SJ and SP Family Trust vs CIT

D.A. Mehta, J.—Heard learned senior counsel for the parties. The petition has been preferred challenging the notice dated February 8, 2010, issued for assessment year 1994-95 u/s 263 of the income tax Act, 1961 ("the Act"), by the respondent-Commissioner of income tax-V, Ahmedabad.

According to the respondent, the assessment completed by the Assessing Officer u/s 143(3) read with section 254 of the Act on December 30, 2008, is erroneous and prejudicial to the interests of the Revenue for the following reasons :

The hon''ble income tax Appellate Tribunal, vide Order No. I. T. A. 500/Ahd/1998 at para. 15.1, has questioned the cognizance of this certificate and its admissibility as an evidence/proof. The Hon''ble income tax Appellate Tribunal unambiguously mentioned that this certificate cannot be taken as an evidence to comply with the requirement of income tax law under reference and, therefore, seems to be of no use to the assessee. Under the circumstances, the Assessing Officer should not have relied on his certificate and allowed the deduction under sections 80HH and 80I of the Act. Further, the Assessing Officer has not mentioned in the assessment order as to whether the unit is registered with the Registrar as demanded by the Hon''ble income tax Appellate Tribunal. Hence, deduction under sections 80HH and 80I are wrongly allowed by the Assessing Officer.

The principal controversy is as to whether the petitioner-assessee is a'' small scale industrial undertaking for the purposes of relief under the provisions of section 80I of the Act. It is an accepted position that in so far as the relief u/s 80HH of the Act is concerned, no such requirement is prescribed.

For the purposes of determining whether a unit is a small scale industrial undertaking, Explanation 3, appearing below sub-section (2) of section 80I of the Act, stipulates that the said phrase would have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA of the Act. When one reads the said provision, namely, section 80HHA(8) and the Explanation there under with special reference to clause (b), it is provided that an industrial undertaking shall be deemed to be a small scale industrial undertaking which, on the last day of the previous year, is regarded as a small scale industrial undertaking u/s 11B of the Industries (Development and Regulation) Act, 1951 ("the IDR Act").

u/s 3(j) of the Industries (Development and Regulation) Act, 1951, small scale industrial undertaking has been defined to mean an industrial undertaking which in accordance with the requirements specified under sub-section (1) of section 11B is entitled to be regarded as a small scale industrial undertaking for the purposes of the Industries (Development and Regulation) Act, 1951. Section 11B of the Industries (Development and Regulation) Act, 1951, states that the Central Government may with a view to ascertaining the requirements stated in the said sub-section specify, having regard to the factors mentioned in sub-section (2), by notified order as to which industrial undertaking shall be regarded for the purposes of the Industries (Development and Regulation) Act, 1951, to be a small scale industrial undertaking upon compliance with the factors stated therein.

In the light of the aforesaid position in law, prima facie, the impugned notice u/s 263 of the Act appears to be without jurisdiction considering the fact that the Assessing Officer has referred to the certificate wherein the Department of Industries, Government of Andhra Pradesh, has specified that the unit of the assessee holds a permanent registration certificate as a small scale industrial undertaking within the meaning of section 11B of the Industries (Development and Regulation) Act, 1951. It is also necessary to consider the effect of section 80I(5) of the Act in the facts of the case.

Hence, rule returnable on May 4, 2010.

Ad interim relief granted earlier to continue as interim relief. Direct services permitted.