ITO, WD-8(3), KOLKATA, Kolkata V. M/s Rajrani Exports Pvt. Ltd., Kolkata

ITA 474/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1726 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 22-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K CHANDA
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, HONBLE AM & SRI S.S . VISWANETHRA RAVI, HONBLE JM] I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 INCOME TAX OFFICER, WARD 8(3), KOLKATA ...APPELLANT P-7 CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 5 TH FLOOR ROOM NO. 5/17 KOLKATA 700 069. M/S. RAJRANI EXPORTS PVT. LTD.. ...RESPONDENT 7A, PRETORIA STREET KOLKATA - 700071 [PAN : AABCR 8968 E] APPEARANCES BY: SHRI PAWAN KUMAR AGARWAL, AR, APPEARING ON BEHALF O F THE ASSESSEE. SHRI M. K. CHANDA, JCIT, SR. DR, APPEARING ON BEHAL F OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JULY 31, 20 17 DATE OF PRONOUNCING THE ORDER : AUGUST 09, 2 017 O R D E R PER SHRI J. SUDHAKAR REDDY :- THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, KOLKATA (HE REINAFTER THE LD. CIT(A)), PASSED U/S. 250 OF THE INCOME TAX ACT, 19 61 (THE ACT), DT. 05/02/2015, FOR THE ASSESSMENT YEAR 2002-03, ON THE FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT (A) -3, KOLKATA WAS JUSTIFIED IN ALLOWING EXEMPTION U/S 10B OF RS. 4,89,58,726/- SIMPLY RELYING ON THE ORDER OF SPECIA L BENCH ITAT, KOLKATA TRIBUNAL IN THE CASE OF MADHU JAYANTI INTER NATIONAL 2 I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 M/S. RAJRANI EXPORTS PVT. LTD LIMITED WHEREAS THE CASE OF THE ASSESSEE IS STILL P ENDING BEFORE DIVISION BENCH. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT (A) - 3, KOLKATA WAS JUSTIFIED IN ALLOWING EXEMPTION U/S 10B OF RS. 4,89,58,726/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSING OFFICER IN HIS ORDER FOR THE A. Y 2003-04 HAS ESTAB LISHED WITH A DETAILED REASONING THAT THE APPELLANT COMPANY WAS E NGAGED IN THE TRADING ACTIVITY OF PURCHASE AND SALE OF TEA. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT (A) - 3, KOLKATA WAS JUSTIFIED IN ALLOWING EXEMPTION U/S 10B OF RS. 4,89,58,726/- BY IGNORING JUDICIAL PRONOUNCEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF APPEJAY (P) LTD ( 206 ITR 367) WHEREIN IT IS HELD THAT BLENDING OF TEA WHICH MAY AMOUNT TO PR OCESSING BUT NOT MANUFACTURE OR PRODUCTS OF AN ARTICLE WITHIN TH E MEANING OF SECTION 32A OR SECTION 80J. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT (A) - 3, KOLKATA WAS JUSTIFIED IN ALLOWING EXEMPTION U/S 10B OF RS. 4,89,58,726/- WITHOUT CONSIDERING RATIO LAID DOWN B Y THE HON'BLE COURT OF BOMBAY IN THE CASE OF J.B ADVANI & CO (P) LTD VS CIT(193 ITR 781) AND HON'BLE HIGH COURT OF RAJASTHN ALSO IN THE CASE OF DD SHAH & BROS VS UNION OF INDIA & ANOTHER (283 ITR 48 6), WHEREIN IT IS HELD THAT MERE BLENDING OF TEAR OF THE PURPOSE O F EXPERT) DOES NOT CONSTITUTE MANUFACTURE. 5. THAT THE APPELLANT CRAVES TO LEAVE TO SUBMIT ADD ITIONAL GROUNDS OF APPEAL IF ANY, AT OR BEFORE THE TIME OF HEARING AND / OR ALTER, MODIFY, REFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3 I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 M/S. RAJRANI EXPORTS PVT. LTD 2. THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS GRA NTED RELIEF IN THIS CASE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02, WHEREIN THE LD. CIT(A) VID E HIS ORDER DT. 23/05/2015, FOLLOWED THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD VS. DCIT IN I.T.A. NO. 1463/KOL/2007 , FOR ASSESSMENT YEAR 2004-05 , AND GRANTED RELIEF. 2.1. HE SUBMITTED THAT THE FACTS OF THE CASE AS BRO UGHT OUT BY THE LD. ASSESSING OFFICER WAS NOT CONTROVERTED BY THE LD. C IT(A) AND UNDER THOSE CIRCUMSTANCES, IT WAS WRONG TO FOLLOW THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL AND GRANT RELIEF. IN SUPPORT OF THIS C ONTENTIONS HE DREW THE ATTENTION OF THE BENCH TO PAGE NO. 2 OF THE ASSESSM ENT ORDER, WHEREIN THE ASSESSING OFFICER HAS OBSERVED AS FOLLOWS:- THE ASSESSEE COMPANY HAS NOT SHOWN ANY PROCESSING CHARGES, BLENDING CHARGES, LABOUR COST, RESEARCH EXPENSES ET C. FROM THE TAX AUDIT REPORT OF QUANTITY WISE INFORMATION IT AL SO REVEALS THAT 100% YIELD WAS SHOWN, WHICH IS VERY UNUSUAL AS THERE WERE ALWAYS SOME LOSS IN YIELD IN ANY MANUFACTURING PROC ESS. ON THE BASIS OF FACTS RELATING TO ACCOUNTS, FIXED ASSETS, PURCHASE, SALE AND VARIOUS OTHER EXPENSES, IT IS CL EAR THAT NO EXPENSES WERE INCURRED IN CONNECTION WITH ALLEGED P ROCESSING OF TEA. IN FACT, THE RECORD SHOWS THAT THE ALLEGED 100 % EOU (HEREINAFTER REFERRED AS UNIT) IS ENGAGED IN THE TRADING ACTIVITY OF PURCHASE AND SALE OF TEA. FOR TEA MANUFACTURING COMPANY, THE 4 I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 M/S. RAJRANI EXPORTS PVT. LTD RULE-7 AND RULE-8 OF THE I.T. RULES, 1962 APPLIES W HICH DECIDES THE RATIO OF MANUFACTURING VIS--VIS AGRICULTURAL I NCOME OUT OF TEA MANUFACTURING. IN THE INSTANT CASE, THERE IS NO APPLICATION OF RULE7 OR RULE8 FOR THE SIMPLE REASON THAT THE ASSES SEE HAS BEEN PROCURING THE FINISHED PRODUCT (TEA) FROM THE MANUF ACTURER OR FROM THE OPEN MARKET. HENCE THE ASSESSEE IS NOT AT ALL WITHIN THE PURVIEW OF MANUFACTURER/PRODUCER OF TEA. 2.2. THIS FACTUAL FINDING OF THE ASSESSING OFFICER DEMONSTRATES THAT THERE WAS NO MANUFACTURING ACTIVITY DONE BY THE ASSESSEE DURING THE YEAR. HE SUBMITTED THAT UNDER THOSE FACTS AND CIRCUMSTANCES, THE ORDER OF THE LD. CIT(A) HAS TO BE REVERSED. 3. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THE ORDER OF THE SMC BENCH OF THE TRIBUNAL IN ITA NO. 376/KOL/2015, ASSESSMENT YEAR 2001-02, ORDER DT. 19.08.2016 AND ALSO BY THE DECIS ION OF THE KOLKATA A BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 2039/KOL/2006 FOR ASSESSMENT YEAR 2003-04. HE RELIED HEAVILY ON T HE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. (SUPRA) . ON A QUERY FROM THE BENCH ON THE FACTUAL FINDINGS OF THE ASSESSING OFFICER, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT POINT OUT AS TO WHETHER THE LD. CIT(A) HAS DEALT WITH THESE ISSUES. NEVERTH ELESS, HE ARGUED THAT THE 5 I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 M/S. RAJRANI EXPORTS PVT. LTD ASSESSEE HAD APPOINTED A CONTRACTOR AND THESE EXPEN SES WERE INCURRED THROUGH THE CONTRACTOR. HE SUBMITTED THAT, GIVEN A CHANCE, THE ASSESSEE WOULD PRODUCE ALL THE REQUIRED MATERIAL. WHEN POINT ED OUT THAT ANY FRESH EVIDENCE PRODUCED BEFORE THE TRIBUNAL WOULD BE ADDI TION EVIDENCE, THE LD. COUNSEL, REQUESTED THAT THE ISSUE BE REMANDED TO TH E FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION ON THESE FACTUAL MAT TERS. HE SUBMITTED THAT THE LD. CIT(A) HAD NOT SOUGHT FOR ANY DETAILS ON TH ESE FACTUAL ASPECT AND HENCE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUS E FROM PRODUCING THE SAME BEFORE THE LD. CIT(A). 4. THE LD. SR. DR., ON THE OTHER HAND SUBMITTED THAT THOUGHT THE DECISION OF THE SPECIAL BENCH IS IN FAVOUR OF THE ASSESSEE, T HE REVENUE HAS NOT ACCEPTED THE SAME AND CARRIED THE MATTER BEFORE THE HONBLE HIGH COURT. HE REITERATED THE CONTENTIONS THAT ON FACTS THERE I S NO MANUFACTURING EXPENSES RECORDED AND HENCE THERE IS NOT MANUFACTUR E. 5. RIVAL CONTENTIONS HEARD. ON CAREFUL CONSIDERATIO N OF THE ARGUMENTS, PERUSAL OF THE PAPERS ON RECORD, DECISIONS OF THE L OWER AUTHORITIES AND CASE LAWS CITED, WE HOLD AS FOLLOWS:- 5.1. THE ASSESSING OFFICER HAS GIVEN A FACTUAL FIND ING THAT THE ASSESSEE HAS NOT SHOWN ANY PROCESSING CHARGES, BLENDING CHARGES, LABOUR COST, RESEARCH EXPENSES ETC. IN ITS PROFIT & LOSS ACCOUNT. THE ADJ UDICATION OF THE ASSESSING 6 I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 M/S. RAJRANI EXPORTS PVT. LTD OFFICER IS THAT, NO EXPENSES WERE INCURRED IN CONNE CTION WITH THE ALLEGED PROCESSING OF TEA AND HENCE NO MANUFACTURING ACTIVI TY HAD BEEN CARRIED OUT BY THE ASSESSEE. THE ASSESSEE SUBMITS THAT THE LD. CIT(A) NOR THE ASSESSING OFFICER ASKED FOR THESE EVIDENCES AND HENCE THE SAM E COULD NOT BE PRODUCED. IT WAS SUBMITTED THAT SUCH EXPENDITURE WA S INCURRED BY THE ASSESSEE AND EVIDENCE FOR THE SAME CAN BE PRODUCED. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THIS CLAIM OF THE ASSESSEE. AS FAR AS THE LEGAL ISSUE IS CONCERNED, T HE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE PROPOSITION OF LAW LAID DOWN BY THIS TRIBUNAL FOR THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 & ASSESSMENT YEAR 2003-04. HENCE WE SET ASIDE THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. KOLKATA, THE 9 TH DAY OF AUGUST, 2017. SD/- SD/- [S.S. VISWANETHRA RAVI] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOU NTANT MEMBER DATED :09.08.2017 {SC SPS} 7 I.T.A. NO. 474/KOL/2015 ASSESSMENT YEAR: 2002-03 M/S. RAJRANI EXPORTS PVT. LTD COPY OF THE ORDER FORWARDED TO: 1. INCOME TAX OFFICER, WARD 8(3), KOLKATA P-7 CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 5 TH FLOOR ROOM NO. 5/17 KOLKATA 700 069.. 2. M/S. RAJRANI EXPORTS PVT. LTD 7A, PRETORIA STREET KOLKATA - 700071 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES