TaxTMI 
TaxTMI 
2015 (3) TMI 1227
X X X X Extracts X X X X
X X X X Extracts X X X X
....10B of Act, 1961. 3. Petitioner is a partnership firm. There are two partners, namely Anoop Kumar Mehra and Ashok Kumar Mehra. The firm is engaged in business of manufacture and export of 'saddlery' goods and allied items. Petitioner's unit is a 100% Export Oriented Unit (hereinafter referred to as 'EOU'). It commenced business and submitted return since Financial Year 2000-01 (Assessment Year 2001-02). Being a 100% EOU, petitioner was exempted from liability of tax under Section 10B of Act, 1961 to the extent of total income derived from export articles or things or computer software for a period of 10 consecutive assessment years. It was allowed exemption consistently for 10 years, commencing from financial year 2000-01 (assessment year 2001-02) to financial year 2009-10 (assessment year 2010-11). 4. For 11th year i.e. financial year 2010-11 (assessment year 2011-12), again assessee filed return on 19th September, 2011, declaring 'nil' income, claiming exemption under Section 10B of Act, 1961. Petitioner declared total sales turnover at Rs. 157088434.12 and profit of Rs. 4,66,16,547.45. It claimed exemption on the entire amount of profit under Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... aside this issue and restored the matter to the file of the Assessing Officer with a direction to re-compute the deduction allowable to the assessee under section 10B of the Act in the lght of the judgment of the Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd., 17 taxmann.com 100. The ld. D.R. has further contended that in the impugned assessment year, the issue is same, therefore, the order of the ld. CIT(A) may kindly be set aside with a direction to re-adjudicate the issue afresh in the light of the judgment of the Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. (supra). 10. Having carefully examined the order of the ld. CIT(A), we find that an identical issue was restored back to the Assessing Officer with a direction to re-adjudicate the same in the light of the judgment of the Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. (supra) in assessment year 2008-09, therefore, following the same, we set aside this issue in this assessment year and restore the matter back to the file of the Assessing Officer to re-adjudicate the same in the light of the aforesaid judgment of the Hon'ble Karnataka High Cour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1-12 has not been touched by appellate authorities. Therefore, CIT is well within jurisdiction to issue impugned notice and it is protected by explanation 'C', Section 263 of Act, 1961. 12. The questions up for consideration are : (i) Whether there exists any order of assessment in respect whereof impugned notice has been issued, so as to attract Section 263? (ii) Whether doctrine of merger would apply to the case in hand so as to hold that order of assessment merged in the appellate order and after decision of Tribunal in appeal filed by Revenue, there did not exist any order of assessment, whatsoever? (iii) Whether the notice dated 23.02.2015 is a valid exercise of power by CIT? 13. In order to attract Section 263 of Act, 1961, there must exist an erroneous order of assessment of Assessing Officer, prejudicial to the interest of Revenue. 14. In Malabar Industrial Company Ltd. Vs. CIT [2000 (243) ITR 83 (SC)], Court considered Section 263(1) of Act, 1961 and held that pre-requisite to exercise of jurisdiction by Commissioner, suo motu, under Section 263 is that order of Income Tax Officer is erroneous and prejudicial to the interest of Revenue. Commissioner has to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee for 10 consecutive years. Admittedly it has availed the said exemption for 10 consecutive years i.e. from assessment year 2001-02 to assessment year 2010-11. 19. Having exhausting the period of exemption available under Section 10B of Act, 1961, still assessee sought to claim exemption under Section 10B(1) for 11th year i.e. assessment year 2011-12. It was apparently not permissible under Section 10B of Act, 1961. Assessing Officer, under some misconception of fact or law, as the case may be, did not address himself to the applicability of Section 10B and proceeded on assumption that assessee has rightly claimed exemption under Section 10B(1) of Act, 1961. This wrong assumption on the part of Assessing Officer whether of fact or law, apparently was erroneous and also caused prejudice to the interest of Revenue, for the reason that tax lawfully payable to department on previous income, earned by assessee in the assessment year 2011-12 would stand lost, if assessment order is not revised. We therefore, have no hesitation in holding that the twin conditions for attracting Section 263(1) of Act, 1961, exist in the case in hand and therefore, to that extent Commissioner was justifie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1961, we find relevant provisions in Explanation 'C' of Section 263(1) of Act, 1961. 25. Explanation to Section 263(1) of Act, 1961, having sub clauses (a) and (b) was inserted by Taxation Laws (Amendment Act, 1984) with effect from 01.10.1984. Thereafter, entire explanation was substituted by Finance Act, 1988 with effect from 01.06.1988, which had Clause (c) also. Some minor amendments came to be made in Explanation (c) by Finance Act, 1989, which was given effect from 01.06.1988. Section 263(1) with explanation as it stands after aforesaid amendments, read as under: "263. (1) The Commissioner may call for and examine the record of any proceedings under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment (Explanation.- For the removal of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith respect to those items was in favour of assessee. It is in respect of these three items, Commissioner sought to exercise revisional power under Section 263 of Act, 1961. An argument was advanced firstly, that amendment has come into force w.e.f. 01.06.1988, therefore, would not apply to assessment order and order of appeal, finalised long back. Secondly, that after merger of order of assessment in the appellate order, Section 263 cannot be invoked. Relying on Explanation Clause (c) and holding that it will cover all earlier matters, the Court in CIT Vs. Sri Arbuda Mills Ltd. (Supra) said as under : "The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under Section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred." (emp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accepted by him. Thus, this aspect was not in appeal at any stage. It is only on the question of "quantum of profit" for which exemption was claimed that the appeal was filed. The Assessing Officer discussed the matter and found that instead of Rs. 4,97,28,163.45 which was claimed by assessee, it was entitled to exemption to the extent of Rs. 4,61,90,179.58 under Section 10B and there is taxable income of Rs. 3537980/-. On taxability of aforesaid amount, assessee preferred appeal and only that aspect was considered by CIT(A) as also Tribunal. At no stage, the issue whether assessee was entitled to claim exemption under Section 10B at all or not, having already exhausted beyond the period of exemption permissible under Section 10B, was not a subject matter of consideration before appellate authorities. Hence, this question was open to be looked into by Commissioner. In our view, he has rightly exercised power under Section 263 of Act, 1961, by taking aforesaid view we find support from a decision in CIT Vs. Ratilal Bacharilal And Sons [(2006) 282 ITR 457 (Bom.)], wherein almost in similar circumstances, the Court said as under :- "........... At the instance of the assessee, the a....