ITO, New Delhi V. M/s. Printman, New Delhi

ITA 1312/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3313 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 05-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: N O N E
• Section: 68

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL F BENCH, NEW DELHI. , , BEFORE SH. RAJENDRA, ACCOUNTANT MEMBER & BINA PILLAI,JUDICIAL MEMBER ./I.T.A. NO. 1312/DEL/2015, /ASSESSMENT YEAR: 2011-12. INCOME TAX OFFICER, WARD : 33 (2), NEW DELHI. VS. M/S. PRINTMAN, A15/20,VASANT VIHAR, NEW DELHI 110 057. PAN: AALFP 2553 J (REVENUE) (ASSESSEE) REVENUE BY: SHRI RAVI KANT GUPTA, SR.D.R.; ASSESSEE BY: N O N E ; / DATE OF HEARING: 08.03.2018 / DATE OF PRONOUNCEMENT: 08.03.2018. ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDER DTD.29.12.2014,OF THE CIT (A) -11,NEW DELHI,THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF SLITTING AND PRINTING OF ALUMINIUM FOILS,FILED ITS RETURN OF INCOME ON 21.9. 2011,DECLARING NIL INCOME.THE AO COMPLET- ED THE ASSESSMENT U/S.143(3) OF THE ACT, ON 28.3.20 14,DETERMINING ITS INCOME AT RS.1.62 CRORES. 2 .FIRST GROUND OF APPEAL IS ABOUT ALLOWING THE DEDUC TION TO THE ASSESSEE UNDER SECTION 80-IC OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO AS KED THE ASSESSEE TO EXPLAIN UNDER WHICH SUB SECTION OF SECTION 80-IC IT HAD CLAIMED THE DED UCTION,AS IT WAS THE FIRST YEAR OF BUSINESS.IN ITS REPLY THE ASSESSEE STATED THAT DEDUCTION WAS CLAIME D AS PER THE PROVISIONS OF SECTION 80-IC (2) (A)(II) OF THE ACT.HOWEVER, THE AO WAS NOT CONVINCE D ABOUT THE CLAIM MADE BY THE ASSESSEE.HE FURTHER DIRECTED IT TO FILE COMPLETE PROCESS OF MAN UFACTURING ACTIVITIES CARRIED OUT BY IT. AFTER CONSIDERING THE SAME,THE AO HELD THAT THE ASSESSEE WOULD PURCHASE ALUMINIUM FOILS,THAT IT WOULD SLIT INTO DIFFERENT SIZES AND WOULD EMBOSS THE FOIL S SO THAT ITS CLIENTS COULD USE THESE STRIPS FOR PACKAGING THEIR GOODS,THAT NO NEW PRODUCT CAME INTO EXISTENCE, THAT AS PER THE LIST OF PLANT AND MACHINERY 12 MACHINES WERE BEING USED FOR THE PURPO SE OF DIFFERENT KINDS OF PRINTING, THAT NO DISTINCT ARTICLE/THING CAME INTO BEING AFTER COMPLE TION OF WHOLE PROCESS,THAT THE FOILS REMAINED FOILS EVEN AFTER END OF THE ALLEGED MANUFACTURING P ROCESS,THAT ACTIVITY CARRIED OUT BY THE ASSESSEE WAS NOT COVERED WITHIN THE MEANING OF WORD MANUFAC TURE AS PROVIDED IN SECTION 2(29BA) OF ITA. NO. 1312 (DEL) OF 2015. M/S. PRINTMAN, NEW DEL HI. 2 THE ACT.HE RELIED UPON THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. S. R. TISSUES PVT. LTD. & ANOTHER,DELIVERED BY THE HONBLE APEX COURT IN CASE NO. APPEAL (CIVIL) 5293 5294 OF 2001.FINALLY,HE HELD THAT CLAIM MADE BY THE ASSESS EE OF BEING MANUFACTURER HAD TO BE REJECTED. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE SUBMISSIONS.HE ALSO RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING THE AVAILABLE MATERIAL AND GOING THROUGH THE PROCES S CARRIED OUT BY THE ASSESSEE,THE FAA HELD THAT ISSUE STOOD COVERED BY THE JUDGEMENT OF THE HO NBLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF CIT VS. INDERJEET KOCHHAR (ITA 596 OF 2 009).HE FURTHER HELD THAT THE PROCESS CARRIED OUT BY THE ASSESSEE BROUGHT REVERSIBLE CHANGES, THA T THE ASSESSEE HAD COMPLIED WITH ALL THE REQUISITE CONDITIONS FOR CLAIMING THE DEDUCTION UND ER SECTION 80IC, THAT IT WAS ENGAGED IN MANU - FACTURING ACTIVITY,THAT IT HAD PRODUCED A DIFFERENT AND DISTINCT ARTICLE FOR USE BY THE PHARMACEUTI - CAL COMPANIES,THAT THE AO HAD GONE BY THE INTERPRET ATION OF THE TERM MANUFACTURING AS PER THE EXCISED LAW,THAT HE IGNORED THE DEFINITION OF WORD MANUFACTURE, AS PROVIDED UNDER SECTION 2(29BA) OF THE ACT,THAT EACH ACT HAD DIFFERENT CONN OTATIONS AND INTERPRETATIONS OF TERM MANU - FACTURING,THAT AO IGNORED THE WORD PRODUCES USED IN SECTION 80IC. HE REFERRED TO THE CASES OF INDIA CINE AGENCIES 308 ITR 846; UJAGAR PRINTS 179 ITR 317; EMPIRE INDUSTRIES 162 ITR 846 AND ARIHANT MARBLE & TILES 320 ITR 729 AND HELD THA T THE CASE RELIED UPON BY THE AO WAS DISTINGUISHABLE ON FACTS.FINALLY,HE ALLOWED THE CLA IM OF DEDUCTION OF RS.1.09 CRORES, MADE BY THE ASSESSEE UNDER SECTION 80-IC OF THE ACT. 4. BEFORE US THE DEPARTMENTAL REPRESENTATIVE(DR)STATED THAT THE MATTER COULD BE DECIDED ON MERITS.AS STATED, NONE APPEARED ON BEHALF OF THE AS SESSEE. WE HAVE PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD REJECTED THE CLAIM OF THE ASSESSEE,MADE UNDER SECTION 80-IC OF THE ACT,BY REL YING UPON A JUDGEMENT OF THE HONBLE SUPREME COURT,THAT THE JUDGEMENT WAS DELIVERED WITH REFERENCE TO A CENTRAL EXCISE MATTER, THAT THE FAA HAD REVERSED THE ORDER OF THE AO BY RELYING UPON THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT,THAT IN THE CASE OF INDERJEET KOCHHAR TH E HONBLE DELHI HIGH COURT,ON THE IDENTICAL FACTS,HAD HELD THAT THE ASSESSEE WAS ENGAGED IN MAN UFACTURING.WE WOULD LIKE TO REPRODUCE THE SECTION 80IC WHICH READS AS UNDER: (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-SECTION (2), THERE SHALL, IN ITA. NO. 1312 (DEL) OF 2015. M/S. PRINTMAN, NEW DEL HI. 3 ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFI TS AND GAINS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE, (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDU LE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING.. FROM THE ABOVE,IT IS CLEAR THAT BENEFIT OF SECTION 80IC ARE AVAILABLE TO ASSESSEES WHO ARE MANUFACTURER OR THE PRODUCER OF CERTAIN ARTICLES OR THINGS.THE AO HAS TOTALLY MISSED THE WORD PRODUCE WHILE MAKING THE ADDITION.TERMS MANUFACTURI NG /PRODUCING HAVE TO UNDERSTOOD IN PROPER PERSPECTIVE.THEY APPEAR TO BE SAME BUT THERE IS A SUBTLE DIFFERENCE.PRODUCE IS A WIDER TERM THAN MANUFACTURE.THE WORD MANUFACTURE HAS BEEN DEFINED BY THE HONBLE GUJARAT HIGH COURT,IN THE CASE OF MITESH IMPLEX,(367 ITR 85)AS U NDER: WHERE A CHANGE OR SERIES OF CHANGES BROUGHT ABOUT BY THE APPLICATION OF PROCESSES TAKE THE COMMODITY TO THE POINT WHERE, COMMERCIALLY IT CAN N O LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT IS, INSTEAD, RECOGNISED AS A DISTINCT AND NEW ARTICLE THAT HAS EMERGED AS A RESULT OF THE PROCESS, IT WOULD AMOUNT TO MANUFACTURE OF AN A RTICLE OR THING. THE WORD MANUFACTURE IMPLIES A CHANGE BUT EVERY CHANGE IN THE RAW MATERIAL IS NO T MANUFACTURE. THERE MUST BE SUCH A TRANSFORMATION THAT A NEW AND DIFFERENT ARTICLE MUS T EMERGE HAVING A DISTINCT NAME, CHARACTER OR USE. IN THE CASE UNDER CONSIDERATION THE END PRODUCT WAS NOT THE SAME AS THE RAW MATERIAL.THE ASSESSEE WOULD APPLY PROCESS AND IT WAS KNOWN AS A NEW COMMERCIAL ARTICLE OR THING.IN OUR OPINION,THERE IS NO NEED TO TAKE HELP OF WORD PRODU CE TO ALLOW THE CLAIM MADE BY THE ASSESSEE. AFTER CONSIDERING THE ABOVE AND TAKING NOTE OF THE CATEGORICAL FINDING OF FACT GIVEN BY THE FAA THAT A NEW PRODUCT CAME INTO EXISTENCE,WE ARE OF TH E OPINION THAT THERE IS NO LEGAL OR FACTUAL INFIRMITY IN HIS ORDER.SO,CONFIRMING THE SAME,WE DE CIDE THE FIRST GROUND OF APPEAL AGAINST THE AO. 5. SECOND GROUND OF APPEAL IS ABOUT DELETING THE ADDIT ION OF RS.42.50 LAKHS, MADE BY THE AO, ON ACCOUNT OF UNEXPLAINED ACCRETION TO THE CAPITAL ACC OUNT OF THE PARTNERS.DURING THE ASSESSMENT PROCEEDINGS THE AO FGOUND THERE WAS ADDITION IN CAP ITAL ACCOUNT OF THE PARTNERS, NAMELY, ANSHU SIKRI (RS.15 LAKHS),ASEEM KHULLAR (RS.12.50 LAKHS) AND PREM KUMAR ARORA (RS.15 LAKHS).HE DIRECTED THE ASSESSEE TO EXPLAIN THE SOURCE OF THES E CREDITS IN THE BOOKS OF FIRMS IN THE NAMES OF THE PARTNER.AS PER THE AO,THE ASSESSEE HAD FILED EX PLANATION IN THAT REGARD ON 24.2.2014 AND 21.3.2014, BUT IT DID NOT FILE ANY EXPLANATION WITH REGARD TO ADDITION IN CAPITAL ACCOUNTS OF THE PARTNERS.INVOKING THE PROVISIONS OF SECTION 68 OF T HE ACT HE HELD THAT THE CREDIT OF ITA. NO. 1312 (DEL) OF 2015. M/S. PRINTMAN, NEW DEL HI. 4 RS.42,50, 000/- IN THE NAMES OF THE ABOVE MENTIONED PARTNERS HAD NOT BEEN SATISFACTORILY EXPLAINED, THAT SAME WAS TO BE DEEMED TO BE INCOME OF THE ASSESSEE FIRM. 6. IN THE APPELLATE PROCEEDINGS,BEFORE THE FAA THE ASS ESSEE MADE DETAILED SUBMISSIONS.AS PER THE FAA THE DETAILS OF SOURCES OF ADDITION TO CAPITAL A CCOUNTS WERE FURNISHED BEFORE HIM DURING THE APPELLATE PROCEEDINGS.HE HELD THAT THE EXPLANATION FILED BY THE ASSESSEE HAD TO BE ACCEPTED. FINALLY HE DELETED THE ADDITION MADE BY THE AO. 7. BEFORE US,THE DR STATED THAT NO EVIDENCES WERE FILE D BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS,THAT THE FAA ADMITTED DOCUMENTS FROM TH E ASSESSEE,BUT DID NOT CALL FOR REMAND REPORT FROM THE AO,THAT THE AO DID NOT GET PROPER O PPORTUNITY TO EXAMINE THE DOCUMENTS SUBMITTED FOR THE FIRST TIME BEFORE THE FAA. 8. AFTER CONSIDERING THE AVAILABLE MATERIAL,WE FIND TH E AO HAD CALLED FOR DETAILS ABOUT THE ADDITION TO THE CAPITAL ACCOUNTS OF THE PARTNERS,TH AT NO EXPLANATION WAS FILED IN THAT REGARD BEFORE HIM,THAT THE ASSESSEE FURNISHED CERTAIN DOCUMENTARY EVIDENCES BEFORE THE FAA, THAT HE DID NOT ASK FOR ANY COMMENTS FROM THE AO ABOUT THE EVIDENCE S FILED BEFORE HIM BY THE ASSESSEE. WE ARE AWARE THAT THE FAA CAN ADMIT NEW EVIDENCES DURING T HE APPELLATE PROCEEDINGS,AS PER THE PROVISIONS OF RULE 46-A(3) OF THE INCOME TAX RULES, 1962.WE FIND THAT HE HAS NOT INVOKED THAT SAID SUB SECTION.AS HE HAS NOT AFFORDED A REASONABL E OPPORTUNITY TO THE AO ABOUT THE NEW EVIDENCES,THEREFORE,WE ARE OF THE OPINION THAT MATT ER SHOULD BE REMANDED BACK TO THE FAA.HE IS DIRECTED TO DECIDE THE ISSUE AFTER AFFORDING A REAS ONABLE OPPORTUNITY TO THE AO WITH REGARD TO THE DOCUMENTS FILED BEFORE HIM. GROUND NO. 2 IS DECIDED IN FAVOUR OF THE AO,IN PART. AS A RESULT, APPEAL FILED BY THE AO STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON : 08.03.2018 . : 08.03.2018 SD/- SD/- (BEENA PILLAI) (RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NEW DELHI. /DATED : 08 TH MARCH, 2018 . *MEHTA* SR. P.S. ITA. NO. 1312 (DEL) OF 2015. M/S. PRINTMAN, NEW DEL HI. 5 / COPY OF THE ORDER FORWARDED TO :- 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR F BENCH, ITAT, NEW DELHI / , F , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, NEW DELHI.