Addl. CIT, Khanna V. M/s Little Bee Impex, Doraha

MA 78/CHANDI/2009

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0770 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER MA NOS. 77 & 78/CHD/2009 (IN ITA NOS. 36 & 37/CHD/2009) ASSESSMENT YEARS: 2004-05 & 2005-06 THE ADDL.CIT, VS. M/S LITTLE BEE IMPEX KHANNA DORAHA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 19/07/2013 DATE OF PRONOUNCEMENT : 02.08.2013 ORDER PER T.R.SOOD, A.M. THESE MISC. APPLICATIONS ARE ARISING OUT OF THE OR DER OF TRIBUNAL IN ITA NOS. 36 & 37/CHD/2009 DATED 31.3.2009. THROUGH THESE MISC. APPLICATIONS, THE REVENUE IS SEEKING RECTIFICATION OF THE ORDER OF THE TRIBUNAL DATED 31.3.2009. 2. THE LD. DR REFERRED TO CONTENTIONS OF MISC. APPL ICATION AND RELIED ON THE ISSUES RAISED IN THE APPLICATION AT PAGES 5 & 6 OF THE APPLICATION. 2 3. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUBMITTED THAT THE REVENUE HAS ALREADY FILED APPEALS BEFORE THE HO N'BLE HIGH COURT AND, THEREFORE, THIS APPLICATION IS NOT MAINTAINABLE AT ALL. IN ANY CASE, SIMPLY BECAUSE THE RESPONDENT HAS BEEN SHOWN AS ADDL. CIT IT CANNOT BE SAID THAT AN ERROR HAS CREPT IN THE ORDER OF TRIBUNAL. 4. SIMILARLY ON THE SECOND POINT, NO CONDITIONS HAV E BEEN BROUGHT WHICH WERE REQUIRED TO BE EXAMINED BY ALLOWING DEDU CTION U/S 10B WHICH WERE DISCUSSED BY COMMISSIONER HAVE NOT BEEN ADJUD ICATED BY THE TRIBUNAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. THE VARIOUS POINTS WHICH HAVE BEEN RAISED BY THE REVENUE AT PAG ES 5 & 6 OF THE MISC. PETITION READS AS UNDER:- (I) THAT THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-II, LUDHIANA PASSED UNDER SECTION 263 OF THE INCOME-TAX , ACT, 1961 WHEREAS THE ADDL. COMMISSIONER OF INCOME- TAX, KHANNA RANGE, KHANNA HAS BEEN SHOWN RESPONDENT WHILE DELIVERING THEIR JUDGMENT IN THE APPEAL REFER RED SUPRA AND THE COMMISSIONER OF INCOME-TAX-II, LUDHIANA HAS NOT BEEN SHOWN AS THE RESPONDENT WHILE PASSING THE ORDER. THE ORDER IS REQUIRED TO BE RECA LLED AND PASSED AFRESH FOLLOWING PRINCIPLES OF NATURAL JUSTICE . (II) THAT WHILE DELIVERING THEIR JUDGMENT, HONBLE ITAT HAVE GIVEN THEIR ADJUDICATION ON THE ISSUE OF ALLOW ABIL ITY OF 3 DEDUCTION 10B IN VIEW OF ONLY ONE CONDITIONS REQUIR ED I.E. MANUFACTURING OR PRODUCTION. HONBLE ITAT HAVE NOT GIVEN ANY FINDING ON THE OTHER CONDITIONS ESSENTIAL FOR CLAIMING DEDUCTION UNDER SECTION 10B, WHICH WERE NO T VERIFIED BY THE A.O. AT THE TIME OF ASSESSMENT AS H ELD BY THE COMMISSIONER OF INCOME-TAX ON PAGE 9 & 10 OF TH E ORDER UNDER SECTION 263 DATED 18.12.2008 AS REPRODU CED ABOVE. (III) FURTHER, THE STAND OF THE HONBLE ITAT, THAT WHEN T HE ASSESSMENT HAS BEEN FINALIZED WITH THE CONCURRENCE WITH THE COMMISSIONER, SUCH CONCURRENCE COULD NOT BE HEL D TO BE ERRONEOUS BY THE COMMISSIONER SUBSEQUENTLY BY INVOKING THE PROVISION OF SECTION 263, IS NOT IN CONCURRENCE WITH THE DECISION OF HON,BLE SUPREME CO URT IN CASE OF CIT VS. GREENWORLD CORPORATION (2009) 22 4 CTR(SC) 113 WHICH HAS DECLARATORY EFFECT ON THIS OR DER. HONBLE ITAT MAY KINDLY BE PLEASED TO RECTIFY THEIR ORDER IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. GREENWORLD CORPORATION (SUPRA), BEING MISTAKE APPARENT FROM RECORD AND UPHOLD THE ORDER THE ORDER OF THE COMMISSIONER OF INCOME-TAX-I I, LUDHIANA. IN VIEW OF THE ABOVE FACTS OF THE CASE, THE HONBLE ITAT MAY KINDLY BE PLEASED TO RECTIFY THEIR ORDER AND TO ADJUDICATE ON THE ISSUE OF THE OTHER CONDITIONS FOR CLAIMING UNDER SECTION 10B WHICH THE A.O. DID NOT VERIFY AS HELD IN THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 ON 18.12.2008 AND ALSO IN VIEW OF THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. GREENWORLD CORPORATION AS REFERRED SUPRA. 4 6. WE FIND THAT THERE IS NO PROVISION IN THE ACT RE GARDING WHO SHOULD BE TREATED AS RESPONDENT BY THE ASSESSEE. HOWEVER, IN THE APPELLATE TRIBUNAL RULES, 1963 A PROVISION HAS BEEN MADE UND ER RULE 13 ON THIS SUBJECT. RULE 13 READS AS UNDER;- WHO MAY BE JOINED AS RESPONDENT IN AN APPEAL BY ASSESSEE . 13. IN ANY APPEAL BY AN ASSESSEE UNDER SUB-SECTION (1) OF SECTION 253, THE INCOME-TAX OFFICER [ASSESSI NG OFFICER} CONCERNED SHALL BE MADE A RESPONDENT TO TH E APPEAL. 7. THE ABOVE CLEARLY SHOWS THAT IN THE APPEAL BY TH E ASSESSEE, THE ASSESSING OFFICER CONCERNED SHALL BE MADE AS RESPON DENT. IN THIS CASE THE ADDL. COMMISSIONER HAS ACTED AS ASSESSING OFFICER A ND, THEREFORE, ADDL. COMMISSIONER WAS TREATED AS RESPONDENT AND, THEREFO RE, NO ERROR CAN BE SAID TO HAVE BEEN TAKEN PLACE IN THE ORDER OF THE T RIBUNAL . 8. POINT NO. (II) : IN RESPECT OF POINT RAISED BY T HE REVENUE, WE HAVE CAREFULLY PERUSED THE ORDER OF THE TRIBUNAL AS WELL AS THE REVISION ORDER PASSED BY LD. COMMISSIONER. WE FIND THE WHOLE ISSU E HAS BEEN ADJUDICATED BY THE TRIBUNAL THROUGH PARAS 4 TO 13 A ND ALL ASPECTS HAVE BEEN COVERED. IN THE MISC. APPLICATION, NO SPECIFI C ASPECT HAS BEEN SHOWN WHICH WAS NOT COVERED BY THE TRIBUNAL, THEREF ORE, IT CANNOT BE SAID THAT AN ERROR HAS CREPT INTO THE ORDER OF THE TRIBU NAL. 5 9. POINT NO.3: IT HAS BEEN POINTED OUT THAT THE T RIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT ASSESS MENT ORDER PASSED WITH THE CONCURRENCE OF THE COMMISSIONER. NO SUCH CONCU RRENCE CAN BE GIVEN IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF CIT VS GREENWORLD CORPORATION (SC) 314 ITR 81 (SC). 10. FIRST OF ALL, WE MAY MENTION THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V GREENWORLD CORPORATION (SUPRA) WAS RENDERED ON MAY 06,2009 WHEREAS THE TRIBUNAL HAS DECIDED THE APPEAL VIDE ORDER DATED 31.3.2009. THEREFORE, IT CANNOT BE ARGUED TH AT THIS DECISION WAS RELIED UPON DURING THE HEARING BECAUSE AT THAT TIME THE DECISION OF THE GREENWORLD CORPORATION WAS NOT EVEN PRONOUNCED BY T HE HON'BLE SUPREME COURT. SECONDLY, THE ISSUE OF DEDUCTION U/S 10B OF THE ACT AND WHETHER THE ASSESSEE WAS MANUFACTURING AN ARTICLE OR THING WAS DISCUSSED IN PARAS 4 TO 13. PARA 13 OF THE ORDER READS AS UNDER:- 13. THE WHOLE CONTROVERSY CAN BE GAUGED FROM THE AFORESAID. THE SUBSTANTIVE DIFFERENCE BETWEEN THE COMMISSIONER AND THE ASSESSING OFFICER IS ON THE IS SUE AS TO WHETHER THE ACTIVITY CARRIED OUT BY THE ASSES SEE AMOUNTS TO MANUFACTURE OR PRODUCTION. THE ASSESSEE SUCCESSFULLY CONTENDED BEFORE THE ASSESSING OFFICER THAT