Meghmani Industries Ltd., Ahmedabad V. The DY.CIT., Cent.Circle-1(1), Ahmedabad

ITA 893/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57037 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Depreciation; Block assessment
• Section: 80HHC; 153A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) ITA NO. 893/AHD/2009 A. Y.: 2005-06 MEGHMANI INDUSTRIES LTD., 27, PHASE- I, GIDC, VATVA, AHMEDABAD PA NO. AABCM 0535 G VS THE D. C. I. T., CENTRAL CIRCLE -1 (1), 2 ND FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO. 894/AHD/2009 A.Y.: 2005-06 MEGHMANI DYES & INTERMEDIATES LTD., 27, PHASE- I, GIDC, VATVA, AHMEDABAD PA NO. AABCM 6639 D VS THE D. C. I. T., CENTRAL CIRCLE -1 (1), 2 ND FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANTS BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SHRI S. K. GUPTA, CIT DR DATE OF HEARING: 05-01-2012 DATE OF PRONOUNCEMENT: 13-01-2012 O R D E R PER BHAVNESH SAINI: BOTH THE APPEALS BY DIFFERENT ASSESSEES ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED CIT(A)- III, AHMEDABAD DATED 09-01-2009, FOR ASSESSMENT YE AR 2005-06. BOTH THE PARTIES ARGUED IN ITA NO.893/AHD/2009 AND SUBMITTED THAT ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 2 THE ISSUE IS SAME IN BOTH THE APPEALS, THEREFORE, O RDER IN THAT CASE MAY BE FOLLOWED IN ITA NO.894/AHD/2009. ITA NO.893/AHD/2009 (MEGHMANI INDUSTRIES LTD.) 2. THE ASSESSEE FILED CONCISE GROUNDS OF APPEAL. TH E LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUNDS NO.1 , 3 AND 4 OF THE APPEAL OF THE ASSESSEE. SAME ARE ACCORDINGLY DISMIS SED AS NOT PRESSED. THE ONLY EFFECTIVE GROUND OF APPEAL ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS GROUND NO.2 OF THE CONC ISE GROUNDS OF APPEAL WHICH READS AS UNDER: 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ER RED IN UPHOLDING THE LEARNED ASSESSING OFFICERS ACTION OF GRANTING DEDUCTION U/S. 10 B OF THE INCOME-TAX ACT, 1961 AFTER EXCLUDING THE ADDITIONAL BUSINESS INCOME OF RS.147.06 LACS WHICH WAS PART OF THE APPELLANTS SHARE OF ADDITIONAL BUSINESS INCOME OF RS.275.00 LACS OUT OF THE INCOME OF RS.590.00 LACS SURRENDERED BY THE APPELLA NT GROUP ON THE BASIS OF CERTAIN RECORD OF RECEIPTS AND PAYMENTS FOUND AND SEIZED FROM THE RESIDENTIAL PREM ISES OF SHRI LALIT K. PATEL, A DIRECTOR OF THE APPELLANT COMPANY, DURING THE PROCEEDINGS U/S. 132 OF THE INCOME-TAX A CT, 1961. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY DECLARED INCOME OF RS.8,20,32,180/- IN ITS RETURN FILED IN R ESPONSE TO NOTICE U/S 153A OF THE IT ACT, CONSEQUENT TO SEARCH U/S 132 OF THE IT ACT ON 22-09-2005. THE AO NOTED THAT THE ASSESSEE OFFERED AS NET ADDITIONAL BUSINESS INCOME OF RS.2.75 CRORES, ON TH E BASIS OF PAGE NO.93 OF ANNEXURE A-4, SEIZED FROM THE RESIDENCE OF SHRI LALIT K. ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 3 PATEL AND KANTIBHAI PATEL, DIRECTORS. THE AO NOTED THAT THE AMOUNT IN THIS SEIZED PAGE WAS RS.690 LACS BUT THE AMOUNT OF RS.275 LACS WAS OFFERED IN CASE OF THE ASSESSEE COMPANY, ON THE BAS IS OF TURNOVER IN PROPORTION TO THE TOTAL TURNOVER. THE ASSESSEE EARN ED INCOME FROM EXPORT OF GOODS, ELIGIBLE FOR DEDUCTION U/S 10 B OF THE IT ACT AND FROM BUSINESS OF GOODS NOT SO ELIGIBLE. BASED ON THE PRO PORTIONATE TURNOVER, THE ASSESSEE COMPANY CLAIMED DEDUCTION U/ S 10 B OF THE IT ACT ON A PROPORTIONATE AMOUNT OF RS.1,47,06,034/ - WHICH THE AO DID NOT ALLOW, NOTHING THAT THERE WAS NO EVIDENCE O F THIS AMOUNT HAVING BEEN EARNED FROM EXPORTS MADE/EXPORT PROCEED S REALIZED WITHIN PRESCRIBED TIME LIMIT. THE AO ALSO NOTED THA T THE AUDIT REPORT IN FORM NO. 56 G READ WITH RULE 16 E OF THE IT RULES S UBMITTED BY THE ASSESSEE REFERRED TO THE ADDITIONAL DEDUCTION BUT W ITHOUT ANY SPECIFIC WORKING THEREOF. THE AO FELT THAT THERE WAS NO REAS ON FOR THE ASSESSEE TO HAVE AVOIDED DISCLOSURE OF TAX FREE INC OME, HAD IT BEEN SO. THE AO, THEREFORE, CONCLUDED THAT THE ENTIRE AD DITIONAL BUSINESS INCOME OFFERED ON THE BASIS OF SEIZED PAPERS, WAS I NCOME DERIVED FROM BUSINESS ACTIVITY OTHER THAN THE EXPORTS AND S O THE CLAIM OF DEDUCTION U/S 10 B OF THE IT ACT WAS NOT JUSTIFIED. THE FINDINGS OF THE AO WERE CHALLENGED BEFORE THE LEARNED CIT(A) IN RES PECT OF CLAIM OF DEDUCTION U/S 10B OF THE IT ACT AND IT WAS SUBMITTE D THAT THE ASSESSEE WAS MAINLY ENGAGED IN EXPORTS AND IN THE I MPUGNED ASSESSMENT YEAR 2005-06 ITS INCOME WAS ALMOST TOTAL LY DERIVED FROM EXPORT TURNOVER IN ITS ROLE AS EOU. AS NOTED BY THE AO HIMSELF, THE INCOME OFFERED TO TAX HAD BEEN DERIVED FROM BUSINES S OPERATIONS ONLY AND SO THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 10 B OF THE IT ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 4 ACT IN PROPORTION TO THE INCOME DERIVED FROM ITS EO U, COMPARED TO ITS TOTAL INCOME. THE ARGUMENT OF THE AO THAT EVIDENCE OF REALIZATION OF EXPORT PROCEEDS HAS NOT BEEN SUBMITTED, WAS INVALID BECAUSE WHAT HAD BEEN OFFERED AS THE ADDITIONAL INCOME AND NOT T HE ADDITIONAL TURNOVER. THE ADDITIONAL INCOME OFFERED WAS ALLOCAT ED ON THE BASIS OF TURNOVER AND SO NO DETAILED WORKING IN FORM NO.56 G WAS REQUIRED. SIMILARLY, IT WAS NOT CORRECT FOR THE AO TO STATE T HAT THE ASSESSEE WAS AVOIDING THE DISCLOSURE OF TAX FREE INCOME. THE ASS ESSEE HAD BEEN EARNING ITS INCOME FROM EOU AND HAD SOUGHT PROPORTI ONATE DEDUCTION IN ABSENCE OF ALL THE REQUISITE DETAILS. THE AUTHEN TICITY OF ITS CLAIM WAS ESTABLISHED BY THE AUDIT REPORT IN FORM NO.56 G ITS ELF. THE DECISION IN CASE OF BHAVANI GEMS OF ITAT, MUMBAI BENCH DATED 21 -12-2006 WAS REFERRED TO IN THIS REGARD. THE INITIATION OF P ENALTY PROCEEDINGS AND CHARGING OF INTEREST WERE ALSO ASSAILED. 4. THE LEARNED CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO IN R EJECTING THE CLAIM OF THE ASSESSEE U/S 10 B OF THE IT ACT. THE FINDING S OF THE LEARNED CIT(A) IN PARA 7 AND 8 OF THE APPELLATE ORDER ARE R EPRODUCED AS UNDER: 7. THE CONTENTIONS WERE CAREFULLY CONSIDERED. THE AO IN HIS COMPUTATION OF INCOME, HAS NOTED THAT THE NE T PROFIT AS PER P & L ACCOUNT WAS RS.13,53,36,699/- WHICH AF TER ADDING THE DISALLOWABLES, TOTALED RS.17,56,15,070/- . TO THIS, WAS ADDED ADDITIONAL BUSINESS INCOME OF RS.2. 75 CRORES. FINALLY AFTER DEDUCTING THE DEPRECIATION AN D CONTRIBUTION U/S. 35(1) (II), THE BUSINESS INCOME O F UNIT 1 & 2 WAS COMPUTED AT RS.18.42 CRORES. THE EXEMPTED BUSINESS INCOME OF 100% EOU UNIT AFTER DEPRECIATION WAS COMPUTED AT RS.9.53 CRORES AND THE ELIGIBLE ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 5 DEDUCTION U/S. 10B WAS WORKED OUT AT RS.9.46 CRORES . THE APPELLANT HAD ALSO DISCLOSED INCOME ON SHORT TERM C APITAL GAINS. IN OTHER WORDS, THE ASSERTION OF THE APPELLA NT THAT ITS BUSINESS INCOME CONSTITUTED ALMOST ENTIRELY FRO M EXPORTS, WAS NOT CORRECT. THE APPELLANT HAD BUSINES S INCOME APART FROM THE EXPORTS. IT WAS FOR THE APPEL LANT TO ESTABLISH THAT THE ADDITIONAL BUSINESS INCOME OFFER ED WAS FROM EXPORT ACTIVITIES ALONE, IN THE FORM AND MANNE R AS ENVISAGED IN SECTION 10B OF THE ACT. THIS HAS NOT B EEN DONE WITH REFERENCE TO THE RELATED EXPORT DOCUMENTA TION AND THE EVIDENCE OF RECEIPTS IN CONVERTIBLE FOREIGN EXCHANGE IN THE MANNER PRESCRIBED IN EXPLANATION 1 AND 2 TO SECTION 10B (3) AND SUB-SECTION (5) TO SECTION 10B OF THE ACT. THE A. O. HAS ALSO POINTED OUT THAT IT WAS ONLY A REFERENCE IN THE AUDIT REPORT (IN FORM 56G), AND IT WAS NOT VALIDATED/SUPPORTED BY SPECIFIC WORKING/DETAILS. TH E UNREPORTED DECISION OF ITAT MUMBAI, CITED IN CASE O F M/S. BHAVANI GEMS, IS ALSO OF NO HELP TO THE APPELLANT. IT WAS RENDERED IN CASE OF A FIRM, WHICH HAD NO LOCAL/DOME STIC SALES AND WAS IN CONTEXT OF DEDUCTION U/S. 80HHC VI S-- VIS, PROVISIONS OF SECTION 158BB OF THE ACT. 8. THUS ON A HOLISTIC CONSIDERATION OF THE FACTS AN D CIRCUMSTANCES THE CLAIM U/S. 10B IN RESPECT OF A PROPORTIONATE AMOUNT OF RS.1,47,06,034/- WAS NOT ON LY A FAR FETCHED AFTER THOUGHT BUT ALSO AN INVALID, UNSU PPORTED, UNAUTHENTIC ONE. IN THESE FACTS AND CIRCUMSTANCES, THERE WAS NO INFIRMITY IN THE ACTION OF THE A. O. IN REJE CTING IT. THIS GROUND OF APPEAL IS THEREFORE REJECTED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R EFERRED TO PB-21 WHICH IS THE STATEMENT OF SHRI LALIT K. PATEL AND I N HIS STATEMENT HE HAS EXPLAINED THE SEIZED PAPER ANNEXURE A-4 IN WHIC H IT WAS EXPLAINED THAT THE SEIZED PAPER CONTAINS THE NOTING FOR TRANSACTION FOR RECEIPTS AND PAYMENTS OF HIS FAMILY MEMBERS WHO ARE THE ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 6 DIRECTORS/BHAGIDARS OF MEGHMANI GROUP CONCERN. HE H AS ALSO REFERRED TO PB-31 WHICH IS TRANSLATED VERSION OF AN NEXURE A-4/PAGE- 93 UNDER REFERENCE TO PROVE THAT THE SEIZED PAPER C ONTAINS THE DETAILS OF RECEIPTS AND PAYMENTS. THE LEARNED COUNSEL FOR T HE ASSESSEE ALSO REFERRED TO PB-28 WHICH IS THE BIFURCATION OF THE U NDISCLOSED INCOME OF RS.5.90 CRORES OUT OF WHICH RS.2.07 CRORES IS SU RRENDERED IN THE CASE OF THE PRESENT ASSESSEE AND RS.2 CRORES IN THE CASE OF THE OTHER ASSESSEE M/S. MEGHMANI DYES AND INTERMEDIATES LTD. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO CONSIDERING THE FACTS OF THE CASE COMPUTED THE INCOME OF THE AS SESSEE FROM BUSINESS ONLY EVEN BY ADDING THE ADDITIONAL INCOME OF RS.2.75 CRORES AND ALSO GRANTED BENEFIT TO THE ASSESSEE FOR EXEMPT BUSINESS INCOME U/S 10B OF THE IT ACT, BUT THE ADDITIONAL IN COME WAS NOT CONSIDERED FOR THE PURPOSE OF GRANTING DEDUCTION U/ S 10 B OF THE IT ACT. HE HAS SUBMITTED THAT THE ASSESSEE HAS OFFERE D ADDITIONAL INCOME ON ACCOUNT OF BUSINESS WHICH IS ALSO ACCEPTE D BY THE AO UNDER THE HEAD BUSINESS INCOME AND THE ASSESSEE H AS NO OTHER SOURCE OF INCOME. THEREFORE, THE AO SHOULD HAVE CON SIDERED THE ADDITIONAL INCOME AS BUSINESS INCOME OF THE ASSESSE E. HE HAS SUBMITTED THAT THE DETAILS MENTIONED IN THE SEIZED PAPER PB -31 SHOWS NON-GENUINE EXPENSES WHICH WERE REDUCED FROM THE EXPENSES CLAIMED IN THE BOOKS OF ACCOUNTS WHICH RES ULTED INTO ENHANCEMENT OF THE INCOME. THEREFORE, THE AO HAS NO T APPRECIATED THE FACTS OF THE CASE PROPERLY AND DENIED THE EXEMP TION TO THE ASSESSEE WRONGLY. HE HAS ALSO REFERRED TO PB-56 WHI CH IS THE STATEMENT OF LALITBHAI K. PATEL IN WHICH HE HAS FUR THER EXPLAINED THAT ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 7 RECEIPTS AND PAYMENTS CONTAINED IN THE SEIZED PAPER WAS ON ACCOUNT OF INCOME ON DIFFERENCE OF PURCHASES AND SALES OF B OTH THE ASSESSEE COMPANIES AS WELL AS DETAILS OF MISC. EXPENSES OF B OTH THE ASSESSEE COMPANIES. HE HAS SUBMITTED THAT THE REASONS GIVEN BY THE AO ARE, THEREFORE, TOTALLY INCORRECT IN DENYING EXEMPTION U /S 10 B OF THE IT ACT AND FURTHER SUBMITTED THAT THE ASSESSEE DISCLOSED A LL THE PARTICULARS IN THE PROFIT & LOSS ACCOUNT(PB II 56) AND MADE A PROPORTIONATE CLAIM OF DEDUCTION U/S 10B OF THE IT ACT AS PER SECTION 1 0B (4) OF THE IT ACT WHICH READS AS UNDER: [(4) FOR THE PURPOSES OF SUB-SECTION (1), THE PROFI TS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUT ER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PRO FITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTIO N AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE UNDERTAKING.] 5.1 THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE DECISION OF THE HONBLE HIGH COURT OF HIMACHAL PRADESH IN TH E CASE OF CIT VS ALLIED INDUSTRIES, 229 CTR 462 IN WHICH IT WAS HELD AS UNDER: WHERE THE TRIBUNAL HELD THAT THE INCOME SURRENDERE D BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS BEING ADDED AS BUSINESS INCOME WAS INCOME DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND , THUS, ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB AS THE ASSESSING OFFICER HAD NOT SPECIFICALLY PROVED THAT THE INCOME WAS NOT FROM THE BUSINESS AND PROFESSION: HELD THAT, THE ASSESSEE-FIRM HAD OFFERED A SUM OF RS.2,50,000 FOR TAXATION TO COVER UP ALL TYPES OF DISCREPANCIES. IT WAS NOWHERE THE CASE OF THE ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 8 ASSESSEE OR THE REVENUE THAT THIS WAS INCOME DERIVE D FROM UNDISCLOSED SOURCE. THE ADDITION OF RS.2,50,00 0 WAS MADE TO THE INCOME OF THE BUSINESS ITSELF. THEREFORE, IT WOULD HAVE TO BE DEEMED TO BE INCOME FROM THE BUSINESS OF THE COMPANY. IF IT WAS INCOME DERIVED FROM THE BUSINESS THEN SUCH INCOME WAS TO BE CONSIDERED WHILE WORKING OUT THE DEDUCTION ALLOWABLE UNDER SECTION 80-IB. SINCE THE ENTIRE PRO FITS OF THE BUSINESS WERE ENTITLED FOR 100 PER CENT DEDUCTION, THE ADDITION ON ACCOUNT OF SUCH DISCREPANCY WOULD ONLY RESULT IN THE ENHANCEMENT OF THE INCOME OF THE BUSINESS AND WOULD BE ENTITLED FO R SUCH DEDUCTION. 5.2 HE HAS FURTHER SUBMITTED THAT THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS SUMAN PAPER AND BOARDS LTD. 314/ ITR/119 HELD THAT IN THE BLOCK ASSESSMENT ON UNDISCLOSED INCOME DEDUCTION IS ADMISSIBLE U/S 80 I/80 IA OF THE IT ACT. IN THIS IT WAS HELD AS UNDER: THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-I/80-IA OF THE INCOME-TAX ACT, 1961, IN RESPECT OF THE TOTAL UNDISCLOSED INCOME FOR THE BLOCK PERIOD COMMENCING FROM 1986-87 TO JANUARY 6, 1996. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E. THE TRIBUNAL ON AN INTERPRETATION OF THE PROVISIONS OF SECTIONS 158BB(1), 158BB(4) AND 158BH AS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE HELD THA T THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTIO N 80-I OR SECTION 80-IA IN RESPECT OF THE UNDISCLOSED INCOME ASSESSED BY THE ASSESSING OFFICER UNDER THE BLOCK PERIOD SINCE THE UNDISCLOSED INCOME DECLARED IN FORM NO.2B WAS UNDER THE HEAD BUSINESS INCOME FROM INDUSTRIAL UNDERTAKING AS THE ONLY ACTIVITY OF THE ASSESSEE WAS THAT OF MANUFACTURE AN D SALE OF BOARD PAPER AND CRAFT PAPER WHICH HAD BEEN ALL ALONG ASSESSED AS BUSINESS INCOME AND IN ALL TH E ASSESSMENT YEARS FAILING WITHIN THE BLOCK PERIODS. ON ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 9 A REFERENCE CONTENDING THE TRIBUNAL WAS REQUIRED TO CONSIDER THE AMENDED PROVISIONS AND DECIDE ABOUT AVAILABILITY OF RELIEF UNDER SECTION 80-I OR SECTIO N 80-IA OF THE ACT AFTER DETERMINING (I) WHETHER THE ENTIRE UNDISCLOSED INCOME IS RELATABLE TO THE INDUSTRIAL UNDERTAKING; AND (II) THE REQUIREMENTS OF FILING TH E AUDIT REPORT, WHICH MAY BE EVEN DURING THE COURSE O F THE APPELLATE PROCEEDINGS.: HELD, THAT IN SO FAR AS THE FIRST CONTENTION WAS CONCERNED, IT WAS NOT RAISED BEFORE THE TRIBUNAL AN D, HENCE, IT WAS NOT NECESSARY TO ISSUE ANY DIRECTIONS AT THIS STAGE TO THE TRIBUNAL, LEAVING IT OPEN TO THE REVENUE TO RAISE THE ISSUE AT THE TIME WHEN THE TRIBUNAL ADJUSTS ITS DECISION IN ACCORDANCE WITH TH E JUDGMENT OF THIS COURT. SIMILARLY, IN RELATION TO T HE FILING OF AUDIT REPORT, THE TRIBUNAL HAS ALREADY DE ALT WITH THE ASPECT OF THE MATTER. HOWEVER, IT WILL BE OPEN TO THE REVENUE TO SEEK PROCEDURAL COMPLIANCE WITH THE PROVISIONS OF SECTION 80-I (7) OF THE ACT BY MO VING THE TRIBUNAL IN THIS REGARD WHEN THE TRIBUNAL ADJUS TS ITS DECISION IN ACCORDANCE WITH THE JUDGMENT OF THI S COURT THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 8- I OR 80-IA OF THE ACT. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDER OF THE AO AND SUBMITTED THAT NO EVIDENCE WAS FILED TO MAKE A CLAIM U/S 10B OF THE IT ACT. UNDISCLOSED INCOME WAS BASED ON SEIZ ED PAPER AND THE ASSESSEE ALSO MADE CLAIM OF CAPITAL GAINS AND O THER INCOME, THEREFORE, THE ASSESSEE CANNOT SAY THAT IT HAS EARN ED ONLY INCOME FROM BUSINESS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE OFFE RED ADDITIONAL ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 10 BUSINESS INCOME OF RS.2.75 CRORES ON THE BASIS OF T HE SEIZED PAPER FOUND FROM THE RESIDENCE OF LALIKBHAI K. PATEL. SHR I LALITBHAI K. PATEL IN HIS STATEMENT RECORDED IN THE SEARCH BY REVENUE AUTHORITIES EXPLAINED THAT THE SAME CONTAINS DETAILS OF RECEIPT S AND PAYMENTS OF HIS FAMILY MEMBERS WHO ARE THE DIRECTORS/PARTNERS O F MEGHMANI GROUP CONCERN. IN HIS FURTHER STATEMENT HE HAS FURT HER EXPLAINED THAT THE AMOUNTS OF RECEIPTS AND PAYMENTS NOTED IN THE S EIZED PAPER BELONGED TO BOTH THE ASSESSEES CONCERN AS WELL AS M ISC. EXPENSES OF THE SAID COMPANIES (ASSESSEES). THE DETAILS OF T HE NOTING CONTAINED IN THE SEIZED PAPER ARE MENTIONED AT PAGE 31 OF THE PAPER BOOK WHICH SUPPORT THE CONTENTION OF THE LEARNED CO UNSEL FOR THE ASSESSEE THAT THE DETAILS CONTAINED IN THE SEIZED P APER PERTAINED TO THE UNACCOUNTED EXPENSES WHICH WERE ULTIMATELY SURR ENDERED FOR THE PURPOSE OF TAXATION. THE ASSESSEE SUBMITTED COMPLET E DETAILS BEFORE THE AO AT THE ASSESSMENT STAGE AND MADE THE CLAIM O F DEDUCTION U/S 80 IB OF THE IT ACT. IT IS NOT IN DISPUTE THAT THE ASSESSEE EARNED INCOME FROM EXPORTS OF GOODS ELIGIBLE FOR DEDUCTION U/S 10B OF THE IT ACT. THE ASSESSEE SURRENDERED THE ADDITIONAL INCOME ON ACCOUNT OF BUSINESS INCOME WHICH IS ALSO ACCEPTED BY THE AO IN COMPUTATION OF BUSINESS INCOME IN THE ASSESSMENT ORDER. THE AO ALS O GRANTED EXEMPTION TO THE ASSESSEE IN RESPECT OF INCOME EARN ED FROM BUSINESS OF EXPORTS U/S 10 B OF THE IT ACT IN COMPU TATION OF INCOME. THEREFORE, THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE WITH REGARD TO THE SAID RECEIPTS/AMOUNTS FROM EXPORTS MADE. THE AO WAS ALSO NOT JUSTIFIED IN HOLDING THAT FOR ADDITIONAL DEDUCTION NO SPECIFIC WORKING IS GIVEN. SINCE THE ASSESSEE ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 11 MADE A CLAIM OF PRO-RATA DEDUCTION ONLY, THEREFORE, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DENYING EXEMPTION TO THE ASSESSEE THAT THE ASSESSEE CLAIMED CAPITAL GAINS AND OTHER INCOME. TH E COMPUTATION OF INCOME MADE BY THE AO IN THE ASSESSMENT ORDER SP ECIFICALLY PROVE THAT CAPITAL GAINS AND OTHER INCOME HAVE NO RELATIO N WITH THE BUSINESS INCOME OF THE ASSESSEE. SINCE THE AO ACCEPTED THE C LAIM OF THE ASSESSEE FOR BUSINESS INCOME ON ACCOUNT OF SURRENDE R OF ADDITIONAL BUSINESS INCOME, THEREFORE, FINDINGS OF THE AUTHORI TIES BELOW ARE NOT JUSTIFIED TO HOLD THAT THE BUSINESS INCOME DID NOT CONSTITUTE FROM EXPORTS ONLY. THE CLAIM OF THE ASSESSEE IS FURTHER SUPPORTED BY THE SEIZED PAPER WHICH SHOWS THAT ON ACCOUNT OF REDUCTI ON IN THE EXPENSES, THE ADDITIONAL INCOME IS OFFERED FOR TAXA TION. THEREFORE, THE SAME IS CONNECTED WITH THE BUSINESS INCOME OF THE A SSESSEE FROM EXPORTS ONLY. THE OTHER REASONS OF RECEIPT OF FOREI GN EXCHANGE ETC. HAVE NO RELEVANCE TO THE MATTER IN ISSUE. MOREOVER, SECTION 10B OF THE IT ACT PROVIDES FOR SPECIAL PROVISIONS FOR DEDU CTION IN WHICH CONDITION OF SUB-SECTION 2 AND 3 SHALL HAVE TO BE S ATISFIED. THE AO HAS NOT MADE OUT ANY CASE OF VIOLATION OF PROVISION S OF SECTION 10B (2) AND (3) OF THE IT ACT. FURTHER, SINCE THE ASSES SEE CLAIMED PRO-RATA DEDUCTION U/S 10B (4) OF THE IT ACT (SUPRA), THE AU THORITIES BELOW SHOULD HAVE APPRECIATED THE FACTS OF THE CASE IN TH E LIGHT OF THE RELEVANT PROVISIONS OF LAW. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF ALLIED INDUSTRIES (SUPRA) AN D THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SUMAN PAPER AND BOARDS LTD. (SUPRA) WHICH CLEARLY APPLY TO THE CASE OF THE ASSESSEE. ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 12 SINCE THE SEIZED PAPER WAS CONNECTED WITH THE BUSIN ESS ACTIVITY OF THE ASSESSEE I.E. EXPORTS AND THE AO ADDED THE ADDI TIONAL BUSINESS INCOME IN THE BUSINESS INCOME OF THE ASSESSEE FROM EXPORTS AND ALSO GRANTED DEDUCTION U/S 10B OF THE IT ACT TO THE ASSE SSEE, WOULD PROVE THAT THE ASSESSEE WAS ALSO ENTITLED FOR DEDUCTION U /S 10 B OF THE IT ACT ON ADDITIONAL BUSINESS INCOME ALSO. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE IN THE LIGHT OF THE ABOVE DISCUSSIONS AND THE CASE LAWS REFERRED TO ABOVE, WE ARE OF THE VIEW THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10 B OF THE IT ACT ON PR O-RATA BASIS. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DIRECT THE AO TO ALLOW DEDUCTION TO THE ASSESSEE U/S 10B O F THE IT ACT ON PRO-RATA BASIS. IN THE RESULT, CONCISE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 893/AHD/2009 IS PARTLY ALLOWED. ITA NO.894/AHD/2009 (MEGHMANI DYES & INTERMEDIATES LTD.) 9. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.1, 3 AND 4 OF THE CONCISE GROUNDS OF APPEAL. THE SAME ARE DISMISSED AS NOT PRESSED. GROUND NO.2 OF THE CONCIS E GROUNDS OF APPEAL READS AS UNDER: 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ER RED IN UPHOLDING THE LEARNED ASSESSING OFFICERS ACTION OF GRANTING DEDUCTION U/S. 10 B OF THE INCOME-TAX ACT, 1961 AFTER EXCLUDING THE ADDITIONAL BUSINESS INCOME OF ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 13 RS.108.74 LACS WHICH WAS PART OF THE APPELLANTS SHARE OF ADDITIONAL BUSINESS INCOME OF RS.200.00 LACS OUT OF THE INCOME OF RS.590.00 LACS SURRENDERED BY THE APPELLA NT GROUP ON THE BASIS OF CERTAIN RECORD OF RECEIPTS AND PAYMENTS FOUND AND SEIZED FROM THE RESIDENTIAL PREM ISES OF SHRI LALIT K. PATEL, A DIRECTOR OF THE APPELLANT COMPANY, DURING THE PROCEEDINGS U/S. 132 OF THE INCOME-TAX A CT, 1961. 10. THE ISSUE IS SAME AS IS CONSIDERED I ITA NO.893 /AHD/2009. BY FOLLOWING THE SAME ORDER, WE SET ASIDE THE ORDERS O F THE AUTHORITIES BELOW AND DIRECT THE AO TO ALLOW DEDUCTION TO THE A SSESSEE U/S 10B OF THE IT ACT ON PRO-RATA BASIS. IN THE RESULT, CON CISE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .894/AHD/2009 IS PARTLY ALLOWED. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT DEKA DEKA DEKA DEKA/ // / ITA NO.893 AND 894/AHD/2009 (AY- 2005-06) MEGHMANI INDUSTRIES LTD. VS DCIT, CC-1(1), AHMEDABA D MEGHMANI DYES & INTERMEDIATES LTD. VS DCIT, CC-1(1) , AHMEDABAD 14 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD