M.G.S.Govindarajulu Chettiar & Sons, Karur V. ACIT, Trichy

ITA 1861/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64154 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-08-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 01-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: V D GOPAL
• Keywords: Income from undisclosed sources; Retrospective amendment
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1861/MDS/2010 ASSESSMENT YEAR: 2004-05 M/S M.G.S. GOVINDARAJULU CHETTIAR & SONS, NO.662, JAWAHAR BAZAAR, KARUR 639 001. PAN : AAAFM5553L (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, NO.4, WILLIAMS ROAD, TRICHIRAPALLI 620 001. (RESPONDENT) APPELLANT BY : SHRI V.D. GOPAL, ADVOCATE RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 09.08.2012 DATE OF PRONOUNCEMENT : 09.08.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, THREE GROUND S HAVE BEEN TAKEN, OUT OF WHICH, GROUND NO.1 IS GENERAL NEEDING NO ADJUDICATION. 2. VIDE ITS GROUND NO.2, ASSESSEE IS AGGRIEVED THAT CIT(APPEALS) SUSTAINED AN ADDITION OF ` 6,53,348/- MADE BY THE ASSESSING OFFICER, FOR PAYMENT MADE TO A SUPPLIER. 2 I.T.A. NO. 1861/MDS/10 3. SHORT FACTS APROPOS ARE THAT ASSESSEE RUNNING A BUSINESS OF COTTON FABRICS, HAD FILED RETURN FOR THE IMPUGNED ASSESSME NT YEAR DECLARING AN INCOME OF ` 15,94,340/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE HAD PURCHASED CLOTH FROM ONE M/S VERAVATI TEXTILES, MUMBAI. IN ORDER T O CONFIRM THE PURCHASE, ASSESSING OFFICER SENT A LETTER TO M/S VE RAVATI TEXTILES. THEREUPON, AUTHORIZED REPRESENTATIVE OF THE SAID M/ S VERAVATI TEXTILES FILED BEFORE THE A.O. A COPY OF ASSESSEES ACCOUNT AS APPEARING IN THEIR BOOKS. FROM THE SAID ACCOUNT, THE A.O. NOTED THAT ASSESSEE HAD EFFECTED PURCHASES WORTH ` 7,02,100/- AND ALSO MADE PAYMENT OF ` 6,55,348/-. THE BALANCE IN THE BOOKS OF M/S VERAVA TI TEXTILES, IN THE ACCOUNT OF THE ASSESSEE, WAS ` 46,752/-. AS AGAINST THIS, THE BOOKS OF THE ASSESSEE REFLECTED A PURCHASE OF ` 5,93,348/- FROM THE SAID M/S VERAVATI TEXTILES, MUMBAI, AGAINST WHICH NO PAYMENT AMOUNT WHATSOEVER WAS SHOWN TILL THE END OF THE PREVIOUS Y EAR RELEVANT TO IMPUGNED ASSESSMENT YEAR. THE SUM OF ` 5,93,348/- STOOD AS PAYABLE TO M/S VERAVATI TEXTILES IN THE BOOKS OF THE ASSESS EE. ASSESSEE WAS REQUIRED TO EXPLAIN THIS DIFFERENCE, WHEREUPON IT W AS STATED THAT THEY HAD NOT EFFECTED ANY PAYMENT TO M/S VERAVATI TEXTILES. HOWEVER, THE A.O. RELYING ON THE ACCOUNT COPY OF ASSESSEE, AS APPEARI NG IN THE BOOKS OF M/S VERAVATI TEXTILES, CAME TO A CONCLUSION THAT AS SESSEE HAD EFFECTED 3 I.T.A. NO. 1861/MDS/10 A PAYMENT OF ` 6,55,348/- TO THE SAID CONCERN AND THIS WAS NOT ACCOUNTED BY THE ASSESSEE. HE, THEREFORE, CONSIDER ED SUCH AMOUNT AS UNACCOUNTED INCOME OF THE ASSESSEE AND COMPLETED TH E ASSESSMENT. 4. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT IT HAD PRODUCED BOOKS OF ACCOUNTS AT THE TIME OF HEARING, BEFORE THE ASSESSING OFFICER AND NO AMOUNT WHATSOEVER WAS PAID DURING THE RELEVANT PREVIOUS YEAR AGAINST PURCHASES MADE FROM M/S VERAVATI TEXTILES, MUMBAI. ASSESSEE POINTED OUT TO CIT(APPE ALS) THAT AS PER THE ACCOUNT COPY PRODUCED BY M/S VERAVATI TEXTILES THE PAYMENTS EFFECTED BY ASSESSEE TO THEM WAS FROM KARUR VYSYA BANK ACCOU NT. RELYING ON THE COPY OF ITS BANK ACCOUNT WITH KARUR VYSYA BANK, ASSESSEE POINTED OUT THAT THERE WAS NO PAYMENT THROUGH SUCH ACCOUNT TO M/S VERAVATI TEXTILES, MUMBAI. THEREFORE, AS PER THE ASSESSEE, NO PAYMENTS WERE EFFECTED BY IT TO M/S VERAVATI TEXTILES, MUMBAI. A SSESSEE ALSO POINTED OUT THAT ASSESSING OFFICER WAS IN A HURRY TO COMPLE TE THE ASSESSMENT AND THEREFORE, DID NOT GIVE SUFFICIENT OPPORTUNITY TO BRING OUT THE ANOMALIES IN THE ACCOUNT PRODUCED BY M/S VERAVATI T EXTILES. 5. CIT(APPEALS) WAS NOT IMPRESSED BY THE CONTENTION S OF THE ASSESSEE. ACCORDING TO HIM, IN THE REMAND REPORT G IVEN BY THE ASSESSING OFFICER IT WAS MENTIONED THAT THERE WERE NO ENTRIES IN THE BOOKS OF THE ASSESSEE TO SUPPORT THE PAYMENTS MADE TO M/S VERAVATI 4 I.T.A. NO. 1861/MDS/10 TEXTILES. AS PER CIT(APPEALS), ASSESSEE HAD FAILED TO PRODUCE DETAILS REGARDING THE PAYMENT AND HENCE, HELD THAT THE ADDI TION WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 6. NOW BEFORE US, LEARNED A.R. SUBMITTED THAT IN TH E BOOKS OF M/S VERAVATI TEXTILES, THE PAYMENT RECEIVED BY THEM FRO M THE ASSESSEE HAS BEEN SHOWN AS THROUGH M/S KARUR VYSYA BANK. ASSESS EE HAD PRODUCED BEFORE THE ASSESSING OFFICER ALL BANK ACCOUNTS INCL UDING ITS ACCOUNT WITH KARUR VYSYA BANK. THERE WERE NO ENTRIES IN SUCH AC COUNT FOR ANY PAYMENTS EFFECTED TO M/S VERAVATI TEXTILES. THEREF ORE, ACCORDING TO HIM, THE ADDITION MADE WAS UNLAWFUL. 7. PER CONTRA, LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. ASSESSING OFFICER HAD OBTAINED FROM M/S VERAVATI TE XTILES A COPY OF ASSESSEES ACCOUNT IN THEIR BOOKS AND IN SUCH BOOKS , THE FIGURE OF PURCHASE MADE BY THE ASSESSEE WAS ` 7,02,100/- AND THE PAYMENT EFFECTED AGAINST SUCH PURCHASE WAS ` 6,55,348/-. AS AGAINST THIS, ASSESSEE IN ITS BOOKS HAD SHOWN PURCHASE FROM M/S V ERAVATI TEXTILES ` 5,93,348/- AND THE WHOLE OF THE AMOUNT STOOD AS BAL ANCE DUE TO M/S VERAVATI TEXTILES AT THE END OF THE YEAR. AS PER T HE ASSESSEE, HAD IT 5 I.T.A. NO. 1861/MDS/10 EFFECTED ANY PAYMENTS THROUGH ITS ACCOUNT WITH KARU R VYSYA BANK, AS CLAIMED BY M/S VERAVATI TEXTILES, THEN IT WOULD HAV E DEFINITELY REFLECTED IN THE RELEVANT BANK STATEMENT. WE ARE OF THE OPIN ION THAT NONE OF THE AUTHORITIES BELOW MADE A DETAILED ANALYSIS OF BANK STATEMENT OF THE ASSESSEE WITH KARUR VYSYA BANK FOR VERIFYING THE CL AIM OF THE ASSESSEE. THERE IS ALSO NO VERIFICATION AS TO WHETHER ASSESSE E WAS HAVING MORE THAN ONE ACCOUNT WITH KARUR VYSYA BANK, THROUGH WHI CH PAYMENTS, IF ANY, WERE EFFECTED TO M/S VERAVATI TEXTILES. THERE FORE, WE ARE OF THE OPINION THAT THE ADDITION WAS MADE WITHOUT VERIFYIN G THE DETAILS IN FULL. DUE TO DISPARITY IN THE STATEMENTS GIVEN BY M/S VER AVATI TEXTILES AND THAT OF THE ASSESSEE, WE ARE OF THE OPINION THAT TH E MATTER HAS TO BE VERIFIED AFRESH. WE, THEREFORE, SET ASIDE THE ORDE RS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF A.O. FOR CO NSIDERATION DE NOVO. 9. SECOND GROUND RAISED BY THE ASSESSEE IS ON THE D ENIAL OF BENEFIT OF DEDUCTION UNDER SECTION 80HHC BY THE A.O., WHICH WAS CONFIRMED BY THE CIT(APPEALS). 10. ASSESSEE BEING AN EXPORTER OF COTTON FABRICS, C LAIMED DEDUCTION UNDER SECTION 80HHC OF THE ACT. WHILE WORKING OUT SUCH DEDUCTION, ASSESSEE HAD ADDED 90% OF DEPB SALES. ASSESSING OF FICER NOTED THAT THERE WAS AN AMENDMENT TO SECTION 80HHC OF THE ACT WHEREBY SECOND, THIRD AND FOURTH PROVISO WERE INSERTED UNDER SUB-SE CTION (3) BY TAXATION 6 I.T.A. NO. 1861/MDS/10 LAWS (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFEC T FROM 1.4.1998. ACCORDING TO A.O., AS PER THIRD PROVISO, ASSESSEE H AD TO FIRST PROVE WITH SUFFICIENT EVIDENCE THAT IT HAD AN OPTION TO CHOOSE DUTY DRAW BACK OR DEPB AND THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DEPB SCHEME. AS PER THE A.O., ASSESSEE HAD NOT SATISFIED THIS RE QUIREMENT DESPITE BEING REQUIRED TO DO SO. HE, THEREFORE, DECLINED T O ALLOW DEDUCTION UNDER SECTION 80HHC TO 90% OF DEPB CLAIM. 11. IN ITS APPEAL BEFORE CIT(APPEALS), CONTENTION O F THE ASSESSEE WAS THAT IT WAS A CREDIT GIVEN TO THE ASSESSEE FOR OFF- SETTING THE IMPORT DUTY ON RAW MATERIAL USED FOR MANUFACTURING OF EXPORT GO ODS. AS PER THE ASSESSEE, VIDE SECTION 28(IIID), PROFIT ON TRANSFER OF DEPB WAS CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION. CONSIDERATION RECEIVED ON TRANSFER OF DEPB CREDIT C OULD NOT BE REGARDED AS PROFIT. ACCORDING TO IT, VALUE OF DEPB FELL WIT HIN THE AMBIT OF SECTION 28(IV) AND NOT SECTION 28(IIID) OF THE ACT. THEREF ORE, IT WAS ARGUED THAT DEDUCTION UNDER SECTION 80HHC OUGHT HAVE BEEN GIVEN IN RESPECT OF SALE OF DEPB LICENCE. HOWEVER, CIT(APPEALS) WAS NO T IMPRESSED. ACCORDING TO HIM, ASSESSEE HAD NOT PRODUCED EVIDENC E SOUGHT BY THE ASSESSING OFFICER TO PROVE THAT DEPB RECEIVABLE WAS LESS THAN DUTY 7 I.T.A. NO. 1861/MDS/10 DRAW BACK. CIT(APPEALS) HELD THAT DEDUCTION CLAIME D UNDER SECTION 80HHC ON 90% OF DEPB WAS RIGHTLY DISALLOWED. 12. NOW BEFORE US, LEARNED A.R. POINTED OUT THAT HO NBLE GUJARAT HIGH COURT IN A RECENT DECISION IN THE CASE OF AVANI EXP ORT AND OTHERS V. CIT (SPECIAL CIVIL APPEAL NO.7926 OF 2006 DATED 2.7.201 2) HAS HELD THAT THE AMENDMENT MADE BY TAXATION LAWS (AMENDMENT) ACT, 20 05 ADDING SECOND, THIRD AND FOURTH PROVISOS TO SECTION 80HHC( 3) OF THE ACT COULD NOT BE READ RETROSPECTIVELY AND COULD ONLY BE PROSP ECTIVELY CONSTRUED. ACCORDING TO HIM, THE IMPUGNED ASSESSMENT YEAR BEIN G 2004-05, ASSESSING OFFICER AS WELL AS CIT(APPEALS) FELL IN E RROR WHEN THEY APPLIED SUCH PROVISOS WHILE CALCULATING ELIGIBLE DEDUCTION OF THE ASSESSEE UNDER SECTION 80HHC OF THE ACT. 13. PER CONTRA, LEARNED D.R. ADMITTED THAT DECISION OF HONBLE GUJARAT HIGH COURT (SUPRA) WENT AGAINST THE REVENUE INSOFAR AS APPLICATION OF THIRD PROVISO WAS CONCERNED. NEVERTHELESS, ACCORDI NG TO HIM, THE MATTER HAD TO GO BACK TO A.O. FOR RE-CALCULATING THE DEDUC TION UNDER SECTION 80HHC OF THE ACT AS PER LAW. 14. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE WAS DENIED DEDUCT ION UNDER SECTION 80HHC OF THE ACT ON ITS DEPB CLAIM AND FOR THIS, AS SESSING OFFICER 8 I.T.A. NO. 1861/MDS/10 RELIED ON THIRD PROVISO TO SECTION 80HHC(3), INSERT ED THROUGH TAXATION LAWS (AMENDMENT) ACT, 2005. HONBLE GUJARAT HIGH C OURT IN THE CASE OF AVANI EXPORT (SUPRA), ON A PETITION CHALLENGING THE VALIDITY OF SECOND, THIRD AND FOURTH PROVISOS, INSERTED BY TAXATION LAW S (AMENDMENT) ACT, 2005, WITH RETROSPECTIVE EFFECT FROM 1.4.1998, HELD AS UNDER:- 26. ON CONSIDERATION OF THE ENTIRE MATERIALS ON RECOR D, WE, THEREFORE, FIND SUBSTANCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONERS THAT THE IMPUGNED AMENDMENT IS VIOLATIVE FOR ITS RETROSPECTIVE OPERATION IN ORDER TO OVERCOME THE DE CISION OF THE TRIBUNAL, AND AT THE SAME TIME, FOR DEPRIVING THE B ENEFIT EARLIER GRANTED TO A CLASS OF THE ASSESSEES WHOSE ASSESSMEN TS WERE STILL PENDING ALTHOUGH SUCH BENEFIT WILL BE AVAILABLE TO THE ASSESSEES WHOSE ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OTHER WORDS, IN THIS TYPE OF SUBSTANTIVE AMENDMENT, RETROSPECTIVE O PERATION CAN BE GIVEN ONLY IF IT IS FOR THE BENEFIT OF THE ASSESSEE BUT NOT IN A CASE WHERE IT AFFECTS EVEN A FEWER SECTION OF THE ASSESS EES. 27. WE, ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONL Y TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EA RLIER ASSESSMENT YEARS OF THE ASSESSEES WHOSE EXPORT TURNO VER IS ABOVE RS.10 CRORE. IN OTHER WORDS, THE RETROSPECTIVE AMEN DMENT SHOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEES. 15. SINCE LEARNED D.R. IS UNABLE TO SHOW ANY OTHER CONTRARY JUDGMENT IN THIS REGARD, WE ARE OF THE OPINION THAT THE MATT ER HAS TO GO BACK TO THE A.O. FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LA W. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE OF DEDUCTION UNDER SECTION 80HHC BACK TO THE FILE OF A.O. FOR DE NOVO DISPOSAL. 9 I.T.A. NO. 1861/MDS/10 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 9 TH OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 9 TH AUGUST, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), TIRUCHIRAPALLI (4) CIT-I, TIRUCHY (5) D.R. (6) GUARD FILE