Preetha S. Nair, Kollam V. ACIT, Kollam

ITA 387/COCH/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2605 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-02-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 29-06-2009
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: PREETHA S NAIR
• Keywords: Reopening of assessment; Retrospective amendment; Revised return; Reassessment proceedings
• Section: 143(3); 80HHC; 80IB; 139(5); 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 387 & 389/COCH/2009 ASSESSMENT YEARS : 2003-04 SMT. PREETHA S. NAIR, PROP. NUT PRODUCTS COMPANY, KOCHUPILAMMOODU, KOLLAM. [PAN: ABDPN 1379H] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-, KOLLAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SMT. PREETHA S. NAIR, ADV. REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR DATE OF HEARING 13/02/2013 DATE OF PRONOUNCEMENT 12/04/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS ARE INSTITUTED BY THE ASSESSE E, CHALLENGING SEPARATE ORDERS PASSED BY THE LD. CIT(A)-IV, KOCHI AND THEY RELATE TO THE ASSESSMENT YEAR 2003-04. 2. THE APPEAL NUMBERED AS ITA 388/COCH/2009 IS ARIS ING OUT OF THE ORDER PASSED BY THE LD. CIT(A) AGAINST THE ASSESSMENT ORDER DATED 2 9-12-2006 PASSED U/S. 143(3) R.W.S. 147 OF THE ACT AND THE OTHER APPEAL NUMBERED AS ITA 387/COCH/2009 IS ARISING OUT OF THE ORDER PASSED BY THE LD. CIT(A) AGAINST T HE ASSESSMENT ORDER DATED 11-11- 2008 PASSED U/S. 143(3) R.W.S. 147 OF THE ACT. WE SHALL FIRST DISPOSE OFF THE APPEAL NUMBERED AS I.T.A. NO. 387/COCH/2009. 3. THE GROUNDS URGED BY THE ASSESSEE ARE RELATED TO THE FOLLOWING ADDITIONS/DISALLOWANCES CONFIRMED BY THE LD. CIT(A) : I.T.A. NO. 387 & 388/COCH/2009 2 (A) CREDIT APPEARING IN THE CAPITAL ACCOUNT BROUGH T TO TAX UNDER OTHER SOURCES : RS. 14,96,230/-. (B) ADDITION RELATING TO SHORTAGE OF STOCK : RS.1, 85,60,113/- (C) DISALLOWANCE OF CLAIM OF PAYMENTS RELATING TO GROUP GRATUITY SCHEME : RS. 1,01,111/- (D) DENIAL OF DEDUCTION U/S. 80HHC OF THE ACT. (E) DENIAL OF DEDUCTION U/S. 80IB OF THE ACT. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROCESSING OF RAW CASHEW NUTS AND EXPOR T OF CASHEW KERNELS. SHE FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 31-03-2004 DECLARING A TOTAL INCOME OF RS.6,22,169/- AFTER CLAIMING DEDUCTIONS U /S. 80HHC AND U/S. 80IB OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT TH E DEDUCTIONS CLAIMED U/S. 80HHC AND 80IB WERE EXCESSIVE. ACCORDINGLY, SHE RE-OPENED THE ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT ON 24-08-2005. THE ASSESSING O FFICER LATER COMPLETED THE ASSESSMENT BY DETERMINING THE TOTAL INCOME AT RS.1, 92,70,240/- MAKING VARIOUS ADDITIONS. THE ASSESSEE CHALLENGED ALL THE ADDITION S BEFORE THE LD. CIT(A), BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE HAS FILED THIS AP PEAL BEFORE US. 5. THE FIRST ISSUE RELATES TO THE ADDITION OF RS.14 ,96,230/- PERTAINING TO CREDIT FOUND IN THE CAPITAL ACCOUNT OF THE ASSESSEE. BEFORE THE ASSESSING OFFICER, THE ASSESSEE EXPLAINED THAT THE ABOVE SAID CREDIT AMOUNT REPRESE NTS PROFITS RELATING TO THE BUSINESS TRANSACTIONS CARRIED OUT DURING THE FINANCIAL YEAR 1998-99 AND 1999-2000. IT WAS SUBMITTED THAT THOSE TRANSACTIONS WERE OMITTED TO B E PASSED THROUGH THE ACCOUNTS OF THE RELEVANT YEARS AND HENCE THE PROFIT WAS ACCOUNT ED DURING THE YEAR UNDER CONSIDERATION UPON ASCERTAINING THE MISTAKE. BEFOR E THE ASSESSING OFFICER, THE ASSESSEE AGREED TO OFFER THE SAME AS HER BUSINESS PROFIT, BU T CLAIMED DEDUCTION U/S. 80HHC OF THE ACT. THE ASSESSING OFFICER TOOK THE VIEW THAT THE CASH CREDIT FOUND IN THE CAPITAL ACCOUNT HAS TO BE CONSIDERED AS INCOME FROM UNDECL ARED SOURCES AND ACCORDINGLY REJECTED THE CLAIM OF DEDUCTION U/S. 80HHC OF THE A CT. ACCORDINGLY, THE ASSESSING I.T.A. NO. 387 & 388/COCH/2009 3 OFFICER ASSESSED THE SAME UNDER THE HEAD INCOME FR OM OTHER SOURCES. THE LD. CIT(A) ALSO CONFIRMED THE SAID ADDITION. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSU E AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE COULD NOT SUBSTANTIATE HER CLAIM WITH ANY MATERIAL THAT THE CASH CREDIT FOUND IN THE CAPITAL ACCOUNT REPRESENT BUSINESS TRANSACTIONS THAT TOO RELATING TO EXPORTS. THE LD D.R FURTHER CONTENDED THAT THE CLAIM OF THE ASSESSEE THAT THE SAID CASH CREDIT REPRESENTS EXPORT PROFITS, THE SAME CAN NOT BE ALLOWED AS DEDUCTION DURING THE YEAR UNDER CONSIDERATION AS IT IS A PROFIT OF A N EARLIER YEAR. WE FIND MERIT IN THE SAID CONTENTION. FURTHER THE ASSESSEE HAS TO SATISFY VA RIOUS CONDITIONS PRESCRIBED UNDER SEC. 80HHC OF THE ACT IN ORDER TO AVAIL DEDUCTION UNDER THAT SECTION. THE ASSESSEE, WITHOUT DEMONSTRATING COMPLIANCE OF ALL THE CONDITIONS, SIM PLY SEEKS DEDUCTION U/S 80HHC OF THE ACT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSIN G OFFICER IN ASSESSING THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. 7. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.1.8 5 CRORES RELATING TO THE CLAIM OF SHORTAGE OF STOCK. THE FACTS RELATING THE SAME ARE STATED IN BRIEF. FROM THE QUANTITATIVE PARTICULARS FILED BY THE ASSESSEE, THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAD CLAIMED SHORTAGE OF STOCK TO THE TUNE OF 6894 BAGS, WHICH WORKED OUT TO 21.50% OF THE TOTAL PURCHASES. THE ASSESSING OFFICER CONSIDE RED IT TO BE VERY MUCH ON THE HIGHER SIDE. WHEN QUESTIONED, THE ASSESSEE SUBMITTED THAT THE PURCHASES, PRODUCTION AND CLOSING STOCK ARE ALL SUPPORTED BY PURCHASE INVOICE S AND STOCK REGISTERS. ACCORDINGLY, IT WAS SUBMITTED THAT THE SHORTAGE OF STOCK DECLARED B Y THE ASSESSEE IS THE ACTUAL SHORTAGE DUE TO DRIAGE LOSS AND TRANSIT LOSS. ON FU RTHER ANALYSIS, THE ASSESSING OFFICER NOTICED THAT THE SHORTAGE DECLARED BY THE ASSESSEE WORKED OUT TO BE 1.8% ON IMPORTED ITEMS AND 45.8% ON LOCAL PURCHASES. THE ASSESSING O FFICER REFERRED TO THREE COMPARABLE CASES, NAMELY, K.R. USHASREE OF SAI EXPOR TS, A. ABDUL AZEES AND A. RAMACHANDRAN AND NOTICED THAT THE DEFICIT STOCK DEC LARED BY THOSE ASSESSEES WAS LESS THAN 1%. THE ASSESSING OFFICER FURTHER NOTICED TH AT THE ASSESSEE HAD SHOWN THE QUANTITY OF BAGS PROCESSED AT 39564 BAGS FOR SALES TAX PURPOSES, WHERE AS SHE HAS I.T.A. NO. 387 & 388/COCH/2009 4 SHOWN THE PROCESSED QUANTITY AT 32072 BAGS FOR INCO ME TAX PURPOSES. HENCE, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE S HORTAGE OF STOCK CLAIMED BY THE ASSESSEE WAS VERY MUCH ON THE HIGHER SIDE. THE ASS ESSING OFFICER, ACCORDINGLY, LIMITED THE CLAIM OF SHORTAGE TO 1.8% ON IMPORTED ITEMS AND 5% ON LOCAL PURCHASES. ACCORDINGLY, THE ASSESSING OFFICER DETERMINED THE E XCESS CLAIM OF SHORTAGE AT 5635 BAGS. THE ASSESSING OFFICER CONSIDERED THE SAME AS SALES MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS, SINCE THERE WAS NO E XCESS STOCK AVAILABLE AS PER STOCK REGISTER MAINTAINED BY THE ASSESSEE. BY TAKING THE AVERAGE RATE OF SALES AS PER THE BOOK RESULTS, THE ASSESSING OFFICER DETERMINED THE SALES VALUE OF 5635 BAGS AT RS.1,71,31,400/- AND ASSESSED THE SAME. 8. BEFORE THE LD CIT(A), THE ASSESSEE REITERATED TH E CONTENTIONS THAT WERE MADE BEFORE THE ASSESSING OFFICER, VIZ., THE SHORTAGE OF STOCK HAS ARISEN DUE TO ACTUAL DRIAGE LOSS AND TRANSIT LOSS. HOWEVER, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE FILED SOME ADDITIONAL GROUNDS AND ALSO ADD ITIONAL STATEMENT OF FACTS BEFORE LD CIT(A). IN THE SAID ADDITIONAL GROUNDS, THE ASSES SEE CLAIMED THAT ONE CONSIGNMENT OF IMPORT WEIGHING 491.249 METRIC TONNE COMPRISING OF 6250 BAGS WHICH WAS EQUIVALENT TO 6141 BAGS OF STANDARD QUANTITY OF 80 KG. WAS T AKEN DELIVERY BY A SISTER CONCERN NAMED M/S VIJAYALAXMI CASHEW COMPANY. IT WAS SUBM ITTED THAT THE ASSESSEE FAILED TO ACCOUNT FOR THE SAME IN HER BOOKS OF ACCOUNT, THOUG H THE PURCHASE INVOICE WAS ACCOUNTED. ACCORDINGLY, THE ASSESSEE OFFERED THE P URCHASE VALUE OF THE ABOVE SAID IMPORT AS ITS INCOME. 9. SINCE THE ASSESSEE MADE A NEW CLAIM IN THE A DDITIONAL GROUNDS, THE LD CIT(A) REMANDED THE ADDITIONAL GROUND, ALONG WITH THE ADDI TIONAL STATEMENT OF FACTS, TO THE FILE OF THE ASSESSING OFFICER SEEKING HIS COMMENTS. IN THE REMAND PROCEEDING BEFORE THE AO, THE ASSESSEE AGAIN CHANGED HER STAND AND PUT UP A FRESH CLAIM., I.E., IT WAS CLAIMED THAT THE ASSESSEE HAS SOLD THE 6250 BAGS RE FERRED ABOVE ON HIGH SEAS TO ITS SISTER CONCERN NAMED M/S VIJAYALAXMI CASHEW COMPANY , FOUR DAYS PRIOR TO THE DATE OF ARRIVAL OF CONSIGNMENT AT THE COCHIN PORT. IT WAS FURTHER SUBMITTED THAT THE SALE VALUE WAS FIXED RS. 1,62,11,217/- AND ACCORDINGLY, THE AS SESSEE PRAYED THAT THE ADDITION I.T.A. NO. 387 & 388/COCH/2009 5 MAY BE SUSTAINED TO THE TUNE OF RS.1,62,11,217/- IN THE PLACE OF RS.1,71,31,400/- ASSESSED BY THE ASSESSING OFFICER. THE ASSESSEE AL SO SUBMITTED THAT THE TRANSACTIONS RELATING TO HIGH SEAS SALES WERE NOT RECORDED BOTH IN THE ACCOUNTS OF THE ASSESSEE AS WELL AS IN THE ACCOUNTS OF THE SISTER CONCERN. HOW EVER, THE ASSESSING OFFICER DID NOT ENTERTAIN THE NEW EXPLANATIONS AND ACCORDINGLY OBJE CTED TO THE ADMISSION OF THE ADDITIONAL GROUNDS. 10. AFTER THE RECEIPT OF THE REMAND REPORT, THE LD CIT(A) POSTED THE CASE FOR HEARING ON 18.02.2009. IN THE MEANTIME, THE ASSESSING OFFI CER AGAIN REOPENED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION IN ORDER TO REWORK THE DEDUCTION U/S 80HHC OF THE ACT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. K.RAVINDRANATHAN NAIR (295 ITR 228). IN THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT, THE ASSESSEE OFFERED THE VALUE OF HIGH SEA SALES AS HER INCOME. HENCE, THE ASSESSEE FILED A LETTER BEFORE LD CIT(A) SEEKING PERMISSION TO WITHDRAW THE ADDITIONAL GROUNDS URGED BEFORE HIM. THE ASSESSEE ALSO STATED THAT THE ADDITIONAL GROUNDS MAY BE TREATED AS NOT PRESSED. 11. THE LD. CIT(A) NOTICED THAT THE ASSESSEE HAS BE EN SHIFTING HER STANDS VERY OFTEN BY MAKING ALTOGETHER NEW CLAIMS, VIZ., (A) FIRST IT WAS CLAIMED THAT THE SHORTAGE WAS DUE TO DRIAGE LOSS AND TRANSIT LOSS; (B) LATER IT W AS SUBMITTED THAT THE DELIVERY OF THE IMPORT WAS TAKEN BY THE SISTER CONCERN; (C) WHEN TH E ASSESSING OFFICER CALLED FOR THE BOOKS OF ACCOUNTS OF THE SISTER CONCERN IN ORDER TO VERIFY AS TO WHETHER THE SISTER CONCERN HAS ACCOUNTED FOR THE MISTAKEN DELIVERY, THEN THE ASSESSEE CAME OUT WITH THE THEORY OF HIGH SEA SALES. THE LD CIT(A) FURTHER NOTICED THAT THE ASSESSEE AS WELL AS THE SISTER CONCERN DID NOT ACCOUNT FOR THE TRANSACT IONS RELATING TO THE ALLEGED HIGH SEA SALES/PURCHASES. HENCE, THE LD CIT(A) DID NOT GIVE ANY CREDENCE TO THE HIGH SEA SALES AGREEMENT PRODUCED BEFORE HER. 12. THE LD. CIT(A) DID NOT GIVE COGNIZANCE OF A DDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO THE SUBSEQUENT NOTICE ISSUED U/S. 148 OF THE ACT, BY HOLDING THAT THE RE-OPENING OF A SSESSMENT IS DONE ONLY FOR THE I.T.A. NO. 387 & 388/COCH/2009 6 BENEFIT OF THE REVENUE AND THE LAW DOES NOT PERMIT AN ASSESSEE TO DISCLOSE INCOME AFTER DETECTION BY THE DEPARTMENT BY TAKING ADVANTA GE OF THE NOTICE ISSUED U/S 148 OF THE ACT, I.E., THE ASSESSEE CANNOT UTILISE THE REOP ENING OF ASSESSMENT FOR HIS BENEFIT. BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PHOOLCHAND BAJRANG LAL & ANOTHER VS. ITO (203 ITR 456), THE LD CIT(A) HELD THAT IT WOULD BE A TRAVESTY OF JUSTICE TO ALLOW THE ASSESSEE SUCH LATI TUDE. THE LD CIT(A) ALSO DID NOT APPROVE THE CLAIM THAT THE TRANSACTIONS RELATING TO HIGH SEA SALES WERE OMITTED TO BE ACCOUNTED IN THE BOOKS OF BOTH THE ASSESSEE AND THE BUYER. SINCE THE ASSESSEE HERSELF HAS ACCEPTED THAT THE IMPORT WAS TO THE TUNE OF 614 1 BAGS OF STANDARD WEIGHT, THE LD. CIT(A) HELD THAT THE ADDITION SHOULD BE MADE IN RES PECT OF 6141 BAGS, INSTEAD OF 5635 BAGS DETERMINED BY THE ASSESSING OFFICER. ACCORDIN GLY, THE LD. CIT(A) DETERMINED THE VALUE OF 6141 BAGS AT RS.1,85,60,113/- AND ORDERED ACCORDINGLY. 13. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE. THE ASSESSEE HAS ACCEPTED BEFORE THE TAX AUTHORITIES THAT THERE WAS OMISSION ON HER PART TO ACCOUNT FOR THE SALE OF 6141 BAGS OF STANDARD WEIGHT AND HENCE, THERE SHOUL D NOT BE ANY DISPUTE THAT THE SHORTAGE OF STOCK TO EXTENT OF 6141 BAGS NEEDS TO B E ASSESSED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE IS ONLY DISPUTING THE VALUE TO BE ADOPTED FOR 6141 BAGS. THE ASSESSEE HAS HEAVILY PLACED RELIANCE ON THE CLAIM O F HIGH SEAS SALES MADE TO HER SISTER CONCERN AND ACCORDINGLY CLAIMS THAT THE SALE S VALUE DECLARED IN THE DOCUMENTS RELATING TO HIGH SEAS SALES VIZ., RS.1,62,11,217/- SHOULD BE CONSIDERED AS THE INCOME OF THE ASSESSEE. HOWEVER, THE LD. CIT(A) DID NOT ACCE PT THE THEORY OF HIGH SEA SALES AND ACCORDINGLY DETERMINED THE VALUE OF 6141 BAGS, ON T HE BASIS OF AVERAGE SALES RATE, AT RS.1,85,60,113/-. WE FIND MERIT IN THE STAND TAKEN BY THE LD. CIT(A) SINCE: (A) THE TRANSACTION OF ALLEGED HIGH SEAS SALES HAV E BEEN ENTERED WITH THE SISTER CONCERN OF THE ASSESSEE. (B) THE ALLEGED TRANSACTIONS OF HIGH SEAS SALES/PU RCHASES HAVE NOT BEEN RECORDED IN THE BOOKS OF THE ASSESSEE AS WELL AS IN THE BO OKS OF THE SISTER CONCERN. (C) THE HIGH SEAS SALES INVOICE AS WELL AS HIGH SEA S SALES AGREEMENT ARE SELF- GENERATED DOCUMENTS WITHIN THE CONTROL OF THE ASSES SEE AND HENCE LACKS CREDENCE. NO EXTERNAL DOCUMENTS WERE BROUGHT ON RE CORD IN SUPPORT OF CLAIM. I.T.A. NO. 387 & 388/COCH/2009 7 (D) THE CLAIM OF THE ASSESSEE THAT IT HAD DECLARED THE VALUE OF HIGH SEAS SALES IN THE RETURN FILED IN RESPONSE TO THE SUBSEQUENT 148 NOTICE ALSO NEEDS TO BE REJECTED, AS THE RE-OPENING OF ASSESSMENT IS ALWAYS FOR THE BENEFIT OF THE REVENUE. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON TH IS ISSUE. 14. THE NEXT ISSUE RELATES TO THE CLAIM OF PAYMENT TO GROUP GRATUITY SCHEME. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T SHE HAD INCURRED A SUM OF RS.1,01,111/- TOWARDS PAYMENT OF GROUP GRATUITY SCH EME AND THE SAME WAS OMITTED TO BE CLAIMED IN THE ORIGINAL RETURN OF INCOME. ACCOR DINGLY, THE ASSESSEE SOUGHT FOR DEDUCTION OF THE SAME IN THE REASSESSMENT PROCEEDIN GS. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) CONSIDERED THE SAME AS A FRESH CL AIM AND ACCORDINGLY, BOTH OF THEM HELD THAT THE SUCH A CLAIM CAN BE MADE ONLY THROUGH THE REVISED RETURN. FOR THE SAID PROPOSITION, THEY PLACED RELIANCE ON THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT (284 ITR 323). 15. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE RE-OPENING OF THE ASSESSMENT U/S. 148 IS ONLY FOR THE BENEFIT OF THE REVENUE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS P. LT., 198 IT R 297. ADMITTEDLY, THE ASSESSEE DID NOT CLAIM THE PAYMENT MADE TO GROUP GRATUITY SC HEME DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. HENCE, IN VIEW OF THE DECI SION OF THE HONBLE SUPREME COURT (REFERRED SUPRA), THE ASSESSEE CANNOT CLAIM THE SAM E IN THE REASSESSMENT PROCEEDINGS. ACCORDINGLY, WE UPHOLD THE DECISION OF LD CIT(A) ON THIS ISSUE. 16. THE NEXT ISSUE RELATES TO THE CLAIM OF DEDUCTIO N U/S. 80HHC OF THE ACT. WE WOULD LIKE TO DISPOSE OF THE SAME WHILE CONSIDERING THE APPEAL OF THE ASSESSEE IN I.T.A. NO.387/COCH/2009, SINCE THE ISSUE URGED IN THAT APP EAL ALSO RELATES TO THE CLAIM OF DEDUCTION U/S. 80HHC OF THE ACT. 17. THE NEXT ISSUE RELATES TO THE CLAIM OF DEDU CTION U/S. 80IB OF THE ACT. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE I.T.A. NO. 387 & 388/COCH/2009 8 HAS CLAIMED DEDUCTION U/S. 80IB OF THE ACT ON INCID ENTAL INCOMES LIKE SALE OF IMPORT LICENCE ETC. THE ASSESSING OFFICER NOTICED THAT TH E DEDUCTION U/S. 80IB IS TO BE COMPUTED ON THE PROFIT DERIVED FROM MANUFACTURING A CTIVITY ALONE AS HELD BY THE HONBLE KERALA HIGH COURT IN THE CASE OF BHARAT SEA FOOD, 224 ITR 375, CIT VS. COCHIN REFINERIES LTD., 154 ITR 345 AND CIT VS. A.M. MOOSA , 237 ITR 868. WHEN THIS DEFECT WAS POINTED OUT TO THE ASSESSEE, SHE PROMISED TO FI LE A DETAILED OBJECTION TO THE PROPOSAL OF THE ASSESSING OFFICER. HOWEVER, THE AS SESSEE DID NOT FILE ANY OBJECTION BEFORE THE ASSESSING OFFICER. THE AO FURTHER NOTIC ED THAT THE ASSESSEE DID NOT HAVE ANY PROFIT FROM MANUFACTURING ACTIVITY AFTER THE EX CLUSION OF THE INCIDENTAL INCOMES. HENCE THE AO DID NOT ALLOW ANY DEDUCTION U/S. 80IB OF THE ACT. THE LD. CIT(A) ALSO CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THI S ISSUE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. BEFORE US ALSO, THE ASSESSEE FAILED TO SHOW THAT SH E IS ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB OF THE ACT, EVEN AFTER EXCLUSION OF INCIDENTAL INCOMES, WHICH ARE NOT RELATED TO THE MANUFACTURING ACTIVITY. ACCORDINGLY, WE CONFIRM TH E ORDER OF THE LD. CIT(A) ON THIS ISSUE. 19. NOW WE SHALL TAKE UP THE APPEAL NUMBERED AS ITA 388/COCH/09. THE ISSUE RELATING TO DEDUCTION U/S 80HHC OF THE ACT IS AVAIL ABLE IN BOTH THE APPEALS. WE SHALL FIRST SET OUT THE FACTS RELATING TO THE DEDUCTION U /S 80HHC OF THE ACT AS AVAILABLE IN THE APPEAL NUMBERED AS ITA 387/COCH/2009. IN THE FIRST ROUND OF REOPENING, THE ASSESSING OFFICER NOTICED FOLLOWING ERRORS IN THE COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT:- (A) LOSS ARISING ON MANUFACTURED GOODS WAS NOT SET OFF AGAINST THE PROFITS AND THE SAME WAS NOT IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES (266 ITR 521) WHEN THIS MISTAKE WAS POINTED OUT TO THE ASSESSEE, SHE ACCEPTED THE PROPOSAL OF THE ASSESSING TO CARRY OUT NECESSARY CORRECTIONS. IN AD DITION TO THE ABOVE, THE ASSESSING OFFICER ALSO TOOK INTO ACCOUNT FOLLOWING ERRORS. (B) THE ASSESSEE HAD INCLUDED SALE PROCEEDS OF EXP ORT INCENTIVES IN THE TOTAL TURNOVER INSTEAD OF REDUCING 90% OF THE SAME FROM B USINESS PROFITS. I.T.A. NO. 387 & 388/COCH/2009 9 (C) SINCE THE EXPORT TURNOVER OF THE ASSESSEE WAS MORE THAN RS.10.00 CRORES, THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS NOT ENTITLED FOR PROVISO DEDUCTION AS PER THE AMENDMENTS BROUGHT IN BY TAXAT ION LAWS AMENDMENT ACT, 2005. (D) THE METHODOLOGY OF WORKING OUT INDIRECT COST RELATI NG TO TRADING GOODS WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSING OFFICER RECOMPUTED THE D EDUCTION U/S 80HHC OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 20. IN THE ASSESSMENT ORDER RELATING TO THE APPE AL NUMBERED AS ITA 388/COCH/09 (SECOND ROUND OF REOPENING), THE ASSESSING OFFICER AGAIN REWORKED THE DEDUCTION U/S 80HHC OF THE ACT BY EXCLUDING 90% OF THE PROCESSING CHARGES RECEIVED BY THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. K.RAVINDRANATHAN NAIR REPORTED IN 295 ITR 228. THE LD CIT(A) ALSO CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 21. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE RETROSPECTIVE AMENDMENT BROUGHT OUT BY THE TAXATION AMENDMENT ACT, 2005 WAS CONSIDERED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF IN THE CASE OF AV ANI EXPORTS AND OTHERS VS. CIT (2012)(348 ITR 391). THE OPERATIVE PORTION OF THE S AID ORDER READS AS UNDER:- 27. WE, ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONLY TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN E FFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF THE ASSESSES WHOSE EXPORT TURNOVER IS ABOVE RS. 10 CRORE. IN O THER WORDS, THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEES. 22. THE ISSUE RELATING TO TAXABILITY OF DEPB BEN EFITS HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (342 ITR 49). 23. THE DECISION RENDERED IN THE CASE OF K. RAV INDRANATHAN NAIR (REFERRED SUPRA) IN RESPECT OF PROCESSING CHARGES HAS SINCE BEEN CLARIF IED BY THE HONBLE SUPREME COURT IN ` THE CASE OF ACG ASSOCIATED CAPSULES LTD (343 ITR 89) AS UNDER:- I.T.A. NO. 387 & 388/COCH/2009 10 ON A PERUSAL OF THE JUDGMENT OF THE HIGH COURT IN CIT VS. ASIAN STAR CO. LTD. (2010) 326 ITR 56 (BOM.), WE FIND THAT THE REASON W HICH WEIGHED WITH THE HIGH COURT FOR TAKING A DIFFERENT VIEW, IS THAT RENT, CO MMISSION, INTEREST AND BROKERAGE DO NOT POSSESS ANY NEXUS WITH EXPORT TURNOVER AND, THEREFORE, THE INCLUSION OF SUCH ITEMS IN THE PROFITS OF THE BUSINESS WOULD RES ULT IN A DISTORTION OF THE FIGURE OF EXPORT PROFITS. THE HIGH COURT HAS RELIED ON A DECISION OF THIS COURT IN CIT V. K. RAVINDRANATHAN NAIR (2007) 295 ITR 228 (SC) IN WHICH THE ISSUE RAISED BEFORE THIS COURT WAS ENTIRELY DIFFERENT FROM THE I SSUE RAISED IN THIS CASE . IN THAT CASE, THE ASSESSEE OWNED A FACTORY IN WH ICH HE PROCESSED CASHEW NUTS GROWN IN HIS FARM AND HE EXPORTED THE CASHEW N UTS AS AN EXPORTER. AT THE SAME TIME, THE ASSESSEE PROCESSED CASHEW NUTS WHICH WERE SUPPLIED TO HIM BY EXPORTERS ON JOB WORK BASIS AND HE COLLECTED PROCES SING CHARGES FOR THE SAME. HE, HOWEVER, DID NOT INCLUDE SUCH PROCESSING CHARGE S COLLECTED ON JOB WORK BASIS IN HIS TOTAL TURNOVER FOR THE PURPOSE OF COMP UTING THE DEDUCTION U/S. 80HHC(3) OF THE ACT AND AS A RESULT THIS TURNOVER O F COLLECTION CHARGES WAS LEFT OUT IN THE COMPUTATION OF PROFITS AND GAINS OF BUSI NESS OF THE ASSESSEE AND AS A RESULT NINETY PER CENT OF THE PROFITS OF THE ASSESS EE ARISING OUT OF THE RECEIPT OF PROCESSING CHARGES WAS NOT DEDUCTED UNDER CLAUSE (1 ) OF EXPLANATION (BAA) TO SEC. 80HHC. THIS COURT HELD THAT THE PROCESSING CH ARGES WAS INCLUDED IN THE GROSS TOTAL INCOME FROM CASHEW BUSINESS AND HENCE I N TERMS OF EXPLANATION (BAA), NINETY PER CENT OF THE GROSS INCOME ARISING FROM PROCESSING CHARGES HAD TO BE DEDUCTED UNDER EXPLANATION (BAA) TO ARRIVE AT THE PROFITS OF THE BUSINESS. IN THIS CASE, THIS COURT HELD THAT THE PROCESSING C HARGES RECEIVED BY THE ASSESSEE WERE PART OF THE BUSINESS TURNOVER AND ACCORDINGLY THE INCOME ARISING THEREFROM SHOULD HAVE BEEN INCLUDED IN THE PROFITS AND GAINS OF BUSINESS OF THE ASSESSEE AND NINETY PER CENT OF THIS INCOME ALSO WOULD HAVE TO BE DEDUCTED UNDER EXPLANATION (BAA) U/S. 80HHC OF THE ACT. IN THIS CASE, THIS COURT WAS NOT DECIDING THE ISSUE WHETHER NINETY PER CENT DEDUCTIO N IS TO BE MADE FROM THE GROSS OR NET INCOME OF ANY OF THE RECEIPTS MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA). 24. THE HONBLE APEX COURT CONSIDERED THE QUESTION OF THE AMOUNT TO BE EXCLUDED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SEC. 80HHC OF THE ACT IN THE CASE OF A.C.G. ASSOCIATED CAPSULES PVT. LTD. (REFERRED SUPRA) AND THE HONBLE SUPREME COURT HAS CLEARLY HELD THAT 90% OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY NET INTEREST OR NET RENT WHICH HAS BEEN INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAI NS OF BUSINESS IS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SEC. 80HHC OF THE ACT FOR DETERMINING THE PROFITS OF THE BUSINESS. FOR THE SAKE OF CONVENI ENCE, WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY THE HONBLE APEX COURT IN THE ABOVE SAID CASE: I.T.A. NO. 387 & 388/COCH/2009 11 11. FOR THIS INTERPRETATION OF EXPLANATION (BAA) TO SEC. 80HHC OF THE ACT, WE RELY ON THE JUDGMENT OF THE CONSTITUTION BENCH OF T HIS COURT IN DISTRIBUTORS (BARODA) P. LTD. V. UNION OF INDIA (1985) 155 ITR 1 20(SC). SEC. 80M OF THE ACT PROVIDED FOR DEDUCTION IN RESPECT OF CERTAIN INTER- CORPORATE DIVIDENDS AND IT PROVIDED IN SUB-SEC. (1) OF SEC. 80M THAT WHERE TH E GROSS TOTAL INCOME OF AN ASSESSEE BEING A COMPANY INCLUDES ANY INCOME BY WA Y OF DIVIDENDS RECEIVED BY IT FROM A DOMESTIC COMPANY, THERE SHALL, IN ACCO RDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMP UTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH INCOME BY WAY OF DI VIDENDS AN AMOUNT EQUAL TO A PERCENTAGE OF THE INCOME MENTIONED IN THIS SE CTION. THE CONSTITUTION BENCH HELD THAT THE COURT MUST CONSTRUE SEC. 80M ON ITS OWN LANGUAGE AND ARRIVE AT ITS TRUE INTERPRETATION ACCORDING TO THE PLAIN NATURAL MEANING OF THE WORDS USED BY THE LEGISLATURE AND SO CONSTRUED THE WORDS SUCH INCOME BY WAY OF DIVIDENDS IN SUB-SEC. (1) OF SEC. 80M MUST BE REFERABLE NOT ONLY TO THE CATEGORY OF INCOME INCLUDED IN THE GROSS TOTAL INCOME BUT ALSO TO THE QUANTUM OF THE INCOME SO INCLUDED. SIMILARLY, EXPLANATION (BAA) HAS TO BE CONSTRUED ON ITS OWN LANGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN EXPLANATION (BAA), THE WORDS, RE CEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RE CEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS WILL NOT ONLY REFER TO THE NATURE OF RECEIPTS BUT ALSO THE QUANTUM OF RECEIPTS INCLUDED IN THE PROFIT S OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION REFERRED TO IN THE FIRST PART OF EXPLANATION (BAA). ACCORDING LY, IF ANY QUANTUM OF ANY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1) OF EXP LANATION (BAA) HAS NOT BEEN INCLUDED IN THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, NINE TY PER CENT OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDUCTED UNDER EXPLANATION (BAA) TO SEC. 80HHC. 12. IF WE NOW APPLY EXPLANATION (BAA) AS INTERPRETE D BY US IN THIS JUDGMENT TO THE FACTS OF THE CASE BEFORE US, IF THE RENT OR INT EREST IS A RECEIPT CHARGEABLE AS PROFITS AND GAINS OF BUSINESS AND CHARGEABLE TO TAX U/S. 28 OF THE ACT, AND IF ANY QUANTUM OF THE RENT OR INTEREST OF THE ASSESSEE IS ALLOWABLE AS AN EXPENSE IN ACCORDANCE WITH SECTIONS 30 TO 44D OF THE ACT AN D IS NOT TO BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COM PUTED UNDER THE HEAD, PROFITS AND GAINS OF BUSINESS OR PROFESSION, NINE TY PER CENT OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHICH HAS BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, IS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SEC. 80HHC FOR DE TERMINING THE PROFITS OF THE BUSINESS. I.T.A. NO. 387 & 388/COCH/2009 12 25. IN VIEW OF THE FOREGOING DISCUSSIONS RELATING TO THE SUBSEQUENT DEVELOPMENT IN LAW, IN OUR VIEW, THE ISSUE RELATING TO THE COMPUTA TION OF DEDUCTION U/S 80HHC REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFIC ER IN THE LIGHT OF VARIOUS DECISIONS CITED SUPRA. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE CLAIM OF DEDUCTION U/S 80HHC OF THE ACT AFRESH BY CONSIDERI NG VARIOUS DECISIONS DISCUSSED SUPRA AND ALSO BY CONSIDERING ANY OTHER INFORMATION AND EXPLANATIONS THAT MAY BE SUBMITTED BEFORE HIM BY THE ASSESSEE AND TAKE APPRO PRIATE DECISION IN ACCORDANCE WITH THE LAW. 26. IN THE APPEAL NUMBERED AS ITA 387/COCH/09, T HE ASSESSEE HAS URGED FOLLOWING OTHER GROUNDS ALSO. (A) VALIDITY OF REOPENING OF ASSESSMENT WHEN THE EARLIER REOPENED ASSESSMENT WAS PENDING IN APPEAL BEFORE LD CIT(A). (B) DENIAL OF CLAIM OF DEDUCTION U/S 80IB OF TH E ACT. (C) NON-CONSIDERATION OF ADDITIONAL INCOME RELATI NG TO HIGH SEA SALES OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPO NSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. 27. WITH REGARD TO THE FIRST ISSUE, NO ARGUMENT WAS ADVANCED BY LD COUNSEL FOR THE ASSESSEE AND ACCORDINGLY WE DISMISS THE GROUNDS REL ATING TO THE SAME. 28. THE REMAINING TWO ISSUES RELATE TO DENIAL OF DEDUCTION CLAIMED U/S 80IB OF THE ACT AND NON-CONSIDERATION OF ADDITIONAL INCOME RELA TING TO HIGH SEA SALES. AS STATED EARLIER, THE ASSESSING OFFICER, IN THE FIRST ROUND OF RE-OPENING OF ASSESSMENT, REJECTED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT AS HE FO UND THAT THE PROFIT DERIVED FROM MANUFACTURING ACTIVITIES WAS NIL AFTER EXCLUDING IN CIDENTAL INCOME. IN THE FIRST ROUND OF REASSESSMENT, THE ASSESSING OFFICER ALSO MADE ADDIT ION RELATING TO DEFICIT STOCK. WHEN THE APPEAL AGAINST THE SAID ASSESSMENT ORDER WAS PE NDING BEFORE LD CIT(A), THE ASSESSMENT WAS RE-OPENED AGAIN TO REWORK THE DEDUCT ION U/S 80HHC OF THE ACT. IN THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED FOR T HE SECOND TIME U/S 148 OF THE ACT, THE I.T.A. NO. 387 & 388/COCH/2009 13 ASSESSEE APPEARS TO HAVE CLAIMED DEDUCTION U/S 80IB OF THE ACT AGAIN AND ALSO DISCLOSED ADDITIONAL INCOME RELATING TO ALLEGED HIG H SEA SALES DISCUSSED IN THE PRECEDING PARAGRAPHS. IT IS PERTINENT TO NOTE THAT DEFICIT S TOCK NOTICED BY THE ASSESSING OFFICER IN THE FIRST ROUND OF REASSESSMENT PROCEEDING WAS SOUG HT TO BE EXPLAINED BY THE ASSESSEE AS HIGH SEA SALES EFFECTED BY IT AND WHICH WAS OM ITTED TO BE ACCOUNTED IN THE BOOKS OF ACCOUNTS. THUS, THE AMOUNT RELATING TO DEFICIT STOCK WAS OFFERED AS ADDITIONAL INCOME BY THE ASSESSEE IN THE RETURN OF INCOME RELA TING TO SECOND ROUND OF REASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSING O FFICER, WHILE PASSING ORDER IN THE SECOND ROUND OF REASSESSMENT PROCEEDING, DID NOT CO NSIDER THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE AND ALSO DID NOT ALLOW DEDU CTION U/S 80IB OF THE ACT. 29. IN THE APPEAL PREFERRED BEFORE LD CIT(A) AG AINST THE SECOND REASSESSMENT ORDER, THE ASSESSEE RAISED THE CLAIM FOR DEDUCTION U/S 80I B OF THE ACT AND ALSO THE ISSUE OF NON-CONSIDERATION OF ADDITIONAL INCOME RELATING TO HIGH SEA SALES. THE LD CIT(A) REJECTED THE ISSUE RELATING TO ADDITIONAL INCOME BY HOLDING THAT THE OMISSION, IF ANY, SHOULD HAVE BEEN CORRECTED BY FILING A REVISED INCO ME U/S 139(5) OF THE ACT. WITH REGARD TO THE CLAIM OF DEDUCTION U/S 80IB, THE LD C IT(A), REJECTED THE SAME BY UPHOLDING THE ORDER OF THE ASSESSING OFFICER THAT T HERE WAS NO POSITIVE INCOME FROM MANUFACTURING ACTIVITIES. 30. THE LD COUNSEL RELIED UPON THE ORDER DATED 10-08-2012 PASSED BY THIS BENCH IN THE CASE OF SHRI R. PRAKASH IN ITA NOS. 242 & 243/C OCH/2007 IN CONNECTION WITH THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. WE NOTICE THAT THE ISSUE IN THE ABOVE SAID CASE WAS REGARDING THE MAINTENANCE OF SEPARATE BOOKS OF ACCOUNT FOR THE PURPOSE OF AVAILING DEDUCTION U/S 80IB OF THE ACT. THE ASSESSING OFFIC ER, IN THE ABOVE SAID CASE, HAD REJECTED THE CLAIM ON THE GROUND THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNTS. THE TRIBUNAL HAD SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISIO N RENDERED BY THE CO-ORDINATE BENCH IN THE CASE OF T.C. USHA IN ITA NOS. 1268 TO 1270 OF T HE ACT. HOWEVER, IN THE INSTANT CASE, THE DEDUCTION U/S 80IB OF THE ACT WAS REJECTE D FOR THE REASON THAT THERE WAS NO PROFIT FROM MANUFACTURING ACTIVITIES. THUS, IT IS SEEN THAT THE ISSUE IN THE INSTANT CASE IS I.T.A. NO. 387 & 388/COCH/2009 14 TOTALLY DIFFERENT AND HENCE THE DECISION RENDERED B Y THIS BENCH IN THE CASE OF SHRI R. PRAKASH, REFERRED SUPRA IS NOT APPLICABLE TO THE IS SUE UNDER CONSIDERATION. BEFORE US, THE ASSESSEE FAILED TO SHOW THAT SHE WAS HAVING POS ITIVE INCOME FROM MANUFACTURING ACTIVITY. HENCE, WE DO NOT FIND ANY INFIRMITY IN T HE DECISION OF LD CIT(A) ON THIS ISSUE. 31. THE NEXT ISSUE RELATES TO THE ISSUE OF NON-C ONSIDERATION OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE. AS STATED EARLIER, THE AS SESSEE OFFERED THE ADDITIONAL INCOME RELATING TO THE ALLEGED HIGH SEAS SALES IN THE RETU RN OF INCOME FILED IN RESPONSE TO THE NOTICE ISSUED FOR THE SECOND TIME U/S 148 OF THE AC T. IT IS ALSO PERTINENT TO NOTE THAT THE ADDITION RELATING TO THE SAME WAS ALREADY MADE BY THE ASSESSING OFFICER IN THE FIRST ROUND OF REASSESSMENT PROCEEDING UNDER THE HEAD SH ORTAGE OF STOCK AND THE ASSESSEE WAS CONTESTING THE SAME IN THE APPEAL FILED BEFORE THE LD CIT(A). IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE HAD ACCEPTED THE DEFICIT STO CK POSITION BEFORE THE LD CIT(A) AND ONLY THE QUANTIFICATION OF THE DEFICIT STOCK WAS PE NDING BEFORE THE FIRST APPELLATE AUTHORITY. UNDER THESE CIRCUMSTANCES, WE ARE OF TH E VIEW THAT THE ACTION OF THE ASSESSEE IN OFFERING THE INCOME, WHICH WAS ALREADY CONTESTED IN THE APPEAL BEFORE LD CIT(A) AND WAS UNDER HIS CONSIDERATION, DOES NOT AP PEAR TO BE CORRECT UNDER THE LAW. IN OUR VIEW, THE INTENTION OF THE ASSESSEE APPEARS TO BE TO TIGHTEN THE HANDS OF THE TAX AUTHORITIES IN THE MATTER OF DETERMINATION OF THE V ALUE OF DEFICIT STOCK. IN THIS FACTUAL MATRIX, IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN IGNORING THE ADDITIONAL INCOME OFFERED B Y THE ASSESSEE. 32. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 12-04-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 12TH APRIL, 2013 GJ I.T.A. NO. 387 & 388/COCH/2009 15 COPY TO: 1. SMT. PREETHA S. NAIR, PROP. NUT PRODUCTS COMPANY , KOCHUPILAMMOODU, KOLLAM. 2.THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- 1, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, KOCH I. 4.THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR ) I.T.A.T, COCHIN