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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh, & Shri N.K. Pradhan
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 20/03/2009 of the Ld. Commissioner of Income Tax, Mumbai, invoking revisional jurisdiction u/s 263 of the Income Tax Act, 1961 (hereinafter the Act).
During hearing, Shri Yogesh Thar along with Ms. Moksha Mehta, ld. counsel for the assessee, contended that the Ld. CIT wrongly invoked revisional jurisdiction u/s 263 of the Act as the assessment order is neither erroneous nor prejudicial to the interest of revenue as the assessment order was framed after due application of mind and considering the factual matrix and further unjustifiably directed the Assessing Officer not to allow the claimed deduction u/s 80IB of the Act in respect of whisper E line at 100% as claimed by the assessee and restricting the same to 30% on the ground that the new line was merely extension of existing business. The observation of the Ld. Commissioner that the assessee made the same product with slight improvement by using the existing infrastructure is incorrect. It was contended that it may be case of inadequate enquiry but there is difference between lack of enquiry and inadequate enquiry. Reliance was placed upon the decision in Jayant Murthy vs DCIT and 1234/Ahd/ 2014 order dated 20/05/2016 and in M/s A.V. Industries ITA No.3469/Mum/2010, order dated 06/11/2015. Further reliance was placed upon the decision
M/s Procter & Gamble Hygiene & Health Care 390 ITR 292 (Bom.). Plea was also raised that investigation by the investigation authority is merely an opinion. It was fairly admitted that the auditor not visited the site. Our attention was invited to few pages of the paper book.
2.1. On the other hand, Shri Subachan Ram, Ld. CIT- DR, strongly defended invocation of revisional jurisdiction by the Ld. Commissioner by inviting our attention to various pages of the paper book by contending that the Inspector from the Department visited the site and informed that there is no separate undertaking, as has been claimed by the assessee and the basic production is same. It was also explained that there was confidential report of the ACIT to the additional CIT. It was pleaded that the Ld. Assessing Officer while framing the assessment did not made proper enquiry and merely accepted the claim of the assessee. Our attention was invited to page-99 to 110 of the paper book by contending that address of alleged unit is same and it is merely a same plant having same registration number. It was strongly contended that auditor merely audited the calculation given by the assessee and no enquiry/ investigation was made by him and he never visited the assessee company. It was explained that the Ld. CIT has categorically stated that during the investigation new facts were unearthed. Our attention to pages 18 of the impugned order. So far as, the cases relied upon by the assessee, is concerned, it was explained that in those cases, full enquiry was made by the Assessing Officer. So far as, the decision in M/s Procter & Gamble Hygiene & Health Care 203 ITR 108 (Bom.) is concerned, explained that there was no elaborate discussion of facts. So far as, 295 ITR 282 (SC) is concerned, it was contended that it is against the assessee and speaking order was passed by the Ld. Commissioner. Reliance was placed upon the decision in 386 ITR 162, (2017) 77 taxman.com 285 (SC), Arvee International vs Addl. CIT 101 ITD 495 (ITAT) (Bom.) Gee Vee Enterprises vs Addl.CIT & Ors. 99 ITR 375 (Del.) and in Kapil Ratan Associates vs CIT 69 SOT 188 (Bom.) order dated 14/01/2015.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that from computation of taxable income sheet enclosed with the return, it was found that the assessee has claimed Rs.45,47,99,725/- as deduction u/s 80IB of the Act on the profit derived from industrial undertakings/units set up at various location at Goa. The assessee company claimed deduction u/s 80IB as industrial undertaking located in Industrial backward state. The details of claimed deductions are summarized as under:-
Sl. Unit Location (Indl. Product Amount of Reference in R/I No. Undertaking) Manufactured Deduction Annexures-8(1) 1 Hond (Goa)** Vaporub-Tins 12,48,06,582/- Annexures-9(1) 2 Honda Goa Vaporub-Non Tins 1,69,33,795/- Annexures-10(1) 3 Whisper, Goa Whisper 9,74,15,850/- 4 Eline Whisper Goa** Eline Whisper 21,40,32,627/- Annexures-11(1) Total 45,47,99,725/- 2.3. During assessment proceedings of earlier assessment year, it was noticed that the assessee company
M/s Procter & Gamble Hygiene & Health Care has closed down its unit at Honda (Goa) during the Financial Year 2002-03 and shifted its Vicks Vaporub Plant to Kundiam (Goa), where it has already factory of producing whisper sanitary napkins. Considering the totality of facts the Ld. Assessing Officer asked the assessee, as there is violation of condition stipulated u/s 80IB as product of both the units is same. The assessee vide letter dated 19/12/2008 filed its submissions. Finally, the assessment was completed.
2.4. The Ld. Commissioner, on perusal of assessment records found that the assessment made for Assessment Year 2004-05 on 28/12/2006, was erroneous as well as prejudicial to the interest of the Revenue, therefore, show cause notice was issued, which has been reproduced in the impugned order. The assessee was found to be claiming deduction u/s 80IB of the Act in respect of four separate industrial units, which are as under:-
Sl. Unit Location (Indl. Product Manufactured Amount of % of No. Undertaking) Deduction deduction 100 1 Hond (Goa)** Vaporub-Tins 12,48,06,582/- 2 Honda Goa Vaporub-Non Tins 1,69,33,795/- 30 30 3 Whisper, Goa Whisper 9,74,15,850/- 4 Eline Whisper Goa** Eline Whisper 21,40,32,627/- 100
From the above, two separate units of whisper, it was found that the sanitary napkins under the name “Whisper” was being manufactured since 01/04/1997 (Assessment Year 1998-99). After availing 100% deduction u/s 80IB of the Act for initial five years, the unit is enjoying deduction at the rate of 30% and the last year for deduction shall be M/s Procter & Gamble Hygiene & Health Care Assessment Year 2007-08. In the month of February, 2004, the assessee launched a new brand called “Whisper E-line”, which is premium version of regular whisper napkins already manufactured by it from the same Kundaim Unit. The assessee, after launching its new brand started claiming deduction at the rate of 100% on the profit made on sale of this brand from Assessment Year 2004-05 onwards treating the same as separate industrial unit. During AY 2005-06 also, the assessee claimed deduction at the rate of 100% of the profit on this product u/s 80IB of the Act. A detailed enquiry was conducted in the factory premises of the assessee through Addl. DIT(Invest.) during assessment proceedings for Assessment Year 2005-06, the report is reproduced hereunder:- i. The machinery installed for production of whisper E- Line is only part of the whole unit at Kundaim, ii. All existing facilities like common electric connection, common factory shed, common air compressor machine and common labour and staff are being used for both ‘regular whisper’ and ‘E-Line products.’ iii. The whisper E-line brand differs from the regular whisper only in thickness of absorbent material. iv. There is no difference in the manufacturing processes between the two products. From the above, it was found that there was no separate unit for Whisper E-line products and the entire production of sale of whisper were carried out from the same undertaking, thus, the separate claim from Assessment Year 2004-05 was M/s Procter & Gamble Hygiene & Health Care not justified, therefore, the assessee for Assessment Year 2005-06 was completed, denying the claimed deduction at the rate of 100% in respect of so called new undertaking, restricting the claim for both the brands at the rate of 30%.
2.5. During hearing, the ld. counsel for the assessee contended that even it is presumed that there is a lack of proper enquiry by the Assessing Officer, there is a difference between lack of enquiry and adequate enquiry, the Ld. CIT- DR contended that still the order is erroneous. He relied upon the decision in Rampyari Devi Saraogi vs CIT 67 ITR 83 (SC), Malabar Industrial Company vs CIt (243 ITR 83 (SC), Swaroop Vegetables Products Industries Ltd. vs CIT 187 ITR 412 (All.), Raj laxmi Mills Ltd. 121 ITD 343 (SB)(ITAT)(Chennai) and SRM Systems and Software Pvt. Ltd. 2010-TIOL-646-HC-MAD-IT. Reliance was also placed in CIT vs Infosys Technologies Ltd. 341 ITR 293 and CIT vs Jawahar Bhattacharya Ji 341 ITR 434 (Gauh.-FB). It is also noted that in Kapil Ratan Associates vs CIT (2015) 55 taxman.com 60 (Mum. ITAT) order dated 14/01/2015, identically, supports the case of the Revenue. We have perused these orders and considered the ratio laid down therein. Likewise, the Hon'ble Calcutta High Court in Rajmandir Estate Pvt. Ltd. vs Pr. CIT (2016) 70 taxman.com 124 (Calc.) order dated 13/05/2016 and the ratio laid down therein supports the case of the Revenue. It is noteworthy that while coming to a particular conclusion, Hon'ble Calcutta High Court considered following judicial pronouncements:-
M/s Procter & Gamble Hygiene & Health Care i. CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8 (SC) (para 3), ii. Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC) (para 4), iii. CIT v. Nova Promoters & Finlease (P.) Ltd. [2012] 342 ITR 169/206 Taxman 207/18 taxmann.com 217 (Delhi) (para 4), iv. CIT v. Durga Prasad More [19711] 82 ITR 540 (SC) (para 6), v. CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (Cal.) (para 6), vi. ITO v. DG Housing Projects Ltd. [2012] 343 ITR 329/212 Taxman 132 (Mag.)/[2012] 20 taxmann.com 587 (Delhi) (para 7), vii. DIT v. Jyoti Foundation [2013] 35 ITR 388/219 Taxman 105/38 taxmann.com 180 (Delhi) (para 7), viii. CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568 (Delhi) (para 8), ix. CIT v. Sophia Finance Ltd. [1994] 205 ITR 98/70 Taxman 69 (Delhi) (FB) (para 8), x. CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi)(para 8), xi. Lotus Capital Financial Services Ltd. v. ITO [IT Appeal No. 479 (Kol.) of 2011] (para 8), xii. CIT v. Lotus Capital Financial Services (P.) Ltd. [ITAT No. 125 of 2012] (para 8), xiii. CIT v. Dataware (P.) Ltd. [ITAT No. 263 of 2011] (para 8), xiv. CIT v. Roseberry Mercantile (P.) Ltd. [G.A. No. 3296 of 2010, dated 10-1-2011] (para 8), xv. CIT v. Sanchati Projects (P.) Ltd. [ITAT No. 140 of 2011] (para 8), xvi. CIT v. Samir Ltd. [2010] 325 ITR 294 Bio-Tech. (P.) (Delhi) (para 8),
M/s Procter & Gamble Hygiene & Health Care xvii. CIT v. Kamdhenu Steel & Alloys Ltd. [2014] 361 ITR 220/[2012] 206 Taxman 254/19 taxmann.com 26 (Delhi) (para 8), xviii. CIT v. Dwarkadhish Capital (P.) Ltd. [2011] 330 ITR 298/[2010] 194 Taxman 43 (Delhi) (paras 9, 10), xix. CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296/[2011] 202 Taxman 548/14 taxmann.com 150 (Delhi) (paras 9, 10), xx. Zafa Ahmad & Co. v. CIT [2013] 214 Taxman 440/30 taxmann.com 267 (All.) (paras 9, 10), xxi. Anil Rice Mills v. CIT [2006] 282 ITR 236/[2005] 149 Taxman 313 (All.) (paras 9, 10), xxii. CIT v. Five Vision Promoters (P.) Ltd. [2016] 380 ITR 289/236 Taxman 502/65 taxmann.com 71 (Delhi) (para 11), xxiii. CIT v. Gabriel India Ltd. [1993] 203 ITR 108/71 Taxman 585 (Bom.) (para 12), xxiv. Hari Iron Trading Co. v. CIT [2003] 263 ITR 437/131 Taxman 535 (Punj. & Har.) (para 12), xxv. CIT v. Leisure Wear Exports (P.) Ltd. [2012] 341 ITR 166/[2011] 202 Taxman 130/11 taxmann.com 54 (Delhi) (para 13), xxvi. Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) (para 14), xxvii. Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) (para 14), xxviii. Reliance Jute & Industries Ltd. v. CIT [1979] 120 ITR 921/2 Taxman 417 (SC) (para 15), xxix. Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) (para 15), xxx. CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 (Delhi) (para 16), xxxi. Grindlays Bank Ltd. v. ITO [1978] 115 ITR 799 (Cal.) (para 17),
M/s Procter & Gamble Hygiene & Health Care xxxii. Vijay Mallya v. Asstt. CIT [2003] 131 Taxman 477 (Cal.) (para 17), xxxiii. CIT v. J.L. Morrison (India) Ltd. [2014] 366 ITR 593/225 Taxman 17 (Mag.)/46 taxmann.com 215 (Cal.) (para 17), xxxiv. Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC) (para 18), xxxv. CIT v. Max India Ltd. [2007] 295 ITR 282/166 Taxman 188 (SC) (para 18), xxxvi. CIT v. Maithan International [2015] 375 ITR 123/231 Taxman 381/56 taxmann.com 283 (Cal.) (para 20), xxxvii. CIT v. Navodaya Castles (P.) Ltd. [2014] 367 ITR 306/226 Taxman 190/50 taxmann.com 110 (Delhi) (para 20), xxxviii. CIT v. N.R. Portfolio (P.) Ltd. [2013] 214 Taxman 408/29 taxmann.com 291 (Delhi) (para 20), xxxix. CIT v. Active Traders (P.) Ltd. [1995] 214 ITR 583/[1993] 69 Taxman 281 (Cal.) (para 20), xl. CIT v. Jawahar Bhattacharjee [2012] 341 ITR 434/209 Taxman 174/24 taxmann.com 215 (Gau.) (FB) (para 20) and xli. Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) (para 27).
2.6. So far as, the cases relied upon by the assessee like CIT vs Nirav Modi (2016) 71 taxman.com 272 (Bom.) is concerned, the factual finding is that the Assessing Officer after making proper and detailed enquiries took a particular view, whereas, in the present appeal proper enquiry was not made by the Assessing Officer, therefore, this judicial pronouncements may not help the assessee. Similar is the position in other cases, which are different on facts.
M/s Procter & Gamble Hygiene & Health Care 2.7. We have also perused the assessment order, which is a subject matter of revisional jurisdiction u/s 263 and the impugned order passed by the ld. Commissioner. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase “prejudicial to the interest of the Revenue” u/s. 263, has to be read in conjunction with the expression “erroneous” order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, “prejudice” must be prejudice to the Revenue administration. At the same time, if another view is possible, revision is not permissible. Our view is fortified by the decision from Himachal Pradesh Financial Corp. (186 Taxmann 105)(HP), Bismillah Trading Co. (248 ITR 292)(Ker.) and CIT vs. Green World Corpn. (314 ITR 81)(SC). For invoking revisional jurisdiction u/s. 263 of the Act, the assessment order must contain grievous error which is subversive of the administration of Revenue. Further, exact error must be disclosed by the Commissioner as was held in CIT vs. G.K. Kabra (211 ITR 336)(AP). Section 263 of the Act enables the Commissioner to have a re-look at the orders or proceedings of the lower authority to effect correction, if so needed, particularly, if the order is erroneous and prejudicial to the interest of the Revenue. The object of the provision is to raise revenue for the state and section 263 is enabling provision conferring jurisdiction upon the Commissioner to M/s Procter & Gamble Hygiene & Health Care revise the order. The provision is intended to plug the leakage of the revenue by the erroneous and prejudicial order. Our view find support from the ratio laid down in following decisions:- i. CIT vs Infosys Technologies ltd. (2012) 341 ITR 293 (Karn.), ii. CIT vs Jawahar Bhattacharyaji (2012) 341 ITR 434 (Guwahati) (FB), iii. CIT vs Leisure wear Exports Ltd. (2012) 341 ITR 166 (Del.), iv. CIT vs Triveni Engineering Works Ltd. (2011) 336 ITR 366 (Del.), v. R.A. Himmatsinghka & Company vs CIT (2012) 340 ITR 253 (Pat.) vi. CIT vs Rajeev Agnihotri (2011) 332 ITR 608 (P & H), vii. CIT vs DLF Ltd. (2013) 350 ITR 555 (Del.), viii. CIT vs Gabreal India Ltd. (1993) 203 ITR 108, 114 (Bom.), ix. Malabar Industrial Company Ltd. vs CIT (2000) 243 ITR 83 (SC), x. Nabha Investments Pvt. ltd. vs UOI (2000) 246 ITR 41 (Del.), xi. Bismillah Trading Company Ltd. vs IO (2001) 248 ITR 292, 308 (Kerala), xii. Paul Mathews & Sons vs CIT (2003) 263 ITR 101, 113 (Kerala), xiii. CIT vs Seshasayee Paper & Boards Ltd. (2000) 242 ITR 490, 500 (Mad.), xiv. Rayon Silk Mills vs CIT 221 ITR 155 (Guj.)
2.8. If the aforesaid judicial pronouncements are kept in juxtaposition with the facts of the present appeal and analyzed, the ld. Assessing Officer has not gone into the M/s Procter & Gamble Hygiene & Health Care aspects, which has been observed in the impugned order and the information received from the investigation wing was not properly investigated, therefore, certainly the assessment order is erroneous as well as prejudicial to the interest of Revenue, causing loss to the Revenue. The Ld. Assessing Officer was expected to make detailed enquiry into the matter, which was not done. It is also noted that there is a observation in the impugned order that whether a unit can be treated as new industrial undertaking if can stand independently without any aid or any help from the existing unit. We are satisfied with the observation of the Ld. Commissioner that no such unit has been installed, which could exist in isolation. The assessee’s claim of having added some machinery and making extra investment, suo- moto will not lead to the conclusion that new undertaking has came into existence. The ratio laid down by Hon'ble Apex Court in Saurashtra Consumption and Chemical Ltd. 260 ITR 181 has clearly observed that the extent of expansion howsoever large it may be, would not amount to installing a new undertaking. Totality of facts, clearly indicates that even in the impugned order, the ld. Assessing Officer was directed to decide afresh after conducting appropriate enquiries and on examining the details after providing due opportunity of being heard before finalizing the assessment, thus, no grievance is caused to the assessee, because the assessee is at liberty to contest the observation made by the ld. Commissioner. Our view is M/s Procter & Gamble Hygiene & Health Care fortified by the decision in Indian Textile vs CIT (157 ITR 112) (Mad.), Gee Vee Enterprises vs Addl. CIT (99 ITR 375)(Del.), Thalibai F Jain vs ITO 101 ITR 1 (Karn.) and CIT vs HPFC 186 Taxman 105 (HP), CIT vs Pushpa Devi 164 ITR 639 (Patna). We are aware that before the Ld. Commissioner invokes the revisional jurisdiction u/s 263 of the Act, he should get satisfied that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Hon’ble Gujarat High Court in CIT vs M. M.Khambatbala 198 ITR 144 (Guj.) even went to the extent that revisional powers can be exercised even if the issue is debatable. The Hon’ble jurisdictional High Court in CIT vs Gabriel India Ltd. (1993) 203 ITR 108 (Bom.) concluded that powers u/s 263 cannot be exercised for starting fishing and roving enquiries. For making a valid order u/s 263(1), it is essential that the Commissioner has to record an express finding that prejudice has been caused to the interest of the Revenue. Our view find support from the ratio laid down in Bhargwa Engineering Corporation vs CIT (1996) 134 taxation 493, 494 (All.), CIT vs Digvijay Traders (1997) 137 CTR (MP) 224, CIT vs Regional Agro Industrial Development Cooperative Society Ltd. (1998) 143 taxation 293 (Kerala), CIT vs Agarwal Enterprises (1998) 100 taxman 360 (All.) and CIT vs Kailash Apartment Pvt. Ltd. (200) 243 ITR 795 (Del.). Totality of facts, clearly indicates that the assessment order has been framed without full enquiries, therefore, the ld. Commissioner justifiably invoked revisional jurisdiction.
M/s Procter & Gamble Hygiene & Health Care
The Hon'ble Apex Court in Rajmandir Estates Pvt. Ltd. (2017) 77 taxman.com 285 (SC), wherein, there was lack of requisite enquiry into increase of share capital and non- application of mind, the Commissioner was held to be justified in invoking the revisional jurisdiction, which is reproduced hereunder:-
“Section 68, read with section 263 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment year 2009-10 - During relevant year, assessee-company had increased its share capital by issuing 7.93 lakhs shares of Rs.10 each at a premium of Rs.390 - Assessing Officer completed assessment without holding requisite investigation except for calling for records - Commissioner passed order under section 263 and opined that this could be a case of money laundering which went undetected due to lack of requisite enquiry into increase of share capital including premium received by assessee and non- application of mind - High Court by impugned order held that since assessee with an authorised share capital of Rs.1.36 crores raised nearly a sum of Rs.32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees was an important pointer necessitating investigation and thus, Commissioner was justified in treating assessment order erroneous and prejudicial to interest of revenue - Whether special leave petition filed against impugned order was to be dismissed - Held, yes [Para 2] [In favour of revenue]”
Even otherwise, the ld. Commissioner has merely directed the Assessing Officer to make proper enquiries and after affording opportunity to the assessee decide in accordance with law, therefore, principally; the assessee should not feel aggrieved, because, if the assessee is in a position to explain the factual matrix, no grievance will be caused to the assessee. At the same time, the mandate of Article 265 of Constitution of India is to levy and collect due
M/s Procter & Gamble Hygiene & Health Care taxes. In view of this factual matrix, we affirm the stand of the ld. Commissioner. The appeal of the assessee is therefore having no merit, consequently, dismissed.
Finally, the appeal of the assessee is dismissed.
Order pronounced in the open court on 26/05/ 2017.