DCIT, Pondicherry V. M/s. Sri Ram Enterprises, Pondicherry

ITA 50/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64557 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 09-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOBADDL
• Assessee Lawyers: T VASUDEVAN
• Keywords: Tangible material; Difference of opinion; Change of opinion
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 50/MDS/2012 ASST. YEAR : 2004-05 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE I, CHENNAI (APPELLANT) V SRI RAM ENTERPRISES, GOLD STREET, 6 TH CROSS, KUYAVARPALAYAM, SATHYA NAGAR EXTENSION, PONDICHERRY, PIN 605 001. PAN :AASFS0031M (RESPONDENT ) C.O. NO.100/MDS/2012 IN (ITA NO. 50/MDS/2012) ASST. YEAR : 2004-05 SRI RAM ENTERPRISES, GOLD STREET, 6 TH CROSS, KUYAVARPALAYAM, SATHYA NAGAR EXTENSION, PONDICHERRY, PIN 605 001. PAN :AASFS0031M (CROSS OBJECTOR) V THE DY. COMMISSIONER OF INCOME TAX, CIRCLE I, CHENNAI. (RESPONDENT ) ASSESSEE BY : SHRI SHAJI P. JACOB, A DDL.CIT RESPONDENT BY : SHRI T. VASUDEVAN, ADVOCATE ITA 50 & CO 100/MDS/12 2 DATE OF HEARING : 22 NOV 2012 DATE OF PRONOUNCEMENT : 27 NOV 201 2 O R D E R PER BENCH : THIS APPEAL BY THE DEPARTMENT AND THE CROSS OBJEC TION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS)XII, CHENNAI DATED 17.10.201 1 IN ITA NO.84/2009-10 FOR THE ASST. YEAR 2004-05 THE ONLY ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT THE COMMIS SIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE UNDER SEC.80IB OF THE I.T. ACT ON THE GROUND THAT T HE ASSESSEE IS ENGAGED IN MANUFACTURE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED ITS RETURN OF INCOME ON 29.2.2003 ADMITTING NIL INCOME AFTER C LAIMING DEDUCTION UNDER SED.80IB OF THE ACT. THE RETURN WAS PROCESSE D UNDER SEC.143(3) OF THE ACT. LATER, NOTICE UNDER SEC.148 OF THE ACT WAS ISSUED AND ASSESSMENT UNDER SEC.143(3) READ WITH SE C.147 OF THE ACT ITA 50 & CO 100/MDS/12 3 WAS COMPLETED ON 14.12.2009 DETERMINING TAXABLE INC OME AT D.7,01,740/- BY DENYING DEDUCTION CLAIMED UNDER SEC .80IB OF THE ACT. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT IT IS DOING JOB WORK FOR GODREJ HI CARE LTD., AND, THEREFORE, E VEN THE JOB WORK DONE BY THE ASSESSEE TO THE THIRD PARTIES IS ELIGIB LE FOR DEDUCTION UNDER SEC.80 IB OF THE ACT. THE ASSESSING OFFICER DENIED DEDUCTION UNDER SEC.80IB FOR THE ASSESSEE STATING THAT THE AS SESSEE IS DOING ONLY THE BUSINESS OF JOB WORK OF METAL CUTTING AND PAPER CUTTING BUT NOT MANUFACTURE OF ANY ARTICLE OR THING. THEREFORE , THE ASSESSEE WAS NOT TREATED AS AN INDUSTRIAL UNDERTAKING AND THE J OB WORK OF METAL CUTTING AND PAPER CUTTING DID NOT AMOUNT TO MANUFAC TURE OR PRODUCTION ACTIVITIES. 3. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SEC.80IB ON THE JOB WO RK CARRIED ON BY IT FOR OTHERS FOLLOWING THE DECISION OF HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT V. TAJ FIRE WORKS INDUSTRIES (15 4 TAXMAN 380) WHEREIN IT WAS HELD THAT JOB WORK DONE FOR OTHERS I S ALSO ELIGIBLE FOR ITA 50 & CO 100/MDS/12 4 DEDUCTION. THE COMMISSIONER OF INCOME TAX (APPEALS ), ON THE JURISDICTION OF RE-OPENING OF ASSESSMENT HELD THAT RE-OPENING IS LEGALLY JUSTIFIED AS THE ASSESSMENT WAS NOT SUBJECT ED TO SCRUTINY UNDER SEC.143(3) EARLIER. THE REVENUE FILED APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SEC.80IB O F THE ACT. THE ASSESSEE FILED CO AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS) IN HOLDING THAT THE RE-OPENING OF ASS ESSMENT UNDER SEC.147 OF THE ACT IS VALID. 4. COMING TO THE MERITS IN REVENUES APPEAL, THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESS EE HAS NOT ESTABLISHED THAT IT IS ENGAGED IN MANUFACTURING ACT IVITIES. THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESS EE IS ONLY DOING JOB WORK, THAT TOO, ONLY METAL CUTTING AND PAPER CU TTING AND NOTHING ELSE. HE SUBMITTED THAT METAL CUTTING AND PAPER CU TTING CANNOT BE CALLED AS MANUFACTURING ACTIVITY AND THE ASSESSEE H AS NOT MANUFACTURED OR PRODUCED ANY ARTICLE OR THING SO AS TO BE ELIGIBLE FOR DEDUCTION UNDER SEC.80IB OF THE ACT. ITA 50 & CO 100/MDS/12 5 5. THE COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 2 OF COMMISSIONER OF INCOME TAX (APPEALS)S ORDER SUBMIT S THAT THE ASSESSEE IS DOING JOB WORK FOR GODREJ HI CARE LTD. THE ASSESSEE IS ENGAGED IN MANUFACTURE OF STANDS FOR MOSQUITO COILS AND PACKING CASES. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT TH E ASSESSEE UNDERTOOK METAL CUTTING AND PAPER CUTTING ONLY TO M ANUFACTURE STANDSS FOR MOSQUITO COILS AND PACKING CASES. THER EFORE, HE SUBMITS THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING ACTIV ITIES AND IS ELIGIBLE FOR DEDUCTION UNDER SEC.80IB OF THE ACT. THE COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF MIDA S POLYMER COMPOUNDS P. LTD. V. ACIT 331 ITR 68 (KER) AND IN THE CASE OF CIT V. SADHU FORGING LTD. (336 ITR 444) (DEL.) IN SUPPO RT OF HIS CONTENTIONS. 6. WE HAVE HEARD BOTH SIDES AND PERUSED THE ORDERS OF LOWER AUTHORITIES. THE ASSESSING OFFICER IN THE AS SESSMENT ORDER OBSERVED THAT THE ASSESSEE WAS DOING BUSINESS OF JO B WORK FOR GODREJ HI CARE LTD, PONDICHERRY AND METAL CUTTING A ND PAPER CUTTING. ITA 50 & CO 100/MDS/12 6 THE ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE FIRM IS DOING ONLY PART OF WORK LIKE METAL CUTTING AND PAPER CUTTING, THE ASSESSEE FIRM IS NOT TREATED AS AN INDUSTRIAL UNDERTAKING AS THE WOR K DONE BY THE ASSESSEE DOES NOT AMOUNT TO MANUFACTURING OR PRODUC TION ACTIVITIES. THEREFORE, HE DENIED DEDUCTION UNDER SEC.80IB OF TH E ACT. THE COMMISSIONER OF INCOME TAX (APPEALS), IN HIS ORDER, OBSERVED THAT THE ASSESSEE DURING THE FINANCIAL YEAR 2003-04 HAS DONE THE JOB WORK FOR M/S. GODREJ HI CARE LTD., WHEREIN THE ASSE SSEE UNDERTOOK METAL CUTTING AND PAPER CUTTING IN ORDER TO MANUFAC TURE THE STANDS FOR MOSQUITO COILS AND PACKING CASES. ON A CAREFU L READING OF THE ORDERS OF THE AUTHORITIES BELOW, WE SEE THAT THE LO WER AUTHORITIES FAILED TO RECORD A FINDING AS TO THE NATURE OF ACTI VITIES CARRIED ON BY THE ASSESSEE. THE ASSESSEE ALSO DID NOT ESTABLISH AS TO WHAT EXACTLY IT IS MANUFACTURING OR PRODUCING SO AS TO TREAT THE ASSESSEE AS AN INDUSTRIAL UNDERTAKING, FOR ALLOWANCE OF DEDUCTION UNDER SEC.80IB OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE UNDERTOOK METAL CUTTING AND PAPER CUTT ING IN ORDER TO MANUFACTURE THE STANDS FOR MOSQUITO COILS AND PACKI NG CASES. FROM THESE FINDINGS OF THE COMMISSIONER OF INCOME TAX (A PPEALS) IT IS NOT ITA 50 & CO 100/MDS/12 7 CLEAR THAT THE ASSESSEE IS MANUFACTURING STANDS FOR MOSQUITO COILS AND PACKING CASES BY ITSELF AND IN THE PROCESS UNDE RTOOK METAL CUTTING AND PAPER CUTTING OR THE ASSESSEE IS ONLY D OING JOB WORK OF METAL CUTTING AND PAPER CUTTING AND SUPPLYING THE S AME TO M/S. GODREJ HI CARE LTD., WHICH IN TURN M/S GODREJ HI CA RE LTD., USED THESE MATERIALS FOR MANUFACTURING STANDS FOR MOSQUI TO COILS AND PACKING CASES. THEREFORE, IN THE ABSENCE OF ANY CL EAR CUT FINDING BY THE LOWER AUTHORITIES, WE FEEL THAT THE ASSESSING O FFICER SHOULD EXAMINE THIS ISSUE AFRESH AND GIVE A FINDING AS TO THE NATURE OF ACTIVITY CARRIED ON BY THE ASSESSEE, IE., WHETHER T HE ASSESSEE IS ENGAGED IN MANUFACTURE OF STANDS FOR MOSQUITO COILS AND PACKING CASES BY ITSELF AND SUPPLYING THE SAME TO M/S.GODRE J HI CARE LTD., OR THE ASSESSEE IS ENGAGED ONLY IN METAL CUTTING AND P APER CUTTING AND SUPPLYING THE SAME TO M/S. GODREJ HI CARE LTD., WHI CH MATERIAL IS USED FOR MANUFACTURE OF MOSQUITO COILS. WE MAKE IT CLEAR THAT THERE IS NO QUARREL WITH THE PROPOSITION THAT THE ASSESSE E WHO HAS UNDERTAKEN THE JOB WORK OF MANUFACTURE OF ARTICLE O R THING AND SUPPLYING THE SAME TO THIRD PARTIES IS ALSO ENGAGED IN THE MANUFACTURING ACTIVITIES AND ITS INCOME FROM JOB WO RK IS ELIGIBLE FOR ITA 50 & CO 100/MDS/12 8 DEDUCTION UNDER SEC.80IB OF THE ACT. THEREFORE, UN LESS THE NATURE OF ACTIVITY IS KNOWN, THE RATIO OF THE DECISIONS ON TH E ISSUE RELIED ON BY THE ASSESSE/REVENUE CANNOT BE APPLIED. IN THE CIR CUMSTANCES, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OF FICER TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF OUR OBSERVATIONS, PROV IDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. WITH REGARD TO THE CROSS OBJECTION FILED BY THE ASSESSEE CONTENDING THAT RE-OPENING OF ASSESSMENT UNDER SEC. 147 OF THE I.T. ACT IS NOT VALID, THE COUNSEL FOR THE ASSESSEE SUB MITS THAT RE- OPENING OF ASSESSMENT IS BAD IN LAW AS THERE IS NO TANGIBLE MATERIAL THAT HAS COME ON RECORD FOR ISSUE OF NOTICE UNDER S EC.148 OF THE ACT. 8. THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TH IS ISSUE HAS BEEN CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PVT. LTD (291 ITR 500) (HON'BLE SUPREME COURT). HE ALSO RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KONE ELEV ATORS PVT. LTD. (340 ITR 454) AND CIT V. IDEAL GARDEN COMPLEX PVT. LTD. (340 ITR 609). ITA 50 & CO 100/MDS/12 9 9. HEARD BOTH SIDES AND GONE THROUGH THE CASE LA W RELIED ON BY THE PARTIES. IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS LT D. (SUPRA), THE ASSESSING OFFICER HAS RIGHTLY INITIATED RE-ASSESSME NT PROCEEDINGS UNDER SEC.148 OF THE ACT. FOLLOWING THE DECISION O F THE HON'BLE SUPREME COURT (SUPRA) THE HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF KONE ELEVATOR INDIA PVT. LTD. V. ITO (340 I TR 454) AND IN THE CASE OF CIT V. IDEAL GARDEN COMPLEX PVT. LTD. (340 ITR 609) (MAD.) HELD THAT RE-ASSESSMENT UNDER SEC.147 IS VALID WHE N INTIMATION UNDER SEC.143(1) OF THE ACT IS ISSUED. THE HON'BLE SUPREME COURT ALSO HELD THAT SINCE THERE IS NO ASSESSMENT UNDER S EC.143(1), THE QUESTION OF CHANGE OF OPINION DID NOT ARISE. THE H ON'BLE SUPREME COURT HELD THAT FAILURE TO TAKE STEPS UNDER SEC.143 (3) WOULD NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE RE-ASSESSMENT PROCEEDINGS UNDER SEC.147 OF THE ACT WHEN INTIMATIO N UNDER SEC.143(1) OF THE ACT WAS NOT ISSUED. IN VIEW OF T HE ABOVE, WE HOLD THAT THE RE-ASSESSMENT MADE UNDER SEC.143 READ WITH 147 IS VALID. THE CO FILED BY THE ASSESSEE IS REJECTED. ITA 50 & CO 100/MDS/12 10 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE AND THE CO FILED BY THE ASS ESSEE IS DISMISSED. 11. ORDER PRONOUNCED ON TUESDAY, THE 27TH D AY OF NOVEMBER 2012, AT CHENNAI. SD/- SD/- ( N.S. SAINI) ( CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED : 27 TH NOVEMBER 2012. JLS. COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT, CHENNAI (4) CIT(A), CHENNAI (5) D.R. (5) GUARD FILE