TMI Blog2012 (12) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts which has been submitted before us that in Schedule XII, shown royalty and service charges at Rs.55.32 lakhs and the assessee has paid an amount of Rs.3,83,158 towards service tax. Therefore claim of the assessee needed to be examined again. Remand back to AO Validity of order u/s 263 passed by CIT - Issue already subject matter before CIT(A) - Deduction u/s 80HHC – Computation of export turnover - Whether Ocean freight included/excluded for arriving at Export turnover - AO held that the said freight is not deductible from the total turnover as the said turnover does not relate to the exports – Held that:- CIT has therefore no powers to exercise his jurisdiction with regard to the issue which is already subject matter of appeal before the CIT (A) in view of the provisions contained in section 263 (1)(c). Therefore we hold that the CIT ‘s direction to the AO to recompute the deduction allowable u/s 80HHC is legally unsustainable. In favour of assessee Addition of excise duty payable on finished goods - Assessee has to prepare P&L A/c as per section 145A of the Act by taking the value of excise duty component in finished goods of closing stock - finished goods have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e excess claim/allowance of depreciation works out to Rs.2,83,94,760/-. 2. The service charges received as per TDS certificates were Rs.59,16,285/- whereas the assessee had admitted Rs.55,32,097/- only. The difference of Rs.3,84,188/- has to be brought to tax. 3. The assessee had admitted an amount of Rs.29,07,68,449/- as export turnover after excluding amount towards ocean freight for calculating deduction u/s 80HHC. But while calculating the deduction u/s 80HHC in the order u/s 143(3) export turnover was taken as Rs.35,25,97,631/-. On account of this, the excess deduction allowed u/s 80HHC to be worked out and disallowed. 4. The assessee had not added he Excise Duty payable on finished goods of Rs.30,02,950/- to the closing stock in violation of section 145A which is supposed to be brought to tax. The CIT issued a notice u/s 263 on 1-12-2008 asking the assessee to show cause. Though the hearing was fixed on a number of dates, the assessee took adjournment on each date and finally when the hearing was fixed on 20-2-2009, as last opportunity, none appeared on behalf of the assessee. The CIT therefore proceeded to pass an ex parte order u/s 263 of IT Act. So far as the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee being aggrieved of the order passed u/s 263 of the IT Act by the CIT, has challenged the same by raising 5 grounds before us. 4. Ground No.1 with sub-grounds a,b and c relates to the disallowance of additional depreciation at Rs.2,83,94,760/-. The learned AR drawing our attention to pages 1 to 17 of the paper book submitted before us that the assessee in fact has filed report in Form 3AA. In the course of assessment proceedings on 27-11-2006 and before the order u/s 143(3) was passed. Therefore, its claim of additional depreciation to the extent of Rs. 2,83,94,760/- should be allowed. The assessee in this regard also made the following submission in writing:- 2.1. Depreciation was allowed in an amount of Rs.7,57,19,358/- as claimed by the assessee. This included addl. Depreciation u/s 32(1)(iia). Additions of Rs.37,85,96,788/- were made to plant and machinery. Addl. Depreciation of Rs.2,83,94,760/- at 50% of the normal percentage of 15% was allowable as per sec. 32(1)(iia). The assessee claimed this amount and the same was allowed by the AO. 2.2 As per third proviso to sec. 32(1)(iia), Form 3AA is to be filed by the assessee in order to eligible to obtain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. We find that the CIT has disallowed the claim of addl. Depreciation on the ground that the assessee having not fulfilled the mandatory requirements of section 32(1)(iia) by filing a report of the accountant in Form No.3AA before completion of the assessment proceedings. Whereas the learned AR of the assessee referring to a letter dated 27-11-2006 addressed to DCIT, Hyderabad at page-1 of the paper book has contended that the report in Form 3AA was filed before the AO on 27-11-2006 before completion of the assessment proceedings, therefore, the assessee is entitled to claim additional depreciation. U/s 263 of the Act, the CIT is to form an opinion on the basis of materials available on record as on the date the assessment order which sought to be revised was passed. Admittedly, in the present case, the assessment order was passed on 29-12- 2006 whereas it is the claim of the learned AR of the assessee that the report in Form 3AA was submitted before the AO on 27-11-2006 which is before the date of completion of assessment order u/s 143(3) of the Act. As can be seen from the letter dated 27-11-2006 accompanying Form 3AA report bears a seal of the Income-tax department show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the direction for addition is justified. 10. We have heard rival contentions and perused the material on record. It is seen from the final accounts of the assessee which has been submitted before us that in Schedule XII, the assessee had shown royalty and service charges at Rs.55.32 lakhs and the assessee has paid an amount of Rs.3,83,158 towards service tax. The details of tax deducted at source also indicate that the amount of Rs.12.12.839/- was deducted by adding the service tax amount of Rs.3,84,188 to the service charges of Rs.55,32,097 received from M/s. Regma Cyramics. After going through the assessee s contention and the documents produced before us, we feel that the claim of the assessee needed to be examined again. The CIT having passed the order ex parte, due to non appearance of the assessee before him, these facts could not be explained before him, we therefore think it proper to restore this issue to the file of the CIT who shall decide it afresh after affording an opportunity of being heard to the assessee. Hence this ground of the appeal is allowed for statistical purpose. 11. Ground No.3 relates to the direction of the CIT to recompute deduction u/s 80HHC aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import of raw materials. The AO held that the said freight is not deductible from the total turnover as the said turnover does not relate to the exports. 12.1. It appears that the character of the ocean freight has not been fully examined by the AO before deciding the issue. The AO is, therefore, directed to verify the claim of the appellant while computing the deduction u/s 80HHC. This ground is allowed subject to due verification by the AO. As can be seen from the aforesaid direction, the deduction of ocean freight was a subject matter of appeal before the CIT (A) which was decided much prior to the initiation of proceedings u/s 263. The CIT has therefore no powers to exercise his jurisdiction with regard to the issue which is already subject matter of appeal before the CIT (A) in view of the provisions contained in section 263 (1)(c) of the Act. In the aforesaid view of the matter, we hold that the CIT s direction to the AO to recompute the deduction allowable u/s 80HHC is legally unsustainable. The ground raised by the assessee on this issue is allowed. 13. In ground No.4 with its sub-grounds, the assessee has challenged the direction of the CIT to add excise duty payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there was no error in not including excise duty in the valuation of finished goods. It is therefore submitted that the C.I.T ought not to have directed the A.O to add excise duty payable on finished goods to the income assessed a.T1d pass orders accordingly. 5.3 Without prejudice to the above submissions, it is submitted that the assessee paid the excise duty on closing stock before filing its return and in the said circumstances, no prejudice would be caused to the revenue as held in the case of Hindustan Lever Ltd. v. V.K. Pandey, Joint Commissioner of Income-tax 251 ITR 209 Bom." 14. The learned DR, on the other hand, supported the orders of the CIT. 15. We have heard rival contentions of the parties and perused the material available on record. As can be seen from the order of the CIT he has directed to add excise duty payable on finished goods simply on the reasoning that the assessee has to prepare Profit Loss A/c as per section 145A of the Act by taking the value of excise duty component in finished goods of closing stock. The CIT has not taken into consideration the fact that the finished goods have not been removed from the manufacturing point which could ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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