Bombay High Court
The Commissioner Of Income Tax, ... vs Maharashtra Hybrid Seeds Co Ltd on 4 September, 2018
Author: B. P. Colabawalla
Bench: S.C. Dharmadhikari, B. P. Colabawalla
itxa.47.02.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 47 OF 2002
The Commissioner of Income Tax
Mumbai City-1 Mumbai ...Appellant.
Vs.
M/s Maharashtra Hybrid Seeds Co. Ltd.
19, Raj Mahal, 84 Veer Nariman Road
Mumbai 400 020 ...Respondent.
.....
Mr Suresh Kumar, for the Appellant.
Mr Hiro Rai with Mr Subhash Shetty, for the Respondent.
.....
Digitally
signed by CORAM : S. C. DHARMADHIKARI &
Anjali
Anjali
Tushar B.P.COLABAWALLA, JJ.
Tushar Aswale Date:
Aswale 2018.09.04 15:27:22 RESERVED ON : 24th August, 2018 +0530 PRONOUNCED ON : 4th September, 2018 JUDGMENT [ Per B. P. Colabawalla J. ]:
1. By this Appeal filed under Section 260-A of the Income Tax Act, 1961 (for short "I. T. Act"), the Appellant -
Revenue is aggrieved by the judgment and order dated 19th Aswale 1/8 itxa.47.02.doc June, 2001 passed by the Income Tax Appellate Tribunal Bench, Bombay (for short the "ITAT"). The present Appeal is only with reference to Assessment Year 1995-1996.
2. This Appeal was admitted by this Court on 9th August, 2004 wherein the following substantial question of law was framed for consideration of this Court which reads thus:-
"Whether on facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in upsetting the order passed by the Commissioner of Income-tax passed under Section 263 of the Income- tax Act, 1961 holding that the assessee was not entitled to the entire figure of deduction under section 80-IA and thereby set aside the assessment order and direct the assessing officer to reframe the assessment after examining full facts of the case and after giving sufficient opportunity of being heard to the assessee?"
3. The Appeal filed before the ITAT related to Assessment Year 1995-1996 and was directed against the order passed by the Commissioner of Income Tax (for short "CIT") under Section 263 of the I. T. Act. In this Assessment year, there was an assessment made under Section 143 (3) on 27th March, 1998 and the Assessee's claim for deduction of Aswale 2/8 itxa.47.02.doc Rs. 2,48,60,985/- under Section 80-IA in respect of its Kallakal (A.P.) and Kamdod (Karnataka) units was allowed. Later, the CIT issued a notice to the Assessee under Section 263 of the I. T. Act on the ground that such allowance was erroneous and prejudicial to the interests of the Revenue and after overruling the objections raised by the Assessee to revise the assessment, passed an order dated 24th March, 2000 holding that the claim under Section 80-IA had been wrongly allowed by the Assessing Officer, and therefore, set aside the assessment with a direction to the Assessing Officer to re-frame the assessment after examining full facts of the case and after giving a reasonable opportunity of being heard to the Assessee. Being aggrieved by this order of the CIT dated 24th March, 2000, the Assessee filed an Appeal before the ITAT. The challenge to the order of the CIT was on the ground of jurisdiction itself as well as on the merits of the matter. After hearing the parties, the ITAT set aside the order of the CIT dated 24th March, 2000 and allowed the Appeal. This is how the matter has come up before us. Aswale 3/8
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4. After having heard Mr. Suresh Kumar appearing on behalf of the Appellant as well as Mr. Hiro Rai appearing for the Respondent, we are satisfied that the reasoning given by the ITAT in the impugned order is a correct one. What is important to note over here is that while issuing notice under Section 263, the CIT had referred to only one ground which is that the deduction under Section 80-IA has been wrongly allowed by the Assessing Officer for Rs. 2,48,60,985/- "as against 30% of the gross total income to be computed as per Section 80-IA read with Section 80-AB". However, when the final order was passed under Section 263, the same has been passed on other grounds also which do not form a part of the notice that was issued by the CIT under Section 263. The two other grounds that find place in the final order passed by the CIT is that, firstly the Kallakal and Kamdod units are not engaged in any manufacture or production of articles or things and secondly that the profits eligible for deduction must be computed not on unit basis but on an over all basis for the business as a whole without ignoring the losses made in the other units. So far as ground no.2 is concerned, the CIT Aswale 4/8 itxa.47.02.doc also held that the Assessee's working of the deduction based on the profits of only the two undertakings at Kallakal and Kamdod without taking note of the losses made in the other units is opposed to the concept of "gross total income".
5. In these circumstances, the ITAT and in our view correctly so held that the Assessee had no opportunity of meeting these two additional grounds which were not stated in the notice. Even if one were to assume that ground no.2 was only the facet of the ground already taken in the notice and was therefore not fatal to the CIT's jurisdiction, the first ground, i.e. units in Kalllakal and Kamdod did not manufacture or produce any article or thing was not taken in the notice issued to the Assessee before passing the order under Section 263.
6. Ordinarily since the Assessee was not given an opportunity of being heard on these two additional grounds we would have remanded the matter back to the CIT for deciding it afresh after giving the Assessee an opportunity of Aswale 5/8 itxa.47.02.doc placing material on record with reference to the two additional grounds itself.
7. However, the matter does not rest here. We find that this claim has been examined by the Assessing Officer in detail and it cannot be said that there was no enquiry by him. We, therefore, find that what the CIT has done is only to substitute his views in place of the views of the Assessing Officer which is clearly opposed to the ruling of this Court in CIT v/s Gabriel India Limited (203 ITR 108). The discussion on this aspect can clearly be found in the impugned order from pages 44 to 46 of the paper book. The factual aspects of the matter have been discussed in the impugned order with reference to how the Assessing Officer has applied his mind to the facts of the present case. After applying his mind and considering the explanation given by the Assessee, the deduction was allowed by the Assessing Officer. We, therefore, find that the CIT was not justified in invoking the provisions of Section 263 by only substituting his views in place of the views of the Assessing Officer. Aswale 6/8
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8. We must also mention here that there was an office note appended to the assessment order which stated " not for the Assessee" and which has been relied upon by the Tribunal in the impugned order. This office note reads thus:-
"(1) The issue of allowability of deduction u/s.80-IA of the I. T. Act, in the light of the decision of the Hon'ble Supreme Court in the case of CIT v/s Budhiraja and Co. 204 ITR 412 as well as the calculation under this section on the basis of profits of Kallakal Unit and Kamod Unit also of the Assessee has been considered.
On the basis of the facts available on record and the explanations and arguments of the Assessee there seems to be no requirement of any consideration of disallowance of deduction under this section at the moment. Correspondence with the Audit is in progress and subsequently if it is found necessary to finality of the correspondence the deduction under this section shall be modified under relevant section of the I. T. Act."
9. As rightly held by the Tribunal, this note firstly shows that all the explanations and arguments of the Assessee have been considered by the Assessing Officer and secondly that the action taken under Section 263 is only on the basis of the audit party's note or report, who it would appear, ultimately did not approve of the Assessing Officer's view regarding the allowability of the deduction. Admittedly, the CIT has not referred to any audit objection but in the light Aswale 7/8 itxa.47.02.doc of the note, the Tribunal held that it would be a fair inference that his action under Section 263 was consequent upon the audit objection. Be that as it may, this office note clearly shows that the Assessing Officer had taken all explanations and arguments of the Assessee into consideration before allowing deduction. This being the case, the CIT could not have merely substituted his own views for that of the Assessing Officer by invoking Section 263 of the I. T. Act.
10. In this factual backdrop, therefore, we have no hesitation in answering the substantial question of law referred to and reproduced by us earlier in the affirmative and in favour of the Assessee and against the Revenue.
11. The Appeal is, therefore, disposed of in the aforesaid terms. However, in the facts and circumstances of the case, there shall be no order as to costs. ( B.P.COLABAWALLA J. ) ( S.C.DHARMADHIKARI J.) Aswale 8/8