DCIT, V. Millipore India Pvt. Ltd.,

ITA 164/BANG/2013

• Counselvise Citation: 16421114 RSA 2013
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 25-06-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 07-02-2013
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Tangible material; Wrong claim; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NOS.164 & 165(B) /2013 (ASSESSMENT YEARS : 1997-98 & 1 998-98) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(1), RASTROTHANA BHAVAN, (OPP: RBI) NRUPATHUNGA ROAD BANGALORE-560 001 APPELLANT VS M/S MILLIPORE (IND.) PVT LTD., NO.50, A, 2 ND PHASE RING ROAD, PEENYA, BANGALORE-560 058. RESPONDENT AND C.O.NOS.81 & 82(B)/2013 (ASSESSMENT YEARS : 1997-98 & 1998-99) (BY ASSESSEE) REVENUE BY : DR. P.K.SRIHARI, ADDL.CIT ASSESSEE BY : SHRI ASHOK KULKARNI , ADVOCATE DATE OF HEARING : 15-09-2015 DATE OF PRONOUNCEMENT : 30-09-2015 O R D E R PER BENCH: THE APPEALS AND CROSS OBJECTIONS ARE FILED BY THE R EVENUE AND ASSESSEE DIRECTED AGAINST ORDER DATED 04-09-2015 OF CIT(A)-III, BANGALORE FOR THE IMPUGNED ASSESSMENT YEARS 1997-98 & 1998-99 . ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 2 2. THE APPEALS OF THE REVENUE ARE TAKEN UP FIRST F OR DISPOSAL. 2.1 GROUNDS TAKEN BY THE REVENUE FOR BOTH THE ASSES SMENT YEARS ARE TYPICALLY WORDED AND THEY ARE REPRODUCED HEREUNDER; 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN QUASHING THE ASSES SMENT ORDER ON THE TECHNICAL GROUND THAT THE ASSESSMENT W AS REOPENED AFTER 6 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT CONSIDERING THE FACTS THAT AT THE TIME OF COMPLETING THE ORIGINAL ASSESSMENT U/S 143( 3), THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS WITH REGARD TO ALLOWABILITY OF DEDUCTION U/S 80IA WHICH RESULTED IN ESCAPEMENT OF INCOME IN THE FORM OF ALL OWING DEDUCTION U/S 80IA ON TRADING PROFITS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW IN DISREGARDIN G THE FACT THAT THE ASSESSEE HAD EARNED PROFIT ON PURCHASE AND SALE OF SPARE PARTS AND INCLUDING THE SAME IN THE INCOME DE RIVED FROM MANUFACTURING ACTIVITIES AND CLAIMED DEDUCTION U/S 80IA EVEN IN RESPECT OF PROFITS ATTRIBUTABLE TO TR ADING ACTIVITIES WHICH IS AGAINST THE PROVISIONS OF SEC.8 0IA. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE AO MAY BE RESTORED.. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 3 3. IT CAN BE SEEN FROM THE ABOVE THAT THE EFFECTIVE GROUNDS ARE GROUND NO.2 & 3. GROUND NO.2 ASSAILS THE CIT(A)S ORDER Q UASHING THE ASSESSMENT HOLDING THAT RE-OPENING TO BE INVALID. 4. FACTS APROPOS ARE THAT THE ASSESEE HAD FILED RET URNS FOR THE IMPUGNED ASSESSMENT YEARS DECLARING INCOME OF RS. 1,66,98,390/- FOR ASSESSMENT YEAR 1997-98 AND RS.9,65,03,307/- FOR AS SESSMENT YEAR 1998- 99. ASSESSMENTS FOR BOTH THESE YEARS WERE COMPLETED AFTER SCRUTINY/S 143(3) OF THE IT ACT, 1961. THAT FOR THE ASSESSMENT YEAR 1997-98 WAS COMPLETED ON 05-11-1999 ASSESSING THE INCOME AT RS. 1,74,35,990/- AND THAT FOR THE ASSESSMENT YEAR1998-99 WAS COMPLETED ON 16-03-2001 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.2, 38,16,550/-. FOR ASSESSMENT YEAR 1997-98 THERE WAS AN APPEAL FILED B Y THE ASSESSEE AGAINST THE INCOME DETERMINED BY THE AO AND CONSEQUENT TO T HE APPELLATE ORDER OF THE CIT(A) THE INCOME OF THE ASSESSEE WAS REVISED T O RS.1,73,33,990/-. THEREAFTER, DURING THE COURSE OF SCRUTINY ASSESSMEN T FOR ASSESSMENT YEAR 2000-01, THE AO FOUND THAT THE ASSESSEE WAS CLAIMIN G DEDUCTION U/S 80IA OF THE IT ACT ON PROFITS DERIVED FROM TRADING ACTIV ITY ALSO. AO WAS OF THE OPINION THAT THE ASSESSEE HAVING CLAIMED SIMILAR DE DUCTION FOR THE EARLIER YEARS, THE ASSESSMENT FOR EARLIER YEARS HAD TO BE R E-OPENED. REASON RECORDED FOR THE RE-OPENING OF THE ASSESSMENTS AS I T APPEARS FROM PAGE-2 OF THE ASSESSMENT WAS PASSED U/S 143(3) R.W.S.147 OF T HE ACT, FOR ASSESSMENT YEAR 1997-98 READS AS UNDER; ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 4 IN THE PREVIOUS YEAR RELEVANT TO THE ASST. YEAR 1997-98 ALSO, THE PROFITS OF ONE OF ITS DIVISION WAS CALCUL ATED AT RS.1,40,64,759/- AND DEDUCTION U/S 80IA OF RS.44,59 ,660/- WAS CLAIMED AT 30%. THE PROCESS DIVISION SALES AS SHOWN IN THE DIVISION WISE PROFIT AND LOSS ACCOUNT ENCLOSED IN THE RETURN ARE AS UNDER; MANUFACTURING SALES 2,77,02,117 SPARES AND OTHER SALES 5,66,98,017 THE COST OF THE SPARES SOLD IS AS UNDER; OPENING STOCK 43,34,118 ADD: PURCHASES 2,40,25,742 2,83,59,860 LESS: CLOSING STOCK 28,39,259 2,55,20,601 THE GROSS PROFIT EARNED ON SPARES COMES TO ABOUT RS.3.11CRORES. THIS PROFIT ON THE SPARE PARTS ACT IVITY IS EMBEDDED IN THE PROFIT OF THE PROCESS DIVISION OF RS.1,40,64,759/-. AS DEDUCTION U/S 80-IA IS ALLOWA BLE ON THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING I.E THE PROFITS DERIVED FROM THE MANUFACTURING ACTIVITY. THE QUANT UM OF SPARE PARTS SALES ITSELF IS INDICATIVE OF THE FACT THAT THIS ACTIVITY IS A SEPARATE ACTIVITY. BY INCLUDING THE PROFITS DERIVED FROM THE TRADING ACTIVITY IN THE PROFITS OF THE IND USTRIAL UNDERTAKING, THE ASSESSEE HAD CLAIMED EXCESSIVE DED UCTION U/S 80IA. THE PROPORTIONATE EXPENSES ON THE SALE O F SPARE PARTS WOULD BE RS.2,50,21,336 X 5,66,98,017 8,20,38 ,790 = 1,72,92,553/-. THE NET PROFIT ON SPARES SALES COME S TO ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 5 APPROXIMATELY AROUND RS.1.38 CRORES. EXCESSIVE DEDU CTION CLAIMED AT 30% ON THIS PROFITS WOULD BE APPROXIMATE LY RS.41.4 LAKHS. THE ASSESSEE DID NOT DISCLOSE THE F ACT THAT THE SPARE PARTS ACTIVITY IS A SEPARATE TRADING ACTIVITY DURING THE ASSESSMENT PROCEEDINGS AND THEREFORE, DID NOT DISCL OSE THE FACTS MATERIAL TO THE COMPUTATION OF DEDUCTION. AS THE TOTAL INCOME WAS UNDER ASSESSED TO THE EXTENT OF EXCESSIV E CLAIM OF DEDUCTION U/S 80IA OF APPROXIMATELY 41.4 LAKHS. TH EREFORE, I HAVE REASON TO BELIEVE THAT THE INCOME HAS BEEN UND ER ASSESSED TO THE EXTENT OF EXCESSIVE CLAIM OF DEDUCT ION U/S 80IA. 4.1 THE ASSESSEE OBJECTED TO THE RE-OPENING INTER-A LIA STATING THAT THE RE-OPENING WAS NOT VALID. HOWEVER, THE AO REJECTE D THIS OBJECTION WITH THE FOLLOWING OBSERVATION; VALIDITY OF PROCEEDINGS U/S 148 FOR ASSESSMENT YEAR 1997-98 IN RESPECT OF M/S MILLIPORE (I) PVT. L TD. IN THIS CASE ASSESSMENT FOR ASSESSMENT YEAR 1997-9 8 WAS CONCLUDED U/S 143(3) ON 05-11-1999. DURING THE COURSE OF ASSESSMENT FOR ASSESSMENT YEAR 2000-01 INFORMATI ON WAS TRADING IMPORTED SPARE PARTS. THE ASSESSEE CLAIMED DEDUCTION U/S 80IA ON PROFITS DERIVED FROM THE TRAD ING ACTIVITY ALSO. THE ASSESSMENT FOR AY: 2000-01 WAS CONCLUDED DENYING THE ASSESSEE THE BENEFIT OF DEDUCTION U/S 8 0IA IN RESPECT OF PROFITS DERIVED FROM TRADING ACTIVITY. THE INFORMATION COLLECTED DURING THE COURSE OF ASSESSMENT FOR AY: 2000-01X CONSTITUTED MATERIAL FA CTS WHICH FORMED THE REASON TO BELIEVE THAT THE INCOME HAS ES CAPED ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 6 ASSESSMENT FOR AY : 1997-98 ALSO. ON THE BASIS OF T HIS MATERIAL, NOTICE U/S 148 OF THE IT ACT WAS ISSUED O N 25-03- 2004 TO REASSESS THE INCOME OF THE ASSESSEE FOR AY: 1997-98. IN RESPONSE TO THE NOTICE U/S 148 THE ASSESSEE FILE D A RETURN OF INCOME ON 21-08-2004. IN THE COVERING LETTER WI TH THE RETURN IT REQUESTED THAT THE ANNEXURES FILED BY THE M ALONGWITH THE ORIGINAL RETURN SUBMITTED ON 24-11-1997, BE TRE ATED AS ANNEXURE TO THE PRESENT RETURN FILED IN RESPO9NSE U /S 148(2) OF THE ACT BE MADE AVAILABLE TO THEM. INSPECTION O F THE RECORDS WAS ALSO REQUESTED. IN RESPONSE, THE COPY OF THE RELEVANT NOTE SHEET I N THE ASSESSMENT RECORDS OF THE ASSESSEE FOR AY: 1997-98 WAS FORWARDED TO THE ASSESSEE ON 26-04-2004. THE ASSES SEE WAS ALSO REQUESTED TO INSPECT THE RECORDS ON ANY ATE CO NVENIENT TO HIM. SHRI SHARATH CHANDRA PRASAD, CA & GENERAL MANA GER FINANCE, SHRI VENKAT RAJ, ACCOUNTS EXECUTIVE AND SH RI GOPAL KRISHNA, SENIOR ACCOUNTANT OF THE ASSESSEE COMPANY APPEARED ON 29-06-2004. THEY WERE ALLOWED TO INS PECT THE RECORDS AND ON THEIR REQUEST PHOTOCOPIES OF NOTE SH EETS PAGES 7,8 & 9 WERE PROVIDED TO THEM. THEY WERE REQUESTE D TO FURNISH REPLY TO ANY OBJECTIONS TO THE REOPENING OF THE ASSESSMENT. THE ASSESSEE HAS FILED LETTER DATE 05-0 8-2004, BRINGING ON RECORD THE OBJECTIONS TO THE RE-OPENING OF THE ASSESSMENT FOR THE AY: 1997-98. PARAWISE COMMENTS ON THE POINTS RAISED BY THE ASSE SSEE ARE GIVEN BLOW; PART 1 : THE ASSESSEE OBJECTS THAT THE ORDER SHEET DOES NOT RECORD THE FORWARDING OF THE PROPOSAL TO THE CI T-III FOR APPROVAL U/S 151. THE ORDER SHEET IS NOT A STATUT ORY DOCUMENT. IT IS ONLY A SUMMARY RECORD TO FACILITA TE THE ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 7 AUTHORITIES TO KEEP TRACK OF THE PRIMARY DOCUMENTS DOCKETED IN THE FILE. COPY OF THE APPROVAL BY THE CIT DAT ED 24-03- 2004, WHICH FORMS THE PRIMARY DOCUMENT FOR THE REOP ENING THE ASSESSMENT AS EXTRACTED FROM THE ASSESSEES ASS ESSMENT RECORD IS ENCLOSED IN ANNEXURE-A. PART 2 & 3 ON REQUEST OF THE ASSESSEE FOR THE REASONS RECORDED FOR RE-OPENING THE ASSESSMENT A COPY OF TH E NOTE SHEET IN WHICH THE REASONS WERE RECORDED, WAS FORWA RDED TO THE ASSESSEE ON 26-04-2004. THE ASSESSE WAS ALSO AFFORDED OPPORTUNITY TO EXAMINE THE ASSESSMENT RECORDS ON 29 -06- 2004. APPROVAL BY THE CIT DATED 24-03-2004 WAS AV AILABLE IN THE RECORDS AND THE ASSESSEE CANNOT NOW CAST DOU BT ON THE ANTECEDENTS OF SUCH APPROVAL. PARA 5,6 & 7: THE ASSESSEE STATES AS UNDER; ACCORDING TO YOU ON A RE-EXAMINATION OF THE RETUR NS OF INCOME AND ACCOMPANYING STATEMENT FILED ORIGINALLY THE INFERENCE IS THAT SALE OF SPARES IS A SEPARATE ACTI VITY. THE ASSESSEE HAS TOTALLY MISCONSTRUED TO HIS ADVAN TAGE THE CONTENTS OF THE REASONS RECORDED ON 23-03-2004 FOR RE- OPENING, THE ASSESSMENT. THE REASONS (A COPY OF WHICH WAS FURNISHED TO THE ASSESSEE) CLEARLY STATED THAT DURI NG THE COURSE OF ASSESSMENTS FOR AY: 2000-01, IT AS FOUND THAT THE ASSESSEE WAS TRADING IMPORTED SPARE PARTS- AN ACTIV ITY ON WHICH DEDUCTION U/S 80IA WAS NOT AVAILABLE. IN OTH ER WORDS IT IS THE MATERIAL PRODUCED BY THE ASSESSEE AND SCR UTINIZED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR AY: 2000-01, DURING THE YEAR 2003, THAT FORMED THE BASI S FOR THE BELIEF THAT SALE OF SPARES WAS A SEPARATE ACTIVITY NOT DIRECTLY CONNECTED WITH THE MANUFACTURING ACTIVITY. ON THE OTHER ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 8 HAND, THE INFERENCE FROM THE EXAMINATION OF THE RET URNS OF INCOME AND ACCOMPANYING STATEMENTS FILED ORIGINALLY IS THAT THE SALE OF SPARES IS AN INTEGRAL AND INSEPARABLE PART OF THE MANUFACTURING ACTIVITY. IN THE ORIGINAL ASSESSMENT ORDER SEC.143(3) THE AO ARRIVED AT THAT CONCLUSION BASED ON THE PROJECTION OF THE ASSESSEE AND THERE WAS NO MATERIA L ON RECORD FOR FORMING A DIFFERENT OPINION. THE AO ACC EPTED THE CLAIM OF THE ASSESSEE AT ITS FACE VALUE AND THE MAT TER WAS NOT THRASHED OUT DURING THE COURSE OF ASSESSMENT. IT WAS ONLY WHEN THE PRIMARY MATERIAL PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S FOR 2000-01 WERE SCRUTINIZED, BELIEF WAS FORMED THAT T HE TRADING ACTIVITY OF THE ASSESSEE WAS INDEPENDENT OF ITS MANUFACTURING ACTIVITY. THE MATERIAL ESTABLISHED TH AT THEY WERE REPETITIVE SALES. IT IS THIS MATERIAL INFORMA TION WHICH FORMS THE BASIS FOR FORMING THE BELIEF THAT THE PRO FITS FROM TRADING ACTIVITY ARE NOT ELIGIBLE FOR DEDUCTION UH/ S 80IA. IT IS NOT A MERE CHANGE OF OPINION BY THE SUCCESSOR OFFIC ER. THE FOLLOWING COURT DECISIONS SUBSTANTIAE THE ISSUE. 1. CALCUTTA DISCOUNT CO.LTD., VS ITO, COMPANIES DI ST-I, CALCUTTA & ANOTHER (41 ITR 191) (SC). 2. PRAFUL CHUNILAL PATEL(1999) 236 ITR 832(GUJ.) IN CASES WHERE THE AO HAD OVERLOOKED SOMETHING A T THE FIRST ASSESSMENT, THERE CAN, IN OUR OPINION, BE NO QUESTION OF ANY CHANGE OF OPINION WHEN THE INCOME WHICH WAS CHARGEABLE TO TAX IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE LAW BUT WAS NOT DONE, DUE TO AN ERROR COM MITTED AT THE FIRST ASSESSMENT. 3. INDO-ADEN SALT MANUFACTURING & TRADING CO. PVT. LTD VS CIT(1986) 159 ITR 624 (SC). ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 9 MERE PRODUCTION OF EVIDENCE BEFORE THE INCOME TA X OFFICER WAS NOT ENOUGH, THAT THERE MAY BE OMISSION OR FAILURE TO MAKE A TRUE AND FULL DISCLOSURE, IF SOME MATERIA L FOR THE ASSESSMENT LAY EMBEDDED IN THE EVIDENCE WHICH THE R EVENUE COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DU TY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF THE ASSESSING AUTHORITY. THE ASSESSEE KNOWS ALL THE MATERIAL AND RELEVANT FA CTS THE ASSESSING AUTHORITY MIGHT NOT. IN RESPECT OF THE FAILURE TO DISCLOSE, THE OMISSION TO DISCLOSE MAY BE DELIBERAT E OR INADVERTENT. THAT WAS IMMATERIAL. BUT, IF THERE IS OMISSION TO DISCLOSE MATERIAL FACTS, THEN, SUBJECT TO THE OT HER CONDITIONS, JURISDICTION TO REOPEN IS ATTRACTED. 4. ZOHAR SIM LOKHANDWALA VS M.G.KAMAT (1994) 210 ITR 956. WHERE THE ASSESEE STATES PRIMARY FACTS IN THE ASSESSMENT PROCEEDINGS, IT IS THE ASSESSEES DUTY T O DISCLOSE ALL OF THEM INCLUDING PARTICULAR ENTRIES IN THE ACC OUNT BOOKS AND PARTICULAR PORTIONS OF THE DOCUMENTS. MERE PR ODUCTION OF FACTS OR DOCUMENTS BEFORE THE AO IS NOT ENOUGH IF S OME MATERIAL FOR THE ASSESSMENT LIES EMBEDDED IN THAT E VIDENCE WHICH THE O CAN UNCOVER BUT DID NOT. 5. VIRUDHNAGAR CO-OP. MILK SUPPLY SOCIETY LTD VS C IT (1990) 183 ITR 545(MAD.) A SUBSEQUENT ASSESSMENT CAN CONSTITUTE INFORMATION. REFERRING TO SALE PROVIDE NT FUND SOCIETY LTD VS CIT (1961) 42 ITR 547 (MAD.) TO THE EFFECT THAT BY LOOKING INTO THE RECORDS, THE OFFICER INFORMS HI MSELF AND THAT RECORD WOULD BE A SOURCE OF INFORMATION, IF TH AT INFORMATION LED TO THE DISCOVERY OF AN ESCAPEMENT O F ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 10 ASSESSMENT OR UNDERASSESSMENT, IT WAS POINTED OUT T HAT IT IS NOT NECESSARY THAT SUCH INFORMATION SHOULD BE FROM AN OUTSIDE SOURCE, BUT THAT IT MAY BE FOUND IN THE ASS ESSMENT RECORDS THEMSELVES. IN THE CONCLUSION, COPY OF THE RECORDINGS AS REQUI RED UNDER LAW, ARE ENCLOSED IN ANNEXURE-A. THE REASON S RECORDED FOR RE-OPENING IS BASED ON MATERIAL FACT G ATHERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY: 2000-01 DURING THE YEAR 2003. THESE FACTS, WHICH WERE NOT AVAILABLE WITH THE AO DURING THE COURSE OF ASSESSMENT FOR AY: 1997-98 FORMED THE BASIS FOR THE BELIEF BY THE SUCCESSOR OF FICER THE SALE OF SPARES WAS A SEPARATE ACTIVITY NOT DIRECTLY CONNECTED WITH THE MANUFACTURING ACTIVITY. THE REASSESSMENT PROCEEDINGS HAVE BEEN VALIDLY INITIATED ACCORDING T O LAW. I THEREFORE, PROPOSE TO CONTINUE THE ASSESSMENT PROCEEDINGS TO DETERMINE WHETHER INCOME HAS ESCAPED ASSESSMENT OR NOT FOR THE RELEVANT ASSESSMENT YEAR. IF A CONCLUSION IS REACHED AT THE END OF THE PROCEEDINGS , WHICH IS PREJUDICIAL TO THE ASSESSEE, HE MAY AGITATE IN APPE AL BEFORE THE CIT(A) ON THE VALIDITY OF THE ABOVE FINDING. 5. IT IS TO BE NOTED THAT FOR AY: 1998-99 ALSO THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA OF THE ACT ON ITS DIVISI ON CALLED PROCESS DIVISION AND THE TOTAL SALES OF THE SAID DIVISION C OMING TO RS.9,54,57,075/- INCLUDED A SUM OF RS.6,81,74,886/- BEING SALE OF SP ARES AND OTHER ITEMS. THE AO HELD THAT THE ASSESSEE HAVING NOT DISCLOSED THE FACTUM OF A SEPARATE TRADING ACTIVITY FOR SPARE PARTS, EITHER D URING THE ORIGINAL ASSESSMENT PROCEEDINGS NOR IN ITS COMPUTATION OF DE DUCTION U/S 80IA OF ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 11 THE ACT, RE-OPENINGS WERE VALID. THEREAFTER, HE PR OCEEDED TO COMPLETE THE ASSESSMENT AND IN SUCH ASSESSMENTS CURTAILED THE CL AIM OF DEDUCTION U/S 80IA OF THE ACT TO THE PROFITS DERIVED FROM THE MAN UFACTURING ACTIVITY OF THE ASSESSEE RELYING ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS STERLING FOODS 237 ITR 579. THE APPORTIONMENT OF P ROFITS BETWEEN MANUFACTURING AND SPARE SALES OF THE PROCESS DIVISI ON WAS DONE ON THE BASIS OF TURNOVER REJECTING THE CONTENTION OF THE A SSESSEE THAT THE SALE OF SPARES WAS CLOSELY LINKED TO THE MANUFACTURED EQUIP MENT SOLD BY IT AND THEREFORE, COULD NOT BE CONSIDERED AS AN INDEPENDEN T TRADING ACTIVITY. 6. AGGRIEVED, THE ASSESSEE MOVED IN APPEAL BEFO RE THE CIT(A) FOR BOTH THESE YEARS. ALONG WITH THE VALIDITY OF THE RE-OPE NING, ASSESSEE ALSO ASSAILED THE CURTAILMENT OF DEDUCTION CLAIMED U/S 8 0IA OF THE ACT. CONTENTION OF THE ASSESSEE WAS THAT DURING THE COUR SE OF ORIGINAL PROCEEDINGS ITS CLAIM FOR DEDUCTION U/S 80IA WAS DU LY SCRUTINIZED BY THE AO. AS PER THE ASSESSEE RE-OPENING WAS DONE MERELY ON A CHANGE OF OPINION. CLAIM OF THE ASSESSEE WAS THAT THERE WAS NO FAILURE ON ITS PART TO DISCLOSE ANY MATERIAL FACT AT THE TIME OF ORIGINAL ASSESSMENT. THE ASSESSEE POINTED OUT THAT THE RE-OPENING WAS AFTER A PERIOD OF 4 YEARS FROM THE END OF THE IMPUGNED ASSESSMENT YEARS AND THE CONDITION SET OUT IN PROVISO TO SEC.147 WAS NOT FULFILLED. AS PER THE ASSESSSEE IN ITS REPLY TO NOTICES U/S 143(2) OF THE ACT, ISSUED DURING THE COURSE OF ORIG INAL ASSESSMENT, IT HAD GIVEN FULL DETAILS OF THE CLAIM PREFERRED U/S 80IA OF THE ACT, 1961. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 12 ASSESSEE POINTED OUT THAT IT WAS GRANTED SUCH DEDUC TION FROM VERY INCEPTION. AS PER THE ASSESSEE SIMILAR RE-OPENING DONE FOR AY: 1996-97 WAS QUASHED BY THE CIT(A) ON ITS APPEAL AND THE ORDER O F THE CIT(A) WAS UPHELD BY THIS TRIBUNAL. CONTENTION OF THE ASSESSEE WAS THAT ALL PARTICULARS REGARDING SALE OF SPARES WERE AVAILABLE WITH THE AO DURING THE COURSE OF ORIGINAL PROCEEDINGS AND IT HAD DISCLOSED ALL WHAT WAS NECESSARY. THUS, ACCORDING TO THE ASSESSEE THE BASIC CONDITION REQUI RED FOR ASSUMING JURISDICTION U/S 147 OF THE ACT, WAS NOT SATISFIED. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER IN HIS ORDER FOR THE AY: 1997-98: 4.6 I HAVE CONSIDERED THE ISSUE. THE BASIC QUEST ION THAT ARISES IS WHETHER THE ASSESSEE DISCHARGED ITS ONUS I DECLARING ALL MATERIAL FACTS BEFORE THE AO IN THE ORIGINAL AS SESSMENT. 4.7. THE AO HAS NOTED IN THE ASSESSMENT ORDER THAT THE QUANTUM OF SPARE PARTS SALE IN THE ACCOUNTS IS INDI CATIVE OF THE FACT THAT THIS ACTIVITY IS A SEPARATE ACTIVITY, AND THAT BY INCLUDING THE PROFITS FROM THESE SALES WHICH ARE IN THE NATURE OF TRADING, THE ASSESSEE CLAIMED DEDUCTION U/S 80IA EXCESSIVELY. IT IS ALSO HELD BY THE AO THAT BY NOT DISCLOSING THAT THE PURCHASE AND SALE OF SPARES WAS A SEPARAT E TRADING ACTIVITY BEFORE THE AO THE ASSESSEE DID NOT DISCLO SE ALL MATERIAL FACTS RELEVANT TO THE COMPUTATION OF DEDUC TION. IN COUNTER TO THIS ARGUMENT, THE ASSESSEE HOLDS TH AT THE SALE OF SPARES IS A INSEPARABLE PART OF THE MAIN AC TIVITY OF SALE OF EQUIPMENT AND AFTER SALES SERVICE NECESSARI LY REQUIRES THE AVAILABILITY OF SPARES. THE AO HOWEVER, DID N OT ACCEPT THE ARGUMENT OF THE ASSESSEE ON THE GROUND THAT THO UGH THE ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 13 BUSINESS COMPULSIONS OF PURCHASE AND SALE OF SPARES MAY ATTEND THE BUSINESS OF THE ASSESSEE, IT DID NOT ENA BLE IT TO MAKE THE CLAIM U/S 80IA ON THESE RECEIPTS. THE ASSESSEE AT THE APPELLATE STAGE POINTS OUT THA T THERE IS A CONTRADICTION IN THE STAND TAKEN BY THE AO WHE N HE ACCEPTS THAT THE ASSESSEE HAD THE BUSINESS COMPULSI ON OF SUPPLYING THE SPARES, BUT AT THE SAME TIME DENIES T HE FACT THE LATTER BEING AN INSEPARABLE ACTIVITY CONNECTED TO T HE SUPPLY OF TECHNICAL PRODUCTS (PAGE-3) OF THE ASSESSMENT ORDER . THE CONTENTION OF THE ASSESSEE IS THAT THE AO COUL D NOT HAVE RATIONALLY RE-OPENED THE ASSESSMENT ON THE GRO UNDS STATED BY HIM U/S 148(2) AND NEITHER COULD HE HAVE DISALLOWED THE CLAIM U/S 80IA TO THE RELEVANT EXTEN T. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE ASSESSEE AND THE ORDER OF THE RE-ASSESSMENT PASSED BY THE AO. THE REASONS FOR RE-OPENING AS RECORDED BY THE AO ON 03- 02-2005 STATES THAT THE ASSESSEE FAILED TO DISCLOSE MATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT SINCE IT D ID NOT INFORM THE AO THAT PURCHASE AND SALE OF SPARE PARTS CONSTI TUTED A SEPARATE TRADING ACTIVITY. THE ONLY REASON THAT THE AO HAD TO COME TO THE CONCLUSION RELIED ON BY HIM WAS THE QUANTUM OF SPARE PARTS SALES. THE ASSESSEES ARGUMENT T HAT THE SUPPLY OF SPARES WAS A PART OF ITS SALE ACTIOVITY O F TECHNICAL PRODUCTS, WITH THE FORMER CONSTITUTING AN INSEPARAB LE PART OF THE LATTER ACTIVITY, IS BRUSHED ASIDE BY THE AO WIT HOUT MORE REASON THAN AN OPINION THAT SUCH ACTIVITY IS A SEPA RATE TRADING ONE. I AM IN AGREEMENT WITH THE ASSESSEES CONTENTION T HAT THE APPROACH OF THE AO APPEARS TO BE SOMEWHAT CONTRADICTORY. ON THE ONE HAND, HE RECOGNIZES THE ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 14 COMPULSIONS OF THE ASSESSEE TO SELL SPARES, WHILE O N THE OTHER, HE TREATS SUCH SALES AS SEPARATE TRADING ACTIVITIES WHICH WOULD IMPLY THAT THEY WERE UNCONNECTED TO THE MAIN SALE OF TECHNICAL EQUIPMENT FOR WHICH THESE SPARES WERE NEE DED. HE HAS NOT GIVEN ANY CONVINCING EVIDENCE TO TREAT THES E SALES AS A SEPARATE ACTIVITY, THOUGH THE FACT OF THESE SALES WERE DULY DISCLOSED IN THE BALANCE SHEET FILED WITH THE RETUR N. THE AOS CONTENTION THAT THE ASSESSEE FAILED TO DISCLOSE MAT ERIAL FACTS BY NOT POINTING OUT THAT THESE SALES OF SPARES CONS TITUTED SEPARATE TRADING ACTIVITIES IS NOT FOUND TO BE EIT HER LEGALLY TENABLE ( THE LAW DOES NOT MANDATE ANY SUCH DECLARA TION ON THE PART OF THE ASSESSEE UNLESS SPECIFICALLY QUERIE D DURING VALID PROCEEDINGS) OR BASED ON CREDIBLE EVIDENCE. I N THE CIRCUMSTANCES, I AM OF THE VIEW THAT THE ASSESSMENT HAS BEEN RE-OPENED ON A MERE CHANGE OF OPINION RATHER THAN O N THE BASIS OF ANY CREDIBLE EVIDENCE. 4.8 I ALSO NOTE THAT FOR THE AY: 1996-97 IN THE AS SESSEES OWN CASE, THE LEARNED CIT(A)-III, BANGALORE HAD HEL D IN IDENTICAL CIRCUMSTANCES AND GROUNDS THAT THE RE-OPE NING WAS CAUSED BY A CHANGE OF OPINION AND HENCE THE SAME W AS ANNULLED. THE LEARNED ITAT, BANGALORE BENCH BY THEI R ORDER DATED 23-11-2007 DISMISSED THE APPEAL OF THE DEPART MENT AND UPHELD THE ORDER OF THE CIT(A) STATING THAT SIN E THE OMISSION WAS CAUSED ON DEPARTMENTS SIDE, THE TIME LIMIT OF 4 YEARS U/S 147 HAD BEEN EXCEEDED WHILE OPENING THE ASSESSMENT. 4.9 HENCE, ON A CONSIDERATION OF THE TOTALITY OF F ACTS AND CIRCUMSTANCES, I HAVE TO FIND THAT THE ASSESSMENT P ASSED BY THE AO U/S 143(3) R.W.S.147 IN THIS CASE CANNOT STA ND. THE SAME IS ACCORDINGLY, ANNULLED. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 15 FOR ASSESSMENT YEAR 1998-98, IT SEEMS THE LEARNED C IT(A) ADOPTED THE SAME REASONING AS FOR AY: 1997-98. SINCE HE QUA SHED THE ASSESSMENTS DECLARING THE RE-OPENING TO BE INVALID, THE GROUNDS WITH REGARD TO THE MERITS WERE NOT DEALT WITH BY HIM. 7. NOW BEFORE US LEARNED DR STRONGLY ASSAILING THE ORDERS OF THE CIT(A) SUBMITTED THAT THE ASSESSEE HAD FAILED TO DI SCLOSE FULLY AND TRULY ALL MATERIAL PARTICULARS IN ITS RETURN OF INCOME. ASSE SSEE HAD NOT STATED AT ANY POINT OF TIME THAT IT HAD PREFERRED THE CLAIM FOR D EDUCTION U/S 80IA OF THE ACT, ON ITS TRADING PROFITS. THE BIFURCATION DONE BY THE ASSESSEE IN ITS P&L ACCOUNT FOR THE RESPECTIVE YEARS DIVIDED ITS EXPEND ITURE AND REVENUE BETWEEN ITS TWO DIVISIONS NAMELY ANALYTICAL AND PROCESS. AS PER THE LEARNED DR IN THESE P&L ACCOUNTS ASSESSEE HAD NOT M ADE ANY BIFURCATION BETWEEN MANUFACTURING SALES AND SALE OF SPARES. LE ARNED DR SUBMITTED ASSESSEE HAD BIFURCATED THE SALES BETWEEN MANUFACTU RING SALES AND SALE OF SPARES AND OTHER ITEMS, ONLY IN THE SCHEDULE APPEND ED TO THE P&L ACCOUNT. 8. LEARNED DR SUBMITTED THAT REQUIREMENTS SET OUT I N PROVISO TO SEC. 147 STOOD SATISFIED. ACCORDING TO HIM, THERE WAS A FAILURE ON THE PART OF THE ASSESEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR THE ASSESSMENT. SPECIFIC RELIANCE WAS PLACED BY THE LEA RNED DR ON EXPLANATION I TO THE SAID SECTION. ACCORDING TO HIM, ASSESSEE COULD NOT ARGUE THAT DUE ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 16 DILIGENCE IF APPLIED BY THE AO, HE COULD HAVE FOUND THE CLAIM U/S 80IA TO HAVE BEEN MADE FOR SALE OF SPARES AS WELL. 9. AS PER THE LEARNED DR JUST FOR A REASON THAT ASS ESSEE HAD IN REPLY TO NOTICE U/S 142(1) OF THE ACT, GAVE A COMPUTATION OF ITS DEDUCTION U/S 80IA WOULD NOT ABSOLVE IT FROM ITS DUTY TO CORRECTL Y DISCLOSE THE NATURE OF THE CLAIM MADE BY IT. AS PER THE LEARNED DR EVEN I N SUCH COMPUTATION ASSESSEE FAILED TO BIFURCATE THE CLAIM OF DEDUCTION BETWEEN TRADING SALES AND MANUFACTURING SALES. THUS, AS PER THE LEARNED D R, AO HAD REACHED NO OPINION REGARDING THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN THE ORIGINAL PROCEEDINGS. IT WAS NOT A CHANGE OF OPIN ION. THERE WERE TANGIBLE MATERIALS AVAILABLE WITH THE AO FOR ATTEMPTING THE RE-OPENING, WHICH HAD COME INTO HIS HANDS DURING THE COURSE OF ASSESSMENT FOR AY: 2000-01. IT WAS THESE MATERIALS WHICH PROMPTED HIM TO RE-OPEN T HE ASSESSMENT YEAR 2000-01. LEARNED DR SUBMITTED THAT THE ASSESSEE HA D NOT DISPUTED THAT IT HAD SALES OF SPARES AND SUCH SALES WERE HIGHER THAN MANUFACTURING SALES FOR BOTH THE YEARS. THUS, ACCORDING TO HIM, LEARNE D CIT(A) FELL IN ERROR IN HOLDING THE RE-OPENING PROCEEDINGS INVALID. 10. PER CONTRA, LEARNED AR STRONGLY SUPPORTING THE ORDERS OF THE LEARNED CIT(A) SUBMITTED THAT THE ASSESSEE HAD FOR BOTH THE YEARS FILED DETAILED COMPUTATION FOR THE CLAIM PREFERRED BY IT U/S 80IA OF THE IT ACT, 1961. AS PER THE LEARNED AR THE SCHEDULE OF INCOM E FROM SALES FILED ALONG ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 17 WITH THE RETURNS CLEARLY BIFURCATED THE REVENUE IN THE PROCESS DIVISION INTO TWO VIZ. MANUFACTURING SALES AND SPARES/OTHER SALES . FURTHER, AS PER THE LEARNED AR FOR THE AY: 1998-99 THE AO HAD VIDE HIS LETTER DATED 08-12- 2000 CALLED FOR A CALCULATION SHEET ON THE DEDUCTIO N CLAIMED U/S 80IA OF THE ACT. AS PER THE LEARNED AR THIS WAS DULY PROVI DED. THUS, AS PER THE LEARNED AR THE AO WAS WELL AWARE OF THE DETAILS OF THE CLAIM MADE BY THE ASSESSEE. SUCH CLAIM WAS ALLOWED ONLY AFTER CONSIDE RING ALL THE SUBMISSIONS AND THE MATERIALS SUBMITTED BY THE ASSE SSEE. LEARNED AR SUBMITTED THAT THE ATTEMPT FOR RE-OPENING WAS GROUN DED ON A CHANGE OF OPINION. THE NEW OPINION THAT ASSESSEE COULD NOT H AVE CLAIMED DEDUCTION U/S 80IA ON SALE OF SPARES WAS REACHED ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY: 2000-01 AND SUCH CHA NGE OF OPINION WAS NOT BASED ON ANY TANGIBLE MATERIALS. FURTHER, AS P ER THE LEARNED AR THE CLAIM U/S 80IA WAS FIRST PREFERRED BY THE ASSESSEE IN AY: 1993-94 AND IN THE SCRUTINY ASSESSMENT FOR AY: 1993-94 THE CLAIM W AS ALLOWED. RELIANCE WAS ALSO PLACED ON THE INTIMATION DATED 30-03-1994 FOR AY: 1993-94, WHEREIN THE CLAIM OF DEDUCTION WAS SPECIFICALLY MEN TIONED. ACCORDING TO HIM, FOR A LATER ASSESSMENT YEAR ON THE SAME SET OF CIRCUMSTANCES, THE CLAIM COULD NOT BE DISALLOWED. FOR HIS ARGUMENT TH AT A RE-OPENING COULD NOT BE DONE MERELY ON A CHANGE OF OPINION, WITHOUT ANY NEW TANGIBLE MATERIALS RELIANCE WAS PLACED ON THE JUDGMENT OF TH E HONBLE APEX COURT IN THE CASE OF DCIT VS SIMPLEX CONCRETE PILES (IND.)LT D., 358 ITR 129, CIT VS ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 18 KELVINATOR OF INDIA LTD 320 ITR 561 AND ACIT VS ICI CI SECURITIES PRIMARY DEALERSHIP LTD., 348 ITR 299. 11. FOR HIS CONTENTION THAT ELIGIBILITY IN INITIAL YEAR HAVING BEEN ACCEPTED AND GRANTED IT COULD NOT BE DENIED IN SUBS EQUENT YEARS, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS NIPPON ELECTRONICS (IND.) PVT. LTD 1 81 ITR 518 AND ACE MULTI AXES SYSTEMS LTD VS DCIT 367 ITR 266. 12. ADLIBITUM OF THE REPLY OF THE LEARNED DR WAS TH AT SIMILAR RE- ASSESSMENTS DONE FOR AY: 1996-97 WHICH WAS HELD INV ALID BY THE CIT(A) WAS CARRIED IN APPEAL BY THE REVENUE BEFORE THIS TR IBUNAL IN ITA NO.54(B)/2005. RELYING ON THE ORDER DATED 7-04-200 7 OF A CO-ORDINATE BENCH, LEARNED DR SUBMITTED THAT DEPARTMENTS APPEA L WAS ALLOWED BY THIS TRIBUNAL AND THE INITIATION OF RE-ASSESSMENTS HELD TO BE VALID. AS PER THE LEARNED DR ASSESSEE HAD MOVED IN FURTHER APPEAL BEF ORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE JURISDICT IONAL HIGH COURT IN ITA NO.647/2007 DATED 19-11-2012 HAD UPHELD THE VALIDIT Y OF THE RE-OPENING. AS PER THE LEARNED DR HONBLE JURISDICTIONAL HIGH C OURT HAD DEALT WITH ALL THE GROUNDS AND ASSERTION NOW MADE HERE BY THE LEAR NED AR, IN THE SAID JUDGMENT. 13. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT THE ATTEMPTED RE-ASSESSMENTS WER E MADE AFTER 4 YEARS, ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 19 FROM THE END OF THE RESPECTIVE ASSESSMENT YEARS AND HENCE, PROVISO TO SEC.147 CLEARLY APPLIED. THE SAID PROVISO IS RE-P RODUCED HEREUNDER; PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR: AS PER THE ASSESSEE IT HAD IN ITS P&L ACCOUNTS FILE D ALONG WITH THE RETURNS FOR THE IMPUGNED ASSESSMENT YEARS SEPARATELY SHOWN HE REVENUE FROM ITS PROCESS DIVISION UNDER THE HEAD MANUFACTURING SALE S AND SPARES AND OTHER SALES.. THE RELEVANT SCHEDULES FOR THE RESPE CTIVE YEARS ON WHICH THE ASSESSEE IS PLACING RELIANCE FOR THIS ARGUMENT IS R E-PRODUCED HEREUNDER; ASSESSMENT YEAR 1997-98 ANALYTICAL PROCESS OTHERS TOTAL (U/S 80IA) SCHEDULE -I SALES --------------------------------------------------- -------------------------------------- EXCISE DUTY 2,764.742 3,626,303 6,3 91,045 MANUFACTURING SALES 21,442,307 27, 702,117 49,144,424 SPARES AND OTHER SALES 14,271,54 0 56,690,017 20,969,565 SUB TOTAL 3 8,478,597 88,026,437 126,505,304 LESS: DISCOUNT ALLOWED 3,406,28 7 5,987,647 9,393,934 35,072,310 82,038,790 117,11 1,10 ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 20 ASSESSMENT YEAR 1997-98 ANALYTICAL PROCESS OTHERS TOTAL & OTHER (U/S 80IA) SCHEDULE -I SALES --------------------------------------------------- --------------------------------------------- -- EXCISE DUTY 3,488.805 3,866,933 7,355,738 MANUFACTURING SALES 28,605,634 27, 802,230 56,407,864 SPARES AND OTHER SALES 19,839,290 68,174,886 88,014,176 SUB TOTAL 51, 933,729 99,844,049 1,51,777,778 LESS: DISCOUNT ALLOWED 4,151,53 1 4,386,974 8,538,505 47,782,198 95,457,075 143, 239,272 14. WHAT WE FIND IS THAT THE ABOVE DETAILS WERE AVAILABLE ONLY AS PART OF THE SCHEDULES TO THE P&L ACCOUNT. IN THE P &L ACCOUNT ASSESSEE HAD ONLY ONE HEAD FOR SHOWING ITS SALES AND THERE WAS N O BIFURCATION. COMPUTATION OF 80IA DEDUCTION MADE BY THE ASSESSEE FOR BOTH THE YEARS STARTS FROM THE PROFITS OF THE PROCESS DIVISION AND DO NOT AT ANY PLACE SHOW OR INDICATE THAT THE SUCH PROFITS INCLUDE IN IT, PR OFITS ARISING OUT OF SALE OF SPARES. NO DOUBT, FOR AY: 1998-99 THERE WAS AN ENQ UIRY BY THE AO ON HOW THE COMPUTATION U/S 80IA AS MADE. IN THE REPLY GIV EN BY THE ASSESSEE IT HAS AGAIN STARTED FROM THE FIGURE OF PROFITS BEFOR E TAX OF THE PROCESS DIVISION AND FAILED TO INDICATE THAT SUCH PROFITS I NCLUDED PROFITS ARISING OUT OF SALE OF SPARES. AT THIS JUNCTURE, IT IS NECESSA RY TO HAVE A LOOK AT EXPLANATION-I TO SEC.147 OF THE IT ACT, 1961, WHICH IS REPRODUCED HEREUNDER; PRODUCTION BEFORE THE AO OF ACCOUNT BOOKS OR OTH ER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGEN CE HAVE BEEN ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 21 DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO 15. THE CLAIM OF THE ASSESSEE IS THAT THE AO HAD CONSIDERED THE SALES IN ITS ENTIRETY WITH THE KNOWLEDGE THAT IT INCLUDED SALE OF SPARES OR IN OTHER WORDS, AS PER THE ASSESSEE IT WAS GRANTED U/S 80IA OF THE IT ACT, BASED ON AN OPINION BY THE AO THAT IT WAS ELIGIBLE FOR SUCH A DEDUCTION ON SALE OF SPARES ALSO. IN OUR OPINION, THIS CONTENTION OF T HE ASSESSEE IS NOT COMING OUT FROM THE RECORDS OR FACTS. IT MIGHT TO BE TRUE THAT THE AO COULD HAVE WITH DUE DILIGENCE DISCOVERED THAT THE CLAIM U/S 80 IA OF THE ACT INCLUDED THAT FOR SALE OF SPARES. HOWEVER, BY VIRTUE EXPLAN ATION-I REPRODUCED ABOVE, THIS WILL NOT AMOUNT TO DISCLOSURE WITHIN THE MEANI NG OF PROVISO TO SEC.147. WE ARE INCLINED TO ACCEPT THE CONTENTION OF THE LEA RNED DR THAT THE AO HAD NOT FORMED ANY OPINION ON THE VERACITY OF THE CLAIM OF THE ASSESSEE U/S 80IA OF THE IT ACT, WITH RESPECT TO THE SALE OF SPA RES, WHILE FRAMING THE ORIGINAL ASSESSMENT. WE ALSO FIND THAT THE AO HAD SPECIFICALLY DEALT WITH THE OBJECTION OF THE ASSESSEE ON THE RE-OPENING NOT ING INTER-ALIA THAT INFORMATION GATHERED BY HIM DURING THE COURSE OF AS SESSMENT FOR ASSESSMENT YEAR 2000-01 FORMED THE TANGIBLE MATERIA L WHICH CAME INTO HIS POSSESSION, SUBSEQUENT TO THE ASSESSMENTS FOR THE I MPUGNED ASSESSMENT YEARS. IN OUR OPINION, TANGIBLE MATERIAL WOULD NO T NECESSARILY MEAN A TYPE OF MATERIAL THAT CAN BE WEIGHED IN THE HANDS OR THA T WHICH IS ALWAYS PERCEPTIBLE TO THE SENSE OF TOUCH. TANGIBLE MATERI AL IMPLY MATERIAL WHICH IS ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 22 GOOD ENOUGH TO SHOW A WRONG CLAIM OR EXCESSIVE CLAI M MADE BY THE ASSESSEE. ANOTHER CONTENTION OF THE ASSESSEE IS TH AT FOR ASSESSMENT YEAR 1993-94, IT WAS GRANTED DEDUCTION U/S 80IA OF THE I T ACT, 1961. ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1993-94 PL ACED AT PAPER BOOK PAGES 45-46 DOES NOT MENTION ANYTHING REGARDING SUC H CLAIM OR HOW IT WAS DEALT WITH. EVEN THE INTIMATION 143(1) FOR THE SAI D YEAR ON WHICH STRONG RELIANCE WAS PLACED BY THE LEARNED AR, AVAILABLE AT PAPER BOOK PAGE NO.44, MENTION A CLAIM OF DEDUCTION U/S 80I AND NOT 80IA O F THE IT ACT, 1961. 16. COMING TO THE VARIOUS JUDGMENTS RELIED ON BY TH E ASSESSSEE, IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. (SUPRA) HAD UPHELD THE FULL BENCH JUDGMENT OF HONBLE DELHI HIGH COURT WHEREIN A RE-ASSESSMENT ATTEMPTED BASED ON INFORMATION CONTAINED IN A TAX A UDIT REPORT WHICH WAS FILED BY THE ASSESSEE ALONG WITH ORIGINAL RETURN OF INCOME WAS CONSIDERED INVALID. THE ONLY REASON FOR RE-OPENING IN THE SAID CASE WAS THAT ASSESSEE HAD CLAIMED INTEREST PERTAINING TO EARLIER ASSESSME NT YEAR IN THE CURRENT YEAR. THEIR LORDSHIP HELD THAT A REOPENING CANNOT BE DONE ON A MERE CHANGE OF OPINION. AS AGAINST THIS, IN THE CASE BE FORE US, IT IS NOT A QUESTION OF CHANGE OF OPINION FOR THE SIMPLE REASON THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE AO HAD NEVER REACHED A CONCLUSION REGARDING ELIGIBILITY FOR DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA OF THE IT ACT, 1961, ON THE PROFITS ARISING FROM THE SALE OF SPARES. AS FOR THE JUDGMENT IN THE CASE OF M/S SIMPLES CONCRETE PILES (IND.) LTD (SUPRA) THE ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 23 RE-OPENING WAS ATTEMPTED ON A SUBSEQUENT REVERSAL O F THE HONBLE HIGH COURT DECISION BY THE HONBLE APEX COURT. THERE I S NO SUCH REVERSAL AND THEREFORE, THIS CASE ALSO WILL NOT HAVE ANY APPLICA BILITY. AS FOR THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF ICICI SECU RITIES PRIMARY DEALERSHIP LTD.,(SUPRA) THERE WAS FULL DISCLOSURE BY THE ASSES SEE IN THE RETURN OF INCOME ON HIS DEALINGS IN STOCKS AND SHARES. AS A GAINST THIS, HERE THE ASSESSEE CAREFULLY KEPT AWAY FROM THE AO AN IMPORTA NT ASPECT RELATING TO ITS CLAIM FOR DEDUCTION U/S 80IA VIZ. THAT IT INCLU DED SPARES. COMING TO THE JUDGMENT OF THE HONBLE JURISDICTIONAL COURT IN THE CASE OF M/S NIPPON ELECTRONICS (IND.) PVT. LTD (SUPRA) THE QUESTION TH ERE WAS WHETHER THE OLD MACHINERY ACQUIRED IN INITIAL YEAR EXCEEDED 20% OF THE TOTAL VALUE OF MACHINERY. THE LORDSHIP HELD THAT ONCE THE CONDITI ON FOR CLAIM U/S 80J WAS SATISFIED IN THE INITIAL YEAR, THEN IT COULD NO T BE DENIED IN THE SUBSEQUENT YEARS. SIMILAR IS THE LAW SET OUT BY T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S ACE MULTI AXES SYSTEM S LTD (SUPRA). THESE JUDGMENTS CANNOT HELP AN ASSESSEE WHO WAS ALLOWED A CLAIM U/S 80IA OF THE ACT IN AN EARLIER YEAR ON MANUFACTURING SALES S EEKING SIMILAR RELIEF FOR TRADING SALES IN A SUBSEQUENT YEAR. AS MENTIONED BY US, ASSESEE HERE WAS NOT ABLE TO ESTABLISH THAT ITS CLAIM FOR INITIAL YE AR WAS U/S 80IA OF THE ACT AND IF IT WAS INDEED U/S 80IA OF THE ACT, THE CLAIM INCLUDED PROFITS FROM SALE OF SPARES AS WELL. IN OUR OPINION, NONE OF TH ESE JUDGMENTS WILL COME TO THE AID OF THE ASSESSEE. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 24 17. IN ANY CASE, WE FIND THAT SIMILAR RE-OPENING WA S ATTEMPTED BY THE AO FOR ASSESSMENT YEAR 1996-97 ALSO WHICH ON ASSESS EES APPEAL WAS HELD TO BE INVALID BY THE CIT(A). WHEN THE MATTER WAS C ARRIED BY THE REVENUE IN FURTHER APPEAL BEFORE THIS TRIBUNAL IT HELD AS UNDE R; 9. THIS IS AN A[PEAL FILED BY THE DEPARTMENT FOR THE ASSESSMENT YEAR 1996-97 AND THE GROUNDS THAT HAVE BEEN RAISED READ AS UNDER; 2. THE LD. CIT(A) ERRED IN CANCELLING THE ASSESSME NT ORDER PASSED U/S 143(3) R.W.S. 147 OF THE IT ACT HOLDING THAT THE RE- OPENING OF THE ASSESSMENT WAS BASED ON CHANGE OF OP INION ON THE PART OF THE AO AND THAT THE REOPENING OF THE ASSESSMENT WAS BARRED BY LIMITATION. 3. THE LD.CIT(A) OUGHT TO HAVE NOTICED THAT HE FAC TS OF THE CASE ARE DISTINGUISHABLE FROM THAT OF THE CASE OF CIT VS FORAMER FRANCE REPORTED IN 264 ITR 566 (SC(). 4. THE LD.CIT(A) OUGHT TO HAVE NOTICED THAT THE [P ROFIT FROM THE SALE OF SPARE PARTS WAS NOT ELIGIBLE FOR D EDUCTION U/S 80IA AND AS THE DEDUCTION WAS ALLOWED ON THE ENTIRE PROFIT OF THE PROCESS DIVISION IN THE ORIGINAL ASSESSMENT, TH E REASSESSMENT WAS VALIDLY MADE. 10. AS IS EVIDENCE FROM THE ORDER OF ASSESSMENT, T HE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT AS CONTAINED IN PARAGRAPHS 3 TO 8 ARE REPRODUCED BELOW ; 1. IN RESPONSE TO THE NOTICE U/S 147, THE ASSESSEE FILED RETURN OF INCOME ON 28-04-2003, DECLARING TAXABLE I NCOME OF ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 25 RS.92,39,431/-. IN RESPONSE TO NOTICE U/S 143(2) I SSUED ON 23-09-2003, THE ASSESEE REQUESTED FOR REASONS FOR R EOPENING THE ASSESSMENT. THE REASONS WERE FURNISHED TO THE ASSESSEE, AND IN RESPONSE, THE ASSESSEE FILED A LETTER DATED 30-10-2003 WHEREIN IT WAS STATED THAT THE RECORDING INDICATES FIGURES FOR AY: 1997-98, INSTEAD OF AY: 1996-97. IT IS CLARIFI ED THAT THE FIGURES RELATE TO AY: 96-97 ITSELF, HOWEVER, A TYPO GRAPHIC ERROR CREPT IN, AND AY: 97-98 SHOULD BE READ AS AY: 96-97 . THE MATTER HAS BEEN BROUGHT TO THE NOTICE OF THE ASSESS EE. THE TYPOGRAPHIC ERROR SHOULD HAVE BEEN OBVIOUS TO THE A SSESSEE AS ALL FIGURES MENTIONED RELATES TO 1997-98 AND NOT TO 1996- 97. THIS IS A MISTAKE, WHICH COMES UNDER THE PURVI EW OF SECTION 192B WHICH STATES THAT NO PROCEEDINGS CAN BE INVALID MERELY BY REASON OF ANY MISTAKE. IF THE PROCEEDIN G IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH THE INTENT AND PURPOSE OF THE ACT. THEREFORE, THE REASSESSMENT PROCEEDINGS HAVE BEEN VALIDLY INITIATED AND CANNOT BE HELD DEFECTIVE ON THE GROUND OF A TYPOGRAPHIC ERROR. 4. THE ASSESSEE IS A MANUFACTURER OF MEMBRANE FILT ERS AND WATER PURIFICATION PRODUCTS AND SUPPLIES TO PHARMACEUTICALS. MICRO ELECTRONICS, RESEARCH INSTI TUTES AND FOOD & BEVERAGE INDUSTRIES. THE ASSESSEE CLAIMED DE DUCTION OF RS.25,45,701/- U/S 80IA ON THE PROFITS OF PROCES S DIVISION. ACCORDING TO THE ASSESSEE, IT RUNS TWO DIVISIONS NA MELY ANALYTICAL AND PROCESS DIVISION. ARE ABSOLUTE MEMBR ANE SEPARATORS WHILE IN THE PROCESS DIVISION THE PRODUC T MANUFACTURED ARE HIGH PURITY WATER SYSTEMS AND FILT RATION PRODUCTS. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 26 5. NO SEPARATE P & L ACCOUNTS IN RESPECT OF THE TWO DIVISIONS ARE ENCLOSED WITH THE RETURN. HOWEVER, T HE AUDITORS, WHILE FURNISHING THE DETAILS OF THE DEDUC TIONS ADMISSIBLE UNDER CHAPTER VIA, STATED THAT THEY RELI ED ON TRAIL BALANCE PREPARED AND EXPENDITURE BETWEEN THE DIVISI ONS. SUCH DIVISION-WISE PROFIT AND LOSS ACCOUNT STATEMEN T WAS ENCLOSED WITH TAX AUDIT REPORT. THE DEDUCTION U/S 80IA WAS CALCULATED ON THE BASIS OF THE PROFIT OF THE PROCES S DIVISION OF RS.84,74,423/- AS SHOWN IN THE DIVISION-WISE P & L ACCOUNT. AFTER MAKING ADJUSTMENT TO THIS PROFIT AS PER THE P ROVISIONS OF THE IT ACT, THE TOTAL INCOME OF THIS DIVISION WAS C OMPUTED IN THE STATEMENT OF TOTAL INCOME AT RS.84,85,669/- AND 30% THEREON AMOUNTING TO RS.25,45,701/- WAS CLAIMED AS DEDUCTION U/S 80IA. 6. THE PROCESS DIVISION P & L ACCOUNT SHOWS TOTAL SALES OF RS.6,07,78,655/- COMPRISING OF MANUFACTURING SAL ES OF RS.1,97,37,483/- AND SPARES OF RS.4,10,41,122/-. 7. THE DEDUCTION U/S 80IA IS ALLOWABLE ON THE PROF ITS DERIVED FROM THE BUSINESS OF AN INDUSTRIAL UNDERTAK ING, MEANING THEREBY THAT THE PROFITS ELIGIBLE FOR DEDUC TION ARE TO BE DERIVED FROM THE MANUFACTURING ACTIVITY OF THE I NDUSTRIAL UNDERTAKING. THE MEANING OF WORDS DERIVED FROM WAS EXPLAINED BY HONBLE SUPREME COURT IN THE CASE OF C IT VS STERLING FOODS (1999) 237 ITR 579,, WHEREIN IT WAS HELD THAT THERE SHOULD BE A DIRECT NEXUS BETWEEN PROFITS AND GAINS AND THE UNDERTAKING. SPARES SALES STATED TO BE MADE BY THE PROCESS DIVISION ESSENTIALLY CONSTITUTE A TRADING A CTIVITY BECAUSE THE SPARES WERE IMPORTED AND SOLD IN INDIA. THE PROFITS DERIVED FROM PURCHASE AND SALE OF SPARES WA S ALSO NOT ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 27 EXCLUDED FROM THE PROFITS OF THE PROCESS DIVISION W HILE COMPUTING THE DEDUCTION. 8. AS THE ABOVE INCOME ARE NOT DERIVED FROM THE UNDERTAKING, THE ASSESSEE WAS ASKED TO EXPLAIN AS T O WHY THE DEDUCTION CLAIMED U/S 80IA ON THE PROFIT ON SPA RES TRADING ACTIVITY SHOULD NOT BE DENIED. SIMILAR ISS UE AROSE IN THE ASST. YEAR 1999-2000 AND DEDUCTION U/S 80IA WAS DENIED TO THE ASSESSEE AND THE ASSESSEES APPEAL IS PENDING BEFORE THE CIT(A). THE ASSESSEE RELIES ON THE SUB MISSIONS FOR PROCEEDINGS FOR ASST. YEAR 1999-2000 TO SUBSTANTIAT E THE CLAIM OF DEDUCTION U/S 80IA ON THE PROFITS EARNED O N IMPORT AND SALE OF SPARES. 11. THE ASSESSMENT IN THIS CASE WAS ORIGINALLY CONCLUDED ON 30-11-1998 AND CONSEQUENT TO THE ORDER OF REVISION MADE BY THE COMMISSIONER U/S 263, THE ASSE SSMENT WAS SO MADE ON 17-07-2000. NOTICE U/S 147 WAS ISS UED ON 27-03-20003 FOR REOPENING OF THE ASSESSMENT. THE CIT(A) HAS PROCEEDED ON THE BASIS THAT THE AO WAS REAPPLYING HIS MIND ON THE SAME SET OF FACTS, THOUG H THE AO HAD SPECIFICALLY MENTIONED THAT IT WAS CONSEQUENT T O ORDER OF ASSESSMENT FOR AY: 1999-2000 WHEREIN DEDUCTION U/S 80IA WAS HELD TO BE LIMITED TO INDUSTRIAL ACTIVITY ONLY. SECTION 147 AS IT STOOD PROVIDED EXPLANATION (1) AND (2) AND SU B-CLAUSE (C) TO THIS EXPLANATION READS AS UNDER; (C ) WHERE AN ASSESSMENT HAS BEEN MADE, BUT- (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSES SED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RA TE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIED UNDER THIS ACT; OR ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 28 (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 12. THE ABOVE CLEARLY SHOWS THAT AN CLAIM OF LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, WHIC H COULD NOT HAVE BEEN ALLOWED OTHERWISE, WOULD BE DEEMED AS INCOME ESCAPING ASSESSMENT. THEREFORE, THE BASIS O F ARRIVING AT THE ALLOWANCE WAS WRONG AS A CONSEQUENCE OF WHIC H THE ASSESSEE WAS ALLOWED ALLOWANCE U/S 80IA IN EXCESS, WHICH IN THE LIGHT OF THE VARIOUS DECISIONS, HAD TO BE RE STRICTED. IN VIEW OF THE AMENDED PROVISION OF SECTION 147, WE UP HOLD THE INITIATION OF REASSESSMENT AND SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 18. ASSESSEE HAD MOVED IN FURTHER APPEAL AGAINST T HE ORDER OF THE TRIBUNAL BEFORE THE HONBLE JURISDICTIONAL HIGH COU RT IN ITA NO.647 OF 2007. THE JURISDICTIONAL HIGH COURT HAD HELD AS UN DER; 6. IN RESPECT OF ITA NOS.647/2007 AND 454/2008, IT IS THE CONTENTION THAT THE ISSUE OF REOPENING THE ASSE SSMENT IS NOT PERMISSIBLE MERELY BY A CHANGE OF OPINION. 7. SRI K.V.ARAVIND, LEARNED COUNSEL FOR THE I NCOME TAX DEPARTMENT, SUBMITS THAT IN THE RETURNS THE ASSESSE E HAS NOT FURNISHED THE ACCOUNTS TRULY AND CORRECTLY. THE FAC T THAT THE ASSESSEE HAD NOT KEPT ANY SEPARATE ACCOUNTS FOR TRA DING AND MANUFACTURING AND FURNISHING, CONSOLIDATED ACCOUNTS WOULD ITSELF DISCLOSE THAT THE TRUE AND CORRECT PARTICULA RS HAVE NOT BEEN FURNISHED. THEREFORE, THE RESPONDENT IS ENTITL ED TO REOPEN THE ASSESSMENT. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 29 8. WITH REGARD TO CORRECTNESS OF THE DETAILS OF THE RECEIPTS FROM TRADING AND MANUFACTURING, IT BECOMES JUST AND NECESSARY TO PROBE INTO ACCOUNTS TO BIFURCATE THE I NCOME FROM TRADING AND MANUFACTURING TO ASCERTAIN THE EXPENSES TO BE ALLOCATED IN ORDER TO APPRECIATE TO WHAT EXTENT THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER CLAUSE 3 OF S UB-SECTION 2 OF S.80IA OF THE ACT. 9. IT IS THE CONTENTION OF THE ASSESSEE TH AT THE EXEMPTION GIVEN INITIALLY IN THE FIRST YEAR IS ACCEPTED AND T HE SAME SHOULD BE CONTINUED FOR FURTHER YEARS IS A QUESTION LEFT OPEN TO BE CANVASSED BEFORE THE ASSESSING OFFICER. THE QUES TION WHETHER MAKING OF WATER FILTER AMOUNTS TO INDUSTRIA L AND MANUFACTURING ACTIVITY IS ALSO KEPT OPEN FOR CONSID ERATION. IN THAT VIEW OF THE MATTER, THE ORDER OF THE TRIBUNAL IS UPHELD. THE ASSESSING OFFICER SHALL TAKE NOTE OF THE OBSERV ATIONS MADE ABOVE WHILE MAKING ASSESSMENT AND GRANTING DEDUCTIONS. THUS, THE HONBLE JURISDICTIONAL HIGH COURT HAD UPH ELD THE RE-OPENING DONE FOR ASSESSMENT YEAR 1996-97. THE RE-OPENINGS DONE FOR ASSESSMENT YEARS 1997-98 & 1998-99, WHICH ARE IMPUGNED ALSO EM ANATE FROM THE SAME SET OF FACTS AND CIRCUMSTANCES. WE ARE THEREF ORE, OF THE OPINION THAT THE CIT(A) FELL IN ERROR IN HOLDING THE RE-ASSESSME NT TO BE INVALID. WE SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARDS. GRO UND NO.2 OF THE REVENUE STANDS ALLOWED. ITA NOS. 164 & 165(BANG)2013 & CO NOS.81 & 82(B)/13 30 19. GROUND NO.3 OF THE REVENUE AND THE CROSS OBJEC TION RAISED BY THE ASSESSEE ARE ON THE MERITS OF THE CLAIM OF DEDU CTION U/S 80IA ON PROFITS ATTRIBUTABLE TO THE SALE OF SPARES AND ASSETS. WE FIND THAT THE CIT(A) HAD NOT ADJUDICATED ON THE ISSUE OF DEDUCTION CLAIMED U /S 80IA OF THE ACT, SINCE HE HELD THE RE-ASSESSMENT INVALID. WE THEREF ORE, REMIT THE ISSUE ON MERITS BACK TO THE FILE OF THE CIT(A) FOR CONSIDERA TION AFRESH IN ACCORDANCE WITH LAW. 20. TO SUMMARIZE THE RESULTS OF THE APPEALS OF THE REVENUE ARE ALLOWED PRO-TANTO, WHEREAS THE CROSS OBJECTION OF T HE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH SEPTEMBER, 2015. SD/- (ASHA VIJAYARAGHAVAN) SD/- (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE: D A T E D : 30-09-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE