JITENDRA KUMAR AGARWAL,GHAZIABAD vs. ITO WARD - 1(3), GHAZIABAD

1. This appeal filed by the assessee is directed against the order dated 13.11.2017 of the Commissioner of Income Tax (Appeals)- Ghaziabad pertaining to Assessment Year 2014-15.

The relevant facts as culled from the material on records are as under:

Determining income u/s 143(3) of the Act at Rs.16,84,665/- against the returned income in a sum of Rs.89,050/- 2. Dismissing the appeal of the assessee without providing reasonable, proper and due opportunity of hearing.

Restricting deduction u/s 80IC of the Act at 25% as against 100% due to the assessee on account of profit derived from eligible unit on substantial expansion as provided u/s 80IC(2) of the Act.

Making an addition of Rs.2,46,600/- on account of professional receipts reflected in Form 26AS and allegedly not included in books of accounts. Both the above actions being most arbitrary, erroneous, unlawful and unjust must be quashed with directions for relief.”

AO noted that assessee has started its business w.e.f 31.03.2005 for the manufacturing of Pharma products which falls in Para C of the 14th Schedule and had claimed 100% deduction u/s 80IC from the initial assessment year i.e. from 2006-07. According to AO, assessee was entitled for deduction at 100% u/s 80IC of the Act till the A.Y. 2010-11 but he noted that assessee has been claiming deduction at 100% continuously from the A.Y. 2014-15. AO was of the view that u/s 80IC-(3)(ii), the assessee was entitled to deduction at 100% for 5 assessment years commencing from the initial assessment year 2006-07 and the 5th year got completed in A.Y. 2010-11. For the year under consideration, according to AO, assessee was entitled for deduction u/s 80IC-3(ii) at 25% of profits as against 100% claimed by the assessee. The submission of the assessee that there has been substantial expansion in the unit and therefore it was eligible for deduction at 100% u/s 80IC was not found acceptable to AO. AO accordingly restricted the deduction u/s 80IC at 25% of the profits i.e. Rs.4,49,671/- and denied the benefit of deduction on the balance amount of Rs.13,49,015/-. Aggrieved by the order of AO, assessee carried the matter before

Before us, Learned AR submitted that identical issue arose in assessee’s own case in A.Y. 2011-12, 2012-13 & 2013-14 and all those years, the matter was remanded back to AO by the Hon’ble ITAT. He pointed to the findings of the Tribunal in A.Y. 2011-12 in order dated 11.05.2018, ITA No.6186/Del/2016 order dated 30.10.2019 for A.Y. 2012-13 & ITA No.5252/Del/2017 order dated 06.02.2020 for A.Y. 2013-14. He therefore submitted that since the issue in the year under consideration is identical to that of earlier years, following the decision of Tribunal, the matter be remanded back to AO with similar directions.

Learned DR on the other hand supported the order of lower authorities.

We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the denial of 100% claim of deduction u/s 80IC. We find that identical issue arose in assessee’s own case in A.Y. 2011-12 (ITA No.5253/Del/2017 order dated 11.05.2018), in A.Y. 2012-13 (ITA No.6186/Del/2016 order dated 30.10.2019) and A.Y. 2013-14 (ITA No.5252/Del/2017 order dated 06.02.2020). The Co-ordinate bench of Tribunal while deciding the issue in 5 immediately preceding Assessment Year i.e. A.Y. 2013-14 had remanded the issue to the file of the AO by observing as under: “4. I have heard the submissions of both the parties and perused the material available on record. It is an admitted fact that the legal issue as addressed by the Apex Court in the case of Classic Binding Industries was subsequently re-visited by the Hon’ble Supreme Court in the case of Aarham Softronics (supra). The Apex Court clarified the legal position therein by holding as under : “24. The aforesaid discussion leads us to the following conclusions: (a) Judgment dated August 20, 2018 in Classic Binding Industries case omitted to take note of the definition "initial assessment year" contained in section 80-IC itself and instead based its conclusion on the definition contained in section 80-IB, which does not apply in these cases. The definitions of "initial assessment year" in the two sections, viz., sections 80-IB and 80-IC are materially different. The definition of "initial assessment year" under section 80-IC has made all the difference. Therefore, we are of the opinion that the aforesaid judgment does not lay down the correct law. (b) An undertaking or an enterprise which had set up a new unit between January 7, 2003 and April 1, 2012 in the State of Himachal Pradesh of the nature mentioned in clause (ii) of sub-section (2) of section 80-IC, would be entitled to deduction at the rate of 100 per cent, of the profits and gains for five assessment years commencing with the "initial assessment year". For the next five years, the admissible deduction would be 25 per cent, (or 30 per cent, where the assessee is a company) of the profits and gains. (c) However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become "initial assessment year", and from that assessment year the assessee shall be entitled to 100 per cent, deductions of the profits and gains. (d) Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100 per 6 cent, deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in the eighth year by an assessee such an assessee would be entitled to 100 per cent, deduction for the first five years, deduction at 25 per cent, of the profits and gains for the next two years and at 100 per cent, again from the eighth year as this year becomes "initial assessment year" once again. However, this 100 per cent, deduction would be for the remaining three years, i.e., eighth, ninth and tenth assessment years.”

It is seen that the Tribunal, relying on the aforesaid decision of Hon’ble Supreme Court, has remanded the issue back to the Assessing Officer. For ready reference, relevant extract of the Tribunal order dated 30.10.2019 is reproduced as under : “5. But, in the case of the assessee, the facts of substantial expansion remained to be verified and, therefore, the Tribunal (supra) in the immediately preceding assessment year, restored the matter to the file of the Assessing Officer with the direction as under: “10. Since in the instant case there are certain errors in the Audit Report which is apparent and since the Id. CIT(A) has given a finding that the Auditors of the assessee neither verified substantial expansion claimed to have been undertaken by the assessee nor stated that initial assessment year would be other than the assessment year 2006-07, therefore, considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore this issue to the file of the Assessing Officer with a direction to verify the details of such substantial expansion undertaken by the assessee. The Assessing Officer shall decide the issue afresh and in accordance with law keeping in mind the decision of the Hon’ble Himachal Pradesh High Court in the case of Stovekraft India (supra).Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. I hold and direct accordingly. The grounds raised by the assessee are allowed for statistical purposes.”

AO on perusal of 26AS noted that Form 26AS showed that assessee had received Rs.2,46,000/- contractual receipt but the same was not offered to tax. AO noted that no explanation was offered by assessee for not offering the aforesaid amount to tax.

Before us, Learned AR submitted that addition has been wrongly made by AO and CIT(A) has not decided the issue on merits. He therefore submitted that assessee be provided one more opportunity to prove its case. Learned DR on the other hand supported the order of AO.

We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to the addition of Rs. 2,46,000/- as undisclosed income. It is assessee’s contention that the addition has been wrongly made and the CIT(A) has upheld the order of AO without passing a speaking order. It is the contention of assessee before us that assessee be provided an opportunity to prove its case before the AO. Considering the aforesaid request and in the interest of justice, we are of the view that one more opportunity be granted to assessee to prove his case. We therefore restore the issue back to the file of the AO to decide the issue afresh in accordance with law after granting adequate opportunity of hearing to the assessee. Assessee is also directed to promptly submit the details called for by the AO. Thus the ground is allowed for statistical purpose.