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TMI Blog2017 (11) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of Supreme Court referred in 259 ITR page 19 was not followed by the AO as well as by the CIT(A). 5. That the CIT(A) should have appreciated that in the initial year the deduction was allowed cannot be rejected in the subsequent year. 6. That the CIT(A) should have appreciated that the notice was not in the prescribed form, the notice was no notice in the eye of law. 7. That the charging of interest is illegal and against the law. 8. That the cost may kindly be awarded to the appellant." 2. By way of Ground no. 1 to 6, the assessee has challenged the correctness and legality of the reopening of assessment. 3. Facts giving rise to these grounds are that, in this case the assessment u/s 143(3) of the Act was completed on 04-02-2008. Thereafter, an order u/s 154 for the Income Tax Act, 1961(hereinafter referred to as the Act) was passed on 08-02-2010 whereby the deduction claimed by the assessee was withdrawn in view of the Judgment of Hon'ble Supreme Court in the case of M/s Liberty India vs. CIT 317 ITR 218. 3.1 The order passed u/s 154 of the Act was challenged and reached to the stage of this Tribunal. The issue was decided against the Revenue. Subsequently, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decided first, but nothing was done by AO and now matter is before your good-self. In absence of disposing off the objection submitted before the AO, the entire assessment completed by the Assessing Officer became null and void in view of the judgment of Hon'ble Supreme Court delivered in case of G.K.N. Shaft, reported in 259 ITR page 19. This was also argued before the CIT(A) but despite specific submissions, the CIT(A) not thought it fit so as to deal with this submission and summarily rejected. It is, therefore, humbly prayed that order passed by the Assessing Authority as well as the commissioner of Income Tax (Appeal) may kindly be declared illegal and against the law. I also want to submit that there is prescribed proforma for giving notice in each Section and that had been prepared by the Central Board of Direct Taxes. CBDT also prescribed one proforma in case of reassessment u/s 147 of the Income Tax Act i.e. ITNS 34. A copy of the same is being submitted in the Paper Book along with prescribed proforma at page 11 & 12, the notice issued was not in prescribed proforma. In this respect, I want to draw your kind attention towards the fact that one specific ground was take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kindly be declared as illegal and against the law. As regards ground no. 3, I want to draw your kind attention towards the fact that there is provision in the constitution u/s 28(i) (iiie). The provision of the Section is still on the statues and the Hon'ble Rajasthan Court adjudicated that this provision is not withdrawn. Therefore, it is still applicable. In this respect, I want to draw your kind attention towards the fact that the Hon'ble Rajasthan High Court has categorically considered amended procedure while delivering the judgment in the case of M/s Saraf Season Udyog reported in 40 TAX WORD 196. In view of the above facts and circumstances, you will observe that this judgment of Rajasthan High Court and cannot be overlooked although the same was overlooked by CIT(A) while passing the order. It is therefore, submitted that this ground may kindly also be considered and allowed. As regards Ground no. 4 is concerned, it is stated that the judgment of Hon'ble High Court and Supreme Court is having the character of binding nature and the same should have been followed. The Assessing Officer as well as CIT(A) failed to follow the same. Therefore, may kindly be accepted and or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention towards the judgment delivered by Karnataka High Court in case of ACE multi Axes System Ltd. the relevant portion thereof is being reproduced hereunder: "Industrial growth which is required to be achieved, if two interpretations are possible, the courts have to learn in favour of extending the benefit of deduction to an assessee who has availed the opportunity given to him under law and has grown in his business. Therefore we are of the view, if a small scale industry, in the course of 10 years, stabilizes early, makes further investments in the business and it results in it's going outside the purview of the definition of a small scale industry, that should not come in the way of its claiming benefit under sec. 80IB for 10 consecutive years, from the initial assessment year. Therefore the approach of the authorities runs counter to the scheme and the intent of the Legislature. Thereby - they have denied the legitimate benefit, an incentive granted to the assessee. Both the said orders cannot be sustained. Therefore the substantial question of law is answered in favour of the assessee and against the Revenue. Hence we pass the following." The ratio of the judgment is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of the claim u/s 80IC in the initial assessment year of the claims i.e. A.Y. 2005-06 itself in an order passed u/s 143(3) of the Act. This was followed in the subsequent A.Y. These assessments are not disturbed till date. There is no change in the facts and circumstances of the case. Only fresh view, contrary to the earlier view is taken during this impugned Assessment year on the same set of facts and exemption is denied. This cannot be permitted as held by the Jurisdictional High Court in the case of Delhi Patra Prakasham Ltd. (supra). Respectfully following the same, we uphold the order of the Ld. CIT (A) for different reasons." From the perusal of above judgment you will observe that the disallowances of claim of the assessee are against the law. You are requested to kindly accept the appeal of the assessee. As regards ground No. 6, it is stated the same is in respect of the prescribed proforma . I have already submitted my submission in earlier para while submitting illegality in respect of the Section 147 of IT Act." 5.1 Per contra Ld. D/R vehemently opposed the submissions and supported the order of the authorities below. He submitted that allowability of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the total profit of the assessee. He also contended that in the case of assessee itself for the assessment year 2005-06 and 2006-07, the ITAT had allowed the claim under Section 80-IB of the Act of 1961 and such assessments have become final as the same has not been challenged by the revenue before this Court, and when the claim has been allowed in the past on same set of facts and material, deductions having been claimed on the same facts, the order of the Tribunal is required to be followed in the light of judgment rendered in the case of Radhasoami Satsang Vs. CIT 1992 AIR 377 (SC) and other judgments. He also contended that when two reasonable constructions are possible then the one which is more favourable to the assessee has to be adopted and relied on the judgment in the case of CIT Vs. Vegetable. Products Ltd., (1973) 88 ITR 192 (SC). 10. He further contended that the initial order of claim u/Sec. 80-IB was for assessment year 2005-06 and determination is required to be seen in initial year and if claim in initial year is found in order, it deserves to be subsequently in subsequent Year. In this regard, he has also relied upon Saurashtra Cement Chemical Industries Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; case (1996) 218 ITR 71 (Raj.) only without noticing the relevant provisions of Section 80A and 80AB and Section 80B(5) and also Section 80HH(9). It may be noticed that the decision in Vishnu Oil and Dal Mills case (1996), 218 ITR 71 (Raj.) dealt with the question whether in computing the gross total income for the purpose of Chapter VI-A requires adjustments of unabsorbed carry forward loss or unabsorbed carry forward depreciation in terms of Part D of Chapter IV or in terms of Chapter VI of the Act, which as seen above has to be computed without taking into account the provisions of Chapter VI-A, but after taking into account the provisions of the Act-whether under Chapter IV or Chapter VI. However, the Court was not dealing with the interaction of the various sections contained in Chapter VI-A on the issue of deduction of any amount which is to be allowed under Chapter VI-A. Thus the decision rendered in Shree Engineers' case without reference to the relevant provisions of the Act merely by reference to Vishnu Oil Mills case (1996), 218 FIR 71 (Raj.) was per incuriam and cannot be taken as a binding precedent and does not assist the Revenue in any manner." 2.9 Similar v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is debatable it cannot be corrected under Section 154 of the Act of 1961. It is to be noticed that the year under appeal is not an order u/Sec. 154 and the Assessing Officer has passed an order under Section 143 (3) from the stage of passing of the assessment o der and has not passed a rectificatory order under Section 154 of the Act of 1961 which has been considered in the case of Bothra International (supra). 15. We have reproduced Para 2.9 of the order of the Tribunal. and we find that the instant case- is 'not a case of a rectificatory order or mistake apparent from record rather it is a case of regular scrutiny assessment and not an order under Section 154 of the Act of 1961. Therefore, the very foundation and premise on which the ITAT has proceeded is wholly perverse. 16. Counsel for the assessee contended that since in the initial year, the claim has been allowed by the Tribunal and attained finality, therefore the view in the subsequent years was required to be followed and though the principles of law of precedence may not apply but expected to maintain consistency. Be that as it may, in the appeal memo it is observed by the appellant that the tax effect was lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be seen is "derived from" and not "attributable to". The expression "derived from" is restrictive as against "attributable to", which is wider. There should be immediate nexus and not distant nexus. In our view DEPB/duty draw back benefits do not form part of net profit of undertaking as they are riot derived from the eligible business but are incentives under a particular scheme. The Hon'ble Apex Court in the case of CIT Vs. Sterling Foods (supra), where the controversy was relating to deduction u/Sec. 80-HH of the Act, had an occasion to consider about the profits from sale of import entitlements, its nature and observed ad-infra:- "We do not think that, the source of the import entitlements can be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be the Export Promotion Scheme of the Central Government where under the export entitlements become available. There must be, for the application of the words "derived from", a direct nexus between the profits and gains and only industrial undertaking. In the instant case, the nexus is not direct and only incidental. The industrial under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking, we need to trace the source of the profits to manufacture. (see CIT v Kirloskar Oil Engines Ltd. reported in [1986] 157 ITR 762." The Hon'ble Court analysed Duty Exemption Remission Scheme and held DEPB as an incentive. It held in para 18 as under: "Analysing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory/policy provisions in the Customs Act/Scheme(s) framed by the Government of India. In the circumstances, we hold that profits derived by way of such incentives do not fall within the expression "profits derived from industrial undertaking" in section 80-IB." It held in para 24 as under: "In the circumstances, we hold that duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of section 80-I/80-IA/80-IB of the 1961 Act" Thus, in our view, the judgment is directly and squarely on the issue and the issue is no more res integra. It may also be relevant to observe that the judgments rendered by this Court in the case. of Saraf Seasoning Udyog (supra) and CIT Vs. Chokshi Contacts (P) Ltd. (supra) are judgments prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the assessment. Now question arises whether the assessment can be annulled on the ground that the Assessing Officer has not disposed of the objection in the manner he was expected to do. The Hon'ble Bombay High court in the case of Allan Cold Storage Ltd. vs. Income Tax Officer and Others [2006] 287 ITR 1 (Bom), considering the decision of Hon'ble Supreme Court in the case of G.K.N. Driveshaft's (India) Ltd. vs. ITO (Supra) under the identical facts has held as under:- "8. Having noted this scenario, in our view the proper course will be to interfere with the assessment order passed in all four matters by the concerned officer. We are aware that when an alternative remedy is resorted to, the writ jurisdiction is not to be exercised, but that is a rule of self-limitation. The orders challenged in the present matter are clearly against the law laid down by the apex court and, therefore, the exercise of writ jurisdiction is called for. That being so, we allow all these petitions and quash and set aside the orders of assessment passed in all these four petitions. Inasmuch as the assessment orders are set aside, the appeals filed by the petitioners no longer required to be prose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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