M/s Standard Auto Gears Pvt. Ltd, Mohali V. DCIT, Mohali

ITA 487/CHANDI/2011

• Counselvise Citation: 48721514 RSA 2011
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: ANIL KUMAR BATRA
• Keywords: Unexplained investment; Business income; Deemed to accrue or arise in india
• Section: 28; 80HHC; 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 487/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S STANDARD AUTO GEARS V DCIT, CIRCLE 6(1), PVT. LTD., PLOT NO. 125, MOHALI. INDUSTRIAL AREA, PHASE IX, MOHALI. PAN: AAACG-8512E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL KUMAR BATRA RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 10.04.2012 DATE OF PRONOUNCEMENT : 18.04.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 21.02.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF REBATE OF RS.4,50,000/- U/S 80IB BEING 30% OF RS.15,00,000/-, THE AMOUNT SURRENDERED DURING SURVEY, AS BEING AMOUNT NOT DERIVED FROM BUSINESS OF THE APPELLANT. THE CLAIM OF THE APPELLANT BE ALLOWED. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY OF THE GROUND OF APPEAL BEFORE THE SAME IS TAKEN UP FOR FINAL HEARING. 2 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' CONTENDED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTI ON, IN RESPECT OF SURRENDER OF RS.15,00,000/-, MADE BY THE ASSESSEE, IN THE COURSE OF SURVEY OPERATION U/S 133 A OF THE ACT, CONDUCTED BY THE DEPARTMENT ON 21.03.2007. HE REFERRED TO PAGE 1 OF THE PAPER BOOK WHICH IS A LET TER DATED, 21.03.2007, WHEREBY THE ASSESSEE HAD VOLUNTARILY MA DE A SURRENDER OF RS.15,00,000/- AGAINST DISCREPANCIES IN STOCK, INVESTMENT IN CONSTRUCTION OF BUILDING AND C ASH IN HAND. THE SURRENDER HAS BEEN MADE SUBJECT TO NO PENALTY. HOWEVER, THERE IS NO MENTION BY THE ASSES SEE IN THE SURRENDER LETTER THAT ASSESSEE, IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. HOWEVER, EVEN SUCH ASSERTION IN THE SURRENDER LETTER WOULD NOT AUTOMATICALLY CONFER ENT ITLEMENT OF DEDUCTION U/S 80IB OF THE ACT. 4. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT, IN THE C ASE OF NATIONAL LEGGUARD WORKS V CIT 288 ITR 18 (P&H). LD . 'DR' ALSO PLACED RELIANCE ON THE DECISION OF THE CHANDIG ARH BENCH A IN ITA NO. 73/CHD/2010 & CO/16/CHD/2010, IN THE CASE OF ACIT V M/S EURO CONTAINERS, WHEREIN IDE NTICAL ISSUE HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSE E. 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT DECISIONS RELIED UPON BY THE PARTIES. IN THIS CASE, IN THE COURSE OF SURVEY PROCEEDINGS U/S 133A OF THE ACT, THE ASSESSEE HAD DISCLOSED ADDITIONAL INCOME ON ACCOUNT OF EXCESS STOCK OF 3 RS.3,00,000/-, UNACCOUNTED CASH OF RS.6,00,000/- AN D UNEXPLAINED INVESTMENT IN CONSTRUCTION OF BUILDING OF RS.6,00,000/-, AS MENTIONED IN THE ASSESSMENT ORDER DATED 09.09.2009. THE AO, RECORDED FINDINGS THAT THE SURRENDER AMOUNTING TO RS.15,00,000/-, IN RESPECT O F VARIOUS DISCREPANCIES, DETECTED IN THE COURSE OF SU RVEY OPERATION, DOESNT CONSTITUTE PROFIT DERIVED FROM I NDUSTRIAL UNDERTAKING AND, HENCE, CANNOT BE ALLOWED AS DEDUCT ION U/S 80IB OF THE ACT. IT WAS, FURTHER, OBSERVED BY THE A O THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY EVIDENCE DEMONST RATING THAT THE INCOME SURRENDERED IN THE COURSE OF SURVEY OPERATION WAS DERIVED FROM THE INDUSTRIAL UNDERTAKI NG ITSELF, TO MAKE THE SAME ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE AO ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT JABALPUR BENCH IN THE CASE OF ACIT V PRIYA PAPER 10 6 TTJ 234, WHEREBY IT WAS HELD THAT INCOME DISCLOSED, ON THE BASIS OF EXCESS STOCK, IS NOT ELIGIBLE FOR DEDUCTIO N. THE AO, ALSO PLACED RELIANCE ON THE DECISION IN THE CA SE OF DCIT V SHIVA FABRICATORS, WHEREIN IT WAS HELD THAT CASH AND STOCK SURRENDERED, CANNOT BE SAID TO BE PART OF INDUSTRIA L UNDERTAKING. 6. LD. CIT(A) UPHELD THE FINDINGS OF THE AO. 7. LD. 'DR' PLACED RELIANCE ON THE DECISION OF THE CHANDIGARH BENCH IN THE CASE OF ACIT V M/S EURO CONTAINERS IN ITA NO. 73/CHD/2010 AND CO 16/CHD/201 0 (SUPRA). A PERUSAL OF THE SAME REVEALS THAT THE IS SUE IS SQUARELY COVERED BY THIS DECISION OF THE TRIBUNAL, IN FAVOUR 4 OF THE REVENUE. HOWEVER, FOR THE SAKE OF READY REF ERENCE, THE RELEVANT PART OF THE DECISION IS REPRODUCED HER EUNDER: 12. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIO NS AND CONTENTS OF THE CROSS OBJECTIONS RAISED BY THE ASSESSEE. THE EXPRESSION DERIVED FROM IS JUDICIALL Y DEFINED IN NUMEROUS DECISIONS OF THE HON'BLE APEX COURT AND VARIOUS HIGH COURTS. THE ASSESSEE IS ELIGIBLE IN RESPECT OF SUCH PROFIT WHICH SPROUTS FR OM THE INDUSTRIAL UNDERTAKING ITSELF AND NOT IN RESPEC T OF PROFIT WHICH EMANATES FROM UNDISCLOSED INCOME SURRENDERED IN THE COURSE OF SURVEY OPERATIONS. TH E IDENTICAL ISSUE HAS BEEN COVERED IN THE DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL IN ACIT V ARORA FABRICS PVT.LTD. (SUPRA) AND JURISDICTIONAL HIGH CO URT IN THE CASE OF NATIONAL LEGGUARD WORKS V CIT (APPEALS) (2007) 288 ITR 18 (P&H). FINDINGS OF THE LD. CIT(A) ON THE ISSUE IN QUESTION ARE REPRODUCED HEREUNDER: IN THE CASE OF ACIT V ARORA FABRICS PVT.LTD. (2008) 171 TAXMAN 113 (CHD)(MAJ), THE FACTS OF THE CASE WERE THAT THE ASSESSEE COMPANY WAS CARRYING ON THE BUSINESS OF MANUFACTURING OF KNITTED CLOTH. A SURVEY UNDER SECTION 133A WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE BY THE DEPARTMENT WHEREIN THE ASSESSEE COMPANY SURRENDERED AN INCOME OFRS.52.50 LACS. SUBSEQUENTLY, THE ASSESSEE COMPANY CLAIMED THAT THE SURRENDERED AMOUNT WAS ITS BUSINESS INCOME ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. HOWEVER, THE AO DID NOT ALLOW THE DEDUCTION UNDER SECTION 80IB ON THE SURRENDERED AMOUNT. THE HON'BLE JURISDICTIONAL TRIBUNAL ON THESE FACTS HELD THAT AS THE ASSESSEE HAD NOT SUBSTANTIATED ITS CLAIM WITH DOCUMENTARY EVIDENCE THAT THE SURRENDERED AMOUNT WAS EARNED FROM MANUFACTURING 5 ACTIVITY OR WAS DERIVED FROM INDUSTRIAL UNDERTAKING, DEDUCTION UNDER SECTION 80IB COULD NOT BE ALLOWED ON THE SURRENDERED INCOME. 13. THE ISSUE IS ALSO SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF NATIONAL LEGGUARD WORKS (SUPRA). THE RELEVANT PARA OF THE SAID DECISION IS REPRODUCED HEREUNDER : EXPORT SPECIAL DEDUCTION UNDER SECTION 80HHC- AMOUNT SURRENDERED BY ASSESSEE AFTER SURVEY OPERATIONS DISCLOSED EXCESS STOCK BURDEN ON ASSESSEE TO PROVE AMOUNT REPRESENTED EXPORT PROFITS BURDEN NOT DISCHARGED ASSESSEE NOT ENTITLED TO SPECIAL DEDUCTION UNDER SECTION 80HHC IN RESPECT OF SUCH AMOUNT INCOME-TAX ACT, 1961, SS. 80 HHC, 133A. 14. HAVING REGARD TO THE LEGAL AND FACTUAL DISCUSSI ONS, WE ARE OF THE CONSIDERED OPINION THAT THE CONTENTIO NS RAISED BY THE ASSESSEE IN THE IMPUGNED CROSS OBJECTIONS CANNOT BE ACCEPTED AND HENCE, THE SAME A RE DISMISSED. 8. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL LEGGUARD WORKS V CIT & ANOTHER (SUPRA) HAS HELD THAT THE STOCK SURRENDERED UNDER SURVEY IS INCOME F ROM OTHER SOURCES AND NOT ELIGIBLE FOR DEDUCTION U/S 80 HHC OF THE ACT. IN THIS CONTEXT, IT IS MENTIONED THAT IN S ECTION 80HHC AND 80IB OF THE ACT, THE EXPRESSION DERIVED FROM IS APPEARING. THEREFORE, ON THE PARITY OF REASONING LA ID DOWN IN THE CASE OF NATIONAL LEGGUARD WORKS (SUPRA), THE AS SESSEE IS NOT ELIGIBLE FOR DEDUCTION, ON SURRENDER, U/S 80IB OF THE ACT. 6 8(I) FURTHER, HON'BLE JURISDICTIONAL HIGH COURT, I N ANOTHER DECISION IN THE CASE OF SARLA HANDICRAFTS PVT. LTD. V ADDL.CIT 296 ITR 94, HAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80HHC, OF THE ACT IN RESPECT OF SURRENDERED INCOME. 8(II) THE HON'BLE GUJRAT HIGH COURT, IN THE CASE OF FAKIR MOHMED HAJI HASAN V CIT 247 ITR 290 HAS HELD AS UN DER: UNEXPLAINED INVESTMENT-ASSESSMENT-DEDUCTIONS- GOLD CONFISCATED FROM ASSESSEE NOT RECORDED IN BOOKS OF ACCOUNT AND NO EXPLANATION OFFERED AS TO SOURCE OF ACQUISITION-DEEMED INCOME NOT SHOWN TO FALL UNDER HEAD OF INCOME PROFITS AND GAINS OF BUSINESS OR PROFESSION-NO DEDUCTION ALLOWABLE IN RESPECT OF VALUE OF GOLD CONFISCATED-INCOME-TAX ACT,1961, S.69. 8(III) THE HON'BLE JURISDICTIONAL HIGH COURT, IN THE CASE OF HOME TEX V CIT (2011) 243 CTR 81 (P&H) HAS CATEGORICALLY HELD THAT WHERE ASSESSEE HAD FAILED TO SHOW THAT AM OUNT WHICH WAS INVESTED IN EXCESS STOCK AND WAS SURRENDE RED AT THE TIME OF SURVEY, WAS DERIVED FROM INDUSTRIAL UNDERTAKING, DEDUCTION U/S 80IB FOR SUCH AMOUNT CAN NOT BE ALLOWED. IT IS, FURTHER, MENTIONED THAT THE HON' BLE JURISDICTIONAL HIGH COURT, WHILE ADJUDICATING THE I SSUE, ALSO CONSIDERED THE DECISION OF THE HON'BLE HIMACHA L PRADESH HIGH COURT IN THE CASE OF CIT V ALLIED INDU STRIES (2009) 31 DTR (HP) 323. THE HON'BLE JURISDICTIONAL HIGH COURT HAS DISTINGUISHED THE DECISION RELIED UPON BY THE ASSESSEE IN THAT CASE. THEREFORE, THE DECISION RELIED UPON BY THE ASSESSEE, IN THE PRESENT CASE, RENDERED BY T HE HON'BLE HIMACHAL PRADESH, IN THE CASE OF ALLIED IND USTRIES (SUPRA) IS NOT APPLICABLE TO THE PRESENT CASE, BEIN G 7 DISTINGUISHABLE AND ALSO IN THE LIGHT OF THE CONSID ERATION OF THE SAME BY THE HON'BLE HIGH COURT. 9. HAVING REGARD TO THE FACT-SITUATION OF THE PRESE NT CASE, DECISION OF THE TRIBUNAL IN THE CASE OF M/S EURO CO NTAINERS (SUPRA) AND VARIOUS DECISIONS OF THE JURISDICTIONAL HIGH COURT AND THE HON'BLE GUJRAT HIGH COURT, AS DISCUSS ED ABOVE, APPEAL OF THE ASSESSEE IS DISMISSED, AS THE UNDISCLOSED INCOME SURRENDERED BY APPELLANT, DOESN T CONSTITUTE PROFIT DERIVED FROM THE INDUSTRIAL UND ERTAKING ITSELF. AS THE NATURE AND SOURCE OF INVESTMENT IN EXCESS STOCK, AND CONSTRUCTION OF BUILDING INCLUDING THE C ASH IN HAND IS FROM UNDISCLOSED SOURCE, THE SAME CANNOT BE CLASSIFIED UNDER THE HEAD CONTEMPLATED U/S 28 OF TH E ACT. FURTHER, IT IS WELL-ESTABLISHED PROPOSITION OF LAW THAT ALL BUSINESS INCOMES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. IT IS ONLY THE ELIGIBLE PROFIT, WHICH SPR OUTS FROM THE INDUSTRIAL UNDERTAKING ITSELF, IS ELIGIBLE FOR DEDU CTION U/S 80IB OF THE ACT. THEREFORE, FINDINGS OF THE CIT(A) ARE UPHELD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH APRIL,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH APRIL,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH