DCIT, Circle-7(1), Hyd, Hyderabad V. Kishore Sons Surfactants, Hyd, Hyderabad

ITA 884/HYD/2015

• Counselvise Citation: 88422514 RSA 2015
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 30-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Keywords: Rectification of order; Assessment record; Block assessment
• Section: 153A; 80IB; 54; 263; 154; 2

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 883, 884 & 885/HYD/2015 ASSESSMENT YEAR: 2003-04, 2004-05 & 2005-06 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 7(1), HYDERABAD VS. M/S KISHORESONS SURFACTANTS, HYDERABAD (APPELLANT) (RESPONDENT) REVENUE BY : RAMAKRISHNA BANDI ASSESSEE BY : SHRI K.C. DEVDAS DATE OF HEARING : 06-10-2015 DATE OF PRONOUNCEMENT : 09-10-2015 O R D E R PER BENCH: THESE APPEALS FILED BY REVENUE PERTAINING TO SAME ASSESSEE FILED BY REVENUE ARE DIRECTED AGAINST SEPARATE O RDERS OF LD. CIT(A) 3, ALL DATED, 17/04/2015, HYDERABAD, FOR THE AYS 2003-04, 2004-05 AND 2005-06. SINCE IDENTICAL ISSUE IS INVOLVED IN T HESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, WE FIND IT CONVENIENT TO DISPOSE OF THESE APPEALS BY WAY OF THIS COMMON A ND CONSOLIDATED ORDER. 2. THE GROUNDS RAISED BY REVENUE IN THESE APPEALS A RE COMMON, WHICH ARE AS UNDER: 1. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS 2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE AO AFTER EXAMINING ALL THE ASPECTS HAS CONSIDERED THE PROCEEDINGS U/S 154, AS THE MISTAKE IS WITHIN THE PURVIEW OF S ECTION 154. 2 ITA NOS. 883 TO 885 /HYD/2015 KISHORESONS SURFACTANTS, HYD. 3. AS FACTS AND GROUNDS OF APPEAL ARE IDENTICAL, TO DISPOSE OF THESE APPEALS, WE REFER TO THE FACTS FROM AY 2003-0 4 BEING ITA NO. 883/H/2015. 4. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A. Y.2003-04 ON 11-11-2009 ADMITTING TOTAL INCOME OF RS.1,14,68,620 1- IN RESPONSE TO NOTICE U/S 153A. SUBSEQUENTLY, THE SCRUTINY ASSESSM ENT U/S.L43(3) RWS 153A WAS COMPLETED ON 21-12-2010. ON PERUSAL OF TRADING ACCOUNT OF THE ASSESSEE, IT WAS OBSERVED BY AO THAT THE TOTAL TURNOVER FOR FINANCIAL YEAR RELEVANT TO THE ASST.YE AR 2003-04 WAS RS.L,55,93,071/-. OUT OF THIS TOTAL TURNOVER, AN AM OUNT OF RS.1,19,06,207/- PERTAINS TO JOB WORK CHARGES AND T HE BALANCE PERTAINS TO SALES. AGAINST THE TOTAL TURNOVER OF. R S.L,55,93,071/-, THE ASSESSEE'S INCOME UNDER THE HEAD INCOME FROM BUSINE SS WORKS OUT TO RS.L,28,74,708/-. OUT OF THIS INCOME, THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS.32,18,677/- (I.E. 25% OF RS.L,28,74 ,708/-) U/S.80IB OF THE INCOME-TAX ACT, 1961 (ACT). THE ABOVE MENTIONED DEDUCTION WAS CLAIMED ON THE PROFIT EARNED OUT OF JOB WORK CHARGE S ALSO. AO WAS OF THE VIEW THAT THE SAID CLAIM WAS NOT ALLOWABLE AS T HE DEDUCTION U/S.80IB OF THE INCOME-TAX ACT, 1961. AO HELD THAT WHILE PASSING THE ASSESSMENT ORDER U/S.L43(3) R.W.S 153A OF THE INCOM E-TAX ACT, 1961 ON 21-12-2010, THE DEDUCTION U/S.80IB OF THE INCOME -TAX ACT, 1961 WAS ALLOWED INADVERTENTLY ON THE PROFIT EARNED ON T HE TOTAL TURNOVER INSTEAD OF ALLOWING THE SAME ON THE PROFIT EARNED O N SALES ONLY. AS THE MISTAKE IS APPARENT FROM RECORD, A NOTICE U/S.L 54 OF THE I.T. ACT WAS ISSUED TO THE ASSESSEE ON 06.06.2011. IN RESPON SE TO NOTICE U/S.154, THE ASSESSEE FILED ITS REPLY. THE ASSESSEE 'S SUBMISSION WAS CONSIDERED AS NOT TENABLE. THE AO, THEREFORE, DISAL LOWED THE CLAIM U/S 80IB TO THE EXTENT OF RS. 23,58,646 WHICH IS PR OPORTIONATE TO JOB WORK INCOME IN THE ORDER PASSED U/S 154 DATED 04/0 3/2014. 5. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 3 ITA NOS. 883 TO 885 /HYD/2015 KISHORESONS SURFACTANTS, HYD. 6. IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE AR SUBMITTED THAT THE CLAIM U/S 80IB WAS FIRST MADE IN THE AY 19 98-99 AND THE CLAIM WAS ACCEPTED BY THE ASSESSING OFFICER FOR ALL THE SUBSEQUENT YEARS ALSO. IN AY 2003-04, THE CIT IN AN ORDER U/S 263 DATED 19.03.2008 HAD DIRECTED THE ASSESSING OFFICER TO DI SALLOW 25% OF THE CLAIM AND THE SAID ORDER WAS SET ASIDE BY THE ITAT VIDE ITS ORDER IN ITA NO.834/HYD/2008, DTD. 23.10.2009. SIMILAR DISAL LOWANCE AS IN THE CURRENT YEAR HAD ALSO BEEN MADE FOR AY 2005-06 WHIC H WAS ALSO SET ASIDE BY THE ITAT. THE AR ALSO SUBMITTED THAT THE E LIGIBILITY OF THE APPELLANT FOR DEDUCTION U/S 80IB ON JOB WORK CHARGE S COULD NOT BE BROUGHT UNDER THE PURVIEW OF SEC. 154. THE AR CONTE NDED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED TO RE-APPRECIAT E AND REINTERPRET THE PROVISIONS OF LAW AND THAT THE NATURE OF THE DI SALLOWANCE DID NOT FALL WITHIN THE CONCEPT OF MISTAKE APPARENT FROM TH E RECORD AS DEFINED BY THE HONBLE SUPREME COURT IN THE CASE OF ITO VS VOLKART BROTHERS [1971] 82 ITR SO(SE) IN THE FOLLOWING WORDS: 'A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIO US AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THER E MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. 7. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, L D. CIT(A) OBSERVED THAT ELIGIBILITY OF JOB WORK CHARGES FOR D EDUCTION U/S 80IB HAS BEEN A MATTER OF DISPUTE AND LEGAL INTERPRETATI ON BY VARIOUS COURTS. AS A RESULT, THIS ISSUE CANNOT BE CONSIDERE D TO BE A MISTAKE APPARENT FROM RECORD SINCE IT IS A DEBATABLE POINT OF LAW. THE LD. CIT(A) HELD THAT THE RECOURSE TO SEC.154 FOR MAKING THE DISALLOWANCE IS, THEREFORE, NOT JUSTIFIED AND NOT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. THE LD. CIT(A) SET ASIDE THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER, ALLOWING THE APPEAL OF ASSESSEE. IN AY 2004-05 AND 2005-06 ALSO LD. CIT(A) ALLOWED THE APPEALS OF ASSESSEE. 4 ITA NOS. 883 TO 885 /HYD/2015 KISHORESONS SURFACTANTS, HYD. 8. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. 9. LD. DR RELIED UPON THE ORDER OF AO AND SUBMITTED THAT LD. CIT(A) WAS WRONG IN ALLOWING THE APPEAL OF ASSESSEE BY SETTING ASIDE THE ORDER OF AO. 10. IT IS WORTHWHILE TO MENTION THE FACTS RELATING TO THE ISSUE IN DISPUTE AS MENTIONED IN THE STATEMENT OF FACTS BY ASSESSEE, WHICH ARE AS UNDER: I) APPELLANT FIRM WAS ENGAGED IN THE MANUFACTURE AN D SALE OF ACID SLURRY, AT THIMMAPUR VILLAGE, MAHABOOBNAGAR DIST., A.P. WH ICH WAS NOTIFIED AS INDUSTRIALLY BACKWARD DISTRICT UNDER CATEGORY 'B' FOR THE PURPOSE OF THE PROVISIONS OF SECTION 80LA OF I.T. ACT, 1961. II) THE FIRST ASSESSMENT YEAR OF THE APPELLANTS CL AIM U/S.80-IA WAS FOR THE ASSESSMENT YEAR 1998-99. THE CLAIM WAS EXAMINED. A CATEGORICAL FINDING IN THE ASSESSMENT ORDER WAS GIVEN AS TO H OW AND WHY THE APPELLANT WAS ELIGIBLE FOR THE CLAIM AND THE CLAIM HAS BEEN ALLOWED. THE UNDERTAKING SATISFIED THE CONDITIONS LAID DOWN UND ER THE RESPECTIVE PROVISIONS OF THE I.T. ACT, 1961 AS HAS BEEN HELD WHILE ALLOWING THE CLAIM. III) THE CLAIM THAT STOOD CONSIDERED AND ALLOWED F OR THE FIRST ASSESSMENT YEAR IN WHICH THE CLAIM WAS MADE AND ACCEPTED I.E ., ASSESSMENT YEAR 1998-99 HAS BEEN CLAIMED YEAR AFTER YEAR TAKING IN TO CONSIDERATION THE PERIOD OF ELIGIBILITY OF 8 YEARS. ACCORDINGLY THE LAST ASSESSMENT YEAR FOR THE CLAIM WAS 2005-2006. IV) COMMISSIONER OF INCOME TAX FOR THE ASSESSMENT YEAR 2003-2004 INVOKING HIS SUPERVISORY JURISDICTION PASSED ORDER S U/S.263 ON 19/03/2008 DIRECTING THE ASSESSING OFFICER TO DISALLOW THE C LAIM OF DEDUCTION OF 25% THAT WAS CONSIDERED AND ALLOWED ON THE SALE OF BY PRODUCT, SPENT SULPHURIC ACID. THE ORDERS U/S.263 OF I.T. ACT OF THE COMMISSIONER OF INCOME TAX WERE CONTESTED BEFORE THE ITAT. V) THE ITAT CANCELLED THE ORDER OF CIT, IN TERMS O F ITS ORDER DATED 23RD OCTOBER 2009. THE CONSEQUENCE BEING THAT THE CLAI M OF DEDUCTION HAS 5 ITA NOS. 883 TO 885 /HYD/2015 KISHORESONS SURFACTANTS, HYD. BEEN HELD TO BE VALID. AGAIN FOR THE ASSESSMENT YE AR 2005-2006 WHILE COMPLETING THE ASSESSMENT ON 31/12/2007 THE CLAIM WAS DENIED. THIS IS BECAUSE THE REVISION PROCEEDINGS U/S.263 FOR THE ASSESSMENT YEAR 2003- 2004 ON THE SAME ASPECT INITIATED ON 7TH DECEMBER 2006 WERE PENDING BEFORE THE CIT WITHOUT ANY ORDERS U/S.263 BEING PASSED. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005- 200 6 WAS CONTESTED IN APPEAL. VI) THE MATTER STOOD DECIDED BY THE ORDER OF THE I TAT BY ITS ORDERS DATED 23RD OCTOBER 2009. 3. I) ON 18TH JUNE 2008 I.E., BEFORE THE DECISION OF THE ITAT FOR THE ASSESSMENT YEAR 2003-2004, THERE WAS AN ACTION U/S .132 OF I.T. ACT, 1961. AS A CONSEQUENCE, THE ASSESSMENT FROM THE AS SESSMENT YEAR 2003-2004 HAS FALLEN UNDER THE PURVIEW OF THE PROV ISIONS OF SECTION 153A OF I.T. ACT 1961. II) IT IS BORNE OUT OF THE ASSESSMENT RECORDS THAT THE ASSESSMENT YEARS 2003-2004; 2004-2005 AND 2005-2006 ARE PART OF THE BLOCK ASSESSMENTS COMPLETED U/S.143(3) READ WITH SECTION 153A OF THE I.T. ACT, 1961. THE SUBJECT MATTER AT ISSUE WAS ONCE AGAIN EXAMINED BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS AND THE CLAIM HAS B EEN ALLOWED. THE BACK DROP OF THE FACTUAL ASPECTS AS OBTAINED IN THE ASS ESSMENT RECORDS ARE CRYSTAL CLEAR ABOUT THE EXAMINATION OF THE CLAIM A ND IT ACCEPTANCE BY THE REVENUE. III) APPELLANT WAS SERVED WITH A NOTICE ISSUED U/S .154 DATED 06/06/2011 IN RESPECT OF THE ISSUE RELATING TO THE CLAIM OF D EDUCTION. THIS WAS ON THE PREMISE THAT DEDUCTION CANNOT BE ALLOWED IN RESPE CT OF JOB WORK CHARGES OF THE UNDERTAKING. THIS WAS BASED ON AN AUDIT OBJ ECTION OF REVENUE AUDIT. A DETAILED EXPLANATION HAS BEEN SUBMITTED. THE DEC ISIONS RELIED UPON BY AUDIT WERE NOT APPLICABLE TO THE APPELLANT'S FACTS AND THEY ARE DISTINGUISHABLE. A COPY OF THE EXPLANATION IS ENCL OSED TO BE READ AS PART AND PARCEL OF THIS STATEMENT OF FACTS. IV) THE ASSESSING OFFICER WITH A SIMPLE AND BALD O BSERVATION READING AS 'THE ASSESSEE'S SUBMISSION IS CONSIDERED BUT NOT F OUND TENABLE' PASSED THE PRESENT RECTIFICATION ORDER U/S.154 TR EATING THE SAME AS A MISTAKE APPARENT FROM RECORD MODIFYING THE ASSESS ED INCOME WITH AN ADDITION OF RS.23,58,646/-. 6 ITA NOS. 883 TO 885 /HYD/2015 KISHORESONS SURFACTANTS, HYD. 11. REFERRING TO THE ABOVE FACTS ON RECORD, LD. AR OF ASSESSEE SUBMITTED BEFORE US AS UNDER: I) THE MATTER AT ISSUE CANNOT BE BROUGHT UNDER THE PURVIEW OF THE PROVISIONS OF SECTION 154 OF I.T. ACT, 1961. T HIS IS BECAUSE THE ORIGINAL ASSESSMENT AND THE FURTHER ASSESSMENT U/S.143(3) READ WITH SECTION 153A OF I.T. ACT, 1961 WAS PRIMA -FACIE IN ACCORDANCE WITH LAW. II) THE REVENUE IS NOT JUSTIFIED TO RE-APPRECIATE AND RE-INTERPRET THE PROVISIONS OF LAW. III) THE BENEFIT, OF DEDUCTION AVAILABLE FOR A SPE CIFIED NUMBER OF YEARS ON SATISFACTION OF THE CONDITIONS LAID DOWN AS PER THE RESPECTIVE PROVISIONS OF THE ACT ONCE CONSIDERED A ND ALLOWED CANNOT BE WITHDRAWN SUBSEQUENTLY AND THAT TOO BY R ECOURSE TO THE PROCEEDINGS U/S.154 OF THE I.T. ACT, 1961 WHEN THERE WAS NO CHANGE EITHER IN FACTS AND/OR IN LAW. IV) THE SETTLED JUDICIAL PROPOSITION OF LAW ENUNCI ATED BY THE APEX COURT WAS CATEGORICAL TO THE EFFECT THAT 'A M ISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATE NT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LO NG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABL E POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REV ENUE AUTHORITIES. ON GOING THROUGH THE FACTS ON RECORD, IT IS AN ADMI TTED FACT THAT THE CLAIM OF ASSESSEE U/S 80IB WAS ALLOWED BY THE REVEN UE AUTHORITIES FROM AY 1998-99, WHICH WAS THE FIRST AY IN WHICH AS SESSEE MADE ITS CLAIM U/S 80IB. THE BENEFIT, OF DEDUCTION AVAILABLE FOR A SPECIFIED 7 ITA NOS. 883 TO 885 /HYD/2015 KISHORESONS SURFACTANTS, HYD. NUMBER OF YEARS ON SATISFACTION OF THE CONDITIONS L AID DOWN AS PER THE RESPECTIVE PROVISIONS OF THE ACT ONCE CONSIDERED AN D ALLOWED CANNOT BE WITHDRAWN SUBSEQUENTLY AND THAT TOO BY RECOURSE TO THE PROCEEDINGS U/S.154 OF THE I.T. ACT, 1961 WHEN THER E WAS NO CHANGE EITHER IN FACTS AND/OR IN LAW. THE HONBLE SUPREME COURT IN CASE OF ITO VS. VOLKART BROTHERS [1971] 82 ITR 50 GAVE A CA TEGORICAL FINDING THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY B E CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LA W IS NOT A MISTAKE APPARENT FROM THE RECORD. IN VIEW OF THE SETTLED POSITION OF LAW, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF CIT(A) I N THE AYS UNDER CONSIDERATION AND ACCORDINGLY THE SAME ARE HEREBY U PHELD DISMISSING THE GROUNDS RAISED BY REVENUE IN ALL THE APPEALS UN DER CONSIDERATION. 13. IN THE RESULT, APPEALS FILED BY REVENUE ARE DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 9 TH OCTOBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED:9 TH OCTOBER, 2015 KV COPY TO:- 1) DCIT, CIRCLE 7(1), 2 ND FLOOR, B-BLOCK, IT TOWERS, AC GUARDS HYDERABAD. 2) M/S KISHORESONS SURFACTANTS, 14-6-88/89, CHU DI BAZAR, HYDERABAD. 3 CIT(A)- 3, HYDERABAD 4) CIT 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.