M/S. JEWEL ENTERPRISES, THANE V. THE CIT-I,

ITA 6477/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1649 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 08-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 24-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K BALODIA
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Audit objection; Retrospective amendment
• Section: 143(3); 142(1); 80HHC; 80HH; 263; 63; 28

Judgement Text

ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI BEFORE SHRI D K AGARWAL (JUDICIAL MEMBER), AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER). ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 JEWEL ENTERPRISES .APPELLANT 12 A, SATYAM MEHTA INDUSTRIAL ESTATE NAVGHAR ROAD, BHAYANDER (E), THANE 401105 (PAN : AACFJ2700J) VS. INCOME TAX OFFICER - WARD 2 (1), THANE . RESPONDENT APPELLANT BY : DR K SHIVRAM RESPONDENT BY : SHRI N K BALODIA O R D E R PER PRAMOD KUMAR: ITA NO. 6477/MUM/07 ASSESSMENT YEAR : 2003-04 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 21 ST AUGUST 2007, PASSED BY THE COMMISSIONER OF INCOME TAX I, MUMBAI, UNDER SECTION 263 OF THE INCOME TA X ACT, 1961, FOR THE ASSESSMENT YEAR 2003-04. 2. IN THE GROUNDS OF APPEAL , AS SET OUT IN THE MEM ORANDUM OF APPEAL, THE ASSESSEE HAS RAISED AS MANY AS FOUR VERY DETAIL ED GROUNDS OF APPEAL, BUT, AS LEARNED REPRESENTATIVES FAIRLY AGRE E, THE SOLE ISSUE REQUIRING OUR ADJUDICATION IS WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER WAS IND EED JUSTIFIED IN ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 2 OF 12 EXERCISING HIS POWERS UNDER SECTION 263. 3. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFAC TURE AND EXPORTS OF STAINLESS SHEET UTENSILS AND OTHER PRODUCTS. ON 12 TH NOVEMBER, 2003, THE ASSESSEE FILED ITS INCOME TAX RETURN DISCLOSING A TAXABLE INCOME OF RS 1,51,330, AFTER CLAIMING DEDUCTION UNDER SECTION 80 HHC, IN RESPECT OF EXPORT PROFITS, AMOUNTING TO RS 49,16,854. THE INCOME TAX RETURN WAS DULY ACCOMPANIED BY THE PROFIT AND LOSS ACCOUNT AND OTHER FINANCIAL STATEMENTS, AUDIT REPORT, CERTIFICATE UND ER SECTION 10CCAC ETC. THIS INCOME TAX RETURN WAS PICKED UP FOR SCRUTINY A SSESSMENT. THE ASSESSEE ATTENDED THESE SCRUTINY ASSESSMENT PROCEED INGS, PRODUCE THE BOOKS OF ACCOUNTS IN RESPONSE TO NOTICE UNDER SECTI ON 142(1) DATED 25 TH OCTOBER 2004, AND COMPLIED WITH THE REQUISITIONS O F THE ASSESSING OFFICER FROM TIME TO TIME. ON 31 ST JANUARY 2006, THE ASSESSING OFFICER FINALLY PASSED AN ASSESSMENT ORDER ACCEPTING THE IN COME RETURNED BY THE ASSESSEE, AND, IN THE ASSESSMENT ORDER SO PASSE D, INTER ALIA , OBSERVED AS FOLLOWS: ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT, IT IS SEEN THAT THE ASSESSEE HAS EARNED AN AMOUNT OF RS 61,53,537 O N EXPORT LICENCES SALES. AS PER SECTION 28(IIIA) OF THE INCO ME TAX ACT, PROFIT ON SALE OF LICENCES GRANTED UNDER THE IMPORT (CONTROL) ORDER 1955, MADE