ITO 18(1)(3), MUMBAI V. Sri. SHRINIWAS G. MITTAPALLI, MUMBAI

ITA 5031/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9151 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 08-08-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: PARESH SHAH
• Keywords: Wrong claim; Tax effect; Onus to prove; Revised return
• Section: 143(3); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . , / BEFORE SHRI D. MANMOHAN, VICE PRESIDENT /AND !'# , ! . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 5031/MUM/2008 $ $ $ $ / ASSESSMENT YEAR 2005-06 THE INCOME TAX OFFICER 18(1)(3), R.NO. 106, PIRAMAL CHAMBER, PAREL, MUMBAI-12. VS. SHRI SHRINIWAS G. MITTAPALLI, R.NO. 69, WORLI B.D.D. CHAWL NO. 85, ACHARAY DHONDI BABA NARAYAN MARG, WORLI, MUMBAI-400 018. PAN: AIWPM 7694 J ( %& / APPELLANT ) ( '(%& / RESPONDENT ) REVENUE BY : SHRI GIRIJA DAYAL ASSESSEE BY : SHRI PARESH SHAH ) *+ / DATE OF HEARING : 26-11-2012 ,$ ) *+ / DATE OF PRONOUNCEMENT : 07-12-2012 -!. / O R D E R PER RAJENDRA, A.M. ASSESSING OFFICER (AO) HAD FILED THIS APPEAL AGAINS T THE ORDER DT. 13-05-2008 OF THE CIT(A)-XVIII, MUMBAI RAISING FOLLOWING GROU NDS OF APPEAL: I) THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW THE DEDUCTION U/S. 80IB CLAIMED AT RS. 19.49/- CRORES WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE S CLAIM OF DEDUCTION U/S. 801B IS NOT LEGALLY CORRECT DUE TO NO MANUFACTURING ACTIVITY BY EMPLOYING MORE THAN 10/20 WORKERS. III) FOR THESE AND OTHER REASONS IT IS SUBMITTED TH AT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. RESTORED. ITA NO. 5031/MUM/2008 SHRI SHRINIWAS G. MITTAPALLI 2 2) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THE ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINES S OF ASSEMBLING OF WRIST WATCHES IN AN INDUSTRIAL UNIT AT MAPUSA, GOA, FILED HIS ORIGINAL RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 12.61 CRORES ON 31-10 -2005. LATER ON HE FILED A REVISED RETURN ON 05-02-2007 DECLARING TOTAL INCOME OF RS. 19.46 CRORES. AO FINALISED THE ASSESSMENT ON 31-12-2007, U/S. 143(3) OF THE INCOME TAX ACT, 1961(ACT) DETERMINING TOTAL INCOME AT RS. 19.46 CRORES. 2.1. ASSESSEE HAD CLAIMED 100% DEDUCTION U/S. 80IB OF TH E ACT FOR THE FIRST TIME IN THE AY 2004-05. TAKING INTO CONSIDERATION VARIOUS FACTS, AO DENIED HIM THE SAID BENEFIT IN THAT YEAR. WHILE PASSING ORDER FOR THE CURRENT AY, AO RE-PRODUCED THE VARIOUS REASONS FOR NEGATING THE CLAIM MADE BY THE AO U/S. 80IB. HE HELD THAT THERE WAS NO CHANGE IN THE FACTS OF THE CASE VIS--VIS OF EARLIER AY, THAT THE ASSESSEE WAS INFORMED ABOUT INTENTION OF THE AO TO REJECT THE CL AIM MADE U/S. 80IB OF THE ACT, THAT ASSESSEE WAS ALSO INFORMED ABOUT TREATING THE INCOM E FOR THE CURRENT YEAR AS INCOME FROM OTHER SOURCES. FOLLOWING THE ORDER FOR THE LA ST AY, HE HELD THAT ENTIRE INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHE R SOURCES. HE ALSO HELD THAT ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S. 80IB O F THE ACT. 2.2. WITH REFERENCE TO JOB CHARGES CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE, HE FOUND THAT ASSESSEE HAD CREDITED RS. 30.90 LAKHS TO THE P&L A/C UNDER THE HEAD PROCESSING CHARGES. THE SAID SUM WAS CLAIMED TO H AVE BEEN RECEIVED AS ASSEMBLING CHARGES. AO HELD THAT ACTIVITIES STATED TO BE CARRI ED ON BY THE ASSESSEE DID NOT AMOUNT TO MANUFACTURING, THAT DETAILS FILED BY THE ASSESSE E FROM VARIOUS GOVERNMENT AGENCIES WAS OF LITTLE USE TO ALLOW THE CLAIM MADE BY THE AS SESSEE, THAT NONE OF THE AUTHORITIES HAD CERTIFIED THE ACTIVITIES CARRIED OUT BY THE ASS ESSEE, THAT THE CERTIFICATE ISSUED BY THE CENTRAL EXCISE OFFICIALS WAS ISSUED PRIOR TO THE CO MMENCEMENT OF THE ACTIVITY, THAT THE EXCISE DEPARTMENT HAD NEITHER CERTIFIED THE COR RECTNESS OF THE STATEMENT NOR DID IT CERTIFY THAT STATEMENTS FILED BY THE ASSESSEE WERE VERIFIED BY IT, THEM THAT SUBMISSION MADE BY THE ASSESSEE ABOUT REGISTRATION WITH VARIOU S AUTHORITIES WAS SELF-SERVING STATEMENT. AO FURTHER HELD THAT THE ASSESSEE HAD N OT SUBSTANTIATED THE FACT THAT BUSINESS WAS NOT FORMED BY TRANSFER OF PLANT & MACH INERY, THAT AN OPPORTUNITY FOR THE SAME WAS GIVEN TO HIM, THAT ASSESSEE HAD LEFT FIXED ASSETS WORTH RS. 16 LAKHS IN CONTROL OF SOMEBODY-ELSE, THAT HIS ACTION CLEARLY P ROVED THAT PLANT & MACHINERY NEVER BELONGED TO HIM, THAT THE ASSETS-IN-QUESTION WERE N OT OWNED BY THE ASSESSEE, THAT CONDITION (II) SPECIFIED IN SECTION 80IB OF THE ACT WAS NOT FULFILLED AS FAR AS NUMBER WORKERS EMPLOYED BY THE ASSESSEE WAS CONCERNED. AO HAD DEPUTED TWO INSPECTORS TO GOA TO FIND OUT THE CORRECTNESS OF THE ADDRESSES OF THE WORKERS GIVEN BY THE ASSESSEE. AS PER AO ADDRESSES WERE IN-COMPLETE. HE EXAMINED THE ASSESSEE IN THIS REGARD ON 28-12-2007. FINALLY, HE REJECTED THE CLAIM MADE BY THE ASSESSEE U/S. 80IB OF THE ACT. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT ISSUES RAISED BY THE AO DID NOT ANYWAY NEGATE THE FACT THAT THE BUSINESS HAD BEEN DONE IN THE NAME AND IN THE OWNERSHIP OF THE APPELLANT, THAT THE APPELLANT HAD LEGALLY OWNED ALL THE BUSINESS, THAT HE WAS RESPONSIBLE FOR ALL THE ASSETS AND LIAB ILITIES/ACTS OF THE ENTERPRISE, THAT THE ASSESSMENT HAD BEEN FRAMED ON POSSIBILITIES AND SUR MISES, THAT CONCLUSION OF AO WAS NOT BASED ON THE FACTS BUT UPON A POSSIBILITY, THAT IT TANTAMOUNT TO THE CLEAR ADMISSION ITA NO. 5031/MUM/2008 SHRI SHRINIWAS G. MITTAPALLI 3 THAT TRUTH IN THIS REGARD HAD NOT BEEN FOUND OUT, T HAT CONCLUSIONS DRAWN BY THE AO WERE BASED UPON THE POSSIBILITIES ONLY, THAT IF THE BUSINESS WAS CARRIED OUT BY SOMEBODY-ELSE DEDUCTION U/S. 80IB OF THE ACT WOULD HAVE BEEN AVAILABLE TO HIM, THAT ASSESSEE HAD NOT RESTORED TO COLOURABLE DEVICES FOR DUBIOUS TAX PLANNING, THAT LIABILITY OF TAXATION IN TWO SITUATIONS WOULD HAVE BEEN ALMOS T IDENTICAL. HE FURTHER HELD THAT IN LIGHT OF THE ORDER FOR THE AY 2004-05, THE ISSUE OF ALLOWABILITY U/S. 80IB IN RESPECT OF THE JOB WORK CHARGES HAD TO BE REJECTED, THAT OUT O F THE TOTAL CLAIM OF RS. 19.46 CRORES, ASSESSEE WAS ENTITLED TO GET DEDUCTION OF RS. 19.15 CRORES (19,46,52,780/- 30,90,000/- = 19,15,62,780/-). 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT IT WAS A CASE OF BOGUS CLAIM MADE BY THE ASSESSEE U/S. 80IB OF THE A CT ON BEHEST ON ONE MR. JAIN, THAT ASSESSEE WAS PERSON OF NO MEANS, THAT ASSESSEE HAD NOT FULFILLED THE CONDITIONS STIPULATED BY SECTION 80IB OF THE ACT-ESPECIALLY WI TH REGARD TO NUMBER OF WORKERS. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ASSES SEE WAS ENTITLED TO DEDUCTION OF SECTION 80IB OF THE ACT, THAT DETAILS OF WORKERS WE RE FILED BEFORE THE AO, THAT WORKERS WERE PAID REGULAR WAGES, THAT LABOUR LAWS WERE FOLL OWED, THAT FAILURE OF INSPECTOR DEPUTED BY THE AO DID NOT PROVE THAT REQUIRED NUMBE R OF EMPLOYEES WERE NOT WORKING. 4.1. IN REPLY TO QUERY RAISED BY THE BENCH WITH REGARD T O APPEAL FILED BY THE REVENUE BEFORE THE TRIBUNAL FOR THE EARLIER ASSESSM ENT YEAR IT WAS INFORMED BY THE AR AND THE DR THAT SAID APPEAL WAS NOT DECIDED ON M ERITS AND WAS DISMISSED AS THE TAX EFFECT WAS LESS THAN RS. 2 LAKHS. THUS, IT IS CLEAR THAT CLAIMS AND COUNTER CLAIMS MADE BY THE ASSESSEE AND THE AO HAVE NOT BEEN ADJUD ICATED UPON BY THE TRIBUNAL. 4.2. AFTER GOING THROUGH THE ORDER OF THE FAA WE FIND TH AT HE HAS FAILED TO PERFORM THE DUTIES ASSIGNED TO HIM BY THE ACT. NO AUTHORIT Y IS REQUIRED TO STATE THAT HIS POWERS ARE CO-TERMINUS WITH THOSE OF THE AO.AS PER THE PRO VISIONS OF THE ACT HE HIMSELF CAN MAKE INQUIRY OR GET THE INQUIRIES MADE BY THE AO BE FORE PASSING ORDER. HE HAS HELD THAT TRUTH BEHIND THE SCENE WAS NOT BROUGHT ON RECO RD. IF HE WAS OF THE OPINION THAT SOMETHING MORE WAS REQUIRED TO FIX THE DUE TAX LIAB ILITY OF THE ASSESSEE, HE SHOULD HAVE USED HIS POWERS ASSIGNED TO HIM UNDER SECTIONS 250 AND 251 OF THE ACT. 4.3. WE ARE OF THE OPINION THAT FURTHER INVESTIGATION IS REQUIRED TO DECIDE THE ISSUE AS WHETHER THE ASSESSEE WAS ELIGIBLE FOR CLAIMING D EDUCTION U/S.80IB OF THE ACT WITH REGARD TO NUMBER OF WORKERS EMPLOYED BY HIM. AS PE R THE SETTLED PRINCIPLES OF TAX JURISPRUDENCE BURDEN OF PROOF HAS TO DISCHARGED BY THE ASSESSEE, WHENEVER A CLAIM FOR EXEMPTION / DEDUCTION/REBATE IS MADE. IN THE CASE UNDER CONSIDERATION AO HAD MADE INQUIRIES AT GOA AND HE HAS HELD THAT CONDITIONS ST IPULATED BY SECTION 80IB(II) WERE NOT FULFILLED. AFTER HEARING WAS OVER BOTH THE PAR TIES WERE INFORMED THAT IF THEY WISHED THEY COULD FILE WRITTEN SUBMISSIONS, IF ANY, IN SUPPORT OF THEIR ARGUMENTS. DR HAS NOT FILED ANY PAPERS, WHEREAS AR HAS FILED A PA PER BOOK CONTAINING 234 PAGES. IT IS NOT KNOWN WHETHER THE DOCUMENTS PRODUCED BEFORE US WERE SUBMITTED BEFORE THE REVENUE AUTHORITIES OR NOT. AO HAS GIVEN A CATEGOR ICAL FINDING THAT ADDRESSES OF THE WORKERS WERE INCOMPLETE, THAT INSPECTOR DEPUTED BY HIM WAS NOT ABLE TO LOCATE THEM. IN THE PAPER BOOK FILED BY THE AR PAGES 210-219 DEA L WITH THE ISSUE OF NUMBER OF WORKERS, THEIR WAGES AND RELATED MATTERS. SO, IN T HE INTEREST OF JUSTICE WE RESTORE BACK THE MATTER TO THE FILE OF THE AO. HE IS DIRECTED T O AFFORD REASONABLE OPPORTUNITY OF ITA NO. 5031/MUM/2008 SHRI SHRINIWAS G. MITTAPALLI 4 HEARING TO THE ASSESSEE BEFORE PASSING FRESH ORDER. ASSESSEE IS DIRECTED TO CO-OPERATE WITH THE AO. APPEAL FILED BY THE AO STANDS DISPOSED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER, 2012 -!. ) ,$ + ! ' 0 1-2 7 TH DECEMBER, 2012 ) 3 4 SD/- SD/- ( . / D. MANMOHAN) ( !'# / RAJENDRA) / VICE PRESIDENT !+ -5 / ACCOUNTANT MEMBER MUMBAI, 1- DATE: 7 TH DECEMBER, 2012 TNMM -!. -!. -!. -!. ) )) ) '*6 '*6 '*6 '*6 7!6$* 7!6$* 7!6$* 7!6$* / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE (6* '* //TRUE COPY// -!. -!. -!. -!. / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI