TaxTMI 
TaxTMI 
2016 (4) TMI 124
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....ns of law after allowing an opportunity to the assessee which clearly indicates that the issue was remitted back to the Assessing Officer to be decided afresh based on facts of the case after giving an opportunity to the assessee." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the merits of the case in the light of the factual and judicial position as discussed in the assessment order and the decision of Hon'ble High Court of Punjab & Haryana, in the cases of National Legguard Works vs. CIT(A) & Another (288 ITR 18) and Sarla Handicrafts P. Ltd. Vs. Addl.CIT (296 ITR 94)." 4. The Appellant pray that the order of Commissioner of Income Tax (Appeals) on the above grounds be set aside and that the order of AO be restored." The assessee in its cross objection has raised the following grounds:- 1) In law & as per the facts & in the circumstances in the appellant's case the Ld. IT.O. is raising a frivolous ground for disallowance of claim u/s 80HHC. The Hon'ble Mumbai ITAT had in its order dated 21 SI February 2006, had specifically stated in para 36 page no. 23 that, the A.O. is directe....
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....te : "When the assessee has neither recorded in the books of account nor disclosed to the Department by filing the return or otherwise, the Legislature seems to be not indulgent to allow deduction under Chapter VI-A or rebate under section 88 against the undisclosed income of the block period. In view of the specific exclusion of the other Chapters for the purpose of computing the undisclosed income, deductions contemplated under Chapter VI-A cannot be allowed to the assessee. In view of the plain language of sec.158BB(1) the other provisions of this Act shall not apply for the purpose of computation of undisclosed income." From the above, it is clear that the ITAT, Calcutta decided this issue on the basis of preamended section 158BB. After the amendment w.e.f.1.7.1995, the undisclosed income of the block period shall be the aggregate of the total income of the previous years falling which the block period computed in accordance with the provisions of the IT Act. Thus, the undisclosed income has to be computed not merely having regard to the provisions of Chapter IV, which was the position prior to the amendment, but having regard to the provisions of the I....
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....2006 and M.A.No.285/Mum/2007, dated 15-5-2007 after having following observations :- "8.I have considered the facts of the issue, the observations of the AO as well as the submissions and other documents filed by the AR in support of his contentions. I find merit in the submissions made by the AR that the decision of the jurisdictional fact finding authority/court is binding on all lower authorities. I also find merit in the submissions that not following the order of the ITAT would result in chaos in administration of tax laws and that the assessee officers are bound to follow the decisions of the Tribunal. 8.1 The Hon'ble ITAT in IT(SS)A No.110/Mum/2000 vide orders dated 21.0.1.2006 on page 23 in para 36 has given a categorical finding that" the assessee is entitled to deduction u/s.80HHC as per the relevant provisions. The A.O is therefore, directed to compute and allow deduction admissible u/s.80HHC to the assessee." The matter was further clarified by the Hon'ble tribunal III response to a miscellaneous application moved by the appellant in MA No.285/Mum/07 vide orders dated 15.05.2007. The Honble Tribunal in paragraph 2 on page 3 of the order has obs....
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.... to the deduction under section 80HHC on the undisclosed income is not in dispute. But the question is whether the undisclosed income fulfills the criteria laid down under section 80HHC is the question. According to the assessing officer, undisclosed income offered by the assessee does not fulfill the criteria laid down under section 80HHC. Validity of this finding recorded by the assessing officer has not been considered either by CIT(A) or by the ITAT. Counsel for the assessee stated that the assessee is a 100% exporter, that the undisclosed income was referable to the export activities and, therefore, the assessing officer was not justified in refusing to grant deduction under section 80HHC. As noted above, the fact that the undisclosed income can be considered for deduction under section 80HHC, it does not mean that the undisclosed income fulfills the criteria laid down under section 80 HHC. Since this aspect of the matter has not been considered by the ITAT on merits, by consent of the parties the impugned order of the IT AT dated 24th July, 2009 passed in I.T.(SS)A. NO.84/Muml2008 is quashed and set aside. The appeal is restored to the file of ITAT for fresh consideration in ....
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.... the course of search and also reflected in the return of income was entirely on account of excess stock found during the course of search which was calculated by adopting average percentage of yield of cut and polished diamonds from out of rough diamonds. These facts entirely establish that whatever undisclosed income was declared, the same generated only from the existing business of manufacturing of cut and polished diamonds to be exported. From the record we also found that the additional income of Rs. 95 lacs has been credited by the assessee firm to the audited Profit and Loss Account and it has not been debited by way of purchases. The excess stock forms part of the closing stock and thus such closing stock is either exported during the year itself or in subsequent years resulting into accrual of profits only from exports. All the sale proceeds have been received in convertible foreign exchange within the prescribed period as per section 80HHC(2) and the claim for deduction is supported by the certificate of the Chartered Accountants in the prescribed Form. Deduction has also been calculated as per the formula prescribed u/s.80HHC. The Assessing Officer has accepted the tota....
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....r interpretation of the provisions of section 158BB and Part Il, Part III of the Form o. 28 for the block assessment, the Income-tax Appellate Tribunal was justified in law in holding that the assessee is eligible to deduction under section 80- I or 80- lA with reference to 'total undisclosed income' of the block period ?" 10. The Hon'ble High Court recorded the following finding in the last para of the judgement: "Hence, in the light of the amended provisions, which have been made retrospectively applicable, no fault can be found with the impugned order of the Tribunal holding that the assessee is entitled to claim deduction under section 80-1 or 80- lA of the Act. The question referred for the opinion of this court is, therefore, answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly with no order as to costs. 11. Identical question was also referred for the adjudication of the Hon'ble Gujarat High Court in the case of CIT vs. Suman Paper and Board Ltd., 314 ITR 119, which was answered in favour of the assessee holding that assessee is eligible for deduction. 12. N....
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....CIT in ITA 0.150/Murnl1999 for the A.Y. 1995-96. In that case also the firm was engaged in export of cut and polished diamonds. Search and seizure was carried out at Surat accompanied by survey at Bombay. During the course of the aforesaid operations excess cash and excess stock of diamonds were found and the partner disclosed additional income of Rs. 20 lacs which was comprised of the following: Unexplained cash 75,000 Excess Diamond stock 13,93,130 Other assets to be specified 5,31,870 20,00,000 The aforesaid disclosure was later revised to Rs. 25 lacs, break-up of which is given at pages 2 & 3 of the Tribunal's order which is as under: When the return of income was filed only excess cash of Rs. 75,000 was disclosed and remaining additional income of Rs. 24,25,000 was wiped out by deduction claimed u/s.80HHC. Following note was given in the return of income which has been reproduced at para-3 of the ITAT's order: "Profit of Rs.l,34,71,086/- shown in item No.5 is inclusive of Stock-in-trade Rs. 24,25,000/- in form of Cut and Polished and .Rough Diamonds earned during the course of business and voluntarily declared u/s....
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....sessee is a partnership firm whose only source of income is the diamond business and whose partners have at the earliest point of time stated that the income represented the undisclosed stock of rough and polished diamonds and the same have been disclosed as part of the closing stock in the financial statements, it is possible to raise an inference, which appears to us, to be reasonable, applying the principles laid down in the judgements cited above and hold that the disclosed income has to be assessed under the head 'business' and not under the head 'other sources'. The circumstances narrated above point to such a conclusion which in our opinion is reasonable. We accordingly accept the assessee's case. 16. Facts and circumstances of the instant case are pari material to the decision of the ITAT Mumbai Bench as narrated above, accordingly we hold that declared income has fulfilled all the conditions laid down u/s.80HHC for claim of deduction. 17. We also found that the Rajasthan High Court in CIT v. Haswani Arts [2013] 352 ITR 574 (Raj.) has held that the income surrendered on account of excess valuation of closing stock in the course of survey action is ....