DCIT, CHENNAI v. M/s. M.R.F.Limited, CHENNAI

ITA 1678/CHNY/2010 | 2006-2007
Pronouncement Date: 11-03-2011 | Result: Dismissed

Appeal Details

RSA Number 167821714 RSA 2010
Assessee PAN AAACM4154G
Bench Chennai
Appeal Number ITA 1678/CHNY/2010
Duration Of Justice 5 month(s) 3 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. M.R.F.Limited, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-03-2011
Date Of Final Hearing 03-03-2011
Next Hearing Date 03-03-2011
Assessment Year 2006-2007
Appeal Filed On 08-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE ACCOUNTANT MEMBER] I.T.A.NOS.1374 TO 1377/MDS/2010 ASSESSMENT YEARS : 2002-03 2004-05 2006-07 & 200 7-08 M/S MRF LTD NO.124 GREAMS ROAD CHENNAI 600 006 VS THE DY. CIT LARGE TAX PAYER UNIT CHENNAI [PAN AAACM4154G ] (APPELLANT) (RESPONDENT) I.T.A.NOS.1676 TO 1679/MDS/2010 ASSESSMENT YEARS : 2002-03 2004-05 2006-07 & 200 7-08 THE DY. CIT LARGE TAX PAYER UNIT CHENNAI VS M/S MRF LTD NO.124 GREAMS ROAD CHENNAI 600 006 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.VIJAYARAGHAVAN DEPARTMENT BY : SHRI SHAJI P. JACOB O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS IS A BUNCH OF EIGHT APPEALS FOUR EACH BY THE ASSESSEE AND THE REVENUE IN WHICH SAME ASSESSEE IS INVOLVED. W E HAVE HEARD THEM TOGETHER AND PROCEED TO DECIDE THEM BY A COMMON ORD ER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 2 -: I.T.A.NOS. 1676 TO 1679/MDS/2010 2. THESE ARE APPEALS OF THE REVENUE RESPECTIVELY FO R ASSESSMENT YEARS 2002-03 2004-05 2006-07 AND 2007-08. TH E FIRST COMMON ISSUE INVOLVED IN ALL THESE APPEALS RELATES TO EXPE NDITURE INCURRED ON MRF PACE FOUNDATION ONLY THE AMOUNTS OF EXPENDITUR E CLAIMED ARE DIFFERENT IN RESPECTIVE ASSESSMENT YEARS. 3. FOR THE SAKE OF CONVENIENCE WE FIRST DEAL WITH APP EAL IN I.T.A.NO. 1676/MDS/2010. IN ASSESSMENT YEAR 2002-03 EXPEND ITURE OF ` 1.59 CRORES HAS BEEN CLAIMED AND HAS BEEN DENIED. THE D ETAILED FACTS REGARDING THIS ISSUE ARE THAT THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 ON 31.10.2002 DE CLARING INCOME OF ` 69.07 CRORES. THIS INCOME WAS REVISED ON 30.3.200 4 TO ` 68.8093649. SUBSEQUENTLY ORDER U/S 143(3) WAS PASSED ON 31.3.2 005 IN WHICH TOTAL INCOME WAS DETERMINED AT ` 84 54 56 900/-. SUBSEQUENTLY RE- ASSESSMENT PROCEEDING WAS INITIATED AND IN ASSESSME NT MADE U/S 143(3) R.W.S 147 ON 23.12.2009 TOTAL INCOME WAS DE TERMINED AT ` 85 72 83 140/-. THIS EXPENDITURE OF ` 1.59 CRORES IS RELATED TO PROMOTION OF MRF PACE FOUNDATION BUT HAS BEEN CLA IMED AS AN ADVERTISEMENT EXPENDITURE ALLEGEDLY FOR THE PROMOTI ON OF THE COMPANYS BRAND IMAGE. BUT THIS CLAIM WAS NOT FOUND TO HAVE BEEN INCURRED ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 3 -: TOWARDS BUSINESS AND HAS BEEN TREATED BY THE ASSESS ING OFFICER AS EXPENDITURE INCURRED FOR THE SAKE OF CHARITY. ON T HE CONTRARY THE LD. CIT(A) HAS DELETED THIS ADDITION ON THE REASONING THAT SECTION 37(1) IS A RESIDUARY PROVISION IN SO FAR AS THE BUSINESS EXP ENDITURE IS CONCERNED. IN CASE ANY EXPENDITURE IS NOT COVERED UNDER SECTIO NS 30 TO 36 BUT FULFILLS ALL THE DESCRIPTIONS OF SECTION 37 IT CAN BE CLAIMED AND ALLOWED U/S 37(1). OBVIOUSLY SUCH AN EXPENDITURE IS NOT C APITAL IN NATURE AND IS ALSO NOT PERSONAL IN NATURE. THE EXPENDITURE IN QU ESTION WAS FOUND TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF ASSESSEES BUSINESS. THE LD. CIT(A) HAS FURTHER OBSERVED THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SASSOON J. DAV ID & CO.P. LTD VS CIT 118 ITR 261(SC) CLEARLY APPLIES TO THE FACTS O F THIS CASE. THIS EXPENDITURE WAS FOUND TO HAVE BEEN INCURRED ON ACCO UNT OF BUSINESS EXPEDIENCY TOWARDS PROMOTION OF SALES RELATED TO TH E BUSINESS PROMOTION. THE LD. CIT(A) HAS ALSO DESCRIBED THE M ODALITIES OF COMPETITIVE MARKET PREVAILING IN THESE DAYS AND THE ASSESSEE HAS TO FIND OUT VARIOUS TOOLS AND TECHNIQUES TO PROMOTE BUSINES S WITHIN THE LEGAL PARAMETERS OF SUCH EXPENDITURE. HE HAS FURTHER OBS ERVED THAT THIS EXPENDITURE INCURRED TOWARDS MRF PACE FOUNDATION IS AN ALLOWABLE DEDUCTION U/S 37(1) OF THE ACT. ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 4 -: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE . BUT WE ARE NOT IN AGREEMENT WITH THE FINDING OF THE LD. CI T(A). THE ASSESSEE WAS ENGAGED IN GIVING TRAINING TO THE PACE BOWLERS OF CRICKET IN INDIA. IT HAS BEEN CLAIMED THAT THIS E XPENDITURE HAS BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOS E OF BUSINESS. IT WAS CLAIMED THAT THE FOUNDATION SELECTS YOUNG ME N AND TRAINS THEM IN THE ART OF PACE BOWLING. THE TRAINEES UNDE RGO A SYSTEMATIC AND SCIENTIFIC TRAINING AND THEY ARE TAUGHT THE LA TEST TECHNIQUES. AS PER THE ASSESSEE IT PROMOTES THIS IN THE FORM OF PRODUCT ENDORSEMENT TRAINING OF BOWLERS THROUGH THE PACE F OUNDATION WHICH HAS MADE MRF A HOUSEHOLD NAME IN INDIA. SO IN THE LIGHT OF THIS AND THE REGULAR PROGRAMME IT WAS TRIED TO I MPRESS UPON US THAT THESE ACTIVITIES OF THE ASSESSEE HELP IN SALE OF MRF PRODUCTS IN INDIA AND OTHER COUNTRIES. IN FACT IN THE GIVEN C ASE THE ASSESSEE HAS NOT SPONSORED ANY SPORTS ACTIVITY FOR ITS SALE PROMOTION INSTEAD IT HAS FORMED A PACE-FOUNDATION FOR PROVIDING TRAI NING TO FAST BOWLERS FOR THE CRICKET GAME. BUT WE ARE UNABLE TO GO WITH THE ASSESSEE AS ACTIVITY OF THE ASSESSEE CANNOT BY ANY STRETCH OF IMAGINATION BE TREATED AS BUSINESS ACTIVITY. IT M AY SOUND HIGH THAT THIS ASSESSEE IS DOING SOMETHING GOOD FOR THE PUBLIC BUT IT IS NOT SO IN THE FISCAL PARLANCE BECAUSE IT HAS NOT FU NDED THESE EXPENSES FROM ITS OWN MONEY WHICH IS TAX PAID; RATH ER THE ASSESSEE WANTS TO DRAW MILEAGE OUT OF SUCH A CHARIT Y AKIN ACTIVITY. NO BODY WOULD OBJECT TO SUCH TYPE OF PHI LANTHROPIC ACTION IF IT IS DONE BY THE ASSESSEE INSTEAD OF OUT OF TH E PAYABLE TAX WHICH IS IN A SENSE A PUBLIC MONEY. IF SUCH EXPENS ES ARE ALLOWED THIS ASSESSEE OR ANY OTHER ASSESSEE CAN EVADE TAX B Y SUCH ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 5 -: GIMMICKS. IN SUCH CIRCUMSTANCES NO COURT OR FORUM WOULD LIKE TO BE A PARTY TO SUCH A SUBVERSION OF THE PROVISIONS O F THE LAW WHICH WOULD AMOUNT TO DIVERSION OF FUNDS WITH JUDICIAL AP PROVAL. THE DECISION OF ITAT CALCUTTA RENDERED IN THE CASE OF JCIT VS ITC LIMITED 112 ITD 57 AND ON WHICH THE LD.AR HAS PL ACED RELIANCE WAS RENDERED ENTIRELY ON DIFFERENT FACTS. IN THAT CASE THE EXPENDITURE WAS INCURRED FOR SPONSORSHIP OF GAMES A ND WAS CORRECTLY ALLOWED AS BUSINESS EXPENDITURE. THE SPO NSORSHIP-MODE WAS ADVERTISEMENT BY WAY OF ERECTING HOARDINGS AT T HE PLACE OF GAMES. SO THIS SPONSORSHIP EVENT WAS FOUND TO BE INCIDENTAL TO THE BUSINESS OF THE ASSESSEE IN ORDER TO PROMOTE IT S PRODUCTS. WE ARE NOT READY TO ACCEPT THAT BY PROVIDING TRAINING IN THE MANNER IT DOES MRFS NAME GETS HUGE PUBLICITY BY WAY OF FUL FILLING THE CONDITIONS LAID DOWN FOR ALLOWBILITY OF EXPENDITURE U/S 37(1) OF THE ACT. THE EXPENSES IN QUESTION ARE NOT FOR THE SP ONSORSHIP OF CRICKET SO AS TO GET PUBLICITY THROUGH HOARDINGS AN D MEDIA ADVERTISEMENTS. THE CASE OF THE ASSESSEE IS THAT I T EXPORTS ITS PRODUCTS TO 65 COUNTRIES OUT OF WHICH SOME ARE CRI CKET LOVING COUNTRIES. BUT EVEN THEN HOW PROMOTING BOWLING ACT IVITY IN ONE COUNTRY COULD AFFECT SALES OF TYRES TO OTHER COUNTR IES. THE EXPENDITURE INCURRED TOWARDS TRAFFIC SIGNALS AND S PONSORSHIP OF SPORTS AND THE LIKE EVENTS WHICH HAS THE ADVERTISE MENT VALUE IN THE FORM OF DISPLAY OF NAME OF BOARDS HOARDINGS DU RING THE EVENTS AND MEDIA ADVERTISEMENT WHICH CANNOT BE CONNECTED W ITH THE PROMOTION OF CRICKET BY WAY OF TRAINING OF THE PACE BOWLERS. CONSEQUENTLY WE ARE FULLY IN AGREEMENT WITH THE ASSESSING OFFICER AND DISAGREE WITH THE FINDING OF THE LD. CI T(A) HENCE BY SETTING ASIDE THE FINDING OF THE LD. CIT(A) WE REV ERSE HIS FINDING IN ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 6 -: THIS REGARD AND DO NOT ALLOW THE EXPENDITURE ON THI S ITEM BY TREATING IT AS BUSINESS EXPENDITURE OR OTHERWISE. ACCORDINGLY WE RESTORE THE FINDING OF THE ASSESSING OFFICER AND SE T ASIDE THE FINDING OF THE LD. CIT(A) IN THIS REGARD. 5. THE SECOND ISSUE RELATES TO CHARGING OF INTEREST U /S 234D OF THE ACT. THE ASSESSING OFFICER HAS CHARGED INTEREST U/ S 234D IN HIS ORDER DATED 23.12.2009 FOR REFUNDS GRANTED EARLIER FOR GI VING EFFECT TO APPELLATE ORDER ETC. THE CASE OF THE ASSESSEE IS THAT INTEREST U/S 234D CAN BE CHARGED ONLY IF THE REFUND ORIGINATES FROM A N ORDER PASSED U/S 143(1) AND NOT OTHERWISE. IN THIS REGARD RELIANCE HAS BEEN PLACED ON THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS RAMCO INDUSTRIES TAX CASE NO.1343/2009. THIS ADDITION MADE ON ACCOU NT OF CHARGING OF INTEREST U/S 234D HAS BEEN DELETED BY THE LD. CIT( A). 