2015 (11) TMI 1788 - AT - Income Tax

Tribunal remands case on deduction claim under section 80HHC for fresh decision

Surajmal Exports Versus Assistant Commissioner of Income Tax, Kolkata

The Tribunal set aside the CIT(A)'s order and remanded the case to the AO for a fresh decision on the deduction claim under section 80HHC. The AO was ... Condonation of delay - delay of 2078 days - HELD THAT:- It is observed that in the identical facts and circumstances involved in the case of Magnum Export, the Coordinate Bench of this Tribunal has condoned a similar delay of 2078 days on the part of the assessee in filing its appeal for the similar reasons vide its order [2014 (1) TMI 435 - ITAT KOLKATA]. This decision of the Coordinate Bench of this Tribunal cited by the assessee thus is squarely applicable in the present case and this position is not disputed even by the D.R. at the time of hearing before us, we, therefore, condone the delay on the part of the assessee in filing this appeal before the Tribunal and proceed to dispose of the said appeal on merit. Disallowance on account of assessee’s claim for deduction under section 80HHC - Issue relating to the assessee’s claim for deduction under section 80HHC has to go back to the AO for deciding on merit keeping in view the relevant provisions of the law as are finally applicable to the year under consideration. It is also observed that vide its order dated 08.02.2013 [2014 (1) TMI 435 - ITAT KOLKATA] passed in the case of Magnum Export, the Coordinate Bench of this Tribunal has also restored a similar issue to the file of the AO for deciding the same afresh after verifying the relevant facts from record and applying the relevant provisions of law. Set aside the impugned order of the CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same afresh - Appeal of the assessee is treated as allowed. Issues Involved:1. Disallowance of deduction under section 80HHC.2. Reopening of assessment under section 147.3. Delay in filing the appeal before the Tribunal.4. Validity of retrospective amendment to section 80HHC.Issue-Wise Detailed Analysis:1. Disallowance of Deduction under Section 80HHC:The core issue in this appeal concerns the disallowance of the assessee's claim for deduction under section 80HHC amounting to Rs. 32,38,664/-. The assessee, a partnership firm engaged in the export of Yarn and Fabrics, had initially filed a return declaring a total income of Rs. 5,89,920/-. The Assessing Officer (AO) originally allowed the deduction under section 80HHC, considering receipts from DEPB sold amounting to Rs. 38,63,331/-. However, following an amendment to section 80HHC read with section 28(iiid) by the Taxation Laws (Amendment) Act, 2005, the AO reassessed the total income at Rs. 38,28,581/- and disallowed the deduction, as the assessee's export turnover exceeded Rs. 10 crores and did not meet the conditions stipulated in the third proviso of the amended section.2. Reopening of Assessment under Section 147:The assessment was reopened under section 147 due to the retrospective amendment to section 80HHC by the Taxation Laws (Amendment) Act, 2005. The AO reassessed the total income and disallowed the deduction under section 80HHC, as the assessee could not fulfill the conditions of the third proviso, specifically regarding the option between duty drawback and the Duty Entitlement Pass Book Scheme (DEPB).3. Delay in Filing the Appeal Before the Tribunal:The appeal was filed with a delay of 2041 days. The assessee sought condonation of this delay, supported by an affidavit from its Chartered Accountant. The delay was attributed to the pendency of a related constitutional validity challenge before the Supreme Court and the Gujarat High Court. The Tribunal noted that in a similar case (Magnum Export), a delay of 2078 days was condoned. Given the identical circumstances, the Tribunal condoned the delay and proceeded to hear the appeal on its merits.4. Validity of Retrospective Amendment to Section 80HHC:The assessee argued that the retrospective amendment to section 80HHC was unconstitutional. The Gujarat High Court, in Avani Exports vs. Commissioner of Income-tax, held that the retrospective amendment was violative as it adversely affected a class of assessees with export turnover exceeding Rs. 10 crores. The High Court quashed the amendment to the extent that it applied retrospectively, stating that such amendments should not be detrimental to any assessee. The Tribunal, considering this judgment, agreed that the issue needed to be re-evaluated by the AO in light of the final applicable provisions of the law.Conclusion:The Tribunal set aside the order of the CIT(A) and remanded the matter back to the AO for a fresh decision on the assessee's claim for deduction under section 80HHC. The AO was directed to apply the relevant provisions of law, as clarified by the Gujarat High Court, and verify the relevant facts and figures from the record. The appeal was thus treated as allowed, and the order was pronounced in the open court on November 30, 2015.