ITA No. 47 of 2002 [1] IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 47 of 2002 Date of decision: 20th May, 2020 Nahar Spinning Mills Ltd. Appellant v. Commissioner of Income Tax (Central), Ludhiana .. Respondent CORAM: HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE AVNEESH JHINGAN Present: Mr. Sanjay Bansal, Senior Advocate with Mr. Amit Prasad, Advocate for appellant. Mr. Rajesh Katoch, Senior Standing Counsel and Ms. Pridhi Jaswinder Sandhu, Junior Standing Counsel for revenue. ... AVNEESH JHINGAN, J. assessee is in appeal under Section 260A of Income Tax Act, 1961 (for short, 'the Act') against order dated 5.9.2001 passed by Income Tax Appellate Tribunal, Chandigarh (for short, 'the Tribunal'). Following substantial questions of law have been claimed: 1. Whether on facts and in circumstances of case CIT has jurisdiction to revise assessment made by AO allowing deduction from computation of taxation of profits of Industrial Undertaking u/s 80-I of Act in respect of amounts of duty draw back received for manufactured goods exported by it? 2. Whether on facts and circumstances of case and on 1 of 6 ::: Downloaded on - 25-05-2020 15:53:34 ::: ITA No. 47 of 2002 [2] true and correct construction of section 80-I of I.T. Act and correct understanding on Apex Court's decision in matter of Sterling Foods as reported in 237 ITR 579 Tribunal did not err in law in disallowing exemption in respect of duty draw back while computing tax free profit u/s 80-I of I.T. Act ? 3. Whether assessment order dated 25.8.92 made by AO for Asstt. Year 1989-90 was erroneous and prejudicial to interest of revenue so as to invite jurisdiction u/s 263 of Act to revise it? With regard to question No. 2 claimed, learned counsel for revenue relied upon decision of this Court in ITA No.151 of 1999 Commissioner of Income Tax v. M/s Nahar Spinning Mills Ltd., decided on 9.11.2010 in case of assessee itself deciding following question in favour of revenue: Whether on facts and in circumstances of case, Ld. ITAT was right in law in upholding Orders of Ld. CIT (A) that Deduction u/s 80-I is admissible even on Export Incentive and Cash Compensatory Assistance on Export even though receipt of which is not attributable to conduct of any Manufacturing Activities by respondent. Learned counsel for appellant is not in position to dispute that question No. 2 as claimed is covered against assessee. Hence, question No. 2 dealing with merits of controversy is decided against assessee. 2 of 6 ::: Downloaded on - 25-05-2020 15:53:34 ::: ITA No. 47 of 2002 [3] only issue surviving and addressed is with regard to invoking jurisdiction under Section 263 of Act. facts are that assessment year involved is 1989-90. return was filed on 1.1.1990 and processed under Section 143(1) of Act on 26.2.1990. Notice under Sections 147/148 of Act was issued on 28.9.1990 and in pursuance to notice, return was filed on 9.11.1990. assessment order was passed on 25.8.1992. assessee was engaged in manufacture of garments and exported thereof, as also exporting of traded garments (i.e. purchased and exported). Assessing Officer allowed deduction under Section 80-I only qua manufactured goods exported out of India. Appeal was filed claiming deduction under Section 80-I on export of traded goods. Further contending that labelling and packing of goods bought from market tantamounts to manufacture and therefore deduction under Section 80-I of Act be allowed. 1st Appellate Authority relying upon decision of previous year in case of assessee held that assessee is entitled to deduction under Section 80-I on goods manufactured and exported. Aggrieved of order, appeal was filed by revenue before Tribunal and assessee filed cross objections. In meantime, on 9.3.1995, notice under Section 263 of Act was issued on ground that Assessing Officer erred in allowing deduction under Section 80-I on duty draw back received on manufactured goods. contention of assessee that said issue was subject-matter of appeal before 1st Appellate Authority was rejected vide order dated 23.3.1993. assessment order was set aside directing Assessing Officer to withdraw relief allowed under Section 80-I on duty draw back on goods manufactured and exported out of India. appeal filed 3 of 6 ::: Downloaded on - 25-05-2020 15:53:34 ::: ITA No. 47 of 2002 [4] against revisional order was dismissed by Tribunal on 5.9.2001, hence present appeal. Learned counsel for appellant argued that revisional authority had no jurisdiction to revise order of assessment as issue of deduction under Section 80-I on duty draw back was subject-matter of appeal. He places reliance upon explanation to Section 251 of Act, same reads as under: Explanation.-- In disposing of appeal, Commissioner (Appeals) may consider and decide any matter out of proceedings in which order appealed against was passed, notwithstanding that such matter was not raised before Commissioner (Appeals) by appellant. Further Explanation 1(c) to Section 263(1) of Act is relied upon. same is also quoted: Explanation 1 (c) where any order referred to in this sub- section and passed by Assessing Officer had been subject matter of any appeal filed on or before or after 1st day of June, 1988, powers of Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Learned counsel for revenue defended orders stating that issue before 1st Appellate Authority was not with regard to deduction under Section 80-I on duty draw back, rather it was seized of issue whether deduction under Section 80-I is available on goods purchased from market and exported out of India? 4 of 6 ::: Downloaded on - 25-05-2020 15:53:34 ::: ITA No. 47 of 2002 [5] Learned counsel for appellant contended that issue with regard to deduction on incentive as whole was before 1st Appellate Authority and could not be taken up in revision. He places reliance upon decision of Gujarat High Court in Commissioner of Income-tax v. Mehsana District Co-op. Milk Producers Union Ltd., (2003) 130 Taxman 235 (Guj.). contention raised by learned counsel for appellant lacks merit. There is no dispute on fact that Assessing Officer had restricted deduction under Section 80-I only qua goods manufactured and exported. It is matter of record that Assessing Officer while restricting deduction under Section 80-I allowed deduction on duty draw back in respect of goods manufactured and exported. 1st Appellate Authority noted contention of assessee that dispute was that assessee claimed deduction under Section 80-I on goods bought from market and exported. Appellate Authority held that assessee is entitled to deduction under Section 80-I proportionately on goods manufactured and exported. dis-allowance of deduction under Section 80-I on goods purchased from market and exported was upheld. Tribunal rightly observed that issue whether deduction under Section 80-I is available on duty draw back on manufactured goods was never specifically dealt in appeal. There was no occasion for raising issue as deduction was allowed by Assessing Officer. There is no quibble that Commissioner (Appeals) as per explanation to Section 251 of Act can consider matter arising out of proceedings in which appeal is filed irrespective of fact that said matter has not been raised by appellant. There is also no dispute 5 of 6 ::: Downloaded on - 25-05-2020 15:53:34 ::: ITA No. 47 of 2002 [6] that as per explanation 1(c) to Section 263(1), revision cannot be done of issue which has been considered and decided in appeal. In present case, issue whether assessee was entitled to deduction under Section 80-I of Act on duty draw back with regard to goods manufactured and exported was neither considered nor decided in appeal. reliance on certain part of order by learned counsel for appellant is not well founded. said observations were vis-a-vis proportionate deduction under Section 80-I qua goods manufactured and exported. reliance on decision of Gujarat High Court in Mehsana District Co-op. Milk Producers Union Ltd.'s case (supra) does not enhance case of assessee, as already discussed, issue taken up in revision was not subject matter of appeal. appeal is dismissed. (AVNEESH JHINGAN) (AJAY TEWARI) JUDGE JUDGE 20th May, 2020 mk Whether speaking/reasoned: Yes/No Whether reportable: Yes/No 6 of 6 ::: Downloaded on - 25-05-2020 15:53:34 ::: Nahar Spinning Mills Ltd. v. Commissioner of Income-tax (Central), Ludhiana