M/s. CCL Products (India) Limited, Hyderabad V. The CIT Circle -II, Hyderabad

ITA 487/HYD/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7156 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS; T DEWKAR PRASAD
• Assessee Lawyers: S K NOORUL HASSAN; V SRIDHARAN KARAN TALWAR
• Keywords: Principle of natural justice; Benefit of exemption
• Section: 143(3); 10AA; 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I .T.A. NO. 487/HYD/2011 ASSESSMENT YEAR : 2006-07 M/S. CCL PRODUCTS (I) LTD. HYDERABAD PAN: AAACC9552G VS. DY. CIT CIRCLE-1(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: S/SHRI V. SRIDHARAN, KARAN TALWAR AND S.K. NOORUL HASSAN RESPONDENT BY: S/SHRI V. SRINIVAS AND T. DEWKAR PRASAD DATE OF HEARING: 10-10-2011 DATE OF PRONOUNCEMENT: 14-12-2011 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT-I, HYDERABAD DATED 31-01-2011 PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT ERRED IN NOT APPRECIATING THE SETTLED POSITION OF L AW THAT THE POWER UNDER SECTION 263 CAN BE EXERCISED ONLY WHEN BOTH THE CONDITIONS IN THE SECTION ARE FULFILLED. 2. THE CIT ERRED IN NOT APPRECIATING THAT WHEN TWO VIEWS ARE POSSIBLE IN INTERPRETING THE PROVISIONS OF SECT ION 10B OF THE ACT THE ORDER OF THE ASSESSING OFFICER CANNOT BE HELD AS ERRONEOUS AND PRINCIPAL TO INTERE ST OF REVENUE, AMICABLE TO REVISION UNDER SECTION 263. 3. THE CIT ERRED IN NOT ENTERTAINING THE GROUND THA T THE INVESTMENTS IN NEW PLANT AND MACHINERY MADE AFTER 1.4.2001 CONSTITUTED AN INDEPENDENT NEW INDUSTRIAL UNDERTAKING IN ITSELF AND HENCE ELIGIBLE FOR DEDUCT ION UNDER SECTION 10B ON THE FOOTING SUCH A FRESH CLAIM I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 2 THAT CANNOT BE ADVANCED DURING THE PROCEEDINGS OF SECTION 263. 4. THE CIT ERRED IN CONCLUDING 10 YEAR PERIOD MENTI ONED IN SECTION 10B(1) WILL BE RECOVERED FROM ASSESSMENT YEAR 1995-96 AND NOT FROM A.Y. 2000-01? 5. THE CIT ERRED IN HOLDING THAT THE NEW PLANT AND MACHINERY DOES NOT CONSTITUTE NEW INDUSTRIAL UNDERTAKING EVEN WHEN THE SAID PLANT AND MACHINERY FULFILLED ALL THE REQUIREMENTS OF A NEW INDUSTRIAL UNDERTAKING LIKE BEING CAPABLE OF FINAL INDEPENDENT OPERATION, ETC. 6. THE CIT ERRED IN NOT APPRECIATING THAT ON A TRUE CONSTRUCTION OF SECTION 10B OF THE ACT, SECTION IS APPLICABLE TO AN APPROVAL A 100% EOU AND HENCE THE EARLIER PERIOD OF ITS OPERATION AS AN ORDINARY UNIT /NON- EOU IS NOT RELEVANT FOR APPLYING/ COMPUTING 10 YEAR PERIOD OF EXEMPTION. 7. THE CIT ERRED IN NOT APPRECIATING THE FACT THAT 2 NEW INDUSTRIAL UNDERTAKINGS HAVE BEEN FORMED IN THE YEA R 2001-02 AND 2004-05, WHICH ARE DISTINCT FROM THE EXISTING UNIT AND ARE CAPABLE OF BEING OPERATED INDEPENDENTLY AND ACCORDINGLY AS PER SECTION 10B TH E BENEFIT HAS TO BE SEPARATELY EXTENDED TO EACH SEPARATE UNDERTAKING. 8. FOR THE ABOVE REASONS, IT IS PRAYED THAT THIS HO NBLE COURT MAY BE PLEASED TO ALLOW THE PETITION TO PLACE ON THE RECORD THE ABOVE PRECISE ADDITIONAL GROUNDS OF APPEAL AND PASS SUCH OTHER ORDER OR ORDERS AS THE HONBLE TRIBUNAL MAY DEEM FIT. 3. THE BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING INSTANT CO PY FROM THE COFFEE BEANS IN ITS FACTORY AT DUGGIRALA, GUNTUR DISTRICT. THE ASSESSEE COMPANY HAS COMMENCED ITS COMMERCIAL OPERATION IN T HE AFORESAID FACTORY ON 9TH APRIL 1995 AS DTA UNIT. THE ASSESSEE COMPANY SUBSEQUENTLY OBTAINS A LETTER OF PERMISSION ON 4-3- 1999 AND CONVERTED ITS DTA UNIT INTO EOU UNIT. THE ASSESSEE COMPANY CO MMENCED ITS OPERATION AS AN EOU UNIT WITH THE FACT FROM 9TH APR IL 1999 AFTER OBTAINING REQUISITE PERMISSION FROM CUSTOM AUTHORIT IES. THE ASSESSEE COMPANY CLAIMED BENEFIT UNDER SECTION 10B OF THE AC T FOR THE FIRST TIME IN THE ASSESSMENT YEAR 2000-2001 RELEVANT TO THE PR EVIOUS YEAR 1999- 2000. THE ASSESSEE COMPANY, AS IN THE PAST, CLAIMED THE BENEFIT OF I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 3 SECTION 10B OF THE ACT FOR RS.29, 91,61,718/-, IN I TS RETURN FOR THE ASSESSMENT YEAR 2006-07 RELEVANT TO THE PREVIOUS YE AR 2005-06. THE ASSESSING OFFICER ALLOWED THE DEDUCTION UNDER SECTI ON 10B OF THE ACT IN THE ASSESSMENT PASSED UNDER SECTION 143[3] OF THE A CT ON 9TH NOVEMBER 2009. SUBSEQUENTLY, THE CIT ASSUMED ITS JU RISDICTION UNDER SECTION 263 OF THE ACT AND ISSUED A NOTICE ON 15-11 -2009 TO REVISE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. T HE CIT CALCULATED 10 YEARS PERIOD FROM THE ASSESSMENT YEAR 1995-96 AN D NOT FROM ASSESSMENT YEAR 2000-01 AS CLAIMED BY THE ASSESSEE COMPANY BY RELYING ON THE CIRCULAR NO.1 OF 2005 DATED 6-1-2005 ISSUED BY CBDT. HE ALSO HELD THAT SINCE THE ASSESSING OFFICER HAS N OT CONSIDERED AFORESAID CIRCULAR, THERE IS NO POSSIBILITY OF THE TWO OPINIONS IN THE CASE UNDER CONSIDERATION AND THERE IS AN ERROR IN THE OR DER OF THE ASSESSING OFFICER WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ALSO REJECTED THE CLAIM OF THE ASSESSEE COMPANY THAT A S EPARATE UNDERTAKING HAS COME INTO EXISTENCE ON ACCOUNT OF I NCREASED INVESTMENT ON THE FOOTING THAT NEW CLAIM CANNOT BE ENTERTAINED IN THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. AGGRIEVE D BY THE ORDER OF CIT, THE ASSESSEE COMPANY IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT SECTION 10B (1) OF THE ACT IS A PROVISION CONSCIOUSLY ENACT ED BY THE PARLIAMENT CONFERRING INCENTIVE TO ASSESSEE. THIS IS ALSO ESTA BLISHED BY CONTEMPORANEOUS CIRCULAR DATED 16.02.1998 OF CBDT A ND CIRCULAR NO.528 DATED 16 TH DECEMBER, 1988. HENCE, IT IS OBVIOUS THAT THE SAI D SECTION 10B OF THE ACT WAS INSERTED TO PROVIDE INCE NTIVES TO THE EOUS. THIS INCENTIVE IS OVER AND ABOVE EXISTING INCENTIVE S FOR EXPORT GIVEN BY THE GOVERNMENT. IT IS SUBMITTED THAT AN INVENTIVE P ROVISION SHOULD BE LIBERALLY CONSTRUED. FOR THIS PROPOSITION HE RELIED ON THE DECISION IN THE CASE OF BAJAJ TEMPO V. CIT, (1992) 3 SCC 78. HE ALS O REFERRED CLAUSE 9.15[B] OF THE EXIM POLICY FOR THE PROPOSITION THAT THE PERIOD OF TAX HOLIDAY WOULD BE 10 YEARS EVEN WHILE PARA 9.28 PROV IDES FOR CONVERSION OF EXISTING DTA UNITS INTO EOU. THEREFOR E, IT IS SUBMITTED THAT THE BENEFIT IS TO BE AVAILABLE TO AN EOU FOR T HE PERIOD OF 10 YEARS I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 4 AFTER CONVERSION. EXPRESSION UNDERTAKING EMPLOYED IN SECTION 10B APPLIES ONLY TO AN UNDERTAKING APPROVED BY THE COMP ETENT AUTHORITY AS EOU. IT IS THEREFORE, CANNOT BE FOR A PERIOD OR POI NT OF TIME WHEN THE UNIT WAS A DTA UNIT AND NOT AN EOU UNIT. THE TERM UNDERTAKING WHENEVER AND WHEREVER USED IN THE SECTION, REFERS T O DULY APPROVED 100% EOU ONLY. IT DOES NOT EVEN WHISPER OR REFER TO AN UNDERTAKING LOCATED IN A DTA. THE ENTIRE SECTION IS CONCERNED W HEN AN EOU ONLY AND APPLIES TO EOU ONLY. SECTION 10B [8] IS TO THE EFFECT THAT AN ASSESSEE MAY MAKE A DECLARATION TO THE ASSESSING OF FICER THAT THE PROVISIONS OF SECTION 10B MAY NOT BE MADE APPLICABL E TO HIM FOR A PARTICULAR ASSESSMENT YEAR, IN THAT EVENT, SECTION 10B WILL NOT BE APPLICABLE TO THE ASSESSEE FOR THE ASSESSMENT YEAR IN VIEW OF SECTION 10B [8] OF THE ACT. THE PERIOD FOR WHICH THE UNDERT AKING WAS AN APPROVED EOU, BUT BENEFIT OF SECTION 10B OF THE ACT NOT AVAILED FOR PAUCITY OF PROFITS OR ON ACCOUNT OF LOSSES, CANNOT BE EXCLUDED IN CALCULATING 10 YEARS. THE WORDS IN SECTION 10B [1] REFERRING TO COMMENCEMENT OF UNIT CANNOT BE STRETCHED TO COVER T HE PERIOD WHEN UNIT WAS NOT AN EOU BUT A DTA UNIT. THE EXPRESSION EMPLOYED IN SUBSTITUTED SECTION 10B AS IT STOOD FROM 1.4.99 IS NOT TO INCLUDE THE PERIOD FOR WHICH UNIT WAS DTA BEFORE CONVERSION INT O EOU. IT IS ALSO SUBMITTED THAT THE OBLIGATIONS TO BE FULFILLED BY A N EOU AND BENEFIT TO BE ENJOYED BY AN EOU SHOULD GO TOGETHER HAND IN HAN D. AS PER 10AA [2] PROVIDES FOR EXEMPTION TO SEZ UNITS FOR A STIPU LATED TIME PERIOD, TO BE RECKONED FROM THE DATE THE SEZ UNIT COMMENCES MA NUFACTURE OR PRODUCTION ETC., WHEREAS BY CONTRAST, IT CAN BE SEE N THAT THERE IS NO CORRESPONDING PROVISION IN SECTION 10B OF THE ACT T O PROVIDE THAT IN CASE OF CONVERSION OF A DTA UNIT INTO AN EOU, THE P ERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS HAS TO BE RECKONED FRO M THE DATE OF COMMENCEMENT OF MANUFACTURE AS A DTA UNIT. IT IS SU BMITTED THAT A CIRCULAR CANNOT IMPOSE ON THE TAX PAYER A BURDEN HI GHER THAN WHAT THE ACT ITSELF, ON A TRUE INTERPRETATION, ENVISAGES. FO R THIS PROPOSITION, HE RELIED ON THE FOLLOWING JUDGMENT OF THE APEX COURT IN THE CASE OF KESHAVJI RAVJI AND CO AND CIT REPORTED IN 2 SCC 231 AND IN THE CASE I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 5 OF STATE OF MP VS. G.S. DALL AND FLOOR MILLS REPORT ED IN SUPP 1 SCC 150. 5. IT IS FURTHER SUBMITTED THAT PRIOR TO THE ASSESS MENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS AVAILED BEN EFIT OF SECTION 10B FOR ONLY ONE YEAR, I.E., FOR THE ASSESSMENT YEA R 2000-01. THEREFORE, IN TERMS OF PROVISO TO SECTION 10B [1] O F THE ACT, THE ASSESSEE COMPANY IS ELIGIBLE FOR BENEFIT UNDER SECT ION 10B OF THE ACT FOR BALANCE NINE YEARS. FURTHER HE SUBMITTED THAT THE ASSESEE HAS INVESTED SUBSTANTIAL AMOUNTS EQUIVALENT TO RS. 97.7 9 CRORES IN INCREASING THE CAPACITY OF SD-1 AS WELL AS TOWARDS PROCUREMENT OF A SPRAY DRIED UNIT AND ALSO FORMATION OF A FREEZE DRI ED UNIT. AS A RESULT OF ADDITIONAL INVESTMENTS, IN FINANCIAL YEAR 2005-2 006 THE PRODUCTION ACHIEVED WAS 6825 TONNES. IT IS SUBMITTED THAT THE INVESTMENTS OF RS. 97.79 CRORES RESULTED IN THE SETTING UP OF A NEW UN DERTAKING FOR THE PURPOSE OF SECTION 10B.THIS STANDS EVIDENCED FROM T HE FACT THAT THESE UNITS ARE PHYSICALLY IDENTIFIABLE AS SEPARATE, MANU FACTURE MARKETABLE COMMODITIES FROM INPUTS AND INTER-SE THE SPRAY DRIE D TECHNOLOGY AND FREEZE DRIED TECHNOLOGY EMPLOYED DIFFERENTLY SKILLE D LABOUR AS WELL AS PLANT AND MACHINERY, BUILDING ETC. IN SUPPORT OF T HIS CONTENTION, THE AUTHORISED REPRESENTATIVE DREW OUR ATTENTION THE SW ORN AFFIDAVIT AND ALSO COPIES OF INVOICES FOR INSTALLING NEW MACHINE RIES, COPIES OF PLANS SHOWING THE EXTENSIONS OF BUILDINGS AND ALSO FILED PHOTOS OF FACTORY. 6. IT IS SUBMITTED THAT SINCE TWO VIEWS ARE POSSIBL E IN THE CASE UNDER CONSIDERATION, THE CIT CANNOT ASSUME HIS JURI SDICTION UNDER SECTION 263 OF THE ACT. WHEN THE ASSESSING OFFICER ADOPTS ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFI CER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS NOT SUSTAINA BLE IN LAW. IN THE CASE UNDER CONSIDERATION, TWO VIEWS ARE CLEARLY POS SIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW. THE SAME IS NOT I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 6 AMENABLE TO BE REVISED UNDER SECTION 263 OF THE ACT . FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING JUDGMENTS O F THE APEX COURT IN THE CASE OF CIT VS. MAX INDIA LIMITED, REPORTED IN 15 SCC 401 AND IN THE CASE OF CIT VS. ARVIND JEWELLERS REPORTED IN 259 ITR 502. 7. IT IS SUBMITTED THAT THE CIT NOT JUSTIFIED IN HO LDING THAT A NEW ISSUE CANNOT BE RAISED IN THE PROCEEDINGS UNDER SEC TION 263 OF THE ACT, SINCE THE PROCEEDINGS UNDER SECTION 263 OF THE ACT ARE INITIATED FOR THE PURPOSE OF THE REVENUE. HE RELIED ON THE JUDGMENT O F THE APEX COURT IN THE CASE OF CIT VS. SUN ENGINEERING REPORTED IN 198 ITR 297. A DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE COMPANY BEFORE THE ASSESSING OFFICER AND THE SAME WAS ALLOWED BY THE A SSESSING OFFICER. THE CIT NEGATED THE CLAIM OF THE ASSESSEE COMPANY I N THE REVISED ASSESSMENT. THE ASSESSEE COMPANY CAN CERTAINLY PUT FORTH ADDITIONAL GROUND TO SUSTAIN THE SAME RELIEF ALREADY GRANTED T O IT BY THE ASSESSING OFFICER. ON MERIT, FOR THE NEW CLAIM RAISED BY THE ASSESSEE COMPANY, IT IS SUBMITTED THAT SEPARATE UNDERTAKINGS HAVE BEEN S ET UP BY THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR 2006-07 WHICH FALLS WITHIN 10 YEARS OF COMMENCEMENT OF THE SEPARATE UND ERTAKINGS BY INCURRING THE ADDITIONAL INVESTMENTS OF MORE THAN R S. 100 CRORES AND THE NEW UNDERTAKING WAS EXIST SEPARATELY BY THEMSEL VES, HENCE, THESE SEPARATE UNDERTAKINGS SET UP BY THE ASSESSEE COMPAN Y FORMS NEW UNDERTAKINGS ELIGIBLE FOR THE BENEFITS QUO THEIR PR OFITS SEPARATELY UNDER SECTION 10B OF THE ACT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE BENEFIT WAS ONLY GIVEN TO TEN CONSECUTIVE ASSESSMEN T YEARS STARTING WITH THE FIRST YEAR WHEN THE CONCERN STARTED TO MAN UFACTURE OR PRODUCE ARTICLES OR THINGS. THE LITERAL INTERPRETATION IS T O BE ADOPTED WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS. I N A TAXING ACT, ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE I S NO ROOM FOR ANY LIBERAL INTERPRETATION. SINCE THE ASSESSEE, COMMENC ED ITS PRODUCTION IN THE ASSESSMENT YEAR 1996-97, IT IS ELIGIBLE TO CLAI M BENEFIT UNDER SECTION 10B OF THE ACT UP TO THE ASSESSMENT YEAR 20 05-06 ONLY, WHICH I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 7 IS THE 10 TH AND FINAL YEAR OF THE CLAIM. THE TIME SPAN FROM TH E FIRST YEAR OF COMMENCEMENT IS TO BE RECKONED FOR THE PURPOSE O F BENEFIT UNDER THE PARTICULAR PROVISION. HENCE, THE INTERPRETATION GIVEN BY THE ASSESSEE TO THE WORD ANY IN THE SECTION TO MEAN ANY AND EVERY YEAR IRRESPECTIVE OF COMMENCEMENT OF PRODUCTION IS NOT A CCEPTABLE IN LAW. THE CIRCULAR [SUPRA], RELIED ON BY THE CIT, IS ONLY CLARIFYING THE POSITION OF LAW, ON THE REPRESENTATIONS RECEIVED FROM THE EX PORTERS. THE TIME PERIOD STARTS FROM THE FIRST YEAR OF MANUFACTURE AN D EXTENDS TO FIRST 10 YEARS ONLY. IT IS NOT AS IF AFTER THE APPROVAL IS O BTAINED THAT ONE GETS A FRESH LEASE OF 10 YEARS OF LIFE. EVEN ILLUSTRATIONS AT SUB (IV) AND SUB (V) OF PARA 5 OF THIS CIRCULAR ALSO GOT TO ESTABLISH TH AT THE ASSESSEE CAN CLAIM THE BENEFIT ONLY IF FALLS WITHIN THE PERIOD O F 10 YEARS FROM THE FIRST YEAR IN WHICH IT HAD COMMENCED MANUFACTURE OR PRODU CTION. IT CAN NEVER GO BEYOND THE 10 TH YEAR FROM THE FIRST YEAR OF ITS COMMENCEMENT OF MANUFACTURE OR PRODUCTION. HENCE THE ASSESSING O FFICER FAILED TO TAKE NOTE OF THE CIRCULAR AS WELL AS THE POSITION OF LAW BEFORE GRANTING HASTILY THE DEDUCTION OF EXEMPTION UNDER SECTION 10B OF THE ACT. HENCE, THE ORDERS OF THE ASSESSING OFFICER ARE PREJUDICIAL AS WELL AS ERRONEOUS TO THE INTERESTS OF REVENUE. IN THE CASE UNDER CONSIDE RATION, THERE ARE NO TWO OPINIONS POSSIBLE. THAT ACTION UNDER SECTION 26 3 OF THE ACT IS VALID IN LAW. THERE ARE NO TWO POSSIBLE WAYS OF INTERPRET ING SECTION 10B OF THE ACT IN THE INSTANT CASE. EVEN OTHERWISE, THE AS SESSING OFFICER FAILED TO CONSIDER CIRCULAR NO. 1 OF 2005 AND ALSO MISCONS TRUED THE IMPORT OF LAW. HE SUBMITTED THAT THE CBDT CIRCULAR IS BINDIN G ON THE ASSESSING OFFICER FOR THIS PURPOSE HE RELIED ON THE FOLLOWING JUDGEMENTS: (I) TANNA AND MODI VS. CIT & ORS, 292 ITR 209: WHEREIN HELD THAT EXECUTIVE CONSTRUCTION IS ORDINARILY ALLO WED TO PREVAIL AND WILL BE BINDING ON THE AUTHORITIES U NDER THE INCOME-TAX ACT, 1961. A FORTIORI, CLARIFICATOR Y CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES MAY ALSO BE TAKEN INTO CONSIDERATION FOR THE PURPOS E OF CONSTRUCTION OF THE STATUTE. I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 8 (II) R & B FALCON (A) PTY. LTD. VS. CIT, 301 ITR 30 9 WHEREIN HELD THAT THE INTERPRETATION OF THE CBDT IN ITS CIRCULAR BEING IN THE REALM OF EXECUTIVE CONSTRUCTI ON, SHOULD PRIMARILY BE HELD TO BE BINDING, SAVE AND EXCEPT WHERE IT VIOLATES ANY PROVISIONS OF LAW OR I S CONTRARY TO ANY JUDGEMENT RENDERED BY THE COURTS. THE REASON FOR GIVING EFFECT TO SUCH EXECUTIVE CONSTRUCTION IS NOT ONLY THE SAME AS CONTEMPORANEOUS WHICH WOULD COME WITHIN THE PURVIEW OF THE MAXIMUM TEMPORANIA CASTE PESTO, EVEN IN A CERTAIN SITUATION A REPRESENTATION MADE B Y AN AUTHORITY LIKE THE MINISTER PRESENTING THE BILL BEFORE PARLIAMENT MAY ALSO BE FOUND BOUND THEREBY. WHERE REPRESENTATION IS MADE BY THE MAKER OF LEGISLATION AT THE TIME OF INTRODUCTION OF THE BILL OR CONSTRUCTIO N THEREUPON IS PUT BY THE EXECUTIVE ON ITS COMING INT O FORCE THE SAME CARRIES GREAT WEIGHT. 9. REGARDING INTERPRETATION OF STATUTE HE RELIED ON THE FOLLOWING JUDGEMENTS: I) PRADIP J. MEHTA VS. CIT, 300 ITR 231 (SC) II) K.P. VERGHESE VS. ITO, 131 ITR 5907 10. FURTHER HE SUBMITTED THAT THERE IS NO QUESTION OF LIBERAL INTERPRETATION IN THESE KINDS OF CASES. HE SUBMITT ED THAT THE RULE OF CONSTRUCTION THAT IF THE STATUTORY PROVISION IS SUS CEPTIBLE TO, OR ADMITS OF, TWO REASONABLY POSSIBLE VIEWS, THEN THE ONE WHI CH WOULD PROMOTE ITS CONSTITUTIONALITY SHOULD BE PREFERRED ON THE GR OUND THAT THE LEGISLATURE IS PRESUMED NOT TO HAVE INTENDED AN EXC ESS OF ITS OWN JURISDICTION, IS SUBJECT TO THE FURTHER RULE THAT I T APPLIES ONLY WHERE TWO VIEWS ARE REASONABLY POSSIBLE ON THE STATUTORY LANG UAGE. IF THE WORDS OF THE STATUTE, ON A PROPER CONSTITUTION, CAN BE RE AD ONLY IN A PARTICULAR WAY, THEN THEY CANNOT BE READ IN ANOTHER WAY BY A C OURT OF I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 9 CONSTRUCTION ANXIOUS TO AVOID ITS UNCONSTITUTIONALI TY. FOR THIS PURPOSE HE RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. HASHMATUNNISA BEGUM & ORS., 176 ITR 98, PETRON ENGI NEERING CONSTRUCTION P. LTD. & ANOTHER VS. CBDT, 175 ITR 52 3 (SC), CIT VS. N.C. BUDHARAJA & CO. & ANR., 204 ITR 412 (SC), CIT VS. CELLULOSE PRODUCTS OF INDIA LTD., 192 ITR 155 (SC), IPCA LABO RATORY LTD. VS. DCIT, 266 ITR 521 (SC). 11. HE SUBMITTED THAT THE ASSESSING OFFICER HASTILY ALLOWED THE DEDUCTION TAKING THE FIRST YEAR AS 1999 WHICH IS TH E YEAR WHICH IT WAS RECOGNIZED AS 100% EOU UNIT, DISREGARDING THE CIRCU LAR. ASSESSEE IS NOT ELIGIBLE FOR THE BENEFIT IN THE 11 TH YEAR. THE FRESH CLAIM OF THE ASSESSEE MADE DURING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT, ARE NOT TENABLE, AS THESE PROCEEDINGS WERE INITIATE D FOR THE PURPOSE OF REVENUE. FRESH STAND AND FRESH CLAIM THAT A NEW UNI T HAS COME INTO EXISTENCE ON ACCOUNT OF EXPANSION CANNOT BE ENTERTA INED AT THAT STAGE. EVEN ON MERIT, ON EXPANSION, THE BENEFIT IS NOT ADM ISSIBLE UNDER SECTION 10B OF THE ACT. IT IS ONLY WHEN A NEW UNIT IS FORMED OR COMES INTO EXISTENCE, AS AN INDEPENDENT ELIGIBLE UNIT, SU CH BENEFIT CAN BE CLAIMED. WHATEVER MAY BE ADDITION TO PLANT AND MACH INERY OR ENHANCEMENT OF PRODUCTION CAPACITY, IT DOES NOT MAT TER FOR THE PURPOSES OF SECTION 10B OF THE ACT. IT CANNOT BE CL AIMED THAT, FOR EVERY EXPANSION A 100% EOU UNIT, A NEW UNIT HAS COME INTO EXISTENCE TO CLAIM THE BENEFIT UNDER SECTION 10B OF THE ACT. THE ASSESSEE COMPANY EVEN FILED ONLY SINGLE FORM 56G, SINGLE UNIT IS REC OGNISED AS 100% EOU UNIT AND THE BOOKS OF ACCOUNTS ARE SO MAINTAINE D, THIS CLAIM OF THE ASSESSEE IS NOT ADMISSIBLE IN LAW. THE FRESH CL AIMS MADE BY THE ASSESSEE IN THE PROCEEDINGS UNDER SECTION 263 OF TH E ACT CANNOT BE ENTERTAINED AND THE SAME ARE TO BE REJECTED AS THE PROCEEDINGS UNDER SECTION 263 OF THE ACT, ARE FOR THE BENEFIT OF REVE NUE ONLY. EVEN OTHERWISE, THE CURSORY PERUSAL OF LAW SHOWS THAT TH ESE ARE NOT ADMISSIBLE IN LAW. ON EXPANSION, THE ASSESSEE COMPA NY IS NOT ELIGIBLE FOR BENEFIT OF EXEMPTION UNDER SECTION 10B OF THE A CT, EXCLUSIVELY RECKONING THE SAME AS A NEW UNIT. I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 10 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE THROUGH ALL THE JUDGEMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP T HE LEGAL ISSUE WITH REFERENCE TO THE JURISDICTION OF INVOKING THE PROVI SIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHEME OF THE IT ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO ERRONEOUS ORDE R OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REV ENUE. AS HELD IN THE CASE OF MALABAR INDUSTRIES CO. LTD., VS. CIT ( 243 ITR 83 (SC), THE COMMISSIONER CAN EXERCISE REVISION JURISDICTIONAL U/S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESSING OFFICER S OUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. THE WORD ERRONEOUS HAS NOT BEEN DEFINED IN THE IN COME TAX ACT. IT HAS BEEN HOWEVER DEFINED AT PAGE 562 IN BLACKS LAW DICTIONARY (SEVENTH EDITION) THUS; ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM TH E LAW. THE WORD ERROR HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TR UE OR THAT WHAT IS TRUE IS FALSE. AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW LEXICO N REPRINT 2002, THE WORD ERROR HAS BEEN DEFINED TO MEAN- . ERROR. A MISTAKEN JUDGEMENT OR DEVIATION FROM THE TRUTH IN MATTERS OF FACT, AND FROM THE LAW IN MATTERS OF JU DGEMENT ERROR IS A FAULT IN JUDGEMENT, OR IN THE PROCESS OR PROCEEDING TO JUDGEMENT OR IN THE EXECUTION UPON TH E SAME, IN A COURT OF RECORD; WHICH IN THE CIVIL LAW IS CALLED A NULLITYIE (TERMES DE LA LEY) I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 11 SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INADVERTENCE S.99 CPC AND S.215 CR.PC. ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPEC T THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION 13. AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE S COPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAI NED THUS: AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COU RSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INTENTIONA L. A MISTAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCO NCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLEDGE, A MISTAKE IS FROM INSUFFICIENT OR FALSE OBSERVATION. BLUNDER IS A PRACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMITTED THROUGH GLARING IGNORANCE, HEEDLESS NESS, OR AWKWARDNESS. AN ERROR MAY BE OVERLOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIED, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERACT. STRIC TLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A P HANTASM OF THE IMAGINATION. THE ONE COMES OF DISORDERED VISION, T HE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL S CIENCE TO MATTERS OF SENSATION, WHETHER THERE IS NO CORRESPON DING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN U NACCOUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALLY IN ONE REMAR KABLE OTHERWISE FOR ACCURATE INFORMATION AND RIGHT DECISI ON. IT IS EXCEPTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO BE DECEIVED. 14. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGHT T O BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN W HETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. IN OUR VI EW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 WOULD BE ERRONEOUS AND FALL IN THE AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INTER ALIA , BASED ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR NON-APPLICATION OF MIND TO SOMETHING WHICH WAS OBVIOUS AND REQUIRED APPLICATION OF MIND OR BASED ON NO OR INSUFFICIENT MATERIALS SO AS TO AFFECT THE MERITS OF THE CASE AND THEREBY CAUSE PREJUDICE TO THE INTE REST OF THE REVENUE. 15. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMO VE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 12 ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAKE S A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECO RD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS , WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANTED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS O N THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICE R SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE CLAIM M ADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLI KE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESSING OFFICER UNDER T HE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJUDICATOR BUT ALSO OF AN INVE STIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN, WHICH IS AP PARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH T HE ROLES EFFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOUSLY O N THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED B Y THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED TH AT THE PRESENT ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE INC OME-TAX ACT. IN OTHER WORDS, THE ASSESSING OFFICER WAS STATUTORILY REQUIRED TO MAKE THE ASSESSMENT UNDER SECTION 143(3) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTIO N 143. BULK OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY I S ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTIN Y. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSING OFF ICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOUL D BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. T HE ASSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTERE ST OF THE ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF WHAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND, HE HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THAT NO ONE DODGED I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 13 THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMA TE TAX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS O N HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS OF THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCE PTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSI NG OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN M ADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHER E THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE THERE IS ANYTHIN G WRONG WITH HIS ORDER IF ALL THE FACTS STATED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORRECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS NOT ONLY WHEN IT CONTAINS S OME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE AS SESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMIN E THE GENUINENESS OF THE CLAIM WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTED BY THE DECISIONS OF THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI V. C IT (67 ITR 84) (SC), SMT. TARA DEVI AGGARWAL V. CIT (88 ITR 323) (SC), AND MALABAR INDUSTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC). 16. IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON'BL E COURT HAS HELD AS UNDER: THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL THE ORDERS PAS SED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 14 17. IN ITS HUMBLE VIEW, ARBITRARINESS IN DECISION-MAKI NG WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAU SES PREJUDICE TO AN ASSESSEE OR TO THE STATE EXCHEQUER. THE LEGISLATURE HAS TAKEN AMPLE CARE TO PROVIDE FOR THE MECHANISM TO HAVE SUCH PREJ UDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH RE VISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH AP PEALS AND OTHER MEANS OF JUDICIAL REVIEW, THE PREJUDICE CAUSED TO T HE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISD ICTION OF THE COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DE CISION-MAKING CAUSING PREJUDICE TO EITHER PARTY CANNOT THEREFORE BE ALLOWED TO STAND AND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO C OUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFIC ER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INTERES T OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS THE STATE. IF HE FA ILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS CAN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF THE A SSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE INSTANCE OF THE CO MMISSIONER, IF THE REVENUE IS PREJUDICED. WHILE MAKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. HE IS THE INVESTIGATOR, PROSEC UTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATOR HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIRES INTO A SUBSTANTIAL M ATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDING ON THE RELEVA NT ISSUE GIVING, HOWSOEVER BRIEFLY, HIS REASONS THEREFOR. IN S.N. MU KHERJEE V. UNION OF INDIA AIR 1990 SC 1984, IT HAS BEEN OB SERVED BY THE HON'BLE SUPREME COURT AS FOLLOWS: REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUD ICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHOR ITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDE RATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRA TIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXC LUDES CHANCES OR ARBITRARINESS AND ENSURES A DEGREE OF FA IRNESS I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 15 IN THE PROCESS OF DECISION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND ITS APPLIC ATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT T O APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION , THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AU THORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION O F A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICI T SO AS TO INDICATE THAT THE AUTHORITY HAS GIVEN DUE CONSID ERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDIN G OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PAS SED AT THE ORIGINAL STAGE. THE APPELLATE OR REVISIONAL AUT HORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GIVE SEPARATE RE ASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AGREES WITH T HE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. 18. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE S UPREME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785. IT IS SETTLED LAW THAT WHILE MAKING ASSESSMENT ON ASSE SSEE, THE ITO ACTS IN A QUASI-JUDICIAL CAPACITY. AN ASSESSMENT ORDER I S AMENABLE TO APPEAL BY THE ASSESSEE AND TO REVISION BY THE COMMI SSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER O N A SUBSTANTIAL ISSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ALSO POINTS TO THE SAME DIRECTION. THEY HAVE HELD THAT ORDERS, WHICH A RE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE, MUST BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF THE ASSESSING OFFICERS ARE ALLOWED TO MAKE ASSESSMENTS IN AN ARBITRARY MANNER, AS HAS BEEN DONE IN THE CASE BEFORE US, THE ADMINISTRATION OF R EVENUE IS BOUND TO SUFFER. IF WITHOUT DISCUSSING THE NATURE OF THE TRA NSACTION AND MATERIALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN A DDITION TO THE INCOME OF THE ASSESSEE, THE SAME WOULD HAVE BEEN CO NSIDERED ERRONEOUS BY ANY APPELLATE AUTHORITY AS BEING VIOLA TIVE OF THE PRINCIPLES OF NATURAL JUSTICE WHICH REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. WE FIND NO REASON WHY THE SAME VIEW SHOULD NOT BE TAKEN WHEN AN ORDER IS AGAINST THE IN TERESTS OF THE I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 16 REVENUE. AS A MATTER OF FACT SUCH ORDERS ARE PREJUD ICIAL TO THE INTERESTS OF BOTH THE PARTIES, BECAUSE EVEN THE ASSESSEE IS D EPRIVED OF THE BENEFIT OF A POSITIVE FINDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIENTLY ESTABLISHED HIS CASE. 19. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAID THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN T HE FOLLOWING CASES: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISED PROCEEDS ON IN CORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW . IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING T HE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND. (III) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSE SSEE HAS STATED IN HIS RETURN OR WHERE HE FAILS TO MAKE THE REQUISITE ENQUIRIES OR EXAMINE THE GENUINENESS OF T HE CLAIM WHICH IS CALLED FOR IN THE CIRCUMSTANCES OF T HE CASE. 20. IN THE PRESENT CASE, WE FIND THAT THE ASSESSING OFFICER HAD PASSED THE ORDER UNDER SECTION 143[3] OF THE ACT, O N 9-11-2009, WHEREAS THE CIRCULAR ISSUED BY THE CBDT, BASED ON W HICH THE CIT DECLINED THE EXEMPTION UNDER SECTION 10B OF THE ACT , WAS ON 6-1-2005. WHILE PURSING THE ORDER OF THE ASSESSING OFFICER, W E DID NOT FIND ANY DISCUSSION BY THE ASSESSING OFFICER ABOUT THE ELIGI BILITY IN CLAIMING THE DEDUCTION OF EXEMPTION UNDER SECTION 10B OF THE ACT . THE ORDER PASSED BY ASSESSING OFFICER IS TOTALLY SILENT ON TH IS ISSUE AND HENCE, THE ORDER IS ERRONEOUS SO FAR IT IS PREJUDICIAL TO INTE REST OF THE REVENUE. NON CONSIDERATION OF THE CIRCULAR ISSUED BY THE CBDT IS CLEARLY FALLS IN THE CATEGORY OF NON-APPLICATION OF MIND BY THE ASSESSIN G OFFICER IN PASSING THE ASSESSMENT ORDER UNDER DISCUSSION. HENCE, IT I S CLEAR THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND WHILE GR ANTING THE EXEMPTION UNDER SECTION 10B OF THE ACT. IN THE CASE UNDER CONSIDERATION, THERE ARE NO TWO OPINIONS POSSIBLE. HENCE, THE ACTION UND ER SECTION 263 OF THE ACT IS VALID IN LAW. THERE ARE NO TWO POSSIBLE WAYS OF INTERPRETING SECTION 10B OF THE ACT IN THE INSTANT CASE. UNDER THESE CIRCUMSTANCES, I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 17 THE CIT HAD RIGHTLY ASSUMED HIS JURISDICTION UNDER SECTION 263 OF THE ACT. THEREFORE, THE GROUND RAISED BY THE ASSESSEE O N ISSUE OF VALIDITY OF THE JURISDICTION, IS REJECTED. 