SH. DEVENDER KUMAR MITTAL,NEW DELHI vs. ITO, NEW DELHI

This is an appeal filed by the assessee against the order of the CIT(A)- XXIII, New Delhi dated 13.10.2014, challenging the penalty imposed and sustained u/s. 271(1)(c) of the IT Act for the assessment year 2010-11.

The brief facts of the case are that the appellant is engaged in the business of processing, preservation and packing of sea buckthorn fruits in the State of Jammu & Kashmir (State specified in the eighth schedule). For this, the assessee has made a deed of agreement with the Governor of J & K through General Manager, DIC Leh for the period of 10 years for the lease of plot of land 2 Kanals situated in the Industrial Area. The return of income was filed on 28.09.2010 for the assessment year 2010-11 declaring an income of Rs.2,27,000/- at ward 22(1), New Delhi. The appellant claimed 100% deduction u/s. 80-IB(11A) of Rs.15,24,421/-. The appellant claimed deduction for the first year in assessment year 2004-05. The case was selected for scrutiny and assessment was completed, whereby the claim of the assessee u/s. 80-IB(11A) was disallowed and restricted to 25%. During the course of assessment proceedings, the appellant accepted that he has claimed 75% excess deduction under the aforesaid section and paid the tax on it stating that he is accepting the disallowance just for the peace of mind and to avoid further litigation. The Assessing Officer, therefore, initiated penalty proceedings u/s. 271(1)(c) of the Act and imposed a penalty of Rs.3,53,286/- for furnishing inaccurate particulars of income. Aggrieved by this penalty order, the assessee preferred appeal before the first appellate authority who upheld the order of the Assessing Officer. Against this order of ld. CIT(A), the assessee is in appeal before the Tribunal.

The learned AR of the assessee submitted that the ld. Assessing Officer has failed to consider the reply offered to him vide letter dated 30.01.2013 which is reproduced as under : The assessee was running the same business earlier which is extensively damaged due to fire, in circumstances prescribed u/s 33B. Section 80IB says in case of an undertaking whose business was discontinued in any previous year due to extensive damage by fire etc. is reestablished before the expiry of 3 years from the end of the previous year in which it was discontinued. In this case the deduction is allowed as allowable to the new undertaking established in the previous year. In this case the assessee has established his business within a year of the damage. In evidence of that we are submitting a copy of the bill for the purchase of machinery and construction of the shed during the Assessment Year. Section 80IB is reproduced as under: 80IB.Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.- (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to(11), (11 A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:— (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; Section 33B is reproduced as under: 33B. Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of— (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or (ii) riot or civil disturbance; or (iii) accidental fire or explosion ; or (iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), and, thereafter, at any time before the expiry of three years from the end ol such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so reestablished, reconstructed or revived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty per cent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged or destroyed : [Provided that no deduction under this section shall be allowed in relation to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year] Explanation.—In this section, "industrial undertaking" means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.] Hence in view of the Provisions and facts enumerated above, it is clear that the Assessing Officer has not examined the documents filed by the Assessee and passed the order in haste. He never considered the fact that the business of the assessee was damaged due to fire, in circumstances prescribed u/s 33B. In this case the assessee have established his business within a year of the damage. In evidence of that he has submitted a copy of the bill for the purchase of machinery and construction of the shed during the initial assessment Year to the Assessing Officer during the assessment proceedings. The Assessing Officer passes his order on the belief that the assessee is claiming 100% deductions in the 7th year from the initial assessment year which is wrong. He never considered the circumstances/situations mentioned above.”

The ld. AR submitted that the unit was extensively damaged and he has re-established it within three years after the damage. The assessee expended for installation of new machinery for Rs.7,25,324/- and expended on civil construction Rs.3,12,700/-, the bills of which are placed on paper book page No. 63 & 64 and started production from assessment year 2010-11.The appellant has submitted report in Form No. 10 CCB (see Rule 18BBB). He strongly opposed the penalty imposed by the Assessing Officer. He also submitted that the above submission was made before the ld. CIT(A) but he also did not consider the same.

The learned Departmental Representative relied on the orders of the authorities below. He submitted that the authorities below have passed reasoned order and therefore, the impugned order does not require any interference.

We have considered the rival submissions and perused the entire material on record and we find that the ld. Authorities below have not considered the submissions of the appellant in their orders and the ld. DR has also made no arguments on the above matter. We, therefore, think it appropriate to restore the matter to the file of Assessing Officer for deciding the matter afresh after considering the submissions of the assessee as noted above. Accordingly, the order of the ld. CIT(A) is set aside and the matter is restored to the file of AO for deciding the matter afresh after considering the contentions of the assessee as mentioned hereinabove, by passing a speaking order in accordance with law after affording reasonable opportunity of being heard to the assessee.