THE ACIT, 5 (1), V. M/S INDRA EXPORT PVT,LTD,

ITA 387/IND/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1500 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-10-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 01-06-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Section: 143(3); 80HHC; 143(1); 139(1); 147; 148; 263; 139

Judgement Text

PAGE 1 OF 8 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.387/IND/2006 AY : 1998-99 ACIT-5(1), INDORE ..APPELLANT V/S. M/S. INDIRA EXPORT PVT. LTD., 10/11, YESHWANT ROAD, INDORE (PAN AAACI 3883 Q) ..RESPONDENT DEPARTMENT BY : SHRI K.K. SINGH, CIT, DR ASSESSEE BY : SHRI AJAY TULSIYAN, CA ORDER PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-II, INDORE DATED 29.3.2006 FOR THE AY 1998-99 ON THE GROUND THAT THE LD. FIRST APPELLATE AUTHORITY ERRED IN ANNULLING THE ASSESSMENT ON THE GROUND THAT THE AO HAS NOT BROUGHT ON RECORD THAT THE ESCAPEMENT WAS ON ACCOUN T OF THE FAILURE ON THE PART OF THE ASSESSEE. 2. DURING HEARING OF THE APPEAL, WE HAVE HEARD SHR I K.K. SINGH, LD. CIT, DR AND SHRI AJAY TULSIYAN, LD. COUNSEL FOR ASSESSEE . THE CRUX OF THE ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THE LD. FIRST APPELLATE AUTHORITY HAS PAGE 2 OF 8 NOT APPLIED THE PROVISIONS OF LAW. THE ASSESSMENT O RDER WAS STRONGLY DEFENDED BY CONTENDING THAT THE DECISION FROM HONB LE APEX COURT IN IPCA LABORATORY LTD. VS. DCIT (266 ITR 521) (SC) IS CLEA RLY APPLICABLE TO THE FACTS OF THE CASE. ON THE OTHER HAND, THE LD. COUNSEL FOR ASSESSEE DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE ULTIMATE RESU LT/PROFIT IS MINUS, PROFIT OF BUSINESS IS ALSO MINUS AND THE ENTIRE INCOME HAS BEEN CLAIMED AS LOSS. IT WAS PLEADED THAT THE RETURN WAS FILED BEFORE THE DE CISION IN THE CASE OF IPCA LABORATORY, THE PROCEEDINGS U/S 263 OF THE ACT WERE STARTED BY THE DEPARTMENT AND LATER ON DROPPED. RELIANCE WAS PLACE D IN BISHWANATH TEA CO. VS. DCIT (267 ITR 687) (CAL) TO THE EFFECT THAT NO SATISFACTION WAS RECORDED IN THE REASONS BY THE ASSESSING OFFICER. THE CRUX OF T HE ARGUMENTS IS IN SUPPORT TO THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE IS A GARMENT MANUFACTURER. IN THE AUDIT RE PORT, FILED WITH THE RETURN, CONTAINING COMPUTATION OF DEDUCTION U/S 80HHC ALSO REFLECTED LOSSES IN EXPORT OF TRADING GOODS AS WELL AS IN MANUFACTURING. NOTIC E U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE TO WHICH THE ASSESSEE FILED RETURN ON 20.5.2004. ULTIMATELY, VIDE ORDER DATED 31.3.2005, THE TOTAL I NCOME WAS COMPUTED AT RS.70,61,690/-. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY, ON LEGAL ISSUE ANNULLED THE ASSESSMENT WHICH IS UNDER CHALLENGE BE FORE THIS TRIBUNAL BY THE REVENUE. PAGE 3 OF 8 4. THE ASSESSEE FILED THE ORIGINAL RETURN ON 27.11 .1998 U/S 139(1) DECLARING TOTAL INCOME AT NIL ALONG WITH THE STATUT ORY AUDIT REPORT DATED 14.8.98 UNDER THE COMPANIES ACT 1956, BALANCE SHEET , PROFIT AND LOSS ACCOUNT INCLUDING ALL THE SCHEDULES AND NOTES FORMI NG PART OF THE ACCOUNTS AS WELL AS THE COMPLETE AUDIT REPORT DATED 25.11.98 RE QUIRED U/S 44AB OF THE ACT. THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC, CERT IFICATE IN FORM 10CCAC DATED 26.11.98 DULY AUDITED WAS ALSO FILED ALONG WI TH THE RETURN. ALL THE MATERIAL FACTS AS REQUIRED WERE DISCLOSED BY THE AS SESSEE. THE CASE WAS PROCESSED US/ 143(1) ON 13.9.99 ACCEPTING THE RETUR NED INCOME AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 26.3.2001 AF TER DETAILED SCRUTINY AND VERIFICATION OF THE BOOKS OF ACCOUNTS. THE ASSE SSMENT PROCEEDINGS COMMENCED ON 13.9.99 WERE COMPLETED ON 26.3.2001. D EDUCTION U/S 80HHC WAS SPECIFICALLY ALLOWED TO THE APPELLANT. DURING H EARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE LD. COMMISS IONER OF INCOME TAX-II, INDORE, ISSUED A NOTICE U/S 263 DATED 22.2.2002, EX AMINED THE CLAIM OF THE ASSESSEE U/S 80HHC AND THEREAFTER HE DROPPED THE PR OCEEDINGS VIDE ORDER DATED 16.10.2002. THIS ASSERTION OF THE ASSESSEE WA S NOT CONTROVERTED BY THE REVENUE. THE LD. COUNSEL FOR ASSESSEE ALSO CONTENDE D THAT THE REASONS RECORDED BY THE ASSESSING OFFICER ARE CRYPTIC AND V AGUE. WE HAVE PERUSED THE REASONS AND FOUND THAT IT HAS NOWHERE BEEN MENTIONE D THAT THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE. ANOTHER POINT PERTINENT TO MENTION HERE IS THAT THE CLAIM OF DEDUCTION U/S 80HHC R.W.S. 80AB, 80B(5) AND BOARD CIRCULAR PAGE 4 OF 8 NO.421 DATED 12.6.1985 WAS DULY CONSIDERED BY HONB LE APEX COURT IN IPCA LABORATORY LTD. VS. DCIT (266 ITR 521) (SUPRA) BY H OLDING THAT DEDUCTION U/S 80HHC(1) CAN BE PERMITTED ONLY IF THERE IS A POSITI VE PROFIT IN THE EXPORT OF BOTH SELF MANUFACTURED AS WELL AS TRADING GOODS AND IF THERE IS A LOSS IN EITHER OF THE TWO THEN THE LOSS HAS TO BE TAKEN INTO ACCOU NT FOR THE PURPOSES OF COMPUTING PROFITS. ADMITTED UNDOUBTEDLY SEC. 80HHC WAS INCORPORATED IN THE ACT WITH A VIEW TO PROVIDE INCENTIVE FOR EARNING FO REIGN EXCHANGE, EVEN THOUGH AS PER WORDING OF THE SECTION A LIBERAL INTE RPRETATION HAS TO BE GIVEN. HOWEVER, IF THE LANGUAGE OF THE SEC. IS CLEAR THEN THE BENEFIT WHICH ARE NOT AVAILABLE CANNOT BE CONFERRED BY IGNORING OR MISINT ERPRETING THE WORDS IN THE SECTION. ANOTHER POINT PERTINENT TO MENTION HERE TH AT THE DECISION IN IPCA LABORATORY LTD. (SUPRA) WAS PRONOUNCED BY THE HONB LE APEX COURT ON 11.3.2004 WHEREAS IN THE PRESENT CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED ON 26.3.2001 AND AT THAT TIME, VARIOUS JU DICIAL DECISIONS WERE AVAILABLE, WHEREIN, THE VIEW SUPPORTING THE MANNER OF CLAIM MADE BY THE ASSESSEE WAS AVAILABLE. HOWEVER, THE AFORESAID DECI SION FROM HONBLE APEX COURT WAS NOT AVAILABLE BEING OF LATER DATE, MEANIN G THEREBY ONE OF THE POSSIBLE VIEW WAS TAKEN BY THE LD. ASSESSING OFFICE R, BECAUSE THE ASSESSEE FILED THE RETURN BEFORE THE DECISION IN IPCA LABORA TORY. ANOTHER POINT PERTINENT TO MENTION HERE IS THAT, AS MENTIONED IN THE IMPUGN ED ORDER ALSO, THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING ASS ESSMENT UNDER SECTION 148 WERE NEVER COMMUNICATED TO THE ASSESSEE INSPITE OF REPEATED REQUEST. AS PER PAGE 5 OF 8 THE DECISION/OBSERVATION FROM THE HONBLE APEX COUR T IN THE CASE OF GKN DRIVE SHAFT (INDIA) LTD. VS. ITO (259 ITR 19)(SC), THE ASSESSING OFFICER IS BOUND TO FURNISH THE REASONS WITHIN A REASONABLE TI ME, CONSEQUENTLY, IT CAN BE SAID THAT THE ASSESSEE WAS DEPRIVED OF FROM RAIS ING OBJECTIONS OR SEEKING CLARIFICATION ON THE SAME BEFORE THE ASSESSING OFFI CER. THE ASSESSEE GETS SUPPORT FROM THE DECISION IN THE CASE OF BISHWANATH TEA CO. LTD. VS. DCIT (267 ITR 687) (CAL). THE RELEVANT PORTION FROM THE ORDER IS REPRODUCED HEREUNDER: HELD, THAT A CAREFUL PERUSAL OF THE REASONS RECORDE D BY THE ASSESSING OFFICER SHOWED THAT HE HAD NOT REACHED HIS SATISFACTION THAT THE REASON FOR REOPEN ING THE ASSESSMENT WAS DUE TO THE FAILURE ON THE PART O F THE ASSESSEE TO MAKE RETURN UNDER SECTION 139 OR TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. THERE COULD NOT BE ANY FAILURE ON THE PART OF THE ASSESSEE AS ALONG WITH THE RETURNS, AUDIT REPORTS W ERE FURNISHED. AUDIT REPORT IS A PART OF THE RETURNS. T HE COMMISSIONER HAD NOT RECORDED ANYWHERE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE NOTICE S UNDER SECTION 148 WERE NOT VALID AND WERE LIABLE TO BE QUASHED. WHILE COMING TO THE AFORESAID CONCLUSION, THE FOLL OWING CASES WERE CONSIDERED BY THE HONBLE COURT: CIT V. CORPORATION BANK LTD. [2002] 254 ITR 791 (SC ); ESS ESS KAY ENGINEERING CO. P. LTD. V. CIT [2001] 2 47 ITR 818 (SC); PHOOL CHAND BAJRANG LAL V. ITO [1993] 203 ITR 456 ( SC); RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC); UNION CARBIDE (INDIA) LTD. V. ITO [1973] 87 ITR 529 (CAL). PAGE 6 OF 8 5. THE LD. FIRST APPELLATE AUTHORITY BEFORE COMING TO ANY CONCLUSION EVEN SOUGHT COMMENTS OF THE LD. ASSESSING OFFICER WHEREI N IN THE REMAND REPORT THE THEN ASSESSING OFFICER MERELY CLAIMED THAT THE REOPENING WAS BASED UPON VALID REASONS. HOWEVER, NO COMMENTS WERE OFFERED ON SUFFICIENCY OF REASONS. ADMITTEDLY, THE REGULAR ASSESSMENT WAS MADE U/S 143 (3) AND NOTICE U/S 148 WAS ISSUED AFTER A LAPSE OF FOUR YEARS THAT TOO ON THE BASIS OF CERTAIN COURT DECISIONS BUT FACT REMAINS THAT THE NECESSARY DETAI LS/MATERIAL WAS DULY DISCLOSED BY THE ASSESSEE, THEREFORE, WE ARE OF THE HUMBLE OPINION THAT ITO IS NOT PERMITTED TO REOPEN THE ASSESSMENT U/S 147 ON T HE BASIS OF LATER DECISION FROM THE COURT. OUR VIEW IS SUPPORTED BY THE DECISI ON IN INDIRA CO. LTD. VS. ITO (80 ITR 559) (CAL). IN VIEW OF THIS FACT, IT CA N BE SAID THAT THE PROCEEDINGS INITIATED U/S 147 R.W. SEC. 148 AND CON SEQUENT ASSESSMENT ARE UNJUSTIFIED, THEREFORE, LEGALLY UNSUSTAINABLE. EVEN ON PERUSAL OF REASONS RECODED SHOWS THAT THERE IS ALLEGATION OF ESCAPEMEN T OF INCOME AND THERE IS EVEN NO WHISPER OF AN ALLEGATION THAT SUCH ESCAPEME NT OCCURRED DUE TO THE FAILURE ON THE PART OF THE ASSESSEE EITHER IN DISCL OSING FULLY AND TRULY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT OR THE ASSE SSEE HIDE ANYTHING. IN THE ABSENCE OF SUCH FINDING, THE ASSUMPTION OF JURISDIC TION U/S 147 IS QUITE UNJUSTIFIED. OUR VIEW IS FURTHER FORTIFIED BY THE D ECISION OF THE HONBLE APEX COURT IN CIT VS. TARAJAN TEA CO. LTD. (236 ITR 477) (SC), HONBLE BOMBAY HIGH COURT IN HINDUSTAN LIVER VS. R.B. WADKAR/ACIT (268 ITR 332) (BOM) WHICH WAS APPRECIATED/FOLLOWED BY THE HONBLE P & H HIGH COURT IN DULICHAND PAGE 7 OF 8 SINGHANIA VS. ACIT (269 ITR 192) (P & H). THE RELEV ANT PORTION OF THE ORDER IS REPRODUCED HEREWITH: HELD, THAT THE REASONS RECORDED FOR ISSUE OF NOTICE SHOWED THAT THE SATISFACTION RECORDED THEREIN WAS MERELY ABOUT THE ESCAPEMENT OF INCOME. THERE WAS NOT EVEN A WHISPER OF AN ALLEGATION THAT SUCH ESCAPEMENT HAD OCCURRED BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. ABSENC E OF THIS FINDING WHICH IS A SINE QUA NON FOR ASSUM ING JURISDICTION UNDER SECTION 147 OF THE ACT IN A CASE FALLING UNDER THE PROVISO THRERTO, MADE THE ACTION TAKEN BY THE ASSESSING OFFICER WHOLLY WITHOUT JURISDICTION. THE NOTICE WAS NOT VALID AND WAS LIAB LE TO BE QUASHED. 6. IN THE PRESENT APPEAL, SINCE THERE WAS NO OMISSI ON OR FAILURE ON THE PART OF THE ASSESSEE, THEREFORE, THE ASSUMPTION OF JURISDICTION U/S 147/148 IS UNJUSTIFIED, CONSEQUENTLY, THE ASSESSMENT HAS BEEN RIGHTLY ANNULLED BY THE LD. CIT(A). IN THE LIGHT OF THESE FACTS AND JUDICIAL PR ONOUNCEMENTS, WE HAVE NOT FOUND ANY INFIRMITY IN THE IMPUGNED ORDER. IT IS UP HELD. PAGE 8 OF 8 IN THE RESULT, THIS APPEAL OF THE REVENUE IS HAVIN G NO MERIT, THEREFORE, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.10.200 9. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 .10.2009 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/ CIT(A)/DR