DCIT CC 7(2), MUMBAI V. MAMANIA FAMILY TRUST, MUMBAI

ITA 2749/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9086 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2003-2004
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KRISHNA AGARWAL

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND PAWA N SINGH,JUDICIAL MEMBER ./ITA/2749/MUM/2015 , /ASSESSMENT YEAR:2003-04 ./ITA/2752/MUM/2015 , /ASSESSMENT YEAR:2006-07 D.C.I.T CENTRAL CIRCLE 7(2) ROOM NO.655,AAYAKAR BHAVAN, M. K.ROAD CHURCHGATE,MUMBAI - 400020 VS. MAMANIA FAMILY TRUST C/O. APPOLO PLASTICS, 33-HUGES,3 R D FLOOR, OPP. PREMPURI ASHRAM, N.S.PATKAR MARG, GRANT ROAD (W), MUMBAI - 400007 PAN:AAAAM 1339 D ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SH. ARUN KRISHNA AGARWAL ASSESSEE BY: SH. NITESH JOSHI / DATE OF HEARING: 03.01.2017 / DATE OF PRONOUNCEMENT: 03.01.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , -PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 26.12.2014 OF THE CIT(A )-49,MUMBAI THE ASSESSING OFFICER (A.O) HAS FILED APPEALS FOR THE ABOVE MENTIONED TWO ASSESSMENT YEARS.ASSESSEE, AN AOP, IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ELECTRI CAL GOODS, PLASTIC MOULDING ARTICLES, FANS ETC. THE AO HAD DENIED THE BENEFIT OF DEDUCTION CLA IMED BY THE ASSESSEE UNDER SECTION 80-IB OF THE ACT TO THE ASSESSEE FOR THE AY.S 2003-04 TO 2006-07. THE MATTER TRAVELLED UPTO THE TRIBUNAL. VIDE ITS ORDER DT.30.11.2010 THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE AO. THE AO AGAIN DISALLOWED THE DEDUCTION CLAIMED BY TH E ASSESSEE, WHO PREFERRED THE APPEALS BEFORE THE FAA. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER , HE DELETED THE ADDITION MADE BY THE AO WITH REGARD TO GENERATION OF SCRAP. 2. DURING THE COURSE OF HEARING BEFORE US, THE AR AND THE DR AGREED THAT THE ISSUE RAISED BY THE AO FOR BOTH THE ASSESSMENT YEARS STANDS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE AY 2005-06 (ITA NO.2751/MUM/2015 DT.30.11.2006). WE WOULD LIKE TO REPRODUCE THE SAID ORDER OF TRIBU NAL AND IT READS AS UNDER :- 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FAMILY TRUST AND CARRYING THE BUSINESS ACTIVITIES UNDER THE NAME AND STYLE OF M/S. APOLLO PLASTICS, HAVING TWO UNITS AT DAMAN AND ENGAGED IN THE ACTIVITY OF MANUFACTURING OF ELECTRI CAL GOODS AND PLASTIC MOULDING ARTICLES, FANS, BRASS AND COPPER PARTS OF ELECTRICAL GOODS. T HE ORIGINAL ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961( IN SHORT 'THE ACT') WAS C OMPLETED ON 17.12.2007 DETERMINING THE ASSESSABLE INCOME TO THE TUNE OF RS.53,00,640/- AS AGAINST THE RETURNED INCOME AT RS.NIL. 2794-MF TRUST 2 THE ASSESSING OFFICER DISALLOWED THE SCRAP AMOUNTIN G TO RS.53,00,640/- CLAIMED BY THE ASSESSEE, THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE SAID ORDER BY VIRTUE OF ORDER DATED 15.10.2008. THE ASSE SSEE FILED AN APPEAL U/S.254 OF THE ACT BEFORE THE HON'BLE ITAT, MUMBAI. THE HON'BLE ITAT R ELYING UPON ITS OWN ORDER DATED 30.11.2010 IN ASSESSEE'S OWN CASE SET ASIDE THE ISS UE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION CONTAINING PARA 8 OF THE ORDER DATED 30.1 1.2010. THE PARA 8 OF THE SAID ORDER IS HEREBY REPRODUCED AS UNDER:- 'FROM THE ORDERS OF THE LOWER AUTHORITIES, IT IS NO T CLEAR AS TO HOW THE SCRAP WAS GENERATED AND THEREFORE, IN ORDER TO VERIFY ITA NO. 2751/MUM/15 A.Y.2005-06 WHETHER THE SCRAP HAD DIRECT NEXUS WITH THE INDUSTRIAL OPER ATION OR IT WAS SCRAP OF OTHER NATURE, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR NECE SSARY VERIFICATION. TO THE EXTENT, THE SCRAP HAS DIRECT NEXUS WITH THE INDUSTRIAL OPERATIONS THE REBY IMPLYING THAT TO THE EXTENT SCRAP IS IN THE NATURE OF BYE-PRODUCT OF INDUSTRIAL OPERATIO NS, THE SAME WOULD QUALIFY FOR DEDUCTION U/S.80IB. IN THE RESULT, GROUND NO.3 FOR A.Y.2003-04 AND GROUND NO.1 FOR A.YS. 2004-05 AND 2005-06 ARE ALLOWED FOR STATISTIC AL PURPOSES.' 4. THEREAFTER, THE ASSESSING OFFICER EXAMINED THE C ASE IN VIEW OF THE DIRECTIONS OF THE HON'BLE ITAT AND WAS OF THE VIEW THAT THE ASSESSEE FAILED TO PROVIDE THE CORROBORATIVE EVIDENCE TO SUPPORT THE SCRAP GENERATED FROM INDUST RIAL ACTIVITIES WHICH HAS DIRECT NEXUS WITH INDUSTRIAL OPERATIONS, THEREFORE, THE CLAIM WA S DECLINED AND THE ASSESSEE FILED FURTHER APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF T HE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1:- 5. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE LEARNED REPRESENTATIVE OF T HE REVENUE HAS ARGUED THAT THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE BEFORE THE ASSESSING OF FICER, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DECLINED THE CLAIM OF THE ASSESSEE BUT THE CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE FINDING OF THE CIT( A) IS WRONG AGAINST LAW AND FACTS WHICH IS LIABLE TO BE SET ASIDE. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE ORDER OF THE CIT(A) IN QUESTION. BEFORE GOING F URTHER, IT IS NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.:- '7.1 THE ITAT IN THE APPELLANT'S CASE HELD THAT SIN CE IT WAS NOT CLEAR FROM THE ORDERS OF THE LOWER AUTHORITIES AS TO HOW THE SCRAP WAS GENER ATED, IT RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER IN ORDER TO VERIFY WHETHER TH E SCRAP HAD DIRECT NEXUS WITH THE INDUSTRIAL OPERATION OR IT WAS THE SCRAP OF THE OTH ER NATURE. DURING THE COURSE OF RE- ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S. 254 OF THE ACT, THE APPELLANT HAD FURNISHED THAT DETAILED MANUFACTURING PROCESS VIDE ITS LETTER DATE D 08.02.2012 WHICH IS REPRODUCED IN PARAGRAPH 6.1 ABOVE. THE PROCESS OF MANUFACTURING A S EXPLAINED BY THE APPELLANT SHOWS 2794-MF TRUST 3 THAT THE GENERATION OF SCRAP IS INGREDIENT PART OF THE MANUFACTURING AS EXPLAINED BY THE APPELLANT SHOWS THAT THE GENERATION OF SCRAP IS ING REDIENT PART OF THE MANUFACTURING ACTIVITY. IN THE ASSESSMENT ORDER THE AO DID NOT CO NTRAVENE THE SUBMISSIONS MADE BY THE APPELLANT WITH REGARD TO THE PROCESS OF SCRAP GENE RATION. ON THE CONTRARY, THE AO MERELY ASKED THE APPELLANT TO FURNISH INFORMATION REGARDIN G THE PERCENTAGE OF SCRAP GENERATED BY ANY OTHER INDUSTRIAL UNDERTAKING ENGAGED IN SIMILAR MANUFACTURING ACTIVITIES AND ALSO REQUESTED THE APPELLANT TO FURNISH DOCUMENT FOR SAT ISFACTION OF PERMISSIBLE LEVEL OF SCRAP GENERATION BY ASSOCIATION OF INDUSTRIES. IN RESPONS E TO WHICH THE APPELLANT VIDE ITS LETTER DATED 18.03.2013 STATED THAT THE PERCENTAGE OF SCRA P GENERATED BY SIMILAR UNDERTAKINGS IN MANUFACTURING ACTIVITIES RANGES FROM 3 TO 5 % AND I N MOULDING OF ARTICLES RANGES FROM 7 TO 10% IN BRASS, COPPER, IRON AND ALUMINIUM. IT WAS ALSO SUBMITTED THAT THE PERCENTAGE DIFFERS DEPENDING UPON THE QUALITY OF RAW MATERIALS AND MACHINERIES. THE APPELLANT FURTHER SUBMITTED THAT THE PERCENTAGE OF SCRAP GENE RATED IN ITS OWN CASE RANGES FROM 1 TO 1.25% OF SALE WHICH IS REASONABLE. AS REGARDS THE P RODUCTION OF DOCUMENTS FROM ASSOCIATION OF INDUSTRIES WHICH SATISFIES ANY PERCE NTAGE OF SCRAP GENERATION IN SIMILAR TYPE OF ACTIVITIES IT WAS SUBMITTED THAT NO ASSOCIA TION OF INDUSTRIES DO CERTIFY ANY SUCH PERCENTAGE OF SCRAP GENERATION AND ALL THE INDUSTRI ES HAVE THEIR DIFFERENT NORMS AND SPECIFICATION OF PRODUCTION. IN THE ASSESSMENT ORDE R, THE AO MERELY DISREGARDED THE CLAIM OF THE APPELLANT ON THE BASIS THAT NO SUPPOR TING DOCUMENTARY EVIDENCE WAS FURNISHED BY THE APPELLANT IN SUPPORT OF ITS CLAIM. I AM NOT ABLE TO AGREE WITH THE VIEWS OF THE AO. THE DIRECTION OF THE HON'BLE ITAT TO THE AO WAS TO VERIFY WHETHER THE SCRAP WAS GENERATED OUT OF INDUSTRIAL OPERATION OR OTHERWISE. THE APPEL LANT FURNISHED DETAILS OF PROCESS OF MANUFACTURING IN WHICH IT COULD BE SEEN THAT THE SC RAP IS GENERATED AS BY-PRODUCT. THE ASSERTION OF THE APPELLANT HAS NOT BEEN NEGATED BY ASSESSING OFFICER BY BRINGING ON RECORD EITHER CONTRARY EVIDENCE OR POINTING OUT THE INACCU RACIES IN THE PROCESS EXPLAINED BY THE APPELLANT. NOTHING PRECLUDED THE ASSESSING OFFICER FROM BRINGING ON RECORD THE INFORMATION SOUGHT BY HIM FROM THE APPELLANT REGARDING COMPARAB LE CASE OR DATA RELEASED BY THE ASSOCIATION OF INDUSTRIES EVEN AFTER THE APPELLANT FAILED TO PRODUCE SUCH INFORMATION. TO MY MIND THE NATURE OF MANUFACTURING ACTIVITY IN QUESTI ON WOULD INVOLVE GENERATION OF SCRAP ALSO. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, I HEREBY DELETE THE ADDITION MADE BY THE ASSESSING OF FICER FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07 REGARDING SCRAP SALES.' 6. ON APPRAISAL OF THE ABOVE MENTIONED ORDERS, NO D OUBT THE ASSESSING OFFICER HAS TO VERIFY THE CLAIM OF THE ASSESSEE AND TO CERTIFY THE DIRECT IONS OF THE ITAT IN VIEW OF THE ORDER DATED 30.11.2010. THE SAID DIRECTIONS ARE HEREBY REPRODUC ED BELOW:- 2794-MF TRUST 4 'FROM THE ORDERS OF THE LOWER AUTHORITIES, IT IS NO T CLEAR AS TO HOW THE SCRAP WAS GENERATED AND THEREFORE, IN ORDER TO VERIFY WHETHER THE SCRAP HAD DIRECT NEXUS WITH THE INDUSTRIAL OPERATION OR IT WAS SCRAP OF OTHER NATUR E, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR NECESSARY VERIFICATION. TO THE EXTENT, THE SCRAP HAS DIRECT NEXUS WITH THE INDUSTRIAL OPERATIONS THEREBY IMPLYING THAT TO THE EXTENT SCRAP IS IN THE NATURE OF BYE- PRODUCT OF INDUSTRIAL OPERATIONS, THE SAME WOULD QU ALIFY FOR DEDUCTION U/S.80IB. IN THE RESULT, GROUND NO.3 FOR A.Y.2003-04 AND GROUND NO.1 FOR A.YS. 2004-05 AND 2005-06 ARE ALLOWED FOR STATISTICAL PURPOSES.' 7. ACCORDING, TO THE SAID DIRECTIONS THE ASSESSING OFFICER HAS BEEN DIRECTED TO VERIFY THIS FACT THAT THE SCRAP HAS DIRECT NEXUS WITH THE INDUSTRIAL OPERATIONS THEREBY IMPLYING THAT TO THE EXTENT SCRAP IS THE NATURE OF BY PRODUCTIVE INDUSTR IAL OPERATION THEN THE SAME WOULD QUALIFY FOR SECTION 80IBOF THE ACT. THE APPELLANT HAS EXPLA INED HIS VERSION BY LETTER DATED 18.03.2013 WHICH HAS BEEN MENTIONED IN THE ORDER OF THE CIT(A), HOWEVER, AFTER FURNISHING OF THE DETAILS TO THE ASSESSING OFFICER, THE ASSESS ING OFFICER FAILED TO DO ANY EXERCISE TO ITA NO.2751/MUM/15 A.Y.2005-06 DISCREDIT THE CLAIM OF T HE ASSESSEE. NO CLAIM OF SIMILAR TYPE OF INDUSTRY WAS COMPARED. THE EXPLANATION GIVEN BY THE ASSESSEE WAS VERIFIED. HE FURTHER ASKED THE DETAILS WITHOUT VERIFYING THE EXPLANATION TENDERED BY THE ASSESSEE. NO DOUBT IN THE SAID CIRCUMSTANCES THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF T HE VIEW THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIR ED TO BE INTERFERE WITH AT THIS APPELLATE STAGE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S HEREBY DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL ,WE DECIDE THE EFFECTIVE GROUNDS OF APPEAL AGAINST THE AO FOR BOTH THE ASSESSMENT YEARS . AS A RESULT APPEALS FILED BY THE AO STAND DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY,2017. 3 , 2017 SD/- SD/- ( / PAWANSINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03.01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// 2794-MF TRUST 5 / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.