M/s Surya Pharmaceuticals Ltd.,, Chandigarh v. ACIT,, Chandigarh

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 ACIT CIRCLE 1(1) VS. M/S SURYA PHARMACEUTIC ALS 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 ACIT CIRC LE 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. A CT. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE APPEAL FILED BY T HE REVENUE. 2 2. THE APPEAL FILED BY THE REVENUE AND CROSS OBJEC TION 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 AMEND ED GROUNDS OF APPEAL:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) IN APPEAL NO. 27/P/06-07 THROUG H ORDER DATED 10.01.2007 HAS ERRED IN PASSING A NON- SPEAKING ORDER IN CONTRAVENTION OF SECTION 250(6) O F THE INCOME TAX ACT 1961. THAT THE LD. CIT(A) HAS NOT STATED WITH CLARITY THE POINTS ARISING IN THE APPE AL THE EVIDENCE ON RECORD THE SUBMISSIONS OF THE APPELLAN T- ASSESSEE THE DECISION OF THE LD. CIT(A) THEREON AN D THE REASONS FOR SUCH DECISION. THAT A DECISION DOES NO T 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 ORDE R OF ASSESSMENT ON THE GROUND OF VALIDITY OF JURISDICTIO N HOLDING IT TO BE A NULLITY BY:- I) IGNORING CBDTS ORDER IN F. NO. 32012/9/2004- AD.VI DATED 24.2.2006 PARAGRAPH 3 WHEREOF HAD CONFERRED VALID JURISDICTION UPON SMT. KALPANA KATA RIA 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 TH E BOARD EXERCISE THE POWERS AND PERFORM THE FUNCTION S 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) WHER EBY THE ASSESSEE SHOULD HAVE CHALLENGED THE JURISDICTIO N 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 GROUN DS PERTAINING TO THE ALLOWANCE OF DEDUCTION U/S 80IB A ND 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 ER RED 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 REST ORED. 4. THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED T HE FOLLOWING AMENDED GROUNDS OF APPEAL:- 1 THAT THE APPELLATE ORDER DATED 10.01.2007 IN APPE AL 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 CANCEL ING 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 RUL E 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 TH E ACTION OF LD. ASSESSING OFFICER BY TREATING ADVANCE LICENCE AS INCENTIVE FOR THE PURPOSES OF CALCULATIO N 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 T HE 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 RESP ECT OF THE VALIDITY OF JURISDICTION OF THE ASSESSING OFFICER IN COMPLETING THE ASSESSMENT ORDER. 6. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE HAD A REGISTERED OFFICE AT DELHI WHICH WAS SHIFTED TO BA DDI. THE JURISDICTION OVER THE CASE WAS TRANSFERRED TO CIRCLE I (1) CHA NDIGARH 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) CHANDIGA RH. THE ASSESSEE RAISED OBJECTION REGARDING THE ISSUE OF JURISDICTIO N OF JOINT CIT WHO PASSED THE ORDER BEFORE THE CIT(A). THE MAIN GRIE VANCE OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THOUGH THERE WAS A NOTI FICATION OF THE BOARD EMPOWERING CCIT / DGITS AS CONTEMPLATED U/S 120 (4 ) OF THE INCOME TAX ACT FOR VESTING THE JURISDICTION IN THE JOINT C ITS FOR CARRYING ON THE FUNCTIONS OF AN ASSESSING OFFICER HOWEVER NO CON SEQUENTIAL 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 TH E CIT(A) THAT MS KALPANA KATARIA HAD JURISDICTION OVER ASSESSEES CA SE AND ON HER PROMOTION AS JCIT THE QUESTION AROSE REGARDING HER JURISDICTION AND THE CONSEQUENT ASSESSMENT ORDER PASSED WITHOUT INTIMATI NG THE ASSESSEE THAT AN ORDER GRATING HER JURISDICTION HAD BEEN PASSED. THE CIT(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 DEFI NED IN SECTION.. 2(7A) OF THE ACT. HENCE THE ASSESSMENT ORDER WAS HELD T O BE NULLITY AND CANCELLED. 5 7. REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN CANCELLING THE ORDER OF ASSESSMENT ON THE GROUND OF VALIDITY OF JU RISDICTION IN THE OFFICER PASSING THE ASSESSMENT ORDER. THE REVENUE IN ADDIT ION TO THE AMENDED GROUNDS OF APPEAL HAD RAISED THE FOLLOWING ADDITION AL GROUND OF APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A) IN APPEAL NO. 27/P/06-07 THROUG H ORDER DATED 10.1.2007 HAS GROSSLY ERRED IN IGNORIN G 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 O F INCOME TAX WERE ACCORDED JURISDICTION TO EXERCISE T HE POWERS AND PERFORM THE FUNCTIONS EITHER INDIVIDUALL Y OR CONCURRENTLY OR BOTH ALONGWITH THE DESIGNATED SUBORDINATE ASSESSING OFFICERS SPECIFIED IN COL.6 O F THE SCHEDULE TO THE SAID ORDER. THAT A COPY OF THE AFO RESAID ORDER DATED 15/19.10.2001 HAD DULY BEEN ENDORSED TO THE LEARNED CIT(A) CHANDIGARH. 8. THE SAID ADDITIONAL GROUNDS OF APPEAL BEING LEGA L 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 FAI RLY AGREED THAT THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISS UE RAISED IN THE CASE OF MR. KRISHAN BANSAL VS. ACIT (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 I N VIEW OF THE PROVISIONS OF SECTION 120 (4)(B) INCOME TAX ACT HAS BEEN DELIB ERATED UPON BY THE TRIBUNAL IN THE CASE OF M/S KRISHAN BANSAL VS. ACI T (SUPRA) WHEREIN VIDE ORDER DATED 30 TH JULY 2010 IT HAS BEEN HELD AS UNDER:- 6 19. THE ASSESSEE BY WAY OF ADDITIONAL GROUNDS OF A PPEAL RAISED DURING THE COURSE OF HEARING HAS CHALLENGED THE JURISDICTION OF THE ASSESSING OFFICER INITIATING TH E PROCEEDINGS U/S 147/148 OF THE ACT AND THEREAFTER COMPLETING TH E ASSESSMENT PROCEEDINGS IN THE CASE. THE REASONS FO R REOPENING THE ASSESSMENT WERE RECORDED BY THE ADDL. CIT RANGE-VI CHANDIGARH AND THE ASSESSMENT ORDER HAS B EEN PASSED BY THE JOINT CIT RANGE-VI CHANDIGARH. TH E 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 AS SESSMENT PROCEEDINGS. AS PER THE LD. AR FOR THE ASSESSEE T HE ADDL. CIT DOES NOT ASSUME THE POWER OF AN ASSESSING OFFICER I N THE ABSENCE OF ORDER U/S 120(4) CLAUSE (B) OF THE ACT. ELABORATE SUBMISSIONS WERE MADE BY THE ASSESSEE IN THIS REGAR D. 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 A MENDED 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 A ND 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 FUN CTIONS OF THE ASSESSING OFFICER WHERE SO AUTHORIZED BY THE BO ARD OR CIT. FURTHER NOTIFICATION NO.732(E) DATED 31.7.20 01 WAS ISSUED IN THIS REGARD BY THE CBDT. VIDE GAZETTE NO TIFICATION CBDT DIRECTED THE JOINT CIT TO ACT AS ASSESSING OFF ICER U/S 120(4)(B) OF THE ACT. VIDE LETTER DATED 15.10.2001 CIT-II CHANDIGARH CONFERRED THE JURISDICTION U/S 120 OF TH E ACT UPON THE ADDL./JOINT CIT. FURTHER RELIANCE WAS PLACED B Y THE LD. DR FOR THE REVENUE ON THE RATIO LAID DOWN IN BINDAL APPARELS LTD. 169 TAXMAN 49(DEL). THE LD. DR FOR THE REVEN UE FURTHER POINTED OUT THAT THE JURISDICTION IN THE INSTANT CA SE 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 PLAC ED 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 1 27 OF THE ACT THE SAME IS TO BE CHALLENGED BY WAY OF WRIT PE TITION 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 IN HERENT LACK OF JURISDICTION OF THE ASSESSING OFFICER INITIATING THE RE- ASSESSMENT PROCEEDINGS AND THEREAFTER COMPLETING TH E 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 TR ANSFERRED U/S 127 OF THE ACT FROM ITO-4(1) CHANDIGARH TO JOINT C IT RANGE- VI CHANDIGARH VIDE ORDERS PASSED BY THE CIT-II C HANDIGARH DATED 27.2.2003. THE COPY OF THE SAID ORDERS ARE PLACED AT PAGES 1-4 OF THE PAPER BOOK. THEREAFTER REASONS F OR REOPENING OF THE ASSESSMENT RELATING TO THE CAPTION ED 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 JOI NT CIT RANGE-VI CHANDIGARH. 21. THE HON'BLE PUNJAB & HARYANA COURT IN JASVINDE R KAUR KOONER (SUPRA) HAD HELD AS UNDER :- IF THE ASSESSEE IS AGGRIEVED BY AN ORDER OF TRANSFER THE REMEDY OF THE ASSESSEE IS TO CHALLENG E SUCH AS ORDER IN INDEPENDENT PROCEEDING EITHER BEFORE TH E HIGHER ADMINISTRATIVE AUTHORITIES AS PER THE ACT OR IN ANY INDEPENDENT PROCEEDINGS BY WAY OF A WRIT PETITI ON OR OTHER WISE. IF NO SUCH CHALLENGE IS MADE AT THE INITIAL STAGE THE ISSUE CANNOT BE RAISED IN AN APPEAL AGAIN ST THE ASSESSMENT ORDER. 22. IN VIEW OF THE ABOVE-SAID RATIO LAID DOWN BY TH E HON'BLE PUNJAB & HARYANA COURT THE ASSESSEE IF AGGRIEVED B Y THE ORDER OF TRANSFER OF JURISDICTION TO THE JOINT CIT RANGE-VI CHANDIGARH BY WAY OF ORDER PASSED U/S 127 OF THE AC T HAS TO CHALLENGE THE SAME EITHER BEFORE THE HIGHER ADMINIS TRATIVE AUTHORITIES UNDER THE ACT OR IN INDEPENDENT PROCEED INGS BY WAY OF WRIT PETITION OR OTHERWISE. THE ASSESSEE CA NNOT RAISE SUCH ISSUE IN AN APPEAL FILED BEFORE THE TRIBUNAL. THE SECOND PLEA OF THE ASSESSEE IS NON COMPLIANCE TO THE PROVI SIONS OF SECTION 120(4)(B) OF THE ACT UNDER WHICH FIRSTLY T HE CBDT HAS TO EMPOWER CIT AND SECONDLY THE CIT TO AUTHORIZE IN WRITING. THE CBDT VIDE NOTIFICATION NO.267/2001 DATED 17.9.2 001 HAD ISSUED INSTRUCTIONS TO CIT IN CONNECTION WITH CONFE RMENT OF JURISDICTION TO ADDL./JOINT CIT TO EXERCISE THE POW ERS AND FUNCTIONS OF THE ASSESSING OFFICER WHEN SO AUTHORI ZED. THE CIT VIDE LETTER NO. FNO.2/CIT/CHD-II/JURIS./2001-20 02/752 DATED 15.10.2001 IN EXERCISE OF POWERS CONFERRED RE AD WITH CBDT NOTIFICATION NO.S.O. NO.732(E) DATED 31.7.2001 ORDERED AND AUTHORIZED ADDL./JOINT CITS TO EXERCISE THE POW ERS AND PERFORM THE FUNCTIONS EITHER INDIVIDUALLY OR CONCUR RENTLY OR BOTH ALONGWITH THEIR DESIGNATED SUBORDINATE AUTHORI TIES (AOS). THE COPY OF THE SAID ORDER HAS BEEN FILED ON RECORD BY LD. DR FOR THE REVENUE. THE CIT-II VIDE ORDER PASSED UNDE R SECTION 127 OF THE ACT DATED 27.2.2003 TRANSFERRED THE CASE OF THE ASSESSEE FROM ITO-4(1) TO JOINT CIT RANGE-VI CHAN DIGARH. THE COPY OF SAID ORDER IS PLACED ON RECORD. THE CB DT 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 NO TIFICATIONS 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 T HE 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 CI TI CHANDIGARH UNDER WHICH THE JOINT CITS HAD BEEN ACCORDED JURIS DICTION TO EXERCISE THE POWERS AND PERFORM THE FUNCTIONS EITHER INDIVIDUALL Y OR CONCURRENTLY 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 JURISDICTIO N UPON SMT. KALPANA KATARIA IN THE FOLLOWING WORDS:- ON PROMOTION THESE OFFICERS WILL CONTINUE TO EXE RCISE THE FUNCTIONS AND POWERS OF THE POST THEY WERE HOLD ING PRIOR TO THEIR PROMOTION TILL FURTHER ORDERS. 11. IN VIEW OF THE ABOVE SAID AND THE INITIAL NOTIF ICATION OF THE CBDT AND OUR REASONING IN THE CASE OF MR KRISHAN BANSAL VS. ACIT (SUPRA) WE SET ASIDE THE ORDER OF CIT(A) AND HOLD THAT THE ASS ESSING 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 OR DER. THE GROUND NO. 2 RAISED BY THE REVENUE IN THIS REGARD IS THUS ALLOWE D. 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 A CT. BOTH THE LEARNED AR FOR THE ASSESSEE AND THE LEARNED DR FOR THE REVE NUE FAIRLY ADMITTED THAT THE ISSUE STANDS COVERED BY THE ORDER OF THE T RIBUNAL IN ASSESSEES 9 OWN CASE RELATING TO ASSESSMENT YEARS 2001-02 & 200 4-05 WHEREIN THE SAID ISSUE HAS BEEN REMITTED BACK TO THE FILE OF AS SESSING OFFICER. 13 THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE DEDUCTION CLAIMED U/S 80 IB OF THE ACT WAS NOT ALLOWED BY THE ASSESSI NG OFFICER AS THE AUDIT REPORT IN FORM NO.10CCB UNDER THE PROVISIONS OF SEC TION 80 IB (13) READ WITH SECTION 80 IA(7) OF THE ACT WAS NOT FILED. TH E DEDUCTION CLAIMED U/S 80HHC OF THE ACT IN RESPECT OF THE PANCHKULA UNIT A ND BADDI UNIT WAS RECOMPUTED IN RESPECT OF THE MISCELLANEOUS / OTHER INCOME AND DEPB INCENTIVE AVAILED BY THE ASSESSEE AND THEIR NON DED UCTION 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 AN D IN ORDER TO CLAIM BENEFIT OF PROVISO TO SECTION 80HHC THE CONDITION LAID THEREIN HAD TO BE FULFILLED. THE ASSESSING OFFICER DENIED THE DEDUC TION U/S 80HHC OF THE ACT IN VIEW OF THE AMENDMENT TO SECTION 80HHC OF TH E ACT AS THE TURNOVER WAS MORE THAN 10 CRORES AND THE ASSESSEE H AD NOT FULFILLED THE CONDITIONS AS PER THE AMENDED PROVISIONS OF LAW. 14. BEFORE THE CIT(A) THE LEARNED AR FOR THE ASSES SEE 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) REPLY ING ON SERIES OF DECISIONS IN TURN RELIED UPON BY THE LEARNED AR F OR THE ASSESSEE HELD THAT THE REQUIREMENT OF FILING THE AUDIT REPORT WERE DIR ECTORY PROVISION AND IF THE SAME WAS FILED DURING THE ASSESSMENT PROCEEDING S THE CLAIM WAS ALLOWABLE. IT WAS FURTHER HELD BY THE CIT(A) THAT THE APPELLATE PROCEEDING BEFORE HIM WERE CONTINUATION OF THE ASSESSMENT PROC EEDINGS AND THE 10 POWERS OF CIT(A) WERE CO-EXTENSIVE TO THAT OF THE A SSESSING 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 CIT(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 T HE ADMISSION OF THE SAID EVIDENCE FURNISHED BEFORE THE CIT(A) AND AS SU CH 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 CLAI M OF DEDUCTION U/S 80 IB OF THE ACT SHALL BE ALLOWED IN CASE THE AUDIT REPOR T 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 FURNISHE D ALONG WITH THE RETURN OF INCOME NOR WAS IT FILED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD WAS TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NEVER POINTED OUT BY THE ASSESSING OFFICER THAT THE SAID AUDIT REPORT WAS NOT AVAILABLE WITH T HE RETURN OF INCOME. THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80 IB O F THE ACT SUMMARILY ON THE GROUND OF NON FURNISHING OF AUDIT REPORT WAS IN CHALLENGE BEFORE THE CIT(A). THE ASSESSEE FURNISHED THE COPY OF THE AUDIT REPORT IN FORM NO. 10CCB BEFORE THE CIT(A) AND THE SAME WAS ACCEPT ED AND THE DEDUCTION ALLOWED TO THE ASSESSEE BY THE CIT(A). H OWEVER 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 RESP ECT OF CLAIM OF DEDUCTION U/S 80 IB OF THE ACT WAS NOT CONFRONTED T O THE ASSESSING 11 OFFICER AND THE DEDUCTION WAS ALLOWED WITHOUT VERIF YING THE PARTICULARS OF THE CLAIMS MADE BY THE ASSESSEE. WE ARE IN AGREEMEN T WITH THE ORDER OF CIT(A) TO THE EXTENT THAT THE FURNISHING OF THE AUD IT REPORT ALONGWITH THE RETURN OF INCOME ARE DIRECTORY PROVISIONS AND AN OP PORTUNITY SHOULD HAVE BEEN ALLOWED BY THE ASSESSING OFFICER BEFORE REJECT ING THE CLAIM OF THE ASSESSEE. HOWEVER WE ARE OF THE VIEW THAT ONCE TH E ASSESSEE HAD FURNISHED THE AUDIT REPORT IN FORM NO. 10CCB BEFORE THE CIT(A) FURTHER REQUIREMENT OF LAW IS THAT THE SAME SHOULD HAVE BEE N CONFRONTED TO THE ASSESSING OFFICER FOR VERIFICATIONS OF THE PARTICU LARS OF CLAIM OF DEDUCTION. ACCORDINGLY WE REVERSE THE ORDER OF CIT (A) IN THIS REGARD AND REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFIC ER TO COMPUTE THE DEDUCTION CLAIMED BY THE ASSESSEE IN ACCORDANCE WIT H LAW AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . 16. THE NEXT ISSUE RAISED BY THE REVENUE IS IN REGA RD TO THE CLAIM OF DEDUCTION U/S 80HHC OF THE ACT. THE ASSESSING OFFI CER HAD DENIED THE DEDUCTION ON ACCOUNT OF DEPB INCENTIVE IN VIEW OF T HE AMENDED PROVISIONS OF SECTION 80HHC AS THE TOTAL TURNOVER O F 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 B Y INCLUDING DERC / ADVANCE LICENSE AS PART OF TOTAL TURN OVER AND BY E XCLUDING 90% OF DERC / ADVANCE LICENSE IN DETERMINING THE PROFITS OF THE BUSINESS UNDER CLAUSE (BAA) TO EXPLANATION U/S 80HHC (4C) OF THE ACT. I T 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 CIT(A) ALSO HELD THAT THE EXP ORT TURN OVER THE ASSESSEE WAS MORE THAN RS. 10 CRORES THE FIFTH PRO VISO WAS APPLICABLE AND 12 THE ASSESSING OFFICER WAS DIRECTED TO COMPUTE THE D EDUCTION AFTER TAKING INTO ACCOUNT THE SAID PROVISO AS WELL AS OTHER DIRE CTIONS IN THE CASE. 17. ADMITTEDLY THE ISSUE OF CLAIM OF DEDUCTION U/S 80HHC OF THE ACT AROSE BEFORE THE TRIBUNAL IN ITA NOS. 732 & 733/CH D/2007 IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2001-02 AND 2004-05 WHEREIN VIDE ORDER DATED 27.2.2009 THE ISSUE HAS BEEN REST ORED BACK TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH AS PER PA RA 31 OF THE SAID ORDER. IN LINE WITH THE RATIO LAID DOWN BY THE TRIBUNAL W E 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 OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUND NOS. 3 & 4 RAI SED 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 CIT(A). WE FIND NO MERIT IN THE STAND OF THE REVENUE IN VIEW OF OUR REFERENCE TO THE FINDINGS OF THE CIT(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 CIT(A) AND HENCE THE SAME ARE DISMISSE D. 20. THE ISSUE IN GROUND NO.4 IS IN SUPPORT OF THE O RDER 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 TA X 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 DI SMISSED. 21. THE ISSUES IN GROUNDS NOS. 5 TO 7 ARE IN RESPEC T 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 GRIEVAN CE 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 NO S 5 TO 7 ARE ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT APPEAL OF THE REVENUE AND CROSS O BJECTION OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH AUGUST DAY OF AUGUST 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH AUGUST 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR