AOV International, New Delhi V. ACIT, New Delhi

ITA 6738/DEL/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9342 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2002-2003
• Appeal Filed On: 22-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R S AHUJA
• Keywords: Principle of natural justice; Retrospective amendment; Cost of acquisition; Competent authority; Right to appeal
• Section: 142(1); 80HHC; 143(1); 205; 147; 148; 28; 144

Judgement Text

1 ITA NOS.6736, 6737 & 6738/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 6736/DEL/2015 ( A .Y 2000-01) OM PRAKASH ARORA AOV INTERNATIONAL, 136-A, POCKET-12, JASOLA NEW DELHI AACPA1874A (APPELLANT) VS ACIT CIRCLE-22(1) NEW DELHI (RESPONDENT) ITA NO. 6737/DEL/2015 ( A .Y 2001-02) ITA NO. 6738/DEL/2015 ( A .Y 2002-03) AOV INTERNATIONAL 136-A, POCKET-12, JASOLA NEW DELHI AAFFA2656M (APPELLANT) VS ACIT CIRCLE-22(1) NEW DELHI (RESPONDENT) APPELLANT BY SH. R. S. AHUJA, CA RESPONDENT BY SH. AMIT KATOCH, SR. DR ORDER PER SUCHITRA KAMBLE, JM THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGAIN ST THE ORDER DATED 5/8/2013 PASSED BY CIT(A)-10, NEW DELHI FOR ASSESS MENT YEAR 2000-01, 2001-02 AND 2002-03 RESPECTIVELY. 2. THESE THREE APPEALS ARE IDENTICAL. THEREFORE, G ROUNDS OF APPEAL FOR ITA NO. 6736/DEL/2015 ARE REPRODUCED AS UNDER:- DATE OF HEARING 11.12.2018 DATE OF PRONOUNCEMENT 17.12.2018 2 ITA NOS.6736, 6737 & 6738/DEL/2015 1. (A) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ITO & THE CIT(A) ERRED IN: 1) NOT CONDONING THE DELAY FOR FILING THE APPEAL. 2) NOT SEEING THE MERITS OF THE CASE THAT THE ASSES SEE WAS ENTITLED TO CLAIMS BASED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT. 3) REJECTING ASSESSEE CLAIM U/S 80HHC OF THE I.T AC T ON THE INCOME EARNED FROM SALE OF DEPB LICENSE ON THE BASIS OF TAXATION LAWS (AMENDMENT )ACT, 2005 AND THE PREVAILING JUDGMENTS OF THE HON'BLE SU PREME COURT. 4) LAW TO REOPEN THE CASE FOR ASSESSMENT U/S 147 O F I.T ACT, 1961. 3. THE BRIEF FACTS OF ASSESSMENT YEAR 2000-01 ARE T AKEN FIRST AS THE ISSUE IS IDENTICAL IN ALL THE THREE APPEALS. IN THIS CASE, RETURN WAS FILED BY THE ASSESSEE ON 31/10/2000 DECLARING INCOME OF RS. 24,43,040/- W HICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. SUBSEQUENTLY, AS PER THE TAXATION LAWS (AMENDMENT) ACT, 2005 A CLARIFICATION/AMENDMENT WAS CARRIED OUT TO SECTION 80HHC OF THE INCOME TAX ACT. IN VIEW OF WHICH, IF ANY ASSESSEE SATISFIES THE UNDERSTATED CONDITIONS THEN THE PROFITS COMPUTED UN DER CLAUSE (A), OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (3) OF SECTION 80 HHC SHALL NOT BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO 90% OF DEPB/ REP INCOME:- (I) THE TURNOVER OF THE ASSESSEE IS MORE THAN 10 CR ORE. (II) HE HAD AN OPTION TO CHOOSE EITHER DUTY DRAW BA CK OR DUTY ENTITLEMENT PASS BOOK SCHEME (III) THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO CUSTOMS DUTY WAS NOT HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DUTY ENTITL EMENT PASS BOOK SCHEME. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD C LAIMED DEDUCTION U/S 80HHC ON THE INCOME EARNED FROM SALE OF DEPB LICENS E AND DURING THE YEAR UNDER CONSIDERATION, ASSESSEES TOTAL EXPORT TURNOV ER WAS OF RS. 10,67,31,419/-. THE ASSESSING OFFICER OBSERVED THA T THE ASSESSEE SATISFIES ALL THE ABOVE MENTIONED CONDITIONS, THEREFORE, DEDUCTIO N CLAIMED U/S 80HHC IS RESTRICTED TO THE PROFIT COMPUTED UNDER SUBSECTION (3) OF THE SAID SECTION AND 3 ITA NOS.6736, 6737 & 6738/DEL/2015 NO FURTHER INCREASE AS PER THE PROVISO TO THE SAID SECTION ON ACCOUNT OF DEPB INCOME IS ALLOWED. THE ASSESSING OFFICER FURTHER OB SERVED THAT THE ASSESSEE CLAIMED EXCESS DEDUCTION UNDER SECTION 80HHC BY INC REASING THE DEDUCTION BEING 90% OF THE DEPB PROFITS AND HELD THAT INCOME TO THE EXTENT ABOVE HAS ESCAPED ASSESSMENT. KEEPING IN VIEW THE ABOVE FACTS , THE ASSESSING OFFICER INITIATED PROCEEDINGS TO ISSUE NOTICE U/S 148 AFTER OBTAINING THE REQUISITE APPROVAL FROM THE COMPETENT AUTHORITY AND NOTICE U/ S 148 WAS SERVED UPON THE ASSESSEE. IN RESPONSE TO NOTICE ISSUED U/S 148, NO RETURN WAS FILED BY THE ASSESSEE. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ISSUED AND SERVED STATUTORY NOTICES U/S 142(1) ALON G WITH QUESTIONNAIRE, BUT THE SAME REMAINED UN-COMPLIED WITH. SINCE THE PROCE EDINGS INITIATED WERE TIME BARRING, THE ASSESSING OFFICER COMPLETED THE SAME I N THE MANNER AS PRESCRIBED IN THE PROVISIONS OF SECTION 144 OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE EARNED DEPB CREDITS OF RS.33,61,129/- AND WAS HAVING TURNOVER EXCEEDING RS.10 CRORE. IN VIEW OF T HE AMENDMENT BROUGHT TO SECTION 80HHC OF THE INCOME TAX ACT BY THE TAXATION LAWS (AMENDMENT) ACT 2005, IT WAS HELD BY THE ASSESSING OFFICER THAT DEP B CREDITS ARE NOT COVERED UNDER CLAUSE OF SECTION 28 OF THE INCOME TAX ACT AN D HENCE THE SAID INCOME WILL NOT QUALIFY FOR ANY DEDUCTION UNDER THE PROVIS O OF SECTION 80HHC. THEREFORE, THE ASSESSING OFFICER RECALCULATED THE D EDUCTION U/S 80HHC AFTER DEDUCTING THE 90% OF DRAW BACK AND DEPB INCOME OF R S.31,13,526/- FROM THE BUSINESS PROFIT OF RS.1,60,45,112/- AND 90% OF INCO ME FALLING U/S. 28(IIIA), (IIIB) OR (IIIC) AMOUNTING TO RS.88,510/- WAS ADDED BACK AND ACCORDINGLY DEDUCTION U/S 80HHC WAS COMPUTED AT RS. 1,30,20,096 /-. THUS, ASSESSMENT WAS COMPLETED AT INCOME OF RS.54,71,050/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASS ESSEE ON THE GROUND THAT APPEAL FILED BY THE ASSESSEE IS TIME BARRED/BELATED APPEAL. 4 ITA NOS.6736, 6737 & 6738/DEL/2015 5. THE LD. AR SUBMITTED THAT THE APPEAL BEFORE THE CIT(A) WAS FILED AFTER 5 YEARS 6 MONTHS AND 13 DAYS. THE FACT WAS NEVER DENI ED BY THE ASSESSEE BEFORE THE CIT(A). THE LD. AR SUBMITTED THAT THE ASSESSEE IN FY 1999-2000 RELEVANT FOR AY 2000-01 WAS ENGAGED IN THE BUSINESS OF TRADI NG AND EXPORT OF MEAT AND ENGINEERING PRODUCTS, ETC. THE LD. AR FURTHER SUBMI TTED THAT THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2000-01 ON 31. 10.2000 DECLARING TOTAL INCOME OF RS. 24,43,040/- UNDER THE HEAD BUSINESS I NCOME COMPRISING OF INCOME DERIVED FROM EXPORT OF MEAT AND ENGINEERING PRODUCTS. THIS RETURN WAS PROCESSED AND ASSESSED U/S 143(1) (A) OF THE INCOME TAX ACT, 1961. THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE WAS REOPENE D UNDER PROVISIONS OF SECTION 147/148 OF THE INCOME TAX ACT, 1961 ('THE A CT') BY ISSUING NOTICE U/S 148. THE REASON FOR REOPENING WAS AMENDMENT IN SECT ION 28 AND SECTION 80HHC BY TAXATION LAW (AMENDMENT) ACT, 2005 WITH RE TROSPECTIVE EFFECT FROM I S1 APRIL, 1998 AND THEREFORE INCOME WAS REASSESSED VI DE ORDER FRAMED U/S 144 OF THE ACT AT RS.54,71,050- AFTER RE-COMPUTATION OF DEDUCTION CLAIMED BY THE APPELLANT U/S 80HHC. THE LD. AR SUBMITTED THAT THE ORDER FRAMED U/S 144 READ WITH SECTION 147 AND 148 WAS NOT APPEALED BY T HE ASSESSEE ON THE ADVICE OF HIS COUNSEL. THE LD. AR FURTHER SUBMITTED THAT O N 8 TH FEBRUARY 2012, THE HON'BLE SUPREME COURT IN CASE OF TOPMAN EXPORTS BEI NG CIVIL APPEAL NO. 1699 OF 2012 ARISING OUT OF SLP NO. 26558 OF 2010 REPORT ED IN 205 TAXMAN 119 HAS HELD THAT COST OF ACQUIRING DUTY ENTITLEMENT PASS B OOK (DEPB) IS NOT NIL BECAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOM DUT Y ON EXPORT CONTENT OF THE EXPORT PRODUCT AND THIS COST OF ACQUISITION IS CALL ED THE FACE VALUE. CLAUSE (IIIC) OF SECTION 28 REFERS TO THE COST OF ACQUISITION OF DEPB AND THUS REPRESENTS THE FACE VALUE OF DEPB. CLAUSE (IIID) OF SECTION 28 REF ERS TO THE PROFIT ON TRANSFER OF DEPB WHICH IS SALE CONSIDERATION REDUCED BY FACE VA LUE OF DEPB. THUS THE INTERPRETATION GIVEN BY THE ASSESSING OFFICER TO TH E AMENDMENT IN SECTION 80HHC BY THE TAXATION LAW (AMENDMENT) ACT, 2005 WIT H RETROSPECTIVE EFFECT FROM I S ' APRIL, 1998 IS INCORRECT IN VIEW OF THE JUDGMENT OF THE APEX COURT AND THE APPELLANT HAS BEEN ASKED TO PAY HUGE AMOUNT OF TAX DUE TO THIS INCORRECT INTERPRETATION IN THE REASSESSMENT MADE ON THE BASI S OF THE AMENDMENT. NOW 5 ITA NOS.6736, 6737 & 6738/DEL/2015 ON THE PASSING OF THE JUDGMENT BY THE APEX COURT IT HAS BEEN CLEAR THAT THE LAW EXISTED SINCE ITS INCEPTION ON AMENDMENT AS HAS BEEN INTERPRETED BY THE HON'BLE COURT. THE LD. AR SUBMITTED THAT THE ASSESS EE CAME TO KNOW ABOUT THIS JUDGMENT OF THE APEX COURT REFERRED ABOVE AND ABOUT THE INTERPRETATION OF LAW AND APPLICATION OF THE SAME TO HIS CASE, WHEN H E ENGAGED A NEW COUNSEL IN JULY 2013. THE LD. AR SUBMITTED THAT NOW ON BECOMIN G AWARE OF THE LAW AS IT IS, THE ASSESSEES CASE, ON THE PRINCIPLES OF NATUR AL JUSTICE, IS LIABLE TO BE GIVEN THE CORRECT INTERPRETATION OF LAW IN A SIMILAR MANN ER AS THE DEPARTMENT HAD REOPENED THE CASE ON ACCOUNT OF AMENDMENT IN LAW AN D REASSESSED HIM ON A HIGHER INCOME. HENCE THE ASSESSEE FILED APPEAL AGAI NST THE ORDER OF REASSESSMENT OF THE ASSESSING OFFICER WHEREIN HE HA S DETERMINED A HIGHER INCOME IN THE HANDS OF THE ASSESSEE BEFORE THE CIT( A). THE LD. AR SUBMITTED THAT THE ORDER OF REASSESSMENT WAS MADE ON 20.11.20 08 AND THUS ACCORDING TO THE PROVISIONS OF SECTION 249(2), THE APPEAL AGAINS T SUCH REASSESSMENT COULD HAVE BEEN FILED BY THE ASSESSEE LATEST BY DECEMBER 2009 AND THUS TECHNICALLY THE APPEAL FILED BEFORE THE CIT(A) WAS DELAYED BY 2 018 DAYS. BUT CONSIDERING THE JUDGMENT OF THE APEX COURT PASSED ON 08.02.2012 AND THE ATTENTION TO THE SAME BEING BROUGHT TO THE ASSESSEE BY THE NEW COUNS EL IN JULY 2013, THERE IS A SUFFICIENT CAUSE WITH THE ASSESSEE FOR SUCH DELAY . THE WAY THE DEPARTMENT HAD RESORTED TO THE PROVISIONS OF REASSESSMENT FOR DETERMINING HIGHER INCOME TO TAX DUE TO AMENDMENT IN THE ACT BROUGHT BY THE G OVERNMENT WITH RETROSPECTIVE DATE (IN 2005 WITH RETROSPECTIVE DATE OF 1998) FOR COLLECTION OF ADDITIONAL AMOUNT OF TAX ON SUCH REASSESSED INCOME, THE ASSESSEE ALSO HAS A RIGHT TO FILE AN APPEAL AGAINST SUCH REASSESSMENT O RDER AND HIS INCOME IS LIABLE TO BE DETERMINED ACCORDING TO THE INTERPRETATION OF LAW AS GIVEN BY THE APEX COURT IN ITS JUDGMENT. THE PRINCIPLES OF NATURAL JU STICE ALLOW THE ASSESSEE TO FILE THIS APPEAL WITH DELAY AND CONSIDERING THE GIV EN FACTS SUCH DELAY IS PRAYED TO BE CONDONED BY YOUR HONOR. THE ASSESSEE RELIED U PON THE JUDGMENT OF THE APEX COURT IN CASE OF COLLECTOR, LAND ACQUISITION V. MST. KATJI (1987) REPORTED IN 167 ITR 471 WHEREIN THE HONBLE COURT HAS HELD T HAT THE EXPRESSION 6 ITA NOS.6736, 6737 & 6738/DEL/2015 'SUFFICIENT CAUSE EMPLOYED BY THE LEGISLATURE IS ADEQUATELY ELASTIC T O ENABLE THE COURT TO APPLY THE LAW IN A MEANINGFUL MANNER W HICH SUB SERVES THE ENDS OF JUSTICE. FURTHER THE LD. AR ALSO RELIED UPON THE DECISION IN CASE OF N. BALAKISHNAN V. M. KRISHNAMURTHY, AIR 1998 SC 3222. 6. THE LD. DR SUBMITTED THAT THE CIT(A) RIGHTLY DIS MISSED THE APPEAL OF THE ASSESSEE WHICH IS FILED BELATEDLY. THE LD. DR RELIE D UPON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE CIT(A) HAS NOT TAKEN INTO ACCOUNT THAT THE CASE OF THE ASSESSEE WAS REOPENED UNDER PROVISI ONS OF SECTION 147/148 OF THE INCOME TAX ACT, 1961 ('THE ACT') BY ISSUING NOT ICE U/S 148. THE REASON FOR REOPENING WAS AMENDMENT IN SECTION 28 AND SECTION 8 0HHC BY TAXATION LAW (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FRO M I S1 APRIL, 1998 AND THEREFORE INCOME WAS REASSESSED VIDE ORDER FRAMED U /S 144 OF THE ACT AT RS.54,71,050- AFTER RE-COMPUTATION OF DEDUCTION CLA IMED BY THE APPELLANT U/S 80HHC. THE LD. AR SUBMITTED THAT THE ORDER FRAMED U /S 144 READ WITH SECTION 147 AND 148 WAS NOT APPEALED BY THE ASSESSEE ON THE ADVICE OF HIS COUNSEL. THE LD. AR FURTHER SUBMITTED THAT ON 8 TH FEBRUARY 2012, THE HON'BLE SUPREME COURT IN CASE OF TOPMAN EXPORTS BEING CIVIL APPEAL NO. 1699 OF 2012 ARISING OUT OF SLP NO. 26558 OF 2010 REPORTED IN 205 TAXMAN 119 HAS HELD THAT COST OF ACQUIRING DUTY ENTITLEMENT PASS BOOK (DEPB) IS N OT NIL BECAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOM DUTY ON EXPORT CONTENT OF THE EXPORT PRODUCT AND THIS COST OF ACQUISITION IS CALLED THE FACE VALUE. CLAUSE (IIIC) OF SECTION 28 REFERS TO THE COST OF ACQUISITION OF DEPB AND THUS REPRESE NTS THE FACE VALUE OF DEPB. CLAUSE (IIID) OF SECTION 28 REFERS TO THE PROFIT ON TRANSFER OF DEPB WHICH IS SALE CONSIDERATION REDUCED BY FACE VALUE OF DEPB. THUS T HE INTERPRETATION GIVEN BY THE ASSESSING OFFICER TO THE AMENDMENT IN SECTION 8 0HHC BY THE TAXATION LAW (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FRO M I S ' APRIL, 1998 IS INCORRECT 7 ITA NOS.6736, 6737 & 6738/DEL/2015 IN VIEW OF THE JUDGMENT OF THE APEX COURT AND THE A PPELLANT HAS BEEN ASKED TO PAY HUGE AMOUNT OF TAX DUE TO THIS INCORRECT INTERP RETATION IN THE REASSESSMENT MADE ON THE BASIS OF THE AMENDMENT. NO W ON THE PASSING OF THE JUDGMENT BY THE APEX COURT IT HAS BEEN CLEAR THAT T HE LAW EXISTED SINCE ITS INCEPTION ON AMENDMENT AS HAS BEEN INTERPRETED BY T HE HON'BLE COURT. IT IS THE SUBMISSION OF THE LD. AR THAT THE ASSESSEE CAME TO KNOW ABOUT THIS JUDGMENT OF THE APEX COURT REFERRED ABOVE AND ABOUT THE INTERPRETATION OF LAW AND APPLICATION OF THE SAME TO HIS CASE, WHEN HE EN GAGED A NEW COUNSEL IN JULY 2013. THUS, THE REASON FOR DELAY WAS PROPERLY EXPLAINED BY THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION THAT THE DELAY SHO ULD HAVE BEEN CONDONED BY THE CIT(A), OTHERWISE THE ASSESSEE WILL BE REMEDILE SS DESPITE HAVING LEGAL POSITION IN ITS FAVOUR. HENCE, WE ARE CONDONING THE DELAY IN FILING THE APPEAL BEFORE THE CIT(A) AND REMAND BACK THE MATTER TO THE FILE OF THE CIT(A) FOR ADJUDICATION OF THE ISSUES CONTESTED THEREIN ON MER ITS. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWI NG PRINCIPLES OF NATURAL JUSTICE. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSE. ALL THE OTHER TWO APPEALS ARE ALSO ON IDENTICAL GROUNDS , THEREFORE, THE THREE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. IN RESULT, ALL THE THREE APPEALS FILED BY THE AS SESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DECEMBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 17/12/2018 R. NAHEED COPY FORWARDED TO: 8 ITA NOS.6736, 6737 & 6738/DEL/2015 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 1 1 .12 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1 7 .12 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 7 .12.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 7 .12.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 7 .12.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER