KOHINOOR FOODS LTD. Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These appeals are preferred by the appellant/assessee under Section 260-A of the Income-Tax Act, 1961 (hereinafter referred to as the Act?) questioning the validity of order passed by the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal?) dated 18 th May, 2007 whereby two appeals of the appellant herein, involving common issues pertaining to the assessment years 1994-95 and 1995-96 have been dismissed. We may point out at the outset that the original assessment was reopened, for these years by issuing notice under Section 148 read with Section 147 of the Act on the ground that the assessee was wrongly allowed deduction under Section 80-IA of the Act. However, the assessee has failed in its attempt before the CIT (A) as well as ITAT. Before we come to the nature of the challenge led and the question of law raised by the assessee in these appeals, it would be apposite to take stock of the relevant facts. For the sake of brevity we will disclose the facts of the assessment year 1994- 95 as on the basis of these facts, the following common question of law pertaining to both the years can conveniently be decided:-

(2.) The appellant Kohinoor Foods Ltd (formally known as Satnam Overseas Limited) is a limited Company incorporated under the Companies Act, 1956 and is engaged in the business of manufacturing of Rice and also trades in pulses, Rice, Sesame Seeds, groundnut etc. It is also engaged in Exports of Rice, pulses etc. For the instant assessment year i.e. 1994-95, the appellant company had furnished a return of total income on 30 th November, 1994 declaring therein a total income of Rs.1,37,35,880/- alongwith its annual audited accounts. The return of income was processed under Section 143 (1) (a) of the Act on 31 st March, 1995. Subsequently the appellant company revised its return of income on 30 th November, 1995 declaring gross total income of Rs.7,29,24,766/-, however after claiming deduction, under Chapter VI A of the Act, net taxable income was disclosed at NIL. The reason for revision of the return of income was that n the original return deduction u/s 80 IA of the Act was claimed after reducing deduction u/s 80HHC of the Act from the profits and gains from the business and profession whereas in the revised one the same was computed as, a percentage to the profits from the business and profession before making any deduction u/s 80HHC of the Act. The appellant had also claimed a deduction U/s 80IA of the Act amounting to Rs.1,96,66,528/-. The Assessing Officer passed an order u/s 143(1)(a) at Rs. 1,97,16,610/- on 30 th September, 2006. The Assessing Officer did not allow deduction under Section 80IA of the Act for the reason that "in the absence of separate working of the industrial profit the deduction claimed under Section 80-IA is not allowable". The appellant company filed an appeal against the intimation u/s 143(1)(a) of the Act and the Commissioner of Income Tax (Appeals) by an order dated 6 th August, 1997 held that the adjustment made by the Assessing Officer did not constitute a prima facie adjustment within the purview of Section 143 (1) (a) of the Act and allowed the appeal of the appellant company on this ground. The Commissioner of Income Tax (Appeals) filed an appeal before the Tribunal, which was dismissed by an order dated 18 th October, 2002. The proceedings under Section 147 of the Act was initiated by issuance of a notice under Section 148 of the Act on 8 th March, 1999 for the instant assessment year 1994-95. The reasons recorded (as per the order of the Commissioner of Income Tax (Appeals) and order of the Tribunal) for the initiation of proceedings under Section 147 of the Act are reproduced as under:-

(3.) In response to the notice u/s 148 of the Act the appellant company filed the return of income though under protest on 26 th July, 1999 declaring nil income after claiming deduction u/s 80HHC, 80-IA & 80G of the Act at the same figure as was done in the revised return of income. The Assessing Officer, however, by an order dated 18 th December, 2000 framed an assessment under Section 143(3) read with Section 148 of the Act at Rs.34,31,020/-. The Assessing Officer did not allow deduction under Section 80-IA of the Act on Rs.1,86,39,748/- by holding the same cannot be said to have derived from industrial undertaking.