Tribunal partially allows appeal, upholds assessment reopening for income escape. DEPB profits ineligible for section 80IB deductions. Reassessment directed for section 80HHC & DEPB profit chargeability.

The appeal was partly allowed for statistical purposes. The reopening of the assessment was upheld due to income escapement reasons. The Tribunal confirmed the ineligibility of DEPB profits for deductions under section 80IB. Reassessment was directed for section 80HHC deductions and DEPB profit chargeability in accordance with relevant judicial precedents.

---

---

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Reduction of claim under section 80 IB on export incentives in the form of DEPB.
3. Reduction of claim under section 80 HHC on total export incentives received in the form of DEPB.
4. Chargeability of Income Tax on profit on transfer of Duty Entitlement Pass Book scheme.
5. Chargeability of interest under sections 234B, 234C, and 220(2).

Issue-Wise Detailed Analysis:

1. Reopening of Assessment under Section 147:
The assessee contested the reopening of the assessment on the grounds that the original assessment order under section 143(3) had already been appealed and merged with the order of the CIT(A). The Tribunal found that the reopening was valid concerning the inclusion of the turnover of the 80IB unit in the total turnover, as there was escapement of income. However, the reopening based on the DEPB receipts' eligibility for 80IB deduction was not justified, as it was a debatable issue at the time of reopening. Despite this, the reopening was upheld as valid due to the first contention.

2. Reduction of Claim under Section 80 IB on Export Incentives (DEPB):
The Tribunal upheld the AO's decision that DEPB profit was not eligible for deduction under section 80IB, as it was not income derived from an industrial undertaking. This decision was consistent with the Supreme Court's ruling in Liberty India v. CIT, which held that duty drawback/DEPB are not derived from industrial undertakings and hence no deduction is available under sections 80-I, 80-IA, and 80-IB.

3. Reduction of Claim under Section 80 HHC on Total Export Incentives (DEPB):
The Tribunal noted that amendments to sections 28 and 80HHC by the Taxation Laws Amendment Act, 2005, affected the eligibility for deductions under section 80HHC for DEPB receipts. The assessee did not meet the conditions laid out in the amendments, thus disqualifying them from the deduction. However, the Tribunal directed the AO to reassess this issue in light of the Bombay High Court's ruling in Vijaya Silk House (Bangalore) Ltd., which limited the retrospective application of the amendments, and the Supreme Court's ruling in Topman Exports, which clarified the tax treatment of DEPB.

4. Chargeability of Income Tax on Profit on Transfer of DEPB:
The Tribunal directed the AO to reassess the issue of DEPB profit chargeability in accordance with the Supreme Court's decision in Topman Exports, which distinguished between the face value of DEPB (taxable under section 28(iiib)) and the profit on transfer of DEPB (taxable under section 28(iiid)).

5. Chargeability of Interest under Sections 234B, 234C, and 220(2):
The Tribunal directed the AO to consider CBDT Circular No.2/2006 dated 17/1/2006 when determining the chargeability of interest under sections 234B, 234C, and 220(2). This issue was deemed consequential and did not require specific adjudication.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific directions for reassessment on certain issues. The reopening of the assessment was upheld due to valid reasons for income escapement. The Tribunal confirmed the ineligibility of DEPB profits for deductions under section 80IB and directed reassessment for section 80HHC deductions and DEPB profit chargeability in line with relevant judicial precedents.

---