ZYLOG PLAST ALLOYS P. LTD, MUMBAI V. DCIT CIR 7(3), MUMBAI

ITA 7892/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3976 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 31-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 22-11-2011
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: RAJESH V PAREKH
• Section: 143(3); 80IB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.7892/M/2011 (ASSESSMENT YEAR: 2005 - 2006 ) MRS. ZYLOG PLAST ALLOYS PVT LTD., C/O. JITEDRA SHAH, 14 DIVYA MAHAL, GYAN MANDIR ROAD, DADAR (W), MUMBAI 400020. / VS. DCIT 7(3), AAYAKAR BHAVAN, 6 TH FLOOR, MUMBAI - 400020. ./ PAN : AAACZ0342B ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH V. PAREKH / RESPONDENT BY : SHRI ASGHAR ZAIN, VP , DR / DATE OF HEARING : 16.02.2016 / DATE OF PRONOUNCEMENT : 16.02.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 22.11.2011 IS AGAINST THE ORDER OF THE CIT (A) - 13, MUMBAI DATED 30.6.2011 FOR THE ASSESSMENT YEAR 2005 - 06. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. AS PER THE FACTS OF THE CASE AND AS PER LAW WHETHER THE LD CIT (A) WAS RIGHT IN CONFIRMING THE ADDITION OF RS. 66,68,579/ - ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT. 2. AS PER THE FACTS OF THE CASE AND AS PER LAW WHETHER THE LD CIT (A) WAS RIGH T IN CONFIRMING THE STAND OF THE AO FOR OPENING THE MATTER U/S 148 OF THE ACT. 2. THE LEGAL ISSUE RAISED IN GROUND NO.2 RELATES TO IF THE REOPENING OF THE ASSESSMENT IS JUSTIFIED IN THIS CASE ON THE GROUND THAT THE ASSESSEE IS NO LONGER A SMALL SCALE IND USTRY IN VIEW OF THE INVESTMENT RESTRICTIONS PROVIDED TO THE SMALL SCALE INDUSTRIES. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE , WHO IS A MANUFACTURER IN TERMOPLASTIC, ELASTOMER / PLOYOLEFIN , FILED THE RETURN OF INCOME 2 DECLARING THE TOTAL INCOME OF RS. 2,07,14,030/ - . ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACTON 30.11.2007, WHEREIN ASSESSEE WAS ALLOWED DEDUCTION OF RS. 66,68,579/ - CLAIMED U/S 80IB BEING A SMALL SCALE MANUFACTURER. IN THE ASSESSMENT AO MADE AD - HOC DISALL OWANCE OF RS. 1 LAKH ON ACCOUNT OF CONVEYANCE AND VEHICLE EXPENSES. THEREAFTER, THE CASE WAS REOPENED U/S 143(3) R.W.S 147 OF THE ACT BY ISSUING A NOTICE U/S 148 OF THE ACT DATED 8.3.2010. THE REASON RECORDED FOR REOPENING OF THE CASE IS THAT SINCE THE A SSESSEES QUANTUM OF BUSINESS EXCEEDS THE ELIGIBILITY TO BE RECKONED AS SMALL SCALE UNIT, AND THEREFORE, ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF DEDUCTION U/S 80IB OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER PASSED ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT DISALLOWING THE DEDUCTION OF RS. 66,68,579/ - U/S 80IB OF THE ACT VIDE HIS ORDER DATED 15.11.2010. AGGRIEVED WITH THE SAID ORDER OF AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEF ORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DISMISSED THE APPEAL. AGAIN AGGRIEVED AND DISSATISFIED WITH THE CIT (A)S ORDER, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL BY RAISING MAINLY THE LEGAL ISSUE VIDE GROUND NO.2 EXTRACTED ABOVE. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BRIEFLY NARRATED THE FACTS OF THE CASE AND SUBMITTED THAT DURING THE YEAR, ASSESSEES INVESTMENT IS BELOW RS. 4 CRS (IE RS. 3.94 CRS) ONLY. ON THIS IS SUE, LD COUNSEL FOR THE ASSESSEE FILED A JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ACE MULTI AXES SYSTEMS LTD VS. DCIT [2014] 367 ITR 266 (KARN), DATED 28.7.2014, WHICH IS RELEVANT FOR THE PROPOSITION THAT IF A SMALL SCALE INDUSTRY STABI LI SES EARLY, MAKES PROFITS, MAKES FUTURE INVESTMENTS IN ITS BUSINESS , AND GO ES OUT OF THE DEFINITION OF SMALL SCALE INDUSTRY, THE BENEFIT OF DEDUCTION U/S 80IB COULD NOT BE DENIED. THEREFORE, IF A SMALL SCALE INDUSTRY , IN THE COURSE OF 10 YEARS, STABILISE S EARLY, MAKES FA RTHER INVESTMENT S IN THE BUSINESS AND IT RESULTS IN ITS GOING OUTSIDE THE PURVIEW OF THE DEFINITION OF A SMALL SCALE INDUSTRY, THAT SHOULD NOT COME IN THE WAY OF ITS CLAIMING BENEFIT UNDER SECTION 80IB FOR TEN CONSECUTIVE YEARS, FROM THE I NITIAL ASSESSMENT YEAR. HE SUBMITTED THAT IN THE PRESENT CASE, THE AO REOPENED THE CASE MERELY FOR THE REASON THAT THE ASSESSEE GOES OUT OF THE D E F I N I T I O N O F A SMALL SCALE INDUSTRY. 3 THUS, THE DECISION OF THE AO / CIT (A) IS LEGALLY UNSUSTAINABLE IN LAW. THEREFORE, THE RE - OPENING SHOULD BE QUASHED AS UNSUSTAINABLE CONSIDERING THE ABOVE LEGAL PROPOSITION. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REV ENUE AUTHORITIES AS WELL AS THE CITED JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ACE MULTI AXES SYSTEMS LTD (SUPRA) AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID JUDGMENT OF T HE HONBLE KARNA TAKA HIGH COURT (SUPRA), WE ARE OF THE OPINION , THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE SHOULD BE ACCEPTED AND GROUND NO.2 RAISED BY THE ASSESSEE SHOULD BE ALLOWED IN ITS FAVOUR. WE ORDER ACCORDINGLY. 7. CONSIDERING THE ABOVE DECIS ION ON THE LEGAL ISSUE RAISED IN GROUND NO.2, THE ADJUDICATION OF GROUND NO.1 RELATING TO THE MERITS BECOMES ACADEMIC. ACCORDINGLY, GROUND NO.1 IS DISMISSED AS ACADEMIC. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH FEBRUARY, 2016. S D / - S D / - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 16.2.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 4 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI