DCIT, NEW DELHI vs. SH. SHYAM SUNDER KHEMKA, NEW DELHI

ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 18/07/2013 of learned Commissioner of Income-tax (Appeals)-VII, New Delhi for assessment year 2009-10, raising following grounds:

2. Briefly stated facts of the case are that the assessee, an individual, was engaged in the business of manufacturing, processing and packing of food products (Glucon-D etc.) in the name and style of M/s Food and Healthcare Specialties from its factory at Batamondib, Ponta Shahib, Himachal Pradesh during the year under consideration. The profit from this unit by the assessee is subject to the deduction under section 80IC of the Income-tax Act 1961 (in short “the Act”). The assessee filed original return of income declaring total income of Rs. 3,45,80,500/- on 25/09/2009. The case was selected for scrutiny and during the course of scrutiny proceedings, the assessee revised its return of income on 28/09/2011, declaring total income at Rs. 16,29,213/-. In the original return of income deduction under section 80IC of the Act was claimed at the rate of 25% of the profit of the unit, whereas in the revised return filed the assessee claimed deduction under section 80IC of the Act at the rate of 100% of the profit of the unit. The Assessing Officer did not consider the revised return filed by the assessee and in the assessment order under section 143(3) of Act dated 31/10/2011, he disallowed the claim of 100% deduction under section 80IC of the Act, as according to the Assessing Officer, the revised return was not within the meaning of section 139(5) of the Act. Aggrieved, the assessee preferred appeal before learned Commissioner of Income-tax (Appeals), who after considering the facts of the case and the judicial precedents available on the issue in dispute directed the Assessing Officer to allow hundred percent deduction under section 80IC of the Act. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.

3. In ground No. 1, the Revenue has challenged the direction of the learned Commissioner of Income-tax (Appeals) in allowing 100% deduction under section 80IC of the Act by considering the return of income which was filed after the due date under section 139(5) of the Act. 3.1 Before us, the learned Senior Departmental Representative addressing the grounds submitted that in the case of the assessee, revised return could have been filed at any time before 31/03/2011, but the revised was filed on 28/09/2011, thus, it was not a valid revised return and therefore claim of deduction of 100% under section 80IC of the Act as against 25% claimed in the original return, was rightly denied by the Assessing Officer and the action of the learned Commissioner of Income-tax (Appeals) was not in accordance to law. 3.2 On the contrary, learned counsel of the assessee supporting the findings of learned Commissioner of Income-tax (Appeals), submitted that the assessee has been allowed similar claim in proceedings under section 263 of the Act by the principal Commissioner of income tax in assessment year 2010- 11. In assessment year 2012-13, also the Assessing Officer in assessment completed under section 143(3) of the Act has allowed 100% deduction in respect of the profit of the unit under section 80IC of the Act. He further relied on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Jai Parabolic Springs Ltd, reported in 306 ITR 42 (Del), wherein it is held that that the Tribunal has power to allow the deduction to the assessee, to which it was otherwise entitled, even though no claim was made by the assessee in the return of income. Accordingly, he submitted the learned Commissioner of Income-tax(Appeals) has rightly allowed the deduction after considering decisions of Hon’ble Apex Court, Hon’ble jurisdictional High Court and various courts and Tribunal on the issue in dispute. 3.3 We have heard the rival submissions and perused the material on record including the paper book filed by the assessee. The Assessing Officer has denied the hundred percent deduction under section 80IC of the Act on the ground that the revised return in which the claim for hundred percent deduction was made, is not valid revised return. On this issue learned Commissioner of Income-tax (Appeals) after considering precedents available opined that the Assessing Officer is duty- bound to assess the correct income and allow the claims/deductions as are admissible to the assessee, even if, omitted to be claimed by the assessee. Thus, there are two issues before our consideration. The first issue is whether the claim of hundred percent deduction under section 80IC of the Act is admissible to the assessee as per law. The second issue is whether such claim made through a invalid revised return can be allowed to the assessee. 3.4 As regard to the first issue of admissibility of the claim is concerned, the fact are that it is the sixth year of the operation of the unit of the assessee in respect of which claim of deduction is made. As per the section 80IC(3) of the Act, enterprise or the undertaking referred in Section 80IC(2)(b)(ii) of the Act shall be allowed deduction at the rate of hundred percent of eligible profit for 5 assessment year commencing with initial assessment year and thereafter 25% of the eligible profit for next AYs. However, the assessee claimed that it has made substantial expansion in the fifth year of operation i.e. Assessment year 2008-09, therefore it was eligible for 100% deduction for further period of five years from assessment years 2008-09. The learned Commissioner of Income-tax (Appeals) after verifying the facts of investment has upheld the admissibility of the hundred percent deduction as under: “Thus, there is no dispute with regard to deduction allowable to the assessee u/s 80IC of the Act, as the same has been allowed to the appellant in the earlier assessment years and also even in the subsequent assessment years. There is also no dispute with regard to expansion carried out by the appellant in FY 2007-08, as the AO himself has allowed 100% deduction in AY 2008-09 and AY 2010-11. It is seen from the details available on record, that the total value of plant and machinery as on 31.3.2007 (before Rs. 1,80,36,875/-. During the Financial year 2007-08 there was further expansion, and new plant and machinery was purchased for Rs. 1,14,42,802/- as is evident from the Depreciation chart available on record. Thus, this fact is not disputed that there was substantial expansion during the financial year 2007-08, which was more than 50% of value of the Plant and machinery added to the existing Plant and Machinery as on 31.3.2007. Therefore, the case of the appellant is covered as per clause (ix) of sub section (8) of Section 80IC of the Act, and appellant is entitled for deduction @ 100% from the Asstt. Year under which substantial expansion has taken place. Thus, the first assessment year after substantial expansion was AY 2008- 09, for which appellant was allowed deduction @ 100% of the profit derived from his above unit, and appellant is therefore, entitled for 100% deduction of profits for further four assessment years including AY 2009-10. I have also noticed that there was extension of power load as well which was increased to 375 K.W. w.e.f. 2.7.2007 as against the existing loan of 175 K.W.”

3.5 The learned counsel relied on the finding of the Tribunal in the case of Meetu Jain Vs. JCIT in wherein the Tribunal has followed the ratio laid down in the case of Tirupati LPG Industry Limited Vs. DCIT (2014), 45 taxmann.com 326 (Delhi-Trib), and observed as under: “4. We have heard both the parties and have carefully perused the records of the case. In the case of M/s. Tirupati LPG Industries Ltd. in which one of us was party to the said decision we have held as under:- “10.1 As per sub-section (2) of section 80 IC deduction under this section is available to any undertaking or enterprises in the following two categories:- i. The undertaking or enterprises has begun or begins to manufacture or produce any article or thing during the period 7.1.2003 to 1.4.2012; ii. The undertaking which manufacture or produce any article or thing and undertakes substantial expansion during the period 7.1.2003 to 1.4.2012. 10.2 A bare reading of provisions of sub section (2) would reveal that the deduction under the aforesaid two categories are independent. In the first category the deduction is being given to the undertaking which has begun or begins manufacturing or production of article and thing during the specified period of 7.1.2003 to 1.4.2012. Thus under the first category the deduction is available to newly set-up units. 10.2.1 In the second category, the deduction is allowed in case of expansion by the existing units which undertake substantial expansion during the specified period of7.1.2003 to 1.4.2012." 10.3 There is no dispute on the fact that (a) the assessee is entitled to exemption U/S 80 IC of the Act ie. that the assessee has satisfied all the conditions specified in the section; (b) that there is substantial expansion during the year as per requirement of the section 10.4 The only dispute that arises for our consideration is the interpretation of the term "initial assessment year" and whether the same comes with any restriction The Revenue seeks to take the color from the object of introducing Section 80-IC. The A.O. referred to policy of the government for giving incentives to the State of Uttaranchal and Himachal Pradesh. It is well settled that external aids should not be taken for the purpose of interpreting the Statute, when the language of the Section is clear and unambiguous. A plain reading of Sec.80-IC(8)(v) which defines the term "initial assessment year" read with Sec.80- IC(8)(ix) which defines the term "substantial expansion" makes it clear that there is no restriction or bar on more than one substantial expansion being undertaken by an assessee. In our view, a unit can undertake any number of substantial expansions, in the absence of any specific restriction in the Section There is no suggestion in the language of the section that incentive U/S 80 IC is not available if the assessee 3 substantially expands for a second or third time. Substantial expansion requires additional investment and results in higher production, employment etc. Industrialists have to be encouraged to undertake substantial expansion The section recognizes this fact and provides for an incentive, if an assessee undertakes "substantial expansion". 10.5 The term 'substantial expansion' is stated in S.80- IC(8)(ix) requires investment in plant & machinery exceeding at least 50% of the book value of plant and machinery ie. gross value before taking depreciation into account. If such substantial Assessment Year relevant to the P.Y. in which such substantial expansion is completed becomes the initial assessment year. Once it becomes the initial Assessment Year consequently under sub section (3) the assessee would be entitled to 100% deduction of profits and gains for a period of 5 years commencing from such initial Assessment Year, and thereafter the % of deduction from profits come down The term "initial year" has been defined, as a year in which substantial expansion is completed. There is nothing to suggest that there cannot be a second initial year if a second substantial expansion is completed. Even if an existing unit which is claiming 80- IC, undertakes first substantial expansion then also the year of completion of the substantial expansion will me "initial year". If the literal meaning of the term "initial assessment year" is to be taken, then there is no requirement of defining this term in the section. We have to go by the language of the section. 10.6 The CIT(A) denies the deduction on the ground that it would amount to evergreening of an incentive provision. Sub section (6) of S. 80-IC reads as follows. "(6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years.” This section imposes a restriction for a total period of 1 0 years for claiming the deduction in question, irrespective of the fact whether the deduction is claimed u/s 80- IC or u/s 80- IB or u/s 10C as the case may be. Thus there is no evergreening of the provisions. The assessee cannot claim the said deduction fur a total period exceeding 10 years. The deduction could be allowable only for the balance period of 5 years including this Assessment Year 2009-10. Only the rate of deduction goes up. 10.7 The Chandigarh 'B" Bench of the Tribunal in the case of S.R. Paryavaran Engineers Circle 5(1) (P.) Ltd. (supra) was considering a case where the assessee originally claiming deduction u/s 80 IB(iv) of the Act from the A.Y. 1999-2000. For the first 5 years it had claimed exemption of 100%. Thereafter it undertook substantial expansion and claimed deduction u/s 80 IB(iv). The AO rejected the same and observed that benefit could be availed u/s 80 IC and as the substantial expansion was less than 50% of the value of plant and machinery the claim is to be rejected. The Tribunal observed that the assessee is entitled to deduction u/s 80- IC. It held that mere mention of a wrong Section would not disentitle the assessee to claim the above said deduction. To our mind this case law is not directly on the point.

11. In view of the above discussion, as on a plain reading of the section and interpretation of the term initial Assessment Year, we conclude that the claim of the assessee is admissible. Even if a view is taken that there is some ambiguity in the language of the section, then, being an incentive provisions, the ratio of the decisions of the Hon'ble Supreme Court in the case of Bajaj Tempo (supra), Gwalior Rayon Silk Mfg. Co. Ltd. (supra) have to be followed and benefit given to the assessee. We also make it clear that the deduction cannot be extended beyond the period of 10 years from the A. Y.2004-05.”

5. Thus the ratio of the aforesaid decision is that even in case of substantial expansion of an eligible unit claiming deduction u/s 80C is allowable for a maximum period of 10 years from the inception. Therefore the claim of the assessee is valid in the eyes of law and is therefore is allowed.” 3.6 We also find that learned Commissioner of Income Tax while disposing the proceedings under section 263 of the Act for assessment year 2010-11 has given finding that during the financial year 2007-08, corresponding to the assessment year 2008-09, the assessee made substantial expansion. The relevant finding of the Commissioner of Income Tax is reproduced as under: “2. Assessing Officer's proposal for rejecting the claim of 100% deduction u/s 80 SC of the IT Act on the ground that the substantial expansion has not been carried out based on the findings given by him in the assessment year 2011-12 are also far from satisfactory and convincing analysis. The definition of substantial expansion has been stated in the section 80IC(8)(IX) which stipulates ‘'Substantial expansion” means increase in the investment In the plant and machinery by at least fifty percent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken. It has been noticed that during the financial year 2007- 08 the assessee has made investment in the plant and machinery of Rs. 1,14,42,802/- which is more than 50% of the gross block value at the beginning of the previous year in which substantial expansion undertaken i.e. as at 01.04.2004 which is Rs. 1,80,36,875/ (before depreciation), such, it is substantial expansion. Specific definition of substantial expansion as stated u/s 80IC itself cannot be twisted to once conviction and convenience. Therefore, I do not find any merit in the proposal of the Assessing Officer for rejection the claim of 100% deduction u/s 80IC of the IT Act on the ground that substantial expansion has not been carried out. Claim of the assessee finds support in the decision of Delhi ITAT also in the case of M/s Tirupati LPG Industrial Ltd. In totality of all the above mentioned facts and circumstances I do not find any reason to modify the assessment order to the extent of claim made by the assessee u/s 80IC of the IT Act as proposed by the Assessing Officer u/s 263 of the IT Act.”

3.7 Thus, we find that in subsequent assessment years, the Department itself has accepted the admissibility of the hundred percent deduction under section 80IC of the Act for five assessment years from assessment year 2008-09 on account of substantial expansion. Hence, the rule of consistency demands that the Department should have allowed the claim of hundred percent deduction under section 80IC of the Act for the year under consideration also. 3.8 In view of the above discussion and respectfully following the findings of the Tribunal in the case of Meetu Jan Vs. JCIT (supra) we hold that for the year under consideration the assessee is eligible for claim of deduction under section 80IC of the Act at the rate of 100% in view of substantial expansion made in assessment year 2008-09.

“………..Now the only issue and grievance of the appellant is that the Assessing Officer has not allowed 100% deduction u/s 80IC of the Act, on the basis of revised claim u/s. 80IC, as per revised return filed by him during the course of assessment proceedings, which according to the Assessing Officer was out of time, and beyond the period as prescribed under Section 139(5) of the Act. For the sake of convenience these provisions are reproduced as under:- [(5) If any person, having furnished a return under sub- section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier: Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.]” A plain reading of the above section explains that the Assessee can file a revised return before the expiry of one year from the end of the relevant assessment year or before completion of the assessment, whichever is earlier, if the assessee discovered that there remained some omission or there was some wrong statement in the return filed u/s 139(1) or in pursuance to notice issued u/s 142(1). ‘Omission’ in the simple plain words can be considered that if assessee failed to declare some income, or to claim some expenses which omitted while filing the return. Assessee can revised the same by filing a revised return as per provisions of Section 139(5) of the Act. Further, if there was some wrong statement of fact in the return filed earlier, it can also be revised by way of filing a revised return u/s 139(5) of the Act. But, in case the assessee has made some wrong claim under any provisions of the Act, or has under claimed or excess claimed any deduction, which has not been revised by the assessee by way of filing a revised return, it never means that the AO shall assess the same what has been declared in the original return filed, if no return is revised. In that case, the AO is duty bound to allow the deduction as per provisions of the Act, but in no case it gives any powers to AO to assess an income which even if wrongly declared by the assessee, and is not taxable as per statute. For example, if assessee has declared dividend income as taxable, or has shown the share from partnership or AOP as taxable, which are separately assessed in those status, that just because assessee has inadvertently declared some income which was not taxable, statute does not empower the AO to punish by way of putting tax on such income declared, just because assessee has inadvertently declared in his return of income, and had not revise the same by way of filing of a return u/s 139(5). Such a wrong declaration, or any inadmissible claim Or wrong claim even if not revised by the assessee by way of filing a revised return, cannot be AO is duty bound to assess the correct income of the assessee as per provisions of the Act only. Therefore, I do not find any substance in the argument of the AO that just because the claim u/s 80IC was revised by the appellant during the course of assessment proceedings, and not by way of filing of a revised return as per provisions of section 139(5) of the Act, can be denied in any manner. AO is given power to assess and determine the correct income of any assessee being assessed by him as per provisions of the Act. The question remains whether the assessee is entitled to deduction u/s 80IC or not and if deduction is allowable u/ 80IC to the Assessee, then whether the same was to be allowed at 25% or 100%. As discussed supra, it is not the case of the AO that assessee had not carried out substantial expansion during the FY 2007-08. Therefore, even if the assessee would not have revised the claim or would not have revised the return, AO was duty bound to allow the correct claim as admissible to the assessee under the law, as it was not a fresh claim of any deduction claimed but it is a case where the deduction claimed inadvertently at a lower figure and therefore, I find substantial force in the argument of the Ld. AR that the case of the assessee is not affected by case of Goetze (India) Ltd. Vs. CIT 284 ITR 323, as facts of said judgment are different from facts of this case and said judgment is not applicable on this case.

Hon’ble Punjab & Haryana High Court in the case of Commissioner of Income Tax Vs. RAMCO INTERNATIONAL (2009) 221 CTR (P&H) 491 while adjudicating the issue with regard to claim of the assessee for deduction u/s 80IB held that even if claim has not been made in the return by the assessee, and Assessee furnished the documents and Form No. 10CCB during assessment proceedings, claim for deduction under s. 80-IB was admissible—There was no requirement for filing any revised return—No substantial question of law arises—Goetze (India) Ltd. vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) distinguished.

Hon’ble Delhi High Court, in the case of CIT vs. Bharat General Reinsurance Co. Ltd. 81 ITR 303 (Del.) wherein has held that it was incumbent on the income tax department to find out whether a particular income was assessable or not. Merely because the assessee wrongly included the income in its return for a particular year, it could not confer jurisdiction on the department to tax that income in that year even though legally such income was not taxable as per law. In the case of CIT vs. JAI PARABOLIC SPRINGS LTD. 306 ITR 42 (Del), the issue before the Hon’ble Delhi High Court was “whether the Tribunal was right in law in allowing relief of Rs. 15,58,500 in the assessment year under consideration when no such claim was made by the assessee in the return of income”? Hon’ble High Court held that Tribunal had power to allow deduction for expenditure to assessee to which it was otherwise entitled even though no claim was made by assessee in the return. Hon’ble Gujrat High Court held in the case of S.R. Koshti 276 ITR 165 (Guj), held that if an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. Hon’ble Apex Court in the case of Mahalkshmi Sugar Mills 160 ITR 920 (SC) held that there is a duty cast on the Income-tax Officer to apply the relevant provisions of the Indian Income-tax Act for the purpose of determining the true figure of the assessee's taxable income and the consequential tax liability. Merely because the assessee fails to claim the benefit of a set-off, it cannot relieve the Income-tax Officer of his duty to apply section 24 (set off of loss etc) in an appropriate case. Hon’ble Bombay High Court held in the case of Central Provinces Manganese Ore 112 ITR 734 held Income-tax Officer is not of much importance, if the liability arises then a claim can be made bona fide at any stage before the higher authority, who is competent to grant relief. Hon’ble Allahabad High Court held in the case of CIT vs. Lucknow Public Educational Society 318 ITR 223 (ALL) that the department should not take advantage of the ignorance of the assessee. Hon’ble High Court held that the assessee was an educational institution registered under S.12A. It filed return claiming under s.10(23C). Later, it filed a revised return claiming exemption under s. 11, along with the requisite audit report and is entitled to exemption under section 11 and that exemption was the statutory exemption available to the assessee. The assessee was legally entitled to exemption under s.

I have considered the various judgments relied upon by the Ld. AR, discussed in the written submissions filed, and reproduced supra, and also the circular issued by the Board, which directs that the AO is duty bound to assess the correct income and to allow the claims/ deductions as per law as are admissible to the assessee, even if omitted to be claimed by the assessee. Respectfully following judgment of the Hon’ble Apex Court, Hon’ble jurisdictional High Court, and various other Courts, and more particularly, when the AO himself has allowed the claim of the appellant in subsequent assessment year and earlier assessment years, I do not find and reason for not allowing the claim of the appellant, even if no revised return was filed within the meaning of section 139(5) of the Act, but claim was made during the course of assessment proceedings, as the duty of the Assessing Officer is to assessee the true and correct income of the assessee, and to allow admissible deduction even if not claimed due to ignorance or inadvertently.”

4.2 In view of the various judgments available on the issue in dispute, it is settled law that the Assessing Officer is obliged to allow any claim of deduction , even though the assessee has not filed revised return, if otherwise the claim of assessee is admissible as per law. 4.3 Thus, we hold that the claim made by the assessee under section 80 IC of the Act for hundred percent deduction in the return of income filed on 28/09/2011 is allowable. The order of the learned Commissioner of Income Tax on the issue in dispute is well reasoned and we do not find any infirmity in the same. The ground No. 1 of the appeal is accordingly dismissed.

6. The grounds No. 3 to 5 of the appeal are general in nature and, therefore, we are not required to adjudicate upon at our end.

7. In the result, appeal filed the Revenue is dismissed. The decision is pronounced in the open court on 29th July, 2016.