1993-VIL-176-ITAT-

Income Tax Appellate Tribunal BOMBAY

IT APPEAL NO. 8653 (BOM.) OF 1988

Date: 19.07.1993

SALIM ABBASBHAI

Vs

INCOME-TAX OFFICER

Balkrishna Jhaveri, for the Assessee
D.K. Singh, for the Revenue

BENCH

P.J. GORADIA, ACCOUNTANT MEMBER AND M.K. CHATURVEDI, JUDICIAL MEMBER.

JUDGMENT

M.K. CHATURVEDI, Judicial Member:-

These two appeals rotate round the identical issue. For the sake of convenience, these are consolidated and disposed of by a common order.

2. The solitary dispute raised before us pertains to the rejection of the assessee I s claim for deduction under section 80HH and 80-1 as because the assessee failed to get his books audited as per the prescription of section 80HH and 80-1.

3. The business of the assessee is of ship breaking. The assessee carried on such business in Bombay and Jamnagar. The assessee claimed in his return deduction under section 80HH and 80-1. The claim of the assessee was not admitted by the Revenue authorities as because. the assessee did not comply. with the requirement of the section, so far as ,the ,filing. of the audit report is concerned.

4. Shri Balkrishna Jhaveri, learned counsel for the assessee, appeared before us.' It was submitted that ship breaking has to be considered as an industrial undertaking for the purposes of section 80HH and 80-1. Our attention was invited on the Tribunal's decision rendered in the case of First ITO v. Rama Ship breaking Yard (1988) 36 Taxman 353 (Bom). Our attention was also invited on the decision of. the Bombay High Court rendered in the case of, CST v. Indian Metal Traders 41 STC 169. Further it was submitted that the default, committed by the assessee was only procedural in nature. Therefore, an opportunity should be provided to Correct the defect. Learned counsel relied on the decision of the Tribunal in the case of Mahalaxmi Rice Factory v. ITO (1984) 18 TTJ((Chd.) 563 (1983) 5 ITD 238 (Chd).

5. Shri D.K. Singh, leqrned Departmental Representative, appeared before us. It was submitted that the case of the Bombay High Court relied upon by the assessee was in relation' to sales-tax matter. Hence. It cannot be applied in the facts and circumstances of the present case. It was vehemently argued that the filing of audit report is an essential requirement to enable the benefit. That requirement was not complied with before the first appellate authority. In view of this, claim of the assessee was rightly being rejected. He relied on the orders of the Revenue authorities.

6. We have heard the rival submissions in the light of material placed before us and precedents relied upon. The Assessing Officer has noted that during the relevant assessment year, the assessee purchased a new ship by name Vishwa Kausal. The business of the assessee continued to be the same. He disallowed the claim as because conditions for eligibility of deduction were not satisfied. According to the Assessing Officer, the business of the assessee was not, coming within the ambit of an industrial undertaking. The decision of the' Bombay High Court and of the Tribunal was not brought before the Assessing Officer. For the, first time, the precedents to buttress the claim of the assessee were brought. before the first appellate authority. The CIT(A) declined to accept the claim of the assessee on the ground that the audit report Was not, submitted as per 'the requirement of the section. The Tribunal in the case of Rama Shipbreaking Yard (supra) held that the activity of shipbreaking amounts to manufacturing activity. The Bombay 'High Court in the case of Indian Metal Traders (supra) held that:

"the scrap iron and steel which were obtained by the respondents by dismantling and breaking up of the ship must be regarded as a different commercial commodity from the ship itself, and hence the activity would amount to manufacture. The goods manufactured would be the scrap iron and steel obtained or manufactured by the dismantling and breaking up of the ship, itself. The case was, therefore, covered by the provisions of section 13(a) of the Act and the purchase tax was payable by the respondents in respect of the purchase price attributable to the frame or hull or the body proper of the ship out of which scrap iron and steel and steel plates as well as wooden planks, excluding the loose ones and rivets and bolts, were obtained by the respondents.

The mere fact that the respondents have purchased the ship for the purpose of breaking up and scrapping the same would not convert the ship into scrap. The ship could well be regarded as the raw material and the scrap iron and steel obtained fro the ship by the dismantling and breaking up the ship could be regarded as finished goods."

7. In the case of Mahalaxmi Rice Factory (supra), the Tribunal held, "if the assessee has not furnished an audit report but has given the necessary particulars on which deduction can be computed, the claim cannot be rejected without giving an opportunity to the assessee to rectify the defect".

8. In view of the above, we are of the opinion that the requirement to get the accounts audited is a procedural requirement. The wages of processual sin ought not to be the death of right. It is incumbent on the Assessing Officer to render justice and to maintain all the fine jurisprudential norms. There has been a shift from the older jurisprudential values of substantive rights to the present values of procedural regularity, justice is seen as the consequence of procedural fairness. There cannot be anything of greater consequence than to keep the stream of justice clear and pure, that parties may proceed with safety to themselves. We have noted that the assessee submitted before us the audit report Since it was not available before the Revenue authorities, we decline to accept the case.

9. Having regard to the facts and circumstances of the case, and after carefully- perusing the precedents over the point and in the light of the discussion made above, we, set aside the impugned order and restore the matter to the file of the Assessing Officer with direction to consider the audit report and decide the issue afresh in accordance with law after providing adequate opportunity to the assessee of being heard.

In the result, appeals stand allowed for statistical purposes.

 

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.