21. ON MERIT, THE FIRST MOOT QUESTION ARISING OUT OF THIS APPEAL IS WHETHER THE PERIOD OF TEN CONSECUTIVE ASSESSMENT YE ARS IS TO BE RECKONED FROM THE DATE OF COMMENCEMENT OF THE MANUF ACTURING AS A DTA UNIT OR FROM THE DATE OF COMMENCEMENT OF MANUFA CTURE AS A EOU UNIT. WE FIND THAT THAT CBDT IN ITS CIRCULAR NUMBER 1 DATED 6- 1-2005 HAS CLEARLY CLARIFIED THAT IN CASE OF A DTA UNIT, W HICH CONVERTS INTO AN EOU UNIT, THE UNIT CAN AVAIL THE DEDUCTION UNDER SE CTION 10B OF THE ACT FROM THE YEAR IN WHICH IT RECEIVES THE EOU STATUS A PPROVAL. GIVEN THE FACT THAT THE SAID CBDT CIRCULAR RECOGNIZE THE CONV ERSION, IT SHOULD BE POSSIBLE TO CLAIM AND INCOME TAX EXEMPTION POST CON VERSION. HOWEVER, GIVEN THE PROVISIONS OF THE ACT UNDER CIRC ULAR ANY UNIT WHICH HAS BEEN SET UP BEFORE APRIL 1 1999 WOULD NOT BE EL IGIBLE FOR THE SAME TAX DEDUCTION, IRRESPECTIVE OF WHEN THE CONVERSION HAPPENS. HENCE IT IS VERY CLEAR THAT THE INTENTION OF THE CIRCULAR IS TO RECKON THE TEN YEARS EXEMPTION PERIOD WHICH STARTS FROM THE YEAR OF COMM ERCIAL PRODUCTION IRRESPECTIVE OF WHEN THE CONVERSION HAPPENS. WHEN T HERE IS AN AMBIGUITY IN THE INCENTIVE PROVISION, IT SHOULD BE LIBERALLY CONSTRUED BUT AT THE SAME TIME WHEN THERE IS NO AMBIGUITY THERE I S NO QUESTION OF LIBERAL CONSTRUCTION. SINCE THE AFORESAID CIRCULAR IS VERY CLEAR AND AMBIGUITY, IT IS TO BE FOLLOWED PLAINLY. WE ALSO DI SAGREE WITH THE ARGUMENTS OF LEARNED COUNSEL FOR THE ASSESSEE THAT THE AFORESAID CIRCULAR IS NOT SPEAKING ONE AND DOES NOT CONTAIN A NY REASON WHATSOEVER AND THE SAME IS NOT BINDING ON THE ASSES SEE. IT IS PERTINENT TO NOTE THAT ALL THE CIRCULARS ISSUED BY THE CBDT A RE BINDING ON THE ASSESSING OFFICER AND ALSO THE JUDGMENTS RELIED ON BY THE DEPARTMENTAL REPRESENTATIVE ALSO SUPPORTS OUR VIEW. THE AFORESA ID CIRCULAR IS VERY CLEAR AND THE INTENTION OF THE CIRCULAR IS THAT THE RECKONING OF THE TEN YEAR PERIOD STARTS FROM THE DATE OF COMMERCIAL PROD UCTION EITHER AS A DTA UNIT OR AS AN EOU UNIT. THE TAX BENEFIT WOULD B E AVAILABLE FOR THE REMAINING PERIOD OF TEN CONSECUTIVE ASSESSMENT YEAR S BEGINNING FROM I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 18 THE PERIOD IT STARTED MANUFACTURING IN THE DOMESTIC TARIFF AREA. THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE T HAT SINCE THE ASSESSEE HAS AVAILED DEDUCTION UNDER SECTION 10B OF THE ACT FOR ONLY ONE ASSESSMENT YEAR 2000-01, THE BENEFIT IS AVAILAB LE FOR BALANCE 9 YEARS IS NOT CORRECT AS WE FIND THAT, ON PLAIN READ ING OF THE AFORESAID CIRCULAR, THE EXEMPTION PERIOD ENDS AT THE TENTH YE AR OF ITS COMMISSIONING WHETHER AS DTA UNIT OR EOU UNIT. WE ALSO FIND THAT THE AFORESAID CIRCULAR, CERTAIN ILLUSTRATIONS WERE GIVE N TO CLARIFY THE INTENTION OF THE CIRCULAR AND EVEN FROM SUCH ILLUSTRATIONS IT IS CLEAR THAT THE TEN YEAR PERIOD IS TO BE RECKONED FROM THE DATE OF ITS ORIGINAL COMMERCIAL PRODUCTION. HENCE, THE GROUNDS RAISED BY THE ASSESS EE ON THIS ISSUE ARE HEREBY REJECTED. 22. NOW, WE TURN INTO THE ISSUE WHETHER THE ASSESS EE CAN MAKE A FRESH CLAIM DURING THE PROCEEDINGS UNDER SECTION 26 3 OF THE ACT. IT IS WELL SETTLED LAW THAT THE ASSESSEE CANNOT MAKE ANY FRESH CLAIM DURING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT, BECAU SE THE PROCEEDINGS UNDER SECTION 263 OF THE ACT ARE INITIATED FOR THE BENEFIT OF REVENUE. HENCE, THE CIT WAS RIGHT IN REJECTING THE FRESH CLA IM MADE BY THE ASSESSEE THAT IT HAS GONE FOR MASSIVE EXPANSION AND HENCE, THE SAME SHOULD BE CONSIDERED AS SETTING UP OF NEW UNIT WHIC H WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 10B OF THE ACT. EVEN OT HERWISE, ON EXPANSION, SUCH BENEFIT CANNOT BE CLAIMED WHATEVER MAY BE THE ADDITION TO PLANT AND MACHINERY OR ENHANCEMENT OF T HE PRODUCTION CAPACITY. THE CIT ALSO CATEGORICALLY FOUND THAT THE ASSESSEE HAD ONLY SINGLE UNIT ON VERIFICATION OF THE RECORDS. IT IS A RGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT A NEW UNIT HAS COME I NTO EXISTENCE ON EXPANSION ON ACCOUNT OF HUGE INVESTMENT IN PLANT AN D MACHINERY AND INCREASE IN PRODUCTION CAPACITY AND HENCE, THE BENE FIT OF DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE GIVEN FOR EXP ANDED UNIT, IS NOT CORRECT. THE INTENSION OF LEGISLATION CLEARLY STATE S THAT THE BENEFIT IS ADMISSIBLE ONLY TO A NEW UNDERTAKING AND NOT FOR TH E EXPANSION. HENCE, EVEN ON THIS GROUND, THE ASSESSEE FAILS. AF TER CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED I.T.A. NO. 487/HYD/2011 M/S. CCL PRODUCTS (INDIA) LTD. ======================== 19 OPINION, THE ASSESSING OFFICER ALLOWED THE DEDUCTIO N UNDER SECTION 10B OF THE ACT WRONGLY AND HENCE, THE CIT RIGHTLY ASSUM ED HIS JURISDICTIONS UNDER SECTION 263 OF THE ACT IN DENYING THE DEDUCTI ON UNDER SECTION 10B OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DECEMBER, 2011. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 14 TH DECEMBER, 2011 TPRAO COPY FORWARDED TO: 1. M/S. CCL PRODUCTS (INDIA) LTD., 7-1-24/2/D, GREE NDALE, AMEERPET, HYDERABAD-500 016. 2. THE DY. CIT, CIRCLE 1(2), HYDERABAD. 3. THE CIT-I, HYDERABAD. 4. THE ADDL. CIT, RANGE 1, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD