TMI Blog2011 (12) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 10B of the Act for only one assessment year 2000-01, the benefit is available for balance 9 years is not correct - on plain reading of the aforesaid circular, the exemption period ends at the tenth year of its commissioning whether as DTA unit or EOU unit. - in the circular, certain illustrations were given to clarify the intention of the circular and even from such illustrations it is clear that the ten year period is to be reckoned from the date of its original commercial production. - Decided against the assessee. Fresh claim during the proceedings under section 263 of the Act. - held that:- the CIT was right in rejecting the fresh claim made by the assessee that it has gone for massive expansion and hence, the same should be considered as setting up of new unit which would be entitled for deduction under section 10B of the Act. Even otherwise, on expansion, such benefit cannot be claimed whatever may be the addition to plant and machinery or enhancement of the production capacity. - Decided against the assessee. - ITA No. 487/Hyd/2011 - - - Dated:- 14-12-2011 - Chandra Poojari, Asha Vijayaraghavan, JJ. V. Sridharan, Karan Talwar and S.K. Noorul Hass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Tribunal may deem fit. 3. The brief fact of the case are that the assessee company engaged in the business of manufacturing instant copy from the coffee beans in its factory at Duggirala, Guntur District. The assessee company has commenced its commercial operation in the aforesaid factory on 9th April 1995 as DTA unit. The assessee company subsequently obtains a letter of permission on 4-3-1999 and converted its DTA Unit into EOU Unit. The assessee company commenced its operation as an EOU Unit with the fact from 9th April 1999 after obtaining requisite permission from custom authorities. The assessee company claimed benefit under Section 10B of the Act for the first time in the assessment year 2000-2001 relevant to the previous year 1999- 2000. The assessee company, as in the past, claimed the benefit of Section 10B of the Act for Rs.29, 91,61,718/-, in its return for the assessment year 2006-07 relevant to the previous year 2005-06. The assessing officer allowed the deduction under Section 10B of the Act in the assessment passed under section 143[3] of the Act on 9th November 2009. Subsequently, the CIT assumed its jurisdiction under section 263 of the Act and issued a not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke a declaration to the assessing officer that the provisions of section 10B may not be made applicable to him for a particular assessment year, In that event, Section 10B will not be applicable to the assessee for the assessment year in view of Section 10B [8] of the Act. The period for which the undertaking was an approved EOU, but benefit of Section 10B of the Act not availed for paucity of profits or on account of losses, cannot be excluded in calculating 10 years. The words in Section 10B [1] referring to commencement of unit cannot be stretched to cover the period when unit was not an EOU but a DTA unit. The expression employed in substituted section 10B as it stood from 1.4.99 is not to include the period for which unit was DTA before conversion into EOU. It is also submitted that the obligations to be fulfilled by an EOU and benefit to be enjoyed by an EOU should go together hand in hand. As per 10AA [2] provides for exemption to SEZ units for a stipulated time period, to be reckoned from the date the SEZ unit commences manufacture or production etc., whereas by contrast, it can be seen that there is no corresponding provision in Section 10B of the Act to provide that in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew taken by the assessing officer is not sustainable in law. In the case under consideration, two views are clearly possible and the assessing officer has taken one possible view. The same is not amenable to be revised under section 263 of the Act. For this proposition, he relied on the following judgments of the Apex Court in the case of CIT vs. Max India Limited, reported in 15 SCC 401 and in the case of CIT vs. Arvind Jewellers reported in 259 ITR 502. 7. It is submitted that the CIT not justified in holding that a new issue cannot be raised in the proceedings under section 263 of the Act, since the proceedings under section 263 of the Act are initiated for the purpose of the Revenue. He relied on the judgment of the Apex court in the case of CIT vs. Sun Engineering reported in 198 ITR 297. A deduction has been claimed by the assessee company before the assessing officer and the same was allowed by the assessing officer. The CIT negated the claim of the assessee company in the revised assessment. The assessee company can certainly put forth additional ground to sustain the same relief already granted to it by the assessing officer. On merit, for the new claim raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as well as erroneous to the interests of revenue. In the case under consideration, there are no two opinions possible. That action under section 263 of the Act is valid in law. There are no two possible ways of interpreting section 10B of the Act in the instant case. Even otherwise, the assessing officer failed to consider Circular No. 1 of 2005 and also misconstrued the import of law. He submitted that the CBDT Circular is binding on the assessing officer for this purpose he relied on the following judgements: (i) Tanna and Modi vs. CIT and Ors, 292 ITR 209: Wherein held that executive construction is ordinarily allowed to prevail and will be binding on the authorities under the Income-tax Act, 1961. A fortiori, clarificatory circulars issued by the Central Board of Direct Taxes may also be taken into consideration for the purpose of construction of the statute. (ii) R and B Falcon (A) Pty. Ltd. vs. CIT, 301 ITR 309 wherein held that the interpretation of the CBDT in its circular being in the realm of executive construction, should primarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgement rendered by the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expansion, the benefit is not admissible under section 10B of the Act. It is only when a new unit is formed or comes into existence, as an independent eligible unit, such benefit can be claimed. Whatever may be addition to plant and machinery or enhancement of production capacity, it does not matter for the purposes of section 10B of the Act. It cannot be claimed that, for every expansion a 100% EOU unit, a new unit has come into existence to claim the benefit under section 10B of the Act. The assessee company even filed only single Form 56G, single unit is recognised as 100% EOU unit and the books of accounts are so maintained, this claim of the assessee is not admissible in law. The fresh claims made by the assessee in the proceedings under section 263 of the Act cannot be entertained and the same are to be rejected as the proceedings under section 263 of the Act, are for the benefit of revenue only. Even otherwise, the cursory perusal of law shows that these are not admissible in law. On expansion, the assessee company is not eligible for benefit of exemption under section 10B of the Act, exclusively reckoning the same as a new unit. 12. We have carefully considered the riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of knowledge, a mistake is from insufficient or false observation. Blunder is a practical error of a peculiarly gross or awkward kind, committed through glaring ignorance, heedlessness, or awkwardness. An error may be overlooked or atoned for, a mistake may be rectified, but the shame or ridicule which is occasioned by a blunder, who can counteract. Strictly speaking, Hallucination is an illusion of the perception, a phantasm of the imagination. The one comes of disordered vision, the other of discarded imagination. It is extended in medical science to matters of sensation, whether there is no corresponding cause to produce it. In its ordinary use it denotes an unaccountable error in judgement or fact, especially in one remarkable otherwise for accurate information and right decision. It is exceptional error or mistake in those otherwise not likely to be deceived." 14. In order to ascertain whether an order sought to be revised under Section 263 is erroneous, it should be seen whether it suffers from any of the aforesaid forms of error. In our view, an order sought to be revised under Section 263 would be erroneous and fall in the aforesaid category of "errors" if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made and the genuineness of the claim ought to have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a varied role to play. He is the investigator, prosecutor as well as adjudicator. As an adjudicator he is an arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows: "Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances or arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case. 19. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases: (i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. In the same category fall orders passed without applying the principles of natural justice or without application of mind. (iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case. 20. In the present case, we find that the assessing officer had passed the order under section 143[3] of the Act, on 9-11-2009, whereas the circular issued by the CBDT, based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guity there is no question of liberal construction. Since the aforesaid circular is very clear and ambiguity, it is to be followed plainly. We also disagree with the arguments of learned counsel for the assessee that the aforesaid circular is not speaking one and does not contain any reason whatsoever and the same is not binding on the assessee. It is pertinent to note that all the circulars issued by the CBDT are binding on the assessing officer and also the judgments relied on by the Departmental Representative also supports our view. The aforesaid circular is very clear and the intention of the circular is that the reckoning of the ten year period starts from the date of commercial production either as a DTA Unit or as an EOU Unit. The tax benefit would be available for the remaining period of ten consecutive assessment years beginning from the period it started manufacturing in the domestic tariff area. The arguments of the learned counsel for the assessee that since the assessee has availed deduction under section 10B of the Act for only one assessment year 2000-01, the benefit is available for balance 9 years is not correct as we find that, on plain reading of the aforesaid c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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