Soma Textiles & Industries Ltd.,, Ahmedabad v. The Addl.CIT, Circle-8,, Ahmedabad

ITA 1116/AHD/2007 | 2003-2004
Pronouncement Date: 24-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 111620514 RSA 2007
Assessee PAN AADCS0405R
Bench Ahmedabad
Appeal Number ITA 1116/AHD/2007
Duration Of Justice 3 year(s) 9 month(s) 9 day(s)
Appellant Soma Textiles & Industries Ltd.,, Ahmedabad
Respondent The Addl.CIT, Circle-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 24-12-2010
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year 2003-2004
Appeal Filed On 15-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D. AGRAWAL V.P. (AZ) AND HO N'BLE SHRI T.K. SHARMA J.M.) I.T.A. NO. 1116/AHD./2007 ASSESSMENT YEAR : 2003-2004 SOMA TEXTILES & INDUSTRIES LTD. AHMEDABAD VS.- A DDL. COMMISSIONER OF INCOME TAX (PAN : AADCS 0405 R) (APPELLANT) (RESP ONDENT) & I.T.A. NO. 211/AHD/2009 ASSESSMENT YEAR : 2003-2004 ASSISTANT COMMISSIONER OF INCOME TAX -VS.- SOMA TEXTILES & INDUSTRIES LTD. (OSD) CIRCLE-8 AHMEDABAD AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PAMIL H. SHAH DEPARTMENT BY : SHRI K. MADHUSUDAN SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : BOTH THESE APPEALS WERE HEARD ON THE SAME DATE AR GUED BY THE LD. COMMON REPRESENTATIVE THEREFORE THESE ARE DECIDED BY THI S COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE FIRST TAKE UP THE ASSESSEES APPEAL I.E. ITA NO. 1111/AHD/2007 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- (1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF A.O. DISALLOWING CLAIM FOR DEDUCTION U/S. 10B OF THE ACT IN RESPECT OF 100% EOU AT BARAMATI WITHO UT PROPER CONSIDERATION OF THE SUBMISSIONS FILED. IN VIEW OF THE FACTS DET AILS AND EVIDENCES FILED THE APPELLANTS CLAIM FOR DEDUCTION U/S. 10B OF THE ACT REQUIRES TO BE ALLOWED. (2) THE LEARNED CIT(A.) HAS ERRED IN LAW AND ON FACTS I N NOT ADJUDICATING THE GROUND OF APPEAL DISPUTING THE ADDITION OF RS.70 14 0/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF 1/10 TH OF CAR EXPENSES FOR PERSONAL USE OF THE SAME. IN VIEW OF THE FACTS AND SUBMISSIONS FILED AS WELL AS LEGAL POSITION LAID DOWN BY THE JURISDICTIONAL COURT OF LAW AND SINCE T HE SAID GROUND OF APPEAL HAVING BEEN DECIDED IN FAVOUR OF THE APPELLANT BY T HE LEARNED CIT(A.) IN AY 2002-03 THE IMPUGNED ADDITION OF RS.70 140/- REQUI RED TO BE DELETED. 2 ITA NO. 1116-AHD-2007 & ITA-211-AHD-2009 3. FACTS RELATING TO CONTROVERSY INVOLVED IN GROUND NO. 1 ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKET ING OF VARIOUS TEXTILE PRODUCTS NAMELY CLOTHS YARN ETC. ITS MAIN MANUFACTURING UNITS ARE LOCATED AT AHMEDABAD AND BARAMATI IN MAHARASHTRA. FOR THE ASSESSMENT YEAR UNDER APPEAL IT FILED THE RETURN OF INCOME DECLARING NIL INCOME. IN THIS RETURN THE ASSESSEE HAS CLAIMED TH AT ITS BARAMATI UNIT IS A 100% EOU AND CLAIMED DEDUCTION UNDER SECTION 10B IN RESPECT OF P ROFITS OF THAT UNIT. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAI MED UNDER SECTION 10B ON THE GROUND THAT BASIC REQUIREMENT OF 100% IS NOT FULFILLED. ON APPE AL IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ACT ION OF ASSESSING OFFICER. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) THE ASSESSEE IS IN APPEAL. 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI PAMIL SHAH LD. COUNSEL APPEARED AND CONTENDED THAT THE PROVISION OF INCOME TAX ACT REQUIRES THAT THE UNDERTAKING SHOULD HAVE BEEN APPROVED AS 100% EOU AND IT NOWHER E SPEAKS THAT THE UNIT SHOULD EXPORT THE ENTIRE PRODUCTION. IT WAS FURTHER CONTENDED THAT SU B-SECTION 4 OF SECTION 80IB PROVIDES FORMULA FOR COMPUTING THE DEDUCTION WHICH STATES THAT PROFI TS IN PROPORTION OF EXPORT TURNOVER TO THE TOTAL TURNOVER IS TO BE TAKEN WHICH IMPLIEDLY SUGGESTS TH AT THERE WILL BE SOME DOMESTIC TURNOVER AND BENEFIT OF DEDUCTION IS LIMITED TO EXPORT TURNOVER IN TERMS OF SALES PROCEEDS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. BUT THAT DOES NOT MEA N THAT DEDUCTION IS TO BE DENIED IN TOTALITY. IT WAS ALSO CONTENDED THAT SEEPZ (SPECIAL ECONOMIC ZON E MINISTRY OF COMMERCE & INDUSTRY MUMBAI) PERMITTED DTA SALES. PARA 9.5 AND PARA 9.9( B) OF IMPORT EXPORT POLICY WHICH STATES THAT DTA SALE IS PERMITTED PROVIDED DUTY PAYMENTS A RE MADE NET FOREIGN EXCHANGE EARNING PERCENTAGE ACHIEVED. THE LD. COUNSEL OF THE ASSESSE E RELIED ON THE DECISION OF THE ITAT THIRD MEMBER BENCH CHENNAI IN THE CASE OF TUBE INVESTMEN TS OF INDIA LIMITED VS.- ACIT REPORTED IN [2009] 117 ITD 239 (CHENNAI)(THIRD MEMBER) DELI VERED ON 05.12.2008 WHEREIN IT WAS HELD THAT WHERE ASSESSEE AN EXPORT-ORIENTED UNIT HAD D OMESTIC SALES OF MORE THAN 25 PER CENT OF TOTAL SALES VALUE DURING THE RELEVANT ASSESSMENT YEAR IT WAS ENTITLED TO PARTIAL DEDUCTION PROPORTIONATELY ON EXPORT TURNOVER AS PER PROVISION S OF SUB-SECTION 4 OF SECTION 80IB OF THE INCOME TAX ACT 1961. HE ACCORDINGLY CONTENDED THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW PROPORTIONATE DEDUCTION AS PROVIDED IN SUB-SECTION 4 OF SECTION 80IB(10) OF THE ACT. 3 ITA NO. 1116-AHD-2007 & ITA-211-AHD-2009 5. ON THE OTHER HAND SHRI K. MADHUSUDAN LD. SR. D .R. APPEARING ON BEHALF OF THE REVENUE COULD NOT CONTROVERT THE AFORESAID PRAYER OF THE LD . COUNSEL OF THE ASSESSEE TO ALLOW PROPORTIONATE DEDUCTION AS PER PROVISIONS CONTAINED IN SUB-SECTIO N 4 OF SECTION 80IB(10) OF THE INCOME TAX ACT 1961. 6. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUT HORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PA SSED THE IMPUGNED ORDER ON 05.01.2007. THE DECISION OF ITAT THIRD MEMBER BENCH CHENNAI I N THE CASE OF TUBE INVESTMENTS OF INDIA LIMITED VS.- ACIT REPORTED IN [2009] 117 ITD 239 ( CHENNAI)(THIRD MEMBER) WAS DELIVERED ON 05.12.2008. ADMITTEDLY THIS DECISION WAS NOT AVAILA BLE WHEN LEARNED COMMISSIONER OF INCOME TAX(APPEALS) PASSED THE IMPUGNED ORDER. BE THAT IT MAY BE SUB-SECTION (4) OF SECTION 80IB(10) CLEARLY PROVIDES THE FORMULA FOR COMPUTING DEDUCTIO N WHICH STATES THAT PROFITS IN PROPORTION OF EXPORT TURNOVER TO THE TOTAL TURNOVER IS TO BE TAKE N WHICH IMPLIEDLY SUGGESTS THAT THERE WILL BE SOME DOMESTIC TURNOVER AND BENEFIT OF DEDUCTION IS LIMITED TO EXPORT TURNOVER IN TERMS OF SALES PROCEEDS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ALLOW THE PROPORTIONATE DEDUCTION AS PER DECISIO N OF THE ITAT THIRD MEMBER BENCH CHENNAI IN THE CASE OF TUBE INVESTMENTS OF INDIA LIMITED (S UPRA). 7. WITH REGARD TO GROUND NO. 2 THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE ASSESSEE IS A COMPANY AND IT IS ARTIFICIAL JUDICIAL PERSON A ND THEREFORE NO DISALLOWANCE ON ACCOUNT OF PERSONAL USER CAN BE MADE. IN SUPPORT OF THIS RELI ANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENG INEERING VS.- CIT REPORTED IN 253 ITR 749 (GUJ.). TO A QUERY FROM THE BENCH THE LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT ADJUDICATED THE GROUND NO. 3 WHEREBY THE ASSESSEE CHALLENGED THE AD DITION OF RS.70 140/- ON ACCOUNT OF DISALLOWANCE OF 1/10 TH OF CAR EXPENSES FOR PERSONAL USE. THE LD. D.R. POI NTED OUT THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE DIRECTED TO DECIDE THIS GROUND OF APPEAL IN ACCORDANCE WITH LAW. 7.1. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED O RDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT ADJUDICATED THE GROUND NO. 3. WE ACCORDINGLY DIRECT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO DECIDE GROU ND NO. 3 THROUGH WHICH IT CHALLENGED THE 4 ITA NO. 1116-AHD-2007 & ITA-211-AHD-2009 DISALLOWANCE OF 1/10 TH OF CAR EXPENSES AMOUNTING TO RS.70 140/- AFTER GIV ING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 8. NOW WE TAKE UP THE REVENUES APPEAL I.E. ITA NO . 211/AHD/2009 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- (1) THE LD. CIT(A.) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE PENALTY LEVIED BY THE A.O. U/S. 271(1)(C) OF THE ACT OF RS.19 00 140/ - ON THE GROUND THAT THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESS EE TO CLAIM DEDUCTION U/S 10B OF THE ACT. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XIV AHMEDABAD OUGHT TO HAV E UPHELD THE ORDER OF THE ASSESSING OFFICER. 9. AT THE TIME OF HEARING BEFORE US THE LD. D.R. P OINTED OUT THAT THE ASSESSING OFFICER LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON T HE BASIS OF NON-ALLOWANCE OF DEDUCTION UNDER SECTION 10B BECAUSE THE ASSESSEE HAS NOT FULFILLED BASIC REQUIREMENT OF 100% EXPORT. THE LD. D.R. FURTHER POINTED OUT THAT IF IN THE QUANTUM APP EAL IT IS HELD THAT ASSESSEE IS ENTITLED TO PROPORTIONATE DEDUCTION AS PROVIDED IN SUB-SECTION 4 OF SECTION10B OF THE INCOME TAX ACT 1961 IN THAT EVENT ASSESSING OFFICER BE DIRECTED TO RE- WORK OUT THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF CLAIMING EXCESSI VE DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT 1961. THE LD. D.R. FURTHER CLARIFIED THAT BY CLAIMING INADMISSIBLE OR HIGHER DEDUCTION THE ASSESSEE-COMPANY HAS CONCEALED PARTICULARS OF I NCOME AS PER EXPLANATION 1 TO SECTION 271(1)(C) THEREFORE ASSESSING OFFICER BE DIRECTED TO RE-WORK OUT THE PENALTY UNDER SECTION 271(1)(C). 10. ON THE OTHER HAND LD. COUNSEL APPEARING ON BEH ALF OF THE ASSESSEE CONTENDED THAT THE ASSESSEE WAS OF THE BONAFIDE BELIEF THAT IT IS ENTI TLED TO DEDUCTION UNDER SECTION 10B BECAUSE THE ASSESSEE-UNDERTAKING HAS BEEN APPROVED AS 100% EOU AND SECTION NOWHERE SPEAKS THAT UNIT SHOULD EXPORT THE ENTIRE PRODUCTION. THE VIEW OF AS SESSING OFFICER IS NOT FOUND CORRECT BY THE DECISION OF ITAT THIRD MEMBER BENCH CHENNAI IN TH E CASE OF TUBE INVESTMENTS OF INDIA LIMITED REPORTED IN [2009] 117 ITD 239 (CHENNAI)(TH IRD MEMBER). THEREFORE IT IS NOT A FIT CASE TO LEVY THE PENALTY UNDER SECTION 271(1)(C). HE ALS O RELIED ON THE LATEST JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. REPORTED IN 322 ITR 158 (SC). 5 ITA NO. 1116-AHD-2007 & ITA-211-AHD-2009 11. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE PENALTY MERELY ON THE GR OUND THAT DEDUCTION UNDER SECTION 10B WAS CLAIMED WITH MALAFIDE INTENTION ON THE PART OF THE ASSESSEE. IN OUR CONSIDERED OPINION THIS IS PRIMA FACIE INCORRECT WHICH IS EVIDENT FROM THE PRO VISIONS CONTAINED IN SUB-SECTION 4 OF SECTION 10B. THE ASSESSEE-UNDERTAKING HAS BEEN APPROVED AS 100% EOU AND SECTION 10B NOWHERE SPEAKS THAT UNIT SHOULD EXPORT THE ENTIRE PRODUCTIO N. PRIMA FACIE IT APPEARS THAT THE ASSESSEE WAS OF THE BONAFIDE BELIEF THAT BEING APPROVED AS 100% EOU IT IS ENTITLED TO DEDUCTION UNDER SECTION 10B IN RESPECT OF BARAMATI UNIT. THE HON'BLE SUPREM E COURT IN THE CASE OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. (SUPRA) WHILE CANCELLING THE PENALTY HELD THAT MAKING INCORRECT CLAIM DOES NOT A MOUNT TO CONCEALMENT OF PARTICULARS OF INCOME. THE HEAD-NOTES OF THE SAID DECISION READS AS UNDER :- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT THERE H AS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PEN ALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUN T TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOC UMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRACT P ENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. THEREFORE IN OUR CONSIDERED OPINION THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. IS SQUARELY APPLI CABLE TO THE FACTS OF THE ASSESSEES CASE. 6 ITA NO. 1116-AHD-2007 & ITA-211-AHD-2009 THEREFORE IN OUR OPINION THIS IS NOT A FIT CASE T O LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. 11.1. IN VIEW OF THE ABOVE THE VIEW TAKEN BY THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) IS UPHELD AND THE GROUND RAISED BY THE RE VENUE IN ITS APPEAL IS DISMISSED. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 24.12.2010 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 24/ 12 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.