C I T Vs. MERCURY METAL PVT LTD

JUDGEMENT

(1.) BRIEFLY stated, the facts are that the CIT, after examining the records of the assessee, found that the return of income for the A.Y. 199394 was filed on 03.03.1994 declaring total income at Rs.Nil. Along with the return, the assessee had claimed deduction of Rs.2,56,80,968/u/ s.80HHC of the Income Tax Act. Thereafter, the assessee filed a revised return on 15.06.1994 declaring total income at Rs.Nil but, in the computation attached with the revised return, the claim of deduction u/s. 80HHC was revised to Rs.2,73,91,138/. The increase in the claim of deduction was on account of the export incentive relating to export made in the Financial Year 199293 relevant to the A.Y. 199394 on mercantile basis although, actually, the export incentive amounting to Rs.17,45,430/was received during the F.Y. 199394 relevant to the A.Y. 199495. The CIT further found that the A.O has completed the assessment u/s.143(3) on 29.03.1996 determining the total income of the assessee at Rs.1,23,950/. In the above assessment order passed by the A.O., export incentive of Rs.17,45,430/was considered as income of A.Y. 199394 and the entire amount was allowed as deduction u/s.80HHC. In the return filed for A.Y. 199495, the assessee claimed deduction of Rs.17,45,430/being income already considered in A.Y. 199394. The CIT required the assessee to clarify the position regarding the claim of amount of Rs.17,45,430/as export benefits in A.Y. 199394 when the same were actually received in the A.Y. 199495. From the details furnished by the assessee it was noticed that the amount of Rs.17,45,430/comprised of two components; A. Export Incentive Rs. 7,43,894/B. B. Licence Premium Rs. 10,01,536/.

(2.) ACCORDING to the CIT, the profit on sale of licence can be considered only when the licence is actually sold and profits are received in terms of S.28(ii)(a) and the same cannot be considered on mercantile basis. The CIT also noticed that in column 9(a) of the Tax Audit Report furnished by the assessee for A.Y. 199394, the accounting of refunds and credits of duties of Customs, Excise, etc. is stated to have been made on receipt basis. According to the CIT, the assessee pressed for the inclusion of income of Rs.17,45,430/in the A.Y. 199394 and simultaneously pressed for equal amount of deduction u/s.80HHC so as to avoid the payment of tax. Accordingly, the CIT issued a show cause Notice to the assessee on 23.03.1997 calling upon the assessee to show cause as to why the assessment framed by the A.O on 29.03.1996 should not be revised as per the provisions of Section 263 of the Act.

(3.) IN response to the said Notice, the assessee furnished his reply vide reply dated 23.09.1997. After considering the submissions advanced on behalf of both the sides, the CIT set aside the order of the A.O and remanded the matter for deciding the same afresh in light of the observations made in its order dated 05.12.1997. On appeal by the assessee, the Appellate Tribunal set aside the order of the CIT.