Income Tax Appellate Tribunal - Ahmedabad
Rivaa Exports, Surat vs Assessee on 20 April, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD 'D' BENCH , AHMEDABAD
Before S/Shri Mahavir Singh, JM and A. N. Pahuja, AM
ITA No.2041& 2042/Ahd/2009
Asst. Years: 2003-04 & 2004-05
Rivaa Exports, Rivaa V/s. Incom e-tax Officer, W ard
House, Udhna Darwaja, 2(4), Surat.
Ring Road, Surat.
PAN :AADFP1706H
(Appellant) .. (Respondent)
Assessee by :- Shri S. N. Soparkar, AR
Revenue by:- Shri C. K. Mishra, DR
ORDER
A.N. Pahuja: These appeals filed by the assessee against two separate orders dated 20.04.2009 of the ld. CIT(A)-II,Surat for Assessment years 2003-04 & 2004-05, raise the following common grounds :-
1. "The ld. CIT(A) has erred in law and on facts in confirming the view taken by Assessing Officer in reducing the entire sale proceeds of DEPB incentive instead of reducing only profits earned on transfer of DEPB licence in computing deduction u/s 80HHC of the Act. Both the lower authorities have ignored specific directions of the Hon'ble ITAT to reconsider the issue of sale proceedsof DEPB license in view of the amendment brought in section 28 & 80HHC of the Act by Taxation Laws(Amendment) Act, 2005 with retrospective effect from 1.4.1998.
2. Ld. CIT(A) has erred in observing that as original appeal was decided keeping in view the amendment in section 80 HHC there remained no scope for Assessing Officer to reconsider the issue as per the directions of the Hon'ble ITAT. Ld. CIT(A) has observed the direction of the Hon'ble ITAT to be erroneous that lead to unnecessary and avoidable wastage of scarce resources of the Government. The said observations of ld. CIT(A) are perverse, uncalled for and totally in ignorance of the fact that the dispute as to whether total sale proceeds or only profit element of DEPB license to be reduced in computation of deduction u/s 80 HHC has been referred to Special Bench and is yet not resolved.
2 IT A No . 20 41 & 20 4 2/ A h d/ 20 09
3. Ld. CIT(A) has further erred in holding the assessee and Authorised Representative responsible for misleading the Hon'ble ITAT in respect of the non-adjudication of the ground raised against levy of interest u/s 234A, 234B & 234C without fully appraising himself of the fact that the assessee has not raised such ground before CIT(A) in the impugned appeal or in the first round of the appeal before the Hon'ble ITAT. Moreover the Hon'ble ITAT in their order has erroneously mentioned that issue relating to levy of interest u/s 234A, 234D was agitated by the assessee.
The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal."
2. Ground nos. 1 & 2 relate to the issue regarding confirmation of the view taken by the Assessing Officer in reducing the entire sale proceeds of DEPB incentive instead of reducing only profits earned on transfer of DEPB license while computing deduction u/s 80 HHC of the Income-tax Act,1961[hereinafter referred to as the 'Act']. Facts, in brief, as per relevant orders are that in pursuance to return declaring nil income filed on 22.10.2003, the assessee claimed deduction of Rs. 1,93,42,703/- u/s 80HHC of the Act in the AY 2003-
04. However, while completing assessments u/s 143(3) of the Act on 28.2.2006 & 22.12.2006 for the aforesaid two assessment years, the Assessing Officer[AO in short] denied the claim for such deduction. On appeal, the ITAT vide their orders dated 23.3.2007 & 23.1.2008 in ITA nos.2904/Ahd./2006 & 3691/Ahd./2007 respectively restored the matter to the file of the AO with the directions to reconsider the claim for deduction u/s 80HHC on the sale proceeds of DEPB in the light of amended provisions of sec. 28 & 80HHC of the Act besides the issue relating to interest u/s 234A, 234B & 234D of the Act. In pursuance to these directions, the AO while computing deduction u/s 80HHC of the Act, reduced 90% of the receipts on account of DEPB .Consequently, deduction u/s 80HHC of the Act worked out to be nil in these two assessment years. On appeal, the ld. CIT(A) while referring to his own earlier orders dated 9.10.2006 & 25.7.2007 upheld the findings of the AO on the ground that deduction u/s 80HHC of the Act had already been worked out in the light of amended provisions of sec. 80HHC of the Act. In the process, the ld. CIT(A) in para 3.3 of the impugned orders made certain uncalled for observations . The assessee in their grounds of 2 3 IT A No . 20 41 & 20 4 2/ A h d/ 20 09 appeal objected to these observations on the ground that the issue as to whether or not total sale proceeds or only profit on sale of DEPB license is to be reduced while computing deduction u/s 80HHC of the Act was pending before the Special Bench. . The ld. Authorised Representative on behalf of the asseessee while objecting to the uncalled for observations of the ld. CIT(A) submitted that the issue is now covered by the decision dated 11.8.2009 of the Special Bench, Mumbai in the case of M/s Topman Exports Vs. ITO in ITA No.5769/Mum/2006 and pleaded that the matter may be restored to the file of the Assessing Officer for reconsideration in the light of aforesaid decision of the Special Bench. On the other hand, the ld. D.R. did not oppose these submissions of the ld. A.R.
3. We have heard both the parties and have gone through the facts of the case as also the decision relied upon. We find that in the aforesaid decision dated 11.8.2009 in the case of M/s Topman Exports,318 ITR(AT) 87(Mumbai) (SB)., the following question was referred to the Special Bench:
Whether the entire amount received on sale of DEPB entitlements represents profit chargeable under section 28(iiid) of the Income Tax Act or the profit referred to therein requires any artificial cost to be interpolated?
3.1 The Special Bench adjudicated the aforesaid question in following terms:
i) The argument of the Revenue that DEPB is a post export event and has no relation with the purchase of goods cannot be accepted. There is a direct relation between DEPB and the customs duty paid on the purchases. For practical purposes, DEPB is a reimbursement of the cost of purchase to the extent of customs duty;
(ii) The DEPB benefit (face value) accrues and becomes assessable to tax when the application for DEPB is filed with the concerned authority.
Subsequent events such as sale of DEPB or making imports for self consumption etc are irrelevant for determining the accrual of the income on account of DEPB;
(iii) Though s. 28 (iiib) refers to a "cash assistance against exports", it is wide enough to cover the face value of the DEPB benefit;
(iv) S. 28 (iiid) which refers to the "profits on transfer of the DEPB"
obviously refers only to the "profit" element and not the gross sale proceeds 3
4 IT A No . 20 41 & 20 4 2/ A h d/ 20 09 of the DEPB. If the Revenue's argument that the sale proceeds should be considered is accepted there would be absurdity because the face value of the DEPB will then get assessed in the year of receipt of the DEPB and also in the year of its transfer;
(v) Consequently, only the "profit" (i.e. the sale value less the face value) is required to be considered for purposes of s. 80HHC.
3.2 In the light of aforesaid findings of the Special Bench we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to the file of the AO for deciding the issue relating to claim for deduction u/s 80HHC of the Act in relation to the amount of DEPB, afresh in accordance with law, after allowing sufficient opportunity to the assessee and keeping in view the aforesaid decision of the Special Bench.
3.3 As regards issue relating to levy of interest u/s 234A ,234B& 234D raised in ground no. 3 of the appeal, the ld. AR on behalf of the assessee did not make any submissions before us. The ITAT vide their orders dated 23.3.2007 & 23.1.2008 had restored this issue to the file of the AO while the ld. CIT(A) has observed in the impugned order directions issued by the ITAT to reconsider levy of interest are erroneous and irrelevant. Levy of interest u/s 234A,234B & 234D of the Act, being mandatory [Commissioner Of Income Tax.vs Anjum M. H. Ghaswala And Others,252 ITR 1(SC)] and no infirmity having been pointed out in its levy, this ground is dismissed. However, the AO shall allow consequential relief while giving effect to this order.
4. As regards observations of the ld. CIT(A) in para 3.3 & 3.4 of his order, the ld. DR while submitting a copy of order dated 12.11.2009 u/s 154 of the Act pointed out that the said observations in para 3.3. of his earlier order have now been expunged by the ld. CIT(A). Though the said observations have now been expunged by the ld. CIT(A), we may clarify that if the ld. CIT(A) had any grievance against the directions of the ITAT in their order dated 23.3.2007 & 23.1.2008, necessary action could have been initiated before the appropriate judicial forum instead of giving vent to his feelings in the impugned orders. The ld. CIT(A) while disposing of an appeal acts as a quasi-judicial authority. In Khalid Automobiles Vs. Union of 4 5 IT A No . 20 41 & 20 4 2/ A h d/ 20 09 India[1995]4SCC(Suppl.)653, it was pointed out that an order of Tribunal is binding on the Assessing Officer and the first appellate authority and that failure to follow the same may constitute contempt of Tribunal's order even as found in Sree Rajendra Mills Ltd. Vs. Joint CTO[1971]28 STC 483(Mad). Even if a reference from the order of the Tribunal is pending before the High Court, it is binding on the Assessing Officer as was found in Senthil Raja Metal Vs. CTO[1990] 79STC38(Mad). In case of failure to follow the order of the appellate authority, Hon'ble Supreme Court in the case of Union of India Vs. Kamlakshi Finance Corporation Ltd,AIR 1992 SC 711 affirmed the strictures passed by the Hon'ble High Court. Hon'ble High Court in the said case observed "The reply of the department was that since they had preferred an appeal to the Supreme Court from that decision, the said decision should not be followed. That fallacious reasoning has appealed to the Assistant Collector. This is totally unacceptable and amounts to indiscipline of worst sort. This indicates how quasi-judicial powers are being misused by people who are not qualified to exercise the same.................." While affirming the aforesaid observations,Hon'ble Supreme Court held "The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and harassment caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It can't be too vehemently emphasised that it is of utmost importance that in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of appellate authorities. The order of Appellate Collector is binding on Assistant Collectors working within his jurisdiction and order of Tribunal is binding upon the Assistant Collectors and Appellate Collectors who function under the jurisdiction of Tribunal. The principle of judicial discipline requires that the orders of higher Appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not 'acceptable' to the department-in itself is objectionable phrase- and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only by undue harassment to assessees and chaos in administration of tax laws."
4.1 In the light of aforesaid observations of the Hon'ble Apex Court , suffice it to say that the AO and the ld. CIT(A) are bound by an order of the ITAT unless and until operation of such order has been suspended by a competent 5 6 IT A No . 20 41 & 20 4 2/ A h d/ 20 09 court. In view thereof, the ld. CIT(A) is directed to expunge his uncalled for observations in para 3.4 of the impugned order .
5. In view of the foregoing, ground nos. 1 to 3 are disposed of. No additional ground having been raised in terms of the residuary ground, accordingly, the same is dismissed.
6. In the result, appeals are partly allowed, but for statistical purposes.
Order pronounced in Open Court on 31 / 12 /2009
Sd/- Sd/-
(Mahavir Singh) (A.N. Pahuja)
Judicial Member Accountant Member
Ahmedabad,
Dated ;31.12.2009
Mahata/-
Copy of the Order forwarded to:-
1. The assessee.
2. Incom e-tax Officer, W ard 2(4), Surat.
3. The CIT(Appeals)-II,Surat
4. The CIT concerned.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
6