2016 (10) TMI 99 - HC - Income Tax

Revision u/s 263 - whether industrial undertakings of the assessee were eligible for deduction under Sections 80HH and 80I ? - Held that - For multiple reasons the notice for revision cannot be sustained. As noted, the issue in the past had traveled through various stages and ultimately, before the High Court also the question in case of this assessee came to be settled. Such issue was examined by the High Court concerning earlier assessment year. The question considered by the High Court was whether the Tribunal was right in holding that the assessee which was engaged in the business of bidi was entitled to deduction under Section 80HH and 80I of the Act. By dismissing Revenue s appeal and confirming the decision of the Tribunal by a judgement dated 28.11.2005, Division Bench of the High Court rejected such a question on the ground that in case of this very assessee for the earlier assessment year 1989- 90, the Revenue has accepted the Tribunal s decision on this point. Tribunal discarded assessee s contention that having been registered as small scale industrial unit, the assessee fulfilled the requirement of being an industrial undertaking. Having done that, we find it somewhat incongruent whether the Tribunal directed the Assessing Officer to examine whether the unit was an industrial undertaking and also to examine whether it was registered. In plain terms, therefore, the second requirement imposed by the Tribunal was not germane. The third condition of the unit satisfying other requirements has been duly recorded by the Assessing Officer in the order of assessment. Even the Commissioner in the impugned notice has not objected to non-fulfillment of this requirement. This leaves us with the first requirement cast by the Tribunal viz. of the unit being an industrial undertaking. We have proceeded on the basis that in the process, the Tribunal desired that the Assessing Officer should verify whether the assessee itself is carrying on manufacturing activity. In this context, the Assessing Officer referred to the materials on record including the decision of the High Court in case of Prabhudas Kishordas Tobacco Products P. Ltd. (2006 (1) TMI 68 - GUJARAT High Court ) in which, under similar circumstances, the Revenue s contention that the assessee did not carry on itself the activity came-up for consideration.It can thus be seen that the decision of the Assessing Officer upon remand by the Tribunal was based on materials on record and the law laid down by the High Court in similar cases. Under the circumstances, the Commissioner s both the objections to the exercise of assessment carried out by the Assessing Office must fail. The Assessing Officer had not relied merely on the certificate of registration of the industry to come to the conclusion that the assessee was an industrial undertaking. The Commissioner s objection that the Assessing Officer did not verify the registration of the industrial unit was equally erroneous. We have already noted that the Tribunal s insistence on such verification itself was contrary to the documents on record and, in any case, it is not even the case of the Revenue that the units were not registered. Before concluding, we may deal with the Revenue s preliminary objection to the High Court entertaining a writ petition at show cause notice stage. Firstly, the petition was admitted long back. We would not therefore, summarily dismiss the same without examination of merits of the case. Secondly, we find that the Commissioner had recorded completely impermissible and erroneous reasons to assume jurisdiction for taking the order of assessment in revision. Under the circumstances, the fact that the petitioner had approached at the stage of show-cause notice would not preclude us from striking down the same. -Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued by the Commissioner of Income Tax under section 263 of the Income Tax Act, 1961.
2. Determination of whether the petitioner qualifies as an "industrial undertaking" eligible for deductions under sections 80HH and 80I of the Income Tax Act.
3. Examination of the registration status of the petitioner as a Small Scale Industrial undertaking (SSI).
4. Verification of compliance with other legal requirements for claiming deductions under sections 80HH and 80I.

Detailed Analysis:

1. Validity of the Notice Issued by the Commissioner of Income Tax:
The petitioner, a private trust engaged in the manufacture and sale of bidis, challenged the notice dated 08.02.2010 issued by the Commissioner of Income Tax under section 263 of the Income Tax Act, 1961. The Commissioner sought to revise the assessment order dated 30.12.2008 passed by the Assessing Officer. The Commissioner believed the assessment was erroneous and prejudicial to the interest of the Revenue, primarily because the Assessing Officer allegedly relied on a registration certificate that, according to the Tribunal, could not be taken as evidence for compliance with the requirements of the Act.

2. Determination of Whether the Petitioner Qualifies as an "Industrial Undertaking":
For the assessment year 1994-95, the petitioner claimed deductions under sections 80HH and 80I of the Act. The Assessing Officer initially rejected these claims, arguing that the petitioner was not engaged in manufacturing activities as the primary processes were conducted by contractors. However, on appeal, the Commissioner allowed the deductions, and the Tribunal remanded the case to the Assessing Officer to verify if the petitioner met the conditions of being an industrial undertaking and a small scale unit. The Tribunal emphasized verifying whether the petitioner was engaged in manufacturing activities and whether the unit was registered.

3. Examination of the Registration Status as an SSI:
The Tribunal directed the Assessing Officer to verify if the petitioner was registered as an SSI and if this registration satisfied the requirements for deductions under sections 80HH and 80I. The Assessing Officer confirmed that the petitioner had permanent registration with the Department of Industries, Government of Andhra Pradesh, and accepted the unit as an industrial undertaking eligible for the deductions. The Tribunal had noted that mere registration as an SSI would not automatically entitle the petitioner to deductions without fulfilling other statutory requirements.

4. Verification of Compliance with Other Legal Requirements:
The Assessing Officer, upon remand, verified that the petitioner fulfilled all other conditions required under the law for claiming deductions. This included examining the High Court's decision in the case of Prabhudas Kishordas Tobacco Products P. Ltd., which supported the petitioner's claim that its activities constituted manufacturing. The High Court had previously ruled that the petitioner was entitled to deductions under sections 80HH and 80I, establishing a precedent for the current assessment.

Conclusion:
The High Court found that the Commissioner’s objections were not sustainable. The issue of the petitioner being an industrial undertaking eligible for deductions had been settled in previous years through various stages of appeal, including the High Court. The concept of consistency in judicial pronouncements was emphasized, questioning the reopening of settled issues without any change in material facts. The Tribunal's directions for verifying the registration status and compliance with other requirements were found to be either already satisfied or irrelevant. Consequently, the High Court set aside the impugned notice dated 08.02.2010, making the rule absolute. The petition was disposed of accordingly, and the cause title of the judgment was corrected to reflect the correct year.

Separate Judgments:
The judgment was delivered by Honourable Mr. Justice Akil Kureshi, and there were no separate judgments by other judges.