Principal Commissioner of Income-tax-14, Kolkata v. Vinod Kumar Surana
[Citation -2017-LL-1025-16]

Citation 2017-LL-1025-16
Appellant Name Principal Commissioner of Income-tax-14, Kolkata
Respondent Name Vinod Kumar Surana
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 25/10/2017
Judgment View Judgment
Keyword Tags commencement of production • initial assessment year • industrial undertaking • granting of deduction • mistake apparent • audit objection • debatable issue
Bot Summary: The present appeal is against an order of the Income-tax Appellate Tribunal Bench SMC Kolkata, which in substance allow the assessee s claim for deduction under Section 80IB of the Income-tax Act, 1961. The assessee has been claiming deduction in terms of Section 80IB of the Income-tax Act since its inception in the financial year 2001-02. CIT(A) further observed that no expenditure was incurred by the assessee towards payment of wages to temporary workers, labourers, if any, which satisfy the requirement of 10 or more workers in terms of section 80IB of the Act. AO. having granted deduction u/s 80IB of the Act in the initial assessment year is 5 entitled to withdraw the same in the subsequent years and more so whether it can be done by him in the proceedings u/s 154 of the Act. Deduction u/s 80IB of the Act is granted to the assessee for promoting the growth of manufacturing units in the backward region by the Govt. 80IB of the Act had reached the corridors of various courts including the Hon ble Supreme Court on various grounds and admittedly, the ground of deduction therein does not become automatic unless the conditions stipulated in the section have fully complied with by them in letter and spirit by the assessee. The Tribunal had rightly held that the question as to whether the assessee failed to satisfy the condition stipulated in Section 80IB sub-section sub-clause was an issue which could be the subject of investigation but 7 scrutiny assessment could not be further scrutinized invoking the jurisdiction for rectification under Section 154 of the Act to arrive at such a finding.


ORDER SHEET G.A.NO.2272 of 2016 With ITAT No.294 of 2016 IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE IN MATTER OF: PRINCIPAL COMMISSIONER OF INCOME TAX-14, KOLKATA AND VINOD KUMAR SURANA 35A PRINCEP STREET, KOLKATA-700072. BEFORE: Hon'ble JUSTICE ANIRUDDHA BOSE Hon'ble JUSTICE PROTIK PRAKASH BANERJEE Date : 25th October, 2017. Appearance: Mr. Siddhartha Bhattacharya, Adv. Court : Affidavit of service is filed showing service of notice in pursuance of notice of coordinate Bench issued on 5th January, 2017. Let affidavit be kept with records. present appeal is against order of Income-tax Appellate Tribunal Bench SMC Kolkata, which in substance allow assessee s claim for deduction under Section 80IB of Income-tax Act, 1961. assessee goes unrepresented before us. We find from records that assessee went unrepresented before Tribunal also. It is also revealed from records that assessee operates small manufacturing unit at Yanam in Pondicherry and this unit has been registered as Small Scale Tiny Unit. assessee has been claiming deduction in terms of Section 80IB of Income-tax Act since its inception in financial year 2001-02. In this appeal, however, we are concerned with assessment year 2004-05 corresponding to financial year 2003-04. There was scrutiny assessment in that assessment year and 2 certain expenses were added. So far as subject of dispute in this appeal is concerned however, that did not form basis of scrutiny assessment. Deduction was claimed by assessee, as we have already observed, under Section 80IB of 1961 Act. So far as this appeal is concerned, question arises as regards non-fulfilment of condition contained in clause (iv) of Sub- section (2) of Section 80IB, which would disentitle industrial undertaking from claiming deduction under Section 80IB(1) of Act. said clause reads: - [iv] In case where industrial undertaking manufactures or produces articles or things, undertaking employs ten or more workers in manufacturing process carried on with aid of power, or employs twenty or more workers in manufacturing process carried on without aid of power. order was passed by Assessing Officer on 12th March, 2009 under Section 154 of 1961 Act and it is asserted on behalf of Revenue that this order was passed because of audit objection. This order, inter alia, records : Original assessment was made U/s. 143(3) on 29.12.2006 at total income of Rs.2,57,600/-. assessee had industrial undertaking under name & style Modern Industries . He availed deduction of Sec. 80IB in computation of total income of industrial undertaking. revenue audit raised objection that deduction 80IB taken by assessee is not justified as number of workers in undertaking is only 3(three) in place of 10. Notice U/s.154 was issued to assessee and pointed out mistake deleted by Revenue Audit. Sri K.S.Nahata, 3 A/R of assessee had submitted gist of Sec. 80IB claiming that claim of sec.80IB in bonafied. I have gone through explanation offered by assessee and also Sec. 80IB and it is observed that assessee is not justified in claiming Sec.80IB because of fact that Sec. 80IB has clearly indicates that In case where Industries undertaking manufacturers or produce articles or things that undertaking employees must be 10 or more. In case of assessee it is observed from details of salary and wages of Modern Industries that there was only 3 workers in said undertaking. Hence claim of deduction U/s. 80IB is disallowed and total income is computed as below:- Total income after giving appeal effect Rs.2,37,220/- Add: Claim of deduction U/s. 80IB Rs.7,26,400/- Total Income Rs.9,63,620/- Calculation of Tax Total Income Rs.9,63,620/- Income Tax thereon Rs.2,63,080/- Less: Rebate U/s.88 Rs. 15,000/- Rs.2,48,080/- Less : TDS Rs. 4,225/- Rs.2,43,855/- Add: Interest U/s.234B Rs.1,48,718/- Payable Rs.3,92,573/- Assessed U/s 154 as above. Issued DN & copy of order to assessee. (quoted verbatim). assessee s appeal against this order was sustained by Commissioner. assessee however was successful in his appeal before Tribunal, which, inter alia, held :- 5. I have heard ld. DR and perused materials available on record. 