UNDER THE IMPORTS & EXPORTS (CONTR OL) ACT, 1947 ( 18 OF 1947), IS CHARGEABLE TO INCOME TAX UND ER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. HO WEVER, DUE TO LATER AMENDMENTS OF SECTION 28 AND SECTION 80 HH C OF THE INCOME TAX ACT, 1961, EXPORTERS HAVING TURNOVER OF LESS THAN RS 10.00 CRORES WILL NOW BE ELIGIBLE FOR DEDUCTION IN RESPECT OF DUTY ENTITLEMENT PASSBOOK SCHEME. IN VIEW OF THE ABOVE, THE DEDUCTION, CLAIMED BY THE ASSESSEE FIRM, OF RS 49,16,854 IS ALLOWED UNDER SECTION 80HH C AND RETURN OF INCOME IS ACCEPTED AS IT IS. 4. THE MATTER, HOWEVER, DID NOT REST AT THAT. ON 21 ST JUNE 2007, THE ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 3 OF 12 SUCCESSOR ASSESSING OFFICER INTIMATED THE ASSESSEE THAT, IN RESPONSE TO A REVENUE AUDIT OBJECTION, HE PROPOSES TO REFER TH E MATTER TO THE COMMISSIONER FOR EXERCISE OF POWERS UNDER SECTION 2 63 SO AS TO REVISE THE ORDER SINCE THE DEDUCTION WAS INCORRECTLY COMP UTED AS THE LOSS INCURRED IN EXPORT OF GOODS WAS NOT SET OFF AGAINST EXPORT INCENTIVES BEFORE ALLOWING THE DEDUCTION. IN HIS LETTER, THE ASSESSING OFFICER, INTER ALIA, STATED AS FOLLOWS: IN THIS CASE, ASSESSMENT FOR AY 2003-04 HAS BEEN CO MPLETED UNDER SECTION 143(3) ON 31.1.2006 ASSESSING THE TOT AL INCOME AT RS 1,51,330. WHILE COMPLETING THE ASSESSMENT, TH E AO HAS CONSIDERED THE CONTENTION OF THE ASSESSEE AS REGARD S DEDUCTION UNDER SECTION 80 HHC CLAIMED AT RS 49,16,854. 2. HOWEVER, THE REVENUE AUDIT ( PARA 2 OF LAR ITRA/ LAPXXIII/ 46 TH CYCLE/AQ NO. 2 DATED 9.4.2007) POINTED OUT THAT THE DEDUCTION WAS INCORRECTLY COMPUTED AS LOSS INCU RRED IN EXPORT OF GOODS WAS NOT SET OFF AGAINST EXPORT INCE NTIVES BEFORE ALLOWING THE DEDUCTION. THIS HAS RESULTED IN SHORT LEVY OF TAX OF RS 8,81,612 INCLUDING INTEREST UNDER SECT ION 234 B ( DETAILED WORKING OF DEDUCTION IS ENCLOSED) 3. THE REVENUE AUDIT REPORT APPEARS TO BE CORRECT A S THE CLAIM OF THE ASSESSEE UNDER SECTION 80HHC IS ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE. HENCE, I PROPOSE THIS CASE TO THE HONBLE CIT-I, THANE, FOR REVISION UNDER SECTION 263. . 5. THE ASSESSEE MADE DETAILED SUBMISSIONS TO THE AS SESSING OFFICER AS TO WHY IT IS NOT A FIT CASE FOR EXERCISE OF REVISIO N POWERS BY THE COMMISSIONER. IT WAS ALSO POINTED OUT THAT AT THE P OINT OF TIME WHEN THE INCOME TAX RETURN WAS FILED BY THE ASSESSEE, T HERE WAS DIVERGENCE OF OPINION AMONG THE VARIOUS HIGH COURTS AND TRIBUN ALS AND THAT ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 4 OF 12 THERE WAS NO JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT. IT WAS ALSO POINTED OUT THAT THE CLAIM OF THE ASSESSE E WAS IN ACCORDANCE WITH ONE OF THE VIEWS EXPRESSED BY VARIOUS BENCHES OF THE TRIBUNAL. A LIST OF TRIBUNAL DECISIONS, WHICH SUPPORTED THE COM PUTATION BY THE ASSESSEE, WAS ALSO FILED. THESE SUBMISSIONS OF TH E ASSESSEE DID NOT DISSUADE THE ASSESSING OFFICER AND HE APPARENTLY RE FERRED THE