Income Tax Appellate Tribunal - Chennai
Euro Leder Fashions Limited, Chennai vs Assessee on 19 July, 2012
IN THE INCOME-TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI.
Before Shri N.S. Saini, Accountant Member &
Shri Challa Nagendra Prasad, Judicial Member
I.T.A. No. 1804/Mds/2010
Assessment Year : 2003 - 04
M/s. Euro Leder Fashions Limited, The Deputy Commissioner of Income
99, G.S.T. Road, Pallavaram, Vs. Tax, Company Circle II (1),
Chennai 600 043. Chennai.
[PAN: AAACE0729P]
(Appellant) (Respondent)
Appellant by : Shri V.S. Jayakumar, Advocate
Respondent by : Ms. Anupama Shukla, CIT
Date of Hearing : 19.07.2012
Date of pronouncement : 26.07.2012
ORDER
PER Challa Nagendra Prasad, Judicial Member
This is an appeal filed by the assessee against the order of the Commissioner of Income Tax, Chennai-I, Chennai passed under section 263 of the Income Tax Act dated 23.03.2010 for the assessment year 2003-04. Shri V.S. Jayakumar, Advocate represented on behalf of the assessee and Ms. Anupama Shukla, CIT represented on behalf of the Revenue.
2. This appeal is filed late by 92 days and the assessee filed an affidavit praying for condonation of delay stating the delay is neither wanton nor willful but due to circumstances beyond the control of the assessee and thus 2 I.T.A. No.1 No.1804/M/ 04/M/1 /M/10 prayed for condonation of delay and to admit the appeal for hearing as it was prevented by sufficient cause in filing of the appeal in time. 2.1 To this plea of the condonation of delay, the ld. DR did not strongly object.
2.2 After hearing both sides and considering the material on record with regard to limitation issue, we are satisfied that the assessee was prevented by sufficient cause from not filing the appeal within the stipulated time. As such, while accepting the plea of the assessee, we condone the delay and admit the appeal for hearing.
3. The assessee raised following grounds of appeal:
"1. The order of the CIT u/s. 263 of the Income Tax Act is contrary to the law, facts and circumstances of the case.
2. The CIT erred in directing the AO to modify the order dated 26.11.07 passed under section 143(3) read with section 147.
3. The CIT erred in holding that the amendment brought in Section 80 HHC has nothing to do with the reduction of earlier year's losses while computing relief under 80 HHC.
4. The CIT erred in ignoring the interim stay granted by the High Court in respect of the operations of the amendment made by the taxation laws (Amendment Act, 2005).
5. The CIT failed to notice that the two decisions relied on by him does not put the assessee in a worst position as they are not applicable to the facts of the appellant's case.
6. The CIT failed to note that the assessment completed under section 143(3) read with section 147 cannot be revised under section 263 in the manner done by him.3 I.T.A. No.1
No.1804/M/ 04/M/1 /M/10
7. The appellant craves leave to adduce additional grounds of appeal at the time of hearing."
4. Facts of the case are that the assessee filed return of income for the assessment year 2003-04 on 30.03.2003 admitting NIL income. The return was processed under section 143(1) on 07.02.2004. Later, a notice under section 148 was issued on 23.02.2007. The assessment was completed on 26.11.2007 under section 143(3) read with section 147 of the Act. While completing the assessment the Assessing Officer recomputed the deduction allowable under section 80HHC by reducing 90% of income on sale of DEPB license and computed the income accordingly. Later, the Commissioner of Income Tax, Chennai - I issued a notice under section 263 of the Act dated 23.02.2010 requiring the assessee to show-cause as to why the assessment completed on 26.11.2007 under section 143(3) read with section 147 by the Assessing Officer should not be set aside as the assessment order is erroneous and prejudicial to the interest of Revenue for the reason that deduction under section 80HHC was allowed before set off of carry forward losses of earlier assessment years.
5. The assessee filed its objection to the notice issued by the Commissioner of Income Tax stating that the assessee filed a Miscellaneous Petition before the Hon'ble Madras High Court challenging the constitutional validity of the amendment made to 80HHC and an ad-interim stay was 4 I.T.A. No.1 No.1804/M/ 04/M/1 /M/10 granted by the Hon'ble Madras High Court. Therefore, since an ad-interim stay was granted by the Hon'ble Madras High Court, the Commissioner of Income Tax cannot revoke section 263 to direct the Assessing Officer to rework out the deduction allowable under section 80HHC. Taking into consideration, the reply filed by the assessee, the Commissioner of Income Tax passed order on 23.03.2010 under section 263 of the Act directing the Assessing Officer to modify the assessment order suitably to allow credit/relief under section 80HHC as per the ratio of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. vs. DCIT [266 ITR 521]. Against this order of the Commissioner of Income Tax, the assessee is in appeal before us.
6. The counsel for the assessee submits that retrospective amendment was made to section 80HHC by Taxation Law (Amendment) Act, 2005 with effect from 01.04.1998, whereby the export turnover of `.10.00 crores was arbitrarily fixed to confer certain benefit under section 80HHC viz, the DEPB profits, cash incentives and other sums. The deduction is allowed in full in the hands of the assessee whose turnover did not exceed `.10.00 crores and in the cases where the turnover exceeded `.10.00 crores the claim was flatly denied. He submits that the assessee filed a writ petition before the Hon'ble Madras High Court challenging the constitutional validity of the said amendment in section 80HHC and an ad interim stay was granted by the 5 I.T.A. No.1 No.1804/M/ 04/M/1 /M/10 Hon'ble Madras High Court. The counsel for the assessee submits that the Hon'ble Gujarat High Court in the case of Avani Exports & Others v. CIT & Ors. in a batch of appeals by order dated 02.07.2012 in Special Civil Application No. 7926 of 2006 has held that the amendment to Taxation Laws (Amendment) Act, 2005 is only prospective and could be given effect from the date of amendment and not in respect of earlier assessment years. The counsel for the assessee further submits that in view of the decision of the Hon'ble Gujarat High Court, the issue is debatable. Therefore, the Commissioner of Income Tax is not justified in invoking the provisions of section 263. To disturb the working made by the Assessing Officer in the assessment order.
7. The counsel for the Revenue supported the order of the Commissioner of Income Tax passed under section 263 of the Act.
8. We have heard both sides, perused the materials available on record, orders of lower authorities and the case law relied upon. The assessment was completed under section 143(3) read with section 147 on 26.11.2007. While completing the assessment, the Assessing Officer allowed deduction under section 80HHC without setting off of carry forward loss of the earlier assessment years. Since the order passed by the Assessing Officer is against the ratio of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratories vs. DCIT, judgment dated March 11, 2004 reported in 6 I.T.A. No.1 No.1804/M/ 04/M/1 /M/10 266 ITR 521, the Commissioner of Income Tax directed the Assessing Officer to recompute the relief allowable under section 80HHC suitably in view of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratories vs. DCIT (supra). The contention of the assessee is that the Hon'ble Madras High Court granted an ad-interim stay, therefore, the deduction allowed under section 80HHC by the Assessing Officer cannot be reworked appears to be not relevant with the issue of allowing deduction under section 80HHC in accordance with the ratio laid down by the Hon'ble Supreme Court in the case of IPCA Laboratories v. DCIT (supra). Because, what was challenged by the assessee before the Hon'ble Madras High Court was the constitutional validity of retrospective amendment to section 80HHC, whereby the export turnover of `.10.00 crores was arbitrarily fixed to confer certain benefit under section 80HHC, DEPB profits, cash incentives and other sums. Similarly, the decision of the Hon'ble Gujarat High Court in the case of Avani Exports & Others v. CIT & Ors.(supra) holding that amendment to section 80HHC is prospective and could be given effect from the date of amendment and not in respect of earlier assessment years is also nothing to do with the ratio of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratories v. DCIT (supra). In the circumstances, we see no infirmity in the order passed by the Commissioner of Income Tax under section 263 in directing the Assessing Officer to allow deduction under section 80HHC in accordance with the ratio of the decision 7 I.T.A. No.1 No.1804/M/ 04/M/1 /M/10 of IPCA Laboratories (supra). The grounds raised by the assessee are dismissed.
9. In the result, the appeal of the assessee is dismissed.
Order pronounced on Thursday, the 26th of July, 2012 at Chennai.
Sd/- Sd/- (N.S. SAINI) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 26.07.2012 Vm/- To: The assessee//A.O./CIT(A)/CIT/D.R.