IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "A", MUMBAI
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
MA No.39/M/2015
(Arising out of ITA No.2329/M/2015)
Assessment Year: 2004-05
M/s. ACE Impex, The Asst. Comm. Of Income
105, New Tejpal Indl. Premises, Tax,
Andheri Kurla Road, Circle 12(1),
Vs.
Sakinaka, Aayakar Bhavan,
Andheri (E), Mumbai - 400020
Mumbai 400 072
PAN: AAFGA 0317A
(Appellant) (Respondent)
Present for:
Assessee by : Shri Ishwar Rathi, A.R.
Revenue by : Shri Manoj Kumar, D.R.
Date of Hearing : 21.08.2015
Date of Pronouncement : 16.09.2015
ORDER
Per Sanjay Garg, Judicial Member:
The present miscellaneous application has been moved by the assessee
pleading that a mistake apparent on record has occurred in the order dated
23.01.2015 of this Tribunal passed in ITA No.2329/M/2011. It has been
pleaded that the assessee had agitated the reopening of the assessment under
section 147 of the Act. During the course of hearing the assessee had taken
two additional grounds of appeal which read as under:
"1. That the assessing officer has erred in re-opening of assessment under
section 147 of the Income Tax Act on the basis of objections raised by the
audit party, whereas the same audit objections have not been accepted by
the assessing officer under such facts and circumstance of the case the re-
opening of assessment u/s 147 is bad in law and void ab-initio.
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2. Without prejudice to the above, as per the facts and circumstance of
the case and the provisions of law no tangible material was available with the
assessing officer to form a belief that income has escaped assessment in
terms of section 147 by granting excess deduction u/s 80 HHC and / or 80 IB
and hence the re-opening of assessment is bad in law and void ab-initio."
2. It has been submitted that during the course of hearing of the appeal on
merits, the arguments were advanced on the additional ground of appeal also.
However, the Tribunal while deciding the appeal on merits has failed to
consider the additional grounds of appeal and the arguments thereof advanced
by the Ld. A.R. of the assessee in that respect. It has therefore been contended
that non consideration of the above stated grounds of appeal has caused
prejudice to the assessee and hence, a mistake apparent on record has occurred
which is required to be rectified.
3. We have heard the rival contentions and have also gone through the
order dated 23.01.2015 passed in ITA No.2329/M/2011 and also through the
relevant record relied upon by the assessee. It is true that the assessee had
agitated the reopening of the assessment in his under section 147 of the Act.
The assessee in the original grounds No.1 & 2 of the appeal has taken the very
issue of reopening of the assessment under section 147 of the Act which has
been thoroughly discussed in our order dated 23.01.2015. A categorical
finding has been given that as per the provisions of section 80HHC, the
turnover of 80 IB and non 80 IB units is to be taken together but the Assessing
Officer (hereinafter referred to as the AO) had failed to include the total
turnover of 80 IB unit into total turnover of business of the assessee and hence
the income of the assessee had escaped assessment. The reopening of the
assessment on this ground was valid as the AO had valid reasons to believe
that the income of the assessee had escaped assessment. However, the
reopening in relation to section issue of DEPB receipts whether eligible for
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M/s. ACE Impex
deduction under 80 IB was held to be not valid because the view taken by the
AO at the time of original assessment proceedings was one of the possible
views and the same was subsequently held to be correct view also. Now in the
light of above findings, we have to see whether discussion of the
arguments/grounds raised by the assessee during the course of hearing had
resulted into an error apparent on record or not.
The assessee in the additional grounds of appeal has pleaded that the
reopening was done on the basis of audit objections which the AO had not
accepted but later on he reopened the assessment; and that no tangible material
was available with the AO to form a belief that income had escaped assessment
by granting excess deduction under section 80HHC/ 80 IB of the Act.
4. We have considered the arguments advanced by the Ld. A.R. The Ld.
A.R. has brought our attention to page 32 to 36 of the paper book file. Page 32
is the copy of the letter dated 16.01.08 of the senior audit officer wherein he
has pointed out that the profits considered for deduction under section 80 IB
was inclusive of DEPB which was not derived from the undertaking and hence
was not eligible under section 80 IB. Further, at page 33 is the another copy of
the letter of the senior audit officer dated 16.01.08 wherein he has pointed out
that while computing the deduction under section 80HHC, the AO had failed to
include the total turnover of 80 IB unit and that the adoption of the incorrect
total turnover has resulted in underassessment of income. The letter dated
16.01.08 is the document upon which the Ld. A.R. has relied upon to contend
that the AO had formed his belief of escapement of income on the basis of
audit party objection. Further, at page 36 is the letter dated 23.01.2008 of the
AO addressed to the senior audit officer pointing out that the entire turnover of
Daman unit (80 IB unit) was export turnover and it has been pointed out that
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the addition of the said turnover in the total turnover will also require addition
of the export turnover in the numerator for the purpose of calculating the
percentage. The AO, through this letter, has meant to say that even the
computation is made as per the prescribed formula for deduction under section
80HHC, the tax effect would be neutral. However, in the reasons recorded for
reopening of the assessment dated 24.03.09, one of the reasons is that the AO,
while calculating deduction under section 80HHC, had not included the total
turnover of the 80 IB unit. Now the contention of the Ld. A.R., while relying
upon the various case laws, has been that the AO had formed his belief on the
basis of audit objection report which he himself has not accepted as is revealed
from his letter dated 23.01.2008 addressed to the senior audit officer. For a
valid reopening of assessment as discussed in our order on merits, the AO must
have valid reasons to believe that the income has escaped assessment. We
have already discussed in our order dated 23.01.2015 that as per the provisions
of the relevant section, the turnover of the 80 IB unit into the total turnover of
the business was required to be included. Since the AO had not included the
same, hence the income of the assessee had escaped assessment. The reason
recorded by the AO in this respect has also been held to be a valid reason.
Merely because the information has come into the knowledge of the AO on the
basis of audit report, but if the same is correct, legally valid and which shows
that the view taken by the AO in the assessment proceedings was not the
legally correct view, then, certainly it is open to the AO to apply his mind.
Though, in this case the AO initially had not accepted the objection of the audit
party as is revealed from his letter dated 23.01.2008, however, he later on
realized that his view was not correct. Thereafter, he reopened the assessment
vide reasons recorded for reopening dated 24.03.09. It is a case where the
view taken by the AO during assessment proceedings or the view taken by the
AO while giving reply to the audit officer was not a legally correct view and
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hence was not a possible view also. Even if the export turnover is to be
included in the numerator while calculating the deduction under section
80HHC, even then as per the formula prescribed, it will result into lesser
deduction under section 80HHC in comparison to that it was allowed to the
assessee during the original assessment proceedings. The view taken by the
AO, during the original assessment proceedings, was neither legally correct
view nor one of the legally possible views.
5. We have already given a finding in our order dated 23.01.2015 that the
turnover of the 80 IB unit was required to be included while calculating the
deduction under section 80HHC. Hence, under such circumstances, even non
discussion of the above stated additional grounds taken by the assessee during
his submissions before the Tribunal has not resulted into any mistake, defect or
error in our order dated 23.01.2015. Merely recalling the order at this stage
due to non discussion of an argument of the Ld. A.R. in this respect will not be
proper course when it is apparent on the record that the above grounds of the
Ld. A.R. have no force and the issue has already been considered and decided
in the impugned order dated 23.01.2015. The Hon'ble Jurisdictional Bombay
High Court in the case of "CIT vs. Ramesh Electric and Trading Company
(1993) 203 ITR 497 (Bom.) has held as under:
"In our view, the power of rectification under section 254(2) of the Income-tax Act
can be exercised only when the mistake which is sought to be rectified as an
obvious and patent mistake which is apparent from the record, and not a mistake
which requires to be established by arguments and a long drawn process of
reasoning on points on which there may conceivably be two opinions, as has been
shown in the present case. Failure by the Tribunal to consider an argument
advanced by either party for arriving at a conclusion is not an error apparent on the
record, although it may be an error of judgment."
6. Hence, in the light of the above decision of the Hon'ble Jurisdictional
Bombay High Court, we have no hesitation to hold that even non discussion of
the additional grounds stated by the assessee in his application have not
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resulted any error in the impugned order dated 23.01.2015. In view of our
above discussion, we do not find any merit in the application of the assessee
and the same is accordingly dismissed.
Order pronounced in the open court on 16.09.2015.
Sd/- Sd/-
(R.C. Sharma) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 16.09.2015.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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