Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI GEORGE GEORGE K.
Per GEORGE GEORGE K.,JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the CIT(A), Trivandrum dated 24/09/2019. The relevant assessment year is 1993- 94.
The grounds raised read as follows:
1) The order of the Commissioner of Income Tax (Appeals) Trivandrum is against law, opposed to facts and weight of evidence.
2) The learned Commissioner of Income Tax (CIT) (Appeals) erred in confirming the proceedings of the Assessing Officer dated 7/12/10 rejecting the 154 application filed by the appellant against the proceedings dated 24/9/08.The present appeal is against the proceedings dated 7/12/10 of the assessing officer.
3(a) ln the proceedings dated 24/9/08 giving effect to the order of the Hon High Court of Kerala in of 2002 dated 5/2/08, the Deputy Commissioner of Income Tax (DCIT), Circle 1,Kollam deducted 90% of the Processing charges received Rs 424030/- from the profits of the Business for computation of deduction u/s 80HHC . No notice u/s 154 had been issued by the DCIT for this adjustment which is bad in law. The DCIT and the CIT (Appeals ) ought to have noted that there is no finding on this aspect in the judgment of Jurisdictional High Court or in the appeal filed by the revenue in the High Court which has been admitted by the DCIT in the proceedings dated 7/12/2010. In fact the Hon High Court had only held that" The assessment is restored on the questions raised by the revenue before the court". The only question raised by the revenue before the Hon High Court is treatment of interest on FD.
3(b)The CIT(A) ought to have been convinced that the limited issue before the Supreme Court in 295 ITR 228 ( on which the High Court has relied) was only on the question of inclusion or otherwise of Raw cashew nuts processing charges in the total turnover for computing 80HHC. He ought to have seen that the AO went beyond his jurisdiction to give a new interpretation to the decision of SC in 295 ITR 228.
4) 234B interest charged by the AO from the date of ITAT order (in favour of the appellant) till the date of reversal of ITAT order by the HC is incorrect since there was no liability on the appellant under S 234B following the ITAT decision. The appellant relies on judicial decisions in this respect.
5) The learned CIT (Appeals ) erred in concluding that in the appeal against the order u/s 154 (ie order dated 7/12/2010), the appellant can only raise grounds pertaining to apparent mistake in the appeal effect order ( ie order dated 24/9/08) and the grounds raised by the appellant cannot be held to be mistakes apparent from record. The adjustments made in the appeal effect order dated 24/9/08 are contrary to the directions of the HC and are mistakes apparent from records only. The learned CIT (Appeals) ought to have seen that against the apparent mistakes in the order dated 7/12 10, the appellant had moved rectification application u/s 154 of the Act and the DCIT rejecting the application vide letter dated 15/3/11 had directed the appellant to file appeal before CIT(A) and hence the appeal filed before CIT(A) is in order.
For the above and other additional grounds that may be advanced and further evidence or records that may be produced at the time of hearing, the appellant prays that the appeal may be allowed.
The brief facts of the case are as follows:
The assessee filed rectification applications u/s. 154 of the I.T. Act on 05/12/2008 and17/06/2010. The rectification applications were directed against the order/proceedings of the Assessing Officer dated 24/09/2008. (order giving effect to Hon’ble High Court judgment in ITA No. 3/2002). The prayer in the rectification petitions was that the AO while giving effect to the Hon’ble High Court judgment has erred in reducing 90% of the processing charges from ‘profits of business’, while computing deduction u/s. 80HHC of the I.T. Act.
According to the assessee, the AO had exceeded the jurisdiction by reducing 90% processing charges from the ”profits of business”, while computing deduction u/s. 80HHC of the I.T. Act, since no such direction was given by the Hon’ble High Court. The rectification applications of the assessee were rejected by the Assessing Officer vide order dated 07/12/2010. The relevant findings of the Assessing Officer read as follows:
“While giving effect to the judgment of Hon’ble High Court of Kerala, 90% of processing charges have deducted while computing “profits of business” for the purpose of computation of deduction u/s. 80HHC, though there was no finding on processing charges in the appeal filed by the Revenue before the Hon’ble High Court. However the Hon’ble High Court vide their judgment in of 2002 stated that “since the questions raised are covered by decision of this Court reported in Nanji Topanbhai and Co. vs. ACIT (2000) 243 ITR 192 and that of the Supreme Court in CIT V. K. Ravindranathan Nair (2007) 295 ITR 228, these appeals filed by the revenue are allowed vacating the orders of the Tribunal and restoring the assessment on the questions raised”. As per Supreme Court decision in the case of K. Ravindranathan Nair, 90% of processing charges had to be reduced to arrive at the business profits and processing charges had also to be included in the total turnover. Therefore, computation of deduction u/s. 80HHC as per proceedings dated 24.9.2008 is correct and hence needs no rectification. Therefore, as contention on this point is without any merits and accordingly, rejected.”
3. Aggrieved by the order of the Assessing Officer, rejecting the rectification applications u/s. 154 of the I.T. Act, the assessee preferred appeal to the first appellate authority. The CIT(A) rejected the contentions raised by the assessee and dismissed the appeal filed by the assessee. The relevant finding of the CIT(A) reads as follows:
“4.2 It is observed from the grounds raised that they pertain to the grievance of the Appellant against the appeal effect order dated 24.09.2008 to the order of Hon’ble High Court. The appellant had not filed appeal against the said appeal effect order. The Appellant had filed petition under section 154 of the Act before the Assessing Officer disputing the appeal effect order and the same was rejected by the Assessing Officer. Now, in the appeal against the order under section 154 of the Act, the Appellant can only raise grounds pertaining to apparent mistake in the appeal effect order and not issues which require verification of facts. The grounds raised by the Appellant cannot be held to be mistakes apparent from record. Hence, it is held that there is no merit in the grounds raised by the Appellant and the same is dismissed.”
Aggrieved by the order of the CIT(A), the assessee has preferred this appeal before the Tribunal. The Ld. AR has filed paper book enclosing rectification applications, brief written submission etc. The Ld. AR in the written submissions has reiterated the submissions made before the Income Tax authorities.
4.1 The Ld. DR strongly supported the orders of the Assessing Officer and the CIT(A) .
I have heard the rival submissions and perused the record. The assessee had filed rectification applications seeking to rectify the proceedings of the Assessing Officer for giving effect to the Judgment of the High Court. The Assessing Officer while giving effect to the judgment of the High Court had re- calculated deduction u/s. 80HHC of the I.T. Act by reducing 90% of the processing charges from the “profits of business”. The assessee’s request in the rectification applications u/s. 154 of the I.T. Act is that there was no finding given by the Hon’ble High Court to reduce 90% of processing charges from the ‘profits of business’’ and recalculate deduction u/s. 80HHC of I.T. Act. Therefore according to the assessee, the AO exceeded the jurisdiction, while giving effect to the Hon’ble High Court judgment. In order to understand the issue in controversy, the finding of Hon’ble High Court in of 2002 is reproduced herein:
“since the questions raised are covered by decision of this Court reported in Nanji Topanbhai and Co. vs. ACIT (2000) 243 ITR 192 and that of the Supreme Court in CIT V. K. Ravindranathan Nair (2007) 295 ITR 228, these appeals filed by the revenue are allowed vacating the orders of the Tribunal and restoring the assessment on the questions raised”.
5.1 The Hon’ble High Court has vacated the ITAT’s order by following the judgment of the Hon’ble Supreme Court in the case of CIT V. K. Ravindranathan Nair (supra) and the judgment of the Hon’ble Kerala High Court in the case of Nanji Topanbhai and Co. vs. ACIT (supra). As per the judgment of the Hon’ble Apex Court in the case of Ravindranathan Nair (supra), 90% of processing charges had to be reduced from business profits and processing charges had to be included in the total turnover, while calculating deduction u/s. 80HHC of the I.T. Act. Therefore the Assessing Officer while giving effect to the judgment of Hon’ble High Court has to necessarily follow the dictum laid down by the Hon’ble Apex Court (since Hon’ble High Court has followed the judgment of the Hon’ble High Court).
5.2 Moreover, the assessee has not filed any appeal against the order/proceeding of the Assessing Officer dated 24/09/2008 (The proceeding giving effect to the judgment of the Hon’ble High Court). The assessee filed petitions u/s. 154 of the Act against the order/proceeding dated 24/09/2008. The present appeal proceeding is an appeal against the order u/s. 154 of the I.T. Act.
In the proceeding from an order u/s. 154 of the I.T. Act, the assessee can only raise grounds pertaining to mistakes apparent on record and not issues which requires elaborate examination/verification of facts. Since the present appeal proceeding is arising out of order passed u/s. 154 of the I.T. Act, the scope of examination by the appellate authority is very limited, i.e., whether order of the AO dated 07/12/2010, suffers from any mistake apparent from record. The order of AO dated 07/12/2010 does not suffer from any mistake apparent from record because principle laid down by Hon’ble Apex Court in the case of K.
Ravindranathan Nair (supra) whether is applicable to this case, requires elaborate examination of both law and facts. Therefore the contention raised by the Ld. AR is rejected. It is ordered accordingly.