The Deputy Commissioner of Income tax, Jalandhar V. M/s. Pashina International, Jalandhar

ITA 85/ASR/2010

• Counselvise Citation: 8520914 RSA 2010
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-05-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 16-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Reason to believe; Reassessment proceedings
• Section: 80HHC; 147; 148; 144

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.85(ASR)/2010 ASSESSMENT YEAR:2001-02 PAN:2001-02 THE DY. COMMR. OF INCOME-TAX, VS. M/S. PASHINA INTE RNATIONAL, RANGE-1, JALANDHAR. BASTI SHEIKH ROAD, JALANDHAR. (APPELLANT) (RESPONDENT) C.O. NO.7(ASR)/2010 (ARISING OUT OF ITA NO.85(ASR)/2010) ASSESSMENT YEAR: 2001-02 M/S. PASHINA INTERNATIONAL VS. DY. COMMR. OF INCOM E-TAX, JALANDHAR. RANGE-1, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. TARSEM LAL, DR RESPONDENT BY: SH. SANDEEP VIJH, CA DATE OF HEARING :09/05/2012 DATE OF PRONOUNCEMENT:21/05/2012 ORDER PER BENCH: THIS APPEAL OF THE REVENUE AND C.O. OF THE ASSESSE E ARISE FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 13.11.2009 FO R THE ASSESSMENT YEAR 2001-02. 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO RECO MPUTED THE DEDUCTION U/S 80HHC IN RESPECT OF DEPB BENEFIT RECE IVED BY THE ASSESSEE IN LIGHT OF THE DIRECTIONS OF THE HON BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF M/S. TOPMAN EX PORTS MUMBAI VS. THE INCOME TAX OFFICER (OSD) 14(2), MUMB AI IN ITA NO.5769/MUM/2006. 1.1. WHILE DOING SO, THE CIT(A) FAILED TO APPRECIAT E THAT: I. WHETHER CIT(A) IS RIGHT IN NOT HOLDING THAT THE TOTAL SALE CONSIDERATION INCLUSIVE OF FACE VALUE OF DEPB AND P REMIUM AMOUNT RECEIVED THEREOF REPRESENTS; PROFIT CHARGEA BLE UNDER SECTIONS 28(IIID) AND 28(IIIE) OF THE INCOME-TAX AC T, 1961 ? II WHETHER CIT(A) IS RIGHT IN LAW IN NOT HOLDING TH AT PROFIT ON TRANSFER OF DEPB ENTITLEMENT REPRESENTS THE ENTIRE AMOUNT INCLUSIVE OF PREMIUM OF SALE OF SUCH DEPB. III WHETHER CIT(A) IS RIGHT IN LAW IN HOLDING THAT WORD PROFIT REFERRED TO IN SECTION 28(IIID) AND (IIIE) OF INCOM E-TAX ACT, 1961 MEANS THE DIFFERENCE BETWEEN THE SALE PRICE OF DEPB AND THE FACE VALUE OF DEPB IGNORING THE FACT THAT THE ENTIR E AMOUNT REPRESENTS THE PROFIT IN THE HANDS OF ASSESSEE. IV. WHETHER CIT(A) IS RIGHT IN LAW IN DEDUCTING THE FACE VALUE OF DEPB FROM SALE PRICE OF DEPB FOR CALCULATING PROFIT U/S 28(IIID) AND 28(IIIE) OF INCOME TAX ACT, 1961 AS IF THE FACE VALUE FOR THE PURPOSE OF DETERMINATION OF DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT, 1961.? V. WHETHER CIT(A) IS RIGHT IN LAW IN HOLDING THAT T HE WORD PROFIT REFERRED TO IN SECTIONS 28(IIID) AND 28(IIIE) OF TH E ACT REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED TO THE EXTEN T THAT THE FACE VALUE OF DEPB/DFRC SHOULD BE DEDUCTED FROM THE SALE PROCEED FOR THE PURPOSE OF DETERMINATION OF DEDUCTI ON U/S 80HHC OF THE ACT. VI THAT THE CIT(A) FAILED TO APPRECIATE THAT DEDUCT ION U/S 80HHC OF THE ACT WAS RIGHTLY COMPUTED IN ACCORDANCE WITH AMENDMENT MADE BY TAXATION LAW (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 01.04.1998. 2. THAT, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE AO RESTORED. 3 3. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AN D DISPOSED OF. 2. IN THE C.O. THE ASSESSEE HAS RAISED FOLLOWING GR OUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED IN REJECTING THE GROUND THAT THE O RDERS U/S 144 IS BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN REJECTING THAT THE ASSUMPTION O F JURISDICTION FOR RE-ASSESSMENT IS BAD IN LAW. THE RE-ASSESSMENT PROCEEDINGS HAD BEEN INITIATED ONLY BY SUSPICION AND WITHOUT RE ASON TO BELIEVE. THE ASSESSING OFFICER HAS NOT DISCHARGED T HE ONUS FOR ISSUING NOTICE U/S 148 AND HAS BEEN PREJUDICED AGAI NST THE ASSESSEE. 3. FIRST OF ALL, WE DEAL WITH THE LEGAL ISSUE R AISED BY THE ASSESSEE IN THE CROSS OBJECTION. THE LD. COUNSEL FOR THE ASSESS E, SH. SANDEEP VIJH, CA REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE LD . CIT(A). HE FURTHER ARGUED THAT THE CASE OF THE ASSESSEE WAS REOPENED F OR THE REASONS THAT THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS.10 CRORES . THE BENEFIT OF DEDUCTION IN RESPECT ITEMS COVERED UNDER SECTIONS 2 8(IIID)/28(IIIE) WOULD BE AVAILABLE IF CERTAIN CONDITIONS WERE FULFILLED. A L ETTER DATED 13.03.2007 WAS SENT ASKING THE ASSESSEE TO PROVIDE INFORMATION REL ATING TO THE DEDUCTION U/S 80HHC. THE ASSESSEE HAS NOT EVEN FURNISHED DETAILS OF EXPORT INCENTIVES I.E. BIFURCATION OF AMOUNTS RECEIVED AS IMPORT LICENCE, DUTY DRAWBACK, DEPB, DFRC ETC. THE AO RECORDED THE REASONS THAT THE B ENEFIT OF DEPB/DFRC 4 AVAILED BY THE ASSESSEE WERE MORE THAN THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO CUSTOM DUTY. SUCH RATES GIVEN REASO NS TO BELIEVE THAT THE DEPB/DFRC RATE WAS MORE THAN THE DRAW BACK CREDIT ATTRIBUTABLE TO CUSTOM DUTY AND LAST OF ALL WHILE FRAMING ASSESSMEN T IN VARIOUS CASES WITH IDENTICAL FACTS, IT HAS BEEN NOTICED THAT THE ASSES SEE DID NOT FULFILL THE TWIN CONDITIONS AS PROVIDED IN THE THIRD AND FOURTH PROV ISO TO SECTION 80HHC(3) OF THE ACT. IT WAS ARGUED BY SH. SANDEEP VIJH THAT THE PROCEEDINGS IN THE PRESENT CASE WERE REASSESSMENT PROCEEDINGS AND IN T HE REASSESSMENT PROCEEDINGS, THE ONUS WAS ON THE REVENUE AND NOT O N THE ASSESSEE. IT WAS FOR THE REVENUE TO FORM A BELIEF THAT INCOME HAS ESCAPE D ASSESSMENT AND FOR THIS PURPOSE, INFORMATION HAS TO BE AVAILABLE WITH THE R EVENUE. THERE IS A DIFFERENCE AND WHICH IS A ACCEPTED LEGAL POSITION THAT THE REASONS TO BELIEVE IS STRONGER THAN REASON TO SUSPECT AND I N THE ABSENCE OF INFORMATION BEING IN THE POSSESSION OF THE REVENUE, THERE CAN BE NO REASON TO BELIEVE. THOUGH IN THE PRESENT LETTER, THE FIGURES OF DEPB RATES ON CERTAIN SUPORTS GOODS HAVE BEEN GIVEN ALONGWITH THE RATE OF DUTY DRAWBACK, NEITHER THE RATES MENTIONED FOR DUTY DRAWBACK ARE FULLY COR RECT NOR ARE THE RATES OF DEPB FULLY CORRECT. IMPORTANTLY, WITHOUT KNOWING TH E TYPE OF INCENTIVES EARNED BY THE ASSESSEE, THERE COULD BE NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. A SPEAKING ORDER SHOULD HAVE BE EN PASSED BY THE AO 5 IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF GKN DRIVESHAFT VS. ITO REPORTED IN 259 ITR 19. IT WAS A LSO POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT SIMILAR MATTERS HAD BEEN STAYED BY THE HONBLE HIGH COURT AND THEREFORE, THERE WAS NO HUR RY FOR THE AO TO MAKE ASSESSMENT. THOUGH THE PROCEEDINGS WERE DECIDED BY THE HONBLE HIGH COURT ON 18.11.2008, THE AO COULD HAVE CONVENIENTLY TAKEN UP THE RE- ASSESSMENT AFTER THE SAID DATE. IN SUMMING UP, SH. SANDEEP VIJH, THE LD. COUNSEL FOR THE ASSESSEE, ARGUED THAT THE SUBMISSI ONS MADE BY THE ASSESSEE TO THE EXTENT PERTAIN TO THE FACT THAT THE AO HAD N O CONCRETE INFORMATION ABOUT THE TYPES OF INCENTIVES EARNED BY ASSESSEE, I.E. OF DEPB AND DUTY DRAWBACK AND THUS THE AO WAS NOT IN A POSITION TO FORM A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THE DCIT HAD WRITTEN LETTER TO NUMBER OF ASSESSEES FOR ATTENDING OFFICE OF THE JOINT DIRECTO R GENERAL OF FOREIGN TRADE. THE SUBSEQUENT INFORMATION CANNOT BE THE BASIS FOR FORMING A BELIEF THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. AS A MATTER OF FACT, THESE SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A) WHICH, IN FACT, WERE SENT TO THE AO FOR HIS COMMENTS AND ON RECEIVING COMMENTS, THE ASSESSEE HAD FILED THE REJOINDER, WHICH IS A MATTER OF RECORD AND THE LD. CIT(A) HAS NOT APPRECIATED THE SUBMISSIONS OF THE ASSESSEE. 6 4. ON THE OTHER HAND, THE LD. DR, SH. TARSEM LAL, APPEARING FOR THE REVENUE RELIED UPON THE ORDER OF THE LD. CIT(A) AND ARGUED THAT THE LD. CIT(A) HAD WRITTEN A VERY REASONED ORDER AND PRAYED TO DISMISS THE C.O. OF THE ASSESSEE ON LEGAL GROUNDS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE REASONS RECORDED BY THE AO, THERE IS NO DISPUTE TO THE FACT THAT THE AO HAD RECORDED THE REASONS AS HE HAD EXAM INED THE RATES OF DEPB/DFRC AND DUTY DRAW BACKS ETC. AND NOTICED THAT BENEFIT OF DEPB/DFRC WAS AVAILED BY THE ASSESSEE AT HIGHER THA N THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO CUSTOM DUTY. HE HAS AL SO NOTED THAT SIMILAR FACTS HAD BEEN NOTED IN THE ASSESSMENT OF OTHER CASES ON IDENTICAL FACTS. THEREFORE, HE ARRIVED AT THE BELIEF THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80HHC IN RESPECT OF INCENTIVES AND AMOUNT OF 85,42, 881/- WHICH HAD ESCAPED ASSESSMENT. AT THE OUTSET, WE ARE OF THE VI EW THAT IN THE REASONS RECORDED ON THE BASIS OF IDENTICAL FACTS IN SIMILAR LY CASES, THE AO IS AUTHORIZED TO FORM A BELIEF THAT INCOME OF THE ASSE SSEE HAD ESCAPED ASSESSMENT AND SUCH IDENTICAL FACT IS MATERIAL WITH WHICH THE REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT CAN BE INITIATED AND NOTICE U/S 148 OF THE ACT CAN BE ISSUED. 7 5.1. APART FROM THAT THE LD. CIT(A) HAS DEALT WITH ALL THE OBJECTIONS OF THE ASSESSEE. EVEN AFTER DEALING WITH THE COMMENTS IN T HE REJOINDER AND AFTER TAKING REMAND REPORT FROM THE AO, ALL THE OBJECTION S DEALT BY THE LD. CIT(A) ARE REASONED ONE IN PARA 2.3 TO 2.5. OF HIS ORDER. AFTER PERUSAL OF THE SAID PARAS AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFO RE THE LD. CIT(A) ORIGINALLY IN THE REJOINDER AND SUBMISSIONS MADE BE FORE US, THE AO WAS JUSTIFIED IN ISSUE OF ENQUIRY LETTER PRIOR TO THE I SSUE OF THE LETTER UNDER SECTION 148 OF THE ACT AND THERE WAS NO BAR ON MAKING NECES SARY ENQUIRY PRIOR TO THE ASSUMPTION OF JURISDICTION UNDER SPECIFIC PROVI SIONS OF THE ACT. THE ASSESSEE WAS ASKED TO FURNISH INFORMATION FOR WHIC H THE ASSESSEE DID NOT RESPOND AND THE AO CAME TO THE BELIEF THAT THE ASSE SSE HAD NOT FILED THE RETURN OF INCOME. THE AO HAD THE POWER TO SEEK THE INFORMATION FROM THE ASSESSEE WHETHER THE RETURNS FOR ANY YEAR HAS BEEN FILED BY THE ASSESSEE OR NOT. SUCH INFORMATION IS USEFUL FOR THE PROCEEDINGS U/S 147 OF THE ACT. IN THE RETURN FILED BY THE ASSESSEE, THE RELEVANT INFORMAT ION WAS NOT DISCLOSED FOR BIFURCATION OF DUTY DRAWBACK AND OTHER EXPORT INCEN TIVES. THE ASSESSEE HAD MENTIONED IN THE AUDITED ACCOUNTS FILED ALONGWITH R ETURN OF INCOME AS EXPORT BENEFIT ALONGWITH DUTY DRAWBACK. THIS IS MENTIONED BY THE ASSESSEE IN ITS AUDITED ACCOUNTS GAVE THE AO REASO NABLE MATERIAL TO BELIEF THAT THE ASSESSEE HAD EXPORT INCENTIVES OTHER THAN DUTY DRAWBACK AS WELL. 8 THE ASSESSEE WAS APPARENTLY NOT ELIGIBLE FOR GETTIN G DEDUCTION U/S 80HHC IN RESPECTIVE OF OTHER EXPORT INCENTIVES IN VIEW OF TH E CONDITIONS LAID IN 3 RD AND 4 TH PROVISO OF SECTION 80HHC, WHICH APPARENTLY, THE AS SESSEE DID NOT FULFILL. THE INFORMATION FROM JOINT DIRECTOR OF FOREIGN TRA DE ASKED BY THE AO WAS RELEVANT WITH RESPECT TO FINANCIAL YEARS 2001-02 T O 2004-05 AND NOT IN THE IMPUGNED YEAR. THEREFORE, THE ARGUMENT OF SH. SANDE EP VIJ, THE LD. COUNSEL FOR THE ASSESSEE THAT REASSESSMENT U/S 147 OF THE A CT CANNOT BE INITIATED ON THE SUBSEQUENT INFORMATION IS INCORRECT AND CANNOT BE A BASIS TO QUASH THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT. 5.2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ARGUMENTS MADE BEFORE US AND THE ORDERS OF BOTH THE AUTHORITIES B ELOW AND RELIED UPON BY BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE AO HA S VALIDLY ISSUED THE NOTICE UNDER SECTION 148 OF THE ACT AND REASSESSMENT PROCE EDINGS SO INITIATED ARE VALID AND ORDER UNDER SECTION 144 HAS BEEN MADE ACC ORDING TO LAW. THUS, GROUND NO. 1 & 2 OF THE ASSESSEE RAISED IN THE C.O. ARE DISMISSED. 6. NOW, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO. 85(ASR)/2010. THE REVENUE IN THE PRESENT APPEAL HAS AGITATED THE ORDE R OF THE LD. CIT(A) IN DIRECTING THE AO TO RECOMPUTE THE DEDUCTION UNDER S ECTION 80-HHC IN RESPECT OF DEPB BENEFIT RECEIVED BY THE ASSESSEE IN THE LIGHT OF THE 9 DIRECTIONS OF THE HONBLE ITAT, SPECIAL BENCH, MUMB AI IN THE CASE OF M/S. TOPMAN EXPORTS MUMBAI VS. THE INCOME TAX OFFICER ( OSD) 14(2), MUMBAI IN ITA NO.5769/MUM./2006. 7. IT WAS POINTED OUT BY THE LD. DR, SH. TARSEM LAL THAT THE MATTER IN THE CASE OF M/S. TOPMAN EXPORTS MUMBAI VS. ITO (OSD ) (SUPRA) HAS TRAVELED TO THE HONBLE SUPREME COURT, IN (2012) 3 SCC 593. THEREFORE, THE DECISION BY THE SPECIAL BENCH OF ITAT IN THE SAID CASE HAS BEEN UPHELD BY THE HONBLE SUPREME COURT OF INDIA. 8. THE LD. COUNSEL FOR THE ASSESSE, SH. SANDEEP VIJ H,CA, ALSO ACCEPTED THE ARGUMENTS MADE BY THE LD. DR, MR. TARSEM LAL, W ITH REGARD TO THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN T HE CASE OF M/S. TOPMAN EXPORTS MUMBAI VS. ITO (OSD) (SUPRA). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON HEARING THE PARTIES AND PERUSAL OF THE ORDER OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF M/S. TOPMAN EXPORTS M UMBAI VS. ITO (OSD) (SUPRA) , WE REMAND THE MATTER TO THE AO WITH THE D IRECTIONS TO RECOMPUTE THE DEDUCTION U/S 80HHC IN ACCORDANCE WITH LAW IN T HE LIGHT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. T OPMAN EXPORTS MUMBAI 10 VS. ITO (OSD) (SUPRA) . IN THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS, ALL THE GROUNDS OF THE REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.85(AS)/2010 AND C.O. NO.7(ASR)/2010 OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST MAY, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21ST MAY, 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. PASHINA INTERNATIONAL, JALANDHAR. 2. THE DCIT, CIR.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.