HINDUSTAN GUM & CHEMICALS LTD.,KOLKATA vs DCIT, CIR-12(1), KOLKATA, KOLKATA

Income Tax Appellate Tribunal, BENCH “B”, KOLKATA

Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]

Per Shri M.Balaganesh, AM

This appeal of the assessee arises out of the order of the Learned CIT dated 08.02.2016 for the Asst Year 2010-11 passed against the order u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

The only issue to be decided in this appeal is as to whether the ld.CIT is justified in invoking the revisionary jurisdiction u/s 263 of the Act in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee is a public limited company engaged in the business of manufacturing /trading of guar gum and wind power generation. The assessee is having 100% Export Oriented Unit (EOU) at Viramgam and had claimed deduction u/s 10B of the Act in the sum of Rs.5,12,79,987/- in the return of income which was originally processed u/s 143(1) of the Act later in the assessment proceedings u/s 143(3) of the Act, the ld. AO after thoroughly examining the claim of deduction u/.s 10B of the Act accepted the eligibility of claim of deduction u/s 10B of the Act and finally made disallowance of Rs.86,85,103/- in respect of certain receipts not attributable to export oriented unit and denied deduction u/s 10B thereon. In other words, the claim of deduction u/s 10B of the Act by the 2 M/s. Hindustan Gum & Chemicals Ltd. A.Yr.2010-11 assessee in the sum of Rs.5,12,79,987/- was disturbed by making the addition in the sum of Rs.86,85,103/-. But the ld. AO started examining this claim of deduction u/s 10B of the Act by stating in the assessment order as below :- “The company has shown exempt income of Rs.6,25,86,229/-“ The ld. AO also stated that the assessee had claimed 100% deduction from its profits derived from EOU from the export of articles. This little confusion in the assessment order triggered the initiation of revision proceedings u/s 263 of the Act which made the ld. CIT to arrive at the conclusion that the assessee had claimed deduction u/s 10B of the Act to the tune of Rs.6,25,86,299/- whereas the Chartered Accountant in Form No.56G had certified the claim of deduction u/s 10B of the Act only to the tune of Rs.5,12,79,987/- and accordingly the ld. AO ought to have added the balance sum of Rs.1,13,06,312/- in the assessment which, in the opinion of the ld CIT, resulted in under assessment to the extent thereby making the order of the ld. AO erroneous and prejudicial to the interest of the revenue. The assessee in reply to the show cause notice brought to the attention of the ld. CIT that the said sum of Rs.6,25,86,299/- represents only the profits derived from100% EOU before depreciation and after computing the business profits in accordance with the provisions of the Act, the amount eligible for deduction u/s 10B of the Act was worked out at Rs.5,12,79,987/- which was also certified by the Chartered Accountant in Form No.56G for the same amount. The assessee accordingly claimed deduction u/s 10B of the Act only to the extent of Rs.5,12,79,987/- which was accepted by the ld. AO u/s 143(1) of the Act initially and later u/s 143(3) of the Act by making disallowance on some other account to the tune of Rs.86,85,103/-. Hence it was pointed out that no error had occurred in the order of the ld. AO warranting the initiation of assessment proceedins u/s 263 of the Act. The ld. CIT however, proceeded to set aside the assessment de novo with a direction to the ld. AO to examine the applicability of section 10B of the Act by reaching to the conclusion that this issue has not been properly examined by the ld. AO. Aggrieved, the assessee is in appeal before us on the following grounds :- “

1. That on the facts and in the circumstances of the case, the assessment made by the learned DCIT neither erroneous nor prejudicial to the interest of revenue and therefore the learned CIT was not justified in invoking the provisions of Section 263.

2. That the order u/s.263 is bad in law and, therefore, the same is liable to be quashed.

3 M/s. Hindustan Gum & Chemicals Ltd. A.Yr.2010-11 3. That on the facts and in the circumstances of the case, the Ld.CIT was not justified in holding that no proper investigation was made by the Ld.DCIT in connection with assessee's claim for deduction u/s.10B whereas all relevant report linformation pertaining to the claim were submitted by the appellant and duly verified during the assessment proceedings.

4. That on the facts and in the circumstances of the case, the Ld.CIT failed to appreciate that claim for deduction u/s.10B was made by the appellant on basis of report of the Auditors and the same was duly considered by the Ld.DCIT while passing the assessment order. That the appellant company craves leave to, add to, alter, amend and/or withdraw all or any of the above grounds at or before the hearing of the appeal.”

The ld. AR brought our attention to the relevant pages of the paper book containing computation of total income, independent profit and loss account of 100% EOU, independent Income tax depreciation statement of 100% EOU, computation of deduction u/s 10B of the Act, Form No.56G issued by the Chartered Accountant together with the workings and consolidated financial statements together with the annual report for the year ended 31.03.2010 and also filed a complete reconciliation of the computation of the business in columnar form stating that even assuming the contentions of the ld. CIT are to be taken as correct, even then the business income still remains at Rs.16,46,29,552/- vide page 18 of the paper book. Based on these documents relied upon by him he argued that there was absolutely no error in the computation of deduction u/s 10B of the Act by the AO and accordingly no revision jurisdiction u/s 263 of the Act could have been invoked by the ld. CIT in the facts and circumstances of the case. He also argued that the ld. CIT had not pointed out as to where the order of the ld. AO is erroneous and without pointing out as to which part of the order is erroneous just giving a blanket direction to the AO to re-examine the claim of deduction u/s 10B of the Act on the ground that proper examination has not been carried out by the AO is totally unwarranted, especially when the ld. AO had thoroughly examined the entire aspect which is quite evident from pages 1 to 3 of the assessment order wherein elaborate discussion and findings on the claim of deduction u/s 10B of the Act was given by the ld AO. In response to this the ld. DR relied on the order of the ld. CIT.

We have heard the rival submissions and perused the materials available on record including the paper book and the relevant pages contained therein as relied

4 M/s. Hindustan Gum & Chemicals Ltd. A.Yr.2010-11 upon by the ld. AR (supra). We find from the perusal of the said contents of the paper book, that there is absolutely no error in the claim of deduction u/s 10B of the Act made by the ld AO and for the sake of clarity, we would like to state that the assessee had claimed deduction u/s 10B of the Act only to the extent of Rs.5,12,79,987/- in the return of income which was also duly supported by a Chartered Accountant certified in Form No.56G to that extent. This return was initially processed u/s 143(1) of the Act wherein the ld. AO had granted deduction u/s 10B of the Act for an amount of Rs.5,12,79,987/-. Later on in the scrutiny proceedings u/s 143(3) of the Act the ld. AO while examining the claim of deduction u/s 10B of the Act went through the entire workings of the assessee and found that the assessee is not entitled for deduction u/s 10B of the Act in respect of certain receipts to the tune of Rs.86,85,103/- which according to him are not attributable to 100% EOU and accordingly made disallowance u/s 10B of the Act thereon to that extent. While completing the assessment u/s 143(3) of the Act, the ld. AO started the computation of the total income from the “assessed income u/s 143(1) of the Act – Rs.16,46,29,551/-“ and later on proceeded to make regular disallowances in the assessment to that income. Hence it is very clear that the AO had granted deduction only to the extent of Rs.5,12,79,987/- u/s 10B of the Act. Hence, we are thoroughly convinced that there is no error in the order of the ld. AO warranting revisionary proceedings u/s 263 of the Act in the facts and circumstances of the case. We have no hesitation to quash the revision proceedings u/s 263 of the Act. Accordingly the grounds raised by the assessee are allowed.

6. In the result the appeal of the assessee is allowed.

Order pronounced in the court on 19.12.2016.

Sd/- Sd/- [S.S.Viswanethra Ravi] [M.Balaganesh] Judicial Member Accountant Member Date: 19.12.2016.

R.G.(.P.S.)

HINDUSTAN GUM & CHEMICALS LTD.,KOLKATA vs. DCIT, CIR-12(1), KOLKATA, KOLKATA