Held no substantial question of law arose; appellate court rejected argument that re-assessment was unjustified absent material showing non-disclosure, noting the original benefit of deduction was wrongly granted and affirmed by Supreme Court.
Appeal dismissed as there is no substantial question of law arising.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.
I.T.A. No. 479 of 2009
DATE OF DECISION : 18.11.2009
Jawand Sons, Ludhiana
.... APPELLANT
Versus
Commissioner of Income Tax (Appeals)-II, Ludhiana
..... RESPONDENT
Present: Mr. Pankaj Jain and Mr. D.K. Goyal, Advocates, for the appellant-assessee.
SATISH KUMAR MITTAL , J.
The assessee has filed the instant appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the Act') against the order dated 26.2.2009, passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as the ITAT') in ITA No. 568/Chd/2008, pertaining to the assessment year 2001-02, raising the following substantial question of law :-
The brief facts of the case are that the assessee-appellant firm is
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engaged in the business of manufacture and export of hosiery goods. On 20.10.2001, the assessee filed Income-tax return for the assessment year 2001-02, declaring the total income at Rs. 5,61,096/- along with the audit report under Section 44-AB of the Act. The audit report for claim of deduction under Section 80 HHC of the Act in form 10 CCAC and the audit report for claim of deduction under Section 80 IB of the Act were attached with the Income-tax return. The assessment was completed under Section 143 (3) of the Act on 27.3.2003 at Rs. 5,86,096/-. Subsequently, a notice under Section 148 of the Act was issued for re-assessment on the ground that some income has escaped assessment. After considering the objections filed by the assessee to the issuance of notice under Section 148 of the Act, the Joint Commissioner of Income Tax (Appeals) Range VI, Ludhiana, proceeded with the re-assessment and vide order dated 28.12.2006 (Annexure A-3), while following the decision of the Supreme Court in CIT v. Sterling Foods (1999) 237 ITR 579 and a decision of this Court in Liberty India v. Commissioner of Income-Tax (2007) 293 ITR 520, disallowed the deduction claimed by the assessee on account of the export incentives and interest received under Section 80-IB of the Act. Accordingly, an amount of Rs.24,79,620/- received by the assessee as export incentives was reduced from the net profit declared by the assessee in the profit and loss account for the purposes of determination of correct deduction under Section 80-IB of the Act. Regarding the claim of the assessee for deduction of Rs.17,67,256/- under Section 80 HHC of the Act,
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it was held that the said deduction was rightly claimed and no addition on that account was made. The aforesaid order was affirmed in appeal by the Commissioner of Income Tax (Appeals)-II, Ludhiana, vide order dated 31.3.2008, as well as by the ITAT vide its order dated 26.2.2009.
During the course of arguments, learned counsel for the appellant-assessee could not controvert the legal position that in view of the decision of the Supreme Court in Sterling Foods' case (supra) and the decision of this Court in Liberty India's case (supra) , no deduction on account of the Duty Draw Back and the Duty Entitlement Pass Book Scheme (hereinafter referred to as `DEPB') under Section 80-IB of the Act can be allowed. It is also conceded position that the judgment of this Court in Liberty India's case (supra) has been affirmed by the Apex Court in Liberty India v. Commissioner of Income-Tax, (2009) 317 ITR 218. From this, it is clear that in the initial assessment, the benefit of deduction of the Duty Draw Back and DEPB under Section 80-IB of the Act was wrongly granted to the appellant-assessee, for which he was not entitled. However, learned counsel for the appellant-assessee argued that initiation of the reassessment proceedings was not in consonance with the requirement of Sections 147 and 148 of the Act. Learned counsel argued that the Assessing Officer was not justified in re-opening the assessment, merely on the basis of change of opinion, and while framing the opinion that some income chargeable to tax has escaped assessment on account of non-disclosure of fully and truly all material facts necessary for assessment for the relevant
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assessment year. Therefore, he submitted that as far as the assessee is concerned, he has fully disclosed all the material facts necessary for assessment. The audit report as well as the accounts were shown and in no way, it can be said that the assessee had not disclosed the relevant facts. Thus, the initiation of proceedings of re-assessment itself was bad and the orders passed in the said proceedings are liable to be set aside. Learned counsel argued that while taking the wrong interpretation of the proviso to Section 147 of the Act, the ITAT has wrongly come to the conclusion that the re-assessment proceedings were rightly initiated, whereas the revenue has not discharged the onus for bringing on record the material to show that disclosure was not made fully and truly.
After hearing learned counsel for the appellant-assessee and going through the order passed by the ITAT, we do not find any ground to interfere in this appeal, as in our opinion no substantial question of law is arising in this appeal, because a pure finding of fact has been recorded to the effect that the re-assessment proceedings have rightly been initiated after framing the opinion that some income chargeable to tax has escaped assessment. Under Section 147 of the Act, after its amendment with effect from 1.4.1989, wide power has been given to the Assessing Officer even to cover the cases where the assessee had fully disclosed the material facts. The only condition for action is that the Assessing Officer should have reason to believe that the income chargeable to tax had escaped assessment. Such belief can be reached in any manner, and is not qualified by a pre-
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condition of faith and true disclosure of material facts by the assessee as contemplated in the pre amended Section 147 (a) of the Act. In the instant case, as far as merits of the case is concerned, with regard to the permissible deduction under Section 80-IB of the Act, it is clear position that the assessee was not entitled to claim deduction on account of Duty Draw Back and DEPB incentives, as these incentive profits do not fall within expression “profits derived from industrial undertaking” in Section 80-IB of the Act. Therefore, Duty Draw Back and DEPB do not form part of net profits of the industrial undertaking for the purposes of Section 80-IB of the Act.
In view of the above, we do not find any illegality in the impugned order and in our opinion, no substantial question of law is arising from the impugned order of the ITAT.
Dismissed.
( SATISH KUMAR MITTAL ) JUDGE
November 18, 2009 ( MEHINDER SINGH SULLAR ) ndj JUDGE
2 issues framed by the court
Whether initiation and conclusion of assessment proceedings under Section 147 is sustainable without discharging onus for bringing material showing disclosure not made fully and truly?
Whether an assessee is entitled to claim deduction under Section 80-IB for Duty Draw Back and DEPB incentives?
Colour shows how this judgement treated each authority
CIT v. Sterling FoodsReferred¶18
CIT v. Sterling Foods (1999) 237 ITR 579
Liberty India v. Commissioner of Income-TaxReferred¶18
Liberty India v. Commissioner of Income-Tax (2007) 293 ITR 520
Liberty India v. Commissioner of Income-TaxReferred¶22
Liberty India v. Commissioner of Income-Tax, (2009) 317 ITR 218
5 provisions across 1 enactments
Jawand Sons
Commissioner of Income Tax (Appeals)-II, Ludhiana
Satish Kumar Mittal
Mehinder Singh Sullar
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