MATTER TO THE COMMISSIONER FOR EXERCISING POWERS UNDER SEC TION 263. ON 31 ST JULY 2007, THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE COMMISSIONER SHOULD NOT EXERCISE HIS REVISION POWER S UNDER SECTION 263 AND THUS REVISE THE DEDUCTION GRANTED TO THE AS SESSEE UNDER SECTION 80 HHC. IN RESPONSE TO THIS SHOW CAUSE NOTI CE, THE ASSESSEE ONCE AGAIN REFERRED TO AND MAINLY RELIED UPON HIS R ATHER ELABORATE WRITTEN SUBMISSIONS DATED 16 TH JULY 2007 FILED BEFORE THE ASSESSING OFFICER. NONE OF THESE SUBMISSIONS IMPRESSED THE L EARNED COMMISSIONER EITHER. LEARNED COMMISSIONER SET OUT THE AMENDED PROVISIONS OF SECTION 80 HHC, AND NOTED THAT WHILE THE ASSESSMENT WAS COMPLETED ON 31 ST JANUARY 2006, THE PROCESS OF RETROSPECTIVE AMENDMENT IN SECTION 80 HHC WAS COMPLETED IN DECEMB ER 2005. THE ASSESSING OFFICER WAS THUS REQUIRED TO APPLY THE AM ENDED PROVISIONS OF LAW. THE ASSESSING OFFICER OUGHT TO HAVE ADJUSTE D 90% OF INCENTIVES AGAINST THE PROFITS OR LOSSES OF THE ASSESSEE, WHIC H HE FAILED TO DO. HE WAS THUS OF THE OPINION THAT THE ORDER SO PASSED BY THE ASSESSING OFFICER WAS CLEARLY ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 5 OF 12 REVENUE INASMUCH AS DEDUCTION OF RS 22,03,757 WAS A LLOWED IN EXCESS. ACCORDINGLY, IN EXERCISE OF HIS POWERS UNDER SECTIO N 263, LEARNED COMMISSIONER DIRECTED AN ADDITION OF RS 22,03,757. AGGRIEVED BY THE ORDER SO PASSED BY THE LEARNED COMMISSIONER, THE AS SESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. BROADLY, THE CHALLENGE T O ASSUMPTION OF JURISDICTION UNDER SECTION 263 IS ON THE GROUND THA T THE COMMISSIONER COULD NOT HAVE INVOKED HIS REVISION JURISDICTION, A S THE ASSESSING OFFICER HAD PASSED THE ASSESSMENT ORDER AFTER TAKIN G INTO ACCOUNT ALL THE RELEVANT FACTS, INCLUDING RETROSPECTIVE AMENDME NTS IN LAW, AND THE ORDER SO PASSED BY THE ASSESSING OFFICER CANNOT BE CONSTRUED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. IT IS POINTED OUT THAT THE COMMISSIONER IN ERROR IN OBSERVING THAT TH E ASSESSING OFFICER HAS NOT TAKEN INTO ACCOUNT THE RETROSPECTIVE AMENDM ENTS MADE IN SECTION 80 HHC IN DECEMBER 2005, AS THE ASSESSING O FFICER HAS SPECIFICALLY REFERRED TO THE SAME IN THE ASSESSMENT ORDER. IT IS ALSO CONTENDED THAT THE ASSESSING OFFICER HAD EXAMINED T HE CLAIM OF DEDUCTION UNDER SECTION 80 HHC, AND, THEREFORE, THE DECISION THEREON CANNOT BE REVIEWED IN THE GARB OF REVISION PROCEEDI NGS. IT IS FURTHER CONTENDED THAT IT IS AT BEST A CASE OF SUBSTITUTION OF OPINION BY THE ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 6 OF 12 ASSESSING OFFICER, BY THAT OF THE COMMISSIONER SO METHING WHICH IS NOT PERMISSIBLE UNDER THE SCHEME OF THE ACT. RELIA NCE IS PLACED ON HONBLE SUPREME COURTS JUDGMENTS IN THE CASE OF CI T VS MAX INDIA LIMITED (295 ITR 282) AND IN THE CASE OF MALABAR IN DUSTRIAL CO LTD VS CIT (243 ITR 83), HONBLE BOMBAY HIGH COURTS JUDGM ENT IN THE CASE OF CIT VS GABRIEL INDIA LIMITED (203 ITR 117), HONBLE GUJRATA HIGH COURTS JUDGMENTS IN THE CASE OF CIT VS ARVIND JEWE LLERS (259 ITR 502) AND CIT VS NIRMA CHEMICAL WORKS PVT LTD ( 309 ITR 6 7), HONBLE DELHI HIGH COURTS JUDGMENT IN THE CASE OF CIT VS ASHISH RAJPAL (180 TAXMAN 623), AND VARIOUS DECISIONS OF THE COORDINATE BENC HES INCLUDING IN THE CASES OF HONDA SIEL POWER PRODUCTS LTD VS CIT (22 DTR 164) AND USHA MARTIN INDUSTRIES LIMITED VS DCIT (86 ITD 261). IT IS CONTENDED THAT WHEN ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW O F THE MATTER, THE VIEW SO TAKEN BY HIM CANNOT BE DISTURBED MERELY BEC AUSE THE COMMISSIONER DOES NOT AGREE WITH THAT VIEW. IT IS ALSO CONTENDED THAT VIEW OF THE AUDIT PARTY CANNOT BE A BASIS FOR EXERC ISE OF POWERS UNDER SECTION 263, AND THAT MERELY BECAUSE THE ASSESSMENT ORDER DOES NOT REFER TO THE QUERIES RAISED BY THE ASSESSING OFFICE R,IT CANNOT BE SAID THAT THERE WAS NO ENQUIRY AND THE ASSESSMENT IS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ON TH E STRENGTH OF THESE ERUDITE ARGUMENTS, DR SHIVRAM, LEARNED COUNSEL FOR THE ASSESSEE, URGES US TO QUASH THE REVISION PROCEEDINGS. SHRI BALODIA, ON THE OTHER HAND, PAINSTAKING TAKES US THROUGH THE AMENDED LEGAL PROV ISIONS WITH A VIEW ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 7 OF 12 TO DEMONSTRATE THAT THE ASSESSING OFFICER DID NOT C ORRECTLY APPLY THE CORRECT LAW. IT IS ALSO STATED THAT ONCE THE VIEW TAKEN BY THE ASSESSING OFFICER IS NOT BASED ON CORRECT READING OF SIMPLE L EGAL PROVISIONS, THAT ERROR CANNOT BE ALLOWED TO BE PERPETUATED ON THE GR OUND THAT THE COMMISSIONER CANNOT SUBSTITUTE ASSESSING OFFICERS VIEWS BY HIS VIEWS. IT IS ALSO POINTED OUT THAT ALL THESE JUDICIAL PREC EDENTS WHICH HAVE BEEN RELIED UPON BY THE ASSESSEE WERE WITH REGARD TO PRE AMENDMENT LAW, BUT, SO FAR AS POST AMENDMENT LEGAL POSITION IS CON CERNED, THE SAME IS BEYOND ANY DISPUTE OR CONTROVERSY. BY NO STRETCH OF LOGIC, THEREFORE, THE VIEW TAKEN BY THE ASSESSING OFFICER CAN BE JUST IFIED OR SUPPORTED. IT IS SUBMITTED THAT REFERRING TO THE AMENDED LAW I S ONE THING, AND FOLLOWING IT IS ANOTHER. WHILE THE ASSESSING OFFICE R HAS INDEED REFERRED TO THE AMENDMENTS IN LAW, HE DID NOT REALLY BOTHER TO UNDERSTAND, ANALYZE OR APPLY THE AMENDMENTS IN THE LAW. IT IS T HIS MISTAKE WHICH HAS RENDERED THE ORDER PASSED BY THE ASSESSING OFFI CER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE WER E THUS URGED TO CONFIRM THE IMPUGNED ORDER, AND DECLINE TO INTERFER E IN THE MATTER. IN REJOINDER, LEARNED COUNSEL FOR THE ASSESSEE REITERA TED HIS SUBMISSIONS AND POINTED OUT THAT REVISION IS NOT A REMEDY FOR A LL KIND OF MISTAKES, EVEN IF THERE BE A MISTAKE, OF THE ASSESSING OFFICE R, AND AN ERROR OF JUDGMENT, AS AT BEST THE MISTAKE BEFORE COULD BE, I S NOT ONE OF THE MISTAKES WHICH CAN BE REMEDIED UNDER SECTION 263. W E ARE THUS URGED TO APPRECIATE THE LIMITATIONS OF COMMISSIONERS POW ERS UNDER SECTION ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 8 OF 12 263 AND HOLD THAT THE IMPUGNED ORDER DID INDEED GO BEYOND THE MANDATE AND LIMITED SCOPE OF THESE POWERS. WE ARE O NCE AGAIN URGED TO QUASH THE IMPUGNED REVISION ORDER. 