The Commissioner Of Income-Tax, Madurai. Appellant v. M/S. Ramco Industries Ltd., Rajapalayam. Respondent

Dated : 07.12.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN and THE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) No.1343 of 2009 The Commissioner of Income-tax,Madurai. Appellant v. M/s. Ramco Industries Ltd.,Rajapalayam. Respondent Tax Case Appeal preferred under section 260A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal 'C' Bench, Chennai dated 22.06.2009 made in ITANo.2014/Mds/2008. For appellant : Mr.T.Ravikumar,Standing Counsel forIncome Tax Department JUDGMENT (Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.)The revenue is on appeal against the order of the Income Tax Appellate Tribunal, 'C' Bench, Chennaidated 22.06.2009 made in ITA No.2014/Mds/2008. 2. The minimum facts required for disposal of this appeal, as culled out from the statement of factsare as follows : The assessee is a public limited company carrying on business in manufacture andsale of fibre cement sheet, accessories, fibre cement pipes and cotton yarn. For the assessment year2001-01 the assessee filed its return of income on 29.11.2000 admitting a total income ofRs.6,78,42,400/-. The assessment was completed under section 143(3) of the Act on 07.03.2003determining the total income at Rs.10,96,71,500/- in which Rs.4,88,20,435/- was allowed asdepreciation and Rs.2,45,59,438/- was allowed as deduction under section 10B of the Income TaxAct, 1961. Subsequently, the assessment was reopened based on the revenue audit objection. Thereopened assessment under section 143(3) read with section 147 of the Act was completed on28.12.2007 determining the total income of Rs.11,26,02,970/-. In the reopened assessment, theassessing officer has withdrawn a sum of Rs.1,14,00,164/-, which he considered as excessdepreciation granted on the export oriented unit, and also restricted the deduction under section 80IB of the Act to Rs.33,72,436/- instead of Rs.1,82,14,811/-, allowed in earlier order. The assesseecarried the matter on appeal to the Commissioner of Income Tax (Appeals), who has deleted thedisallowance of depreciation made by the assessing officer as aforesaid on the ground that themethod followed by the assessee was correct and the audit party committed a mistake. That orderwas carried on appeal at the instance of the revenue. The Income Tax Appellate Tribunal upheld theorder of the Commissioner of Income Tax (Appeals) and dismissed the revenue's appeal. Thecorrectness of the same is canvassed in this appeal by formulating the following substantialquestions of law : 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal wasright in law in deleting the addition of Rs.1,14,00,164/- even though mistake in computation ofdeduction under section 10B of the Income Tax Act, 1961, is valid? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in lawin holding that the interest under section 234-D of the Act cannot be levied for the period prior to01.06.2003 is valid? 3. Heard the learned counsel for the revenue and perused the materials available on record. 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal wasright in law in deleting the addition of Rs.1,14,00,164/- even though mistake in computation ofdeduction under section 10B of the Income Tax Act, 1961, is valid? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in lawin holding that the interest under section 234-D of the Act cannot be levied for the period prior to01.06.2003 is valid? 3. Heard the learned counsel for the revenue and perused the materials available on record. 4. It could be seen from the records available that the Commissioner of Income Tax (Appeals), aftergoing through the audit objection and the stand of the assessing officer, found that the assessingofficer has blindly followed the audit objection without applying his mind to the correct method ofworking of taxable income. Admittedly, the assessee started with the figure of profit as per books forall the units at Rs.17,21,45,681/- and there was no dispute on this. The book profit relating to section10B unit at Rs.2,45,59,438/- and there was also no dispute and even the audit party has acceptedthis figure. What the assessee has done was the first the book profit (after depreciation) relating to10B unit was excluded in the memo of total income and on the balance taxable profit. The assesseeadded back the book depreciation relating to other units (other than 10B unit) and claimed incometax depreciation at Rs.4,88,20,435/- in respect of other units. There is no mistake in the methodfollowed by the assessee. According to the Commissioner of Income Tax (Appeals), the audit partyconsidered two items out of three items to be actually considered for adjustment and came to theconclusion that there was understatement of total income. The assessing officer, without applicationof mind to the materials available on record, blindly followed the audit objection and revised theassessment. The exact mistake of the audit party was that after its stand that the book depreciationrelating to all the units should be added back in the memo of total income, but it omitted to considerthe fact that the assessee would be entitled to income tax depreciation in respect of all the unitswhereas the company had claimed only income tax depreciation of other units except 10B unit. Thisis the mistake committed by the audit party and even though the proper and correct reply wassubmitted by the assessee, the assessing officer, without due application of mind, revised theassessment order. The reasons stated by the Commissioner for setting aside the assessment orderhas been accepted by the Tribunal. Before us, the revenue is not able to establish that the viewtaken by the Commissioner of Income Tax (Appeals) and confirmed by the Tribunal is not inaccordance with law. So is the issue with regard to section 234D penalty. The Commissioner ofIncome tax (Appeals) has observed that section 234D of the Act is applicable only where any refundis granted to the assessee under section 143(1) of the act and the same is payable back to thedepartment on completion of the assessment under section 143(3) of the Act. The assessing officerhas not granted refund under section 143(1) of the Act and in the circumstances section 234D is notapplicable. From the reading of section, it makes it clear that section 234D would apply only inrespect of refund made under section 143(1) of the Act. Hence, we do not find any illegality orirregularity in the order passed by the Commissioner of Income Tax (Appeals), which has beenconfirmed by the Tribunal. 5. In the result, we find that the first question of law formulated, cannot be regarded as a substantial 5. In the result, we find that the first question of law formulated, cannot be regarded as a substantial question of law for the purpose of entertainment of the appeal and with regard to the secondquestion of law, as section 234-D of the Act could be invoked only for the refund granted undersection 143(1) of the Act, the question of law is answered against the revenue and in favour of theassessee. The appeal deserves to be dismissed and it is accordingly dismissed. No costs.