Tlirough: None v. Uoi&Ors

$~26«&27*IN the HIGH COURT OF DELHI AT NEW DELHI+W.P.rO 3166/2008 PUNJAB STAINLESS STEEL INDUSTRIESTHR.HARVINDER SINGH .....Petitioner Tlirough: None versus UOI&ORS. .....Respondents Througli;Ms. NishaSharma,Adv. forR-L\ Mr. Rucliir Bhatia, Adv. for Rr 2 & 3. W.P.rO 7569/2008 + ZANELINILEATHERWEAR.....PetitionerThrough: None ,versus; ASSISTANT COMMISSIONEROF,INCOME TAX & ORS. .....Respondents, Through;Mr. ZohebHossain,Adv. GORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMIWAZIRIORDER%04.01.2017 LThese writ petitionschdlengethe re-assessmentnotices dated24.03.2008and 29.03.2007.In both cases the re-assessmentsare mrespect of Assessment Year (AY) 2001-02; both the originalassessmentswere completedunder Section143(3)of the IncomeTaxAct, 1961 (in short the Act). 2.The petitioners challenge the re-assessment notice on the-ground that the mere introductionof a new provision albeit withretrospectiveQiiQcX.perse does not authorizethe Revenueto issuethe Signature Not VerifiedSigning Date:05.10.2024 17:15:06Certify that the digital and physical file havebeen compared and the digital data is as perthe physical file and no page is missing. /\ re-assessmentnotices. Thehad claimedand were petitioners grantedbenefits under Section 8QHHC(3) of the Act, in the originalassessments that were framed under Section 143(3). By virtue of theTaxation Laws (Second Amendment) Act, 2005, which is givenretrospectiveeffect from 01.04.1998,two provisos were added tosection80HHC(3). They arereproducedbelow: ".... Provided also that in the case ofan assessee havingexportturnoverexceedingrupees ten crores duringthepreviousyear, theprofitscomputedunder clause (a) orclause (b) or clause (c) of this sub-section or aftergiving effect to thefirst proviso, as the case may be,shall befurther increasedby the amountwhich bears toninetyper centofany sum referredto in clause (Hid),ofsection 28, the same proportion as the export turnoverbears to the total turnoverof the businesscarried on bythe assessee,ifthe assesseehas necessaryandsufficientevidence toprove that, - (a) he hadanoptionto chooseeitherthe dutydrawbackor the Duty EntitlementPass Book Scheme, being theDutyRemissionScheme;and (b)the rate of drawback credit attributableto thecustoms was than the rate of credit duty higherallowable under the Duty Entitlement Pass BookScheme, beingtheDutyRemissionScheme: Provided also that in the case of,an assessee havingexportturnoverexceedingrupees ten crores during thepreviousyear, theprofitscomputedunder clause (a) orclause (b) or clause (c) of this sub-section or aftergiving effect to thefirst proviso, as the case may be,shall befurther increasedby the amountwhich bears toninetyper centofany sum referredto in clause (Hie) ofsection 28, the same proportion as the export turnoverbears to the total turnoverof the businesscarried on bytheassessee,if the assesseehas necessaryand sufficient evidence to prove that, - (a) he had an option to choose either the duty drawbackor the Duty Fee Replenishment Certificate, being theDuty Remission Scheme; and (b)the rate of drawback credit attributableto the -customs duty was higherthanthe rateof creditallowableundertheDutyFreeReplenishmentCertificate, being the Duty RernissionScheme. Explanation. - For thepurposes of this clause, "rate ofcredit allowable"means the rate of credit allowableunder the Duty Free Replenishment Certificate, beingthe Duty Remission Scheme calculated in the manner,asmay be notified by the Central Government....." evidence to prove that, - (a) he had an option to choose either the duty drawbackor the Duty Fee Replenishment Certificate, being theDuty Remission Scheme; and (b)the rate of drawback credit attributableto the -customs duty was higherthanthe rateof creditallowableundertheDutyFreeReplenishmentCertificate, being the Duty RernissionScheme. Explanation. - For thepurposes of this clause, "rate ofcredit allowable"means the rate of credit allowableunder the Duty Free Replenishment Certificate, beingthe Duty Remission Scheme calculated in the manner,asmay be notified by the Central Government....." 3.In essence, the effect of these amendments was that for anassessee to claim eligibility to the benefit under the provision, inaddition to the existing conditions, it had to produce sufficientevidenceprovingthat it had eitherthe optionto choseDutyDrawbackScheme or Duty Entitlement Pass Book Scheme (DEPB) entitlementwith a further condition that the rate of drawback credit attributabletothe customs duty was higher than the rate of credit allowable underthe DEPB Scheme being the Duty Remission Scheme, At the timewhen the petitioners had entered into transactions and claimed andwere granted benefits under Section 80HHB this condition did notexist. The retrospective introduction of these provisions, as it were,led to the re-assessmentnotice. 4.The Gujarat High Court in its judgment reported as M/s AvaniExports & Am. vs CIT (2012) 348 ITR 391 (Guj.) held that theretrospective effect given to these provisions was unsustainable. TheCourt held as follows: ^ "26. On consideration of the entire materials onrecord, we, therefore, find substance in the contentionof the learned counsel for the petitioners that theimpugnedamendmentis violativefor its retrospective overcome the decision of theoperation in order toTribunal, and at the same time, for depriving thebenefit earlier granted to a class of the assesseeswhose assessments were still pending although suchbenefit will be available to the assessees whoseassessments have already been concluded.In otherwords, in this type of substantive amendment,retrospectiveoperation can be given only if it isforthe benefitof the assessee but not in a case where itaffectsevenafewer section ofthe assessees. 27. We, accordingly,quash the impugnedamendmentonly, to this extent that the operation of the saidsection could be given effect fromthe ate ofamendment and not in respect of earlier assessmentyears of the assesseeswhose exportturnoveris aboveRs.10 crore.In otherwords,the retrospectiveamendment should not be detrimental to any of theassessees" 5.The Supreme Court confirmed the Gujarat High Court'sjudgmentto the extentitheldthatthe retrospectivitywas invalidin itsjudgmentdated 30.03.2015passed in Special Leave to Appeal (C)No. 9273/2013,titled: CITS &Anr. vs M/s AvaniExports&Anr.At the same time the Court further modified the Gujarat High Court'sruling to the following extent: "... Having seen the twin conditions and since80HHC benefit is not available after 1.4.05, we aresatisfied that cases of exporters having a turnoverbelow and those above 10 cr. should be treatedsimilarly.This order is in substitution of thejudgment in appeal..." 6.The Revenue contends that the re-assessmentnotice in this caseissued subsequent to the amendments, should not be interfered with.It relies upon two circumstances - first that the original assessmentwas framed, under Section 143(3) and, secondly, that the explanation(ii)(c) to Section 147 would apply in the present case. But for the re-assessment notice they would be under-assessed. "... Having seen the twin conditions and since80HHC benefit is not available after 1.4.05, we aresatisfied that cases of exporters having a turnoverbelow and those above 10 cr. should be treatedsimilarly.This order is in substitution of thejudgment in appeal..." 6.The Revenue contends that the re-assessmentnotice in this caseissued subsequent to the amendments, should not be interfered with.It relies upon two circumstances - first that the original assessmentwas framed, under Section 143(3) and, secondly, that the explanation(ii)(c) to Section 147 would apply in the present case. But for the re-assessment notice they would be under-assessed. 7.The Taxation Laws (Second Amendment) Act was enacted in2005 and sought to be brought into force w.e.f 01.04.1998.Thepresent case concerns AY 2001-02. Clearly, therefore, the period forwhich the re-assessmentnotice was issued, falls within the mischiefof the Gujarat High Court's judgment in that retrospective effect ofthe amendment which was the only basis for the impugned reassessment notice, no longer exists. In other words, the declarationby the Gujarat High Court, as confirmed by the Supreme Court thatthe explanationsto section 80HHC(3)would be prospectivei.e. w.e.f01.04.2005, would mean that there was no such condition when theassessee filed its return. 8.For this short reason itself the re-assessmentnotices carmot besustained. They are herebyquashed. The writ petitionsare allowed.S. RAVINDRA BHAT, J JANUARY 04,2017/kk NAJMIWAZIRI,J