Gopal Fabrics, Ahmedabad V. The ACIT, Circle-6, Ahmedabad

ITA 3214/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67827 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 03-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Retrospective amendment; Difference of opinion; Change of opinion
• Section: 80HHC; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.3214/AHD/2010 A.Y. 2003-04 GOPAL FABRICS B/H INTERNATIONAL HOTEL, MOHAN HOUS. SOC. ISANPUR, NAROL, AHMEDABAD PAN: AABFG 5396A VS THE ACIT CIRCLE 6, AHMEDABAD (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P. L. KUREEL, SR.D.R. , ASSESSEE(S) BY : URVASHI SHODHAN, A.R. / DATE OF HEARING : 27/09/2013 / DATE OF PRONOUNCEMENT: 25/10/2013 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M AN ORDER OF LEARNED CIT(A)-XI, AHMEDABAD, DATED 20 TH SEPTEMBER, 2013. AT THE OUTSET, LEARNED AR HAS INFORMED THAT THE GROUNDS RA ISED ORIGINALLY AS PER THE GROUNDS OF APPEAL WERE INCOMPLETE, THEREFORE, F ORM NO.36, I.E., FORM OF GROUNDS OF APPEAL WAS AMENDED. AS PER THE AMENDED GROUNDS OF APPEAL; THE GROUNDS ARE AS UNDER: 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN C ONFIRMING ACTION OF AO IN RE OPENING THE ASSESSMENT PROCEEDINGS U/S 147 OF THE A CT. LD. CIT (A) ERRED IN NOT APPRECIATING THE SUBMISSIONS THAT AO SOUGHT TO RE OPEN ASSESSMENT ON 'CHANGE OF OPINION' IN ABSENCE OF ANY TANGIBLE MATE RIAL TO DISALLOW CLAIM OF DEDUCTION U/S 80HHC OF THE ACT PROCESSED AND ALLOWE D IN SCRUTINY PROCEEDINGS. LD. CIT (A) OUGHT TO HAVE QUASHED THE RE-ASSESSMENT PROCEEDINGS RATHER THAN TERMING THE GROUND AS GENER AL AND DISMISSING IT. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO IN RESTRICTING DEDUCTION CLAIMED U/S 80HHC OF THE ACT BY REDUCING 90% OF ITA NO.3214/AHD/2010 GOPAL FABRICS V/S. ACIT, AHMEDABAD. FOR A.Y. 2003-04 - 2 - MISCELLANEOUS INCOME OF RS.6,95,840/-, INTEREST INC OME OF RS.17,443/-& INSURANCE CLAIM OF RS.19,091/- FROM PROFITS OF THE BUSINESS. LD. CIT(A) OUGHT TO HAVE ALLOWED THE DEDUCTION AS CLAIMED BY THE APP ELLANT. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO IN EXCLUDING 90% OF DEEMED CREDIT (EXCISE) OF RS.92,81 ,803/- AND VATAV & KASAR OF RS.2,90,811/- FROM BUSINESS PROFITS WHILE GRANTI NG DEDUCTION U/S 80HHC OF THE ACT. LD. CIT (A) ERRED IN DISMISSING THE GROUND HOLDING THE TWO ITEMS NOT AS SUBJECT MATTER OF THE ORDER OVERLOOKING THE ANNE XURE TO THE ORDER GIVING WORKING OF DEDUCTION U/S 80HHC OF THE ACT. 4. LD. CIT (A) ERRED IN LAW AND ON FACTS IN RE FRAINING FROM ADJUDICATING GRANT OF DEDUCTION CLAIMED U/S 80HHC OF THE ACT ON INCOME FROM DEPB LICENSE AS COMPUTED IN RETURN OF INCOME. LD. CIT (A ) OUGHT TO HAVE APPRECIATED THE FACT THAT DENIAL OF SUCH DEDUCTION IS AGAINST LAW SINCE THE RETROSPECTIVE AMENDMENT INTRODUCED BY FINANCE ACT, 2005 IS HELD TO BE BAD IN LAW BY THE HON'BLE GUJARAT HIGH COURT IN THE WRIT P ETITION FILED BY THE APPELLANT. ALTERNATIVELY AND WITHOUT PREJUDICE TO T HE CONTENTION OF AMENDMENT HELD INFRUCTUOUS BY THE HON'BLE HIGH COURT, IN ANY CASE IT IS ONLY THE PROFIT ON SALE OF DEPB LICENSE THAT COULD BE EXCLUDED WHILE C OMPUTING DEDUCTION U/S 80HHC OF THE ACT AND NOT THE ENTIRE SALE PROCEEDS A S HELD BY THE APEX COURT IN TOPMAN EXPORTS REPORTED AT 342 ITR 49. 2. WE HAVE ALSO BEEN INFORMED THAT EARLIER AN EX-PA RTE ORDER WAS PASSED BY THE ITAT B BENCH VIDE ORDER DATED 17 TH OF JUNE, 2011 (ITA NO.3214/AHD/2010, A.Y. 2003-04) IN THE CASE OF THIS ASSESSEE AND THE ASSESSEES APPEAL WAS DISMISSED. THEREAFTER VIDE AN ORDER DATED 6 TH OF JULY, 2012 IN MA NO. 143/AHD/2011, THE SAID ORDER W AS RECALLED AND THE REGISTRY WAS DIRECTED TO POST THE HEARING FOR AFRES H DISPOSAL. IN CONSEQUENCE THEREUPON, NOW THIS APPEAL IS AGAIN FIX ED FOR HEARING. 2.1 WE HAVE ALSO BEEN INFORMED THAT THE LEARNED CIT (A) HAD PASSED AN EX-PARTE ORDER BECAUSE NO-ONE WAS PRESENT BEFORE HI M ALTHOUGH SEVERAL OPPORTUNITIES OF HEARING WERE GRANTED. LEARNED CIT( A) HAS ADJUDICATED THE ISSUES IN THE FOLLOWING MANNER: THE SECOND GROUND OF APPEAL IS DIRECTED AGAINST RE STRICTING APPELLANTS CLAIM OF DEDUCTION U/S 80HHC. IT IS SEEN THAT WHILE CALCULATING THE DEDUCTION U/S. 80HHC OF THE ACT, THE APPELLANT CALCULATED THE PROFITS OF THE BUSINESS WITHOUT REDUCING 90% OF THE MISCELLANEOUS INCOME OF RS.6,95,840/-, INTEREST OF RS.17,443/- AND INSURANCE CLAIM OF RS.19,091/-. ACCORDING TO THE AO THESE INCOMES DID NOT HAVE ANY DIRECT NEXUS WITH THE EXPO RT ACTIVITY OF THE ITA NO.3214/AHD/2010 GOPAL FABRICS V/S. ACIT, AHMEDABAD. FOR A.Y. 2003-04 - 3 - APPELLANT. THEREFORE, AFTER DISCUSSING THE ISSUE AN D AS PER THE EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT, THE AO RESTRICTE D THE DEDUCTION U/S. 80HHC OF THE ACT. THE ONLY MATERIAL AVAILABLE ON RECORD IS STATEMENT OF FACTS AND GROUNDS OF APPEAL. THE SAME ARE REPRODUCED HEREUNDER:- IT IS SUBMITTED THAT THE DEEMED CREDIT (EXCISE) OF RS.92,81,803/-, VATAV KASAR RS.2,90,811/- AND MISC. AMOUNT WRITTEN OFF IN COME RS.6,95,840/- AND INSURANCE CLAIM RS.19,091/- ALL ARE IN REFERENC E TO EXPORT SALES AND HENCE THE CLAIM U/S. 80HHC WAS RIGHTLY MADE IN THE RETURN OF INCOME. FURTHER THE DEPB CLAIM OUGHT TO HAVE BEEN ALLOWED A S CLAIMED IN THE RETURN OF INCOME. IT IS PRAYED THAT THE APPELLANT IS HAVING 100% EXPO RT SALES AND HENCE THE CLAIM OUGHT TO HAVE BEEN ALLOWED. IT IS PRAYED THAT THE ASSESSMENT ORDER BE SET ASIDE AND CANCELLED IN VIEW OF THE ABOVE FACTS I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT RAISED THROUGH STATEMENT OF FACTS AND GROUNDS OF APPEAL AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. AS SEEN FROM THE ASSESSMENT O RDER, DEDUCTION U/S. 80HHC WAS RESTRICTED BY REDUCING 90% OF THE MISCELL ANEOUS INCOME OF RS.6,95,840/- INTEREST OF RS.17,443/- AND INSURANCE CLAIM OF RS.19,091/-, ON THE GROUND THAT THESE INCOMES HAVE NO DIRECT NEXUS WITH EXPORT ACTIVITY OF THE APPELLANT. APPELLANT IS NOT ABLE TO CONTROVERT THIS FINDING. FURTHER, THE DECISIONS OF THE APEX COURT IN THE CASE OF CIT VS. RAVINDRANATHAN NAIR (295 ITR 228) AND CIT VS. LAXMI MACHINE WORKS (290 ITR 6 67) UPHELD SUCH TREATMENT. AS REGARDS THE APPELLANTS CONTENTION RE GARDING DEEMED CREDIT OF EXCISE OF RS.92,81,803/- AND KASAR OF RS.2,90,811/- ; IT IS SEEN THAT IN THE IMPUGNED ORDER NO SUCH AMOUNTS WERE DEDUCTED AND TH EREFORE THESE TWO ITEMS ARE NOT SUBJECT MATTER OF THE IMPUGNED ORDER. THEREFORE THIS GROUND OF APPEAL IS DISMISSED. 3. WITH THIS BRIEF BACKGROUND, AFTER HEARING BOTH T HE SIDES. AS FAR AS GROUND NO.1 IS CONCERNED, WE ARE OF THE VIEW THAT T HE REOPENING OF THE ASSESSMENT FOR A.Y. 2003-04 BEING DONE BY NOTICE U/ S.148 DATED 15 TH OF JANUARY, 2007, WHICH WAS DULY SERVED ON 16 TH MARCH, 2007 WHICH WAS WITHIN THE PERMISSIBLE PERIOD OF FOUR YEARS, THEREF ORE, THE TRIBUNAL IN THE PAST HAS TAKEN A CORRECT VIEW THAT THE REOPENING WA S VALID BEING MADE WITHIN FOUR YEARS AS PRESCRIBED U/S.147 OF IT ACT. THIS IS NOT A CASE OF CHANGE OF OPINION. CERTAIN INCOME HAD ESCAPED ASSES SMENT, THEREFORE, THE ITA NO.3214/AHD/2010 GOPAL FABRICS V/S. ACIT, AHMEDABAD. FOR A.Y. 2003-04 - 4 - AO WAS FULLY EMPOWERED TO REOPEN THE ASSESSMENT AS PRESCRIBED UNDER THE ACT. THIS GROUND OF THE ASSESSEE IS HEREBY DISM ISSED. 4. AS FAR AS THE REST OF THE GROUNDS ARE CONCERNED, WE HAVE NOTED THAT DUE TO NON-APPEARANCE OF THE ASSESSEE BEFORE LEARNE D CIT(A), THOSE WERE NOT PROPERLY ADJUDICATED UPON BY LEARNED CIT(A). NO W BEFORE US LEARNED AR HAS FAIRLY SUBMITTED THAT SOME OF THE DECISIONS OF HONBLE SUPREME COURT IN RESPECT OF DEDUCTION U/S. 80HHC ARE AGAINS T THE ASSESSEE AND SOME OF THEM ARE IN FAVOUR OF THE ASSESSEE BUT THOS E LATEST DECISIONS WERE NOT PROPERLY APPRECIATED BY LEARNED CIT(A). LEARNED AR HAS PLACED A CHART BEFORE US, RELEVANT PORTION REPRODUCED BELOW: CONFIRMING RESTRICTION OF DEDUCTION U/S. 80HHC OF THE ACT BY REDUCING 90% OF MISCELLANEOUS INCOME OF RS.6,95,840/- INTEREST OF RS.17,443/- & INSURANCE CLAIM OF RS.19,091/- FROM BUSINESS PROFITS AGAINST ASSESSEE K RAVINDRANATH NAIR 295 ITR 228(SC) NETTING OFF INTEREST 343 ITR 89 (SC) IN FAVOUR OF ASSESSEE 330 ITR 62 (BOM) CONFIRMING EXCLUSION OF 90% OF DEEMED CREDIT (EXCISE) OF RS.92,81,803/- & KASAR VATAV OF RS.2,90,811/- FROM BUSINESS PROFITS WHILE GRANTING DEDUCTION U/S 80HHC IN FAVOUR OF ASSESSEE MILTON LAMINATES LTD. ITA # 87/AHD/2010 (COPY ENCLOSED) NOT ADJUDICATING GRANT OF DEDUCTION U/S 80 HHC OF THE ACT ON INCOME FROM DEPB LICENSE AS COMPUTED IN RETURN OF INCOME IN FAVOUR OF ASSESSEE AVANI EXPORTS 348 ITR 391 (GUJ) AMENDMENT (2005) HELD TO BE VOID ALTERNATIVE & WITHOUT PREJUDICE ONLY PROFIT ON SALE OF DEPB LICENSE TO BE EXCLUDED WHILE COMPUTING BUSINESS PROFITS FOR GRANT OF DEDUCTION U/S 80HHC IN FAVOUR OF ASSESSEE TOPMAN EXPORTS 342 ITR 49 (SC) ITA NO.3214/AHD/2010 GOPAL FABRICS V/S. ACIT, AHMEDABAD. FOR A.Y. 2003-04 - 5 - 5. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, ONE THING IS APPARENT THAT SOME OF THE ISSUE, I.E., THE ISSUE OF DEPB FOR THE PURPOSE OF 80HHC COMPUTATION HAVE NOT BEEN PROPERLY APPRECI ATED BY LEARNED CIT(A) AND SOME OF THE ISSUE WAS NOT DECIDED IN THE LIGHT OF THE DECISIONS ALREADY RENDERED BY THE HONBLE SUPREME C OURT. IN FACT, DURING THE FIRST APPELLATE PROCEEDINGS THERE WAS NO ASSIST ANCE PROVIDED BY THE ASSESSEE. WE, THEREFORE, RESTORE THESE ISSUES BACK TO THE STAGE OF LEARNED CIT(A) TO BE DECIDED DE NOVO AFTER ANALYZING THE FA CTS AND FIGURES IN RESPECT OF THE MISCELLANEOUS INCOME, INTEREST AMOUN T, INSURANCE CLAIM, ETC. AND THEREUPON APPLY THE CASE LAWS AND DECIDE D E NOVO AS PER LAW. SIDE BY SIDE, WE HEREBY DIRECT THIS ASSESSEE TO BE PRESENT BEFORE LEARNED CIT(A) EITHER IN PERSON OR THROUGH AN AUTHORIZED RE PRESENTATIVE WITHIN 30 DAYS ON RECEIPT OF THIS ORDER AND ASSIST THE LEARNE D CIT(A) IN ALL RESPECT TO GET THIS APPEAL FINALIZED AT AN EARLY DATE. IN A NY CASE, LEARNED CIT(A) IS AT LIBERTY TO PROCEED AS PER LAW. WITH THESE DIRECT IONS, THESE GROUNDS BEING RESTORED BACK FOR DE NOVO ADJUDICATION HENCE MAY BE TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED THAT TOO FOR STATISTICAL PURPOSE ONLY. SD/- SD/- (ANIL CHATURVEDI) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED /10/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT ITA NO.3214/AHD/2010 GOPAL FABRICS V/S. ACIT, AHMEDABAD. FOR A.Y. 2003-04 - 6 - 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD