Newgen Imaging Systems Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1377/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90431 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Keywords: Principle of natural justice; Scheme of amalgamation; Tax effect; Revenue expenditure
• Section: 143(3); 80IB; 10B; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1377/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S NEWGEN IMAGING SYTEMS PVT. LTD (MERGED AND NOW KNOWN AS NEWGEN KNOWLEDGE WORKS PVT. LTD.) 68, ROYAPETTAH HIGH ROAD ROYAPETTAH, CHENNAI 600 014 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE IV(4) CHENNAI [PAN AAACN 2041 B] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI SRIRAM SESHADRI, ADVOCATE /RESPONDENT BY : SHRI JOE SEBASTIAN, CIT / DATE OF HEARING : 18-05-2015 ! / DATE OF PRONOUNCEMENT : 29-05-2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-IV, CHENNAI, DATED 2 5.3.2014 AND PERTAINS TO ASSESSMENT YEAR 2009-10. ITA NO.1377/14 :- 2 -: 2. SHRI SRIRAM SESHADRI, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S 143(3) ON 18.11.2011. HOWEVER, THE ADMINISTRATIVE COMMISSIO NER FOUND THAT THE BANGALORE AND ANNA SALAI UNITS OF THE ASSESSEE WHICH ARE IN THE 9 TH AND 7 TH YEAR OF CLAIM SHOULD HAVE RENEWED THEIR STPI STATU S. SUCH RENEWAL HAS NOT BEEN OBTAINED AS PER THE DETAILS AV AILABLE ON RECORD. THEREFORE, THE COMMISSIONER FOUND THAT THE CLAIM OF DEDUCTION U/S 10B TO THE EXTENT OF ` 2,74,19,992/- AND ANOTHER SUM OF ` 1,83,36,902/- SHOULD BE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO THE LD. COUNSEL, THE M AIN REASON FOR INITIATING PROCEEDINGS U/S 263 IS THAT THE ASSESSIN G OFFICER HAS NOT CONDUCTED ANY ENQUIRY WITH REGARD TO DEDUCTION U/S 80IB OF THE ACT. REFERRING TO THE ASSESSMENT ORDER, THE LD. COUNSEL SUBMITTED THAT DURING THE COURSE OF HEARING, THE DETAILS CALLED F OR BY THE ASSESSING OFFICER WERE FILED AND THE SAME WAS VERIFIED. THER EFORE, IT MAY NOT BE RIGHT TO SAY THAT THE ASSESSING OFFICER HAS NOT CON DUCTED ANY PROPER ENQUIRY. 3. REFERRING TO THE JUDGMENT OF THE DELHI HIGH COURT IN CIT VS SUNBEAM AUTO LTD, 332 ITR 167, THE LD. COUNSEL SUBM ITTED THAT THE REVENUE CONTENDED BEFORE THE HIGH COURT THAT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING OFFICER DID NOT CON SIDER THE ITA NO.1377/14 :- 3 -: EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL IN N ATURE. THE ASSESSMENT ORDER DOES NOT GIVE ANY REASON FOR ALLOW ING THE CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. THE DELHI HI GH COURT FOUND THAT THAT BY ITSELF WOULD NOT INDICATIVE OF THE FAC T THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSING OFFICER IS NOT REQUIRE D TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTI ON. THEREFORE, ACCORDING TO THE LD. COUNSEL, ONE HAS TO SEE FROM T HE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWI NG THE CLAIM. IN THIS CASE, ACCORDING TO THE LD. COUNSEL, THE ASSESS ING OFFICER CALLED FOR ALL THE DETAILS AND APPLIED HIS MIND AND ALLOWED TH E CLAIM OF THE ASSESSEE. THEREFORE, IT IS NOT A CASE OF NON-APPLI CATION OF MIND. MERELY BECAUSE THE ASSESSING OFFICER HAS NOT DISCUS SED ANYTHING IN THE ASSESSMENT ORDER, IT DOES NOT MEAN THAT THE ASSESSI NG OFFICER HAS NOT APPLIED HIS MIND OR NOT CONDUCTED ANY ENQUIRY AS RE QUIRED UNDER THE ACT. 4. THE LD. COUNSEL HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF P&H HIGH COURT IN HARI IRON TRADING CO. VS CIT, 263 ITR 437, AND SUBMITTED THAT THE COMMISSIONER EXERCISED HIS POWER U/S 263 ONLY AFTER EXAMINING THE RECORDS OF ANY PROCEEDINGS UNDE R THE ACT. THE EXPRESSION RECORD HAS