TMI Blog2017 (11) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... he followings grounds of appeal:- 1. That the order passed by the Commissioner of Income-Tax (Appeals)-5, Jaipur is illegal and against the law. 2. That the CIT(A) should have accepted that the action taken by the Assessing Officer u/s 147 of Income Tax Act 1961 is illegal and against the law. 3. That the Commissioner of Income-tax (Appeals) should have appreciated that the provisions of the statute is binding on the Revenue Officer which was neither declared unconstitutional nor stayed by any of the competent court. 4. That the Order passed by the CIT(A) is against the judicial decorum and discipline because the Judgment 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction/exemption was allowed u/s 147 of IT Act. This was the issue before the Assessing Officer. The assessment of the year 2006-07 was completed u/s 143(3) of the Income Tax Act and reopened by exercising the powers of section 147 of the IT Act. Thus, after receiving the notice, the assessee obtained reasons for reopening of the assessment and submitted the objection before the Assessing Officer. Copy thereof is at page 9-10 of the Paper Book. The Assessing Authority not disposed off objection submitted by the assessee inspite of the judgment of the Hon ble Supreme Court, that if any objection is being submitted in response to notice, it should be dealt with and 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, hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Hon ble Supreme Court and the assessee relied upon the judgment of Hon ble Supreme Court in case of Simplex Concrete Pipes (I) Limited. The judgment of Hon ble Supreme Court on the issue of the law that whether on the basic of the judgment of Supreme Court, the assessmednt can be re-opened or not. The assessee also relied upon the judgment of Rajasthan High Court delivered in the case of M/s Vardhman Industries wherein the Hon ble Rajasthan High Court also held that there cannot be re-opening of assessment on the ground of change of opinion. The CIT(A) fails to appreciate and sustained the order. It is also submitted that the reasons for reopening of the assessment may 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 proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the ITAT Pune Bench in which the Hon ble bench is also of the same view. I am reproducing hereunder the relevant portion of the order of Tribunal (para 14) as under for your ready reference: Assessee and without any changed circumstances, the said claim was sought to be denied in a subsequent year, and such an attempt was negated by the Hon ble High Court. In the instant case, as we have noted earlier the circumstances have changed after the initial assessment year and therefore, the claim is sought to be denied on valid grounds and without disturbing the claim in the initial year because the circumstances in the initial year have not under gone any change. I want to also draw your kind attention 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 indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITAT, Delhi Bench H New Delhi wherein in the same set of circumstances the Hon ble Tribunal dismissed the appeal of the department. The relevant portion is being reproduced hereunder: In the Income Tax Appellate Tribunal Delhi Benches: H New Delhi Before Shri I.C. Sudhir, J.M. And Shri J. Sudhakar Reddy, A.M. ITA Nos. 766,2593/Del/2013 Assessment years: 2009-10, 2010-11 ITO, Ward-2, Room No. 210, 1st Floor, Income Tax Building, IDPL Veerbhadra, Rishikesh Uttrakhand VS. Smt. Urmila Bhandari Prop. M/s Hotel Narayana Palace, Tapovan Badrinath Marg, Tehri Garhwal, Rishikesh, Uttrakhand 15. The proposition laid down in this judgment applies to the facts of this case. The AO has examined the condition of allowability 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IB of the Act is required to be examined in the initial year. It is contended that year 2005-06 being the initial year, and the deduction was allowed in that year by AO. Therefore, it cannot be disturbed in subsequent year. We find that the similar submissions were made before the Hon ble High Court in DB Income Tax Appeal No. 7/2014 (Supra) same was recorded by the Hon ble High Court as under:- 9. Per contra, Mr. Suresh Ojha, learned counsel for the assessee respondent contended that incentives are part of the business income and deduction under Section 80-IB of the Act of 1961 is required to be allowed on the business income and once the export incentives are also part of business income/receipts then deduction under Section 80-IB is required to be allowed 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 cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her it is trite that when any amended provision is not considered or for that matter, any relevant provision of the Act is not considered while giving a judgment, it is treated as in per curium. 2.8 The Hon'ble High Court has taken its view while deciding the case of Chokshi Contracts (P) Ltd. in 251 ITR 587 (Raj.) that in case amended provisions of the Act: are not considered the judgment looses the character of a binding nature. The Court has also held as under:- Coming to the judgment relied on by the Id. Counsel for the Revenue in Shree Engineer's case (supra), we are of the opinion that the answer question no.3 which was referred by the Tribunal has been rendered solely with the reference to the earlier decision of the Court in 'Vishnu Oil and Dal Mills' 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 unabso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent. We have found that the allowance of deduction is not a daring, obvious, patent and apparent from record. Hence, it cannot be rectified, in view of our above discussion. Accordingly, we accept the appeal of the assessee and set aside the finding of the Ld. CIT (A) by reversing the same and allow this appeal. .... Sd/ Sd/- (Hari Om Maratha) Judicial Member (N.K. Saini) Accountant Member Jaipur Dated 17/12/2013 [Underlining by us] 14. On perusal of Para 2.7 and 2.9 of the Tribunal's order it is clear that the Tribunal finds judgment of Liberty India is per incurium and further found that the issue on facts is debatable and holds that where the issue 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Having said so, we will deal with question of deduction under Section 80-IB as to whether the same is allowable or not as held in M/s. Garment Craft (supra):- Sec. 80-IB of the Income Tax Act provides for deduction at a specified percentage in respect of profits and gains derived from the eligible industrial undertakings and other infrastructure development undertaking on fulfillment of .specified Conditions for a period of 10 or 12 consecutive assessment years from initial assessment year, as the case may be. On perusal of Sec. 80-IB, in our view, it postulates that the deduction u/Sec. 80-IB is available to the eligible industrial undertaking where the gross total income of the eligible assessee includes any profits and gains derived from any eligible business referred to in the section (emphasis supplied). What 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 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... degree sources ? According to the assessee(s), DEPB credit/duty drawback receipt reduces the value of purchases (cost neutralization), hence, it comes within first degree source as it increases the net profit proportionately. On the other hand, according to the Department, DEPB credit/duty drawback receipts do not come within first degree source as the said incentives flow from the incentive schemes enacted by the Government of India or from section 75 of the Customs Act, 1962. Hence, according to the Department, in the present cases, the first degree source is the incentive scheme/provisions of the Customs Act. In this connection, the Department places heavy reliance on the judgment of this court in Sterling Foods [1999] 237 ITR 579. Therefore, in the present cases, in which we are required to examine the eligible business of an industrial undertaking, 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 satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er:- However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. From the above observation, it can be inferred that AO was required to dispose of objections by way of speaking order before proceeding 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), cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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