Income Tax Appellate Tribunal - Chandigarh
Surya Pharmaceuticals Ltd.,, ... vs Department Of Income Tax
Author: G.S.Pannu
Bench: G.S.Pannu
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'A' CHANDIGARH
BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER
AND MS SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.296 /Chd/2007
Assessment Year: 2003-04
The AC IT, Circle 1(1), Vs. M/s Surya Pharmaceuticals Ltd.,
Chandigarh Chandigarh
PAN No. AABCS3001K
&
C.O. No. 21/Chd/2007
(in ITA No.296 /Chd/2007)
Assessment Year: 2003-04
M/s Surya Pharmaceuticals Ltd., Vs. The AC IT, Circle 1(1),
Chandigarh Chandigarh
PAN No. AABCS3001K
(Appellant) (Respondent)
Appellant By : Smt. Sunita Puri
Respondent By: Shri Vineet Krishan
ORDER
PER SUSHMA CHOWLA, JM
The appeal by the Revenue is against the order of CIT(A), Chandigarh dated 10.1.2007 relating to assessment year 2003-04 against the order passed under Section 143(3) of the I.T. Act. The assessee has filed Cross Objection against the appeal filed by the Revenue. 2
2. The appeal filed by the Revenue and Cross Objection filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.
3. The Revenue has raised the under mentioned amended grounds of appeal:-
"1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) in appeal No. 27/P/06-07 through order dated 10.01.2007 has erred in passing a non- speaking order in contravention of Section 250(6) of the Income Tax Act, 1961. That the Ld. CIT(A) has not stated with clarity, the points arising in the Appeal, the evidence on record, the submissions of the appellant- assessee, the decision of the Ld. CIT(A) thereon and the reasons for such decision. That a decision does not merely mean the conclusion.
2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in canceling the order of assessment on the ground of validity of jurisdiction, holding it to be a nullity by:-
I) ignoring CBDT's order in F. No. 32012/9/2004-
Ad.VI dated 24.2.2006, paragraph 3 whereof had conferred valid jurisdiction upon Smt. Kalpana Kataria in the following words:-
"On promotion, these officers will continue to exercise the functions and powers of the post they were holding prior to their promotion till further orders."
II) ignoring the provisions of Section 120(1) and the Explanation to Section 120(1) thereof inserted with retrospective effect from 1.4.1988 vide Finance Act, 2006 whereby any Income Tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the Income Tax authority lower in rank.
III) not interpreting the provisions of Section 120(4) correctly.
IV) Ignoring the provisions of Section 124(3) whereby the assessee should have challenged the jurisdiction of Assessing Officer within stipulated time. In law, a 3 subsequent challenge at the appellate stage on the validity of jurisdiction, is not maintainable.
3 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) after holding the order of assessment to be a nullity, had erred in proceeding further and thereafter dealing with the other grounds pertaining to the allowance of deduction u/s 80IB and 80 HHC of the Act.
4 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) had also erred in admitting the additional evidence in contravention of Rule 46A of the I.T. Rules, 1962 while directing the allowance of deduction u/s 80 IB and 80HHC without providing an opportunity to the Assessing Officer and further erred in allowing deduction u/s 80IB and 80HHC.
5 It is prayed that the order of the Ld. CIT(A) be cancelled and that of the Assessing Officer be restored.
4. The assessee in its cross objection has raised the following amended grounds of appeal:-
1 That the Appellate order dated 10.01.2007 in appeal No. 27/P/06-07 passed by the Ld. CIT(A) Chandigarh is a very elaborate, exhaustive and speaking order.
2 That the Ld. CIT(A) was fully justified in canceling the assessment order.
3 That there is nothing wrong or unlawful in adjudicating upon the other grounds of appeal on merits even after holding the assessment as nullity.
4 There has absolutely been no contravention of Rule 46-
A while directing the allowance of deduction u/s 80 HHC and 80 IB. Even otherwise, this ground of the revenue is irrelevant, as the assessment itself has been held to be nullity.
5 That the Ld. CIT(A) gravely erred in upholding the action of ld. Assessing Officer by treating Advance Licence as incentive for the purposes of calculation of deduction u/s 80 HHC.
6 That the Ld. CIT(A) gravely erred in not allowing deduction u/s 80HHC according to IT rules.
7 That the Ld. CIT(A) erred in not allowing the deduction of Advance Licence from the purchase as the Advance Licence and/or material imported thereunder 4 shall not be transferable even after completion of export obligation under the Exim Policy of the Ministry of Commerce and Industry.
5. The first issue raised by the Revenue is in respect of the validit y of jurisdiction of the Assessing Officer in completing the assessment order.
6. The brief facts relating to the issue are that the assessee had a registered office at Delhi, which was shifted to Baddi. The jurisdiction over the case was transferred to Circle -I (1), Chandigarh u/s 127 of the Act. The case was picked up for scrutiny and the assessment order was passed by the Joint CIT (OSD), Circle-1(1) Chandigarh. The assessee raised objection regarding the issue of jurisdiction of Joint CIT, who passed the order before the C IT(A). The main grievance of the assessee before the C IT(A) was that though there was a notification of the Board empowering CCIT / DGIT's as contemplated u/s 120 (4) of the Income Tax Act for vesting the jurisdiction in the joint CIT's for carrying on the functions of an Assessing Officer, however, no consequential order was passed by CCIT or CIT u/s 120(4)(b) of the Income Tax Act. It was also argued by the learned AR for the assessee before the C IT(A) that Ms Kalpana Kataria had jurisdiction over assessee's case and on her promotion as JCIT, the question arose regarding her jurisdiction and the consequent assessment order passed without intimating the assessee that an order grating her jurisdiction had been passed. The C IT(A) held that considering the fact that the Assessing Officer had informed that no order u/s 120(4)(b) was passed, Ms Kalpana Kataria, Jt. C IT could not have exercised functions of an Assessing Officer as defined in Section.. 2(7A) of the Act. Hence, the assessment order was held to be nullit y and cancelled.
5
7. Revenue is in appeal against the order of C IT(A) in cancelling the order of assessment on the ground of validit y of jurisdiction in the officer passing the assessment order. The Revenue in addition to the amended grounds of appeal had raised the following additional ground of appeal:-
On the facts and circumstances of the case and in law, the learned CIT(A) in appeal No. 27/P/06-07, through order dated 10.1.2007, has grossly erred in ignoring the pre-existing order No. CIT-I/CHD/Jurd./2001- 02/Tech/4862-4889 dated 15/19.10.2001 issued by the CIT-I, Chandigarh, whereby the Joint Commissioner of Income tax were accorded jurisdiction to exercise the powers and perform the functions either individually or concurrently or both alongwith the designated subordinate Assessing Officers specified in Col.6 of the Schedule to the said order. That a copy of the aforesaid order dated 15/19.10.2001 had duly been endorsed to the learned CIT(A), Chandigarh.
8. The said Additional grounds of appeal being legal ground is admitted for adjudication in view of the ratio laid down by the Apex Court in NTPC [229 ITR 383(SC)].
9. The learned DR for the Revenue filed the copy of the communication dated 15 / 19.10.2001 under which the Joint Commissioner of Income Tax were accorded the jurisdiction. Both the learned DR for the Revenue and the learned AR for the assessee fairl y agreed that the issue in the present appeal is identical to the issue raised in the case of Mr. Krishan Bansal Vs. AC IT (ITA Nos. 423 to 426/Chd/2009) relating to Assessment Years 1997-98 to 1999-2000 & 2001-02. We find that the issue of vesting of jurisdiction in the Joint CIT in view of the provisions of Section 120 (4)(b) Income Tax Act has been deliberated upon by the Tribunal in the case of M/s Krishan Bansal Vs. ACIT (Supra) wherein vide order dated 30 t h July 2010, it has been held as under:- 6
"19. The assessee by way of additional Grounds of appeal raised during the course of hearing has challenged the jurisdiction of the Assessing Officer initiating the proceedings u/s 147/148 of the Act and thereafter completing the assessment proceedings in the case. The reasons for reopening the assessment were recorded by the Addl.CIT, Range-VI, Chandigarh and the assessment order has been passed by the Joint CIT, Range-VI, Chandigarh. The allegation of the Ld. AR for the assessee was that the Addl.CIT was not an Assessing Officer and hence the issue of notice u/s 148 of the Act was invalid and consequently, the assessment proceedings. As per the Ld. AR for the assessee the Addl. CIT does not assume the power of an Assessing Officer in the absence of order u/s 120(4) Clause (b) of the Act. Elaborate submissions were made by the assessee in this regard. The Ld. DR for the Revenue in reply pointed out that in view of the amended provisions of section 2(7A) of the Act as amended by Finance Act, 2007 w.r.e.f. 1.06.1994 & 01.10.1996, a Joint CIT can exercise the powers of an Assessing Officer in case the same are conferred u/s 120(4) (b) of the Act. Further u/s 2(28C) of the Act, the definition of Joint CIT was inserted in the Act w.e.f. 1.10.1998 by the Finance Act, 1998 and as per the definition Joint CIT includes Addl.CIT u/s 117(1) of the Act. The CBDT vide Notification No.267/2001 under F.No.187/5/2001-ITA dated 17.09.2001 directed that the Joint CIT and Joint DIT shall exercise the powers and functions of the Assessing Officer where so authorized by the Board or CIT. Further, Notification No.732(E) dated 31.7.2001 was issued in this regard by the CBDT. Vide Gazette Notification, CBDT directed the Joint CIT to act as Assessing Officer u/s 120(4)(b) of the Act. Vide letter dated 15.10.2001, CIT-II, Chandigarh conferred the jurisdiction u/s 120 of the Act upon the Addl./Joint CIT. Further reliance was placed by the Ld. DR for the Revenue on the ratio laid down in Bindal Apparels Ltd. 169 Taxman 49(Del). The Ld. DR for the Revenue further pointed out that the jurisdiction in the instant case vested in ITO-4(1) and vide order dated 27.2.2003 passed u/s 127 of the Act, the CIT-II, transferred the case to the Joint CIT, Range- VI, Chandigarh. The copy of the said order is placed at page- 2 of the paper book filed by the Revenue dated 3.3.2008. The Ld. DR for the Revenue pointed out that in view of the ratio laid down by the Punjab & Haryana Court in the case of Smt.Jasvinder Kaur Kooner (291 ITR 80)(P&H), if the assessee is aggrieved by an order of transfer u/s 127 of the Act, the same is to be challenged by way of writ petition and the said issue cannot be raised in an appeal before the Tribunal.
20. We have heard the rival contentions and perused the records. The assessee has raised the issue of inherent lack of jurisdiction of the Assessing Officer initiating the re- assessment proceedings and thereafter completing the same.7
The assessee was being assessed to tax by ITO-4(1), Chandigarh, who had issued the intimation u/s 143(1) of the Act. Admittedly, the case of the assessee was transferred u/s 127 of the Act from ITO-4(1), Chandigarh to Joint CIT, Range- VI, Chandigarh, vide orders passed by the CIT-II, Chandigarh dated 27.2.2003. The copy of the said orders are placed at pages 1-4 of the paper book. Thereafter reasons for reopening of the assessment relating to the captioned years were recorded by Addl.CIT, Range-VI, Chandigarh on 27.10.2003/25.3.2004. The order of re-assessments in the respective years thereafter were passed by the Joint CIT, Range-VI, Chandigarh.
21. The Hon'ble Punjab & Haryana Court in Jasvinder Kaur Kooner (supra) had held as under :-
"If the assessee is aggrieved by an order of transfer, the remedy of the assessee is to challenge such as order in independent proceeding either before the higher administrative authorities as per the Act or in any independent proceedings by way of a writ petition or other wise. If no such challenge is made at the initial stage the issue cannot be raised in an appeal against the Assessment order".
22. In view of the above-said ratio laid down by the Hon'ble Punjab & Haryana Court, the assessee if aggrieved by the order of transfer of jurisdiction to the Joint CIT, Range-VI, Chandigarh by way of order passed u/s 127 of the Act has to challenge the same either before the higher administrative authorities under the Act or in independent proceedings by way of writ petition or otherwise. The assessee cannot raise such issue in an appeal filed before the Tribunal. The second plea of the assessee is non compliance to the provisions of section 120(4)(b) of the Act, under which firstly the CBDT has to empower CIT and secondly the CIT to authorize in writing. The CBDT vide Notification No.267/2001 dated 17.9.2001 had issued instructions to CIT in connection with conferment of jurisdiction to Addl./Joint CIT to exercise the powers and functions of the Assessing Officer, when so authorized. The CIT vide letter No. FNo.2/CIT/CHD-II/Juris./2001-2002/752 dated 15.10.2001 in exercise of powers conferred read with CBDT Notification No.S.O. No.732(E) dated 31.7.2001 ordered and authorized Addl./Joint CITs to exercise the powers and perform the functions either individually or concurrently or both alongwith their designated subordinate authorities (AOs). The copy of the said order has been filed on record by Ld. DR for the Revenue. The CIT-II vide order passed under section 127 of the Act dated 27.2.2003 transferred the case of the assessee from ITO-4(1) to Joint CIT, Range-VI, Chandigarh. The copy of said order is placed on record. The CBDT Notification S.O. 732(E) dated 31.7.2001, S.O. 880(E) to S.O. 882(E) dated 14.9.2001 published in the Gazette of India Part 8 II, Section 3, Sub-section (ii) Extraordinary also authorized the Addl.CIT/Joint CIT. In view of the various notifications referred to in paras above and Gazette Notification, we find sufficient compliance to the provisions of section 120(4)(b) of the Act. We hold the invoking of jurisdiction by the designated officer in the present case.
10. The learned DR for the Revenue has furnished on record the copy of the communication dated 15/19.10.2001 issued by C IT-I Chandigarh under which the Joint CIT's had been accorded jurisdiction to exercise the powers and perform the functions either individuall y or concurrentl y or both alongwith the designated subordinate Assessing Officers. The CBDT vide order in F. No. 32012/9/2004-Ad.VI dated 24.2.2006, paragraph 3 whereof had conferred valid jurisdiction upon Smt. Kalpana Kataria in the following words:-
"On promotion, these officers will continue to exercise the functions and powers of the post they were holding prior to their promotion till further orders."
11. In view of the above said and the initial notification of the CBDT and our reasoning in the case of Mr Krishan Bansal Vs. AC IT (Supra), we set aside the order of C IT(A) and hold that the Assessing Officer was vested with necessary jurisdiction to initiate and complete the assessment proceeding for the year under appeal. We uphold the jurisdiction of the Assessing Officer to pass the present assessment order. The ground No. 2 raised by the Revenue in this regard is thus allowed.
12. The issue in ground Nos. 3 & 4 raised by the Revenue is against the allowance of deduction u/s 80 IB and 80HHC of the Act. Both the learned AR for the assessee and the learned DR for the Revenue fairl y admitted that the issue stands covered by the order of the Tribunal in assessee's 9 own case relating to Assessment Years 2001-02 & 2004-05 wherein the said issue has been remitted back to the file of Assessing Officer. 13 The brief facts relating to the issue are that the deduction claimed u/s 80 IB of the Act was not allowed by the Assessing Officer as the audit report in form No.10CCB under the provisions of Section 80 IB (13) read with Section 80 IA(7) of the Act was not filed. The deduction claimed u/s 80HHC of the Act in respect of the Panchkula unit and Baddi unit was recomputed in respect of the miscellaneous / other income and DEPB incentive availed by the assessee and their non deduction to the extent of 90% from the profits of business under explanation (baa) to Section 80HHC (4C) of the Act. The Assessing Officer also noted that the turn over of the assessee was more than Rs. 10 crores and in order to claim benefit of proviso to Section 80HHC, the condition laid therein had to be fulfilled. The Assessing Officer denied the deduction u/s 80HHC of the Act in view of the amendment to Section 80HHC of the Act as the turnover was more than 10 crores and the assessee had not fulfilled the conditions as per the amended provisions of law.
14. Before the CIT(A), the learned AR for the assessee submitted the copy of report in form No.10CCB in connection with the claim of deduction u/s 80 IB of the Act. The CIT(A) repl ying on series of decisions, in turn relied upon by the learned AR for the assessee held that the requirement of filing the audit report were directory provision and if the same was filed during the assessment proceedings, the claim was allowable. It was further held by the CIT(A) that the appellate proceeding before him were continuation of the assessment proceedings and the 10 powers of CIT(A) were co-extensive to that of the Assessing Officer. Following the ratio laid down by the Hon'ble Jammu & Kashmir High Court in CIT Vs. Trehan Enterprises [248 ITR 333 (J &K)] wherein it was held that the requirement of filing audit report u/s 80 IB of the Act was met with, if the same was filed before the C IT(A), though not filed during the course of assessment proceedings, the claim of deduction u/s 80 IB of the Act was allowed. The Revenue is aggrieved by the admission of the said evidence furnished before the C IT(A) and as such plea of violation of the provision of Rule 46A of the I.T. Rules.
15. We have heard the rival contentions and perused the records. Though it is the requirement of law, that the claim of deduction u/s 80 IB of the Act shall be allowed in case the audit report in form No.10CCB is furnished along with the return of income. In the facts and circumstances of the case, the said audit report was not furnished along with the return of income nor was it filed during the course of assessment proceedings. The grievance of the assessee in this regard was that during the course of assessment proceedings it was never pointed out by the Assessing Officer that the said audit report was not available with the return of income. The disallowance of deduction under Section 80 IB of the Act summaril y on the ground of non furnishing of audit report was in challenge before the C IT(A). The assessee furnished the copy of the audit report in form No. 10CCB before the C IT(A) and the same was accepted and the deduction allowed to the assessee by the CIT(A). However, we find that there is violation of the provision of rule 46A of the I.T. Act in this regard. The said audit report in form 10CCB in respect of claim of deduction u/s 80 IB of the Act was not confronted to the Assessing 11 Officer and the deduction was allowed without verifying the particulars of the claims made by the assessee. We are in agreement with the order of CIT(A) to the extent that the furnishing of the audit report alongwith the return of income are directory provisions and an opportunit y should have been allowed by the Assessing Officer before rejecting the claim of the assessee. However, we are of the view that once the assessee had furnished the audit report in form No. 10CCB before the CIT(A), further requirement of law is that the same should have been confronted to the Assessing Officer for verifications of the particulars of claim of deduction. Accordingl y, we reverse the order of C IT(A) in this regard and remit the issue back to the file of Assessing Officer to compute the deduction claimed by the assessee in accordance with law after affording a reasonable opportunit y of hearing to the assessee.
16. The next issue raised by the Revenue is in regard to the claim of deduction u/s 80HHC of the Act. The Assessing Officer had denied the deduction on account of DEPB incentive in view of the amended provisions of Section 80HHC as the total turnover of the assessee was more than Rs. 10 crores. The CIT(A) had directed the Assessing Officer to recalculate the deduction u/s 80HHC of the Act by including DERC / advance license as part of total turn over and by excluding 90% of DERC / advance license in determining the profits of the business under clause (baa) to Explanation u/s 80HHC (4C) of the Act. It was further held by CIT(A) that the deduction shall be increased under the fifth proviso to Section 80HHC (3) by 90% of DEPB / DERC credits X export turn over / total turn over. The C IT(A) also held that the export turn over the assessee was more than Rs. 10 crores, the fifth proviso was applicable and 12 the Assessing Officer was directed to compute the deduction after taking into account the said proviso as well as other directions in the case.
17. Admittedl y, the issue of claim of deduction u/s 80HHC of the Act arose before the Tribunal in ITA Nos. 732 & 733/Chd/2007 in assessee's own case relating to Assessment Years 2001-02 and 2004-05, wherein vide order dated 27.2.2009, the issue has been restored back to the file of Assessing Officer for adjudication afresh as per para 31 of the said order. In line with the ratio laid down by the Tribunal, we remit this issue also back to the file of the Assessing Officer to decide the same in accordance with amended provisions of Section 80HHC as amended by Taxation Laws (Amendment) Act, 2005, after affording a reasonable opportunit y of hearing to the assessee. The ground Nos. 3 & 4 raised by the Revenue are thus allowed for statistical purposes.
18. The Revenue by way of ground No.1 is aggrieved by the non speaking ordear of the C IT(A). We find no merit in the stand of the Revenue in view of our reference to the findings of the C IT(A) and the decision in respect of each ground. The ground No.1 raised by the Revenue is thus dismissed.
C.O. No. 21/Chd/2007
19. The ground Nos. 1 to 3 raised by the assessee are in support of the order of the C IT(A) and hence the same are dismissed.
20. The issue in ground No.4 is in support of the order of the CIT(A) while allowing the deduction u/s 80HHC and 80 IB of the Act and there being no contravention of Rule 46A of the Income Tax Rules. The issue 13 has been set aside to the file of Assessing Officer for reconsideration and hence this ground raised by the assessee is also dismissed.
21. The issues in grounds Nos. 5 to 7 are in respect of the claim of deduction u/s 80HHC of the Act. As the issuing is being set aside to the file of Assessing Officer as per our directions in the paras hereinabove to decide the same in accordance with law, the grievance of the assessee shall be looked into by the Assessing Officer while computing the claim of deduction u/s 80HHC of the Act. The grounds Nos 5 to 7 are allowed for statistical purposes.
22. In the result appeal of the Revenue and Cross objection of the assessee are partl y allowed.
Order Pronounced in the Open Court on this 18 t h August day of August, 2010.
Sd/- Sd/-
(G.S.PANNU) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 18 t h August, 2010
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR