Rivaa Exports, Surat V. The Income tax Officer, Ward-2(4), Surat

ITA 2041/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1933 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 26-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Set aside
• Section: 80HHC; 234B; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH , AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND A. N. PAHUJA, AM RIVAA EXPORTS, RIVAA HOUSE, UDHNA DARWAJA, RING ROAD, SURAT. V/S . INCOME-TAX OFFICER, WARD 2(4), SURAT. PAN :AADFP1706H (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S. N. SOPARKAR, AR REVENUE BY:- SHRI C. K. MISHRA, DR O R D E R A.N. PAHUJA: THESE APPEALS FILED BY THE ASSESSEE AGAINST TWO SE PARATE ORDERS DATED 20.04.2009 OF THE LD. CIT(A)-II,SURAT FOR ASSESSMENT YEARS 2003-04 & 2004-05, RAISE THE FOLLOWING COMMON GROUN DS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VIEW TAKEN BY ASSESSING OFFICER IN REDUCING THE ENTIRE S ALE PROCEEDS OF DEPB INCENTIVE INSTEAD OF REDUCING ONLY PROFITS EAR NED ON TRANSFER OF DEPB LICENCE IN COMPUTING DEDUCTION U/S 80HHC OF THE ACT. BOTH THE LOWER AUTHORITIES HAVE IGNORED SPECIFIC DIRECTI ONS OF THE HONBLE ITAT TO RECONSIDER THE ISSUE OF SALE PROCEEDSOF DEP B LICENSE IN VIEW OF THE AMENDMENT BROUGHT IN SECTION 28 & 80HHC OF THE ACT BY TAXATION LAWS(AMENDMENT) ACT, 2005 WITH RETROSPE CTIVE EFFECT FROM 1.4.1998. 2. LD. CIT(A) HAS ERRED IN OBSERVING THAT AS ORIGIN AL APPEAL WAS DECIDED KEEPING IN VIEW THE AMENDMENT IN SECTION 80 HHC THERE REMAINED NO SCOPE FOR ASSESSING OFFICER TO RECONSID ER THE ISSUE AS PER THE DIRECTIONS OF THE HONBLE ITAT. LD. CIT(A) HAS OBSERVED THE DIRECTION OF THE HONBLE ITAT TO BE ERRONEOUS THAT LEAD TO UNNECESSARY AND AVOIDABLE WASTAGE OF SCARCE RESOURC ES OF THE GOVERNMENT. THE SAID OBSERVATIONS OF LD. CIT(A) ARE PERVERSE, UNCALLED FOR AND TOTALLY IN IGNORANCE OF THE FACT T HAT THE DISPUTE AS TO WHETHER TOTAL SALE PROCEEDS OR ONLY PROFIT ELEMENT OF DEPB LICENSE TO BE REDUCED IN COMPUTATION OF DEDUCTION U/S 80 HH C HAS BEEN REFERRED TO SPECIAL BENCH AND IS YET NOT RESOLVED. ITA NO.2041& 2042/AHD/2009 ASST. YEARS: 2003-04 & 2004-05 2 ITA NO.2041& 2042/AHD/2009 2 3. LD. CIT(A) HAS FURTHER ERRED IN HOLDING THE ASSE SSEE AND AUTHORISED REPRESENTATIVE RESPONSIBLE FOR MISLEADING THE HONB LE ITAT IN RESPECT OF THE NON-ADJUDICATION OF THE GROUND RAISE D AGAINST LEVY OF INTEREST U/S 234A, 234B & 234C WITHOUT FULLY APPRAI SING HIMSELF OF THE FACT THAT THE ASSESSEE HAS NOT RAISED SUCH GROU ND BEFORE CIT(A) IN THE IMPUGNED APPEAL OR IN THE FIRST ROUND OF THE APPEAL BEFORE THE HONBLE ITAT. MOREOVER THE HONBLE ITAT IN THEIR OR DER HAS ERRONEOUSLY MENTIONED THAT ISSUE RELATING TO LEVY O F INTEREST U/S 234A, 234D WAS AGITATED BY THE ASSESSEE. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF OR BEFORE THE HEARING OF THE APPEAL. 2. GROUND NOS. 1 & 2 RELATE TO THE ISSUE REGARDING CONFIRMATION OF THE VIEW TAKEN BY THE ASSESSING OFFICER IN REDUCING THE ENTI RE SALE PROCEEDS OF DEPB INCENTIVE INSTEAD OF REDUCING ONLY PROFITS EARNED O N TRANSFER OF DEPB LICENSE WHILE COMPUTING DEDUCTION U/S 80 HHC OF THE INCOME- TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT]. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT IN PURSUANCE TO RETURN DECLARING NIL INCOME FILED ON 22.10.2003, THE ASSESSEE CLAIMED DEDUCTION OF RS. 1,93,42,703/- U/S 80HHC OF THE ACT IN THE AY 2003- 04. HOWEVER, WHILE COMPLETING ASSESSMENTS U/S 143( 3) OF THE ACT ON 28.2.2006 & 22.12.2006 FOR THE AFORESAID TWO ASSESS MENT YEARS, THE ASSESSING OFFICER[AO IN SHORT] DENIED THE CLAIM FOR SUCH DEDUCTION. ON APPEAL, THE ITAT VIDE THEIR ORDERS DATED 23.3.2007 & 23.1.2008 IN ITA NOS.2904/AHD./2006 & 3691/AHD./2007 RESPECTIVELY R ESTORED THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO RECONSIDE R THE CLAIM FOR DEDUCTION U/S 80HHC ON THE SALE PROCEEDS OF DEPB IN THE LIGHT OF AMENDED PROVISIONS OF SEC. 28 & 80HHC OF THE ACT BESIDES THE ISSUE RELATI NG TO INTEREST U/S 234A, 234B & 234D OF THE ACT. IN PURSUANCE TO THESE DIREC TIONS, THE AO WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT, REDUCED 9 0% OF THE RECEIPTS ON ACCOUNT OF DEPB .CONSEQUENTLY, DEDUCTION U/S 80HHC OF THE ACT WORKED OUT TO BE NIL IN THESE TWO ASSESSMENT YEARS. ON APPEAL, THE LD. CIT(A) WHILE REFERRING TO HIS OWN EARLIER ORDERS DATED 9.10.2006 & 25.7.2007 UPHELD THE FINDINGS OF THE AO ON THE GROUND THAT DEDUCTION U/ S 80HHC OF THE ACT HAD ALREADY BEEN WORKED OUT IN THE LIGHT OF AMENDED PR OVISIONS OF SEC. 80HHC OF THE ACT. IN THE PROCESS, THE LD. CIT(A) IN PARA 3. 3 OF THE IMPUGNED ORDERS MADE CERTAIN UNCALLED FOR OBSERVATIONS . THE ASSESS EE IN THEIR GROUNDS OF 3 ITA NO.2041& 2042/AHD/2009 3 APPEAL OBJECTED TO THESE OBSERVATIONS ON THE GROUN D THAT THE ISSUE AS TO WHETHER OR NOT TOTAL SALE PROCEEDS OR ONLY PROFIT O N SALE OF DEPB LICENSE IS TO BE REDUCED WHILE COMPUTING DEDUCTION U/S 80HHC OF T HE ACT WAS PENDING BEFORE THE SPECIAL BENCH. . THE LD. AUTHORISED REPR ESENTATIVE ON BEHALF OF THE ASSEESSEE WHILE OBJECTING TO THE UNCALLED FOR OBSER VATIONS OF THE LD. CIT(A) SUBMITTED THAT THE ISSUE IS NOW COVERED BY THE DECI SION DATED 11.8.2009 OF THE SPECIAL BENCH, MUMBAI IN THE CASE OF M/S TOPMAN EXPORTS VS. ITO IN ITA NO.5769/MUM/2006 AND PLEADED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION IN THE LI GHT OF AFORESAID DECISION OF THE SPECIAL BENCH. ON THE OTHER HAND, THE LD. D.R. DID NOT OPPOSE THESE SUBMISSIONS OF THE LD. A.R. 3. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. WE FIND THAT IN THE AFORESAID DECISION DATED 11.8.2009 IN THE CASE OF M/S TOPMAN EXPORTS,3 18 ITR(AT) 87(MUMBAI) (SB)., THE FOLLOWING QUESTION WAS REFERRED TO THE S PECIAL BENCH: WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED? 3.1 THE SPECIAL BENCH ADJUDICATED THE AFORESAI D QUESTION IN FOLLOWING TERMS: I) THE ARGUMENT OF THE REVENUE THAT DEPB IS A POST EXPORT EVENT AND HAS NO RELATION WITH THE PURCHASE OF GOODS CANNOT BE ACCEP TED. THERE IS A DIRECT RELATION BETWEEN DEPB AND THE CUSTOMS DUTY PAID ON THE PURCHASES . FOR PRACTICAL PURPOSES, DEPB IS A REIMBURSEMENT OF THE COST OF PURCHASE TO THE EXTENT OF CUSTOMS DUTY; (II) THE DEPB BENEFIT (FACE VALUE) ACCRUES AND BECOMES A SSESSABLE TO TAX WHEN THE APPLICATION FOR DEPB IS FILED WITH THE CONCERNED AUTHORITY . SUBSEQUENT EVENTS SUCH AS SALE OF DEPB OR MAKING IM PORTS FOR SELF CONSUMPTION ETC ARE IRRELEVANT FOR DETERMINING THE ACCRUAL OF THE INCOME ON ACCOUNT OF DEPB; (III) THOUGH S. 28 (IIIB) REFERS TO A CASH ASSISTA NCE AGAINST EXPORTS, IT IS WIDE ENOUGH TO COVER THE FACE VALUE OF THE DEPB BENEFIT; (IV) S. 28 (IIID) WHICH REFERS TO THE PROFITS ON TRANSFER OF THE DEPB OBVIOUSLY REFERS ONLY TO THE PROFIT ELEMENT AND NOT THE GROSS SALE PROCEEDS 4 ITA NO.2041& 2042/AHD/2009 4 OF THE DEPB. IF THE REVENUES ARGUMENT THAT THE SAL E PROCEEDS SHOULD BE CONSIDERED IS ACCEPTED THERE WOULD BE ABSURDITY BEC AUSE THE FACE VALUE OF THE DEPB WILL THEN GET ASSESSED IN THE YEAR OF RECE IPT OF THE DEPB AND ALSO IN THE YEAR OF ITS TRANSFER; (V) CONSEQUENTLY, ONLY THE PROFIT (I.E. THE SALE VALUE LESS THE FAC E VALUE) IS REQUIRED TO BE CONSIDERED FOR PURPOSES OF S. 80H HC . 3.2 IN THE LIGHT OF AFORESAID FINDINGS OF THE SPECIAL BENCH WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE ISSU E RELATING TO CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT IN RELATION TO THE AMOUNT OF DEPB, AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPO RTUNITY TO THE ASSESSEE AND KEEPING IN VIEW THE AFORESAID DECISION OF THE SPECI AL BENCH. 3.3 AS REGARDS ISSUE RELATING TO LEVY OF INTEREST U/S 234A ,234B& 234D RAISED IN GROUND NO. 3 OF THE APPEAL, THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS BEFORE US. THE ITAT VIDE THEIR ORDERS DATED 23.3.2007 & 23.1.2008 HAD RESTORED THIS ISSUE TO THE FILE OF THE AO WHILE THE LD. CIT(A) HAS OBSERVED IN THE IMPUGNED ORDER DIRECTIONS ISSU ED BY THE ITAT TO RECONSIDER LEVY OF INTEREST ARE ERRONEOUS AND IRREL EVANT. LEVY OF INTEREST U/S 234A,234B & 234D OF THE ACT, BEING MANDATORY [COMMI SSIONER OF INCOME TAX.VS ANJUM M. H. GHASWALA AND OTHERS,252 ITR 1(SC)] AND NO INFIRMITY HAVING BEEN POINTED OUT IN ITS LEVY, THIS GROUND IS DISMISSED. HOWEVER, THE AO SHALL ALLOW CONSEQUENTIAL RELIEF WHILE GIVING EF FECT TO THIS ORDER. 4. AS REGARDS OBSERVATIONS OF THE LD. CIT(A) I N PARA 3.3 & 3.4 OF HIS ORDER, THE LD. DR WHILE SUBMITTING A COPY OF ORDER DATED 1 2.11.2009 U/S 154 OF THE ACT POINTED OUT THAT THE SAID OBSERVATIONS IN PARA 3.3. OF HIS EARLIER ORDER HAVE NOW BEEN EXPUNGED BY THE LD. CIT(A). THOUGH THE S AID OBSERVATIONS HAVE NOW BEEN EXPUNGED BY THE LD. CIT(A), WE MAY CLARIFY THAT IF THE LD. CIT(A) HAD ANY GRIEVANCE AGAINST THE DIRECTIONS OF THE IT AT IN THEIR ORDER DATED 23.3.2007 & 23.1.2008, NECESSARY ACTION COULD HAVE BEEN INITIATED BEFORE THE APPROPRIATE JUDICIAL FORUM INSTEAD OF GIVING VENT T O HIS FEELINGS IN THE IMPUGNED ORDERS. THE LD. CIT(A) WHILE DISPOSING OF AN APPEAL ACTS AS A QUASI-JUDICIAL AUTHORITY. IN KHALID AUTOMOBILES VS. UNION OF 5 ITA NO.2041& 2042/AHD/2009 5 INDIA[1995]4SCC(SUPPL.)653, IT WAS POINTED OUT THAT AN ORDER OF TRIBUNAL IS BINDING ON THE ASSESSING OFFICER AND THE FIRST APPE LLATE AUTHORITY AND THAT FAILURE TO FOLLOW THE SAME MAY CONSTITUTE CONTEMPT OF TRIBUNALS ORDER EVEN AS FOUND IN SREE RAJENDRA MILLS LTD. VS. JOINT CTO[197 1]28 STC 483(MAD). EVEN IF A REFERENCE FROM THE ORDER OF THE TRIBUNAL IS PE NDING BEFORE THE HIGH COURT, IT IS BINDING ON THE ASSESSING OFFICER AS WAS FOUND IN SENTHIL RAJA METAL VS. CTO[1990] 79STC38(MAD). IN CASE OF FAILURE TO FOLLO W THE ORDER OF THE APPELLATE AUTHORITY, HONBLE SUPREME COURT IN THE C ASE OF UNION OF INDIA VS. KAMLAKSHI FINANCE CORPORATION LTD,AIR 1992 SC 711 A FFIRMED THE STRICTURES PASSED BY THE HONBLE HIGH COURT. HONBLE HIGH COUR T IN THE SAID CASE OBSERVED THE REPLY OF THE DEPARTMENT WAS THAT SINCE THEY HA D PREFERRED AN APPEAL TO THE SUPREME COURT FROM THAT DECISION, THE SAID DECISION SHOULD NOT BE FOLLOWED. THAT FALLACIOUS RE ASONING HAS APPEALED TO THE ASSISTANT COLLECTOR. THIS IS TOTALL Y UNACCEPTABLE AND AMOUNTS TO INDISCIPLINE OF WORST SORT. THIS IND ICATES HOW QUASI-JUDICIAL POWERS ARE BEING MISUSED BY PEOPLE W HO ARE NOT QUALIFIED TO EXERCISE THE SAME.................. WHILE AFFIRMING THE AFORESAID OBSERVATIONS,HONB LE SUPREME COURT HELD THE HIGH COURT HAS, IN OUR VIEW, RIGHTLY CRITICISE D THIS CONDUCT OF THE ASSISTANT COLLECTORS AND HARASSMENT CAUSED BY T HE FAILURE OF THESE OFFICERS TO GIVE EFFECT TO THE ORDERS OF AUTH ORITIES HIGHER TO THEM IN THE APPELLATE HIERARCHY. IT CANT BE TOO VE HEMENTLY EMPHASISED THAT IT IS OF UTMOST IMPORTANCE THAT IN DISPOSING OF THE QUASI-JUDICIAL ISSUES BEFORE THEM, REVENUE OFFI CERS ARE BOUND BY THE DECISIONS OF APPELLATE AUTHORITIES. TH E ORDER OF APPELLATE COLLECTOR IS BINDING ON ASSISTANT COLLECT ORS WORKING WITHIN HIS JURISDICTION AND ORDER OF TRIBUNAL IS BI NDING UPON THE ASSISTANT COLLECTORS AND APPELLATE COLLECTORS WHO F UNCTION UNDER THE JURISDICTION OF TRIBUNAL. THE PRINCIPLE O F JUDICIAL DISCIPLINE REQUIRES THAT THE ORDERS OF HIGHER APPEL LATE AUTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE MERE FACT THAT THE ORDER OF THE APPELLATE AUTHO RITY IS NOT ACCEPTABLE TO THE DEPARTMENT-IN ITSELF IS OBJECTI ONABLE PHRASE- AND IS THE SUBJECT MATTER OF AN APPEAL CAN FURNISH NO GROUND FOR NOT FOLLOWING IT UNLESS ITS OPERATION HAS BEEN SUSP ENDED BY A COMPETENT COURT. IF THIS HEALTHY RULE IS NOT FOLLOW ED, THE RESULT WILL ONLY BY UNDUE HARASSMENT TO ASSESSEES AND CHAOS IN ADMINISTRATION OF TAX LAWS. 4.1 IN THE LIGHT OF AFORESAID OBSERVATIONS OF T HE HONBLE APEX COURT , SUFFICE IT TO SAY THAT THE AO AND THE LD. CIT(A) ARE BOUN D BY AN ORDER OF THE ITAT UNLESS AND UNTIL OPERATION OF SUCH ORDER HAS BEEN S USPENDED BY A COMPETENT 6 ITA NO.2041& 2042/AHD/2009 6 COURT. IN VIEW THEREOF, THE LD. CIT(A) IS DIRECTED TO EXPUNGE HIS UNCALLED FOR OBSERVATIONS IN PARA 3.4 OF THE IMPUGNED ORDER . 5. IN VIEW OF THE FOREGOING, GROUND NOS. 1 TO 3 A RE DISPOSED OF. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND, ACCORDINGLY, THE SAME IS DISMISSED. 6. IN THE RESULT, APPEALS ARE PARTLY ALLOWED, BUT FOR STATISTICAL PURPOSES. SD/- SD/- (MAHAVIR SINGH) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED ;31.12.2009 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. INCOME-TAX OFFICER, WARD 2(4), SURAT. 3. THE CIT(APPEALS)-II,SURAT 4. THE CIT CONCERNED. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 31 / 12 /2009