ROHA DYECHEM P. LTD, MUMBAI V. ACIT CEN CIR 43, MUMBAI

ITA 3926/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71562 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-10-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 05-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV R PRASAD
• Assessee Lawyers: SNEHAL J SHAH
• Keywords: Opportunity of being heard; Initiation of penalty proceedings
• Section: 143(3); 80HHC; 147; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , . ! , ' # BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 ROHA DYECHEM PVT. LTD., A 44-45, MIDC, 2 ND STREET, MAROL, ANDHERI (E), MUMBAI 400092 $ $ $ $ / VS. THE ACIT, CEN. CIRCLE-43, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 & ' ./ ' ./ PAN/GIR NO. : AAACR 4974P ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) &( + / APPELLANT BY: SHRI SNEHAL J. SHAH )*&( , + / RESPONDENT BY : SHRI RAJIV R. PRASAD $ , -' / DATE OF HEARING : 23/10/2013 ./% , -' / DATE OF PRONOUNCEMENT : 23/10/2013 0 / O R D E R PER I.P.BANSAL,J.M: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE. T HEY ARE DIRECTED AGAINST TWO SEPARATE ORDERS DATED 16/3/2012 PASSED BY LD. C IT, CIR.4, MUMBAI IN RESPECT OF ASSESSMENT YEAR 1999-2000 AND 2000-01 RE SPECTIVELY UNDER THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT,19 61(THE ACT). GROUNDS OF APPEAL IN BOTH THE APPEALS ARE IDENTICAL AND ARE AS UNDER: I. 1. THE LEARNED COMMISSIONER OF INCOME TAX (CENT RAL)-IV (CIT-(CENTRAL)) ERRED IN INVOKING THE PROVISION OF SECTION 263 WITHOUT HAVIN G JURISDICTION TO DO SO, THEREBY RENDERING THE ORDER VOID AB INITIO, ILLEGAL AND BAD IN LAW AND AS SUCH THE ORDER PASSED U/S 263 IS LIABLE TO BE QUASHED. WITHOUT PREJUDICE TO ABOVE GROUND, ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 2 II. 1. THE CIT-(CENTRAL) ERRED IN PASSING AN ORDER U/S 263 WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD AND WITHOUT APPRECIATING THE FACT THAT THE ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHOUT PREJUDICE TO ABOVE GROUND, III. 1. THE CIT- (CENTRAL) ERRED IN PASSING AN ORDE R U/S 263 SETTING ASIDE THE ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT THE ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERE ST OF THE REVENUE. WITHOUT PREJUDICE TO ABOVE GROUND, IV. 1. THE CIT-(CENTRAL) ERRED IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTING HIM TO REFRAME THE ASSESSMENT IN ACCORDAN CE WITH THE LAW. 2. IT WAS POINTED OUT THAT THE FACTS AND CIRCUMSTAN CES OF BOTH THE CASES ARE SIMILAR, THEREFORE, FOR THE SAKE OF CONVENIENCE THE FACTS REGARDING A.Y 1999-2000 ARE DISCUSSED BELOW. 3. ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED BY THE AO INITIALLY ON 23/1/2002, WHEREIN TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS.2,94,03,980/- BY ALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. LATER ON NOTICE UNDER SECTION 147 WAS ISSUED ON THE BASIS OF TAXATION LAW (AMENDMENT) ACT 2005 R.W.S. CBDT CIRCULAR NO.2 OF 2 006 DATED 27/7/2006. ACCORDINGLY, TOTAL INCOME WAS RECOMPUTED AT RS.7,81 ,75,917/-. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A), WHO UPH ELD THE ORDER OF AO. AGAINST THE SAID ORDER OF LD. CIT(A) APPEAL WAS FILED BEFOR E ITAT AND ITAT DIRECTED THE AO TO FURNISH THE COPIES OF REASONS RECORDED FOR REOPE NING OF THE CASE SO THAT THE ASSESSEE MAY BE ABLE TO RAISE OBJECTION AND THEN TO PROCEED TO ASSESS THE ASSESSEE AS PER LAW. IN PURSUANCE OF DIRECTIONS O F ITAT THE ASSESSMENT AGAIN WAS FINALIZED VIDE ORDER DATED 16/12/2010 PASSED UN DER SECTION 143(3) R.W.S. 147, WHEREBY INCOME OF THE ASSESSEE WAS AGAIN ASS ESSED AT THE SAME FIGURE OF RS.7,81,75,917/- BY DISALLOWING THE CLAIM OF ASSESS EE UNDER SECTION 80 HHC ON DEPB. 3.1 IT IS FOR THE SAID ASSESSMENT ORDER LD. CIT H AS INVOKED SECTION 263 IN RESPECT OF ASSESSMENT YEARS 1999-2000 AND 2000-01. LD. CIT HAS FOUND FROM THE RECORD THAT IN EARLIER ASSESSMENT ORDER WHICH W AS DATED 27/7/2006 THE AO HAD INITIATED PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) OF THE ACT. HOWEVER, IN ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 3 SUBSEQUENT ASSESSMENT ORDER DATED 16/12/2010 THE AO DID NOT INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). REFERRING TO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SURENDRA P. AGA RWAL, 275 ITR 113 IN WHICH IT IS HELD THAT FAILURE OF THE AO TO INITIATE PEN ALTY PROCEEDINGS IN THE COURSE OF ASSESSMENT PROCEEDINGS WILL RENDER THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN RESPONS E TO SHOW CAUSE NOTICE ISSUED IN THIS REGARD THE ASSESSEE RELIED ON CIRCULAR NO.2 OF 2006 DATE 17/1/2006 IN WHICH IT WAS CLARIFIED THAT NO PENALTY SHOULD BE LEVIED IN RESPECT OF FRESH DEMAND RAISED CONSEQUENT TO ENACTMENT OF TAXATION LAW (AM ENDMENT) ACT 2005 ON ACCOUNT OF FAILURE IN THE RETURNED/ASSESSED INCOME ATTRIBUTABLE TO PROFITS ON SALE OF DEPB CREDITS OR DFRC. THE CIRCULAR FURTHER STA TES THAT IN SUCH CASES WHERE PENALTY HAS BEEN INITIATED, THE PENALTY PROCEEDINGS SHALL BE DROPPED. REFERRING TO THE SAID CIRCULAR IT WAS PLEADED THAT THE ASSES SMENT ORDER PASSED BY AO DATED 16/12/2010 CANNOT BE HELD TO BE ERRONEOUS EVE N THOUGH PENALTY PROCEEDINGS WERE INITIATED IN THE ORDER DATED 27/7/ 2006 ON THE SAME ISSUE. 3.2 HOWEVER, LD. CIT HAS REJECTED SUCH CONTENTION O F THE ASSESSEE ON THE GROUND THAT SECTION 80I/80IB DEDUCTION ALLOWABLE TO ASSESSEE AT RS.4,87,82,254/- HAS BEEN REDUCED FROM DEDUCTION AL LOWABLE UNDER SECTION 80HHC AT RS.12,80,15,828/- AND ACCORDINGLY DEDUCTIO N UNDER SECTION 80HHC WAS ALLOWED AT RS.7,92,33,574/- ONLY INSTEAD OF RS. 12,80,15,828/- BY INVOKING SECTION 80 HHC (4B). IT IS FURTHER OBSERVED BY LD. CIT THAT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE INITIATED IN ORIGINAL ORDER AGAINST AFOREMENTIONED DISALLOWANCE. THE FAILURE OF THE AO TO INITIATE P ENALTY UNDER SECTION 271(1)(C) IN THE ORDER DATED 16/12/2010 WITH REFERENCE TO THE DI SALLOWANCE OF DEDUCTION IN VIEW OF SECTION 80HHC(4B) HAS RENDERED THE ASSESSM ENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIRCUL AR RELIED UPON BY ASSESSEE ONLY RELATES TO NON-LEVIABLITY OF PENALTY UNDER SECTION 271(1)(C) WITH REGARD TO DISALLOWANCE UNDER SECTION 80HHC ON DEPB CREDITS O NLY. SINCE THE AO HAS FAILED TO INITIATE SUCH PENALTY PROCEEDINGS WHICH C OULD BE INITIATED ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSMEN T ORDER PASSED BY AO BECOME ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTE REST OF REVENUE. FOR THESE REASONS HE HAS SET ASIDE THE ASSESSMENT ORDER FOR B OTH THE YEARS TO THE FILE OF AO ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 4 WITH A DIRECTION TO REFRAME ASSESSMENT IN ACCORDANC E WITH LAW AFTER PROVIDING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. 4. AFTER NARRATING THE FACTS LD. AR SUBMITTED THAT ACCORDING TO WELL ESTABLISHED LAW PENALTY PROCEEDINGS ARE INDEPENDENT AND SEPARATE FROM THE ASSESSMENT PROCEEDINGS INASMUCH AS ASSESSEE IS ALL OWED TO ADDUCE FRESH EVIDENCE DURING THE PENALTY PROCEEDINGS. THEREFORE , FAILURE ON THE PART OF AO TO INITIATE PROCEEDINGS CANNOT VITIATE THE ASSESSMENT ORDER PARTICULARLY WHEN ASSESSED INCOME REMAIN UNCHANGED AND CONSEQUENTLY CANNOT BE A MATTER OF REVISION BY THE COMMISSIONER UNDER SECTION 263 OF T HE ACT. HE IN THIS REGARD REFERRED TO THE DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF J.K.DCOSTA 133 ITR 7(DEL), WHEREIN CIT INVOKED POWER FOR THE R EASONS THAT AO FAILED TO INITIATE PENALTY PROCEEDINGS DURING THE COURSE OF A SSESSMENT PROCEEDINGS. IT WAS HELD THAT PENALTY PROCEEDINGS ARE SEPARATE FROM AS SESSMENT PROCEEDINGS. THERE IS NO IDENTITY BETWEEN THE TWO. THOUGH IT IS USUAL FOR THE AO TO RECORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE TO BE INITIATED, THIS IS MERE A MATTER OF CONVENIENCE THAN OF LEGAL REQUIREMENT. A LL THAT THE LAW REQUIRES, SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT T HEY SHOULD BE INITIATED IN THE COURSE OF PROCEEDINGS FOR ASSESSMENT. FAILURE OF T HE ITO TO RECORD IN THE ASSESSMENT ORDER HIS SATISFACTION OR THE MATTER IN REGARD TO THE LEVIABILITY OF PENALTY CANNOT BE SAID TO A FACTOR VITIATING THE A SSESSMENT ORDER IN ANY RESPECT. AN ASSESSMENT CANNOT BE SAID TO BE ERRONEOUS OR PR EJUDICIAL TO THE INTEREST OF REVENUE BECAUSE OF THE FAILURE OF THE ITO TO RECORD HIS OPINION ABOUT THE LEVIABILITY OF PENALTY IN THE CASE. LD. AR SUBMIT TED THAT SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT AGAINST AFOREMENTIONED DE CISION OF HONBLE DELHI HIGH COURT HAS BEEN DISMISSED BY HONBLE SUPREME COURT A ND REFERENCE IN THIS REGARD WAS MADE TO (1984) 147 ITR (ST.) 1. HE ALSO RELIED UPON THE FOLLOWING DECISIONS IN WHICH SIMILAR PROPOSITION HAS BEEN LAID DOWN: CIT V. SUDERSHAN TALKIES (201 ITR 289 (DELHI) CIT V. NIHAL CHAND REKYAN (242 ITR 45(DELHI) CIT V. KESHRIMAL PARSMAL (157 ITR 484 (RAJASTHAN) SURENDRA PRASAD SINGH V. CIT (173 ITR 510 (GAUHATI ) ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 5 CIT V. LINOTYPE AND MACHINERY LTD. (192 ITR 337(CAL CUTTA). CIT V. SUBHASH KUMAR JAIN (335 ITR 364(PUNJAB & HA RYANA) 4.1 LD. AR FURTHER REFERRED TO THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF ADDL. CIT VS. ACHAL KUMAR JAIN, 142 ITR 60 6, IN WHICH IT WAS OBSERVED THAT THOUGH IT WAS TRUE THAT THE SATISFACTION OF THE ITO, BEFORE THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS, WAS THE CONDITION PREC EDENT FOR AN EXERCISE OF THE JURISDICTION TO IMPOSE PENALTY, NON-EXPRESSION OF SUCH A SATISFACTION IN THE ASSESSMENT ORDER COULD NOT INVALIDATE IT. IT WAS HELD THAT LD. CIT WAS WRONG IN INVOKING THE PROVISIONS OF SECTION 263. 4.2 LD. AR FURTHER MENTIONED TO THE DECISION OF HO NBLE GUJARAT HIGH COURT IN THE CASE OF PARMANAND M. PATEL, 278 ITR 3, WHEREIN EVEN CONSIDERING THE DECISION RELIED UPON BY LD. CIT [SURENDRA P. AGARWA L(SUPRA)] IT WAS HELD THAT THE INITIATION OF PENALTY IS UNDER THE EXCLUSIVE DOMAIN OF AO AND LD. CIT IS NOT EMPOWERED TO RECORD SATISFACTION BY INVOKING SECTIO N 271(1)(C) AND IF HE IS NOT ENTITLED TO DO SO ON HIS OWN, HE CANNOT DO IT BY DI RECTING THE AO TO INITIATE THE PROCEEDINGS AND IN THIS MANNER SECTION 263 PROCEED INGS WERE HELD TO BE INVALID. HE SUBMITTED THAT SIMILAR VIEW WAS TAKEN BY HONBLE GUJARAT HIGH COURT IN SUBSEQUENT DECISION IN THE CASE OF DR. SURESH G. SH AH VS. CIT, 289 ITR 110. LD. AR ALSO REFERRED TO THE FOLLOWING DECISIONS TO CONT END THAT NON-INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) IN THE ASSESSMENT ORDER DID NOT RENDER THE ASSESSMENT ORDER ERRONEOUS AS WELL AS PR EJUDICIAL TO THE INTEREST OF REVENUE: CIT VS. C.R.K SWAMY (2003) (254 ITR 158) (MAD) J.P.CONSTRUCTIONS , (2009) ITAT AHMEDABAD 4.3 LD. AR FURTHER REFERRED TO THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT, 243 ITR 83 (SC) TO CONTEND THAT FOR INVOKING POWER UNDER SECTION 263 TWO CONDITIONS ARE REQUIRED TO BE FULFILLED SIMULTANEOUSLY, WHICH ARE THAT THE ASSESSMENT ORDE R SHOULD BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. TH US LD. AR SUBMITTED THAT THE ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 6 ONLY GROUND ON WHICH LD. CIT HAS DIRECTED THE AO TO INITIATE CONCEALMENT PENALTY IS ON ACCOUNT OF REDUCTION IN 80IA BENEFIT BY INVO KING THE PROVISIONS OF SECTION 80IA(9) WHICH IN THE OPINION OF LD. CIT, HAS RENDER ED THE ASSESSMENT ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE SUBMITTED THAT THE AO AFTER PROPER APPLICATION OF MIND HAS AR RIVED AT A CONCLUSION THAT IT IS NOT A FIT CASE WHERE PENALTY SHOULD BE INITIATED HA VING REGARD TO THE FACT THAT THERE WAS A FULL DISCLOSURE IN RESPECT OF CLAIM CO UPLED WITH THE FACT THAT THE ISSUE INVOLVED WAS HIGHLY DEBATABLE IN NATURE. T HEREFORE, LD. AR SUBMITTED THAT LD. CIT HAS WRONGLY INVOKED JURISDICTION UNDER SECT ION 263 OF THE ACT. 4.4 WITHOUT PREJUDICE TO ABOVE ARGUMENTS IT WAS SUB MITTED THAT AT THE TIME OF PASSING THE ORDER UNDER SECTION 263, THE SOLE ISSUE IS REDUCTION OF BENEFIT UNDER SECTION 80IA ON WHICH LD. CIT HAS DIRECTED THE AO T O INITIATE PENALTY PROCEEDINGS. HE SUBMITTED THAT THE ISSUE HAS AL READY BEEN DECIDED BY ITAT IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE RELYI NG UPON DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIATE D CAPSULES LTD. VS. DCIT (332 ITR 42). HE SUBMITTED THAT THIS ORDER OF ITAT WA S AVAILABLE WHEN LD. CIT HAS PASSED ORDER UNDER SECTION 263. THEREFORE, LD. A R PLEADED THAT LD. CIT WAS NOT JUSTIFIED IN HOLDING THAT THE ORDER PASSED BY L D. AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. LD. AR IN THIS REGARD ALSO REFERRED TO THE ORDER OF TRIBUNAL DATED 20/05/2011 PASSED IN MA NO. 73/MUM/2011 IN RESPECT OF ASSESSMENT YEAR 2001-02, COPY OF WHICH HAS BEEN ANNEXED AS ANNEXURE-H, WHEREIN THE TRIBUNAL FOLLOWING THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES LTD. VS. DCIT(SUPRA) HAS HELD THAT THE DEDUCTION UNDER SECTION 80 IA AND 80 HHC C OMBINED TOGETHER SHOULD NOT EXCEED THE TOTAL INCOME SHOWN BY THE ASSESSEE. THUS IT WAS SUBMITTED BY LD. AR THAT THE ORDERS PASSED BY LD. CIT UNDER SECT ION 263 SHOULD BE SET ASIDE AND QUASHED. 5. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS PASSED BY LD. CIT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER PASSED ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 7 BY LD. CIT. THE POWER UNDER SECTION 263 HAS BEEN INVOKED BY LD. CIT ON THE GROUND THAT CONCEALMENT PENALTY IS LEVIABLE ON THE ASSESSEE TO THE EXTENT ITS CLAIM UNDER SECTION 80 HHC WAS REDUCED BY THE DEDU CTION GRANTED UNDER SECTION 80I/80IB OF THE ACT. HE IN THIS REGARD HAS MENTIONED TO THE PROVISIONS OF SECTION 80 HHC(4B). HE HELD THAT ACCORDING TO CIRC ULAR RELIED UPON BY THE ASSESSEE CONCEALMENT PENALTY CANNOT BE LEVIED ON DI SALLOWANCE OF DEDUCTION UNDER SECTION 80 HHC ON DEPB CREDITS. ACCORDING TO LD. CIT THE FAILURE OF AO TO INITIATE CONCEALMENT PENALTY PROCEEDINGS ON THE AMOUNT WHICH IS CLAIMED AND ALLOWED AS DEDUCTION UNDER SECTION 80I/80IB WHILE C OMPUTING THE DEDUCTION UNDER SECTION 80HHC HAS RENDERED THE ASSESSMENT ORD ER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. 7.1 ON THESE FACTS WE HAVE TO CONSIDER THAT WHETHE R LD. CIT WAS RIGHT IN INVOKING POWER UNDER SECTION 263 WHICH HAVE BEEN P RESSED ONLY FOR THE REASON THAT AO HAS FAILED TO INITIATE CONCEALMENT PENALTY PROCEEDINGS. LD. CIT FOR THIS PURPOSE HAS RELIED UPON THE DECISION IN THE CASE OF SURENDRA P. AGARWAL(SUPRA). ON THE OTHER HAND, THERE ARE SEVERAL DECISIONS IN W HICH A CLEAR PROPOSITION HAS BEEN LAID DOWN THAT NON-INITIATION OF PENALTY PROCE EDINGS CANNOT RENDER THE ASSESSMENT ORDER AS ERRONEOUS. THESE DECISIONS HA VE BEEN DISCUSSED IN DETAIL WHILE RECORDING THE ARGUMENTS OF THE LD. AR. IT I S PERTINENT TO MENTION HERE THAT THE HONBLE SUPREME COURT HAS DISMISSED THE SLP FIL ED BY THE DEPARTMENT AGAINST THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF J.K.DCOSTA(SUPRA). THIS POINT HAS BEEN TAKEN NOTE IN THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF SURENDRA PRASAD SINGH VS. CIT, 173 ITR 510. HOWEVER, THE AFOREMENTIONED DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SURENDRA P. AGARWAL (SUPRA) HAS DISSENTED WITH THE AFOREMENTIONED DECISION OF HONBLE DELHI HIGH COURT. SEVERAL OTHE R HIGH COURTS HAVE ALSO EXPRESSED THE VIEW THAT NON-INITIATION OF PENALTY PROCEEDINGS DURING THE COURSE OF ASSESSMENT PROCEEDINGS DOES NOT RENDER THE ASSES SMENT ORDER ERRONEOUS SO AS TO MAKE ENTITLE THE CIT TO INVOKE SECTION 263. THESE DECISIONS HAVE ALSO BEEN MENTIONED IN THE ABOVE PART OF THIS ORDER WHILE REC ORDING THE ARGUMENTS OF THE ASSESSEE. THEREFORE, THERE IS CATENA OF DECISION S WHICH FAVOUR THE VIEW THAT NON-INITIATION OF PENALTY PROCEEDINGS DURING THE CO URSE OF ASSESSMENT ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 8 PROCEEDINGS CANNOT RENDER THE ASSESSMENT ORDER AS ERRONEOUS. ACCORDING TO WELL ESTABLISHED LAW IF THERE ARE TWO VIEWS, THE VI EW FAVOURABLE TO ASSESSEE IS TO BE ADOPTED PARTICULARLY WHEN THE OPINION OF JURISDI CTIONAL HIGH COURT OR APEX COURT IS NOT AVAILABLE ON THAT VIEW. REFERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C IT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. IN THIS VIEW OF THE SITUATION IT HAS TO BE HELD THAT LD. CIT HAS WRONGLY INVOKED JURISDICTION UNDER SECTION 263. 7.3 THERE IS ONE MORE ASPECT OF THE MATTER. LD. CI T WHILE HOLDING THAT ASSESSMENT ORDER IS ERRONEOUS HAS OBSERVED THAT CON CEALMENT PENALTY IS LEVIABLE WITH RESPECT TO AMOUNT OF DEDUCTION UNDER SECTION 8 0 IB BY WHICH DEDUCTION UNDER SECTION 80 HHC HAS BEEN REDUCED. WE FOUND TH AT THIS ISSUE HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN THE MISCELLANEO US APPLICATION FILED BY THE ASSESSEE. FOLLOWING THE DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES VS. DCIT(SUPRA), THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AS PER FOLLOWING OBSERVATIONS: 9. GROUND NO.3: AFTER HEARING BOTH THE PARTIES, W E FIND WE FIND THAT THE AO REDUCED DEDUCTION U/S.8OHHC, WHILE COMPUTING DEDUCT ION U/S.801B(10) IN VIEW OF THE PROVISIONS OF SECTION 801B(13) R.W.S. 801A(9). THE ACTION OF THE AO HAS BEEN CONFIRMED BY THE ID. CIT[A). 1.0. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PVT. LTD. VS. DCIT IN IT.APPEAL NO.3036 OF 2010, DATED 10 TH JANUARY, 2011. 11. ON THE OTHER HAND, ID. DR RELIED ON THE ORDER OF THE CIT[A]. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PVT. LTD. VS. DCIT [SUPRA], HAS DECIDED THE ISSUE VIDE PARA-39 WHICH READS AS UNDER: IN THE RESULT, WE HOLD THAT SECTION 80-IA(9) DOES NOT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VI-A, BUT IT AFFECTS THE ALLOWABILITY OF DEDUCTIONS COMPUTED UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VI-A, SO THAT THE AGGREG ATE DEDUCTION UNDER SECTION 80-IA AND OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI-A DO NOT EXCEED 100 PER CENT. OF THE PROFITS OF THE BUSINESS OF THE ASSESSEE. OUR ABOVE VIEW IS ALSO SUPPORTED BY THE CENTRAL BOARD O F DIRECT TAXES CIRCULAR NO. 772 DATED DECEMBER 23, 1998 ([1999] 235 TR (ST. ) 35), WHEREIN IT IS STATED THAT SECTION 80-IA(9) HAS BEEN INTRODUCED WI TH A VIEW TO PREVENT THE TAXPAYERS FROM CLAIMING REPEATED DEDUCTIONS IN RESP ECT OF THE SAME AMOUNT ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 9 OF ELIGIBLE INCOME AND THAT TOO IN EXCESS OF THE EL IGIBLE PROFITS. THUS, THE OBJECT OF SECTION 80-IA(9) BEING NOT TO CURTAIL THE DEDUCTIONS COMPUTABLE UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTE R VI-A, IT IS REASONABLE TO HOLD THAT SECTION 80-IA(9) AFFECTS ALLOW-ABILITY OF DEDUCTION AND NOT COMPUTATION OF DEDUCTION. TO ILLUSTRATE, IF RS.100 IS THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, RS. 30 IS THE PROFITS ALLOWED A S DEDUCTION UNDER SECTION 80-IA(1) AND THE DEDUCTION COMPUTED AS PER SECTION 80HHC IS RS. 80/-, THEN, IN VIEW OF SECTION 80-IA(9), THE DEDUCTION UNDER SE CTION 80HHC WOULD BE RESTRICTED TO RS. 70/-, SO THAT THE AGGREGATE DEDUC TION DOES NOT EXCEED THE PROFITS OF THE BUSINESS. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO COMPUT E THE DEDUCTION AS HELD BY THE HONBLE BOMBAY HIGH COURT IN PARA-39 ABOVE IN THE RESULT, THE MISCELLANEOUS APPLICATION IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 0/5/2011. THEREFORE, IF SIMILAR ISSUE HAS ALREADY BEEN D ECIDED IN FAVOUR OF ASSESSEE BY THE ITAT IN WHICH ADDITION ITSELF HAS BEEN DELETED THEN HOW THE NON-INITIATION OF CONCEALMENT PENALTY WILL RENDER THE ASSESSMENT ORDE R ERRONEOUS. THUS, THERE IS A FORCE IN THE ALTERNATIVE CONTENTION OF LD. AR T HAT THE ISSUE ON WHICH LD. CIT HAS INVOKED POWER UNDER SECTION 263 WAS ALREADY DEC IDED IN FAVOUR OF THE ASSESSEE. IT MAY BE MENTIONED HERE THAT WHEN LD. C IT INVOKED JURISDICTION UNDER SECTION 263, THE AFOREMENTIONED ORDER OF TRIB UNAL WAS AVAILABLE ON RECORD. FOR THIS REASON ALSO WE HOLD THAT POWER UNDER SECTI ON 263 HAS WRONGLY BEEN EXERCISED. 7.4 KEEPING IN VIEW THE ABOVE DISCUSSIONS THE IMPU GNED ORDERS PASSED BY LD. CIT UNDER SECTION 263 ARE HELD TO BE INVALID AND AR E QUASHED. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 /10/2013 . 0 , ./% ' 1 2$3 23/10//2013 / , 4 SD/- SD/- ! (RAJENDRA) . . (I.P.BANSAL) ' /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 2$ DATED 23/10/2013 ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 10 . $ . .VM , SR. PS 0 0 0 0 , ,, , )-56 )-56 )-56 )-56 7 6%- 7 6%- 7 6%- 7 6%- / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 )-$ , , / DR, ITAT, MUMBAI 6. 4: ; / GUARD FILE. 0$ 0$ 0$ 0$ / BY ORDER, *6- )- //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ./ I.T.A. NO. 3926 & 3927/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEARS : 1999-2000 & 2000-01 11 DATE INITIALS 1. DRAFT DICTATED ON: 23/10/2013 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 24/10/2013 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: