M/s. Allahabad Tannery, Kanpur V. Jt. Commissioner of Income Tax, Kanpur

ITA 334/LKW/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8042 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 19-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Depreciation; Opportunity of being heard; Retrospective amendment
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 334 TO 336/LKW/2012 ASSESSMENT YEAR S : 2006 - 07, 2007 - 08 & 2008 - 09 M/S ALLAHADAD TANNER Y 99/85A, JAJMAU KANPUR V. JT. CIT - I KANPUR PAN: AAEFA9951C (APP ELL ANT) (RESPONDENT) ITA NO S . 385 TO 387/LKW/2012 ASSESSMENT YEAR S : 2006 - 07, 2007 - 08 & 2008 - 09 ASSTT. CIT - I KANPUR V. M/S ALLAHADAD TANNERY 99/85A, JAJMAU KANPUR PAN: AAEFA9951C (APP ELL ANT) (RESPONDENT) DEPARTMENT BY: SHRI. ALOK MITRA, D.R. ASSESSEE BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 23 0 7 2014 DATE OF PRONOUNCEMENT: 25 0 8 2014 O R D E R PER BENCH : THESE CROSS - APPEALS ARE PREFERRED BY THE ASSESSEE AS WE LL AS THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A). SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE, HOWEVER, PREFER TO A DJUDICATE THEM ONE AFTER THE OTHER. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : I.T.A. NO.334 & 335/LKW/2012: 2 . THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) PERTAINING TO ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 ON COMMON GROUNDS. FOR THE SAKE OF REFERENCE, W E EXTRACT THE GROUNDS RAISED IN I.T.A. NO.334/LKW/2012 AS UNDER: - 1 . BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE MADE BY THE AO IN RESPECT OF DEDUCTION U/S.80IB OF THE I . T ACT 1961 ON EXPORT INCENTIVES AMOUNTING TO RS.4,24 ,66,821/ - . 2 . BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING THE GROUNDS OF APPEAL IN RESPECT OF DISALLOWANCE OF A SUM OF RS.26,51,310/ - ON ACCOUNT OF INTEREST PAID IN JAJMAU UNIT AND ALLOWING THE SAME IN BANTHER UNIT IN VIEW OF THE FAC T THAT THE DEDUCTION U/S.80IB WAS DENIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). 3 . BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT DUE TO NON ALLOWBILITY OF INTEREST IN JAJMAU UNIT INSTEAD OF BANTHER UNIT, T HE DEDUCTION U/S.80IB HAS BEEN SHORT COMPUTED BY THE SAID AMOUNT OF INTEREST. 3 . THE ASSESSEE HAS MOVED AN APPLICATION FOR ADMISSION OF THE FOLLOWING ADDITIONAL GROUND S IN BOTH THE APPEALS: - 1 . BECAUSE THE NOTICE U/S 143(2) HAS BEEN ISSUED NOT BECAUSE THE AO FE LT NECESSARY AND EXPEDIENT BUT ON THE INSTRUCTIONS OF CBDT, THE NOTICE ISSUED IS BAD IN LAW, THE ASSESSMENT BE ANNULLED. 2 . BECAUSE NOTICE U/S 143(2) ISSUED BY JCIT - 1 IS BEYOND THE PERIOD AS LAID DOWN THEREIN, AND SERVED THEREAFTER, THE ORDER PASSED U/S 143(3 ) DATED 02.06.2008 BY JCIT - 1, KANPUR IS WITHOUT PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : JURISDICTION BAD IN LAW, BE ANNULLED. 3 . BECAUSE NO ORDER U/S 127 HAVING BEING PASSED BY THE CIT, KANPUR TRANSFERRING THE JURISDICTION FROM DCIT - I TO JCIT - 1, KANPUR, THE ORDER PASSED BY JCI T IS WITHOUT JURISDICT ION HENCE BE ANNULLED. 4 . BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE THAT THE NOTICE U/S. 143(2) DATED 06.03.2007 WAS ISSUED BY ACIT - I AND AS SUCH THE JURISDICTION TO FRAME THE ASSESSMENT WAS WITHOUT ACIT ABOVE, WHEREAS THE, ASSESSMENT HAS BEEN FRAMED BY JCI T - I WHO WAS NOT POSSESSED OF JURISDICTION TO FRAME THE ASSESSMENT. 5 . BECAUSE THE CIT(A) HAS FAILED TO GIVE ANY FINDING ON THE ADDITIONAL GROUNDS OF APPEAL RAISED BEFORE HIM, IN ABSENCE OF WHICH THE ORDER PASSED BY C1T(A) IS VOID AB INIT I O BAD IN LAW AND BE Q UASHED. 4 . SINCE THE GROUNDS WERE LEGAL IN NATURE, WE ADMIT THE SAME AND PREFER TO ADJUDICATE THEM AT THRESHOLD. 5 . DURING THE COURSE OF HEARING ON ADDITIONAL GROUNDS, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT THE ASSESSMENT PR OCEEDINGS WERE INITIATED BY THE DY. COMMISSIONER OF INCOME TAX (DCIT), BUT THE ASSESSMENT WAS COMPLETED BY THE JOINT COMMISSIONER OF INCOME TAX (JCIT). THE LD. COUNSEL FOR THE ASSESSEE HAS CANDIDLY ADMITTED THAT THE ISSUE OF VALIDITY OF THE ASSESS MENT, WH ERE THE ASSESSMENT WAS INITIATED BY AN OFFICER JUNIOR IN RANK AND ASSESSMENT WAS COMPLETED BY AN OFFICER SENIOR IN RANK , WAS ADJUDICATED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE BY HOLD ING THAT THE ASSESSMENT BY THE HIGHER AUTHORITIES MAY BE POSSIBLE EVE N IF THE PROCEEDINGS WERE INITIATED BY THE SUBORDINATE AUTHORITIES WHO IS ALSO HAVING CONCURRENT JURISDICTION. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE JUDGMENT IN THE CASE OF PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : BINDAL APPARELS LTD. VS. ACIT (2006) 8 SOT 498; CITY GARDEN VS. ITO [2012] 21 TAXMANN.COM 373. 6 . THE REVENUE HAS ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SUBHASH CHANDER VS. CIT [2008] 166 TAXMAN 307, IN WHICH IT HAS BEEN HELD THAT IN TERMS OF SECTION 124 (3)(B) OF THE ACT, THE JURISDICTION OF THE ASSESSING OFFICER CANNOT BE CALLED IN QUESTION BY THE ASSESSEE AFTER EXPIRY OF ONE MONTH FROM THE DATE OF WHICH HE WAS SERVED WITH A NOTICE UNDER SUB - SECTION (1) OF SECTION 142 OF THE ACT OR AFTER COMPLETION OF AS SESSMENT, WHICH WAS TO BE EARLIER. HE HAS ALSO PLACED RELIANCE UPON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BERGER PAINTS INDIA LTD. VS. ACIT [2000] 246 ITR 133 , IN WHICH IT HAS BEEN HELD THAT QUESTION OF JURISDICTION OF THE ASSESSIN G AUTHORITY CANNOT BE DISPUTED AFTER COMPLETION OF ASSESSMENT PROCEEDINGS. 7 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THIS ISSUE HAS BEEN EXAMINED BY THE TRIBUNAL IN THE ASSESSEES OW N CASE RELATING TO ASSESSMENT YEAR 2005 - 06 , IN WHICH IT HAS BEEN HELD THAT ASSESSMENT BY AN HIGHER AUTHORITY MAY BE POSSIBLE EVEN IF THE PROCEEDINGS WERE INITIATED BY A SUBORDINATE AUTHORITY WHO IS ALSO HAVING CONCURRENT JURISDICTION. IN THE INSTANT CASE, UNDISPUTEDLY ASSESSMENT PROCEEDINGS WERE INITIATED BY THE DCIT AND THE ASSESSMENT WAS COMPLETED BY THE JCIT. THEREFORE, WE FIND NO DEFECT IN THE JURISDICTION OF THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE I N I.T.A. NO.196/LKW/2011 AS UNDER: - 5. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RELEVANT PROVISIONS OF THE ACT AND THE ORD ERS OF THE AUTHORITIES BELOW, WE FIND THAT DCIT, PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : RANGE - 1 HAS PROCESSED THE RETURN OF INCOME U/S 143(1) OF THE ACT BY MAKING ADJUSTMENTS AND ISSUED THE REFUND. NOTICE U/S 143(2) WAS ISSUED AND ASSESSMENT WAS FRAMED U/S 143(3) BY THE JT.CIT, RANGE - 1. DURIN G THE COURSE OF HEARING OF THE APPEAL, NO CONTROVERSY WAS RAISED WITH REGARD TO THE CONCURRENT JURISDICTION OF THE DCIT AND JT.CIT OVER THE APPELLANT. MEANING THEREBY BOTH THE OFFICERS ARE QUITE COMPETENT TO FRAME AN ASSESSMENT OF THE RETURNS FILED BY THE ASSESSEE. THE MOOT QUESTION ARISES BEFORE US IS WHETHER THE JT.CIT, WHO IS ADMITTEDLY SENIOR OFFICER HAVING SUPERVISORY POWER/JURISDICTION OVER THE DCIT, CAN FRAME THE ASSESSMENT U/S 143(3) OF THE ACT WHERE RETURN OF INCOME WAS PROCESSED U/S 143(1) BY TH E DCIT? 5.1 BEFORE DWELLING UPON THE ISSUE, WE HAVE TO LOOK TOWARDS THE OBJECT AND PURPOSE OF CONFERRING THE CONCURRENT JURISDICTION TO THE AUTHORITY HIGHER IN RANK OF THE INCOME - TAX AUTHORITY/ASSESSING OFFICER WHO WAS SUPPOSE TO FRAME THE ASSESSMENT IN N ORMAL COURSE. OUR ATTENTION WAS INVITED TO THE PROVISIONS OF SECTION 120 OF THE ACT WITH THE SUBMISSION THAT THROUGH THE EXPLANATION BELOW SUB SECTION (1) INSERTED BY FINANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 01/04/88 CLARIFYING THAT ANY INCOME - TAX AUTHORITY BEING A HIGHER AUTHORITY IN RANK, MAY, IF SO DIRECTED BY THE BOARD, EXERCISE THE POWERS OR PERFORM THE FUNCTION OF THE INCOME - TAX AUTHORITY LOWER IN RANK AND ANY SUCH DIRECTION ISSUED BY THE BOARD SHALL BE DEEMED TO BE A DIRECTION ISSUED UNDER S UB SECTION (1). MEANING THEREBY THE INCOME - TAX AUTHORITY BEING AN AUTHORITY HIGHER IN RANK WHILE EXERCISING ITS SUPERVISORY POWERS, MAY SEIZE THE MATTER PENDING WITH THE ASSESSING OFFICER WHO IS JUNIOR IN RANK AND EXERCISE THE POWERS AND PERFORM THE FUNCT IONS OF THAT ASSESSING OFFICER AT ANY POINT OF TIME WHEREVER THE INTERVENTION IS CALLED FOR. IF WE LOOK THE OBJECT AND PURPOSE OF THIS EXPLANATION, WE FIND THAT THE CONCURRENT JURISDICTION ARE PROVIDED TO AUTHORITIES HIGHER IN RANK IN ORDER TO HAVE BETTER SUPERVISION OVER ITS SUBORDINATES AND IF THEY FEEL NECESSARY, THEY MAY SEIZE WITH THE MATTER AND COMPLETE THE REMAINING ACT OR FUNCTION, WHICH WAS TO BE EXERCISED BY THE ASSESSING OFFICER WHO IS JUNIOR TO HIM. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : 5.2 WE HAVE EXAMINED THE MATERIAL REFERRED T O BY THE ASSESSEE WITH REGARD TO CONCURRENT JURISDICTION AND WE FIND THAT IN EXERCISE OF POWER CONFERRED BY SECTION 120(4)(B) OF THE ACT, THE CENTRAL BOARD OF DIRECT TAXES (IN SHORT CBDT) ISSUED A NOTIFICATION DATED 17 TH SEPTEMBER, 2001 CONFERRING THE POWE RS AND FUNCTIONS OF AN ASSESSING OFFICER ON JT. COMMISSIONER OF INCOME TAX WHICH BY VIRTUE OF SECTION 2(28C) OF THE ACT INCLUDES THE ADDL. COMMISSIONER OF INCOME TAX. SUBSEQUENT TO THE NOTIFICATION DATED 17 TH SEPTEMBER 2001, THE CBDT ISSUED AN ORDER DATED 16 TH MAY 2007 TO THE EFFECT THAT IN VIEW OF THE INCREASING GAP BETWEEN THE WORKLOAD AND SCRUTINY ASSESSMENT, IT HAS BEEN DECIDED TO ENTRUST THE RANGE HEADS WITH THE RESPONSIBILITY OF MAKING ASSESSMENTS IN TOP REVENUE POTENTIAL CASES OF THE RANGE TO BE SEL ECTED ON THE BASIS OF THE RETURNED INCOME. 5.3 ON THE ISSUE OF CONCURRENT JURISDICTION, THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BERGER PAINTS INDIA LTD. (SUPRA) HAD EXPLAINED THE MEANING OF EXPRESSION CONCURRENT TO MEAN TWO AUTHORITIES HAVING EQ UAL POWERS TO DEAL WITH THE SITUATION, BUT THE SAME WORK CANNOT BE DIVIDED BETWEEN THEM. THE RELEVANT OBSERVATIONS OF HON'BLE CALCUTTA HIGH COURT ARE EXTRACTED HEREUNDER: CONCURRENT JURISDICTION MEANS A SUBORDINATE AUTHORITY CAN DEAL WITH THE MATTE R EQUALLY WITH ANY SUPERIOR AUTHORITY IN ITS ENTIRETY SO THAT EITHER ONE OF SUCH JURISDICTIONS CAN BE INVOKED. IT CANNOT BE CONSTRUED AS CONCURRENT JURISDICTION WHEN ONE PART OF THE ASSESSMENT WILL BE DEALT WITH BY ONE SUPERIOR OFFICER AND THE OTHER PART WILL BE DEALT WITH BY ONE SUBORDINATE OFFICER. 5.4 THE DISTINCTION BETWEEN CONCURRENT EXERCISE AND JOINT EXERCISE OF JURISDICTION WAS ALSO EXAMINED BY HON'BLE DELHI HIGH COURT IN THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : CASE OF VALVOLINE CUMMINS LIMITED (SUPRA) IN WHICH IT HAS BEEN OBSERV ED AS UNDER: IT APPEARS TO US QUITE CLEARLY THAT THERE IS A DISTINCTION BETWEEN CONCURRENT EXERCISE OF POWER AND JOINT EXERCISE OF POWER. WHEN POWER HAS BEEN CONFERRED UPON TWO AUTHORITIES CONCURRENTLY, EITHER ONE OF THEM CAN EXERCISE THAT POWER AND ON CE A DECISION IS TAKEN TO EXERCISE THE POWER BY ANY ONE OF THOSE AUTHORITIES, THAT EXERCISE MUST BE TERMINATED BY THAT AUTHORITY ONLY. IT IS NOT THAT ONE AUTHORITY CAN START EXERCISING A POWER AND THE OTHER AUTHORITY HAVING CONCURRENT JURISDICTION CAN C ONCLUDE THE EXERCISE OF THAT POWER. THIS PERHAPS MAY BE PERMISSIBLE IN A SITUATION WHERE BOTH THE AUTHORITIES JOINTLY EXERCISE POWER BUT IT CERTAINLY IS NOT PERMISSIBLE WHERE BOTH THE AUTHORITIES CONCURRENTLY EXERCISE POWER. ONE EXAMPLE THAT IMMEDIATEL Y COMES TO THE MIND IS THAT OF GRANT OF ANTICIPATORY BAIL. BOTH THE SESSIONS JUDGE AND THE HIGH COURT HAVE CONCURRENT POWER. IT IS NOT AS IF A PART OF THAT POWER CAN BE EXERCISED BY THE HIGH COURT AND THE BALANCE POWER CAN BE EXERCISED BY THE SESSIONS J UDGE. IF THE HIGH COURT IS SEIZED OF AN APPLICATION FOR ANTICIPATORY BAIL IT MUST DEAL WITH IT AND SIMILARLY IF THE SESSIONS JUDGE IS SEIZED OF AN ANTICIPATORY BAIL, HE MUST DEAL WITH IT. THERE CAN BE NO JOINT EXERCISE OF POWER BOTH BY THE HIGH COURT AS WELL AS BY THE SESSIONS JUDGE IN RESPECT OF THE SAME APPLICATION FOR ANTICIPATORY BAIL. 5.5 WE HAVE EXAMINED THE FACTS OF BOTH THE CASES. WE FIND THAT IN THIS CASE THE PROCESS WAS INITIATED BY THE AUTHORITY HIGHER IN RANK BUT THE SUBSEQUENT ACTION WAS TAKEN BY THE AUTHORITY JUNIOR IN RANK. THE SITUATION WHERE THE PROCESS WAS INITIATED BY THE JUNIOR OFFICER AND SUBSEQUENT ACTION WAS TAKEN BY THE AUTHORITY HIGHER IN RANK, WAS NEITHER EXAMINED BY THEIR LORDSHIPS IN THIS CASE NOR CONCEPTUALIZED. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : 6. WE HAVE ALSO EXAMINED THE THEORY OF MODE OF ASSESSMENT AS PROPOUNDED BY THE LEARNED D.R. AND WE FIND FORCE THEREIN. THERE ARE TWO MODE OF ASSESSMENTS. ONE IS CALLED PRELIMINARY/SUMMARY ASSESSMENT OR THE ASSESSMENT FRAMED U/S 143(1) AND THE OTHER IS CALLED R EGULAR ASSESSMENT FRAMED U/S 143(3) OF THE ACT. THE CBDT TIME TO TIME ISSUES THE GUIDELINE FOR FRAMING THE REGULAR ASSESSMENT U/S 143(3) AFTER ISSUING NOTICE U/S 143(2) OF THE ACT. REST OF THE ASSESSMENTS ARE PROCESSED U/S 143(1) OF THE ACT. UNDISPUTEDL Y, MAXIMUM ASSESSMENTS ARE FRAMED U/S 143(1) WHERE THE ASSESSING OFFICER HAS ISSUED THE INTIMATION AFTER MAKING A PRIMA FACIE ADJUSTMENT. ALONG WITH THE INTIMATION THE ASSESSING OFFICER EITHER RAISES THE DEMAND OR ISSUES THE REFUND BUT WHENEVER CASE FALLS WITHIN THE GUIDELINES ISSUED BY CBDT, IT IS TO BE TAKEN FOR SCRUTINY AND THE ASSESSMENT IS REQUIRED TO BE COMPLETED U/S 143(3) OF THE ACT AND FOR COMPLETING THE ASSESSMENT U/S 143(3), THE ASSESSING OFFICER IS REQUIRED TO ISSUE A NOTICE U/S 143(2) WITHIN A PERIOD PRESCRIBED U/S 143(2) OF THE ACT. THEREAFTER THE ASSESSMENT IS FRAMED U/S 143(3) AFTER PROVIDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, THERE ARE TWO MODE OF ASSESSMENT AND THEY ARE INDEPENDENT TO EACH OTHER. 7. WE HAVE A LSO CAREFULLY EXAMINED THE OTHER JUDGMENTS REFERRED TO BY THE ASSESSEE. IN ALL THOSE JUDGMENTS, THE PROCEEDINGS FOR ASSESSMENT WAS INITIATED BY THE AUTHORITY HIGHER IN RANK AND REST OF THE ASSESSMENT IS COMPLETED BY THE ASSESSING OFFICER WHO IS JUNIOR TO THE OFFICER WHO HAS INITIATED THE PROCESS FOR ASSESSMENT. IN THOSE CASES, IT WAS REPEATEDLY HELD THAT ONCE THE AUTHORITY HIGHER IN RANK HAS SEIZED WITH THE MATTER, THE AUTHORITY LOWER IN RANK FORFEITS ITS JURISDICTION TO PROCEED WITH THE MATTER IN ANY MA NNER AND TO COMPLETE THE REMAINING ASSESSMENT. THE OBJECT/BASIS FOR GIVING THAT FINDING, ACCORDING TO US, ARE THAT ONCE THE AUTHORITY HIGHER IN RANK SEIZED WITH THE MATTER PENDING BEFORE THE SUBORDINATE AUTHORITY FOR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 9 - : ADJUDICATION, THE SUBORDINATE AUTHORIT Y IS CEASED WITH THE JURISDICTION TO PROCEED FURTHER IN THAT MATTER. THE REASON FOR DOING SO IS QUITE OBVIOUS AS ONCE THE HIGHER AUTHORITY HAS STARTED APPLYING HIS MIND TO THE ISSUE IN DISPUTE, THE SUBORDINATE AUTHORITY CANNOT PROCEED WITH THE MATTER. I F IT IS NOT DONE, THERE WOULD BE CHAOS IN THE ADMINISTRATION OF JUSTICE. BUT IN THE INSTANT CASE, THE DCIT HAS COMPLETED THE ONE MODE OF ASSESSMENT BY ISSUING INTIMATION U/S 143(1) OF THE ACT AND THE JT.CIT HAS INITIATED AND COMPLETED THE SECOND MODE OF A SSESSMENT. THEREFORE, WE DO NOT FIND ANY ILLEGALITY IN THE ASSESSMENT AS THE FINAL ASSESSMENT WAS COMPLETED BY JT.CIT, RANGE - 1, WHO IS ADMITTEDLY SENIOR AND SUPERVISORY AUTHORITY OF DCIT, RANGE - 1. WE HASTEN TO ADD THAT ASSESSMENT BY THE HIGHER AUTHORITY MAY BE POSSIBLE EVEN IF THE PROCEEDINGS WERE INITIATED BY THE SUBORDINATE AUTHORITY WHO IS ALSO HAVING CONCURRENT JURISDICTION BUT IN ANY CASE THIS ISSUE IS NOT BEFORE US AND WE RESTRICT OURSELVES TO THE CONTROVERSY INVOLVED. WE, THEREFORE, DO NOT FIND AN Y INFIRMITY AND ILLEGALITY IN THE ASSESSMENT ORDER FRAMED BY THE JT.CIT, RANGE - 1. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) IN THIS REGARD. 8. GROUND NO. 3 AND 4 OF THE APPEAL ARE COVERED AGAINST THE ASSESSEE IN VIEW OF THE JUDGMENT OF HON'BLE APEX COU RT IN THE CASE OF LIBERTY INDIA VS COMMISSIONER OF INCOME - TAX [2009] 317 ITR 218 (SC) AND THE CIT HAS DECIDED THE APPEAL FOLLOWING THE JUDGMENT OF LIBERTY INDIA IN WHICH IT HAS BEEN HELD THAT THE RECEIPTS BY WAY OF D UTY DRAWBACK RECEIPTS AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKINGS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. 8 . SO FAR AS THE GROUNDS ON MERIT IN BOTH THE APPEALS ARE CON CERNED, THEY ARE ALSO COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL, IN WHICH FOLLOWING THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT [2009] 317 ITR 218, IT WAS HELD THAT RECEIPTS BY WAY OF DUTY DRAWBACK AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS DERIVED PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 10 - : FROM THE INDUSTRIAL UNDERTAKING. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) WAS CONFIRMED BY THE TRIBUNAL. FOLLOWING THE AFORESAID ORDER AND THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CI T (SUPRA) , WE DISMISS THE GROUNDS OF THE ASSESSEE RELATING TO DEDUCTION UNDER SECTION 80IB OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 9 . WITH REGARD TO OTHER GROUNDS RELATING TO INTEREST DEBITED TO BANTHER UNIT IS CONCERNED, IT WAS P OINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT ONCE THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT, IT WOULD NOT MAKE ANY DIFFERENCE EVEN INTEREST WAS ALLOWED TO BE DEBITED IN THE BANTHER UNIT. ACCORDINGLY HE DID NOT PRESS T HIS GROUND AND WE, THEREFORE, REJECT THE SAME BEING NOT PRESSED. I.T.A. NO.385 & 3 86 /LKW/2012: 10 . THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON COMMON GROUNDS EXCEPT THE DIFFERENCE IN QUANTUM. THEREFORE, WE EXT RACT THE GROUNDS RAISED IN I.T.A. NO.386/LKW/2012 AS UNDER: - 1 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REST RICTING THE DISALLOWANCE OF RS. 15,69,973 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIR AND MAIN TENANCE OF MACHINERY & BUILDING TO RS.1,00,000/ - ONLY, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND WITHOUT MENTIONING ANY SPECIFIC REASONS FOR MAKING SUCH RESTRICTION. 2 . THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTR ICTING THE DISALLOWANCES OF RS. 1,27,444 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VEHICLE MAINTENANCE, DEPRECIATION ON CAR AND TELEPHONE EXPENSES TO RS.63,72 2/ - ONLY, PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 11 - : W ITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND WITHOUT MENTIONING ANY SPECIFIC REASONS FOR RESTRICTING THE DISALLOWANCES. 3 . THAT THE ORDER OF THE LD. CIT (A) - II, KANPUR DATED 23.03.201 2 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 20.07.2009 TO BE RESTORED. 11 . WITH REGARD TO GROUND NO.1, WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE ADDITION WAS MADE ON AD HOC BASIS BY THE ASSESSING OFFICER, WHICH WAS REDUCED TO RS.1 LAKH BY THE LD. CIT(A). 12 . AGGRIEVED WITH THE REDUCTION OF DISALLOWANCE, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 13 . HAVING CAREFULLY EXAMINED T HE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT IN ASSESSMENT YEAR 2006 - 07 , ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF REPAIR OF MACHINERY AT RS.5,83,448/ - IN JAJMAU UNIT AND RS.6,73,546/ - IN BANTHER UNIT. WITHOUT POINTING OUT ANY DEFECT IN THE MAINT ENANCE OF THE VOUCHERS AND ACCOUNTS, THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE OF 10%. THE LD. CIT(A) HAS REDUCED THE SAME TO RS.1 LAKH TO COVER UP THE MINOR DISCREPANCY IN THE VOUCHERS. THOUGH THE REVENUE HAS PLACED RELIANCE UPON THE ORDER OF T HE ASSESSING OFFICER, BUT COULD NOT POINT OUT ON WHAT BASIS THE DISALLOWANCE WAS MADE, AS THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BILLS AND VOUCHERS MAINTAIN E D BY THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) , WHO HAS RIGHTLY REDUCED THE DISALLOWANCE TO RS.1 LAKH TO COVER UP THE MINOR DISCREPANCY. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 12 - : 14 . SIMILAR IS THE POSITION IN THE OTHER CASE I.E. IN I.T.A. NO.386/LKW/2012. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT(A) IN BOTH THE CASES O N THIS ISSUE. 15 . WITH REGARD TO OTHER GROUND RELATING TO DISALLOWANCE ON ACCOUNT OF DEPRECIATION AND VEHICLE MAINTENANCE, WE FIND THAT THE REVENUE HAS MADE DISALLOWANCE OF VEHICLE MAINTENANCE, DEPRECIATION ON CAR AND TELEPHONE EXPENSES AT 1/5 TH OF THE TOTAL C LAIM OF THE ASSESSEE, WHICH WAS REDUCED TO 1/10 TH BY THE LD. CIT(A). 16 . SINCE THE ELEMENT OF PERSONAL USE OF VEHICLE AND TELEPHONE CANNOT BE RULED OUT, SOME DISALLOWANCE IS REQUIRED TO BE MADE AND THE LD. CIT(A) HAS RESTRICTED IT TO 1/10 TH OF THE TOTAL CLAIM OF THE ASSESSEE WHICH WE CONSIDER TO BE QUITE REASONABLE. WE, THEREFORE, DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE CONFIRM THE SAME. I.T.A. NO.336 /LKW/2012: 17 . THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAIN ST THE ORDER OF THE LD. CIT(A) ON THE FOLLOWING GROUNDS: - 1 . BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE MADE BY THE AO IN RESPECT OF DEDUCTION U/S.80IB OF THE IT ACT 1961 ON EXPORT INCENTIVES AMOUNTING TO RS.50,97,628/ - . 2 . B ECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING THE GROUNDS OF APPEAL IN RESPECT OF DISALLOWANCE OF A SUM OF RS.67,09,600/ - ON ACCOUNT OF INTEREST PAID IN JAJMAU UNIT AND ALLOWING THE SAME IN BANTHER UNIT IN VIEW OF THE FACT THAT THE DE DUCTION U/S.80IB WAS DENIED BY THE AO AND CONFIRMED BY THE CIT(A). 3 . BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 13 - : THE FACTS THAT DUE TO NON ALLOWBILITY OF INTEREST IN JAJMAU UNIT INSTEAD OF BANTHER UNIT, THE DEDUCTION U/S.801B HAS BEE N SHORT COMPUTED BY THE SAID AMOUNT OF INTEREST. 18 . DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUND: - 1 . BECAUSE THE JURISDICTION TO FRAME THE ASSESSMENT WAS APPELLANT FROM THE ASSESSM ENT ORDER OF A.Y. 2006 - 07 AND A.Y. 2007 - 08, AND THERE BEING NO PROPER ORDER UNDER SECTION 127 FOR CHANGE OF JURISDICTION, THE ORDER FRAMED BY ACIT - I IS VOID AB INITIO, WITHOUT JURISDICTION, BAD IN LAW AND BE QUASHED. 19 . SINCE THE ADDITIONAL GROUND RAISED BY T HE ASSESSEE IS LEGAL IN NATURE, WE ADMIT THE SAME. WE, HOWEVER, PREFER TO ADJUDICATE THIS ADDITIONAL GROUND AT THRESHOLD. 20 . THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE NOTICE S ISSUED BY THE JCIT TO THE ASSESSEE IN CONNECTION WITH COMPL ETION OF ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2008 - 09. NOTICES ISSUED BY THE JCIT ARE APPEARING AT PAGES 24, 25, 29, 30 AND 31 OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT ASS ESSMENT PROCEEDINGS WERE CONDUCTED BY THE JCIT, SHRI. M. K. SRIVASTAVA, BUT THE ASSESSMENT WAS FRAMED BY THE ACIT, SMT. KIRTI SANKRATYAYAN. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER PLACED HEAVY RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 WHEREIN IT HAS BEEN CATEGORICALLY OBSERVED THAT WHERE THE ASSESSMENT PROCEEDINGS ARE INITIATED BY THE AUTHORITY HIGHER IN RANK OR THE MATTER IS SEIZED WITH THE AUTHORITY HIGHER IN RANK , THE SUBORDINATE AUTHORITY IS CEA SED WITH JURISDICTION AND CANNOT FRAME ASSESSMENT. THEREFORE, IN THE INSTANT CASE WHEN THE ASSESSMENT PROCEEDINGS WERE INITIATED BY THE JCIT, THE ASSESSMENT OUGHT TO HAVE BEEN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 14 - : COMPLETED BY HIM ALONE AND NOT BY A SUBORDINATE AUTHORITY . THEREFORE, THE ASSE SSMENT FRAMED BY THE ACIT IS ILLEGAL AND DESERVES TO BE QUASHED. 21 . THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED THAT THE ACIT AND JCIT HAS CONCURRENT JURISDICTION AND BOTH THE OFFICERS HAV E JURISDICTION TO FRAME THE ASSESSMENT. THEREFORE, THERE IS NO ILLE GALITY IF THE ASSESSMENT WAS COMPLETED BY THE ACIT THOUGH IT WAS INITIATED BY THE JCIT. 22 . WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE AND WE FIND THAT THIS ASPEC T HAS ALREADY BEEN EXAMINED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NO .196/LKW/2011. IN THAT CASE, WE HAVE CATEGORICALLY OBSERVED THAT IF THE ASSESSMENT PROCEEDINGS ARE INITIATED BY AN AUTHORITY HIGHER IN RANK OR AT ANY POINT OF TIME AN AUTHO RITY HIGHER IN RANK IS SEIZED WITH THE MATTER, AN AUTHORITY JUNIOR IN RANK IS CEASED WITH JURISDICTION AND CANNOT FRAME THE ASSESSMENT. THEREFORE, IF THE ASSESSMENT IS DONE BY AN OFFICER JUNIOR IN RANK WHERE THE PROCEEDINGS WERE INITIATED BY AN OFFICER SE NIOR IN RANK, THE ASSESSMENT WILL BE INVALID AND ILLEGAL. THOUGH WE HAVE ALREADY REPRODUCED T HE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE FOREGOING PARAS, BUT WE EXTRACT THE RELEVANT PORTION HEREUNDER EVEN FOR THE SAKE OF REPETITION IN ORDER TO UNDERST AND THE REAL ISSUE INVOLVED BEFORE THE JUDICIAL FORUM : - 5.3 ON THE ISSUE OF CONCURRENT JURISDICTION, THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BERGER PAINTS INDIA LTD. (SUPRA) HAD EXPLAINED THE MEANING OF EXPRESSION CONCURRENT TO MEAN TWO AUTHORITI ES HAVING EQUAL POWERS TO DEAL WITH THE SITUATION, BUT THE SAME WORK CANNOT BE DIVIDED BETWEEN THEM. THE RELEVANT OBSERVATIONS OF HON'BLE CALCUTTA HIGH COURT ARE EXTRACTED HEREUNDER: CONCURRENT JURISDICTION MEANS A SUBORDINATE AUTHORITY CAN DEAL WI TH THE MATTER EQUALLY WITH ANY PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 15 - : SUPERIOR AUTHORITY IN ITS ENTIRETY SO THAT EITHER ONE OF SUCH JURISDICTIONS CAN BE INVOKED. IT CANNOT BE CONSTRUED AS CONCURRENT JURISDICTION WHEN ONE PART OF THE ASSESSMENT WILL BE DEALT WITH BY ONE SUPERIOR OFFICER AND TH E OTHER PART WILL BE DEALT WITH BY ONE SUBORDINATE OFFICER. 5.4 THE DISTINCTION BETWEEN CONCURRENT EXERCISE AND JOINT EXERCISE OF JURISDICTION WAS ALSO EXAMINED BY HON'BLE DELHI HIGH COURT IN THE CASE OF VALVOLINE CUMMINS LIMITED (SUPRA) IN WHICH IT HAS BEEN OBSERVED AS UNDER: IT APPEARS TO US QUITE CLEARLY THAT THERE IS A DISTINCTION BETWEEN CONCURRENT EXERCISE OF POWER AND JOINT EXERCISE OF POWER. WHEN POWER HAS BEEN CONFERRED UPON TWO AUTHORITIES CONCURRENTLY, EITHER ONE OF THEM CAN EXERCISE THAT POWER AND ONCE A DECISION IS TAKEN TO EXERCISE THE POWER BY ANY ONE OF THOSE AUTHORITIES, THAT EXERCISE MUST BE TERMINATED BY THAT AUTHORITY ONLY. IT IS NOT THAT ONE AUTHORITY CAN START EXERCISING A POWER AND THE OTHER AUTHORITY HAVING CONCURRENT JURISD ICTION CAN CONCLUDE THE EXERCISE OF THAT POWER. THIS PERHAPS MAY BE PERMISSIBLE IN A SITUATION WHERE BOTH THE AUTHORITIES JOINTLY EXERCISE POWER BUT IT CERTAINLY IS NOT PERMISSIBLE WHERE BOTH THE AUTHORITIES CONCURRENTLY EXERCISE POWER. ONE EXAMPLE THAT IMMEDIATELY COMES TO THE MIND IS THAT OF GRANT OF ANTICIPATORY BAIL. BOTH THE SESSIONS JUDGE AND THE HIGH COURT HAVE CONCURRENT POWER. IT IS NOT AS IF A PART OF THAT POWER CAN BE EXERCISED BY THE HIGH COURT AND THE BALANCE POWER CAN BE EXERCISED BY TH E SESSIONS JUDGE. IF THE HIGH COURT IS SEIZED OF AN APPLICATION FOR ANTICIPATORY BAIL IT MUST DEAL WITH IT AND SIMILARLY IF THE SESSIONS JUDGE IS SEIZED OF AN ANTICIPATORY BAIL, HE MUST DEAL WITH IT. THERE CAN BE NO JOINT EXERCISE OF POWER PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 16 - : BOTH BY THE H IGH COURT AS WELL AS BY THE SESSIONS JUDGE IN RESPECT OF THE SAME APPLICATION FOR ANTICIPATORY BAIL. 7. WE HAVE ALSO CAREFULLY EXAMINED THE OTHER JUDGMENTS REFERRED TO BY THE ASSESSEE. IN ALL THOSE JUDGMENTS, THE PROCEEDINGS FOR ASSESSMENT WAS INITIATE D BY THE AUTHORITY HIGHER IN RANK AND REST OF THE ASSESSMENT IS COMPLETED BY THE ASSESSING OFFICER WHO IS JUNIOR TO THE OFFICER WHO HAS INITIATED THE PROCESS FOR ASSESSMENT. IN THOSE CASES, IT WAS REPEATEDLY HELD THAT ONCE THE AUTHORITY HIGHER IN RANK HA S SEIZED WITH THE MATTER, THE AUTHORITY LOWER IN RANK FORFEITS ITS JURISDICTION TO PROCEED WITH THE MATTER IN ANY MANNER AND TO COMPLETE THE REMAINING ASSESSMENT. THE OBJECT/BASIS FOR GIVING THAT FINDING, ACCORDING TO US, ARE THAT ONCE THE AUTHORITY HIGHE R IN RANK SEIZED WITH THE MATTER PENDING BEFORE THE SUBORDINATE AUTHORITY FOR ADJUDICATION, THE SUBORDINATE AUTHORITY IS CEASED WITH THE JURISDICTION TO PROCEED FURTHER IN THAT MATTER. THE REASON FOR DOING SO IS QUITE OBVIOUS AS ONCE THE HIGHER AUTHORITY HAS STARTED APPLYING HIS MIND TO THE ISSUE IN DISPUTE, THE SUBORDINATE AUTHORITY CANNOT PROCEED WITH THE MATTER. IF IT IS NOT DONE, THERE WOULD BE CHAOS IN THE ADMINISTRATION OF JUSTICE. BUT IN THE INSTANT CASE, THE DCIT HAS COMPLETED THE ONE MODE OF AS SESSMENT BY ISSUING INTIMATION U/S 143(1) OF THE ACT AND THE JT.CIT HAS INITIATED AND COMPLETED THE SECOND MODE OF ASSESSMENT. THEREFORE, WE DO NOT FIND ANY ILLEGALITY IN THE ASSESSMENT AS THE FINAL ASSESSMENT WAS COMPLETED BY JT.CIT, RANGE - 1, WHO IS ADMI TTEDLY SENIOR AND SUPERVISORY AUTHORITY OF DCIT, RANGE - 1. WE HASTEN TO ADD THAT ASSESSMENT BY THE HIGHER AUTHORITY MAY BE POSSIBLE EVEN IF THE PROCEEDINGS WERE INITIATED BY THE SUBORDINATE AUTHORITY WHO IS ALSO HAVING CONCURRENT JURISDICTION BUT IN ANY CA SE THIS ISSUE IS NOT BEFORE US AND WE RESTRICT OURSELVES TO THE CONTROVERSY INVOLVED. WE, THEREFORE, DO NOT FIND ANY INFIRMITY AND ILLEGALITY IN THE ASSESSMENT ORDER FRAMED BY THE JT.CIT, RANGE - 1. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) IN THIS REGAR D. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 17 - : 23 . SINCE THE ISSUE IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL , WE , FOLLOWING THE SAME, HOLD THAT SINCE THE ASSESSMENT PRO CEEDINGS WERE INITIATED BY JCIT, THE ASSESMENT WAS COMPLETED BY THE ACIT, WHO IS JUNIOR IN RANK, HAS NO JURISDICTION, THEREFORE, THE ASSESSMENT FRAMED IS ILLEGAL AND INVALID AND WE ACCORDINGLY QUASH THE SAME. SINCE THE ASSESSMENT ORDER IS QUASHED, WE FIND NO JUSTIFICATION TO DEAL WITH THE APPEAL ON MERIT. MOREOVER, ON MERIT THE GROUND RELATING TO SECTION 80IB OF THE ACT IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA), BUT WHEN THE ASSESSMENT ITSELF IS QUASHED, NO ADDITION IS CALLED FOR. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED . I.T.A. NO.3 8 7 /LKW/2012: 24 . THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER: - 1 . THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIO N OF RS.1,19,55,775/ - ON ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENT OF COMMISSION TO FOREIGN AGENT WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2 . THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ABOVE ADDITION WITHOUT CONSIDERING THE BOARD'S CIRCULAR NO.7 OF 2009. 3 . THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS NOT APPRECIATED THE SETTLED PRINCIPLE IN RESPECT OF INTER PRETATION OF PROSPECTIVE OR RETROSPECTIVE NATURE OF AMENDMENT IN THE STATUTE AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS GOLD COIN HEALTH FOOD PVT. LTD.(2008) 304 ITR 308 (SC) AND CIT VS MOSER BAER INDIA LTD.[2009] 315 ITR 460(SC). 4 . THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 18 - : HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE SERVICES RENDERED BY THE NON RESIDENT AGENT TO PROCURE ORDERS FROM FOREIGN BUYERS ARE PURELY TECHNICAL OR MANAGERIAL IN NATURE. THE REFO RE, THE PROVISION OF SECTION 9(1 )(VII) IS CLEARLY APPLICABLE ON THE ASSESSEE. 5 . THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE PAYMENT BY THE RESIDENT ASSESSEE IN CONNECTIO N WITH ITS BUSINESS IN INDIA TO A PERSON OUTSIDE THE COUNTRY IS NOTHING BUT A FEE WHICH HAS BEEN PAID BY THE RESIDENT ASSESSEE TO THE NON - RESIDENT FOR THE TECHNICAL SERVICES RENDERED BY HIM. 6 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCES OF RS. 10,22,153/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIR TO MACHINERY & BUILDING TO RS. 1,00,000/ - ONLY, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 7 . THAT THE ORDER OF THE LD. CIT (A) - II, KANPUR DATED 23.03.2012 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30.12.2010 TO BE RESTORED. 25 . APROPOS GROUNDS NO.1 TO 5, IT IS NOTICED THAT THE DISALLOWAN CE WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENT OF COMMISSION TO FOREIGN AGENT. THE LD. CIT(A) HAS ADJUDICATED THE ISSUE RELYING UPON THE ORDER OF THE TRIBUNAL. THIS ISSUE HAS ALREADY BEEN EXAMINED BY US IN THE CASE OF ACIT VS. M/S MODEL EXIMS, KANPUR IN I.T.A . NO. 697/LKW/2013 IN THE LIGHT OF CBDT CIRCULAR AND AMENDMENTS. THE VIEW TAKEN BY THE TRIBUNAL HAS BEEN APPROVED BY THE HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. M/S MODEL EXIMS, 358 ITR 2 (ALLD). TH E RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE EXTRACTED HEREUNDER: - PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 19 - : WE FIND THAT ALL THE QUESTIONS AS FRAMED BY THE DEPARTMENT ARE COVERED BY OUR JUDGMENT IN CIT V. M/S MODEL EXIMS, KANPUR, INCOME TAX APPEAL (DEF.) NO.164 OF 2011, DECIDED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE ON 10.09.2013 AND DIE JUDGMENT IN CIT, KANPUR V. M/S ALLIED EXIMS, INCOME TAX APPEAL NO.313 OF 2013 DECIDED ON 13.11.2013. IN BOTH THESE JUDGMENTS WE HAVE HELD, THAT A.O. DID NOT BRING ANYTHING ON RECORD, WHICH COU LD DEMONSTRATE THAT NON - RESIDENT AGENTS WERE APPOINTED AS SELLING AGENTS, DESIGNERS OR TECHNICAL ADVISERS. THE PAYMENT OF COMMISSION TO FOREIGN AGENTS DID NOT ENTITLE SUCH FOREIGN AGENTS TO PAY TAX IN INDIA AND THUS THE TDS WAS NOT LIABLE TO BE DEDUCTED UN DER SECTION 195 OF THE ACT. THE DISALLOWANCE MADE BY A.O. UNDER SECTION 40 (A) (I) FOR NON - DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 WERE NOT JUSTIFIED. SHRI BHARAT JI AGRAWAL HAS TRIED TO DISTINGUISH THE JUDGMENTS ON THE GROUND THAT IN THE PRESENT CASE THERE WAS SUFFICIENT MATERIAL BY WAY OF WRITTEN SUBMISSIONS OF THE ASSESSEE, WHO HAD STATED IN HIS REPLY ON 20.12.2010 THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURE AND EXPORT OF FINISHED LEATHER, SHOE UPPER AND LEATHER PRODUCTS. THE ASSESSEE'S MAIN BUSINESS BEING EXPORT BUSINESS IT HAS TO TAKE THE SERVICE OF FOREIGN AGENTS, WHO SECURE EXPORT ORDERS AND HELP IN EXECUTION OF SUCH BUSINESS. FOR THE SERVICES RENDERED BY THE FOREIGN AGENTS, THEY ARE PAID COMMISSION IN FOREIGN EXCHANGE BY REMITTING TH E AMOUNT THROUGH BANK. WE FIND THAT THE CIT (A) HAS CONSIDERED THE ALLEGED ADMISSION IN THE REPLY OF THE ASSESSEE AND HAS ALSO PERUSED THE AGREEMENT FROM WHICH HE FOUND THAT THERE WAS NOTHING, WHICH COULD DEMONSTRATE THAT THESE AGENTS WERE APPOINTED AS SEL LING AGENTS, DESIGNERS OR TECHNICAL ADVISERS FOR INVOKING THE PROVISIONS OF SECTION 9 (1) (VII) OF THE ACT. THE FINDINGS RECORDED BY THE CIT (A), WHICH HAVE BEEN CONFIRMED BY THE ITAT IS QUOTED AS BELOW: - '5.3.2 THE A. O. HAS ALSO INVOKED THE PROVISIONS OF SECTION 9 (1) (VII) ON THE PREMISE THAT SUCH PAYMENTS ALSO FULL UNDER FTS. IN THIS REGARD SHE HAS OBSERVED THAT NORMALLY THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 20 - : EXPORTER APPOINTS THE AGENTS AS HIS SELLING AGENT, DESIGNER & TECHNICAL ADVISER FOR HIS PRODUCTS. HE HAS FURTHER OBSERVED THAT BEI NG COMMISSION AGENT REQUIRED MANAGERIAL ACUMEN & EXPERTISE AND THEREFORE, WOULD BE COVERED UNDER SECTION 9 (1) (VII) OF THE ACT AS MANAGERIAL SERVICES. ON PERUSAL OF THE ASSESSMENT ORDER AND ASSESSMENT FOLDER, I FIND THAT THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD WHICH COULD DEMONSTRATE THAT THESE AGENTS HAD BEEN APPOINTED AS SELLING AGENTS, DESIGNERS & TECHNICAL ADVISERS. RATHER ON ME CONTRARY I FIND THAT THE AGREEMENT IS OF FOR PROCURING ORDERS AND NOTHING ELSE. IN ABSENCE OF ANY SUCH EVIDENCE, THIS OBS ERVATION OF THE A.O. IS MERE CONJECTURE AND THEREFORE, NO COGNIZANCE OF THE SAME CAN BE TAKEN. IT IS A TRITE LAW THAT SUSPICION, NO MATTER HOW GRAVE, CANNOT TAKE PLACE OF EVIDENCE. IN THIS CASE, THERE IS EVEN NO CASE OF SUSPICION, LEAVE ASIDE ANY EVIDENCE TO THE EFFECT THAT THE AGENTS WERE NOT ONLY SELLING AGENTS BUT ALSO DESIGNERS AND TECHNICAL ADVISERS. THE CONFIRMATION FROM THE RESPECTIVE FOREIGN AGENTS THAT THE FOREIGN AGENTS DID NOT HAVE ANY BRANCH OR PE IN INDIA FURTHER SUPPORTS THE CASE OF THE APPELL ANT. 5.3.3 THE A.O.'S OBSERVATION THAT AS A SELLING AGENT, THE AGENT HAS TO HAVE MANAGERIAL ACUMEN AND, THEREFORE, HIT BY THE PROVISIONS OF SECTION 9 (1) (VII), IS BASELESS. THE PROVISIONS OF SECTION 9 (1) (VII) DEALS WITH FEES FOR TECHNICAL SERVICES AND I T HAS TO BE READ IN THAT CONTEXT. PAR THAT MATTER, EVERYTHING IN LIFE REQUIRES MANAGERIAL SKILLS, LIKE RUNNING THE HOUSEHOLD, BEING AN ASSESSING OFFICER, RUNNING A SHOP ETC. WILL THAT TANTAMOUNT TO PROVIDING MANAGERIAL SERVICES IN THE CONTEXT OF SECTION 9 (1) (VII)? THE ANSWER IS CLEAR NO. THUS, THE AFORESAID PAYMENTS DO NOT FALL WITHIN THE MEANING OF 'FTS' AS DESCRIBED IN SECTION 9 (1) (VII) OF THE ACT. 5.3.4 THE INCOME OF THE NON - RESIDENT WAS NOT CHARGEABLE TO TAX IN INDIA SINCE THE SAME WAS NEITHER RECEI VED IN INDIA NOR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 21 - : HAD IT ACCRUED OR DEEMED TO ACCRUE IN INDIA. ACCORDINGLY, THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 IN RESPECT OF COMMISSION PAID TO THE FOREIGN AGENTS. DISALLOWANCE U/S 40 (A) (I) IS, THEREFORE, DELETED.' SHRI BHARAT JI AGRAWAL SUBMITS THAT THE CIT (A) AND ITAT HAVE NOT CONSIDERED THE EXPLANATION ADDED TO SECTION 9 (1) (VII) BY THE FINANCE ACT, 2010 W.E.F. 1.6.1976 AND WHICH PROVIDES THAT FOR THE PURPOSE OF SECOND PROVISO THE INCOME OF SUCH NON - RESIDENT SHALL BE DEEME D TO ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) [OF SUB - SECTION (1)] AND SHALL BE INCLUDED IN TOTAL INCOME OF NON - RESIDENT WHETHER OR NOT, NON - RESIDENT HAS RESIDENCE OR PLACE OF BUSINESS OR BUSINESS COMMISSION IN INDIA; OR NON - RESIDENT HAS RENDERED SERVICES IN INDIA. WE DO NOT FIND THAT THE FACT SITUATION CONTEMPLATED OR CLARIFIED IN THE EXPLANATION ADDED BY FINANCE ACT, 2010 IS APPLICABLE TO THE PRESENT CASE AS IN THE PRESENT CASE THE AGENTS APPOINTED BY THE ASSESSEE HAD THEIR OFFICES SITUATE IN A FOREIGN COUNTRY AND THAT THEY DID NOT PROVIDE ANY MANAGERIAL SERVICES TO THE ASSESSEE. SECTION 9 (1) (VII) DEALS WITH TECHNICAL SERVICES AND HAS TO BE READ IN MAT CONTEXT. THE AGREEMENT OF PROCURING ORDERS WOULD NOT INVOLVE ANY MANAGE RIAL SERVICES. THE AGREEMENT DID NOT SHOW THE APPLICABILITY OR REQUIREMENT OF ANY TECHNICAL EXPERTISE AS FUNCTIONING AS SELLING AGENT, DESIGNER OR ANY OTHER TECHNICAL SERVICES. THERE ARE NO DISTINGUISHING FEATURE IN THIS CASE, NOR DO WE FIND THAT THE RATIO OF THE CONSTITUTION BENCH DECISION IN COMMISSIONER OF C. EX., BOLPUR V. RATAN MELTING & WIRE INDUSTRIES, (2008) (231) E.L.T. 22 (SC) (PARA 6) IS APPLICABLE IN AS MUCH AS IN THE PRESENT CASE THERE WAS NO DECISION OF THE SUPREME COURT OR HIGH COURT OR ANY S TATUTORY PROVISION, WHICH WAS CONTRARY TO THE CIRCULAR, WHICH WAS WITHDRAWN ON 22.10.2009. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 22 - : THE QUESTIONS OF LAW ARE COVERED BY THE JUDGMENTS OF THIS COURT CITED AS ABOVE, AND ARE DECIDED IN FAVOUR OF THE ASSESSEE AND A AGAINST THE DEPARTMENT. 26 . WE, THEREFO RE, FOLLOWING THE AFORESAID JUDGMENT OF THE JURISDICTIONAL HIGH COURT, DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND CONFIRM THE ORDER OF THE LD. CIT(A) IN THIS REGARD. 27 . APROPOS GROUND NO.6 RELATING TO DISALLOWANCE ON ACCOUNT OF REPAIR AND MAINTENANCE OF M ACHINERY AND BUILDING, THE ADDITION OF WHICH WAS RESTRICTED BY THE LD. CIT(A) TO RS.1 LAKH, WE FIND THAT THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE OF RS.10,22,153/ - WITHOUT POINTING OUT ANY DEFECT IN THE BILLS AND VOUCHERS MAINTAINED BY THE ASSESS EE, WHICH WAS RESTRICTED TO RS.1 LAKH BY THE LD. CIT(A). THIS ISSUE HAS ALREADY BEEN EXAMINED BY US IN THE FOREGOING APPEAL WHERE WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A). FOLLOWING THE SAME, WE DISMISS THE GROUND OF APPEAL OF THE REVENUE ON THIS ISS UE. 28 . IN THE RESULT, APPEALS OF THE ASSESSEE IN I.T.A. NO.334 & 335/LKW/2012 ARE DISMISSED AND IN I.T.A. NO.336/LKW/2012 IS ALLOWED WHERE AS THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.8.2014. SD/ - SD/ - [ A. K. GARO DIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH AUGUST , 2014 JJ: 3007 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 23 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )