Shri Sant Jai Narain (P) Ltd., New Delhi V. ITO, New Delhi

ITA 1544/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58712 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 13-02-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS S MOHANTHY
• Keywords: Retrospective amendment
• Section: 143(3); 80HHC; 147; 6; 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G: NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T. A. NO.1544/DEL/2010 ASSESSMENT YEAR : 1997-98 SHRI SANT JAI NARAIN (P) LTD., INCOME-TAX OFFICER, M-4, GREEN PARK(MAIN), VS. WARD 8(3), NEW DELHI. NEW DELHI. PAN NO. AAACS1913R (APPELLANT) (RESPONDEN T) APPELLANT BY : SHRI N.L. ANAND, ADVOCATE RESPONDENT BY : MRS. S. MOHANTHY, DR. O R D E R PER K.D. RANJAN, ACCOUNTAT MEMBER: THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 199 7-98 ARISES OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-XI, NEW DELHI AND IS DIRECTED AGAINST ORDER UNDER SEC. 154/143(3) OF THE INCOME-TAX ACT, 1961. 2 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO COMP UTATION OF DEDUCTION UNDER SEC. 80HHC IN RESPECT OF EXPORT INCENTIVES. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ORIGINAL ASSESSMENT WA S MADE UNDER SEC. 143(3) ON 28.07.1999. THEREAFTER ORDER UNDER SEC. 147/144 WAS PASSED ON 28 TH FEBRUARY, 2005. RELYING ON DECISION OF HONBLE SUP REME COURT IN THE CASE OF IPCA LABORATORIES VS. DCIT, 266 ITR 521 THE CLAI M FOR DEDUCTION U/S 80HHC WAS REJECTED AS THERE WAS LOSS FROM EXPORTS. SUBSEQUENTLY THE FINANCE ACT, 2005 AMENDED SECTION 80HHC BY INSERTIO N OF PROVISOS 2 TO 5. THE ASSESSEE FILED A RECTIFICATION APPLICATION DATE D 27 TH MARCH, 2006 BEFORE THE AO. THE AO VIDE HIS ORDER DATED 20 TH JUNE 2006, DISMISSED THE RECTIFICATION APPLICATION ON THE GROUND THAT HE HAD NO JURISDICTION TO RECTIFY THE DECISION ADJUDICATED BY THE CIT(A). THE ASSESS EE AGGRIEVED BY THE ORDER OF THE AO MOVED AN APPEAL BEFORE THE CIT(A) AND REL IED ON CBDT CIRCULAR NO.5/2006 DATED 15.05.2006. IT WAS CONTENDED THAT AS PER AMENDED PROVISIONS DEDUCTION UNDER SECTION 80HHC WAS ADMISS IBLE EVEN IN LOSS CASES. THE MATTER WAS EXAMINED BY THE CIT(A) AND V IDE HIS ORDER DATED 10.11.2006 IN APPEAL NO.99/06-07 OBSERVED THAT ASSE SSMENT ORDER MERGED WITH THE ORDER OF THE CIT(A) SO FAR AS THE ISSUES T HAT WERE DECIDED BY THE CIT(A) WERE CONCERNED. THE LEARNED CIT(A) DISMISSE D THE APPEAL ON TECHNICAL GROUND THAT AO HAD NO JURISDICTION TO REC TIFY THE ORDER OF THE 3 CIT(A). AGAINST THIS ORDER OF THE CIT(A) THE ASSES SEE PREFERRED APPEAL BEFORE ITAT. ITAT VIDE ORDER DATED 25 TH JULY, 2008 IN ITA NO.276/DEL/2007 DISMISSED THE APPEAL BY OBSERVING T HAT THE AO CANNOT RECTIFY ORDER PASSED BY THE LEARNED CIT(A). HOWEVE R, IT WAS ALSO OBSERVED THAT THE ASSESSEE WILL BE FREE TO TAKE ANOTHER REME DIAL ACTION OPEN TO HIM. 3. THE ASSESSEE FILED RECTIFICATION APPLICATION UND ER SEC. 154 WITH THE CIT(A) ON 26.07.2008. THE ASSESSEE ALSO FILED RECT IFICATION APPLICATION WITH THE ASSESSING OFFICER ON 16.03.2009 REQUESTING TO A LLOW DEDUCTION UNDER SEC. 80HHC AS PER THE AMENDMENT MADE IN THE LAW. T HIS APPLICATION WAS DISMISSED BY THE AO VIDE HIS ORDER UNDER SEC. 154 P ASSED ON 15.05.2009 REITERATING THE EARLIER STAND THAT RECTIFICATION CA N BE MADE BY THE CIT(A). THE ASSESSEE AGGRIEVED BY THE ORDER OF THE AO PREFE RRED AN APPEAL AGAINST ORDER DATED 15.05.2009 BEFORE THE CIT(A)-XI. THE L EARNED CIT(A) AGAIN DISMISSED THE APPEAL FILED BY THE ASSESSEE RELYING ON HIS EARLIER DECISION. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE H AS PREFERRED APPEAL BEFORE THIS TRIBUNAL. 4. DURING THE COURSE OF HEARING THE LEARNED AR OF T HE ASSESSEE SUBMITTED THAT AFTER AMENDMENT THE ASSESSEE IS ELIGIBLE FOR D EDUCTION UNDER SEC. 80HHC IN RESPECT OF EXPORT INCENTIVES. HE FURTHER SUBMITTED THAT AO SHOULD HAVE RECTIFIED HIS ORDER ON THE GROUND THAT AMENDME NT IN THE LAW HAS BEEN 4 MADE AFTER THE DATE OF PASSING OF THE ORIGINAL ASSE SSMENT ORDER. ON THE OTHER HAND, THE LEARNED SR. DR SUPPORTED THE ORDER OF THE CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE ASSE SSMENT ORDER PASSED UNDER SEC. 147/144 DATED 28 TH FEBRUARY, 2005. AT THE RELEVANT TIME AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F IPCA LABORATORIES VS. DCIT (SUPRA), THE ASSESSEE WAS NOT ENTITLED TO DEDU CTION UNDER SEC. 80HHC IF THE PROFIT FROM EXPORT BUSINESS WAS IN NEGATIVE. IN THE CASE OF ASSESSEE NET LOSS OF EXPORT BUSINESS COMPUTED UNDER SEC. 80HHC W AS AT (-) RS.31,083/-. THEREFORE, AS PER THE LAW PREVALENT ON THE DATE WHE N ASSESSMENT UNDER SEC. 144 READ WITH SEC. 147 WAS MADE, THE ASSESSEE WAS N OT ELIGIBLE FOR DEDUCTION UNDER SEC. 80HHC. SUBSEQUENT TO THE ORDER PASSED B Y THE AO THE TAXATION LAWS (AMENDMENT) ACT, 2005 INSERTED 2 ND , 3 RD , 4 TH AND 5 TH PROVISO TO SEC. 80HHC(3) OF THE ACT. WHILE 2 ND , 3 RD & 4 TH PROVISOS WERE INSERTED WITH RETROSPECTIVE EFFECT FROM 1.04.1998, THE 5 TH PROVISO WAS INSERTED WITH RETROSPECTIVE EFFECT FROM 1.04.1992. AS PER 5 TH PROVISO IF THE COMPUTATION UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SEC . 80HHC(3) IS A LOSS, SUCH LOSS SHALL BE SET-OFF AGAINST THE AMOUNT WHICH BEAR S TO 90% OF (A) ANY SUM REFERRED TO IN CLAUSE (IIIA) OR CLAUSE (IIIB) OR CL AUSE (IIIC), AS THE CASE MAY BE, OR (B) ANY SUM REFERRED TO IN CLAUSE (IIID) OR CLAU SE (IIIE) AS THE CASE MAY BE, 5 OF SECTION 28, AS APPLICABLE IN THE CASE OF AN ASSE SSEE REFERRED TO IN THE SECOND OR THIRD OR THE FOURTH PROVISO, AS THE CASE MAY BE, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTA L TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THE ASSESSEE HAS REC EIVED DUTY DRAWBACK WHICH IS COVERED UNDER SEC. 28(IIIC) OF THE ACT. S INCE THE AMENDMENT TO SEC. 80HHC HAS BEEN CARRIED OUT AFTER THE DATE OF PASSIN G OF ORDER UNDER SEC. 147/144 OF THE ACT AND THE INSERTION OF FIFTH PROVI SO TO SEC. 80HHC(3) IS WITH RETROSPECTIVE EFFECT FROM 1.4.1992, THE ASSESS EES CASE IS TO BE EXAMINED IN THE LIGHT OF PROVISIONS OF FIFTH PROVIS O TO SEC. 80HHC(3) INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 . AT THE TIME WHEN ASSESSMENT WAS MADE THE FIFTH PROVISO WAS NOT IN EX ISTENCE IN THE STATUTE AND THEREFORE, AT THE TIME OF ASSESSMENT, THE ASSES SING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION UNDER SEC. 80 HHC RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IP CA LABORATORIES (SUPRA). HOWEVER, AFTER THE AMENDMENT OF THE LAW, THE ASSESS EE WILL BE ELIGIBLE FOR DEDUCTION IN RESPECT OF EXPORT INCENTIVES I.E. DUTY DRAWBACK IF THE CONDITIONS ARE SATISFIED. SUBSEQUENTLY AMENDMENT OF LAW MAKING THE ASSESSEE ELIGIBLE FOR DEDUCTION IS A MISTAKE APPARE NT FROM RECORDS WHICH NEEDS TO BE RECTIFIED U/S 154 OF THE ACT. THEREFOR E, THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE CASE OF THE ASSESSEE WITHIN THE MEANING OF FIFTH 6 PROVISO TO SEC. 80HHC(3) OF THE ACT. THE ASSESSING OFFICER WILL DECIDE THE ISSUE AFTER AFFORDING THE ASSESSEE A REASONABLE OPP ORTUNITY OF BEING HEARD. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2012. SD/- SD/- (I.P. BANSAL) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH FEBRUARY, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.