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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI B.P.JAIN & SHRI SUDHANSHU SRIVASTAVA
Revenue against the order dated 15.05.2012 passed by the Ld. Commissioner of Income Tax (Appeals)-V, New Delhi for assessment year 2008-09.
The brief facts of the case are that the return of income was filed leading nil income after claiming deduction under section 80IC of the Income Tax Act, 1961 (hereinafter called “the Act”) amounting to Rs. 52,36,748/-. The return of income was processed under section 143 (1) of the Act and, subsequently, the assessee also filed revised return of income at nil income claiming the deduction under section 80IC at Rs. 12,29,594/-. Subsequently, the case was selected for scrutiny and the AO proceeded to disallow the assessee’s claim of deduction under section 80 IC on the ground that the assessee could not establish during the course of assessment proceedings for assessment year 07 – 08 that it was carrying out manufacturing activity and not trading activity. The AO also added an amount of Rs. 41,17,327/- towards disallowance out of purchases. The AO also recomputed the book profit of the assessee under section 115JB of the Act by disallowing provision for doubtful debts amounting to Rs. 5,17,038/-.
2.1 Aggrieved, the assessee preferred an appeal before the Ld. first appellate authority. The Ld. CIT (Appeals), allowed the assessee’s 2 | P a g e claim of deduction under section 80IC of the Act but confirmed the disallowance of Rs. 41,17,327/- on account of purchases and also directed the AO to add the disallowance of purchases to the book profit of the assessee company and thus made an enhancement.
2.2 Now, aggrieved, both the assessee as well as the Department have approached the ITAT and have challenged the action of the Ld. CIT (Appeals).The following grounds have been raised by the assessee in ITA 3515/Del/2015 :-
“1. Enhancement without show-cause notice u/s 251(2) 1. On facts and circumstances of the case and in law, without prejudice to grounds no 6 & 7 below, learned CIT(A) has erred and was not justified in enhancing the assessment without issuing mandatory show-cause notice to the appellant u/s 251(2) of the Act and thus the order of learned CIT(A) is liable to set aside.
On Merits: Unaccounted Purchases 2. On facts and circumstances of the case and in law, Lower Authorities have erred and were not justified in rejecting the claim of the assessee for unaccounted purchases of Rs 39,81,087/-, which were actually sold and included to the credit of profit & loss account, thereby increasing the profit for the year to that extent, when the same error finds mention the records of subsequent year and in total disregard to the evidences of purchases and stock records produced during the proceedings, without any investigation, verification and/ or appraisal of records and documentary evidences produced on record
3. On facts and circumstances of the case, lower authorities have erred in ignoring the factum of the impugned sum of Rs 39,81,087/- which was accounted for in subsequent year and was voluntarily disallowed in the return submitted u/s 139(1) as ‘prior period’ and thus further addition during the year under appeal has resulted in double taxation.
4. On facts and circumstances of the case, lower authorities have erred and were not justified in the arbitrary addition of Rs 1,36,240/- on adhoc basis without finding fault in the books of accounts or rejecting the books of accounts on an unreasonable, unjustified and erroneous grounds.
5. On facts and circumstances of the case and in law, learned CIT(A) has erred and was not justified in arbitrarily considering the impugned purchases of Rs. 41,17,327I- as undisclosed investment by invoking section 69 of the Act, in total disregard to the evidences on record without carrying out any verification. 6. On facts and circumstances of the case and in law, learned CIT(A) has erred and was not justified in enhancing the assessment of total income u/s 115JB of the Act by increasing the book profits by the impugned sum of Rs 41,17,327l-, being unaccounted purchases, and Rs 517,038/- on account of provision for doubtful debts, which adjustments are outside the mandate of Book Profit as defined u/s 115JB under the law.
GENERAL
5. The above grounds of appeal are independent without prejudice to each other.
6. The appellant craves to add, modify any ground of appeal or to adduce new evidence during the course of hearing of appeal, as may be necessary for discharge of due justice.” 4 | P a g e 2.3 The following grounds have been raised by the Department in ITA 3242/Del/2012 :-
“On the facts and in circumstances of the case the ld. Commissioner of Income Tax(A) has erred in holding that claim of the assessee for deduction u/s 80IC is allowable.”
In respect of the Department’s appeal, the Ld. departmental representative submitted that the Department’s appeal was delayed by 1031 days and prayed that the same should be condoned as there was an inadvertent omission by the Department in not filing the appeal in time. Our attention was drawn to the letter of the Ld. Principal Commissioner of Income Tax, Delhi – 1, dated 29/05/2015 and on record, which narrated the circumstances and prayed for the condonation of delay . The Ld. authorised representative opposed the condonation of delay. After hearing both the parties and looking into the facts of the case, we condone the delay and admit the appeal to be heard on merits.
In respect of the Department’s appeal challenging the action of the Ld. CIT (Appeals) in allowing the deduction under section 80 IC, the Ld. authorised representative placed on record ITAT Delhi Bench’s order in assessee’s own case for assessment year 07-08 in wherein, vide order dated 04/08/2017, ITAT has dismissed the Department’s appeal challenging the action of the Ld. CIT (Appeals) in allowing the assessee’s claim of deduction under section 80IC for assessment year 07 – 08. The Ld. authorised representative submitted that the ITAT has held that the assessee was eligible for claim of deduction under section 80IC and further since there was no change in circumstances during the year under consideration and the AO has merely relied on the assessment order for 07 – 08, the assessee’s claim for deduction was allowable in this year also.
In response, the Ld. departmental representative relied on the order of the assessing officer but could not negate the fact that ITAT Delhi Bench had decided the issue in favour of the assessee in assessment year 07-08 and that there was no change in the circumstances in this year as compared to the earlier assessment year.
On the issue of enhancement in the assessee’s appeal, the Ld. authorised representative submitted that the enhancement was made 6 | P a g e without issuing show cause notice under section 251 (2) of the Act and, thus, the order of the Ld. CIT (Appeals) was liable to be set- aside.
In response, the Ld. departmental representative supported the orders of the Ld. CIT (Appeals) but could not negate the fact that no show cause notice was issued by the Ld. First Appellate Authority before enhancement.
We have heard the rival submissions and have also perused the material on record. As far as the issue of assessee’s claim of deduction under section 80IC of the Act is concerned, it is seen that the issue has been decided in favour of the assessee for assessment year 2007 – 08 by ITAT Delhi Bench in assessee’s own case, vide order dated 04/08/2017, wherein the ITAT has approved the findings of the Ld. CIT (Appeals) and has noted that the all the relevant records were available with the Department at the time of assessment proceedings but the AO had merely acted on a presumption in giving the finding that there was no manufacturing process involved in a small place where the assessee was based. As there has been no change in the factual circumstances combined the fact that the AO has simply 7 | P a g e relied on the findings of the AO for assessment year 07–08 while disallowing the claim of deduction under section 80IC of the Act, we hold that the assessee is eligible for deduction under section 80IC of the Act for this year also. Accordingly, the ground raised by the Department and the appeal of the Department stand dismissed.
8.1 Coming to the issue of enhancement made by the Ld. CIT (Appeals), it is very much evident and an admitted fact that no notice of enhancement was issued in terms of section 251 (2) of the Act and therefore, the assessee was denied an opportunity to present its case. Accordingly, we deem it fit, in the interest of justice, to restore the assessee’s appeal pertaining to enhancement to the file of Ld. CIT (Appeals) with the direction to adjudicate the issue after giving due opportunity to the assessee to present its case.
8.2 Accordingly the assessee’s appeal stands allowed for statistical purposes.
In the final result, the Department’s appeal stands dismissed whereas the assessee’s appeal stands allowed for statistical purposes.
Order is pronounced in the open court on 27th December, 2017.