Shri Pankaj A.Shah, Baroda V. The CIT,Cent.Circle-II, Ahmedabad

ITSSA 521/AHD/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8992 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-09-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 31-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B S SANDHU
• Keywords: Revision of order; Business expenditure; Opportunity of being heard; Question of law
• Section: 143(3); 80HHC; 153A; 260A; 80IB; 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A.N. PAHUJA, AM) IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 A. Y: 2000-01, 2001-02, 2002-03 AND 2003-04 SHRI PANKAJ A. SHAH, 205, NITIRAJ APARTMENT, 68, SUVARNAPURI SOCIETY, CHIKUWADI, BARODA VS THE C. I. T., CENTRAL CIRCLE-II, 3 RD FLOOR, ANNEXURE TO AAYAKAR BHAVAN, ASHRAM ROAD, NAVRANGPURA, AHMEDABAD PA NO. ALNPS 3416 Q (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MILIN MEHTA, AR RESPONDENT BY SHRI B. S. SANDHU, DR O R D E R PER BENCH: ALL THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDER OF THE CIT-II, AHMEDABAD DATED 29-03-2010 PASSED U/S 263 OF THE IT ACT FOR THE ABOVE ASSESSMENT YEARS 2000-01, 2001-02, 2002-03 AND 2003-04 ON THE FOLLOWING COMMON GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN SETTING ASIDE THE ENTIRE ASSESSMENT BY INVOKING POW ERS U/S 263 OF THE ACT, WHICH WAS COMPLETED BY WAY OF ASSESSMENT MADE U/S 153A R. W. S. 143(3) OF THE ACT BY THE AO DESPITE THE FACT THAT THE CONDITIONS STIPULA TED FOR INVOKING SUCH EXTRA ORDINARY JURISDICTIONS WERE NOT SATISFIED. 2. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN FACT AND IN LAW IN REDUCING DEDUCTION AVAILABLE U/S 80 I A AND 80 IB OF THE ACT, FROM PROFITS OF BUSINESS FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80 HHC OF THE ACT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD. IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 2 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE FACTS AND POSITION ARE SAME IN ALL THE APPEALS AND HE HAS MAI NLY ARGUED IN APPEAL IN IT (SS) A NO.521/AHD/2010 FOR ASSESSMENT YEAR 20 00-01. THEREFORE, FOR THE PURPOSE OF DISPOSAL OF ALL THE APPEALS FACT S CONTAINED IN THE IMPUGNED ORDER FOR ASSESSMENT YEAR 2000-01 ARE DISC USSED. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSMENT OR DER U/S 153A (B) READ WITH SECTION 143(3) OF THE IT ACT IN RESPECT O F ASSESSMENT YEAR 2000- 01, HAS BEEN PASSED ON 31-12-2007, DETERMINING TOTA L INCOME AT RS.2,79,933/-. THE SAID ORDER HAS BEEN PERUSED BY T HE LEARNED COMMISSIONER OF INCOME TAX. THE ASSESSEES MAIN BUS INESS WAS THAT OF MANUFACTURE OF CHEMICALS WHICH WAS CARRIED OUT IN T HE NAME OF M/S. STERLING CHEMICALS. ON PERUSAL OF THE ASSESSMENT OR DER, IT WAS NOTICED THE ASSESSEE HAD CLAIMED DEDUCTIONS U/S 80 HHC AND 80 IA OF THE IT ACT FALLING UNDER SUB-HEAD C- DEDUCTIONS IN RESPECT OF CERTAIN INCOMES UNDER CHAPTER VI A OF THE IT ACT. ACCORDINGLY, OUT OF GROSS TOTAL INCOME, DEDUCTIONS U/S 80 HHC OF RS.13,64,206/- AND U/S 80 IA OF RS.7,41,171/- WERE ALLOWED AS PER WORKING FORMING P ART OF THE ASSESSMENT ORDER. AS PER PROVISIONS OF SUB SECTION (9) OF SECTION 80 IA READ WITH SECTION 80 IB (13) OF THE IT ACT WHERE A NY AMOUNT OF PROFIT AND GAINS OF AN INDUSTRIAL UNDERTAKING OR OF AN ENTERPR ISE IN THE CASE OF AN ASSESSEE IS CLAIMED AND ALLOWED UNDER THIS SECTION FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND G AINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS OF THIS CHAPTER UNDER THE HEADING C DEDUCTIONS IN RESPECT OF CERTAIN INCOME, AND SH ALL IN NO CASE EXCEED THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS OF INDUSTRIAL UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. HOWEVER, THE CAL CULATION OF DEDUCTIONS U/S 80 IA AND 80 IB OF THE IT ACT REVEALS THAT THE DEDUCTIONS WERE EFFECTED IN THIS CASE WITHOUT TAKING INTO CONSIDERA TION THE PROVISIONS OF SECTION 80 IA (9) READ WITH SECTION 80 IB (13) OF T HE IT ACT WHEREIN THE DEDUCTIONS ALLOWED U/S 80 IB OF T4HE IT ACT SHOULD HAVE BEEN REDUCED IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 3 WHILE ALLOWING DEDUCTION U/S 80 HHC OF THE IT ACT. THIS HAS RESULTED IN ALLOWANCE OF EXCESSIVE DEDUCTION U/S 80 HHC OF THE IT ACT. THE ASSESSMENT ORDER WAS FOUND TO BE PRIMA FACIE ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, VIDE SHOW CA USE NOTICE U/S 263 OF THE IT ACT DATED 24-02-2010 SERVED ON 25-02-2010, T HE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY IMPUGNED ASSESSMENT O RDER WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE SHOULD NOT BE SET ASIDE BY INVOKING THE PROVISIONS OF SECTION 263 OF THE IT ACT. VIDE AFORESAID NOTICE THE ASSESSEE WAS GIVEN OPPORTUNITY OF BEING HEARD IN PERSON OR OTHERWISE REQUIRED TO SU9BMIT ANY EXPLANA TION IN THIS RESPECT IN WRITING. 5. THE ASSESSEE IN RESPONSE TO THE NOTICE ATTENDED THE PROCEEDINGS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX AND F ILED THE REPLY. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE ASSESSEE HAD ORIGINALLY FILED RETURN OF INCOME ON 25-10-2000 DEC LARING TOTAL INCOME OF RS.4,94,470/-. DEDUCTIONS U/S 80HHC AND 80 IA OF TH E IT ACT WERE CLAIMED IN THE ABOVE RETURN. SUBSEQUENTLY, A SEARCH HAD TAKEN PLACE AND THE AO COMPLETED THE ASSESSMENTS U/S 153A READ WITH SECTION 143(3) OF THE IT ACT. IT WAS ARGUED THAT IN ABSENCE OF ANY IN CRIMINATING MATERIAL IN RELATION TO THE ASSESSMENT YEAR WHICH IS COMPLETED AND NOT PENDING COULD NOT BE DISTURBED ON THE ISSUE REGARDING DEDUC TIONS U/S 80 HHC AND 80 IA OF THE IT ACT. IN SUPPORT OF THE CONTENTI ON, THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: 1) KAILASH AUTO FINANCE 32 SOT 80 (LUCKNOW) 2) MS. SHYAM LATA KAUSHIK VS ACIT 114 TTJ (DEL.) 940 3) SHIVNATH RAI HAARNARAIN (INDIA) LTD. (2008) 304 ITR (AT) 271 (DEL.) 4) MEGHMANI INDUSTRIES LTD. ITA NOS. 3400, 3401 AND 3402/AHD/2008, 2003-04 AND 2004-05. IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 4 6. THE LEARNED COMMISSIONER OF INCOME TAX CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE PRO VISIONS OF SECTION 80 IA (9) READ WITH SECTION 80 IB (13) OF THE IT ACT IN T HE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF ITAT DELHI IN THE CASE OF HIND USTAN MINT & AGRO PRODUCTS PVT. LTD. 119 ITD 107 HELD THAT THE AO HAS GRANTED EXCESSIVE DEDUCTION AND, THEREFORE, THE ORDER OF THE AO IS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HIS FIN DINGS IN PARA 4 TO 6 IN THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 4. THE ASSESSEES SUBMISSION HAS BEEN CAREFULLY PE RUSED AND CONSIDERED. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80 HHC AND 80 IB OF I. T. ACT WITHOUT CONSIDERING THE PROVISIONS OF SECTION 80 IA (9) READ WITH SECTION 80 IB (13). THE PREVISIONS OF SECTION 80 IA (9) ARE AS FOLLOWS: (9) WHERE ANY AMOUNT OF PROFITS AND GAINS OF AN [UNDERTAKING] OR OF AN ENTERPRISE IN THE CASE OF AN ASSESSEE IS CLAIMED AND ALLOWED UNDER THIS SECTION FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE EXTENT OF SUC H PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER ANY OT HER PROVISIONS OF THIS CHAPTER UNDER THE HEADING C. DEDUCTIONS IN RESPECT OF CERTAIN INCOMES, AND SHAL L IN NO CASE EXCEED THE PROFITS AND GAINS OF SUCH ELIGIB LE BUSINESS OF [UNDERTAKING] OR ENTERPRISE, AS THE CAS E MAY BE. IN VIEW OF THE ABOVE PROVISIONS, THE CLAIM OF THE A SSESSEE AND THE ALLOWANCE GRANTED BY THE ASSESSING OFFICER U/S. 80 HHC WITHOUT REDUCING THE DEDUCTION CLAIMED U/S. 80 IB I S INCORRECT. THE ABOVE VIEW IS FORTIFIED BY THE DECISIONS IN THE CASE OF ACIT VS. ROGINI GARMENTS & OTHERS (108 ITR 49) THE HONB LE ITAT, CHENNAI D SPECIAL BENCH HAD OBSERVED THAT IT NOW HERE SUGGESTS THAT MORE THAN 100 PERCENT DEDUCTION ON TH E SAME PROFIT CAN BE GRANTED TO THE ASSESSEE UNDER VARIOUS SECTIONS ENUMERATED IN CHAPTER VIA. SEC. 80 HHC IS PART OF C HAPTER VIA. HONBLE CHENNAI HIGH COURT IN THE CASE OF CIT VS. SHARON VANEERS (P) LTD., TAX CASE (APPEAL) NO.62 OF 2004, DT. 26 TH FEB. 2007, HAS MADE IT CLEAR THAT IT IS NOT CORRECT TO SAY THAT S. 80 HHC OF THE ACT IS A SELF CONTAINED PROVISION. TH E DEDUCTION CANNOT BE ALLOWED IGNORING THE RESTRICTIVE CLAUSE CONTAINED IN S. 80 IA (9). THE RESTRICTIVE CLAUSE IN S. 80 IA MAKES IT ABUNDANTLY CLEAR THAT WHEREVER DEDUCTION U NDER ANY IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 5 SECTION OF CHAPTER VI-A( C ), THE COMPUTATION WILL BE SUBJECT TO RESTRICTION LAID DOWN IN SECTION 80 IA (9). IT PREC LUDES PRO TANTO, ALL DEDUCTIONS OF SUCH PROFITS AND GAINS CLA IMED UNDER CHAPTER VI-A (C). SEC. 80 HHC IS PART OF CHAPTER VI A (C) AND IT IS NOT A SELF CONTAINED PROVISION. THERE IS ABSOLUTELY NO AMBIGUITY ON THIS ASPECT. THEREFORE, RELIEF UNDER S . 80 IA SHOULD BE DEDUCTED FROM THE PROFITS AND GAINS OF TH E BUSINESS BEFORE COMPUTING RELIEF UNDER S. 80 HHC OF THE ACT. (PARA 42 OF THE DECISION). FURTHER, A FIVE MEMBER SPECIAL B ENCH OF THE HONBLE ITAT DELHI IN THE CASE OF ACIT V/S HINDUSTA N MINT AND AGRO PRODUCTS (P) LTD., NEW DELHI 119 ITD 107 D ATED 23 RD JUNE 2009 HAVE ALSO CONFIRMED THE VIEW TAKEN IN THE CASE OF ROGINI GARMENTS ON THIS ISSUE. 5. THE ASSESSEE HAS ARGUED THAT THE ASSESSING OFFIC ER WAS NOT ALLOWED TO EXAMINE ISSUE OF ALLOWANCES U/S. 80 IB AND 80 HHC AS THERE WAS NO MATERIAL FOUND DURING SE ARCH RELATING TO THE ABOVE ALLOWANCES. A PLAIN READING O F THE PROVISIONS OF SECTION 153A OF I. T. ACT SHOWS THAT ONCE A SEARCH HAD TAKEN PLACE, THE ASSESSING OFFICER IS EM POWERED TO ISSUE NOTICES FOR THE ASSESSMENT YEARS OF THE PR ESCRIBED PERIOD AND TO ASSESS OR REASSESS INCOME FOR THESE A SSESSMENT YEARS. THE CONTRARY VIEW EXPRESSED BY THE HONBLE B ENCHES OF THE ITAT IS NOT ACCEPTED BY THE DEPARTMENT AND THE ISSUE IS BEING AGITATED IN APPEALS FILED U/S. 260A OF THE I. T. ACT. IN VIEW OF THE ABOVE POSITION, THE CONTENTIONS BY ASSE SSEE ARE NOT ACCEPTED. 6. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, TO ASCE RTAIN THE CORRECT FACT AND TO TAKE A COMPREHENSIVE VIEW IN TH E MATTER AFTER CONDUCTING PROPER INVESTIGATION/INQUIRY, IT I S NECESSARY THAT THE WHOLE ASSESSMENT ORDER IS SET ASIDE FOR FR AMING THE SAME DE NOVO. HOWEVER, THE ASSESSING OFFICER IS DIR ECTED TO GIVE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE A SSESSEE FIRM BEFORE FINALIZING THE SET ASIDE ASSESSMENT ORDER. 7. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE ASSAI LING THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX U/S 263 OF T HE IT ACT SUBMITTED THAT IN THE CASE OF SCM CREATIONS VS ACIT 304 ITR 3 19 HELD THAT THE RELIEF U/S 80 IA OF THE IT ACT SHOULD NOT BE DEDUCT ED FROM THE PROFITS AND GAINS OF BUSINESS BEFORE COMPUTING RELI EF U/S 80 HHC OF IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 6 THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, S UBMITTED THAT SINCE TWO VIEWS WERE POSSIBLE ON THE ABOVE ISS UE, THEREFORE, PROCEEDINGS U/S 263 OF THE IT ACT COULD NOT HAVE BE EN INITIATED IN THE MATTER. HE HAS SUBMITTED THAT THE DECISION OF THE I TAT SPECIAL BENCH IN THE CASE OF HINDUSTAN MINT AND AGRO PRODUCTS (P) LT D. (SUPRA) WOULD BE SUPERCEDED BY THE JUDGMENT OF THE HIGH COURT. HE HA S SUBMITTED THAT SINCE THE AO HAS TAKEN ONE OF THE VIEWS WITH WHICH THE LEARNED COMMISSIONER OF INCOME TAX DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS MAX INDIA LTD. 295 ITR 282 IN WHICH IT WAS HELD AS UNDER: EXPORT PROFITS DEDUCTIION INCOME-TAX ACT, 1961 S. 80 HHC. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961 , HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS IF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISS IBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR W HERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HA S TAKEN ONE VIEW WHICH THE COMMISSIONER DOES NOT AGRE E, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDIC IAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESS ING OFFICER IS UNSUSTAINABLE IN LAW. HE HAS SUBMITTED THAT SINCE THE ISSUE IS DEBATABLE ONE, THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX SHOULD NOT HAVE EXERCISED JURISDICTION U/S 263 OF THE IT ACT. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE IN ALL THE ASSESSMENT YEARS ABOVE PREFERRE D APPEAL ON QUANTUM BEFORE THE ITAT AHMEDABAD D BENCH IN IT(SS) A NOS . 97 TO 102 AND 2740/AHD/2009 AND RAISED THE ISSUE NO.7 WITH REGAR D TO ELIGIBLE DEDUCTION ON ENHANCED INCOME FROM THE BUSINESS CONS EQUENCE TO IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 7 DISALLOWANCE OF BUSINESS EXPENSES ON WHICH ASSESSEE HAD CLAIMED DEDUCTIONS U/S 80 IA AND 80 HHC OF THE IT ACT AND T HE TRIBUNAL VIDE ORDER DATED 23-12-2009 ALLOWED THE CLAIM OF THE ASS ESSEE FOR DEDUCTION U/S 80 IA/80 HHC OF THE IT ACT IN RESPECT OF THE AD DITIONS. COPY OF THE ORDER IS FILED ON RECORD. THE LEARNED COUNSEL FOR T HE ASSESSEE ARGUED THAT THE ASSESSMENT ORDER EMERGED WITH THE ORDER OF THE TRIBUNAL DATED 23-12-2009. THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX IS NOT JUSTIFIED IN INITIATING PROCEEDINGS U/S 263 OF THE IT ACT ON THAT MATTER. 8. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E IMPUGNED ORDER U/S 263 OF THE IT ACT AND ALSO REFERRED TO THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS MAX INDIA LTD. (SUPRA) IN WHICH IT WAS HELD THAT THE LAW AS STOOD WHEN THE LEARNED COMMISSIONER PASSED THE ORDER DATED MARCH 5, 1997, IT HAD TO BE TAKEN INTO ACCOUNT AND THE COMMISSIONER HAD NO JURISDICTION TO INTERFERE IN THE EXERCISE OF HIS POWER OF REVISION U/S 263 OF TH E ACT. THE LEARNED DR, THEREFORE, SUBMITTED THAT THE ISSUE AS ON THE D ATE OF PASSING OF THE IMPUGNED ORDER ON 29-03-2010 WAS FAVOURABLE TO THE REVENUE AND CERTAIN DECISIONS WERE AGAINST THE ASSESSEE THAT AS PER SECTION 80 IA (9) READ WITH SECTION 80 IB (13) OF THE IT ACT, THE DED UCTION ALLOWED U/S 80 IB SHOULD HAVE BEEN REDUCED WHILE ALLOWING DEDUCTIO N U/S 80 HHC OF THE IT ACT AND THE SAME VIEW IS TAKEN IN FAVOUR OF THE REVENUE BY THE ITAT SPECIAL BENCH IN THE CASE OF HINDUSTAN MINT & AGRO PRODUCTS PVT. LTD. (SUPRA). THE LEARNED DR SUBMITTED THAT THE ISS UE HAS TO BE EXAMINED WITH REFERENCE TO PROVISIONS CONTAINED U/S 80IA (9) READ WITH SECTION 80IB (13) OF THE IT ACT WHICH HAD NOT BEEN CONSIDERED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SCM CREATI ONS VS ACIT (SUPRA). THEREFORE, NON-CONSIDERABLE OF SPECIFIC PR OVISIONS OF LAW WOULD BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LEARNED DR, THEREFORE, SUBMITTED THAT THE ISSUE WAS SETTLED AND NO TWO VIEWS WERE POSSIBLE ON THE ISSUE. THEREFORE, THERE WAS NO DEBATABLE ISSUE AS IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 8 ARGUED BY THE ASSESSEES COUNSEL. THE LEARNED DR SU BMITTED THAT THE ISSUE RAISED IN THE PROCEEDINGS U/S 263 OF THE IT A CT WAS NOT THERE BEFORE THE ITAT AHMEDABAD D BENCH IN THE CASE OF THE SAM E ASSESSEE IN QUANTUM PROCEEDINGS DECIDED VIDE ORDER DATED 23-12- 2009 (SUPRA) AS IS ARGUED BY THE ASSESSEES COUNSEL. THEREFORE, PRINCI PLE OF MERGER WOULD NOT APPLY IN THIS CASE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. ITAT DELHI SPECIAL BENCH CONSISTING OF 5 MEMBERS IN THE CASE OF ACIT VS HINDUSTAN MINT & AGRO PRODUCTS PVT. LTD. (SUPRA) CONSIDERED THE FOLLOWING QUESTION OF LAW: WHETHER IN VIEW OF THE PROVISIONS OF SECTION 80 I A (9) READ WITH SECTION 80 IB (13), THE DEDUCTION OF INCOME UNDER CHAPTER VI-A CAN BE ALLOWED ON THE ENTIRE PROFIT AN D GAINS OF AN UNDERTAKING OR AN ENTERPRISE OF AN ASSESSEE OR I T IS TO BE ALLOWED ON SUCH PROFIT AND GAINS AS ARE REDUCED BY THE DEDUCTION CLAIMED AND ALLOWED UNDER SECTION 80 IB/ 80-IA. THE AFORESAID QUESTION WAS CONSIDERED IN THE LIGHT OF THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SCM CREATI ONS VS ACIT (SUPRA). THE PROVISIONS OF SECTION 80 IA (9) AND SE CTION 80 IB (13) READ AS UNDER: SECTION 80IA (9) WHERE ANY AMOUNT OF PROFITS AND G AINS OF AN [UNDERTAKING] OR OF AN ENTERPRISE IN THE CASE OF AN ASSESSEE IS CLAIMED AND ALLOWED UNDER THIS SECTION FOR ANY ASSE SSMENT YEAR, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND G AINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS OF THIS C HAPTER UNDER THE HEADING C.DEDUCTIONS IN RESPECT OF CERT AIN INCOMES, AND SHALL IN NO CASE EXCEED THE PROFITS A ND GAINS OF SUCH ELIGIBLE BUSINESS OF [UNDERTAKING] OR ENTERPRI SE, AS THE CASE MAY BE. SECTION 80-IB (13) THE PROVISIONS CONTAINED IN SUB -SECTION (5) AND SUB-SECTIONS (7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBLE BUSINESS UNDER THIS S ECTION . IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 9 10. SUB SECTION (9) OF SECTION 80 IA OF THE IT ACT WAS INTRODUCED WITH EFFECT FROM APRIL, 1999 BY THE FINANCE (NO.2) ACT, 1998 AND SUB SECTION (13) OF SECTION 80 IB OF THE IT ACT IS CONSEQUENTIA L AS CERTAIN PROVISIONS OF SECTION 80 IA OF THE IT ACT ARE IMPORTED AND MADE A PPLICABLE TO SECTION 80IB OF THE IT ACT. THE ITAT SPECIAL BENCH IN THE C ASE OF HINDUSTAN MINT & AGRO PRODUCTS PVT. LTD. (SUPRA) CONSIDERED FIRST QUESTION BEFORE THEM WHETHER THE DECISION IN THE CASE OF SCM CREATIONS ( SUPRA) HAS IMPLIEDLY OVERRULED OF SPECIAL BENCH DECISION IN THE CASE OF ROGINI GARMENTS (SUPRA) NOTWITHSTANDING THE PROVISIONS OF SECTION 8 0 IA (9) OF THE IT ACT AS NOTED ABOVE. THE SPECIAL BENCH OF THE ITAT CONSI DERING THE AFORESAID DECISION OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF SCM CREATIONS (SUPRA) NOTED THAT NO REFERENCE WAS MADE TO THE STA TUTORY PROVISIONS AS CONTAINED ABOVE AND CHANGE IN THE STATUTORY PROVISI ONS OF SUB SECTION (9) OF SECTION 80 IA OF THE IT ACT. AFTER DISCUSSING TH E RELEVANT PROVISIONS OF LAW AND AMENDMENTS IN 1999 ABOVE AND ALL THE CASE L AWS REFERRED TO BY THE HONBLE MADRAS HIGH COURT IN ITS DECISION, THE TRIBUNAL FOR THE REASONS GIVEN IN THE ORDER HELD THAT THE SAID DECISION IN THE CASE OF SCM CREATIONS (SUPRA) DID NOT LAY DOWN THAT SECTION 80 IA (9) OR 80 IB (13) OF THE IT ACT SHOULD BE DISREGARDED WHILE C OMPUTING DEDUCTION U/S 80 HHC OR OTHER DEDUCTIONS UNDER CHAP TER C OF VI-A. THE TRIBUNAL IN PARA 37 OF THE ORDER HELD AS UNDER: 37. WE ACCORDINGLY HOLD THAT DEDUCTION TO BE ALLOW ED UNDER ANY OTHER PROVISION OF CHAPTER VI-A WITH THE HEADING C IS TO BE REDUCED BY AMOUNT OF DEDUCTION ALLOWED UNDER SECTION 80-IB/80-IA OF THE INCOME-TAX ACT. WE ANSWER THE QUESTION REFERRED TO THE SPECIAL BENC H IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE REVENUE. 11. CONSIDERING THE ABOVE DECISION OF THE DELHI SPE CIAL BENCH OF THE ITAT IN THE CASE OF HINDUSTAN MINT & AGRO PRODUCTS PVT. LTD. (SUPRA) IT IS CLEAR THAT THE TRIBUNAL HAS ALREADY TAKEN A VIEW TH AT THE PROVISIONS OF SECTION 80 IA (9) READ WITH SECTION 80 IB (13) OF T HE IT ACT HAVE NOT BEEN IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 10 TAKEN INTO CONSIDERATION IN THE CASE OF SCM CREATIO NS (SUPRA). THESE AMENDMENTS WERE NOT BROUGHT TO THE KNOWLEDGE OF THE HONBLE HIGH COURT IN THE CASE OF SCM CREATIONS (SUPRA). THEREFO RE, THE SAME CANNOT BE TREATED AS PRECEDENT IN FAVOUR OF THE ASSESSEE. THE DECISION IN THE CASE OF HINDUSTAN MINT & AGRO PRODUCTS PVT. LTD. (S UPRA) WAS PRONOUNCED ON 23-06-2009. THEREFORE, THE LAW AS STO OD WHEN THE LEARNED COMMISSIONER OF INCOME TAX PASSED THE IMPUG NED ORDER ON 29-03-2010 HAD TO BE TAKEN INTO ACCOUNT AS PER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS MAX IND IA LTD. (SUPRA). THEREFORE, THE POSITION OF LAW AS ARISES IN THE PRE SENT APPEAL WAS SETTLED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THEREFORE, NO DEBATABLE ISSUE OR TWO VIEWS ARISE OUT OF THE MATTE R IN CONTROVERSY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO T HE ORDER OF ITAT AHMEDABAD D BENCH IN THE CASE OF THE SAME ASSESSE E IN IT(SS) A NOS. 97/AHD/2009 AND OTHERS DATED 23-12-2009 FOR SAME AS SESSMENT YEARS IN WHICH THE ISSUE WAS DIFFERENT WHICH RELATES TO R E-COMPUTATION OF ELIGIBLE DEDUCTION ON THE ENHANCED INCOME FROM BUSI NESS, CONSEQUENT TO DISALLOWANCE OUT OF BUSINESS EXPENSES IN REFERENCE TO DEDUCTION CLAIMED U/S 80 IA AND 80 HHC OF THE IT ACT. SINCE THE ISSUE INVOLVED IN THE PRESENT APPEALS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX U/S 263 OF THE IT ACT WAS WITH REFERENCE TO THE NON-CONSIDE RATION OF THE PROVISIONS OF SECTION 80 IA (9) READ WITH SECTION 8 0 IB (13) OF THE IT ACT, THEREFORE, THE ISSUE BEFORE THE TRIBUNAL IN QUANTUM AND IN THE PROCEEDINGS U/S 263 OF THE IT ACT ARE ALL TOGETHER DISTINCT AND DIFFERENT. THE ISSUE OF NON CONSIDERATION OF THE PROVISIONS UN DER SECTION 80 IA (9) WAS NOT BEFORE THE TRIBUNAL IN QUANTUM PROCEEDINGS. PRINCIPLE OF MERGER, THEREFORE, WOULD NOT APPLY TO THE FACTS AND CIRCUMS TANCES OF THE CASE. 12. IT IS ALSO ADMITTED FACT THAT THE PROVISIONS OF SECTION 80 IA (9) AND 80 IB (13) OF THE IT ACT ARE APPLICABLE TO THE ASSE SSMENT YEARS UNDER APPEAL. IT IS ALSO ADMITTED FACT THAT THE PROVISION S CONTAINED IN THE IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 11 AFORESAID SECTIONS WOULD REVEAL THAT THE DEDUCTION ALLOWED U/S 80 IB OF THE IT ACT SHOULD NOT BE REDUCED WHILE ALLOWING DED UCTION U/S 80 HHC OF THE IT ACT. THEREFORE, IN THE CASE OF THE ASSESSEE THE AO HAS ALLOWED EXCESSIVE DEDUCTION U/S 80 HHC OF THE IT ACT WITHOU T CONSIDERING THE AFORESAID PROVISIONS OF LAW. IT WOULD, THEREFORE, S HOW THAT THE PROVISIONS OF SECTION 80 IA (9) READ WITH SECTION 80 IB (13) O F THE IT ACT HAVE NOT BEEN CONSIDERED BY THE AO. THE AO HAS, THEREFORE, F AILED TO MAKE PROPER INQUIRY IN ACCORDANCE WITH LAW. THE FAILURE BY THE AO TO MAKE INQUIRY AT THE ASSESSMENT STAGE WOULD ALSO SHOW THAT THE ASSES SMENT ORDER PASSED BY HIM IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE JUSTIFYING THE ACTION OF THE LEARNED COMMISSIONER O F INCOME TAX U/S 263 OF THE IT ACT. WE ARE FORTIFIED IN OUR VIEW BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES VS ADDL. CIT & OTHERS 99 ITR 375 AND THE DECISION OF THE HONBLE M ADRAS HIGH COURT IN THE CASE OF K. A. RAMASWAMY CHETTIAR AND ANOTHER VS CIT 220 ITR 657. 13. CONSIDERING THE ABOVE DISCUSSIONS, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX PASSED U/S 263 OF THE IT ACT. WE CONFIRM HIS FINDINGS AND DISMISS THE APPEAL OF THE ASSESSEE IN IT(SS) A NO.521/AHD/ 2010. 14. IN THE REMAINING APPEALS ALSO SIMILAR ISSUE ARI SES. BY FOLLOWING THE ORDER IN IT(SS)A NO.521/AHD/2010, WE DISMISS THE RE MAINING APPEALS OF THE ASSESSEE. 15. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-09-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 30-09-2010 LAKSHMIKANT/- IT (SS) A NO. 521, 522, 523 AND 524/AHD/2010 SHRI PANKAJ A. SHAH VS CIT, CC-II, AHMEDABAD 12 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