Income Tax Appellate Tribunal - Indore
H.E.G. Limited,, Raisen vs Assessee on 1 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M.
PAN NO. : AAACH6184K
I.T.A.No. 257/Ind/2010
A.Y. : 2000-01
H.E.G.Limited, CIT,
Mandideep, Bhopal.
Distt. Raisen (MP) vs
Appellant Respondent
Appellant by : Shri Sumit Nema, Adv.
Respondent by : Shri Darshan Singh, CIT DR
Date of Hearing : 01.08.2012
Date of : 31.08.2012
pronouncement
ORDER
PER R. C. SHARMA, A.M.
This is an appeal filed by the assessee against the order passed by the Commissioner of Income tax u/s 263 dated 30th March, 2010, for the assessment year 2000-01, in the matter of order passed by Assessing Officer u/s 147/143(3) of the Income-tax Act, 1961.
2. Following grounds have been taken by the assessee :-
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1. That the Ld. CIT erred in setting aside the assessment of the appellant even when a speaking order was passed by the A.O. after full application of mind and after thoroughly scrutinizing the claims made by the appellant, the return of total income and the information filed by the appellant during the course of assessment proceedings. Therefore, invoking of the provisions of section 263 by the Ld. CIT is illegal and bad in law. The order u/s 263 requires to be cancelled.
2. Considering that the first notice issued u/s 263 by the Ld. CIT was dated 4-3-2008 on the issue of allowability of sales tax deferment and thereafter another notice u/s 263 dated 17-3-2008 on the issue of deduction u/s 80HHC allowed without considering the provisions of section 80IA(9) of the Income tax Act, the order passed by the Ld. CIT is nothing but an order to do reassessment of the appellant's case. Moreover, the Ld. CIT accepted the appellant's submissions with respect of 2
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claim of sales tax deferment. Therefore, the Order of the Ld. CIT supersedes the provisions of section 153 of the Income tax Act. The order of the Ld. CIT is, therefore, illegal and bad in law for this reason also.
3. Also considering that the first order passed by the AO was u/s 250/143(3) dated 25-32004 wherein claim of deduction u/s 80HHC was allowed alongside deduction u/s 80IA, then how come the provisions of section 263 are invoked in respect of the last order u/s 147/143(3) dated 17-12-2007. The law does not permit to invoke revisionary powers in respect of last order when the position follows from earlier orders in the case of the appellant. The order of the Ld. CIT is, therefore, illegal and bad in law for this reason also.
Without prejudice to the above:-
4. That the Ld. CIT erred in holding that the order of the A.O. is erroneous since deduction U/S 80HHC has been wrongly allowed to the appellant without invoking the provisions of section 80IA (9) of the Income tax Act. It is submitted that as per law, the said claim is allowable and 3
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has been rightly allowed by the A.O.
5. The order of the Ld. CIT U/S 263 therefore requires to be cancelled.
3. Rival contentions have been heard and records perused. In the order passed u/s 263, the ld. CIT observed as under :-
"From an examination of the income tax assessment records of the assessee firm for the assessment year 2000-01, it transpired that in the assessment made vide order dated 17.12.2007 u/s 147 the Assessing Officer has allowed deduction u/s 80IA and Section 80HHC as under :-
Deduction u/s 80IA Power Division, Tawa 5,31,66,651 Power Division, Durg 0 Power Division, Rishabdev 1,88,34,226 Total Deduction u/s 80IA 7,20,00,877 Dec u/s 80HHC 2,58,09,787 4
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Further it is observed that while calculating/allowing u/s 80HHC, the provisions of sub-Section (9) of Section 80IA were not considered. As per provisions of Section 80IA(9), where deduction is allowed u/s 80IA in respect of eligible profits for any assessment year, deduction to the extent of such profits shall not be allowed under any other provision of Chapter VI A of the Income-tax Act, 1961. Accordingly, deduction allowed u/s 80IA, to the extent of Rs. 7,20,00,877/- was required to be reduced while computing the profits for allowance of deduction u/s 80HHC."
4. After discussing the case laws cited by the ld. Authorized Representative, the ld. CIT reached to the following conclusion :-
"Therefore, in view of the facts stated in the above paragraphs, I find that in view of the amendment of Section 80IA w.e.f. 1.4.99 with the insertion of sub Section (9A), the profit of the business while allowing deduction u/s 80HHC shall be further reduced by profits on which deduction u/s 80IA has 5
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been allowed. The language of Section 80IA(9)is very clear that where the deduction is allowed u/s 80IA in respect of the profits for any assessment year, deduction to the extent of such profit shall not be allowed under any other provision of chapter VI A which include deduction u/s 80HHC of the Income- tax Act, 1961.
After careful examination of the facts placed on record and written submission filed by the assessee, I am of the opinion that the assessment order dated 17.12.2007 u/s 147 for assessment year 2000-01 by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of revenue and is, therefore, set aside for being made afresh from the return stage. The Assessing Officer is directed to make fresh assessment as per law after carrying out proper enquiries and investigation and after giving reasonable opportunity of being heard to the assessee. "
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5. Aggrieved by the above order, the assessee is in appeal before us. Shri Sumit Nema, Advocate, appeared on behalf of the assessee and contended that claim of deduction u/s 80HHC was examined by the Assessing Officer and partly allowed in the first assessment order dated 31.3.2003, passed u/s 143(3). As per ld. Authorized Representative, the period of limitation has to be counted from this order and not from the reassessment order passed u/s 147 dated 1`7.12.2007, because the re-assessment order was for disallowing part of Section 80HHC on profits on transfer of duty free entitlement pass book as per amendment to Section 28(iiid). Thus, the reassessment order was only for a limited purpose and this reassessment order did not deal with the original deduction partly allowed u/s 80HHC. As per ld. Authorized Representative , the limitation has to be counted form the date of order u/s 143(3) dated 31.3.2003 and not from order u/s 147 dated 17.12.2007 and for this purpose, reliance was placed on the decision reported at 293 ITR 1, 19 Taxman 142.
6. With regard to the merit of disallowance of deduction u/s 80HHC, the contention of ld. Authorized Representative 7
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was that two views existed as on the date. There were judgments in favour of the assessee and also judgments in favour of Revenue, therefore, the ld. CIT was not justified in invoking the powers u/s 263 in respect of matters which are debatable and one of the legal tenable views has been taken by the Assessing Officer. As per ld. Authorized Representative , Jurisdictional High Court in the case of J.P. Tobacco, 229 ITR 123, on the issue of Section 80HHC decided in favour of the assessee and this view was affirmed by the Hon'ble Supreme Court and reported at 292 ITR 1. As per ld. Authorized Representative , this view of Jurisdictional High Court has been followed by Hon'ble Madras High Court in the case reported at 304 ITR 319. As per ld. Authorized Representative, the M.P. decision has been considered to be as good law even after amendment, thus, the view favourable to the assessee, especially in view of the Jurisdictional High Court, decision has to be followed .
7. Shri Sumit Nema, Advocate, further contended that the order passed u/s 263 is illegal and bad in law on the plea that where two views are possible, there cannot be exercise of 8
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powers u/s 263 as held in 295 ITR 282, in the case of MAX India. He further submitted that this case was related to 80 HHC deduction, wherein Hon'ble Supreme Court noted that the said Section was amended 11 times and different views exist. Thus, where there are different views possible, there can not be said to be an error, which is amenable to Section 263. In view of the above arguments, the ld. Authorized Representative prayed that order passed by CIT u/s 263 deserves to be quashed.
8. On the other hand, Shri Darshan Singh, CIT DR, appeared on behalf of Revenue and contended that while passing order, the Assessing Officer has not applied his mind to the amended provisions of law effective from assessment year 1999-2000, accordingly, failed to reduce the amount of deduction u/s 80IA from the eligible profit and has wrongly allowed deduction u/s 80HHC on the entire amount of profit. As per ld. CIT DR, the order passed by the Assessing Officer without applying correct provisions of law has rendered his order erroneous and prejudicial to the interests of the revenue 9
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in so far as deduction allowed u/s 80IA amounting to Rs. 7.20 crores remained to be reduced from the eligible profits.
9. We have considered the rival submissions and have gone through the orders of the authorities below and also the decision cited at Bar by the ld. Authorized Representative and ld. CIT DR. We had also considered the judicial pronouncements relied on by the CIT in his order passed u/s
263. From the record, we found that in its return of income for the assessment year 2000-01, the assessee has claimed deduction u/s 80IA and 80HHC. While computing deduction u/s 80HHC, the assessee was required to reduce the amount of deduction claimed u/s 80IA in respect of eligible profits, in terms of provisions of sub Section (9) of Section 80IA as introduced by the Finance Act, 1998, w.e.f. assessment year 1999-2000. However, the assessee has not reduced the claim of deduction u/s 80HHC in terms of provisions of Section 80IA(9) introduced by Finance Act, 1998, w.e.f. A.Y. 1999- 2000. Thus, higher amount of claim was made u/s 890HHC in the assessment year 2000-01. While passing order u/s 143(3) dated 31.3.2003, the Assessing Officer, has not disturbed the 10
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wrong computation offered by the assessee with respect to eligible claim of deduction u/s 80HHC in terms of Section 80IA(9). Thereafter, this assessment was reopened u/s 147 on the plea that deduction u/s 80IA in respect of three Power Divisions has been allowed without set off of losses of past assessment years contrary to the provisions of Section 80IA(5) of the Income-tax Act. Likewise, deduction u/s 80HHC was found to be claimed excessively. Thus, income of the assessee company has escaped assessment.
10. In the order passed u/s 147 read with Section 143(3) dated 17.12.2008 the assessable income of the assessee was computed at Rs. 8.96 crores as against nil income returned by the assessee. In the reassessment order so framed u/s 143(3) read with Section 147, the Assessing Officer has again not considered the amended provisions of law with respect to insertion of sub Section (9) of Section 80IA and allowed claim of deduction u/s 80HHC on the eligible profits without first deducting the amount of deduction allowed u/s 80IA. Thus, the assessment order passed u/s 143(3) read with Section 147 dated 17.12.2007, has become erroneous and prejudicial to 11
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the interests of the revenue. If the order passed by Assessing Officer is not as per provisions of law applicable for the relevant assessment year under consideration i.e. 2000-01, Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd., 243 ITR 83, held that passing the order by Assessing Officer without applying the relevant provisions of law applicable in that year renders the assessment order erroneous as well as prejudicial to the interests of revenue.
11. With regard to AR's contention on limitation period , we found from record that original assessment of assessee was framed under Section 143(3), wherein claim of deduction under Section 80HHC and 80IA was partly allowed. Thereafter, it was found that the assessee has wrongly claimed deduction u/s 80HHC as well as u/s 80IA in respect of Three Power Divisions. When the reassessment order was framed on 17.12.2007, the amendment brought in by Taxation Laws Amendment Act, 1998, w.e.f. assessment year 1999-2000, by insertion of sub Section (9) under Section 80IA was not considered and the Assessing Officer has allowed deduction u/s 80HHC without reducing the deduction allowed u/s 80IA 12
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from the eligible profit. Under these circumstances, the order passed u/s 143(3) has merged with the order passed u/s 147, wherein both claim of deduction u/s 80HHC and 80IA was revised/recomputed. As per provisions of sub Section (2) of Section 263, no order shall be made under sub section (1) of Section 263 after expiry of two years from the end of the financial year in which the order sought to be revised was passed. Since in the instant case, order of reassessment passed on 17.12.2007 was sought to be revised, the same was well within the limitation period provided u/s 263(2).
12. In the instant case, in respect of an issue which was subject matter of reassessment, limitation u/s 263(2) would run from the date of reassessment order and the doctrine of merger will be applicable. It is not the case of the assessee that in reassessment order, the assessee's claim for deduction u/s 80HHC & 80IA was not examined nor disturbed. The ld. CIT in exercise of his power u/s 263 sought to revise the claim of deduction u/s 80HHC, which was wrongly allowed even in the reassessment order passed on 17.12.2007. Since the claim of deduction u/s 80HHC and 80IA were already subject matter of 13
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reassessment, the same were merged in the reassessment and limitation of two years, under sub Section (2) of Section 263 has to be reckoned from the date of the order of reassessment dated 17.12.2008.
13. In view of the above, the order passed by the CIT u/s 263 dated 30th March, 2010, was well within the limitation period prescribed u/s 263(2). So far as the contention of the ld. Authorized Representative to the effect that issue was debatable and two views were possible, therefore, the action of CIT u/s 263 was not warranted on such debatable issue, has no merit. Whether the issue decided by Assessing Officer is debatable is to be considered as on the date the Assessing Officer has passed the order, wherein the error has occurred and which has rendered the order of Assessing Officer erroneous as well as prejudicial to the interests of the Revenue. In this case, the order was passed by the Assessing Officer on 17.12.2007, as on the date of passing the order the amended provisions of law was already there in force.
Furthermore, the controversy in the matter was judiciously decided by the I.T.A.T. Special Bench in the case of Rogini 14
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Garments, vide order dated 27th April, 2007, and which was reported at 108 ITD 49. As there was contrary view on the issue, a Special Bench was formed to decide whether relief u/s 80IA should be deducted from profits and gains of assessee's business while computing relief u/s 80HHC. It was held by the Special Bench vide its order that in view of the specific restrictions provided by insertion of sub Section (9) of Section 80IA w.e.f. assessment year 1999-2000, relief u/s 80IA should be deducted from profits and gains of business and on the balance of profit relief u/s 80HHC is to be allowed. This decision of the I.T.A.T. Special Bench dated 27th April, 2007, was already available before the Assessing Officer when he passed his order on 17th December, 2007. As on that date, there was no any contrary view of any High Court and since the I.T.A.T. Special Bench was formed to resolve the issue and order of Special Bench resolving the controversy was already available to Assessing Officer much prior to date of passing the order dated 17.12.2007, it cannot be said that on the date the Assessing Officer has passed the order, issue was debatable. Now coming to the decision of Jurisdictional High Court 15
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reported at 229 ITR 123, relied on by the ld. Authorized Representative in support of the proposition that the issue of claim of deduction u/s 80HHC was decided in favour of the assessee, as per our considered view, this decision is not applicable to the assessee in assessment year 2000-01, in so far as it was related to the assessment year 1984-85, i.e. much prior to the amendment of Section 80IA by Finance Act, 1998, effective from assessment year 1999-2000, by insertion of sub Section (9).
14. There is no dispute to the well settled legal proposition that in case the issue is debatable and the Assessing Officer has taken one of the legally tenable views, the ld. CIT cannot exercise his powers u/s 263, so as to blame the Assessing Officer that he has not taken the other course of action available to him. Here we have to see as to whether on the date the Assessing Officer has passed the order, the issue was debatable or not. On the basis of judicial pronouncement available as on the date of order passed by the Assessing Officer, we have to see whether the issue is debatable or not.
In the instant case before us, the issue with regard to 16
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application of sub Section (9) of Section 80IA w.e.f. assessment year 1988-89, was not in dispute in view of the decision of the I.T.A.T. Special Bench in the case of Rogini Garments (supra). As on this date, there was no other decision of any of the High Court, which supports the view taken by the Assessing Officer, therefore, it cannot be said that the Assessing Officer has taken one of the possible views when the issue was debatable. In the case of MAX India Limited, 295 ITR 282, the deduction claimed u/s 80HHC, in the assessment year 1992-93, on the negative profit of the assessee, was allowed by the Assessing Officer, when two views were existed on the word "Profits" in proviso to Section 80HHC(3). When the ld. CIT has passed the order u/s 263, on the plea of amendment in 2005 in Section 80HHC which was retrospective in nature, it was held by the Hon'ble Supreme Court that since two views existed on the word "Profits" , the order passed by the Assessing Officer taken one of the legal possible views, cannot be branded as erroneous and prejudicial to the interests of the revenue. Hon'ble Supreme Court has also observed that subsequent amendment in 2005, even though retrospective would not 17
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attract provisions of Section 263. The other case laws of Bombay High Court reported at 332/42, Karnataka High Court reported on 341 ITR 219 favouring the view taken by Assessing Officer are of subsequent dates, therefore, it cannot be said that as on the date the Assessing Officer has passed the order, the issue was debatable. In this case, there was no retrospective amendment of Section providing computation of deduction u/s 80HHC read with Section 80IA(9). It is not the case of assessee that because of retrospective amendment the CIT held the order of Assessing Officer as erroneous. Amended provision of law was already there when the assessee had filed its return of income and when the Assessing Officer passed his order.
15. In the result, the appeal of the assessee is dismissed.
This order has been pronounced in the open court on 31st August, 2012.
sd/- sd/-
(JOGINDER SINGH) (R. C. SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated :31st August, 2012.
CPU*
2330.8
18