M/s. Dynamech, Jalandhar city V. The Additional Commissioner of Income Tax, Jalandhar

ITA 83/ASR/2011

• Counselvise Citation: 8320914 RSA 2011
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Depreciation; Period of limitation; Difference of opinion; Time period of passing order; Condonation of delay; Change of opinion
• Section: 143(3); 142(1); 80HHC; 80IB; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 83(ASR)/2011 ASSESSMENT YEAR:2003-04 PAN :AABFD7257N M/S. DYNAMECH, VS. ADDL. COMMR. OF INCOME-TAX, JALANDHAR CITY. RANGE-1, JALANDHAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH. Y.K. SUD, CA DEPARTMENT BY:SH. TARSEM LAL, DR DATE OF HEARING : 21.02.2012 DATE OF PRONOUNCEMENT:21.02.2012 ORDER FOR CONDONATION OF DELAY PER BENCH: THE ASSESSEE IN THE PRESENT CASE HAS FILED AN APPL ICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL BEFORE TH E TRIBUNAL. IT WAS NOTICED THAT THERE WAS A DELAY OF 147 DAYS IN FILING THE AP PEAL BEFORE THE TRIBUNAL. 2. THE LD. COUNSEL FOR THE ASSESSEE, SH. Y.K. SUD, CA, ARGUED THAT THE APPEAL COULD NOT BE FILED DUE TO OVERSIGHT OF THE C OUNSEL AND THE DELAY CANNOT BE ATTRIBUTED ON THE PART OF THE ASSESSEE. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED AN AFFIDAVIT IN SUPPORT OF HIS P LEADINGS. THE SAID AFFIDAVIT FOR THE SAKE OF CLARITY IS REPRODUCED AS UNDER: 2 AFFIDAVIT RE: M/S. DYNAMECH VS. ADDL. CIT, RANGE-1, JALANDHAR. JALANDHAR. I Y.K. SUD, S/O LATE SH. D.D. SUD SOLEMNLY AFFIRM AS UNDER: 1. THAT THE APPELLANT IS REGULARLY ASSESSED TO TAX WITH RANGE-1, JALANDHAR. 2. THAT THE APPELLANT HAD PREFERRED AN APPEAL BEFOR E THE CIT(A) AGAINST THE ORDER OF THE AO PASSED U/S 13(3) R/W S.147. 3. THAT THE CIT(A) DISPOSED THE ABOVE APPEAL VIDE H IS ORDER DATED 29.7.2010 WHICH WAS SENT BY SPEED POST TO THE ASSESSEE AT THE ADDRESS GIVEN ABOVE. 4. THAT IT IS WORTH MENTIONING THAT BOTH THE PARTNE RS OF THE FIRM LIVE IN NOIDA WHERE THE MANUFACTURING UNIT OF THE FIRM IS WORKING. 5. THAT THE ABOVE ORDER WAS RECEIVED BY THE CLERK O F THE ASSESSEE AND THE COPY OF THE SAME WAS SENT BY HER T O THE UNDERSIGNED COUNSEL FOR HIS INFORMATION AND NECESSA RY ACTION. 6. THAT THE COUNSEL ON RECEIVING THE ORDER UNDER RE FERENCE WENT THROUGH THE CONTENTS OF THE ORDER AFTER NOTING DOWN HIS OBSERVATIONS KEPT IT ASIDE TO FILE AN APPEAL SUBSEQUENTLY. THE COUNSEL WAS DURING THE PERIOD WAS BUSY IN MANAGING THE AUDIT U/S 44AB AND ALSO IN FIL ING OF RETURNS WHICH WERE TO BE FILED ON OR BEFORE 30.09.2 010. 7. THAT THE COUNSEL THROUGH AN OVERSIGHT COULD NEIT HER CONVEY THE ORDER TO THE PARTNERS NOR COULD CONVEY H IS DECISION TO FILE THE APPEAL BEFORE THE ITAT AGAINST THE SAID ORDER. 8. THAT IT WAS ONLY WHEN NOTICE U/S 154 WAS ISSUED BY THE AO FOR CHARGING INTEREST ON THE FACT OF ORDER OF CIT(APPEALS) WAS RECEIVED THAT THE COUNSEL COULD RE ALIZE HIS MISTAKE OF NOT FILING THE APPEAL IN TIME. 9. THAT SINCE THE DELAY OF 149 DAYS IS ATTRIBUTED T O THE MISTAKE OF THE COUNSEL IT IS PRAYED THAT THE SAME M AY KINDLY BE CONDONED. SD/- 3 (DEPONENT) VERIFICATION THAT THE DEPOSITIONS CONTAINED ABOVE FROM PARA 1 TO 9 ARE TRUE TO THE BEST OF MY KNOWLEDGE AND NOTHING THEREIN IS FALSE OR KEPT CONCEALED. SD/- (DEPONENT) 2.1. THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF HIS ARGUMENTS RELIED UPON THE DECISION OF THE HONBLE ANDHRA PRADESH HI GH COURT, IN THE CASE OF VOLTAS LTD VS. DCIT REPORTED IN 241 ITR 471 AND ALS O ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. WEST B ENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LTD. (2011) 334 ITR 269. 3. THE LD. DR, ON THE OTHER HAND, OPPOSED THE ADMIS SION OF THE APPEAL AND ARGUED THAT THE DELAY BE NOT CONDONED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE EXPLANATION SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE WAS FOUND TO BE SUFFICIENT AND BONAFIDE AND WAS NOT A DELIBER ATE DELAY. FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F N.BALA KRISHANAN VS. M.KRISHNA MURTHY (1998) 7 SCC 123, IN WHICH IT WAS HELD BY THE HONBLE SUPREME COURT THAT IN THE ABSENCE OF ANYTHING SHOWN AS MALAFIDE OR DELIBERATE DELAY, AS A DILATORY TACTICS, COURT SHOU LD NORMALLY CONDONE THE 4 DELAY. ONCE THE COURT ACCEPTS THE EXPLANATION AS SU FFICIENT, IT IS THE RESULT OF POSITIVE EXERCISE OF DISCRETION. IN VIEW OF THE FAC TS ON RECORD AND THE EXPLANATION SUBMITTED BY THE LD. COUNSEL FOR THE AS SESSEE AND DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF N. BALA KRISHN AN (SUPRA), THE DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL IS CONDONED A ND APPEAL OF THE ASSESSEE IS ADMITTED. THE REGISTRY IS DIRECTED TO FIX UP THE MATTER FOR HEARING IN DUE COURSE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS POSED OF IN THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST FEBRUARY, 2012. SD/- SD/- (H.S.SIDHU) (B.P.JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21ST FEBRUARY , 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. DYNMECH, JALANDHAR. 2. THE ADDL. CIT, R-1, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 83(ASR)/2011 ASSESSMENT YEAR:2003-04 PAN :AABFD7257N M/S. DYNAMECH, VS. ADDL. COMMR. OF INCOME-TAX, JALANDHAR CITY. RANGE-1, JALANDHAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH. Y.K. SUD, CA DEPARTMENT BY:SH. TARSEM LAL, DR DATE OF HEARING : 22.02.2012 DATE OF PRONOUNCEMENT:24.02.2012 ORDER PER BENCH: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 29.07.2010 FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE A.O. IN INITIATING THE PROCEEDING U/S 147/148 OF TH E I.T.ACT. 2. THAT THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING T HE ACTION OF THE A.O. IN REDUCING OF RS.1278240/- AS DEDUCTION U/S 80IB FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COM PUTATION U/S 80HHC. 2 3. THAT ORDER OF THE CIT(A) AND A.O. ARE AGAINST LA W AND FACTS OF THE CASE. 2. THE LD. COUNSEL FOR THE ASSESSEE, SH. Y.K. SUD, CA, DID NOT PRESS GROUND NOS. 2 & 3. THE SAME ARE DISMISSED AS NOT PR ESSED. 3. AS REGARDS GROUND NO.1, THE LD. COUNSEL FOR THE ASSESSEE, INVITED OUR ATTENTION TO THE SEQUENCE OF EVENTS, WHICH WERE PLA CED ON RECORD AS UNDER: S.NO. DATE PARTICULARS 1. 29.11.2003 RETURN OF INCOME FILED AT INCOME OF 1573858/- AFTER CLAIMING DEDUCTION OF 80HHC- RS.3147714/- AND 80IB RS.1573857/-. 2. 17.12.2003 RETURN PROCESSED U/S 143(1) 3. 17.3.2006 ORDER U/S 143(3) PASSED ALLOWING DED UCTION U/S 80HHC AT RS.3189712/- AND DEDUCTION U/S 80IB AMOUNTING TO RS.1573857/- NOT ALLOWED ON THE GROUND THAT AUDITORS REPORT U/S 80IA(7) FILED IN OLD FORMAT. 4. 30.8.2006 CIT(A) PASSED AN ORDER IN FAVOUR OF THE ASSESSEE ALLOWING DEDUCTION U/S 80IB. THE ORDER PASSED AFTER HEARING THE ASSESSEE AS WELL AS ASSESSING OFFICER. 5. 6.3.2009 NOTICE U/S 148 ISSUED TO THE ASSESSEE AFTER RECORDING OF THE REASONS AFTER THE EXPIRY OF 4 YEARS FROM THE END OF ASSTT. YEAR. 6. 17.6.2009 OBJECTIONS TO THE REASONS RECORDED F ILED. 7. 