DCIT CEN CIR-40, MUMBAI V. GENERAL FOODS LTD, MUMBAI

ITA 3796/MUM/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62447 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEEPAK NAGOR
• Keywords: Search and seizure; Opportunity of being heard; Revised return
• Section: 143(3); 153A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLIAYA (A.M.) ITA NO. 3565/MUM/2008 ASSESSMENT YEAR : 2004-05 GENERAL FOODS LIMITED, 51, BROACH STREET, IST FLOOR, KAPADIA CHAMBERS, MUMBAI. PAN : AAACG5677J VS. ASSTT. COMMISSIONER OF INCOME TAX- CENTRAL CIRCLE 40, MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 3796/MUM/2008 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME TAX- CENTRAL CIRCLE 40, MUMBAI. VS. GENERAL FOODS LIMITED, 51, BROACH STREET, IST FLOOR, KAPADIA CHAMBERS, MUMBAI. PAN : AAACG5677J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK NAGOR REVENUE BY : SHRI PAVAN VED DATE OF HEARING 14-5-2012 DATE OF PRONOUNCEMENT 23-5-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER DATED 31-3-2008 PASSED BY THE LD. CIT (A) CENTRAL VII, ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 2 MUMBAI FOR THE A.Y. 2004-05. BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SOYA OI L. IN THE CASE OF RUCHI SOYA GROUP, A SEARCH AND SEIZURE ACTION U/S 1 32(1) OF THE INCOME TAX ACT 1961 (THE ACT) WAS CARRIED OUT BY THE DEPAR TMENT ON 17.11.2005 AT THEIR VARIOUS PREMISES LOCATED AT MUMBAI AND IND ORE. THE ASSESSEE COMPANY IS A MEMBER OF RUCHI SOYA GROUP AND WAS COV ERED UNDER THE SEARCH ACTION U/S 132(1) OF THE ACT. IN RESPONSE TO NOTICE ISSUED U/S 153A OF THE ACT, THE ASSESSEE FILED RETURN DECLARIN G TOTAL INCOME OF RS. 5,16,64,918/- AS AGAINST ORIGINAL RETURN FILED DECL ARING TOTAL INCOME OF RS. 4,91,64,918/-. THE DIFFERENCE OF RS. 25 LACS IN THE RETURN FILED U/S 153A IS THE DECLARATION MADE BY THE ASSESSEE DURING THE COURSE OF SEARCH. HOWEVER, THE ASSESSMENT WAS COMPLETED AFTER MAKING DISALLOWANCE U/S 10A OF THE ACT RS. 65,14,829/- AND DISALLOWANCE U/S 14A RS. 9,827/- ON A TOTAL INCOME OF RS,. 5,81,89,5 74/- VIDE ORDER DTD. 24-12-2007 PASSED U/S 153A R.W.S. 143(3) OF THE ACT . ON APPEAL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO. 3565/MUM/2008 (ASSESSEES APPEAL) ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 3 4. ALL THE GROUNDS TAKEN BY THE ASSESSEE ARE AGAINS T THE SUSTENANCE OF DISALLOWANCE OF DEDUCTION U/S 10A OF THE ACT AMO UNTING TO RS. 6514829/-. 5. BRIEFLY STATED FACTS OF THE ABOVE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASS ESSEE HAS CLAIMED DEDUCTION U/S 10A OF THE ACT AMOUNTING TO RS. 65148 29/- FOR MANUFACTURING AND MAKING EXPORTS FROM SEZ KANDLA SU PPORTED BY A REPORT IN FORM NO. 56F SUBMITTED ALONG WITH THE RET URN. ON MAKING NECESSARY VERIFICATION IT WAS, INTER ALIA, OBSERVED BY THE A.O. THAT THE ASSESSEE CLAIMED THAT IT IS CONVERTING SOYABEAN MEA L TO SOYABEAN MEAL SUPER GRADE AND CLAIMING DEDUCTION U/S 10A OF THE A CT. HOWEVER, ON PERUSAL OF THE P&L ACCOUNT, THE A.O. OBSERVED THAT NO ACTIVITY IS UNDERTAKEN, IT IS ONLY PURCHASES WHICH ARE EXPORTED UNDER THE GARB OF SEZ KANDLA AND ACCORDINGLY HE HELD THAT NO MANUFACT URING ACTIVITY HAS BEEN CARRIED OUT AND THUS THE ASSESSEE COMPANY IS N OT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. 6. ON APPEAL, THE LD. CIT(A) OBSERVED THAT THE APPE LLANT HAS FAILED TO REBUT THE OBSERVATIONS AND THE FINDINGS OF THE A.O. WHATSOEVER, IT IS NOT DISPUTED THAT NO MANUFACTURING ACTIVITIES WERE UNDE RTAKEN BY THE APPELLANT WHICH IS THE PRE-REQUISITE FOR CLAIMING S UCH DEDUCTION, MANUAL OR PROCESSING THROUGH MACHINE DID NOT RESULT INTO A NEW PRODUCT THOUGH IT MIGHT HAVE IMPROVED THE QUALITY OF THE GOODS AND AFTER RELYING ON ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 4 CERTAIN DECISIONS CITED AT PAGE 6 OF HIS ORDER, UPH ELD THE DISALLOWANCE MADE BY THE A.O. 7. AT THE TIME OF HEARING, THE ASSESSEES REPRESENT ATIVE FILED WRITTEN SUBMISSION INTER ALIA STATED AS UNDER:- 3. NEWLY INTRODUCED SUB-SECTION 1OA(1A) ALLOWED DE DUCTION OF 100% OF PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTICLES OR THINGS WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE DURING THE PREVIOUS YEAR COMMENCING ON OR AFTER 1.4.2003 I N ANY SEZ. 4. DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05, THE ASSESSEE SET UP A UNIT IN KANDLA SEZ AND MADE EXPOR TS THEREFROM. NECESSARY DOCUMENTS IN SUPPORT WERE SUBMITTED. AGRE EMENT (AS ENVISAGED IN PARA 8 OF THE SEZ SCHEME) BETWEEN THE ASSESSEE AND THE GOVT. FOR SETTING UP THE SEZ UNIT FOR MANUFACTURE O F EDIBLE SOYA PRODUCTS (CUSTOMIZED) APPEARS AT PAGE 16-18 OF THE PAPER BOO K. COPY OF GREEN CARD VALID UPTO 28.2.2009 ISSUED BY DEVELOPMENT COM MISSIONER KSEZ IS AT PAGE 15 OF PB. 5. THE ASSESSEE PURCHASED THE RAW MATERIAL, I.E. YE LLOW SOYABEAN MEAL EXTRACTION AT KANDLA AND THEREAFTER THE MATERIALS W ERE TRANSFERRED TO SEZ SHED OF THE, UNIT. BEING AGRO BASED PRODUCTS, C ERTAIN MANUFACTURING PROCESS WERE CARRIED OUT SO AS TO CONVERT IT IN DIF FERENT GRADES OF PRODUCT MEANT FOR EXPORT. THE MATERIAL PURCHASED WAS TESTED FOR ITS QUALITY PARAMETERS INCLUDING MOISTURE CONTENT, IMPURITIES, PROTEIN CONTENT ETC. THE PROCESSING INVOLVED CLEANING, GRADING AND BLEND ING WHICH CONVERTED THE RAW MATERIAL INTO FINISHED PRODUCT OF UNIFORM, CONSISTENT AND DESIRED PRODUCT QUALITY FOR EXPORT. IT WAS DONE IN ASSESSEE S SEZ UNIT. IT WAS GOT DONE ON JOB WORK BASIS FROM RISHI SHIPPING, ANOTHER SEZ UNIT ALSO FOR WHICH APPROVAL FROM DEVELOPMENT COMMISSIONER WAS TA KEN. 6. IT WILL BE SEEN FROM MOU ENTERED INTO BETWEEN TH E ASSESSEE AND RISHI SHIPPING (COPY AT PAGES 19-20 OF PB) THAT SOYABEAN DEOILED CAKE (SOYABEAN EXTRACTION) WHICH IS THE RAW MATERIAL WAS PROCESSED IN THE PLANT AND SOYABEAN MEAL (SUPER GRADE) WAS PRODUCED. 6.1. THE FINISHED GOOD IS COMPLETE NEW PRODUCT HAVI NG A DISTINCT NAME AND IS USED FOR HIGH PROTEIN ISOLATE AND CONCENTRAT E. THEREFORE, THE AO/CIT(A) ERRED IN HOLDING THAT NO MANUFACTURING AC TIVITY WAS CARRIED OUT. RELIANCE WAS ALSO PLACED ON FOLLOWING DECISIONS:- ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 5 1. CIT V. BUDHARAJA (N.C.) AND CO. 204 ITR 412 (SC ), 2. ASPINWALL AND CO. LTD. V. CIT 251 ITR 323 (SC), 3. CIT VS. SESA GOA LTD. 271 ITR 331 (SC), 4. PRP GRANITES V. ACIT (2009) 221 CTR (MAD) 371, 5. VIJAY SHIP BREAKING CORPN. V. CIT 219 CTR (SC) 639 (SC), 6. ACIT V. MUKHERJEE & CO. (P) LTD. 113 ITR 718 (C AL), 7. CIT V. RAJMOHAN CASHEWS (P.) LTD. 185 ITR 472 ( KER), 8. CIT V. TALWAR KHULLAR (P) LTD. 235 ITR 70 (ALL) , 9. CHILLIES EXPORTS HOUSE LTD. V. CIT 225 ITR 814 (SC), 10. CIT V. GAEKWAR FOAM & RUBBER CO. LTD. 35 ITR 662 (B OM) , AND 11. CAPSULATION SERVICES P. LTD. V. CIT 91 ITR 566 (BOM). 8. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND THE LD. CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE CLAIM OF THE ASSESSEE THAT IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING I.E. CONVERTING SOYABEAN MEAL TO SOYABEAN MEAL SUPER GRA DE WHICH ACCORDING TO THE ASSESSEE A DISTINCT COMMODITY FROM THE RAW MATERIAL. IT WAS FURTHER CLAIMED THAT DURING THE PREVIOUS YEAR R ELEVANT TO THE ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS SET UP A U NIT IN KANDLA SEZ AND MADE EXPORTS AND ALSO CLAIMED DEDUCTION U/S 10A OF THE ACT. HOWEVER, WE FIND THAT THE CLAIM OF THE ASSESSEE HAS NOT BEEN EXAMINED EITHER BY THE A.O. OR BY THE LD. CIT(A) DESPITE THE FACT THAT THE ASSESSEE, ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 6 BEFORE THE LD. CIT(A), HAS FILED ITS WRITTEN SUBMIS SIONS APPEARING AT PAGE 3 TO 5 OF THE ORDER OF THE LD. CIT(A). THE LD. CIT (A) WITHOUT GIVING ANY COGENT REASON THAT THE ASSESSEE IS NOT ENGAGED IN T HE MANUFACTURING ACTIVITY HAS REJECTED THE CLAIM OF THE ASSESSEE BY HOLDING THAT IT IS NOT DISPUTED THAT NO MANUFACTURING ACTIVITIES WERE UNDE RTAKEN BY THE APPELLANT WHICH IS A PRIME PRE-REQUISITE FOR CLAIMI NG DEDUCTION. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS NOT CO NVERTING SOYABEAN MEAL TO SOYABEAN MEAL SUPER GRADE OR THE SAID CONVE RSION DOES NOT AMOUNT TO MANUFACTURING ACTIVITY. THIS BEING SO, W E ARE OF THE VIEW THAT THE ISSUE HAS NOT BEEN EXAMINED PROPERLY AND HENCE, IN THE INTEREST OF JUSTICE, WE CONSIDER IT FAIR AND REASONABLE THAT TH E MATTER SHOULD GO BACK TO THE FILE OF THE A.O. AND ACCORDINGLY WE SET ASID E THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BA CK THE MATTER TO THE FILE OF THE A.O. TO DECIDE THE SAME AFRESH IN THE L IGHT OF OUR ABOVE OBSERVATIONS AND ACCORDING TO LAW AFTER PROVIDING R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA 3796/MUM/2008 (BY REVENUE) 10. GROUNDS OF APPEAL NO. 1 & 2 TAKEN BY THE REVENU E READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING BENEFIT OF TELESCOPING OF RS.25,00,000/- WHILE UPHOLDING THE A.O.S ACTION OF DISALLOWANCE OF ASSE SSEES CLAIM OF DEDUCTION U/S.10A OF THE I.T. ACT, 1961 AT RS.40,24 ,656/-. ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 7 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 11. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT WHILE F ILING THE RETURN, THE ASSESSEE DISCLOSED AN ADDITIONAL INCOME OF RS. 25 L AKHS AND OFFERED FOR TAX ON ADHOC BASIS SO AS TO COVER UP ANY DISCREPANC IES AND DISALLOWANCES OUT OF EXPENDITURE DEBITED TO P&L ACC OUNT. HOWEVER, THE A.O. EXCEPT MENTIONING THAT THE ASSESSEE HAS FILED REVISED RETURN DECLARING EXTRA INCOME OF RS. 25 LAKHS DID NOT DISC USS THIS ISSUE IN THE ASSESSMENT ORDER. BEFORE THE LD. CIT(A) THE ASSESS EE, INTER ALIA, STATED THAT WITHOUT PREJUDICE TO THE LEGALITY OF DEDUCTION CLAIMED U/S 10A OF THE ACT, THE DISALLOWANCE U/S 10A MAY BE RESTRICTED TO RS. 40,24,656/- ONLY INSTEAD OF RS. 64,24,656/-. THE LD. CIT(A) AFTER C ONSIDERING THE ASSESSEES LETTER AND THE SUBMISSIONS, HELD THAT TH E APPELLANT IS ENTITLED TO TELESCOPING OF RS. 25 LAKHS DISCLOSED AS ADDITIO NAL INCOME FROM THE INCOME DETERMINED BY THE A.O. AFTER DISALLOWING THE CLAIM U/S 10A AND DIRECTED THE A.O. TO GIVE CREDIT THEREOF AND RE-DET ERMINE THE ASSESSED INCOME AND HENCE ALLOWED THE CLAIM OF THE ASSESSEE. 12. AT THE TIME OF HEARING, THE LD. D.R. SUPPORTS T HE ORDER OF THE A.O. HOWEVER, HE DID NOT DISPUTE THAT NOW THE ISSUE STAN DS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S NATIONAL STEEL & AGRO INDUSTRIES LTD. ACIT AND VICE VERSA IN ITA NOS. 4558 TO 4561/MUM/2008 FOR A.YS. 2000-01 TO 2003-04 & ITA NO. 4476 TO 4478/MUM/2008 FOR A.YS. 2001-02 TO 2003-04 DTD. 12.3.2010. ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 8 13. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN M/S NATIONAL STEEL & AGRO INDUSTRIES LT D. (SUPRA). 14. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE WHILE FILING THE RETURN OF INCOME IN RESPONSE TO TH E NOTICE U/S 153A DECLARED AN ADDITIONAL INCOME OF RS. 25 LAKHS AND, IN ALTERNATIVE, CLAIMED THAT THE DISALLOWANCE, IF ANY, U/S 10A MAY BE RESTRICTED TO RS. 40,24,656/- ONLY INSTEAD OF RS. 64,24,656/-. THE L D. CIT(A) AFTER EXAMINING THE ISSUE HELD THAT THE ASSESSEE IS ENTIT LED TO TELESCOPING OF RS. 25 LAKHS DISCLOSED AS ADDITIONAL INCOME FROM TH E INCOME DETERMINED BY THE A.O. 15. IN M/S NATIONAL STEEL & AGRO INDUSTRIES LTD. (S UPRA) IT HAS BEEN HELD AS UNDER (PARA 12):- COMING TO THE ISSUE OF TELESCOPING WHICH IS GROUND NO. 2 FOR ASSESSMENT YEAR 2001-02 AND GROUND NO. 3 FOR ASSESSMENT YEAR 2 002-03 AND GROUND NO. 1 FOR ASSESSMENT YEAR 2003-04, IN THE LIGHT OF OUR DISCUSSION AND THE LEGAL POSITION WHILE CONSIDERING GROUND NO. 2 IN TH E ASSESSEES APPEAL, WE FULLY AGREE WITH THE FINDINGS OF THE CIT (APPEALS) AND HOLD THAT THERE IS NO ERROR WHATSOEVER IN THE DIRECTION OF THE CIT (APPEA LS) TO THE A.O. TO GRANT THE BENEFIT OF TELESCOPING. WHEN THE ASSESSEE HAS DECLARED ADDITIONAL INCOME, OBVIOUSLY THE SAME IS AVAILABLE FOR EXPLAIN ING EITHER EXPENDITURE OR FOR EXPLAINING THE INVESTMENTS MADE DURING THAT YEAR. THESE GROUNDS RAISED IN THE REVENUES APPEALS ARE DISMISSED. ITA NO. 3565 & 3796/MUM/2008 M/S GENERAL FOODS L TD. 9 IN ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA) IN THE GROUP CASE OF THE ASSESSEE, DECLINE TO INTERFERE WI TH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT AND ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE ARE REJECTED. 16. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF MAY, 2012. SD/- (N.K. BILLIAYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 23 RD MAY, 2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- CENTRAL VII, MUMBAI 4. COMMISSIONER OF INCOME TAX CENTRAL- 4, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI