M/s. SHAH NARESHKUMAR & CO., MUMBAI V. ACIT CIR. - 14(3), MUMBAI

ITA 5358/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1219 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 10-12-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 12-10-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANT J LAL
• Assessee Lawyers: I P RATHI
• Keywords: Reopening of assessment; Business income; Difference of opinion; Capital receipt; Set aside
• Section: 143(3); 80HHC; 147; 148; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P M JAGTAP, AM & SHRI R S PADVEKAR, JM ITA NO.5358/MUM/2006 (ASST YEAR 2000-01) SHAH NARESHKUMAR &CO 205/3B MANGALDAS MARKET BLDG 1 ST FLOOR, MANGALDAS MARKET MUMBAI 400 002 VS TE ASST COMMR OF INCOME TAX CIR 14(3), MUMBAI (APPELLANT) (RESPONDENT) PAN AAAFS3703Q ASSESSEE BY: SHRI I P RATHI REVENUE BY: SHRI HEMANT J LAL O R D E R PER R S PADVEKAR: IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMP UGNED ORDER OF THE LD CIT(A)-XV, MUMBAI FOR THE ASSESSMENT YEAR 2000-0 1 DATED 21.8.2006. 2 THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT U/S 147 BY THE A.O. AND ON THIS ISSUE THE FOLLOWING GROUND NOS 1 TO 3 ARE TAKEN. I) THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE REOPENING OF ASSESSMENT U/S 147. FUR THER THE ASSESSMENT REOPENED U/S 147 FOR REDUCING THE DEDUCT ION U/ 80HHC WAS SUBJECT MATTER OF FIRST APPEAL, DECIDED BY THE CIT(A) BEFORE SUCH REOPENING. II) THAT THE LD CIT(A) HAS ERRED IN CONFIRMING THE REOPENING OF ASSESSMENT U/S 147 WHEN AS PER THE FACTS OF THE CAS E, AT THE TIME OF RECORDING THE REASONS FOR REOPENING FOR ISSUE OF NO TICE U/S 147 NO EXCESS DEDUCTION WAS GRANTED AS PER THE LAW AVAILAB LE AS ON THAT DATE. III) THAT THE REOPENING OF ASSESSMENT U/S 147 WAS B AD IN LAW AS THE SAME WAS BASED ON DIFFERENCE OF OPINION. 2 3 THE FACTS WHICH REVEALED FROM THE RECORDS ARE TH AT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2000-01 ON 30.10. 2000 IN WHICH THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80HHC AT RS.4,96 ,03,692/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATE D 31.10.2002. IN THE SAID ORDER, THE A.O. REJECTED THE CLAIM OF DEDUCTIO N U/S 80HHC ON THE GROUND THAT AFTER EXCLUDING THE EXPORT INCENTIVE AN D INTEREST, THE NET RESULT IS SHOWING LOSS FROM THE EXPORT BUSINESS. THOUGH T HE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE U/S 80HHC WAS REJECTED BY TH E A.O. BUT HE PUT RESTRICTION THAT IF THE ASSESSEES CLAIM IS SUCCEE DED IN APPEAL THEN TO THE EXTENT OF RS. 4,44,86,440/-, THE SAME WOULD BE ALL OWED. ON APPEAL, THE LD CIT(A) ALLOWED THE CLAIM BY HOLDING THAT THE ASSESS EE IS A MANUFACTURE AS WELL AS TRADER EXPORTER. AGGRIEVED BY THE ORDER O F THE LD CIT(A), THE REVENUE CARRIED THE ISSUE BEFORE THE TRIBUNAL. 3.1 WHEN THE APPEAL WAS PENDING BEFORE THE TRIBUNAL , THE A.O. ISSUED THE NOTICE U/S 148 BY GIVING REFERENCE TO THE BOARD CIR CULAR NO.F NO.153/90- 2004-TPL DATED 8.9.2004. THE REASONS FOR ISSUANCE O F THE NOTICE U/S 148 ARE QUOTED IN THE ASSESSMENT ORDER AS UNDER: IN THIS CASE, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,24,504/- AFTER CLAIMING DEDUCTION/S 80HHC OF RS. 4,96,03,692/-. ON PERUSAL OF WORKING OF DEDUCTION U /S 80HHC AND P&L ACCOUNT, IT IS OBSERVED THAT ASSESSEE ENJOYED THE B ENEFIT OF PROVISO T SEC. 80HHC(3) ON THE DEPB. BY VIRTUE OF THIS, THE A SSESSEE HAS ENJOYED DEDUCTION/S 80HHC IN EXCESS. AS PER BOARDS CIRCULAR F NO.1453/90-2004-TPL DATED 8.9.2004. DEPB DOES NOT QUALIFY FOR THE CONCESSION PROVIDED BY THE PROVISO TO SEC. 80HHC(3) OF THE ACT. 3.2 THE A.O. PASSED THE FRESH ASSESSMENT U/S 143(3) R.W.S 147 OF THE I T ACT DATED 17.3.2006 IN WHICH AFTER RE-COMPUTING THE DEDUCTION U/S 80HHC, ALLOWED THE SAME TO THE EXTENT OF RS.44,19,351/- A S AGAINST RS.4,96,03,692/- CLAIMED BY THE ASSESSEE. THE ASSE SSEE CHALLENGED THE REASSESSMENT BEFORE THE LD CIT(A) BUT WITHOUT SUCCE SS. NOW, THE ASSESSEE IS IN APPEAL HERE BEFORE US. 3 4 THE LD COUNSEL OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE A.O. INITIATED PROCEEDINGS FOR REOPENING OF THE ASSESSME NT IN MARCH, 2005 AND AT THAT TIME THERE WAS NO AMENDMENT TO SEC. 80HHC. IT IS FURTHER ARGUED THAT THE REFERENCE OF THE BOARD CIRCULAR GIVEN BY THE A. O. IN THE REASONS IS NOTHING BUT IT IS A REPLY TO THE REPRESENTATION MAD E BY WAY OF A LETTER ADDRESSED BY THE BOARD TO THE PRESIDENT OF FEDERATI ON OF INDIAN EXPORT ORGANISATION. HE, THEREFORE, SUBMITTED THAT THERE W AS NO JUSTIFICATION IN ISSUING THE NOTICE U/S 148 AND THE ENTIRE PROCEEDIN GS MAY BE QUASHED. THE LD COUNSEL OF THE ASSESSEE RELIED ON THE FOLLOWING PRECEDENTS: I) CIT VS KELVINATOR OF INDIA LTD ( CIVIL APPEAL N OS 2009-2011 OF 2003) II) M/S EMA INDIA LTD VS ACIT (CIVIL MISC. WRIT PET ITION NO.181(TAX) OF 2004 WE HAVE ALSO HEARD THE LD DR. 5 AS PER THE REASONS GIVEN BY THE A.O., THE BOARD H AS ISSUED A CIRCULAR NO. F NO.153/90-2004-TPL DATED 8.9.2004. THE LD CO UNSEL HAS FILED A COPY OF THE SAID CIRCULAR REFERRED BY THE A.O. AND WHICH IS PLACED ON RECORD. ON PERUSAL OF THE CIRCULAR, IT IS SEEN THAT IN FACT IT WAS A REPLY GIVEN BY THE UNDER SECRETARY (TPL-II) OF THE CBDT TO THE PRESIDE NT OF FEDERATION OF INDIAN EXPORT ORGANISATIONS ON THE ISSUE OF THE TREATMENT OF DEPB ON THE DEDUCTION CLAIMED U/S 80HHC. IT IS TRUE THAT IN ST RICT SENSE, IT CANNOT BE TREATED AS CIRCULAR; BUT, IT IS AN OPINION AS WELL AS DECISION OF THE BOARD AFTER INTERPRETING THE PROVISIONS OF SEC. 80HHC, IN RESPE CT OF THE TREATMENT OF THE SALE PROCEEDINGS OF THE DEPB WHILE WORKING OUT THE ALLOWABLE DEDUCTION U/S 80HHC(3). AS PER THE PROVISIONS OF SEC. 119 OF THE ACT ALL THE ORDERS/INSTRUCTIONS AND DIRECTIONS OF THE BOARD ARE BINDING ON THE TAX AUTHORITIES AS CBDT IS THE APEX BODY HAVING THE CON TROL OVER ALL THE TAX AUTHORITIES. 5.1 ADMITTEDLY, WHEN THE ASSESSEES ORIGINAL ASSESS MENT WAS COMPLETED U/S 143(3), I.E. 31.10.2002, THE COMMUNICATION OF T HE BOARD WAS NOT AVAILABLE AS IT IS SUBSEQUENT TO THE PASSING OF THE ASSESSMENT U/S 143(3). IN OUR HUMBLE OPINION, THE RELIANCE PLACED BY THE L D COUNSEL OF THE ASSESSEE 4 IN THE CASE OF KELVINATOR INDIA LTD (SUPRA) IS NOT HELPFUL TO THE ASSESSEES CASE DUE TO THE FACT THAT WHEN THE A.O. COMPLETED T HE ASSESSMENT ORIGINALLY U/S 143(3) ON 31.10.2002, THE DECISION TAKEN BY THE BOARD WAS NOT BEFORE THE A.O. AND WHEN SUBSEQUENTLY IT WAS NOTICE BY THE A.O., HE WAS BOUND TO FOLLOW THE SAME. WHEN A.O. INITIATES PROCEEDING UND ER SEC. 147 OF THE ACT, THE ONLY REQUIREMENT IS WHETHER THERE IS SOME MATER IAL TO FORM BELIEF AND BELIEF SHOULD NOT BE BASED ON SOME SUSPICION. 6 AFTER CONSIDERING THE TOTALITY OF THE FACT AND CI RCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE A.O. WAS JUSTIFIED I N INITIATING THE PROCEEDINGS U/S 147 AGAINST THE ASSESSEE; ACCORDINGLY, WE CONFI RM THE SAME AND ACCORDINGLY, THE GROUND NOS.1 TO 3 TAKEN BY THE ASS ESSEE ARE DISMISSED. 7 ON MERIT, THE GROUND NOS 4 TO 7 READ AS UNDER: I) THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE, IN CONFIRMING THE REDUCTION IN CLAIM U/S 80HHC OF THE ACT TO RS. 44,19,351/- AS AGAINST THE CLAIM OF RS. 4,96,03 ,692/-. II) THAT THE LD CIT(A) HAS ERRED IN CONFIRMING THE TOTAL ALE PROCEEDS OF DEPB RS. 5,02,04,823/- AS ANY PROFIT ON TRANSF ER OF DUTY ENTITLEMENT PASS BOOK SCHEME... U/ 28(IIID), WHILE CALCULATING THE DEDUCTION U/S 80HHC, AS AGAINST ACTUAL PROFIT O N TRANSFER OF DEPB ENTITLEMENT OF RS.5,55,595/-. III)THAT THE LD CIT(A) HAS FURTHER ERRED IN NOT CON SIDERING THE FACE VALUE OF DEPB ENTITLEMENTS AS EXPORT INCENTIVES U/S 28(IIIA) OR (IIIB) OR (IIIC) OR BUSINESS INCOME U/S 28(I) OR 28 (IV) WHILE CALCULATING THE DEDUCTION/S 80HHC OR THE SAME OUGHT TO HAVE REDUCED FROM THE COST OF EXPORTS. IV)THAT THE LD CIT(A) HAS ERRED IN CONFIRMING ANY PROFIT ON TRANSFER OF DEPB SCHEME.. DEFINED U/S 28(IIID) AS BUSINESS INCOME AND THEREBY INCLUDED IN TOTAL INCOME, WHEREA S THE SAME WERE EXPORT ENTITLEMENTS, BEING CAPITAL RECEIPT AND NOT COVERED AS INCOME U/S 2(24). 8 WE HAVE HEARD THE PARTIES. THE LD COUNSEL OF THE ASSESSEE SUBMITTED THAT ON MERIT, THE ISSUE HAS TO SET ASIDE TO THE FI LE OF THE A.O. FOR FRESH ADJUDICATION IN LIGHT OF PRINCIPLES LAID DOWN BY T HE SPECIAL BENCH OF THE 5 ITAT IN THE CASE OF TOPMAN EXPORTS REPORTED IN 318 ITR 87 (AT)(SB). THE LD DR HAS NO OBJECTION IN SETTING ASIDE THE ISSUE TO T HE FILE OF THE A.O.. 9 ACCORDINGLY, WITH THE CONSENT OF BOTH THE PARTIES , WE SET ASIDE THE ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECIDE THE SAME AFRESH IN LIGHT OF THE PRINCIPLES LAID DOWN BY THE HONBLE SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS ( SUPRA ) AND GROUND NOS. 4 TO 7 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 10 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 25 TH , DAY OF JUNE 2010. SD/- SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER (R S PADVEKAR ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 25 TH , JUNE 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI