ITO, JODHPUR V. Smt. Manisha Jain, JODHPUR

ITA 44/JODH/2006

• Counselvise Citation: 4423314 RSA 2006
• Duration Of Justice: 8 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 25-01-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: N R MERTIA
• Keywords: Opportunity of being heard
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 01 /J U /20 06 (A.Y. 200 2 - 03 ) SMT. MANISH JAIN, PROP. M/S. NOBLE ART & CRAFT HOUSE , B - 14, OPP. K.N. HALL, RAI - KA - BAGH, JODHPUR . VS. ITO , WARD - 1(3), JODHPUR. PAN NO. ABFPJ 6900 Q (APPELLANT) (RESPONDENT) ITA NO. 44 /J U /20 06 (A.Y. 200 2 - 03 ) ITO , WARD - 1(3), JODHPUR. VS. SMT. MANISH JAIN, PROP. M/S. NOBLE ART & CRAFT HOUSE, B - 14, OPP. K.N. HALL, RAI - KA - BAGH, JODHPUR . (APPELLANT) PAN NO. ABFPJ 6900 Q (RESPONDENT) ASSESSEE BY : SHRI N .R. MERTIA . DEPARTMENT BY : SHRI O.P. MEENA - D.R. DATE OF HEARING : 16 / 0 7 /201 4 . DATE OF PRONOUNCEMENT : 27 /0 8 /201 4 . O R D E R 2 PER BENCH THESE CROSS APPEAL S BY THE ASSESSEE AND THE D EPARTMENT ARE DIRECTED AGAINST THE ORDER DATED 30 /11 /20 05 OF L D . CIT(A) - 1 , J ODHPUR . IN THE ASSESSEES APPEAL, T HE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. THE LD. CIT(A) HAS IN THE FACTS AND CIRCUMSTANCES OF THE CASE ERRED ON FACTS AND IN LAW AND WAS NOT JUSTIFIED IN SUSTAINING THE ASSESSED INCOME OF RS. 1,51,19,175/ - BY CONFIRMING THE ACTION OF THE LD. A.O. OF DENYING EXEMPTION CLAIMED U/S. 10B OF THE ACT BY THE APPELLANT AND SUSTAINING THE ADDITION OF RS. 1,18,500/ - U/S. 68. 2 .1 THAT IN THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW AND WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT HAS NOT FULFILLED THE THREE CONDITIONS LAID DOWN U/ S. 10B(2) OF THE I.T. ACT, 1961 AND THEREBY ERRED IN HOLDING THAT THE LD. A.O. HAD RIG HTLY DISALLOWED THE CLAIM OF APPELLANT U/S. 10B OF THE ACT . 2.2 THAT THE LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE SERIOUSLY ERRED IN LAW AND IN FACTS IN HOLDING THAT THE APPELLANT HAS NOT CARRIED OUT MANUFACTURING ACTIVITIES AND ON ITS GIVEN ADDRESS AT 171/5 , VILLAGE BHAKRASANI, PALI ROAD, JODHPUR AND WAS NOT E NTITLED FOR CLAIMED EXEMPTION U/S. 10B OF THE ACT. 2.3 THAT THE LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE SERIOUSLY ERRED IN LAW AND IN FACTS IN HOLDING AND CONFIRMING THE FINDING OF THE LD. A.O. THAT THE APPELLANT UNIT IS NOTHING MORE THAN A U NIT WHICH WAS FORMED AND COME INTO EXISTENCE ONLY BE SPLI TTING OF THE BUSINESS OF M/S. NO BAL ART EXPORTS, A SISTER CONCERN. 2.4 THAT THE LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE OUGHT TO HAVE ALLOWED THE CLAIMED EXEMPTION U/S. 10B OF THE ACT, TO THE APPELLANT FOR WHICH THE APPELLANT WAS FULLY ENTITLED AND HAS FULFILLED ALL THE CONDITIONS OF SECTION 10B OF THE I.T. ACT, 1961. 2.5 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE HON'BLE ITAT MAY VERY KINDLY REVERSE THE ACTION OF BOTH THE LOWER AUTHORITIES BY ACCEPTING THE ABOVE GR O UNDS AND SUBMISSIONS OF THE APPELLANT. 3.1 THAT THE LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE ERRED IN LAW AND IN FACTS IN UPHOLDING THE ADDITION OF RS. 1,18,500/ - ON ACCOUNT OF CASH CRE D ITS. 3 3.2 THAT THE LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE SERIOUSLY ERRED IN LAW AND IN FACTS IN HOLDING THAT THE APPELLANT HAS FAILED TO DISCHARGE THE BURDEN OF PROVING GENUINENESS OF THE CASH CREDITS AND THE LD. A.O. WAS JUSTIFIED IN MAKING ADDITION OF RS. 1,18,500/ - . 3.3 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE HON'BLE ITAT MAY VERY KINDLY DEL E TE THE IMPUGNED ADDITION OF RS. 1,18,500/ - . 4.1 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE HIMSELF FULLY ALLOWED THE ALTERNATIVE CLAIM OF DEDUCTION U/S. 80HHC OF THE ACT, FOR WHICH ALL THE MATERIALS WERE ALREADY AVAILABLE ON RECORD OF THE A.O. PARTICULARLY WHEN THE FACT OF ENTIRE SALES OF THE APPELLANT BEING EXPORT SALES OUT OF INDIA WHICH WAS NOT IN DISPUTE FROM EIT HER SIDE. HENCE THE LD. CIT(A) WAS NOT JUSTIFIED AND ERRED IN DIRECTING THE A.O. TO PROCEED IN ACCORDANCE WITH HIS DIRECTIONS IN THIS REGARD. 4.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE HON'BLE ITAT MAY VERY KINDLY ALLOW THE ALTERNATE CLAIM OF DEDUCTION U/S. 80 HHC IN CASE THE CLAIM OF EXEMPTION U/S. 10B OF THE ACT, FAILS. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DEL E TE THE GROUND ON OR BEFORE THE DATE OF HE A RING OF APPEAL. 6. THE APPELLANT PRAYS THAT HIS APPEAL MAY PLEASE BE ALLOWED. THE GROUNDS RAISED I N THE DEPARTMENT AL APPEAL READ AS UNDER: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - 1, JODHPUR HAS ERRED IN: - 1. A LLOWING DEDUCTION U/S. 80HHC IGNORING THE VITAL FACT THAT NO SUCH CLAIM WAS MADE BY THE ASSESSEE IN HER RETURN OF INCOME. 2. ALLOWING DEDUCTION U/S. 80HHC IGNORING THE FACT THAT ONCE THE ASSESSEE HAS EXERCISED IN OPTION TO CHOOSE EXEMPTION U/S. 10B, IT WAS NOT OPEN FOR HIM TO CLAIM DEDUCTION U/S. 80HHC AT SUBSEQUENT APPELLATE STATE. THAT TH E APPELLANT RESERVES ITS RIGHT TO ADD, AMEND OR ALTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF APPEAL, IS FINALLY HEARD FOR DISPOSAL. 4 2 FIRST WE WILL DEAL WITH THE ASSESSEES APPEAL IN I.T.A.NO. 01/JU/2006. THE MAIN GRIEVANCE OF THE ASSESSEE VIDE GROUND NOS. 1 TO 2.5 RELATE TO THE DENIAL OF EXEMPTION CLAIMED U/S. 10B OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT). 3. FACTS RELATING TO TH I S ISSUE, IN BRIEF, ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 31/10/2002 DECLARING AN INCOME OF RS. 69,505/ - , WHICH WAS PROCESSED U/S. 143(1 ) OF THE ACT ON 31/03/2003. LATER ON, CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED THE INCOME FROM EXPORT OF HANDICRAFT ITEMS AS EXEMPT ED U/S. 10B OF THE ACT AND THAT THIS WAS THE FIRST YEAR WHEN THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 10B OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE FIRM WAS CREATED ON PAPERS TO AVAIL 100% TAX EXEMPTION U/S. 10B OF THE ACT AND THAT IN ADDITION TO THIS BUSINESS, ANOTHER HANDICRAFT BUSINESS IN THE NAME OF M/S. NOBLE ART EXPORT IN WHICH HUSBAND OF THE ASSESSEE IS PARTNER WAS THERE AND THE ASSESSEE HAD ST A RTED HER OWN BUSINESS IN THE NAME OF M/S. NOBLE ART & CRAFT HOUSE AT B - 14, OPP. K.N. HALL, RAI - KA - BAGH , JODHPUR . THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE THAT MANUFACTURING OF HANDICRAFT ITEMS WAS 5 CARRIED AT 171/5, VILLAGE BHAKRSNI, PALI ROAD, JODHP UR. ACCORDING TO HIM, THE ASSESSEE FIRM WAS CREATED ON PAPER IN THE SAME BUSINESS PREMISES WITH SAME MANPOWER AND WITH SAME EXISTING MACHINERY TO CLAIM EX E MPTION U/S. 10B OF THE ACT AND THE ASSESSEE HAD NO MACHINERY OF ITS OWN FOR MANUFACTURING THE GOODS. THE ASSESSING OFFICER MENTIONED THAT THE ASSESSEE COULD NOT OFFER ANY EXPLANATION AS TO WHY ITS NET PROFIT RATE WAS AT 44% AS AGAINST 31% DECLARED BY THE SISTER CONCERN ALTHOUGH BUSINESS REMAINED IN THE SAME HOUSE MANAGED BY THE SAME PERSON UNDER THE SAME CIRCUMSTANCES AND PRODUCT MIX BEING THE SAME . HE THEREFORE, DID NOT ALLOW THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 10B OF THE ACT . 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DID NOT FIND MERIT IN THE SUB MISSIONS OF THE ASSESSEE WHICH ARE REPRODUCED IN PARA 3.1 AT PAGE NOS. 2 TO 19 OF THE IMPUGNED ORDER. THE LD. CIT(A) ALSO ASKED REMAND REPORT FROM THE ASSESSING OFFICER WHICH HAS BEEN REPRODUCED IN PARA 3.2 AT PAGE NOS. 1 9 TO 21 OF THE IMPUGNED ORDER, FOR THE COST OF REPETITION, SUBMISSIONS OF THE ASSESSEE AND THE CONTENTS OF THE REMAND REPORT ARE NOT REPRODUCED HEREIN . THE ASSESSEE FURTHER SUBMITTED TO THE LD. CIT(A) THAT THERE WAS NO IOTA OF EVIDENCE ON RECORD WHICH COULD ESTA BLISH THE SPLITTING UP OF THE BUSINESS OR RECONSTRUCTION OF 6 THE BUSINESS ALREADY IN EXISTENCE. IT WAS FURTHER STATED THAT BY ESTABLISHING THE BUSINESS BY THE ASSESSEE THERE WAS NO FALL IN THE BUSINESS OF OTHER CONCERNS O F THE GROUP NOR THERE WAS ANY S ORT OF DIVISION OF BUSINESS AND THAT MERELY THE NATURE OF BUSINESS ALMO S T IF REMAIN ING THE SAME, IT DID NOT TANTAMOUNT TO SPLITTING OR RECONSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE. IT WAS CONTENDED THAT EVEN IF IDENT ICAL BUSINESS HAD BEEN ESTABLISHED B Y ONE OF THE FAMILY MEMBER, THE SAME BY NO STRETCH OF IMAGINATION COULD BE HELD SPLITTING UP OR RECONSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE. IT WAS STATED THAT THE ASSESSEE PRODUCED THE MARKETABLE GOODS AND DIFFERENT SALEABLE PRODUCTS AS PER EXPOR T ORDER AND THAT THE RAW B OUGHT OUT ITEMS IN ANY MANNER WERE NOT SALEABLE. IT WAS ALSO STATED THAT THE ASSESSEE WAS ENGAGED IN THE PRODUCTION OF ARTICLES & THINGS AND S OLD THEM FOR EARNING FOREIGN CURRENCY SO AS TO GET EXEMPTION U/S. 10B OF THE ACT. 5. THE LD. CIT(A), HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE DID NOT FULFILL THE CONDITIONS LAID DOWN IN SUB - SECTION (2) OF SECTION 10B OF THE ACT AND WAS ENGAGED IN TRADING ACTIVITIES WHICH COULD NOT BE CALLED AS MANUFACTURING OR PRODUCING AC TIVITY. HE FURTHER OBSERVED THAT WHEN THE ASSESSEE HAD GOT NO MACHINERY OF HER OWN THEN HOW THE GOODS HAD BEEN MANUFACTURED AND 7 PRODUCED. ACCORDING TO HIM , THE GOODS EXPORTED BY THE ASSESSEE HAD BEEN MANUFACTURED AND PRODUCED IN THE PLANT & MACHINERY BELONGING TO OTHERS WHICH HAD ALREADY BEEN USED FOR SO MANY YEARS. HE THEREFORE, HELD THAT THE ASSESSING OFFICER RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE U/S. 10B OF THE ACT. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORD AS TO HOW THE PROPERIETORY CONCERN OF THE ASSESSEE FIRM WAS FORMED AFTER SPLITTING UP OF THE BUSINESS OF SISTER CONCERN. HE FURTHER SUBMITTED THAT THERE IS NO NEED T O OWN PLANT & MACHINERY FOR CLAIMING DEDUCTION U/S. 10B OF THE ACT BECAUSE MANUFACTURING CAN BE DONE WITH THE PLANT & MACHINERY TAK EN ON LEASE/RENT. HE ALSO SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. MAKERS MART REPORTED IN (2014) 29 ITR (TRIB.) 444 (JODHPUR) . 7 . IN HIS RIVAL SUBMISSIONS , LEARNED D.R. STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE PROPRIETORY CONCERN OF THE ASSESSEE WAS ONLY ON PAPER, IT WAS NOT HAVING ANY BUSINESS 8 ACTIVITY, THEREFORE, THE DEDUCTION CLAIMED U/S. 10B OF THE ACT WAS RIG HTLY DENIED BY THE ASSESSING OFFICER AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE P RESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER HAD NOT BROUGHT COGENT MATERIAL ON RECORD TO SUBSTANTIATE AS TO HO W AND IN WHAT MANNER THE BUSINESS OF THE ASSESSEES CONCERN WAS FORMED AFTER SPLITTING OF BUSINESS OF THE SISTER CONCERN. IT IS ALSO NOTICED THAT THE CASE RELIED BY THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT AVAILABLE TO THE ASSESSING OFFICER AT THE TIME OF FRAMING THE ASSESSMENT. WE THEREFORE, IN THE ABSENCE OF CL EAR FACTS ON RECORD AND TO MEET THE ENDS OF JUSTICE , DEEM IT APPROPRIATE TO REMAND THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE A ND SINCE THE OTHER ISSUES AGITATED BY THE ASSESSEE AND THE DEPARTMENT ARE HAVING THE DIRECT LINK WITH THE AFORESAID DISCUSSED ISSUE, SO, THOSE ARE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION . 9 9 . IN THE RESULT, APPEAL O F THE ASSESSEE AS WELL AS DEPARTMENT ARE ALLOWED FOR STATISTICAL PURPOSES. ( ORDER PRONOUNCED IN THE COURT ON 27 TH AUGUST , 201 4) . SD/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH AUGUST , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .