Manoj Garg, Jalpaiguri vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA [Before Shri P. K. Bansal, AM & Shri Mahavir Singh, JM]

I.T.A No.344/Kol/2014 Assessment Year: 2009-10 Shri Manoj Garg Vs. The Commissioner of Income-tax P.O. Banarhat, Dist. Jalpaiguri Jalpaiguri West Bengal (PAN:ADHPG 8039P) (Appellant) (Respondent)

Date of hearing: 10.06.2015 Date of pronouncement: 03.07.2015

For the Appellant: Shri S.K.Tulsian, Advocate For the Respondent: Shri Ravi Jain, CIT-DR

ORDER Per Shri Mahavir Singh, JM:

This appeal by assessee is arising out of revision order of Commissioner of Income Tax, Jalpaiguri vide No. CIT/Jal/263 matter/12-13/3999 dated 12.02.2013 u/s 263 of the Act. Assessment was framed by ITO, Wd-1(2), Jalpaiguri u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2009-10 vide his order dated 15.12.2011.

2. The only issue in this appeal of assessee is against the revision order of CIT u/s 263 of the Act in directing the AO to disallow the deduction u/s 80IC of the Act in respect of "Central Excise Refund" and Sales Tax remission. For this, assessee has raised following five grounds:-

"1. That the Ld. CIT, Jalpaiguri erred in holding that the assessment order passed by the Ld. AO for Asst. Year 2009-10 was erroneous and prejudicial to the interest of the revenue and in that mistaken view, he erred in cancelling the said assessment order.

1(a). That since as per several decisions of the Hon'ble Income Tax Appellate Tribunal / High Court, Central Excise Refund of Rs.12,93,302/-- and Sales Tax Remission of Rs.22,45,232/- were admissible deductions u/s. 80-IC of the I.T. Act, the Ld. CIT was not justified in proposing to disallow such deductions in excise of his powers u/s. 263 of the IT Act.

2. That since in the show cause notice dated 12.02.2013 issued u/s. 263 of the IT Act, the Ld. CIT directed the assessee to show cause why Central Excise Refund of Rs.12,93,302/- and Sales Tax Remission Rs.22,45,232/- were not inadmissible deductions u/s. 80IC of the I.T. Act, but passed no adverse comment in respect of other items included in the assessment order for Asst. Year 2009-10, he erred in cancelling the entire assessment 2 ITA No.344/K/2014 Sh. Manoj Garj AY 2009-10

order instead of restricting his decision on the two issues raised by him in his show-cause notice.

2(a) That since the assessee was not allowed an opportunity of showing cause and of being heard in respect of all items of total income other than the two items referred to in Ground-2 above, the order of the Ld. CIT u/s 263 cancelling the entire assessment order is bad in law for non-compliance with the provisions of Sec. 263(1) of the IT Act.

3. That after a change of incumbent, as the Ld. Successor CIT had not issued any show- cause notice u/s. 263 to the assessee and given it a reasonable opportunity of sowing cause and of being heard regarding the alleged non application of mind by the Ld. AO and/or his failure to conduct enquiry, his order u/s. 263 is liable to be set aside in view of his non-compliance with the provisions of Sec. 263(1) of the IT Act.

4. That on the acts and in the circumstances of the case as there were no non application of mind by the Ld. AO and/or his failure to conduct enquiry as alleged by the Ld. CIT in his order u/s. 263, his order u/s 263 is liable to be set aside.

5. That even assessing but not admitting that the Ld. AO did not apply his mind and/or conduct enquiry as alleged by the Ld. CIT, he was not justified in assuming jurisdiction u/s. 263 of the IT Act without establishing that the Asstt. Order passed by the Ld. AO was erroneous and prejudicial to the interest of the Revenue."

3. Briefly stated facts are that the assessee, an individual, derives income mainly from two sources viz., commission from dealing in paddy and proprietorship business ion manufacturing PVC pipes and related articles. The assessee filed his return of income showing taxable income at Rs.1,45,654/- after claiming deduction of Rs.53,55,332/- under Chapter VI-A of the Act for AY2009-

10. The AO issued notices u/s 143(2) and also questionnaire u/s. 142(1) of the Act. After examining the books of accounts, the AO completed assessment u/s 143(3) of the Act on total income of Rs.1,45,654/-. After completion of the assessment, the CIT examined the assessment record and found that the entire business since from the manufacturing business was claimed as deduction by the assessee u/s. 80-IC of the Act. And details of business since as shown in Schedule-G of the account disclosed a total amount of Rs.35,38,534/- consisting of Central Excise refund of Rs.12,93,302/- and sales tax remission of Rs.22,45,232/-. The CIT issued SCN dated 12.02.2013 and pointed out that the aforesaid two amounts should not be considered as profit derived from the manufacturing business and therefore the deduction u/s. 80-IC allowed by the AO in respect of these two items was wrongly allowed. Further, according to CIT, no certificates of the Auditors in Form No. 10CCB was furnished along with the Tax Audit Report as per Rule 18BBB of the I.T. Rules for granting benefit u/s 80-IC of the Act. In view of these defect, he was 3 ITA No.344/K/2014 Sh. Manoj Garj AY 2009-10

of the view that the deduction u/s. 80-IC of the Act to the extent of Rs.35,38,534/-- representing Central Excise refund and sales tax remission as stated above was wrongly allowed and therefore the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue.

4. In response to SCN the assessee filed a written submissions claiming that as per several judicial precedents the Central Excise Refund and Sales Tax Remission were eligible for deduction u/s. 80-IC of the Act. He also pointed out that at the stage of assessment the certificates regarding Small Scale Industry as well as Tax Audit Report as per Rule 18BBB were duly filed. Subsequently, successor CIT took-up the pending revision proceedings and in the course of hearing he raised an additional ground i.e. non application of mind and lack of enquiry on the part of the AO and directed the AR to file reply in the light of several judicial decisions e.g. Guwahati High Court decision in the case of CIT v. Jawahar Bhattacherjee (2012) 341 ITR 434 (Gauhati); Allahabad High Court decision in the case of CIT vs. Shri Bhawan Das (2005) 272 ITR 367 (All) and Apex Court decision in the case of Malabar Industries Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) and other case laws as mentioned at page 15-16 of the order u/s. 263. The CIT thereafter passed revision order u/s. 263 of the Act. Aggrieved, assessee preferred appeal before Tribunal.

5. Before us, the assessee argued that Central Excise Refund Rs.12,93,302/- and Sales Tax Remission of Rs.22,45,232/- have been held as admissible deduction u/s. 80-IC of the Act by the AO while framing assessment and CIT was not justified in holding that the AO erred in allowing the deduction of these items u/s. 80-IC of the Act. The assessee also argued that the CIT was not justified in assuming jurisdiction u/s. 263 of the Act without establishing that the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue. Regarding the allegation of non submission of certificate of Small Scale Industries and Auditors Report in Form 10CCB, it was submitted by the AR that these certificates were filed at the assessment stage and copies of the same were also enclosed with the written submission filed by the AR. In his order u/s 263 of the Act the CIT has not rebutted the contention of the AR that these certificates were not filed at the assessment stage. Even otherwise, it has been held that the 4 ITA No.344/K/2014 Sh. Manoj Garj AY 2009-10

submissions of these certificates are not mandatory but only directory and hence it could be filed at the appellate stage also. Since copies of these certificates were again enclosed with the written submission of the AR filed before the CIT, the allegation of non-submission of these certificates lost its importance. As regards other objections raised by the CIT, the AR in his written submission submitted that in the case of CIT vs. Meghalaya Steels Ltd.(2011)332 ITR 91 (Gauhati) it was held that Central Excise Refund was eligible for deduction u/s. 80-IB/80-IC of the Act. He also contended that as per Co-ordinate Bench of this Tribunal of Kolkata decision Sales Tax Remission was also eligible for deduction u/s. 80-IC of the Act. The AR relied on ITAT Guwahati Bench in the case of Meghalaya Mineral Products vs. ACIT reported in 168 TTJ 143, wherein it is also held that Central Excise refund and VAT remission are both eligible for deduction u/s 80-IC of the Act. The AR contended that the CIT was therefore not justified in holding that these two items were not eligible for deduction u/s. 80IC of the Act. In this connection attention is also invited to the Hon'ble Supreme Court decision in the case of Malabar Industrial Co. Ltd. 243 ITR 83 in which it has been held that where two views were possible and the AO had taken one view with which the CIT did not agree, the assessment order could not be treated as an order prejudicial to the interest of Revenue and therefore the CIT could not take recourse to action u/s. 263 of the Act. Since deduction of Central Excise refund and Sales Tax remission are both covered by the Tribunal decisions as stated above, the CIT was not justified in initiating proceedings u/s 263 of the Act in the instant case on the ground that the income by way of Central Excise Refund and Sales Tax Remission were not eligible for deduction u/s. 80-IC of the Act.

6. We have heard rival contentions and gone through the facts and circumstances of the case. We find that the revision proceeding u/s. 263 of the Act was initiated on the ground that Central Excise Refund and Sales Tax Remission were not admissible deduction u/s. 80C of the Act. We find in the instant case, that the AO in the course of the assessment proceedings applied his mind and made enquiry regarding the deduction u/s. 80IC of the Act as claimed by the assessee in his computation of income by calling for necessary documentary evidences. A 5 ITA No.344/K/2014 Sh. Manoj Garj AY 2009-10

certified true copy of the order sheet of the assessment records of the assessee for AY 2009-10 has been placed on the paper book. We further find that on 05.12.2011 the AO examined the assessee's claim of deduction u/s. 80-IC and recorded as follows:-

"The basis of the assessee's claim of deduction u/s. 80-IC is examined and found to be in order."

7. We further find that even on merits the issue is covered by the judgment of Hon'ble Guwahati High Court in the case of Meghalaya Steels Ltd.(supra), wherein it was held that Central Excise Refund was eligible for deduction u/s. 80-IB/80-IC of the Act. We further noticed that the Guwahati Bench of this Tribunal in the case of Meghalaya Mineral Products (supra), has also held that Central Excise refund and VAT remission are both eligible for deduction u/s 80-IC of the Act. In view of the above, we are of the view that the CIT was therefore not justified in holding that these two items were not eligible for deduction u/s. 80IC of the Act. In this connection, we want to note the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) in which it has been held that where two views were possible and the AO had taken one view with which the CIT did not agree, the assessment order could not be treated as an order prejudicial to the interest of Revenue and therefore the CIT could not take recourse to action u/s. 263 of the Act. Since deduction of Central Excise refund and Sales Tax remission are both covered by the Tribunal decisions as stated above, the CIT was not justified in initiating proceedings u/s 263 of the Act in the instant case on the ground that the income by way of Central Excise Refund and Sales Tax remission were not eligible for deduction u/s. 80-IC of the Act. Accordingly, the revision passed by CIT is quashed.

8. In the result, appeal of assessee is allowed.

9. Order is pronounced in the open court on 03/07/2015.

Sd/- Sd/- (P. K. Bansal) (Mahavir Singh) Accountant Member Judicial Member

Dated: 3rd July, 2015 6 ITA No.344/K/2014 Sh. Manoj Garj AY 2009-10

*Dkp/P.S.

Copy of the order forwarded to:

1. APPELLANT - ShriManoj Garg, P.O.Banarhat, Dist. Jalpaiguri, W.B

2 Respondent - CIT Jalpaiguri

3. The CIT(A), Jalpaigur

4. CIT, Jalpaiguri.

5. DR, Kolkata Benches, Kolkata

/True Copy, By order,

Asstt. Registrar.