ITO(OSD), CHENNAI V. M/s. Wichitra Auto Limited, CHENNAI

ITA 369/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5028 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 26-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Assessment record
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B ENCH B C HENNAI BEFORE SHRI U.B. BEDI , J.M. AND SHRI N.S. SAINI , AM .. I.T.A. NO. 369 /MDS/2 0 1 0 ASSESSMENT YEAR S 200 4 - 0 5 THE INCOME TAX OFFICER COMPANY CIRCLE I II (3) CHENNAI VS. M/S WICHITRA AUTO LIMITED 84/1, SIDCO INDUSTRIAL ESTATE AMBATTUR, CHENNAI 600 098 (PAN NO. A A ACW 0695 C ) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI SHAJI P. JACOB O R D E R PER N.S . SAINI, A.M : - TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT (A) - I II , CHENNAI DATED 1 1 . 12 .20 0 9 FOR ASSESSMENT YEAR 200 4 - 0 5 . PAGE 2 OF 9 I.T.A. NO. 369 / MDS/20 1 0 2. THE REVENUE HAS RAISED TWO E FFECTIVE GROUNDS OF APPEAL. HOWEVER, THE ONLY ISSUE INVOLVED IN BOTH THE GROUNDS OF APPEAL IS THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB OF THE INCOME - TAX ACT, 1961 [IN SHORT, THE ACT] ON JOB WORK CHARGES RECEI VED BY THE ASSESSEE. 3. NOTICE OF HEARING WAS SENT TO THE RESPONDENT ASSESSEE BY REGISTERED POST WITH ACKNOWLEDGEMENT DUE ON 14.3.2011. THE SAID NOTICE HAS NOT BEEN RETURNED UNSERVED BY THE POSTAL AUTHORITIES . THEREFORE, IT IS PRESUMED THAT NOTICE WAS S ERVED ON THE ASSESSEE. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE CASE WAS CALLED FOR HEARING. NEITHER ANY APPLICATION FOR ADJOURNMENT WAS FILED. HOWEVER, THE BENCH WAS OF THE VIEW THAT THIS APPEAL CAN BE DISPOSED OFF IN THE ABSENCE OF THE COUNS EL FOR RESPONDENT ASSESSEE AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R. THEREFORE, APPEAL WAS HEARD EX PARTE QUA THE RESPONDENT ASSESSEE. 3. WE HAVE HEARD THE SUBMISSIONS OF THE LD. D.R. AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, ASSESSEE CLAIMED DEDUCTION U/S 80IB OF THE ACT OF RS. 19,42,945/ - WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. THE PAGE 3 OF 9 I.T.A. NO. 369 / MDS/20 1 0 DISALLOWANCE WAS MADE ON TWO GROUN DS BY THE ASSESSING OFFICER. FIRSTLY, ACCORDING TO ASSESSING OFFICER, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MACHINING OF AUTO COMPONENTS AND NOT IN MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. SECONDLY, THE ASSESSING OFFICER OBSERVED FROM THE AUDIT REPORT FURNISHED BY THE ASSESSEE IN FORM NO. 10 CCB THAT THE DATE OF COMMENCEME NT OF OPERATION OF INDUSTRIAL U N D ERT A KING WAS 18.4.1991 AND THEREFORE, THE INITIAL ASSESSMENT YEAR WAS 1992 - 93 AND CONSEQUENTLY, THE ASSESSEE WAS ELIGIB LE FOR DEDUCTION ONLY UPTO ASSESSMENT YEAR 2001 - 02 U/S 80IB OF THE ACT AND THE ASSESSMENT YEAR UNDER CONSIDERATION BEING 2004 - 05. 4. THE LD. CIT(A) REVERSED THE ORDER OF THE ASSESSING OFFICER BY TAKING INTO CONSIDERATION THE FLOW CHART SUBMITTED BY THE AS SESSEE BEFORE HIM BY TAKING INTO CONSIDERATION THE ANNUAL REPORT AND TAX AUDIT REPORT. THE OPERATING PORTION OF THE LD. CIT(A) S ORDER READS AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL SUBMISSIONS. I AM OF THE OPINION THAT THE CLAIM OF THE APPELLANT HAS TO BE ALLOWED FOR THE REASONS DISCUSSED HEREAFTER. THE PERUSAL OF THE PAGE 4 OF 9 I.T.A. NO. 369 / MDS/20 1 0 EVIDENCES FURNISHED BY THE APPELLANT REVEAL THAT THE APPELLANT HAS OBTAINED REQUISITE POWER CONNECTION FROM TAMILNADU ELECTRICITY BOARD FOR THE MANUFACTURING ACTIVITIES. THE HIGH TENSION LOAD IS AWARDED FOR MANUFACTURING ACTIVITIES ONLY. THE APPELLANT ALSO HOLDS THE, REGISTRATION CERTIFICATE CLASSIFYING IT AS A SMALL SCALE INDUSTRIAL UNDERTAKING (SSI) HAVING THE LICENCE FOR MANUFACTURE/ PROCESSING/MACHINING OF AUTOMOBILE COMPONENTS. IT HAS PLANT AND MACHINERY OF RS.1.13 CRORES. FROM THE PHOTOGRAPHS PRODUCED AND THE FLOW CHARTS FURNISHED, IT IS VERY CLEAR T H AT THE FINISHED PRODUCT OF THE APPELLANT IS DISTINCT AND DIFFERENT FROM THE RAW MATERIALS USED. THE APPELLANT HAS ALSO SUBMITTED THAT THE GOODS ARE DISPATCHED ON PAYMENT OF EXCISE DUTY AFTER THE COMPLETION OF MANUFACTURING OPERATIONS. THE PAYMENT OF EXCISE DUTY WILL ARISE ONLY ON MANUFACTURED PRODUCTS WHICH GO TO PROVE THAT THE APPELLANT IS ENGAGED IN THE MANUFACTURING ACTIVITY. FURTHER, IT HAS ALSO BEEN SUBMITTED BY THE APPELLANT THAT THE MANUFACTURING PROCESS IS DONE DIRECTLY UNDER THE CONTROL AND SUPERV ISION OF THE APPELLANT S EMPLOYEES. THE HON'BLE JURISDICTIONAL HIGH COURT IN TAJ FIRE WORKS INDUSTRIES [SUPRA] HAS CLEARLY HELD THAT THE ASSESSEE WHO IS ENGAGED ON JOB WORK BASIS AND WHO SATISFIES THE TEST OF MANUFACTURE BY PAGE 5 OF 9 I.T.A. NO. 369 / MDS/20 1 0 PRODUCING A NEW MATERIAL WHICH IS DIFFERENT FROM THE RAW MATERIAL IS ENTITLED TO SPECIAL DEDUCTION U/S 80HH AND 80I. IT WAS HELD AS UNDER: IT WAS NOT IN DISPUTE THAT THE APPELLANT HAD ONLY BEEN SUPPLIED WITH RAW MATERIALS FROM SRI KALEESWARI FIRE WORKS AND IT H AD ENGAGED COOLIES VIZ. 200 LABO URERS TO PRODUCE END PRODUCT OF CRACKERS. THUS IT SATISFIED THE TEST OF MANUFACTURE BY PRODUCING THE NEW MATERIAL, NAMELY, CRACKERS AND ALSO SATISFIED THE TEST OF INDUSTRIAL UNDERTAKING AS THE ASSESSEE HAD BEEN INVOLVED IN SYSTEMATIC ACTIVITY , ORGANIZED BY COOPERATION BETWEEN EMPLOYER AND EMPLOYEES VIZ 200 LABOURERS AND FOR THE PRODUCTION AND DISTRIBUTIONS OF GOODS VIZ. NEW PRODUCT, CRACKERS. THE ASSESSEE WAS ENTITLED TO THE SPECIAL DEDUCTION U/S 80HH AND 80IB. THE FACTS OF THE APPELLANT ARE SIMILAR. ACCORDINGLY, RESPECTFULLY FOLLOWING THE ABOVE JUDICIAL PRECEDENTS, I HOLD THAT THE APPELLANT IS ENTITLED TO DEDUCTION U/S 80IB OF THE ACT. 4.1 WITH REGARD TO THE ASSESSING OFFICER S OBSERVATION THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION ONLY UPTO ASSESSMENT YEAR 2001 - 02, I FIND THAT THE LD. A.R. HAS CLEARLY CLARIFIED THAT IT IS ONLY A TYPOGRAPHICAL AND CLERICAL ERROR IN THE FORM NO. 10CCB. IT IS ALSO SUPPORTED BY EVIDENCES LIKE ANNUAL REPORT, TAX AUDIT REPORT, ETC . PAGE 6 OF 9 I.T.A. NO. 369 / MDS/20 1 0 5. BEFORE US, THE LD. D.R. REITERATED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER S ORDER FINDS SUPPORT FROM THE DECISION OF THE LARGER BENCH OF TH E TRIBUNAL IN THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTION [P] LTD VS. ACIT [2009] 126 TTJ [MUMBAI] [TM] 577. 6. WE FIND THAT HE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE IS ENGAGED IN ONLY MACHINE COMPONENTS AND NOT MANUFACTURE OF ANY PRODUCT OR ARTICLE OR THING. WE FIND THAT NO ELABORATE DETAILS OF THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS HAS BE E N BROUGHT ON RECORD BY EITHER OF THE LOWER AUTHORITIES . THE OBSERVATION OF THE ASSESSING OFFICER IS ALSO TO THE EFFECT THAT ASSESSEE HAS NOT PURCHASED ANY RAW MATERIALS AND HAS NOT SOLD ANY FINISHED GOODS. IN OUR CONSIDERED OPINION, THE CORE ACTIVITIES OF A MANUFACTURING UNIT IS TO CONVERT RAW MATERIAL INTO DIFFERENT PRODUCT WHICH IS FINISHED PRODUCT OF AN UNDERTAKING. IT IS IMMATERIAL TH AT WHETHER RAW MATERIAL WAS PURCHASED BY AN INDUSTRIAL UNDERTAKING ITSELF OR WAS SUPPLIED TO IT BY SOMEBODY ELSE. THE MANUFACTURING BUSINESS CARRIED ON BY ASSESSEE ON ITS OWN BEHALF OR ON BEHALF OF SOMEBODY ELSE IS NOT RELEVANT FOR DECIDING THE ELIG I BI LIT Y OF PAGE 7 OF 9 I.T.A. NO. 369 / MDS/20 1 0 DEDUCTION U/S 80IB OF THE ACT. OUR ABOVE VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE DELHI HI GH COURT IN THE CASE OF NU LUK (P) LTD VS. CIT [1986] 157 ITR [DEL] 253 . 7. FURTHER THE LD. CIT(A) HAS STATED FROM THE PHOTOGRAPH AND FLOW CHART FURNIS HED BEFORE HIM IT IS CLEAR THAT THE FINISHED PRODUCT OF THE ASSESSEE IS DISTINCT AND DIFFERENT FROM THE RAW MATERIAL USED. HOWEVER, WE FIND FROM THE RECORDS THAT IT IS NOT CLEAR AS TO WHAT WAS THE RAW MATERIAL OF THE ASSESSEE OR WHAT WAS THE FINISHED PROD UCT OF THE ASSESSEE S INDUSTRIAL UNDERTAKING. IN THE ABSENCE OF THESE DETAILS, WE ARE NOT IN A POSITION TO UPHOLD THE ORDER OF THE LD. CIT(A). FURTHER THE CLAIM OF THE ASSESSEE IS THAT IT UNDERTOOK MANUFACTURING ACTIVITY AND MANUFACTURED HOSE PIPE USED IN AUTOMOBILE COMPONENTS ON BEHALF OF OTHERS BUT WE FIND THAT THE COPY OF AGREEMENT WHICH THE ASSESSEE ENTERED INTO WITH OTHERS ARE NOT BROUGHT ON RECORD. WE DO NOT FIND ANY MATERIAL AVAILABLE ON RECORD FROM WHICH IT CAN BE FOUND THAT WHAT WAS THE RAW MATERIAL OF THE ASSESSEE S INDUSTRIAL UNDERTAKING AND WHAT WAS EXACTLY THE FINISHED GOODS OF THE INDUSTRIAL UNDERTAKING. COPIES OF INVOICE RAISED BY THE ASSESSEE HA VE ALSO NOT BEEN BROUGHT ON RECORD BY EITHER OF THE PARTIES. FURTHER, IN RESP ECT OF THE DATE OF COMMENCEMENT PAGE 8 OF 9 I.T.A. NO. 369 / MDS/20 1 0 OF PRODUCTION OR OPERATION OF THE INDUSTRIAL UNDERTAKING WE FIND THAT THE ASSESSING OFFICER ONLY RELIED UPON THE DATE MENTIONED IN THE AUDIT REPORT AND FORM NO. 10CCB WHICH WAS CLAIMED BY THE ASSESSEE AS A TYPOGRAPHICAL ERRO R. IT COULD NOT BE APPRECIATED THAT THE ASSESSING OFFICER HAD NOT LOOKED INTO THE PAST ASSESSMENT RECORDS AND OTHER VARIOUS MATERIAL FROM WHICH EXACT DATE OF COMMENCEMENT OF PRODUCTION OR OPERATION OF ASSESSEE S INDUSTRIAL UNDERTAKING COULD HAVE BEEN FOUN D. THE ABOVE APPROACH IS DEFINITELY NOT ACCEPTABLE. IF THE ASSESSEE IS STATUTORILY ELIGIBLE FOR SOME BENEFIT, THEN IN OUR OPINION, BENEFIT COULD NOT BE DENIED MERELY BECAUSE OF AN INNOCENT MISTAKE LIKE TYPING MISTAKE WHICH COULD HAVE BEEN EASILY ASCERTAI NED WITH OTHER MATERIAL LIKE PAST ASSESSMENT RECORD, SSI REGISTRATION CERTIF ICATE, ETC. BE THAT AS IT MAY, THE LD. CIT(A) HAS STATED THAT WITH REGARD TO THE ASSESSING OFFICER S OBSERVATION THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION ONLY UPTO ASSESSMENT YEAR 2001 - 02, I FIND THAT THE LD. A.R. HAS CLEARLY CLARIFIED THAT IT IS ONLY A TYPOGRAPHICAL AND CLERICAL ERROR IN THE FORM NO. 10CCB. IT IS ALSO SUPPORTED BY EVIDENCES LIKE ANNUAL R EPORT, TAX AUDIT REPORT, ETC . 8. FROM THE ABOVE OBSERVATION OF THE LD. CIT(A), IT IS NOT CLEAR WHAT WAS STATED IN THE ANNUAL REPORT AND IN THE TAX AUDIT REPORT AND HOW HE PAGE 9 OF 9 I.T.A. NO. 369 / MDS/20 1 0 ARRIVED THE CONCLUSION THAT THE DATE MENTIONED IN FORM NO.10CCB WAS ONLY TYPOGRAPHICAL ERROR. WE FIND THAT THE ORDER OF THE L D. CIT(A) IS NOT A SPEAKING ORDER AS WELL AS THE ASSESSING OFFICER HAS NOT PROPERLY VERIFIED THE FACTS AND NOT BROUGHT ALL RELEVANT MATERIAL ON RECORD . IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED OPINION, IT SHALL BE FAIR AND JUST TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATING THE ISSUE AFRESH AFTER VERIFICATION IN LIGHT OF THE DISCUSSION MADE HEREINABOVE . THE ASSESSING OFFICER SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJU DICATING THE ISSUE AFRESH. 9 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE COURT ON 3 RD JUNE 2011. SD/ - SD/ - ( U.B.S BEDI ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 3 RD JUNE, 201 1 . VL / - COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE