2013 (3) TMI 247

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....n under Section 80-HHC of the Act as there was no dispute that the assessee had satisfied all the relevant conditions for grant of such deduction from its gross total income during the relevant assessment year on account of export of handicraft items manufactured and sold by it during the relevant previous year. 2. While admitting the present appeal of the Revenue, a coordinate bench of this Court framed the following substantial question of law under Section 260A of the Act: "Whether on the facts and in the circumstances of the case, the learned ITAT was justified in allowing the deductions under Sec. 80HHC on excess stock of Rs.9,39,170/- found during the course of survey and surrendered as business income without evidence that the receipt of money is in convertible foreign exchange?" 3. Learned counsel for the appellant- Revenue, Mr. K.K. Bisa , relying upon the decision of Punjab & Haryana High Court in the case of National Legguard Works Vs. Commissioner of Income-Tax (Appeals) & Anr. reported in (2007) 288 ITR 18 (P&H) submitted that since the assessee has surrendered the alleged excess stock of Rs.9,39,170/- for Assessment Year 2002-03, therefore, the assessee is no....

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....of National Legguard Works (supra) relied upon by the learned counsel for the Revenue by submitting that there the findings of facts by the learned ITAT was against the assessee and that is why the assessee went up to Hon'ble High Court by way of appeal under Section 260A of the Act; and the High Court while upholding the said findings of facts by the Tribunal has held that the assessee was not entitled to the said benefit of deduction under Section 80HHC of the Act. He submitted that, however, in the present case of the assessee, since the findings of facts by the CIT (A) as well as ITAT are in favour of respondentassessee and such findings of facts are binding on this Court in appeal u/s 260A of the Act. Therefore, in the absence of any contrary material placed on the record by the Revenue before this Court, the assessee is entitled to the benefit of deduction to the extent of 70% of profits including increased valuation of the closing stocks as defined under Section 80HHC (1B) of the Act. 6. We have heard the learned counsels at length and perused the impugned orders and given our thoughtful consideration to the rival submissions and also perused the judgment relied upon by t....

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.... the present case, while the Assessing Authority in the impugned assessment order dated 19.08.2003 has merely disallowed the said benefit of deduction under Section 80HHC of the Act by observing that since such excess stock valuation was surrendered by the assessee as income during the course of survey, therefore, he is not entitled to the benefit u/s 80HHC of the Act without giving any detailed reasons for such denial of deduction, but the learned CIT (A) while allowing appeal of the assessee on the said ground in his order dated 13.10.2004 has held in para 4.3 of the order, that because the assessee is doing the business of handicraft items only and during the survey proceeding also, nothing contrary was found by the Department, which can show that the assessee is doing the business other than handicraft items, therefore, the Assessing Officer ought to have allowed the said deduction under Section 80HHC of the Act. The Revenue thereafter took the matter further before the ITAT also in second appeal but the learned ITAT also while dismissing the appeal of the Revenue on this ground affirmed the findings of learned CIT (A) upholding the claim of the respondent-assessee of deduction....

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....f deduction would be 70% of the profit vide sub-Section (1B) (ii) of the said Section 80 HHC of the Act. 11. With great respects, we are unable to apply the judgment cited at bar on behalf of Revenue in the present case. In the case of National Legguard Works (supra) since the findings of facts in the case before the Punjab & Haryana High Court were different and against the assessee, which were accepted by the Division Bench of the Punjab and Haryana High Court; and in that context, the Division Bench of Punjab & Haryana High Court held while summarily dismissing the appeal of the assessee at the admission stage itself that since the assessee failed to discharge the burden that the amount represented export profits was not discharged by the assessee, therefore, he was not entitled to benefit of deduction under Section 80HHC of the Act and no substantial question of law arose in the matter. The relevant portion from the decision of Hon'ble Apex Court in the case of National Legguard Works (supra) is reproduced as under for ready reference: "The Assessing Officer did not accept the stand of the assessee and held that the excess stocks available at the premises were not recorde....