Appeal details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 2879 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-10-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Assessment Year
2010-2011
Appeal Filed On
21-03-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 1923/MUM/2014 (ASSESSMENT YEAR:2010-11) INCOME TAX OFFICER - 14(3)4, MUMBAI 400 021 APPELLANT VS. M/S. R.S.B.L. JEWELS, 603, A WING MINAL COMPLEX, OFF. SAKI VIHAR ROAD, ANDHERI (E), MUMBAI 400 072 RESPONDENT PAN: AAKFR4450M /BY APPELLANT : SHRI VIVEK ANAND OJHA, D.R. /BY RESPONDENT : SHRI RUSHABH MEHTA, A.R. /DATE OF HEARING : 08.10.2015 /DATE OF PRONOUNCEMENT : 28.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-25, MUMBAI, DA TED 03.12.2013 FOR A.Y. 2010-11 ON FOLLOWING GROUNDS: ITA NO.1923/MUM/14 A.Y. 10-11 [ITO VS. M/S. R.S.B.L . JEWELS] PAGE 2 1. THE LD CIT(A) HAS ERRED IN LAW AS WELL ON THE F ACT IN ALLOWING DEDUCTIONS U/S 10AA OF THE ACT BY IGNORING THE FACT THAT, THE ASSESSEE HAS NEVER CONDUCTED MANUFACTURING ACTIVITIES IN THE PREMISES SITUATED I N SEZ AT SURAT WHICH IS ENTITLED FOR DEDUCTION U/S 10 AA OF I.T. ACT., 1961. 2. FURTHER, THE LD CIT(A) HAS ERRED IN LAW AS WELL ON THE FACT BY IGNORING THE FACT THAT THE ASSESSEE IS ONLY INVOLVED IN THE TRADING BUSINESS WHEREIN THE PROFIT SHOULD NOT BE MORE THAN 2% OF THE TOTAL TURNOVER AS COMPARED WITH THE OTHER ASSESSEE ENGAGED IN THE SAM E LINE OF BUSINESS HAVING THE PROFIT RATIO RANGING 1% TO 4%. 2. ASSESSEE IS PARTNERSHIP FIRM ENGAGED IN BUSINESS OF MANUFACTURING AND EXPORT OF JEWELER AND MEDALLIONS IN SPECIAL ECONOMIC ZONE (SEZ) AT SACHIN, SURAT. 2.1 ASSESSEE CLAIMED DEDUCTION U/S.10AA OF THE ACT AMOUNTING TO RS.35,48,810/- AND IN RESULT, DECLARED NIL TAXABLE INCOME IN E-RETURN OF INCOME FILED FOR A.Y. 2010-11. CASE WAS SELECTED FOR SCRUTINY. ASSESSING OFFICER PASSED ORDER U/S.143(3) BY DISALLOWING THE CLAIM OF EXEMPTION U /S.10AA OF THE ACT THEREBY DETERMINING TOTAL INCOME AT RS.35,7 3,810/-. 2.1.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRA NTED RELIEF TO ASSESSEE. SAME HAS BEEN OPPOSED BEFORE US ON BE HALF OF REVENUE INTER ALIA SUBMITTING THAT CIT(A) ERRED IN LAW AS WELL ON THE FACT IN ALLOWING DEDUCTIONS U/S 10AA OF THE ACT BY ITA NO.1923/MUM/14 A.Y. 10-11 [ITO VS. M/S. R.S.B.L . JEWELS] PAGE 3 IGNORING THE FACT THAT, THE ASSESSEE HAS NEVER COND UCTED MANUFACTURING ACTIVITIES IN THE PREMISES SITUATED I N SEZ AT SURAT, WHICH IS ENTITLED FOR DEDUCTION U/S 10AA OF I.T. ACT AND FURTHER CIT(A) ERRED IN LAW AS WELL ON THE FACT BY IGNORING THE FACT THAT ASSESSEE IS ONLY INVOLVED IN TRADING BUSI NESS WHEREIN PROFIT SHOULD NOT BE MORE THAN 2% OF TOTAL TURNOVER AS COMPARED WITH OTHER ASSESSEE ENGAGED IN SAME LINE O F BUSINESS HAVING PROFIT RATIO RANGING 1% TO 4%. SO, THE ORDE R OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED . ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED T HE ORDER OF CIT(A). 2.1.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT ASSESSEE HAS CARRIED OUT MA NUFACTURING ACTIVITY IN SEZ UNIT IN THE YEAR UNDER CONSIDERATIO N. THE MAIN ISSUE ON WHICH DEDUCTION HAS BEEN DISALLOWED IS CON SUMPTION OF ELECTRICITY. REGARDING THIS, LEARNED AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO PAGE NO.37 OF THE PAPER BOOK WHEREIN ON 11 TH AUGUST, 2009 TO 13 TH SEPTEMBER, 2009, CONSUMPTION IS SHOWN TO BE 20 UNITS AND IN THIS BACKGROUND, IT WAS SUBMITTED THAT IT WAS SUFFICIENT CONSUMPTION OF ELECTRICITY F OR CARRYING OUT MANUFACTURING OF MEDALLIONS FROM 25KG. OF GOLD IMPO RTED BY ASSESSEE. THE SAID MEDALLIONS WERE EXPORTED WHICH IS NOT IN DISPUTE. OTHER FACTS ARE ALSO NOT IN DISPUTE. IN THIS REGARD, LEARNED AUTHORIZED REPRESENTATIVE DREW OUR ATTENTIO N TO THE ORDER OF ITAT G BENCH IN ITA NOS.5811 & 6653/MUM/ 2013 FOR A.Y 2009-10 IN CASE OF RIDDI SIDDHI BULLIONS LT D. VS. ACIT, ITA NO.1923/MUM/14 A.Y. 10-11 [ITO VS. M/S. R.S.B.L . JEWELS] PAGE 4 WHEREIN VIDE PARA 12, TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 12. DECISION OF THE TRIBUNAL - CLAIM OF EXEMPTION U/S L0A OF THE ACT: WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE OF BONA FIDE OF THE MANUFACTURING ACTIVITY AT SEZ, SU RAT FOR EARNING EXEMPT INCOME OF RS. 6.43 CRS AS WELL AS TH E UNDER VALUATION OF THE PURCHASE OF GOLD BARS WHILE BRININ G INTO SEZ, SURAT. IN THIS REGARD, PROMINENT ISSUES FOR ADJUDICATION ARE THE ASSESSEE'S ABILITY TO EARN THE EXEMPT INCOME OF RS 6.43CR WITH MANUFACTURING ACTIVITY OF TWO DAYS AT SEZ, SURAT, DISCREPANCY WITH REGARD TO CONSUMPTI ON OF MINIMUM UNITS OF ELECTRICITY AND NON CLAIMING OF LA BOUR CHARGES INVOLVING MIS. S.L. INDUSTRIES TO THE EXTEN T OF 110 KGS OF GOLD MEDALLIONS. SO FAR AS ELECTRICITY CONSU MPTION IS CONCERNED, IT IS THE CLAIM OF THE ASSESSEE THAT FOR USE OF PLANT AND MACHINERY WORTH RS. 16.14 LAKHS, AROUND 6 5.60 UNITS @ 8.2 UNITS PER 8 HRS, IS ENOUGH. THE BOOKS O F ACCOUNTS SUPPORTS THE SAME IN FAVOUR OF THE CLAIM O F THE ASSESSEE AND THE CONSUMPTION IS ONLY AROUND 130 UNI TS, WHICH IS REPORTED IN THE ELECTRICITY METERS. ALL OT HER DISCUSSIONS ON THIS ISSUE IS DEBATABLE AND THE SAME IS INCONCLUSIVE. IT IS A FACT THAT THE TOTAL UNITS CON SUMED IN THOSE TWO MONTHS OF SEPTEMBER, 2008 (943 UNITS) AND OCTOBER, 2008 (870 UNITS) EXPLAINS THE CONSUMPTION OF ELECTRICITY IN THOSE TWO MONTHS. THEREFORE, THIS DI SCREPANCY IN ELECTRICITY CONSUMPTION IS INCONCLUSIVE AND IT C ANNOT BE STATED THAT THE MACHINERY WAS NOT PUT TO USE. IT I S NOT THE CASE OF THE REVENUE THAT THE PROCESS OF MAKING GOLD MEDALLIONS INVOLVES HIGH VOLTAGE PLANT AND MACHINER Y REQUIRING HUGE AMOUNT OF ELECTRICITY. AO HAS NOT B ROUGHT ANY INCRIMINATING MATERIAL TO SUGGEST THAT THE ASSE SSEE SUPPRESSED ANY ELECTRICITY CONSUMPTION OUTSIDE THE BOOKS. SIMILAR CLAIMS U/S10A OF THE ACT RE MADE IN EARLIER AYS SINCE 205-06 AND THE SAME ARE NOT DENIED TOO. THER EFORE, ON THIS ISSUE, CONSIDERING THE ABSENCE ANY INCRIMIN ATING EVIDENCES AGAINST THE ASSESSEE, WE APPROVE THE CONT ENTION OF THE ASSESSEE. ITA NO.1923/MUM/14 A.Y. 10-11 [ITO VS. M/S. R.S.B.L . JEWELS] PAGE 5 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FAC TS BEING SIMILAR, SO, FOLLOWING SAME REASONING, WE ARE OF TH E VIEW THAT ASSESSEE WOULD HAVE MANUFACTURED MEDALLIONS 25KG. B Y CONSUMING 20 UNITS AS CLAIMED BY ASSESSEE. IN VIEW OF THIS, ORDER OF CIT(A) ON THE ISSUE IS UPHELD, WHEREBY HE HAS ALLOWED THIS CLAIM OF ASSESSEE. 2.2 COMING TO THE ISSUE OF NET PROFIT. ASSESSEE FI RM HAS SHOWN TURNOVER OF RS.3,81,14,722/- ON WHICH GROSS P ROFIT WAS SHOWN AT RS.41,05,538/- @ 10.77% AND NET PROFIT WAS SHOWN AT RS.35,48,810/- @ 9.31%. A SURVEY U/S.133 OF THE ACT WAS CONDUCTED IN ASSESSEES CASE ON 21.09.2010. THE SU RVEY PARTY VISITED THE SEZ UNIT AT SACHIN, SURAT AND STATED TH AT BOOKS OF ACCOUNTS WERE NOT MAINTAINED BY ASSESSEE, THEREFORE , AMOUNT OF GROSS PROFIT AND NET PROFIT COULD NOT BE ASCERTA INED. THE SURVEY PARTY FURTHER REPORTED THAT CERTAIN OTHER PA RTIES INVOLVED IN SIMILAR BUSINESS ACTIVITIES HAD DECLARE D GROSS PROFIT @ 1% TO 4% APPROXIMATELY OF TURNOVER WHICH IS LOW A S COMPARED TO THOSE SHOWN BY ASSESSEE. ACCORDINGLY, HE RESTRICTED THE SAME TO 2% OF TOTAL TURNOVER. IN AP PEAL, CIT(A) GRANTED RELIEF TO ASSESSEE. 2.2.1 SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE FOR THE REASON AS IN ITS GROUND OF APPEAL A BOVE. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPO RTED THE ORDER OF CIT(A). ITA NO.1923/MUM/14 A.Y. 10-11 [ITO VS. M/S. R.S.B.L . JEWELS] PAGE 6 2.2.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD, WE FIND THIS ISSUE BEFORE US IS REGARDIN G REASONABLENESS OF THE PROFIT DISCLOSED BY ASSESSEE. ASSESSING OFFICER HAS TAKEN ALTERNATIVE PLEA THAT IF AN APPEL LATE AUTHORITY FINDS THAT MANUFACTURING ACTIVITY TOOK PLACE IN SEZ , GROSS PROFIT BE RESTRICTED AT 2% AS AGAINST 10.77% DECLAR ED BY ASSESSEE AND DEDUCTION TO BE ALLOWED ACCORDINGLY. ASSESSEE HAD PRODUCED RELEVANT RECORDS CALLED FOR AND REQUIS ITE MATERIAL AND DOCUMENTS, WHEREAS ASSESSING OFFICER HAS NOT BR OUGHT ON RECORD ANY EVIDENCE TO DOUBT THE MANUFACTURING ACTI VITY UNDERTAKEN BY ASSESSEE AT ITS SEZ UNIT. AS DISCUSSE D ABOVE, ACCOUNTS OF ASSESSEE WERE SUBJECTED TO AUDIT WHICH MEANS THAT STATUTORY AUDITOR HAS LOOKED INTO PURCHASES AND SAL ES INVOICES AND ALSO ALL THE CUSTOM AND OTHER DOCUMENTS. THERE IS NO QUALIFICATION IN AUDITORS REPORT WHICH POINTED OUT ANY DEFICIENCY, WHICH ONLY STRENGTHENED THE FACT AS PUR CHASES AND SALES ARE GENUINE. ASSESSING OFFICER HAS NOT POINT ED OUT ANY FAULT OR DEFECT BROUGHT ON RECORD ANY DEFECTS FOUND IN BOOKS OF ACCOUNT SO AS TO RESTRICT THE PROFIT AT 2%. IN THI S BACKGROUND, THERE WAS NO JUSTIFICATION FOR ARRIVING AT A FIGURE OF 2% SPECIALLY WHEN BASIS OF WHICH 2% IS CALCULATED ITSELF NOT JUS TIFIED. IN VIEW OF ABOVE, THERE WAS NO JUSTIFICATION FOR ARRIV ING AT FIGURE OF 2% ITSELF BASED ON INCORRECT BASIS. ACCORDINGLY, C IT(A) RIGHT DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U /S.10AA AS CLAIMED BY ASSESSEE. THIS REASONED FINDING OF CIT( A) NEEDS NO INTERFERENCE FROM OUR SIDE. ITA NO.1923/MUM/14 A.Y. 10-11 [ITO VS. M/S. R.S.B.L . JEWELS] PAGE 7 3. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF OCTOBER, 2015. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 28/10/2015 S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE !# / ASSESSEE $ %&%'( ) / CONCERNED CIT * )+ / CIT (A) ,-./00'(1 '( 1 2 %& / DR, ITAT, MUMBAI 3/4567 / GUARD FILE. BY ORDER / #8 1 9: ;% 1 '( 12 %&<
