ACIT, New Delhi V. M/s The T.T. Ltd., New Delhi

ITA 3721/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9713 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 10-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 19-12-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: RAVI MODI
• Keywords: Opportunity of being heard; Set aside
• Section: 143(3); 80HHC; 147; 148

Judgement Text

I.T.A. NO.3721/DEL./2008 (A.Y. : 2001-02) IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `H : NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.3721/DEL./2008 (ASSESSMENT YEAR : 2001-02) ACIT, CIRCLE 16(1), VS. M/S THE T.T. LTD., NEW DELHI. 879, MASTER PRITHVI NATH MARG, KAROL BAGH, NEW DEHI-110 005. (PAN/GIR NO.AAACT0767A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAVI MODI, CA REVENUE BY : SHRI N.K. CHAND, SR.DR ORDER PER A.K. GARODIA: AM THIS IS A REVENUES APPEAL DIRECTED AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME- TAX (APPEALS)-XIX, NEW DELHI DATED 13.10.2008 FOR A SSESSMENT YEAR 2001-02. THE ONLY GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80HHC OF I.T. ACT ESPECIALLY WHEN THE RE WAS NOT PROFIT FROM EXPORT OF TRADING GOODS. 2. BRIEFLY STATED, THE FACTS ARE THAT IN THE PRESEN T CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) AS PER ORDER DATED 23.3.2004 A T A TOTAL INCOME OF RS.6183121. THEREAFTER THE ASSESSMENT WAS REOPENED U/S 147 AND THE NOTICE U/S 148 WAS ISSUED ON 9.10.2006 AFTER RECORDING OF REASONS. IN THE RE-AS SESSMENT ORDER U/S 147/143(3) DATED 11.12.2007, THE ASSESSING OFFICER HAS DISALLOWED TH E DEDUCTION OF RS.1683353 ALLOWED U/S 80HHC IN THE ORIGINAL ASSESSMENT ORDER. THE RE ASON GIVEN BY THE ASSESSING OFFICER FOR MAKING THE DISALLOWANCE IS THAT WHILE ARRIVING AT THE PROFIT IN RESPECT OF EXPORT OF TRADING GOODS, THE ASSESSEE HAS CONSIDERED INDIRECT COST AT RS.723.88 LAKH AS AGAINST ACTUAL INDIRECT COST OF RS.1339.75 LAKHS. THE ASSE SSING OFFICER HAS STATED IN THE ASSESSMENT ORDER THAT THIS DIFFERENCE IN THE INDIRE CT COST, IF CONSIDERED, THERE IS NO PROFIT I.T.A. NO.3721/DEL./2008 (A.Y. : 2001-02) 2 FROM EXPORT AND, HENCE DEDUCTION IS NOT ALLOWABLE U /S 80HHC. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CO MMISSIONER OF INCOME-TAX (APPEALS). BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS CONTENDED THAT THE DIFFERENCE IN INDIRECT COST TAKEN BY THE COMPANY AT RS.723.88 LAKH AND TAKEN BY THE ASSESSING OFFICER AT RS.1339.75 LAKH I.E. RS.615.87 LAKH IS O N ACCOUNT OF SELLING COST OF RS.493.44 LAKH AND THE EXPENSES PERTAINING TO EOU UNIT. IT W AS ALSO SUBMITTED THAT SINCE THE COMPANY HAS INCLUDED THE SELLING EXPENSES IN DIRECT COST AND EXCLUDED THE TURNOVER OF EOU UNIT AND HENCE IF TOTAL INDIRECT COST OF RS.133 9.75 LAKH IS CONSIDERED, THERE WILL BE NO SIGNIFICANT IMPACT IN COMPUTATION OF PROFIT FROM TRADING EXPORT. THE ASSESSEE FURNISHED A DETAILED CALCULATION BEFORE THE COMMISS IONER OF INCOME-TAX (APPEALS) AND IT WAS POINTED OUT THAT AS AGAINST PROFIT OF RS.135.56 LAKH AS PER THE COMPUTATION ENCLOSED WITH THE RETURN OF INCOME BY THE ASSESSEE COMPANY, THE PROFIT FROM TRADING EXPORT WILL BE OF RS.128.69 LAKH, EVEN IF THE SAME IS COMPUTED AS PER ASSESSING OFFICERS OBSERVATION ABOUT INDIRECT COST AT RS.1339.75 LAKH. IT WAS HELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT INDIRECT COST HAS TO BE C ONSIDERED AT RS.1339.75 LAKH AS POINTED OUT BY THE ASSESSING OFFICER. REGARDING D IRECT COST OF RS.3718.78 LAKH SHOWN BY THE ASSESSEE IN THE COMPUTATION OF PROFIT FROM T HE TRADING EXPORT, THE SAME WAS REDUCED TO RS.3525.37 LAKH ON THE BASIS THAT SELLIN G EXPENDITURE OF RS.19341694 WAS INCLUDED BY THE ASSESSING OFFICER IN THE INDIRECT C OST AND, HENCE THE SAME HAS TO BE REDUCED FROM DIRECT COST. IT IS FURTHER STATED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN PARA.16 OF HIS ORDER THAT THE OTHER DI SPUTE IS WITH REGARD TO TOTAL TURNOVER AS SEEN FROM THE 10CCAC CERTIFICATE. IT IS NOTED BY T HE CIT(A) THAT THE TOTAL TURNOVER ADOPTED BY THE ASSESSEE WAS OF RS.9014.83 LAKH WHER EAS AS PER PROFIT AND LOSS ACCOUNT, THE TOTAL TURNOVER IS OF RS.10540.65 LAKH. IT IS F URTHER NOTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT WHEN THE LD.AR OF THE ASS ESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE IN TOTAL TURNOVER, IT WAS SUBMITTED BY T HE LD.AR OF THE ASSESSEE THAT TURNOVER OF RS.1026.72 LAKHS IN RESPECT OF EOU UNIT WAS EXCL UDED BY THE ASSESSEE. IT WAS HELD BY THE CIT(A) THAT AS PER THE DEFINITION OF TOTAL TURN OVER IN EXPLANATION (2) TO SECTION 80HHC(3), THE SAME CANNOT BE EXCLUDED AND, HENCE HE ADOPTED THE AMOUNT OF TOTAL TURNOVER AT RS.10459.40 LAKH (NET SALES EXPORT IN CENTIVES) AS SHOWN IN THE P& L A/C. I.T.A. NO.3721/DEL./2008 (A.Y. : 2001-02) 3 THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS WORKED OUT THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC AT RS.10456032, AS PER THE W ORKING ENCLOSED BY HIM WITH HIS ORDER AS PER ANNEXURE. IN THIS WORKING, THE COMMIS SIONER OF INCOME-TAX (APPEALS) ADOPTED THE TOTAL TURNOVER AT RS.10459.40 LAKH, TOT AL EXPORT OF TRADING GOODS AT RS.4190.87 LAKH, DIRECT COST AT RS.3525.37 LAKH AND INDIRECT COST AT RS.1339.75 LAKH. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. IT WAS SUBMITTED BY THE LD.DR OF THE REVENUE THA T IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD REJECTED THE CLAIM OF THE ASS ESSEE REGARDING DEDUCTION U/S 80HHC FOR THE REASON THAT THERE WAS HUGE DIFFERENCE OF RS .615.87 LAKH IN THE INDIRECT COST AS CLAIMED BY THE ASSESSEE IN THE COMPUTATION OF DEDUC TION U/S 80HHC AT RS.723.88 LAKH AS AGAINST INDIRECT COST OF RS.1339.75 AS PER THE ASSE SSING OFFICER. IT WAS SUBMITTED THAT ALL OTHER CONTENTIONS REGARDING DECREASE IN DIRECT COST TO THE EXTENT OF RS.193.41 LAKH AND INCREASE IN TOTAL TURNOVER ETC. WERE NEVER MADE BEF ORE THE ASSESSING OFFICER AND COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT CONFRO NTED THE SAME WITH THE ASSESSING OFFICER BY OBTAINING A REMAND REPORT FROM THE ASSES SING OFFICER AND HENCE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING O FFICER TO EXAMINE THE FACTUAL ASPECT REGARDING THESE TWO CLAIMS OF THE ASSESSEE FOR DECR EASE IN DIRECT COST TO THE EXTENT OF RS.19341694 AND ALSO REGARDING INCREASE IN TOTAL TU RNOVER TO RS.10459.40 LAKH AS ADOPTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AS AGAI NST RS.9014.83 LAKH AS SHOWN BY THE ASSESSEE IN FORM NO.10CCAC. 4. AS AGAINST THIS, LD.AR OF THE ASSESSEE SUPPORT ED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND HE HAD NO OBJECTION FOR SENDING BACK THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL VERIFICATION R EGARDING THESE TWO CLAIMS IN CONNECTION WITH DECREASE IN DIRECT COST AND INCREASE IN TOTAL TURNOVER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW. WE ARE OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS D ECIDED THE ISSUE AS PER LAW AFTER EXAMINING ALL ASPECTS OF THE MATTER, BUT WE FEEL TH AT THE CLAIM OF THE ASSESSEE REGARDING REDUCTION IN DIRECT COST BY AN AMOUNT OF RS.1934169 4 ON ACCOUNT OF SELLING EXPENDITURE I.T.A. NO.3721/DEL./2008 (A.Y. : 2001-02) 4 WHICH WAS INCLUDED IN THE INDIRECT COST BY THE ASSE SSING OFFICER WHEREAS AS PER THE ASSESSEE, THE SAME WAS INCLUDED BY THE ASSESSEE IN DIRECT COST, WE FEEL THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER TO FACTUALLY VERIFY THIS ASPECT. REGARDING THE AMOUNT OF TOTAL TURNOVER ALSO, WE FEE L THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER TO FACTUALLY VERIFY T HIS ASPECT AND THEN WORK OUT DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC AS HAS BEEN DON E BY THE COMMISSIONER OF INCOME- TAX (APPEALS). WE, THEREFORE, SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE QUANTUM OF DIR ECT COST AND TOTAL TURNOVER. IF THE ASSESSEE CAN ESTABLISH THAT AN AMOUNT OF RS.1934169 4 WHICH HAS BEEN ADDED BY THE ASSESSING OFFICER IN THE INDIRECT COST WAS INCLUDE D BY THE ASSESSEE IN DIRECT COST, THE SAME SHOULD BE REDUCED FROM DIRECT COST BECAUSE TH E SAME CANNOT BE ADDED IN BOTH. THE ASSESSING OFFICER SHOULD ALSO VERIFY THE CORRECTNES S OF THE AMOUNT OF TOTAL TURNOVER ADOPTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AT RS.10459.40 LAKH AND THEREAFTER HE SHOULD WORK OUT AND COMPUTE THE DEDUC TION ALLOWABLE TO THE ASSESSEE U/S 80HHC. NEEDLESS TO SAY, THE ASSESSING OFFICER SHOU LD PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSE. 7. ORDER PRONOUNCED IN OPEN COURT ON THE DATE OF HE ARING I.E. 10.09.2009. (A.D. JAIN ) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: SEPT. 10, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XIX, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT I.T.A. NO.3721/DEL./2008 (A.Y. : 2001-02) 5