ACIT CIRCLE-7(2), NEW DELHI vs. MANISH SABHARWAL, CHANDIGARH

The only ground of appeal taken by the Revenue reads as under:-

The facts in brief are that for the AY 2011-12 the assessee individual e-filed his original return on 28.09.2011 declaring income of Rs. 26,04,895/-. It was processed under section 143(1) of the Income Tax Act, 1961 (the “Act”). Later on the case was selected for scrutiny and assessment was completed on 17.01.2014 on total income of Rs. 26,04,895/- allowing therein the assessee’s claim of exemption of Rs. 15,00,710/- under section 80IC of the Act. The assessment was reopened under section 147 of the Act by recording the reason that the assessee has not maintained separate accounts for the purpose of calculating the profits of the units for which deduction under section 80IC of the Act was claimed and the assessee had not furnished Form 10CCB at the time of original assessment. Accordingly, notice under section 148 of the Act was issued in response to which the assessee filed return declaring total income of Rs. 26,04,895/- on 21.03.2018. During re-assessment proceedings, the assessee objected to the reopening of the assessment and even sought direction under section 144A of the Act from the Addl. CIT, Range-7, New Delhi which was received by the Ld. Assessing Officer (“AO”) on 30.11.2018. In para 7, the Ld. AO reproduced the relevant extract of the direction as under:- “In this regard it is to be mentioned that an application has been filed by the authorized representative of Sh. Manish Sabharwal, PAN: AFRPS9185G for A.Y. 2011-12 requesting to issue direction u/s 144A of the IT Act. On perusal of the application of the assessee and assessment record it is seen that in the schedule file with original balance sheet at page 48 to 54, capital, fixed assets, investment, inventory, sundry debtors, current liabilities, sales, purchases and all other relevant heads are bifurcated in three units i.e unit 1, 2 and 3 which shows that the assessee has maintained/furnished three separate accounts for the purpose of calculating the profits and deduction thereon. Hence, it cannot be said that the assessee has not maintained separate unit wise account for the purpose of calculating profits ant deduction thereon. Further the asseessee has claimed that mandatory certificate of 10CCB was submitted during original assessment proceeding also. It is further noted that even during assessment proceedings u/s l47 the assessee has submitted the form 10CCB as Annexure 9 and 10 alongwith its letter dated 15-10-18 and audited unit wise final accounts as Annezure 11. 2

Aggrieved, the assessee appealed before the Ld. CIT(A). During appellate proceedings the assessee made submissions which have been incorporated by the Ld. CIT(A) in para 4.1 of his appellate order. He recorded his observations and findings in para 4.3 of his order which is reproduced below:

The Ld. DR relied on the order of the Ld. AO.

The Ld. AR supported the order of the Ld. CIT(A). He drew our attention to the written submission appearing at pages 1-6 which form part of the Paper Book filed by the assessee.

We have heard the Ld. Representative of the parties, considered their arguments and perused the records. It is not in dispute that the original assessment was framed after scrutiny under section 143(3) of the Act allowing the assessee’s claim for deduction under section 80IC of the Act. However, the case was reopened for the reason that the assessee had not furnished Form 10CCB along with original return and income of three units had not been bifurcated. During re-assessment proceedings vide letter dated 03.09.2018 the assessee submitted that Form 10CCB was duly filed along with the return and income of three units have duly been bifurcated in the schedule filed with the original balance sheet. The assessee’s case is that he has been allowed deduction under section 80IC in all the previous and subsequent years and the facts of the year under consideration are identical to all these years. The predecessor Ld. AO had allowed the impugned deduction only after verifying the facts from Form 10CCB. No material has been brought on record by the Revenue to controvert the above contentions of the assessee.

From the direction under section 144A of the Act issued by the Ld. Addl. CIT Range-7 New Delhi, it is observed that he perused the assessment record and recorded the finding after seeing the material in the Schedule filed that heads are bifurcated in three units i.e. unit 1, 2 and 3 which shows that the assessee has maintained/furnished three separate accounts for the purpose of calculating the profits and deduction thereon. The Ld. Addl. CIT further noted that even during re-assessment proceedings the assessee submitted Form 10CCB alongwith letter dated 15.10.2018 and audited unit-wise final accounts. If that be so, the assessee’s case is fully covered in favour of the assessee by the decision of the Hon’ble Supreme Court in CIT vs. G.M. Knitting Industries (P) Ltd. (2015) 376 ITR 456 (SC) as also by the decision of the Hon’ble Delhi High Court in CIT vs. Centimeters Electricals Pvt. Ltd. 317 ITR 249 (Delhi).

We, therefore, for the reasons set out above decline to interfere and finding no substance in the appeal of the Revenue reject the same.

In the result, the appeal of the Revenue is dismissed.