 14 8 OF THE SAID ACT WAS NOT WARRANTED. THE SAID NOTICES ARE QUASHED AND ALL PRO CEEDINGS PURSUANT THERETO ARE ALSO QUASHED. 6. IT IS PERTINENT TO MENTION OVER HERE THAT TH E ASSESSEE HAD GONE IN THE ABOVE CITED WRIT PETITION BEFORE THE HONBLE DELHI HIGH COURT AGAINST THE NOTICES ISSUED U/S 148 OF THE ACT FOR THE ASSESSMEN T YEARS 2005-06 TO 2008-09 ON THE BASIS THAT THERE WAS AN OBJECTION BY THE AUDIT PARTY THAT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF THE DEDUCTIO N U/S 80I OF THE ACT. AFTER ITA NO. 1310/DEL/2013 8 DISCUSSING THE CASE IN DETAIL THE HONBLE HIGH COUR T ALLOWED THE WRIT PETITIONS WITH THIS FINDING THAT NO REASONABLE PERS ON CAN BE ATTRIBUTED WITH ANY REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSES SMENT WHEN THE PETITIONERS PRODUCT CLEARLY DOES NOT FALL WITHIN T HE NEGATIVE LIST. THE HONBLE HIGH COURT WAS PLEASED TO HOLD THAT ISSUANCE OF NOT ICES U/S 148 WAS NOT WARRANTED AND THE SAME WERE QUASHED AND ALL PROCEED INGS PURSUANT THEREOF WERE ALSO QUASHED. 7. SINCE THE ISSUE RAISED IN THE GROUND IS FU LLY COVERED BY THE ABOVE CITED JUDGMENT OF THE HONBLE DELHI HIGH COURT IN T HE CASE OF PRESENT ASSESSEE ITSELF, WE ARE NOT INCLINED TO ENTERTAIN T HE REQUEST OF THE LD. DR TO DIRECT THE ASSESSEE TO FILE EXCISE RECORD OR INTERF ERE WITH THE FINDING OF THE LD. CIT(A) ON THE ISSUE. THE SAME IS UPHELD. THE GR OUNDS ARE ACCORDINGLY REJECTED. 8. CONSEQUENTLY APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2014. SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 17 TH JANUARY, 2014 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR, ITAT