ACIT, Ludhiana V. M/s Nikkmal Jewellers, Ludhiana

ITA 1123/CHANDI/2014

• Counselvise Citation: 112321514 RSA 2014
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 18-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL VERMA
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Reopening of assessment; Rule of consistency; Proportionate interest; Cost of acquisition; Speculation loss; Wrong claim; Competent authority; Notional interest; Revised return; Bonafide mistake
• Section: 148; 28; 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1081/CHD/2014 ASSESSMENT YEAR: 2011-12 M/S NIKKAMAL JEWELLERS, VS ADDL. CIT, 455, THE MALL, RANGE VII, LUDHIANA. LUDHIANA. PAN: AABFN7282Q & ITA NO. 1123/CHD/2014 ASSESSMENT YEAR: 2011-12 ACIT, VS M/S NIKKAMAL JEWELLERS, CIRCLE VII, 455, THE MALL, LUDHIANA. LUDHIANA. PAN: AABFN7282Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL DEPARTMENT BY : SHRI SUNIL VERMA DATE OF HEARING : 01.09.2015 DATE OF PRONOUNCEMENT : 16.09.2015 O R D E R PER BHAVNESH SAINI,JM BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS)-II LUDHIANA DATED 13.11.2014 FO R ASSESSMENT YEAR 2011-12. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BOTH THE APPEALS ARE DECIDED AS UNDER. 2 ITA 1081/2014 (ASSESSEE'S APPEAL) 3. ON GROUND NOS. 1 TO 3, ASSESSEE CHALLENGED THE ADDITION OF RS. 59,013/- UNDER SECTION 36(1)(III) O F THE INCOME TAX ACT IN RESPECT OF ADVANCES GIVEN TO M/S VIKAS HOUSE BUILDING COMPANY PVT. LTD. THE BRIEF FACTS A RE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD GIVEN LOA NS AND ADVANCES TO THE EXTENT OF R. 6.74 CR. FROM THE DETA ILS OF THESE LOANS AND ADVANCES, ASSESSING OFFICER FURTHER NOTED THAT A SUM OF RS. 1.85 CR HAD BEEN GIVEN TO M/S VIK AS HOUSE BUILDING COMPANY PVT. LTD. FOR PURCHASE OF PROPERTY. NO INTEREST WAS CHARGED ON THIS AMOUNT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY PROPORTIONATE INTEREST ON THIS AMOUNT MAY NOT BE DISALLOWED. THE ASSESSEE SUBMITTED THAT ADVANCE WAS GIVEN FOR PURCHASE OF PROPERTY, HOWEVER, SUBSEQUENT LY THERE WAS A CHANGE OF PLAN AND THE FUNDS GIVEN WERE RECEIVED BACK. THE ASSESSEE CONTENDED THAT ADVANCE WAS GIVEN IN THE NORMAL COURSE OF BUSINESS. THE ASSESS ING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF T HE ASSESSEE AND DISALLOWED RS. 59,013/- UNDER SECTION 36(1)(III) OF THE ACT. 4. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEF ORE LD. CIT(APPEALS), HOWEVER, LD. CIT(APPEALS) WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. T HE LD. CIT(APPEALS) NOTED THAT THE ASSESSEE HAD GIVEN AN 3 AMOUNT OF RS. 1.85 CR TO M/S VIKAS HOUSE BUILDING COMPANY PVT. LTD. ON WHICH NO INTEREST WAS CHARGED AND THE AMOUNT WAS RECEIVED BACK IN SUBSEQUENT YEAR. T HE NATURE OF TRANSACTION INVOLVED WAS MERELY INTEREST FREE ADVANCES GIVEN TO THIS PARTY. NO EVIDENCE WITH REG ARD TO PURCHASE OF PROPERTY WAS FILED. NO DETAILS WERE FI LED WITH REGARD TO NATURE OF THE PROPERTY TO BE PURCHASED, W HETHER RESIDENTIAL OR COMMERCIAL. NO EVIDENCE OF ANY COMM ERCIAL EXPEDIENCY WAS PRODUCED. IT WAS ALSO FOUND THAT ON ONE HAND, INTEREST WAS PAID FOR BORROWED FUNDS, ON THE OTHER HAND, NO INTEREST HAS BEEN CHARGED ON LOANS TO OTHE RS. THE LD. CIT(APPEALS) DID NOT ACCEPT CONTENTION OF T HE ASSESSEE THAT ASSESSING OFFICER HAS NOT PROVED ANY NEXUS THAT INTEREST FREE ADVANCES WERE MADE OUT BORROWED FUNDS. IT WAS, THEREFORE, FOUND THAT IT IS A CASE OF DIVER SION OF FUNDS FOR NON-BUSINESS PURPOSES AND ACCORDINGLY, AP PEAL OF THE ASSESSEE WAS DISMISSED. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT ADVANCE WAS GIVEN FOR ACQUIRING A LAND IN SOUTH CITY FOR THE PU RPOSE OF SHOWROOM TO BE USED IN THE BUSINESS. THE SAID AREA WAS UPCOMING AREA AND ANY EXPANSION IN SUCH AREA WOULD DEFINITELY BENEFIT THE BUSINESS PROSPECT OF THE ASS ESSEE CONCERN. WHEN THE DEAL COULD NOT BE MATERIALIZED A S THE OTHER PARTY BACKED OUT AND EVEN THE AMOUNT SO GIVEN WAS AT STAKE, THEREFORE, THERE WAS NO QUESTION OF CHARG ING ANY 4 INTEREST ON THAT AMOUNT. THE ASSESSEE SENT A LEGAL NOTICE (PB-206) ASKING FOR THE REFUND OF THE AMOUNT WITH INTEREST. PB-208 IS ALSO ANOTHER LETTER WRITTEN TO THIS COMPANY. PB-210 , 211 AND 212 ARE COPY OF THE ACCO UNT OF M/S VIKAS HOUSE BUILDING COMPANY PVT. LTD. IN TH E BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS, THEREFOR E, SUBMITTED THAT WHEN THE ASSESSEE HAS TAKEN UP LEGAL ACTION AGAINST THIS PARTY ONLY THEN AMOUNT AS ADVAN CED COULD BE RECOVERED IN PARTS. IT WAS, THEREFORE, NO T THE INTEREST FREE ADVANCES. HE HAS RELIED UPON UNREPOR TED DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT-II LUDHIANA VS SHRI SURAJ DEV DADA ITA 23 OF 2013 DATED 11.02.2014. HE HAS ALSO RELIED UPON DEC ISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF BRIGHT ENTERPRISES PVT. LTD. VS CIT, JALANDHAR ITA 224/2013 DATED 15.07.2015 IN WHICH DEPARTMENTAL APP EAL WAS DISMISSED HOLDING THAT THE FUNDS/RESERVES OF TH E ASSESSEE WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES GIVEN TO SISTER CONCERN. HE HAS, THEREFOR E, SUBMITTED THAT SINCE ASSESSEE HAS SUFFICIENT INTERE ST FREE FUNDS, TO THE TUNE OF RS. 3.53 CRORES AS ON 31.03.2 010 AND RS. 5.34 CR ON 31.03.2011 THEREFORE, ADDITION W AS ALSO UNJUSTIFIED AND THE MATTER COULD BE VERIFIED B Y THE ASSESSING OFFICER. 6. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE ADDITION. THE 5 ASSESSING OFFICER FOUND THAT ASSESSEE HAD GIVEN LOA NS AND ADVANCES TO THE EXTENT OF RS. 6.74 CR. THE ASSESSE E FURNISHED DETAILS OF SUCH LOANS AND ADVANCES AND OU T OF THE SAME, IT WAS OBSERVED THAT A SUM OF RS.1.85 CR HAS BEEN GIVEN TO M/S VIKAS HOUSE BUILDING COMPANY PVT. LTD. FOR PURCHASE OF PROPERTY. ON ONE HAND, THE AS SESSING OFFICER NOTED THAT INTEREST IS TO BE CAPITALIZED AS PER PROVISO TO SECTION 36(1)(III) OF THE ACT BUT ON THE OTHER HAND, MADE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE HAS FILED COPY OF THE LEGAL NOTI CE ISSUED ON BEHALF OF THE ASSESSEE DATED 30.03.2012 (PB-206) TO M/S VIKAS HOUSE BUILDING COMPANY PVT. LTD. IN WHICH IT WAS STATED THAT THIS COMPANY APPROACHED THE ASSESSE E AND OFFERED FOR THE PURCHASE OF LAND IN THE SHAPES OF PLOTS IN SOUTH CITY AT LUDHIANA. THE ASSESSEE HAS PAID R S. 2.50 CR AND THE COMPANY HAS ASSURED TO EXECUTE THE AGREEMENT BETWEEN THE PARTIES. THE ASSESSEE BELIEV ING THE STATEMENT OF THIS COMPANY GIVEN A CHEQUE OF RS. 2.50 CR DATED 22.03.2011. THE ASSESSEE APPROACHED THIS PARTY FOR EXECUTING THE AGREEMENT IN THIS REGARD BUT THAT PARTY WAS DELAYING THE MATTER ON ONE PRETEXT OR THE OTHER . THE AFORESAID COMPANY THEN RETURNED RS. 65 LACS THROUGH TWO CHEQUES ON 24.03.2011 AND THUS, THE BALANCE REMAINE D PAYABLE IN A SUM OF RS.1.85 CR. FURTHER, A SUM OF RS. 35 LACS WAS RETURNED ON 02.04.2011 LEAVING A BALANCE O F RS. 1.50 CR WHICH WAS NOT PAID TILL THE ISSUE OF THE DE MAND NOTICE ISSUED BY THE ASSESSEE. PB-211 IS A COPY OF ACCOUNT OF THIS COMPANY IN THE BOOKS OF ASSESSEE WH ICH 6 SHOWS THAT BALANCE OF RS. 1.50 CR WAS RETURNED TO ASSESSEE ON 31.03.2012 IN THREE INSTALLMENTS AFTER ISSUE OF THE DEMAND NOTICE. PRIOR TO ISSUE OF DEMAND NOT ICE DATED 30.03.2012, THE ASSESSEE ALSO ISSUED NOTICE T O THIS COMPANY DIRECTLY ON 20.08.2011 DEMANDING THE RETURN OF THE AMOUNT IN QUESTION ALONGWITH INTEREST AT 15% P. A. (PB-208). THESE FACTS, THEREFORE, CLEARLY ESTABLIS H ON RECORD THAT INITIALLY ASSESSEE HAS ADVANCED A SUM O F RS. 2.50 CR TO M/S VIKAS HOUSE BUILDING COMPANY PVT. LT D. FOR PURCHASE OF PROPERTY AND WHEN THE SAID PARTY DE LAYED IN EXECUTION OF THE AGREEMENT, PART OF THE AMOUNT W AS RETURNED. THE SUBSTANTIAL AMOUNT WAS RETURNED AFTE R ISSUE OF THE DEMAND NOTICE. IN SUCH A SITUATION, I T WAS DIFFICULT FOR THE ASSESSEE TO FURNISH ANY EVIDENCE AS NOTED BY THE LD. CIT(APPEALS) WHETHER IT WAS RESIDENTIAL OR COMMERCIAL PROPERTY TO BE PURCHASED BY THE ASSESSEE . SINCE THE PRINCIPAL AMOUNT ITSELF REMAINED AT THE S TAKE, THEREFORE, THERE WAS NO QUESTION FOR THE ASSESSEE T O CHARGE NOTIONAL INTEREST ON THE SAME. NO EVIDENCE WITH REGARD TO COMMERCIAL EXIGENCY COULD ALSO BE FILED B EFORE THE AUTHORITIES BELOW. NOTHING IS BROUGHT ON RECOR D IF THE SAID PARTY WAS RELATED TO THE ASSESSEE SO AS TO CLA IM THAT INTEREST FREE ADVANCES HAVE BEEN GIVEN OUT OF THE F UNDS OF THE ASSESSEE. IN THE DEMAND NOTICE, ASSESSEE ASKED FOR THE INTEREST @ 12% ON BALANCE AMOUNT OF RS. 1.50 CR . THEREFORE, IT APPEARS THAT ASSESSEE HAS MADE A CLAI M OF INTEREST ACCORDINGLY. THEREFORE, THE FACTS AND CIRCUMSTANCES CLEARLY SHOW THAT IT MAY NOT BE AN IN TEREST 7 FREE ADVANCE OR LOAN GIVEN TO M/S VIKAS HOUSE BUILD ING COMPANY PVT. LTD., AS IS STATED BY THE AUTHORITIES BELOW. IN THE CASE OF CIT V SHRI SURAJ DEV DADA (SUPRA), H ON'BLE PUNJAB & HARYANA HIGH COURT REPRODUCED THE ORDER OF THE TRIBUNAL IN WHICH THE TRIBUNAL NOTED THAT ASSESSING OFFICER CHARGED INTEREST OF RS. 2,60,000/- ON NOTIO NAL BASIS ON THE GROUND THAT THE LOAN ADVANCED TO NALAN DA SPINNERS LTD. WAS WITHOUT ANY COMMERCIAL EXIGENCY. THERE IS NO DISPUTE THAT LOAN WAS ADVANCED BY ASSES SEE ON 27.03.2006 I.E. DURING ASSESSMENT YEAR. IT WAS ALS O APPARENT FROM RECORD THAT THE PRINCIPLE AMOUNT OF T HE SAID LOAN WAS RECOVERED AFTER FILING RECOVERY SUIT IN CI VIL COURT. IT IS ALSO APPARENT FROM RECORD THAT ASSESSEE MANAG ED TO GET PART AMOUNT VIDE CHEQUES OF DIFFERENT DATES LEA VING THE BALANCE TO THE TUNE OF RS. 7.5 LACS. THE TRIBU NAL, CONSIDERING THESE FACTS FOUND THAT SINCE THE PRINCI PAL AMOUNT WAS AT STAKE, THERE WAS NO OCCASION FOR ASSE SSEE TO CHARGE INTEREST ON THE ADVANCED AMOUNT. THE DEPARTMENTAL APPEAL WAS, THUS, DISMISSED BY THE TRI BUNAL. 8. THE HON'BLE PUNJAB & HARYANA HIGH COURT CONFIRME D THE FINDINGS OF THE TRIBUNAL AND OBSERVED THAT, THE ASSESSEE HAD NOT CHARGED ANY INTEREST ON THE AMOUNT ADVANCED TO M/S NALANDA SPINNERS LTD. AS THE AMOUNT ADVANCED TO M/S NALANDA SPINNERS LTD. WAS NOT RETUR NED FOR WHICH A CIVIL SUIT WAS FILED AND WITH THE ASSIS TANCE OF INFLUENTIAL PEOPLE, THE SAME WAS RECOVERED. THE DECISION RELIED UPON BY LD. COUNSEL FOR THE ASSESSE E SQUARELY APPLY TO THE FACTS AND CIRCUMSTANCES OF TH E CASE 8 BECAUSE THE PRINCIPAL AMOUNT ITSELF WAS IN DISPUTE WHICH, ACCORDING TO THE SUBMISSION OF THE ASSESSEE WAS GIV EN TO THE ABOVE COMPANY FOR PURCHASE OF PROPERTY AND WHEN AGREEMENT WAS NOT EXECUTED, THE ASSESSEE MADE EFFOR TS FOR RECOVERY OF THE AMOUNT IN QUESTION AND ULTIMATELY, AFTER ISSUING A DEMAND NOTICE DATED 30.03.2012 AND NOTICE DATED 20.08.2011 (PB-208), THE AMOUNT IN QUESTION W AS RETURNED TO THE ASSESSEE. THEREFORE, AUTHORITIES B ELOW WERE NOT JUSTIFIED IN MAKING DISALLOWANCE UNDER SEC TION 36(1)(III) OF THE ACT. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE ADDITION. WE, SET ASI DE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION . THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE ACCORDINGLY, ALLOWED. 9. ON GROUND NOS. 4 TO 6, THE ASSESSEE CHALLENGED T HE ORDER OF LD. CIT(APPEALS) IN CONFIRMING THE ORDER O F THE ASSESSING OFFICER IN NOT ALLOWING THE CLAIM OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS OF RS. 1,42,93,116/-. 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIM ED CARRY FORWARD BUSINESS LOSS OF RS.1,42,93,116/- FOR ASSESSMENT YEAR 2010-11. THE ASSESSING OFFICER FUR THER NOTED THAT THE ASSESSEE HAD FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 26.09.2010 SHOWING A TOT AL INCOME OF RS. 1,04,79,139/- UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. THE ASSESSING OFFICER ASKED T HE ASSESSEE TO EXPLAIN WHY THE WRONG CLAIM OF SET OFF OF LAST 9 YEARS BUSINESS LOSS MAY NOT BE DISALLOWED. THE AS SESSEE SUBMITTED THAT BROUGHT FORWARD LOSSES FOR ASSESSMEN T YEAR 2010-11 WAS SPECULATIVE LOSS AMOUNTING TO RS. 1,67,12,762/-. THE ASSESSEE ALSO SUBMITTED A COPY OF COMPUTATION OF INCOME. THE ASSESSING OFFICER WAS N OT SATISFIED WITH THE ASSESSEE'S SUBMISSIONS. THE ASS ESSING OFFICER REFERRED TO RETURN OF INCOME FILED BY ASSES SEE AND AGAIN POINTED OUT THAT NO CARRY FORWARD BUSINESS LO SS WAS CLAIMED IN THE RETURN FILED. THE ASSESSING OFFICER REPRODUCED THE RETURN FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IN ASSESSMENT ORDER AND POI NTED OUT THAT NO SPECULATIVE LOSS HAD BEEN SHOWN IN THE RETURN OF INCOME. THE ASSESSING OFFICER FURTHER POINTED O UT THAT ASSESSEE HAD NOT SHOWN ANY SPECULATIVE GAIN FOR THE YEAR UNDER CONSIDERATION AGAINST WHICH SPECULATIVE LOSS OF ANY EARLIER YEAR COULD BE SET OFF. THE ASSESSING OFFIC ER, ACCORDINGLY, DISALLOWED THE CLAIM OF SET OFF OF LOS S OF RS. 1,42,93,116/- PERTAINING TO THE EARLIER YEARS. 11. THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE L D. CIT(APPEALS) IN WHICH IT WAS SUBMITTED THAT AT THE TIME OF FILING OF THE ON-LINE RETURN, THE SPECULATIVE LOSS WAS NOT SHOWN UNDER THE SPECIFIC COLUMN IN SCHEDULE-BP BUT SAME WAS SHOWN AT POINT NO. 22 OF SCHEDULE-BP. THE ASSE SSEE SUBMITTED THAT THERE WAS ONLY A CLERICAL MISTAKE IN FILING THE RETURN OF INCOME AND THAT CLAIM OF CARRY FORWAR D OF SPECULATIVE LOSS WAS JUSTIFIED. THE LD. CIT(APPEAL S) NOTED THAT THE RETURN FOR PRECEDING ASSESSMENT YEAR 2010- 11 HAS BEEN PROCESSED UNDER SECTION 143(1) AND THERE W ERE 10 NO CARRY FORWARD OF SPECULATIVE LOSS ALLOWED IN THE YEAR. ACCORDINGLY, CLAIM OF ASSESSEE WAS DISMISSED. 12. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT IT WAS A GENUINE SPECULATIVE LOSS WHICH WAS MENTIONED IN INT ERNAL COLUMN OF RETURN OF INCOME IN ASSESSMENT YEAR 2010- 11 AND THE BONAFIDE MISTAKE OF NOT MENTIONING IN THE RELEVANT COLUMN OF RETURN WAS ONLY ON THE PART OF T HE COUNSEL FOR ASSESSEE. THE SPECULATIVE LOSS HAD BEE N DULY DISCLOSED IN THE AUDITED ACCOUNTS AND WAS ALSO SEPA RATELY ADDED IN THE COMPUTATION OF INCOME. HE HAS ALSO RE FERRED TO SEVERAL PAGES FROM THE PAPER BOOK AND RELIED UPO N DECISIONS WHICH WE WOULD TAKE UP IN THIS ORDER. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHOR ITIES BELOW. 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS. PB-218 I S THE COPY OF THE E-RETURN FILED BY ASSESSEE FOR PRECEDIN G ASSESSMENT YEAR 2010-11. PB-39 IS COMPUTATION OF INCOME FILED BY ASSESSEE BEFORE THE ASSESSING OFFIC ER ALONGWITH ACKNOWLEDGEMENT OF FILING OF RETURN IS PB -41. PB-226 IS SCHEDULE-BP OF RETURN FOR ASSESSMENT YEAR 2010-11 AND IN COLUMN NO. 1, IT IS NOTED PROFIT BE FORE TAX AS PER PROFIT & LOSS ACCOUNT RS. -28,49,336/-) THI S FIGURE MATCH WITH THE COMPUTATION OF INCOME FILED B Y ASSESSEE (PB-39). PB-227 IS CONTINUATION OF SCHEDUL E-BP 11 OF RETURN FOR ASSESSMENT YEAR 2010-11 IN WHICH IN C OLUMN NO. 22, IT IS STATED ANY OTHER ITEM OR ITEMS OF AD DITION UNDER SECTION 28 TO 44DA =RS. 1,68,49,634/- THI S FIGURE IS ALSO SHOWN IN THE COMPUTATION OF INCOME F OR ASSESSMENT YEAR 2010-11 (PB-39). IN THIS FIGURE OF RS.1,68,49,634/-, THE FIGURE OF SPECULATIVE LOSS OF RS.1,67,12,762/- IS ALSO MENTIONED IN THE BIFURCATI ON SHOWN IN THE COMPUTATION OF INCOME (PB-39) FILED FO R ASSESSMENT YEAR 2010-11. THE ASSESSEE, THEREFORE, DISCLOSED SPECULATIVE LOSS IN E-RETURN. ULTIMATELY, IN THE E-RETURN PB-227 IN COLUMN NO. 32 OF SCHEDULE-BP, TH E INCOME WAS SHOWN IN A SUM OF RS. 1,04,79,139/- WHIC H IS THE SAME FIGURE SHOWN IN THE COMPUTATION OF INCOME FOR THE SAME ASSESSMENT YEAR 2010-11 (PB-39). IN THE COMPUTATION OF INCOME ITSELF (PB-39), ASSESSEE HAS ALSO SPECIFICALLY MENTIONED SPECULATION BUSINESS AND LOS S FROM SPECULATION BUSINESS IN A SUM OF RS. 1,67,12,762/- AND WAS CARRIED FORWARD TO THE NEXT YEAR. 13(I) THE LD. CIT(APPEALS) ALSO NOTED IN THE IMP UGNED ORDER THAT ASSESSEE HAS ALSO SUBMITTED COPY OF COMPUTATION OF INCOME. IT WOULD, THEREFORE, SHOW T HAT COMPLETE FACTS WERE AVAILABLE BEFORE ASSESSING OFFI CER AND THE LD. CIT(APPEALS) WITH REGARD TO FILING OF THE E -RETURN FOR ASSESSMENT YEAR 2010-11. MAY BE THE ASSESSEE H AS NOT SHOWN THE SPECULATIVE LOSS IN THE PROPER COLUMN , THE DETAILS SUBMITTED IN THE E-RETURN AND COMPUTATION O F INCOME CLEARLY SHOWS THAT ASSESSEE HAS SUFFERED 12 SPECULATIVE LOSS OF RS. 1,67,12,762/- IN ASSESSMENT YEAR 2010-11 WHICH WAS ALSO DISCLOSED IN THE E-RETURN AS WELL AS COMPUTATION OF INCOME. THE FINDINGS OF THE AUTH ORITIES BELOW ARE, THEREFORE, FACTUALLY INCORRECT IN THIS R EGARD. FURTHER, IT IS NOTED IN THE IMPUGNED ORDER THAT ASS ESSING OFFICER POINTED OUT THAT ASSESSEE HAD NOT SHOWN ANY SPECULATIVE GAIN FOR THE YEAR UNDER CONSIDERATION A GAINST WHICH THE SPECULATIVE LOSS FOR ANY EARLIER YEAR CAN BE SET OFF. THESE FINDINGS OF THE AUTHORITIES BELOW ARE A LSO FACTUALLY INCORRECT. THE SPECULATIVE INCOME IN ASS ESSMENT YEAR UNDER APPEAL I.E. 2011-12 HAS BEEN DULY DISCLO SED IN THE CONSOLIDATED PROFIT & LOSS ACCOUNT FILED AT PAG E 25 OF THE PAPER BOOK AS UNDER : I) PROFIT FROM TRADING IN RS.33,01,109.63 COMMODITY II) MTF GAIN RS. 1,09,92,006.08 TOTAL : RS.1,42,93,115.71 --------------------- 14. THE COMPUTATION OF INCOME FOR ASSESSMENT YEA R UNDER APPEAL WAS FILED BEFORE THE AUTHORITIES BELOW , COPY OF WHICH IS FILED AT PAGE 1 OF THE PAPER BOOK WHERE IN THE PROFIT OF RS. 1,42,93,116/- (ROUND FIGURE) ON ACCOU NT OF SPECULATIVE BUSINESS HAS BEEN SET OFF AGAINST LAST YEARS SPECULATIVE LOSS OF RS.1,67,12,762/- AND THE BALANC E UNABSORBED LOSS HAS BEEN CARRIED FORWARD TO THE TUN E OF RS. 24,19,646/- TO FUTURE YEAR. THUS, THE ABOVE SPECULATIVE INCOME FOR THE YEAR UNDER CONSIDERATION HAS BEEN SET OFF AGAINST THE BROUGHT FORWARD SPECULATIV E LOSS OF PRECEDING ASSESSMENT YEAR 2010-11 AND BALANCE 13 SPECULATION LOSS OF RS. 24,19,646/- HAS BEEN CARRIE D FORWARD TO THE SUBSEQUENT ASSESSMENT YEAR. THE COP Y OF E-RETURN FOR ASSESSMENT YEAR 2011-12 UNDER APPEAL I S FILED AT PB-242 AND AT PB-244, ASSESSEE HAS DISCLOS ED THE AMOUNT OF RS. 1,42,93,116/- AND AT PB-258, ASSESSEE HAS SHOWN IN SCHEDULE CFL THAT FOR ASSESSMENT YEAR 2010 -11, THE BROUGHT FORWARD LOSS OF RS. 1,42,93,116/- HAS B EEN GIVEN SET OFF AND BALANCE SPECULATIVE LOSS HAS BEEN CARRIED FORWARD IN A SUM OF RS. 24,19,646/-. THUS, THE AUTHORITIES BELOW HAVE WRONGLY OBSERVED THAT ASSESS EE HAD NOT SHOWN ANY SPECULATIVE GAIN FOR THE YEAR UNDER CONSIDERATION IN THE RETURN OF INCOME. THIS FACT I S SPECIFICALLY DISCLOSED IN THE E-RETURN AS WELL AS COMPUTATION OF INCOME FILED WITH THE AUTHORITIES BE LOW. 15. WE MAY ALSO NOTE HERE THAT SECTION 73 OF THE IN COME TAX ACT DEALS WITH LOSSES IN SPECULATION BUSINESS A ND THE SALIENT FEATURE OF THIS PROVISION IS THAT ANY LOSS, COMPUTED IN RESPECT OF SPECULATION BUSINESS CARRIED ON BY AS SESSEE, SHALL NOT BE SET OFF EXCEPT AGAINST PROFIT AND GAIN S, IF ANY, OF ANOTHER SPECULATION BUSINESS. IN CASE THE SPECULATION LOSS HAS NOT BEEN WHOLLY SET OFF, THEN SUCH LOSS MAY BE CARRIED FORWARD TO THE SUBSEQUENT ASSES SMENT YEARS I.E. IT SHALL BE SET OFF FOR THE ASSESSMENT Y EAR ITSELF AND WHEN IT CANNOT BE SET OFF WHOLLY, THE AMOUNT OF LOSS, NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE NEXT YEARS NOT MORE THAN FOUR YEARS. THUS, THERE WAS NO REQUI REMENT UNDER THIS PROVISION THAT SPECULATIVE LOSS IN CASE NOT NOTED PROPERLY IN SPECIFIED COLUMN OF E-RETURN, WOU LD 14 DISENTITLE THE ASSESSEE TO CLAIM SET OFF OF BROUGHT FORWARD LOSSES IN ASSESSMENT YEAR UNDER APPEAL. MERELY ASSE SSEE HAS NOT DISCLOSED SPECULATIVE LOSS IN PRECEDING ASSESSMENT YEAR 2010-11 IN SPECIFIED COLUMN OF THE RETURN WOULD NOT GIVE RIGHT TO THE AUTHORITIES BELO W TO DISALLOW THE CLAIM OF ASSESSEE OF SET OFF OF BROUGH T FORWARD LOSS, PARTICULARLY WHEN COMPLETE FACTS WERE DISCLOS ED AT THE ASSESSMENT STAGE WHICH IS SUPPORTED BY THE COMPUTATION OF INCOME AND DETAILS FURNISHED THE E-R ETURN AND BEFORE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO CIRCULAR NO. 14 DATED 11.04.19 55 ISSUED BY THE CBDT IN WHICH PARA 3 READS AS UNDER : 3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIG HTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN E VERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAI MING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICE RS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WH ERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATT ITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPART MENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMIN G REFUNDS AND RELIEFS RESTS WITH ASSESSEES ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD : (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER ; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDUR E TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEFS. 16. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UP ON DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT N T HE 15 CASE OF IT VS RAMCO INTERNATIONAL 332 ITR 306 IN WH ICH IT WAS HELD AS UNDER : ASSESSEE HAVING DULY FURNISHED THE DOCUMENTS AND SUBMITTED FORM NO. 10CCB DURING ASSESSMENT PROCEEDINGS, CLAIMING DEDUCTION UNDER S. 80-IB WHICH WAS NOT CLAIMED IN THE RETURN, DEDUCTION IS ADMISSIBLE EVEN IN THE ABSENCE OF A REVISED RETURN. 17. HE HAS ALSO RELIED UPON DECISION OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS GANGAPPA CABLES LTD. 116 ITR 778 IN WHICH IT WAS HELD AS UNDER : WHEN THERE IS SUFFICIENT EVIDENCE ON RECORD TO SUPPORT A CLAIM, NEITHER THE AAC NOR THE TRIBUNAL IS BARRED FROM ENTERTAINING A CLAIM ON THE BASIS OF THE EVIDENCE ON RECORD WHICH IS SUFFICIENT TO SUPPORT THE CLAIM. THE DECISION OF THE SUPREME COURT IN ADDL. CIT VS. GURJARGRAVURES P. LTD., THEREFORE, IS NO BAR TO THE ENTERTAINING OF THE CLAIM BY THE AAC OR THE TRIBUNAL, IN VIEW OF THE FACT THAT ALL THE NECESSARY MATERIAL FOR ALLOWING A CLAIM UNDER S. 80J(1) WAS BEFORE THE ITO.CIT VS MAHALAKSHMI TEXTILE MILLS LTD. (1967) 66 ITR 710 (SC) : TC8R.1015 AND HUKUMCHAND MILLS LTD, VS. CIT (1967) 63 ITR 232 (SC) : TC8R.1010#1 RELIED ON; ADDL. CIT VS. GURJARQRAVURES P. LTD. 1978 CTR (SC) 1 : (1978) 111 ITR 1 (SC) : TC7R.367#1 DISTINGUISHED. 18. HON'BLE SUPREME COURT IN THE CASE OF CIT VS MAHALAXMI SUGAR MILLS CO. LTD. 160 ITR 920 HELD AS UNDER: ' BY THE COURT : THERE IS A DUTY CAST ON THE INCOME-TAX OFFICER TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOME-TAX ACT FOR THE PURPOSE OF DETERMINING THE TRUE FIGURE OF THE ASSESSEE'S TAXABLE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. THAT THE ASSESSEE FAILS TO CLAIM THE BENEFIT OF A SET-OFF CANNOT 16 RELIEVE INCOME-TAX OFFICER OF HIS DUTY TO APPLY SECTION 24 IN AN APPROPRIATE CASE. 19. THE ABOVE BOARDS CIRCULAR AND THE DECISIONS CI TED CLEARLY SUPPORT THE EXPLANATION OF THE ASSESSEE AND IT WAS DUTY OF THE ASSESSING OFFICER TO APPLY THE RELEVANT PROVISIONS OF LAW AND GRANT RELIEF TO THE ASSESSEE INSTEAD OF REJECTING THE CLAIM OF ASSESSEE BY NOT MENTIONIN G THE SPECULATIVE LOSS IN PARTICULAR COLUMN OF THE E-RETU RN FOR ASSESSMENT YEAR 2010-11. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON SOME OTHER DECISIONS WITH REGARD TO FACT THAT FOR THE MISTAKE OF COUNSEL, ASS ESSEE SHOULD NOT SUFFER. HOWEVER, SAME ARE NOT RELEVANT TO THE MATTER IN ISSUE. 20. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT AUTHORITIES BELOW WERE NOT JUSTIFIED IN NOT AL LOWING THE CLAIM OF SET OFF OF BROUGHT FORWARD SPECULATIVE LOSS OF RS. 1,42,93,116/-. THE ORDERS OF AUTHORITIES BELOW ARE THEREFORE, SET ASIDE AND WE DIRECT THE ASSESSING OF FICER TO ALLOW SET OFF OF BROUGHT FORWARD SPECULATIVE LOSS F OR ASSESSMENT YEAR 2010-11 IN ASSESSMENT YEAR UNDER AP PEAL OF THE AMOUNT IN QUESTION. 21. IN THE RESULT, GROUND NOS. 4, 5 AND 6 OF THE AP PEAL OF THE ASSESSEE ARE ALLOWED. 22. THE GROUND OF APPEAL NOS. 7 AND 8 ARE GENERAL A ND NEED NO ADJUDICATION. 17 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 1123/2014 (DEPARTMENTAL APPEAL) 24. IN THE DEPARTMENTAL APPEAL, REVENUE CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN DELETING THE DISALLOWA NCE OF RS. 48,18,153/- CLAIMED BY ASSESSEE UNDER SECTION 1 0B OF THE ACT. 25. THE BRIEF FACTS ARE THAT RETURN DECLARING NET TAXABLE INCOME OF RS. 82,85,690/-WAS FILED ON 24.09.2011. T HE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SA LE OF GOLD JEWELLERY AND TRADING OF BULLION. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AO NOTED THAT THE ASSESSEE H AD CLAIMED DEDUCTION U/S 10B OF THE I.T. ACT TO THE EX TENT OF RS. 48,18,153/-. IN THIS REGARD THE AR OF THE ASSES SEE SUBMITTED THAT IT HAD ESTABLISHED 100% EXPORT ORIEN TED UNIT AT NOIDA AND WAS ENTITLED TO DEDUCTION U/S 10B . THE ASSESSEE ALSO SUBMITTED THE DETAILS OF THE CONVERTI BLE FOREIGN EXCHANGE RECEIVED IN INDIA. FROM THESE DETA ILS, THE AO NOTED THAT FOREIGN EXCHANGE REALIZED IN INDIA WA S ONLY TO THE EXTENT OF RS. 1,83,60,952/-. FURTHER AS PER THE REPORT UNDER RULE 16E IN FORM 56G AS PROVIDED U/S 1 0B OF THE I.T. ACT, THE EXPORT TURNOVER WAS SHOWN AT RS. 24,59,60,784/-. THE AO ASKED THE ASSESSEE TO JUSTIF Y THE CLAIM OF DEDUCTION U/S 1OB AS IT HAD NOT RECEIVED T HE EXPORT TURNOVER IN CONVERTIBLE FOREIGN EXCHANGE IN INDIA AS REQUIRED U/S 10B. THE ASSESSEE SUBMITTED THAT IT HAD MADE EXPORTS OF US $ 52,56,435. THE ASSESSEE FURTHE R 18 SUBMITTED THAT INSTEAD OF MAKING THE PAYMENT IN FOR EIGN CURRENCY AND THEN RECEIVING THE SAME AMOUNT BACK IN FOREIGN CURRENCY AGAINST GOODS EXPORTED THE ASSESSE E HAD RECEIVED THE NET AMOUNT IN FOREIGN CURRENCY AFTER ADJUSTING AMOUNT OF IMPORTS BEING MADE. THE AO CONSIDERED THE ASSESSEES SUBMISSIONS BUT WAS NOT SATISFIED. REGARDING THE ASSESSEE'S CONTENTION THAT IT WAS REQUIRED TO MAKE PAYMENT OF IMPORTS IN FOREIGN CURR ENCY THE AO REFERRED TO THE PURCHASE BILL SUBMITTED BY T HE ASSESSEE AND POINTED OUT THAT AS PER THE BILL THE G OLD BARS WERE RECEIVED BY THE ASSESSEE FREE OF COST FOR THE PURPOSE OF MANUFACTURING JEWELLERY AND SENDING THE JEWELLER Y BACK TO THE PERSON NOMINATED. THE AO POINTED OUT THAT IN THESE CIRCUMSTANCES THE ASSESSEE WAS NOT REQUIRED TO MAKE ANY PAYMENT FOR MATERIAL RECEIVED. THE AO REFERRED TO T HE PURCHASE AND SALE INVOICES AND OBSERVED THAT THE AS SESSEE HAD ONLY CARRIED OUT JOB WORK REGARDING MANUFACTURI NG OF JEWELLERY AND THAT NO PURCHASE, MANUFACTURE, PRODUC TION OR EXPORT HAD BEEN CARRIED OUT BY THE ASSESSEE. ALL THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE BY THE AO AND THE ASSESSEE WAS ASKED TO EXPLAIN WHY EXEMPTION U/S 1OB MAY NOT BE DISALLOWED. 25(I) THE ASSESSEE SUBMITTED THAT IT WAS A 100% EXPORT ORIENTED UNIT ENGAGED IN MANUFACTURING AND EXPORT O F JEWELLERY. THE ASSESSEE FURTHER SUBMITTED THAT IT W AS CLAIMING EXEMPTION U/S 10B SINCE ITS YEAR OF INCEPT ION I.E. ASSESSMENT YEAR 2004-05. THE ASSESSEE SUBMITTED THA T 19 THE STANDARD GOLD IS IMPORTED AS WELL AS PURCHASED BY THE ASSESSEE FROM LOCAL MARKET. THE SAME IS CONVERTED I NTO JEWELLERY OR ORNAMENTS WHICH ARE THEREAFTER EXPORTE D. THE ASSESSEE SUBMITTED THAT SINCE BOTH THE EXPORTS AND IMPORTS ARE MADE FROM DUBAI, FOR MAKING IMPORT PAYM ENTS AND REALIZING EXPORT PROCEEDINGS THE ASSESSEE HAD B EEN FOLLOWING THE PRACTICE OF REALIZING THE NET FOREIGN EARNING. FOR THIS PURPOSE IN ORDER TO AVOID UNNECESSARY HASS LES AND EXTRA EXPENDITURE IN PROCESS OF MAKING PAYMENT THE APPELLANT HAD ENTERED INTO AN ARRANGEMENT WITH THE SUPPLIER I.E. M/S SIROYA JEWELLERS AND THE BUYER I. E. M/S AL SALAM JEWELLERS. AS PER THIS ARRANGEMENT, THE GO ODS IMPORTED WERE PROVIDED FREE OF COST BY THE SUPPLIER TO THE APPELLANT AND THE NET EXPORT PROCEEDINGS AFTER MAKI NG ADJUSTMENT OF IMPORT PAYMENT WERE MADE TO THE ASSES SEE. THE ASSESSEE SUBMITTED THAT IT WAS BRINGING IN NET FOREIGN EXCHANGE INTO INDIA. THE ASSESSEE ALSO RELIED ON TH E CASE OF CIT VS. LOVLESH JAIN(2012) 204 :TAXMAN 134(DEL). THE ASSESSEE FURTHER SUBMITTED THAT IN THE PRECEDING YE ARS ALSO THE ASSESSMENT WAS COMPLETED U/S 143(3) AND TH E ISSUE OF CLAIM OF DEDUCTION U/S 10B WAS EXAMINED BY THE AO AND WAS ALLOWED. THE ASSESSEE ALSO REFERRED TO T HE BILL OF ENTRY PERTAINING TO THE ACTUAL IMPORTS AND THE C OPY OF FDR SUBMITTED AS SECURITY WITH THE CUSTOM AUTHORITI ES AND CLAIMED THAT THE ASSESSEE WAS COMPLYING WITH TH E PROVISIONS OF IMPORT AND EXPORT PROCEDURES. THE ASS ESSEE ALSO REFERRED TO THE FACT THAT IT HAD BEEN FILING V AT RETURNS REGULARLY WITH THE VAT AUTHORITIES AND THE FACT 20 REGARDING PURCHASE AND SALE HAVE BEEN DULY CONFIRME D BY THE CONCERNED AUTHORITIES. THE AO CONSIDERED THE ASSESSEE'S SUBMISSIONS BUT WAS NOT SATISFIED. THE A O REFERRED TO THE DEFINITION OF PURCHASE AND SALE AND OBSERVED THAT THE ASSESSEE WAS NOT INVOLVED IN ANY PURCHASE OR SALE OF JEWELLERY. THE AO POINTED OUT T HAT SECTION 10B PROVIDED BENEFITS ONLY WITH REGARD TO P ROFITS DERIVED FROM EXPORTS OF ARTICLES OR THINGS MANUFACT URED. THE AO OBSERVED THAT THE ASSESSEE MAY HAVE MANUFACT URE THE JEWELLERY ITEMS BUT THE SAME WAS ONLY FOR JOB W ORK BUT WAS NOT FOR EXPORT. 25(II) THE AO REFERRED TO THE DECISION OF THE HO N'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOVELESH JA IN (SUPRA) AND OBSERVED THAT THE FACTS IN THAT CASE WE RE DIFFERENT IN AS MUCH AS IN THAT CASE THE ASSESSEE H AD IMPORTED GOLD WHICH WAS NOT SO IN THE CASE OF THE APPELLANT. AS REGARDS THE CONTENTION OF THE ASSESSE E THAT THE CLAIM OF DEDUCTION U/S 1OB HAD BEEN ALLOWED IN THE EARLIER ASSESSMENT YEAR, THE AO OBSERVED THAT PRINC IPLE OF RES-JUDICATA DOES NOT APPLY TO THE I.T. PROVISIONS. THE AO ALSO POINTED OUT THAT THE ASSESSEE HAD CLOSED ITS N OIDA UNIT. IN THIS REGARD THE AO POINTED OUT THAT DEDUCT ION U/S 10B WAS NOT AVAILABLE TO THE ASSESSEE FROM ASSESSME NT YEAR 2012-13. THE AO OBSERVED THAT THE CLOSURE OF T HIS UNIT, EVEN THOUGH THE ASSESSEE WAS EARNING HANDSOME PROFIT INDICATED THAT NO ACTUAL BUSINESS WAS CARRIE D OUT FROM THE PLACE. THE AO HELD THAT THE ASSESSEE WAS N OT 21 INVOLVED IN EXPORT OF ARTICLE OR THING AND THEREFOR E WAS NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE I.T. ACT. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF DEDUCTION OF RS . 48,14,153/-. 26. THE LD. COUNSEL FOR THE ASSESSEE VIDE WRITTEN SUBMISSIONS DATED 22.09.2014 REITERATED THE FACTS O F THE CASE AND THE SUBMISSION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE SUBMITTED THAT IT WAS IMPORTING STANDARD GOLD FROM M/S SIROYA JEWELLE RS DUBAI AND AFTER CONVERSION OF STANDARD GOLD INTO ORNAMENTS IT WAS EXPORTED TO DUBAI TO THE SAME PART Y OR TO A THIRD PERSON AT DUBAI NAMELY M/S AL-SALAM JEWELLERS. THE ASSESSEE SUBMITTED THAT TO AVOID UNNECESSARY HASSLES AND EXTRA EXPENDITURE IN PROCES S OF MAKING PAYMENT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH THE SUPPLIER I.E. M/S SIROYA JEWELLE RS AND THE BUYER M/S AL-SALAM JEWELLERS THAT THE GOODS IMP ORTED WILL BE PROVIDED FREE OF COST BY THE SUPPLIER TO TH E ASSESSEE AND THE NET EXPORT PROCEEDS AFTER MAKING ADJUSTMENT OF IMPORT PAYMENTS WILL BE PAID TO THE ASSESSEE. ACCORDINGLY GOLD WAS IMPORTED FREE OF COS T. THE ASSESSEE FURTHER SUBMITTED THAT IT FULFILLED ALL TH E REQUIREMENTS MENTIONED IN SECTION 1OB AND ALSO COMP LIED WITH THE STIPULATION FOR 100% EOU AS REQUIRED BY TH E NOIDA EXPORT PROCESSING ZONE AND ACCORDINGLY CLAIME D DEDUCTION U/S 10B. THE ASSESSEE SUBMITTED THAT IT W AS INVOLVED IN THE ACTIVITY OF CONVERTING GOLD BISCUIT S OR BARS 22 INTO JEWELLERY AND THE SAME AMOUNTS TO PRODUCTION O R MANUFACTURE OF A NEW ARTICLE. IN THIS REGARD THE AS SESSEE REFERRED TO THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF ASPINWALL & CO. LTD. VS. CIT (200 1) 251 ITR 323. THE ASSESSEE ALSO REFERRED TO THE FOLLOWI NG CASE LAWS: I. COMMISSIONER OF INCOME TAX VS. SOPHISTICATED MARBLES & GRANITE INDUSTRIES (2011) 331 ITR 96. II. COMMISSIONER OF INCOME TAX VS. RAMSONS ORGANICS LTD. (2010) 228 CTR (DEL) 502. III. COMMISSIONER OF INCOME TAX VS. M/S PALLAVI GRANITE INDUSTRIES, HIGH COURT OF MADRAS (ITA NO. 1118 OF 2009 & 888 OF 2010). IV. COMMISSIONER OF INCOME TAX VS. SHASHI KANT MITTAL (ITA NO. 67/2010 AND 458/2010). V. COMMISSIONER OF INCOME TAX VS. TAJ FIRE WORKS INDUSTRIES (2007) 288 ITR 92. 27. THE ASSESSEE ACCORDINGLY CONTENDED THAT IT WA S INVOLVED IN THE MANUFACTURE OF ARTICLES. REGARDING THE ISSUE OF WHETHER THE ASSESSEE WAS INVOLVED IN IMPOR T OR EXPORT OR ONLY JOB WORK, THE ASSESSEE SUBMITTED THA T EXPRESSION 'EXPORTED' OR 'IMPORTED' HAS REFERENCE T O THE NATURE OF GOODS AND NOT A PERSON/OWNER. THE ASSESSE E SUBMITTED THAT IN ORDER TO COMPLY WITH THE SEZ RULE S, THE ASSESSEE HAD TO SUBMIT ANNUAL PERFORMANCE REPORT TO THE DEVELOPMENT COMMISSIONER, NSEZ, NOIDA WHERE TOTAL EXPORTS AND TOTAL IMPORTS MADE BY THE ASSESSEE DURI NG THE YEAR ALONG WITH THE NET EARNINGS OF THE FOREIGN EXCHANGE ARE TO BE MENTIONED. THIS REPORT WAS EVIDE NCE OF 23 THE FACT THAT THE ASSESSEE WAS EARNING NET FOREIGN EXCHANGE. THE ASSESSEE ALSO REFERRED TO THE CIRCULA R NO. 34/2013 DATED 04.09.2013 OF THE CUSTOMS DEPARTMENT WHEREIN IT HAD BEEN STATED THAT, WHATEVER, GOLD WAS IMPORTED IN THE SEZ ZONE SHALL BE EXCLUSIVELY FOR T HE PURPOSE OF EXPORT AND THE SAME CONDITION HAD BEEN FULFILLED BY THE ASSESSEE. THE ASSESSEE ALSO RELIED ON THE CASE OF CIT VS LOVELESH JAIN(SUPRA). 27(I) THE ASSESSEE FURTHER RELIED ON THE DECISI ON OF THE HON'BLE CHANDIGARH BENCH IN THE CASE OF SHIVA EXPOR T IN WHICH IT HAD BEEN HELD THAT ONCE SOME GOVT. DEPARTM ENT HAVE ACCEPTED ONE FACT, LIKE IN THE CASE OF THE ASS ESSEE THAT HE IS ENGAGED IN THE BUSINESS OF EXPORT AND IM PORT, THEN THE INCOME TAX DEPARTMENT IS NOT ENTITLED TO DISALLOW THAT FINDING WITHOUT ANY MATERIAL OR VALID REASON. THE ASSESSEE SUBMITTED THAT IT WAS THE CUSTOM AUTHO RITY WHICH WAS TO DETERMINE WHETHER IT IS A CASE OF EXPO RT OR NOT AND THERE IS NO FINDING AGAINST THE ASSESSEE AN D AS SUCH THE INCOME TAX AUTHORITY CANNOT DISALLOW THAT FINDING AT ALL. THE ASSESSEE FURTHER SUBMITTED THAT EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD ACCEPTED ITS SALE AND PURCHASE AS REFLECTED IN THE AUDITED BALANCE SHEET AND ALL THE EXPENSES DEBITED IN THE P &L ACCOUNT AGAINST SUCH SALE AND PURCHASE WERE ALSO ACCEPTED AND THAT NO DISCREPANCY WAS POINTED OUT DU RING THE COURSE OF ASSESSMENT PROCEEDING. ALL THE SALES AND PURCHASES WERE SUPPORTED WITH THE COMPLETE BILLS AN D THE 24 SAME BILLS WERE ALSO PRODUCED BEFORE THE AO. THE AS SESSEE SUBMITTED THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNT U/S 145(3). IN THESE CIRCUMSTANCES THE AO W AS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD CARR IED OUT ONLY JOB WORK AND WAS NOT INVOLVED IN EXPORT AND IM PORT. THE ASSESSEE ALSO REFERRED TO THE RBI GUIDELINES WH ICH PROVIDED FOR NETTING OF EXPORTS. 28. DURING THE COURSE OF APPELLATE PROCEEDINGS ANOT HER ISSUE WAS DISCUSSED WITH THE ASSESSEE. THIS ISSUE W AS WITH REGARD TO THE COMPUTATION OF DEDUCTION UNDER S ECTION LOB. THE PROVISION OF SECTION 10B WERE DISCUSSED WI TH THE AR OF THE ASSESSEE AND IT WAS BROUGHT TO THE NOTICE OF THE AR OF THE ASSESSEE THAT THE DEDUCTION U/S 10B HAD T O BE COMPUTED ON THE BASIS OF FOREIGN EXCHANGE REALIZED WITHIN THE PRESCRIBED TIME AND NOT WITH RESPECT TO THE TOT AL EXPORT TURNOVER. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF DEDUCTION U/S 10B IN ACCORDANCE WITH THESE PROVISIONS. 29. THE AR OF THE ASSESSEE VIDE WRITTEN SUBMISSI ONS DATED 21.10.2014 SUBMITTED THAT THE ASSESSEE HAD BROUGHT THE NET EXPORT PROCEEDS LEFT AFTER NETTING IT OFF WITH THE IMPORT PAYMENT WHICH HE WAS REQUIRED TO MA KE IN FOREIGN EXCHANGE. THE ASSESSEE SUBMITTED THAT AS TH E PAYMENTS FOR EXPORTS WERE RECEIVED FROM THE SAME PA RTY TO WHOM THE PAYMENTS FOR IMPORTS WERE TO BE MADE, IT W AS MORE CONVENIENT AND PROFITABLE FOR THE ASSESSEE TO NET OFF THE EXPORT REALIZATION WITH THE PAYMENTS OF THE EXP ORT AND 25 BRING THE NET PROCEEDS INTO INDIA, INSTEAD OF FIRST MAKING PAYMENT OF IMPORTS AND THEN BRINGING ENTIRE EXPORT PROCEEDS INTO INDIA. THE NET RESULT IN BOTH THE CAS E WOULD BE THE SAME. THE ASSESSEE SUBMITTED THAT IT WAS FOL LOWING THIS MODUS OPERANDI SINCE SEVERAL YEARS AS IT WAS A PERMISSIBLE ARRANGEMENT, APPROVED BY RBI AND VARIOU S JUDICIAL AUTHORITIES. IN THIS REGARD THE ASSESSEE R EFERRED TO THE MASTER CIRCULAR OF RBI. THE ASSESSEE ALSO REFER RED TO THE FOLLOWING CASE LAWS:- I. CORE JEWELLERY P. LTD. MUMBAI VS. INCOME TAX OFFICER, WARD (1)(2), MUMBAI, ITAT MUMBAI 'C' BENCH-ITA NO. 715/MUM/2010. II. J.B. BODA & CO. PVT LTD. VS. CENTRAL BOARD OF DIRECT TAXES, SUPREME COURT OF INDIA (1997) 223 ITR 271 (SC). THE ASSESSEE ALSO REFERRED TO CBDT CIRCULAR NO. 31 DATED 20.12.1995. 30. THE COPY OF THE WRITTEN SUBMISSIONS OF THE ASSE SSEE WERE FORWARDED TO THE ASSESSING OFFICER. THE ASSESS ING OFFICER VIDE HIS REPORT DATED 21.10.2014 SUBMITTED AS UNDER : 'THE AO HAS DISCUSSED IN DETAIL THE ISSUES RAISED BY THE ASSESSEE IN ITS 'ASSESSMENT ORDER PASSED ON 05.03,2014. THE AO HAS DISCUSSED THIS ISSUE IN PARA 3 OF ITS ORDER. I REPLY UPON THE DETAILED ORDER PASSED BY THE AO, HOWEVER, WHILE DOING ASSESSMENT FOR THE A.Y. 2009-10 THE A.O. PASSED ORDER DATED 28.08.2014. AGAIN THE ISSUE WAS DISCUSSED IN DETAIL. A COPY OF ORDER FOR THE A.Y. 2009-10 IS ENCLOSED HEREWITH. IN THE ASSESSMENT 26 ORDER FOR THE A.Y. 2009-10 THE AO HAS DISTINGUISHED THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOVLESH JAIN IN IT A NO. 1223/2011, 204 TAXMAN 134, 2012 IN AS MUCH AS THAT THE HON'BLE DELHI HIGH COURT HAS NOT TOUCHED THE POINT ABOUT MANNER OF CALCULATION OF DEDUCTION U/S I OB (SEE PARA 6.5 OF THE AO'S ORDER FOR THE A.Y. 2009-10). THE AO HAS ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TARULATA SHYAM VS. CIT, 108 ITR 345 WHICH WAS FOLLOWED BY HON'BLE ITAT, CALCUTTA-B BENCH IN THE CASE OF TATA TEA LTD. VS. JCIT, 87 ITD 351 (SEE PARA 6.3 AND 6.4 OF AOS ORDER FOR THE A.Y. 2009-10). THE ASSESSEE HAS PLACED RELIANCE ON VARIOUS CASE LAWS IN REGARD TO THE DEFINITION OF THE WORD MANUFACTURE. THE AO IN ITS ORDER HAS HELD THAT THE ASSESSEE HAS DONE ONLY THE JOB WORK. THE AO HAS DISCUSSED IN DETAIL ALL THE POINTS IN PARA 3.5 OF ITS ORDER WHEREIN REFERENCE WAS MADE TO SALE OF GOODS ACT ALSO. IT IS REQUESTED TO DISPOSE THE APPEAL BASED ON THE ARGUMENTS MADE BY AO IN THE ORDER FOR THE A. Y. 2011-12 & 2009-10. IT MAY BE POINTED OUT THAT THE AO HAS PLACED ON RECORD NEW MATERIAL WHILE PASSING ORDER FOR THE A. Y. 2009-10. ' FURTHER, VIDE HIS REPORT DATED 21.10.2014 THE AO SUBMITTED AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HON'BLE IT AT, MUMBAI BENCH IN THE CASE OF CORE JEWELLERY P. LTD IN IT A NO, 715/MUM/2010 DATED 13.04.201L IT HAS BEEN SUBMITTED THAT THE HON'BLE IT AT HAS FOLLOWED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF J.B. BODA & CO. PVT. LTD., 223 ITR 271 (SC) DATED 30.10.1996. YOUR ATTENTION IS INVITED TO PARA 6 OF THE ORDER OF HON'BLE IT AT IN THE CASE OF CORE JEWELLERY P. LTD. WHEREIN IT HAS BEEN MENTIONED THAT BRINGING THE 27 SALES PROCEEDS OF EXPORT OF THE GOODS OR ARTICLES INTO INDIA IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE PERIOD OF SIX MONTHS OR SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IS MANDATORY CONDITION. IN PARA 8 THE HON'BLE IT AT HAS DEALT WITH THE APPEAL IN REGARDS TO THE EXCLUSION OF PAYMENT MADE FOR THE IMPORT FROM THE EXPORT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A. IN THAT CASE THE AO HAS REDUCED AN AMOUNT OF RS. 82,55,682/-. THAT MEANS THERE WAS REAL PAYMENT. IN THE PRESENT CASE, THAT IS THE CASE OF THE ASSESSEE, THERE IS NO SUCH PAYMENT. IN FACT THERE IS NO REDUCTION BY THE AO OF ANY KIND. IN FACT, THERE IS NO COST OF GOLD AS IS EVIDENT FROM THE VOUCHERS ENCLOSED WITH THE ASSESSMENT ORDER. IT HAS BEEN CLEARLY MENTIONED THAT GOLD IS GIVEN FREE OF COST. IN THAT CASE THE FACTS ARE DIFFERENT AND DISTINGUISHABLE. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF JB BODA & CO. PVT. LTD. 223 ITR 271(SC) IS ALSO DISTINGUISHABLE. IN THAT CASE AGAIN THERE WAS TWO WAY TRAFFIC. THAT MEANS THE ASSESSEE HAD TO MAKE SOME PAYMENTS AND ALSO WAS TO RECEIVE SOME PAYMENTS. IN THE PRESENT CASE THERE IS NO SUCH FACT THAT THE ASSESSEE HAS TO MAKE SOME PAYMENT FOR IMPORT OF GOLD. IN FACT, THE GOLD WAS FREE OF COST AND THE AO HAS GIVEN A FINDING THAT THE ASSESSEE WAS JUST DOING THE JOB WORK ON BEHALF OF THE FOREIGN PARTY. IT MAY FURTHER BE MENTIONED THAT THE HON'BLE SUPREME COURT HAS MAINLY GIVEN THE RELIEF ON ACCOUNT OF CIRCULAR NO. 731 DATED 20.12.1995 ISSUED BY CBDT IN REGARDS TO ALLOWANCE OF DEDUCTION U/S 80O, IN THE PRESENT CASE THERE IS NO ISSUE OF ALLOWANCE OF DEDUCTION U/S 80O THE ASSESSEE IS CLAIMING EXEMPTION U/S IOB AND THERE IS NO CIRCULAR ISSUED BY THE CBDT IN REGARDS TO THE EXEMPTION U/S 1OB. 28 HAD THERE BEEN ANY INTENTION ON THE PART OF THE CBDT TO ALLOW EXEMPTION U/S 10B IN THESE CIRCUMSTANCES, THE CBDT WOULD HAVE ISSUED SUCH CIRCULAR. THEREFORE, THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE DIFFERENT ON FACTS AND ALSO DISTINGUISHABLE. IT IS REITERATED THAT THE BASIC POINT OF RELIEF IN CASE OF JB BODA & CO. PVT. LTD., 223 ITR 271(SC) OF WAS THAT THE ASSESSEE WAS UNDER OBLIGATION TO MAKE SOME PAYMENTS ON ACCOUNT OF IMPORT OR ON ACCOUNT OF SOME PREMIUM TO BE REMITTED BY THE ASSESSEE TO THE FOREIGN PARTY AND WAS ALSO TO RECEIVE SOME FEES ON ACCOUNT OF SERVICES RENDERED WHICH WAS ELIGIBLE U/S 80O. THERE ARE NO SUCH FACTS IN THE CASE OF M/S NIKKA MAL JEWELLERS. 31. THE COPY OF THE REPORT OF THE ASSESSING OFFICER WAS SUPPLIED TO THE ASSESSEE AND THE ASSESSEE VIDE WRIT TEN SUBMISSIONS DATED 31.10.2014 SUBMITTED AS UNDER : ' 1.1 FROM THE COMMENTS OF THE AO AS GIVEN ABOVE IT IS EVIDENT THAT THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2011-12 ON 05.03.2014. IN THIS ASSESSMENT ORDER, THE LD. AO DISALLOWED IN FULL, EXEMPTION CLAIMED BY THE ASSESSEE U/S 10B OF THE ACT AMOUNTING TO RS. 48,18,153/-. AFTER PASSING THIS ORDER, BASED ON THE MATERIAL GATHERED DURING THIS ASSESSMENT, THE LD. AO REOPENED THE ASSESSMENT OF THE ASSESSEE U/S 148 FOR THE ASSESSMENT YEAR2009-10 AND AFTER DISCUSSING THE SAME ISSUE OF DEDUCTION US/ IOB AGAIN, PASSED ORDER DATED 28.08.2014. 1.2 IN PARA 2.1 (I) OF THE ORDER FOR ASSESSMENT YEAR 2009-10, IN REPLY TO THE OBJECTIONS RAISED BY THE ASSESSEE ON THE REOPENING OF ASSESSMENT U/S 148, THE LD. AO HELD AS UNDER: 'THE OBJECTION RAISED BY THE ASSESSEE IS INCORRECT IN LAW AS WELL AS ON THE FACTS. THE NOTICE U/S 148 HAS NOT BEEN ISSUED ON THE CONJUNCTURES AND SURMISES BUT ON SOUND FOOTINGS AND ON THE BASIS OF INFORMATION COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011-12. IT IS 29 INCORRECT TO SAY THAT NO NEW FACT HAS COME INTO EXISTENCE. ACTUALLY IT HAS COME TO THE NOTICE OF TH E DEPARTMENT FOR THE FIRST TIME THAT THE ASSESSEE IS NOT INVOLVED IN EXPORT OF ANY ARTICLE OR THING BUT IT IS ACTUALLY INVOLVED IN THE JOB WORK OF A PARTY FRO M DUBAI. THE ISSUE HAS BEEN ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER FOR A.Y. 2011-12. THE ASSESSEE HAS NEVER PURCHASED ANY GOLD, THEREFORE THERE CANNOT BE ANY EXPORT FOR THE PURPOSE OF EXEMPTION U/S 1OB OF THE IT. ACT.' 1.3 FROM THE ABOVE LINES OF THE AO, IT IS EVIDENT THAT THE CASE OF ASSESSMENT YEAR 2009-10 WAS REOPENED ON THE BASIS OF INFORMATION COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011-12 ON THE ISSUE OF EXEMPTION U/S 10B. THE MODUS OPERANDI FOLLOWED BY THE ASSESSEE IN IMPORT AND EXPORT, BRINGING OF EXPORT PROCEEDS INTO INDIA, PROCEDURE OF ISSUING EXPORT INVOICES AND RECEIVING IMPORT INVOICES IS SAME IN BOTH THE YEARS. 1.4 IN THE ASSESSMENT PROCEEDINGS OF BOTH THE YEARS, THE ASSESSEE HAD RELIED ON THE JUDGMENT OF HONORABLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. LOVLESH JAIN 204 TAXMAN 134 (DEL) (2012). 1.5 IN PARA NO. 3.5 (VII) AT PAGE NO. 17 OF ASSESSMENT ORDER FOR ASSESSMENT YEAR 2011-12 THE LD. AO HAS MENTIONED AS UNDER: 'THE FACTS OF THE CASE RELIED UPON BY THE ASSESSEE ARE ENTIRELY DIFFERENT. IN THE CASE RELIED UPON, TH E ASSESSEE HAD POSSESSION OF THE GOLD AND HAD A RIGHT, DOMINANCE AND DOMINION OVER IT. IN THE SAID CASE THE ASSESSEE HAD IMPORTED GOLD AND IT HAD BECOME THE OWNER. HE WAS IN A POSITION TO DISPOSE OFF IN ANY WAY THE WAY HE LIKED. IN THE INSTANT CASE, THE ASSESSEE HAD NEVER BECOME THE OWNER OF THE GOLD RECEIVED BY IT BUT THE OTHER PARTY WHOSE GOLD WAS RECEIVED ALWAYS REMAINED THE OWNER. THE ASSESSEE HAD TO RETURN THE GOLD AFTER JOB WORK. ' 1.6 CONSIDERING THE SAME JUDGMENT OF HONORABLE DELHI HIGH COURT, THE LD. AO IN PARA NO. 6 (I) AT PAGE NO. 20 OF ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009-10 MENTIONED AS UNDER: 30 'THERE IS NO DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, YET RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IT IS CONSIDERED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING. ' PARA NO. 6 (II): 'THE HON'BLE HIGH COURT HAS HELD THAT THERE IS NO PRE CONDITION OF OWNERSHIP FOR ALLOWING DEDUCTION U/S IOA/10B. THE HON'BLE HIGH COURT HELD THAT THE ACTIVITY UNDERTAKEN I.E. EXPORT/IMPORT, IS IMPORTANT AND THE PERSON INVOLVED AND ASSOCIATED WITH THE SAID ACTIVITY IS IMPORTANT/RELEVANT, MERE OWNERSHIP IS NOT THE SOLE CRITERIA TO DETERMINE WHETHER A PERSON IS AN IMPORTER OR EXPORTER. ' PARA NO. 6.2: 'IN OTHER WORDS THE MAIN EMPHASIS IS THAT THE GOVERNMENT GAVE INCENTIVE FOR THOSE PERSONS WHO BROUGHT INTO INDIA CONVERTIBLE FOREIGN EXCHANGE. SIMILAR PROVISION HAS BEEN PROVIDED IN SECTION 10B OF THE ACT. ' PARA NO. 6.3: 'AS PER THESE PROVISIONS THE DEDUCTION IS TO BE GIVEN -WITH REFERENCE TO AMOUNT OF CONVERTIBLE FOREIGN EXCHANGE RECEIVED IN INDIA BY THE ASSESSEE. ' PARA NO. 6.5: 'BASED ON THESE PRINCIPLES I.E. DEFINITION AS GIVEN IN SECTION 1OB (3) OF THE I.T. ACT AND THE DEFINITI ON OF EXPORT TURNOVER, THE WORKING OF DEDUCTION IS CALCULATED AS BELOW : DEDUCTION U/S 10B OF THE I.T. ACT = PROFITS OF THE BUSINESS * EXPORT TURNOVER TOTAL TURNOVER OF THE BUSINESS PAR A NO. 6.5.1: 'THE ASSESSEE HAS FILED THE DETAILS OF CONVERTIBLE FOREIGN EXCHANGE RECEIVED IN INDIA, FROM THE DETAILS FILED, IT IS OBSERVED THAT THE FOREIGN EXCHANGE REALIZED IN INDIA IS ONLY TO THE EXTENT OF RS. 23,23,83,294/-. FURTHER, FROM THE REPORT SUBMITTED U/S 1OB OF THE I.T, ACT UNDER RULE 16E OF THE I.T. RULES, IN FORM 56G, IT WAS OBSERVED THA T 31 THE EXPORT TURNOVER IS MENTIONED AT RS. 119,14,16,709/- WHICH IS ALSO THE TOTAL TURNOVER............................ APPLYING THE FORMULA DEDUCTION AVAILABLE TO THE ASSESSEE COMES TO RS. 55,64,928/- AS WORKED OUT BELOW:- DEDUCTION U/S I OB OF THE I. T. ACT = 2,85,31,092 X 23,23,83,294 119,14,16,709 = 5 5,64,9 2 8/-. PARA NO. 6.5.3:'THE DEDUCTION AVAILABLE TO THE ASSESSEE U/S 10B OF THE I. T, ACT WOULD BE RS. 55,64,928/- AS AGAINST THE CLAIM OF RS. 2,85,31,092/-. THIS WORKING IS IN CONSONANCE WITH THE DECISION OF THE HON'BLE DELHI HIGH COURT AND THE DECISION OF THE HON'BLE SUPREME COURT IN , THE CASE OF TARULATA SHYAM VS. CIT, 108 ITR 345 AND ALSO FOLLOWED BY THE HON'BLE IT AT CALCUTTA-B BENCH IN THE CASE OF TATA TEA LTD. VS. JCIT, 87 ITD 351. ' 1.7 FROM THE ABOVE EXTRACTS OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2011-12 AND 2009-10, IT IS EVIDENT THAT IN ASSESSMENT YEAR 2011-12 THE LD. AO DENIED THE EXEMPTION U/S 10B IN FULL MENTIONING THAT THE CASE OF THE ASSESSEE IS DIFFERENT FROM THE CASE OF CIT VS LOVLESH JAIN. THI S ORDER WAS PASSED ON 05.03.2014. LATER ON WHILE DOING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10, THE LD. ASSESSING OFFICER AGAIN DISCUSSED THE ISSUE AGAIN AND FOLLOWED THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE ABOVE CASE AND ALLOWED EXEMPTION OF RS. 55,64,928/- I.E. BASED ON THE NET FOREIGN EXCHANGE RECEIVED IN INDIA (EXPORT RECEIVABLES - IMPORT PAYABLES). THIS ORDER WAS PASSED ON 28.08.2014. THUS, THE LD. AO HAS HIMSELF CHANGED HIS STAND TAKEN EARLIER AND ACCEPTED THAT EXEMPTION SHOULD BE ALLOWED FOR NET FOREIGN EXCHANGE RECEIVED IN INDIA OUT OF TOTAL TURNOVER. 1.8 THE SAME APPROACH WAS TAKEN BY THE AO IN THE CASE OF CORE JEWELLERY PVT. LTD. MUMBAI WHICH THE ASSESSEE HAS QUOTED IN HIS REPLY DATED 21.10.2014, IN THIS CASE ALSO THE LD. AO AND THE HON'BLE CIT (A) ALLOWED THE EXEMPTION ON THE BASIS OF NET FOREIGN EXCHANGE RECEIVED IN INDIA. THE HON 'BLE MUMBAI BENCH OF IT AT REVERSED THE DECISION. IT HELD AS UNDER: 'IT WOULD NOT BE JUST FOR INSISTING THE TWO WAY TRAFFIC OF THE SAME AMOUNT FIRST BRING THE ENTIRE EXPORT PROCEEDINGS IN FOREIGN EXCHANGE 32 AND THEN AGAIN MAKE THE PAYMENT FOR IMPORTS. THEREFORE, THE PAYMENT MADE FOR IMPORTS AGAINST THE EXPORT REALIZATION IS DEEMED TO BE BROUGHT TO INDIA. AS THERE IS NO REQUIREMENT OF TWO WAY TRAFFIC OF THE SAME AMOUNT AS HELD BY HON, SUPREME COURT IN THE CASE OF J.B. BODA AND COMPANY PRIVATE LIMITED VS. CBDT (SO REPORTED IN 223 ITR 271 (S C).' BOTH THESE JUDGMENTS HAVE ALREADY BEEN QUOTED BY THE ASSESSEE IN ITS REPLY DATED 21.10.2014. 1.9 THUS, THE CONTENTION TAKEN BY THE LD. AO IN HER REPLY DATED 21.10.2014 VIDE F. NO.: ACIT/C- VII/LDH/13-14/932 DATED 21.10.2014 THAT THESE JUDGMENTS ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE IS NOT CORRECT AND THE ASSESSEE SHOULD BE ALLOWED FULL EXEMPTION U/S JOB BASED ON THE PRINCIPLES OF THESE JUDGMENTS.. 32. THE LD. COUNSEL FOR THE ASSESSEE ALSO FILED WRI TTEN SUBMISSIONS DATED 20.10.2104 AND RELEVANT PART OF T HE WRITTEN SUBMISSION IS REPRODUCED IN THE APPELLATE O RDER AS UNDER : IT IS SUBMITTED VERY HUMBLY THAT THE ASSESSING OFFICER IS ONLY FOCUSING ON THE ONE ASPECT I.E. IN THE INVOICE ISSUED BY THE SUPPLIER, IT IS WRITTEN THAT THE GOODS ARE SENT FREE OF COST. HOWEVER, A.O. IS IGNORING THE FACT THAT THE WORDS 'FREE OF COST' HAVE BEEN MENTIONED ON IMPORT INVOICE ONLY, DUE TO THE FACT THAT ASSESSEE HAS ENTERED INTO AN ARRANGEMENT WITH THE OVERSEAS SUPPLIER OF GOLD TO BRING IN THE NET FOREIGN EXCHANGE INTO INDIA. FOR EXAMPLE, WE ASSUME THAT ASSESSEE HAS EXPORTED GOODS WORTH US $ 200000/-. THE ASSESSE HAS ALSO IMPORTED GOODS WORTH US $ 180000/-FROM THE SAME PARTY. NOW, IF THE ASSESSEE ENTERS INTO AN ARRANGEMENT WITH THE PARTY THAT TO AVOID TWO WAY TRAFFIC, IT WILL NOT MAKE PAYMENT OF US $ 180000/- AND THEN BRING US $ 200000/- INTO INDIA AND INSTEAD, HE WILL BRING JUST US $ 33 20000/-MTOJNDIA (NET FOREIGN EXCHANGE). IN THIS CASE, THE ASSESSE IS NOT REQUIRED TO MAKE PAYMENT FOR IMPORTS MADE BY HIM. FOLLOWING THIS PRINCIPLE ONLY, THE INVOICES ISSUED BY THE SUPPLIER IN THE PRESENT CASE BEAR THE WORDS 'FREE OF COST', MEANING THEREBY THAT THE ASSESSEE IS NOT REQUIRED TO MAKE PAYMENT FOR IMPORTS DUE TO THE PROCEDURE OF NET FOREIGN EXCHANGE FOLLOWED BY HIM AS PERMITTED BY RBI, THE COMPETENT AUTHORITY, AND ALSO FOUND TO BE IN ORDER BY THE VARIOUS JUDICIAL AUTHORITIES. THE WORDS MENTIONED IN THE INVOICE HAVE ONLY PROCEDURAL SIGNIFICANCE AND THEY DO NOT IN ANY WAY TAKE AWAY THE OWNERSHIP OF THE ASSESSEE ON GOLD IMPORTED AND HIS OBLIGATION TO PAY FOR THE SAME, 2.2 THE CONTENTION TAKEN BY THE LD. AO THAT THE ASSESSEE WAS NOT REQUIRED TO MAKE PAYMENT FOR IMPORTS IS TOTALLY WRONG. THE LD. AO HAS CONCENTRATED ONLY ON ONE ASPECT I.E. IMPORT INVOICES. THE LD. AO HAS TOTALLY IGNORED THE 'BILLS OF ENTRY' ENCLOSED WITH EVERY IMPORT INVOICE. ON EVERY BILL OF ENTRY, THE CUSTOMS DUTY PAYABLE BY THE IMPORTER OF GOODS HAS BEEN MENTIONED. YOUR HONOR' ATTENTION IS INVITED TO THE FOLLOWING PROVISIONS OF THE CUSTOMS ACT, 1962: A) ON GOLD JEWELLERY, CUSTOMS DUTY IS LEVIED ON AD- VALOREM BASIS. B) FOR CALCULATION OF AD-VALOREM DUTY, IT IS NECESSARY TO FIND OUT VALUE OF GOODS AS IN THIS CASE, THE DUTY IS CALCULATED BY MULTIPLYING THE 'VALUE' OF GOODS WITH RATE OF CUSTOMS DUTY. C) AS PER SECTION 14(1) OF THE CUSTOMS ACT, 1962, THE VALUE OF IMPORTED GOODS SHALL BE THE TRANSACTION VALUE OF SUCH GOODS. D) THE TRANSACTIONS VALUE SHALL BE: -THE PRICE ACTUALLY PAID OR PAYABLE FOR THE GOODS. 34 2.3 THUS, FROM THE PROVISIONS OF THE CUSTOMS ACT, 1962, IT IS CLEAR THAT CUSTOMS DUTY IS PAYABLE ONLY WHEN THE IMPORTER HAS TO PAY A PRICE FOR THE GOODS IMPORTED. IF THE IMPORTED GOODS HAVE NO VALUE I.E. THEY ARE FREE OF COST, NO CUSTOMS DUTY IS PAYABLE. IN THE PRESENT CASE, AS THE ASSESSEE HAS TO PAY CUSTOMS DUTY AS MENTIONED ON EVERY BILL OF ENTRY, I T MEANS THAT HE HAS TO PAY FOR THE GOODS. 2.4 THAT THE ASSESSEE HAS NOT MADE PAYMENT FOR IMPORTED GOODS ONLY DUE TO THE ARRANGEMENT OF NET FOREIGN EXCHANGE FOLLOWED BY HIM. IN FACT, HE HAS T O MAKE PAYMENT FOR THE GOODS IMPORTED BY HIM. HE HAS ADJUSTED THE IMPORT PAYMENT AGAINST EXPORT PAYMENT TO BRING IN NET FOREIGN EXCHANGE INTO INDIA . 2.5 YOUR GOODSELF 'S ATTENTION IS ALSO INVITED TO THE SAMPLE COPIES OF THE BILLS PLACED IN THE PAPER BOOK AT PAGES 151 TO 160 WHEREIN, IT IS VERY MUCH EVIDENT THAT THE PURCHASE VALUE HAS BEEN ADJUSTED AGAINST THE SALE VALUE AND, THUS, THE CONTENTION OF THE ASSESSING OFFICER THAT THE GOODS ARE FREE OF CO ST IS TOTALLY INCORRECT. 2.6 THE ASSESSING OFFICER'S CONTENTION IN THE REMAND REPORT THAT IN THE CASE OF M/S CORE JEWELLERY PVT. LTD, OF THE MUMBAI 'C' BENCH, THE ASSESSING OFFICER HAS REDUCED THE AMOUNT OF RS, 82,55,6821-, WHICH WAS THE PURCHASE COST AND, AS SUCH, THE FACTS ARE DIFFERENT VIZ THE CASE OF THE ASSESSEE. IT IS SUBMITTED THAT IN OUR CASE, THE ASSESSING OFFICER HAS HELD IT TO BE A JOB WORK ONLY AND, THUS, DENIED THE EXEMPTION IN FULL WE HAVE ALSO SUBMITTED THAT THE ASSESSEE HAS ALSO PURCHASED SOME GOLD FROM THE LOCAL MARKET AND THEN EXPORTED THE SAME AND IT PROVES THE FACTS THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND EXPORT OF JEWELLERY AND NO SALE HAVE BEEN MADE IN INDIA AND IT IS 100% EXPORT ORIENTED UNIT. 35 33. THE LD. CIT(APPEALS), CONSIDERING SUBMISSIONS O F THE ASSESSEE DELETED THE ADDITION AND ALLOWED THE APPEA L OF THE ASSESSEE. HIS FINDINGS IN PARAS 4.10 TO 4.1 7 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : 4.10. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS. THERE ARE TWO ISSUES TO BE CONSIDERED IN THIS GROUN D OF APPEAL: I. WHETHER THE APPELLANT IS INVOLVED IN THE PROCESS OF MANUFACTURING/EXPORT AND IS THEREFORE ELIGIBLE FOR DEDUCTION U/S 10B. II. WHETHER THE COMPUTATION OF DEDUCTION U/S 10B AS CLAIMED BY THE APPELLANT IS CORRECT OR NOT. 4.11. EACH OF THE AFORESAID ISSUES IS BEING DISCU SSED AS UNDER:- 4.12 WHETHER THE APPELLANT IS INVOLV ED IN THE PROCESS OF MANUFACTURING/EXPORT AND IS THEREFOR E ELIGIBLE FOR DEDUCTION U/S 10B. IN THIS REGARD THE AO HAS HELD THAT THE APPELLANT I S MERELY INVOLVED IN THE JOB WORK AND IS NOT CARRYING OUT AN Y EXPORT AND IS THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE IT. ACT. THE APPELLANT'S CONTENTION IS THAT IT IS IMPOR TING GOLD FROM DUBAI AND IS EXPORTING MANUFACTURED ORNAMENTS TO DUBAI. IT IS ACCORDINGLY ELIGIBLE FOR DEDUCTION U/S 10B. IN THIS REGARD THE APPELLANT HAS RELIED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOVELESH JA IN (SUPRA). 4.13 ON THIS ISSUE THE FOLLOWING FACTS ARE RELEVA NT : A) THE CASE OF ASSESSMENT YEAR 2009-10 WAS REOPENED ON THE BASIS OF INFORMATION COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011-12, ON THE ISSUE OF DEDUC TION U/S 10B. THE MODUS OPERANDI FOLLOWED BY THE APPELLANT I N IMPORT AND EXPORT, BRINGING OF EXPORT PROCEEDS INTO INDIA, PROCEDURE OF ISSUING EXPORT INVOICES AND RECEIVING IMPORT INV OICES IS SAME IN BOTH THE YEARS. B) IN THE ASSESSMENT PROCEEDINGS OF BOTH THE YEARS, TH E APPELLANT HAD RELIED ON THE JUDGMENT OF HON'BLE HIG H COURT OF 36 DELHI IN THE CASE OF CIT VS. LOVELESH JAIN 204 TAXM AN 134 (DEL) (2012). C) IN PARA NO. 3.5(VII) AT PAGE NO. 17 OF ASSESSMENT O RDER FOR ASSESSMENT YEAR 2011-12 THE LD. AO HAS MENTIONE D AS UNDER: 'THE FACTS OF THE CASE, RELIED UPON BY THE ASSESSEE ARE ENTIRELY DIFFERENT. IN THE CASE RELIED UPON, TH E ASSESSEE HAD POSSESSION OF THE GOLD AND HAD A RIGHT , DOMINANCE AND DOMINION OVER IT. IN THE SAID CASE TH E ASSESSEE HAD IMPORTED GOLD AND IT HAD BECOME THE OWNER. HE WAS IN A POSITION TO DISPOSE OFF IN ANY W AY THE WAY HE LIKED. IN THE INSTANT CASE, THE ASSESSEE HAD NEVER BECOME THE OWNER OF THE GOLD RECEIVED BY IT BUT THE OTHER PARTY WHOSE GOLD WAS RECEIVED ALWAYS REMAINED THE OWNER. THE ASSESSEE HAD TO RETURN HE GOLD AFTER JOB WORK. D) CONSIDERING THE SAME JUDGMENT OF HON'BLE DELHI HIGH COURT, THE LD. AO IN PARA NO. 6(I) AT PAGE NO. 20 OF ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009-10 MENTIONED AS UNDER :- THERE IS NO DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, YET RESPECTFULLY FOLLOWING THE DECISION OF T HE HON'BLE DELHI HIGH COURT IT IS CONSIDERED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING E) THUS IN ASSESSMENT YEAR 2011-12 THE LD. AO DENIED THE DEDUCTION U/S 10B IN FULL MENTIONING THA T THE CASE OF THE APPELLANT IS DIFFERENT FROM THE CAS E OF CIT VS LOVLESH JAIN. THIS ORDER WAS PASSED ON 05.03.2014. LATER ON WHILE DOING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10, THE LD. AO AGAIN DISCUSSED THE ISSUE AND AGAIN FOLLOWED THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE ABOVE CASE AND ALLOWED DEDUCTION OF RS. 55,64,928/- I.E. BASED ON THE NET FOREIGN EXCHANGE RECEIVED IN INDIA (EXPORT RECEIVABLES IMPORT PAYABLES). THIS ORDER WAS PASSED ON 28.08.2014. THUS, THE LD. AO HAS HIMSELF CHANGED HIS STAND TAKEN EARLIER AND ACCEPTED THAT DEDUCTION SHOULD BE ALLOWED FOR NET FOREIGN EXCHANG E RECEIVED IN INDIA OUT OF TOTAL TURNOVER. 4.14 FROM THE AFORESAID FACTS IT IS EVIDENT THAT T HE AO HAS HIMSELF ACCEPTED THAT THE CASE OF THE APPELLANT IS COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOVELESH JAIN (SUPRA). RESPECTFULLY FOLLOWING T HE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOVELESH 37 JAIN (SUPRA) IT IS HELD THAT THE APPELLANT IS ELIGI BLE FOR DEDUCTION U/S 10B OF THE I.T. ACT. 4.15 WHETHER THE COMPUTATION OF DEDUCTION U/S 10B AS CLAIMED BY THE APPELLANT IS CORRECT OR NOT. AS PER THE PROVISIONS OF SECTION 10B OF THE I.T. AC T THE WORKING OF DEDUCTION U/S 1 OB IS COMPUTED AS UNDER: DEDUCTION U/S I OB OF THE I, T. ACT = PROFITS OF THE BUSINESS * EXPORT TURNOVER TOTAL TURNOVER OF THE BUSINESS FURTHER, AS PER DEFINITION OF EXPORT TURNOVER GIVEN IN SECTION 10B, 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN R ESPECT OF EXPORT BROUGHT INTO INDIA IN CONVERTIBLE FOREIGN EX CHANGE IN ACCORDANCE WITH SUB SECTION 3. AS PER MODUS OPERAND I FOLLOWED BY THE APPELLANT, THE APPELLANT IS IMPORTI NG GOLD FROM DUBAI AND IS EXPORTING JEWELLERY ITEMS. NO PAYMENT FOR THE IMPORT OF GOLD IS BEING MADE BY THE APPELLANT AND T HE SAME IS BEING ADJUSTED AGAINST THE AMOUNT RECEIVABLE FOR EX PORT OF ORNAMENTS/JEWELLERY AND ONLY THE NET AMOUNT RECEIVA BLE IS BEING BROUGHT INTO INDIA IN CONVERTIBLE FOREIGN EXC HANGE. THE APPELLANT HAS CONTENDED THAT INSTEAD OF FIRST MAKIN G THE PAYMENT FOR IMPORTS AND THEN BRINGING THE ENTIRE EX PORT PROCEEDS INTO INDIA, WHICH WOULD INVOLVE EXTRA EXPE NDITURE AND HASSLES AND WOULD BE A FUTILE EXERCISE, ONLY TH E NET AMOUNT RECEIVABLE AFTER ADJUSTING THE PAYABLES AND RECEIVABLES WAS BROUGHT INTO INDIA, THE APPELLANT H AS CONTENDED THAT THE PAYMENTS MADE FOR IMPORTS AGAINS T THE EXPORT REALIZATION ARE DEEMED TO BE BROUGHT INTO IN DIA. I AGREE WITH THE APPELLANT ON THIS ISSUE. THIS ISSUE IS SQU ARELY COVERED BY THE DECISION OF THE HON'BLE MUMBAI BENCH OF ITAT IN THE CASE OF CORE JEWELLERY PVT LTD. (SUPRA). IN THIS CASE PERTAINING TO COMPUTATION OF DEDUCTION/S 10A, THE H ON'BLE MUMBAI ITAT HELD AS UNDER:- ' WHEN THE IMPORT EXPENDITURE IS ALLOWABLE, IT WOUL D NOT BE JUST FOR INSISTING THE TWO WAY TRAFFIC OF THE SA ME AMOUNT FIRST BEING THE ENTIRE EXPORT PROCEEDINGS IN FOREIG N EXCHANGE AND THEN AGAIN MAKE THE PAYMENT FOR IMPORTS. THEREF ORE, THE PAYMENT MADE FOR IMPORTS AGAINST THE EXPORT REALIZA TION IS DEEMED TO BE BROUGHT TO INDIA. AS THERE IS NO REQUI REMENT OF TWO WAY TRAFFIC OF THE SAME AMOUNT AS HELD BY THE H ON 'BLE 38 SUPREME COURT IN THE CASE OF J.B. BODA AND COMPANY PVT. LTD. VS. CBDT (SC) REPORTED IN 223 ITR 271 (SC). ' 4.16 RESPECTFULLY FOLLOWING THE DECISION OF THE HON 'BLE MUMBAI ITAT IN THE CASE OF CORE JEWELLERY PVT. LTD. , (SUPRA) AND THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF J.B. BODA AND COMPANY PVT. LTD. VS. CBDT (SC) REPOR TED IN 223 ITR 271 (SC), IT IS HELD THAT THE DEDUCTION U/S 10B HAS TO BE COMPUTED BY TAKING THE FIGURE OF EXPORT TURNOVER BY INCLUDING THE PAYMENT FOR IMPORTS ADJUSTED AGAINST THE EXPORT REALIZATION AS BEING DEEMED TO BE BROUGHT TO INDIA. 4.17. KEEPING IN VIEW THE AFORESAID FACTUAL AND LEG AL POSITION THE DISALLOWANCE MADE BY THE AO IS DELETED. THIS GR OUND OF APPEAL IS ALLOWED. 34. THE LD. DR RELIED UPON ORDERS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE BILLS OF THE ASSESSEE SHOWS REPAIRING/REMAKING WHICH IS JOB WORK IN NATURE, THE REFORE, THERE IS NO EXPORT IN THE CASE OF THE ASSESSEE. 34(I) ON THE OTHER HAND, LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT DIFFERENCE IN THE VALUE WAS TREA TED AS PROFIT AND SUBMITTED THAT THE ASSESSEE MADE SAME CL AIM OF EXEMPTION UNDER SECTION 10B OF THE ACT SINCE ITS IN CEPTION I.E. ASSESSMENT YEAR 2004-05 TO 2010-11 AND THE ASSESSING OFFICER ALLOWED SUCH EXEMPTION UNDER SECT ION 143(3) IN ASSESSMENT YEARS 2004-05 TO 2009-10. COP IES OF ORDERS UNDER SECTION 143(3) FOR ASSESSMENT YEARS 20 04-05 TO 2009-10 ARE FILED ON RECORD. HE HAS SUBMITTED T HAT IN ASSESSMENT YEAR 2010-11, SIMILAR EXEMPTION WAS ALLO WED UNDER SECTION 143(1). HE HAS ALSO SUBMITTED THAT A FTER PASSING OF THE ASSESSMENT ORDER ON 05.03.2014 FOR 39 ASSESSMENT YEAR UNDER APPEAL I.E. 2011-12, ASSESSIN G OFFICER REOPENED THE ASSESSMENT OF ASSESSEE UNDER S ECTION 148 OF THE INCOME TAX ACT FOR ASSESSMENT YEAR 2009- 10, HOWEVER, AGAIN ALLOWED DEDUCTION UNDER SECTION 10B IN THE ORDER UNDER SECTION 148/143(3) OF THE INCOME TA X ACT. BY FOLLOWING THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF LOVLESH JAIN (SUPRA) HE HAS, THEREFORE, SUB MITTED THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF LOVLES H JAIN (SUPRA) ORDER OF ITAT MUMBAI BENCH IN THE CASE OF C ORE JEWELLERY P. LTD. (SUPRA) AND DECISION OF SUPREME C OURT IN THE CASE OF JB BODA & CO. PVT. LTD. (SUPRA). 35. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND FINDINGS OF FACTS RECORDED BY LD. CIT(APPEALS), WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. IT IS ADMITTED FACT THAT ASSESSEE CLAIMED DEDUCTION UN DER SECTION 10B OF THE INCOME TAX ACT IN ASSESSMENT YEA R UNDER APPEAL I.E. 2011-12. SAME CLAIM WAS MADE IN PRECEDING ASSESSMENT YEARS 2004-05 TO 2010-11 AND T HE CLAIM OF ASSESSEE HAS BEEN ALLOWED BY ASSESSING OFF ICER UNDER SECTION 143(3) OF THE INCOME TAX ACT AFTER SC RUTINY ASSESSMENTS. IN ASSESSMENT YEAR 2010-11, IT WAS AL LOWED UNDER SECTION 143(1). IN ASSESSMENT YEAR 2009-10, THE ASSESSING OFFICER AFTER PASSING THE ASSESSMENT ORDE R UNDER APPEAL, RE-OPENED UNDER SECTION 148, HOWEVER BY FOLLOWING THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF LOVLESH JAIN (SUPRA), ALLOWED THE CLAIM OF ASSESSEE 40 UNDER SECTION 10B OF THE ACT. IN THE CASE OF LOVLE SH JAIN (SUPRA), HON'BLE DELHI HIGH COURT HELD THAT WHEN THE ASSESSEE IMPORTED STANDARD GOLD INTO INDIA AND THEN CONVERTED IT INTO JEWELLERY OR ORNAMENTS AND EXPORT ED THE ORNAMENTS, IT AMOUNTS TO EXPORTING ARTICLES OR THIN GS, CONVERSION OF STANDARD ASSESSEE AMOUNTS TO MANUFACTURE/PRODUCTION WHICH QUALIFIES FOR DEDUCTIO N UNDER SECTION 10A/10B OF THE ACT. IN THE CASE OF CORE JEWELLERY P. LTD. (SUPRA) THE MUMBAI BENCH FOLLOWIN G THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F J.B. BODA & CO. PVT. LTD. (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FINDINGS ARE ALREADY REPRODUCED A BOVE IN THIS ORDER. IT, THEREFORE, STANDS ESTABLISHED THAT IN PRECEDING SEVERAL ASSESSMENT YEARS, THE ASSESSING O FFICER ALLOWED EXEMPTION UNDER SECTION 10B OF THE INCOME T AX ACT IN FAVOUR OF THE ASSESSEE ON THE SAME FACTS AND EVEN LATER ON IN PROCEEDINGS UNDER SECTION 148 OF THE AC T, ALLOWED SIMILAR CLAIM UNDER SECTION 148/143(3) OF T HE ACT. THEREFORE, THE REVENUE AUTHORITIES SHOULD FOLLOW RU LE OF CONSISTENCY AND SHOULD NOT HAVE MADE DISALLOWANCE U NDER SECTION 10B OF THE INCOME TAX ACT IN ASSESSMENT YEA R UNDER APPEAL ITSELF. THE RULE OF CONSISTENCY WHEN FOLLOWED, WILL RESULT INTO THE DELETION OF THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER. WE ARE FORTIFIED IN OUR VIEW BY JUDGEMENT OF THE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT 193 ITR 321, GODAVARI CORPORATION LTD. 156 ITR 835 (MP) AND ESCORTS LTD. 338 ITR 435 (DELHI). THE HON'BLE PUNJAB & HARYANA HIGH 41 COURT IN THE CASE OF VIKAS CHEMI GUM INDIA 276 ITR 32 HELD THAT , SOURCE OF INCOME IN ASSESSMENT YEAR 1986-87 NOT CHALLENGED, DOES NOT OPEN TO CHALLENGE THE SAME SOURCE IN SUBSEQUENT YEARS. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF DELHI HIGH COURT I N THE CASE OF LOVLESH JAIN (SUPRA) AND ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF CORE JEWELLERY PVT. LTD. (SUPR A) AND DECISION OF HON'BLE SUPREME COURT IN THE CASE OF JB BODA & CO. PVT. LTD. (SUPRA). THE LD. CIT(APPEALS) WAS THEREFORE, JUSTIFIED IN DELETING THE DISALLOWANCE. WE THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY, DISMISS ED. 36. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . 37. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 TH SEPT.,2015. FIT FOR PUBLICATION (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMB ER