KHATRI WOOL SPINNING MILLS P LTD., BEAWAR V. ACIT, Ajmer

ITA 919/JPR/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6508 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: B M VYAS
• Keywords: Audit objection; Difference of opinion; Change of opinion
• Section: 80IB; 147; 148; 154

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 919/JP/2011 ASSTT. YEAR- 2005-06 PAN NO. AAACK7404M M/S KHATRI WOOL SPINNING MILLS THE A.C.I.T., PVT. LTD., TALERA MARKET VRS. CIRCLE-2, AJMER. BEAWAR. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI B.M. VYAS. DEPARTMENT BY :- SHRI D.C. SHARMA. DATE OF HEARING : 12/06/2014 DATE OF PRONOUNCEMENT : 11/07/2014 PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 06/09/2011 OF THE LEARNED C.I.T.(A), AJMER FOR THE A .Y. 2005-06. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- I. THE ASSESSMENT MADE WITHOUT ISSUE AND SERVICE OF NOTICE UNDER SECTION 143 (2) OF THE I.T. ACT, 1961, IS WITHOUT JUR ISDICTION AND, THEREFORE, THE SAME IS NULL AND VOID ABINITIO AND D ESERVES TO BE ANNULLED/CANCELLED. II. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS BY SUMMARILY DISMISSING THE APPELLANTS CONTENTION THA T RECTIFICATION PROCEEDINGS UNDER SECTION 154 OF THE ACT, WERE PENDI NG ON THE DATE OF ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, THEREFORE, THE ENTIRE REVENUE-OPENING ASSESSMENT PROCEEDINGS WE RE ILLEGAL AND LIABLE TO BE QUASHED. III. THE LEARNED CIT(APPEALS) HAS ERRED IN FAILING T O CONSIDER AND APPRECIATE THE FACT THAT THE REASSESSMENT PROCEEDIN GS WERE 2 INITIATED THROUGH A MERE CHANGE OF OPINION BY THE A SSTT. CIT, WHEN ALL MATERIAL FACTS WERE DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE AUTHORITY BELOW WAS NOT JUSTIFIED IN EXCLUDING INTEREST OF RS. 341805/- RECEIVED ON ADVANCES MADE BY ASSESSEE AND DISALLOWE D RS. 102541/- OUT OF RS. 407423/- CLAIMED UNDER SECTION 80 IB OF THE ACT WHEREAS SUCH INCOME WAS ASSESSED AS INCOME FROM P ROFIT OR GAINS DERIVED FROM THE BUSINESS OF AN INDUSTRIAL UN DERTAKING IN ORIGINAL ASSESSMENT AS WELL AS IN RE-ASSESSMENT. ALTERNATIVELY. V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITY BELOW HAS FAILED TO APPRECIATE THAT INTEREST INCOME OF RS. 341805/- ON ADVANCES WHICH WAS NOT CONSIDERED FOR DED UCTION OF SECTION 80IB OF THE ACT SHOULD HAVE BEEN SET OFF WIT H INTEREST PAID ON LOANS TAKEN AND THEREFORE, THERE WAS NO IMPACT ON PROFITS AND GAINS DECLARED AT RS. 1358077/- ON WHICH DEDUCTION U/SEC. 80IB OF THE ACT WAS CLAIMED. 2. THE LEARNED ASSESSING OFFICER COMPLETED ASSESSME NT IN THIS CASE ORIGINALLY ON 27/4/2007 WHEREIN DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 (HEREAFTER REFERRED AS THE ACT) WAS ALLOWED AT R S. 4,07,423/-. IN THIS CASE, THERE WAS AN AUDIT OBJECTION AS PER REASSESSME NT ORDER ON THE BASIS OF THE RECORDED REASONS U/S 147 OF THE ACT AND ISSUED NOTICED U/S 148 OF THE ACT. THE ASSESSEE ALSO RESPONDED IN RESPONSE TO NOTICE IS SUED U/S 148 OF THE ACT BEFORE THE LEARNED ASSESSING OFFICER. IT WAS ARGUED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAD DISCLOSED COMPLETE FA CTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON THE BASIS OF AUDIT OB JECTION, NO OPINION CAN BE FORMED BY THE LEARNED ASSESSING OFFICER. THIS IS MER E CHANGE OF OPINION AND A 3 RECOURSE OF REASSESSMENT PROCEEDING IS BAD IN LAW. TH E ASSESSEE HAD DISCLOSED TOTALLY AND FULLY ALL THE MATERIAL FACTS. THE LEARNED ASSESSING OFFICER ALSO ISSUED NOTICE U/S 154 OF THE ACT, WHICH WAS REPL IED BY THE ASSESSEE BUT NO ORDER OF RECTIFICATION WAS RECEIVED BY THE ASSESS EE. THEREFORE, HE CHALLENGED TWO PROCEEDINGS AGAINST THE ASSESSEE, ONE U/S 154 OF THE ACT AND ANOTHER U/S 148 OF THE ACT. THE LEARNED A.R. ALSO AR GUED BEFORE THE LEARNED ASSESSING OFFICER THAT INTEREST/SCRAP SALES ARE PAR T OF DERIVED INCOME AS INTEREST RECEIVED ON ADVANCES MADE BY THE ASSESSEE IS PROFIT OR GAIN DERIVED FROM THE BUSINESS OF AN UNDERTAKING. HE RELIED UPON VARIOUS CASE LAWS BEFORE THE ASSESSING OFFICER. THEREFORE, HE RIGHTLY CLAIMED DEDUCTION U/S 80IB OF THE ACT. THE LEARNED ASSESSING OFFICER HAS NOT FOUND ASS ESSEES SUBMISSION CONVINCING, THUS THE RECALCULATED 80IB DEDUCTION AT RS. 3,41,805/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), WHO HAD DISMISSED THE APPEAL BY OBSERVING THAT FROM THE LANGUAGE OF SECTI ON 80IB, IT IS CLEAR THAT DEDUCTION IS IN RESPECT OF PROFITS OR GAINS DERIVED FROM THE BUSINESS. BY NO STRETCH OR IMAGINATION THE ABOVE THREE ITEMS NAMELY INTEREST ON FDR, OTHER INTEREST AND SCRAP SALE CAN BE CONSIDERED AS PROFIT FROM BUSINESS. THE MERE FACT THAT THE APPELLANT HAS SHOWN INTEREST AS BUSIN ESS INCOME AND NOT AS INCOME FROM OTHER SOURCES, CANNOT ALTER THE CHARACT ER OF INCOME. THEREFORE, HE AFFIRMED THE ASSESSING OFFICERS ACTION AS VALID . 4 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSE SSEE THAT NOTICE ISSUED U/S 143(2) OF THE ACT IS OUT OF JURISDICTION AND IT WAS ARGUED THAT SECTION 154 PROCEEDING WAS PENDING BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT, THEREFORE, THE ENTIRE REOPENING PROCEEDING IS ILLEG AL AND LIABLE TO BE QUASHED. THE ASSESSEE HAS FURNISHED ALL THE DETAILS BEFORE TH E ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDING WHO HAS CONSI DERED ALL THE DETAILS WHEN ALLOWING DEDUCTION UNDER SECTION 80IB AT RS. 4,0 7,423/-. ALTERNATIVELY, IT WAS ARGUED THAT IF INTEREST IS NOT CONSIDERED AS DER IVED INCOME THEN THE INTEREST RECEIVED AND INTEREST PAID, NET AMOUNT IS TO BE CONSIDERED FOR DISALLOWANCE OF 80IB DEDUCTION. 6. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE OR DER OF THE LOWER AUTHORITY. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LEARNED ASSESS ING OFFICER MADE THE ORIGINAL ASSESSMENT ORDER ON 27/4/2007. IT WAS OBSER VED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED DED UCTION U/S 80IB OF THE ACT ON GROSS TOTAL INCOME OF RS. 13,58,077 @ 30%. AT RS . 4,07,423/- BEING 10 TH YEAR OF THE DEDUCTION AND THUS THE NET INCOME HAS B EEN DECLARED AT RS. 9,50,654/-. THE CLAIM OF THE ASSESSEE U/S 80IB IS SU PPORTED BY AN AUDIT REPORT OF C.A. DATED 15/9/2005 IN FORM NO. 10CCB UNDER RUL E 18BBB FILED ALONGWITH 5 RETURN OF INCOME. THUS THE CLAIM OF THE ASSESSEE IS IN ORDER AND ACCORDINGLY ACCEPTED. BEFORE ISSUING THE NOTICE U/S 148 OF THE ACT, THE LEARNED ASSESSING OFFICER HAD NOT DECIDED THE PROCEEDING U/S 154 OF T HE ACT ON SAME ISSUE. IT WAS HELD BY THE VARIOUS COURTS THAT TWO PROCEEDINGS O N SAME ISSUE CANNOT BE INITIATED. FURTHER THE LEARNED ASSESSING OFFICER HA D NOT RECORDED HIS SATISFACTION AS PER SECTION 147 OF THE ACT. THAT INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN ASSESSEES CASE, THERE WAS AN AUDIT OBJECTION, THEREFORE, CONSIDERING ALL THE FACTS OF THE CASE, WE FIND THAT REASSESSMENT PROCEEDING IS INVALID. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/07/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 11 TH JULY, 2014 * RANJAN COPY FORWARDED TO :- 1. M/S KHATRI WOOL SPINNING MILLS PVT. LTD., BEAWAR. 2. THE ACIT, CIRCLE-2, AJMER. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 919/JP/2011) BY ORDER, AR ITAT JAIPUR.