GIA EXPORTS, MUMBAI V. ACIT CEN CIR 33, MUMBAI

CO 231/MUM/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8770 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Search and seizure; Additional evidence
• Section: 143(3); 142(1); 133A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH, MUMBAI , BEFORE SHRI R.K.GUPTA, JM & SHRI N.K.BILLAIYA , AM ITA NO. 8080 TO 8082 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 200 6 - 07, 2007 - 08 & 2008 - 09 ) ACIT CEN. C IR. 33 , MUMBAI VS. M/S GIA EXPORTS, 70/70A, LAXMI PREMISES, 1 ST FLOOR, SHAIKJH MEMON, ST. MUMBAI - 400 002 PAN/GIR NO. : A A GFG 311 6 R ( APPELLANT ) .. ( RESPONDENT ) C.O. NO S . 229 TO 231 /MUM/20 1 2 ( ASSESSMENT YEAR :2006 - 07, 2007 - 08 & 2008 - 09 ) M/S GIA EXPORTS, 70/70A, LAXMI PREMISES, 1 ST FLOOR, SHAIKJH MEMON, ST. MUMBAI - 400 002 VS. ACIT CEN. CIR. 33, MUMBAI PAN/GIR NO. : AAGFG 3116 R ( APPLICANT ) .. ( RESPONDENT ) /REVENUE BY : MR. PAVAN VED /ASSESSEE BY : MR. REEPAL G. TRALSHAWALA DATE OF HEARING : 1 1 TH JUNE, 201 3 DATE OF PRONOUNCEMENT : 19 TH JUNE, 2013 O R D E R PER BENCH : THE DEPARTMENT HAS FILED THREE APPEALS AND THE ASSESSEE HAS FILED THREE CROSS OBJECTIONS, RELATING TO ASSESSMENT YEARS FROM 2006 - 07 TO 2008 - 09. 2 . SINCE COMMON ISSUES ARE INVOLVED IN ALL THE CASES, THEREFORE, FOR THE SAKE OF CONVENIENCE, ALL THE CASES HAVE BEEN HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 2 3 . THE DEPARTMENT IN ITS APPEALS IS OBJECTING IN DIRECTING THE AO TO ALLOW THE DEDUCTION UNDER SECTION 10A OF THE ACT AS THERE ARE ENOUGH EVIDENCES TO SHOW THAT NO MANUFACTURING ACTIVITIES WERE CARRIED OUT AT SEZ, SURAT UNIT. THE DEPARTMENT HAS ALSO MENTIONED IN ITS GROUNDS THAT APPELLATE ORDER OF THE CIT(A) SHOULD BE SE T ASIDE AND THE MATTER MAY BE REFERRED TO THE AO FOR FRESH ADJUDICATION. 4 . LEARNED DR DURING THE APPELLATE PROCEEDING STATED THAT THE DEPARTMENT HAS ALSO RAISED AN ADDITION AL GROUND THAT THE ORDER OF THE CIT(A) IS PERVERSE IN NATURE. THEREAFTER THE APPEALS OF THE DEPARTMENT AND THE CROSS OBJECTIONS OF THE ASSESSEE WERE TAKEN FOR HEARING. 5 . LEARNED DR, FIRSTLY, PLACED RELIANCE ON THE ORDER OF THE AO, THEREAFTER ENTIRE ORDER OF THE AO FOR ASSESSMENT YEAR 2006 - 07 W AS READ ALSO. AFTER READING THE ORDER OF TH E AO, LEARNED DR READ THE FINDING OF THE CIT(A) ALSO. ACCORDINGLY, IT WAS SUBMITTED THAT OBJECTIONS RAISED BY THE AO HAVE NOT BEEN CONSIDERED BY THE LEARNED CIT(A) IN RIGHT PERSPECTIVE, THEREFORE, THE ORDER OF THE LEARNED CIT(A) IS PERVERSE IN NATURE. ACCO RDINGLY, THE ORDER OF THE LEARNED CIT( A) IS LIABLE TO BE SET ASIDE AND THE ORDER OF THE LEARNED AO IS LIABLE TO BE RESTORED. IT WAS FURTHER SUBMITTED THAT THE AO HAS EXAMINED THE ISSUE THREADBARE AND IT WAS FOUND THAT THERE WAS NO MANUFACTURING ACTIVITY AT SEZ UNIT AT SURAT. SINCE, THE CONDITIONS WE RE ALSO NOT SATISFIED, THEREFORE, THE AO WAS CORRECT IN DENYING DEDUCTION UNDER SECTION 10A FOR ALL THE THREE YEARS I.E. FOR ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2008 - 09. ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 3 6 . ON THE OTHER HAND, LEARNED COUNSE L OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE CIT(A). IT WAS FURTHER SUBMITTED THAT IN FACT IN THE CASE OF AURO GOLD JEWELLERY PVT. LTD., A SEARCH AND SEIZURE ACTION WAS CONDUCTED UNDER SECTION 132(1) ON 24 - 9 - 2008. THE ASSESSEE IS A PARTNERSHIP FIR M WHERE THE DIRECTORS OF M.S AURO GOLD JEWELLERY PVT. LTD. ARE PARTNERS. DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS AND BOOKS OF ACCOUNTS PERTAINING TO THE ASSESSEE WERE SEIZED. ACCORDINGLY NOTICE UNDER SECTION 153C WAS SERVED ON THE ASSESSEE. THEREAFT ER A SURVEY UNDER SECTION 133A WAS CONDUCTED ON THE ASSESSEE AND AFTER THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACCORDINGLY, NOTICE UNDER SECTION S 143(2) AND 142(1) WERE ISSUED ON THE ASSESSEE REQUIRING THE ASSESSEE TO FILE DETAILS AS PER A NNEXURE ENCLOSED ALONG WITH NOTICE. IT WAS FURTHER EXPLAINED THAT THE AO NOTED IN HIS ORDER THAT IN VIEW OF THE FINDING ON THE SURVEY CARRIED OUT IN ASSESSEES CASE, IT WAS FOUND THAT THE FACTORY WAS CLOSED, MACHINERY WERE NOT IN A WORKING CONDITION AS THE PLANT AND MACHINERY WERE RUSTED AND NON FUNCTIONI NG, THERE WAS NO TRACE OF MANUFACTURING ACTIVITY, NEITHER THERE WAS PERMANENT EMPLOYEE IN THE SEZ UNIT AT SURAT. THE MACHINERY IF TREATED AS IN GOOD CONDITION WAS NOT CAPABLE OF THE HUGE PRODUCTION OF SUCH HIGH VALUE ADDITION IN THE TIME OF FRAME AVAILABLE. POWER CONSUMPTION WAS NOT SUFFICIENT TO SUPPORT THE HUGE PRODUCTION SHOWN BY THE ASSESSEE COMPANY. THE A O ALSO NOTED THAT THE PROFIT MARGIN SHOWN BY THE ASSESSEE COMPARED TO THE NON SEZ UNITS WAS MUCH HIG HER AS COMPARED TO THE CASE OF M/S RIDDHI SIDDHI ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 4 BULLIONS LTD. DISCUSSING THE ISSUE IN DETAIL IN HIS ORDER, THE AO CAME TO THE CONCLUSION THAT THE CLAIM OF DEDUCTION UNDER SECTION 10A MADE BY THE ASSESSEE SUFFERS FROM IRREGULARITIES AND IS LIABLE FOR REJE CTION AND HENCE, DEDUCTION UNDER SECTION 10A WAS DENIED FOR ASSESSMENT YEAR 2006 - 07. SIMILAR ORDER WAS PASSED FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 AND ACCORDINGLY , THE DEDUCTION CLAIMED BY THE ASSESSEE FOR ALL THE THR EE YEARS WERE DENIED BY THE AO. 7 . ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) , BEFORE WHOM DETAILED WRITTEN SUBMISSION WERE FILED, WHICH ARE REPRODUCED IN THE ORDER OF THE CIT(A) IN RESPECTIVE YEARS FOR ALL THE THREE YEARS. CIT(A) AFTER CONSIDERING THE ORDER OF THE AO AND THE SUBMISS ION, FOUND THAT THE ASSESSEE DESERVES TO SUCCEED IN ITS APPEAL ON THE POINT OF ISSUE IN RESPECT OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE CONTENTION OF THE ASSESSEE WAS CONSIDERED BY THE CIT(A) IN DETAIL AND THEREAFTER THE CIT(A) FOUND THAT THE AO WAS NOT CORRECT IN DENYING THE DEDUCTION. THE CIT(A) HAS NOTED THAT IN FACT THE AO HAS PLACED RELIANCE ON THE FINDING OF SURVEY PARTY WHICH WAS CONDUCTED UNDER SECTION 133A . IT WAS NOTED BY THE CIT(A) THAT SURVEY WAS CONDUCTED SOMETIME IN THE MONTH OF OCTOBER , 2007 WHEREAS THE ACTIVITY OF THE MANUFACTURING CARRIED OUT MUCH EARLIER. BOOKS OF ACCOUNTS AS WELL AS OTHER RECORDS I.E RECORDS OF EXCISE DEPARTMENT, RECORDS OF CUSTOM AUTHORITY AND IMPORT OF GOLD AND MANUFACTURING BILLS WERE EXAMINED BY THE CIT(A) AND I T WAS FOUND THAT NO ADVERSE MATERIAL WAS THERE TO HOLD THAT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITY. AFTER DISCUSSING THE ISSUE IN ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 5 DETAIL, LEARNED CIT(A) CONCLUDED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A. ACCORDING LY, HE ALLOWED THE DEDUCTION FOR ALL THE THREE YEARS. IT WAS FURTHER EXPLAINED THAT IN SAME UNIT SIMILAR MANUFACTURING ACTIVITY CONDUCTED BY THE ASSESSEE IN EARLIER YEARS, THE DEPARTMENT ITSELF HAS ALLOWED DEDUCTION UNDER SECTION 10A. IT WAS FURTHER SUBMIT TED THAT FOR ASSESSMENT YEAR 2006 - 07 IN REGULAR ASSESSMENT THE CLAIM OF DEDUCTION UNDER SECTION 10A WAS DENIED BY THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO PARTLY ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE IN RESPECT TO DEDUCTION UNDER SECTION 10A. THEREAFTER THE ASSESSEE PREFERRED APPEAL BEFORE THE ITAT , WHO ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 10A, WHICH WAS IN RESPECT OF DELAYED PAYMENT RECEIPT. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED AT PAGE 195 TO 197 AND THE ORDER OF THE CIT(A) IS PLACED AT PAGE 193. IT WAS FURTHER SUBMITTED THAT EVEN FOR ASSESSMENT YEAR 2010 - 2011, THE AO HIMSELF HAS ALLOWED THE DEDUCTION UNDER SECTION 1 0 A. COPY OF THE ORDER PASSED UNDER SECTION 143(3) , DATED 30 - 3 - 2013 WAS FILED BY THE LEARNED AR. ACC ORDINGLY, IT WAS SUBMITTED THAT THIS IS NOT A CASE OF THE DEPARTMENT THAT THE ASSESSEES UNIT WAS NOT ABLE TO MANUFACTURE THE ITEMS SOLD BY THE ASSESSEE. IN FACT, ACTIVITIES ARE DONE AS PER REQUIREMENT AND WHENEVER ASSESSEE IMPORTS GOLD FROM ABROAD THEN ON LY IT STARTS ITS MANUFACTURING ACTIVITY AND AFTER MANUFACTURING THE MATERIAL, IT SUPPLIES TO ITS CUSTOMERS. IT WAS FURTHER SUBMITTED THAT THE ACTIVITY OF THE ASSESSEE IS SUBJECT TO EXCISE AND CUSTOM DEPARTMENT. EACH AND EVERY DETAIL HAS BEEN FILED TO THE ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 6 EXCISE DEPARTMENT AS WELL AS CUSTOM DEPARTMENT AND NONE OF THE AUTHORITY FOUND AT ANY POINT OF TIME THAT THE ASSESSEE IS NOT INDULGED IN MANUFACTURING ACTIVITY. ACCORDINGLY, IT WAS SUBMITTED THAT LEARNED CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS. 8 . IN REPLY, LEARNED DR STATED THAT THERE IS NO ORDER OF THE EXCISE AND CUSTOM DEPARTMENT THAT THE ASSESSEE HAS BEEN DOING ANY MANUFACTURING ACTIVITY IN THESE YEARS. 9 . IN COUNTER REPLY, LEARNED COUNSEL OF THE ASSE SSEE STATED THAT THERE IS NO REQUIREMENT IN LAW TO PASS AN ORDER BY THE EXCISE AND CUSTOM DEPARTMENT AS THERE WAS NO IRREGULARITY WAS NOTED BY THESE AUTHORITIES. THEREFORE, THE CONTENTIONS OF THE LEARNED AR ARE NOT CORRECT. 10 . THE COUNSEL OF THE ASSESSEE STATED THAT IF THE ORDERS OF THE CIT(A) ARE CONFIRMED THEN IN THAT CASE THE CROSS OBJECTION FILED BY THE ASSESSEE MAY BE TREATED AS NOT PRESSED, OTHERWISE, THE ASSESSEE SHOULD BE ALLOWED TO ARGUE HIS CASES. 11 . ON THE OTHER HAND, LEARNED DR HAS FILED A W RITTEN REPLY IN RESPECT OF CROSS OBJECTIONS FILED BY THE ASSESSEE, WHICH ARE TAKEN ON RECORD. 1 2 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO PERUSED THE ORDERS OF THE AO AS WELL AS THE ORDER OF THE LEARNED CIT(A) FOR ALL T HE THREE YEARS I.E. FOR ASSESSMENT YEARS 2006 - 07 ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 7 TO 2008 - 09 . WE HAVE ALSO PERUSED THE OTHER MATERIAL PLACED ON RECORD. AFTER GOING THROUGH THE RELEVANT MATERIAL, WE FOUND THAT THE SURVEY WAS CONDUCTED UNDER SECTION 133A OF THE ACT ON 8 - 10 - 2008 AT THE PREMI SES OF THE ASSESSEE. IT WAS FURTHER NOTED THAT REGARDING ASSESSMENT YEARS 2006 - 07 & 2007 - 08 , THE RETURN OF INCOME WAS FILED IN DUE COURSE CLAIMING DEDUCTION UNDER SECTION 10A. SINCE THE SEARCH WAS CONDUCTED AT THE PREMISES OF THE AURO GOLD JEWELLERY PVT. L TD. AND CERTAIN MATERIAL WAS FOUND RELATING TO THE ASSESSEE, ACCORDINGLY, NOTICE UNDER SECTION 153C WAS ALSO ISSUED ON THE ASSESSEE. THEREAFTER CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT PROCEEDING WAS STARTED AFTER ISSUING RELEVANT NOTICE S . THE AO HAS MENTIONED ALL THESE IN HIS ORDER AND THEREAFTER THE FINDING OF THE SURVEY PARTY HAVE BEEN TAKEN INTO CONSIDERATION BY THE AO. AT THE TIME OF SURVEY, THE UNIT OF THE ASSESSEE WAS NOT FUNCTIONAL BECAUSE THERE WAS NO ORDER AND MACHINES WER E LYING IDLE. ACCORDINGLY, THE SURVEY PARTY NOTED THAT AT THE TIME OF SURVEY THERE WAS NO EMPLOYEES KEPT BY THE ASSESSEE AND THE UNIT OF THE ASSESSEE WAS CLOSED. THEREAFTER THE UNIT WAS INSPECTED ALONG WITH MACHINERIES ETC. AND FOUND THAT MACHINERIES WERE NOT IN WORKING CONDITION, THEREFORE, NO POSSIBILITY OF ANY MANUFACTURING ACTIVITY AT THE PREMISES OF THE ASSESSEE. THE IRREGULARITIES AND DEFICIENCIES NOTED BY THE SURVEY PARTY WERE TAKEN INTO CONSIDERATION BY THE AO AND THEY WERE DISCUSSED IN THE ORDER OF THE AO ITEM WISE . T HE AO BRIEFLY MENTIONING THE SUBMISSIONS OF THE ASSESSEE CONCLUDED THAT SINCE THERE WAS NO MANUFACTURING AT THE UNIT ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 8 OF THE ASSESSEE FOUND BY THE SURVEY PARTY. ACCORDINGLY, THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UN DER SECTION 10A AS CLAIMED BY THE ASSESSEE. SIMILAR REASONING HAS BEEN GIVEN BY THE AO FOR ALL THE ASSESSMENT YEARS. D ETAILED WRITTEN SUBMISSIONS WERE FILED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(A) , WHICH ARE RECORDED IN PARA 1.6 AT PAGES 3 & 4 IN HIS ORDER FOR ASSESSMENT YEAR 2006 - 07. FOR THE SAKE OF CLARIFICATION, THESE SUBMISSION S ARE REPRODUCED HERE AS UNDER ALSO : - 1.6 BEFORE ME, THE APPELLANT SUBMITTED AS UNDER: THE APPELLANT SUBMITS THAT THE FACT THAT IT HAS IMPORTED RAW MATERIAL (GOLD BARS/METAL) AND SUBSEQUENTLY EXPORTED DULY MANUFACTURED' BANGLES FROM THE SAID UNIT DURING THE PERIOD UNDER REFERENCE IS SUBSTANTIATE D OR EVIDENCED BY INDEPENDENT, THIRD PARTY AND GOVERNMENT AGENCIES DOCUMENTS WHICH PROVES TILE CLAIM OF THE APPELLANT BEYON D ANY DOUBT. SOME OF THESE DOCUMENTS ARE: SUPPLIERS INVOICE O IMPORT' OF RAW MATERIAL (GOLD METAL) WITH THEIR PACKING LIST MENTIONING THEREIN DESCRIPTION, QUANTITY AND VALUE IN US$; IMPORT INSURANCE COVER NOTE MENTIONING THEREIN THE DESCRIPTION, QUANTI TY AND VALUE; AIR W AY BILL OF AIRLINE MENTIONING THEREIN DESCRIPTION, QUANTITY AND VALUE; CLEARING AND FORWARDING AGENT'S BILL MENTIONING THEREIN DESCRIPTION, QUANTITY AND VALUE; CUSTOM BILL OF ENTRY PREPARED AT SURAT CUSTOMS DEPARTMENT MENTIONING TH EREIN THE DESCRIPTION, QUANTITY AND VALUE; ASSAYING REPORT FROM THE GOVERNMENT APPROVED VALUER CERTIFYING THE CLASS OF GOODS AND PURITY OF THE FINISHED GO ODS MEANT FOR EXPORTS; EXPORT INVOICE OF APPELLANT & PACKING LIST' MENTIONING THEREIN DESCRIPTION OF FINISHED GOODS EXPORTED, QUANTITY AND VALUE IN US$; EXPORT INSURANCE COVER NOTE MENTIONING THEREIN THE DESCRIPTION, QUANTITY AND VALUE; CLEARING & FORWARDING AGENT'S WII ON EXPORT OF CONSIGNMENT MENTIONING THEREIN THE DESCRIPTION, QUANTITY AND VALUE; ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 9 G. R. FORM PREPARED AT SURAT CUSTOMS DEPARTMENT MENTIONING THER EIN THE DESCRIPTION, QUANTITY AND VALUE; AIR WAY BILL OF AIRLINE ON EXPORT OF CONSIGNMENT MENTIONING THEREIN THE DESCRIPTION, QUANTITY AND VALUE; PAYMENT ADVICE FROM BANK ON SENDI N G FORE IGN OUTWARD REMITTANCE TO SUPPLIER OF RAW MATERIAL FOR TILE PAYMENT MADE BY THE APPELLANT TO THEM TOWARDS THE COST OF IMPORT; CREDIT: ADVICE FROM BANK ON RECEIVING INWARD FOREIGN REMITTANCE FROM OVERSEAS CUSTOMER TOWARDS THE PROCEEDS OF EXPORT INVOICE; D. R. C. ISSUED BY THE BANK ON THEIR RECEIVING EXPORT PROCEEDS IN CONVERTIBLE FOREIGN EXCHANGE. FROM T HE AFORESAID DETAILS, THE APPELL ANT SUBMITS THAT IT HAS PROVED BEYOND ANY DOUBT THAT THE RAW MATERIAL I.E. GOLD BAR IS IMPORTED AND AFTER MANUFACTURING THE FINISHED PRODUCT I.E. BANGLES HAVE BEEN EXPORTED AND THIS IS CERTIFIED BY THE VARIOUS GOVERNMENT AUTHORITIES INCLUDING THAT OF CUSTOMS DEPARTMENT LOCATED IN THE SURA T SEZ. THUS, THE APPEL L ANT SUBMITS THAT ONCE THE GOODS ARE IMPORTED AND EXPORTED, IT I S NATURAL THAT THE GOODS ARE ALSO MANUFACTURED AND THE ONLY MANUFACTURING PLACE IS THE FACTORY OF THE APPELLANT LOCATED IN THE SURAT SEZ WHERE THE IMPORTED GOODS COME IN AND THE FINISHED GOODS GO OUT, WHICH IS DULY VERIFIED AND INSPECTED NOT ONLY BY THE SE Z AUTHORITIES BUT ALSO THE CUSTOMS AUTHORITIES. THIS PROVES THAT THE GOODS ARE MANUFACTURED IN THE SEZ UNIT OF APPELLANT IN SURAT AND HENCE, THE CLAIM OF DEDUCTION FOR EXEMPTING EXPORT INCOME IS PROPER AND COULD NOT BE DISALLOWED. 1 3 . AFTER EXAMINING ALL THESE SUBMISSIONS AND DETAILS, LEARNED CIT(A) RECORDED A FINDING IN PARA 1.7 TO 1.9 , WHICH ARE AS UNDER : - 1.7 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ORDER OF THE A.O. AND FACTS OF T HE CASE CAREFULL Y, IT IS NOTICED THAT DURING THE COURSE OF SEARCH & SEIZURE OPERATION AT THE BUSINESS AND OFFICE PREMISES OF THE ASSESSEE COMPANY AT MUMBAI, IT WAS NOTICED THAT THE ASSES SEE HAS CLAIMED DEDUCTION U/S. 10A IN RESPECT OF PROFIT OF UNIT NO. 366 LOCATED IN SEZ SACHIN SURAT IN THE NAME OF THE FIRM M / S GIA EXPORTS IN WHICH BOTH THE DIRECTORS OF THE COMPANY ARE PARTNERS. THUS SIMULTANEOUSLY A SURVEY OPERATION U/S. L33A WAS CARRIED OUT IN THE SEZ UNIT. WHEN THE SURVEY TEAM REACHED THERE BOTH THE UNITS WERE LOCKED A ND THE PLANT AND MACHINERY WAS RUSTED AND NON - FUNCTIONING. THERE WAS. NO TERRACE OF ANY MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE COMPANY DURING THE YEAR. THERE WAS NO PERMANENT EMPLOYEE OR LABOUR EMPLOYED IN THE SEZ UNIT. NO BOOKS OF ACCOUNTS OR OTHER DOCUMENTS WERE MAINTAINED THERE. THE POWER CONSUMPTION WAS NOT SUFFICIENT TO PROVIDE SUPPORT FOR THE HUGE PRODUCTION OF EXPORTS AND MACHINERY INSTALLED WAS ALSO NOT CAPABLE OF PRODUCING SUCH HIGH VALUE PRODUCTION FOR EXPORTS. THE ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 10 PROFITS SHOWN FROM T HIS SEZ UNIT WAS ALSO HIGHER THAN THE NON SEZ UNIT. ON THESE BASIS, THE A.O. HAS HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S. 10 A AND DISALLOWED THE SAME. 1.8 ON THE OTHER HAND, THE A.R. OF THE APPELLANT HAS SUBMITTED THAT DURING THE SEARCH/SURVEY YEAR THE ASSESSEE FIRM HAS NOT RECEIVED ANY ORDER FOR EXPORT. THEREFORE, THE UNIT WAS CLOSED AT THE TIME OF SEARCH. IT WAS ADMITTED THAT THE UNIT WAS GENERALLY REMAINED CLOSED WHEN THERE IS NO EXPORT ORDER. IT WAS ALSO ADMITTED THAT NO PE RMANENT EMPLOYEE OR PERMANENT LABOUR WAS EMPLOYED IN THIS UNIT. BUT THE OBJECTION OF THE A.O. WAS THAT THE PLANT AND MACHINERY WAS NOT WORKING WAS NOT ADMITTED BY THE APPELLANT BECAUSE HE HAS STATED THAT EVEN IN THE ASSESSMENT PROCEEDINGS, HE HAS REQUESTED THE A.O. TO VISIT THE UNIT AND VERIFY THAT THE MACHINERY WAS IN WORKING CONDITION. REGARDING THE ALLEGATION OF THE POWER CONSUMPTION, THE A. R. OF THE APPELLANT HAS SUBMITTED THAT THE FIRM HAS POWER CONNECTION AND IT WAS USED ONLY WHEN IT HAS GOT THE EXPO RT ORDERS. THE A. R. OF THE APPELLANT HAS EMPHASIZED THAT THE SEZ UNIT IS WORKING ONLY FOR EXPORT PURPOSES. ALL THE RAW MATERIAL IS IMPORTED UNDER THE SUPERVISION AND CONTROL OF CUSTOM AND CENTRAL EXCISE DEPARTMENT. NO ITEM CAN BE ENTERED OR REMOVED WITHOU T THE APPROVAL OF THE CUSTOM AND CENTRAL EXCISE DEPARTMENT. NO MATERIAL PRODUCED FROM THESE UNITS CAN BE SOLD IN INDIA BECAUSE IT IS ONLY FOR EXPORT PURPOSES WHICH IS AGAIN UNDER THE SUPERVISION AND CONTROL OF CUSTOM AND CENTRAL EXCISE DEPARTMENT. IT WAS F URTHER STATED THAT ALL THE IMPORT AND EXPORT RAW MATERIAL AND FINISHED GOODS WAS MADE THROUGH SHIPMENT AND PROPER INVOICES OF SALES HAVE BEEN MAINTAINED AND FOREIGN REMITTANCES WERE ALSO RECEIVED THROUGH PROPER BANKING CHANNELS WITH THE APPROVAL OF THE RES ERVE BANK OF INDIA. IT WAS ADMITTED THAT THE BOOKS OF ACCOUNTS AND THE OTHER DOCUMENTS WERE NOT MAINTAINED THERE AT THE TIME OF SURVEY U/S. 1 33A BECAUSE IN THIS YEAR NO IMPORT OR EXPORT ACTIVITY WAS CARRIED OUT BY THE COMPANY FROM THIS UNIT DURING THE YEAR . TO VERIFY THESE FACTS, THE A.R. OF THE APPELLANT WAS ASKED TO SUBMIT THE COMPLETE DETAILS OF IMPORTS AND EXPORTS MADE THROUGH THIS UNIT AND THE APPROVAL OF THE CUSTOM AND CENTRAL EXCISE DEPARTMENT. DOCUMENTS R E LATING TO SHIPMENT IMPORT AND EXPORT CLEARAN CE INVOICES OF IMPORT & EXPORT AND FOREIGN REMITTANCES IN THE BANK ACCOUNTS. ALL THESE DOCUMENTS WERE SUBMITTED AS BEFORE THE A.O. DURING THE ASSESSMENT PROCEEDINGS. I HAVE EXAMINED THESE DOCU MENTS AND NO DISCREPANCY WAS NOTICED IN THESE PAPERS. EVEN THE A O HAS ALSO NOT MENTIONED ANY DISCREPANCY IN THE IMPORT AND EXPORT CLEARANCE PAPERS SUBMITTED DURING THE COURSE OF ASSESSMENT. IT IS AN UNDISPUTED FACT THAT IN THE SEZ UNIT NO IMPORT OR EXPORT CAN BE MADE WITHOUT THE APPROVAL OF THE CUSTOM AND CENTRAL EXCIS E DEPARTMENT. ALL THE PAYMENTS AND RECEIPTS WERE MADE THROUGH BANKING CHANNELS AND NO DISCREPANCY WAS POINTED OUT BY THE A. O . FROM THESE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS AN UNIT IN SEZ, SURAT. RAW MATERIAL WAS IMPORTED AND THE FINAL PRODUCT ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 11 WAS EXP ORTED WITH DUE APPROVAL OF THE CUSTOM AND CENTRAL EXCISE DEPARTMENT. ALL THE PAPERS RELATING TO THE SHIPMENT AND FOREIGN REMITTANCES WERE IN ORDER AND MOREOVER THE ASSESSEE HAS SUBMITTED THAT THERE WAS NO IMPORT AND EXPORT ACTIVITY TAKEN PLACE IN SURVEY YE AR IN THESE TWO UNITS. THESE FACTS PROVE THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S. 10 A OF THE I T. ACT. THE ALLEGATION RAISED THAT THE UNITS WERE CLOSED IS REBUTTED BY THE A.R. BY PROVING THAT THERE WAS NO IMPORT AND EXPORT ACTIVITY CARRIED OUT DURING THE SEARCH/SURVEY YEAR. THE PLANT AND MACHINERY WAS RUSTED IS ALSO TRUE BECAUSE NO PRODUCTION ACTIVITY WAS CARRIED OUT. THERE WAS NO PERMANENT EMPLOYEE AND LABOUR IN THESE UNITS IS ALSO TRUE BECAUSE THE UNITS WERE CLOSED BECAUSE OF NO IMPORT AND EXPORT ORDER. THE MACHINERY INSTALLED WAS THERE WHICH WAS CAP ABLE OF PRODUCING THE HIGH VALUE ADDITIONS AS PER EXPORT ORDERS CANNOT BE DENIED BECAUSE IT WAS NOT WORKING AT THE T IME OF SURVEY. 1. 9 IN VIEW OF THESE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE SEZ UNIT OF THE FIRM IS ELIGIBLE FOR DEDUCTION U/S. 10 A BECAUSE THE A. O . HAS NOT FOUND ANY INCRIMINATING DOCUMENT DURING THE COURSE OF SURVEY AND SEARCH OPERATION TO POINT OUT THAT NO IMPORT OR EXPORT HAS BEEN MADE BY THIS UNIT. THE EVIDENCES COLLECTE D DURING THE SURVEY THAT THE UNIT WAS LOCKED, MACHINERY WAS NOT .WORKING, NO LABOUR EMPLOYED AND NO POWER CONNECTION ETC. ARE ONLY THE CIRCUMSTANTIAL EVIDENCES. ON THE BASIS OF THESE EVIDENCES WE CANNOT IGNORE THE CORE EVIDENCE I.E. THE CLEARANCE FROM THE CUSTOMS AND CENTRAL EXCISE DEPARTMENT, BILLS OF SHIPMENT, PROPER INVOICES, FOREIGN REMITTANCES THROUGH BANKING CHANNELS WITH THE APPROVAL OF THE RBI AND MACHINES INSTALLED IN THE SEZ UNIT. NO DOCUMENTS WERE FOUND AND SEIZED TO DISPROVE THESE FACTS. SECONDL Y, DURING THE SEARCH/SURVEY YEAR I.E. 2008, THERE WAS NO IMPORT/EXPORT ORDERS WITH THE FIRM THAT IS WHY THE UNIT WAS CLOSED. THEREFORE, THE AO IS DIRECTED TO ALLOW THE DEDUCTION U/S. 10A AS CLAIMED BY THE APPELLANT. THUS, THE GROUND OF APPEAL IS ALLOWED. SIMILAR FINDINGS HAVE BEEN RECORDED BY THE LEARNED CIT(A) FOR OTHER TWO YEARS I.E. FOR ASSESSMENT YEARS 2007 - 08 & 2008 - 09. 1 4 . AFTER CONSIDERING THE ORDER OF THE AO, ORDER OF THE CIT(A) AND SUBMISSION OF BOTH THE PARTIES, IT IS NOTICED THAT THE AO DEN IED DEDUCTION MERELY ON THE BASIS OF FINDING OF SURVEY PARTY AND NOT ON THE BASIS OF ANY COGENT MATERIAL. DETAILED SUBMISSIONS WERE FILED BEFORE THE AO ON BEHALF OF THE ASSESSEE, COPY OF WHICH ARE PLACED AT PAGE 42 ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 12 TO 63 IN THE PAPER BOOK. IN THIS WRITTEN SUBMISSION FILED BEFORE THE AO, THE ASSESSEE HAS EXPLAINED ALL THE ACTIVITIES IN DETAIL. IT IS ALSO NOTICED THAT THE AO HAS NOT TAKEN INTO CONSIDERATION THESE SUBMISSIONS OF THE ASSESSEE AS HE HAS HEAVILY PLACED RELIANCE ON THE FINDING OF THE SURVEY PARTY. HOWEVER, LEARNED CIT(A) HAS CONSIDERED THE SUBMISSION IN RIGHT PERSPECTIVE AND FOUND THAT THE ASSESSEE IS EL I GIBLE FOR DE DUC TION UNDER SECTION 1 0A. THE CIT(A) HAS TAKEN NOTE OF THE OBJECTIONS RAISED IN THE ORDER OF AO AND THEREAFTER THE SUBMISSION O F THE ASSESSEE AND FOUND THAT THE AO WAS NOT CORRECT IN DENYING DEDUCTION TO THE ASSESSEE. IT IS NOTICED THA T TO VERIFY THE CLAIM OF THE ASSESSEE AND EXPLANATION , THE ASSESSEE WAS ASKED TO SUBMIT THE COMPLETE DETAILS OF IMPORTS AND EXPORTS MADE THROUGH ITS UNIT AND APPROVAL FROM CUSTOM AND CENTRAL EXCISE DEPARTMENT. DOCUMENTS RELATING TO SHIPMENT IMPORT AND EXPORT CLEARANCE INVOICES OF IMPORT AND EXPORT AND FOREIGN REMITTANCES IN THE BANK ACCOUNTS. THE CIT(A) FOUND THAT ALL THESE DOCUMENTS WERE SUBMITTED BEFORE T HE AO DURING THE ASSESSMENT PROCEEDINGS. THE CIT(A) HAS FURTHER OBSERVED THAT HE HAS EXAMINED ALL THESE DOCUMENTS AND NO DISCREPANCY WAS NOTICED IN THESE PAPERS . EVEN THE AO HAS NOT MENTIONED ANY DISCREPANCY IN THE IMPORT AND EXPORT CLEARANCE PAPERS SUBMI TTED DURING THE COURSE OF ASSESSMENT. IT IS AN UNDISPUTED FACT THAT IN THE SEZ UNIT NO IMPORT OR EXPORT CAN BE MADE WITHOUT THE APPROVAL OF THE CUSTOM AND CENTRAL EXCISE DEPARTMENT. ALL THE PAYMENTS AND RECEIPTS WERE MADE THROUGH BANKING CHANNELS AND NO DI SCREPANCY WAS POINTED OUT BY THE A.O. FROM THESE FACTS, IT IS CLEAR THAT THE ASSESSEE ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 13 HAS AN UNIT IN SEZ, SURAT. RAW MATERIAL WAS IMPORTED AND THE FINAL PRODUCT WAS EXPORTED WITH DUE APPROVAL OF THE CUSTOM AND CENTRAL EXCISE DEPARTMENT. ALL THE PAPERS RELA TING TO THE SHIPMENT AND FOREIGN REMITTANCES WERE IN ORDER . T HE ASSESSEE HAS SUBMITTED THAT THERE WAS NO IMPORT AND EXPORT ACTIVITY TAKEN PLACE IN SURVEY YEAR . ACCORDINGLY, THE CIT(A) FOUND THAT THERE WAS NO CASE OF THE AO TO DENY THE DEDUCTION TO THE ASSE SSEE. WE FURTHER NOTICED THAT EVEN THERE IS NO FINDING IN THE ORDER OF THE AO THAT SURVEY PARTY HAS CONVEYED TO THE AO OR IN DETAILED REPORT THAT THERE WAS NO EXPORT OR IMPORT OF ITEMS MANUFACTURED BY THE ASSESSEE AT THE PREMISES. THE SURVEY PARTY IN FACT NOTED THAT IRREGULARITIES OR DISCREPANCIES AT THE TIME OF SURVEY AND NOT OF THE PAST. THE AO HAS ASSUMED THAT IN THE PAST AS THE UNIT WAS NOT FUNCTIONING, NEITHER THERE WAS ANY EMPLOYEE NOR THERE WAS ANY SUFFICIENT POWER CONSUMPTION TO MANUFACTURE SUCH A H UGE QUANTITY. HOWEVER, THE AO HAS NOT TAKEN INTO CONSIDERATION THE FACT THAT THE ASSESSEE IS MANUFACTURING ONLY HEAVY KADAS, WHICH ARE PURCHASED BY THE VARIOUS PARTIES IN ABROAD. THE ITE MS MANUFACTURED BY THE ASSESSEE, WERE NOT JEWELLERY ITEMS BUT KADAS ON LY. IN OUR VIEW, IN MANUFACTURING KADAS, POWER CONSUMPTION IS LESS AND EMPLOYEES ARE ALSO REQUIRED LESS. MOREOVER, THE IMPORT OF GO L D MADE BY THE ASSESSEE WAS SUBJECT TO CUSTOM CLEARANCE AND EXCISE DEPARTMENT, WHICH WERE CLEARED AFTER DUE VERIFICATION. A PP ROVAL WAS THERE, THEREAFTER MATERIAL WAS SOLD TO ABROAD AND AGAIN SUBJECT TO CUSTOM AND EXCISE CLEARANCE ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 14 WHICH WERE OBTAINED . C OPIES OF ALL THESE DETAILS WERE FILED BEFORE THE AO AS WELL AS BEFORE THE CIT(A). 1 5 . LEARNED DR HAS CONTENDED THAT LEARNED CIT (A) HAS ACCEPTED THE ADDITIONAL EVIDENCE, HOWEVER, NOWHERE WE FOUND THAT LEARNED CIT(A) HAS ACCEPTED ANY ADDITIONAL EVIDENCE. LEARNED CIT(A), WHICH IS SUPERIOR AUTHORITY TO THE AO HAS CATEGORICALLY MENTIONED IN HIS ORDER THAT ALL THE DETAILS FILED BEFORE H IM WERE FILED BEFORE THE AO ALSO. THIS FACT COULD NOT BE DENIED BY THE LEARNED DR EVEN. THEREFORE, WE SEE NO REASON TO DENY THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 10A . 16 . FOR ASSESSMENT YEAR 2006 - 07 , 2007 - 08 & 2008 - 09 , THERE WAS NO SURVEY AS THE SURVEY WAS CONDUCTED DURING THE ASSESSMENT YEAR 200 9 - 10 . THEREFORE, FOR THIS REASON ALSO, THERE WAS NO REASON TO DENY THE DEDUCTION UNDER SECTION 10A FOR THESE YEARS. 17 . REGARDING ASSESSMENT YEAR 2008 - 09, IT IS FURTHER NOTICED THAT THE MANUFACTURI NG ACTIVITIES WERE CONDUCTED MUCH BEFORE THE DATE OF SURVEY CONDUCTED. ALL THESE DETAILS I.E. PURCHASE OF INVOICES, SALE INVOICES WERE FILED BEFORE THE AO, COPY OF WHICH ARE FILED BEFORE THE CIT(A) AND COPIES OF ALL THESE ITEMS ARE ALSO PLACED IN THE PAPER BOOK, WHICH CLEARLY ESTABLISHES, THE MANUFACTURING ACTIVITY WAS CONDUCTED BY THE ASSESSEE MUCH BEFORE THE DATE OF SURVEY. IT IS NOTICED THAT THE ASSESSEE HAS IMPORTED MATERIAL ON 10 - 12 - 2007, 19 - 12 - 2007 AND 26 - 12 - 2007. QUANTITY OF THE MATERIAL IS MENTIONED AS 50,000, 75,000 & ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 15 75,000 RESPECTIVELY . T HE QUANTITY WAS USED AT 79975.32, 74976.38 & 74993.49 AGAINST THE QUANTITY IMPORTED MENTIONED EARLIER. REGULAR WORKERS HAVE BEEN SHOWN AS 7. THE CHAR T OF THESE DETAILS IS PLACED AT PAGE 121 OF THE PAPER BOOK. THE DATE OF SURVEY IS 10 - 8 - 2009. THE FINANCIAL YEAR 2007 - 08 ENDED ON 31 - 3 - 2008 PERTAINING TO ASSESSMENT YEAR 2008 - 09 , WHEREAS THE SURVEY WAS CONDUCTED DURING THE ASSESSMENT YEAR 2009 - 10 AND THERE WAS NO SALE FOR ASSESSMENT YEAR 2009 - 10 , THEREFORE, NO DEDUCTION IS CLAIMED IN ASSESSMENT YEAR 2009 - 10 . AFTER THAT THERE WAS IMPORT AND EXPORT IN THE ASSESSMENT YEAR 2010 - 11, RETURN OF TH IS YEAR WAS FILED. THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) , THE CLAIM OF DEDUCTION UNDER SECTION 10A HAS BEEN ALLOWED BY THE AO ITSELF. COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2010 - 11 IS PLACED IN THE COMPILATION. AFTER GOING THROUGH ALL THESE DETAILS AND MATERI AL AND THE ORDER OF THE CIT(A), WE FOUND NO REASON TO INTERFERE IN THE FINDINGS OF THE LEARNED CIT(A) . THE ORDER OF THE LEARNED CIT(A) DOES NOT SUFFER FROM ANY INFIRMITY, THEREFORE, IT CANNOT BE SAID THAT THE ORDER OF LEARNED CIT(A) IS PERVERSE IN ANY WAY. 18 . IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE CONFIRM THE ORDER OF THE CIT(A) FOR AL L THE THREE ASSESSMENT YEARS. 19 . SINCE WE HAVE CONFIRMED THE ORDER OF THE CIT(A) FOR ALL THE THREE YEARS, THEREFORE, THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS NOT PRESSED. ITA NO S . 8080 TO 8082/11 & CO NOS.229 TO 231/2012 16 20 . IN THE RESULT, APPEAL S OF THE DEPARTMENT AS WELL AS CROSS OBJECT IONS OF THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JUN . 2013 . SD/ - ( ) ( N.K.BILLAIYA ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 19/06 /2013 . /PK M , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI