M/s. Select Leather Finishers, CHENNAI V. ACIT, Vellore

ITA 753/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5183 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 20-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Keywords: Business income; Revision of order; Wrong claim; Set aside
• Section: 143(3); 80HHC; 80IB; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 753/MDS/2010 ASSESSMENT YEAR : 2002-03 M/S SELECT LEATHER FINISHERS #104-C, SIPCOT INDUSTRIAL COMPLEX RANIPET VELLORE DISTRICT VS THE ACIT CIRCLE I VELLORE [PAN AANFS7712L ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PHILIP GEORGE RESPONDENT BY : SHRI K.E.B RENGARAJAN, JR. STANDING COUNSEL O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSESSMENT YE AR 2002-03, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT, CHENNAI, DATED 22.3.2010. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE LD. CIT CALLED FOR THE RECORD OF ASSESSMENT ORDER PASSED U/S 143(3 ) R.W.S 147 OF THE ACT ON 22.6.2007 U/S 263 NOTICING THAT THE ASSESSIN G OFFICERS ORDER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE SHOW CAUSED THE ASSESSEE VIDE LETTER DATED 1.3.2010 . THE SHOW ITA 753/10 :- 2 -: CAUSE NOTICE ISSUED TO THE ASSESSEE IS BEING EXTRAC TED VERBATIM AS UNDER: YOU HAD FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 ON 31.10.2003 DECLARING TOTAL INCOME OF ` 11,34,022/-. THE SAID RETURN WAS PROCESSED UNDER S.143(1) ON 14.09.2004 BY THE ASSISTANT COMMISSIONE R OF INCOME TAX, VELLORE CIRCLE, VELLORE. AS I WAS FOUN D THAT THERE WAS ESCAPEMENT OF INCOME SINCE YOU HAD CLAIME D ED UNDER SECTION 80HHC WITHOUT REDUCING THE DEDUCTION UNDER S.801B FROM THE BUSINESS PROFIT AS STIPULATED IN 80 1A(9) R/W 801B(13), NOTICE UNDER S. 148 WAS ISSUED ON 6.4.200 6. IN RESPECT TO THIS NOTICE, YOU HAD FILED A REVISED R ETURN OF INCOME ON 24.5.2006 ADMITTING THE SAME INCOME AS IN THE ORIGINAL RETURN. THE REGULAR ASSESSMENT UNDER S. 14 3(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 WAS MADE ON 22.06.2007 BY THE ASSISTANT COMMISSIONER OF INCOME TAX, VELLORE CIRCLE DETERMINING THE TOTAL INCOME AT ` 22,53,051/- REWORKING AND REDUCING THE DEDUCTIONS CLAIMED UNDER S. 80IB AND 80HHC OF THE INCOME-TAX ACT, 1961 CLAIMED IN THE RETURN THE SAID ASSESSMENT RESULTED IN AN ADD ITIONAL DEMAND OF ` 5,31,281/-. PERUSAL OF THE RECORDS INDICATE THAT DEDUCTION OF ` 18,70,047/- HAS BEEN ALLOWED ON THE BUSINESS INCOME OF ` 74,80,187/- WHICH INCLUDES ` 53,53,042/- BEING THE DUTY DRAW BACK RECEIVED BY YOU. IT IS WELL SETTLED LAW THAT DEDUCTION UNDER SUB- SECTION(1) OF SECTION 801B IS ALLOWABLE ONLY AGAINS T THE BUSINESS INCOME OF AN ASSESSEE AND NOT AGAINST ANY INCOME OTHER THAN FROM BUSINESS. THIS HAS BEEN CLEA RLY LAID DOWN BY THE DECISIONS OF THE HON'BLE HIGH COUR T OF MADRAS IN CIT VS. JAMEEL LEATHERS & UPPER (246 ITR 97) AND THE HON'BLE SUPREME COURT IN THE CASE OF LI BERTY INDIA VS CIT (183 TAXMAN 349). IN THE BACKGROUND OF THE CLEAR CUT POSITION OF STATUTE AND THE DECISIONS OF THE HON'BLE HIGH COURT AND SUPREME COURT SUPRA, I AM OF THE PRIMA FACIE VIEW T HAT THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFF ICER IN THIS CASE ALLOWING DEDUCTION UNDER S.80IB(1) ON PROFITS DERIVED FROM A NON-BUSINESS SOURCE IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE HER EBY GIVEN AN OPPORTUNITY TO FILE YOUR WRITTEN SUBMISSIO NS ON ITA 753/10 :- 3 -: THE ISSUE MENTIONED ABOVE WITHIN 10 DAYS FROM THE RECEIPT OF THIS LETTER, FURTHERMORE, YOUR CASE STAN DS FIXED FOR HEARING ON 15 TH MARCH, 2010 AT 11 A.M. IN MY OFFICE AT THE ADDRESSED GIVEN ABOVE.' 3. THE ASSESSEE FILED WRITTEN SUBMISSION IN RESPONSE T O THE ABOVE SHOW CAUSE NOTICE ON 22.3.2010. THE MAIN CONTENTIO N OF THE LD.AR BEFORE THE LD. CIT WAS THAT EACH AND EVERY MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER CANNOT BE RECTIFIED U/S 26 3. FURTHER IT WAS SUBMITTED THAT ONCE THE ISSUE IS STATED TO BE DEBAT ABLE IN NATURE AND BECAUSE THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW TO WHICH THE LD. CIT MAY NOT AGREE, THE ORDER CANNOT BE REVISED. AFTER EXAMINING THE LEGAL POSITION AND THE ISSUE ON MERITS, FINALLY , THE LD. CIT SET ASIDE THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2002-03 PA SSED U/S 143(3) R.W.S 147 DATED 22.6.2007 HOLDING IT TO BE ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE THE ASSESSING OFFICER HAD NOT EXCLUDED THE DUTY DRAWBACK INCOME OF ` 53,53,042/- FROM THE BUSINESS INCOME OF ` 74,80,187/- WHILE COMPUTING THE DEDUCTION U/S 80IB OF THE ACT. THE LD. CIT MODIFIED THE ORDER TO THAT EXTENT TO RECOMPUTE THE DEDUCTION U/S 80IB IN VIEW OF THE DI CTUM OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS JA MEEL LEATHERS AND UPPER ( 246 ITR 97) AND THAT OF HON'BLE HON'BLE SUP REME COURT IN THE CASE OF LIBERTY INDIA VS CIT, 317 ITR 218. NOW TH E ASSESSEE IS AGGRIEVED AND HAS RAKED UP THE ISSUES - ONE ON ASS UMPTION OF JURISDICTION U/S 263 AND SECOND, ON THE MERITS OF T HE CASE. ITA 753/10 :- 4 -: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE RECORDS AVAILABLE BEFORE US. AFTER HEARING BOTH S IDES, IT WAS FOUND THAT THE ISSUE ON MERITS STANDS COVERED AGAINST THE ASSESSEE. ON THE DATE OF HEARING BEFORE THE ASSESSING OFFICER, THE D ECISION OF HON'BLE MADRAS HIGH COURT REFERRED TO ABOVE WAS AVAILABLE A ND HE WAS BOUND TO FOLLOW THE SAME. THE LD.AR TRIED TO CANVAS THAT THERE ARE DIVERGENT DECISIONS OF THE ISSUE OF TREATMENT OF DUTY DRAWBAC K WHILE COMPUTING THE DEDUCTION U/S 80IB. IN OUR OPINION, IT IS NOT A CORRECT ARGUMENT. WHEN A DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT DIRECTLY ON THIS ISSUE WAS AVAILABLE, THE ASSESSING OFFICER WAS BOUND TO FOLLOW THE SAME. THEREFORE, WITH REFERENCE TO THE DECISIONS O F DIFFERENT HIGH COURTS THE ISSUE CANNOT BE TAKEN AS A DEBATABLE ONE EVEN IF THE OTHER HIGH COURTS HAVE TAKEN A DIFFERENT VIEW. THE DECISION OF JURISDICTIONAL HIGH COURT IS BINDING ON THE AUTHO RITIES FALLING UNDER ITS JURISDICTION. MOREOVER, THE VIEW OF THE MADRAS HIG H COURT, NOW STANDS COVERED BY THE DECISION OF HON'BLE SUPREME C OURT RENDERED IN THE CASE OF LIBERTY INDIA VS CIT (SUPRA) ALTHOUGH T HIS DECISION WAS RENDERED SUBSEQUENT TO THE FRAMING OF ASSESSMENT. THE DECISION ON A ISSUE BY THE HON'BLE APEX COURT IS TREATED AS THE LAW FROM VERY INCEPTION IN VIEW OF THE PROVISIONS OF ARTICLE 141 OF THE CONSTITUTION OF INDIA. THEREFORE, ON MERITS, THE ASSESSEE HAS GOT NO CASE, HENCE, WE CONFIRM THE REVISIONAL ORDER ON THAT ACCOUNT. ITA 753/10 :- 5 -: 5. ON JURISDICTION ALSO THE ASSESSEE CANNOT SUCCEED BECAUSE WHEN WRONG CLAIM HAS BEEN ALLOWED BY THE ASSESSING OFFIC ER HIS ORDER BECOMES ERRONEOUS. OBVIOUSLY, THE ALLOWANCE OF A C LAIM WHICH IS NOT ALLOWABLE WOULD RESULT IN PREJUDICE TO THE INTEREST S OF THE REVENUE. CONSEQUENTLY, BOTH THE CONDITIONS LAID DOWN IN SECT ION 263 CO-EXIST IN THIS CASE. HENCE, IN OUR CONSIDERED OPINION, THE L D. CIT HAS CORRECTLY REVISED THE ORDER UNDER SECTION 263 OF THE ACT. A CCORDINGLY, WE DISMISS THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.4.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 29 TH APRIL, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR