Hindustan Gum & Chemicals Ltd., Kolkata V. DCIT, CIR-12(1), KOLKATA, Kolkata

ITA 445/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4067 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 13-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 15-03-2016
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: V K SHARMA
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 143(3); 10B; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI S.S. VISWANETHRA RAVI, JM] ITA NO.445/KOL/2016 ASSESSMENT YEAR : 2010-11 HINDUSTAN GUM & CHEMICALS LTD. -VERSUS- D.C.I.T. , CIRCLE-12(1), KOLKATA KOLKATA (PAN:AAACH 7214 E) ( APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI J.P.KHAITAN, SR.COUNSEL, S HRI SANJAY BHOWMIK, ADVOCATE AND SHRI V.K.SHARMA, AR FOR THE RESPONDENT : SHRI NIRAJ KUMAR, CIT(DR) DATE OF HEARING : 19.12.2016. DATE OF PRONOUNCEMENT : 19.12.2016. ORDER PER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF T HE ORDER OF THE LEARNED CIT DATED 08.02.2016 FOR THE ASST YEAR 2010-11 PASSED AGAINST THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEA L IS AS TO WHETHER THE LD.CIT IS JUSTIFIED IN INVOKING THE REVISIONARY JURISDICTION U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE A SSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING /TRADING O F GUAR GUM AND WIND POWER GENERATION. THE ASSESSEE IS HAVING 100% EXPORT ORIE NTED UNIT (EOU) AT VIRAMGAM AND HAD CLAIMED DEDUCTION U/S 10B OF THE ACT IN THE SUM OF RS.5,12,79,987/- IN THE RETURN OF INCOME WHICH WAS ORIGINALLY PROCESSED U/S 143(1) OF THE ACT LATER IN THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE L D. AO AFTER THOROUGHLY EXAMINING THE CLAIM OF DEDUCTION U/.S 10B OF THE ACT ACCEPTED THE ELIGIBILITY OF CLAIM OF DEDUCTION U/S 10B OF THE ACT AND FINALLY MADE DISAL LOWANCE OF RS.86,85,103/- IN RESPECT OF CERTAIN RECEIPTS NOT ATTRIBUTABLE TO EXP ORT ORIENTED UNIT AND DENIED DEDUCTION U/S 10B THEREON. IN OTHER WORDS, THE CLAIM OF DEDUC TION U/S 10B OF THE ACT BY THE ITA NO.445/KOL/2016 M/S. HINDUSTAN GUM & CHEMICALS LTD. A.YR.2010-11 2 ASSESSEE IN THE SUM OF RS.5,12,79,987/- WAS DISTURB ED BY MAKING THE ADDITION IN THE SUM OF RS.86,85,103/-. BUT THE LD. AO STARTED EXAMI NING THIS CLAIM OF DEDUCTION U/S 10B OF THE ACT BY STATING IN THE ASSESSMENT ORDER A S BELOW :- THE COMPANY HAS SHOWN EXEMPT INCOME OF RS.6,25,86, 229/- THE LD. AO ALSO STATED THAT THE ASSESSEE HAD CLAIME D 100% DEDUCTION FROM ITS PROFITS DERIVED FROM EOU FROM THE EXPORT OF ARTICLES. THIS LITTLE CONFUSION IN THE ASSESSMENT ORDER TRIGGERED THE INITIATION OF REVISION PROCEEDI NGS U/S 263 OF THE ACT WHICH MADE THE LD. CIT TO ARRIVE AT THE CONCLUSION THAT THE AS SESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT TO THE TUNE OF RS.6,25,86,299/- WHEREAS THE CHARTERED ACCOUNTANT IN FORM NO.56G HAD CERTIFIED THE CLAIM OF DEDUCTION U/S 10B OF THE ACT ONLY TO THE TUNE OF RS.5,12,79,987/- AND ACCORDINGLY THE LD. AO OUGHT T O HAVE ADDED THE BALANCE SUM OF RS.1,13,06,312/- IN THE ASSESSMENT WHICH, IN THE OP INION OF THE LD CIT, RESULTED IN UNDER ASSESSMENT TO THE EXTENT THEREBY MAKING THE O RDER OF THE LD. AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASS ESSEE IN REPLY TO THE SHOW CAUSE NOTICE BROUGHT TO THE ATTENTION OF THE LD. CIT THAT THE SAID SUM OF RS.6,25,86,299/- REPRESENTS ONLY THE PROFITS DERIVED FROM100% EOU BEFORE DEPRECIATION AND AFTER COMPUTING THE BUSINESS PROFITS IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT, THE AMOUNT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT WA S WORKED OUT AT RS.5,12,79,987/- WHICH WAS ALSO CERTIFIED BY THE CHARTERED ACCOUNTAN T IN FORM NO.56G FOR THE SAME AMOUNT. THE ASSESSEE ACCORDINGLY CLAIMED DEDUCTION U/S 10B OF THE ACT ONLY TO THE EXTENT OF RS.5,12,79,987/- WHICH WAS ACCEPTED BY TH E LD. AO U/S 143(1) OF THE ACT INITIALLY AND LATER U/S 143(3) OF THE ACT BY MAKING DISALLOWANCE ON SOME OTHER ACCOUNT TO THE TUNE OF RS.86,85,103/-. HENCE IT WAS POINTED OUT THAT NO ERROR HAD OCCURRED IN THE ORDER OF THE LD. AO WARRANTING THE INITIATION O F ASSESSMENT PROCEEDINS U/S 263 OF THE ACT. THE LD. CIT HOWEVER, PROCEEDED TO SET ASID E THE ASSESSMENT DE NOVO WITH A DIRECTION TO THE LD. AO TO EXAMINE THE APPLICABILIT Y OF SECTION 10B OF THE ACT BY REACHING TO THE CONCLUSION THAT THIS ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE LD. AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ASSESSMENT MADE BY THE LEARNED DCIT NEITHER ERRONEOUS NOR PREJUDICIAL TO T HE INTEREST OF REVENUE AND THEREFORE THE LEARNED CIT WAS NOT JUSTIFIED IN INVOKING THE P ROVISIONS OF SECTION 263. 2. THAT THE ORDER U/S.263 IS BAD IN LAW AND, THEREF ORE, THE SAME IS LIABLE TO BE QUASHED. ITA NO.445/KOL/2016 M/S. HINDUSTAN GUM & CHEMICALS LTD. A.YR.2010-11 3 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT WAS NOT JUSTIFIED IN HOLDING THAT NO PROPER INVESTIGATION WAS MADE BY TH E LD.DCIT IN CONNECTION WITH ASSESSEE'S CLAIM FOR DEDUCTION U/S.10B WHEREAS ALL RELEVANT REPORT LINFORMATION PERTAINING TO THE CLAIM WERE SUBMITTED BY THE APPEL LANT AND DULY VERIFIED DURING THE ASSESSMENT PROCEEDINGS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT FAILED TO APPRECIATE THAT CLAIM FOR DEDUCTION U/S.10B WAS MADE BY THE AP PELLANT ON BASIS OF REPORT OF THE AUDITORS AND THE SAME WAS DULY CONSIDERED BY THE LD .DCIT WHILE PASSING THE ASSESSMENT ORDER. THAT THE APPELLANT COMPANY CRAVES LEAVE TO, ADD TO, ALTER, AMEND AND/OR WITHDRAW ALL OR ANY OF THE ABOVE GROUNDS AT OR BEFORE THE HEARING O F THE APPEAL. 4. THE LD. AR BROUGHT OUR ATTENTION TO THE RELEV ANT PAGES OF THE PAPER BOOK CONTAINING COMPUTATION OF TOTAL INCOME, INDEPENDENT PROFIT AND LOSS ACCOUNT OF 100% EOU, INDEPENDENT INCOME TAX DEPRECIATION STATEMENT OF 100% EOU, COMPUTATION OF DEDUCTION U/S 10B OF THE ACT, FORM NO.56G ISSUED BY THE CHARTERED ACCOUNTANT TOGETHER WITH THE WORKINGS AND CONSOLIDATED FINANCI AL STATEMENTS TOGETHER WITH THE ANNUAL REPORT FOR THE YEAR ENDED 31.03.2010 AND ALS O FILED A COMPLETE RECONCILIATION OF THE COMPUTATION OF THE BUSINESS IN COLUMNAR FORM ST ATING THAT EVEN ASSUMING THE CONTENTIONS OF THE LD. CIT ARE TO BE TAKEN AS CORRE CT, EVEN THEN THE BUSINESS INCOME STILL REMAINS AT RS.16,46,29,552/- VIDE PAGE 18 OF THE PAPER BOOK. BASED ON THESE DOCUMENTS RELIED UPON BY HIM HE ARGUED THAT THERE W AS ABSOLUTELY NO ERROR IN THE COMPUTATION OF DEDUCTION U/S 10B OF THE ACT BY THE AO AND ACCORDINGLY NO REVISION JURISDICTION U/S 263 OF THE ACT COULD HAVE BEEN INV OKED BY THE LD. CIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HE ALSO ARGUED THAT THE LD. CIT HAD NOT POINTED OUT AS TO WHERE THE ORDER OF THE LD. AO IS ERRONEOUS AND WITH OUT POINTING OUT AS TO WHICH PART OF THE ORDER IS ERRONEOUS JUST GIVING A BLANKET DIREC TION TO THE AO TO RE-EXAMINE THE CLAIM OF DEDUCTION U/S 10B OF THE ACT ON THE GROUND THAT PROPER EXAMINATION HAS NOT BEEN CARRIED OUT BY THE AO IS TOTALLY UNWARRANTED, ESPECIALLY WHEN THE LD. AO HAD THOROUGHLY EXAMINED THE ENTIRE ASPECT WHICH IS QUIT E EVIDENT FROM PAGES 1 TO 3 OF THE ASSESSMENT ORDER WHEREIN ELABORATE DISCUSSION AND F INDINGS ON THE CLAIM OF DEDUCTION U/S 10B OF THE ACT WAS GIVEN BY THE LD AO. IN RESPO NSE TO THIS THE LD. DR RELIED ON THE ORDER OF THE LD. CIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK AND THE RELEVANT PA GES CONTAINED THEREIN AS RELIED ITA NO.445/KOL/2016 M/S. HINDUSTAN GUM & CHEMICALS LTD. A.YR.2010-11 4 UPON BY THE LD. AR (SUPRA). WE FIND FROM THE PERUSA L OF THE SAID CONTENTS OF THE PAPER BOOK, THAT THERE IS ABSOLUTELY NO ERROR IN THE CLAI M OF DEDUCTION U/S 10B OF THE ACT MADE BY THE LD AO AND FOR THE SAKE OF CLARITY, WE W OULD LIKE TO STATE THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT ONLY TO TH E EXTENT OF RS.5,12,79,987/- IN THE RETURN OF INCOME WHICH WAS ALSO DULY SUPPORTED BY A CHARTERED ACCOUNTANT CERTIFIED IN FORM NO.56G TO THAT EXTENT. THIS RETURN WAS INIT IALLY PROCESSED U/S 143(1) OF THE ACT WHEREIN THE LD. AO HAD GRANTED DEDUCTION U/S 10 B OF THE ACT FOR AN AMOUNT OF RS.5,12,79,987/-. LATER ON IN THE SCRUTINY PROCEEDI NGS U/S 143(3) OF THE ACT THE LD. AO WHILE EXAMINING THE CLAIM OF DEDUCTION U/S 10B OF T HE ACT WENT THROUGH THE ENTIRE WORKINGS OF THE ASSESSEE AND FOUND THAT THE ASSESSE E IS NOT ENTITLED FOR DEDUCTION U/S 10B OF THE ACT IN RESPECT OF CERTAIN RECEIPTS TO TH E TUNE OF RS.86,85,103/- WHICH ACCORDING TO HIM ARE NOT ATTRIBUTABLE TO 100% EOU A ND ACCORDINGLY MADE DISALLOWANCE U/S 10B OF THE ACT THEREON TO THAT EXT ENT. WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT, THE LD. AO STARTE D THE COMPUTATION OF THE TOTAL INCOME FROM THE ASSESSED INCOME U/S 143(1) OF THE ACT RS.16,46,29 ,551/- AND LATER ON PROCEEDED TO MAKE REGULAR DISALLOWANCES IN THE ASSESSMENT TO THAT INCOME. HENCE IT IS VERY CLEAR THAT THE AO HAD GRANTED DEDU CTION ONLY TO THE EXTENT OF RS.5,12,79,987/- U/S 10B OF THE ACT. HENCE, WE ARE THOROUGHLY CONVINCED THAT THERE IS NO ERROR IN THE ORDER OF THE LD. AO WARRANTING REVI SIONARY PROCEEDINGS U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE NO HESITATION TO QUASH THE REVISION PROCEEDINGS U/S 263 OF THE ACT. ACCORDINGL Y THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19.12.2016. SD/- SD/- [S.S.VISWANETHRA RAVI] [M.BALAGAN ESH] JUDICIAL MEMBER ACCOUNTANT MEMBE R DATE: 19.12.2016. R.G.(.P.S.) ITA NO.445/KOL/2016 M/S. HINDUSTAN GUM & CHEMICALS LTD. A.YR.2010-11 5 COPY OF THE ORDER FORWARDED TO: 1 . M/S. HINDUSTAN GUM & CHEMICALS LTD., BIRLA BUILDING , 4 TH FLOOR, 9/1, R.N.MUKHERJEE ROAD, KOLKATA-700001. 2 THE D.C.I.T., CIRCLE-12, KOLKATA. 3 . THE PR. CIT-4, KOLKATA, 4 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES