ITO 18(2)(1), MUMBAI V. KAMINI JEWELS, MUMBAI

ITA 113/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1654 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 07-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REEPAL TRALSHAWALA
• Assessee Lawyers: K V VISPUTE
• Keywords: Additional evidence
• Section: 143(3); 10AA; 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO.113/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) THE ITO 18(2)(1), 304, 3 RD FLOOR, EARNEST HOUSE, NCPA MARG, MUMBAI 400 021. VS. M/S. KAMINI JEWELS, 70/70A, LAXMI PREMISES, 1 ST FLOOR SHEIKH MEMON STREET, ZAVERI BAZAR, MUMBAI- 400 002 ./ ./ PAN/GIR NO. : AAKFK4416G ( ! / APPELLANT ) .. ( '#! / RESPONDENT ) $%& /ASSESSEE BY : SHRI. K.V.VISPUTE /REVENUE BY : SHRI. REEPAL TRALSHAWALA ' ( ) &* / DATE OF HEARING : 22/08/2016 +,-. ) &* / DATE OF PRONOUNCEMENT 09/12/2016 !' / O R D E R PER RAM LAL NEGI, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGA INST ORDER DATED 20/10/2014 PASSED BY THE LD. CIT (APPEALS)-25, MUMB AI FOR THE ASSESSMENT YEAR 2011-12, WHEREBY THE LD. CIT (A) ALLOWED THE A PPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED 27/02/2014 PASSED U/ S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM ENGAGED IN BUSINESS OF MANUFACTURING TRADING, EXPORT & IMPO RT ORNAMENTS, JEWELRY, PRECIOUS STONES, DIAMOND & GOLD MANUFACTURE AND EXP ORT FROM SEZ AT SACHIN, SURAT, FILED ITS RETURN OF INCOME FOR THE A.Y. 2011 -12 DECLARING THE TOTAL INCOME OF RS. 3,56,502/- AFTER CLAIMING THE DEDUCTION U/S 10AA OF THE ACT AMOUNTING TO RS. 60,71,726/-. THE RETURN WAS PROCESSES AND AS SESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED DETERMINING THE TOTAL INCOME AT RS. 64,31,730/- AFTER DISALLOWING RS. 60,71,726/- CLAIMED BY THE ASSESSE E U/S 10AA OF THE ACT. THE ASSESSEE CHALLENGED THE IMPUGNED ORDER BEFORE THE L D. CIT(A) WHO AFTER HEARING THE ASSESSEE ALLOWED THE APPEAL OF THE ASSESSEE HOL DING THAT THE APPELLANT IS ENTITLED TO CLAIM EXEMPTION U/S 10AA OF THE ACT. TH E REVENUE IS IN APPEAL AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON THE F OLLOWING EFFECTIVE GROUNDS:- 1. 'ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN THE LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE DISALLOWANCE M ADE BY THE A.O ON ACCOUNT OF EXEMPTION U/S 10AA OF THE INCOME TAX ACT, 1961 OF RS. 60,71,726/- AS THE A.O, DURING THE COURSE OF THE AS SESSMENT PROCEEDINGS, ESTABLISHED THAT THE ASSESSEE DID NOT CARRY OUT ANY MANUFACTURING ACTIVITY IN THE SEZ PREMISES. 2. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE DISALLOWANCE WAS MADE ON THE BASIS OF MATERIAL FACT S AVAILABLE ON RECORD AND ENQUIRY CONDUCTED, WHICH WAS FURTHER STR ENGTHENED BY THE A.O IN THE REMAND REPORT DURING THE APPELLATE P ROCEEDINGS. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COULD NOT PRO VE THAT THEY HAD CARRIED OUT ANY MANUFACTURING ACTIVITIES IN THE SAI D PREMISES AT SEZ, 3 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 SURAT IN THE F.Y. 2010-11 RELEVANT TO THE ASSESSMEN T YEAR UNDER CONSIDERATION, THE ONUS LIES ON THE ASSESSEE. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, A ND IN THE LAW, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLO WANCE MADE BY THE A.O, BY PLACING THE RELIANCE ON THE CASE LAWS WHICH ARE NOT RELEVANT TO THE INSTANT CASE, AS THE FACTS OF THE INSTANT CA SE ARE ENTIRELY DIFFERENT FROM THE CASES RELIED UPON. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN THE LAW, THE LD. CIT(A) HAS ERRED IN ARRIVING AT THE DECISION TH AT THE A.O MADE ADDITION JUST ON THE BASIS OF PRESUMPTION AND SUSPI CION; AS IN THE ASSESSMENT ORDER, THE A.O HAS FIRMLY ESTABLISHED TH E FACT THAT NO MANUFACTURING ACTIVITY WAS BEING CARRIED OUT BY THE ASSESSEE AT THE SEZ PREMISES. 3. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYIN G ON THE ASSESSMENT ORDER, SUBMITTED THAT THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE AS THE A.O HAS ESTABLISHED THAT THE ASSESSEE DID NOT CARRY OUT ANY MANUFACTURING ACTIVITIES IN THE SEZ PREMISES AT SURAT IN THE F.Y. 2010-11. THERE WAS NO POWER CONNECTION TO UNDERTAKE MANUFACTURING ACTIVIT IES. MOREOVER, THE LAW RELIED UPON BY THE LD. CIT(A) IS NOT APPLICABLE TO THIS CASES AS THE FACTS OF THE INSTANT CASE ARE DIFFERENT FROM THE CASES RELIED UP ON BY HIM. 4. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE FIRM CARRIED OUT ITS MANUFACTURING ACTIVIT IES OF MANUFACTURING GOLD MEDALLIONS FROM ITS SEZ UNIT, SACHIN, SURAT DURING THE RELEVANT PREVIOUS YEAR FROM 27/03/2011 TO 29/03/2011. THE SAID ACTIVITIES INVOLVED IMPORTING OF GOLD BARS, PROCESSING IT INTO GOLD MEDALLIONS, AND EXPOR TING THEREOF. THE APPELLANT 4 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 PROCESSED 40KG. GOLD BARS AND TO ESTABLISH THESE FA CTS, RELEVANT DOCUMENTS WERE PLACED BEFORE THE AO. THE AO WAS APPRISED OF T HE FACT THAT 28/03/2011 A DIESEL GENERATOR WAS HIRED ON RENT FROM M/S. SAGAR ENTERPRISES AND THE WORK WAS CARRIED OUT FOR WHICH AN AMOUNT OF RS. 8500/- WAS PAID BY THE ASSESSEE AS RENT AND COST OF DIESEL USED. SINCE, THE FINDIN GS OF THE LD. CIT(A) IS BASED ON THE EVIDENCE ON RECORD THE SAME NEEDS NO INTERFE RENCE. HENCE, THE REVENUES APPEAL IS LIABLE TO BE SET ASIDE. 5. THE LD. COUNSEL FURTHER SUBMITTED THAT IN ORDER TO VERIFY THE SAID FACTS, AO ISSUED NOTICE U/S 133(6) OF THE ACT TO M/S. SAGA R ENTERPRISES AND M/S. SAGAR ENTERPRISES VIDE LETTERS DATED 04/02/2014 AND 27/02/2014 CONFIRMED THAT BILL NO. 25 OF 29/03/2014 FOR RS. 8500/- WAS R AISED FOR PROVIDING DIESEL GENERATOR ON RENT AND COST OF DIESEL USED. SHRI. S ATISH RAWAL CONFIRMED VIDE LETTER DATED 24/12/2013 AND 31/01/2014 THAT LABORER S WERE SUPPLIED AS ASKED BY THE ASSESSEE FIRM. IN VIEW OF THE AFORESA ID FACTS THE A.O HAS WRONGLY CONCLUDED THAT NO MANUFACTURING ACTIVITIES WERE UND ERTAKEN IN SEZ UNIT DURING THE RELEVANT FINANCIAL YEAR. THE LD. COUNSEL FURTHER SUBMITTED THAT THE MUMBAI TRIBUNAL HAS DECIDED THE SIMILAR ISSUE IN FA VOUR OF THE ASSESSEE IN AICT VS. M/S GIA EXPORTS (ITA NO 8080 TO 8082/M/201 1 FOR THE AYS 2006-07, 2007-08 & 2008-09 RESPECTIVELY.) 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GO NE THROUGH THE MATERIAL PLACED BEFORE US INCLUDING THE DECISION RELIED UPON THE ASSESSEE. THE ONLY ISSUE TO BE ADJUDICATED IN THIS CASE IS WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10AA OF THE ACT. THE LD. CIT(A) HAS D ECIDED THE ISSUE INVOLVED IN THIS CASE IN FAVOUR OF THE ASSESSEE HOLDING AS U NDER:- 8. IN THE PRESENT FACTS OF THE CASE, EVEN THE A.O IS NOT DISPUTING THE FACT THAT THE APPELLANT HAS MADE EXPORTS OUT OF IMPORTED GOODS. I HAVE ALSO TAKEN NOTE OF THE CASE LAW REFERRED BY THE APPELLAN T IN ITS ON SISTER CONCERN 5 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 CASE WHERE THE ITAT HAS ALLOWED RELIEF IN SIMILAR A ND IDENTICAL ISSUES. IN THIS CONTEXT, THE APPELLANT RELIES UPON DECISION OF MUMBAI ITAT IN THE CASE OF ACIT V/S GIA EXPORTS, ITA NO. 8080/M/2011, A.YS 2006-07 TO 2008-09, BENCH G, MUMBAI, ORDER DATED 19/06/2013 WHEREIN U NDER SIMILAR FACTS, IT IS HELD IN PARA 14 & 15 OF THE ORDER AS UNDER ( RELEVANT PART EXTRACTED)- 14. IT IS NOTICED THAT TO VERIFY THE CLAIM OF THE ASSESSEE AND EXPLANATION, THE ASSESSEE WAS ASKED TO SUBMIT THE C OMPLETE DETAILS OF IMPORTS AND EXPORTS MADE THROUGH ITS UNIT AND AP PROVAL FROM CUSTOM AND CENTRAL EXCISE DEPARTMENT. DOCUMENTS REL ATING TO SHIPMENT IMPORT AND EXPORT CLEARANCE INVOICES OF IM PORT AND EXPORT AND FOREIGN REMITTANCES IN THE BANK ACCOUNTS. THE C IT(A) FOUND THAT ALL THESE DOCUMENTS WERE SUBMITTED BEFORE THE A.O D URING THE ASSESSMENT PROCEEDINGS. THE CIT(A) HAS FURTHER OBSE RVED THAT HE HAS EXAMINED ALL THESE DOCUMENTS AND NO DISCREPANCY WAS NOTICED IN THESE PAPERS. EVEN THE A.O HAS NOT MENTIONED ANY DISCREPANCY IN THE IMPORT AND EXPORT CLEARANCE PAPERS SUBMITTED DU RING THE COURSE OF ASSESSMENT. IT IS AN UNDISPUTED FACT THAT IN THE SEZ UNIT NO IMPORT OR EXPORT CAN BE MADE WITHOUT THE APPROVAL O F THE CUSTOM AND CENTRAL EXCISE DEPARTMENT. ALL THE PAYMENTS AND RECEIPTS WERE MADE THROUGH BANKING CHANNELS AND NO DISCREPANCY WA S POINTED OUT BY THE A.O. FROM THESE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS A UNIT IN SEZ, SURAT. RAW MATERIAL WAS IMPORTED AND T HE FINAL DEPARTMENT. ALL THE PAPERS RELATING TO THE SHIPMENT AND FOREIGN REMITTANCES WERE IN ORDER. THE ASSESSEE HAS SUBMITT ED THAT THERE WAS NO IMPORT AND EXPORT ACTIVITY TAKEN PLACE IN SU RVEY YEAR. ACCORDINGLY, THE CIT(A) FOUND THAT THERE WAS NO CAS E OF THE A.O TO DENY THE DEDUCTION TO THE ASSESSEE. WE FURTHER NOTI CED THAT EVEN THERE IS NO FINDING IN THE ORDER OF THE A.O THAT SU RVEY PARTY HAS CONVEYED TO THE A.O OR IN DETAILED REPORT THAT THER E WAS NO EXPORT OR IMPORT OF ITEMS MANUFACTURED BY THE ASSESSEE AT THE PREMISES. THE SURVEY PARTY IN FACT NOTED THAT IRREGULARITIES OR D ISCREPANCIES AT THE TIME OF SURVEY AND NOT OF THE PAST. THE A.O HAS AS SUMED THAT IN THE PAST AS THE UNIT WAS NOT FUNCTIONING, NEITHER THERE WAS ANY EMPLOYEE NOR THERE WAS ANY SUFFICIENT POWER CONSUMP TION TO MANUFACTURE SUCH A HUGE QUANTITY. HOWEVER, THE A.O HAS NOT TAKEN INTO CONSIDERATION THE FACT THAT THE ASSESSEE IS MA NUFACTURING ONLY HEAVY KADAS, WHICH ARE PURCHASED BY THE VARIOUS PAR TIES IN ABOARD. 6 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 THE ITEMS MANUFACTURED BY THE ASSESSEE, WERE NOT JE WELLERY ITEMS BUT KADAS ONLY. IN OUR VIEW, IN MANUFACTURING KADAS , POWER CONSUMPTION IS LESS AND EMPLOYEES ARE ALSO REQUIRED LESS. MOREOVER, THE IMPORT OF GOLD MADE BY THE ASSESSEE WAS SUBJECT TO CUSTOM CLEARANCE AND EXCISE DEPARTMENT, WHICH WERE CLEARED AFTER DUE VERIFICATION. APPROVAL WAS THERE, THEREAFTER MATERI AL WAS SOLD TO ABROAD AND AGAIN SUBJECT TO CUSTOM AND EXCISE CLEAR ANCE WHICH WERE OBTAINED. COPIES OF ALL THESE DETAILS WERE FIL ED BEFORE THE A.O AS WELL AS BEFORE THE CIT(A). 15. LEARNED DR HAS CONTENDED THAT LEARNED CIT()A H AS 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 A.O HAS CATEGORICALLY ME NTIONED IN HIS ORDER THAT ALL THE DETAILS FILED BEFORE HIM WERE FI LED BEFORE THE A.O ALSO. THIS FACT COULD NOT BE DENIED BY THE LEARNED DR EVEN. THEREFORE, WE SEE NO REASON TO DENY THE CLAIM OF TH E ASSESSEE FOR EXEMPTION UNDER SECTION 10A. 9. SIMILAR AND IDENTICAL ISSUES WERE DECIDED IN FAVOUR OF THE APPELLANT IN THE CASE OF M/S. GOENKA DIAMOND & JEWELLERS LTD. VS . DCIT, CIRCLE-2, JAIPUR VIDE ITA NO. 509/JP/2011; IN THE CASE OF M/S . AMAR EXPORTS V. ADDL. CIT, RANGE-9, SURAT VIDE AHMEDABAD ITAT IN IT A NO. 436/AHD.20 AND AGAIN BY THE HONBLE MUMBAI ITAT IN THE CASE OF M/S. GITANJALI EXPORTS CORPORATION LTD. VS. ADCIT-5(1), MUMBAI IN ITA NOS. 6947 & 6948/6718 & 6783/6949 & 6950/6758 & 6787/MUM/2011. 10. IN VIEW OF THE ABOVE OBSERVATIONS, THE APPELL ANT IS ENTITLED TO CLAIM EXEMPTION U/S 10AA. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE EXEMPTION OF RS. 60,71,726/-AS CLAIMED IN THE RETUR N OF INCOME. 7. WE NOTICE THAT IN THIS CASE THE ASSESSEE HAS PLA CED ON RECORD THE COPY OF LETTER DATED 12.3.2014 FROM THE THEN OFFICER ON SPE CIAL DUTY, ADDRESSED TO THE ITO14(2)(4) MUMBAI, VIDE WHICH CERTAIN INFORMATION U/S 136 OF THE ACT WERE SUPPLIED. FROM THE CONTENTS OF THE SAID LETTER, IT CAN BE INFERRED THAT THE UNIT WAS IN OPERATION ON 28.3.2011 AS CONTENDED BY THE A SSESSEE. THE AO HAS ALSO MENTIONED IN ASSESSMENT ORDER THAT ON PERUSAL OF DE TAILS IT REVEALED THAT THE 7 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 ASSESSEE HAD CARRIED OUT ITS BUSINESS ACTIVITIES FR OM ITS SEZ UNIT, SACHIN, SURAT FROM 27.3.2011 TO 29.3.2011. AS PER THE ASSES SEE THE PROCESS OF MANUFACTURING GOLD MEDALLIONS FROM GOLD BARS REQUIR E FEW HEAVY MACHINES AND APART FROM OTHER EXPENSES, IT REQUIRES TWO TYPES OF DIRECT EXPENSES I.E., LABOUR CHARGES AND ELECTRICITY CHARGES. THE AO HAS DISALLO WED THE EXEMPTION ON THE GROUND THAT SINCE THE ASSESSEE FAILED TO ESTABLISH GENUINENESS OF ELECTRICITY AND LABOUR CHARGES THE PARTICULARS FURNISHED TO SUBSTAN TIATE ITS CONTENTION THAT GOLD MEDALLIONS WERE MANUFACTURED FROM GOLD BARS DU RING THE RELEVANT PERIOD, CANNOT BE ACCEPTED. 8. WE FURTHER NOTICE THAT DURING ASSESSMENT PROCEE DINGS THE ASSESSEE FURNISHED THE WHEREABOUTS OF THE FIRM FROM WHOM THE ASSESSEE HAD HIRED GENERATOR SET TO FULFILL THE REQUIREMENT OF ELECTRI CITY IN MANUFACTURING PROCESS AND THE CONCERNED PERSON WAS EXAMINED BY THE AO. SI MILARLY, AO HAS EXAMINED THE PERSON WHO MADE AVAILABLE THE MANPOWER TO THE ASSESSEE. SO, IN OUR CONSIDERED OPINION THE ASSESSEE HAS DISCHARGED THE ONUS ON IT TO PROVE THAT DURING THE RELEVANT PREVIOUS YEAR, IT CARRIED OUT THE BUSINESS ACTIVITIES FROM SEZ UNIT, SACHIN TO AVAIL THE CLAIM OF DEDUCTI ON U/S 10AA OF THE ACT. 9. THE LD. CIT(A) HAS MAINLY BASED HIS FINDINGS ON THE DECISION OF THE COORDINATE BENCH RENDERED IN ACIT V/S GIA EXPORTS, (SUPRA) IN WHICH THE COORDINATE BENCH OF THE ITAT HAS DECIDED THE SIMILA R ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE SAID CASE THE AO HAD DENIED DEDUCTION ON THE BASIS OF REPORT OF SURVEY PARTY WI THOUT TAKING INTO CONSIDERATION THE DETAILED EXPLANATION SUBMITTED BY THE ASSESSEE. IN THE PRESENT CASE ALSO THE AO HAS NOT ACCEPTED THE EVIDE NCE ADDUCED BY THE ASSESSEE TO ESTABLISH THAT SINCE THERE WAS NO ELECT RICITY CONNECTION GENERATOR WAS HIRED AND MANPOWER WAS ALSO ARRANGED TO CARRY O UT THE MANUFACTURING ACTIVITIES. THEREFORE, IN OUR CONSIDERED OPINION, T HE IMPUGNED ORDER PASSED BY 8 ITA NO 113/MUM/2015 ASSESSMENT YEAR: 2011-12 THE LD. CIT(A) IS IN ACCORDANCE WITH THE VIEW TAKEN BY THE COORDINATE BENCH IN THE AFORESAID CASE AND AS PER THE EVIDENCE ON RECOR D. SINCE, WE DO NOT FIND ANY LEGAL OR FACTUAL INFIRMITY IN THE ORDER PASSED BY T HE LD. CIT(A), WE UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVEN UE. 10. IN THE RESULT, THE REVENUES APPEAL FOR ASST. YEAR 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DECEMBER, 2016 SD/- SD/- ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER ' /( MUMBAI; 0 DATED:09/12/2016 !'#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT. 3. ' 2& ( ) / THE CIT(A)- 4. ' 2& / CIT 5. 56 '&7$ , * 7$. , ' /( / DR, ITAT, MUMBAI 6. 8 9( / GUARD FILE. !' / BY ORDER, #5& '& //TRUE COPY// ()*+ (DY./ASSTT. REGISTRAR) , ' /( / ITAT, MUMBAI PRAMILA