M/S A.S. PRECISION MACHINES P LTD THR SHRI AJIT SINGH vs. COMMISSIONER OF INCOME TAX AAYAKAR BHAWAN RISHI NAGAR LUDH PB

Whether Reporters of local papers may be allowed to see the judgment?

To be referred to the Reporters or not? YES

Whether the judgment should be reported in the Digest? Present: Mr. S.K.Mukhi, Advocate with Mr. Rajiv Sharma, Advocate for the appellant-assessee.

A few facts relevant for the decision of the controversy involved as narrated in ITA No.475 of 2015 may be noticed. The appellant- assessee is a private limited company engaged in the business of manufacturing of rolling mill machinery and its parts based at Mandi Gobindgarh. Survey was conducted under section 133A of the Act in the appellant's case on 24.7.2008. The appellant company surrendered a sum of ` 06 crores on account of right off of business sundry creditors, outstanding since long due to some dispute with the said parties. The same were written back as income of the appellant for the year under appeal which were shown as business advances forfeited in the cash book as on 25.7.2008 and thereafter utilised in the business of manufacturing and on the income thereof, deduction under section 80IB of the Act was claimed as per the provisions of law. Return of income for the assessment year in question was filed declaring income of ` 7,02,02,910/-. Notice for scrutiny of assessment was issued to the appellant. The appellant appeared and its accounts were checked. Addition of ` 80,529/- was made under section 80IB of the Act on account of DEPB receipts of ` 2,68,430/- after scrutiny. The assessment was completed by the Assessing Officer under section 143 (3) of the Act on 29.10.2010, Annexure A.

According to the appellant, the order under section 263 of the Act was time barred having not been served on it within two years from the end of the financial year in which the impugned order was passed which expired on 31.3.2013 while the impugned order was issued on 4.4.2013 and received by the assessee on 06.04.2013. Hence the GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh instant appeals by the appellant-assessee.

We have heard learned counsel for the appellant-assessee.

The primary issues that arise for consideration as discernible from the questions claimed are:- (i) whether the order passed under section 263 of the Act in view of sub section (2) thereof was within the period of limitation. Reliance was placed on judgment of the Kerala High Court in Cochin Plantations Limited vs. State of Kerala, (1997) 227 ITR 38 (Kerala); and Tribunal read thus:- “8. The learned counsel for the assessee submitted that assessment order was passed on 29.10.2010 and the order GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh under section 263 has been passed on 20.3.2013. However, the impugned order was dispatched on 4.4.2013 and received by assessee on 6.4.2013. He has therefore submitted that revision order is barred by limitation. He has however admitted that the last date of passing of the revision order was 31.3.2013. 9. The learned DR contended that the only requirement of the law was to pass the revision order within two years which is passed by the learned Commissioner of Income Tax in this case. There is no requirement to dispatch the order within that period itself.

On consideration of the rival submissions, we are of the view, this ground of appeal of the assessee has no merit. Section 263(2) of the Act provides that no order shall be made under sub section (1) after expiry of two years from the end of the financial year in which the order sought to be revised was passed. In this case, the assessment order was passed on 29.10.2010 which was sought to be revised. Therefore, after end of the financial year, the order could have been passed upto 31.3.2013 which is also admitted by the learned counsel for the assessee. In the case of assessee, the order under section 263 of the Act has been passed on 20.3.2013, therefore, same is passed by the learned Commissioner of Income Tax within the period of limitation. There is no requirement under the law to dispatch the order within period of limitation itself. The Hon'ble Supreme Court in the case of R.K.Upadhyaya vs. Shanabhai P.Patel, 166 ITR 163 held that “issue of notice under section 147 within the period of limitation. Service on assessee beyond period. Assessment valid.” This contention of learned counsel for the assessee has no merit and is accordingly rejected because service of the impugned order is not a condition precedent within the period so prescribed. The order shall have to be passed GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh within the period of limitation which is so in the case of the assessee. This ground of appeal of the assessee is accordingly rejected.” 7. learned counsel for the appellant in Cochin Plantations Limited's case (supra) would not come to the rescue of the appellant in view of the judgment of the Apex Court in R.K.Upadayaya's case (supra).

With regard to the second issue regarding claim under section 80IB of the Act, it was recorded by the Tribunal that the Assessing Officer had passed the assessment order without making any enquiry and investigation and allowed claim under section 80IB of the Act. Thus, the order was held to be erroneous and prejudicial to the interest of the revenue. The CIT was held to be justified in setting aside the assessment order and directing the Assessing Officer to pass the assessment order afresh by giving opportunity of hearing to the assessee. The conclusion of the Tribunal is quoted below:- “11. The learned counsel for the assessee submitted that assessee is eligible for deduction under section 80IB on surrendered income as well as on job work and Assessing Officer after making proper enquiry granted relief to the assessee at assessment stage. The learned counsel for the GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh assessee has, however, not been able to place on record any query letter issued by the Assessing Officer with regard to deduction under section 80IB or any reply filed before Assessing Officer in this regard. The learned counsel for the assessee ultimately submitted that the directions may be issued to the learned Commissioner of Income Tax to consider the plea of the assessee on merit. On the other hand, learned DR submitted that Assessing Officer has not made any enquiry on both the issues and no income is derived form any business or industrial undertaking on which surrender was made as well as job income was shown. Therefore, when Assessing Officer failed to make enquiry on both the aspects, learned Commissioner of Income Tax was justified in holding that assessment order to be erroneous and prejudicial to the interest of revenue.

The learned DR also submitted that learned Commissioner of Income Tax is bound by the judgment of Hon'ble Punjab and Haryana High Court in the case of National Legguard Works 288 ITR 18 directly applicable in this issue. The learned DR relied upon decision of the Hon'ble Punjab and Haryana High Court in the case of Arun Luthra 252 ITR 76 on the proposition of decision of the juri ictional High Court are binding on all the subordinate authorities.

We have considered rival submissions. It is not in dispute that during the course of survey conducted in the premises of assessee on 24.7.2008, certain incriminating documents were found relating to loan and advances. The assessee surrendered a sum of ` 6 crore to cover up these discrepancies. The accounts of the assessee revealed that assessee had declared income of ` 6 crore as business advances written off. Hon'ble Punjab and Haryana High Court in the case of National Legguard Works (supra) held that the deduction under section 80HHC of the Act is GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh available on showing fulfilment of the conditions prescribed and that there could be no presumption that surrendered income on account of unexplained stocks represented export income. The assessee however claimed deduction under section 80IB on income of ` 6 crore so surrendered during the course of survey. It is interesting to note that despite it is a case of survey under section 133A conducted against the assessee and finding incriminating material against the assessee during the course of survey, the Assessing Officer has even failed to mention this fact in the assessment order that it is a case of survey and during the course of survey, incriminating material was found against the assessee. The Assessing Officer has not discussed anything in the assessment order if he has conducted any enquiry or investigation with regard to material found against the assessee during the course of survey. The Assessing Officer has also failed to make any enquiry or investigation with regard to claim of deduction under section 80IB made by assessee on surrendered income and income on job charges at the assessment stage. The learned counsel for the assessee has shown his inability to produce any query letter issued by the Assessing Officer at assessment stage for investigating or conducting any enquiry with regard to claim of deduction under section 80IB on surrendered income of ` 6 crore or on job charges. The learned counsel for the assessee has also shown inability to produce any reply filed before Assessing Officer of making claim of deduction under section 80IB on the surrendered income as well as on job charges by fulfilling conditions of Section 80IB. It would

Considering the totality of the facts and circumstances, it is clear that Assessing Officer has passed the assessment order without conducting enquiry and investigation on the above issues and has allowed the claim of assessee under section 80IB of the Act without making any enquiry and investigation. Therefore, the order was correctly treated as erroneous and prejudicial to the interest of revenue. The learned CIT was, therefore, justified in setting aside the assessment order and directing the Assessing Officer to pass the assessment order afresh de novo by giving opportunity of being heard to the assessee. In this view of the matter, no further directions are required to the learned Commissioner of Income Tax in the matter as is argued by learned counsel for the assessee. The appeal of the assessee has thus no merit. The same is accordingly, dismissed.”

The proposition enunciated in Malabar Industrial Co. Limited's case (supra) is well settled that the Commissioner has to be concluded as under:- GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh “23.....Juri iction under section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interest of the revenue. Cases of assessment order passed on wrong assumption of facts, on incorrect application of law, without due application of mind or without following principles of natural justice are not beyond the scope of Section 263 of the Act.”

The findings recorded by the Tribunal are based on appreciation of evidence on record and consideration of relevant statutory provisions and the case law on the point. Learned counsel for the appellant- assessee has not been able to show any illegality or perversity in the said findings.

In view of the above, no substantial question of law arises. The appeals stand dismissed. (Ajay Kumar Mittal) Judge March 14, 2016 (Raj Mohan Singh) 'gs' Judge GURBAX SINGH 2016.04.21 16:38 integrity of this document High Court Chandigarh