CHAKOLOAS SPINNING & WEAVING MILLS LTD vs. COMMISSIONER OF INCOME TAX, COCHIN

These two appeals are being filed by the very same assessee and the reliefs sought for are based on the very same questions of law. Hence, the appeals are disposed of by a common judgment.

I.T.A.No.6 of 2005 is filed against the order of the Tribunal for the assessment year 1995-'96 while I.T.A. No.5 of 2005 is filed against the order of the Tribunal for the assessment year 1998-'

The appellant-assessee is engaged in the manufacture and sale of cotton yarn, staple fibre yarn, cotton fabrics and staple fibre fabrics. The appellant exported substantial quantities of the aforementioned goods and had claimed the benefit of deduction under section 80HHC of the Income-tax Act. While computing the benefit, the appellant ignored the negative figure representing the profits of the business and based its calculation of the relief under section 80HHC only on the positive figure of export incentives/draw back received by it. The Assessing Officer accepted the calculation. Later, the orders were rectified under section 154 of the Income-tax Act. The appeal filed by the assessee was successful. Against the same, the department filed appeals before the Tribunal.

The Tribunal relying on the decision of the Apex Court found that section 80AB of the Income-tax Act has been given an over riding effect over all other sections. The Apex Court made it clear that the profit has to be computed after giving set off all other provisions of the Income-tax Act and the negative profit has to set off against the positive profit. By a common order the Tribunal allowed the appeals and set aside the order of the Commissioner of Income-tax (Appeals). Aggrieved by the above, the assessee has preferred the appeals

Heard the learned counsel for the appellant and the learned counsel for the revenue.

The only argument which is addressed before us by the learned counsel for the appellant that for the assessment year 1992-'93 the Tribunal had accepted the contrary position in the case of the assessee and found that in fact computation of profits under section 80HHC can be based on the positive profit. Therefore, it is submitted that the Revenue cannot be permitted to urge to the contrary in the other assessment years, including 1995-96 and 1998-'

The learned counsel submits that the Revenue is estopped.

Per contra, the learned counsel for the Revenue submits that actually the assessee has not raised the issue before the Tribunal namely, the revenue was estopped from challenging the order of the Commissioner in view of the decision of the Tribunal for the assessment year 1992-'

Still further more the learned counsel for the Revenue drew our attention a decision of the Apex Court reported in C.K.Gangadharan and another V. Commissioner of Income- tax (2008) 304 ITR 61 (SC) wherein the Apex Court inter alia held as follows:

If the assessee takes the stand that the Revenue acted mala fide in not preferring appeal in one case and filing the appeal in other case, it has to establish mala fides. As a matter of fact, as rightly contended by the learned counsel for the revenue, there may be certain cases where because of the small amount of revenue involved, no appeal is filed. Policy decisions have been taken not to prefer appeal where the revenue involved is below a certain amount. Similarly, where the effect of the decision is revenue neutral there may not be any need for preferring the appeal. All these certainly provide the foundation for making a departure. In answering the reference, we hold that merely because in some cases the Revenue has not preferred appeal that does not operate as a bar for the Revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the Tribunals or the High Courts.”

It is pointed out that tax effect as far as the present appeals are concerned is as follows:- For the assessment year 1995-'96 the demand is `20,28,950/- and for the assessment year 1998-'99 it is `9,09,731/-.

It is submitted by the learned counsel for the Revenue that probably for 1992-'93 the period of rectification available under section 154 of the Income-tax Act might have been expired. More importantly, we notice that there is substantial tax involved in these two appeals. The principle of res judicata is not applicable. We may also notice that the impugned order does not reflect any attempt on the part of the appellant-assessee to bring to the notice of the Tribunal that the Tribunal should not interfere with the order of the Commissioner in view of the earlier order of the Tribunal for the assessment year 1992-'93. 10. We also notice the submission of the Revenue that no appeal was preferred against the order of the Tribunal for the assessment year 1992-'93, in view of the monetary limit.

As far as assessment years 1995-'96 and 1998-'99 are concerned, the tax involved in these appeals is substantial and therefore the order which is in favour of the assessee for the assessment year 1992-'93 cannot be set up as a bar.

In such circumstances, we answer both the questions against assessee and in favour of the Revenue. The appeals are accordingly dismissed. K. M. JOSEPH, JUDGE K. HARILAL, JUDGE mn.