7. IN OUR CONSIDERED VIEW THERE CAN INDEED BE NO QU ARREL WITH THE LEGAL PROPOSITION, CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THAT AS LONG AS AN ASSESSING OFFICER HAS TAKEN A PO SSIBLE VIEW OF THE MATTER AFTER APPLYING HIS MIND TO THE FACTS OF THE CASE AND THE LEGAL PROVISION, THE VIEW SO TAKEN CAN NOT BE SUBJECTED T O REVISION PROCEEDINGS UNDER SECTION 263 MERELY BECAUSE THE CO MMISSIONER HAS A DIFFERENT VIEW OF THE MATTER. THE TRUE TEST, THERE FORE, MUST LIE IN WHETHER OR NOT THE VIEW TAKEN BY THE ASSESSING OFFI CER COULD BE SAID TO BE A POSSIBLE VIEW OF THE MATTER, UPON DUE APPLICAT ION OF MIND TO FACTS OF THE CASE AS ALSO THE APPLICABLE LEGAL PROVISIONS . IN THE PROCEEDINGS BEFORE THE COMMISSIONER, THE ASSESSEE HAD SOUGHT TO JUSTIFY THE VIEW TAKEN BY THE ASSESSING OFFICER ON THE BASIS OF CERT AIN JUDICIAL PRECEDENTS ON THE ISSUE, BUT THEN NONE OF THOSE JUD ICIAL PRECEDENTS RELATE TO THE LEGAL POSITION POST THE RETROSPECTIVE AMENDMENTS MADE IN 2005, IN SECTION 80 HHC. IT IS ALSO CONTENDED BY THE ASSESSEE THAT AS AT THE TIME OF FILING OF THE INCOME TAX RETURN, THE RE WERE CONFLICTING VIEWS OF DIFFERENT JUDICIAL AUTHORITIES, BUT WHEN W E ARE EXAMINING WHETHER OR NOT THE ORDER OF THE ASSESSING OFFICER W AS ERRONEOUS, IT HAS TO BE QUA THE LEGAL POSITION PREVAILING AT THE TIME OF ORDER BEING PASSED ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 9 OF 12 AND NOT QUA THE LEGAL POSITION PREVAILING AT THE TIME OF FILIN G OF INCOME TAX RETURN. THE LEGAL POSITION PREVAILING AT THE P OINT OF TIME WHEN ORDER SOUGHT TO BE REVISED WAS PASSED DID NOT, IN O UR CONSIDERED VIEW, ADMIT ANY AMBIGUITY OR CONTROVERSY THAT THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) UNDER SECTIO N 80 HHC(3) OR AFTER GIVING EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER C ENT. OF ANY SUM REFERRED TO IN CLAUSE (IIID) OR CLAUSE (IIIE), AS T HE CASE MAY BE, OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEAR S TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE . THAT WAS NOT DONE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. T HE ASSESSING OFFICER HAS REFERRED TO THE AMENDMENT IN SECTION 80 HHC I N DECEMBER 2005, BUT SO FAR AS COMPUTATION OF DEDUCTION IS CONCERNED , HE HAS SIMPLY FOLLOWED THE PRE AMENDMENT LEGAL POSITION. REFERRIN G TO AN AMENDMENT IS ONE THING, AND APPLYING IT IS ANOTHER. THE ASSES SING OFFICER HAS REFERRED TO THE AMENDMENT BUT DID NOT APPLY THE SAM E IN THE COMPUTATION PART. IN OUR HUMBLE UNDERSTANDING, THE VIEW TAKEN BY THE ASSESSING OFFICER IN THE ORDER SUBJECTED TO THE REV ISION PROCEEDINGS IS A VIEW WHICH NO REASONABLE PERSON, WITH UNDERSTANDI NG OF THE AMENDMENT LEGAL PROVISION, COULD TAKE. IN THIS VIE W OF THE MATTER, WE SEE NO INFIRMITY IN COMMISSIONERS ASSUMPTION OF PO WERS UNDER SECTION 263 OF THE ACT. 8. BY WAY OF THE ADDITIONAL GROUNDS OF APPEAL, THE ASSESSEE HAS ALSO ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 10 OF 12 RAISED GRIEVANCE AGAINST THE CONCLUSIONS ARRIVED AT BY THE CIT(A) ON MERITS, IN ASMUCH AS, ACCORDING TO THE ASSESSEE, T HE COMMISSIONER ERRED IN REDUCING 90% DEPB FROM PROFITS OF THE BUSI NESS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 HHC WITHOUT A PPRECIATING THAT ONLY PROFIT ELEMENT ON THE TRANSFER OF DEPB LICENC E HAS TO BE REDUCED. HAVING HEARD THE RIVAL CONTENTIONS ON ADMISSION OF THIS ADDITIONAL GROUND OF APPEAL, AND HAVING REGARD TO THE FACT THA T IT IS PURELY A LEGAL ISSUE, WE ADMIT THE ADDITIONAL GROUND OF APPEAL AND PROCEED TO DECIDE THE SAME ON MERITS. AS LEARNED REPRESENTATIVES AGRE E, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, BY SPECIAL BENCH DECISION IN THE CASE OF TOPMAN EXPORTS VS ITO (318 ITR AT 87). TO THIS EXTENT, THEREFORE, WE MODIFY THE ORDER OF THE COMMISSIONER SO FAR AS THE QUANTUM OF ADJUSTMENT IS CONCERNED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS AND MANNER INDICATED ABOVE. ITA NO. 6478/MUM/07 ASSESSMENT YEAR : 2004-05 10. LEARNED REPRESENTATIVES AGREE THAT WHATEVER BE THE OUTCOME OF THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 20 03-04, THE SAME WILL APPLY FOR THIS ASSESSMENT YEAR AS WELL. RESPEC TFULLY FOLLOWING THE VIEW TAKEN BY US ABOVE FOR THE ASSESSMENT YEAR 200 3-04, WHILE WE APPROVE THE ASSUMPTION OF JURISDICTION BY THE CIT U NDER SECTION 263 IN ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 11 OF 12 PRINCIPLE, WE MODIFY THE ORDER OF THE COMMISSIONER SO FAR AS THE QUANTUM OF ADJUSTMENT IS CONCERNED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IS ALSO PARTLY ALLOWED IN THE TERMS AND MAN NER INDICATED ABOVE. TO SUM UP, BOTH THE APPEALS ARE PARTLY ALLOW ED IN THE TERMS AND IN THE MANNER INDICATED ABOVE. PRONOUNCED IN THE OP EN COURT TODAY ON 31 ST DAY OF MAY, 2010. SD/XX SD/XX (D K AGARWAL) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 31 ST DAY OF MAY, 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT, , MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, J BENCH, ITAT, M UMBAI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI ITA NOS. 6477 AND 6478/MUM/07 ASSESSMENT YEARS 2003-04 AND 2004-05 PAGE 12 OF 12 DATE INITIAL 1. DRAFT DICTATED ON 28.5.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28.5.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28.5.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28.5.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.5.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 31.5.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 31.5.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER G