Zenelini Leather Wear, New Delhi V. ACIT, New Delhi

ITA 3340/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5699 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 20-09-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Opportunity of being heard; Retrospective amendment; Validity of assessment; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 80HHC; 147; 148; 28; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 3340/DEL/2009 ASSESSMENT YEAR : 2001-02 ZANELINI LEATHER WEAR, 143-145, OKHLA INDUSTRIAL ESTATE, NEW DELHI VS. ACIT, CIRCLE 22(1), NEW DELHI. (APPELLANT) (RESPONDENT) PAN : AAAFZ 0175 D APPELLANT BY : SHRI GURJEET SI NGH, CA RESPONDENT BY : MS. MONA MOHANTY, DR O R D E R PER: C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 21.01.2009 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE BY THE AO U/S. 147/144/143(3) OF THE INCOME TAX ACT, 1961 (THE AC T) FOR A.Y. 2001-02. 2. THE GROUND APPEAL RAISED BY THE ASSESSEE BY THE ASSESSEE ARE AS UNDER:- 1. BECAUSE THE ACTION OF CIT(A) IS UNDER CHALLENGE ON FACTS AND LAW REGARDING UPHOLDING THE REASSESSMENT PROCEEDINGS INITIATION AND CONCLUSION THEREOF. 2. BECAUSE THE ACTION OF CIT(A) IS UNDER CHALLENGE ON FACTS AND LAW FOR DISALLOWANCE OF DEDU CTION U/S. 80HHC FOR AN AMOUNT OF RS. 49,34,825/-. EVEN THE WRONG INTERPRETATION RENDERED QUA SECTION 28 (IIID) IS ERRONEOUS. ITA NO. 3340/DEL/2009 PAGE 2 OF 6 3. BECAUSE THE ACTION OF CIT(A) IS UNDER CHALLENGE ON FACTS AND LAW FOR DISALLOWANCE OF CLAI M OF ESI (RS. 25017/-) AND PF AMOUNTING TO RS. 2,14,206/ -. 3. BEFORE WE PROCEED TO ADJUDICATE THE VARIOUS GROU NDS OF APPEAL RAISED BY THE ASSESSEE, WE ARE INCLINED TO DEAL WITH ONE P RELIMINARY OBJECTION RAISED BY THE REGISTRY THAT THE APPEAL FILED BY THE ASSESS EE IS BARRED BY 127 DAYS. 4. THE ASSESSEE HAS FILED A PETITION FOR CONDONATIO N OF DELAY SUPPORTED BY AN AFFIDAVIT STATING THEREIN THE CAUSE OF DELAY. THE ASSESSEE HAS SUBMITTED THAT DUE TO CERTAIN REPAIRING WORK CARRIE D OUT IN THE OFFICE PREMISES, THE RELEVANT PAPERS WERE MISPLACED AND CO ULD BE LOCATED ON 07.07.2009 AND, THEREAFTER, THE APPEAL WAS IMMEDIAT ELY PREPARED AND FILED ON 20.07.2009. CONSIDERING THE REASON SHOWN BY THE ASSESSEE SUPPORTED BY THE AFFIDAVIT, WE CONDONE THE DELAY AND ADMIT THIS APPEAL FOR DISPOSAL ON MERIT. 5. REGARDING GROUND NO. 1 ABOUT THE VALIDITY OF INI TIATION OF REASSESSMENT PROCEEDINGS, THE FACTS ARE THAT THE ASSESSEES RETU RN OF INCOME FILED ON 31.03.2001 WAS INITIALLY PROCESSED U/S. 143(1) OF T HE ACT. NO REGULAR ASSESSMENT U/S. 143(3) WAS MADE IN PURSUANCE TO THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE. THE ASSESSEE FILED I TS ORIGINAL RETURN SHOWING TAXABLE INCOME AT RS. 13,26,640/-. SUBSEQUENTLY, I T WAS NOTICED BY THE AO THAT AN AMENDMENT HAS BEEN MADE IN SECTION 80HHC BY THE TAXATION LAWS (AMENDMENT) ACT 2005 WITH RETROSPECTIVE EFFECT. TH E AMENDED PROVISIONS WERE MADE WITH REGARD TO THE DEDUCTION AVAILABLE U/ S. 80HHC WITH REFERENCE ITA NO. 3340/DEL/2009 PAGE 3 OF 6 TO DEPB/REP INCOME. THE AO WAS OF THE VIEW THAT TH E ASSESSEES CLAIM OF DEDUCTION U/S. 80HHC WITH REGARD TO INCOME EARNED F ROM DEPB LICENSE MADE IN THE RETURN OF INCOME WAS NOT IN CONSONANCE WITH THE PROVISIONS CONTAINED IN TAXATION LAWS (AMENDMENT) ACT 2005. H E, THEREFORE, HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T ON ACCOUNT OF WRONG OR EXCESSIVE CLAIM OF DEDUCTION U/S. 80HHC OF THE A CT. THEREFORE, THE AO ISSUE NOTICED U/S. 148 OF THE ACT TO THE ASSESSEE A FTER OBTAINING NECESSARY APPROVAL. IN RESPONSE TO THE NOTICE ISSUED U/S. 14 8, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE ORIGINAL RETURN FILED ON 31. 03.2001 MAY BE TREATED AS RETURN FILED IN COMPLIANCE TO THE NOTICE U/S. 148 O F THE ACT. THEREAFTER, THE STATUTORY NOTICES U/S. 143(2) AS WELL 142(1) ALONGW ITH QUESTIONNAIRE WERE ISSUED AND SERVED UPON THE ASSESSEE. NONE FOR THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS ON 26.11.2007, WHEN THE MATT ER WAS FIXED. THE AO COMPLETED THE ASSESSMENT U/S. 144 OF THE ACT. THE AO THEN DETERMINED THE TOTAL INCOME AT RS. 54,55,470/- AFTER HOLDING THAT THE DEDUCTION U/S. 80HHC IS COMPUTED BY HIM TURNED INTO NEGATIVE AFTER DEDUC TING 90% OF DRAWBACK AND DEPB INCOME FROM THE BUSINESS PROFIT. 6. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BE FORE THE CIT(A). 7. THE CIT(A) HELD THAT THE ASSESSMENT MADE BY THE AO U/S. 144 READ WITH SECTION 147 WAS VALID. AFTER HEARING BOTH THE PARTIES AND IN THE LIGHT OF THE REASONS RECORDED BY THE AO, AND IN THE LIGHT OF THE FACT THAT THE ITA NO. 3340/DEL/2009 PAGE 4 OF 6 REOPENING HAS BEEN MADE BY THE AO IN THE LIGHT OF T HE SUBSEQUENT AMENDMENT MADE WITH RETROSPECTIVE EFFECT, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAD EVERY REASON TO BELIEVE INCOME HAD ESCAPED ASSESSMENT. THEREFORE, GROUND NO. 1 RAISED BY THE ASSESSEE ABOU T THE VALIDITY OF ASSESSMENT MADE U/S. 147 IS REJECTED. 8. IN GROUND NO. 2, THE ASSESSEE HAS DISPUTED THE A CTION OF THE AUTHORITIES BELOW IN DISALLOWING THE DEDUCTION U/S. 80HHC WITH REFERENCE TO THE DEPB RECEIPTS. THE ASSESSEE HAS SUBMITTED THAT THE PROV ISIONS OF LAW HAS NOT BEEN CORRECTLY INTERPRETED AND APPLIED. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF SPECIAL BENCH OF INCOME TAX AP PELLATE TRIBUNAL, MUMBAI BENCH IN THE CASE OF TOPMAN EXPORTS VS. ITO (2009) 125 TTJ (MUM.) (SB) 289 TO CONTEND THAT THE DEDUCTION U/S. 80HHC IS TO BE COMPUTED ON DEPB INCOME IN THE LIGHT OF THE PROPOSI TION AND PRINCIPLE LAID DOWN BY THE SPECIAL BENCH IN THE ABOVE REFERRED CAS E. 9. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 10. AFTER HEARING BOTH THE PARTIES AND HAVING FOUND THAT THE DECISION OF SPECIAL BENCH OF INCOME TAX APPELLATE TRIBUNAL, MUM BAI BENCH IN THE CASE OF TOPMAN EXPORTS VS. ITO (SUPRA) WAS NOT AVAI LABLE EITHER BEFORE THE AO OR BEFORE THE CIT(A), WHEN THE RESPECTIVE ORDERS WERE PASSED BY THEM, WE ARE INCLINED TO RESTORE THIS MATTER BACK TO THE FILED OF THE AO FOR HIS FRESH ITA NO. 3340/DEL/2009 PAGE 5 OF 6 ADJUDICATION AFTER CONSIDERING THE DECISION OF SPEC IAL BENCH OF INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH AND OTHER PROVISIO NS OF LAW AND ANY OTHER DECIDED CASES APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE AO SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. THE ASSESSEE SHALL BE AT LIBERTY TO SUBMIT ANY SUCH CONTENTIONS OR SUBMISSIONS BEFORE THE AO IN SUPPORT OF ITS CLAIM U/S. 80HHC ON DEPB ETC. AS THE ASSESSEE MAY BE ADVISED. THE AO SHALL DECIDE THE ISSUE AFRESH AFTE R CONSIDERING ALL THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE AND THE DECIDED CASES. WE ORDER ACCORDINGLY. 11. GROUND NO. 3 REGARDING DISALLOWANCE OF CLAIM OF ESIC AND PF IS NOT A SUBJECT MATTER OF REASSESSMENT U/S. 147 OF THE ACT. THIS ISSUE COULD HAVE BEEN RAISED BY THE ASSESSEE IN THE ORIGINAL ASSESSM ENT PROCEEDINGS. THIS DISALLOWANCE HAS NOT BEEN MADE BY THE AO IN THE REA SSESSMENT MADE U/S. 147 OF THE ACT. THEREFORE, THIS ISSUE CANNOT BE A SUBJECT MATTER OF THE APPEAL FILED AGAINST THE REASSESSMENT MADE U/S. 147 BY THE AO. THE ASSESSEE SHALL BE AT LIBERTY TO RAISE THIS ISSUE AT THE APPROPRIAT E FORM IN APPROPRIATE MANNER AS PER LAW. IT IS ALSO TO BE MENTIONED HERE THAT I N THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE, THE LATE DEPOSIT OF E SIC CONTRIBUTION AND LATE DEPOSIT OF PROVIDENT FUND HAS BEEN ADDED BACK BY TH E ASSESSEE ITSELF AND HAS SHOWN THE INCOME IN THE RETURN OF INCOME ACCORDINGL Y. IF ANY ITEM HAS BEEN WRONGLY INCLUDED IN THE RETURN OF INCOME, THE ASSES SEE COULD HAVE TAKEN A ITA NO. 3340/DEL/2009 PAGE 6 OF 6 PLEA TO EXCLUDE THE SAME BUT ONLY IN THE PROCEEDING S INITIATED IN PURSUANCE TO THE ORIGINAL RETURN OF INCOME, AND NOT IN THE REASS ESSMENT PROCEEDINGS INITIATED U/S. 147 OF THE ACT, WHICH ARE CONFINED O NLY TO THE SUBJECT MATTER OF AMOUNT WHICH HAD ESCAPED ASSESSMENT, AND SOUGHT TO BE INCLUDED IN THE TOTAL INCOME BY THE AO. THEREFORE, THE CIT(A) WAS JUSTIF IED IN NOT ENTERTAINING THIS GROUND IN THE APPEAL FILED AGAINST THE REASSES SMENT MADE U/S. 147 OF THE ACT AFTER RELYING UPON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CHETTINAD CORPORATION PVT. LTD. VS. CIT (1993) 200 ITR 320 (SC) AND CIT VS. SUN ENGINEERING WORKS PVT. LTD. (1992) 189 ITR 297 (SC). THUS, GROUND NO. 3 RAISED BY THE ASSESSEE IS REJECTED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. 13. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 12 TH MARCH, 2010. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 12 TH MARCH, 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR