M/s. Akashshubham finvest Pvt. Ltd., Nashik V. ACIT, Cent. Cir.-1, Nashik

ITA 129/PUN/2007

• Counselvise Citation: 12924514 RSA 2007
• Duration Of Justice: 6 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-09-2013
• Assessment Year: 1997-1998
• Appeal Filed On: 25-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL P CHAWARE
• Keywords: Audit objection; Difference of opinion; Change of opinion
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 129/PN/2007 (ASSESSMENT YEAR 1997-98) M/S. AKASHSHUBHAM FINVEST PVT. LTD., FIRST FLOOR, SUYOJIT HEIGHTS, OPP : RAJIV GANDHI BHAVAN, SHARANPUR ROAD, NASHIK. .. APPELLANT PAN NO. AADCA 8085B VS. ACIT, CENTRAL CIRCLE-1, GADKARI CHOWK, AGRA ROAD, NASHIK. .. RESPONDENT APPELLANT BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI ANIL P. CHAWARE DATE OF HEARING : 24-09-2013 DATE OF PRONOUNCEMENT : 26-09-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 13-11-2006 OF THE CIT(A)-I, NASHIK RELATING TO ASSE SSMENT YEAR 1997-98. 2. THIS APPEAL WAS EARLIER DISMISSED BY THE TRIBUNA L FOR NON- APPEARANCE. SUBSEQUENTLY, THE TRIBUNAL VIDE M.A.NO .84/PN/2012 ORDER DATED 21-09-2012 RECALLED ITS EARLIER ORDER. HENCE, IT IS A RECALLED MATTER. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ORIGIN AL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) ON 29-02-2000 DETERMINING THE TAXABLE INCOME AT NIL. IN THE SAID ORDER THE ASSESSING OFFICER AFTER EXAMINING VARIOUS DETAILS FILED BY THE ASSESSEE ALLOWED THE CLAIM OF DEDUCTIO N U/S.80IA AMOUNTING TO RS.13,79,449/- BY HOLDING INTER ALIA THAT THE COMP ANY IS A SMALL SCALE 2 INDUSTRIAL UNIT HAVING MANUFACTURING FACILITY AT SI LVASSA IN THE BACKWARD STATE OF DADRA & NAGAR HAVELI, DAMAN AND DIU, WHICH IS A NOTIFIED INDUSTRIAL AREA U/S.80IA. THEREFORE, IT IS ENTITLE D FOR 100% EXEMPTION FROM TAX U/S.80IA. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 ON 04-08-2003 ON THE GROUND THAT DEDUCTION U/S.80IA IS NOT ALLOWABLE TO THE ASSESSEE SINCE IT DID NOT DO ANY MANUFACTURING OR P ROCESSING. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND RELY ING ON CERTAIN DECISIONS THE ASSESSING OFFICER REJECTED THE CLAIM OF DEDUCTI ON U/S.80IA AND DETERMINED THE INCOME AT RS.13,79,449/-. 4. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT TH E RE-OPENING HAS BEEN MADE AFTER A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAD DISCLOSED TRULY AND FULLY A LL MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSMENT AND THE ASSESSING OFF ICER HAS COMPLETED THE ASSESSMENT U/S.143(3). FURTHER, THE RE-ASSESSMENT WAS MADE ON THE BASIS OF AUDIT OBJECTION. RELYING ON VARIOUS DECISIONS IT W AS SUBMITTED THAT THE RE- OPENING OF THE ASSESSMENT BY THE ASSESSING OFFICER IS BAD IN LAW AND HENCE SHOULD BE QUASHED. 5. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE EXAMINED THE PROVISIONS OF SECTION 80IA AND HELD THAT THE ASSESSING OFFICER IS JUSTIFIED IN HOL DING THAT THE ACTIVITY OF FINISHING, CUTTING OR POLISHING OF GRANITE OR MARBL E STONES DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION AS REQUIRED UNDER THE PROVISIONS OF SECTION 80IA OF THE ACT. WHILE DOING SO, HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LUCKY MINMAT PVT. LTD. VS. CIT REPORTED IN 245 ITR 830 WHEREIN IT HAS BEEN HELD THAT MERE MINI NG OF LIME STONE/MARBLE AND CUTTING THE SAME BEFORE IT IS SOLD IN THE MARKET COULD NOT 3 BE TREATED TO BE MANUFACTURING PROCESS. HE ALSO RE LIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAES EAGLE S CHICORI VS. CIT REPORTED IN 255 ITR 178 WHERE IT HAS BEEN HELD THAT CONVERSION OF CHICORI ROOTS INTO CHICORI POWDER IS NOT MANUFACTURE. SIMI LARLY, HE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. GEM INDIA MANUFACTURING COMPANY REPORTED IN 249 ITR 807 (SC) WHERE IT HAS BEEN HELD THAT CONVERSION OF RAW DIAMONDS INTO CUT/ POLISHED DIAMONDS DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION. 6. SO FAR AS THE ARGUMENT OF THE ASSESSEE THAT IT H AS FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR THE PURP OSE OF COMPLETION OF ASSESSMENT AND THEREFORE AS PER PROVISO TO SECTION 147 NO NOTICE U/S.148 CAN BE ISSUED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR HE HELD THAT THE ASSESSEE FAILED TO DISCLOSE F ULLY AND TRULY ALL THE MATERIAL FACTS IN RELATION TO THE ELIGIBILITY OF DE DUCTION U/S.80IA. 7. AS REGARDS THE ARGUMENT OF THE ASSESSEE THAT THE NOTICE U/S.148 SHOULD BE QUASHED SINCE THE SAME WAS ISSUED ON THE BASIS OF OBJECTION OF THE AUDIT PARTY AND THERE IS CHANGE OF OPINION BY T HE ASSESSING OFFICER, HE HELD THAT THE SAME IS NOT ACCEPTABLE SINCE THERE EX ISTS SOME MATERIAL FOR FORMATION OF THE BELIEF AND THAT MATERIALS HAVE SOM E RATIONAL AND LIVE LINK FOR FORMATION OF THE REQUISITE BELIEF. HE OBSERVED THAT THE ASSESSING OFFICER WHILE PASSING THE ORDER U/S.143(3) HAD MERE LY ALLOWED DEDUCTION U/S.80IA ON THE BASIS OF COMPUTATION OF INCOME FILE D BY THE ASSESSEE AND HAD NOT APPLIED HIS MIND ON THE ISSUE OF ELIGIBILIT Y OF THE ACTIVITY OF THE ASSESSEE FOR DEDUCTION U/S.80IA. THEREFORE, IT CAN NOT BE SAID THAT THERE WAS A CHANGE OF OPINION. HE NOTED THAT THE AUDIT OBJEC TION RAISED BY THE AUDIT PARTY JUST BROUGHT THE FACT TO THE NOTICE OF THE AS SESSING OFFICER THAT THE 4 ACTIVITY OF THE ASSESSEE IS PRIMA-FACIE NOT ELIGIBL E FOR DEDUCTION U/S.80IA. THE ASSESSING OFFICER HAS RECORDED HIS REASONS TO B ELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND COMPLETED THE RE-ASSESSMENT PROCEEDINGS ACCORDING TO THE PROVISIONS OF THE ACT. THE ASSESS EE HAS NOT DISCLOSED THE MATERIAL FACT TO SHOW THAT THE DEDUCTION U/S.80IA I S ALLOWABLE AND THAT THE BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE IS MA NUFACTURING ACTIVITY. THUS, THERE WAS MATERIAL FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR CLAIMING DEDUCTION U/S.80IA. HE ACCORDINGLY HELD THAT THE CONDITIONS LAID DOWN U/S.147 ARE SQUA RELY SATISFIED IN THIS CASE. DISTINGUISHING THE VARIOUS DECISIONS RELIED ON BY T HE ASSESSEE AND REJECTING THE EXPLANATION/SUBMISSION HE UPHELD THE ACTION OF THE ASSESSING OFFICER IN DETERMINING THE INCOME AT RS.13,79,459/- BY DISALLO WING THE CLAIM OF DEDUCTION U/S.80IA. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A)-I, NASHIK IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF AO AND THEREBY HOLDING THAT THE APPELLANT IS NOT ELIGI BLE FOR DEDUCTION U/S.80IA OF THE ACT. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AS WELL AS IN LAW THE LD.CIT(A)-I, NASHIK IS NOT JUSTI FIED IN HOLDING THAT THE APPELLANT FAILED TO DISCLOSE FULLY AND TRULY AL L THE MATERIAL FACTS NECESSARY FOR ASSESSMENT WHEN ALL THE MATERIAL FACT S WERE AVAILABLE BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT. HE IS FURTHER NOT JUSTIFIED IN CONFIRMING THE VALIDITY OF THE ISSUE O F NOTICE U/S.148 WHEN ALL THE MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT WERE TRULY AND FULLY DISCLOSED BY THE APPELLANT DURING T HE COURSE OF REGULAR ASSESSMENT. 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A)-I, NASHIK IS NOT JUSTIFIED IN HOLDING THA T THE REASONS FOR THE ISSUE OF NOTICE U/S.148 ARE RECORDED PRIOR TO ISSUE OF NOTICE. 5 4. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD.CIT(A)-I, NASHIK IS NOT JUSTIFIED IN CONFIRMING THE VALIDITY OF NOTICE ISSUED U/S.148 OF THE ACT WHEN THE SAID NOTI CE WAS ISSUED BECAUSE OF OBJECTION OF THE AUDIT PARTY WHICH RESUL TED IN THE CHANGE OF THE OPINION OF THE AO. 5. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AS WELL AS IN LAW THE LD.CIT(A)-I, NASHIK IS NOT JUSTI FIED IN CONFIRMING THE VALIDITY OF NOTICE ISSUED U/S.148 OF THE ACT WH EN THE BASIS GIVEN FOR DENYING THE DEDUCTION U/S.80IA OF THE ACT IN TH E ASSESSMENT ORDER IS DIFFERENT FROM THE BASIS GIVEN IN THE SO CALLED REASONS RECORDED FOR THE ISSUE OF THE SAID NOTICE. 6. THE APPELLANT CRAVES FOR ALTERATION, DELETION, A DDITION TO THE ANY OF THE ABOVE GROUNDS OF APPEAL. 9. THE LD.COUNSEL FOR THE ASSESSEE AT THE OUTSET SU BMITTED THAT THE RE- OPENING HAS BEEN MADE AFTER A PERIOD OF 4 YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) AND THERE IS NO ALLEGATION BY THE ASSESS ING OFFICER THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. RELYING ON VAR IOUS DECISIONS HE SUBMITTED THAT IN VIEW OF THE PROVISO TO PROVISIONS OF SECTION 147 THE RE- OPENING OF ASSESSMENT BY ISSUING NOTICE U/S.148 IS VOID AB-INITIO. 10. SO FAR AS THE MERIT OF THE CASE IS CONCERNED TH E LD. COUNSEL FOR THE ASSESSEE REFERRING TO VARIOUS DECISIONS SUBMITTED T HAT CUTTING, POLISHING AND FINISHING OF GRANITE AND MARBLE STONES AMOUNT TO MA NUFACTURING/PRODUCTION AND THEREFORE THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80IA OF THE INCOME TAX ACT. HE ACCORDINGLY SUBMITTED THAT THE RE-ASSE SSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER AND UPHELD BY TH E CIT(A) SHOULD BE QUASHED AND THE ASSESSEE SHOULD BE ALLOWED TO GET T HE BENEFIT OF DEDUCTION U/S.80IA OF THE ACT. HE ALSO SUBMITTED THAT IN SUB SEQUENT YEARS THE CLAIM OF DEDUCTION U/S.80IA HAS BEEN ALLOWED U/S.143(1) A ND NO REMEDIAL MEASURES HAVE BEEN TAKEN BY THE REVENUE. 6 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND T HE CIT(A). 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S .143(3) ON 29-02-2000 HAS ALLOWED THE CLAIM OF DEDUCTION U/S.80IA. SUBSE QUENTLY, DUE TO AUDIT OBJECTION THE ASSESSING OFFICER ISSUED NOTICE U/S.1 48 ON THE GROUND THAT THE ACTIVITY OF THE ASSESSEE, I.E. CUTTING, POLISHING, TREATING ETC. OF THE MARBLES AND GRANITES DOES NOT AMOUNT TO MANUFACTURE AND PRO CESSING AND THEREFORE THE ASSESSEE IS NOT ENTITLED TO BENEFIT OF DEDUCTIO N U/S.80IA OF THE INCOME TAX ACT. 12.1 WE FIND IN THE INSTANT CASE THERE IS NO ALLEGA TION THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIA L FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT AND THE NOTICE U/S.148 HAS BEEN ISSUED AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SINCE ASSESSEE HAS FURNISHED MATERIAL FACTS NECESSARY FOR COMPLETION O F THE ORIGINAL ASSESSMENT AND SINCE THE ASSESSMENT HAS BEEN FRAMED U/S.143(3) , THEREFORE, IN VIEW OF THE PROVISO TO SECTION 147 THE NOTICE ISSUED U/S.14 8, IN OUR OPINION, IS NOT IN ACCORDANCE WITH LAW. THE LD. DEPARTMENTAL REPRESEN TATIVE ALSO COULD NOT CONTROVERT THE SUBMISSION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT IN SUBSEQUENT ASSESSMENT YEARS THE ASSESSMENTS HAVE BE EN COMPLETED U/S.143(1) ALLOWING THE CLAIM OF DEDUCTION U/S.80IA AND NO REOPENING HAS 7 TAKEN PLACE. ACCORDINGLY, WE FIND MERIT IN THE SUB MISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE NOTICE ISSUED U/S .148 IS VOID AND AB-INITIO. 12.2 EVEN ON MERIT ALSO, WE FIND THE HONBLE SUPREM E COURT IN THE CASE OF ITO VS. ARIHANT TILES AND MARBLES PVT. LTD. REPO RTED IN 320 ITR 79 HAS OBSERVED AS UNDER (SHORT NOTES) : THE ASSESSEE, WHICH WAS BASICALLY A FACTORY-OWNER AND NOT A MINE- OWNER, WAS ENGAGED IN PRODUCING POLISHED SLABS AND TILES WHICH WERE PARTLY EXPORTED. THE STEPWISE ACTIVITIES UNDE RTAKEN BY THE ASSESSEE WERE AS FOLLOWS : (I) RAW MARBLE BLOCKS N UNEVEN SHAPE WERE SORTED OUT AND MARKED; (II) SUCH BLOCKS WERE P ROCESSED ON SINGLE BLADE/WIRE SAW MACHINES TO SQUARE THEM BY SE PARATING WASTE MATERIAL; (III) SQUARED UP BLOCKS WERE SAWN FOR MAK ING SLABS; (IV) SAWN SLABS WERE REINFORCED BY FILLING CRACKS; (V) S LABS WERE POLISHED IN POLISHING MACHINES AND CUT INTO REQUIRED DIMENSI ONS/TILES; AND (VI) POLISHED SLABS AND TILES WERE BUFFED BY SHINER S. THE QUESTION WAS WHETHER THE ASSESSEE WAS ENTITLED TO THE BENEFI T OF DEDUCTION UNDER SECTION 80-IA OF THE INCOME-TAX ACT, 1961. T HE HIGH COURT ACCEPTED THE CLAIM OF THE ASSESSEE THAT IT WAS ENTI TLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80-IA SINCE THE POLISHED SL ABS WERE MANUFACTURED/PRODUCED FROM THE MARBLE BLOCKS. ON A PPEAL TO THE SUPREME COURT : HELD : AFFIRMING THE DECISION OF THE HIGH COURT, TH AT THIS WAS NOT A CASE OF MERELY CUTTING MARBLE BLOCKS INTO SLABS. T HERE WAS THE FURTHER ACTIVITY OF POLISHING AND ULTIMATE CONVERSI ON OF THE BLOCK INTO POLISHED SLABS AND TILES. THERE WERE VARIOUS STAGE S THROUGH WHICH THE BLOCK HAD TO GO THROUGH BEFORE THEY BECAME POLI SHED SLABS AND TILES. THE ORIGINAL BLOCK DID NOT REMAIN MARBLE BL OCK; IT BECAME A SLAB OR TILE. BLOCKS WERE CONVERTED INTO POLISHED SLABS AND TILES RESULTING IN THE EMERGENCY OF A NEW AND DISTINCT CO MMODITY. SUCH AN ACTIVITY WAS SOMETHING BEYOND MANUFACTURE AND BROUG HT A NEW PRODUCT INTO EXISTENCE. THE STEPWISE ACTIVITY CONS TITUTED MANUFACTURE OR PRODUCTION IN TERMS OF SECTION 80I A 12.3 ADMITTEDLY, THE ABOVE DECISION WAS PASSED ON 0 2-12-2009 WHICH IS MUCH AFTER THE ORDER PASSED BY THE CIT(A) ON 13-11- 2006 AND THEREFORE SAME WAS NOT AVAILABLE BEFORE THE LD.CIT(A) WHILE D ECIDING THE APPEAL. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT, THE ACTIVITIES OF THE ASSESSEE, IN OUR OPINION, AMOUNTS TO PRODUCTION/MAN UFACTURE OF A THING WHICH IS ELIGIBLE FOR DEDUCTION U/S.80IA OF THE ACT . ACCORDINGLY, THE 8 ASSESSEE SUCCEEDS ON MERIT ALSO. IN VIEW OF THE AB OVE DISCUSSION, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 26 TH DAY OF SEPTEMBER 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACC OUNTANT MEMBER PUNE DATED: 26 TH SEPTEMBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, NASHIK 4 CIT-I, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY I TAT, PUNE BENCHES, PUNE