4 Ground No.1 is general in nature and hence same does not require any adjudication. Ground No.2 to 6 are identical in nature and hence are taken together for purpose of adjudication herein. assessee being small scale unit as registered by Govt. of Pondicherry Industries Department had set up manufacturing unit in backward region and accordingly is entitled for deduction u/s 80IB of Act. It is undisputed that said unit started commencement of production in A.Y.2001-02 being initial assessment year and deduction u/s 80IB of Act was granted to assessee by ld. AO for A. Yrs. 2001-02, 2002-03 and 2003-04 during scrutiny assessment proceedings. Admittedly, deduction u/s 80IB of Act would not have been granted by AO in initial assessment year without verification of compliance of all conditions contemplated in relevant section. ld. CIT(A) in his order has stated that during A.Y.2004-05 assessee had employed only three people which is also evident from details of salary and wages provided by assessee before AO and ld. CIT(A). ld. CIT(A) further observed that no expenditure was incurred by assessee towards payment of wages to temporary workers, labourers, if any, which satisfy requirement of 10 or more workers in terms of section 80IB of Act. Now short issue that arises for our consideration is whether ld. AO. having granted deduction u/s 80IB of Act in initial assessment year is 5 entitled to withdraw same in subsequent years and more so whether it can be done by him in proceedings u/s 154 of Act. fact of withdrawal of deduction u/s 80IB of Act in subsequent years when same were duly granted by ld. AO in initial assessment years per se becomes debatable issue and hence I hold that same cannot be done in proceedings u/s. 154 of Act as same cannot be construed as patent, glaring, obvious mistake apparent from record. I also hold that requirement of compliance of provision of section 80IB of Act should be verified in detail by ld.AO only in initial assessment year i.e. A.Y.2001-02 and he need not stretch or travel beyond that year for purpose of grant of deduction in subsequent years. Deduction u/s 80IB of Act is granted to assessee for promoting growth of manufacturing units in backward region by Govt. of India. It being beneficial provision, same has to be viewed liberally. Even otherwise, whether same had to be viewed literally or liberally per se is debatable issue which cannot be subject matter of rectification u/s 154 of Act. In fact issue of granting of deduction u/s. 80IB of Act had reached corridors of various courts including Hon ble Supreme Court on various grounds and admittedly, ground of deduction therein does not become automatic unless conditions stipulated in section have fully complied with by them in letter and spirit by assessee. 6 Various disputes have cropped up in light of this issue and each issue had its own distinct facts and circumstances and had to be adjudicated by various courts including Supreme Court. This itself makes issue of grant of deduction u/s 80IB of Act highly debatable. Hence, same cannot be subject matter of 154 proceedings. Reliance in this regard is placed on decision of Hon ble Apex Court in case of T.S.Balaram & Co. vs Valkart Bros.(1971) 82 ITR 50(SC). When two views are possible, obviously it becomes debatable issue. It cannot be subject matter of rectification proceedings u/s 154 of Act. In view of aforesaid facts and circumstances of case and in view of judicial precedents, I hold that action of ld. AO in denying deduction u/s 80IB of Act u/s 154 proceedings is bad in law. grounds raised by assessee are allowed. So far as tax impact of this appeal is concerned, it was conceded by learned Counsel for revenue that impact was below threshold. Mr. Bhattacharya, learned Counsel for revenue however cited audit objection as justification for maintaining appeal. We have gone through orders of assessing officer as well as Commissioner in scrutiny assessment. We do not find any material from which it could be ascertained that it was mistake apparent on face of record. Tribunal had rightly held that question as to whether assessee failed to satisfy condition stipulated in Section 80IB sub-section (2) sub-clause (iv) was issue which could be subject of investigation but 7 scrutiny assessment could not be further scrutinized invoking jurisdiction for rectification under Section 154 of Act to arrive at such finding. We accept revenue s contention that principles of res judicata does not apply in tax proceeding but that is not point on which we are rejecting appeal. We do not think any substantial question of law is involved in this appeal. We concur with Tribunal that Section 154 of Act could not be invoked by Assessing Officer in facts of this case. appeal is accordingly dismissed along with stay petition. No order as to costs. (ANIRUDDHA BOSE, J.) (PROTIK PRAKASH BANERJEE, J.) nm Principal Commissioner of Income-tax-14, Kolkata v. Vinod Kumar Surana
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