2006 (4) TMI 511

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....ourse of the assessment proceedings and produced books of account comprising of cash book, ledger, purchase/sales registers, purchase invoices, sales bills, vouchers and bank statements and that the case was discussed with him. The Assessing Officer has, thereafter, discussed the trading results of the assessee in para 3 of his order and has mentioned that this year the rate of Gross Profit was much better at 39.07 per cent as compared to the last year's G.P. rate of 20.7 per cent. 2. The Commissioner of Income-tax, who assumed jurisdiction under section 263, issued a show-cause notice to the assessee on 17-1-2005, in which the assessee was intimated that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the revenue on account of the following reasons: (i) As per notes to the P&L account, there was reduction in the value of closing stock following change in the method of valuation of closing stock as a result of which profit for the year was lower by Rs. 6,37,413. The Assessing Officer failed to take note of the above. (ii) Auditor's note to accounts also indicates that during the current year, assessee claimed depre....

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....9 indicated in ground No. (iii) of the notice issued under section 263 is made up as under: DEPB Rs. 1,02,419 Special Import Licence Rs. 1,07,704 Duty Drawback Rs. 1,96,28,426   Rs. 1,98,38,549 3. In the backdrop of the abovementioned facts, the ld. counsel appearing on behalf of the assessee contended before us that complete details regarding computation of deduction under section 80HHC were filed before the Assessing Officer during the course of the assessment proceedings under section 143(3). In the computation of income filed with the return of income, it was mentioned that the deduction under section 80HHC was as per Form No. 10CCAC filed by the assessee. The statement of computation of income is at pages 1 to 3 of the Paper Book. In the profit and loss account, income received by the assessee from DEPB, special import licence and duty drawback, as per the details given above, were specifically indicated (copy at page 5 of the PB). The ld. counsel invited our attention to Form No. 10CCAC, copy of which is at pages 13 to 14 of the PB. In the Annexure to Form No. 10CCAC, the deduction under section 80HHC has been computed by excluding 90 per cent of the export ince....

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....H' Bench in the case of Mrs. Khatiza S. Oomerbhoy [IT Appeal Nos. 3299 and 3300 (Mum.) of 2005, dated 27-2-2006]. (ii) P&G Enterprises (P.) Ltd. v. Dy. CIT [2005] 93 ITD 138 (Delhi). (iii) ITAT, Mumbai 'J' Bench Order dated 2-2-3005 in the case of Crown Frozen Foods in ITA No. 4242/Mum/2004. Inviting our attention to the Mumbai ITAT decision in the case of Crown Frozen Foods (supra), the ld. counsel submitted that the facts in that case are similar as in the present case. In that case also, the CIT invoked his jurisdiction under section 263 on the ground that deduction under section 80HHC was wrongly allowed by the Assessing Officer in respect of DEPB, duty drawback etc. In that case, the Tribunal observed that the assessee's claim for deduction under section 80HHC was supported by the following ITAT decisions: (i) Asstt. CIT v. Pratibha Syntex [1999] 106 Taxman 32 (Ahd.) (Mag.). (ii) Asstt. CIT v. Ashwini Fisheries Ltd. [2001] 77 ITD 561 (Mad.). (iii) Eastern Leather Products (P.) Ltd. v. Dy. CIT [1999] 68 ITD 358 (Delhi). 4. The ld. CIT DR forcefully supported the order of the ld. CIT and submitted that there is total non-application of mind on the par....

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....omerbhoy (supra). In this order, the Tribunal considered the legal position as emerging from the following judgments: (i) Malabar Industrial Co. Ltd.'s case (supra). (ii) Gabriel India Ltd.'s case (supra). (iii) Girdharilal B. Rohra v. CIT [2004] 86 TTJ 177 (Mum.). (iv) Triveni Engg. Works Ltd. v. Dy. CIT [2003] 131 Taxman 32 (Del.) (Mag.).p> (v) ITAT, Mumbai 'I' Bench order dated 24-3-2004 in the case of Atlanta Agencies in IT Appeal No. 671 (Mum.) of 2003. (vi) ITAT, Mumbai 'H' Bench order dated 31-3-2005 in the case of Shri Bipin P. Shah v. ITO in IT Appeal No. 5992 (Mum.) of 2003. (vii) ITAT, Mumbai 'H' Bench order dated 31-3-2004 in the case of Shri Ambalal B. Patel in IT Appeal No. 5993 (Mum.) of 2003. (viii) ITAT, Mumbai 'A' Bench order dated 27-4-2004 in the case of Ausia Properties Development Ltd. in IT Appeal No. 3653 (Mum.) of 2003. After a detailed discussion, the Tribunal culled out the following fundamental principles emerging from the abovementioned cases: (i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the condit....