The ITO, Ward-2, Junagadh V. M/s D. Jewel, Junagadh

ITA 350/RJT/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3878 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 12-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; Set aside
• Section: 271(1)(c); 143(3); 10AA; 10B; 43

Judgement Text

Page 1 of 5 आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER अपील सं./ITA No.350/Rjt/2017 िनधाᭅरण वषᭅ/Asstt. Year: 2013-2014 Income Tax Officer, Ward-2, Junagadh. Vs. M/s. D. Jewel, 1-Shishu Mangal Road, Gandhigram, Junagadh. PAN: AAHFD4817H (Applicant) (Respondent) Revenue by : Shri B.D. Gupta, Sr.D.R Assessee by : Shri Hersh Samirbhai Jani, A.R सुनवाई कᳱ तारीख/Date of Hearing : 13/06/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 24/06/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-3, Jamnagar, dated 04/08/2017 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2013-14. ITA no.350/Rjt/2017 Asstt. Year 2013-14 Page 2 of 5 2. The Revenue has raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in quasing/cancelling the penalty levied of Rs.81,39,539/- u/s.271(1)(c) of the I.T Act, 1961. 2. Any other ground that the Revenue may raise before or during hearing proceedings before the Hon’ble ITAT. 3. On the facts of the case and in law, the Ld.CIT(A) ought to have upheld the assessment order of the A.O. 4. It is, therefore, prayed that the order of the CIT(A) may be set aside and that of the A.O be restored to the above extent. 3. The Revenue has challenged the deletion of the penalty by the learned CIT-A which was levied by the AO under the provisions of section 271(1)(c) of the Act for ₹ 81,39,539/- being hundred percent of tax sought to be evaded on account of concealment of particulars of income. 4. At the outset, we note that the learned CIT-A in his order dated 24th February 2020 has deleted the penalty by observing as under: As the underlying assessment order alongwith agitated upon adverse observations and disallowances by AO stands deleted, penalty on the same issue does not survive and hence the same is deleted. 4.1 From the above finding of the learned CIT-A, it is seen that the quantum addition based on which penalty was levied, was deleted by his predecessor. Therefore, the penalty order was quashed by the learned CIT(A). 4.2 Further, we note that against the deletion of quantum addition, the Revenue was in appeal before this tribunal in ITA No. 15/RJT/2017 which was decided against the Revenue vide order dated 24-06-2022. The relevant extract of the order reads as under: 11. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case on hand are not disputed and elaborately discussed in the preceding paragraph. Therefore, for the sake of brevity and convenience, we are not inclined to repeat the same while adjudicating the issue on hand. 11.1 The 1st controversy arises for our adjudication so as to whether the assessee was eligible for deduction under section 10A or 10AA of the Act. In this regard, we note that the ITA no.350/Rjt/2017 Asstt. Year 2013-14 Page 3 of 5 deduction under section 10A of the Act has been discontinued with effect from A.Y. 2012-13 for the newly undertaking/unit. Therefore, it was not possible for claiming the deduction under this said section. Thus, any deduction claimed under section 10A of the Act cannot be said that it was claimed by the assessee with mala-fide intent. Furthermore, the assessee has already paid the taxes under the advance tax and self-assessment scheme which is an undisputed fact. The assessee being intending to avoid the alternative minimum tax in pursuance to the provisions of section 115JC of the Act, it would have not paid any self-assessment tax on the date of filing the return of Income. The payment of the self-assessment tax does not raise any doubt on the intention of the assessee merely on the reasoning that the assessee has claimed refund in the income tax return. As such the assessee during the assessment proceedings has come forward and filed the revised return of income declaring income under the provisions of AMT under section 115JC of the Act. Furthermore, the assessee cannot be deprived from the benefit granted under the statute merely on the reasoning that the assessee failed to claim the same in the income tax return. It is incumbent upon the revenue to allow the alleged claimed of deduction for which the assessee is entitled under the provisions of law. 11.2 It is an admitted position that the form 56F is applicable for claiming the deduction under section 10A of the Act. However, we find that at that point of time when the assessee was claiming the exemption under section 10AA of the Act, there was no form prescribed by the CBDT. Thus in the absence of any specific form prescribed by the CBDT, the assessee has opted to use form 56F for claiming the exemption. To our understanding, it was an inadvertent mistake and therefore the assessee cannot be deprived from the benefit available under the provisions of law. 11.3 Furthermore, the assessee has made the claim for the exemption under section 10AA of the Act before the issuance of show cause notice by the Income Tax Department with respect to the deduction claimed under section 10A of the Act. Thus, the revised claim by the assessee was made before detection of the same by the AO. 11.4 We also find that the Hon’ble Rajasthan High Court in the case of CIT versus Rajasthan fasteners Ltd reported in 43 taxmann.com 175 has held as under: “When facts and circumstances reveal that the assessee was eligible even this year for exemption under section 10B and it has been found to be in order except that instead of mentioning exemption under section 10B, while e-filing the return of the income-tax, it was wrongly, on account of typographical error mentioned section 80-IB, it cannot be said to be such a mistake by which the exemption could be disallowed outrightly. The mentioning of section 80-IB was only clerical mistake and with all fairness as per the facts and circumstances and as per the previous claims in tax calculation under section 115J, the assessee was legally entitled for this benefit. It is also an admitted fact that the financial statement also remained the same. The spirit behind this statement must be that the assessee should have claimed the exemption in his return and filed the same within due date and in the instant case, the assessee on the facts available on record clearly shows that the claim was duly made but section was inadvertently wrongly mentioned and this fact came to the notice of the assessee at a later point of time when pointed out by the Assessing Officer. The purpose of assessment proceedings before the taxing authorities is to assess the income correctly and the tax liability of an assessee in accordance with law. If such clerical mistake occurred, then, the Assessing Officer was duty bound to inform the assessee that this claim is wrongly claimed and that one may claim exemption under the concerned section. It is also an admitted position that substantial manufacturing activities were being carried out by the assessee within the bonded premises in terms of CBEC Circular No. 65/2002-Cus, dated 7-10-2002 and Notification No. 52/2003-Cus, dated 31-3-2003. [Para 16] ITA no.350/Rjt/2017 Asstt. Year 2013-14 Page 4 of 5 In view of the above, once the assessee was found eligible for an exemption under section 10B, it having been allowed such exemption in the past, and merely because a typographical error crept in while e-filing the return and it was mentioned as under section 80-IB instead of section 10B, this being a technical mistake, should not come in the way by disallowing the otherwise allowable/eligible exemption. [Para 18] Accordingly, there is no infirmity or perversity in the order of the Tribunal so as to call for any interference of the High Court. It is essentially a concurrent finding of fact by the two lower appellate authorities and no substantial question arise or is required to be considered. [Para 19]” 11.5 Thus in light of the decision held by the Hon’ble Rajasthan High Court we are of the view that the assessee is entitled to benefit u/s 10AA of the Act though it wrongly claim the deduction u/s 10A of the Act at the time of filing the return of Income. 11.6 Another issue came before us is that whether the assessee is engaged in the manufacturing activity or not. As such to claim the deduction u/s 10AA of the Act one of the prerequisite condition is that the assessee manufactures goods/produce article or things. Regarding this we referred the cl. (iii) of Explanation 1 to the provisions of section 10AA of the Act which is as under; “10AA. (1) Subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 222 of the Special Economic Zones Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any services22a during the previous year relevant to any assessment year commencing on or after the 1st day of 23[April, 2006, but before the first day of April, 2021, the following deduction shall be allowed]— ==================” Explanation 1.—For the purposes of this section,— ======= ====== (iii)"manufacture" shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zones Act, 2005” 11.7 However the term “manufacture” has defines that the “manufacture” has same meaning as assigned in cl. (r) of section 2 of the SEZ Act where meaning of manufacture was defined as detailed under; (r) “manufacture” means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining; it was defined that the manufacturer who are as under; 11.8 It is undisputed fact that the assessee was established in SEZ located at Sachin. It has granted the letter of permission to begin the manufacturing activity from 25-02-2012 by the SEZ authority. Therefore, we are of the view that the letter of permission was granted by the SEZ authority after satisfying the condition of the term manufacture as discussed above. 11.9 The agreement dated 06-03-2012 entered with the supplier of Gold Ornaments, point no. 9 specified that the assessee is responsible to assemble, studded/mounting of precious and semi-precious stones, Oxidishing, finishing and packaging etc. The assessee has purchased the Gold Ornaments in the form of raw materials with specification and design given by it and make the studded Gold Jewellery for export. 11.10 The assessee has sufficient labour manpower to manufacture the gold ornaments into studded gold jewellery as seemed from the payment vouchers issued to labourers by it and gate pass issued by the SEZ authorities. Thus in view ITA no.350/Rjt/2017 Asstt. Year 2013-14 Page 5 of 5 of the above, we do not find any infirmity in the order of the learned CIT-A. Hence the ground of appeal of the Revenue is hereby dismissed. 4.3 From the above there remains no ambiguity that the addition on the basis of which the penalty was levied upon the assessee by the AO has ceased to exist. In other words, the quantum additions made by the AO were deleted by the ITAT. Thus, the question of concealment of income or furnishing inaccurate particular of income does not arise and therefore the penalty cannot be sustained. Under the provisions of section 271(1)(c) of the Act the amount of penalty has been specified which shall not be less than hundred percent of the amount of tax sought to be evaded subject to the maximum limit of 300% of such amount. Under explanation 4 to section 271(1)(c) of the Act, the manner for quantifying the amount of tax sought to be evaded has been specified which has direct nexus with the additions/ disallowances made during the quantum proceedings. Therefore, where the quantum additions/disallowances have been deleted, then the manner of quantifying the amount of penalty under explanation 4 to section 271(1)(c) of the Act as discussed above fails. Accordingly, we are of the view that that there cannot be any penalty with respect to the quantum additions which have been deleted by the authorities whether on merit or on technical grounds. Thus, we find no infirmity in the order of the learned CIT-A and therefore the appeal filed by the Revenue is hereby dismissed. 5. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 24/06/2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 24/06/2022 Manish