TMI Blog2006 (5) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... serving that in assessment year 1990-91 he has allowed the claim of the assessee. This finding of the CIT(A) has been challenged before us. While learned DR supported the order of the Assessing Officer, the learned counsel supported the order of the CIT(A). 4. We have considered the rival submissions. Section 80-I/80-I(1A) provides for deduction of the profits derived from industrial undertaking. Sub-section (2) provides for deduction in cases where the industrial undertaking manufactures or produces an article or thing not being any article or thing specified in the list in XIth Schedule. The Assessing Officer felt that the items manufactured/produced by the assessee fell in the list in XIth Schedule and denied the deduction. But we find that in assessment year 1990-91 when the claim was denied by the Assessing Officer the same was allowed by the CIT(A). This finding has not been reversed by the Tribunal. Similarly in assessment year 1991-92 when the Assessing Officer denied the assessee's claim, the same was allowed by the CIT(A). In the assessment years 1992-93 and 1993-94, the Assessing Officer himself has allowed deduction by his order under section 143(3) of the Act. The fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to colour films. It is seen from a perusal of the same that vide order sheet entry dated19-12-1996, the assessee was required to justify its claim for deduction under section 80-I of the Income-tax Act. The Assessing Officer in the course of the assessment proceedings brought the attention of the assessee to the provisions of section 80-I and 80-IA read with XIth Schedule of the Income-tax Act, 1961. According to the Assessing Officer, as per the said Schedule, photographic apparatus and goods were not entitled to deduction under section 80-I of the Act. Confronted with this, the assessee's counsel relied upon the order of the CIT(A)-XVI in assessee's own case for 1990-91 assessment year wherein he had concluded that the colour roll film was not a Schedule XI entry. It was also pointed by him that the then Assessing Officer, Range-I had accepted the order of the CIT(A) and had not recommended second appeal on this issue. 5. Considering these submissions, the Assessing Officer in the year under consideration did not accept the explanation offered by the assessee and rejected its claim for deduction under section 80-I giving the following reason:- "While a particular provision ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. I have considered the submissions. Section 80-I of the Income-tax Act provides that where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, a deduction from such profits equal to 20 per cent (25 per cent in the case of the company) thereof is to be allowed, provided the industrial undertaking does not manufacture or produce any article specified in the list in the Eleventh Schedule. The relevant entry in the Eleventh Schedule at serial 9 and 10 are as below:- The Eleventh Schedule 1. to (8) ** 9. Cinematograph films and projectors. 10. Photographic apparatus and goods. 8. Entry 9 was later (with effect from1-4-1989by Finance Act, 1988) substituted by the words 'projectors' i.e., to say Cinematographic films were taken out of the purview of the Eleventh Schedule. The case of the D.C. is that the photo colour films which the appellant is manufacturing falls under entry 10 of the Eleventh Schedule, as according to him photographic apparatus and goods would include camera and zoom lense etc., and photographic good would definitely include photographic films. My predecessor in appellant's own case for assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can the appeal of the revenue challenging the deletion of the addition made by way of disallowance of deduction under section 80-I of the magnitude of Rs. 4,41,00,000 be dismissed purely on account of the fact that the then Assessing Officer did not challenge the appellate order of the CIT(A) in 1990-91 assessment year. To my mind, on a careful analysis of the past history, it emerges that the issue of deduction under section 80-I on the basis of entry in the XIth Schedule has never been examined by the Tribunal. At the cost of repetition, it may be mentioned again that the issue was concluded by the CIT(A) in 1990-91 assessment year which for some reason was not challenged by the then Assessing Officer and in subsequent years, as per the submissions of the learned AR, the Assessing Officer himself has followed the interpretations given by the CIT(A) in 1990-91 assessment year in 143(3) proceedings. 13. However, on an examination of the issue, it is borne out that there is a slight twist in the factual history as presented before the Bench. From the copy of the CIT(A)'s order for 1995-96 assessment year at page 3 para 28, the same appended at page 38, it is seen that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the date of orders of assessment sought to be re-opened and date of forming opinion by the Assessing Officer nothing new happened, no change of law, no new material came on record and no information was received. As such, the re-opening was quashed. Their Lordships while disposing the writ did not consider the Entries 9 and 10 of Schedule XI of the Income-tax Act vis-a-vis section 80-I as there was no occasion for them to consider the same in Writ of Certiorari as the writs could be disposed on the preliminary issue itself, namely, whether the Assessing Officer had reason to believe that the income of the assessee had escaped assessment. It may be pertinent to state that a superior Court while exercising its writ jurisdiction in a Writ of Certiorari does not supplant its reasoning on the impugned order. The said Writ is destructive in nature and as a result of the same, the impugned order is quashed and no new order as such stands. Accordingly, the 147/148 re-opening was quashed by their Lordships in the Writ of Certiorari and the relevant entries of Schedule XI were not gone into. Reference may be made for the said purpose to Jindal Photo Films Ltd. v. Dy. CIT [1998] 234 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of [ten] year next following the 31-3-1981, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) ** Provided ** Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words 'not being any article or thing specified in the list in the Eleventh Schedule' had been omitted." 21. In the present appeal, we are not concerned with the percentage of deduction and confine ourselves to the issue before us. It is seen that the deduction is to be given to an assessee who fills all the conditions listed in section 80-I(2). In the present appeal, we are concerned only with the requirements of section 80-I(2)(iii). A perusal of it shows that an assessee can claim deduction under the said section only if he is not manufacturing or producing any article or thing not listed as an article or thing specified in the Eleventh Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . I would briefly like to state that the principles of consistency, which are generally brought out in a situation like this, would not be relevant as there is ample case law on the issue that each assessment year is an independent assessment year and there is also ample case law on the issue that if an error had been committed once, then, there is no heroism in perpetuating that error. In the facts of the present case, being of the view that the CIT(A) in 1990-91 assessment year has committed an error of interpretation of a provision of the Act by resorting to consider what was irrelevant and ignoring to consider what was relevant, the conclusion drawn by him in the circumstances is vitiated. 26. In the present facts of the case, it is not a situation of application of rule of consistency to a particular fact or method adopted by the assessee in valuing or recording its affairs. Here, the issue is pertaining to the interpretation to be given to entry 10 of Schedule XI of the Income-tax Act and I am of the view that the reasons for amending entry 9 of Schedule XI of the Act cannot be resorted to for interpreting entry 10 of Schedule XI of the Income-tax Act which has remained as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Tribunal. In the situation where the aggrieved party does not come to the Tribunal, then as far as the facts are concerned, the issue could be said to have achieved finality unless the said party shows and demonstrates that on account of some fact/circumstance/advice etc., it could not or did not appeal against the same. However, in case the issue is challenged as having been settled contrary to the provisions of the Act, then, the said interpretation given by the CIT(A) and the action of the then Assessing Officer not considering it relevant or appropriate to file an appeal against the same cannot and would not be understood to mean and imply that the present appeal filed by the revenue is to be decided purely on the basis of the CIT(A)'s order for 1990-91 assessment year and not referring to the provisions of the Act. The Legislature has been very careful in ensuring that benefits under the Act are afforded to what is considered at that point of time a "priority industry". 28. While interpreting the Statute, no Court or Tribunal can sit in the seat of Legislature and decide what should or should not be a priority industry, let alone the first appellate authority. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hoto films, a common man from the words "photographic apparatus and goods" would understand the inclusion of photo films in the same and to hold that they fulfil a priority need which the Legislature has not intended would be going too far. As observed earlier, while discharging judicial function, the powers of the Legislature cannot be usurped, as then what is to stop anyone from arguing that even projectors perform a laudable function as such should be given exemption. The photographic films are relatable and relevant for interpretation as goods related to photographic apparatus and is so understood by a layman in common parlance or even taking a technical view the input in the photographic apparatus would necessarily include the photo films and thus, bring it in the definition. While adjudicating upon the exemption available under the section, we cannot deal with each and every entry in Schedule XI of the Act by sitting down to decide what to our minds is fulfilling the priority needs in various vital fields like medicine, communication and education. Till the entry stands in the Schedule XI, the claims have to be decided as per the entry in the Schedule and the interpretation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper. There is hardly any justification for treating one kind of film such as cinematographic film, differently from other kind of films, such colour roll films, or X-Ray films graphic and photographic colour paper. In any case all the above kind of films belonging to the same class, the removal of cinematographic films from the list of non-priority list would imply removal of all films. Films cannot be still regarded as prohibitive articles on the basis that colour roll films would be covered under photographic goods, still retained in entry No. 10 of the Schedule Eleven. Photographic goods used in just a position with photographic apparatus would take the same color meaning thereby that photographic goods would relate to accessories, such as Lenses, stand, Trolly, Arch Lamps etc. without which photographic apparatus cannot function effectively and would not necessarily include films, whether Cinematographic or colour roll films, X-Ray films, Graphic Art films which belong to a different class altogether. I have carefully considered the arguments put forth by the authorized representative which no doubt has great force. After the exclusion of the term cinematographic film from ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings, I would merely like to add by way of caution that whether some deductions had been given to some photo films activity either of the assessee or any other assessee, then, the fact that it came under a small scale industry in the case of which an exception has been carved by the Legislature itself, would be a different issue and that aspect anyway has legislative mandate. 32. Before parting, I would briefly like to refer to the judgment cited before us, namely, A.R.J. Security Printers of the jurisdictional High Court. Herein, the peculiar facts were different. The consistent orders of the Tribunal in favour of the assessee for 80-I deductions which were not challenged by the revenue were taken into consideration. In those circumstances, the Hon'ble High Court concluded the issue in favour of the assessee. Whereas in the facts of the present case the issue has come up for interpretation for the first time before the Tribunal, as such, these entries of the XIth Schedule have never been interpreted in assessee's case by any superior Court, accordingly, the rule of consistency followed therein in the peculiar facts of the present case as has already been addressed at l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... films were items prohibited under Eleventh Schedule, Item 10 which read as-'photographic apparatus and goods'. According to the Assessing Officer, photo colour films fell under 'photographic goods'. 3. On appeal, the CIT(A) noted that the provisions of sections 80-I and 32A (which related to investment allowance) were similar in the sense that both referred to Eleventh Schedule of the Act and for the assessment year 1990-91, the assessee was granted investment allowance by the CIT(A) on the footing that the photo colour films cannot be considered as photographic goods and the department not having filed an appeal to the Tribunal against the decision of the CIT(A), the same decision would hold good for the year under appeal in respect of the claim under section 80-I and accordingly directed the Assessing Officer to allow the claim. While doing so, the CIT(A) observed that there was no change in the facts and circumstances for the year under appeal. The revenue filed an appeal before the Tribunal. The ld. AM upheld the order of the CIT(A) and further noticed that the order of the CIT(A) for the assessment year 1990-91 has become final. He also noted that for the assessment years 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the notices of reopening does not amount to upholding the assessee's claim on merits. In this view of the matter, the ld. JM was not prepared to apply the principle of consistency. The ld. JM also observed that when the Tribunal is called upon to decide an issue on the basis of the facts and the relevant principles of law, recourse to the principle of consistency is not permissible. In this view of the matter, the ld. JM held that the CIT(A) was wrong in directing the Assessing Officer to allow the assessee's claim for deduction under section 80-I. There being a difference of opinion between the ld. Members, the point of difference has been referred to me for decision. 6. I have considered the facts, the orders of the ld. Members and the arguments of both the sides. Before I proceed to decide the issue, a few aspects may be noticed. The ld. AM has decided the matter in favour of the assessee purely on the basis of rule of consistency. The ld. JM, as noticed earlier, has held that the aforesaid rule has no application to the present case. There is thus a difference of opinion between the two ld. Members on the question of the application of the rule of consistency. I note that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth Schedule. The assessee's claim for deduction in respect of investment allowance was rejected by the Assessing Officer for the assessment year 1990-91 on the ground that manufacture of photographic films is covered by Entry No. 10 of Eleventh Schedule. On appeal, the CIT(A) accepted the assessee's argument that after the exclusion of cinematographic films from entry No. 9 of the Eleventh Schedule, there does not appear to be any justification in holding the view that photo colour films would still be included in entry No. 10 in the Eleventh Schedule. The CIT(A) opined that all films whether cinematographic or colour roll films must be taken in one category and the Legislature having excluded cinematographic films from entry No. 9 in the Eleventh Schedule with effect from 1-4-1989, it must be taken that photo colour films also stood excluded from entry No. 10. In this view of the matter, he directed the Assessing Officer to allow investment allowance. 8. The above order of the CIT(A) was accepted by the department and no appeal was filed to the Tribunal. 9. For the assessment year 1991-92 the assessee did not claim any deduction under section 80-I in the original return, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled that if a notice under section 148 has been issued without the jurisdictional foundation under section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court. If "reason to believe" be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the Assessing Officer to initiate the proceedings under section 147/148 of the Act." The aforesaid judgment of the Hon'ble Delhi High Court has become final, the Special Leave Petition filed by the Income-tax Department having been dismissed by the Supreme Court by order dated18-12-1998. 10. The position now is that for the assessment year 1990-91, the assessee's claim for investment allowance under section 32A has been accepted by the department, no appeal against the order of the CIT(A) for that year having been filed by the department to the Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to show how the Assessing Officer showed great haste in accepting the assessee's claim for deduction under section 80-I by completing the assessments on the basis of the revised returns within a short span of time after the order of the CIT(A) for the assessment year 1990-91 became available. On these facts, it is strongly urged that the ld. AM was not right in invoking the rule of consistency to bind the department. 12. It is difficult for me to accept the above contentions which were very ably presented before me by Smt. Sangeeta Gupta on behalf of the department. What is the rule of consistency? It has been explained by the Supreme Court in the judgment in Radhasoami Satsang v. CIT [1992] 193 ITR 321 and the fallowing passage should be noticed:- "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was filed. Thus, the order of the CIT(A) is the basic order. It was this order which was followed by the Assessing Officer in the assessment years 1991-92 to 1993-94, albeit while allowing deduction under section 80-I. I have already noticed that the primary condition for both the sections 32A and 80-I is that the assessee should not manufacture or produce any item mentioned in the Eleventh Schedule. The objection of the Assessing Officer to allowing the deduction under section 32A was overruled by the CIT(A). No appeal was filed by the department to the Tribunal. It is, therefore, not open to the Assessing Officer to reiterate the same objection which did not find favour with the CIT(A), whose order was accepted by the department. One further aspect may be noticed here. The decision to file or not to file an appeal to the Tribunal is taken by the CIT(Admn.). If for the assessment year 1990-91, the CIT(Admn.) had not thought it fit to appeal against the reasoning of the CIT(A), it is perhaps not for the Assessing Officer, who only performs the ministerial function of filing the appeal on the direction of the CIT(A), to indirectly overrule the decision of his superior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistency and can unbind the department from its earlier position. We are not to lose sight of the bigger picture in our anxiety to find a justification for the departure from the settled position in an abortive attempt to take remedial action. The consequence of holding that a remedial action held (by the Hon'ble Delhi High Court in this case) to have been taken without basis, should still be accepted as showing resilience on the part of the department would be drastic. All that the department has to show is that they had taken some remedial action, albeit without any basis except for a change of mind, which would exclude the application of the rule of consistency. Permitting the department to do so would be contrary to the spirit of the rule so meticulously constructed by a series of judgments both of the Supreme Court and of the jurisdictional High Court. The basis of the rule of consistency seems to me, with respect, to be the classic observations of His Lordship Justice H.R. Khanna speaking for the Supreme Court in Parshuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1. It was held that "we have to bear in mind that the policy of law is that there must be a point of finality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconsidering decisions rendered a long time back particularly under taxing statutes cannot ignore the harm that is likely to happen by unsettling law that had been once settled." 16. In the case of Berger Paints India Ltd. v. CIT [2004] 266 ITR 99, it was again held by the Supreme Court that if the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the revenue to challenge its correctness in the case of other assessee without just cause. Similar observations have been made by the Supreme Court in the following cases:- 1.UnionofIndiav. Kaumudini Narayan Dalal [2001] 249 ITR 219; 2. CIT v. Narendra Doshi [2002] 254 ITR 606; 3. CIT v. Shivsagar Estate [2002] 257 ITR 59. The above judgments of the Supreme Court show the anxiety to prevent the income-tax authorities from taking different stands in the case of different assessees in respect of the same issue or taking different stands in the case of the same assessee for different assessment years in respect of the same issue. 17. For the above reasons, I agree with the ld. AM that the rule of consistency applies to the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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