ACIT, UDAIPUR V. M/s. Wolkem India Ltd., UDAIPUR

ITA 193/JODH/2006

• Counselvise Citation: 19323314 RSA 2006
• Duration Of Justice: 5 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 03-04-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR BANWARI LAL
• Keywords: Reopening of assessment; Business income; Period of limitation; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 80HHC; 234B; 80IB; 147; 148; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ JODHPUR BENCH, JODHPUR ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NO. 778 (JODH.) OF 2005 I. T. APPEAL NO. 604 (JODH.) OF 2004 I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 I. T. APPEAL NO. 349 (JODH.) OF 2007 A N D I. T. APPEAL NO. 160 (JODH.) OF 2009. ASSESSMENT YEARS : 200001 TO 2004-05. ASSTT. COMMISSIONER OF INCOME-TAX, M/ S. WOLKEM INDIA LTD., C I R C L E : 1, VS. NOBLE HOUSE, SWAROOP SAGAR, U D A I P U R. U D A I P U R. P A N / G I R NO. AAA CW 1831 A. ( APPELLANT ) ( R ESPONDENT ) ASSESSEE BY : SHRI AMIT KOTHARI, A. R.; DEPARTMENT BY : DR. BANWARI LAL [CIT] D. R.; O R D E R. P E R B E N C H : THESE APPEALS FILED BY THE REVENUE FOR ASSESSMENT Y EARS 2000-01 TO 2004-05 ARISE OUT OF THE ORDERS OF THE LD. CIT (APPEALS), UDAIPUR. THES E WERE HEARD TOGETHER AND ARE BEING DISPOSED OF, FOR THE SAKE OF CONVENIENCE, BY THIS COMMON ORD ER. I. T. APPEAL NO. 778 (JODH.) OF 2005 : ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE CIT (APPEALS) HAS ERRED IN :- 1. QUASHING THE PROCEEDINGS INITIATED UNDER SECTION 14 8; 2 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. 2. DIRECTING THE ASSESSING OFFICER NOT TO EXCLUDE 90 P ER CENT OF JOB CHARGES FROM THE PROFITS OF THE BUSINESS FOR COMPUTING THE DEDUC TION UNDER SECTION 80-HHC OF THE I. T. ACT, 1961. I. T. APPEAL NO. 160 (JODH.) OF 2009 : ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN :- 1. QUASHING THE ORDER PASSED, CONSEQUENTIAL TO THE ISS UE OF NOTICE UNDER SECTION 148; 2. DELETING THE DISALLOWANCE MADE ON ACCOUNT OF ALLOWI NG OF DEDUCTION UNDER SECTION 80-HHC AFTER REDUCING THE DEDUCTION UNDER S ECTION 80-IA FROM THE TOTAL PROFIT. 2. FIRST WE WILL TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2000-01 AND 2003-04 IN ITA. NO. 778 (JU) OF 2009 AND ITA. NO. 160 (JU) OF 2009. T HE FIRST ISSUE FOR CONSIDERATION, WHICH IS COMMON IN BOTH THE APPEALS RELATES TO QUASHING THE ASSESSMENT ORDER PASSED IN CONSEQUENTIAL TO ISSUE OF NOTICE UNDER SECTION 148 OF THE I. T. ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. IN ASSESSMENT YEAR 2000-01 RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,70,81,810/- WAS PROCESSED UNDER SECTION 143(1)(A) OF THE ACT AND SU BSEQUENTLY ASSESSMENT WAS MADE UNDER SECTION 143(3) ON 17/03/2003. ON APPEAL LD. CIT (AP PEALS) DECIDED APPEAL ON 17/10/2004 RESULTING IN DETERMINATION TAXABLE INCOME OF RS.1, 72,89,110/-. SUBSEQUENTLY, THE AO NOTED THAT THE ASSESSEE HAD NOT REDUCED THE PROFITS OF BUSINES S BY 90 PER CENT OF OTHER INCOME AMOUNTING TO RS.25,58,081/- PERTAINING TO KHERTHALA CONTRACT, WH ICH HE WAS REQUIRED TO DO IN COMPUTING THE DEDUCTION UNDER SECTION 80-HHC AS PER CLAUSE (BAA) OF EXPLANATION TO SECTION 80-HHC. THIS OMISSION RESULTED IN EXCESS DEDUCTION UNDER SECTION 80-HHC AMOUNTING TO RS.4,70,677/-. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 O N 20 TH FEBRUARY, 2005. 3. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS I T WAS SUBMITTED BY THE ASSESSEE THAT NOTICE UNDER SECTION 148 WAS INVALID ON THE GROUND THAT ASSESSMENT WAS DONE UNDER SECTION 143(3) AFTER CONSIDERING ALL THE MATERIAL FACTS AVA ILABLE ON RECORD. IT WAS ALSO SUBMITTED BY THE 3 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. ASSESSEE THAT THE DEDUCTION UNDER SECTION 80-HHC WAS CLAIMED IN ACCORDANCE WITH THE AUDITORS REPORT IN FORM NO. 10-CCAC WHEREIN THE RECEIPTS OF KHERTHALA CONTRACT OF RS.25,58,081/- HAD BEEN TREATED AS BUSINESS INCOME AND GROSS RECEIPTS OF THE SAME HAD BEEN TREATED AS PART OF THE TOTAL TURNOVER. THEREFORE, CONTRACT RECEIPT WAS PA RT AND PARCEL OF BUSINESS AND, ACCORDINGLY, THE PROVISIONS OF CLAUSE (BAA) OF EXPLANATION TO SECTIO N 80-HHC WERE NOT APPLICABLE. HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE AO. HE COMPUTED DEDUCTION UNDER SECTION 80HHC BY REDUCING 90 PER CENT OF KHERHTALA CONTRACT RECEIPTS. 4. AS REGARDS ASSESSMENT YEAR 2003-04 THE AO COMPL ETED ASSESSMENT UNDER SECTION 143(3) ON 26/12/2005 ON TOTAL INCOME OF RS.8,94,81,008/-. SUBSEQUENTLY, THE AO NOTICED THAT THE ASSESSEE HAD NOT REDUCED DEDUCTION UNDER SECTION 80 IA(9) FROM THE PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. HE ACCORDINGLY ISSUED NOTICE UNDER SECTION 148 ON 9/02/2007. THE AO COMPLETED THE ASS ESSMENT AND ALLOWED DEDUCTION UNDER SECTION 80HHC AFTER EXCLUDING DEDUCTION ALLOWABLE U NDER SECTION 80IA / 80IB OF THE ACT. 5.1 ON APPEAL IN ASSESSMENT YEAR 2000-01 IT WAS SUB MITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER MADE ASSESSMENT UNDER SECTION 143(3) AFTER PROPER ENQUIRY, APPLICATION OF MIND, THOROUGH SCRUTINY AND PROPER APPRECIATION OF LAW AND ALLOWED DEDUCTION U/S. 80HHC. IT WAS ALSO SUBMITTED THAT ACTION U/S. 263 OF THE ACT WAS INITI ATED BY THE LD. CIT, JAIPUR VIDE SHOW CAUSE NOTICE DATED 1/12/2004, WHICH WAS DROPPED BY THE LD . CIT VIDE ORDER DATED 24/02/2005. MEANWHILE, THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 ON 21 ST FEBRUARY, 2005 AND RE-ASSESSMENT WAS COMPLETED ON 23 RD MARCH, 2005. THEREFORE, IT WAS ARGUED THAT ISSUAN CE OF NOTICE UNDER SECTION 148 WAS BAD IN LAW AS THE ASSESSMENT HAS BE EN REOPENED MERELY ON CHANGE OF OPINION. HENCE, THE ORDER PASSED BY THE ASSESSING OFFICER WA S BAD IN LAW. THE LD. CIT (A) CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE. HE NOTED THAT TH E AO ALLOWED DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING INCOME FROM KHERTHALA CONTRA CT UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC OF THE ACT AFTER THROUGH VERIFICATION AND EXAMINATION OF ALL THE BOOKS OF ACCOUNTS. EVEN IN 154 PROCEEDINGS ALSO THE AO DID NOT CONSIDER THIS ISSUE. MOREOVER, THE 4 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. K. K. DOSHI & CO. 245 ITR 849 AND CIT VS. S. G. JHAVERI CONSULTANCY 245 ITR 854 W ERE ALREADY THERE AT THE TIME OF ORIGINAL ASSESSMENT AS WELL AS AT THE TIME OF SET ASIDE ASSE SSMENT PROCEEDINGS, BUT THE AO DID NOT APPLY THOSE DECISIONS. THUS AFTER COMPLETION OF REGULAR A SSESSMENT THE REOPENING OF ASSESSMENT UNDER SECTION 148 WAS BASED ONLY ON A CHANGE OF OPINION A S NO FRESH/ADDITIONAL FACTS CAME TO THE KNOWLEDGE OF THE AO. AS PER SECTION 147 THE AO SHO ULD HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THEREFOR E, THE ASSESSEES CASE DID NOT FALL UNDER CLAUSE (C) OF EXPLANATION 2 TO SECTION 147. IN ASS ESSEES CASE THE AO DID NOT FIND ANY ESCAPED INCOME AS ALL THE FACTS WERE FURNISHED BY THE ASSES SEE IN THE RETURN OF INCOME AND DURING THE ASSESSMENT PROCEEDINGS ALSO. THEREFORE, INITIATION OF PROCEEDINGS UNDER SECTION 148 WAS FOUND TO BE UN-TENABLE. THE LD. CIT (A), ACCORDINGLY, QU ASHED THE ASSESSMENT. 5.2 AS REGARDS ASSESSMENT YEAR 2003-04 THE LD. AR O F THE ASSESSEE REITERATED SIMILAR ARGUMENTS. THE LD. CIT (APPEALS) NOTED THAT ORIGIN AL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON CONSIDERATION OF THE CLAIM FOR DEDUCTION UNDER SECTION 80-HHC. AT THE TIME OF SUBMISSION OF THE ORIGINAL RETURN OF INCOME AS PER THE REQUIREMENT OF LAW, THE ASSESSEE SUBMITTED CERTIFICATE FROM THE CHARTERED ACCOUNTANT IN THE PRESCRIBED FORM CLAIMING SUCH DEDUCTIONS. THUS PRIMARY FACTS WERE BEFORE THE AO WHEN HE MADE ASSESSMENT UNDER SECTION 143(3) AND IT WAS NOT OPEN TO HIM TO INVOKE THE PRO VISIONS OF SECTION 147 OF THE ACT TO REOPEN THE ASSESSMENT BECAUSE HE MIGHT HAVE OMITTED CERTAI N FACTS BY OVERSIGHT. DISALLOWANCE OF CLAIM U/S. 80-HHC WAS ALLOWED BY THE LD. CIT (A) VIDE ORD ER NO. 235/2006-07. THEREFORE, REOPENING OF ASSESSMENT WAS BASED ON DIFFERENCE OF OPINION. HE PLACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF MERCURY TRAVEL L TD V DY CIT 258 ITR 533 (CAL.) WHEREIN IT WAS HELD T HAT WHERE CLAIM OF THE FOR DEDUCTION U/S 80HHD WAS GRANTED BY THE ASSESSING AUTHORITY AFTER EXAMINATION, THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACT NECESSARY FOR THE ASSESS MENT. FOR CHANGE OF OPINION PROVISION OF SECTION 147 COULD NOT BE PUT IN SERVICE. THE LD. C IT (A) IN VIEW OF THESE FACTS HELD THAT REOPENING OF ASSESSMENT WAS BASED ON CHANGE OF OPIN ION. HE ACCORDINGLY QUASHED THE ASSESSMENT FOR ASSESSMENT YEAR 2003-04 ALSO. 5 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. 6. BEFORE US THE LD. CIT (DR) SUBMITTED THAT ASSESS MENTS HAD BEEN REOPENED WITHIN THE PERIOD OF FOUR YEARS. THE HAS TAKEN INTO ACCOUNT TH E OTHER INCOME FOR THE PURPOSE OF COMPUTATION OF BUSINESS INCOME UNDER EXPLANATION (BAA) TO SECTI ON 80HHC AND NOT THE CONTRACT RECEIPTS OF KHERTHALA JOB WORK. THE ASSESSING OFFICER HAD NEITH ER EXAMINED NOR WAS ANY INFORMATION FURNISHED BY THE ASSESSEE FOR COMPUTATION DEDUCTION U/S 80 HHC WHICH IS EVIDENT FROM ASSESSMENT ORDER. THEREFORE, REOPENING OF ASSESSMEN TS FOR BOTH YEARS ARE NOT BASED ON CHANGE OF OPINION. HE FURTHER SUBMITTED THAT THE DISCLOSURE O F INFORMATION IN THE RETURN OF INCOME IS NOT MATERIAL SO FAR AS THE REOPENING OF ASSESSMENT IS C ONCERNED WITHIN THE PERIOD OF FOUR YEARS. IF ANY INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF EXPLANATION 2 TO SECTION 147, THE ASSESSING OFFICER WILL BE COMPETENT TO ISS UE NOTICE U/S 148 OF THE ACT. THE ASSESSEES CASE FALLS IN CLAUSE (C) OF EXPLANATION 2 TO SECTIO N 147 AS ASSESSMENT HAS BEEN MADE ALLOWING EXCESS RELIEF UNDER THE ACT. THEREFORE, INCOME BY WAY OF EXCESS RELIEF HAS ESCAPED ASSESSMENT IN BOTH THE YEARS. THE LD. SR. DR RELIED ON THE DECIS ION OF ITAT IN THE CASE OF NEETEE CLOTHING P. LTD. 35 DTR 362 (DEL.); SEWAK RAM 47 DTR 361 [P & H ]; JAWAND SONS 326 ITR 39 [P & H]; INDUCTOTHERM (INDIA) P. LTD ACIT 294 ITR 341(GUJ) . 7. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UBMITTED THAT CLAIM OF DEDUCTION UNDER SECTION 80HHC WAS DULY EXAMINED BY THE AO AT THE TI ME OF ORIGINAL ASSESSMENTS MADE U/S 143(3) BY HIM. IN ASSESSMENT YEAR 2000-01, 263 PRO CEEDINGS WERE DROPPED BY THE LD. CIT. DURING THE COURSE OF HEARING IT WAS ALSO POINTED OU T THAT THE ISSUE RELATING TO KHERTHALA CONTRACT RECEIPTS WERE SPECIFICALLY CONSIDERED BY THE ASSESS ING OFFICER, AS IS EVIDENT FROM LETTER DATED 22 ND NOVEMBER, 2002 ADDRESSED TO ACIT, CIRCLE : 1, UDAIP UR. THE DECISION RELIED BY ASSESSING OFFICER IN THE CASE OF CIT V. K. RAVINDRANATHAN N AIR 295 ITR 228 IS NOT APPLICABLE ON THE GROUND THAT MAIN SOURCE OF INCOME WAS JOB WORK CHAR GES WHERE AS IN THE CASE ASSESSEE SAME MACHINERY AND MAN POWER HAS BEEN USED. ITAT, JAIPUR BENCH, JAIPUR IN ASSESSEES OWN CASE IN ITA. NO. 113 (JP.) OF 1996 FOR ASSESSMENT YEAR 1993 -94 HAS HELD THAT INCOME OF KHERTHALA CONTRACT WAS A BUSINESS INCOME. HENCE REOPENING OF ASSESSMENT IS BASED ON CHANGE OF OPINION. 6 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. HE FURTHER SUBMITTED THAT THE ASSESSEES CASE IS CO VERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA LTD. 256 ITR 1 (DEL) APPROVED BY HONBLE SUPREME COURT IN 320 ITR 561 (SC). 8. AS REGARDS ASSESSMENT YEAR 2003-04, LD. AR OF TH E ASSESSEE HAS SUBMITTED THAT THE ASSESSEES VIDE LETTERS DATED 21/10/2005 AND 12/12/2 005 HAD EXPLAINED THE ISSUE RELATING TO DEDUCTION UNDER SECTIONS 80IA/80IB AND 80HHC. THE A SSESSING OFFICER HAD ALLOWED DEDUCTION U/S 80HHC IN THE ORIGINAL ASSESSMENT PROCEEDINGS AF TER CONSIDERING THE REPLIES OF THE ASSESSEE AND THEREFORE, RE-OPENING OF ASSESSMENT IS BASED ON CHANGE OF OPINION . LD AR OF THE ASSESSEE ALSO SUBMITTED THAT THE DECISION OF SPECIAL BENCH I N THE CASE OF ROGINI GARMENTS ALLOWING DEDUCTION U/S 80HHC AFTER REDUCING THE AMOUNT OF DE DUCTION ALLOWED U/S 80IA/80IB HAS NOT BEEN APPROVED BY HONBLE MADRAS HIGH COURT IN THE C ASE OF CIT V SCM CREATIONS 304 ITR 319. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN ASSESSMENT YEAR 2000-01 AT THE TIME OF ORIGINAL ASS ESSMENT THE ASSESSEE VIDE LETTER DATED 22/11/2002 HAS STATED THAT ITAT, JAIPUR BENCH, JAIP UR IN ASSESSEES OWN CASE IN ITA. NO. 113 (JP.) OF 1996 FOR ASSESSMENT YEAR 1993-94 HAD HELD THAT INCOME OF KHERTHALA CONTRACT WAS A BUSINESS INCOME AND HENCE THE TOTAL RECEIPTS FROM T HIS CONTRACT FORM PART OF THE TOTAL TURNOVER FOR DEDUCTION UNDER SECTION 80-HHC. FURTHER UNDER CLAU SE (BAA) OF EXPLANATION TO SECTION 80HHC PROFITS OF BUSINESS MEANS PROFITS OF BUSINESS AS CO MPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS REDUCED BY 90 PER CENT O F SUMS REFERRED TO IN CLAUSE (IIIA), (IIIB), (IIIC) , (IIID) AND (IIIE) OF SECTION 28 OR OF ANY RECEIPT B Y WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE INCL UDED IN SUCH PROFITS. THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT HAS CONSIDERED THE RECEIPTS FROM KHERTHALA CONTRACT AS BUSINESS INCOME AND, THEREFORE, PROVISIONS OF CLAUSE (BAA) O F EXPLANATION WERE HELD TO BE NOT APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE PURPOSE OF COMP UTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. IN VIEW OF THESE FACTS IT IS CLEAR THAT TH E ASSESSING OFFICER AT THE TIME OF ORIGINAL 7 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. ASSESSMENT HAS CONSIDERED THE ISSUE RELATING TO CON TRACT RECEIPTS FROM KHERTHALA CONTRACT AS BUSINESS INCOME. HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HAS HELD THAT AFTER 1/04/1989 THE ASSESSING OFFICER HAS WIDE POWER TO RE-OPEN ASSESSMENT UNDER SECTION 147 PROVIDED HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT TH ERE IS ESCAPEMENT OF INCOME. MERE CHANGE OF OPINION CANNOT PER SAY BE THE REASON TO RE-OPEN THE ASSESSMENT. SINCE THE ASSESSING OFFICER HIMSELF HAS CONSIDERED KHERTHALA CONTRACT AS BUSINE SS INCOME, RE-OPENING OF ASSESSMENT BASED ON SAME FACTS AMOUNTS TO CHANGE OF OPINION. RESPE CTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA), IT IS HELD THAT RE-OPENING OF ASSESSMENT FOR ASSESSMENT YEAR 2000-01 IS BASED ON CHANGE OF OPINION. THEREFORE, THE LD. CIT (APPEALS) WAS JUSTIFIED IN QUASHING THE REASSESSMEN T PROCEEDINGS. 10. NOW COMING TO ASSESSMENT YEAR 2003-04, WE HAVE ALSO GONE THROUGH THE REPLIES SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS. THERE IS NO DISPUTE ABOUT THE FACT THAT THE AO HAD ALLOWED DEDU CTION UNDER SECTION 80HHC WITHOUT REDUCING THE AMOUNT OF DEDUCTION UNDER SECTION 80IA/80IB. I N BOTH THE SUBMISSIONS DATED 21/10/2005 AND 12/12/2005 THE ISSUE RELATING TO REDUCTION OF A MOUNT OF DEDUCTION UNDER SECTION 80IA/80IB FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-HHC W AS NOT EXPLAINED BY THE ASSESSEE. THE ASSESSING OFFICER HAD ALSO NOT CALLED FOR ANY INFOR MATION IN THIS REGARD. THEREFORE, THIS ISSUE HAS NOT BEEN CONSIDERED AT ALL WHILE COMPLETING ORIGINA L ASSESSMENT. 10.1 THERE IS ALSO NO DISPUTE ABOUT THE FACT THAT ASSESSMENT HAS BEEN RE-OPENED UNDER SECTION 147 WITHIN THE PERIOD OF FOUR YEARS. HONBLE SUPRE ME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HAS HELD THAT AFTER 1 ST APRIL, 1989 THE POWER TO RE-OPEN THE ASSESSMENT IS MUCH WIDER. HOWEVER, MERE CHANGE OF OPINION CANNOT PER SAY BE A REASON TO RE-OPEN THE ASSESSMENT. THE AO HAS POWER TO RE-ASSESS, BUT NO POWER TO RE-V IEW. IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, REVIEW WOULD TAKE PLACE IN THE GARB OF R E-OPENING OF ASSESSMENT. HONBLE SUPREME COURT FURTHER HELD THAT CONCEPT OF CHANGE OF OPINIO N IS AN IN-BUILT TEST TO CHECK ABUSE OF POWER 8 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. BY THE ASSESSING OFFICER. THEREFORE AFTER 1/04/198 9 AO HAS POWER TO REOPEN ASSESSMENT UNDER SECTION 147 PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. 10.2 IN THE CASE OF ITO VS. NEETEE CLOTHING P. LTD. 35 DTR 362, ITAT, DELHI BENCH HAS HELD THAT THE ASSESSING OFFICER HAVING ALLOWED DEDUCTION UNDER SECTION 80-HHC WITHOUT REDUCING THE DEDUCTION ALLOWED UNDER SECTION 80IB WITHOUT ANY DI SCUSSION, RE-OPENING OF ASSESSMENT ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT BY REASON OF EXCESS ALLOWANCE OF DEDUCTION UNDER SECTION 80-HHC COULD NOT BE TREATED TO BE BASED ON CHANGE OF OPINION. EVEN OTHERWISE PROCEEDINGS UNDER SECTION 263 WHICH WERE INITIATED BY THE LD. CIT ON THE SAME GROUND AND CANCELLED BY THE TRIBUNAL ON TECHNICAL GROUND CONST ITUTED FRESH INFORMATION IN THE POSSESSION OF THE AO ON THE BASIS OF WHICH HE HAD FORMED A BELIEF THAT EXCESS DEDUCTION HAS BEEN ALLOWED U/S. 80-HHC. THEREFORE, REOPENING OF ASSESSMENT WAS HEL D TO BE VALID. 10.3 SIMILAR VIEW HAS BEEN TAKEN BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF JAWAND SONS VS. CIT (APPEALS) (SUPRA). IT HAS BEEN HELD THAT AFTER THE AMENDMENT OF SECTION 147 W.E.F. 1 ST APRIL, 1989 WIDE POWER HAS BEEN GIVEN TO THE ASSES SING OFFICER TO REOPEN THE ASSESSMENT EVEN IN THE CASES WHERE ASSESSEE HAD FUL LY DISCLOSED THE MATERIAL FACTS. ONLY CONDITION FOR ACTION IS THAT THE AO SHOULD HAVE REA SON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THIS CASE ASSESSEE WAS WRONGLY ALLOWED DEDUCTION UNDER SECTION 80IB IN RESPECT OF DUTY DRAW BACK AND INCENTIVES OV ERLOOKING THE FACT THAT THESE INCENTIVES DID NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FRO M INDUSTRIAL UNDERTAKING IN SECTION 80IB. THEREFORE, THERE WAS NO ILLEGALITY IN THE IMPUGNED ORDER OF THE TRIBUNAL UPHOLDING THE RE- ASSESSMENT PROCEEDINGS. 10.4 IN VIEW OF THE ABOVE, IT IS CLEAR THAT IN ASSESSMENT YEAR 2003-04 THE ASSESSING OFFICER HAD NOT DISCUSSED THE ALLOWABILITY OF DEDUCTION UND ER SECTION 80-HHC AFTER REDUCING THE AMOUNT OF DEDUCTION ALLOWED UNDER SECTION 80-IA NOR WAS TH ERE ANY DISCUSSION BY THE ASSESSEE IN HIS 9 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. WRITTEN SUBMISSIONS FILED BEFORE THE AO. IT IS ALS O A FACT THAT AMENDMENT TO SECTION 80IA HAS BEEN MADE BY INSERTION OF SUB SECTION (9) WHICH RES TRICTS DEDUCTION UNDER SECTION 80-HHC IN RESPECT OF DEDUCTION ALLOWED UNDER SECTION 80IA. T HEREFORE, NON-CONSIDERATION OF PROVISIONS OF SECTION 80IA(9) CANNOT BE SAID THAT THE ASSESSING O FFICER HAD FORMED AN OPINION AT TIME OF ALLOWANCE OF DEDUCTION UNDER SECTION 80-HHC. THERE FORE, FOR ASSESSMENT YEAR 2003-04 THERE IS NO CHANGE OF OPINION. ACCORDINGLY, IN OUR CONSIDER ED OPINION, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED IN QUASHING THE ASSESSMENT. 11. THE NEXT ISSUE IN ASSESSMENT YEAR 2000-01 RELAT ES TO EXCLUDING 90 PER CENT OF JOB CHARGES FROM THE PROFITS OF BUSINESS FOR COMPUTING DEDUCTIO N UNDER SECTION 80-HHC OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE REASSESSMENT HAS EXCLUDED 90 PER CENT OF THE CONTRACT RECEIPTS UNDER CLAUSE (BAA) FOR THE PURPOSE OF COMP UTATION OF PROFITS OF BUSINESS. SINCE WE HAVE UPHELD THE ORDER OF THE LD. CIT (APPEALS) QUASHING THE ASSESSMENT BASED ON CHANGE OF OPINION IN RESPECT OF KHERTHALA CONTRACT RECEIPTS, THIS GROUND OF APPEAL RAISED BY THE REVENUE BECOMES INFRUCTUOUS AND DISMISSED AS SUCH. 12. IN AY 2003-04 NEXT ISSUE FOR CONSIDERATION RELA TES TO DELETING THE DISALLOWANCE MADE ON ACCOUNT OF ALLOWING DEDUCTION UNDER SECTION 80-HHC AFTER REDUCING THE DEDUCTION UNDER SECTION 80-IA FROM ELIGIBLE PROFITS. THE ASSESSING OFFICER DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS COMPUTED DEDUCTION UNDER SECTION 80-HHC AFTER EXCLU DING DEDUCTION U/S. 80-IA/80-IB AT RS.1,18,71,364/-. THIS RESULTED IN LOWER DEDUCTION UNDER SECTION 80-HHC OF THE ACT. ON APPEAL, IT WAS SUBMITTED BY THE ASSESSEE THAT HONBLE MADRA S HIGH COURT IN THE CASE OF SCM CREATIONS VS. ACIT 97 HC IT REVERSED THE DECISION OF SPEC IAL BENCH IN THE CASE OF ACIT VS. ROGINI GARMENTS ON THE ISSUE REGARDING ALLOWABILITY OF DED UCTION UNDER SECTION 80-HHC AFTER EXCLUSION OF DEDUCTION UNDER SECTION 80-IA. THEREFORE, FOR T HE PURPOSE OF DEDUCTION UNDER SECTION 80- HHC THE AMOUNT OF DEDUCTION UNDER SECTION 80IA CANN OT BE REDUCED. THE LD. CIT (A) IN VIEW OF 10 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. SUBMISSIONS MADE BY THE ASSESSEE ACCEPTED THE CONTE NTION OF THE ASSESSEE AND DELETED THE ADDITION. 13. BEFORE US THE LD. CIT (DR) SUBMITTED THAT IN VI EW OF PROVISIONS OF SECTION 80IA(9) THE AMOUNT OF DEDUCTION U/S 80IA/IB ALLOWED HAS TO BE R EDUCED FROM PROFITS FOR THE PURPOSES OF DEDUCTION U/S 80HHC OF THE ACT. HE PLACED RELIANCE ON THE DECISION OF ITAT DELHI (SPECIAL BENCH) (FIVE MEMBER) IN THE CASE OF ACIT VS. HINDUS TAN MINT & AGRO PRODUCTS LTD. 119 I.T.D. 107 (SB) (DEL). ON THE OTHER HANDS LD. AR OF THE AS SESSEE HAS REITERATED THE SAME ARGUMENTS AS WERE MADE BEFORE LD. CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL PLACED ON RECORD. UNDER SECTION 80IA(9) WHERE ANY AMOUNT OF PROFITS AND GAI NS OF AN UNDERTAKING OR OF AN ENTERPRISE IN THE CASE OF AN ASSESSEE IS CLAIMED AND ALLOWED UNDE R SECTION 80IA FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND GAINS S HALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS OF CHAPTER-VIA UNDER THE HEADING C.DEDUCTIONS IN RESPECT OF CERTAIN INCOMES , AND SHALL IN NO CASE EXCEED THE PROFITS AND GAINS OF SUCH ELIGIB LE BUSINESS OF UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. SECTION 80HHC FALLS UNDER THE HEADING C.DEDUCTIONS IN RESPECT OF CERTAIN INCOMES , OF CHAPTER VIA. THE LANGUAGE EMPLOYED IN SECTION 80IA(9) IS PLAIN, CLEAR AND UNAMBIGUOUS. THEREFORE, DEDUCTION ALLOWED U/S 80IB HAS TO BE REDUCED FROM SUCH PROFITS AND GAINS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80 HHC OF THE ACT. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ROCHI RAM & SONS 271 I TR 444 (RAJ.) HAS HELD THAT AFTER AMENDMENT OF SECTION 80IA BY INSERTION OF SUB SECTI ON (9) WHICH PROVIDES THAT IF DEDUCTION UNDER ANY OF THE SECTIONS HAS BEEN ALLOWED UNDER CH APTER VI-A AND IF ANY FURTHER DEDUCTION IS TO BE ALLOWED UNDER ANY OTHER SECTION THAT SHOULD BE A LLOWED ONLY ON THE BALANCE AMOUNT. THESE PROVISIONS HAVE BEEN FOUND TO BE APPLICABLE WITH EF FECT FROM 1/04/1999. ITAT DELHI (SPECIAL BENCH) (FIVE MEMBER) IN THE CASE OF ACIT VS. HINDUS TAN MINT & AGRO PRODUCTS LTD. 119 I.T.D. 107 (SB) (DEL) HAS HELD THAT FOR THE PURPOSE OF COM PUTATION OF DEDUCTION U/S. 80HHC OF THE ACT, THE AMOUNT ALLOWED AS DEDUCTION UNDER SECTION 80IA/ 80IB HAS TO BE REDUCED. RESPECTFULLY 11 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. FOLLOWING THE DECISION OF HONBLE RAJASTHAN HIGH CO URT IN THE CASE OF CIT VS. ROCHI RAM & SONS(SUPRA) AND DECISION OF ITAT DELHI (SPECIAL BEN CH) (FIVE MEMBER) IN THE CASE OF ACIT VS. HINDUSTAN MINT & AGRO PRODUCTS LTD.(SUPRA) IT IS HE LD THAT THE AMOUNT OF DEDUCTION ALLOWED UNDER SECTION 80IB HAS TO BE REDUCED FOR THE PURPOS E OF DEDUCTION U/S 80HHC OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND RE STORE THE ORDER OF ASSESSING OFFICER ON THIS ISSUE. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2000-01 IN ITA. NO. 778 (JU) OF 2009 IS DISMISSED AND THE APPEAL FOR AS SESSMENT YEAR 2003-04 IN ITA. NO. 160 (JU) OF 2009 IS ALLOWED. 16. THE NEXT ISSUE FOR CONSIDERATION, WHICH IS COM MON IN ASSESSMENT YEAR 2001-02 TO ASSESSMENT YEAR 2004-05 RELATES TO ALLOWANCE OF DED UCTION UNDER SECTION 80-HHC WITHOUT REDUCING 90 PER CENT OF JOB CHARGES OUT OF TOTAL TU RNOVER OF BUSINESS. IN THESE ASSESSMENT YEARS THE ASSESSEE HAS TREATED THE RECEIPTS OF KHERTHALA CONTRACT AS BUSINESS INCOME. THE ASSESSING OFFICER EXCLUDED 90 PER CENT OF THESE RECEIPTS IN O RDER TO WORK OUT THE PROFITS OF BUSINESS UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC OF THE ACT. ON APPEAL, IT WAS SUBMITTED THAT THE ASSESSEE CARRIED OUT JOB WORK MAINLY OF MANUFACTURI NG ACTIVITIES SUCH AS CRUSHING, DRESSING, GRINDING ETC. OF WALLASTONITE AND CALCITE AT THE MA NUFACTURING WORK PLACE. THE PRODUCT ON WHICH JOB WORK ACTIVITIES CARRIED OUT WERE SIMILAR TO ASS ESSEES PRODUCTS AND HAD DIRECT NEXUS TO ASSESSEES MANUFACTURING ACTIVITIES. SAME PLANT AN D MACHINERY WAS USED FOR CARRYING OUT THE JOB WORK ACTIVITIES. IT WAS ALSO SUBMITTED THAT NO MAC HINERY SEPARATELY EARMARKED FOR THE JOB WORK ACTIVITIES AND, THEREFORE, WHATEVER JOB WORK WAS CA RRIED OUT BY THE ASSESSEE HAD DIRECT NEXUS TO THE MANUFACTURING ACTIVITIES OF THE ASSESSEE. THE L D. CIT (A) ON CONSIDERATION OF THE SUBMISSIONS MADE BY THE ASSESSEE OBSERVED THAT INCOME EARNED FR OM JOB WORK HAD DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. THEREFORE, 90 PER CENT O F JOB WORK CHARGES COULD NOT BE REDUCED UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80-HHC OF TH E ACT. HE HAS NOTED THAT THE ASSESSEE HAD ALREADY EXCLUDED 90 PER CENT OF INTEREST INCOME, MI SC. INCOME AND EXPORT INVENTIVE UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80-HHC. THE ASSESS EE HAD TAKEN THE RECEIPT OF KHERTHALA 12 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. CONTRACT AS BUSINESS INCOME. HE FURTHER OBSERVED THAT IN THE YEAR 1996 THE ASSESSEE ENTERED INTO CONTRACT WITH M/S. P. I. INDUSTRIES, UDAIPUR FOR CA RRYING OUT DRILLING, BLASTING, RAISING AND LABOUR TRANSPORTATION AT THEIR MINES SITUATED AT KHERTHALA . THE ACTIVITIES IN RESPECT OF KHERTHALA CONTRACT WERE PART OF COMPOSITE / COMMON ACTIVITIES OF BUSIN ESS AS THE SAME WAS CARRIED OUT WITH THE HELP OF POWER, MAN, MACHINE AND ENTIRE UNDERTAKING. THE SE INPUTS WERE ALSO USED IN SIMILAR FASHION FOR MANUFACTURING FACILITIES OF OWN PRODUCTS WHICH ARE SOLD TO CUSTOMERS. THE NET RECEIPT OF KHERTHALA CONTRACT WAS INCOME FROM BUSINESS AND THE EXPENDITURE FOR CARRYING OUT THIS WORK WAS INCLUDED IN THE RELEVANT HEADS OF EXPENDITURE AND S HOWN IN AUDITED PROFIT AND LOSS ACCOUNT. THAT THE WORK CARRIED OUT UNDER THE ABOVE CONTRACT WAS T HROUGHOUT THE YEAR AND NOT SEASONAL AND SPECIFIC IN NATURE. THUS, THE INCOME GENERATED FRO M THE CONTRACT WAS NOT CASUAL IN NATURE, BUT REGULAR BUSINESS INCOME. THEREFORE, FOR THE PURPO SE OF COMPUTATION OF BUSINESS INCOME UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80-HHC RECEI PTS OF KHERTHALA COULD NOT BE TREATED AS RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE. THE LD. CIT (A) IN VIEW OF ABOVE FACTS HEL D THAT THE RECEIPT OF KHERTHALA CONTRACT WERE IN THE NATURE OF MANUFACTURING CONTRACT AND HAD A DIRE CT NEXUS WITH THE BUSINESS OF THE ASSESSEE. HE FURTHER RELIED ON THE DECISION OF ITAT, COCHIN BENC H IN THE CASE OF UNITED MARINE EXPORTS VS. DCIT 115 TAXMAN 225 (AT MAG] WHEREIN IT HAS BEEN HE LD THAT ANY OTHER RECEIPT OF SIMILAR NATURE CONTEMPLATED UNDER CLAUSE (BAA) OF EXPLANATI ON TO SECTION 80-HHC SHOULD BE VERY REMOTE FROM THE TURNOVER. IN THE CASE OF THE ASSESSEE IT COULD NOT BE SAID THAT JOB WORK RECEIPTS WERE REMOTE FROM TURNOVER IN VIEW OF THE FACTS STATED AB OVE. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BANGALORE CLOTHING COMPANY 260 ITR 361 WHEREIN IT HAS BEEN HELD THAT IF THE RECEIPTS A RE FROM OPERATIONAL INCOME, IT WILL CONSTITUTE THE BUSINESS INCOME. THE LD. CIT ALSO PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. K. K. DOSHI & CO. 245 ITR 849 (BOM). HE HELD THAT JOB WORK CHARGES WERE PART OF OPERATIONAL INCOME OF THE ASSE SSEE. HE ACCORDINGLY HELD THAT JOB WORK CHARGES COULD NOT BE INCLUDED UNDER CHARGES OR A NY OTHER RECEIPT OF SIMILAR NATURE. HE, THEREFORE, HELD THAT THE AO WAS NOT JUSTIFIED IN EX CLUDING 90 PER CENT OF JOB CHARGES FOR THE PURPOSE OF COMPUTATION OF PROFITS OF BUSINESS IN OR DER TO DETERMINE THE DEDUCTION UNDER SECTION 80-HHC OF THE ACT. 13 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD USED PLANT AND MACHINERY AND MAN POWER FOR KHERTHALA CONTRACT. MACHINERY AND MAN POWER HAVE BEEN EMPLOYED THROUGHOUT THE YEAR. THE JOB WORK CARRIED OUT BY THE ASSESSEE IS IN LINE WITH THE ACTIVITIES OF THE ASSESSEE. THERE FORE, THE JOB WORK CHARGES RECEIPTS ARE IN THE NATURE OF OPERATIONAL INCOME. HENCE, ASSESSEES CA SE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BA NGALORE CLOTHING CO. SINCE THE JOB WORK CHARGES ARE PART OF OPERATING INCOME, THE INCOME AR ISING FROM KHERTHALA CONTRACT HAS TO BE TREATED AS BUSINESS INCOME AND ACCORDINGLY PROVISIO NS OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80-HHC OF THE ACT WILL NOT BE APPLICABLE. THEREFO RE, THE AO WAS NOT JUSTIFIED TO EXCLUDE 90 PER CENT OF JOB WORK CHARGES UNDER CLAUSE (BAA) OF EXPL ANATION OF SECTION 80-HHC. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY TH E LD. CIT (APPEALS) HOLDING THAT JOB WORK CHARGES COULD NOT BE EXCLUDED FROM PROFITS OF BUSIN ESS UNDER CLAUSE (BAA) EXPLANATION TO SECTION 80-HHC OF THE ACT FOR COMPUTING DEDUCTION UNDER SEC TION 80-HHC. OUR VIEW IS SUPPORTED BY THE DECISION OF THE ITAT JAIPUR BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1993-94 IN I.T.A. NO. 113 (JP.) OF 1996 WHEREIN IT HAS BEEN HE LD THAT RECEIPTS FROM KHERTALA CONTRACT WERE IN THE NATURE OF BUSINESS AND THUS FORMED PART OF TOTA L TURNOVER. IN VIEW OF ABOVE DISCUSSION WE DECIDE THIS ISSUE AGAINST THE REVENUE. THE APPEALS FILED BY THE REVENUE ON THIS ISSUE ARE DISMISSED FOR ALL THE YEARS. 18. THE NEXT ISSUE FOR CONSIDERATION, WHICH IS COMM ON IN ASSESSMENT YEAR 2001-02 TO ASSESSMENT YEAR 2004-05 RELATES TO ALLOWABILITY OF DEDUCTION UNDER SECTION 80-IB OF THE ACT. THE ASSESSING OFFICER DISALLOWED DEDUCTION UN DER SECTION 80-IB ON THE GROUND THAT HONBLE SUPREME COURT IN THE CASE OF DIVISIONAL DY. COMMISS IONER OF SALES TAX VS. BHERAGHAT MINERAL INDUSTRIES 246 ITR 230 (SC) HAD HELD THAT PROCESSIN G UP OF DOLOMITE LUMPS INTO CHIPS IS NOT PROCESS OR MANUFACTURE AND BRINGS ABOUT A NEW COMME RCIAL COMMODITY. THE LD. AO DISALLOWED THE CLAIM OF THE ASSESSEE IN ALL THE YEARS. ON APP EAL, THE LD. CIT (APPEALS) FOLLOWING DECISION FOR ASSESSMENT YEAR 2000-01 HAS HELD THAT ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER SECTION 80-IB OF 14 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. THE ACT. HE ACCORDINGLY DIRECTED THE ASSESSING OFF ICER TO ALLOW DEDUCTION UNDER SECTION 80-IB OF THE ACT. 19. BEFORE US LD. CIT(DR) RELIED ON THE ORDER OF A SSESSING OFFICER. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, JODHPUR BENCH IN ASSESSEES OWN CASE FOR AY 2000-01 IN ITA. NO. 566 (JU) OF 2004 DATED 23/11/2006. 20. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ITAT, JODHPUR BENCH IN ASSESSEES OWN CASE FOR AY 2000-01 AFTER DETAILED DISCUSSION HAS HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTIONS 80-IA/80-IB OF THE ACT. THIS DECISION HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEARS 1 997-98 TO 1999-2000 IN ITA. NO. 601 TO 603 (JDPR.) OF 2004 AND ALSO IN THE CASE OF ACIT VS. S. CHEMORES LTD. IN ITA. NO. 678 (JU) OF 2005 FOR AY 1997-98 DATED 20/6/2007. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2000-01 AND EARLIER YEAR S, RESPECTFULLY FOLLOWING THE DECISIONS OF THE ITAT, IT IS HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IAIB OF THE ACT IN ALL THE YEARS. ACCORDINGLY LD. CIT(A) WAS JUSTIFIED IN ALLOW THE RELIEF TO ASSESSEE IN ALL THE ASSESSMENT YEARS. 21. NEXT ISSUE FOR CONSIDERATION, WHICH IS COMMON I N AY 2002-03 AND 2003-04 RELATES TO CHARGING OF INTEREST UNDER SECTION 234-B OF THE ACT . THE AO WHILE COMPLETING THE ASSESSMENT IN ASSESSMENT ORDER GAVE DIRECTIONS TO CHARGE INTEREST AS APPLICABLE. ON APPEAL THE LD. CIT (APPEALS) DELETED THE INTEREST CHARGED UNDER SECTIO N 234-B RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RANCHI CLUB 24 7 ITR 209 (SC). WHILE DELETING THE INTEREST CHARGED THE LD. CIT (A) HAD OBSERVED THAT THE ASSESSING OFFICER HAD ONLY NARRATED CHARGE INTEREST AS APPLICABLE ACCORDINGLY. SINCE SPECIFIC ORDER WAS NOT PASSED TO CHARGE INTEREST, THE LEVY OF INTEREST WAS DELETED IN BOTH THE YEARS BY L D. CIT(A). 15 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. 22. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE AO HAS IN THE BODY OF ASSESSMENT ORDER HAS MENTIONED: CHARGE INTEREST AS APPLICABLE ACCORDINGLY. HONB LE SUPREME COURT IN THE CASE OF KALYANKUMAR RAY VS. CIT 191 ITR 634 (SC) HAS HELD THAT ASSESSME NT IS ONE INTEGRAL PROCESS INVOLVING NOT ONLY THE ASSESSMENT OF THE TOTAL INCOME, BUT ALSO T HE DETERMINATION OF TAX. THE LATTER IS AS CRUCIAL AS THE FORMER. THE INCOME-TAX OFFICER HAS TO DETER MINE, BY AN ORDER IN WRITING, NOT ONLY THE TOTAL INCOME BUT ALSO THE NET SUM WHICH WILL BE PAYABLE B Y THE ASSESSEE FOR THE ASSESSMENT YEAR IN QUESTION AND THE DEMAND NOTICE HAS TO BE ISSUED UND ER SECTION 156 OF THE INCOME TAX ACT, 1961, IN CONSEQUENCE OF SUCH AN ORDER. THE STATUTE, DOES NOT, HOWEVER, REQUIRE THAT BOTH THE COMPUTATIONS I.E. OF TOTAL INCOME AS WELL AS OF THE SUM PAYABLE SHOULD BE DONE ON THE SAME SHEET OF PAPER, THE SHEET THAT IS SUPERSCRIBED ASSESSMENT ORDER. IT DOES NOT SUBSCRIBE ANY FORM FOR THE PURPOSE. ONCE THE ASSESSMENT OF THE TOTAL INCOME I S COMPLETE WITH INDICATIONS OF DEDUCTIONS, REBATES, RELIEF AND ADJUSTMENTS AVAILABLE TO THE AS SESSEE, THE CALCULATION OF THE NET TAX PAYABLE IS A PROCESS WHICH IS MOSTLY ARITHMETICAL BUT GENERALLY TIME CONSUMING. IF, THEREFORE, THE INCOME-TAX OFFICER FIRST DRAWS AN ORDER ASSESSING THE TOTAL IN COME AND, INDICATING THE ADJUSTMENTS TO BE MADE, DIRECT THE OFFICE TO COMPUTE THE TAX PAYABLE ON THAT BASIS AND THEN APPROVES OF IT, EITHER IMMEDIATELY OR SOMETIME LATER, NO FAULT CAN BE FOUN D WITH THE PROCESS, THOUGH IT IS ONLY WHEN BOTH THE COMPUTATION SHEETS ARE SIGNED OR INITIALED BY THE INCOME TAX OFFICER THAT THE PROCESS DESCRIBED UNDER SECTION 143(3) WILL BE COMPLETE. 22.1 ITNS-150 IS ALSO A FORM FOR DETERMINATION OF TAX PAYABLE AND WHEN IT IS SIGNED OR INITIALED BY THE INCOME TAX OFFICER IT IS CERTAINLY AN ORDER IN WRITING BY INCOME TAX OFFICER DETERMINING THE TAX PAYABLE WITHIN THE MEANING OF S ECTION 143(3). IT MAY BE ONLY A TAX CALCULATION FORM FOR DEPARTMENT PURPOSES AS IT ALSO CONTAINS COLUMNS AND CODE NUMBERS TO FACILITATE COMPUTERIZATION OF THE PARTICULARS CONTA INED THEREIN FOR STATISTICAL PURPOSES, BUT THIS DOES NOT DETRACT FROM ITS BEING CONSIDERED AS AN OR DER IN WRITING DETERMINING THE TAX PAYABLE BY THE ASSESSEE. THERE IS NO REASON WHY THIS DOCUMENT , WHICH IS ALSO IN WRITING WHICH HAS RECEIVED 16 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. THE IMPRIMATUR OF INCOME TAX OFFICER, SHOULD NOT BE TREATED AS PART OF ASSESSMENT ORDER IN THE WIDER SENSE IN WHICH EXPRESSION HAS TO BE UNDERSTOO D IN THE CONTEXT OF 143(3). ALL THAT IS NEEDED IS THAT THERE MUST BE SOMETHING IN WRITING INITIALE D OR SIGNED BY THE INCOME TAX OFFICER BEFORE THE PERIOD OF LIMITATION PRESCRIBED FOR COMPLETION OF ASSESSMENT HAS EXPIRED IN WHICH THE TAX PAYABLE IS DETERMINED. THE FORM USUALLY STANDS AS ASSESSMENT FORM NEED NOT ITSELF CONTAIN THE COMPUTATION OF TAX AS WELL. HONBLE SUPREME COURT, THEREFORE, CAME TO THE CONCLUSION THAT THE MOMENT ASSESSING OFFICER SIGNS ITNS-150 AND THE ASS ESSMENT ORDER, PROCESS UNDER SECTION 143(3) IS COMPLETE. 22.2 IN THE CASE BEFORE US IT IS NOT THE CASE OF THE ASSESSEE THAT THE AO HAD NOT SIGNED ITNS- 150. THEREFORE, IN VIEW OF DECISION OF HONBLE SUP REME COURT IN THE CASE OF KALYANKUMAR RAY (SUPRA) FOR THE PURPOSE OF DETERMINATION OF TAX AN D INTEREST FORM NO. ITNS-150 HAS TO BE TAKEN PART OF THE ASSESSMENT ORDER. FURTHER HONBLE SC I N THE CASE OF CIT VS. ANJUM M. H. GHASWALA 252 ITR 1 HAS HELD THAT THE CHARGING OF INTEREST UN DER SECTION 234-A, 234-B AND 234-C IS MANDATORY. THEREFORE, IF THE FACTS OF THE CASE ARE EXAMINED IN THE LIGHT OF DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF KALYANKUMAR RAY (SUPRA ) AND ANJUM M. H. GHASWALA (SUPRA) IT HAS TO BE HELD THAT INTEREST UNDER SECTION 234-B BE ING MANDATORY IN NATURE HAS TO BE CHARGED. ACCORDINGLY, IN OUR CONSIDERED OPINION THE AO HAS R IGHTLY CHARGED INTEREST UNDER SECTION 234-B OF THE ACT. HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF CIT V. HIMALAYA COLD STORAGE & IRON INDUSTRIES [2005] 147 TAXMAN 90 (ALL.) HAS HELD THA T A SUBSEQUENT DECLARATION OF LAW BY THE APEX COURT WOULD NO DOUBT CONSTITUTE EXISTENCE OF A MISTAKE APPARENT ON RECORD BUT THAT DECLARATION OF LAW BY THE APEX COURT SHOULD BE AVAI LABLE AT THE TIME WHEN THE PROCEEDINGS FOR RECTIFICATION HAD BEEN INITIATED. THEREFORE, AFTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ANJUM M. H. GHASWALA (SUPRA) NON CHARGING O F INTEREST U/S 234A/B/C WILL CONSTITUTE MISTAKE APPARENT FROM RECORD AND THE ASSESSING OFFI CER CAN CHARGE INTEREST U/S 234A/B/C OF THE ACT PROVIDED TIME FOR RECTIFICATION OF SUCH MISTAKE HAS NOT EXPIRED. IN VIEW OF ABOVE, IN OUR CONSIDERED OPINION, THE LD. CIT (A) WAS NOT JUSTIFI ED IN CANCELING THE INTEREST CHARGED UNDER 17 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. SECTION 234-B OF THE ACT IN BOTH THE YEARS. WE, TH EREFORE, DIRECT THE ASSESSING OFFICER TO CHARGE INTEREST U/S 234B IN BOTH THE YEARS. 23. THE NEXT ISSUE FOR CONSIDERATION IN AY 2004 -05 RELATES TO ALLOWING DEDUCTION UNDER SECTION 80HHC AFTER REDUCING DEDUCTION UNDER SECTIO N 80IB OF THE ACT. THE REVENUE HAD FILED REVISED GROUNDS OF APPEAL VIDE LETTER DATED 9.5.20 08 STATING THEREIN THAT DEDUCTION U/S 80HHC SHOULD BE ALLOWED AFTER REDUCING THE AMOUNT OF DEDU CTION U/S 80IB OF THE ACT. THE REVISING OF GROUNDS BY THE REVENUE WAS STRONGLY OPPOSED BY LD. AR OF THE ASSESSEE ON THE GROUND THAT THE ASSESSING OFFICER HAD NOT CONSIDERED SUCH AN ISSUE IN ASSESSMENT ORDER. THEREFORE, REVENUE CANNOT BE PERMITTED TO RAISE SUCH ADDITIONAL GROUND BEFORE THE TRIBUNAL. ON THE OTHER HAND LD. CIT(DR) SUBMITTED THAT IN VIEW OF DECISION OF HONB LE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT [1998] 229 ITR 383 (S C) REVENUE CAN TAKE UP LEGAL GROUND AT ANY STAGE. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD CAREFULLY. IN THIS CASE THE ASSESSING OFFICER HAD DISCUSSED THE PROVISIONS OF S ECTION 80IA(9) AND COMPUTED EXCESS CLAIM OF RS 4,01,228/- U/S 80HHC WORKED OUT AFTER REDUCING THE DEDUCTION U/S 80IA/80IB CLAIMED AT RS 1,02,98,061/-. SINCE ASSESSING OFFICER DID NOT ALLO W DEDUCTION U/S 80IB THE EXCESS DISALLOWANCE COMPUTED AT RS 4,01,228 WAS NOT MADE IN THE ASSESS MENT ORDER. LD. CIT (A) HAS, HOWEVER, ALLOWED DEDUCTION U/S 80HHC WITHOUT REDUCING THE AM OUNT OF DEDUCTION U/S 80IB FOLLOWING THE DECISIONS OF ITAT CITED BY THE ASSESSEE. HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT (SUPRA) HAS HELD THAT IF, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE F IRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. IN THE CASE BEFORE US THE QUESTION OF REDUCING OF DEDUCTION U/S 80IB FOR THE PURPOSES OF DEDUCTION U/S 80HHC WAS DI SCUSSED BY THE ASSESSING OFFICER. IT IS A FACT THAT W.E.F. 1.4.1999 AS PER PROVISIONS OF SECTION 8 0IA(9) THE DEDUCTION ALLOWED U/S 80IA/80IB 18 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. HAS TO BE REDUCED FOR THE PURPOSE OF DEDUCTION U/S 80HHC AND FOR THIS PURPOSE NO INVESTIGATION OF FACTS IS REQUIRED. IT IS PURELY A QUESTION OF LA W. WE ARE AWARE OF OUR DUTY THAT THERE SHOULD NOT BE MISCARRIAGE JUSTICE TO EITHER PARTY TO THE APPEA L. SINCE RELEVANT FACTS ARE AVAILABLE ON RECORD RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT (SUPRA), WE ADMIT THE REVISED GROUND OF APPEAL RAISED BY THE REVENUE AND DECIDE THE ISSUE WHETHER AMOUNT OF DEDUCTION ALLOW ED U/S 80IA/80/IB IS TO BE REDUCED FOR THE PURPOSE OF DEDUCTION U/S 80HHC. IN ASSESSMENT YEA R 2003-04 IN ITA. NO. 160 (JU) OF 2009 WE HAVE HELD THAT DEDUCTION ALLOWED UNDER SECTION 8 0IB OF THE ACT HAS TO BE REDUCED FROM ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. SINCE THE FACTS OF THE CASE ARE IDENTICAL TO THE FA CTS OF CASE FOR AY 2003-04, IT IS HELD THAT DEDUCTION ALLOWED UNDER SECTION 80IB HAS TO BE REDU CED FROM ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. WE ORDER ACCORDINGLY. 25. IN THE RESULT, APPEAL OF REVENUE FOR ASSESSMENT YEAR 2000-01 IS DISMISSED AND OTHER ASSESSMENT YEARS ARE PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 29 TH AUGUST, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER AT NEW DELHI . DATED : 29 TH AUGUST, 2011. *MEHTA * 19 I T A. NO. 778 (JODH.) OF 2005 & IT A. NO. 604 (JOD H.) OF 2004 & I. T. APPEAL NOS. 192 & 193 (JODH.) OF 2006 A N D I T A. NO. 349 (JODH.) OF 2007 & I T A. NO. 160 (JODH.) OF 2009. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.