Sh. Puneet Sehdev, Jammu V. The Addl. Commissioner of Income-tax, Jammu

CO 15/ASR/2012

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9900 (ITAT-AMRITSAR)
• Duration Of Justice: 6 year(s) 5 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-11-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER CO NO. 15/(ASR)/2012 (ARISING O UT OF ITA NO.153/ASR/2012) ASSESSMENT YEAR: 2008-09 SHRI PUNEET SAHDEV, PROP.M/S. PUNEET BANGLE HOUSE, JAIN BAZAR, JAMMU. [PAN: AQKPS 6682C] VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-2, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA (AD VOCATE) RESPONDENT BY: SH. ALOK KUMAR (CIT-D.R.) DATE OF HEARING: 15.11.2018 DATE OF PRONOUNCEMENT: 07.12.2018 ORDER PER SANJAY ARORA, AM: THIS IS A CROSS OBJECTION BY THE ASSESSEE ARISING O UT OF THE CAPTIONED APPEAL BY THE REVENUE, AGITATING THE PART ALLOWANCE OF THE ASSESSEES APPEAL CONTESTING HIS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 16.12.2010 FOR THE ASSESSMENT YEAR (AY) 2008-09, BY THE CIT(A), JAMMU (CIT(A) FOR SHORT) VIDE HIS ORDER DATED 29.02.201 2. 2. IT MAY BE RELEVANT TO NOTICE THE BACKGROUND FACT S OF THE CASE, I.E., BEFORE WE DELINEATE THE ISSUE AT HAND. THE ASSESSEE-INDIVIDUA L IS ENGAGED IN CONVERSION OF 24 CARAT (PURE) GOLD, ALSO CALLED BULLION, INTO 22 CAR AT GOLD, I.E., AS USED FOR MAKING CO NO.15/ASR/2012 (AY 2008-09) PUNEET SAHDEV V. ADDL. CIT 2 GOLD ORNAMENTS, BY INTRODUCING IMPURITIES IN THE FORM OF COPPER AND SILVER. THE ASSESSING OFFICER (AO), IN ASSESSMENT, DENIED THE A SSESSEES CLAIM FOR DEDUCTION U/S.80IB ON THE PRINCIPAL GROUND OF THE SAID CONVER SION BEING NOT MANUFACTURE, RELYING ON THE DECISION IN THE CASE OF TUNGABHADRA INDUSTRIES LTD. VS. CTO [1960] 11 STC 827 (SC). THE OTHER FACTORS, ALSO RESPONSIBL E FOR THE SAID DENIAL INCLUDE THE NON-SATISFACTION OF THE OTHER CONDITIONS OF SEC. 80 -IB. IN APPEAL, THE LD. CIT(A) ACCEPTED THE ASSESSEES CLAIM IN VIEW OF THE DECISI ON BY THE HONBLE DELHI HIGH COURT IN LOVLESH JAIN (IN ITA NO. 1223 OF 2011 DATED 20.12.2011, REPORTE D AT [2012] 67 DTR 232), HOLDING THE CONVERSION OF GOLD INTO GOLD ORNAMENTS TO BE A MANUFACTURE. THE OTHER OBJECTIONS RAISED BY THE A O WERE ALSO MET BY HIM. HE, HOWEVER, RESTRICTED THE SAME TO 95% OF THE PROFIT D ISCLOSED BY THE ASSESSEE FOR THE YEAR, RS.34.22 LACS, THE INCOME AT WHICH THE ASSESS MENT WAS THUS MADE BY THE AO. THIS WAS FOR THE REASON THAT THE ASSESSEE, IN HIS V IEW, APART FROM THE SAID CONVERSION, ALSO CARRIED ON OTHER ACTIVITIES, VIZ. REPAIRS AND ALTERATION OF THE OLD (CUSTOMERS) JEWELLERY, ETC. IN FACT, PURCHASES OF 6148 GMS. OF GOLD, OUT OF A TOTAL PURCHASE OF 37,377 GMS. THEREOF, WERE NOT VERIFIABL E, ALSO INDICATING SOME OTHER ACTIVITY BEING UNDERTAKEN. BOTH THE ASSESSEE AND TH E REVENUE FILED APPEALS AGAINST HIS ORDER; THE REVENUE AGAINST THE ACCEPTANCE OF TH E CLAIM FOR DEDUCTION U/S.80-IB, AND THE ASSESSEE AGAINST ITS RESTRICTION TO 95%, I .E., AGAINST 100%, OF THE PROFIT. THE REVENUES APPEAL, HOWEVER, ALSO LISTED FOR HEAR ING ALONG WITH, BEING NOT MAINTAINABLE IN VIEW OF SECTION 268A READ WITH INST RUCTION NO.3 OF 2018, DATED 11.07.2018 BY THE CBDT, STANDS DISMISSED IN LIMINE BY US ON 15.11.2018. THE ASSESSEES CROSS OBJECTION (CO), WHICH SURVIVES, RA ISES THE FOLLOWING GROUND: 1. THE LD. CIT(A) IS NOT JUSTIFIED IN CONCLUDING T HAT 5 PER CENT OF PROFITS DECLARED BY THE ASSESSEE IS NOT DERIVED FROM THE EL IGIBLE BUSINESS OF THE ASSESSEE AND NOT ALLOWING DEDUCTION U/S.80IB ON SUCH PROFIT AS THE ASSESSEE DOES NOT CARRY OUT ANY BUSINESS OTHER THAN MANUFACTURE OF JEWELLER Y AND ORNAMENTS AND THERE BEING NO MATERIAL ON RECORD THAT THE ASSESSEE HAS C ARRIED OUT ANY OTHER ACTIVITY. CO NO.15/ASR/2012 (AY 2008-09) PUNEET SAHDEV V. ADDL. CIT 3 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THE RELEVANT FINDINGS BY THE LD. CIT(A) READ AS UNDER: REGARDING UNVERIFIED PURCHASES, IT IS SEEN FROM RE CORDS THAT FOR A TOTAL SALE OF 37,443 GMS. CASH PURCHASES WERE ONLY 6148 GMS WHERE AS 31229 GMS. WERE SUPPORTED BY BILLS. THIS PURCHASE OF 6148 GMS IS NO T VERIFIABLE DUE TO ASSESSEES INABILITY TO PRODUCE THE PARTIES. LOOKIN G TO THE NATURE OF BUSINESS OF ASSESSEE IT COULD HARDLY BE DIGESTED THAT THE ASSES SEE WOULD ONLY PURCHASE 24 KG. (CARAT) GOLD AND CONVERT IT INTO ORNAMENTS AND REFUSE TO DO OTHER JOBS LIKE REPAIRING OF OLD JEWELLERY AND MINOR ALTERATIONS IN CUSTOMERS JEWELLERY, ETC. THE FACT THAT PURCHASES TO THIS EXTENT ARE NOT VERI FIED COUPLED WITH THE FACT THAT ALL SUCH PURCHASES WERE SHOWN BELOW RS.20,000/- LOO KS HIGHLY IMPROBABLE AND NO EXPLANATION FOR THIS IS AVAILABLE FROM THE S IDE OF ASSESSEE. IN VIEW OF THIS, IT IS AN INESCAPABLE CONCLUSION THAT A CERTAI N PERCENTAGE OF THE INCOME IS TO BE TREATED AS INCOME FROM BUSINESS WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S.80-IB OF IT ACT NOT BEING IN THE NATURE OF MANU FACTURING. PROVISIONS OF PROVISO TO SECTION 80IA(8) SAYS THAT WHEN THE COMPUTATION OF PROFITS FROM ELIGIBLE BUSINESS PRESENTS EXCEPTIONAL DIFFICULTIES THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAINS ON SUCH REASONABLE B ASIS AS HE MAY DEEM FIT. INVOKING THIS PROVISION, IN MY OPINION THE MOST REA SONABLE AND FAIR ESTIMATE WOULD BE TO TREAT 5% OF SUCH PROFITS AS NOT ATTRIBU TABLE TO ELIGIBLE BUSINESS AND TO BE TAXED SEPARATELY. HELD ACCORDINGLY. 3.2 DURING HEARING, LD. CIT-DR, SHRI ALOK KUMAR, WA S ASKED BY THE BENCH OF THE BASIS ON WHICH THE LD. CIT(A) CLAIMS THE ASSESS EE TO BE, APART FROM MANUFACTURE OF JEWELLERY, ALSO UNDERTAKING JOBS FOR MODIFICATION AND REPAIR OF JEWELLERY, WHICH NO DOUBT JEWELLERS NORMALLY DO. HE WOULD SUBMIT IT TO BE AN ADMITTED FACT BY THE ASSESSEE. THOUGH, THE LD. COUN SEL, SHRI ARORA, DID NOT REBUT THIS ASSERTION BY THE LD. CIT-DR, WE DO NOT OBSERVE ANY SUCH ADMISSION BY THE ASSESSEE ON RECORD, HAVING CAREFULLY PERUSED THE AS SESSMENT AND THE IMPUGNED ORDER AS WELL. AND WHICH, THEREFORE, BECOMES A MATTER OF PRESUMPTI ON, AND WHICH CANNOT BE; THE ASSESSEE IN FACT CATEGORICALLY DENYI NG IT PER HIS SOLE GROUND . RATHER, AS APPEARS TO BE THE CASE, THE ASSESSEE HAS ONLY RE FLECTED SALES OF 22 CARAT GOLD AND/OR GOLD ORNAMENTS; THE LATTER BEING ALSO CLAIME D BEFORE THE FIRST APPELLATE AUTHORITY. THERE IS, ACCORDINGLY, NO BASIS TO SAY T HAT THE ASSESSEE HAS UNDERTAKEN JOB WORK AS WELL - WHICH CANNOT BE SAID TO BE A MAT TER OF RULE, AND IMPUTE A PART OF CO NO.15/ASR/2012 (AY 2008-09) PUNEET SAHDEV V. ADDL. CIT 4 THE EXISTING PROFIT FROM THE REGULAR BUSINESS THERE TO, I.E., AS DONE BY THE LD. CIT(A), WHO HAS NOT ENHANCED THE ASSESSEES INCOME, AS CONT ENDED BY SHRI ARORA BEFORE US. RATHER, WHERE THE LD. CIT(A) HAD SOME BASIS TO HOLD THE ASSESSEE AS ALSO UNDERTAKING REPAIR/MODIFICATION WORK, HE OUGHT TO, STATING SO, I.E., INCLUDING THE SAID BASIS, ESTIMATE THE ADDITIONAL INCOME ON WHICH , ARISING NOT FROM MANUFACTURE OR PRODUCTION, SECTION 80-IB WOULD, WITHOUT DOUBT, NOT HOLD. IN DOING SO, HE COULD EXPLICITLY OR IMPLICITLY REJECT THE ASSESSEES ACCO UNTS, SINCE ACCEPTED BY THE AO. 3.3 CONTINUING FURTHER, TRUE, THE IMPUGNED ORDER IS PREMISED ON THE MANUFACTURE OF JEWELLERY, A FACT BROUGHT FORTH, AS IT APPEARS, FOR THE FIRST TIME BEFORE THE FIRST APPELLATE AUTHORITY, WHO HAS ALSO NOT SOUGHT TO BIF URCATE THE PROFITS BETWEEN THE TWO STATED ACTIVITIES, I.E., CONVERSION OF GOLD AND THE MANUFACTURE OF JEWELLERY. THIS ASPECT OF THE MATTER, HOWEVER, COULD ONLY BE GERMAN E TO THE REVENUES APPEAL, SINCE HELD AS NOT MAINTAINABLE. SIMILARLY, THE ARGU MENT WITH REFERENCE TO UNVERIFIABLE PURCHASES, EMPHASIZED BY THE LD. CIT-D R DURING HEARING, IS IRRELEVANT IN THE CONTEXT OF THE ASSESSEES CO THE ONLY ISSU E RAISED THEREBY BEING THE MAINTAINABILITY OF THE RESTRICTION OF THE DEDUCTION U/S. 80-IB ON THE ASSESSEES PROFIT FROM THE DISCLOSED ACTIVITY/S OF MANUFACTURE AND SA LE OF CONVERTED GOLD AND GOLD ORNAMENTS. AND WHICH WE HAVE, IN THE ABSENCE OF ANY MATERIAL SUGGESTING JOB WORK, NOT DISCLOSED IN ACCOUNTS, ANSWERED IN THE NE GATIVE. THE UNVERIFIABLE PURCHASES, IT NEEDS TO BE APPRECIATED, ARE ALSO OF THE ASSESSEES DISCLOSED BUSINESS. THE REFERENCE BY THE COUNSELS TO THE SUBSEQUENT ORD ERS IN THE ASSESSEES CASE, I.E., IN FIRST APPEAL, FOR AY 2006-07 (PB PGS. 126-139) A ND AY 2009-10 (APPEAL FOR WHICH YEAR WAS ALSO FIXED ALONGWITH), IS, FOR THE S AME REASON, OF NO CONSEQUENCE. WE MAY THOUGH HASTEN TO ADD THAT THERE IS NO MENTIO N OF THE ASSESSEE BEING INVOLVED IN THE SAID JOB WORK ACTIVITY IN THE SAID ORDERS, FOR US TO, AS THE FINAL FACT FINDING AUTHORITY, TAKE COGNIZANCE THEREOF. CO NO.15/ASR/2012 (AY 2008-09) PUNEET SAHDEV V. ADDL. CIT 5 4. IN VIEW OF THE FOREGOING, WE HAVE NO HESITATION IN, ACCEPTING THE ASSESSEES PLEA, HOLD THE RESTRICTION OF THE ASSESSEES CLAIM FOR DEDUCTION U/S. 80-IB TO 95% THEREOF BY THE LD. CIT(A) AS NOT PROPER. THE QUESTI ON OF THE REASONABILITY OF THE SAID RESTRICTION, ALSO ARGUED BEFORE US BY THE LD. CIT-DR, IN THAT VIEW OF THE MATTER, DOES NOT ARISE. WE DECIDE ACCORDINGLY, AND THE ASSE SSEE SUCCEEDS. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 07, 2018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 07.12.2018 PKK. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: SHRI PUNEET SAHDEV PROP. M/S . PUNEET BANGLE HOUSE, JAIN BAZAR, JAMMU. (2) THE RESPONDENT: ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-2, JAMMU. (3) THE CIT(APPEALS), JAMMU (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDE R