M/S MITTAL EXPORT HOUSE, JAIPUR V. PR. COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR

ITA 420/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6331 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA CIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Tangible material; Assessment record
• Section: 263; 143(3); 142(1); 10AA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 420/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14. M/S. MITTAL EXPORT HOUSE, A-129, JANTA COLONY, JAIPUR. VS. PR. COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAFFM 0446 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25.06.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 20/07/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E REVISION ORDER DATED 28 TH MARCH, 2018 PASSED BY THE LD. PRINCIPAL COMMISSIONE R OF INCOME TAX, JAIPUR-II, JAIPUR UNDER SECTION 263 OF THE I.T. ACT FOR THE AS SESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED PR. CIT, JAIPUR-II, JAIPUR HAS ERRED IN PASSING THE ORDER U/ S 263 OF THE INCOME TAX ACT, 1961 WHICH IS VOID AB-INITIO DESERV ES TO BE QUASHED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED PR. CIT, JAIPUR-II, JAIPUR HAS ERRED IN HOLDING THAT THE ORD ER PASSED BY LEARNED ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 2 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. 1961 DATED 29.01.2016 WAS ERRONEOUS AND PREJUDICE T O THE INTEREST OF THE REVENUE. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED PR. CIT, JAIPUR-II, JAIPUR HAS ERRED IN HOLDING THAT THE LEA RNED ASSESSING OFFICER HAS ERRED IN GRANTING DEDUCTION U/S 10AA ON THE STATED SALES OF THE SEZ UNIT UNDER THE GIVEN FACTS. 4. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD, AMEN D OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER, 2013 DECLARING TOTAL INCOME OF RS. 71,79,770/-. THE ASSESSEE CLAI MED EXEMPTION UNDER SECTION 10AA WHICH WAS ALLOWED BY THE AO WHILE COMPLETING T HE ASSESSMENT UNDER SECTION 143(3) ON 29 TH JANUARY, 2016. SUBSEQUENTLY, THE LD. PR. CIT ON E XAMINATION OF ASSESSMENT RECORD NOTED THAT THE AO HAS ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 10AA OF THE ACT WITHOUT PROPER EXAMINATION OF THE MATTER AND PARTICULARLY THE ELIGIBILITY FOR CLAIMING DEDUCTION UNDER SECTIO N 10AA ON ACCOUNT OF THE SEZ UNIT SET UP BY SPLITTING UP THE BUSINESS ALREADY IN EXIS TENCE. ACCORDINGLY, THE LD. PR. CIT ISSUED A SHOW CAUSE NOTICE UNDER SECTION 263 ON 13. 03.2018 PROPOSING TO MODIFY THE ORDER ON THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 10AA. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE FILED ITS REPLY AS W ELL AS REFERRED THE RELEVANT RECORD IN SUPPORT OF THE CLAIM OF DEDUCTION UNDER SECTION 10AA OF THE ACT. THE LD. PR. CIT WAS NOT IMPRESSED WITH THE REPLY AND CONTENTION OF THE ASSESSEE AND HELD THAT THE ORDER PASSED UNDER SECTION 143(3) BY THE AO IS ERRO NEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE SAID ORDER WA S PASSED BY THE AO IN A ROUTINE AND PERFUNCTORY MANNER WITHOUT VERIFICATION OF DEDU CTION UNDER SECTION 10AA OF THE ACT. ACCORDINGLY, THE LD. PR. CIT SET ASIDE THE ASS ESSMENT ORDER ON THE ISSUE OF 3 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. DEDUCTION UNDER SECTION 10AA AND DIRECTED THE AO TO RE-DO THE SAME AFRESH DENOVO IN THE LIGHT OF THE REVISION ORDER. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GOLD AN D SILVER JEWELLERY/ORNAMENTS STUDDED WITH DIAMOND AND PRECIOUS STONES. THE ENTI RE BUSINESS IS OF EXPORT AND THERE ARE NO LOCAL SALES. THE MANUFACTURING UNIT I S LOCATED AT H-115, SEZ-II, SITAPURA, JAIPUR. THE LD. A/R HAS POINTED OUT THAT ALL THE SALES ARE EXPORT SALES AND HAS BEEN APPROVED BY THE SEZ AUTHORITIES AS EVIDENT FROM THE SHIPPING BILLS AND INVOICES OF SALES MADE BY THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE PRODUCED ALL TH E RECORDS DURING THE ASSESSMENT PROCEEDINGS AND THE AO ON EXAMINATION OF THE RELEVA NT RECORD WAS SATISFIED WITH THE CLAIM OF THE ASSESSEE. THEREFORE, WHEN THE ENTIRE SALES ARE EXPORT MADE FROM THE SEZ UNIT ENGAGED IN HANDMADE JEWELLERY AND ROLE OF MACHINERY IS NIL, THEN THE REVISION ORDER PASSED BY THE LD. PR. CIT ON THE BAS IS OF SUSPICION ABOUT THE SETTING UP OF SEZ UNIT BY SPLITTING UP THE EXISTING BUSINES S AND FURTHER DOUBTING THE QUANTUM OF ARTICLES MANUFACTURED AND SOLD BY THE AS SESSEE IN A SHORT SPAN OF TIME IS NOT BASED ON ANY TANGIBLE MATERIAL OR FACT. THE LD . A/R HAS REFERRED TO THE PURCHASE BILLS AND SALES VOUCHERS WHICH WERE DULY APPROVED B Y THE SEZ AUTHORITIES AND SUBMITTED THAT WHEN ALL THE TRANSACTIONS OF PURCHAS E AND SALE AT SEZ UNIT WERE CARRIED OUT AFTER APPROVAL OF THE SEZ AUTHORITIES, THEN THERE WAS NO QUESTION OF SUSPECTING THE PURCHASES AND SALES MADE BY THE ASSE SSEE FROM SEZ UNIT. THE AO THOROUGHLY EXAMINED THE CLAIM OF THE ASSESSEE AND T HE RELEVANT RECORD. THE ASSESSEE FILED THE REPLIES DATED 13 TH JULY, 2015 AND 21 ST JULY, 2015 BEFORE THE AO IN RESPECT OF THE QUERY RAISED BY THE AO. ALL THESE R EPLIES FILED BY THE ASSESSEE ARE 4 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. AVAILABLE IN THE ASSESSMENT RECORD. THE ASSESSEE S PECIFICALLY EXPLAINED THE BUSINESS ADDRESS OF THE FIRM AT H-115, SEZ-II, SITAPURA, JAI PUR AND ALSO FILED THE COPY OF LOA FOR SEZ TO SHOW THE SETTING UP OF A NEW UNIT AT THE SEZ. THE AGREEMENT FOR PURCHASE AND SALE OF SEZ WAS ALSO FURNISHED. THE A O AFTER MAKING NECESSARY ENQUIRY AND EXAMINATION OF THE RELEVANT RECORD WAS SATISFIED WITH THE CLAIM OF THE ASSESSEE. THE LD. A/R HAS FURTHER CONTENDED THAT I T IS NOT A CASE OF SPLITTING UP OF BUSINESS ALREADY IN EXISTENCE. IN FACT, THE EXISTI NG BUSINESS WAS DISCONTINUED AND THE STOCKS OF THE SAME REMAINED LYING IN JANTA COLO NY OFFICE SINCE 2006 AS IT IS. THIS FACT WAS BROUGHT TO THE NOTICE OF THE AO DURIN G THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED 11.1.2016 AND ALSO BROUGHT TO THE NOTICE OF THE LD. PR. CIT IN THE REVISION PROCEEDINGS. THEREFORE, THE ASSESSEE HAS BROUGHT ALL THE RELEVANT RECORD AND DETAILS BEFORE THE AO TO SHOW THAT MANUFACTURIN G AT SEZ UNIT HAS NO CONNECTION OR RELEVANCE WITH THE EXISTING BUSINESS BEING CARRI ED OUT AT JANTA COLONY OFFICE. THE LD. A/R HAS THEN POINTED OUT THAT THE LD. PR. CIT H AS DOUBTED THE TRANSACTION OF PURCHASE AND SALE AS THE QUANTITY OF SALE/ARTICLE W AS MORE THAN THE PURCHASED QUANTITY. HOWEVER, THE LD. PR. CIT COMPLETELY IGNO RED THE FACT THAT THE DIFFERENCE IN PURCHASE OF PURE GOLD QUANTITY AND THE QUANTITY OF SOLD GOODS IS DUE TO THE OTHER METALS AND STONES IN THE MANUFACTURED JEWELLERY. T HE LD. A/R HAS REFERRED TO THE PURCHASE AND SALE BILLS AND SUBMITTED THAT THE DIFF ERENCE IN THE WEIGHT OF THE QUANTITY OF PURCHASE AND SALE IS DUE TO THE USE OF OTHER METALS AND STONES IN THE GOLD JEWELLERY. THE INVOICE CLEARLY REFLECTS THE Q UANTITY OF GOLD BEING 58.3% OF THE GROSS WEIGHT OF JEWELLERY AND REST OF THE WEIGHT WA S OF PRECIOUS/SEMI PRECIOUS STONES AND DIAMONDS. THUS THE OBSERVATION OF THE L D. PR. CIT IS BASED ON PRESUMPTION OF WRONG FACTS THAT SALE QUANTITY IS MO RE THAN THE PURCHASES MADE BY 5 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. THE ASSESSEE DURING THE PERIOD. ANOTHER POINT RAIS ED BY THE LD. PR. CIT IS THE SHORT SPAN OF PERIOD DURING WHICH THE ASSESSEE HAS MADE T HE FIRST SALE OF FINISHED GOODS. THE LD. A/R HAS SUBMITTED THAT SINCE THE ASSESSEE I S NOT USING MACHINERY IN THE MANUFACTURING PROCESS BUT ALL THE MANUFACTURING IS DONE BY THE ARTISANS WHO HAVE BEEN PAID WAGES. HE HAS REFERRED TO THE CHART INDIC ATING THE NAMES OF THE ARTISANS, THE WORK FOR WHICH HE HAS BEEN ENGAGED AND THE WAGE S PAID TO HIM. THUS WHEN THE ASSESSEE HAS GOT THE JEWELLERY MANUFACTURED THROUGH ARTISANS AND NOT THROUGH THE MACHINERY, THEREFORE, ONLY THE WORKERS HAD CARRIED OUT THE MANUFACTURING JOB WITH THEIR OWN TOOLS. THE ASSESSEE, HOWEVER, PURCHASED THE MACHINERY AND TOOLS SUCH AS POLISH MACHINE AND OTHER TOOLS REQUIRED FOR THE MAN UFACTURING ACTIVITY. HE HAS REFERRED THE LIST OF ARTICLES AND TOOLS WHICH WERE PURCHASED BY THE ASSESSEE. THUS THE LD. A/R HAS SUBMITTED THAT THE ASSESSEE PRODUCE D ENTIRE RELEVANT RECORD IN SUPPORT OF THE CLAIM OF MANUFACTURING DONE BY THE A SSESSEE AT SEZ UNIT AND SALE OF THE FINISHED GOODS WHICH IS DULY APPROVED BY THE SE Z AUTHORITIES. THE PURCHASES MADE BY THE ASSESSEE HAVE NOT BEEN DISPUTED EVEN BY THE LD. PR. CIT THOUGH HE HAS DOUBTED ONLY THE MANUFACTURING ACTIVITY DONE BY THE ASSESSEE WITHIN THE SHORT SPAN OF TIME. SINCE THE ASSESSEE GOT ALL THE JEWELLERY MANUFACTURED THROUGH VARIOUS ARTISANS/WORKERS, THEREFORE, RAISING THE OBJECTION AND DOUBT BY THE LD. PR. CIT IS WITHOUT ANY BASIS. THE PR. CIT HAS MISUNDERSTOOD T HE FACTS REGARDING PURCHASE AND SALE OF THE GOODS BY CONSIDERING ONLY THE GROSS WEI GHT OF THE SOLD JEWELLERY WITHOUT CONSIDERING THE NET WEIGHT OF THE GOLD. HENCE THE L D. A/R HAS SUBMITTED THAT WHEN THE ENTIRE RECORD WAS PRODUCED BY THE ASSESSEE BEFO RE THE AO AND AFTER CONDUCTING A THOROUGH EXAMINATION AND ENQUIRY BY THE AO, THE A O WAS SATISFIED AND ACCEPTED THE CLAIM OF THE ASSESSEE, THEN THE LD. PR. CIT CAN NOT REVISE AND SET ASIDE THE ORDER 6 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. PASSED BY THE AO ONLY FOR MAKING A FRESH ASSESSMENT . HE HAS PLEADED THAT THE IMPUGNED ORDER IS NOT SUSTAINABLE AND THE SAME MAY BE QUASHED. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE AO HAS PASSED THE ASSESSMENT ORDER SUMMARILY WITHOUT DISCUSSING ANYTH ING ABOUT THE CLAIM OF DEDUCTION UNDER SECTION 10AA OF THE ACT. THE LD. PR . CIT NOTED FROM THE RECORD THAT THE ASSESSEE WAS EARLIER DOING THE BUSINESS OF SALE OF JEWELLERY FROM JANTA COLONY OFFICE AS THE ADDRESS OF THE ASSESSEE FIRM IS ALSO SHOWN AS JANTA COLONY, JAIPUR. THEREFORE, THE LD. PR. CIT NOTED THAT THE ASSESSEE HAS PURCHASED ONLY A SINGLE POLISH MACHINE OF RS. 58,168/- AND CLAIMED THE TURNOVER OF RS. 1,34,72,590/- DURING THE YEAR UNDER CONSIDERATION. THUS THIS FACT INDICATES THAT THE SEZ UNIT WAS SET UP BY SPLITTING UP THE BUSINESS ALREADY IN EXISTENCE AND ALL THE MACHINERY ALREADY USED BY THE EXISTING BUSINESS WERE SHIFTED TO THE SEZ UNIT AS THE ASSESSEE HAS SHOWN THE PURCHASE OF A SINGLE MACHINE DURING THE YEAR UNDER CONSIDERATION. THE AO HAS NOT AT ALL VERIFIED THE CLAIM IN TERMS OF PROVISIONS OF SECTION 10AA WHETHER THE ASSESSEE HAS FULFILLED THE CONDITIONS FOR ELIGIBILITY OF CLA IM UNDER SECTION 10AA. THUS THE ORDER PASSED BY THE AO WITHOUT CONDUCTING THE PROPER ENQU IRY IS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE AS SESSEE HAS NOT DISPUTED THAT PRIOR TO THE SETTING UP OF THE SEZ UNIT, THE ASSESSEE WAS HAVING ITS BUSINESS FROM THE JANTA COLONY AND, THEREFORE, THE POSSIBILITY OF USI NG THE FACILITY AT JANTA COLONY FOR THE SEZ UNIT ACTIVITY CANNOT BE RULED OUT. THE LD. PR. CIT HAS CLEARLY MADE OUT THE CASE OF MORE SALE THAN THE PURCHASES MADE BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION WHEN THIS IS THE FIRST YEAR OF MANUFA CTURING ACTIVITY OF SEZ UNIT. ALL THESE FACTS WERE REQUIRED TO BE VERIFIED BY THE AO. HOWEVER, WHEN THE AO HAS NOT 7 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. CONDUCTED ANY ENQUIRY THEN THE SAID ORDER PASSED BY THE AO SUFFERS FROM ERROR AND LIABLE TO BE SET ASIDE. HE HAS RELIED UPON THE IMP UGNED ORDER OF THE LD. PR. CIT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS ACCEPTED THE RETURNED INCOME WH ILE PASSING THE SCRUTINY ASSESSMENT ORDER DATED 29.01.2016. HOWEVER, THE AO HAS STATED IN THE ASSESSMENT ORDER THAT A NOTICE UNDER SECTION 142 AS WELL AS UN DER SECTION 142(1) ALONG WITH A QUERY LETTER WAS ISSUED TO THE ASSESSEE. IN COMPLI ANCE, THE ASSESSEE ATTENDED THROUGH ITS AUTHORIZED REPRESENTATIVE AND FILED THE NECESSARY DETAILS ON VARIOUS QUERIES MADE BY THE AO. THE RELEVANT PART OF THE AO S ORDER IS AS UNDER :- THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ON 03.09.2014 BY THE ACIT, CIRCLE-5, JAIPUR WHICH W AS SERVED ON 09.09.2014. ON CHANGE OF INCUMBENT AGAIN NOTICES U/ S 142(1) ALONG WITH A QUERY LETTERS WERE ISSUED ON 17.06.2015, IN COMPLIANCE, THE CASE WAS ATTENDED BY SHRI S.L. PODDAR, CA/AR OF THE ASSESSEE AND NECESSARY DETAILS ON THE VARIOUS QUERIES WERE SUBMI TTED. THE ASSESSEE WAS INVOLVED IN THE BUSINESS OF TRADING AND MANUFAC TURING OF SILVER AND GOLD JEWELLERY, BULLIONS AND PRECIOUS AND SEMI PRECIOUS STONES. THE REGULAR BOOKS OF ACCOUNTS, CONSISTING OF CASH B OOK & LEDGER WERE MAINTAINED. THE BOOKS OF ACCOUNTS WERE DULY AUDITED U/S 44AB AND AUDIT REPORT IN FORM NO. 3CB WERE FURNISHED. THE CA SE WAS EXAMINED ON TEST CHECK BASIS AND DISCUSS, THE RETURN INCOME OF THE ASSESSEE IS ACCEPTED. THUS IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE AO ISSUED THE NOTICE UNDER SECTION 142 ALONG WITH A QUESTIONNAIRE WHEREIN VARI OUS QUERIES WERE ASKED BY THE AO FROM THE ASSESSEE. IN RESPONSE TO THE SAID NOTI CE AND QUERY, THE ASSESSEE FILED 8 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. REPLIES DATED 13.07.2015 AND 21.07.2015 AT PAGES 59 TO 61 AND PAGES 62 TO 63 OF THE PAPER BOOK AS UNDER :- 9 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. 10 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. 11 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. 12 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. IT IS MANIFEST FROM THE REPLIES FILED BY THE ASSESS EE THAT THE ASSESSEE HAS CLEARLY EXPLAINED ALL THE DETAILS OF THE PARTNERSHIP FIRM, NATURE OF BUSINESS OF TRADING AND MANUFACTURING AND FURTHER THE SEZ UNIT OF THE ASSES SEE AT SITAPURA, JAIPUR. THUS THE ASSESSEE HAS EXPLAINED THE FACTS THAT THE ORIGINAL BUSINESS OF THE PARTNERSHIP FIRM WAS BEING CARRIED OUT FROM THE PREMISES A-129, JANT A COLONY, JAIPUR AND A NEW SEZ UNIT WAS SET UP AT H-115, SEZ-II, SITAPURA, JAIPUR. THE ASSESSEE ALSO PRODUCED LOA OF SEZ AND MANUFACTURING PROCESS BEING DONE MANUALL Y. THEREFORE, THE ASSESSEE WAS NOT MAINTAINING ANY REGISTER OF ASSETS. THE CO MPARATIVE TURNOVER DETAILS WERE ALSO PRODUCED BY THE ASSESSEE ALONG WITH ALL THE RE LEVANT DETAILS OF PURCHASE BILLS, SALE INVOICES, MANUFACTURING CHARGES PAID TO THE AR TISANS/WORKERS. THE LD. PR. CIT AFTER COMPLETION OF ASSESSMENT UNDER SECTION 143(3) INVOKED THE PROVISIONS OF SECTION 263 BY ISSUING THE SHOW CAUSE NOTICE DATED 13 TH MARCH, 2018. THE LD. PR. CIT NOTED THAT THE PARTNERSHIP FIRM WAS NOT NEW AND , THEREFORE, IT HAS NOT COME INTO EXISTENCE FOR THE FIRST TIME IN THE YEAR UNDER CONS IDERATION, RATHER IT WAS ALREADY EXISTING AND WAS ENGAGED IN THE SAME BUSINESS OF TR ADING AND MANUFACTURING OF GOLD 13 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. AND SILVER JEWELLERY. IT WAS ALSO NOTED THAT DURIN G THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD EXPLAINED THE OPENING STOCK OF FINISHE D GOODS AS ON 1 ST APRIL, 2012 AND REST MATERIAL WERE LYING IN THE JANTA COLONY OFFICE , AND FURTHER THE SEZ UNIT WAS CLAIMED AS AN INDEPENDENT MANUFACTURING UNIT. HOWE VER, THE LD. PR. CIT NOTED THAT THE PURCHASES OF NEW PLANT AND MACHINERY AMOUNTING TO RS. 58,268/- ONLY HAS BEEN SHOWN DURING THE YEAR. OUT OF THIS TOTAL AMOUNT OF PURCHASE OF PLANT AND MACHINERY, RS. 53,698/- REFLECT VARIOUS SMALL ARTIC LES LIKE WAX, BUF, KUCHHI WIRE ETC. AND THE BILL AMOUNT OF RS. 5560/- REFLECTS PURCHASE OF A SINGLE POLISH MACHINE. THUS THE LD. PR. CIT DOUBTED THE TURNOVER OF RS. 1,34,72 ,590/- CLAIMED BY THE ASSESSEE DURING THE YEAR AS FROM THE MANUFACTURING ACTIVITY OF THE SEZ UNIT HAVING ONLY ONE POLISH MACHINE. IN RESPONSE TO THE SHOW CAUSE NOTI CE, THE ASSESSEE FILED REPLY AND EXPLAINED THE FACTS THAT THE ENTIRE MANUFACTURING W ORK IS DONE BY THE ARTISANS/WORKERS WHO WERE USING THEIR OWN TOOLS AND THE ASSESSEE WAS NOT REQUIRED TO HAVE MORE MACHINERY FOR CARRYING OUT THE MANUFAC TURING WORK. THE ASSESSEE REFERRED TO THE RELEVANT DOCUMENTS AND EVIDENCES AS AVAILABLE ON THE ASSESSMENT RECORD INCLUDING COPY OF PURCHASE BILLS AND SALE VO UCHERS DULY APPROVED BY THE SEZ AUTHORITIES. THE ASSESSEE ALSO EXPLAINED THE NATUR E OF MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE. HOWEVER, THE LD. PR. CIT WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND NOTED THAT THE PURCHASE OF GOLD MADE B Y THE ASSESSEE ON 23 RD MAY, 2012 OF 509.890 GMS WHEREAS THE ASSESSEE MADE FIRST EXPORT OF MIXED GOLD AND SILVER JEWELLERY ON 31 ST MAY, 2012 HAVING GOLD NET WEIGHT AT 686.770 GMS. THE LD. PR. CIT HAS FURTHER NOTED THAT THE TOTAL GOLD PURCH ASED DURING THE YEAR WAS 809.89 GRAMS WHEREAS THE SALE OF JEWELLERY HAVING GOLD OF 1087.388 GMS. THUS ACCORDING TO THE LD. PR. CIT, THE SALES SHOWN FROM THE SEZ UN IT APPARENTLY EXCEEDS THE 14 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. AVAILABILITY OF GOLD AT SEZ UNIT. ALL THESE FACTS AS UNDERSTOOD BY THE LD. PR. CIT LED TO THE REVISION OF THE ASSESSMENT ORDER. WE FIND THAT AS PER THE DETAILS OF PURCHASE AND SALE BILLS, THE LD. PR. CIT HAS TAKEN THE GOLD WEIGHT OF JEWELLERY SOLD VIDE BILL DATED 31 ST MAY, 2012 AT 686.770 GMS. HOWEVER, THE PURE GOLD WEIGHT OF SAID JEWELLERY WAS 402.399 GMS AS AGAINST THE PURCHASES OF 509.89 GMS VIDE BILL DATED 23 RD MAY, 2012. THESE DETAILS ARE ALSO SHOWN IN THE SA LE INVOICES THAT THE GOLD CONTENT IS ONLY 402.399 GMS AS PER THE BILL DATED 3 1 ST MAY, 2012 AS AGAINST THE WEIGHT OF THE GOLD TAKEN BY THE LD. PR. CIT AT 686. 770 GMS. THUS THE DIFFERENCE IN THE WEIGHT TAKEN BY THE LD. PR. CIT IS DUE TO THE P URITY OF GOLD. IT IS APPARENT FROM THE SALE INVOICE ITSELF THAT THE WEIGHT OF THE PURE GOLD IN THE JEWELLERY WAS ONLY 402.399 GMS AS AGAINST THE WEIGHT OF 686.770 GMS. THE RELEVANT DETAILS OF THE DIFFERENCE OF THE GOLD AND THE PURE GOLD WEIGHT AS WELL AS OTHER METALS AND STONES IN THE JEWELLERY EXPORTED BY THE ASSESSEE DURING THE Y EAR ARE AS UNDER :- BILL NO. AND DATE GOLD NET WEIGHT GOLD 995 WEIGHT METAL WEIGHT WEIGHT TAKEN BY PR.CIT (THIS IS WEIGHT 3+4) (1) (2) (3) (4) (5) 01/2012 - 13 31.05.2012 686.770 402.399 284.371 696.770 EX03/12 - 13 18.01.2013 290.258 170.071 120.187 290.258 EX03/2012 - 13 11.02.2013 110.360 64.663 45.697 110.360 1087.388 637.133 450.255 1097.388 ALL THESE DETAILS ARE AVAILABLE IN THE RELEVANT BIL LS WHICH WERE ALSO CONSIDERED BY THE LD. PR. CIT WHILE PASSING THE IMPUGNED ORDER. HOWE VER, HE TOOK THE GOLD WEIGHT OF LESSER PURITY USED FOR MANUFACTURING OF JEWELLERY I NSTEAD OF PURE GOLD WEIGHT WHICH CAN BE COMPARED WITH THE PURCHASES MADE BY THE ASSE SSEE OF THE PURE GOLD. 15 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. THEREFORE, THE LD. PR. CIT HAS PRESUMED WRONG FACTS WHILE COMPARING THE PURCHASE OF GOLD AND SALE OF GOLD JEWELLERY. THE PURCHASES WERE MADE OF PURE GOLD AND, THEREFORE, QUANTITY OF PURE GOLD PURCHASED BY THE A SSESSEE WAS COMPARED WITH THE QUANTITY OF GOLD OF A LESSER PURITY USED FOR MANUFA CTURING OF JEWELLERY. THE LD. PR.CIT HAS COMPLETELY OVER-LOOKED AND IGNORED THE W EIGHT OF PURE GOLD GIVEN IN THE EXPORT BILLS. THUS PURE GOLD WEIGHT OF THE JEWELLE RY AS SHOWN IN THE EXPORT BILL WAS REQUIRED TO BE COMPARED AND IF THE SAME QUANTITY IS TAKEN INTO CONSIDERATION, WE FIND THAT THE PURE GOLD WEIGHT USED IN THE JEWELLER Y SOLD DURING THE YEAR IS LESSER THEN THE PURCHASES MADE BY THE ASSESSEE. HENCE THI S OBSERVATION OF THE LD. PR. CIT IS BASED ON INCORRECT FACTS AND MISUNDERSTANDING OF THE DETAILS PROVIDED IN THE SALE BILLS. 5.1. THE SECOND GROUND FOR INVOKING THE PROVISIONS OF SECTION 263 WAS DOUBTING THE SETTING UP OF SEZ UNIT BY SPLITTING UP OF THE E XISTING BUSINESS WHEREAS WE FIND THAT THE ASSESSEE HAS BROUGHT THIS FACT DURING THE ASSESSMENT PROCEEDINGS THAT THE EARLIER BUSINESS ACTIVITY FROM JANTA COLONY OFFICE WAS DISCONTINUED AND THE STOCKS REMAINED LYING AT JANTA COLONY OFFICE SINCE 2006. THE ASSESSEE HAS ALSO SHOWN THAT THE STOCKS LYING AT THE JANTA COLONY OFFICE WAS NOT DISTURBED EITHER BY THE AO OR BY THE LD. PR. CIT. THESE FACTS WERE AVAILABLE ON THE ASSESSMENT RECORD. WE FIND THAT ALL THE RELEVANT DETAILS AS WELL AS DOCUMENTS WERE AVAILABLE ON THE ASSESSMENT RECORD AND LD. PR. CIT HAS ALSO NOT POINTED OUT THA T ANY FURTHER RECORD WAS REQUIRED FOR EXAMINATION OF THE CLAIM OF DEDUCTION UNDER SEC TION 10AA OF THE ACT. RATHER, THE ASSESSMENT ORDER WAS SET ASIDE ON THE GROUND THAT T HE AO HAS PASSED THE ORDER WITHOUT CONDUCTING A PROPER ENQUIRY IN RESPECT OF T HE CLAIM MADE BY THE ASSESSEE WHICH MAKES THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE 16 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. LD. PR. CIT HAS NOT GIVEN A CONCLUDING FINDING THAT THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE BUT THE MATTER WAS SET ASIDE TO THE RECOR D OF THE AO FOR RE-DOING THE SAME. THUS ONCE THE ENTIRE RECORD RELEVANT TO THE CLAIM OF DEDUCTION UNDER SECTION 10AA WAS AVAILABLE ON THE ASSESSMENT RECORD AND THE AO HAS CONDUCTED AN ENQUIRY AS IT IS EVIDENT FROM THE ASSESSMENT RECORD AND EVE N THE ASSESSMENT ITSELF MANIFEST THE CONDUCTING OF ENQUIRY BY THE AO, IT IS NOT A CA SE OF LACK OF ENQUIRY ON THE PART OF THE AO THOUGH IT MAY BE A CASE OF INADEQUATE ENQUIR Y ON THE PART OF THE AO. ONCE THE CASE IN HAND DOES NOT FALL IN THE CATEGORY OF L ACK OF ENQUIRY, THE ORDER PASSED BY THE AO AFTER CONSIDERING THE RELEVANT RECORD AND MA KING AN ENQUIRY CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. PR. CIT CAN INVOKE THE PROVISIONS OF SECTION 263 ONLY WHEN IT I S FOUND THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE AS PER THE PROVISIONS OF THE ACT. THE LD. PR. CIT CANNOT INVOK E THE PROVISIONS OF SECTION 263 ONLY FOR THE PURPOSE OF SETTING ASIDE THE ORDER FOR MAKING A FRESH ENQUIRY ONCE THE AO HAS CONDUCTED AN ENQUIRY ON THE ISSUE. THERE IS A DISTINCTION BETWEEN THE CASE WHERE THE AO DOES NOT CONDUCT AN ENQUIRY AND THE CA SE WHERE THE AO CONDUCTS AN ENQUIRY BUT THE FINDING RECORDED IS ERRONEOUS AND W HICH IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE CASE FALLING IN FI RST CATEGORY WHERE THERE IS A LACK OF ENQUIRY ON THE PART OF THE AO, IT WOULD RENDER THE ORDER OF THE AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, BUT WHE RE THE AO CONDUCTS AN ENQUIRY AND THE LD. CIT WAS OF THE VIEW THAT THE ORDER OF THE A O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEN SUCH AN ORDER CAN BE REVISED ONLY WHEN THE LD. CIT FINDS THAT ON THE MERITS OF THE ISSUE THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL AND NOT BECAUSE OF LACK OF ENQUIRY. IN THE CASE IN HAND, UNDISPUTEDLY THE AO HAS 17 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. CONDUCTED THE ENQUIRY WHICH WAS FOUND BY THE LD. PR . CIT AS NOT A PROPER ENQUIRY AND, THEREFORE, IT MAY BE A CASE OF INADEQUATE ENQU IRY CONDUCTED BY THE AO. CONSEQUENTLY, THE LD. PR. CIT WHILE INVOKING THE PR OVISIONS OF SECTION 263, IS REQUIRED TO GIVE A FINDING THAT THE ORDER PASSED BY THE AO O N MERITS IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE AO HAS CONDUCTED AN ENQUIRY AND TOOK A VIEW WHICH IS A POSSIBLE VIEW UNDER THE LAW THEN EVEN IF THE VIEW TAKEN BY THE AO IS NOT ACCEPTABLE TO THE LD. PR. CIT, IT WOU LD NOT RENDER THE ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE SO AS TO EMPOWER THE COMMISSIONER TO INVOKE THE PROVISIONS OF SECTION 26 3 OF THE ACT. UNDISPUTEDLY, WHEN THE CASE IN HAND IS NOT IN THE CATEGORY OF LAC K OF ENQUIRY, THEN THE LD. PR. CIT CANNOT EXERCISE HIS JURISDICTION UNDER SECTION 263 FOR ASKING THE AO TO RE-DO THE ASSESSMENT. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD., 343 ITR 329 (DELHI) WHEREIN THE HONBLE HIGH COURT HAS HELD IN PARA 18 AS UNDER :- 18. IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MA LABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX, [2000] 243 ITR 83 / 109 TAXMAN 66 (SC), HAD OBSERVED THAT THE PHRASE 'PREJUDICIAL TO THE INTEREST OF REV ENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFF ICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, WHEN THE ASSESSING O FFICER HAD ADOPTED ONE OF THE COURSES PERMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO REVENUE; OR TWO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER H AS TAKEN ONE VIEW WITH WHICH THE CIT MAY NOT AGREE; THE SAID ORDERS CANNOT BE TREATE D AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE V IEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IN SUCH MATTERS, THE CIT MUST GIVE A FINDING THAT THE VIEW TAKEN 18 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AN D, THEREFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHOW THAT PREJUDICE IS CAUS ED TO THE INTEREST OF THE REVENUE. THUS ONCE ALL THE RELEVANT RECORD AND MATERIAL IN R ESPECT OF THE CLAIM OF DEDUCTION UNDER SECTION 10AA WAS AVAILABLE ON THE ASSESSMENT RECORD AND WERE EXAMINED BY THE AO WHILE ALLOWING THE CLAIM OF THE ASSESSEE, TH EN THE LD. PR. CIT CANNOT EXERCISE HIS JURISDICTION UNDER SECTION 263 ONLY FOR THE PUR POSE OF SETTING ASIDE THE ORDER AND DIRECTING THE AO TO RE-DO THE ASSESSMENT. HENCE, I N VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD. (SUPRA), WE FIND THAT THE IMPUGNED ORDER PASSED UNDER SECTION 263 IS NOT SUSTAINABLE IN LAW. HENCE WE SET ASIDE/QUASH THE IMPUGNED REVISION ORDER PASSED BY THE LD. PR. CIT U NDER SECTION 263. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20/07/2018 . SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20/07/2018. DAS/ 19 ITA NO. 420/JP/2018 M/S. MITTAL EXPORT HOUSE, JAIPUR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. MITTAL EXPORT HOUSE, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE PR. CIT, JAIPUR-II, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO.420/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR