BAYER POLYCHEM (INDIA) LTD, MUMBAI V. ACIT CIR 15(3), MUMBAI

ITA 3260/MUM/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5052 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 07-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 15-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Keywords: Revised return
• Section: 80HHC; 263

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI , , !' !' !' !' # $% # $% # $% # $% , ,, , & & & & ' ' ' ' BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 3260/MUM./2009 ) ( &) * '+* / ASSESSMENT YEAR : 200405 ) BAYER PHARMACEUTICALS PVT. LTD. CENTRAL AVENUE, HIRANANDANI GARDENS POWAI, MUMBAI 400 076 .. ,- / APPELLANT ) V/S INCOME TAX OFFICER (HQ)10, MUMBAI .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AACCB2271M &) *1# 2 3 / ASSESSEE BY : MR. MAYUR KISNADWALA ' 2 3 / REVENUE BY : MR. P.K. SHUKLA )' 2 # / DATE OF HEARING 07.07.2013 $ 45+ 2 # / DATE OF ORDER 13.09.2013 $ $ $ $ / ORDER # $% # $% # $% # $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE CHALLENGING THE IMPUGNED ORDER DATED 16 TH MARCH 2009, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) BY THE L EARNED COMMISSIONERX, MUMBAI, FOR THE ASSESSMENT YEAR 200405. BAYER PHARMACEUTICALS PVT. LTD. 2 2. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER HAS EXERCISED REVISIONARY JURISDICTION UNDER SECTION 263, IN RELA TION TO THE ASSESSMENT ORDER DATED 14 TH DECEMBER 2006, PASSED UNDER SECTION 143(3), IN RES PECT OF SIX ISSUES. 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US, THAT OUT OF SIX ISSUES, SOME OF THE ISSUES WHIC H HAS BEEN RAISED IN THE REVISIONARY ORDER HAS BEEN ACCEPTED BY THE ASSESSIN G OFFICER IN THE SET ASIDE PROCEEDINGS AND SOME OF THE ISSUES HAVE BEEN ACCEPT ED BY THE ASSESSEE THAT THEY ARE ERRONEOUS INSOFAR AS THEY ARE PREJUDI CIAL TO THE INTERESTS OF REVENUE. HOWEVER, THE ASSESSEE IS ONLY CHALLENGING ONE OF THE ISSUES OF ` 1,34,88,803 WHICH HAS BEEN SET ASIDE BY THE LEARNED COMMISSIONER WHICH IS ON ACCOUNT OF MAKE VALUATION OF INVENTORIES AS PER SECTION 145A THAT HAS BEEN RAISED BY THE LEARNED COMMISSIONER IN POINT NO .1 OF HIS ORDER. HE HAS ALSO SUBMITTED BEFORE US THAT OUT OF VARIOUS ISSUES RAISED BY THE LEARNED COMMISSIONER, PART / SOME OF THE ISSUES CAN BE CHAL LENGED UNDER SECTION 263. IN SUPPORT OF HIS CONTENTION, HE HAS STRONGLY RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT V/S HINDUSTAN LEVER LTD. [2012] 343 ITR 161 (BOM.). 4. THE RELEVANT FACTS, APROPOS THE AFORESAID ISSUE ARE THAT THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME FILED ON 1 ST NOVEMBER 2004, HAD ADDED A SUM OF ` 1,34,88,803, IN THE COMPUTATION OF INCOME ON ACCOU NT OF IMPACT OF VALUATION OF INVENTORIES AS PER SECTION 145A. HOWEV ER, IN THE REVISED RETURN OF INCOME FILED ON 9 TH AUGUST 2005, THE SAID AMOUNT WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME. ALONG WITH THE REVISED R ETURN OF INCOME, THE ASSESSEE HAS FILED A LETTER DATED 8 TH AUGUST 2005, MENTIONING THEREIN THAT IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE HAD INA DVERTENTLY OFFERED THIS AMOUNT FOR TAX IN PROFITS UNDER SECTION 145A, HOWEV ER, IT WAS LATER ON FOUND THAT THERE IS NO DIFFERENCE IN THE PROFITS UNDER SE CTION 145A AND A REVISED WORKING OF MODVAT CREDIT UNDER SECTION 145A WAS ATT ACHED. THIS FACT HAS BEEN NOTED BY THE ASSESSING OFFICER IN PARA2 OF TH E ASSESSMENT ORDER DATED 14 TH DECEMBER 2006. THE ASSESSING OFFICER ACCEPTED THE SAID WITHDRAWAL OF BAYER PHARMACEUTICALS PVT. LTD. 3 THE INCOME OFFERED IN THE ORIGINAL RETURN OF INCOME AND ALSO THE WORKING ATTACHED WITH THE REVISED RETURN OF INCOME. 5. IN THE REVISIONARY PROCEEDINGS UNDER SECTION 263, T HE LEARNED COMMISSIONER OBSERVED THAT THE ASSESSING OFFICER HA S NOT MADE ANY ENQUIRY AS TO WHY THE AMOUNT OF ` 1,34,88,803, WAS ARRIVED AT IN THE ORIGINAL RETURN OF INCOME AND HOW THE VARIOUS FIGURES ON ACCOUNT OF ADJUSTMENT IN MODVAT CREDIT IN THE REVISED RETURN OF INCOME HAS BEEN WOR KED OUT. HE ALSO OBSERVED THAT CERTAIN FIGURES GIVEN IN ANNEXURE3 PROFORMA OF PROFIT & LOSS ACCOUNT CERTAIN ITEMS DO NOT TALLY WITH THE FI GURES SHOWN IN THE REVISED WORKING. AFTER REFERRING TO VARIOUS DECISIONS ON TH E POINT THAT IT IS INCUMBENT UPON THE ASSESSING OFFICER TO CARRY OUT ENQUIRY BEF ORE COMPLETING THE ASSESSMENT OTHERWISE SUCH AN ORDER CAN BE HELD ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE UNDER SECTION 263, HE S ET ASIDE THE ORDER. THE ASSESSEES MAIN CONTENTION BEFORE THE LEARNED COMMI SSIONER WAS THAT THE REVISION IN THE RETURN OF INCOME WAS ON ACCOUNT OF DIFFERENCE OF MODVAT CREDIT WHICH WAS CONSIDERED TWICE IN THE ORIGINAL R ETURN OF INCOME, ONE AS AN INCOME AND OTHER AS A PART OF CLOSING STOCK. SUCH A WORKING WAS DULY DEMONSTRATED BEFORE HIM. RELIANCE WAS ALSO PLACED O N VARIOUS DECISIONS INCLUDING THAT OF JURISDICTIONAL HIGH COURT IN CIT V/S GABRIEL INDIA LTD., [1993] 203 ITR 108 (BOM.) AND THE DECISION OF THE H ON'BLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. V/S CIT, [2000] 243 ITR 83 (SC). IT WAS ALSO SUBMITTED THAT ADJUSTMENT OF MODVAT ON PURCHASE, SA LES AND INVENTORIES ARE PROFIT NEUTRAL AND, THEREFORE, NO ADJUSTMENT SH OULD BE MADE UNDER SECTION 145A. HOWEVER, THE LEARNED COMMISSIONER DID NOT AGREE WITH THE ASSESSEES CONTENTION AND HELD THAT THE ASSESSING O FFICER HAS FAILED TO MAKE PROPER AND NECESSARY ENQUIRY ON THIS ISSUE BEFORE C OMPLETING THE ASSESSMENT AND, HENCE, THE ASSESSMENT ORDER WAS SET ASIDE WITH THE DIRECTION OF THE ASSESSING OFFICER TO MAKE PROPER A ND ADEQUATE ENQUIRIES IN RESPECT OF ALL THE ISSUES RAISED BEFORE HIM INCLUDI NG THAT OF SECTION 145A. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE DETAILS OF ORIGINAL AND REVISED RETURN OF INCOM E FILED FOR THE ASSESSMENT BAYER PHARMACEUTICALS PVT. LTD. 4 YEAR 200405, INCLUDING THE REVISED WORKING OF SECT ION 145A. HE SUBMITTED THE WORKING OF THE MODVAT AS GIVEN IN THE ORIGINAL RETURN OF INCOME AND ALSO IN THE REVISED RETURN OF INCOME AND RECONCILIA TION OF THE SAME. FROM THIS, HE SUBMITTED THAT IN THE REVISED RETURN OF IN COME, THE ASSESSEE HAD SHOWN MODVAT CREDIT OF SEMIFINISHED GOODS, FINISHE D GOODS WHICH WERE NOT INCLUDED IN THE ORIGINAL RETURN OF INCOME. THESE WO RKINGS HAVE BEEN FILED BEFORE THE ASSESSING OFFICER AND WERE VERIFIED BY H IM, THEN THERE WAS NO REASON THAT THE LEARNED COMMISSIONER COULD HAVE SET ASIDE THIS ISSUE FOR MAKING ANY KIND OF ENQUIRY. TO THIS EXTENT, THE FIN DINGS OF THE LEARNED COMMISSIONER ARE NOT CORRECT. HE FURTHER SUBMITTED THAT ONCE THE ASSESSING OFFICER HAS VERIFIED AND ACCEPTED THE MODVAT WORKIN G WHICH IS IN ACCORDANCE WITH THE LAW, THE LEARNED COMMISSIONER C ANNOT EXERCISE THE REVISIONARY JURISDICTION UNDER SECTION 263 BECAUSE IT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE. 7. LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON TH E OBSERVATIONS OF THE LEARNED COMMISSIONER AND SUBMITTED THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS FAILED TO MENTION AS TO WHAT WAS THE NATURE OF ENQUIRY OR VERIFICATION DONE BY HIM. IN THE ABSENCE OF SUCH AN ENQUIRY, THE ASSESSMENT ORDER IS ERRONEOUS INSOFAR AS IT IS PREJ UDICIAL TO THE INTERESTS OF REVENUE AND THE LEARNED COMMISSIONER HAS RIGHTLY EX ERCISED HIS JURISDICTION UNDER SECTION 263. 8. WE HAVE HEARD THE RIVAL CONTENTION, PERUSED THE REL EVANT FINDINGS GIVEN IN THE IMPUGNED ORDER AND THE MATERIAL AVAILA BLE ON RECORD. INSOFAR AS THE PRELIMINARY SUBMISSION OF THE LEARNED COUNSEL F OR THE ASSESSEE THAT, EVEN IF ON OTHER ISSUES RAISED IN THE ORDER PASSED UNDER SECTION 263, THE ASSESSEE HAS ACCEPTED PART OF THE ORDER OF THE LEAR NED COMMISSIONER, THEN ALSO IT DOES NOT PRECLUDE FROM CHALLENGING THE OTHE R ISSUES WHICH IS NOT ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE, WE AGREE WITH THIS CONTENTION OF THE LEARNED COUNSEL. THE JUDGMENT RELIED UPON BY THE LEARNED COUNSEL JUSTIFIES HIS CONTENTION. BE FORE THE BOMBAY HIGH COURT, THREE ISSUES WERE SUBJECT MATER OF ADJUDICAT ION WITH REGARD TO BAYER PHARMACEUTICALS PVT. LTD. 5 REVISIONARY ORDER PASSED UNDER SECTION 263. ONE REL ATING TO ALLOCATION OF EXPENDITURE TO THE ELIGIBLE UNITS WHEREIN DEDUCTION UNDER SECTION 80IA / 80HHC WAS APPLICABLE AND OTHER WAS EXPENDITURE WITH REGARD TO ALLOCATION UNDER RULE 8 AND THE THIRD ISSUE WAS AGENCY COMMISS ION AND INTEREST. ON THE FIRST ISSUE, THE HIGH COURT HAS UPHELD THE ORDER OF THE LEARNED COMMISSIONER UNDER SECTION 263 AND FOR OTHER ISSUES, IT WAS HELD THAT THE SAME IS NOT WARRANTED. THUS, EVEN IF THE ASSESSEE HAS CHALLENGE D ONE PART OF THE DIRECTION OF THE LEARNED COMMISSIONER, THE SAME CAN VERY WELL BE CHALLENGED BEFORE THE TRIBUNAL. 9. NOW COMING TO THE ISSUE, WHETHER THE LEARNED COMMIS SIONER IS JUSTIFIED IN SETTING ASIDE THE ORDER IN RELATION TO THE ADDITION UNDER SECTION 145A, WE FIND THAT IN THE ORIGINAL RETURN OF INCOME , THE ASSESSEE HAS ADDED THE SUM OF ` 1,34,88,803, IN THE COMPUTATION OF INCOME ON ACCOU NT OF IMPACT OF VALUATION OF INVENTORIES. HOWEVER, IN THE REVISED RETURN OF INCOME, THE SAID AMOUNT WAS NOT ADDED BACK AND IT WAS STATE D THAT THERE IS NO DIFFERENCE IN PROFIT DUE TO SECTION 145A AND ALONG WITH THAT AN ELABORATE WORKING WAS GIVEN IN THE REVISED RETURN OF INCOME. THIS REVISED RETURN OF INCOME AS WELL AS THE WORKING HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AFTER VERIFICATION WHICH HAS BEEN NOTED BY HIM IN P ARA2 OF THE ASSESSMENT ORDER, EVEN THOUGH, THE ASSESSING OFFICER HAS NOT E LABORATELY DEALT WITH THIS ISSUE. HOWEVER, IT APPEARS THAT HE HAS ACCEPTED THE REVISED WORKING. ON A PERUSAL OF THE WORKING AND RECONCILIATION SUBMITTED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS GIVEN THE WORKING OF MODVAT I NCOME IN THE ORIGINAL RETURN OF INCOME AND AS PER THE REVISED RETURN OF I NCOME IN THE FOLLOWING MANNER: MODVAT INCOME AS PER REVISED RETURN MODVAT CREDIT ON PURCHASE OF RAW MATERIAL 21,258,602 MODVAT CREDIT ON CLOSING STOCK OF RAW MATERIAL 4,201,980 MODVAT CREDIT ON PURCHASE OF PACKING MATERIAL 294,601 MODVAT CREDIT ON CLOSING STOCK OF PACKING MATERIAL 294,601 MODVAT CREDIT AVAILED (INCOME)(BALANCING FIGURE) 17,056,622 21,553,203 21,553,203 BAYER PHARMACEUTICALS PVT. LTD. 6 MODVAT INCOME AS PER REVISED RETURN MODVAT CREDIT ON PURCHASE OF RAW MATERIAL 21,258,602 MODVAT CREDIT ON CLOSING STOCK OF RAW MATERIAL 4,201,980 MODVAT CREDIT ON PURCHASE OF PACKING MATERIAL 294,601 MODVAT CREDIT ON CLOSING STOCK OF PACKING MATERIAL 294,601 MODVAT CREDIT ON RAW MATERIAL TRANSFER FROM HOLDING CO. 377,999 MODVAT CREDIT ON SEMI FINISHED GOODS 1,435,567 MODVAT CREDIT ON FINISHED GOODS 12,431,235 MODVAT CREDIT AVAILED (INCOME) (BALANCE FIGURE) 3,567,819 21,931,202 21,931,202 RECONCILIATION OF ORIGINAL RETURN WITH REVISED RETU RN MODVAT CREDIT ON PURCHASE OF RAW MATERIAL 21,258,602 MODVAT CREDIT ON CLOSING STOCK OF RAW MATERIAL 4,201,980 MODVAT CREDIT ON PURCHASE OF PACKING MATERIAL 294,601 MODVAT CREDIT ON CLOSING STOCK OF PACKING MATERIAL 294,601 MODVAT CREDIT AVAILED (INCOME) (BALANCE FIGURE) 17,056,622 21,553,203 21,553,203 MODVAT CREDIT AVAILED AS PER ORIGINAL RETURN 17,056,622 MODVAT CREDIT ON SEMI FINISHED GOODS 1,435,567 MODVAT CREDIT ON RAW MATERIAL TRANSFER FROM HOLDING CO. 377,999 MODVAT CREDIT ON FINISHED GOODS 12,431,235 MODVAT CREDIT AVAILED AS PER REVISED RETURN (BALANCING FIGURE) 3,567,819 17,434,621 17,434,621 FROM THE ABOVE WORKING, IT IS SEEN THAT THE ASSESSE E HAS RECONCILIED THE FOLLOWING MODVAT CREDIT: 1. MODVAT CREDIT ON SEMIFINISHED GOODS ` 14,35,567 2. MODVAT CREDIT ON FINISHED GOODS ` 1,24,31,235 3. MODVAT CREDIT ON RAW MATERIAL TRANSFERRED FROM HOLDING COMPANY ` (3,77,999) TOTAL: ` 1,34,88,803