Superfine Embroideries Ltd., Coimbatore V. ACIT, Coimbatore

CO 100/CHNY/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7397 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 21-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 80G; 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 700/MDS/2010 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), COIMBATORE. (APPELLANT) V. M/S SUPERFINE EMBROIDERIES LTD., 592, CROSS CUT ROAD, COIMBATORE 641 012. PAN : AAECS7750A (RESPONDENT) C.O. NO. 100/MDS/2010 (IN I.T.A. NO. 700/MDS/2010) ASSESSMENT YEAR : 2004-05 M/S SUPERFINE EMBROIDERIES LTD., 592, CROSS CUT ROAD, COIMBATORE 641 012. (CROSS-OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), COIMBATORE. (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB, ADDL. CIT ASSESSEE BY : SHRI T. BANUSEKAR, CA DATE OF HEARING : 31.05.2012 DATE OF PRONOUNCEMENT : 15.06.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEAL FILED BY THE REVENUE AND CROSS-OB JECTION FILED BY THE ASSESSEE, BOTH DIRECTED AGAINST ORDER DATED 5.3 .2010 OF COMMISSIONER OF INCOME TAX (APPEALS) I, COIMBATORE , FOR THE IMPUGNED ASSESSMENT YEAR. 2 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 2. APPEAL OF THE REVENUE IS TAKEN UP FIRST FOR DISP OSAL. TWO EFFECTIVE GROUNDS HAVE BEEN TAKEN BY THE REVENUE. FIRST ONE QUESTIONS THE QUASHING OF ASSESSMENT BY THE CIT(APPEALS) FOR A RE ASON THAT THE REOPENING WAS DONE MERELY ON CHANGE OF OPINION AND SECOND ONE QUESTIONS THE ORDER OF CIT(APPEALS) INSOFAR AS HE R ULED THAT ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80-IB OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. FIRST ISSUE IS TAKEN UP BEING A QUESTION OF JURI SDICTION. 4. SHORT FACTS APROPOS ARE THAT ASSESSEE DOING EMBR OIDERY WORKS AND SUPPLYING EMBROIDERY GARMENTS ON JOB WORK BASIS , FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 25.10.2004 DECLARIN G TOTAL INCOME OF ` 18,49,914/-. IN THE RETURN, IT SEEMS ASSESSEE HAD CLAIMED A DEDUCTION OF ` 7,59,396/- UNDER SECTION 80-IA OF THE ACT AND ` 2500/- UNDER SECTION 80G OF THE ACT. THEREAFTER ASSESSMENT WAS COMPLETED AFTER SCRUTINY ON 16.5.2006 UNDER SECTION 143(3) OF THE A CT, ACCEPTING THE RETURNED INCOME. APPENDED TO THE ASSESSMENT ORDER WAS AN INCOME- TAX COMPUTATION FORM WHEREIN IT WAS MENTIONED THAT DEDUCTION OF ` 7,61,896/- WAS BEING ALLOWED TO THE ASSESSEE UNDER CHAPTER VI-A OF THE ACT. THEREAFTER, ON 9.7.2008, A NOTICE WAS ISSUED UNDER SECTION 148 OF THE ACT PROPOSING A RE-ASSESSMENT. TO SUCH A NOTIC E, ASSESSEE FILED A LETTER DATED 10.9.2008, MENTIONING THAT THERE WAS N O CHANGE TO THE 3 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 INCOME AS RETURNED ORIGINALLY. DURING THE COURSE O F RE-ASSESSMENT PROCEEDINGS, A.O. REQUIRED THE ASSESSEE AS TO WHY I T COULD BE CONSIDERED AS MANUFACTURING UNIT ENTITLED FOR DEDUC TION UNDER SECTION 80-IB OF THE ACT. REPLY OF THE ASSESSEE WAS THAT I T WAS AN INDUSTRIAL UNDERTAKING MANUFACTURING EMBROIDERY MATERIAL AND D OING JOB WORK OF EMBROIDERY GARMENTS. AS PER THE ASSESSEE, IN THE P ROCESS, IT HAD CONSUMED EMBROIDERY THREAD, BOBBIN THREAD, APPLIQUE CLOTH, ETC. AND THESE ITEMS WERE SPECIFICALLY MENTIONED IN SCHEDULE 15 OF ITS AUDITED ACCOUNTS SUBMITTED ALONGWITH THE RETURN. ACCORDING TO THE ASSESSEE, IT WAS ENGAGED IN SCHEMATIC AND ORGANIZED ACTIVITY OF PRODUCTION BY ENGAGING LABOURERS TO PRODUCE THE END PRODUCT, NAME LY, EMBROIDERED MATERIAL WHICH WAS SOMETHING DIFFERENT FROM THE RAW MATERIAL USED. HENCE, IT WAS SUBMITTED THAT IT WAS ENTITLED FOR DE DUCTION UNDER SECTION 80-IB OF THE ACT. RELIANCE WAS PLACED ON THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TAJ FIRE WORKS INDUSTRIES (204 CTR 108). HOWEVER, THE A.O. WAS NOT IMPRESSED . ACCORDING TO HIM, ASSESSEE WAS NOT ENGAGED IN ANY MANUFACTURING PROCESS. IN THE STATUTORY AUDIT REPORT FILED BY THE ASSESSEE, IT WA S STATED THAT ASSESSEE WAS DOING EMBROIDERY WORK AND COMMISSION WORK. THE COMMISSION INCOME OF THE ASSESSEE CAME TO ` 1,43,11,850/-, WHEREAS, EMBROIDERY AND OTHER INCOME CAME TO ` 2,00,63,914/-. AS PER THE A.O., ASSESSEE WAS NOT PRODUCING ANY PRODUCT LIKE CRACKERS WITH TH E HELP OF RAW MATERIAL 4 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 BUT DOING ONLY EMBROIDERY WORK ON SAREES AND OTHER CLOTH RECEIVED FROM OTHER PARTIES. THE WORK DONE SIMPLY RESULTED IN SO ME VALUE ADDITION AND THE END PRODUCT REMAINED NOTHING BUT SAREES WITH SU CH VALUE ADDITION. HE, THEREFORE, REFUSED TO CONSIDER THE ASSESSEE AS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80-IB OF THE ACT. SUCH DED UCTION EARLIER ALLOWED WAS DISALLOWED IN THE RE-ASSESSMENT AND THE RE-ASSESSMENT WAS COMPLETED ACCORDINGLY. 5. ASSESSEE, IN ITS APPEAL BEFORE CIT(APPEALS) ASSA ILING THE REOPENING, SUBMITTED THAT THE ALLOWANCE UNDER SECTI ON 80-IB OF THE ACT WAS A SUBJECT MATTER OF RECTIFICATORY PROCEEDINGS I NITIATED PRIOR TO THE SCRUTINY PROCEEDINGS AND THEREFORE, THE A.O. WAS SE IZED OF THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT. ORIGINAL ASSESSMENT WAS COMPLETED DULY CONSIDERING THE CLAIM UNDER SECT ION 80-IB. FURTHER, AS PER THE ASSESSEE, THERE WAS NO ADDITIONAL INFORM ATION WHICH WOULD WARRANT A REOPENING, BUT ONLY A CHANGE OF OPINION O N THE PART OF THE ASSESSING OFFICER. ASSESSEE ALSO BROUGHT TO THE NO TICE OF THE CIT(APPEALS) THAT SECTION 147 STOOD AMENDED FROM 1. 4.1989, BUT, STILL MERE CHANGE OF OPINION WAS NOT SUFFICIENT FOR REOPE NING, EVEN WHEN THE REOPENING WAS DONE WITHIN A PERIOD OF FOUR YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR. RELIANCE WAS PLACED ON T HE DECISION OF HONBLE APEX COURT INTEREST CIT V. KELVINATOR OF IN DIA LTD. (320 ITR 561). CIT(APPEALS) WAS APPRECIATIVE OF THESE CONTENTIONS. ACCORDING TO HIM, 5 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 ASSESSING OFFICER HAD INITIATED THE REOPENING ONLY BASED ON CHANGE OF OPINION. THERE WERE NO TANGIBLE MATERIALS JUSTIFYI NG SUCH REOPENING. HE, THEREFORE, HELD THAT REOPENING DONE UNDER SECTI ON 147 OF THE ACT AS BAD IN LAW. 6. INSOFAR AS SECOND ISSUE, WHICH IS REGARDING NATU RE OF ACTIVITY OF THE ASSESSEE, ARGUMENT OF THE ASSESSEE BEFORE CIT(APPEA LS) WAS THAT IT WAS MANUFACTURING EMBROIDERED PRODUCTS AND IN SUCH PROCESS, RAW MATERIALS LIKE, CLOTH AND THREAD WERE CONVERTED INT O FINAL PRODUCTS. AS PER THE ASSESSEE, THESE ITEMS HAD NO RESEMBLANCE WI TH THE ORIGINAL MATERIAL. RELIANCE WAS ONCE AGAIN PLACED ON THE DE CISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TAJ FIRE W ORKS INDUSTRIES (SUPRA). ASSESSEE ALSO PRODUCED CERTAIN SAMPLES OF EMBROIDER ED PRODUCTS BEFORE THE CIT(APPEALS) IN THE COURSE OF APPELLATE PROCEEDINGS. CIT(APPEALS) CAME TO A CONCLUSION THAT WHAT ASSESSE E DID WAS NOT A SIMPLE VALUE ADDITION, BUT, ON THE OTHER HAND, THE END PRODUCT WAS COMPLETELY DIFFERENT FROM RAW MATERIALS CONSUMED. AS PER CIT(APPEALS), ASSESSEE WAS PRODUCING EMBROIDERED PRODUCTS LIKE BA DGES, STICKERS, SPECIAL DESIGNS, PICTURES OF LORD GANAPATHY, LORD V ENKATACHALPATHY, NATURAL SCENERY, ETC. HE, THEREFORE, HELD THAT ASS ESSEE COULD BE DEEMED AS ENGAGED IN A MANUFACTURING ACTIVITY AND D IRECTED THE A.O. TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT. 6 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 7. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT IN THE ORIGINAL ASSESS MENT COMPLETED ON 16.5.2006, THERE WAS NO CONSIDERATION WHATSOEVER RE GARDING CLAIM OF THE ASSESSEE UNDER SECTION 80-IB OF THE ACT, OR THE NATURE OF BUSINESS IN WHICH ASSESSEE WAS ENGAGED. NOTHING WAS MENTIONED IN THE ASSESSMENT ORDER REGARDING THE CLAIM OF ASSESSEE UN DER SECTION 80-IB OF THE ACT. NOT EVEN SECTION 80-IB WAS MENTIONED B Y A.O. ANYWHERE IN THE ASSESSMENT ORDER. THEREFORE, THE ASSESSING OFF ICER HAD NEVER APPLIED HIS MIND ON THIS ASPECT DURING THE COURSE O F ORIGINAL ASSESSMENT PROCEEDINGS. HE SIMPLY PRESUMED THAT ASSESSEE WAS ELIGIBLE UNDER SECTION 80-IB OF THE ACT AND PROCEEDED ACCORDINGLY. NO DETAILS WERE SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS. UNLESS THERE WAS AN OPINION FORMED, T HERE CANNOT BE A CHANGE OF OPINION. ACCORDING TO HIM, DECISION OF H ONBLE APEX COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) RELIED ON BY THE CIT(APPEALS) WAS MISPLACED SINCE THE QUESTION THERE WAS WHETHER A REOPENING COULD BE DONE BASED ON A CHANGE OF OPINION. NO DOUBT, AS PER THE LEARNED D.R., IT WAS HELD BY HONBLE APEX COURT THAT REOPEN ING COULD NOT BE ON A CHANGE OF OPINION. BUT, HERE SINCE THERE WAS NO OP INION FORMED BY THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T PROCEEDINGS. THUS, IT WAS NOT A QUESTION OF CHANGE OF OPINION AT ALL. IT WAS A TOTAL NON- APPLICATION OF MIND. ASSESSEE WAS ALSO NOT SAVED B Y EXPLANATION TO SECTION 147 OF THE ACT SINCE THE REOPENING WAS ADMI TTEDLY DONE WITHIN 7 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, ACCORDING TO HIM, THE RE-ASSESSMENT WAS PERFECTLY D ONE. AS PER LEARNED D.R., ASSESSMENTS FOR EARLIER YEARS WERE DONE UNDER SECTION 143(1) OF THE ACT SUMMARILY, AND THEREFORE, THESE COULD NOT B E CONSIDERED AS A BINDING PRECEDENCE, SO AS TO ACCORD SIMILAR DEDUCTI ON IN THE SUBSEQUENT YEARS ALSO. 8. INSOFAR AS CLAIM OF THE ASSESSEE THAT IT WAS A M ANUFACTURING COMPANY, RELIANCE WAS PLACED BY THE LEARNED D.R. ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. VEENA TEXTILES P. LTD. (155 ITR 794). A S PER THE LEARNED D.R., IT WAS CLEARLY HELD BY THE HONBLE JURISDICTIONAL HIGH COURT THAT EMBROIDERY W ORK RESULTED ONLY IN VALUE ADDITION. THE EMBROIDERED PRODUCTS WERE NOT DIFFERENT FROM ORIGINAL RAW MATERIAL, AND THE PROCESS UNDERTAKEN B Y THE ASSESSEE DID NOT RESULT IN ANY NEW OR DISTINGUISHABLE PRODUCT DI FFERENT FROM THE ORIGINAL RAW MATERIAL WHICH WERE CLOTH AND THREAD. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. S.S.M. FURNISHING CENTRE (155 ITR 791). F OR HIS CONTENTION THAT EARLIER YEARS SUMMARY ASSESSMENT WHEREIN DEDUCTION UNDER S ECTION 80-IB WAS GIVEN, WOULD NOT ACT AS PRECEDENT, RELIANCE WAS PLACED ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF TAMILNADU CHLORATES V. JCIT (98 ITD 1). AS FOR THE RELIANCE PLACED BY THE CIT(APPEALS) ON THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN THE 8 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 CASE OF TAJ FIRE WORKS INDUSTRIES (SUPRA), LEARNED D.R. SUBMITTED THAT THIS WAS ERRONEOUSLY DONE, SINCE THERE WHAT THE ASS ESSEE WAS DOING WAS MERE JOB WORK AND PROCESSING OF VARIOUS RAW MAT ERIALS USED RESULTED IN A NEW PRODUCT WHICH WAS CRACKERS. HERE , THE ASSESSEES WORK WAS ENTIRELY DIFFERENT SINCE IT WAS NOT USING VARIOUS RAW MATERIALS AND PRODUCING ANYTHING NEW. WHAT THE ASSESSEE HAD DONE WAS ONLY MAKING CERTAIN VALUE ADDITION TO THE CLOTH BY DOING SOME EMBROIDERY WORK. RELIANCE WAS ALSO PLACED ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. [3 ITR (TRIB) 600] FOR ARGUING THAT WHERE NO ENQUIR Y WAS MADE BY THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL PRO CEEDINGS, THE RULE REGARDING CHANGE OF OPINION WOULD NOT APPLY. 9. PER CONTRA, LEARNED A.R., SUPPORTING THE ORDER O F CIT(APPEALS), SUBMITTED THAT ADMITTEDLY THE REOPENING WAS DONE WI THIN FOUR YEARS. THE ONLY QUESTION WAS WHETHER SUCH REOPENING WAS BASED ON A CHANGE OF OPINION. LEARNED A.R. BROUGHT TO OUR NOTICE THAT A NOTICE WAS ISSUED BY THE ASSESSING OFFICER ON 17.5.2005 UNDER SECTION 15 4 OF THE ACT, WHEREIN IT WAS PROPOSED TO RECTIFY A MISTAKE IN THE 143(1) INTIMATION. SUCH MISTAKE WAS STATED TO BE NON FILING OF FORM NO .10CCB IN SUPPORT OF THE CLAIM OF DEDUCTION UNDER SECTION 80-IA OF TH E ACT. AS PER THE LEARNED A.R., THE ORIGINAL ASSESSMENT WAS DONE ON 1 6.5.2006 AND ASSESSING OFFICER HAVING ALREADY ISSUED A NOTICE UN DER SECTION 154 OF 9 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 THE ACT, PRIOR TO THE DATE OF COMPLETION OF ASSESSM ENT, IT COULD NOT BE STATED THAT HE WAS NOT AWARE OF THE CLAIM OF DEDUCT ION UNDER SECTION 80- IB. THE ONLY CLAIM MADE BY THE ASSESSEE UNDER CHAP TER VI-A WAS THE CLAIM OF ` 7,59,396/- UNDER SECTION 80-IB OF THE ACT AND A SU M OF ` 2500/- UNDER SECTION 80G OF THE ACT, TOTALLING TO ` 7,61,896/-. THE COMPUTATION STATEMENT SIGNED BY THE ASSESSING OFFIC ER CLEARLY MENTIONED THAT A CLAIM OF ` 7,61,896/- WAS BEING ALLOWED UNDER CHAPTER VI-A. WHEN A RECTIFICATION NOTICE STOOD ALREADY IS SUED UNDER SECTION 154 OF THE ACT ON THE CLAIM UNDER SECTION 80-IA, PO INTING OUT NON-FILING OF THE AUDIT REPORT, IT COULD NOT BE STATED THAT ASSES SING OFFICER WAS NOT AT ALL AWARE ABOUT SUCH DEDUCTION CLAIMED BY THE ASSES SEE UNDER SECTION 80-I OF THE ACT OR HAD NOT APPLIED MIND IN THIS REG ARD. WHEN DEDUCTION IS CLAIMED UNDER SECTION 80-IB AND SUCH CLAIM IS CLEAR LY SPELT OUT IN THE RETURN FILED AND WHEN SUCH DEDUCTION, EFFECTIVELY R ESULTED IN REDUCTION OF THE GROSS TOTAL INCOME OF THE ASSESSEE, THE ASSESSI NG OFFICER DOING AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT, WILL IN THE NORMAL COURSE SURELY APPLY HIS MIND TO SUCH CLAIM. UNLESS AND UN TIL THE CLAIM WAS FOUND TO BE CORRECT, WE CANNOT SAY THAT ASSESSING O FFICER WOULD HAVE GIVEN SUCH DEDUCTION TO THE ASSESSEE. HERE, THE AS SESSING OFFICER HAD PRIMA FACIE ACCEPTED THE CLAIM OF THE ASSESSEE THAT IT WAS A MANUFACTURING UNIT. THEREFORE, HE ACCEPTED THE CLA IM IN THE ORIGINAL ASSESSMENT. WHAT WAS ENDEAVOURED THROUGH THE RE-AS SESSMENT WAS TO 10 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 TAKE A DIFFERENT VIEW ON A CHANGE OF OPINION. RELI ANCE WAS ONCE AGAIN PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA). INSOFAR AS THE ISSUE REGARDING NATURE OF BUSINESS OF THE ASSESSEE WAS CONCERNED, LEARNED A.R. POINTED OU T THAT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VEENA TEXTILES P. LTD. (SUPRA) STOOD REVERSED BY THE DECISION OF HONBLE A PEX COURT IN THE CASE OF S.S.M. BROS. (P) LTD. & ORS. V. CIT (243 ITR 483 ). LEARNED A.R. ALSO SUBMITTED THAT IN THE CASE OF VEENA TEXTILES P. LTD . (SUPRA), THE ISSUE WAS GRANT OF DEVELOPMENT REBATE AND THE REVENUE HAD ALL ALONG ARGUED THAT ASSESSEE WAS NOT DOING ANY MANUFACTURING ACTIV ITY, FOR BEING ELIGIBLE FOR SUCH REBATE. THOUGH THE HONBLE JURISD ICTIONAL HIGH COURT HELD THAT ASSESSEE WAS NOT DOING MANUFACTURING ACTI VITY, HONBLE APEX COURT REVERSED SUCH DECISION AND HELD THAT THE ACTI VITY OF THE ASSESSEE WAS NOTHING BUT MANUFACTURING AND ASSESSEE WAS ELIG IBLE FOR DEVELOPMENT REBATE UNDER SECTION 33 OF THE ACT. AC CORDING TO HIM, PROCESS BY WHICH ASSESSEE WAS PRODUCING EMBROIDERED GOODS WAS MANUFACTURING. THREAD WAS THE MAIN RAW MATERIAL, C LOTH WAS BEING SUPPLIED BY CUSTOMERS. THREAD WAS CUT AND EMBROID ERED ON THE CLOTH AND THREAD COULD NOT BE RECOUPED IN ITS ORIGINAL SH APE FROM THE FINAL PRODUCT. HE, THEREFORE, PRAYED THAT ORDER OF THE C IT(APPEALS) TO BE CONFIRMED. 11 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 10. AD LIBITUM, LEARNED D.R. SUBMITTED THAT JUST BE CAUSE PROCEEDING UNDER SECTION 154 OF THE ACT WAS DROPPED, IT WOULD NOT MEAN THAT A RE- ASSESSMENT UNDER SECTION 147 OF THE ACT COULD NOT B E INITIATED. RELIANCE WAS PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. V. DCIT (340 ITR 64). 11. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. FIRST WE WILL CONSIDER THE ISSUE WHETHER REOPENING OF ASSESSMENT WAS MANDATED OR NOT. THERE IS NO DISPUTE THAT IN THE R ETURN OF INCOME FILED, ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE ACT. THERE IS ALSO NO DISPUTE THAT SUCH A DEDUCTION UNDER SECT ION 80-IB OF THE ACT WAS ALLOWED BY THE ASSESSING OFFICER IN THE ORIGINA L ASSESSMENT DATED 16.5.2006 WITHOUT ANY DISCUSSION. ASSESSING OFFICE R HAD ACCEPTED THE CLAIM AND THE AMOUNT HAS BEEN MENTIONED CLEARLY IN THE COMPUTATION FORM SIGNED BY THE ASSESSING OFFICER AND APPENDED T O THE ORIGINAL ASSESSMENT ORDER. AS STATED BY THE ASSESSEE, IT HA D MADE TWO CLAIMS UNDER CHAPTER VI-A OF THE ACT. ONE WAS FOR DEDUCTI ON ` 7,59,396/- UNDER SECTION 80-IB AND THE OTHER WAS FOR DEDUCTION ` 2500/- UNDER SECTION 80G. THE TOTAL PROFITS OF THE BUSINESS AGA INST WHICH THE CLAIM MADE WAS ` 25,31,319/- AS IT COMES OUT OF THE TAX COMPUTATION FORM APPENDED TO THE ASSESSMENT ORDER. THE CLAIM FOR DE DUCTION UNDER SECTION 80G WAS NEGLIGIBLE, COMING TO ` 2500/- ONLY. THE BODY OF ASSESSMENT ORDER IS REPRODUCED HEREUNDER:- 12 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 IN THIS CASE THE ASSESSEE COMPANY HAS FILED A RETUR N OF INCOME U/S 139(1) OF THE INCOME-TAX ACT, 1961 DECLARING TOTAL INCOME OF RS.18,42,914/- ON 25.10.2004. THIS CASE WAS SELECTED FOR S CRUTINY AND NOTICE U/S 143(2) WAS SERVED ON THE ASSESSED. IN RESPONSE SHRI N. RAVISHANKAR, FCA APPEARED AND THE CASE WAS DISCU SSED WITH HIM. AFTER DISCUSSION, THE ASSESSMENT IS COMPLETED AS UNDER: INCOME FROM HOUSE PROPERTY : RS 73,290 INCOME FROM BUSINESS : RS 17,71,924 RS 18,45,214 LESS : DEDUCTION U/S 80G RS 2,500 TOTAL INCOME RS 18,42,714 INCOME-TAX THEREON RS 6,44,949 SURCHARGE @ 2.5% RS 16,124 RS 6,61,073 LESS : TDS RS 1,05,093 RS 5,55,980 LESS : AT RS 8,00,000 REFUNDABLE RS 2,44,020 LESS : INTT U/S 234C RS 10,583 REFUNDABLE RS 2,33,437 ADD: INTT U/S 244 RS 16,338 RS 2,49,775 REFUND ALREADY GRANTED RS 2,49,775 BALANCE NIL IT IS CLEAR FROM THE ABOVE THAT ASSESSING OFFICER H AD SPECIFICALLY ALLOWED 80G CLAIM OF ` 2500/-, SEPARATELY IN THE BODY OF THE ASSESSMENT O RDER ITSELF. WHEN VIEWED FROM THIS ANGLE, CAN WE SAY TH AT ASSESSING OFFICER WOULD HAVE BEEN OBLIVIOUS OF THE CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT, THAT TOO WHEN THE AMOUNT OF SUCH CLAIM WAS ` 7,59,396/- WHICH WAS, UNDER ANY CIRCUMSTANCES, SUBSTANTIAL VIS --VIS ITS BUSINESS PROFIT OF ` 25,31,319/-. THAT ASSESSING OFFICER HAD APPLIED H IS MIND 13 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 SOFAR AS DEDUCTION OF ` 2500 WAS CONCERNED, BUT HAD NOT APPLIED IT ON A CLAIM OF DEDUCTION OF ` 7,59,396/- WOULD, IN OUR OPINION, BE HARD TO BELIEVE. ESPECIALLY SO, SINCE PRIOR TO THE COMPLET ION OF ORIGINAL ASSESSMENT ON 16.5.2006, THERE WAS A PROCEEDING INI TIATED UNDER SECTION 154 ON 17.5.2006. THE MISTAKE PROPOSED TO BE RECTIFIED HAS BEEN MENTIONED AS UNDER IN SUCH NOTICE (PAPER-BOOK PAGE 3):- PARTICULARS OF MISTAKE PROPOSED TO BE RECTIFIED FORM NO.10CCB FOR CLAIMING CH. VI-A DEDUCTION UNDER SEC. 80IA IS NOT FILED (AMOUNTING TO RS. 759396/-) FORM NO.10CCB IS THE AUDIT REPORT REQUIRED TO BE SU BMITTED IN SUPPORT OF A CLAIM OF DEDUCTION UNDER SECTION 80-I(7)/80-IA (7)/80-IB/80-IC. SO, THE ONLY CONCLUSION THAT IS POSSIBLE IS THAT WHEN T HE ASSESSING OFFICER WAS DOING THE ORIGINAL ASSESSMENT ON 16.5.2006, HE WAS VERY WELL AWARE ABOUT THE CLAIM OF THE ASSESSEE UNDER SECTION 80-IB AND ALSO AWARE THAT FORM NO.10CCB REQUIRED FOR CLAIMING OF S UCH DEDUCTION WAS NOT YET FILED BY THE ASSESSEE. ON THE FACE OF SUCH FACTS, IT IS DIFFICULT TO BELIEVE THAT THE ASSESSING OFFICER HAD NOT FORMED A NY OPINION REGARDING THE CLAIM OF SECTION 80-IB DEDUCTION WHEN HE WAS FR AMING THE ORIGINAL ASSESSMENT. OPINION WAS CERTAINLY FORMED THOUGH NO T EXPRESSED. HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. KELV INATOR OF INDIA LTD. (256 ITR 1) (WHICH WAS UPHELD BY HONBLE APEX COURT ), HAD HELD AS UNDER AT PARA 23 OF ITS ORDER:- 14 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 23. WE ALSO CANNOT ACCEPT SUBMISSION OF MR. JOLLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RECORDED ON ANALYSIS OF THE MATERIALS ON THE R ECORD BY ITSELF MAY JUSTIFY THE A.O. TO INITIATE A PROCEEDING UNDER S. 147 OF THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASS ESSMENT CAN BE PASSED EITHER IN TERMS OF SUB-S. (1) OF S. 143 OR SUB -S. (3) OF S. 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TER MS OF THE SAID SUB-S. (3) OF S. 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT I N TERMS OF CL. (E) OF S. 114 OF THE INDIAN EVIDENCE ACT THE JUDICIAL AN D OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE A.O. TO REOPEN THE PRO CEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING P REMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL FUNCTION TO TAK E BENEFIT OF ITS OWN WRONG. 12. AS FOR THE RELIANCE PLACED BY THE LEARNED D.R. ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. V. DCIT (2012) 340 ITR 53 (LATER AFFIRMED BY HONBL E APEX COURT IN 340 ITR 64), THERE THE RECTIFICATION PROCEEDINGS WERE I NITIATED AFTER THE ORIGINAL ASSESSMENT WAS COMPLETED AND IT WAS FOR TH IS REASON THEIR LORDSHIPS HELD THAT RE-OPENING COULD NOT BE ASSAILE D CITING SUCH RECTIFICATION PROCEEDING AS APPLICATION OF MIND. H ERE, ON THE OTHER HAND, RECTIFICATION WAS ATTEMPTED PRIOR TO ORIGINAL ASSES SMENT, AND HENCE, IN OUR OPINION, THAT DECISION WILL NOT FURTHER THE CAS E OF THE REVENUE IN ANY MANNER. 13. IN THE CIRCUMSTANCES AS MENTIONED ABOVE, IN OUR OPINION, THE PRESUMPTION AS GIVEN UNDER SECTION 114 OF INDIAN EVIDENCE ACT WILL COME TO THE AID OF THE ASSESSEE. 15 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 14. FIRST EFFECTIVE GROUND TAKEN BY THE REVENUE THU S STANDS DISMISSED. 15. NOW COMING TO THE ASPECT WHETHER ASSESSEE WAS D OING A MANUFACTURING ACTIVITY OR NOT, IT IS AN ADMITTED PO SITION THAT ASSESSEE WAS DOING EMBROIDERY WORK ON CLOTH. THE A.O. HIMSE LF HAS GIVEN A FINDING THAT ASSESSEE WAS DOING EMBROIDERY WORK ON CLOTH RECEIVED FROM OTHER PARTIES. AS PER THE A.O., THE END PRODUCT WA S SAME AS THE ORIGINAL ITEM GIVEN BY THE PARTIES. ASSESSEE DEFINITELY WOU LD HAVE USED DIFFERENT MATERIALS FOR DOING THE EMBROIDERY WORK. IT IS NOT AS THOUGH THREAD ALONE WOULD BE SUFFICIENT TO DO EMBROIDERY WORK. TO CONS IDER THE EMBROIDERED WORK OR PRODUCT AS THE SAME AS RAW MATERIAL, WILL, IN OUR OPINION, BE INCORRECT. THERE IS A PROCESSING WHICH HAS BEEN DO NE ON CLOTH WHEN EMBROIDERY WORK IS DONE. A COMMON MAN WILL VIEW TH E NON- EMBROIDERED CLOTH, WHICH IS THE RAW MATERIAL AND EM BROIDERED CLOTH WHICH IS THE FINAL PRODUCT, DIFFERENTLY. IT IS NOT A QUESTION OF SIMPLE VALUE ADDITION. NOT ONLY HAS THE ORIGINAL RAW MATERIAL U NDERGONE A QUALITATIVE CHANGE BUT IN THE PROCESS A NUMBER OF MATERIALS HAV E BEEN USED. THE PROCESS CANNOT BE REVERSED TO OBTAIN THE ORIGINAL M ATERIAL BACK. WE CANNOT OBTAIN THE THREAD OR OTHER ITEMS USED BACK I N ORIGINAL SHAPE. TO THINK THAT CLOTH IN THE ORIGINAL FORM AND SHAPE COU LD HAVE BEEN RETRIEVED, IS AN ERROR. FURTHER, THE CIT(APPEALS) HAS GIVEN A FINDING THAT ASSESSEE WAS NOT DOING EMBROIDERY WORK ON CLOTH, BUT, WAS AL SO PRODUCING 16 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 BADGES, STICKERS, SPECIAL DESIGNS, ETC. ON WHICH AL SO EMBROIDERY WAS DONE. WE ARE OF THE OPINION THAT THE END PRODUCT C OULD NOT BE CONSIDERED AS MERE VALUE ADDITION OR ORIGINAL MATER IAL. LEARNED D.R. STRONGLY RELIED ON THE DECISION OF HONBLE JURISDIC TIONAL HIGH COURT IN VEENA TEXTILES P. LTD.S CASE (SUPRA). HOWEVER, AS POINTED OUT BY THE LEARNED A.R., THIS DECISION STOOD REVERSED BY HONB LE APEX COURT IN THE CASE OF S.S.M. BROS (P) LTD. (SUPRA). THE SAID APP EAL BEFORE HONBLE APEX COURT AROSE FROM TWO CIVIL APPEALS, NAMELY, CI VIL APPEAL NOS.931 OF 1991 AND 1775 OF 1992. CIVIL APPEAL NO.1775 EMA NATED FROM THE DECISION OF JURISDICTIONAL HIGH COURT IN T.C. NO.14 6 OF 1979 REPORTED AS CIT V. VEENA TEXTILES (P) LTD. (155 ITR 794). THE OTHER APPEAL EMANATED FROM THE SECOND CASE RELIED ON BY THE LEAR NED D.R., THE QUESTION RAISED BEFORE THE HONBLE JURISDICTIONAL H IGH COURT WAS WHETHER ASSESSEE PURCHASING CLOTH AND DOING EMBROIDERY DESI GNS WITH MACHINERY, COULD BE CONSIDERED AS MANUFACTURER OR P RODUCER OF TEXTILES. HONBLE JURISDICTIONAL HIGH COURT HELD THAT ASSESSE E WAS NOT INDULGING IN ANY MANUFACTURING ACTIVITY AND THEREFORE, NOT ENTIT LED FOR HIGHER RATE OF DEVELOPMENT REBATE UNDER SECTION 33(1)(B)(B)(I) OF THE ACT. BUT, HONBLE APEX COURT WHILE REVERSING THIS JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, HELD THAT WHAT ASSESSEE WAS DOING WAS A MANU FACTURING ACTIVITY AND IT WAS ENTITLED FOR DEVELOPMENT REBATE. IN THE FACE OF THIS, WE ARE OF THE OPINION THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.S.M. BROS (P) LTD. (SUPRA) COMES TO THE AID OF THE ASSES SEE. ASSESSEE WAS 17 I.T.A. NO. 700/MDS/2010 C.O. NO. 100/MDS/2010 INDEED ENGAGED IN MANUFACTURING ACTIVITY AND ELIGIB LE FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. 16. WE ARE, THEREFORE, OF THE OPINION THAT THIS APP EAL OF THE REVENUE HAS NO MERITS. 17. COMING TO THE CROSS-OBJECTION FILED BY THE ASSE SSEE, SINCE THE APPEAL FILED BY THE REVENUE IS DISMISSED, CROSS-OBJ ECTION HAS BECOME INFRUCTUOUS. 18. TO SUMMARIZE THE RESULT, BOTH, APPEAL OF THE RE VENUE AND CROSS- OBJECTION OF THE ASSESSEE, ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON FRIDAY, TH E 15 TH OF JUNE, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 15 TH JUNE, 2012. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-I, COIM BATORE/ CIT-I, COIMBATORE/D.R./GUARD FILE