COMMISSIONER OF INCOME-TAX Vs. CHHABRA GINNING UDHYOG

JUDGEMENT

(1.) THIS is an appeal filed by the Revenue (Commissioner of Income -tax) under Section 260A of the Income -tax Act, 1961, against an order dated February 4, 2003, passed by the Income -tax Appellate Tribunal (for brevity hereinafter referred to as 'the Tribunal') in M.A. No. 47/Ind/2002 arising out of I.T.A. No. 1046/Ind/96. This appeal was admitted for final hearing on the following substantial questions of law: 1. Whether the Income -tax Appellate Tribunal was justified in entertaining the application made under Section 254 of the Income -tax Act and further erred in granting the relief to the assessee by holding that there was an error apparent on face of the record as required to be made out in rectification of an order dated September 30, 2002, passed in I.T.A. No. 1046 of 1996?

(2.) WHETHER the Income -tax Appellate Tribunal was justified in holding that the assessee is entitled to claim deduction under Sections 80HH and 80 -I in respect of the miscellaneous income earned from other sources (and not derived from industrial undertaking) therebytaking a contrary view to the law laid down by the Supreme Court in the case reported in CTT v. Sterling Foods : 1999ECR481(SC) ? The respondent (assessee) is engaged in ginning business. The dispute in this case relates to the assessment year 1992 -93. The question arose as towhether the assessee who has surrendered voluntarily a sum of Rs. 9 lakhs for being taxed can be treated as an income derived from their industrial undertaking for the purpose of claiming benefit of deduction available under Section 80HH/80 -I of the Act. The Assessing Officer did not treat the surrendered income to be an income derived from the assessee's industrial undertaking and accordingly, declined to grant the benefit to the assessee as provided under Section 80HH/80 -I to the industrial undertaking. The Commissioner of Income -tax (Appeals), however, held in favour of the assessee on an appeal filed by the assessee against the order of the Assessing Officer who has declined to grant the benefit. However on an appeal filed by the Revenue before the Tribunal against the order of the Commissioner of Income -tax (Appeals), the appeal was allowed. The Tribunal, while setting aside the order of the Commissioner of Income -tax (Appeals), held that the surrendered income of the assessee does not amount to an income derived from the industrial undertaking. In the concluding para, the Tribunal was constrained to observe that it was a case where the assessee was making an attempt to somehow convert their black money (ill -gotten wealth) in white money by claiming deduction under Chapter VI -A which is otherwise not available to them under the twin sections. The issue on the facts was dealt with by the Tribunal in detail while negativing the claim of the assessee in the following words: In view of this observation, it is not always correct to apply the ratio of different decisions to the similar facts of the case without going deep into details of the facts in hand. Even the hon'ble Supreme Court in CIT v. Brij Lal Lohia and Mahabir Prasad Khemka : [1972]84ITR273(SC) has held that the fact that in the earlier proceedings, the Tribunal took a different view was not conclusive circumstances and the decision of the Tribunal reached in those proceedings did not operate as res judicata as there was a great deal more evidence before the Tribunal in the proceedings for the subsequent years. In the present year, we find that the assessee is also engaged in some trading activities though it is a fact that such trading activities were very little. On a specific query by the Bench that why the assessee had introduced cash in the balance -sheet for the assessment year 1992 -93 when he could have declared this income by writing off the bogus credits shown in the name of agriculturists, the learned authorised representative could not explain this situation satisfactorily. This fact makes it clear that it is not necessary that the assessee had earned this undisclosed income from the industrial activity because in that case he would have simply written off the bogus credits and credited the concerned amount in the profit and loss account and not introduced fresh cash in the books of account. We also find that after the decision of 'the hon'ble Supreme Court in CIT v. Sterling Foods : 1999ECR481(SC) which was rendered on April 15, 1999, which is after the decision rendered by the Tribunal for the assessment year 1991 -92, i.e., on February 9, 1999, the assessee has to prove that income was derived from an industrial activity so as to make it entitle to deduction under Sections 80HH and 80 -I. We find that the assessee has not brought any evidence to this effect that the so -called concealed income was derived for industrial activity. Decision regarding telescoping relied on by the learned authorised representative cannot be applied for allowing special deduction under Chapter VI -A. Telescoping what has been decided by various courts is that a particular item on which addition has been made can be treated to be a source for another item of expenditure. We have gone through our earlier orders and in order for the assessment year 1991 -92 in I.T.A. No. 14/Ind/96 at paragraph 8 there is a finding that there is no iota of evidence wherefrom it can be interfered that the assessee has ever entered into trading activities with regard to raw cotton which was purchased from the agriculturists, whereas in the current year there are some trading activities, which were carried on by the assessee. We also find merit in the contention of the learned Departmental representative that purpose of deduction under Chapter VI -A was to engage industrial activities and not to encourage conversion of black money which is detected by the Department from detailed enquiries. In those circumstances, we set aside the order of the Commissioner of Income -tax (Appeals).

(3.) HEARD Shri R. L. Jain, learned senior counsel with Ku. V. Mandlik, learned Counsel for the Revenue/appellant and Shri G.M. Chafekar, learned senior counsel with Shri D.S. Kale, learned Counsel for the asses -see/respondent.