THE PRODUCT PRODUCED BY IT WAS A DIFFERENT MARKETABLE COMMODITY THAN THE RAW MATERIAL AND THEREFORE, IT AMOUNTED TO MANUFACTURE OR PRODUCTION. REFERENCE WAS MADE TO THE JUDGEMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF EA ST INDIA COTTON MANUFACTURING CO. PVT. LTD. (SUPRA) AS IS EVIDENT FROM THE PORTION OF THE OFFICE NOTE EXTRA CTED 6 ABOVE. THE ARGUMENT OF THE COMMISSIONER IS THAT TH E ACTIVITY CARRIED OUT BY THE ASSESSEE CANNOT BE TREA TED AS A MANUFACTURE OR PRODUCTION BY APPLYING A MARKETABILITY TEST, BUT IT IS DISTINCTIVENESS OF TH E OUTPUT IN THE COMMERCIAL SENSE, WHICH HAS TO BE CONSIDERED. IN OTHER WORDS, IN THE OPINION OF THE COMMISSIONER, THE QUESTION IS NOT WHETHER THE PROCE SS EMPLOYED BY THE ASSESSEE RENDERS THE FINAL PRODUCT AS MARKETABLE BUT THE QUESTION IS AS TO WHETHER THE FI NAL PRODUCT IS A DISTINCT COMMERCIAL COMMODITY VIS--VI S THE RAW MATERIAL. ACCORDING TO THE COMMISSIONER, T HE TEST TO BE APPLIED IN THIS CASE IS NOT THE MARKETAB ILITY TEST BUT THE DISTINCTIVENESS OF THE OUTPUT IN THE COMMERCIAL SENSE. IN PARA 3(B) OF HIS ORDER, THE COMMISSIONER HAS POINTED OUT THIS AND ACCORDING TO HIM THIS BASIC ISSUE HAS BEEN OVERLOOKED. IN THE OPINION OF THE COMMISSIONER, THE ASSESSMENT ORDER I S RENDERED ERRONEOUS BECAUSE IT IS BASED ON THE FORME R PROPOSITION AND NOT THE LATTER PROPOSITION, WHICH ACCORDING TO HIM WAS REQUIRED TO BE APPLIED. NOW, THE LIMITED POINT WHICH EMERGES FOR CONSIDERATION IS AS TO WHETHER THE ACTION OF THE ASSESSING OFFICER IN TREA TING THE PROCESS OF THE ASSESSEE AS AMOUNTING TO MANUFACTURE OR PRODUCTION BY APPLYING THE MARKETABILITY TEST CAN BE SAID TO BE ERRONEOUS WITH IN THE MEANING OF SECTION 263 OF THE ACT. THIS QUESTIO N HAS TO BE CONSIDERED IN THE LIGHT OF THE PROPOSITIO N CANVASSED BY THE COMMISSIONER THAT THE TEST TO BE APPLIED IS AS TO WHETHER THE FINAL PRODUCT WAS DIST INCT IN COMMERCIAL SENSE. WE HAVE CAREFULLY PONDERED OV ER THIS ASPECT. WE ARE REMINDED OF THE JUDGEMENT OF T HE HON'BLE MADRAS HIGH COURT IN THE CASE OF INDIAN CIN E AGENCIES, REPORTED AT 261 ITR 491 (MAD). THE HON'B LE HIGH COURT HELD THAT THE REDUCTION OF THE SIZE OF J UMBO 7 PHOTOGRAPHIC PAPER ROLLS INTO EASILY MARKETABLE DESIRED SIZES WITH THE HELP OF SLITTING MACHINES DI D NOT AMOUNT TO EITHER MANUFACTURE OR PRODUCTION. OSTENSIBLY, THE ASSESSEE CLAIMED BEFORE THE HON'BLE MADRAS HIGH COURT THAT, ON THE BASIS OF THE MARKETABILITY TEST, THE SLITTING OF JUMBO PHOTOGRAP HIC PAPER INTO SMALLER ROLLS AMOUNTED TO MANUFACTURE OR PRODUCTION. THE HON'BLE HIGH COURT CONSIDERED TH E MARKETABILITY TEST BEING PROPOUNDED BEFORE IT AND H ELD THAT THE SLITTING OF JUMBO PHOTOGRAPHIC PAPERS INTO SMALLER ROLLS DOES NOT AMOUNT TO MANUFACTURE. IN FACT, SEEN IN THE PRESENT CONTEXT, THE CASE MADE OU T BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IS ON A PARALLEL TO THAT BEFORE THE HON'BLE MADRAS HIGH COU RT. THE PROPOSITION DID NOT FIND FAVOUR WITH THE HON'BL E MADRAS HIGH COURT. SO HOWEVER, THE DECISION OF THE HONBLE MADRAS HIGH COURT WAS CARRIED BEFORE THE HONBLE SUPREME COURT AND THE PROPOSITION HAS SINCE BEEN ACCEPTED BY THE HON'BLE SUPREME COURT IN THE CASE OF INDIAN CINE AGENCIES REPORTED IN 308 ITR 98 (SC) AND THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT STANDS OVER-RULED. THE SLITTING OF JUMBO PHOTOGRAPHIC PAPERS INTO SMALLER ROLLS HAS BEEN HEL D TO BE AMOUNTING TO MANUFACTURE OR PRODUCTION. FROM THE AFORESAID, A PREMISE WHICH EMERGES IS THAT EVEN THE MARKETABILITY TEST IS A GOOD TEST TO EVALU ATE WHETHER OR NOT AN ACTIVITY AMOUNTS TO MANUFACTURE OR PRODUCTION. IF, ON THE TEST OF MARKETABILITY OF THE COMMODITY BEING FINALLY PRODUCED, THE OUT-PUT IS RENDERED MARKETABLE, IT WOULD AMOUNT TO MANUFACTUR E OR PRODUCTION. THEREFORE, THE TEST WHICH HAS BEE N APPLIED BY THE ASSESSING OFFICER STANDS APPROVED BY THE HON'BLE SUPREME COURT CONSIDERED IN THE LIGHT O F 8 THE PARITY OF REASONING ENUNCIATED IN THE CASE OF INDIAN CINE AGENCIES (SUPRA). THE MOOT QUESTION IS , CAN SUCH ACTION OF THE ASSESSING OFFICER BE CONSIDE RED AS ERRONEOUS WITHIN THE MEANING OF SECTION 263 OF T HE ACT? IN OUR CONSIDERED OPINION, THE APPROACH OF TH E ASSESSING OFFICER CANNOT BE CONSIDERED AS ERRONEOUS WITHIN THE MEANING OF SECTION 263 OF THE ACT. ON T HIS POINT, WE MAY ALSO MAKE A MENTION THAT EVEN ON THE COMMERCIAL DISTINCTIVENESS TEST SOUGHT TO BE APPLIE D BY THE COMMISSIONER, THERE IS NO FINDING BY THE COMMISSIONER AS TO HOW DOES IT OPERATE IN CONTRADICTION TO THE FINAL OUTCOME CONCLUDED BY THE ASSESSING OFFICER. THUS, THIS IS A CASE WHERE THE VIEW OF THE ASSESSING OFFICER IS SOUGHT TO BE SUBSTITUTE D BY THE COMMISSIONER IN A SUBJECTIVE MANNER, WITHOUT RECORDING A FINDING AS TO HOW THE ULTIMATE CONCLUSI ON OF THE ASSESSING OFFICER IS ERRONEOUS IN LAW. FOR ALL THE ABOVE REASONS, IN OUR CONSIDERED OPINION, COMMISSIONER ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT IN HOLDING THAT THE ASSESSIN G OFFICER WAS NOT CORRECT IN ACCEPTING THE ACTIVITY UNDERTAKEN BY THE ASSESSEE AS AMOUNTING TO MANUFACTURE OR PRODUCTION. 11. THE ABOVE CLEARLY SHOWS THAT ALL THE ASPECTS WE RE DISCUSSED AND THE ORDER PASSED U/S 263 WAS QUASHED BECAUSE OF THESE R EASONS. LATER ON, IN PARA 15, IT WAS OBSERVED THAT A OFFICE NOTE WAS REC ORDED BY THE ASSESSING OFFICER WHICH POINTED OUT THAT THE ASSESSMENT ORDER WAS PASSED AFTER TAKING A VERBAL CONCURRENCE OF THE CONCERNED COMMIS SIONER, THEREFORE, IT BECOMES CLEAR THAT THIS IS ONLY A PASSING REFERENCE AND NOT AS MAIN REASON FOR GRANTING RELIEF TO THE ASSESSEE. THEREFORE, NO ERROR CAN BE SAID TO HAVE 9 BEEN CREPT IN THE ORDER OF TRIBUNAL. IN ANY CASE, WE MAY NOTE THAT ADMITTEDLY APPEALS HAVE ALREADY BEEN FILED BY THE R EVENUE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT AGAINST THE ORD ER OF TRIBUNAL AND, THEREFORE, ALL THE ISSUES ARE SEIZED BEFORE THE HON 'BLE HIGH COURT AND IT CANNOT BE SAID THAT SOME ERROR HAS CREPT IN THE ORD ER OF TRIBUNAL. 12. IN THESE CIRCUMSTANCES, WE FIND NO MERIT IN THE MISC. APPLICATIONS AND ACCORDINGLY THE SAME ARE DISMISSED. 13. IN THE RESULT, MISC. APPLICATIONS ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02.08.20 13 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED 2 ND AUGUST, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR 10