IN THE INCOME-TAX APPELLATE TRIBUNAL
`C' BENCH, CHENNAI.
Before Shri N.S. Saini, Accountant Member &
Shri Challa Nagendra Prasad, Judicial Member
I.T.A. No. 1804/Mds/2010
Assessment Year : 2003 - 04
M/s. Euro Leder Fashions Limited, The Deputy Commissioner of Income
99, G.S.T. Road, Pallavaram, Vs. Tax, Company Circle II (1),
Chennai 600 043. Chennai.
[PAN: AAACE0729P]
(Appellant) (Respondent)
Appellant by : Shri V.S. Jayakumar, Advocate
Respondent by : Ms. Anupama Shukla, CIT
Date of Hearing : 19.07.2012
Date of pronouncement : 26.07.2012
ORDER
PER Challa Nagendra Prasad, Judicial Member
This is an appeal filed by the assessee against the order of the
Commissioner of Income Tax, Chennai-I, Chennai passed under section 263
of the Income Tax Act dated 23.03.2010 for the assessment year 2003-04.
Shri V.S. Jayakumar, Advocate represented on behalf of the assessee and
Ms. Anupama Shukla, CIT represented on behalf of the Revenue.
2. This appeal is filed late by 92 days and the assessee filed an affidavit
praying for condonation of delay stating the delay is neither wanton nor
willful but due to circumstances beyond the control of the assessee and thus
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prayed for condonation of delay and to admit the appeal for hearing as it was
prevented by sufficient cause in filing of the appeal in time.
2.1 To this plea of the condonation of delay, the ld. DR did not strongly
object.
2.2 After hearing both sides and considering the material on record with
regard to limitation issue, we are satisfied that the assessee was prevented
by sufficient cause from not filing the appeal within the stipulated time. As
such, while accepting the plea of the assessee, we condone the delay and
admit the appeal for hearing.
3. The assessee raised following grounds of appeal:
"1. The order of the CIT u/s. 263 of the Income Tax Act is contrary to the
law, facts and circumstances of the case.
2. The CIT erred in directing the AO to modify the order dated 26.11.07
passed under section 143(3) read with section 147.
3. The CIT erred in holding that the amendment brought in Section 80
HHC has nothing to do with the reduction of earlier year's losses
while computing relief under 80 HHC.
4. The CIT erred in ignoring the interim stay granted by the High Court
in respect of the operations of the amendment made by the taxation
laws (Amendment Act, 2005).
5. The CIT failed to notice that the two decisions relied on by him does
not put the assessee in a worst position as they are not applicable to
the facts of the appellant's case.
6. The CIT failed to note that the assessment completed under section
143(3) read with section 147 cannot be revised under section 263 in
the manner done by him.
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7. The appellant craves leave to adduce additional grounds of appeal at
the time of hearing."
4. Facts of the case are that the assessee filed return of income for the
assessment year 2003-04 on 30.03.2003 admitting NIL income. The return
was processed under section 143(1) on 07.02.2004. Later, a notice under
section 148 was issued on 23.02.2007. The assessment was completed on
26.11.2007 under section 143(3) read with section 147 of the Act. While
completing the assessment the Assessing Officer recomputed the deduction
allowable under section 80HHC by reducing 90% of income on sale of DEPB
license and computed the income accordingly. Later, the Commissioner of
Income Tax, Chennai - I issued a notice under section 263 of the Act dated
23.02.2010 requiring the assessee to show-cause as to why the assessment
completed on 26.11.2007 under section 143(3) read with section 147 by the
Assessing Officer should not be set aside as the assessment order is
erroneous and prejudicial to the interest of Revenue for the reason that
deduction under section 80HHC was allowed before set off of carry forward
losses of earlier assessment years.
5. The assessee filed its objection to the notice issued by the
Commissioner of Income Tax stating that the assessee filed a Miscellaneous
Petition before the Hon'ble Madras High Court challenging the constitutional
validity of the amendment made to 80HHC and an ad-interim stay was
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granted by the Hon'ble Madras High Court. Therefore, since an ad-interim
stay was granted by the Hon'ble Madras High Court, the Commissioner of
Income Tax cannot revoke section 263 to direct the Assessing Officer to
rework out the deduction allowable under section 80HHC. Taking into
consideration, the reply filed by the assessee, the Commissioner of Income
Tax passed order on 23.03.2010 under section 263 of the Act directing the
Assessing Officer to modify the assessment order suitably to allow
credit/relief under section 80HHC as per the ratio of the decision of the
Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. vs. DCIT [266
ITR 521]. Against this order of the Commissioner of Income Tax, the
assessee is in appeal before us.
6. The counsel for the assessee submits that retrospective amendment
was made to section 80HHC by Taxation Law (Amendment) Act, 2005 with
effect from 01.04.1998, whereby the export turnover of `.10.00 crores was
arbitrarily fixed to confer certain benefit under section 80HHC viz, the DEPB
profits, cash incentives and other sums. The deduction is allowed in full in
the hands of the assessee whose turnover did not exceed `.10.00 crores
and in the cases where the turnover exceeded `.10.00 crores the claim was
flatly denied. He submits that the assessee filed a writ petition before the
Hon'ble Madras High Court challenging the constitutional validity of the said
amendment in section 80HHC and an ad interim stay was granted by the
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Hon'ble Madras High Court. The counsel for the assessee submits that the
Hon'ble Gujarat High Court in the case of Avani Exports & Others v. CIT &
Ors. in a batch of appeals by order dated 02.07.2012 in Special Civil
Application No. 7926 of 2006 has held that the amendment to Taxation Laws
(Amendment) Act, 2005 is only prospective and could be given effect from
the date of amendment and not in respect of earlier assessment years. The
counsel for the assessee further submits that in view of the decision of the
Hon'ble Gujarat High Court, the issue is debatable. Therefore, the
Commissioner of Income Tax is not justified in invoking the provisions of
section 263. To disturb the working made by the Assessing Officer in the
assessment order.
7. The counsel for the Revenue supported the order of the
Commissioner of Income Tax passed under section 263 of the Act.
8. We have heard both sides, perused the materials available on record,
orders of lower authorities and the case law relied upon. The assessment
was completed under section 143(3) read with section 147 on 26.11.2007.
While completing the assessment, the Assessing Officer allowed deduction
under section 80HHC without setting off of carry forward loss of the earlier
assessment years. Since the order passed by the Assessing Officer is
against the ratio of the decision of the Hon'ble Supreme Court in the case of
IPCA Laboratories vs. DCIT, judgment dated March 11, 2004 reported in
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266 ITR 521, the Commissioner of Income Tax directed the Assessing
Officer to recompute the relief allowable under section 80HHC suitably in
view of the decision of the Hon'ble Supreme Court in the case of IPCA
Laboratories vs. DCIT (supra). The contention of the assessee is that the
Hon'ble Madras High Court granted an ad-interim stay, therefore, the
deduction allowed under section 80HHC by the Assessing Officer cannot be
reworked appears to be not relevant with the issue of allowing deduction
under section 80HHC in accordance with the ratio laid down by the Hon'ble
Supreme Court in the case of IPCA Laboratories v. DCIT (supra). Because,
what was challenged by the assessee before the Hon'ble Madras High Court
was the constitutional validity of retrospective amendment to section 80HHC,
whereby the export turnover of `.10.00 crores was arbitrarily fixed to confer
certain benefit under section 80HHC, DEPB profits, cash incentives and
other sums. Similarly, the decision of the Hon'ble Gujarat High Court in the
case of Avani Exports & Others v. CIT & Ors.(supra) holding that
amendment to section 80HHC is prospective and could be given effect from
the date of amendment and not in respect of earlier assessment years is
also nothing to do with the ratio of the decision of the Hon'ble Supreme
Court in the case of IPCA Laboratories v. DCIT (supra). In the
circumstances, we see no infirmity in the order passed by the Commissioner
of Income Tax under section 263 in directing the Assessing Officer to allow
deduction under section 80HHC in accordance with the ratio of the decision
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of IPCA Laboratories (supra). The grounds raised by the assessee are
dismissed.
9. In the result, the appeal of the assessee is dismissed.
Order pronounced on Thursday, the 26th of July, 2012 at Chennai.
Sd/- Sd/-
(N.S. SAINI) (CHALLA NAGENDRA PRASAD)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Chennai, Dated, the 26.07.2012
Vm/-
To: The assessee//A.O./CIT(A)/CIT/D.R.
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