DY. C.I.T. CENTRAL CIR.-1(3), Nagpur V. M/S SPACEWOOD FURNISHERS PVT. LTD, Nagpur

ITA 619/NAG/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4030 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ORDERS US.; OR
• Keywords: Gift; Principle of natural justice; Tax effect; Difference of opinion; Tax effect; Change of opinion
• Section: 68; 80IB; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 619/NAG/2016 Assessment Year : 2008-09 The DCIT Central Circle 1(3) Nagpur Vs. M/s. Spacewood Furnishers Pvt. Ltd. T-48, MIDC, Hinga, Nagpur PAN No.: AACCS 4955 R Appellant Respondent C.O. No.01/NAG/2021 (Arising out of ITA No. 619/NAG/2016 ) Assessment Year : 2008-09 M/s. Spacewood Furnishers Pvt. Ltd. T-48, MIDC, Hinga, Nagpur Vs. The DCIT Central Circle 1(3) Nagpur PAN No.: AACCS 4955 R Appellant Respondent Assessee by: Shri Rachit Thakar (Adv.) Shri S.C. Thakar (Adv.) Revenue by : Shri Piyush Kolhe (CIT-DR) Date of Hearing: 25/04/2022 Date of Pronouncement: 28/04/2022 ORDER PER: SANDEEP GOSAIN, J.M. This is an Appeal by Revenue for A.Y.2008-09 against the consolidated order of CIT(A)-3, Nagpur dt.27.10.2016 (for A.Y.2004-05 to 2010-11) in which the Revenue has taken the following grounds :- “1. On the facts and circumstances of the case and law the Ld. CIT(A) has erred in deleting the 2 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR disallowance of 80IB(3)(ii) of the I.T.Act amounting to Rs.1,64,74,021/-, stating that no incriminating document had been found during the search relying on the decision of Bombay High Court in the case of All Cargo Logistic Ltd., without appreciating the fact that the above said decision has not been accepted by the Department and SLP has been filed who is pending. 2. On the facts and circumstances of the case and law the Ld. CIT(A) has erred in deleting the disallowance u/s.80IB(3)(ii) of I.T.Act amounting to Rs.1,64,74,021/- relying on the decision of Karnataka H.C. in the case of ACE Multi System Ltd. (367 ITR P.266) without appreciating the fact that the above said decision has not been accepted by the department and SLP has been filed which is pending. 3. Any other ground that may be urged at the time of hearing.” 2. In this case the Assessee has also filed cross-objection which is purely a legal ground :- “1] Learned C.I.T.(A) erred in holding that notice U/s.143(2) is not mandatory in search proceedings U/s.153-A. 2] Learned C.I.T.(A) should have held that the impugned assessments U/s.153-A passed without service of notice U/s.143(2) within prescribed time was without jurisdiction and was liable to be quashed on this ground also. 3] Order of learned C.I.T.(A) holding that notice U/s.143(2) is not mandatory is contrary to the decision of Hon’ble Supreme Court in the case of Hotel Blue Moon and other cases.” 3 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR 2.1 Though the cross objection is late, we have condoned the delay as the grounds are purely legal and further those very grounds are already taken in appeals filed before us by the directors of the Assessee- Company in their individual appeal which has to be decided by us. Accordingly we have admitted the cross objection for our adjudication. 3. The facts of this case are that the Assessee is a private limited company registered under the Company’s Act, 1956 having it’s registered office at Nagpur. Assessee Company was registered as Small Scale Industry carrying on the business of manufacture and sale of wooden furniture, panels, partitions, table tops, doors and modular wooden furniture and other items of such furniture since 1998. Said furniture items are excisable and liable to excise duty. It maintains regular books of accounts, stock account, excise registers etc. as required by law and the same are regularly audited as provided under the Act. Assessee claimed deduction u/s.80IA(2)(d) for A.Y.1999-2000 and u/s.80IB(3)(ii) from A.Y.2000-2001 onwards and continued to claim said deduction for ten consecutive years till A.Y.2008-09 and the same has been regularly allowed by Income Tax Department in assessment u/s.143(3) and/or 143(1) from A.Y.1999-2000 to A.Y.2008-09 and no notice u/s.143(2) has been issued for A.Y.2008-2009 till the date of 4 