M/S LIBERTY SHOES LIMITED,KARNAL vs. DCIT, KARNAL

Facts in brief:- The facts are brought out at para 2.01 of the Ld.CIT(A)’s order which is extracted for ready reference. "The brief history of the case is that the assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 which was computed after effect to the appellate orders at Rs. 3, 80, 50, 490/ -. While calculation the deduction u/ s 80HHC on premium on Import License and DEPB amounting to Rs.7,09,741/- and Rs.1,48,43,127/- respectively was allowed as deduction along with other export profits of the firm. The premium of import license and DEPB are to be considered as per amended provisions of the law. " "The assessee has received DEPB amounting to Rs.1,48,43, 127/ - and sale of import license amounting to Rs. 7,09, 741/ - and claimed deduction u/ s 80HHC on this amount. The case was re-opened for re-computation of income as well as the allow-ability of deduction u/ s 80HHC. From the Profit and Loss account of the assessee it is found that the assessee has received income from the premium on the sale of import license, duty refund, building rent and DEPB import license. As the assessee has increased the 90% of these amount while calculating the profits of the business of the assessee, whereas these were not to be increased as per the provisions of explanation (baa) to the section 80HHC(4A). It will be appropriate if the provisions of section 80HHC (4A), Explanation (baa) is re-produced as under:- (baa) "Profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession» as reduced by (1) ninety per cent of any sum referred to in clauses (iiia),(iiib), (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India; The assessee was asked vide this office letter dated 19.9.2007 to attend the office and furnish the reply on merits and furnish the stay order, if obtained any, of the Hon'ble Court as the stated that writ petition of the assessee is pending. In reply to this, the assessee furnished reply vide letter dated 22.9.2007, which is reproduced as under: "Please refer to assessee's letter dated 10.9.2007 (copy attached), which has not been looked into. The assessee wrote the relevant lines in that letter as under: You are requested to kindly deal objections of the assessee before resorting to the process of reassessment. This matter requires our approach to the Hon'ble jurisdictional High Court where other exporters have already filed writs challenging Taxation Law Amendment Act, 2005 on the issue of discrimination between exporters falling within 10 crores Turnover & more than 10 crores Turnover. The presumption that the assessee has already approached the Hon'ble High Court is not correct as will be clear from the letter and above mentioned lines. Kindly do the needful as requested i.e. proceedings can't be kept pending etc.

The assessee before us has challenged the reopening on the ground that, the reasons for reopening was the amended provisions of S.28(iii d)/80 HHC of the Act as per Taxation Law of Amendment Act, 2005 and that such reopening is bad in law. He relied on the decision of Hon’ble Gujarat High Court as well as the decision of Hon’ble P&H High Court.

In the result the assessee’s appeal is allowed. Order pronounced in the Open Court on 30th November,2015.