6. AFTER HEARING BOTH SIDES WE ARE IN AGREEMENT WITH THE LD. CIT(A) BECAUSE THE PROVISION OF SECTION 234D WAS INTRODUCE D WITH EFFECT FROM 1.6.2003 AND TO HAVE EFFECT FROM ASSESSMENT YEAR 20 04-05. HENCE INTEREST U/S 234D CANNOT BE CHARGED FOR EARLIER YEA RS EVEN THOUGH THE ASSESSMENTS OF THOSE YEARS WERE FRAMED AFTER 1.4.20 03 AND REFUND WAS GRANTED AFTER THE SAID DATE. THIS ISSUE STANDS COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT DELHI IN THE CASE OF ITO VS EKTA PROMOTERS 113 ITD 719(DELHI)(SB) AND ALSO BY THE D ECISION IN THE CASE ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 7 -: OF ORACLE INDIA(P) LTD VS DY. CIT 118TTJ (DEL) 812 . CONSEQUENTLY WE UPHOLD THIS FINDING OF THE LD. CIT(A) AND DISMISS G ROUND NO.3 OF THIS APPEAL. 7. IN THE RESULT THE APPEAL RELATING TO ASSESSMENT YE AR 2002-03 IS PARTLY ALLOWED. 8. THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004- 05 IN I.T.A.NO.1677/MDS/2010 RAISES ONLY ONE ISSUE REGA RDING DELETION OF ADDITION OF ` 2.48 CRORES INCURRED TOWARDS MRF PACE FOUNDATION. 9. WITH THE REASONING GIVEN IN ABOVE PARAGRAPHS FOR A SSESSMENT YEAR 2002-03 WE ALLOW THIS GROUND OF REVENUES APP EAL BY RESTORING THE ADDITION MADE BY THE ASSESSING OFFICER AND SETT ING ASIDE THE FINDING OF THE LD. CIT(A). THUS APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 STANDS ALLOWED. 10. AGAIN IN I.T.A.NO. 1678/MDS/2010 FOR ASSESSMENT YE AR 2006-07 ONLY ONE ISSUE RELATING TO ADDITION OF ` 1.70 CRORES SPENT ON MRS PACE FOUNDATION IS INVOLVED. WITH THE SIMILAR REASONING WE ALLOW THIS GROUND SO ALSO THE APPEAL OF THE REVENUE. 11. IN THE APPEAL OF THE REVENUE IN I.T.A.NO.1679/MDS/2 010 FOR ASSESSMENT YEAR 2007-08 ONLY ONE ISSUE RELATING TO ADDITION OF ` 2.45 ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 8 -: CRORES BEING EXPENDITURE INCURRED ON MRF PACE FOUND ATION IS INVOLVED WHICH WAS DELETED BY THE LD. CIT(A). WE HAVE TO ALLOW THIS APPEAL AS WE HAVE DONE IN EARLIER YEARS. I.T.A.NOS. 1374 TO 1377/MDS/2010 12. THESE ARE THE APPEALS OF THE ASSESSEE FOR ASSESSM ENT YEARS 2002-03 2004-05 2006-07 AND 2007-08 RESPECTIVELY. 13. FOR ASSESSMENT YEAR 2002-03 THE ASSESSEE HAS FILE D APPEAL IN I.T.A.NO. 1374/MDS/2010. WE HAVE DISCUSSED SOME T HE FACTS OF THIS ASSESSMENT YEAR WHILE DEALING WITH REVENUES APPEAL FOR THIS YEAR. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW FACTS AND CIRCUMSTAN CES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE REOPENING OF THE ASSESSMENT AS THE A PPELLANT HAS FURNISHED ALL THE MATERIALS AND PARTICULARS FUL LY AND TRULY. HENCE AS PER PROVISO TO SECTION 147 REASSESSMENT I S BEYOND THE TIME AND WITHOUT JURISDICTION INASMUCH AS THE A SSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 31.03.2005 AN D NOTICE UNDER SECTION148 WAS ISSUED ON 17.03.2009 BE YOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESS MENT YEAR. 2.1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT ADDITION MADE IN THE REASSESSMENT HAS ARISEN ONLY DUE TO CHANGE OF OPINION OR IS A CASE O F REVIEW ON THE SAME SET OF FACTS AND NOT ON ACCOUNT OF CONCEAL MENT OF ANY PARTICULARS BY THE APPELLANT; HENCE THE ORDER I S TO BE QUASHED AS BEING WITHOUT JURISDICTION. ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 9 -: 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE EXCLUSION OF DEPB CREDIT ENTITLEMENT WHILE COMPUTING THE DEDUCTION U/S 80HHC. THE LD CIT ERRED IN HIS INFERENCE REGARDING DEPB CREDIT IN LAW AND JURISDIC TION. 3.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE AMENDMENT ACT OF 2005 ONLY REL ATES TO 'PROFIT ON TRANSFER OF DEPB'. IN THE CASE OF THE AP PELLANT THERE WAS NO TRANSFER OF DEPB DURING THE PREVIOUS YEAR CONSEQUENTLY NO PROFIT WAS EARNED. THE DEPB WAS CON SUMED IN THE BUSINESS OF THE APPELLANT. THE AMENDED PROVI SIONS DO NOT APPLY TO THE APPELLANT COMPANY AND THEREFORE TH E DEPB IN EXPORT PROFITS SHOULD BE ALLOWED. 3.2 THE CIT ERRED IN RELYING ON THE DECISION OF THE BOMBAY HIGH COURT WHICH IS NOT APPLICABLE TO THE FACTS OF THE CASE. 4. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED I N CONFIRMING THE WITHDRAWAL OF 80IA BENEFITS MADE BY THE ASSESSING OFFICER. THE LD. CIT FAILED TO NOTE THAT THE INCLUSION OF THIS ITEM FOR REASSESSMENT IS WITHOUT JURISDICTI ON INASMUCH AS HIS INFERENCE ON DEPB CREDIT WAS WRONG IN LAW AN D WITHOUT JURISDICTION. 4.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE PRODUCT MANUFACTURED BY THE APPELL ANT IS COVERED BY ITEM 27 OF THE ELEVENTH SCHEDULE OF THE ACT AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S.BOIA. 4.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE RESTRICTION APPLIES ONLY TO MA NUFACTURE OF CROWN CORKS OR PILFER PROOF CAPS FOR PACKAGING OR O THER FITTINGS OF CORK RUBBER POLYETHYLENE OR ANY OTHER MATERIAL AND DOES NOT APPLY TO AUTOMOTIVE TYRES TUBES AND OTHER ALLI ED PRODUCTS WHICH THE APPELLANT PRODUCE. 4.3 THE LD CIT FAILED TO APPRECIATE THAT TYRES HAV E A SEPARATE ITC CLASSIFICATION UNDER THE CENTRAL EXCISE ACT AND ASSESSED TO EXCISE DUTY UNDER CHAPTER 40. CORKS AND ARTICLES OF CORK ARE ASSESSED UNDER CHAPTER 45. ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 10 - : 4.4 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS BEEN GRANTED REL IEF UNDER SECTION 80LA FOR THE UNDERTAKING RIGHT FROM AY 1996 -97 ONWARDS. RELIEF U/S.80IA GRANTED IN THE EARLIER YEA RS AND ALSO IN THE REGULAR ASSESSMENT FOR THE CURRENT YEAR CANN OT BE WITHDRAWN IN A REOPENING DUE TO MERE CHANGE OF OPIN ION. 14. IN THIS YEAR RE-OPENING HAS BEEN CHALLENGED IN AD DITION TO SUSTAINED ADDITION. THE ASSESSEE HAS CHALLENGED TH E RE-ASSESSMENT PROCEEDINGS INITIATED UNDER THE PROVISIONS OF SECTI ON 147 R.W.S 148 OF THE ACT. AS WE HAVE ALREADY STATED THE ASSESSEE-C OMPANY FILED RETURN OF INCOME ON 31.10.2002 AND THE ASSESSMENT WAS COM PLETED U/S 143(3) ON 31.3.2005 AT A TOTAL INCOME OF ` 84 54 56 900/-. AGAINST THIS ASSESSMENT FIRST APPEAL WAS FILED AND THE LD. CIT( A) VIDE HIS ORDER DATED 22.2.2006 REVISED THE TOTAL INCOME TO ` 68 62 44 174/-. FURTHER APPEAL WAS FILED BEFORE THE TRIBUNAL AND THE TRIBU NAL HAS REVISED THE TOTAL INCOME AT ` 67 65 38 060/- VIDE ITS ORDER DATED 2.11.2007. ON 17.3.2009 THE DY. CIT LTU ISSUED A NOTICE U/S 14 8 PROPOSING TO REASSESS THE INCOMES WHICH WERE NOT PART OF APPEALS IN THE FIRST ROUND AND REQUIRED THE ASSESSEE TO FILE RETURN WITHIN 30 DAYS FROM THE SERVICE OF THE NOTICE. THE ASSESSING OFFICER FORMED HIS OP INION THAT INCOME HAS ESCAPED ASSESSMENT AND AFTER RECORDING REASONS A NOTICE U/S 148 WAS ISSUED ON 17.3.2009. THE ASSESSEE REQUESTED TO TRE AT THE ORIGINAL RETURN (REVISED RETURN) FILED ON 30.3.2004 TO BE TR EATED AS RETURN FILED IN ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 11 - : RESPONSE TO NOTICE ISSUED U/S 148. LATER ON A NOT ICE U/S 143(2) WAS ISSUED ON 7.5.2009. THE ASSESSEE REQUESTED FOR THE SUPPLY OF REASONS OF REOPENING WHICH WAS DULY COMMUNICATED TO THE ASS ESSEE ON 3.6.2009. THE REASON RECORDED BY THE ASSESSING OFF ICER READ AS UNDER: 1. AS PER TAXATION LAW AMENDMENT 2005 IF THE EXP ORT TURNOVER EXCEEDS ` 10 CRORES THE BENEFIT OF DEDUCTION ON THE DEPB RECEIPTS U/S 80 HHC SHALL BE GIVEN SUBJECT TO THE FULFILLMENT OF CONDITIONS LAID DOWN AS PER THE ABOV E AMENDMENT TO THE SECTION 80HH(3) OF THE ACT. HENCE THE ASSE SSEE HAS TO PROVE THAT IT HAD OPTED TO CHOSE EITHER DUTY DRAW BACK OR DEPB BEING THE DUTY REMISSION SCHEME AND THE RATE OF THE DUTY DRAWBACK WAS HIGHER THAN THE DEPB DURING THAT PERIO D. THE CORRESPONDING PROVISO IS REPRODUCED AS UNDER PROVIDED ALSO THAT IN THE CASE OF AN ASSESSEE HAVI NG EXPORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PRE VIOUS YEAR THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (E) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE F IRST PROVISO AS THE CASE MAY BE SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE (IIID) OF SECTION 28 THE SAME PROPORTION AS THE EX PORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE IF THE ASSESSEE HAS NECESSARY AND SUFFICI ENT EVIDENCE TO PROVE THAT - (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME BEING THE DUTY REMISSION SCHEME AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE U NDER THE DUTY ENTITLEMENT PASS BOOK SCHEME BEING THE DUT Y REMISSION SCHEME. IT HAS BEEN OBSERVED THAT DURING THE CURRENT YEAR THE ASSESSEE HAS EXPORT TURNOVER OF ` 189 30 84 634/- AND INCOME BY WAY OF DEPB CREDIT TO THE TUNE OF `3 2 07 04 678/- BUT THE ASSESSEE HAS NOT PROVED THAT IT HAD OPTED TO CHOSE EITHER D UTY DRAWBACK OR THE DEPB BEING THE DUTY REMISSION SCHEME AND THE RATE OF THE DUTY DRAWBACK WAS HIGHER THAN THE DEPB DURING T HAT PERIOD. ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 12 - : HENCE THE ABOVE DEPB RECEIPT OF ` 32 07 04 678/- SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF 80HHC DE DUCTION BEING THE EXPORT INCENTIVES AS PER THE PROVISO TO S ECTION 80HHC(3) OTHERWISE MEANS THAT THE DEDUCTION U/S. 80 HHC CAN NOT BE FURTHER INCREASED ON THE ABOVE RECEIPT BY WA Y OF DEPB CREDIT. FURTHER THE ABOVE VIEW HAS BEEN CONFIRMED BY THE L D.CIT(A)-III VIDE THE ORDER NO.730/2006-07/A-III DATED 27.03.200 7 IN THE CASE OF M/S. BREAKS INDIA LTD. FOR THE AY 2004-05 O N SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER. BASED ON THE ABOVE FACTS IT IS CLEAR THAT ASSESSEE HAS NOT PRODUCED THE MATERIAL FACTS FULLY AND TRULY BEFORE THE TAX AUTHORITIES FOR THE PURPOSE OF CLAIM OF DEDUCTION U /S 80HHC OF THE INCOME TAX ACT. HENCE I HAVE THE REASON TO BELIEVE THAT THE INCOM E HAS ESCAPED THE ASSESSMENT BY WAY OF EXCESS CLAIM OF D EDUCTION U/S.8)HHC FOR THE CURRENT YEAR. 2. FURTHER IT IS NOTICED FROM THE DETAILS SUBMI TTED BY THE ASSESSEE FOR THE AY 2006-07 THAT THE ASSESSEE HAS BEEN ENGAGED IN IMPORTING TRAINING TO THE PACE BOWLERS O F CRICKET IN INDIA. THE ASSESSEE HAS CLAIMED THAT THE ABOVE EXP ENDITURE AS THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. BUT THE SAME WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THAT YEAR SINCE THE ABOVE EXPENDIT URE INCURRED BY THE ASSESSEE FALLS UNDER THE PURVIEW OF CHARITAB LE NATURE. THE ASSESSEE HAS INCURRED SIMILAR EXPENDITURE FOR T HE CURRENT YEAR ALSO AND THE SAME HAS BEEN CLAIMED WRONGLY AS BUSINESS EXPENDITURE. HENCE THE INCOME HAS ESCAPED THE ASSE SSMENT. 3. THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IA TO THE EXTENT OF ` 15 16 64 360/- DURING THE YEAR STATING THAT IT IS E NGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF AUTOMOBILE TYRES AND ITS RELATED PRODUCTS ETC. THE ABOVE CLAIM OF THE ASSESSEE U/S.80IA DURING THE YEAR SHALL NOT BE ALLOWED SINCE IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF RUBBER PRODUCTS THE ITEMS WHICH HAS BEEN MENTIONED IN THE ASSESSEE 11 TH SCHEDULE OF THE ACT. AS PER THE 11 TH SCHEDULE COLUMN NUMBER 27 OF THE INCOME TAX ACT IT HAS BEEN MENTIONED AS UNDER : - ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 13 - : CROWN CORKS OR OTHER FITTINGS OF CORK RUBBER POL YETHYLENE OR ANY OTHER MATERIAL THE MANUFACTURE OF THE ABOVE ITEMS IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80IA. HENCE THE ASSESSEE IS NOT ENT ITLED FOR ANY BENEFIT U/S.80IA. BASED ON THE ABOVE FACTS IT IS CLEAR THAT ASSESSEE HAS NOT PRODUCED THE MATERIAL FACTS FULLY AND TRULY BEFORE THE TAX AUTHORITIES FOR THE PURPOSE OF CLAIM OF DEDUCTION U /S.80IA OF THE INCOME-TAX ACT. THEREFORE I HAVE THE REASON TO BELIEVE THAT THE IN COME HAS ESCAPED THE ASSESSMENT WITH IN THE MEANING OF SECTI ON 147 OF THE INCOME-TAX ACT. 15. THE CASE OF THE ASSESSEE AS PUT FORTH THROUGH ITS LD.AR IS THAT THE NOTICE FOR RE-ASSESSMENT HAS BEEN ISSUED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND BECAU SE THE ASSESSEE HAD PROVIDED ALL MATERIAL FACTS IN THE RETURNS FILE D THE REVISION DONE ONLY ON THE BASIS OF SOME FACTS WITHOUT THE AVAILAB ILITY OF FRESH MATERIAL WOULD AMOUNT TO CHANGE OF OPINION WHICH CANNOT BE MADE A GROUND FOR REOPENING. AFTER ARGUING ON THE REASONS RECORDED F OR THE REOPENING HE HAS TO SUBSTANTIATE HIS PLACED RELIANCE ON SOME DEC ISIONS. ON THE OTHER HAND THE LD.DR HAS SUPPORTED THE APPELLATE FINDIN GS AND HAS ALSO PLACED RELIANCE ON SOME DECISIONS IN FAVOUR OF THE REVENUE. 16. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED BY BOTH THE PARTIES IN THE LIGHT OF THE RELEVANT PROVISIONS AND PRECEDENTS. RECENTLY ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 14 - : THE HON'BLE SUPREME COURT HAS CHURNED THIS ISSUE IN SUCCESSIVE DECISIONS. MORE RECENTLY THE HON'BLE SUPREME C OURT IN THE CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS PVT. LTD 291 ITR 500 HAS HELD THAT ON THE BASIS OF MATERIAL PRIMA FACIE AVAILAB LE BEFORE THE ASSESSING OFFICER OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE RE ASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASS ESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAS ESCAPED ASSESSMENT ACTION U/S 148 CAN BE TAKEN. BUT OBVI OUSLY THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE MAN CO ULD HAVE FORMED A REQUISITE BELIEF. WHETHER THIS MATERIAL(S) WOULD C ONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PAR TICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDENCE. IN THE GIVEN CASE ASSESSMENT WAS COMPLETED ON 31.3.2005. THE REASON WAS RECORDE D AS DISCUSSED ABOVE. THE ARGUMENT OF THE LD.AR IS THAT U/S 147 IN CASE THE ASSESSMENT ORDER IS COMPLETED U/S 143(3) AS HAS B EEN DONE IN THIS CASE NO ACTION CAN BE TAKEN AFTER THE EXPIRY OF FO UR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASS ESSMENT FOR THAT ASSESSMENT YEAR INTER ALIA. THE ASSESSING OFFICER GAVE A LETTER DATED ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 15 - : 3.6.2009 CONTAINING THE REASONS FOR THE REOPENING. THE REASONS WHEN LOOKED INTO GIVE A CLEAR PICTURE THAT THE ASSESSIN G OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RE COURSE TO SECTION 147 R.W.S 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS . THE POINT OF TIME WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE THIS PLEA OF THE LD.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147 THE ASSE SSING OFFICER CAN EITHER ASSESS OR RE-ASSESS BUT FOR TAKING ACTION THEREUNDE R HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT . IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS I N WRITING. THE RE- ASSESSMENT PROCEEDINGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148 149 150 151 152 AND 153. BUT IN THE PRESENT CA SE WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION. BEFORE WE DO THAT WE MAY MENTION THAT IN THE STATEMENT OF FACTS FILED BEFORE THE LD. CIT(A) THE ASSESSEE HAS MENTIONED THAT THE ASSESSMENT ORDER HAS TRAVELED UPTO THE TRIBUNAL AND THE TRIBUNAL HAS PASSED ORDER DATED 2.11.2007. NOTHING HAS COME ON RECORD AS TO WHETH ER THE TRIBUNAL HAS GIVEN A DIRECTION TO REDO THE ASSESSMENT OR OTHERW ISE. BUT IT IS FOUND MENTIONED THAT THE ASSESSING OFFICER HAS INITIATED PROCEEDINGS U/S 147 R.W.S 148 BY ISSUANCE OF NOTICE DATED 17.3.2009 PRO POSING TO RE-ASSESS ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 16 - : THE INCOME AND REQUIRING THE ASSESSEE TO FILE A RE TURN WITHIN 30 DAYS FROM THE SERVICE OF NOTICE. BE THAT AS IT MAY THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATI ON 2(C) BECAUSE IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ARE S ATISFIED OR NOT. IN CASE (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER A SSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR(I II) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THI S ACT; OR (IV)EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED THE ASSESSING OFF ICER WOULD HAVE VALID COGNIZANCE U/S 147 OF THE ACT. THE REASONS R ECORDED BY THE ASSESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSES SMENT OF TAX HENCE THE CONDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSMENT PROCEEDINGS ARE CONCERNED. IN SO FAR AS THE REAS ONS RECORDED EXTRACTED IN THE ABOVE PORTION OF THIS ORDER WE AR E SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCO ME HAS ESCAPED ASSESSMENT. THIS FACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMENT. THE POWER TO RE-ASSESS POST 1 ST APRIL 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE FAI LING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFI CER TO REOPEN THE ASSESSMENT ON THE BASIS OF MERE CHANGE OF OPINION WHICH CANNOT BE ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 17 - : PER SE A REASON TO REOPEN THE CASE. THE ACT HAS NO T GIVEN POWER TO THE ASSESSING OFFICER TO REVIEW BUT HAS ONLY GIVEN POW ER TO RE-ASSESS. THERE IS A CONCEPTUAL DIFFERENCE BETWEEN THE TWO AS PECTS AS THE ASSESSING OFFICER HAS NO POWER AT ALL TO REVIEW THE ASSESSMENT. THE RE- ASSESSMENT AS STATED ABOVE HAS TO BE BASED ON FUL FILLMENT OF CERTAIN PRE-CONDITIONS BUT THE CONCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWISE IT MAY GIVE UNBRIDLED POWE R TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSESSMENT ORDER WH ICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICE R. SO NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FR OM ASSESSMENT AND THE REASONS RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELIEF HE HAS THE POWER U/S 147 OF THE ACT. ANY INTERPRETATION M ADE BY THE HON'BLE SUPREME COURT WOULD GO BACK TO THE DATE OF LAW ITSE LF AND IT WOULD BE A VALID REASON FOR RE-ASSESSMENT OF THE ALREADY MADE ASSESSMENT ORDER. THIS WAS SO HELD BY THE HON'BLE SUPREME COURT IN TH E CASE OF SARWAN KUMAR VS MADAN LAL AGGARWAL 4SCC 147. 17. LIKEWISE ANY DECISION OF THE HON'BLE JURISDICTION AL HIGH COURT WHICH REMAINED UNCONSIDERED AND WAS BROUGHT TO THE KNOWLEDGE OF THE AUTHORITY SUBSEQUENTLY THIS ALSO CONSTITUTED MATER IAL INFORMATION TO RE- ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 18 - : OPEN THE PROCEEDINGS U/S 147 OF THE ACT AS HELD IN THE CASE OF A.L.A FIRM VS CIT 189 ITR 285(S.C). THIS RATIO WAS AGAI N CEMENTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF IT O VS SARADBHAI M. LAKHANI 243 ITR 1. BUT WHAT WILL BE THE EFFECT IF A RETROSPECTIVE AMENDMENT IS BROUGHT IN THE ACT AS TO WHETHER IT WOULD ALSO RELATE BACK TO THE DATE OF INSERTION OF THE PROVISION AND WOULD TANTAMOUNT TO A REASON FOR MAKING A RE-ASSESSMENT IF THE CHANGED LAW HAS RESULTED ANY ESCAPEMENT OF INCOME. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DENISH INDUSTRIES LTD VS ITO 271 ITR 340 HAS ANSWERED THS QUESTION BY HOLDING THAT IF THE PROCEEDINGS WERE PE NDING ON THE DATE WHEN THE AMENDMENT WAS BROUGHT IN EFFECT EITHER BY WAY OF APPEAL OR REVISION OR REFERENCE [EXPLANATION 8 TO SECTION 43( 1) THE AMENDED PROVISION SHALL APPLY. IN THE GIVEN CASE THE TAXA TION LAW AMENDMENT 2005 AMENDED THE PROVISIONS OF SECTION 80HHC WITH REGARD TO DEDUCTION ON DEPB RECEIPT THAT IN CASE THE EXPORT TURNOVER OF THE ASSESSEE EXCEED ` 10 CRORES IT WOULD BE GIVEN ONLY ON THE FULFILLME NT OF CONDITIONS LAID DOWN IN THE AMENDED SECTION 80HHC(3 ) OF THE ACT. THUS THE HON'BLE GUJARAT HIGH COURTS DECISION COM ES DIRECTLY INTO PLAY AS ON THE DATE WHEN THE AMENDMENT WAS BROUGHT ON TH E STATUTE BOOK THE ASSESSMENT PROCEEDINGS WERE PENDING BY WAY OF APPEAL BEFORE EITHER THE LD. CIT(A) OR THE TRIBUNAL AS WE HAVE GI VEN THE DATE OF THEIR ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 19 - : ORDER IN EARLIER PART OF THIS ORDER. HENCE THE AM ENDED PROVISION WOULD AMOUNT TO A MATERIAL IN THE HANDS OF THE ASSESSI NG OFFICER TO MAKE RE- ASSESSMENT IN THE GIVEN CASE. 18. NOW THE MOST MATERIAL PART WHICH WAS ARGUED BY THE LD.AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRST P ROVISO TO SECTION 147 WHICH STATES THAT WHERE AN ASSESSMENT U/S SUB-SEC TION(3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR WHICH IS 2002-03 IN THIS CASE NO ACTION SHALL BE TAKEN U/S 147 AFTE R THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT ASSESSMENT YEAR. THERE ARE TWO OTHER CONDITIONS WHICH ARE NOT RELEVANT FOR DECIDING THE LEGAL ISSUE UNDER APPEAL. WE HAVE TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS SIGNIFY. THE EXPRESSION FAILURE TO DISCLOSE MATER IAL FACTS HAS BEEN EXPLAINED IN THE TAXMANS DIRECT TAXES MANUAL VOLUM E 3. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISCLOSURE CAN BE EVEN FALSE OR TRUE . IT MAY BE A FULL DISCLOSURE OR IT MAY NOT BE A FULL ONE. A PART DIS CLOSURE MANY A TIMES MAY BE MISLEADING ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 20 - : TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. THIS LAW WAS LAID DOWN BY THE HON'B LE SUPREME COURT IN THE CASE OF SRI KRISHNA PVT. LTD ETC VS ITO & OTH ERS 221 ITR 538. THE WORDS OMISSION OR FAILURE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL AND NECESSA RY FOR ASSESSMENT WILL DIFFER FROM CASE TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME MATERIAL FOUND IN THE EVIDE NCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BUT DID NOT THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF THE ASSESSING AUTHORITY. THIS OMISSION OR FAILU RE MAY BE EITHER DELIBERATE OR EVEN INADVERTENT THAT IS IMMATERIAL BUT IN CASE THERE IS OMISSION TO DISCLOSE THE MATERIAL FACTS THEN SUBJEC T TO THE OTHER CONDITIONS JURISDICTION TO REOPEN IS ATTRACTED. 19. THE ASSESSEE HAD SHOWN EXPENDITURE OF ` 1.59 CRORES TOWARDS PROMOTION OF SALES BUT WHILE DEALING WITH ASSESSMEN T YEAR 2006-07 IT WAS REVEALED THAT THIS EXPENDITURE SOLELY RELATED T O PROMOTING THE MRF PACE FOUNDATION WHICH IS ENTIRELY DIFFERENT FROM AD VERTISEMENT EXPENDITURE FOR PROMOTION OF COMPANYS BRAND IMAGE. LIKEWISE THE ELEVENTH SCHEDULE OF THE ACT CLEARLY DEBARS THE ASS ESSEE FROM CLAIMING ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 21 - : DEDUCTION U/S 80IA OF THE ACT WHICH THE ASSESSEE HA S CLAIMED ON THE BASIS OF INCORRECT FACTS THEREFORE THE ASSESSEE H AS NOT BROUGHT ON RECORD AND HAS FAILED OR OMITTED TO BRING THE FACTS TRULY AND FULLY BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS TRIED TO T AKE SHELTER UNDER THE EXCEPTION PROVIDED BY THE ABOVE STATED PROVISO WHER E AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN COMPL ETED NO ACTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CAN BE TAKEN. BUT AS STATED ABOVE WHEN THE ASSESSEE H AS NOT DISCLOSED FULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSM ENT THIS PROVISO WILL NOT COME TO ITS RESCUE. CONSEQUENTLY WE HOLD THAT THE ENTIRE RE- ASSESSMENT PROCEEDING IN THIS CASE IS VALID AND TH EREFORE THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THE ASSESSEE FAIL S ON THIS LEGAL ISSUE. 20. THE SECOND ISSUE TAKEN VIDE GROUND NO.3 OF THIS APP EAL IS REGARDING THE CLAIM OF THE ASSESSEE THAT DEPB CREDI T ENTITLEMENT HAS TO BE INCLUDED WHILE COMPUTING DEDUCTION U/S 80HHC. T HIS CONTENTION OF THE ASSESSEE IS BASED ON THE PREMISE THAT THE AMEND ED PROVISION SPEAKS ABOUT PROFIT ON TRANSFER OF DEPB WHICH HAS T O BE EXCLUDED BUT IN THE GIVEN CASE THE ASSESSEE HAS NOT TRANSFERRED DEPB DURING THE PREVIOUS YEAR. CONSEQUENTLY NO PROFIT WAS EARNED. RATHER THE DEPB WAS CONSUMED IN THE BUSINESS OF THE ASSESSEE HENCE THE AMENDED PROVISION DOES NOT APPLY TO ASSESSEES CASE AND THE REFORE THE DEPB IN ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 22 - : EXPORT PROFITS HAS TO BE ALLOWED. ON THE OTHER HAN D THE LD.DR HAS RELIED ON THE DECISION OF ITAT MUMBAI SPECIAL BE NCH IN THE CASE OF TOPMAN EXPORTS VS ITO [2009] 33 SOT 337. THE RAT IO OF THIS DECISION IS THAT DEPB INCOME ACCRUES TO THE ASSESSEE EVEN IF THE ASSESSEE HAS NOT SOLD THE SAME. IT WOULD BE HAVING THE SAME CHA RACTER AND MAY HIT BY THE AMENDED PROVISION AND HAS TO BE EXCLUDED FRO M COMPUTING THE DEDUCTION U/S 80HHC. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE IS SUE IS SQUARELY COVERED BY THE DECISION OF TOPMAN EXPORTS(SUPRA) IN FAVOUR OF THE REVENUE AND HENCE WE CANNOT ALLOW THIS GROUND OF THE ASSESSEE . 22. THE LAST ISSUE OF THIS APPEAL IS REGARDING WITHDRAW AL OF 80IA BENEFITS. THE ASSESSEE HAS CLAIMED DEDUCTION OF ` 15 14 97 778/- U/S 80IA OF THE ACT. INITIALLY THIS WAS ALLOWED BUT I N RE-ASSESSMENT PROCEEDINGS THIS DEDUCTION WAS WITHDRAWN BECAUSE TH E COMPANYS PRODUCTS WERE NOT FOUND TO BE ELIGIBLE FOR DEDUCTIO N U/S 80IA AS IT MANUFACTURES ARTICLES SPECIFIED IN ELEVENTH SCHEDUL E OF THE ACT. ITEM 27 OF ELEVENTH SCHEDULES APPENDED TO THE INCOME-TAX AC T 1961 READS AS UNDER: ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 23 - : CROWN CORKS OR OTHER FITTINGS OF CORK RUBBER POLYETHYLENE OR ANY OTHER MATERIAL. 23. A BARE READING OF THIS SCHEDULE MAKES IT AMPLY CLE AR THAT MANUFACTURE OF TYRES OF RUBBER WHICH FALLS UNDER IT EM 27 WHICH EXCLUDE THE ITEM FROM THE BENEFIT OF SECTION 80IA. IN THI S SCHEDULE CROWN CORKS OR OTHER FITTINGS OF CORK RUBBER POLYETHYL ENE OR ANY OTHER MATERIAL HAS BEEN MENTIONED CLEARLY. THE USE OF TH E WORDS CROWN CORKS MAKES IT ABUNDANTLY EVIDENT THAT OTHER FITTI NGS OF CORK OR RUBBER ARE ALSO HIT BY THIS PROVISION AND THE ARGUMENT OF THE LD.AR THAT THE RUBBER FITTINGS WILL TAKE COLOUR FROM CROWN CORKS I S NOT SUSTAINABLE IN THE EYES OF LAW. THE MEANING OF THIS ITEM NO.27 IS VER Y CLEAR AND THE STATUTE HAS INTENDED TO DEBAR MANUFACTURE OF RUBBER FITTINGS FROM SUCH BENEFIT. THE USE OF WORD OR IN BETWEEN CROWN CO RKS OR OTHER FITTINGS OF RUBBER SIMPLY EXPLICITLY SAY SO. THERE IS NO QUE STION OF FURTHER INTERPRETATION REGARDING THE SAME. THERE IS NO DIS PUTE BETWEEN THE PARTIES REGARDING THE FACT THAT TYRE IS A RUBBER FITTING. THE MATERIAL USED FOR TYRE IS DEFINITELY RUBBER AND AS PER ITEM NO.27 OF ELEVENTH SCHEDULE WHICH PRESCRIBES THE LIST OF ARTICLES OR T HINGS NOT ELIGIBLE FOR DEDUCTION U/S 80IA DISENTITLES THE ASSESSEE FROM T HIS CLAIM. THE DECISIONS RELIED ON BY THE LD.AR ARE ENTIRELY ON DI FFERENT FACTS AND THEY ITA 1374 TO 1377/10 & 1676 TO 1679/10 :- 24 - : ARE NOT AT ALL RELEVANT. THEREFORE THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 STANDS DISMISSED. 24. IN I.T.A.NOS. 1375 TO 1377/MDS/2010 PERTAINING TO ASSESSMENT YEARS 2004-05 2006-07 AND 2007-08 EXACTLY IDENTIC AL ISSUES ON MERITS ARE INVOLVED BUT REOPENING IS NOT AN ISSUE IN THES E APPEALS. HENCE WITH SIMILAR REASONING THESE APPEALS ALSO STAND DI SMISSED. 25. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE STA ND DISMISSED. 26. TO SUMMARIZE THE RESULT THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002-03 IS PARTLY ALLOWED AND THE O THER APPEALS FOR ASSESSMENT YEARS 2004-05 2006-07 AND 2007-08 ARE D ISMISSED. ALL THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2002-0 3 2004-05 2006- 07 AND 2007-08 STAND DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.3.2011 SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 11 TH MARCH 2011 RD COPY TO: APPELLANT /RESPONDENT/CIT(A)/CIT/DR