BEEN DEFINED IN CLAUSE (B) OF THE EXPLANATION TO ITA NO.1377/14 :- 4 -: SECTION 263 WHICH INCLUDE ALL RECORDS RELATING TO A NY PROCEEDINGS AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER. ACCORDING TO THE LD. COUNSEL, IN EARLIER ASSESSMENT YEARS, T HE ASSESSING OFFICER HAS EXAMINED ALL RECORDS INCLUDING THE APPROVAL/RE NEWAL GRANTED BY STPI AND THAT RECORD IS AVAILABLE WITH THE ASSESSIN G OFFICER. THEREFORE, THE COMMISSIONER IS EXPECTED TO EXAMINE ALL THE RECORDS RELATING TO EARLIER ASSESSMENT YEARS. ON A QUERY F ROM THE BENCH WHEN THE COMMISSIONER WHILE REVISING THE ASSESSMENT ORDE R RELATING TO ASSESSMENT YEAR 2009-10 IS REQUIRED TO EXAMINE THE RECORDS OF EARLIER ASSESSMENT YEARS, THE LD. COUNSEL SUBMITTED THAT RE CORDS MEANS RECORDS OF ALL THE EARLIER ASSESSMENT YEARS ALSO. THEREFORE, THE COMMISSIONER IS EXPECTED TO EXAMINE ALL THE RECORDS OF THE EARLIER ASSESSMENT YEARS. ACCORDING TO THE LD. COUNSEL, NO N-EXAMINATION OF THE RECORDS OF THE EARLIER ASSESSMENT YEARS BY THE COMMISSIONER IS NOT JUSTIFIED, THEREFORE, THE COMMISSIONER OUGHT NOT TO HAVE REVISED THE ORDER PASSED BY THE ASSESSING OFFICER. 5. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE JUD GMENT OF MADRAS HIGH COUNT IN CIT VS PVP VENTURES LTD, 211 T AXMAN 554, AND SUBMITTED THAT THE COMMISSIONER CANNOT DIVERGE FROM THE GROUNDS ON WHICH THE REVISIONAL PROCEEDING WAS INITIATED. IN THIS CASE, THE COMMISSIONER INITIATED PROCEEDINGS ON THE GROUND TH AT NO ENQUIRY WAS ITA NO.1377/14 :- 5 -: CONDUCTED. ACCORDING TO THE LD. COUNSEL, IT IS NOW ESTABLISHED THAT THE ASSESSING OFFICER HAS CONDUCTED ENQUIRY, THEREFORE, THE COMMISSIONER HAS TO CONFINE HIMSELF ONLY ON THE REASONS WHICH WA S RECORDED IN THE SHOW CAUSE NOTICE FOR REDOING THE ASSESSMENT. 6. ON A QUERY FROM THE BENCH WHETHER THE LD. COUNSEL H AS ANY COMMENTS ON THE JUDGMENT OF THE APEX COURT IN THE C ASE OF TOYOTA MOTOR CORPORATION VS CIT [2008] 306 ITR 52, THE LD. COUNSEL SUBMITTED THAT IN THE CASE BEFORE THE APEX COURT, T HE ASSESSING OFFICER DROPPED PENALTY PROCEEDINGS WITHOUT ANY REASON WHIC H WAS REVISED BY THE COMMISSIONER. IN THOSE CIRCUMSTANCES, THE APEX COURT FOUND THAT THE ASSESSING OFFICER HAS TO PASS A REASONED ORDER. ACCORDING TO THE LD. COUNSEL, THIS JUDGMENT OF THE APEX COURT IS NOT APPLICABLE TO THE FACTS OF THIS CASE. 7. THE LD. COUSNEL FURTHER SUBMITTED THAT THE ASSESSME NT ORDER WAS PASSED AGAINST A COMPANY WHICH IS NOT IN EXISTE NCE. REFERRING TO COPY OF THE LETTER WHICH IS AVAILABLE AT PAGES 1 & 2 OF THE PAPER BOOK FILED BY THE ASSESSEE, THE LD. COUNSEL SUBMITTED T HAT BOTH THE ASSESSING OFFICER AND THE COMMISSIONER WERE INFORME D ABOUT THE SCHEME OF AMALGAMATION APPROVED BY THE MADRAS HIGH COURT WITH EFFECT FROM 1.4.2009. THEREFORE, ON THE DATE OF TH E ASSESSMENT ORDER I.E 18.11.2011, THE ASSESSEE-COMPANY IS NOT IN EXIS TENCE, THEREFORE, ITA NO.1377/14 :- 6 -: THE ASSESSMENT ORDER PASSED AGAINST A NON-EXISTENT COMPANY IS NOT VALID. ON A QUERY FROM THE BENCH, IF THE ASSESSMEN T ORDER PASSED BY THE ASSESSING OFFICER IS AGAINST A NON-EXISTENT COM PANY, WHY THE SAME WAS NOT CHALLENGED BEFORE THE PROPER FORUM IN THE M ANNER KNOWN IN LAW, THE LD. COUNSEL SUBMITTED THAT THERE IS NO TAX EFFECT BY VIRTUE OF THIS ASSESSMENT ORDER, THEREFORE, THERE WAS NO OCCA SION FOR THE ASSESSEE TO CHALLENGE THE ORDER BEFORE THE CIT(A) B Y WAY OF FILING AN APPEAL. 8. WHEN THE ATTENTION OF THE LD. COUNSEL WAS DRAWN TO THE PROVISIONS OF SECTION 170 OF THE INCOME-TAX ACT, TH E LD. COUNSEL SUBMITTED THAT SECTION 170 OF THE ACT PROVIDES FOR SUCCESSION, THEREFORE, PROVISIONS OF SECTION 170 IS NOT APPLICA BLE FOR MAKING ASSESSMENT IN THE HANDS OF AMALGAMATED COMPANY. TH E LD. COUNSEL VERY FAIRLY ADMITTED THAT THE COMPANY WAS AMALGAMAT ED WITH EFFECT FROM 1.4.2009 AND THE SCHEME OF AMALGAMATION WAS AP PROVED BY THE MADRAS HIGH COURT BY AN ORDER DATED 27.8.2010. THE COPY OF THE HIGH COURTS ORDER HOWEVER, WAS RECEIVED BY THE ASSESSE E ONLY ON 10.9.2010. THEREFORE, THE ASSESSEE HAS FILED THE RETURN OF INCOME IN THE NAME OF THE ERSTWHILE COMPANY ON 21.9.2009. TH E LD. COUNSEL FURTHER SUBMITTED THAT WHEN THE ASSESSING OFFICER H AS NO JURISDICTION FOR PASSING THE ASSESSMENT ORDER AGAINST A NON-EXIS TENT COMPANY, THE ITA NO.1377/14 :- 7 -: CONSENT GIVEN BY THE ASSESSEE WILL NOT CONFER ANY JURISDICTION ON THE AUTHORITIES. ACCORDING TO THE LD. COUNSEL, IF THE ASSESSING OFFICER HAS NO JURISDICTION TO PASS AN ORDER AGAINST A NON-EXI STENT COMPANY BY VIRTUE OF CONSENT OF THE ASSESSEE, THE ASSESSING O FFICER CANNOT HAVE ANY JURISDICTION TO PASS AN ORDER. THEREFORE, IN A NY WAY, THE ORDER PASSED BY THE COMMISSIONER AGAINST A NON-EXISTENT C OMPANY IS INVALID. 9. ON THE CONTRARY, SHRI JEO SEBASTIAN, LD. DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT THE COMMISSIONER FOUN D THAT THE ASSESSEE HAD GIVEN A LOAN TO A SUBSIDIARY COMPANY T O THE EXTENT OF ` 9,4,67,000/-. THE ASSESSEE HAS ALSO SHOWN INTERES T ACCRUED DURING THE YEAR UNDER CONSIDERATION SEPARATELY TO THE EXTE NT OF ` 1,23,30,314/-. IN VIEW OF THIS DIFFERENCE, THE COM MISSIONER FOUND THAT THE ASSESSEE HAS FOUR UNITS. HOWEVER, THE ASSESS EE IS CLAIMING DEDUCTION U/S 10B IN RESPECT OF THREE UNITS TO THE EXTENT OF ` 13,87,97,148/- FROM THE TOTAL PROFIT OF ` 18,21,31,589/-. INITIALLY, THE STPI APPROVAL WAS GRANTED FOR A PERIOD OF FIVE YEAR S. THEREAFTER, THE APPROVAL HAS TO BE RENEWED BY SUBMISSION OF RENEWAL APPLICATION FOR BANGALORE AND ANNA SALAI UNITS WHICH ARE IN THE 9 TH AND 7 TH YEAR OF CLAIM. THEREFORE, IT IS NECESSARY TO EXAMINE WHETH ER THE APPROVAL GRANTED BY STPI WAS RENEWED BEYOND THE PERIOD OF FI VE YEARS OR NOT. ITA NO.1377/14 :- 8 -: SINCE THERE IS NO REFERENCE IN THE ASSESSMENT ORDER AND THE ASSESSING OFFICER FAILED TO CONDUCT ANY ENQUIRY, ACCORDING TO THE LD. DR, THE COMMISSIONER HAS RIGHTLY EXERCISED HIS JURISDICTION U/S 263 OF THE ACT. REFERRING TO THE CLAIM OF THE ASSESSEE THAT THE AS SESSING OFFICER HAS EXAMINED ALL THE MATERIALS IN THE EARLIER ASSESSMEN T YEARS, THE LD. DR POINTED OUT THAT UNDER THE PROVISIONS OF INCOME-TAX ACT, EACH AND EVERY ASSESSMENT YEAR IS SEPARATE AND DISTINCT AND THEREFORE, THE ASSESSING OFFICER IS EXPECTED TO EXAMINE THE DOCUME NTS INDEPENDENTLY IN EACH ASSESSMENT PROCEEDINGS. THE LD. DR FURTHER SUBMITTED THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME-TAX PROCEEDINGS. SINCE THE ASSESSING OFFICER HAS NOT E XAMINED THE RENEWAL GRANTED BY STPI BEYOND FIVE YEARS AND THE D IFFERENCE AS SHOWN WITH REGARD TO LOAN GIVEN BY THE ASSESSEE, A CCORDING TO THE LD. DR, THE COMMISSIONER HAS RIGHTLY REVISED THE ORDER OF THE ASSESSING OFFICER. REFERRING TO THE ORDER PASSED BY THE COMM ISSIONER, THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER WAS DIRECTED T O EXAMINE THE MATTER DE NOVO AND THEREAFTER TO COMPLETE THE ASSESSMENT, THEREFO RE, THERE IS NO PREJUDICE CAUSED TO THE ASSESSEE. 10. REFERRING TO THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSEE-COMPANY IS NO IN-EXISTENCE, THE LD. DR SUB MITTED THAT THE COMPANY WAS IN EXISTENCE UPTO 31.3.2009 I.E THE LAS T DAY OF THE ITA NO.1377/14 :- 9 -: FINANCIAL YEAR WHICH IS RELEVANT TO ASSESSMENT YEAR 2009-10, THEREFORE, THE INCOME EARNED BY THE ASSESSEE UPTO 31.3.2009 H AS TO BE ASSESSED IN THE HANDS OF THE ASSESSEE. THE LD. DR FURTHER POINTED OUT THAT THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF THE ASSESSING OFFICER EVEN THOUGH IT WAS MADE IN THE NAME OF THE COMPANY WHICH WAS AMALGAMATED WITH EFFECT FROM 1.4.2009 WITH ANOT HER COMPANY. THEREFORE, NOW THE ASSESSEE CANNOT CLAIM THAT THE COMPANY WAS NOT IN EXISTENCE. ACCORDING TO THE LD. DR, AS ON 31.3. 2009, THE COMPANY WAS VERY MUCH IN EXISTENCE AND THE AMALGAMATION TOO K PLACE ONLY WITH EFFECT FROM 1.4.2009 I.E RELEVANT TO ASSESSMEN T YEAR 2009-10. THEREFORE, ACCORDING TO THE LD. DR, THE ASSESSMENT HAS BEEN RIGHTLY MADE IN THE NAME OF THE ASSESSEE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. LET US FIRST TAKE THE ASSESSMENT MADE IN THE HANDS OF THE PRESENT ASSESSE E. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE-CO MPANY WAS AMALGAMATED WITH M/S NEWGEN KNOWLEDGE WORKS PVT. LT D WITH EFFECT FROM 1.4.2009 BY THE ORDER OF THE MADRAS HIGH COURT DATED 27.8.2010. THE FACT REMAINS THAT UPTO 31.3.2009, THE ASSESSEE- COMPANY IS VERY MUCH IN EXISTENCE AND CARRIED ON BUSINESS. THEREFOR E, THE INCOME EARNED UPTO 31.3.2009 HAS TO BE ASSED ONLY IN THE H ANDS OF THE ITA NO.1377/14 :- 10 -: ASSESSEE. ADMITTEDLY, THE ASSESSEE FILED RETURN O F INCOME FOR THE YEAR UNDER CONSIDERATION. MOREOVER, THE APPEAL BEFORE T HIS TRIBUNAL ITSELF IS FILED ONLY BY THE ASSESSEE IN THE NAME OF M/S NEWG EN IMAGING SYSTEMS PVT. LTD. IF THE CLAIM IS ACCEPTED THAT T HE COMPANY WAS NOT IN EXISTENCE THEN THE PRESENT APPEAL FILED BEFORE T HIS TRIBUNAL ITSELF CANNOT BE ENTERTAINED. IN FACT, AS ON THE DATE OF FILING OF APPEAL BEFORE THIS TRIBUNAL, THE COMPANY IS NOT IN EXISTEN CE AND IT WAS AMALGAMATED BY THE ORDER OF THE HIGH COURT WITH M/S NEWGEN KNOWLEDGE WORKS PVT. LTD. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT INCOME EARNED IN FINANCIAL YEAR 2008-09 ENDING WITH 31.3.2009 RELEVANT TO ASSESSMENT YEAR 2 009-10 HAS TO BE ASSESSED ONLY IN THE NAME OF M/S NEWGEN IMAGING SYS TEMS PVT. LTD. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY PASSED THE ORDER IN THE NAME OF THE ASSESSEE. 12. NOW COMING TO THE CONTENTION OF THE ASSESSEE THAT THE COMMISSIONER CANNOT GO BEYOND THE REASON FOR WHICH THE REVISIONAL PROCEEDING WAS INITIATED, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE REASON FOR INITIATING REVISIONAL PROCEEDING HAS BEEN REPRODUCED IN THE IN IMPUGNED REVISIONAL ORDER ITSELF. FOR THE P URPOSE OF CONVENIENCE, WE ARE REPRODUCING BELOW THE REASONS F OR INITIATING THE REVISIONAL PROCEEDINGS: ITA NO.1377/14 :- 11 -: (I) IN THE SCHEDULE-8 OF THE BALANCE SHEET - LOANS AND ADVANCES, THE ASSESSEE HAD GIVEN A LOAN TO A SUBSID IARY COMPANY AMOUNTING TO RS 9,47,67,000/- ( RS 7,00,45,094/- AS ON 31.03.2008) AND THE INTEREST ACCRUED DURING THE YEAR HAS BEEN SEPARATELY SHOWN AS RS 1,23,30,314/-. FURTHER FROM THE ANNEXURE TO THE AUDIT REPORT VIDE SL.NO.III(A) IT IS SHOWN THAT THE ABOVE LOAN WAS GIVEN TO M/S.NEWGEN INC, USA. AND THE AMOUNT SHOWN AS OUTSTANDING IS RS 10,70,87,314/- INCLUDING THE INTEREST AMOUNT OF RS 1,23,30,314/- SHOWN SEPARATELY IN THE BALANCE SHEET. (II) THE ASSESSEE COMPANY IS IN THE BUSINES S OF GRAPHIC SCANNING, GRAPHIC PROCESSING, PHOTO TYPESETTING AND TRANSMISSION OF THE SAME OUTSIDE INDIA. THE ASSESSE E HAVE FOUR UNITS UNIT-I, ANNA SALAI UNIT, NEELANGARA I UNIT AND BANGALORE UNIT. YOU HAD CLAIMED DEDUCTION U/S 10B OF I.T. ACT, 1961 IN RESPECT OF UNITS AT ANNA SALAI, NEELANGARAI AND BANGALORE AMOUNTING TO RS 13,87,97,148/- FROM THE TOTAL PROFITS OF RS 18,21,31,589/-. FROM FORM 56G - ANNEXURE A, THE BANGALORE UNIT IS A 100% EOU HAVING REGISTERED WITH STPI, BANGALORE, VIDE ORDER DATED 06.03.2000 AND IS IN THE 9 TH YEAR OF CLAIM AMOUNTING TO RS 2,74,19,992/-. THE ANNA SALAI UNIT IS A 100% EOU REGISTERED WITH STPI VIDE ORDER DATED 04.10.2002 AND IS IN THE 7TH YEAR OF CLAIM AMOUNTING TO RS.1,83,36,902/- AND NELANGARAI UNIT IS A 100% EOU AND IS IN THE 3 RD YEAR OF CLAIM AMOUNTING TO RS 9,75,40,253/-. (III) THE STPI APPROVAL FOR REGISTRATION WITH STPI IS FOR A PERIOD OF 5 YEARS AND THEREAFTER THE REGISTRATION HA S TO BE RENEWED BY SUBMISSION OF RENEWAL APPLICATION. FURTHER, THE MERE REGISTRATION WITH STPI DOES NOT PROVIDE ENTITLEMENT FOR THE CLAIM OF DEDUCTION U/S ITA NO.1377/14 :- 12 -: 10B. AS PER THE PROVISIONS OF SECTION 10B OF I.T.ACT , 1961, THE UNDERTAKING WHICH HAS BEEN APPROVED AS 100% EOU BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATIONS) ACT, 1951 AND THE RULES MADE UNDER THE ACT. AS THE UNITS HAVE NOT OBTAINED THE REQUISITE APPROVAL, THEY ARE NOT ELIGIBLE FOR DEDUCTION U/S 10B. (IV) FURTHER, THE BANGALORE AND ANNA SALAI UNITS WHICH AR E IN THE 9 TH AND 7 TH YEAR OF CLAIM SHOULD HAVE RENEWED THEIR STPI STATUS AS ABOVE. SUCH APPROVAL/RENEWAL HAVE NOT BEEN OBTAINED AS PER THE DETAILS AVAILABLE IN THE RECORDS AND AS SUCH THE CLAIM OF DEDUCTION U/S 10B AMOUNTING TO RS 2,74,19,992/- AND RS 1,83,36,902/- SHOULD BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. (V) IN RESPECT OF THE NEELANGARAI UNIT, IT IS SEEN FROM THE FORM 56G, THE REGISTRATION DETAILS OF UNIT WITH STPI NOR THE ORDER DATE HAS BEEN MENTIONED IN SUPPORT OF THE CLAIM, FAILING TO COMPLY WITH THE PROVISIONS OF SECTION 10B. HENCE, THE DEDUCTION CLAIMED BY THE ASSESSEE COMPANY OF RS9,75,40,253/- SHOULD BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. 13. APART FROM THAT, A BARE PERUSAL OF THE ASSESSMENT O RDER SHOWS THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE CLAIM OF THE ASSESSEE FOR GRATING DEDUCTION U/S 1 0B OF THE ACT. THE ASSESSMENT ORDER DOES NOT REFLECT THE APPLICATION O F MIND TO THE MATERIALS AVAILABLE ON RECORD. IT DOES NOT REFER T O ANY ENQUIRY CONDUCTED BY THE ASSESSING OFFICER. THE CONTENTION OF THE LD. COUNSEL ITA NO.1377/14 :- 13 -: BEFORE THIS TRIBUNAL IS THAT THE ASSESSING OFFICER HAS EXAMINED ALL THE DETAILS FOR EARLIER ASSESSMENT YEARS, THEREFORE, IT HAS TO BE PRESUMED THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE MATERIALS AVAILABLE ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. DR, EACH AND EVERY ASSESSMENT YEAR IS SEPARATE AND DISTINCT, THE REFORE, THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE MATE RIALS AVAILABLE ON RECORD INDEPENDENTLY FOR EACH ASSESSMENT YEAR. THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME-TAX PROCEEDINGS. THE MERE FACT THAT THE APPROVAL OF STPI WAS GRANTED FOR FIVE YEAR S AND THE BANGALORE AND ANNA SALAI UNITS ARE CLAIMING DEDUCTION U/S 10 B FOR THE 9 TH AND 7 TH YEAR, IT HAS TO BE VERIFIED WHETHER THE APPROVAL WA S RENEWED BY STPI AFTER THE EXPIRY OF FIVE YEARS. THESE FACTS ARE NO T COMING OUT OF THE RECORD FOR THE YEAR UNDER CONSIDERATION. 14. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SE CTION 263 OF THE ACT. EXPLANATION TO SECTION 263 MORE PARTIC ULARLY, EXPLANATION (B) SAYS THAT RECORDS SHALL INCLUDE ALL THE RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THE WORD RECORD IS QUANTIFIED RELA TING TO ANY PROCEEDING. WHEN THE COMMISSIONER INITIATED THE PR OCEEDINGS FOR THE ASSESSMENT YEAR 2009-10 RELATING TO ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER, HE CAN CALL FOR ALL THE RECORDS RELEVANT TO ASSESSMENT ITA NO.1377/14 :- 14 -: YEAR 2009-10. IF THE ASSESSING OFFICER CAME TO KNOW THAT THERE WAS ANY ERROR OR OMISSION IN RESPECT OF OTHER ASSESSMEN T YEARS, HE CAN CALL FOR THE RECORDS OF THE OTHER ASSESSMENT YEARS ALSO IN EXERCISE OF HIS REVISIONAL JURISDICTION. IN THIS CASE, THE COMMISS IONER FOUND THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE MATERIAL AVA ILABLE ON RECORD DURING THE YEAR UNDER CONSIDERATION AND HE HAS NOT APPLIED HIS MIND TO THE MATERIALS AVAILABLE ON RECORD, THEREFORE, THE A SSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 15. WE FIND THAT THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS CIT, [2000] 243 ITR 83, HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. IN FACT, THE APEX COU RT OBSERVED AT PAGE 88 AS UNDER: IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT TH E INCOME-TAX OFFICER PASSED THE ORDER OF NIL ASSESSMEN T WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COUR T RECORDED THE FINDING THAT THE INCOME-TAX OFFICER FAILED TO AP PLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER P ASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT-COMPANY WAS NOT PLACED B EFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESE NTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE A CCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ITA NO.1377/14 :- 15 -: 16. THE APEX COURT IN TOYOTA MOTOR CORPORATION VS CIT [2008] 306 ITR 52 HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. THE APEX COURT FOUND THAT THE ASSESSING OFFICER HAS TO PASS A REASONED ORDER. FOR THE PURPOSE OF CONVENIENCE, WE REPRODUCE BELOW THE OBSERVATION OF THE APEX COURT AT PAGE 53 AS UNDER: WE ARE NOT INCLINED TO INTERFERE WITH THE IMP UGNED ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD TH AT THE ASSESSING OFFICER HAD DISPOSED OF THE PROCEEDINGS S TATING THE PENALTY PROCEEDINGS INITIATED IN THIS CASE UNDER SE CTION 271C READ WITH SECTION 274 OF THE INCOME-TAX ACT, 1961 ARE HER EBY DROPPED. ACCORDING TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUNA L REFERRED TO CERTAIN ASPECTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN SHORT, 'THE I. T. ACT') WAS IMPERMISSIBLE WHEN CONSIDERED IN TH E BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HIG H COURT HAS DONE IS TO REQUIRE THE ASSESSING OFFICER TO PAS S A REASONED ORDER. THE HIGH COURT WAS OF THE VIEW THAT THE TRIB UNAL COULD NOT HAVE SUBSTITUTED ITS OWN REASONINGS WHICH WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. A CCORDING TO THE ASSESSEE, ALL RELEVANT ASPECTS WERE PLACED F OR CONSIDERATION AND IF THE OFFICER DID NOT RECORD REA SONS, THE ASSESSEE CANNOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THI S STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN U P BY THE ASSESSING OFFICER ON REMAND, IT SHALL BE HIS DUTY T O TAKE INTO ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATE RIALS , IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. 17. THE P&H HIGH COURT IN THE CASE OF CIT VS SUNIL KUMA R GOEL [2005] 274 ITR 53, CONSIDERED AN IDENTICAL ISSUE A ND AFTER REFERRING TO ITA NO.1377/14 :- 16 -: THE JUDGMENT OF CONSTITUTIONAL BENCH OF APEX COURT IN S.N.MUKHERJEE VS UNION OF INDIA, AIR 1990 SC 1984, HAS OBSERVED A S FOLLOWS: IN S.N.MUKHERJEE V. UNION OF INDIA, AIR 1990 SC 1984, A CONSTITUTION BENCH OF THE SUPREME COURT DISCUSSED TH E DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRA LIA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBER OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULLED OUT THE FOLLOWING PROPOSITIONS (PA GE 1995) : 'THE DECISIONS OF THIS COURT REFERRED TO ABOVE INDI CATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASO NS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THA T OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHI CH HAS WEIGHED WITH THE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPERVISORY JURISDICTIO N OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTITUTION AND THAT THE REASONS, IF RECORDED, WOULD ENABLE THI S COURT OR THE HIGH COURTS TO EFFECTIVELY EXERCISE THE APPELLATE OR SUPERVISORY POWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONSIDERATIONS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING THIS VIEW ARE THAT THE REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTE E CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLAR ITY IN THE DECISIONS; AND (III) MINIMISE CHANCES OF ARBITR ARINESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HA S BEEN DRAWN BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIES EXERCISING JUDICIAL FUNCTIONS ON THE GRO UND THAT A JUDGE IS TRAINED TO LOOK AT THINGS OBJECTIVE LY UNINFLUENCED BY CONSIDERATIONS OF POLICY OR EXPEDIEN CY WHEREAS AN EXECUTIVE OFFICER GENERALLY LOOKS AT THIN GS FROM THE STAND POINT OF POLICY AND EXPEDIENCY. ITA NO.1377/14 :- 17 -: REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHORITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI- JUDICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE E XERCISE OF ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN H OLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASON S FOR ITS DECISION, ARE OF NO LESS SIGNIFICANCE. THES E CONSIDERATIONS SHOW THAT THE RECORDING OF REASONS B Y AN ADMINISTRATIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINESS AND ENS URES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION-MAK ING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHI CH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECI SION IS SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IT MAY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION O F A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE AUTHORITY HAS GI VEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLAT E OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELLATE OR REVISIONA L AUTHORITY AGREES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE.' IN TESTEELS LTD. V. N. M. DESAI [1970] 37 FJR 7; AIR 1970 GUJ 1, A FULL BENCH OF THE GUJARAT HIGH COURT HAS MADE AN E XTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT AND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN THA T DECISION. THE SAME ARE (HEADNOTE OF AIR 1970 (GUJ): ITA NO.1377/14 :- 18 -: 'THE NECESSITY OF GIVING REASONS FLOWS AS A NECESSA RY COROLLARY FROM THE RULE OF LAW WHICH CONSTITUTES ON E OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-U P. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUD ICIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXPEDIENCY. THEY MUST DECIDE THE MATTER SO LELY ON THE FACTS OF THE PARTICULAR CASE, SOLELY ON THE MAT ERIAL BEFORE THEM AND APART FROM ANY EXTRANEOUS CONSIDERAT IONS BY APPLYING PRE-EXISTING LEGAL NORMS TO FACTUAL SITU ATIONS. NOW THE NECESSITY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHECKS THE INTRO DUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND EXCLUDES OR, AT ANY RATE, MINIMISES ARBITRARINESS IN THE DECISION-M AKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORDE R IS BASED ON THE POWER OF JUDICIAL REVIEW WHICH IS POSS ESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME COURT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HA VE THE POWER UNDER THE SAID PROVISIONS TO QUASH BY CERTIOR ARI A QUASI-JUDICIAL ORDER MADE BY AN ADMINISTRATIVE OFFICER AND THIS POWER OF REVIEW CAN BE EFFECTIVELY EXERCISED ONLY IF THE ORDER IS A SPEAKING ORDER. IN THE ABSENCE OF ANY REASONS IN SUPPORT OF THE ORDER, THE SAID COURTS CANNOT EXAMINE THE CORRECTNESS OF THE ORDER UNDER REVIEW. THE HIGH COURT AND THE SUPREME COURT WOULD BE POWERLESS TO INTERFERE SO AS TO KEEP THE ADMINIS TRATIVE OFFICER WITHIN THE LIMITS OF THE LAW. THE RESULT WO ULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFI ED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THERE WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRICE. IF THIS REQUIREMENT IS INSISTED UPON, THEN , THEY WILL BE SUBJECT TO JUDICIAL SCRUTINY AND CORRECTION.' IF THE ORDER PASSED BY THE TRIBUNAL IS SCRUTINISED IN THE LIGHT OF THE AFOREMENTIONED PROPOSITION OF LAW, WE DO NOT FIND ANY DIFFICULTY IN SETTING ASIDE THE SAME ON THE GROUND OF VIOLATION OF THE RULES OF NATURAL JUSTICE. THE FLOWERY LANGUA GE USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF THE RESPO NDENT'S PLEA ITA NO.1377/14 :- 19 -: THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR A FFIRMATION. IN OUR OPINION, THE TRIBUNAL WAS DUTY BOUND TO RECO RD TANGIBLE AND COGENT REASONS FOR UPSETTING WELL REASONED ORDE RS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF IN COME-TAX (APPEALS). IT SHOULD HAVE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTIONS 271D AND 271E OF THE ACT IN CONJUN CTION WITH OTHER PROVISIONS OF THE SAME FAMILY AND THEN D ECIDED BY A REASONED ORDER WHETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOULD HAVE CLEARLY REFLECTED THE APPL ICATION OF MIND BY THE LEARNED MEMBERS. 18. IN VIEW OF THE ABOVE JUDGMENTS OF THE APEX COURT, I T IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO PASS A REASONED ORDER. 19. THE ASSESSING OFFICER, BEING A QUASI-JUDICIAL AUTHO RITY AND PROCEEDING BEFORE HIM BEING A JUDICIAL PROCEEDING, IS EXPECTED TO PASS A SPEAKING ORDER BY GIVING HIS OWN REASON FOR ALLOW ING OR DISALLOWING A CLAIM. THE APPLICATION OF MIND TO THE MATERIAL ON RECORD SHALL BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. THE REAS ON FOR THE CONCLUSION REACHED BY THE ASSESSING OFFICER SHALL BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. THE REASON FOR THE CONCLUSION CANNOT BE SUPPORTED BY WAY OF FILING AN AFFIDAVIT OR OTHER DOCUMENT BEFORE THE REVISIONAL/APPELLATE AUTHORITIES. THE MERE FACT TH AT THE ORDER PASSED BY TH ASSESSING OFFICER IS SUBJECTED TO APPEAL/REVI SION, THE ASSESSING OFFICER IS EXPECTED TO GIVE REASON FOR THE CONCLUSI ON SO AS TO ENABLE THE APPELLATE/REVISIONAL AUTHORITIES TO APPRECIATE THE REASONS FOR THE ITA NO.1377/14 :- 20 -: CONCLUSION ARRIVED BY THE ASSESSING OFFICER. IN TH IS CASE, NO SUCH REASON WAS GIVEN. THE ASSESSING OFFICER DOES NOT D ISCUSS ANYTHING ABOUT THE ELIGIBILITY OF THE ASSESSEE FOR DEDUCTIO N U/S 10B OF THE ACT. IT IS ALSO NOT KNOWN WHETHER APPROVAL OF STPI WAS E XTENDED BEYOND FIVE YEARS OR NOT. IN THOSE CIRCUMSTANCES, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS AN ERROR IN THE AS SESSMENT ORDER IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREF ORE, THE COMMISSIONER HAS RIGHTLY EXERCISED HIS JURISDICTION US 263 OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE RE IS NO REASON TO INTERFERE WITH ORDER OF THE ADMINISTRATIVE COMMISSI ONER. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED ON 29 TH OF MAY, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 29 TH MAY, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF