ECHJAY INDUSTRIES P.LTD,MUMBAI vs. ASST CIT CEN CIR 45, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “E”, BENCH MUMBAI

BEFORE : SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM

ITA No.5245/Mum/2017 Assessment Year :2006-07)

ITA No.5246/Mum/2017 Assessment Year :2010-11)

ITA No.3801/Mum/2017 Assessment Year :2011-12)

ITA No.3802/Mum/2017 Assessment Year :2012-13)

ITA No.7069/Mum/2017 Assessment Year :2013-14)

ITA No.7070/Mum/2017 Assessment Year :2014-15)

ITA No.6535/Mum/2017 Assessment Year :2010-11) & ITA No.6536/Mum/2017 Assessment Year :2012-13)

2 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. M/s. Echjay Industries Pvt. Vs. Asst. Commissioner of Ltd., Income Tax, Central Circle- 83, Bajaj Bhavan 45,/Dy.Commissioner of Nariman Point Income Tax-Circle 8(2) Mumbai – 400 023 Mumbai, Aayakar Bhavan Mumbai – 400 020 PAN/GIR No. : AAACE1157B (Appellant) .. (Respondent)

Assessee by : Shri N.R. Rao Revenue by : Shri Sachchidanand Dube Date of Hearing : 01/05/2019 Date of Pronouncement 17/07/2019

O R D E R PER M. BALAGANESH (A.M):

ITA No.5245/Mum/2017 (A.Y.2006-07) This appeal in ITA No.5245/Mum/2017 for A.Y.2006-07 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No. CIT(A)-50/IT-163/2014-15 dated 21/07/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2014 by the ld. Dy. Commissioner of Income Tax (HQ) to CIT(C)-IV, Mumbai (hereinafter referred to as ld. AO).

3 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

ITA No.5246/Mum/2017 (A.Y.2010-11)

This appeal in ITA No.5246/Mum/2017 for A.Y.2010-11 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50,Mumbai in appeal No. CIT(A)-50/IT-510/2014-15 dated 21/07/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/03/2013 by the ld. Asst. Commissioner of Income Tax, Central Circle-45, Mumbai (hereinafter referred to as ld. AO).

ITA No.3801/Mum/2017 (A.Y.2011-12)

This appeal in ITA No.3801/Mum/2017 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/IT-164/2014-15 dated 31/03/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2014 by the ld. Dy. Commissioner of Income Tax (HQ) to CIT(C)- IV, Mumbai (hereinafter referred to as ld. AO).

ITA No.3802/Mum/2017 (A.Y.2012-13)

This appeal in ITA No.3802/Mum/2017 for A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/IT-49/2015-16 dated 31/03/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the

4 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2015 by the ld. Asst. Commissioner of Income Tax-8(2), Mumbai (hereinafter referred to as ld. AO). ITA No.7069/Mum/2017 (A.Y.2013-14)

This appeal in ITA No.7069/Mum/2017 for A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/10494/16-17 dated 28/11/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2016 by the ld. Asst. Commissioner of Income Tax – Central Circle 8(2), Mumbai (hereinafter referred to as ld. AO).

ITA No.7070/Mum/2017 (A.Y.2014-15)

This appeal in ITA No.7070/Mum/2017 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/10366/16-17 dated 28/11/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 14/12/2016 by the ld. Dy. Commissioner of Income Tax, Central Circle- 8(2), Mumbai (hereinafter referred to as ld. AO).

ITA No.6535/Mum/2017 (A.Y.2010-11)

This appeal in ITA No.6535/Mum/2017 for A.Y.2010-11 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/IT-510/2014-15 dated 21/07/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the

5 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/03/2013 by the ld. , Asst. Commissioner of Income Tax, Central Circle-45, Mumbai (hereinafter referred to as ld. AO).

ITA No.6536/Mum/2017 (A.Y.2012-13)

This appeal in ITA No.6536/Mum/2017 for A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/IT-49/2015-16 dated 31/03/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2015 by the ld. Asst. Commissioner of Income Tax-8(2), Mumbai (hereinafter referred to as ld. AO).

Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidate order, for the sake of convenience.

Grounds 1 and 2 in ITA No. 5245/Mum/2017 for Asst Year 2006- 07 We find that the assessee had raised a preliminary ground challenging the validity of reassessment framed u/s 147 of the Act for the Asst Year 2006-07. The brief facts of this issue are that the assessee is a private limited company carrying on the business of manufacturing engineering products mainly for the automobile sector and railways and had also made investments in windmills. It generates power and

6 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. distributes to the State Government grids. The return of income for the Asst Year 2006-07 was filed by the assessee on 30.11.2006 declaring total income of Rs 45,72,93,324/-. The assessment was completed u/s 143(3) of the Act. Later the ld AO received information through the office of the Additional CIT, Central Range-10, Mumbai on receipt of information by him from Deputy Commissioner of Income Tax, Circle -8, Ahmedabad pursuant to survey conducted in the case of M/s Suzlon Energy Ltd and its Group. The information was that the assessee had commissioned a ‘Windmill’ at Dhule, Maharashtra on 27.3.2006 and the same ‘was not running’ and the assessee’s claim of depreciation in respect of windmill at Dhule of Rs 2,49,34,666/- was stated to be incorrect and required to be disallowed. Accordingly, the notice u/s 148 of the Act was issued to the assessee company on 31.3.2013 after recording the following reasons :-

2.1. In the reassessment framed u/s 143(3) r.w.s.147 of the Act dated 31.3.2014, the claim of depreciation in respect of windmills at Dhule in

7 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. the sum of Rs 2,49,34,666/- , the ld AO in para 5.10 of his order stated that there is no case for disallowance of the claim for depreciation as the windmill had commenced during the financial year 2005-06 and also had generated power and sold to Maharashtra State Electricity Board (MSEB), which fact came to know only after examining the facts during the assessment proceedings. The ld AO also observed that the reopening in the case of the assessee was made based on the information obtained from Ahmedabad income tax office, which conducted survey in M/s Suzlon Energy Ltd case on 27.3.2006. The ld AO observed in his order that the windmill had commissioned on 25.3.2006 and generation of power was started. However, due to adequate power grid, the generation was temporarily suspended till the new grid was installed. It is evidenced from the documents / certificates issued by the MSEB for commissioning of windmill on 25.3.2006. Though the generation of power during the financial year 2005-06 was for a short period, it cannot be stated that the windmill was not commenced. The power was generated and sold to MSEB. The information gathered during the survey by Ahmedabad income tax team was also correct, because, the survey team observed that when the windmill was not running as on the date of survey i.e on 27.3.2006, the depreciation claimed by the assessee was inadmissible u/s 32(1) of the Act. With these observations, the ld AO justified his reasons recorded for reopening the assessment as valid and correct.

2.2. In the reassessment, the ld AO determined the total income of the assessee at Rs 47,36,81,440/- after making various additions / disallowances, other than the claim of depreciation on windmill at Dhule in the sum of Rs 2,49,34,666/-. The assessee challenged the validity of reopening before the ld CITA who upheld the action of the ld AO. Aggrieved, the assessee is in appeal before us.

8 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

2.3. We have heard the rival submissions. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. Admittedly, the reopening was made beyond 4 years from the end of the relevant assessment year and hence the applicability of proviso would come into play, wherein, it is duty bound on the part of the ld AO to spell out clearly in the reasons recorded for reopening itself, the failure on the part of the assessee to make a true and full disclosure of information and facts. From the perusal of reasons reproduced hereinabove, we do not find any such mention about the failure on the part of the ld AO in terms of proviso to section 147 of the Act, by the ld AO. In this regard, the Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd vs ACIT reported in 268 ITR 332 (Bom), wherein it was held as under:-

―Reasons recorded should be elaborate and should speak for itself about the mind of the AO for formation of belief that income had escaped assessment. It should not be vague. The satisfaction of the AO that income had escaped assessment should emanate from the reasons recorded at the time of initiation of reassessment itself and the same cannot be ratified or strengthened by subsequent investigations or evidences. Hence the purported investigations or purported collection of evidences based on information gathered by the AO should precede the act of recording reasons by him. ― Hence the reassessment deserves to be quashed on this count itself. 2.4. We also find that the reopening was made for disallowance of claim of depreciation on windmill at Dhule in the sum of Rs 2,49,34,666/- . But we find from the reassessment order, no disallowance was made thereon by the ld AO and hence the basic premise on which reopening was made fails. The formation of belief on the part of the ld AO fails. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Jet Airways (I) Ltd reported in 331 ITR 236 (Bom) wherein it was observed that if no addition is made

9 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. on the issue of reasons recorded, but reassessment is completed making some other additions not recorded in the reasons, then the reasessment is to be declared invalid as the basic premise of satisfaction of the ld AO in forming the belief that income had escaped assessment itself fails. Their Lordships further observed that the belief should be formed at the time of recording of reasons itself and not thereafter on the issues mentioned in the reasons.

2.5. Similar views were taken in the following cases :- a) Ranbaxy Laboratories Ltd vs CIT – 336 ITR 136 (Del) b) CIT VS INFINITY INFOTECH PARKS LTD in ITAT No. 60 of 2014 G.A.No. 1736 of 2014 dated 10.9.2014 (Calcutta HC) c) Martech Peripherals P Ltd vs DCIT and Another reported in (2017) 394 ITR 733 (Mad) dated 4.4.2017

2.6. We also find the Special Leave Petition preferred by the revenue before the Hon’ble Supreme Court in the case of PCIT vs Lark Chemicals (P) Ltd reported in (2018) 99 taxmann.com 312 (SC) against the order of Hon’ble Bombay High Court on the very same reasoning, had been dismissed vide its order dated 5.10.2018.

2.7. In view of the aforesaid observations in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we have no hesitation in quashing the re- assessment proceedings framed by the ld AO for the Asst Year 2006-07. Since the reassessment is quashed, the adjudication of the various additions made on merits becomes academic in nature and we refrain to give our opinion on the same. Accordingly the grounds raised by the assessee on the validity of reopening are allowed.

10 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. 3. ADDITION MADE TOWARDS VALUATION OF CLOSING STOCK OF WORK IN PROGRESS AND FINISHED GOODS Ground No. 2 of Concise Grounds in ITA No. 5246/Mum/2017 for Asst Year 2010-11 Ground No. 2 of Concise Grounds in ITA No. 3801/Mum/2017 for Asst Year 2011-12 Ground No. 2 of Concise Grounds in ITA No. 3802/Mum/2017 for Asst Year 2012-13 Ground Nos. 2(a) and (b) in ITA No. 7069/Mum/2017 for Asst Year 2013-14 Ground Nos. 2(a) and (b) in ITA No. 7070/Mum/2017 for Asst Year 2014-15 The facts of Asst Year 2010-11 are taken up for adjudication and the decision rendered thereon would apply with equal force for other assessment years in appeal before us also except with variance in figures.

The assessee company was incorporated on 31st December 1960. The brief facts of this addition are that the assessee had furnished before the ld AO, the copies of audited accounts division wise profit and loss account , computation of total income, tax audit report in Form 3CD together with its annexures, Audit report in Form No. 10CCB in support of the claim of deduction u/s 80IA of the Act in respect of 3 windmills along with independent profit and loss account in respect of all the windmills. These facts are recorded in Para 1 of the assessment order by the ld AO. The ld AO observed that during the year under consideration, the main business of the assessee company was at Rajkot where it was having its manufacturing facility for manufacture of various metallurgical products like closed dye forgings, forged rolled rings, tyres, profiles, gears, bars and shafts, steel flanges and fittings, rings and gaskets, crown whell and pinion from stainless steel and alloy steel, carbons steel etc. These

11 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. products were used mainly by automobile industry, railways, ISRO, Mahindras, Tata Motors Ltd , Larsen and Toubro Ltd , Tractor & Farm Equipment Ltd. Bharat Earth Movers Ltd, Godrej & Boyce Manufacturing Co. Ltd, ONGC, Ashok Leyland Ltd and others. The ld AO also observed that assessee had set up 7 windmills at various places in Gujarat, Rajasthan and Tamil Nadu and derived income from generation and sale of power to the respective State Government Electricity Undertakings, with whom it had entered into power purchase agreements. The assessee had the state of the art plant and machineries installed at Rajkot. It does not produce any product for shelf and sale in the market. It caters to the orders placed on engineering specifications by its established customers. The products thus are tailor made to the specified customers on the engineering specifications they provide.

3.1. The assessee explained the manufacturing process involved from the stage of raw material to the stage of finished goods as under:-

Material movement process in production: a) Raw material used in the Steel forging is received in the form of Bars/Billets/Blooms & Ingots" in sizes varying from 50mm to 800mm. The length is normally 5 to 8 meters, having weight from 1/2 ton to 15 tons each piece. b) This material is cut to pieces by sawing (the process generates saw- dust which is unrecoverable loss to the tune of 0.3 to 1.5%), suitable for forging into components between two dies on Hammer/Press. The impression of the component is carved on the dies. The cut pieces are heated in Oil fired furnace to 1200° Cg. and in plastic condition, they are forged on the Hammer after filling-in the cavities of the dies (here the scale is formed, which is unrecoverable loss of weight to the tune of 2% per heat; the components needs one or two heats depending on the process). The extra material comes out in the "gutter" provided in the dies, which is trimmed out on the Press and the extra material (recoverable waste) is known as ''heavy melting scrap" sold to Steel melting shops. The forged components are sent to heat treatment shop for different kinds of heat treatment as per customer's requirements where the forcings are heated to 1000° Cg. and cooled in different

12 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. cooling media. Here also, during heating scale is generated which is unrecoverable loss to the tune of 1%. c) The forging then goes to fettling shop where the forgings are cleaned in metal laundry. These forgings are further checked for surface cracks, etc. and then forwarded to Machine shop. If forgings are not to be sold as it is, but are to be supplied in finished component stage or intermediatery stage for customers to finish it, during this operation, turning, milling or gear cutting scrap is generated as "light melting scrap" as recoverable scrap, except 0.2 to 0.3% scrap gets drained out as unrecoverable loss, along with cooling media which is used while machining the component to keep the tools cool. d) Normally the moment billets are cut and forwarded to Forge shop, the material is termed as "goods-in-process", except the end-piece which goes to Scrapyard. It continues to remain "goods-in-process" till it is ready for delivery & cleared by Inspection Agency as "accepted material". The material ready for delivery goes to Finished goods product, and rejected material goes out as "scrap". So in all, there are four stages of material - (1) raw material (2) Goods-in-process (3) Finished goods (4) Scrap. e) Even finished goods at times goes back to "goods-in-process" or scrap-yard on account of cancellation of order by the customer, change in material specification/design by the customer, failing in destructive test, etc. f) As far as the company's products are concerned, as stated above, it is a Jobbing Shop & does not have a proprietary product of its own as it works only on orders placed by the customers. It does not produce anything for the shelf in the market. The components/parts are to the specified customers for specific jobs as per their drawings, specifying material to be bought from sources approved/qualified by them as far as possible, and in case of sources approved/qualified by us. Client's permission is taken before using the material. In any case, Steel mills certificate is sent along with each supply to the buyer. Quality of material to be used, quality production and transparency is the underlining principle that the company follows. g) The order specifications in many cases stipulate to manufacture an extra product per batch to be thoroughly tested as destructive test, before the batch is accepted qualitatively. There are cases where certain orders are placed for certain smaller quantity to manufacture to international standards, especially products such as "flanges", and the company expecting repeat order/s produces more numbers to be sold to the same party/parties at a later date when the same are demanded. This proves economical to produce when the specific machineries and processes are

13 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. geared up for a batch for such production. When the order is repeated, it would certainly get us better profits. h) It is quite possible at times, there are rejections by the customers, rejection within the process department, excess goods manufactured but no orders are received. Then, in those circumstances, such rejected goods become scrap. It is shifted to the scrap yard. ―

3.2. Since its inception, the assessee followed the following method of valuation of its inventories which is also mentioned in their Significant Accounting Policies in their Annual Report :-

Raw material - At Cost Work in Progress - At Cost Finished Goods - At Cost or Net Realisable Value whichever is lower Scrap - At Cost or Net Realisable Value whichever is lower The valuation thus was on ‘Direct Cost’ method.

3.3. With regard to the valuation of work in process and finished goods , the ld AO observed that the assessee had valued the same by considering only the cost of raw materials and no overheads were added to the value of goods at various stages of manufacturing. This method of accounting and valuation process was followed from inception of the assessee company in 1960 regularly and consistently and the same was accepted by the revenue till Asst Year 2009-10. The ld AO for the first time in Asst Year 2010-11 show caused the assessee as to why the WIP and Finished goods should not be valued on ‘add on’ method under which a part of the manufacturing overheads were to be added to the direct cost. The ld AO relied on the decision of the Hon’ble Supreme Court in the case of British Paints India Ltd reported in 188 ITR 14 (SC) in support of his contentions in order to deduce true profits of the assessee company. The assessee submitted that the Hon’ble Supreme Court in the case of British Paints India Ltd had not ruled that add on method was the only one method of

14 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. valuation of inventories and it did not hold that the ‘direct cost’ method was not an acceptable method of valuation. The ld AO however, disregarded the contentions of the assessee in this regard. The ld AO observed that though the books of accounts of the assessee is accepted, the true profits for the year cannot be deduced unless the overhead expenditures are also added to the value of raw material for valuation of WIP and finished goods. Accordingly, he adopted ‘add on method’ and made an addition of (-) Rs 9,16,105/- to the total income towards closing stock of WIP and finished goods for the Asst Year 2010-11.

3.4. The ld CITA upheld the action of the ld AO in adopting ‘add on method’ for valuation of closing stock of WIP and finished goods as against ‘direct cost method’ adopted by the assessee. The ld CITA adopted the workings given by the assessee for valuation of closing stock of WIP and finished goods under ‘add on method’, without prejudice to its claim of adopting ‘direct cost method’ . Accordingly, he adopted the closing stock of WIP and finished goods as on 31.3.2010 at Rs 17,14,25,322/- and opening stock as on 1.4.2009 at Rs 16,05,98,666/- and arrived at an incremental value of Rs 1,08,26,656/- thereon. The ld CITA observed that the assessee had adopted the incremental value of WIP and finished goods in its accounts at Rs 78,68,139/-. This figure of incremental value of WIP and finished goods was further reduced by the ld AO by Rs (-) 9,16,205/-. Accordingly, the ld CITA adopted the incremental figure as per accounts at Rs 69,51,934/- under ‘direct cost method’. This figure of Rs 69,51,934/- was compared by the ld CITA with the incremental figure based on ‘add on method’ at Rs 1,08,26,656/- as above . He arrived at the differential figure of Rs 38,74,722/- which figure was enhanced to the total income of the assessee.

3.5. Aggrieved, the assessee is in appeal before us.

15 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

3.6. We have heard the rival submissions. We find that the assessee had duly explained the modus operandi of the manufacturing process involved in production of finished goods from the raw material stage as detailed above. It is not in dispute that the assessee had been consistently following the ‘direct cost’ method for valuation of work in progress and finished goods since inception from 1960 onwards and the same had been accepted by the revenue till Asst Year 2009-10. We find that the ld AO had relied on the decision of the Hon’ble Supreme Court in the case of British Paints India Ltd reported in 188 ITR 44 (SC) . We find from the perusal of the decision of Hon’ble Supreme Court supra , it had not stated that the ‘add on method’ was the only one method of valuation of inventories. We find that the Hon’ble Supreme Court had not held that the ‘direct cost’ method was not an acceptable method of valuation. We find from the facts in British India Paints case, the said company was manufacturing general goods like paints and not with any tailor made products. The said manufactured paints is used for all the customers of British India Paints Ltd. In that scenario, the Hon’ble Apex Court had held that ‘add on method’ would be appropriate method of valuation of WIP and finished goods. We have already stated that the assessee’s products manufactured are tailor made to meet the specific requirements of specific customers and the product manufactured for one customer cannot be used for other customer. Hence the decision of Hon’ble Supreme Court is distinguishable on facts of the assessee’s case before us. It is not in dispute that the ‘direct cost method’ is also an acceptable method of valuation of inventories. This method is also not prohibited by the Hon’ble Supreme Court in British Paints India case supra. In this scenario, the assessee had adopted the ‘direct cost’ method for valuation of inventories. Now the moot question that is to be decided is whether the method consistently followed by the assessee for the past several

16 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. years and accepted by the revenue be tinkered with during the year , especially when there is no change in set of facts and circumstances. It is well settled that though the Principle of Resjudicata does not apply to income tax proceedings, but the Principle of Consistency cannot be given a go by. In this regard, the reliance has been rightly placed by the ld AR before us on the decision of Hon’ble Supreme Court in the case of Radhasaomi Satsang vs CIT reported in 193 ITR 321 (SC) wherein it was held that :- ―As we are aware of the fact that, strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.‖

3.6.1. In any case, the entire exercise carried out by changing the method of valuation of inventories from one to another method would only result in tax neutral exercise as the closing stock of this year would become automatically the opening stock of next year. Hence the addition made in this year would result in granting deduction for the very same amount in the next year and so and so forth. Hence it is effectively a tax neutral exercise. Reliance in this regard is placed on the decision of Hon’ble Delhi High Court in the case of Mahavir Aluminium Ltd vs CIT reported in 297 ITR 77 (Del) and the decision of Hon’ble Jurisdictional High Court in the case of CIT vs The Mahalaxmi Glass Works Pvt Ltd in Income Tax Appeal No. 192 of 2009 dated 1.4.2009 and in the case of CIT vs Kolsite Maschine Fabrik Ltd in Income Tax Appeal No. 302 of 2009 dated 20.4.2009.

3.6.2. Moreover, we also find that the valuation of inventories on ‘add on method’ by the ld AO was done on an adhoc basis without any scientific

17 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. basis for the same. We find that the assessee, without prejudice to its original contention that only ‘direct cost method’ is to be adopted, had provided scientific workings for the same before the ld CITA and the same had been accepted by the ld CITA in para 7.6. of his order. These workings are also provided in the paper book filed before us. The ld AO had not disputed the said workings before us by way of any ground thereon.

3.6.3. We find that the ‘direct cost method’ is also a recognized method for valuation of inventories. We also find that the impugned dispute before us is squarely addressed by the co-ordinate bench of Calcutta Tribunal in the case of Gobind Sugar Mills Ltd vs ACIT reported in (1998) 99 Taxman 227 (Calcutta) dated 8.11.1995 wherein it was held that :-

18 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. the actual or even part of the cost involved in the manufacture of the goods-in-progress sand finished products. What it contends for is valuation of the raw material without taking into account any portion of the cost of manufacture. No decision has been brought to our notice in support of such a contention. The question of fact which the Assessing Officer must necessarily decide is whether or not the method of accounting followed by the assessee discloses the true income." The above passage brings out the distinction between the case before the House of Lords and the case before the Supreme Court. In the case before the Supreme Court, the cost of raw materials alone was taken into account and, therefore, the Supreme Court held that the method adopted by the assessee is neither the direct cost method nor any other method which takes into account the actual or even part of the cost involved in the manufacture of the goods-in-progress/finished goods. Thus, it will be clear from the aforesaid observation that the ratio of the Supreme Court judgment would apply only where neither the direct cost method nor any other recognised method is followed. The facts in the present case before us are not similar. The assessee before us, as already seen consistently values its closing stock on the direct cost method. Various items of expenditure that go to the make-up the direct cost had already been listed out earlier. The assessee does not stop with valuing its closing stock of finished goods and processed sugar at the cost of raw materials alone, but goes further and adds the direct expenditure also in order to arrive at the direct cost. It cannot therefore be stated that the judgment of the Supreme Court is against the assessee as erroneously held by the CIT. It is nobody’s case that the direct cost method is not a recognised method. In fact, the international accounting standards which have been filed in pp. 33 and 37 of the paper-book before us recognise the direct cost method as one of the methods of valuation of stock. In fact the basis of the judgment of the Supreme Court cited supra is not that the direct cost method is not one of the recognised methods of valuation of stock, but it is that the assessee before the Supreme Court did not follow the direct cost method or any other recognised method of valuation.

19 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. includes the method of valuation of stock, adopted by the assessee if the method is not a recognised method or is one which is not consistently followed by the assessee or is one which does not enable the true profits and gains of the business to be computed. We have already seen that the direct cost method which has been followed by the assessee consistently for a long period is one of the recognised method of valuation of stock. The CIT is therefore, not justified in rejecting the same and substituting the same by "on cost" method. It is no doubt true that the "on cost" method is also one of the recognised methods of valuation of stock but so long as the method of valuation followed by the assessee is a recognised method, consistently followed and from which the true profits and gains can be computed, there is no justification for rejecting the same and substituting the "on cost" method.

We find that this decision of Calcutta Tribunal had been rendered after due consideration of the Hon’ble Supreme Court in the case of British Paints India Ltd reported in 188 ITR 44 (SC).

3.6.4. We also find that the decision of Hon’ble Madras High Court in the case of CIT vs Carborandum Universal Ltd reported in 149 ITR 759 (Mad) had held as under:-

20 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. adoption of that method cannot be questioned by the revenue unless the adoption of that method is found to be not bona fide or restricted for a particular year.

3.6.5. Respectfully following the aforesaid decisions, we hold that the adoption of ‘direct cost method’ which has been consistently followed by the assessee since inception and accepted by the revenue in the earlier years, cannot be construed as an incorrect method.

3.6.6. In view of the aforesaid observations in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon herein above, the grounds raised by the assessee for various assessment years with regard to addition made towards valuation of work in progress and finished goods are allowed and the ld AO is directed to delete the said addition made in various assessment years.

The facts of Asst Year 2010-11 are taken up for adjudication and the decision rendered thereon would apply with equal force for other assessment years in appeal before us also except with variance in figures.

21 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

The assessee does not produce any product for shelf and sale in the market. It caters to the orders placed on engineering specifications by its established customers. The products thus are tailor made to the specified customers on the engineering specifications they provide. The assessee with regard to valuation of stores, spares and consumables had followed the accounting policy to charge off as expenditure as and when the purchase of those items were made and does not keep stock of the same. In other words, no opening or closing stock of stores, spares and consumables were maintained by the assessee as the products made are tailor made as per the requirements of the customers. The assessee submitted that these items are not general items which were procured and retained for use for longer period of time. Infact one product which is manufactured for one customer would not be suitable for other customers’ requirements. The assessee submitted that there is no proprietory product manufactured by it. The customers of assessee are mainly railways, ISRO, Mahindras, Tata Motors Ltd , Larsen and Toubro Ltd , Tractor & Farm Equipment Ltd. Bharat Earth Movers Ltd, Godrej & Boyce Manufacturing Co. Ltd, ONGC, Ashok Leyland Ltd and others. These spares are bought for specific purpose of the orders and they have no other use thereafter. Hence there would be no point in holding stock of those spares, consumables etc. Accordingly, the assessee consistently followed the method to charge off the purchases as an expenditure in the profit and loss account. But internally, the assessee maintained controlling registers recording purchases, releases for consumption and the closing stock at the year end. In any case, the entire costs get absorbed in the invoice raised on the customers and there is no loss to the assessee company. This method of accounting and valuation process was followed from inception of the assessee company in 1960 regularly and consistently and the same was accepted by the revenue till Asst Year

22 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. 2009-10. The ld AO arrived at the closing stock of stores, spares and consumables of the assessee as on 31.3.2010 and valued the same and arrived at the true profits of the assessee. He stated that the correspondingly opening balance as on 1.4.2009 need not be adjusted by valuing the stores stock as no assessment was framed for the Asst Year 2009-10 by the ld AO. Accordingly, he made an addition of Rs 2,22,56,410/- to the total income of the assessee towards closing stock of spares , stores and consumables for the Asst Year 2010-11. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us.

4.1. We have heard the rival submissions. It is not in dispute that the products manufactured by the assessee are tailor made and caters to the specific requirements of specific customers. It is not in dispute that the product manufactured for one customer cannot be utilized for another customer. The stores, spares and consumables bought by the assessee were to be utilized only for the tailor made products of specific customers and there is no point in stocking the same in the shelf as they do not have any use after the sale of products. In other words, the ld AR argued that the assessee manufactured tailor made products based on the engineering specifications provided by the customers , failing which the products would be rejected by them, the stores, spares and consumables purchased during the year will have no application in other production and if the production line is stalled for want of customers’ orders, the assessee company could utmost sell those stores, spares and consumables at mere scrap value which will be a miniscule amount in comparison to the cost incurred. We find lot of force in this argument of the ld AR. Hence it is justified on the part of the assessee to charge off the entire purchases made in the profit and loss account as an expenditure. This practice of charging off the purchases as an

23 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. expenditure in the year of purchase is in line with the Accounting Standards 2 (AS 2) issued by the Institute of Chartered Accountants of India (ICAI) due to the peculiar nature of business pattern of the assessee. It is not in dispute that the assessee had been consistently following this method since inception from 1960 onwards and the same had been accepted by the revenue till Asst Year 2009-10. Now the moot question that is to be decided is whether the method consistently followed by the assessee for the past several years and accepted by the revenue be tinkered with during the year , especially when there is no change in set of facts and circumstances. It is well settled that though the Principle of Resjudicata does not apply to income tax proceedings, but the Principle of Consistency cannot be given a go by. In this regard, the reliance has been rightly placed by the ld AR before us on the decision of Hon’ble Supreme Court in the case of Radhasaomi Satsang vs CIT reported in 193 ITR 321 (SC) wherein it was held that :-

―As we are aware of the fact that, strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.‖

4.1.1. In any case, the entire exercise carried out by changing the method of valuation of inventories from one to another method would only result in tax neutral exercise as the closing stock of this year would become automatically the opening stock of next year. Hence the addition made in this year would result in granting deduction for the very same amount in the next year and so and so forth. Hence it is effectively a tax neutral exercise. Reliance in this regard is placed on the decision of Hon’ble Delhi High Court in the case of Mahavir Aluminium Ltd vs CIT

24 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. reported in 297 ITR 77 (Del) and the decision of Hon’ble Jurisdictional High Court in the case of CIT vs The Mahalaxmi Glass Works Pvt Ltd in Income Tax Appeal No. 192 of 2009 dated 1.4.2009 and in the case of CIT vs Kolsite Maschine Fabrik Ltd in Income Tax Appeal No. 302 of 2009 dated 20.4.2009.

4.1.2. The case laws relied upon herein for the valuation of closing stock of WIP and finished goods would apply for valuation of stores, spares and consumables also. They are not reiterated herein for the sake of brevity.

4.1.3. Accordingly, the grounds raised by the assessee for various assessment years with regard to addition made towards valuation of stores, spares and consumables are allowed and the ld AO is directed to delete the said addition made in various assessment years.

Ground No. 3 of Concise Grounds in ITA No. 5246/Mum/2017 for Asst Year 2010-11 Ground No. 3 of Concise Grounds in ITA No. 3802/Mum/2017 for Asst Year 2012-13 Ground No.1 in ITA No. 7069/Mum/2017 for Asst Year 2013-14 Ground No.1 in ITA No. 7070/Mum/2017 for Asst Year 2014-15

The facts of Asst Year 2010-11 are taken up for adjudication and the decision rendered thereon would apply with equal force for other assessment years in appeal before us also except with variance in figures.

25 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. The ld AO observed that the assessee had claimed expenditure of Rs 27,91,885/- on account of foreign travel. The ld AO observed that the spouses and children of the directors also had travelled along with the directors of the assessee company to various places. The assessee pleaded that as per international custom, whenever any official meetings are called for in overseas countries, it is customary that the family of the directors or key management personnel also should accompany them and hence the entire expenditure incurred is for the purpose of promoting the business interests of the assessee and accordingly allowable as deduction. The ld AO treated the same as personal expenditure and accordingly disallowed a sum of Rs 20,42,857/- out of Rs 27,91,885/- and together with some expenditure incurred through credit cards to the tune of Rs 4,77,030/- . The ld CITA however upheld the action of the ld AO by holding that the foreign travel expenditure had given enduring benefit to the assessee and hence to be treated as capital expenditure. Aggrieved , the assessee is in appeal before us.

5.1. We have heard the rival submissions. It is not in dispute that the family members of the directors had also accompanied the directors of the assessee company on their overseas visits. It is not in dispute that the visit to foreign countries were only for official purposes and hence business interest thereon is duly proved. It is also not in dispute that the assessee exports its products to various countries and in promotion of the business, the directors have to travel to meet their clients and customers at their places frequently. We find that the ld AO had disallowed a sum of Rs 20,42,857/- out of total foreign travel expenses of Rs 27,91,885/- together with expenditure incurred through credit card to the tune of Rs 4,77,030/-. We also find given the figures of turnover of various years before us, the amounts incurred towards foreign travel is very miniscule and hence the same cannot be disbelieved. It is

26 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. customary that the international clients always insist for visits to their places with the family members to increase the affinity and emotional bondage, which in turn would be indirectly relevant for the sustenance of the business and promotion thereon, and the same was done by the assessee company in the instant case just to agree to the directions of the overseas customers in the larger interest of the business promotion of the assessee company. We are unable to persuade ourselves to accept the contention of the ld CITA that such incurrence of foreign travel expenses would be of enduring nature and would result in enduring benefit to the assessee and accordingly to be treated as capital expenditure. No doubt the said visits of the directors of the assessee company to overseas countries with family would result in enduring benefit to the business of the assessee company , as pursuant to such visits with family, the business interests of the assessee company gets protected and promoted. But we find that such enduring benefit would be only on the revenue field and not on the capital field. There is no asset that actually comes into existence except the long standing relationship with the overseas customers. It is already well settled by the Hon’ble Supreme Court that any enduring benefit in the revenue field would have to be treated as revenue expenditure and not capital expenditure. Hence we hold that the foreign travel expenses are incurred for the purpose of business of the assessee and accordingly allowable as deduction.

5.2. We find that the Hon’ble Kerala High Court in the case of CIT vs Apollo Tyres Ltd reported in 237 ITR 706 (Ker) in the context of foreign travel expenses of wife of the director held as under:-

27 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. for the wife of the chairman-cum-managing director of the Company for foreign travel is an allowable deduction. In the assessment in question the assessee claimed deduction of a sum of Rs. 1,38,561 being the foreign travel expenses of Mrs. Gurmeet Kaur, wife of the chairman-cum- managing director of the assessee-company in the computation of total income. The Assessing Officer disallowed the same holding that there is no nexus with the business. The Commissioner (Appeals) con-firmed the said disallowance following the decision of the Gujarat High Court in Bombay Mineral Supply Co. (P.) Ltd. v. CIT [1985] 153 ITR 437/ 23 Taxman 549 and the decision of the Madras High Court in CIT v. T.S. Hajee Moosa & Co. [1985] 153 ITR 422/ 22 Taxman 250. The Tribunal in further appeal following the Special Bench decision of the Tribunal in Glaxo Laboratories (India) Ltd. v. 2nd ITO [1986] 18 ITD 226 (Bom.), allowed the claim of the assessee. According to the revenue, Mrs. Gurmeet Kaur accompanied her husband Shri Raunaq Singh, chairman-cum- managing director of the company not for any business purposes and, therefore, the said amount cannot be allowed as a business expenditure. On the other hand, the assessee contended that Mrs. Gurmeet Kaur accompanied the Chairman-cum-Managing Director, who was on his business tour to foreign countries, to enable him to discharge his social- cum-business obligations in an effective manner and, therefore, it is a legitimate deduction allowable under section 37 of the Act. The Tribunal, on a consideration of the materials available on record, observed that it is not the case of the revenue that her going abroad with her husband was for private or personal purposes and that in fact the ITO has simply disallowed the expenditure stating that the expenditure was not laid out for the purpose of business. The Tribunal also noted that the Commis-sioner (Appeals) has sustained the disallowance only on that count. The Tribunal further noted that boarding and lodging expenses were not claimed, that her foreign trip was approved by the board of directors and, therefore, the business interest in such trip can be presumed and that otherwise there is no need for the board of directors of the company to approve her trip if it was only for private or personal purposes. The Tribunal further relied on the observations of the Special Bench of the Tribunal mentioned above and allowed the deduction. In this context, we will refer to the facts of the decision of the Madras High Court in T.S. Hajee Moosa & Co.'s case (supra). In that case, the assessee claimed deduction of the expenses incurred on the wife of the senior partner of the assessee-firm accompanying him on a foreign tour. Admittedly, the senior partner was a diabetic patient and the wife was taken for the purpose of attending on him. While considering the said claim, the Madras High Court observed that in order to qualify for allowance under section 37(1), the whole of the expenditure must have been solely and exclusively incurred for business purposes and that if there is a dual purpose, then it is obvious that the expenditure would not qualify for allowance, for, it will cease to be wholly and exclusively laid out for business purposes. It further observed that in that case, the partner of the assessee is a diabetic and requires to be

28 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. looked after and that the expenditure incurred is, thus, laid out in part for the advantage, benefit and well-being of the partner of the assessee and it is distinct and different from the amount expended for purposes of business or trade. It was further observed that the attention given by the wife of the partner of the assessee, while on tour, would enure to his benefit and advantage, not only when he was engaged in his business activities but even otherwise as a human being, so that at least in part, the expenditure incurred had been laid out for the advantage and benefit of the partner. Accordingly, it was held that in the absence of materials with reference to the securing of advantages, it cannot be presumed that such advantages resulted to the assessee in its business activities as a result of the foreign tour undertaken by the wife of the partner of the assessee which alone would justify the allowance of the expenditure as one appropriately falling under section 37(1). For taking the said view, the Madras High Court relied on the decision of the Gujarat High Court in Bombay Mineral Supply Co. (P.) Ltd.'s case (supra). That was also a case where the Director of a company keeping indifferent health while undertaking the foreign tour, was accompanied by his wife on the tour. The question arose was as to whether the expenditure incurred on foreign tour of the wife of the director is incurred for purposes of business. The Gujarat High Court observed that 'tax collectors do not want to discourage business executives and managing directors from undertaking foreign tours for business purposes nor to deprive them of the company of their wives on such tours, but, for that we do not think that, in law, it would be permissible for the ITO to allow the expenses incurred for rendering such company, however, necessary and enjoyable it may be from the point of view of personal needs of those executives." Relying on the decision of the Supreme Court in the case of State of Madras v. G.J. Coelho [1964] 53 ITR 186, it held that these are all personal expenses and would not entitle the assessee-company to claim the same as business expenses. 47. But the Tribunal has relied on the decision of the Special Bench of the Tribunal in the case of Glaxo Laboratories (India) Ltd., case (supra) which distinguished the two decisions referred to above. It is the case of the assessee-company that the wife of the Chairman-cum-Managing Director of the company accompanied him on his business tour and that the accompaniment was for the purpose of enabling him to discharge his social-cum-business obligations in an effective manner. The Special Bench observed that in the modern age and more so in the western countries, the senior executives are, as a matter of social custom, accompanied by their wives when the visit, though for business purposes, has necessarily some social aspects also. Neither the assessing authority nor the appellate authority has got a case that the foreign tour made by the Chairman-cum-Managing Director is not for any business purposes or that the accompaniment of the wife is not for the purpose of fulfilling the social aspects aforementioned. The authorities below also do not have a

29 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. case that the accompaniment of the wife of the Chairman-cum-Managing Director did not result in any advantage to the assessee. It is also relevant to note that the board of directors of the company, by resolution, have permitted the same. 48. We had occasion to consider almost a similar situation in ITR No. 39 of 1995. We have noted that the Tribunal in that case took the view that the wife of the Chief Executive accompanied in a business travel and that there was no material to show that her travel was for any purpose other than business and that the Tribunal had taken note of the modern trend in which the senior executives are accompanied by their wives on visits for business purposes. Thereafter, we considered the decisions of the Madras and the Gujarat High Courts discussed above and distinguished the said decisions. Relying on the factual finding entered by the Tribunal, we held that the dictum laid down by the Madras and Gujarat High Courts did not apply. In these circumstances, we do not find any illegality in the findings entered by the Tribunal which relate to question No. 1 in IT Reference No. 43 of 1997.

5.3. In view of the aforesaid observations in the facts and circumstances of the case and respectfully following the judicial precedent relied upon hereinabove, we direct the ld AO to grant deduction towards foreign travel expenses for the various assessment years in dispute before us. Accordingly the grounds raised in this regard for various assessment years are allowed.

30 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. The primary facts for each assessment year with regard to claim of deduction u/s 80IA of the Act are as under:-

Asst Year 2010-11 The assessee did not claim any deduction in respect of windmills at Coimbatore for the year in the return of income. The profits from the windmill unit for the year was Rs 1,40,22,771/-. The carried forward depreciation was Rs 2,61,66,223/- which was notionally carried forward from previous year, although the same had been absorbed against profits from other business source of the assessee in the earlier year itself. The claim for deduction of profits u/s 80IA of the Act was made for the first time by the assessee before the ld CITA. The reason why the assessee did not claim the deduction u/s 80IA of the Act was due to the bonafide belief of the assessee that it is not entitled for deduction u/s 80IA of the Act in view of the fact that after setting off the brought forward depreciation loss from such eligible unit, there was no profit left with the assessee in such eligible unit. Later when the decision of Hon’ble Madras High Court in the case of Velayuthaswamy Spinning Mills Pvt Ltd vs ACIT reported in 340 ITR 477 (Mad) and CIT vs Defree Engineering Pvt Ltd reported in 77 Taxmann.com 11 (Mad) came and got widely discussed in the public forum, the assessee thought it fit to make a claim before the ld CITA. Their Lordships of Hon’ble Madras High Court held that when the units eligible for deduction u/s 80IA of the Act , if the carried forward depreciation loss from the previous years had been absorbed or set off against other business income of the assessee in the earlier years, the depreciation loss carried forward was only notional and should not be considered in working out profits for deduction u/s 80IA of the Act. The said decision also explained the meaning of ‘Initial Assessment Year’ as per section 80IA(5) of the Act. Accordingly, the assessee pleaded that it

31 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. would be eligible for deduction u/s 80IA of the Act in respect of profits derived from windmills for the Asst Year 2010-11 in view of the decision supra.

6.1. The ld CITA however did not entertain the claim of deduction u/s 80IA of the Act on the aforesaid reasoning. He simply applied the decision of Hon’ble Supreme Court in Goetze India case (284 ITR 323) and held that the assessee is not entitled for deduction in the first appellate proceedings as the same was not made either in the original return of income or by way of a revised return.

Asst Year 2011-12 7. In respect of windmill at Coimbatore, the assessee claimed deduction u/s 80IA of the Act in the sum of Rs 4,36,411/- The net profit for the year from the unit was Rs 1,25,79,863/-. The assessee had set off the carry forward depreciation in respect of said windmill for earlier years of Rs 1,21,43,452/- although the same had been set off against profits from other sources of business of the assessee in the previous year. The ld AO allowed Rs 4,36,411/- by way of deduction in case of the claim made u/s 80IA of the Act before him. Before the ld CITA, the assessee claimed the total profit of Rs 1,25,79,863/- in respect of windmill at Coimbatore and Rs 43,95,287/- in respect of windmill at Dhule, Maharashtra, to be allowed in terms of the decisions of Hon’ble Madras High Court in the cases of Velayudhaswamy Spinning Mills and Defree Engineering Pvt Ltd supra. The ld CITA rejected the claim citing the case of Goetze India [284 ITR 323(SC) ] observing that in terms of the said decision, the ld AO and the ld CITA are not competent to admit the claim of deduction made after filing of the return and in the course of assessment or appellate proceedings before CITA.

32 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. Asst Year 2012-13 8. The assessee claimed before the ld CITA during appellate proceedings, deductions against two windmill units, one at Satapar of Rs 4,09,76,915/- and in respect of Dhule unit , an amount of Rs 56,03,418/- , claimed in terms of the decisions of Hon’ble Madras High Court in the cases of Velayudhaswamy Spinning Mills and Defree Engineering Pvt Ltd supra. The same has been rejected by the ld CITA based on decision in the case of Goetze India [ 284 ITR 323 (SC)] observing that in terms of the said decision, the AO and the CITA are not competent to admit the claims for deductions made after filing of the return of income and in the course of assessment or appellate proceedings before CITA.

Asst Year 2013-14 9. The assessee claimed an amount of Rs 2,06,56,309/- as deduction u/s 80IA of the Act in respect of Satapar unit which was allowed by the ld AO. During the course of assessment before the ld AO, the assessee claimed higher deduction of Rs 5,27,34,656/- without set off of notional depreciation loss of Rs 3,20,78,347/- , carried forward from the previous years which otherwise was absorbed against business income from other sources of the assessee in the earlier years itself. Similarly, in respect of windmill at Dhule unit at Maharashtra, the profit was Rs 59,97,255/-. The carry forward notional depreciation loss was Rs 3,89,09,590/-. So no deduction was claimed in the return but in the course of assessment, the assessee claimed net profit of Rs 59,97,255/- as deduction before set off of notional depreciation. The l AO held that the cases relied upon by the assessee have not been accepted by the department and are at various stages of appeal and that there was no decision concerning the issue by the Hon’ble Jurisdictional High Court to follow. So observing, he rejected the claim. Relying on the case of Goetze India Ltd [284 ITR 323 (SC)], the ld CITA upheld the action of the ld AO.

33 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

Asst Year 2014-15 10. In respect of windmill at Dhule at Maharashtra, the assessee claimed deduction u/s 80IA of the Act of Rs 61,17,708/-, ignoring the notional loss of depreciation of Rs 3,29,12,335/- carried forward from earlier years in terms of the decision of Hon’ble Madras High Court in the cases of Velayudhaswamy Spinning Mills and Defree Engineering Pvt Ltd supra. The ld AO held that the cases relied upon by the assessee has not been accepted by the department and are at various stages of appeal and there is no decision concerning the issue by the Hon’ble Jurisdictional High Court to follow. Accordingly, he rejected the claim of the assessee.

10.1. In respect of windmill at Padavala, the assessee claimed deduction of Rs 2,60,02,102/- u/s 80IA of the Act ignoring the notional depreciation loss carried forward of Rs 1,40,14,719/- from the earlier years in terms of the decision of Hon’ble Madras High Court in the cases of Velayudhaswamy Spinning Mills and Defree Engineering Pvt Ltd supra. The ld AO disallowed the claim making the same observations in respect of windmill at Dhule above.

10.2. Relying on the case of Goetze India Ltd [284 ITR 323 (SC)], the ld CITA upheld the action of the ld AO.

34 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. Asst Year Due date u/s 139(1) Date of filing the return 2010-11 15.10.2010 30.09.2010 2011-12 30.09.2011 30.09.2011 2012-13 30.09.2012 29.09.2012 2013-14 30.09.2013 30.09.2013 2014-15 30.11.2014 29.11.2014

12.1. It is not in dispute that the assessee is eligible for deduction u/s 80IA of the Act in respect of profits derived from windmills at various places. We find that the ld AO or ld CITA , as the case may be, had negated the claim of deduction u/s 80IA of the Act. One of the ground for such denial is that the deduction was not claimed by the assessee in the return of income filed u/s 139(1) of the Act as per the provisions of section 80AC of the Act It would be relevant to reproduce the provisions of section 80AC of the Act for the sake of convenience :-

[Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after— (i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80- IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes", no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.]

12.2. On a plain reading of the aforesaid provisions of section 80AC of the Act, we find it only mandates the assessee to file the return of income for the year in which the claim of deduction u/s 80IA of the Act is made, to be filed within the due date prescribed u/s 139(1) of the Act. The above chart clearly depicts that the returns of income for the Asst Years 2010-11 to 2014-15 were duly filed within the prescribed due date u/s 139(1) of

35 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. the Act and hence the provisions of section 80AC of the Act had been duly complied with. We find that the assessee had reasonably explained the reasons for not claiming the deduction u/s 80IA of the Act in respect of all the eligible units, eventhough independent unit wise profit and loss account and other relevant details were indeed maintained and available with the assessee to deduce the profits eligible for deduction u/s 80IA of the Act of each unit. We find that the explanation given by the assessee for not claiming the deduction u/s 80IA of the Act in the return of income is reasonable and due to bonafide understanding of the interpretation of provisions of the Act at a particular point in time. Later when the law was settled by the Hon’ble High Court in the case of Velayudhaswamy Spinning Mills supra (revenue SLP before the Hon’ble Supreme Court was dismsised), then the assessee had made the claim before the appellate authorities. That does not mean that the revenue could take ignorance of the assessee . When an assessee is eligible for some deduction/ exemption / benefit, then the same should be duly given to the assessee irrespective of the claim of the assessee thereon. Reliance in this regard is placed on the old circular of the CBDT in Circular No. 114 XL-35 of 1955 dated 11.4.1955 wherein it was stated that an officer must not take advantage of ignorance of the assessee as to his rights. The revenue cannot deny the same by simply relying on the decision of Hon’ble Supreme Court in the case of Goetze India reported in 284 ITR 323 (SC). Infact even Goetze India does not completely close the doors of an assessee to make a legitimate claim. Moreover, the said judgement in the last paragraph had specifically stated that the restriction imposed that the ld AO has no power to entertain any claim which is not made in the return of income does not apply to the tribunal. In this regard, the relevant paragraph of Hon’ble Supreme Court decision in Goetze India (284 ITR 323) is reproduced below for the sake of convenience :-

36 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. “4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.‖

12.3. We find that the assessee had taken shelter of the decision of Hon’ble Madras High Court in the case of Velayuthaswamy Spinning Mills reported in 340 ITR 477 (Mad) and in the case of Defree Engineering Pvt Ltd (77 taxmann.com 11 – Madras HC). The Hon’ble Madras High Court in the aforesaid case had categorically held that losses of earlier years prior to the initial assessment year which have already been set off against other income cannot be notionally brought forward for reducing the amount of deduction admissible from the initial assessment year onwards. We find that the Special Leave Petitions (SLP) filed by the revenue against the aforesaid decisions of Hon’ble Madras High Court were dismissed by the Hon’ble Supreme Court as under:-  CIT vs Defree Engineering (P) Ltd – 77 taxmann.com 27 (SC)  ACIT vs Velayudhaswamy Spinning Mills (P) Ltd – 76 taxmann.com 176 (SC)

12.4. We also find that the Central Board of Direct Taxes had issued a Circular in this regard vide Circular No. 1/2016 dated 15.2.2016 explaining the meaning of ‘Initial Assessment Year’. For the sake of convenience, the said Circular is reproduced hereinbelow:-

SECTION 80-IA OF THE INCOME-TAX ACT, 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS - CLARIFICATION OF TERM 'INITIAL ASSESSMENT YEAR' IN SECTION 80-IA(5) CIRCULAR NO.1/2016 [F.NO.200/31/2015-ITA-I], DATED 15-2-2016

37 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. Section 80-IA of the Income-tax Act, 1961 ('Act'), as substituted by the Finance Act, 1999 with effect from 1-4-2000, provides for deduction of an amount equal to 100 % of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in sub-section (4) of that section) in accordance with the prescribed provisions. Sub-section (2) of section 80-IA further provides that the aforesaid deduction can be claimed by the assessee, at his option, for any ten consecutive assessment years out of fifteen years (twenty years in certain cases) beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. as stipulated therein. Sub-section (5) of section 80-IA further provides as under— "Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made". In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years.

The matter has been examined by the Board. It is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80-IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen ( or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80-IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfilment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80-IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty

38 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. years, as the case may be and the period of claim should be availed in continuity.

The Assessing Officers are, therefore, directed to allow deduction u/s 80-IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in sub-section (5) of that section for which the Standing Counsels/D.R.s be suitably instructed.

The above be brought to the notice of all Assessing Officers concerned

12.4.1. We find that the CBDT had clearly issued a Circular supra explaining the meaning of ‘Initial Assessment Year’ in the light of decisions rendered by the Hon’ble Madras High Court supra.

12.5. We find that the ld DR placed reliance on the Special Bench decision of Rajkot Tribunal in the case of Saffire Garments vs ITO reported in 28 taxmann.com 27 (Rajkot SB) dated 30.11.2012. For the sake of convenience, the facts before the Rajkot Special Bench, question raised before the Hon’ble Special Bench and decision rendered thereon are as under:- Facts • The assessee, a partnership firm, filed its return of income claiming deduction under section 10A in respect of its profit derived from the export of articles produced in SEZ. • The Assessing Officer, however, noted that the assessee had filed its return on 31-1-2007 whereas the extended due date for filing return of income for the assessee, being a firm, under the provisions of section 139(1) was 31-12-2006. • The Assessing Officer, further noted that as per proviso to sub-section (1A) of section 10A, introduced with effect from 1-4-2006, no deduction should be allowed to assessee who does not furnish return of income on or before the due date. • Accordingly, applying proviso to section 10A(1A), Assessing Officer

39 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

denied deduction under section 10A. • On appeal by the assessee, the Commissioner (Appeals) upheld the order of Assessing Officer. • On further appeal by the assessee, the Tribunal held provisions of the proviso to sub-section (1A) of section 10A to be merely directory and not mandatory and, therefore, on that basis held that even if return of income was not filed within the time-limit prescribed by section 139(1), the assessee could not be denied deduction under section 10A. • Instant Special Bench of the Tribunal was constituted to consider the following questions. Questions involved • Whether proviso to section 10A(1A) is mandatory or merely directory? HELD Scheme of the Act with regard to filing of returns • In order to decide the issue, the whole scheme of the Act needs to be considered. The assessee is required to file the return of income within the prescribed time as per the provisions of section 139(1). This provision of section 139(1) is applicable to all companies and firms irrespective of the fact as to whether they are earning taxable income or not for the current year i.e., from 1-4-2006. In respect of other persons such as individual, HUF, AOP or BOI and artificial Juridical person, the requirement is that if such a person is having taxable income before giving effect to the provisions of section 10A, then also, he is required to file return of income before the due date even if this person is not having taxable income after giving effect to the provisions of section 10A. [Para 11] Consequences of failure to file return within due date • It is found that the provisions of the proviso to section 10A(1A) is nothing but a consequence of failure of the assessee to file the return of income within the due date prescribed under section 139(1). For such a failure of the assessee to file his return of income within the due date prescribed under section139(1), this is not the only consequence. One consequence of such failure is prescribed in section 234A also as per which, the assessee is liable to pay interest on the tax payable by him after reducing advance tax and TDS/TCS if any paid by him apart from some other reductions. Such interest is payable from the date immediately following the due date for filing the return of income and is payable up to the date on which such return of income was furnished by the assessee and if the

40 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd.

assessee has not furnished any return of income then the interest is payable till the date of completion of the assessment under section 144. It is held that above is also one of the consequences of not filing return of income by the assessee within the due date. [Para 11] • One may raise the argument that interest under section 234A is payable only if the assessee has not paid his advance tax and, therefore, such interest is for the failure of the assessee to pay advance tax as per the requirement of the Act and not for the delay in filing return of income. But it is held that it is not so. For the failure of the assessee to pay advance tax as per the requirement of the Act, interest is chargeable under section 234B if such advance tax paid by the assessee is less than 90 per cent of the assessed tax. [Para 11] Imposition of interest is one of consequences of failure to file return within due date and such consequence is mandatory; therefore, disallowance of deduction under section 10A, being one more consequence, cannot be held to be directory, but mandatory • Under this factual and legal position, it has to be held that the interest payable by the assessee under section 234A is for his failure to file the return of income within the due date prescribed under section 139(1). This is by now a settled position of law that charging of interest under various sections including under section 234A, is mandatory. When one of the consequences for not filing return of income within the due date prescribed under section 139(1) is mandatory then, other consequence of the same failure of the assessee cannot be directory and the same is also mandatory. It is, therefore, held that the provisions of the proviso to section 10A(1A) is mandatory and not directory and, therefore, first question is answered in negative and it is held that this proviso to section 10A(1A) is mandatory. [Para 11] • It is, therefore, held that the provisions of proviso to section 10A(1A) is mandatory and not merely directory. [Para 17]

Hence we find that the Hon’ble Special Bench only stipulates the condition that in order to claim exemption u/s 10A of the Act, the assessee should have filed the return of income within the due date prescribed u/s 139(1) of the Act. It is not in dispute that in the instant case before us, the assessee had duly filed return of income for the various assessment years within the due date prescribed u/s 139(1) of the Act as could be evident from the table mentioned hereinabove. The

41 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. Special Bench decision does not even remotely suggest that when the claim was not made in the return of income, then no deduction at all would ever be eligible to the assessee. Hence the reliance placed on the decision of Hon’ble Special Bench of Rajkot Tribunal supra does not advance the case of the revenue in the instant case.

12.6. We find that the ld DR relied on the provisions of section 80AC of the Act to deny the claim of deduction u/s 80IA of the Act to the assessee in the instant case. We find from the perusal of provisions of section 80AC of the Act, it states no deduction shall be allowed for ADMISSIBLE deduction, unless return is furnished on or before the due date u/s 139(1) of the Act. It is not in dispute that the assessee had duly filed the returns for various assessment years on or before the due date prescribed u/s 139(1) of the Act. We find that where return is filed u/s 139(1) of the Act, but assessee failed to make a claim in such return of income or through a revised return of income, an ADMISSIBLE fresh claim can still be allowed by the appellate authorities. With regard to this understanding of ours, we draw support from the following case laws :-

a) CIT vs Pruthvi Brokers & Shareholders reported in 349 ITR 336 (Bom) The operative portion of the said judgement is reproduced below:-

HELD A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. [Para 10] From a consideration of decision of the Supreme Court rendered in the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85 , it is clear that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim.

42 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. They may choose not to exercise their jurisdiction in a given case is another matter. [Para 11] Further the observation of the Supreme Court in the case of Jute Corpn. of India Ltd. (supra ) to the effect 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made….' or 'that the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz ., 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made….' clearly relate to cases where the ground was available when the return was filed and the assessment order was made but 'could not have been raised' at this stage. The words are 'could not have been raised' and not 'were not in existence'. Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz., where 'the ground became available on account of change of circumstances or law.' [Paras 12 and 13] It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court in the case of Jute Corpn. India Ltd. (supra) there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. However, such cases include those, where the ground though available when the return was filed or the assessment order was made, was not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made. [Para 15] In the instant case, the Commissioner (Appeals) and the Tribunal have held the omission to claim the deduction of Rs. 40 lakhs to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs. 20 lakhs paid after the end of the year in question. There is no reason to interfere with this finding. There is less reason to interfere with the exercise of discretion by the appellate authorities in permitting the assessee to raise this claim. The assessee is entitled to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the assessee ought not be prejudiced. [Para 18]

43 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. The orders of the Commissioner (Appeals) and the Tribunal clearly indicate that they had exercised their jurisdiction to consider the additional claim, as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in the case of National Thermal Power Corpn. Ltd. v. CIT [1998] 229 ITR 383 . [Para 19] Both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs. 40 lakhs under section 43B. The Assessing Officer is, therefore, now only to compute the assessee's tax liability which he must do in accordance with the orders allowing the assessee a deduction of Rs. 40 lakhs under section 43B. [Para 20] The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The revenue has not suggested much less established that the omission was deliberate, mala fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. [Para 21] Therefore, the appeal of the revenue was liable to be dismissed. [Para 26]

b) CIT vs Jai Parabolic Springs Ltd reported in 306 ITR 42 (Del) The operative portion of the said judgement is reproduced below:-

Ltd. v. CIT [2006] 284 ITR 3231 (SC), 17. In Goetze (India) wherein deduction claimed by way of a letter before Assessing Officer, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of assessing authority to entertain claim for deduction otherwise than by revised return, and did not impinge on the power of Tribunal. 18. Further, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. [Reliance can be placed on Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 8022 (SC). 19. In view of the above discussion, it is very clear that there is no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arises in the matter and for the

44 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. just decision of the case. Therefore, there is no infirmity in the order of the Tribunal. 20. Accordingly, the appeal of the revenue is hereby dismissed.

c) CIT vs Sam Global Securities Ltd reported in 360 ITR 682 (Del) d) CIT vs Abhinitha Foundation (P) Ltd reported in 396 ITR 251 (Mad)

12.6.1. In view of the aforesaid decisions of various High Courts including the Hon’ble Jurisdictional High Court, we hold that the assessee’s claim of deduction u/s 80IA of the Act can be admitted by way of an additional ground before us for the respective assessment year/(s), as it involves question of law and goes to the root of the matter. Hence we hold that the assessee had to be given deduction u/s 80IA of the Act irrespective of the fact that whether the same was claimed in the return of income or not, but however, subject to fulfillment of other conditions stipulated in the said section. Once the return is filed within due date, then the assessee is entitled to claim any deduction or benefit either by way of a revised return, or revised computation of income either during the course of assessment proceedings or in appellate proceedings. This is however subject to assessee fulfilling other eligible conditions for claiming the same as prescribed in section 80IA of the Act. One such condition prescribed in section 80IA(7) of the Act is with regard to filing of audit report certifying the claim of deduction u/s 80IA of the Act. We find that we have already held hereinabove, that the assessee is entitled to claim deduction u/s 80IA of the Act for the first time before the appellate authorities including the tribunal. Hence the legitimate claim which is otherwise eligible to an assessee, should not be deprived due to non- furnishing of audit report in the prescribed form before the ld AO. In the instant case, the assessee has been claiming deduction u/s 80IA of the Act in respect of windmill units set up at some places, the details of which are enumerated in the facts narrated above in each of the assessment

45 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. years. At the cost of repetition, we state that the assessee had indeed maintained division wise profit and loss account to deduce the division wise profitability and consequential eligibility for deduction u/s 80IA of the Act. We find that each eligible unit has been duly identified as a separate unit and an eligible unit by the assessee. However, in the interest of justice and fair play, we find that the division wise profitability statement for various assessment years , audit report in Form 10CCB for various assessment years and the workings of claim of deduction u/s 80IA of the Act requires to be verified by the ld AO in respect of windmills for which relief is granted by us in this order. Hence we direct the ld AO to examine the same afresh in respect of disputed windmills , either in original grounds, additional grounds or in modified grounds in the light of aforesaid directions. Accordingly, the regular grounds, modified grounds and additional grounds raised by the assessee with regard to claim of deduction u/s 80IA of the Act are allowed for statistical purposes.

Assessee Appeal in ITA No. 6535/Mum/2017 for Asst Year 2010-11 Assessee Appeal in ITA No. 6536/Mum/2017 for Asst Year 2012-13

We find that the various additions / disallowances made by the ld AO and sustained by the ld CITA for the Asst Years 2010-11 and 2012-13 have been either deleted or set aside to ld AO by this tribunal supra. Hence the levy of penalty u/s 271(1)(c ) of the Act on such additions does not survive. Accordingly, the grounds raised by the assessee for the Asst Years 2010-11 and 2012-13 in penalty appeals are allowed.

46 ITA No.5245/Mum/2017 and other appeals M/s. Echjay Industries Pvt. Ltd. 14. TO SUM UP ITA No. AY Appeal Result By ITA 2006-07 Assessee Allowed No.5245/Mum/2017 ITA 2010-11 Assessee Allowed for No.5246/Mum/2017 statistical purposes ITA 2011-12 Assessee Allowed for No.3801/Mum/2017 statistical purposes ITA 2012-13 Assessee Allowed for No.3802/Mum/2017 statistical purposes ITA 2013-14 Assessee Allowed for No.7069/Mum/2017 statistical purposes ITA 2014-15 Assessee Allowed for No.7070/Mum/2017 statistical purposes ITA 2010-11 Assessee Allowed No.6535/Mum/2017 ITA 2012-13 Assessee Allowed No.6536/Mum/2017

Order pronounced in the open court on this 17/07/2019

Sd/- Sd/- (AMARJIT SINGH) (M.BALAGANESH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 17/07/2019 Karuna,Sr.PS Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file. //True Copy// BY ORDER,

(Asstt. Registrar) ITAT, Mumbai