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR search which took place on 19.06.2009. On 19.06.2009 there was a search action u/s.132(1) of the Act at the premises of the Assessee- Company and it’s directors and they were called upon by notice u/s.153- A to file the returns for six years prior to the date of search i.e. A.Y.2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. Assessee by letter dt.18.03.2010 requested Assessing Officer to treat the returns originally filed as filed in pursuance of notice u/s.153-A. 4. Assessee-Company and it’s Directors filed Writ Petition in the High Court of Mumbai, Bench at Nagpur on 20.04.2010 (being W.P. No.2150 of 2010) challenging the search action of the Dept. u/s.132(1) of the Act. Hon’ble High Court annulled search action of the Dept. u/s.132(1) by their order dt.09.12.2011. There was no stay of search proceedings. Accordingly the Assessing Officer issued notice u/s.143(2) of the Act on 24.08.2011 in respect of returns filed by the Assessee on 18.03.2010 in pursuance of notice u/s.153-A. Revenue filed appeal before Hon’ble Supreme Court being Civil Application No.4394 of 2015 arising out of SLP(C) No.38611 of 2012. Hon’ble Supreme Court by it’s order dt.13.05.2015 reversed the order of Hon’ble High Court and ordered that the proceeding would commence from the stage at which the same was interdicted by Hon’ble High Court. 5 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR 5. After the matter came back, A.O. issued notice u/s.142(1) on 01.06.2015 and 18.06.2015 raising various queries. Assessee filed objection that the notice u/s.143(2) earlier issued on 24.08.2011 was barred by time as the same was issued beyond six months from the end of the financial year in which the return was filed. Returns were filed on 18.03.2010 in pursuance of notice u/s.153-A i.e. in financial year ending 31.03.2010. However the notice u/s.143(2) was issued on 24.08.2011 i.e. much beyond the period of six months from the end of the said financial year and hence the same was barred. 6. It was claimed that the deduction u/s.80IB(3)(ii) was rightly allowed year after either in scrutiny assessments u/s.143(2) or u/s.143(1) year after year for all the years and the same cannot be withdrawn unless the same is withdrawn for earlier initial year or on the basis of some incriminating material found during the search. Since no incriminating material was found during the search u/s.132(1) the deduction allowed u/s.80IB(3)(ii) cannot be withdrawn on some change of opinion in 153-A proceedings. 7. It was also contended that in the course of natural development if the industry goes beyond the scope of small scale industry the claim u/s.80IB(3)(ii) cannot be withdrawn merely on that ground. The claim 6 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR which is allowed u/s.80IB(3)(ii) for initial years, has to be allowed for ten consecutive years and cannot be withdrawn unless the claim for initial year is withdrawn. Assessee filed detailed written submission before CIT(A) in respect of the issues involved in appeal. 8. Learned CIT(A) decided the appeals for A.Y.2004-05 to A.Y.2010- 11 by his consolidated order dt.27.10.2016. It may be noted that the appeals by the Dept. for A.Y.2004-05 and 2005-06 were dismissed by ITAT by their order dt.13.07.2018 and for A.Y.2006-07 and 2007-08 were dismissed by ITAT by their order dt.15.10.2019 only on the ground that the tax effect therein was below the monetary limit prescribed for filing the appeals. However in present appeal of the Department for A.Y.2008-09 the tax effect is higher than the monetary limit for filing the appeal and hence the same is being decided on merits. 9. Learned D.R., in respect of the ground taken by Assessee in cross- objection that the notice u/s.143(2) is served beyond the statutory time of six months and hence it is time barred, has submitted, relying on the decision of Delhi High Court in the case of Ashok Chaddha Vs. I.T.O. reported in (2011) 337 ITR P.399 (Delhi) and decision of ITAT in the case of Smt. Sumanlata Vs. ACIT (ITA No.525 to 530/M/2008 7 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR dt.28.09.2016), that notice u/s.143(2) is not mandatory and hence the ground taken by Assessee in cross-objection deserves to be dismissed. 10. Learned A.R. relying on the relevant provisions of the Act and the decisions of Supreme Court and decision of Bombay High Court has strongly emphasized that notice under sec.143(2) is mandatory even in proceedings u/s.153-A and that there being no direct decision of jurisdictional H.C. holding that notice u/s.143(2) is not necessary in 153- A proceedings, the decision of Hon’ble Delhi High Court in the case of Ashok Chaddha Vs. I.T.O. reported in (2011) 337 ITR P.339 (Delhi) is not binding on the Tribunal at Nagpur and especially because of the decisions of Hon’ble Supreme Court in the cases of R. Dalmia and another Vs. C.I.T. (1999) 236 ITR P.480 (S.C.) and C.I.T. Vs. Hotel Blue Moon (2010) 321 ITR P.362 and the decision of Bombay H.C. in the case of CIT Vs. B. G. Shirke Construction Technology (P) Ltd. (2017) 395 ITR P.375 (Bom.) and ratio laid down in those cases and considering the principles of natural justice embodied in sec.143(2), notice u/s.143(2) is mandatory and in absence of notice u/s.143(2) within the time will render the assessment orders u/s.153-A as without jurisdiction. Learned A.R. has given detailed written submission in this regard in paras 12, 12(a) to (q) of the said submission. The same is placed on record. The 8 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR submissions made by the learned A.R. are formidable. However we are unable to accept the same. In the case of coordinate Bench of Mumbai Tribunal in the case of Mrs. Sumanlata Vs. ACIT dt.28.09.2016 one of the issue was whether notice u/s.143(2) is mandatory in 153-A proceedings. Learned Judicial member held that it was mandatory. While learned Accountant member held that the same was not mandatory. Matter was referred to Hon’ble President as third member. Hon’ble third member held that issuance of notice u/s.143(2) is not mandatory in framing assessment u/s.153-A. The decision of the co-ordinate bench on the same issue is binding on us. Hence respectfully following the said decision we dismiss the cross-objection and hold that notice u/s.143(2) is not mandatory and hence non-issue of notice u/s.143(2) by itself will not render the assessment as illegal or without jurisdiction. 11. Now referring to ground No.1 its was stated by learned D.R. that, CIT(A) was not justified in deleting the disallowance of Assessee’s claim u/s.80IB(3)(ii) of I.T.Act amounting to Rs.1,64,74,021/- relying on the decision of Bombay H.C. in the case of All Cargo Logistic Ltd. because the department has not accepted the said decision and it has filed appeal before Hon’ble Supreme Court against the said order and the said appeal is pending. 9 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR 12. Facts in this regard is that the Assessee’s industrial undertaking is manufacturing wooden furniture of various types including wooden modular furniture, panels, partitions, table tops, doors etc. from the year 1998. The Assessee’s industrial unit was a small scale Industry and it started claiming deduction u/s.80IB(i) from A.Y.1999-2000 and the same has been continuously allowed by the department for ten years upto A.Y.2008-09 either by assessment orders u/s.143(3) or 143(1) including for A.Y.2008-09 the last year and that no notice u/s.143(2) was issued for the said year till the date of search dt.19.06.2009. 13. In assessment proceedings started by A.O. u/s.153-A for A.Y.2004-05 to A.Y.2008-09 the Assessee had raised various objections. It was contented that (i) no notice u/s.143(2) having been issued in time the consequent assessment u/s.153-A will be without jurisdiction. (ii) the benefit of sec.80IB(1) claim allowed in initial year 1999-2000 will enure for ten consecutive years and it cannot be withdrawn for subsequent years merely on the ground that the Assessee’s industrial unit has gone out of the purview of small scale Industry. It was pointed out that the industry of the Assessee in course of natural growth had gone out of the scope of small scale industry in the A.Y.2004-05 but still the claim of the Assessee u/s.80IB(1) was rightly allowed for all the 10 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR years from 2004-05 to 2008-09 and the same was according to law (iii) the 80IB(1) claim so allowed for all the years was final and conclusive and the same cannot be withdrawn on mere change of opinion and in absence any incriminating material found during the course of search. It was thus submitted by Assessee before A.O. that the claim u/s.80IB(1) for the year in question cannot be withdrawn as no incriminating material was found during the course of search. However the Assessing Officer did not accept the claim of the Assessee u/s.80IB(ii) and added Rs.1,64,74,021/- to the total income. Against the said order of A.O. the Assessee filed appeal before CIT(A) and reiterated all the grounds with various supporting case law. It was submitted before CIT(A) that the Assessee had established a small scale industrial undertaking for manufacturing wooden furniture from the year 1998 and it has been claiming deduction u/s.80IB(1) from A.Y.1999-2000 to A.Y.2008-09 and the same has been allowed by the Revenue by orders u/s.143(3) and/or 143(1). For A.Y.2008-09 no notice u/s.143(2) was issued till the date of search and hence all those orders either u/s.143(3) or 143(1) were final. No incriminating material was found during the search and hence the claim u/s.80IB(1) which was allowed and had become final cannot be withdrawn on mere change of opinion in 153-A assessment proceedings. 11 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR Various case laws were cited in support of above proposition of law viz. (1) DCIT vs. Manish Construction of Pune Tribunal ITA No.1899 to 1908 (PN) of 2012 dt.30.06.2014, (2) Shri Bishwanath Goradia Vs. Dy.CIT CC- 3, (3) Kolkata ITA Nos.853 & 854 for A.Y.2006-07 and ITA Nos. 855 and 856/Kol/2016 dt.21.09.2016 (4) CIT Central-III Vs. Kabul Chawla ITA No.707 of 2014 with 709/2014 dt.28.08.2015 of Delhi High Court, (5) CIT Vs. (1) Continental Warehousing Corporation ITA No.523 of 2013 and (2) All Cargo Global Logistic Ltd. ITA No.1969 of 2013 dt.21.04.2015 reported in (2015) 374 ITR P.645 (Bom.) which approved the decision of Special Bench of ITAT Mumbai in the case of All Cargo Logistic Ltd. Vs. Dy.C.I.T. ITAT Mumbai (2012) 137 ITD 287 (SB). 14. Learned CIT(A) in para 11.3, 11.4 and 11.5 held has under :- “11.3 The submission and arguments of the Assessee are considered. A perusal of the assessment orders made by A.O. shows that there is no new material found or seized during the search u/s.132 that has been used by the A.O. for disallowing the claim of deduction u/s.80IB which was earlier allowed in completed assessment. The Assessee’s reliance upon the judgment of Hon’ble ITAT Pune in the case of DCIT Vs. Manish Construction Co. is considered. Similar judgments have been made by Hon’ble Mumbai High Court in the case of CIT Vs. Continental Warehousing Corporation (58 Taxman 78). Hon’ble High Court Nagpur in the case of Murli Agro Products Ltd. (49 Taxman 172) and Hon’ble Delhi High Court in the case of Kabul Chawla (ITA No.707/2014) dt.28.08.2015 where it has been held with reference to the assessment proceedings pursuant to notice u/s.153-A that the A.O. cannot made an assessment order or the additions 12 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR therein which are not based on incriminating material found or seized during search for the year for which the assessment proceedings are final. An exception has been made for those assessment years for which the assessment proceedings have not become final or for which the assessments have been abated. 11.4 The remand report of A.O. dated 31.05.2016 and assessment order of the A.O. clearly show that the disallowance of deduction u/s.80IB(3)(ii) claimed by Assessee is not based on any incriminating material or documents found or seized during search. The disallowance appears to have been made purely on a change of opinion. 11.5 I hold that the claim u/s.80IB(ii) allowed in regular assessment u/s.143(3) in absence of any new material cannot be disallowed in assessment proceedings u/s.153-A on mere change of opinion.” 11.6 In the result, ground No.2 raised by the Assessee in appeal is allowed. 15. Learned CIT(A) considering various grounds raised by Assessee in appeal held finally in para 14.7 as under :- “In the result, for A.Y.2004-05 to 2008-09, ground Nos.1,3,4 and 7 are dismissed. Ground Nos.2,5 and 6 are allowed. The A.O. is directed to allow deduction claimed by the Assessee u/s.80IB(3)(ii) of the Income Tax Act.....” 16 Against the said order, the department is in Appeal. In ground No.1 of the dept’s appeal as quoted earlier, the learned D.R. says that the decision of the Hon’ble Bombay H.C. in the case of All Cargo Logistic Ltd. on the basis of which the disallowance of 80IB(3)(ii) claim was deleted holding that no incriminating material was found in the case of search u/s.132(1), was challenged before the Hon’ble Supreme Court in 13 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR SLP. Hon’ble Supreme Court dealing with the said case of All Cargo Logistic Ltd. along with other cases held that two issues were involved, one with regard to scope of sec.153-A of I.T.Act,1961 and other with reference to section 80IA(4) of the Act. As regards the said issue viz. scope of sec.80IA(4) they have already decided against the department in the case of CIT, Delhi-1 Vs. Container Corporation of India Ltd. reported in (2018) 16 SCC 595 and hence the issue regarding scope of sec.153-A can be considered in some other appropriate proceedings and accordingly disposed off the appeal before them. On this basis learned D.R. states that the issue raised by the Dept. though considered by the Hon’ble High Court of Mumbai in the case of All Cargo Logistic Ltd., it is not finally decided by Hon’ble Supreme Court and coupled with the ground No.2 that the Assessee has gone out of the scope of small scale Industry the claim of Assessee u/s.80IB(1) has been rightly disallowed by A.O. especially in view of the decision of Hon’ble Supreme Court in the case of Dy.C.I.T. Vs. ACE Multi Axes System reported in (2018) 400 ITR P.141(SC) reversing the decision of Karnataka H.C. It is thus submitted by learned DR that the order of A.O. disallowing 80IB claim be restored. 14 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR 17. Learned A.R. has submitted that the basic question in the first place is whether in absence of any incriminating material found during the course of search can the claim finally allowed in concluded assessment be disallowed in 153-A assessment proceedings? It is further submitted by the learned A.R. that various Tribunals and various High Courts including jurisdictional High Court of Bombay have all held that in absence of any incriminating material found during the course of search the concluded assessments cannot be interfered with. It is an admitted position that no incriminating material was found during the search. Thus at the threshold the concluded assessment cannot in any way disturbed or varied and once this is the position there is no question of going into any other issue on merits. The decision of Hon’ble Bombay H.C. which is a jurisdiction High Court in the case of All Cargo Global Ltd. (2015) 374 ITR P.645 (Bom.) have held that :- “If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153-A being not expected to the exercised routinely, should be exercised if the search revealed any incriminating material.” 18. Said decision of Hon’ble Bombay High Court is final and is holding the field. In ground No.1 the only reason of the department to challenge CIT(A)’s order was that the dept. has not accepted the decision of 15 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR Hon’ble Bombay H.C. in the case of All Cargo Logistic Ltd. and that they have filed SLP in Supreme Court and that the same was said to be pending. However now the Hon’ble Supreme Court has rendered it’s decision holding that they will decide the issue regarding scope of 153-A in some other appropriate proceedings. Thus the position is that the decision of Hon’ble Bombay H.C. in the case of All Cargo Logistic Ltd. is final and conclusive. Thus the decision of learned CIT(A) based on the said decision of Hon’ble Bombay H.C. cannot be faulted with and on this ground alone the department’s appeal deserves to be dismissed. The decision of Hon’ble Bombay H.C. in the case of Commissioner of Income Tax Vs. Gurinder Singh Bawa reported in (2016) 386 ITR P.481 (Bom.) is to the same effect. 19. It is submitted by learned AR that even if the Assessee’s industry goes out of scope of small scale Industry and goes into medium scale Industry even the claim of Assessee u/s.80IB(1) is rightly allowable because what the Assessee is manufacturing is wooden furniture which not covered by eleventh schedule. Item 23 of eleventh schedule refers to “steel furniture, whether made partly or wholly of steel”. Since the Assessee is admittedly manufacturing wooden furniture it is not covered by any other item of eleventh schedule. Thus if any industrial unit either 16 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR large scale or medium scale or small scale manufacture an item not covered eleventh schedule the same is entitled to exemption/deduction u/s.80IB(1). 20. We have considered the rival submission and have gone through the orders of authorities below and various case laws cited by the parties. Admitted facts are that the Assessee established a small scale Industry (i.e. the industry whose investment in plant and machinery is less than 3 Crore) in the year 1997-98 with an investment of about Rs.77 Lakh for manufacturing of wooden furniture. As stated in asst. order, the small scale Industry of Assessee was registered for manufacture of wooden furniture, panels, partitions, table tops, doors, windows and furniture such as tables, chairs, wardrobe etc. Assessee on it’s said industrial unit claimed deduction u/s.80IB(3)(ii) at the prescribed percentage from its income from A.Y.1998-99.The said claim of the Assessee has been continuously allowed from A.Y.1998-99 to A.Y.2008-09 either in scrutiny assessment u/s.143(3) or 143(1) including asst. year 1998-99. No notice u/s.143(2) was issued for A.Y.2008-09 till the date of search dt.19.06.2009. Thus in all the assessment upto A.Y.2008-09 the claim of the Assessee u/s.80IB(1) stood allowed. In the 17 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR course of search no incriminating material was found. Learned CIT(A) considering the remand report of A.O. in para 11.4 has stated :- “The remand report of the A.O. dt.31.05.2016 and the assessment order of the A.O. clearly show that the disallowance of deduction u/s.80IB(3)(ii) claimed by Assessee is not based on any incriminating material found or seized during the search. The disallowance appears to have been made purely on change of opinion.” Thus there is no dispute that no incriminating material was found or seized during search. Hon’ble Bombay High Court in the case of CIT Vs. (1) Continental Warehousing and (2) All Cargo Global Logistic Ltd. (2015) 374 ITR P.645 (Bom.) (Supra) has held the decision of Special Bench ITAT Mumbai is correctly decided and has held that if there is no incriminating material found during the search there is no warrants for making an order within the meaning of the said provisions. Hon’ble Bombay H.C. in the case of CIT Vs. Gurinder Singh Bawa 386 ITR P.481 (Bom.) (Supra) dismissed the department’s appeal and held as under :- “Held dismissing the appeal that once an assessment was not pending but had attained finality for a particular year, it could not be subject to proceedings under section 153-A of the Act, if no incriminating material were gathered in the course of search or during proceedings under sec.153-A which were contrary to and were not disclosed during the regular assessment proceedings.” In that case for A.Y.2005-06 the Assessee has filed the return declaring income of Rs.9.61 Lakh. The return was processed 18 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR u/s.143(1) and no notice u/s.143(2) of the Act was issued. Search was conducted on 05.01.2007. Consequently an assessment u/s.153-A was made for A.Y.2005-06. Assessing Officer added Rs.93.72 Lakh (which was already declared in the original return as gift) as being covered by section 68 of the Act. CIT(A) confirmed the assessment for the said addition. Before Tribunal Assessee challenged the validity of assessment under sec.153-A of the Act. This was on account of fact that no assessment in respect of the six assessment year was pending and that no incriminating material was found during the course of search. Tribunal cancelled the assessment u/s.153-A as without jurisdiction and also decided the issue in favour of the Assessee on merits. In appeal before Hon’ble High Court the Revenue accepted the ratio laid down by Special Bench of Tribunal in the case of All Cargo Logistic Ltd. and confirmed by Hon’ble High Court that if no incriminating material is found in the course of search then assessment u/s.153-A would be illegal. The grievance of the Revenue was only with regard to the finding of the impugned order on merits. Hon’ble High Court held that once it is not disputed by the Revenue that the decision of the court in Continental Wareshousing would apply to the present case there is no occasion to consider the issue raised on merits. Such an issue would be 19 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR merely academic. Thus the question on merits was not entertained by the High Court. Following the said decision it is not necessary to go to other issue raised by Dept. With regard to ground No.2 the contention of the learned D.R. is that since the Assessee’s industrial unit has gone out of the scope of small scale Industry the claim u/s.80IB(3)(ii) for A.Y.2008-09 is not allowable relying on the decision of Hon’ble Supreme Court in the case of Dy.Comm. of I.T. Vs. ACE Multi Axes System Ltd. (2018) 400 ITR P.141 (SC). In reply the learned A.R. has submitted that the Assessee’s industrial unit right from beginning is manufacturing wooden furniture. Item of wooden furniture is not included in eleventh schedule. Hence any industry either large scale or medium scale, if it manufactures an items not included in eleventh schedule it will be entitled to deduction u/s.80IB(1) as provided in 80IB(2)(iii) which provides that if an industrial unit manufactures any article or thing not being any item in eleventh schedule them it will be eligible for deduction u/s.80IB(1). In respect of small scale Industry a beneficial exception is carved out viz. small scale Industry even if it manufactures any article referred to in eleventh schedule it will be entitled to deduction u/s.80IB(1). Submission of A.R. is that all industries either large scale, medium scale or small scale, if it manufactures items not specified in 20 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR eleventh schedule will be entitled to deduction u/s.80IB(1). Thus the submission of learned A.R. is that even if the Assessee’s industry goes out of the scope of small scale Industry and becomes medium scale Industry it still will be entitled to deduction u/s.80IB(1) as provided in sec.80IB(2)(iii) as it is manufacturing wooden furniture which item is not included in eleventh schedule. What is included in eleventh schedule is steel furniture whether made partly or wholly of steel. Thus the Assessee is entitled to deduction u/s.80IB(1). It was further submitted that the Assessee’s Industry went out of the scope of small scale Industry in A.Y.2003-04 and the Revenue has allowed 80IB(1) deduction for the years from A.Y.2003-04 and A.Y.2004-05 and also all subsequent years and rightly so as the same was according to law. 20.1 Though the submission of the Assessee is substantive we need not go into the merits of the same as we have already held, following the decision of Hon’ble Bombay H.C. in the case of CIT Vs. Gurinder Singh Bawa (Supra), that once we have decided that the assessment u/s.153- A is without jurisdiction it is not necessary to go into merits as it would be merely academic. In view thereof we dismiss the department’s appeal and hold that the claim of deduction u/s.80IB(1) cannot be withdrawn. 21 ITA619/NAG/2016 DCIT, CENTRAL CIR-1(3), NAGPUR VS SPACEWOOD FURNISHERS PVT LTD. NAGPUR 3. In the result, the appeal of the Department is dismissed and the C.O. of the assessee is also dismissed. Order pronounced in the Open Court on 28 th April, 2022 Sd/- Sd/- (ARUN KHODPIA) (SANDEEP GOSAIN) Accountant Member Judicial Member Nagpur Dated:- 28/04/2022 *Mishra Copy of the order forwarded to: 1. The Appellant- The DCIT, Central Circle 1(3), , Nagpur 2. The Respondent- M/s. Spacewood Furnishers Pvt. Ltd. Nagpur 3. CIT 4. The CIT(A) 5. DR, ITAT, Nagpur 6. Guard File (ITA No. 619/Nag/2016) By order, Sr. Private Secretary