16.11.2009 OBJECTIONS DISPOSED OFF BY THE A.O. BY A NON-SPEAKING ORDER. 4. THE BRIEF FACTS AS EMERGING FROM THE ORDER OF AO VIDE PAGES 1 TO 5 ARE AS UNDER: 3 2. THE ASSESSING OFFICER ISSUED NOTICE DATED 06.03 .2009 U/S 147 OF THE ACT AND SERVED IT ON THE ASSESSEE ON 16.03.2 009 AFTER DULY RECORDING THE REASONS. ASSESSEE VIDE LETTER DATED N IL WHICH WAS RECEIVED ON 15.04.2009 INFORMED THAT THE RETURN ORI GINALLY FILED ON 29.11.2003 BE TREATED AS TO HAVE BEEN FILED IN COMP LIANCE TO THE NOTICE U/S 148 AND REQUESTED FOR COPY OF REASONS RECORDED. NOTICE U/S 143(2) AND U/S 142(1) DATED 02.06.2009 WERE ISSUED TO THE ASSESSEE ALONGWITH A COPY OF REASONS RECORDED WHICH WERE DULY SERVED ON THE ASSESSEE ON 06.03.2009. REASONS RECORDED BY THE A.O. ARE REP RODUCED AS UNDER: THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.11.20 03, DECLARING INCOME OF RS.15,73,858/-. THE INCOME WAS COMPUTED AFTER CL AIMING DEDUCTIONS U/S 80HHC AND 80IB OF THE I.T. ACT AS FOLLOWS: TOTAL INCOME : 6295439/- LESS DEDUCTION U/S 80HHC : 3147714/- 80-IB : 1573857 : 4721571/- NET TAXABLE INCOME : 1573858/- 01(A) THE SAME WAS PROCESSED U/S 143(1) ON 17.12.20 03. ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED ON 17.03.2006 AT AN INCOME OF RS.32,25,223/-.WHILE COMPUTING THE ABOVE INCOME DED UCTIONS AS FOLLOWS WERE ALLOWED: DEDUCTION U/S 80HHC : 3189712/- 1(B) ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB OF THE ACT, AT RS.15,73,857/- BEING 25% OF THE TOTAL PROFITS. BUT THE SAME WAS NOT ALLOWED IN THE ASSESSMENT ORDER DATED 17.03.2006 U/ S 143(3) OF THE I.T ACT ON THE GROUND THAT AUDITORS REPORT AS REQUI RED U/S 80IA(7) READ WITH SECTION 80IB(13) OF THE ACT, WAS NOT FILE D WITH THE RETURN OF INCOME. 02. ASSESSEE WENT IN APPEAL AGAINST THE ABOVE ORDER FRA MED U/S 143(3) OF THE ACT BEFORE CIT(A), JALANDHAR, WHO VIDE ORDER DA TED 30.08.2006 IN APPEAL NO.22/06-07/CIT(A)/JAL PASSED ORDER ON THE F OLLOWING ISSUES AGAINST THE ASSESSEE: THAT THE ACIT WAS NOT JUSTIFIED IN TREATING THE SC RAP SALE AS DOMESTIC SALE AND THEREFORE MAKING A PROPORTIONATE DISALLOWANCE CLAIMED IN DEDUCTION U/S 80HHC. 2(A) HOWEVER, CIT(A) ALLOWED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT HOLDING THAT: 4 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD A ND FIND THAT WITH THE RETURN THE REQUISITE REPORT WAS FILED IN T HE OLD FORM WHICH ON BEING POINTED OUT BY THE A.O. LED TO ITS FILING IN THE NEW FORM AT WHICH STOOD CHARGED W.E.F.06.09.2002. THE APPELLANT PLACED RELIANCE ON THE VARIOUS DECISIONS BUT THE A.O. HAS NOT FOUND ANY MERITS IN THE SAME AND HELD THAT CLAIM FOR DEDUCTI ON U/S 80IB WAS NOT ALLOWABLE AS THE CONDITION PRESCRIBED U/S 80IB( 13) READ WITH SECTION 80IB(7) WAS NOT COMPLIED WITH. BUT AFTER CO NSIDERING THE SUBMISSIONS OF THE APPELLANT I TEND TO AGREE WITH T HE SAME THAT THE FILING OF AUDIT REPORT FOR THE PART OF APPELLANTS AUTHORIZED REPRESENTATIVE WAS THAT THE REPORT WAS FURNISHED IN THE OLD FORM THAN IN THE NEW FORM. I FIND THAT THE FACTS OF THE CASE ALSO GET SQUARELY COVERED BY THE DECISION OF HONBLE RAJASTH AN HIGH COURT IN THE CASE RELIED UPON BY THE APPELLANT (SUPRA). A CCORDINGLY, REPORT IN THE NEW FORM BEING SUBMITTED BY THE AUTH ORIZED REPRESENTATIVE OF APPELLANT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE FINDINGS OF THE AO THAT THE CLAIM FOR DEDUCTION CANNOT BE ALLOWED GETS VACATE AND THE GROUND TAKEN BY THE APPELLANT DISALLOWED. COMPUTATION OF DEDUCTION U/S 80IB & 80HHC OF THE I.T.ACT. (A) IN THIS REGARD, IT WILL BE RELEVANT TO REFER TO THE PROVISIONS OF SECTION 80IA(9)(REFER TO IN SECTION 80-IB(13) OF TH E ACT) WHERE ANY AMOUNT OF PROFITS AND GAINS OF AN UNDER TAKING OR OF AN ENTERPRISES IN THE CASE OF AN ASSESSEE IS CLAIMED A ND ALLOWED UNDER THIS SECTION FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER A NY OTHER PROVISIONS OF THIS CHAPTER UNDER THE HEAD C-DEDUCT IONS IN RESPECT OF CERTAIN INCOMES. AND SHALL IN NO CASE E XCEED THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS OF UNDERTAKING OR ENTERPRISES, AS THE CASE MAY BE. (B) SECTION 80-IB(13 OF THE I.T.ACT IS REPRODUCED A S UNDER: THE PROVISION CONTAIN IN SUB-SECTION (5) AND SUB- SECTIONS (7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE APPLI ED TO THE ELIGIBLE BUSINESS UNDER THIS SECTION. (C) CALCULATION OF DEDUCTION U/S 80-IB OF THE I.T.A CT PROFIT AS COMPUTED VIDE ORDER DATED 20.03.2006 U/S 143(3) OF THE I.T.ACT :7809387/- LESS RELIEF ALLOWED U/S 250(6) OF THE I.T. ACT. 20143/- 7789244/- LESS : CONSIDERING THE FACT THAT PARTNERS ARE 5 NOT BEING PAID INTEREST IN RESPECT OF THEIR CAPITAL, ASSESSEE IS SHOWING MORE THAN ORDINARY PROFITS WHICH ARE ARISING TO THE ELIGIBLE BUSINESS. THEREFORE, TAKING THE INTEREST ON CAPITAL OF THE PARTNERS @12% PER ANNUM, INTEREST WORKS OUT TO BE RS.1243976/-. THE SAME IS THEREFORE, BEING DEDUCTED TO COMPUTE THE PROFITS IN VIEW OF THE PROVISION OF SECTION 80-IB(13) READ WITH SECTION 80-IA(10) OF THE I.T. ACT, FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80IB. 1243976/- : 6545268 DEDUCTION @ 25% : 1636317 (D) COMPUTATION OF DEDUCTION U/S 80HHC SECTION 80HHC(4B) IS REPRODUCED AS UNDER: FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDE R SUB-SECTION (1) OR SUB-SECTION (IA) ANY INCOME NOT CHARGED TO T AX UNDER THIS ACT SHALL BE EXCLUDED. DEDUCTION U/S 80HHC OF THE I .T ACT IS COMPUTED AS UNDER: PROFIT OF THE BUSINESS AS COMPUTED U/S 143(3) OF THE I.T. ACT. : 7809387/- LESS RELIEF ALLOWED U/S 250(6) 20143/- 7789244/- LESS DEDUCTION ALLOWED U/S 80IB ABOVE (REFER SECTION 80HHC (4B) OF THE ACT. 1636317/- 6152927/- LESS 90% OF DEPB RS.458880 412992/- 5739935/- PROFIT OF BUSINESS X EXPORT TURNOVER +90% OF DEPB X EXPORT TURNOVER TOTAL TURNOVER TOTAL TURNOVER (5739935 X 20683007) + (412992 X 20683007) 20985386 20985386 5657228 +407041 = 6064269/- DEDUCTION @ 30% = 1819280/- SINCE DEDUCTION U/S 80IB OF THE I.T.ACT ALLOWABLE A T RS.1636317/- AND DEDUCTION U/S 80HHC OF THE ACT SHALL BE ALLOWED AT RS.182963/- (1819280-1636317) IN VIEW OF THE PROVISIONS OF SECT ION 80IA(9) READ WITH SECTION 80IB(13) OF THE ACT. HOWEVER, ASSESSEE WAS ALLOWED DEDUCTION AS FOLLOWS OF THE ACT AFTER EFFECT THE ORDER OF THE LD. CIT(A), JALANDHAR. 6 80IB ALLOWED : 1589253/- 80HHC : 3160873/- 4750106/- DEDUCTION ALLOWABLE AS ABOVE: 1819280/- EXCESS DEDUCTION ALLOWED : 2930826/- IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE INCOME AMOUNTING TO RS.2930826/- CHARGEABLE TO TAX HAS ESCAPED ASSESSME NT FOR THE ASSESSMENT YEAR 2003-04 AND ACCORDINGLY NOTICE U/S 148 OF THE ACT IS ISSUED TO REASSESS THE ABOVE ESCAPED INCOME AND ALSO ANY OTHE R INCOME WHICH COMES TO THE NOTICE IN THE COURSE OF THE PROCEEDING S 3. THE COUNSEL OF THE ASSESSEE IN A LETTER DATED 17 .06.2009 FILED OBJECTIONS TO THE REASONS RECORDED FOR ISSUE OF NOT ICE U/S 148 OF THE I.T. ACT WHICH ARE REPRODUCED AS UNDER: .PERUSAL OF THE REASONS RECORDED BY YOUR GOODSEL F IN PARAGRAPHS 1(A), 1(B), 2 AND 2(A) ARE THE MATTER OF THE RECORD WHEREIN FACTS HAVE BEEN REPRODUCED BY YOUR GOOD SELF AND AR E FACTUALLY CORRECT. HOWEVER, IN PARAGRAPH A(C) YOU HAVE TRIED TO RECOM PUTED THE DEDUCTION U/S 80IB AND 80HHC WHICH HAVE BEEN CORREC TLY WORKED OUT BY YOU AND DEDUCTION U/S 80HHC WAS ORIGINALLY ALLOWED AND DEDUCTION U/S 80IB WAS ALLOWED BY THE CIT(A) AS MENTIONED IN PARA GRAPH 2(A) OF THE REASONS RECORDED BY YOU AND THE ORDER WAS ACCEPTED BY THE REVENUE. IN PARAGRAPH (C) YOU HAVE PROPOSED TO REWORK THE D EDUCTION U/S 80IB BY COMPULSORILY DEDUCTING INTEREST OF RS.12439 76/- ON THE CAPITAL ACCOUNT OF THE PARTNERS. IN THIS REGARD, IT IS SUBM ITTED THAT NO INTEREST WAS PAID TO THE PARTNERS NOR ANY INTEREST WAS PAYABLE A ND THE PARTNERS HAVE NEVER CHARGED THIS INTEREST RIGHT FROM ITS INCEPTIO N TILL DATE AND THIS HAS BEEN DULY ACCEPTED BY THE DEPARTMENT. CHARGING INTE REST ON THE CAPITAL IS A MUTUAL DECISION OF THE PARTNERS AND IT CANNOT BE ENFORCED BY THE DEPARTMENT ON THE PARTNERS TO CHARGE THE SAME. THE PROVISION OF CHARGING INTEREST IN THE PARTNERSHIP DEED IS ONLY AN AUTHORI ZATION TO CHARGE INTEREST OR NOT CHARGE THE SAME ON THEIR CAPITAL. HENCE YOU PROPOSED WORKING IS TOTALLY MISPLACED AND NO INCOME CAN BE SAID TO HAVE ESCAPED ASSESSMENT BY ALLOWING A HIGHER DEDUCTION IN THE ORIGINAL ASSE SSMENT WHICH HAS BEEN CORRECTLY ALLOWED. IT APPEARS THAT YOU ARE TRYING T O CHANGE THE SETTLED OPINION BY ISSUING THE NOTICE U/S 148. SIMILARLY IN CLAUSE (D) YOU HAVE PROPOSED TO REDUCE THE DEDUCTION U/S 80HHC ALLOWED AT THE TIME OF THE ORIGINAL ASSESSMEN T WHICH WAS CORRECTLY ALLOWED. YOUR CHANGED VIEW THAT DEDUCTION U/S 80IB IS TO BE REDUCED FROM THE EXPORT PROFIT IS MIS-FOUNDED AND CANNOT BE SUST AINED. IN THIS REGARD, YOUR KIND ATTENTION IS INVITED TO THE FOLLOWING JUD GMENTS WHEREIN IT HAS BEEN HELD THAT DEDUCTION U/S 80-IA OR 80-IB IS NOT TO BE REDUCED WHILE ALLOWING DEDUCTION U/S 80HHC. 218 CTR 126 (MAD) 7 THE HONBLE COURT HAS HELD THAT DEDUCTION U/S 80IA IS NOT TO BE DEDUCTED FROM PROFITS AND GAINS OF BUSINESS BEFORE COMPUTING RELIEF U/S 80HHC. 118 TTJ 109 (DELHI) THE HONBLE BENCH HAS CONCLUDED THAT DEDUCTION U/S 80IB IS TO BE COMPUTED ON THE GROSS TOTAL INCOME WITHOUT REDUCING THE DEDUCTION U/S 80HHC. 122 TTJ 849 (CHENNAI) THE HONBLE BENCH HAS CONCLUDED THAT DEDUCTION U/S 80HHC IS TO BE ALLOWED ON THE ELIGIBLE PROFITS WITHOUT REDUCING THE DEDUCTION GIVEN U/S 80-IB. FURTHER TO THE ABOVE FIGURES AS MENTIONED IN PARAGR APH I DO NOT MATCH WITH THE FIGURES ON PAGES 2 AND 3. YOUR ACTION OF REWORKING THE DEDUCTION U/S 80IB AND 80HHC IS NOTHING BUT A CHANGE OF OPINION WHICH CANNOT BE SUSTAINED AS HELD BY THE HONBLE SUPREME COURT AND VARIOUS HIGH COURTS IN THE FOLLOW ING JUDGMENTS: 264 ITR 566 (SC), 174 CTR 617 (DELHI)(FULL BENCH) 2 59 ITR 509 (RAJ), 262 ITR 675 (RAJ.) 194 CTR 386 (CAL), 206 CTR 404 ( MUM.), 192 CYR 97 (DEL), 266 ITR 446 (RAJ) 287 ITR 25 (MAD), 188 CTR 532(ALL), 280 ITR 68 (GUJ), 202 CYR 495 (MP), 275 ITR 451 (MAD) 201 C TR 193 (MUM.) IN VIEW OF THE ABOVE SUBMISSIONS, IT IS REQUESTED T HAT THE PROCEEDINGS INITIATED U/S 148 BE KINDLY DROPPED. 5. THE OBJECTIONS RAISED BY THE ASSESSEE WERE DISPO SED OF BY THE AO BY PASSING ORDER DATED 16.11.2009, WHICH IS AVAILABLE AT PARA 4 OF AOS ORDER. THE LD. COUNSEL FOR THE ASSESSEE, APPEARING BEFORE THE AO FURTHER RAISED OBJECTIONS THAT THE AO CANNOT PROCEED IN ANY MATTER BEYOND REASONS RECORDED. THE LD. COUNSEL FOR THE ASSESSEE RELIED U PON THE DECISIONS OF VARIOUS COURTS OF LAW IN THIS REGARD BEFORE THE A.O . THE OBSERVATIONS VIDE 8 PARA 6.1 & 6.2 OF HIS ORDER AS AVAILABLE AT PAGES 9 & 10 OF AOS ORDER ARE AS UNDER: 6.1. ON PERUSAL OF THE REASONING GIVEN BY THE LD. CIT(A) IT IS OBSERVED THAT THE LD. CIT(A) HAS FAILED TO APPRECIA TE CORRECT FACTS AND CIRCUMSTANCES OF ASSESSEES CASE. THE ASSESSEE CLAI MS THAT IT IS FOR THE ASSESSEE TO RUN ITS BUSINESS. ARGUMENT OF THE ASSES SEE IS NOT ACCEPTABLE. SECTION 80-IA(10) EMPOWERS TO COMPUTE P ROFITS AND GAINS FOR THE PURPOSES OF THE DEDUCTION AND THUS PROFIT O F THE BUSINESS HAS BEEN COMPUTED ACCORDINGLY, ONLY FOR THE PURPOSE OF THE DEDUCTIONS. IT IS IMMATERIAL WHETHER ASSESSEE HAS NOT DEBITED SUCH EXPENDITURE OR MADE SUCH PROVISIONS IN THE PROFIT AND LOSS ACCOUNT . FURTHER THE ASSESSEE HAS PASSED ON TAXABLE INTERST & REMUNERATI ON TO PARTNERS IN THE GUISE OF SHARE OF PROFIT WHICH IS NOT TAXABLE A ND THUS BENEFITED THE PARTNERS ALSO. THIS SUB-SECTION 80-IA(10) HAS BEEN ENACTED ONLY T O PREVENT THE ASSESSEES PLANNING & MANIPULATING MORE PROFITS THAN MIGHT BE EXPECTED IN ORDER TO CLAIM MORE DEDUCTION. THUS, THE ASSESSING OFFICER HAS BEEN EMPOWERED TO RECOMPUTED PROFITS AND GAINS INN SUCH CASES ACCORDINGLY. 6.2. THE ASSESSEE FIRM HAS NOT DEBITED THE INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS, THOUGH LAID DOWN IN THE P ARTNERSHIP DEED AND THUS BY NOT GIVING INTEREST ON CAPITAL AND REMU NERATION HAS RESULTED IN GIVING TO THE FIRM MORE THAN ORDINARY P ROFITS AND THUS CLAIMED MORE DEDUCTION U/S 80IB. IN NORMAL CASES EV EN IF NOT PROVIDED IN THE PARTNERSHIP DEED INTEREST ON CAPITA L AND REMUNERATION ARE DEBITED TO THE PROFIT & LOSS ACCOUNT. THUS, THE PROVISIONS CONTAINED IN SECTION 80IA(10) IS APPLICABLE, AS PER SUB SECTION 13 TO SECTION 80IB A ND THUS SUB SECTION I.E. 80IA(1) EMPOWERS THE AO TO COMPUTE THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS FOR THE PURPOSES OF THE DEDUCTION S UNDER THIS SECTION. 6. BEFORE THE LD. CIT(A), THE ASSESSEE RAISED FOLLO WING GROUNDS OF APPEAL: 9 1. THAT THE AO WAS NOT JUSTIFIED IN REOPENING THE RE- ASSESSMENT BY ISSUING A NOTICE U/S 148 OF THE IT AC T. 2. THAT THE AO IGNORED THE OBJECTIONS FILED BY THE ASSESSEE TO THE REASONS RECORDED FOR REOPENING THE ASSESSMEN T U/S 148. 7. THE LD. CIT(A), DID NOT ACCEPT THE EXPLANATION O F THE ASSESSEE AND ACCORDINGLY REJECTED THE SAID GROUNDS OF THE ASSESS EE. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS BENCH. 8. THE LD. COUNSEL FOR THE ASSESSEE, ARGUED AND INV ITED OUR ATTENTION TO PROVISO TO SECTION 147 AND PROVISO TO SECTION 151(1 ) OF THE INCOME-TAX ACT, 1961 ( IN SHORT, THE ACT). THE A.O. DOES NOT ASSU ME JURISDICTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. IN THE PRESENT CASE, THE ASSESSMENT YEAR ENDS ON 31 ST MARCH, 2004 AND THE NOTICE U/S 148 SHOULD HAVE BEEN ISSUED BY THE AO UP TO 31 ST MARCH, 2008, WHICH IN THE PRESENT CASE, HAS BEEN ISSUED ON 06.03.2009, WH ICH IS BEYOND THE LIMITATION PERIOD, AS PROVIDED IN PROVISO TO SECTIO N 147 AND PROVISO TO SECTION 151(1) OF THE ACT. 8.1. SH. Y.K. SUD, CA, THE LD. COUNSEL FOR THE ASSE SSEE, FURTHER ARGUED THAT THERE IS A CHANGE OF OPINION. THE ASSESSEE BEING AG GRIEVED BY THE ACTION OF THE AO IN THE ORIGINAL ASSESSMENT HAD FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) IN THE FIRST ROUND VIDE HIS ORDER DATED 04.1 1.2009 HAS ALLOWED THE 10 GROUNDS OF THE ASSESSEE AND THE DEPARTMENT HAS NOT PREFERRED ANY FURTHER APPEAL, THEREFORE, THE MATTER HAD ATTAINED FINALITY . MOREOVER ALL THE MATERIAL FACTS HAD BEEN FULLY AND TRULY DISCLOSED BEFORE THE A.O. AND THE LD. CIT(A) IN THE FIRST ROUND. THEREFORE, IT CANNOT BE SAID THAT ANY INCOME HAD ESCAPED ASSESSMENT WHEN THE ORDER OF THE LD. CIT(A) IN THE FIRST ROUND OF APPEAL HAD ATTAINED FINALITY. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON FOLLOWING JUDGMENTS OF VARIOUS COURTS OF LAW : 1. 241 ITR (MAD) 672 2. 147 TTJ (JD) 226 3. 340 ITR (DEL) 570 4. 242 ITR (GUJ) 173 5. 321 ITR (DEL) 431 6. 230 CTR (ALL) 167 7. 129 TTJ (AHD) 495 8. 327 ITR (BOM) 272 9. 333 ITR (DEL) 470 10. 335 ITR (GUJ) 234 11. 340 ITR (BOM) 299 12. 324 ITR (BOM) 240 13. 324 ITR (BOM) 48 14. 328 ITR (BOM) 534 15. 329 ITR (ALL) 370 16. 237 (GUJ) 40 17. 329 ITR (BOM) 249 & 257 18. 332 ITR (BOM) 428 19. 331 ITR (MAD) 435 20. 333 ITR (GUJ) 483 21. 334 ITR (GUJ) 420 22. 318 ITR (DEL) 295 9. THE LD. DR, SH. TARSEM LAL, RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW. HE FURTHER ARGUED THAT EVEN IF THE MATERIAL HAS BEEN FULLY AND TRULY 11 DISCLOSED EVEN THEN THE A.O. HAS THE POWER TO RE-OP EN THE ASSESSMENT U/S 147 OF THE ACT. HE RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SEWAK RAM VS. ITO 47 DTR 361 AND TILAK RAJ VS. JCIT 319 ITR 385. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACTS WITH THE SEQUENCE OF EVENTS PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE, SH. Y.K. SUD, CA, APPEARING FOR THE ASSESSEE THAT FOR THE ASSESSMENT YEAR 2003-04, THE NOTICE WAS SERVED U/S 148 OF THE ACT ON 06.03.2009, WHICH IS BEYOND FOUR YEAR S FROM THE END OF THE ASSESSMENT YEAR. THERE IS NOTHING ON RECORD THAT SA NCTION OF THE NOTICE BY THE CCIT/CIT FOR ISSUING NOTICE BEYOND FOUR YEARS. THER EFORE, ON THESE FACTS AND PLEADINGS BY THE LD. COUNSEL FOR THE ASSESSEE, THE A.O. DOES NOT ASSUME JURISDICTION TO MAKE REASSESSMENT U/S 147 OF THE AC T AND NOTICE SERVED U/S 148 IS HELD TO BE INVALID. 10.1 AS REGARDS THE CHANGE OF OPINION, AS PLEADED B Y THE LD. COUNSEL FOR THE ASSESSEE, THE MATTER HAD ATTAINED FINALITY IN T HE FIRST ROUND AND THE LD. CIT(A) HAD ALLOWED THE CLAIM OF THE ASSESSEE. THE D EPARTMENT HAS NOT PREFERRED SECOND APPEAL AGAINST THE ORDER OF THE C IT(A). THE ASSESSEE 12 HAVING DECLARED ALL THE FACTS FULLY AND TRULY IN TH E ORIGINAL RETURN, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. SUBSEQUENT DECISIO N BY THE SPECIAL BENCH, AS MENTIONED BY THE AO CANNOT BE A REASON TO REOPEN THE ASSESSMENT, WHICH WILL TANTAMOUNT TO CHANGE OF OPINION, AS HELD BY TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF HYNOP FOOD AND OIL INDUSTRIES LTD. VS. ACIT, REPORTED IN (2008) 307 ITR 115. THE RELEVANT HEAD NOTE IN TH E CASE OF HYNOP FOOD AND OIL INDUSTRIES LTD. VS. ACIT, DECIDED BY THE HO NBLE GUJARAT HIGH COURT, IS REPRODUCED FOR THE SAKE OF CLARITY, AS U NDER: THAT THE NOTICES FOR REOPENING THE ASSESSMENTS FOR 1990-91, 1991-92 AND 1994-95 WERE ISSUED BEYOND THE PERIOD OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS. FROM THE FACTS FO UND ON RECORD, IT COULD HARDLY BE BELIEVED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FA CT. AS FAR AS THE CLAIM UNDER SECTIONS 80-I & 80-HH OF THE ACT WERE CONCERN ED, IT HAD COME ON RECORD THAT AT THE TIME OF FRAMING OF THE ORIGIN AL ASSESSMENT ORDERS U/S 143(3) OF THE ACT, THE CLAIM TO DEDUCTIONS U/S 80HH AND 80-I WAS ALLOWED, STATING THAT THE ASSESSEE WAS TREATED AS A MANUFACTURING CONCERN IN VIEW OF THE DECISION OF THE COMMISSIONER (APPEALS) GIVEN FOR THE ASSESSMENT YEARS 1987-88 AND 1989-90 AGAINS T WHICH NO SECOND APPEAL WAS FILED BY THE DEPARTMENT BEFORE TH E INCOME-TAX APPELLATE TRIBUNAL. THERE WAS NO OMISSION OR FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY A ND TRULY. AT THE MOST, IT WAS MERELY A CHANGE OF OPINION WHICH COULD NOT E MPOWER THE A.O. ISSUE NOTICE OF REOPENING U/S 148 OF THE ACT BEYOND THE PERIOD OF FOUR YEARS. EVEN WITH REGARD TO DEPRECIATION, THE REASON S RECORDED BY THE A.O. FOR THE ASSESSMENT YEARS 1990-91 AND, 1991-92 CONTAINED FACTUAL ERRORS AS THE ASSESSEE HAD NOT CLAIMED DEPRECIATION AT THE RATE OF 40 PER CENT. THE ASSESSEE HAD CLAIMED THE DEPRECIATION AT THE RATE OF 33.33 PER CENT, WHICH WAS THE RELEVANT RATE PRESCRI BED UNDER THE FIRST SCHEDULE. LOOKING TO THE STATUTORY PROVISIONS AND W ELL-SETTLED POSITION OF LAW, THERE WAS NO CASE FOR THE REVENUE TO ISSUE THE NOTICES U/S 148 OF THE ACT FOR THE ASSESSMENT YEARS 1990-91, 1991-9 1 AND 1994-95 AS 13 THEY WERE, ADMITTEDLY, BEYOND THE PERIOD OF FOUR YE ARS. THESE NOTICES WERE, THEREFORE, LIABLE TO BE QUASHED. SO FAR AS TH E ASSESSMENT YEAR 1992-93 WAS CONCERNED, IT WAS TRUE THAT THE NOTICE WAS ISSUED WITHIN A PERIOD OF FOUR YEARS. HOWEVER, THE A.O. HAD APPL IED HIS MIND AT THE TIME OF FRAMING OF THE ORIGINAL ASSESSMENT AND CONSIDERING THE EARLIER DECISIONS OF THE COMMISSIONER (APPEALS), TH E CLAIM REGARDING SECTIONS 80HH &80I WAS ALLOWED BY HIM. HE TOOK A DI FFERENT VIEW ONLY BECAUSE OF THE FACT THAT ANOTHER ASSESSING OFF ICER DURING THE COURSE OF THE ASSESSMENT YEAR 1994-95 MADE AN INQUI RY AND TOOK A DIFFERENT VIEW THAT THE ASSESSEE WAS NOT ENTITLED T O THE RELIEF UNDER SECTIONS 80HH & 80-I. THIS WOULD AMOUNT TO A CHANGE OF OPINION ON THE SAME FACTS WHICH WERE AVAILABLE BEFORE THE ASSE SSING OFFICER. SUCH A CHANGE OF OPINION WOULD NOT CONFER JURISDICT ION ON THE A.O. TO ISSUE THE NOTICE U/S 148. THE NOTICE UNDER SECTION 148 WITH RESPECT TO THE ASSESSMENT YEAR 1992-93 WAS ALSO NOT VALID. 10.2. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE ON RECORD, PLEADINGS MADE BY BOTH THE PARTIES AND DECISIONS RELIED UPON, AS MENTIONED HEREINABOVE BY BOTH THE PARTIES AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF HYNOP FOOD AND OIL INDUST RIES LTD. VS. ACIT, REPORTED IN (2008) 307 ITR 115, WE ARE OF THE VIEW THAT THE ASSESSEE HAVING DECLARED FULLY AND TRULY ALL MATERIAL FACTS IN THE RETURN OF INCOME, ORIGINALLY FILED, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE FIRST ROUND, CANNOT BE A SUBJECT MATTER OF ESCAPEMENT OF INCOME. THEREF ORE, SUCH A CHANGE OF OPINION IN VIEW OF THE FACT AND OUR FINDINGS HEREIN ABOVE, DOES NOT CONFER THE JURISDICTION ON THE AO TO ISSUE THE NOTICE U/S 148 OF THE ACT. THEREFORE, THE NOTICE ISSUED U/S 148 IS HELD TO BE INVALID ALSO ON THE LIMITATION POINT. AS HELD HEREINABOVE, THE AO HAD RECORDED THE REASONS B EYOND THE PERIOD OF 14 FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THE REFORE, NOTICE ISSUED U/S 148 IS HELD TO BE INVALID AND IS QUASHED. HENCE, GR OUND NO.1 OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH FEBRUARY, 2012. SD/- SD/- (H.S.SIDHU) (B.P.JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24TH FEBRUARY , 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. DYNMECH, JALANDHAR. 2. THE ADDL. CIT, R-1, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.