ITO 24(2)(4), MUMBAI V. SHRI LAXMIKANT SHARMA, MUMBAI

ITA 440/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1818 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LAKSHMI HANDE PURI
• Assessee Lawyers: A K SHARMA
• Keywords: Additional evidence
• Section: 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.5617/M/2011 ASSESSMENT YEAR: 2005-06 ITA NO.4973/M/2010 ASSESSMENT YEAR: 2006-07 MR. LAXMIKANT SHARMA, SOLICITOR BUNGALOW, RANI SATI MARG, MALAD (E), MUMBAI - 97 PAN: ANRPS4379N VS. ITO WARD 24(2)-4, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI (APPELLANT) (RESPONDENT) CO NO.76/M/2011 (IN ITA NO.4973/M/2010) ASSESSMENT YEAR: 2006-07 ITO WARD 24(2)(4), 6 TH FLR, C-13 BLDG., R.NO.605, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 VS. MR. LAXMIKANT SHARMA, SOLICITOR BUNGALOW, QUARRY ROAD, RANI SATI MARG, OPP. GINNI APTT., MALAD (E), MUMBAI 400 097 PAN: ANRPS4379N (APPELLANT) (RESPONDENT) ITA NO.440/M/2011 ASSESSMENT YEAR: 2007-08 ITO WARD 24(2)( 4 ) , 6 TH FLR, C-13 BLDG., R.NO.605, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 VS. MR. LAXMIKANT SHARMA, SOLICITOR BUNGALOW, QUARRY ROAD, RANI SATI MARG, OPP. GINNI APTT., MALAD (E), MUMBAI 400 097 PAN: ANRPS4379N (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI A.K. SHARMA, A.R. REVENUE BY : MS. LAKSHMI HANDE PURI, D.R. ITA NO.5617/M/2011, ITA NO.4973/M/2010, CO NO.76/M/2011 & ITA NO.440/M/2010 MR. LAXMIKANT SHARMA 2 DATE OF HEARING : 14.07.2016 DATE OF PRONOUNCEMENT : 18.11.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE SHORT QUESTION INVOLVED IN THE PRESENT BUNCH O F APPEALS FOR DIFFERENT ASSESSMENT YEARS IS AS TO WHETHER THE ACTIVITY CARR IED OUT BY THE ASSESSEE OF PRODUCTION OF MANGANESE DIOXIDE FALLS IN THE DEFINI TION OF MANUFACTURING ACTIVITY OR NOT; SECONDLY, WHETHER THE ASSESSEE HAD STARTED MANUFACTURING ACTIVITY/PRODUCTION ON OR BEFORE 31.03.2004 TO CLAI M BENEFIT UNDER SECTION 80IB OF THE INCOME TAX ACT. 2. THE APPEAL FOR A.Y. 2005-06 HAS BEEN PREFERRED B Y THE ASSESSEE AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS THE CIT) PASSED UNDER SECTION 263 OF THE ACT VID E WHICH THE LD. CIT HAS SET ASIDE THE ASSESSMENT ORDER DATED 17.03.2010 OF THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVING THAT THE AO HAS NOT PROPERLY EXAMINED THE ABOVE ISSUES. HE OBSERVED THAT NEITHE R THE PRODUCTION STARTED BEFORE 31.03.2004 NOR THE ACTIVITIES CARRIED OUT BY THE ASSESSEE CAN BE SAID TO BE MANUFACTURING ACTIVITY FOR THE PURPOSE OF CLAIMI NG BENEFIT UNDER SECTION 80IB OF THE ACT. 3. THE APPEAL FOR A.Y. 2006-07 HAS ALSO BEEN PREFER RED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(APPEALS) DATED 18. 03.2010. THE LD. CIT(APPEALS) HAS FOLLOWED THE ORDER OF HIS PREDECES SOR FOR A.Y. 2005-06 WHILE DISMISSING THE APPEAL OF THE ASSESSEE. THE DEPARTMENT HAS ALSO FILED A CROSS OBJECTION IN RELATION TO THE ORDER OF THE LD. CIT(APPEALS) FOR A.Y. 2006- 07. HOWEVER, A PERUSAL OF THE GROUNDS OF CROSS OBJ ECTION REVEALS THAT THE DEPARTMENT HAS NOT RAISED ANY GROUND CHALLENGING AN Y PART OF THE ORDER OF THE LD. CIT(APPEALS). THE CROSS OBJECTION MERELY STATE S THAT THE ORDER OF THE AO AND LD. CIT(APPEALS) BE CONFIRMED. ITA NO.5617/M/2011, ITA NO.4973/M/2010, CO NO.76/M/2011 & ITA NO.440/M/2010 MR. LAXMIKANT SHARMA 3 4. FOR A.Y. 2007-08 THE CLAIM OF THE ASSESSEE HAS B EEN ALLOWED BY THE LD. CIT(APPEALS) IN VIEW OF THE ORDER OF THE AO FOR A.Y . 2005-06 DATED 17.03.10 WHEREIN THE AO, AFTER EXAMINING THE EVIDENCES FURNI SHED BY THE ASSESSEE, HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE MA NUFACTURING ACTIVITY HAS BEEN CARRIED OUT PRIOR TO 01.04.2004. 5. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT T HE ASSESSEE FOR THE FIRST TIME MADE THE CLAIM UNDER SECTION 80IB OF THE ACT FOR A. Y. 2005-06. THOUGH, THE CASE OF THE ASSESSEE HAS BEEN THAT THE MANUFACTURIN G ACTIVITY WAS CARRIED OUT DURING THE FINANCIAL YEAR 2003-04 RELEVANT TO A.Y. 2004-05 BUT NO CLAIM UNDER SECTION 80IB WAS MADE FOR A.Y. 2004-05. THE CLAIM UNDER SECTION 80IB FOR THE FIRST TIME HAS BEEN MADE FOR THE YEAR 2005-06. THE AO REJECTED THE CLAIM OF THE ASSESSEE OBSERVING THAT AS PER THE CERTIFICA TE (FORM 10CCB) WHICH IS CERTIFIED BY THE CHARTERED ACCOUNTANT OF THE ASSESS EE, THE ASSESSEE HAS COMMENCED OPERATION/ACTIVITY ON 01.04.2004 WHEREAS SECTION 80IB REQUIRED THE ASSESSEE TO START THE MANUFACTURING ACTIVITY DU RING THE PERIOD BEGINNING OF THE 1ST DAY OF APRIL 1993 AND ENDING OF 31 ST DAY OF MARCH, 2004. HE, THEREFORE, OBSERVED THAT SINCE THE MANUFACTURING AC TIVITY HAD NOT BEEN CARRIED OUT BETWEEN THE AFORESAID DATES, BUT ON THE NEXT DA Y AFTER THE END OF THE SAID PERIOD, HENCE, THE ASSESSEE FAILED TO FULFILL THE P RIMARY CONDITION FOR CLAIMING DEDUCTION UNDER SECTION 80IB OF THE ACT. 6. THE ASSESSEE UNSUCCESSFULLY CONTESTED THE APPEAL AGAINST THE ABOVE ORDER BEFORE THE LD. CIT(A). THE MATTER ULTIMATELY REACH ED UP TO THE LEVEL OF THE TRIBUNAL. BEFORE THE TRIBUNAL, THE ASSESSEE PLEADE D THAT HE COULD NOT ATTEND THE HEARING BEFORE THE LOWER AUTHORITIES BECAUSE HI S WIFE WAS SERIOUSLY ILL. THE ASSESSEE ALSO FILED RELEVANT COPIES OF MEDICAL REPO RTS. THE ASSESSEE FURTHER CLAIMED THAT THE MANUFACTURING ACTIVITY WAS CARRIED OUT PRIOR TO 01.04.2004 AND PRODUCED CERTAIN ADDITIONAL EVIDENCES IN THIS RESPE CT. THE TRIBUNAL AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES, VI DE ORDER DATED 21.10.09, ITA NO.5617/M/2011, ITA NO.4973/M/2010, CO NO.76/M/2011 & ITA NO.440/M/2010 MR. LAXMIKANT SHARMA 4 OBSERVED THAT THE EVIDENCES FILED BY THE ASSESSEE G O TO THE ROOT OF THE MATTER. THE TRIBUNAL, THEREFORE, ADMITTED THE ADDITIONAL EV IDENCES AND RESTORED THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE SAM E AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE BY THE TRIBUNAL. IN THE SET ASID E PROCEEDINGS, THE ASSESSEE PLEADED THAT THE DATE MENTIONED BY THE CHARTERED AC COUNTANT REGARDING THE COMMENCEMENT OF PRODUCTION WAS DUE TO SOME INADVERT ENT MISTAKE, HOWEVER, THE MANUFACTURING ACTIVITY HAS COMMENCED PRIOR TO 0 1.04.2004. THE ASSESSEE FILED DECLARATION OF THE AUDITOR STATING THAT THE D ATE OF COMMENCEMENT WAS PRIOR TO 01.04.04. THE ASSESSEE ALSO PRODUCED BILL S FOR PURCHASE OF MACHINERY, COPIES OF PURCHASE OF RAW MATERIAL AND SALE BILLS O F THE PRODUCT MANUFACTURED, COPY OF SALES TAX RETURNS ETC. THE AO AFTER VERIFIC ATION OF THE DETAILS AND CONSIDERING THE FACTS OF THE CASE ADMITTED THE CLAI M OF THE ASSESSEE. HOWEVER, THE LD. CIT SET ASIDE THE ORDER OF THE AO EXERCISING HIS REVISIONAL JURISDICTION UNDER SECTION 263 OF THE AC T OBSERVING THAT THE AO HAD NOT PROPERLY EXAMINED THE CASE. HE OBSERVED THAT T HE ACTIVITY CARRIED OUT BY THE ASSESSEE WAS NOT A MANUFACTURING ACTIVITY AND F URTHER THAT AS PER THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IN FORM NO. 10CCB, THE ACTIVITY OF THE ASSESSEE, IF ANY, STARED ON 01.04.04 AND NOT PRIOR TO 01.04.04. HE FURTHER OBSERVED THAT EVEN THERE WAS NO ELECTRICITY CONSUMP TION DURING THE PERIOD AND THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE MACH INERY WAS PUT TO USE AND MANUFACTURING ACTIVITY HAD STARTED PRIOR TO 01.04.0 4. BEING AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT, THE ASSESSEE HAS COME I N APPEAL BEFORE US FOR A.Y. 2005-06. 7. THE SAME ISSUE IS INVOLVED IN RELATION TO APPEAL S FOR A.Y. 2006-07 PREFERRED BY THE ASSESSEE AND FOR A.Y. 2007-08 PREF ERRED BY THE REVENUE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. SO FAR AS THE ISSUE AS TO WHETHER THE ACTI VITY CARRIED OUT BY THE ASSESSEE IS MANUFACTURING ACTIVITY OR NOT, THE LD. A.R. OF THE ASSESSEE BEFORE US ITA NO.5617/M/2011, ITA NO.4973/M/2010, CO NO.76/M/2011 & ITA NO.440/M/2010 MR. LAXMIKANT SHARMA 5 HAS SUBMITTED THAT THE ASSESSEE BUYS MANGANESE ORES . THEY ARE FIRST WASHED, SILICON AND OTHER METALS ARE REMOVED AND THEN IT IS CONVERTED INTO POWDER AND SOLD TO CHEMICAL INDUSTRIES. THE LD. A.R. HAS FURT HER INVITED OUR ATTENTION TO A NOTIFICATION NO.STA.-11.02/CR-99/TAXATION-1 DATED 9 TH MAY, 2002 ISSUED BY GOVERNMENT OF MAHARASHTRA IN RELATION TO INDUSTRIA L INPUTS AND PACKING MATERIALS WHEREIN THE GOVERNMENT HAS SPECIFIED CER TAIN ITEMS AS INDUSTRIAL INPUTS AND PACKING MATERIALS. HE HAS INVITED OUR A TTENTION TO ITEM NO.8 OF THE SCHEDULE WHEREIN THE MANGANESE ORES AND CONCENTRATE S HAS BEEN INCLUDED IN THE LIST. HE HAS FURTHER INVITED OUR ATTENTION TO ITEM NO.49 WHEREIN MANGANSESE OXIDES HAVE BEEN MENTIONED AS A DIFFER ENT ITEM AT SL. NO.49. THE LD. A.R. HAS STRESSED THAT THE MANGANESE ORES A RE DIFFERENT PRODUCTS THAN MANGANSESE OXIDES THAT IS WHY THE SAME HAVE BEEN DI FFERENTLY NAMED AND ENTERED AT DIFFERENT SERIAL NUMBERS. THE CASE OF T HE ASSESSEE IS THAT IT MANUFACTURERS MANGANSESE OXIDES FROM RAW MATERIAL W HICH IS CALLED MANGANESE ORES. THE LD. A.R. HAS FURTHER INVITED O UR ATTENTION TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LUCKY MINMAT PVT. LTD. VS. COMMISSIONER OF INCOME TAX 245 ITR 830 WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT THOUGH MINING OF LIMESTONE AND MARBLE BLOCKS AND GETTING AND SIZING THEM CANNOT BE SAID TO BE A MANUFACTURE OR PRODUCTION OF AN ARTICLE, HOWEVER, THE CONVERSION INTO LIME AND LIMESTONE OR CONCRETE BY STONE CRUSHERS COULD LEGITIMATELY CONSIDERED TO BE A MANUFACTURING PROCESS. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. THE ISSUE FOR CONSIDERATION BEFORE US IS A S TO WHETHER FROM THE ACTIVITY CARRIED OUT BY THE ASSESSEE A NEW PRODUCT COMES INT O EXISTENCE AND WHETHER THE NATURE AND CHARACTERISTICS OF THE OLD PRODUCT GETS CHANGED GIVING RISE TO A NEW PRODUCT WHICH IS DIFFERENT IN NATURE AND CHARACTERI STIC AND USAGE. FROM THE ACTIVITY CARRIED OUT BY THE ASSESSEE, IT REVEALS TH AT IT COVERTS THE RAW MANGANESE ORES INTO POWDER BY REMOVING THE SILICON THERE FROM AND HENCE AN ENTIRELY NEW PRODUCT COMES INTO EXISTENCE. THUS IN THE LIGHT OF THE DECISION OF THE HONBLE ITA NO.5617/M/2011, ITA NO.4973/M/2010, CO NO.76/M/2011 & ITA NO.440/M/2010 MR. LAXMIKANT SHARMA 6 SUPREME COURT IN THE CASE OF LUCKY MINMAT PVT. LTD . (SUPRA) AND ALSO IN THE LIGHT OF THE NOTIFICATION DATED 09.05.12, THE ACTIV ITY CARRIED OUT BY THE ASSESSEE CAN BE SAFELY SAID TO BE MANUFACTURING ACTIVITY. 10. SO FAR AS THE SECOND ISSUE WHETHER THE MANUFACT URING ACTIVITY COMMENCED PRIOR TO 01.04.04 OR NOT, THE ASSESSEE HA S EXPLAINED THAT THE DATE MENTIONED AS 01.04.2004 IN THE CERTIFICATE GIVEN BY THE CHARTERED ACCOUNTANT WAS DUE TO AN INADVERTENT MISTAKE, RATHER THE ACTIV ITY HAD STARTED PRIOR TO 01.04.2004. THE ASSESSEE, IN THIS RESPECT, HAS PRO DUCED THE RELEVANT EVIDENCES BEFORE THE AO AS DISCUSSED ABOVE WHICH HAVE BEEN DU LY EXAMINED BY THE AO AS PER THE DIRECTIONS OF THE TRIBUNAL. THE LD. A.R . IN THIS RESPECT HAS INVITED OUR ATTENTION TO THE REMAND REPORT OF THE AO DATED 23.09.10 RELEVANT TO A.Y. 2006-07, WHEREIN, BEFORE THE AO THE ASSESSEE SUBMIT TED THE SIGNED AUDIT REPORT IN FORM NO.10CCB WHICH SHOWED THE DATE OF COMMENCEM ENT AS 20 TH MARCH 2004. ASSESSEE ALSO PRODUCED BILLS FOR THE PURCHAS E OF MACHINERY, COPY OF PURCHASE OF RAW MATERIAL AND SALE BILLS OF THE PROD UCT MANUFACTURED SHOWING THAT THE PURCHASES AND SALES WERE DONE BEFORE 31.03 .2004. THE ASSESSEE ALSO PRODUCED BOOKS OF ACCOUNTS, WAGES AND SALARY REGIST ER IN ORIGINAL WHICH WERE VERIFIED. AFTER EXAMINING THE SAID EVIDENCES THE A O DID NOT FIND ANY FAULT WITH THE SAME. THE ASSESSEE HAS ALSO SUCCESSFULLY EXPLAINED THE NON CONSUMPTION OF ELECTRICITY BY SHOWING THE PURCHASE OF DIESEL GENERATOR SET AND HAS EXPLAINED THAT SINCE THERE WAS SOME DELAY IN TH E INSTALLATION OF ELECTRIC CONNECTION, HENCE, DIESEL GENERATOR SET WAS USED FO R GENERATION OF ELECTRICITY FOR THE PURPOSE OF RUNNING OF MACHINES. 11. WE FURTHER FIND THAT THE DEPARTMENT HAS NOT COM E WITH A SPECIFIC STAND THAT ON WHICH DATE THE ASSESSEE HAS ACTUALLY COMMEN CED THE PRODUCTION. THE DEPARTMENT HAS ONLY FOUND FAULT WITH THE DATE MENTI ONED IN THE CERTIFICATE (FORM 10CCB) REGARDING WHICH THE ASSESSEE HAS SUCCE SSFULLY EXPLAINED THAT IT WAS DUE TO AN INADVERTENT MISTAKE ON THE PART OF CH ARTERED ACCOUNTANT. THE ITA NO.5617/M/2011, ITA NO.4973/M/2010, CO NO.76/M/2011 & ITA NO.440/M/2010 MR. LAXMIKANT SHARMA 7 CORRECT AND RECTIFIED CERTIFICATE HAS BEEN PRODUCED . EVEN IT IS NOT THE CASE OF THE REVENUE THAT THE ACTIVITY HAS COMMENCED MONTHS LATER OR IN ANY SUBSEQUENT YEAR. THERE IS A DIFFERENCE OF ONLY ONE DAY. THE ASSESSEE FROM THE EVIDENCES ON THE FILE HAS SHOWED THAT SINCE THE DAT E OF LIMITATION FOR CLAIMING DEDUCTION WAS APPROACHING, THE ASSESSEE SOMEHOW, HA S BEEN ABLE TO COMMENCE ITS MANUFACTURING ACTIVITY PRIOR TO 01.04. 04 EVEN THOUGH UNDER SOME ODD CIRCUMSTANCES. THE ASSESSEE HAS PRODUCED THE RELEVANT EVIDENCES LIKE PURCHASE OF RAW MATERIAL, SALES, USE OF ELECTR ICITY THROUGH GENERATOR SET ETC. UNDER THESE CIRCUMSTANCES IT CAN BE SAFELY SAID THA T THE ASSESSEE HAS PROVED THAT THE MANUFACTURING ACTIVITY COMMENCED PRIOR TO 01.04.04. 12. IN VIEW OF OUR ABOVE OBSERVATIONS, THE APPEALS OF THE ASSESSEE FOR A.Y. 2005-06 AND 2006-07 ARE HEREBY ALLOWED WHEREAS THE CROSS OBJECTION OF THE REVENUE FOR A.Y. 2006-07 AND APPEAL OF THE REVENUE FOR A.Y. 2007-08 ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2016. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.11.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.