ACIT, Ludhiana V. M/s Ralco Exports, Ludhiana

ITA 38/CHANDI/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68508 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-07-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 08-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Reopening of assessment; Retrospective amendment
• Section: 143(3); 80HHC; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 38/CHD/2010 ASSESSMENT YEAR:2001-02 THE ACIT, VS M/S RALCO EXPORTS, CIRCLE V, OPP. DHANDARI KALAN RAILWAY STATION LUDHIANA. G.T. ROAD, LUDHIANA. PAN NO. AABFR-4114M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MANJIT SINGH RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 02.09.2013 DATE OF PRONOUNCEMENT : 23.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(APPEALS)-II, LUDHIANA DATED 23.10.2009 RELATING TO ASSESSMENT YEAR 2001-02 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN QUASHING THE ASSESSMENT BY HOLDING THAT REOPENING OF ASSESSMENT U/S 147 OF THE INCOME-TAX ACT, 1961 AND ISSUE OF NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961 WAS NOT VALID AS THERE WAS NO FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVAN T FOR ASSESSMENT. 2. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT EVEN ON MERITS ALSO, THE ADJUSTMENTS MADE BY THE A. O. FOR PURPOSE OF DEDUCTIONS U/S 80HHC WERE NOT VALID AND WERE NOT IN ORDER. 3. THAT THE ORDER OF THE CIT(A)-II BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 2 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T THE QUASHING OF THE RE-OPENING OF ASSESSMENT UNDER SECTION 147 OF T HE ACT AND ALSO QUASHING OF NOTICE ISSUED UNDER SECTION 148 OF THE ACT BY THE CIT(APPEALS). THE REVENUE IS ALSO AGGRIEVED BY THE ORDER PASSED BY THE CIT(APPEALS) ON MERITS THAT THE ADJUSTMENTS MAD E BY THE ASSESSING OFFICER FOR THE PURPOSE OF DEDUCTION UNDE R SECTION 80HHC OF THE ACT WERE NOT VALID. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINA L ASSESSMENT IN THE CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 25.3.2004 AT RS. 1,04,28,230/- AS AGAINST RETURNED INCOME OF RS. 1,02,72,663/-. THEREAFTER, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 24.03.2008. IN PURSUANCE TO SUCH NOTICE, THE ASSES SEE FURNISHED THE RETURN OF INCOME DECLARING SAME TOTAL INCOME OF RS. 1,02,72,663/-. THE ASSESSING OFFICER RECOMPUTED THE DEDUCTION UNDE R SECTION 80HHC OF THE ACT IN RELATION TO THE INDIRECT COST A TTRIBUTABLE TO EXPORTS. THE ASSESSEE FAILED TO FURNISH ANY REPLY O R EXPLANATION AND THE ASSESSING OFFICER, THUS RECOMPUTED THE DEDUCTIO N UNDER SECTION 80HHC OF THE ACT AT RS. 1,67,80,225/- AS AGAINST RS . 1,73,48,432/- AND RS. 1,87,75,756/- MADE IN THE ORIGINAL RETURN A ND IN ITS LETTER DATED 7.10.2008. THE CIT(APPEALS) HELD THAT BOTH T HE ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT AND RE-OPENING OF ASSE SSMENT UNDER SECTION 147 WAS NOT VALID AND THEREFORE, THE ASSESS MENT COMPLETED SUBSEQUENT TO THE ISSUE OF SUCH NOTICE WAS LIABLE T O BE QUASHED. 5. THE LD. DR FOR THE REVENUE STRESSED THAT IN VIEW OF THERE BEING EXCESS ALLOWANCE OF DEDUCTION UNDER SECTION 80HHC O F THE ACT, THE INITIATION OF RE-ASSESSMENT PROCEEDINGS AND THE ISS UE OF NOTICE UNDER SECTION 147/148 OF THE ACT WAS CORRECT AND THERE WA S NO MERIT IN THE ORDER OF THE CIT(APPEALS). 3 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE RETURN OF INCOME WAS FILED ON 30.10.2001 AND THE ORIGINAL ASS ESSMENT WAS COMPLETED ON 25.3.2004. THE NOTICE UNDER SECTION 1 48 OF THE ACT WAS ISSUED ON 24.3.2008 I.E. BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND AS THE ASSE SSMENT IN THE CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT, THE PROVISIONS OF PROVISO TO SECTION 147 OF THE ACT WERE APPLICABLE. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT IN THE ABSENCE OF ANY FAILU RE ON PART OF THE ASSESSEE, THERE WAS NO MERIT IN THE INITIATION OF R E-ASSESSMENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSMENT YEAR UNDER CONSIDERATION IS ASSESSME NT YEAR 2001-02 AND THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME ON 30.10.2001. ORIGINAL ASSESSMENT IN THE CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY MAKING RE-ADJUSTMENTS OF THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT VIDE ORDER DATED 25.3.2004 . THEREAFTER, REASONS WERE RECORDED FOR RE-OPENING ASSESSMENT ON ACCOUNT OF THE DEDUCTION CLAIMED UNDER SECTION 80HHC OF THE ACT I. E. INDIRECT COST OF EXPORTS AND NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 24.3.2008. THE SAID NOTICE WAS, ADMITTEDLY BEYOND THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH CASES, WHERE THE ORIGINAL ASSESSMENT HAD BEEN COMPLETED UN DER SECTION 143(3) OF THE ACT AND THE MATTER IS TO BE REOPENED UNDER THE PROVISIONS OF SECTION 147/148 OF THE ACT, THEN THE PROVISO TO SECTION 147 OF THE ACT PROVIDES THAT NO ACTION UNDER THE SA ID SECTION CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAD ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR, BY REASON OF T HE FAILURE ON THE PART OF THE ASSESSEE TO EITHER MAKE A RETURN UNDER SECTION 139 OR IN 4 RESPONSE TO NOTICE ISSUED UNDER SECTION 143(1)/148, OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT OF THE SAID YEAR. IN OTHER WORDS, IN THE FACTS OF THE PRE SENT CASE WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE ACT, THE ACTION UNDER SECTION 147 OF THE ACT CAN ONLY BE TAKEN WHERE THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE INCOME OF A PARTICULAR YEAR. THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE A CT WAS ALLOWED TO THE ASSESSEE VIDE ORDER PASSED UNDER SECTION 143 (3) OF THE ACT. SUBSEQUENTLY, THERE WAS AMENDMENT TO THE PROVISIONS OF THE ACT AND THE ASSESSING OFFICER FOUND THAT THE DEDUCTION ALLO WED UNDER SECTION 80HHC OF THE ACT ON THE BASIS OF THE PROVISIONS BRO UGHT INTO EFFECT RETROSPECTIVELY, WAS WRONG. HOWEVER, WE FIND NO ME RIT IN THE ACTION OF THE ASSESSING OFFICER IN THIS REGARD WHEREIN THE ASSESSING OFFICER HIMSELF HAD ADMITTED THAT THE CLAIM OF DEDUCTION UN DER SECTION 80HHC OF THE ACT MADE IN THE ORIGINAL RETURN WAS FO UND TO BE WRONG IN THE LIGHT OF RETROSPECTIVE AMENDMENT OF THE PROV ISIONS OF SECTION 80HHC(3) OF THE ACT, WHICH WAS SUBSEQUENTLY INTRODU CED I.E. AFTER THE CLOSE OF THE ASSESSMENT IN THE HANDS OF THE ASS ESSEE. 8. IN THE PRESENT CASE, THE NOTICE UNDER SECTION 14 8 OF THE ACT WAS ISSUED BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE FINANCIAL YEAR AND CONSEQUENTLY, THE PROVISIONS OF PROVISO TO SECTION 147 OF THE ACT WERE SQUARELY APPLICABLE AND IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAD FAILED TO DISCLOSE AL L MATERIAL FACTS FULLY AND TRULY NECESSARY FOR ITS ASSESSMENT, RE-OP ENING OF THE ASSESSMENT VIDE NOTICE ISSUED UNDER SECTION 148 OF THE ACT DATED 24.3.2008 WAS NOT VALID. IN VIEW THEREOF, WE UPHOL D THE ORDER OF CIT(APPEALS) IN HOLDING THAT THE ISSUE OF NOTICE UN DER SECTION 148 OF 5 THE ACT AND RE-OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT WERE NOT VALID AND CONSEQUENTLY, THE ASSESSMENT COM PLETED PURSUANT TO THE ISSUE OF SUCH NOTICE WAS LIABLE TO BE QUASHE D. UPHOLDING THE ORDER OF CIT(APPEALS), WE DISMISS THE GROUND NO.1 R AISED BY THE REVENUE. 9. THE REVENUE VIDE GROUND NO.2 HAS RAISED THE ISSU E ON MERITS OF THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE CIT(APPEALS), THOUGH HELD THAT THE ASSESSMENT FRAME D BY THE ASSESSING OFFICER WAS INVALID, HOWEVER DECIDED THE ISSUE ON MERITS AND HELD THAT THE CALCULATION OF THE DEDUCTION UNDE R SECTION 80HHC OF THE ACT BY THE ASSESSING OFFICER WAS INCORRECT. THE REVENUE IS IN APPEAL AGAINST THIS ASPECT OF THE ORDER OF THE CIT( APPEALS). WE FIND THAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, THE CIT(APPEALS) AT PAGE 8 OF THE APPELLATE ORDER HAS E LABORATELY DEALT WITH THE ISSUE AND HAD COMPUTED THE INDIRECT COST O F EXPORT AFTER EXCLUDING THE DEPB AND INSURANCE CLAIM AND FOUND TH E SAME TO BE IN ORDER, I.E. AS CLAIMED BY THE ASSESSEE. THE RELEVA NT FINDINGS OF THE CIT(APPEALS) ARE AS UNDER : I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE ID. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVANT RECORD. THOUGH WHILE DEALING WITH GROUND NO: 2 ABOVE, THE PROCEEDI NGS U/S 147 INITIATED HAVE BEEN HELD TO BE NOT VALID, THEREFORE , THE ASSESSMENT MADE CONSEQUENT TO SUCH REOPENING ARE ALSO NOT VALI D. THEREFORE, THE ADJUSTMENTS MADE BY THE A.O. TO THE DEDUCTION U /S 80HHC IN THE ASSESSMENT COMPLETED BY ISSUING THE SAID NOTICE U/S 148 OF THE ACT, WOULD NOT STAND ACCORDINGLY, THERE IS NO NEED TO DI SCUSS THESE ISSUES IN DETAIL HERE. IT MAY HOWEVER, BE MENTION ED THAT IN VIEW OF THE SUBMISSIONS OF THE ID. COUNSELS, BOTH THE CLAIM S OF THE APPELLANT APPEAR TO BE QUITE IN ORDER. THERE IS NO PROVISION IN THE ACT TO WORK OUT DIRECT COST OF THE TRADING GOODS FOR EXPORT ON PROPORTIONATE BASIS AND FOR INDIRECT COST. IN THE TRADING AND PR OFIT AND LOSS ACCOUNT OF THE APPELLANT FOR THE PERIOD ENDING 31.3 .2001, THE APPELLANT HAD SEPARATELY SHOWN PURCHASES OF IMPORTE D MATERIAL AT RS. 9,76,3 8,208/-. ALL THE EXPENSES RELATING TO THESE PURCHASES ARE STATED TO BE INCLUDED IN THIS AMOUNT. THIS IMPO RTED MATERIAL IS, HOWEVER, SHOWN TO BE SOLD AS DOMESTIC SALES AT RS. 9,89,20,597/-. THEREFORE, WHEN FOR DOMESTIC SALES EACH FIGURES OF SALES AND 6 PURCHASES ETC. ARE DIRECTLY AVAILABLE, THERE WAS NO JUSTIFICATION IN WORKING OUT THE DIRECT COST ATTRIBUTABLE TO EXPORT SALES ON PROPORTIONATE BASIS AS DONE BY THE A.O. THE ADJUST MENT MADE TO DEDUCTION U/S 80HHC ON THIS ACCOUNT IS, THEREFORE, NOT IN ORDER. COMING TO THE SECOND ADJUSTMENT MADE BY THE A .O. THE ID. COUNSEL ARE QUITE CORRECT IN CONTENDING THAT WHEN T HE APPELLANT HAD NOT TAKEN INTO ACCOUNT THE VALUE OF INCENTIVES ON A CCOUNT OF DEPB AND INSURANCE CLAIM FOR THE PURPOSE DEDUCTION U/S 8 0HHC OF THE ACT, THEIR TURNOVER BEING MORE THAN RS. 10 CRORES, A.O. WAS NOT JUSTIFIED IN INCLUDING THESE AMOUNTS FOR THE PURPOS E OF COMPUTATION 10% TO BE EXCLUDED FROM THE INDIRECT COST FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO EXPOR TS (SUPRA). AS EXPLAINED IN THE WRITTEN SUBMISSIONS, THE CORRECT I NDIRECT COST AFTER EXCLUDING DEPB AND INSURANCE CLAIM FOR THE ABOVE PU RPOSE WOULD COME TO RS. 1,01,85,011/-. THEREFORE, THOUGH THE PROCEEDINGS UNDER SECTION 14 7 HAVE ALREADY BEEN HELD TO BE INVALID AND THE ADJUSTMENTS , WHATSOEVER, MADE TO THE DEDUCTION UNDER SECTION 80HHC IN THIS O RDER MADE BY THE A.O. UNDER SECTION 143(3) RED WITH SECTION 147 OF THE ACT, WOULD NOT STAND EVEN OTHERWISE ON MERITS THE ADJUSTMENTS MADE ARE NOT IN ORDER. THE ADDITIONS MADE BY THE A.O. ON THIS ACCO UNT ARE THEREFORE, ALSO TO BE DELETED THOUGH FOR STATISTICA L PURPOSES. 10. THE LD. DR FOR THE REVENUE HAS FAILED TO CONTRO VERT THE ABOVESAID FINDING OF THE CIT(APPEALS) AND IN VIEW T HEREOF, WE FIND NO MERIT IN THE GROUND OF APPEAL NO. 2 RAISED BY TH E REVENUE AND THE SAME IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 23 RD SEPTEMBER,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH