ITO, JODHPUR V. M/s. Kwal Pro Exports, JODHPUR

ITA 257/JODH/2014

• Counselvise Citation: 25723314 RSA 2014
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Rejection of books of accounts
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 257/JODH/2014 (A.Y. 200 9 - 1 0 ) ITO, WARD - 1(2), JODHPUR . VS. M/S. KWAL PRO EXPORTS, 32 KAMAL APARTMENTS, CIRCUIT HOUSE ROAD, JODHPUR. (APPELLANT) PAN NO. AABFK 0850 F (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI R A JENDRA JAIN. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 14 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 26 /0 8 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE D EPARTMENT AGAINST THE ORDER DATED 24/02 /201 4 OF L D . CIT(A), J ODHPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE TRADING ADDITION OF RS. 10,00,000/ - IGNORING THE FACT 2 THAT THE ASSESSEE DID NOT MAINTAIN THE STOCK REGISTER AND HAS DECLARED LOW G.P. RATE IN COMPARISON TO PRECEDING YEAR. 2. THE LD. CIT(A) FAILED TO APPRECIATE FACTS OF THE CASE PERTAINING TO THE YEAR UNDER CONSIDERATION WHEN PARTICULARLY, THE ASSESSING OFFICER HAD BR O UGHT ON RECORD AND IN BODY OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD PURCHASED FINISHED HANDICRAFT S GOODS FOR EXPORT ON WHICH NO MANUFACTURING ACTIVITY WAS CARRIED OUT BY THE ASSESSEE AND THEREBY, HE ERRED, IN RELYING UPON THE DECISIONS OF THE HON'BLE ITAT FOR A.Y. FROM 2002 - 03 TO 2007 - 08. 3. THE CIT(A) HAS ERRED ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE IN DELETING THE DISALLOWANCE OF EXEMPTION CLAIMED U/S. 10B OF RS. 39,59,090/ - BY FOLLOWING THE DECISIONS OF THE ITAT IN THE ASSESSEES OWN CASE FOR A.Y. FROM 2002 - 03 TO 2007 - 08 DESPITE OF THE FACT THAT THE SAME WERE NOT ACCEPTED BY THE DEPARTMENT AN D HAVE BEEN FURTHER CHALLENGED IN THE HON'BLE (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) AND THUS THE ISSUE REGARDING MANUFACTURING STATUS OF THE ASSESSEE IS NOT FINALIZED YET. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OR ALL THE GROUNDS OF THE APPEAL ON OR BEFORE THE DATE OF APPEAL IS FINALLY HEARD FOR DISPOSAL. 2 GROUND NO. 4 IS GENERAL IN NATURE, SO DO NOT REQUIRE ANY COMMENTS ON OUR PART. VIDE GROUND NOS. 1 & 2, THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF TRADING ADDITION OF RS. 10 LAC. 3. ON PERUSAL OF THE GROUNDS RAISED RELATING TO TH IS ISSUE , IT IS CLEAR THAT THE LD. CIT(A) DELETED THE ADDI TIONS BY FOLLOWING THE EARLIER ORDER S OF THE TRIBUNAL, THEREFORE, IT APPEARS THAT THE DEPARTMENT WANTS TO KEEP THE ISSUE ALIVE. 4. FACTS RELATING TO TH I S ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE 3 HAD SHOWN GROSS PROF IT RATE OF 28.41% AS AGAINST 34.72% DECLARED IN THE PRECEDING YEAR. HE MADE A LUMP SUM TRADING ADDITION OF RS. 10 LAC. WHEN THE MATTER WAS CARRIED TO THE LD. CIT(A), THE SAID ADDITION WAS DELETED BY OBSERVING IN PARA 4.3 OF THE IMPUGNED ORDER WHICH READ AS UNDER: - 4.3 I HAVE CONSIDERED THE ORDER OF THE ASSESSING OFFICER AND SUBMISSION OF THE APPELLANT AND I FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING LUMP SUM TRADING ADDITION OF RS. 10,00,000/ - . THOUGH THE ASSESSING OFFICER HAS POINTED O UT THE ASSESSEE HAS NOT KEPT STOCK REGISTER, YET THIS REASON WAS NOT FOUND CONVINCING FOR REJECTION OF BOOKS OF ACCOUNTS IN APPELLANTS OWN FOR EARLIER ASSESSMENT YEARS. IN THE YEAR UNDER CONSIDERATION, THE G.P. RATE WAS CONSIDERABLY LOW FOR THE ASSESSES H AD ADVANCED REASONS BEFORE THE ASSESSING OFFICER BUT NO FINDINGS WERE RECORDED BY THE ASSESSING OFFICER COUNTERING THESE JUSTIFICATIONS GIVEN BY THE ASSESSEE. IT IS SETTLED LAW NO TRADING ADDITION CAN BE MADE WITHOUT RECORDING ANY FINDING THAT CORRECT PROF IT CANNOT BE DEDUCED FROM THE BOOKS OF ACCOUNTS. THIS FINDING TOTALLY LACKS IN THE ASSESSMENT ORDER. IT WOULD BE PERTINENT TO MENTION HERE THAT TRADING ADDITION MADE UNDER SIMILAR FACTS CIRCUMSTANCES WAS DELETED BY THE HON'BLE ITAT IN ITA NO. 293/JU/2009 F OR AY 2006 - 07. KEEPING IN ALL THESE IN MIND, I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE TRADING ADDITION OF RS. 10,00,000/ - , SAME IS HEREBY DELETED. THE GROUND OF APPEAL IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL . 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS NOTICED THAT THE LD. CIT(A) DELETED THE ADDITION BY FOLLOWING THE EARLIER DECISION OF THE ITAT IN ASSESSEES OWN CASE IN I.T.A.NO. 4 293/JU/2009 FOR THE A.Y. 2006 - 07, SO WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A). ACCORDINGLY , WE DO NOT SEE ANY MERIT IN TH ESE GROUND S OF THE DEPARTMENTAL APPEAL. 6 . VIDE GROUND NO. 3 , THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF DISALLOWANCE AMOUNTING TO RS. 39,59,090/ - MADE BY THE ASSESSING OFFICER BY REJECTING THE CLAIM OF THE ASSESSEE U/S. 10B OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . 7 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE U/S. 10BA OF THE ACT AMOUNTING TO RS. 39,59,090/ - BY OBSERVING THAT THE PRODUCTION OR MANUFACTURING OF ARTICLES OR THINGS WAS AN ESSENTIAL CONDITION FOR TAKING THE BENEFIT OF DEDUCTION U/S. 10BA OF THE ACT . THE ASSESSING OFFICER ALSO OBSERVED THAT THE BILLS WERE BASICALLY OF FINISHED/SEMI FINISHED/HANDICRAFTS ONLY AND THE ASSESSEE COULD NOT BE SAID A PRODUCER OR MANUFACTURER FOR THE PURPOSE OF EXEMPT ION U/S. 10BA OF THE ACT . 8 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DELETED THE DISALLOWANCE BY OBSERVING IN PARA 6.3 TO 6.5 OF THE IMPUGNED ORDER WHICH READ AS UNDER: - 5 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ORDER OF THE ASSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT AND I FIND THAT DISPUTE IS REGARDING WHETHER THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 10BA OR NOT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S 10BA HOLDING THE ASSESSEE IS NOT A M ANUFACTURER WHICH IS AN ESSENTIAL CONDITION TO BE ELIGIBLE FOR DEDUCTION U/S 10BA. THE APPELLANTS CONTENTION WAS THAT THE ASSESSEE IS A MANUFACTURER AND 100% EOU THUS, FULFILLS ALL THE CONDITION FOR BENEFIT OF DEDUCTION U/S 10BA. I FIND THAT HON'BLE ITAT, JODHPUR BENCH IN THEIR COMMON ORDER DATED 29 - 5 - 2009 IN ITA NOS. 543 TO 545/JD/2007 &. 415/JD/2008; ASST. YRS. 2002 - 03 TO 2005 - 06 HAS ALREADY DISCUSSED AND EXAMINED ISSUE OF ALLOWABILITY OF DEDUCTION U/S 10BA AT LENGTH AND DECIDE THE SAME IN FAVOUR OF THE ASSESSEE. THE SAME ORDER HAS FURTHER BEEN FOLLOWED BY THE HON'BLE ITAT IN AY 2006 - 07 BY OBSERVING AS UNDER: - WE HAVE HEARD THE PARTIES WITH REFERENCE TO MATERIAL ON RECORD INCLUDING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. ADMITTEDLY THERE IS NO CH ANGE IN THE BUSINESS ACTIVITY OF THE ASSESSEE DURING THE YEAR WHEN IT IS COMPARED TO THE ACTIVITY UNDERTAKEN IN THE IMMEDIATELY PRECEDING YEAR I.E. AY 2005 - 06. IN THAT YEAR THE APPELLANT HAS ESTABLISHED THAT IT HAD PURCHASED RAW MATERIALS, SEMI FINISHED GO O DS AND GOODS OF IDENTICAL DESCRIPTION ON WHICH FURTHER VALUE ADDITION HAVE BEEN DONE BY UNDERTAKING PROCESSES SO AS TO GIVE IT A COMMERCIAL LOOK MAKING IT COMPUTABLY DISTINCT IN CHARACTER AND USE AND DIFFERENT COMMERCIAL COMMODITIES HAS BEEN BROUGHT INTO INEXISTENCE BY HIM. THE END PRODUCT SO PRODUCED WAS THUS DIFFERENT AND DISTINCT BOTH IN CHARACTER AND USE AS WELL. THE FACTS SO FOUND WERE ALSO DIFFERENT FROM ASSESSEES OWN CASE FOR A. Y. 2001 - 02. IN THIS VIEW OF THE MATTER AND THERE BEING NO CHANGE IN TH E FACTS, CIRCUMSTANCES AND LAW IN THE YEAR UNDER CONSIDERATION WHEN COMPARED WITH ASSESSEES OWN CASE FOR IMMEDIATELY PRECEDING YEAR AND AS ALSO FOUND ADMITTED IN THE ORDER OF THE AUTHORITIES BELOW AND FOR PARTLY OF REASON AS ARE TAKEN IN OUR ORDER DATED 2 9.5.2009 IN ASSESSEES OWN CASE FOR A.Y. 2005 - 06 IN ITA NO. 415/JU/2008 AND BY TAKING THE CONSISTENT VIEW, WE HOLD THAT THE APPELLANT HAS UNDERTAKEN ACTIVITY AMOUNTING TO MANUFACTURE OR PRODUCTION OF ARTICLES IN THE YEAR UNDER CONSIDERATION AND THE INCOME THEREOF IS THUS ELIGIBLE FOR EXEMPTION UNDER SECTION 10B OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDER OF ID. CIT(A) AND ALLOW THE GROUND RAISED IN APPEAL BY THE ASSESSEE. FROM THE ABOVE FINDINGS, IT IS CLEAR THAT THE HON'BLE ITAT HAS ACCEPTED THAT 6 THE A CTIVITIES WHICH ARE BEING CARRIED OUT BY THE APPELLANT AMOUNTS TO MANUFACTURE OR PRODUCTION. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ADVERSE ON RECORD TO ESTABLISH THAT THERE IS ANY CHANGE IN THE BUSINESS ACTIVITY OF THE ASSESSEE DURING THE YEAR AS COMPARED TO PRECEDING EARLIER YEARS. 6.4 FURTHER, THE HON'BLE ITAT, JODHPUR IN THEIR ORDER DATED 27 - 8 - 2012 IN ITA NO. 190/JODH/2012 FOR AY 2007 - 08 REVERSED THE ORDER OF ID. CIT BY OBSERVING AS UNDER: - 8.1 HOWEVER, FACTS HERE BEFORE THE TRIBUNAL ARE DIFFERENT. FIRSTLY, THE DEDUCTION UNDER SECTION 10B WAS EXAMINED BY THE ASSESSING OFFICER INDEPENDENTLY ALSO AS HE HAS DISCUSSED THE PROVISIONS OF SECTION 10B. THEREAFTER, THE ASSESSING OFFICER NOTED THAT IN ASS ESSEES OWN CASE FOR A.Y. 2002 - 03 TO 06 - 07 THE TRIBUNAL HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER OBSERVED THAT THE HON'HON'BLE SUPREME COURT IN CASE OF ARIHANT TILES & MARBLES PVT. LTD. DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY WHICH THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT. THEREFORE, IN OUR CONSIDERED VIEW, SINCE THE ASSESSING OFFICER HAS FOLLOWED THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WHICH H AS BEEN AFFIRMED BY HON'BLE SUPREME COURT INCLUDING THE DECISION OF THE TRIBUNAL, THEREFORE, IN OUR VIEW, THE DECISION IN CASE OF HINDUSTAN TIN WORKS LTD. (SUPRA) DOES NOT HELP THE CASE OF THE DEPARTMENT. 8.2 WE HAVE ALSO TAKEN INTO CONSIDERATION VARIOUS O THER CASE LAWS AND FOUND THAT THEY ARE DISTINGUISHABLE ON FACTS. THE DECISION RENDERED BY THE ASSESSING OFFICER IS SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN CASE OF MAX INDIA LTD. AND IN CASE OF MALABAR INDUSTRIAL CO. (SUPRA) AND ALSO BY THE DE CISION OF TRIBUNAL IN CASE OF RAJEEV ARORA, 131 ITD 58 (JP). AS WE HAVE STATED THAT ASSESSING OFFICER HAS DISCUSSED THE ISSUE AND AFTER APPLYING HIS MIND THEN ONLY HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE, THE ASSESSING OFFICER HAS NOT MERELY FOLLOW ED THE ORDER OF THE TRIBUNAL, BUT HAS TAKEN INTO CONSIDERATION THE DECISION OF HON'BLE SUPREME COURT IN CASE OF ARIHANT TILES & MARBLES PVT. LTD. AND ALSO TAKEN INTO CONSIDERATION THE PROVISIONS OF SECTION 10B. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT ORDER PASSED BY LD. CIT WAS 7 NOT JUSTIFIED AND ACCORDINGLY SET ASIDE THE ORDER OF LD. CIT AND RESTORE THE ISSUE PASSED BY THE ASSESSING OFFICER ORIGINALLY. 6.4.1. THE ABOVE DECISION OF HON'BLE ITAT, JODHPUR IN RESPECT OF AY 2007 - 08 FU RTHER STRENGTHEN THE CLAIM OF THE ASSESSEE. IN THAT DECISION BOTH THE FACTS OF THE AY 2002 - 03 TO 2006 - 07 WERE FOUND TO BE RELEVANT AND DECISION OF HON'BLE SUPREME COURT IN CASE OF ARIHANT TILES WAS ALSO FOUND TO BE APPLICABLE. THIS DECISION OF HON'BLE ITAT , JODHPUR AGAIN TOTALLY REVERSED THE OBSERVATIONS OF THE ASSESSING OFFICER MADE IN THE YEAR UNDER CONSIDERATION. I FIND THAT THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT THE FACTS OF THE AY 2001 - 02 ARE FULLY APPLICABLE TO THE YEAR UNDER CONSIDERATION . 6.5 SINCE IN THE PRESENT CASE, THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT THERE IS ANY CHANGE IN BUSINESS ACTIVITY AS COMPARED TO EARLIER YEAR AND BASIS ON WHICH, THE CLAIM OF THE ASSESSEE WAS DENIED, IS ALSO FOUND TO BE UNSATISFACTORY, THEREFORE I FIND NO JUSTIFIABLE REASON TO DIVERT FROM THE ABOVE FINDINGS OF THE HON'BLE ITAT. IN VIEW OF THE ABOVE DISCUSSION, AND ON CONSIDERATION OF RELEVANT FACTS, REASONING OF THE ASSESSING OFFICER AND ARGUMENTS AND SUBMISSIONS MADE BY THE APPELLANT, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF DEDUCTION U/S 10BA OF THE I. T. ACT AMOUNTING TO RS. 39,59,090/ - . IT IS HELD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 10BA OF I. T. ACT, 1961, AS CLAIMED. THE GROUND S OF APPEAL ARE ALLOWED. 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ITAT WHILE DECIDING THE APPEALS , IN I.T.A.NO S . 543 TO 545/ JD/2007 & 415/JD/2008 FOR THE A.Y S . 2002 - 03 TO 2005 - 06 IN ASSESSEES OWN CASE VIDE COMMON ORDER DATED 29/05/2009 , HAS ALLOWED THE DEDUCTION U/S. 10BA OF THE ACT. IN THE INSTANT CASE , IT IS 8 NOT BROUGHT ON RECORD THAT THERE WAS ANY CHANGE IN THE FACTS O F THE CASE FOR THE YEAR UNDER CONSIDERATION VIS - A - VIS THE FACTS INVOLVED IN THE A.YS. 2002 - 03 TO 2005 - 06 WHEREIN ITAT VIDE ORDER DATED 29/05/2009 IN I.T.A.NOS. 543 TO 545/JD/2007 & 415/JD/2008 HAS ALLOWED THE CLAIM OF THE ASSESSEE AND THE SAID ORDER HAS BEEN FOLLOWED BY THE LD. CIT(A) . WE THEREFORE, DO NOT SEE ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS G ROUND OF THE DEPARTMENTAL APPEAL. 10 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE COURT ON 26 TH AUGUST , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH AUGUST , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .