ITO 16(1)(2), MUMBAI V. JITENDRA H SHAH, MUMBAI

ITA 5172/MUM/2009

• Counselvise Citation: 517219914 RSA 2009
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 08-09-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 10-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABANI KANTA NAYAK
• Assessee Lawyers: PRAKASH JOTWANI
• Keywords: Reassessment proceedings
• Section: 131; 144; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) THE INCOME TAX OFFICER 16(1)(2), MATRU MANDIR, MUMBAI-400007 MR. JAYENDRA H.SHAH, 232, PANCHRATNA, OPERA HOUSE, MUMBAI-400004 PAN:AROPS0138C APPELLANT V/S RESPONDENT DATE OF HEARING : 29.8.2011 DATE OF PRONOUNCEMENT : APPELLANT BY : SHRI ABANIKANTA NAYAK RESPONDENT BY : SHRI PRAKASH JOTWA NI O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29.6.2009 PASSED BY THE LD . CIT(A) FOR THE ASSESSMENT YEAR 1998-99. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL AND CARRIES ON BUSINESS AS PROPRIETO R IN THE NAME AND STYLE OF M/S JEWELL DIAMOND EXPORT WITH ITS HEAD OFFICE AT OPERA HOUSE, MUMBAI AND BRANCH OFFICES A T DAMAN AND IN SURAT. THE BUSINESS OF THE ASSESSEE CONSISTED OF PURCHASE AND SALE OF DIAMONDS AND CUTT ING AND POLISHING OF DIAMONDS. HE ALSO CLAIMED THAT HE WAS A MANUFACTURER OF DIAMOND STUDDED SILVER JEWELLERY. T HE ASSESSEE HAS DECLARED AN INCOME OF RS.39,646. HO WEVER, ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 2 THE ORIGINAL ASSESSMENT WAS COMPLETED BY THE AO U/ S 144 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 29. 3.2001. IN COMPLETING THE ASSESSMENT, THE AO REJECTED THE BOO KS OF ACCOUNTS OF THE ASSESSEE AND ALSO DENIED THE DEDUCT ION CLAIMED U/S 80IA OF RS.48,68,732/- FROM THE UNIT I N THE UNION TERRITORY AT DAMAN. THE PROFIT OF RS.39,646/- REP RESENTED THE PROFIT EARNED AT SURAT OFFICE WHICH HAS BEEN OFFERED FOR TAXATION. THE BOOKS OF ACCOUNTS WERE REJECTED BECA USE THE AO FOUND VARIOUS DISCREPANCIES IN THE BOOKS OF ACCO UNTS MAINTAINED BY THE ASSESSEE. AS REGARD THE DENIAL OF THE CLAIM U/S 80IA IS CONCERNED, THE AO CAME TO THE CON CLUSION THAT THERE WAS NO MANUFACTURING ACTIVITY IN THE UNI T AT DAMAN. THE AO ESTIMATED THE INCOME OF THE ASSESSEE AT RS.90,00,000/- WITHOUT ALLOWING THE DEDUCTION U/S 8 0IA. THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A), MUMBAI , WHO VIDE HIS ORDER DATED 22.11.2002 REDUCED THE INCOME SUBSTANTIALLY TO RS.7,00,000/-. WITH REGARD TO THE CLAIM U/S 80IA, THE CIT(A) HELD THAT THE ASSESSEE WAS NOT ENTITLED TO ANY DEDUCTION AS MAKING POLISHED DIAMONDS OUT OF ROUGH DIAMONDS CANNOT BE CONSIDERED A S MANUFACTURING AS ENVISAGED U/S 80IA OF THE A CT. ON SECOND APPEAL BEFORE THE ITAT BY THE ASSESSEE AND REVENUE, THE ITAT WHILE DELETING THE ADDITION OF RS.7,00,000/-, RESTORED THE ISSUE OF DENIAL OF DE DUCTION U/S 80IA TO THE AO. PURSUANT TO THE ORDER OF THE ITAT, THE AO ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 3 ASKED THE ASSESSEE TO PRODUCE VARIOUS DETAILS. T HE ASSESSEE FILED THE SAID DETAILS VIDE LETTERS DATED 4.12.2006, 20.12.2006 AND 26.12.2006. HOWEVER, THE AO DID NO T ACCEPT THE ASSESSEES CLAIM OF DEDUCTION U/S 80IA ON ACCOUNT OF FOLLOWING REASONS (PARAGRAPHS 6 AND 8 O F THE ORDER OF THE CIT(A) : I. THE REPORT FILED BY THE APPELLANT IN FORM NO.10CCB AS PER RULE 18BBB WAS INCOMPLETE AND WITHOUT FULL PARTICULARS. II) THE VENDOR OF PLANT AND MACHINERY, M/S AMBIKA VALVES, HAD DENIED THAT IT SOLD MACHINERY TO THEM AND THIS HAS NOT BEEN ESTABLISHED IN THE REASSESSMENT PROCEEDINGS ALSO. III) THE APPELLANT DID NOT PRODUCE THE BILLS AND VOUCHERS RELATING TO THE ELECTRICITY AND FUEL EXPEN SES OF RS.5.1 LAKHS. IV) THE APPELLANT HAD NOT PREPARED ANY MANUFACTURING ACCOUNT. V) ALL THE SALES MADE AT DAMAN UNIT WAS TO THE SISTER CONCERN M/S SHUKRA JEWELLERY LTD. WHERE TH E APPELLANT HAS SUBSTANTIAL SHARE HOLDINGS (QUOTED). FURTHER, THE APPELLANT HAD FURNISHED ONLY A LETTER FROM M/S SHUKRA JEWELLERY LTD. 2.7.1997 AND ADDRESSED TO THE APPELLANT, WHEREIN IT WAS MENTIONED THAT THE BI LLING SHOULD NOT INCLUDE SEPARATE VALUE FOR SILVER PART O F THE JEWELLERY AND ALTERNATIVELY, THE APPELLANT SHOULD A DD THE SILVER VALUE AND MAKING CHARGES IN DIAMOND PRIC E. HOWEVER, THE APPELLANT DID NOT FURNISH THE COPIES OF SALES BILLS/DELIVERY CHALLANS ISSUED TO SHUKRA SH UKRA JEWELLERY LTD. VI) SALES TAX REGISTRATION CERTIFICATE OR SALES TAX ASSESSMENT ORDER FROM THE AUTHORITIES IN DAMAN HAD NOT BEEN PRODUCED FOR VERIFICATION. VII) COPY OF THE PERMIT/CERTIFICATE OF REGISTRATION AS SSI UNIT ISSUED FOR DAMAN UNIT HAD NOT BEEN FILED. ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 4 VIII) PROOF OF DELIVERY OF GOODS/RAW MATERIAL PURCH ASED FOR RAW MATERIAL IS NOT FILED. IX) CONSIGNMENT NOTES FOR MOVEMENT OF GOODS HAD NOT BEEN FILED. X) THE APPELLANT FILED AN AFFIDAVIT BEFORE THE ITAT BY COOKING UP A STORY BY SUBMITTING A COPY OF A BILL D ATED 2.4.1997 BEARING NO SERIAL NUMBER SUPPOSED TO HAVE BEEN ISSUED BY M/S CALCUTTA ART JEWELLERY, 188A, BHIMRAO WADI, GROUND FLOOR, THAKURDWAR, MUMBAI- 400004 AND ABHILASHA BUILDING, GROUND FLOOR, NAGARWAD, NAVSARI, GUJARAT. LOCAL ENQUIRIES BY TH E INCOME TAX INSPECTOR REVEALED THAT THE PROPRIETOR O F M/S CALCUTTA ART JEWELLERS LEFT THE PLACE 5-6 YEAR S AGO. SUMMONS U/S 131 ISSUED BY POST WERE ALSO RETURNED UN-SERVED. THESE FACTS WERE PUT TO THE APPELLANT AN D HE FAILED TO PRODUCE ANY CONFIRMATION FROM THE PROPRIETOR OF CALCUTTA ART JEWELLERS REGARDING PUR CHASE OF SILVER BY HE APPELLANT. XI) THE COOKED STORY HAS BEEN MANAGED BY FILING CONFIRMATION FROM M/S SHUKRA JEWELLREY LTD, A SI STER CONCERN OF THE APPELLANT HAVING VESTED INTEREST IN THE BUSINESS OF THE APPELLANT. XII) FORM NO.3CD USED IS NOT AS PER PRESCRIBED IN T HE I.T.RULES. THE APPELLANT CONVENIENTLY OMITTED SOME COLUMNS, PARTICULARLY NATURE OF BUSINESS XIII) IN COLUMN NO.12 OF THE AUDIT REPORT, RELEVANT TO MANUFACTURING CONCERNS FULL QUANTITATIVE DETAILS OF RAW MATERIAL AND FINISHED GOODS ARE NOT INDICATED AND I T IS ONLY MENTIONED AS N.A. XIV) THE COLUMN NO.12 ON THE DETAILS OF THE STOCK GIVEN ONLY THE DETAILS OF OPENING STOCK OF ROUGH AN D POLISHED DIAMONDS, PURCHASE OF ROUGH AND POLISHED A ND CLOSING STOCK ROUGH AND POLISHED DIAMONDS ARE GIVEN . IN VIEW OF ALL THESE FACTS AND FIGURES AND DISCUSSI ON, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE DID NOT CA RRY OUT ANY MANUFACTURING ACTIVITY. THEREFORE, HE DENIED THE CLAIM ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 5 OF DEDUCTION U/S 80IA OF RS.48,68,732/- IN RESPECT OF THE UNIT IN DAMAN. 3. THE ASSESSEE IN HIS SUBMISSIONS BEFORE THE LD. CIT(A) HAS STATED AS FOLLOW (PARAGRAPHS 10 AND 11 OF THE ORDER OF CIT(A): I) THE AO HAD NOT RAISED THE ISSUE OF THE REPORT FILED IN FORM NO.10CCB BEING INCOMPLETE IN THE COUR SE OF ASSESSMENT PROCEEDINGS; II) AS REGARDS THE ISSUE OF THE PLANT AND MACHINERY PURCHASED FROM AMBIKA VALVES IT IS STATED THAT NO CLARIFICATION WAS ASKED FOR BY THE AO IN SET ASIDE PROCEEDINGS. THE CIT(A) IN HIS ORDER ON THE ORIGIN AL ASSESSMENT, HAD ACCEPTED THE FACT OF PURCHASE OF MACHINERY FROM AMBIKA VALVES AND THEREFORE, THERE WAS NO REASON TO REJECT THE CLAIM. REFERENCE IS INV ITED TO PAGE NO.10 OF THE ORDER OF THE CIT(A). III) THE DETAILS RELATING TO ELECTRICITY AND FUEL EXPENSES WERE PRODUCED BEFORE THE ITO AND REFERENC E IS INVITED THE APPELLANTS LETTERS DATED 18.12.200 6 AND 26.12.2006 ADDRESSED TO THE AO IN THE SET A SIDE PROCEEDINGS. IV) MANUFACTURING ACCOUNT HAD BEEN PREPARED AND SUBMITTED ALONG WITH THE RETURN ITSELF. NO DETAILS WERE ASKED FOR BY THE AO. V) AS REGARDS THE SALES MADE TO THE SISTER CONCERN M/S SHUKRA JEWELLERY LTD., IT IS CONTENDED THAT TH E INVOICE RAISED BY THE APPELLANT GIVES A SEPARATE QUANTITY OF SILVER AND DIAMONDS. THERE WAS NO REAS ON TO SHOW SEPARATE VALUE FOR BOTH THE ITEMS AS TH E ITEMS WERE SOLD AS COMPOSITE UNITS. SALES BILLS WERE PRODUCED BEFORE THE ASSESSING OFFICER. COPIES OF PACKING SLIP DETAILING THE ITEMS OF JEWELLERY WERE FILED BY LETTERS DATED 22.11.2006 AND 26.12.2006. VI) ALL DETAILS REQUIRED BY THE AO ABOUT SALES TAX REGISTRATION CERTIFICATE WAS PRODUCED BY LETTER DAT ED 26.12.2006 AND SINCE DAMAN IS A TAX FREE ZONE, SALE S ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 6 TAX IS NOT APPLICABLE AND THEREFORE THERE WAS NO S T ASSESSMENT ORDER. VII) COPY OF THE PERMIT OF REGISTRATION AS SSI UNIT WAS FILED BY LETTER DATED 18.12.2006. VIII) AS REGARDS PROOF OF DELIVERY OF GOODS/RAW MAT ERIAL PURCHASED IN DAMAN UNIT WAS CONCERNED, DIAMONDS WHICH WAS THE BASIC RAW MATERIAL, WAS DECLARED AS CLOSING STOCK IN THE LAST YEAR AND SINCE THERE WAS NO NEW PURCHASE OF DIAMONDS DURING THE YEAR NO PROOF O F DELIVERY OF DIAMONDS HAS BEEN FILED. HOWEVER, WITH REGARD TO THE SILVER WHICH WERE USED IN MAKING JEWELLERY THE DETAILS HAVE BEEN FILED VIDE LETTER D ATED 26.12.2006. IX) AS REGARDS CONSIGNMENT NOTES FOR HE MOVEMENT OF GOODS, IT WAS NOT REQUIRED & THESE WEE ALSO NO T ASKED FOR. X) AS REGARDS THE PURCHASE OF SILVER FROM CALCUTTA ART JEWELLERS WAS CONCERNED, IT WAS APPARENT FROM T HE ORDER ITSELF THAT THE PROPRIETOR OF M/S CALCUTTA ART JEWELERS LEFT THE PLACE 5 TO 6 YEAR AGO AND THEREFO RE THERE WAS NOBODY IN THE ADDRESS GIVEN. THE CHANGED ADDRESS OF M/S CALCUTTA ART JEWELLLERS WAS FURNI SHED TO THE AO BUT HE DID NOT MAKE ANY ENQUIRY TO FIND OUT WHETHER THE PERSON WAS AVAILABLE OR NOT AT THE SAID ADDRESS. CALCUTTA ART JEWELLERS HAD SHIFTED TO ANDH ERI AND THEY ARE AVAILABLE IN THE NEW ADDRESS. THE REPO RT OF THE INCOME TAX INSPECTOR REGARDING UNAVAILABILIT Y OF M/S CALCUTTA JEWELERS WAS NOT PROVIDED TO THE APPELLANT. BY LETTER DATED 27.12.2006 THE APPELLANT HAD FURNISHED A CONFIRMATION FROM M/S CALCUTTA ART JEWELLERS. M/S CALCUTTA ART JEWELLERS ARE NOT REL ATED TO THE APPELLANT. XI) M/S SHUKRA JEWELLERY LTD, SISTER CONCERN OF THE APPELLANT WHO HAD PURCHASED THE JEWELLERY FROM T HE APPELLANT HAD RESOLD THE JEWELLERY TO ANOTHER PARTY AND THIS WAS PRODUCED BEFORE THE AO BY LETTER 27.12.20 06. XII) THE NATURE OF BUSINESS IS NOW INDICATED. XIII) THE DETAILS REGARDING RAW MATERIALS WAS SUBMITTED BY LETTER DATED 26.12.2006 AND THE APPELL ANT ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 7 HAD OBTAINED A CLARIFICATION ON THE AUDIT REPORT DISCLOSING THE NATURE OF BUSINESS. XIII) AS REGARD THE DETAILS OF STOCK, WHICH THE AO HAS POINTED OUT HAD NOT BEEN INDICATED, THE APPELLANT CONTENDS THAT THE WHOLE JEWELLERY MANUFACTURED DURI NG THE YEAR HAD BEEN SOLD AND THEREFORE, THERE WAS NO STOCK AVAILABLE AS AT THE END OF THE YEAR. THIS WA S POINTED OUT BY LETTER DATED 26.12.2006. THE LD. CIT(A) WHILE FORWARDING THE SUBMISSIONS OF THE ASSESSEE TO THE AO ASKED FOR THE REMAND REPORT FRO M THE AO. THE AO SUBMITTED HIS REMAND REPORT VIDE LETTE R DATED 15.10.2007 INTERALIA STATING THAT (PARAGRAPH 13 OF CIT(A)): THE AO SUBMITTED HIS REPORT BY LETTER DATED 15.10.2007. THE AO STATED THAT THE APPELLANT HAD Y ET TO FILE THE FORM 10CCB IN RESPECT OF HIS CLAIM U/S 80IA DULY FILLED UP ALONG WITH THE AUDIT REPORT AS PER RULE 18BBB AND MOREOVER, HE HAS SAID THAT THE APPELLANT HAD ONLY FILED THE MONTH WISE BREAK UP OF THE ELECT RICITY AND FUEL EXPENSES WHICH ARE NOT SUPPORTED BY DOCUMENTARY PROOF. AS REGARDS THE FORM ST IV FRO M ASSTT. SALES TAX OFFICER OF DAMAN IS CONCERNED, IT WAS VALID ONLY UP TO 31.3.1997 AND NOT RELEVANT TO TH IS ASSESSMENT YEAR. THE COPY OF THE PERMIT REGISTRATI ON AS SSI UNIT IS NOT ON RECORD. THE PROOF OF DELIVE RY FOR PURCHASE OF SILVER HAS NOT BEEN FILED. AS REGARD T HE CLAIM THAT THE NATURE OF BUSINESS HAS BEEN CLARIFIE D IN FORM 3CD WAS CONCERNED THE FACT IS THAT IT IS NOT ON RECORD. THE APPELLANT BY HIS LETTER DATED 22.12.20 06 HAS FILED A COPY OF CONFIRMATION OF SILVER SUPPLIER M/S CALCUTTA ART JEWELERS HAVING ADDRESS AT ZAVERI BAZ AR AND WHICH IS DATED 5.1.2005 BUT THIS DID NOT GIVE A NY REFERENCE TO ITS OWN OLD ADDRESS OR BILL ISSUED. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SU BMISSIONS, REMAND REPORT OF THE AO AND THE ASSESSEES REJOIND ER, HOWEVER, HELD THAT THE ASSESSEE IS ELIGIBLE FOR DE DUCTION U/S 80IA OF THE ACT. ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 8 4. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), T HE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWIN G GROUNDS OF APPEAL : 1. THE LD. CIT(A) ERRED IN ACCEPTING THE ASSESSEE S PLEA THAT THE ASSESSEE HAS SOLD THE SILVER STUDDED DIAMOND JEWELLERY TO HIS SISTER COMPANY DURING THE YEAR AND THE SILVER STUDDED JEWELLERY WAS NOT PURCHASED FROM THE THIRD PARTIES AND IN CONCLUDING THAT THIS WAS MANUFACTURED BY THE ASSESSEE IGNORING THE VARIOUS REASONS MENTIONED IN ASSESSMENT ORDER TO PROVE THAT THE ASSESSEE IS NOT ENGAGED IN ANY MANUFACTURING ACTIVI TY. 2. THE LD. CIT(A) ERRED IN CONSIDERING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS.48,68,732/ - U/S 80IA OF THE I.T.ACT, 1961 WITHOUT APPRECIATING THE DISCREPANCIES BROUGHT OUT BY THE AO DURING THE ORIG INAL ASSESSMENT PROCEEDING AND REASSESSMENT PROCEEDINGS ESTABLISHING THAT THE ASSESSEE IS NOT A MANUFACTURE R OF GOLD AND HENCE NOT ELIGIBLE FOR DEDUCTION 5. AT THE TIME OF HEARING, THE LD. DR SUBMITS FOR T HE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER, THE L D. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA OF THE ACT. HE, FURTHER, SUBM ITS THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS ME NTIONED IN THE ASSESSMENT ORDER, THE ASSESSEE IS A TRADER AND NOT A MANUFACTURER OF SILVER STUDDED DIAMOND JEWELLERY AS THE ASSESSEE HAS FAILED TO PROVE THE PURCHASES INASMUCH AS ON INQUIRY THROUGH INSPECTOR IT WAS FOUND THAT PROPR IETOR OF M/S CALCUTTA ART JEWELLERY, FROM WHOM THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED THE SILVER, HAS LEFT THE PLACE BEFORE 5-6 YEARS AGO AND THE SUMMON ISSUED U/S 131 SENT TO THE SAID ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 9 PARTY TO THE ADDRESS OF ABHILASHA BUILDING, GROUN D FLOOR, NAGARWAD, NAVSARI, GUJARAT WAS RETURNED BACK AS U N- SERVED BY THE POSTAL AUTHORITY. HE FURTHER SUBMITS THAT THE FORM NO.ST-IV FROM ASSISTANT SALES TAX OFFICER, DAMAN IS VALID UP TO 31.3.1997, NOT RELEVANT TO THE YEAR UN DER CONSIDERATION. HE, THEREFORE, SUBMITS THAT THE ASS ESSMENT ORDER PASSED BY THE AO IN DENYING THE DEDUCTION U/S 80IA BE RESTORED. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT THE ASSESSEE FILED ALL THE REQUIRED DETAILS AS ASKED BY THE AO AND THE LD. CIT(A) COPIES OF WHICH ARE APPEARING AT PAGES 1 TO 149 OF THE ASSESSEES PAPER BOOK TO SHOW THAT THE ASSESSE E IS A MANUFACTURER OF SILVER STUDDED DIAMONDS JEWELLERY AND HAS SUPPLIED THE SAME TO M/S SHUKRA JEWELLERY LTD. W HICH WAS ALSO CONFIRMED BY THEM. WITH REGARDS TO THE PURCH ASES MADE FROM M/S CALCUTTA ART JEWELLERY, HE SUBMITS TH AT INQUIRY WAS CONDUCTED BY THE INCOME-TAX-INSPECTOR IN THE Y EAR 2006 WHEREIN IT WAS REPORTED THAT PROPRIETOR HAD LEFT THE PLACE 5- 6 YEARS AGO. IN OTHER WORDS, THE PARTY WAS THERE IN THE YEAR UNDER CONSIDERATION I.E.IN A.Y.1998-99. HE FURTHER SUBMITS THAT THE ASSESSEE HAS DULY INFORMED THE CHANGED ADD RESS OF M/S CALCUTTA ART JEWELLERY, WHO HAS SHIFTED TO AND HERI. ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 10 HOWEVER, THE AO DID NOT MAKE ANY INQUIRY AT THE NEW ADDRESS. HE FURTHER SUBMITS THAT THE DEDUCTION U/S 80IA WAS DULY ALLOWED TO THE ASSESSEE IN THE IMMEDIATELY PRE CEDING ASSESSMENT YEAR I.E. AY 1997-98 AND ALSO IN SUCCEE DING ASSESSMENT YEARS. THE LEARNED COUNSEL FOR THE ASSE SSEE HAS ALSO PLACED RELIANCE ON THE ORDER OF THE TRI BUNAL IN THE CASE OF STEELFAB BUILDING SYSTEMS V/S ITO IN ITA NO.5296/MUM/2010 (AY-2007-08) DATED 26.8.2011, WHER EIN IT HAS BEEN HELD THAT ONCE THE AO ACCEPTS THE ADMISSI BILITY OF THE CLAIM FOR SUBSEQUENT ASSESSMENT YEAR, THERE IS NO GOOD REASON FOR HIM TO RAISE THIS GRIEVANCE IN THE YEA R UNDER CONSIDERATION I.E. AY 2007-08. HE, THEREFORE, SUBMI TS THAT THE ORDER PASSED BY THE LD. CIT(A) IN ALLOWING THE CLAI M OF THE ASSESSEE BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE O N RECORD. WE FIND THAT THE LD. CIT(A) AFTER EXAMINING THE I SSUE HAS OBSERVED AND HELD AS UNDER : 14. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT. I HAVE ALSO VERIFIED THE RECORDS. T HE ISSUE IN THIS APPEAL IS ESSENTIALLY ALLOWABILITY OF CLAIM U/S 80IA OF THE INCOME TAX ACT. THE AO DENIED THE CLAIM O F THE APPELLANT ON THE BASIS THAT THE REPORT IN FORM 10CC B IS INCOMPLETE, THE BILLS FOR ELECTRICITY AND FUEL EXPE NSES WERE NOT PRODUCED FOR VERIFICATION, SALES TAX REGISTRATION CERTIFICATE OR SALES TAX ASSESSMENT OR DER WERE NOT PRODUCED FOR VERIFICATION, DETAILS OF REGI STRATION AS SSI UNIT WAS NOT PRODUCED, PROOF OF DELIVERY OF GOODS/ RAW MATERIALS PURCHASED FOR DAMAN UNIT WAS NOT FILED, THE REPORT OF THE CHARTERED ACCOUNT IN FOR M ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 11 NO.3CD DID NOT INDICATE THE NATURE OF BUSINESS AND COLUMN 12 OF THE REPORT DID NOT SHOW ANY DETAILS O F JEWELLERY EITHER AS OPENING STOCK, PURCHASE OR AS CLOSING STOCK ETC. THE APPELLANT ON HIS PART STATE D THAT HE, IN FACT, MANUFACTURED THE JEWELLERY AND THESE W ERE SOLD TO HIS SISTER CONCERN M/S SHUKRA JEWELLERY L TD. IN THIS CONNECTION, THE APPELLANT FILED COPIES OF THE INVOICES BY WHICH HE SOLD THE GOODS TO M/S SHUKRA JEWELLERY LTD. IN THIS CONNECTION, THE APPELLANT FILED COPIES OF I NVOICES BY WHICH HE SOLD THE GOODS TO M/S SHUKRA JEWELLER Y LTD. THE INVOICES WERE INVARIABLY ACCOMPANIED BY PACKING SLIPS WHICH SHOW DETAILS OF THE GOODS WHICH WERE SOLD. PERUSAL OF THE PACKING SLIPS SHOW THAT THE APPELLANT ESSENTIALLY MADE THREE TYPES OF JEWELLERY (I) RINGS, (II) PENDANT AND (III) EAR RINGS. THE PACKI NG SLIPS SHOW APART FROM THE WEIGHT IN CARATS OF DIAMONDS IN EACH RING, PENDENT OR EAR-RING, ALSO SHOW THE WEIGHT IN GRAMS OF SILVER IN EACH OF THE ORNAMENTS AND THE PRICE OF EACH ITEM OF JEWELLERY. ALL THE INVOICES OF THE APPELLA NT SHOW THE TOTAL QUANTITY OF THE JEWELLERY IN CARATS AND G RAMS OF DIAMONDS AND SILVER RESPECTIVELY AND THE DESCRIPTI ON OF THE JEWELLERY IS RECORDED AS 50T SILVER JEWELLERY STUDDED WITH CUT & POLISHED DIAMOND. IT IS ALSO SEEN THAT BEFORE EACH CONSIGNMENT OF JEWELLERY, THERE I S AN ORDER PLACED BY M/S SHUKRA JEWELLERY LTD. ON THE APPELLANT. THESE ORDERS WERE PLACED AT LEAST TWO M ONTHS BEFORE THE JEWELLERY WERE SOLD TO M/S SHUKRA JEWEL LERY LTD. AS SOON AS THE GOODS RELATING TO A PARTICULA R INVOICE WERE DELIVERED, THE PURCHASER ISSUED A RECE IPT CUM CREDIT NOTE WHICH INDICATES THAT THE APPELLANT HAD BEEN CREDITED WITH THE AMOUNT AS PER THE INVOICE. IN THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT WAS REQUIRED TO SHOW THAT IT WAS THE SAME GOODS WHICH WERE PURCHASED BY THE SISTER CONCERN M/S SHUKRA JEWELLERY LTD; AND WHICH IN TURN IT HAD SOLD. HE WA S ALSO REQUIRED TO INDICATE THE DETAILS OF THE TURNOVER OF THE COMPANY AND ALSO THE INCOME TAX ASSESSMENT DETAILS ETC. THE APPELLANT FURNISHED A COPY OF THE ASSES SMENT ORDER OF M/S SHUKRA JEWELLERY LTD. FOR THE AY 19 98-99 U/S 143 (3) OF THE INCOME TAX ACT DATED 29.12.2000 AND ISSUED BY THE ADDL. COMMISSIONER, SPL.RANGE 16, MUMBAI. HE ALSO PRODUCED THE ORIGINAL ORDER FOR VERIFICATION. HE ALSO PRODUCED THE ORIGINAL OF THE NOTICE U/S 143(2) ISSUED BY THE AO ON M/S SHUKRA JEWELLER Y LTD. AS WELL AS THE ORIGINAL OF THE QUESTIONNAIRE ISSUED BY THE ADDL. COMMISSIONER, SPL. RANGE 16, MUMBAI . IN THE ITEM 2 OF THE QUESTIONNAIRE, THE COMPANY WAS REQUESTED TO FILE THE DETAILS OF THE TRANSACTIONS WITH SISTER/ASSOCIATE CONCERNS INCLUDING THE APPELLANT M /S ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 12 JEWELL DIAMOND EXPORTS. CLEAN DIAMOND EXPORTS. MAR K DIAMOND EXPORT AND SHUKRA BULLIONS LTD. THE COMPANY M/S SHUKRA JEWELLERY LTD. FILED THE REPLY TO THE QUESTIONNAIRE U/S 142(1) OF THE INCOME TAX ACT BY ITS LETTER DATED 18.11.2000. IN REPLY, THE COMPANY HAD STATED AS FOLLOWS : FOLLOWING BUSINESS TRANSACTION I.E. PURCHASE OF DIAMOND STUDDED SILVER JEWELLERY AT DAMAN WITH GROUP COMPANIES HAVE BEEN DONE DURING THE FINANCIAL YEAR RELEVANT TO THE ABOVE ASSESSMENT YEAR. A) JEWELL DIAMOND EXPORT RS.1,99,09,837/- B) JEWEL DIAMOND EXPORT RS.1,59,49,721/- C) MARK DIAMOND EXPORT RS.1,77,89,025/- D) SHUKRA BULLIONS LIMITED RS. 31,56,865/- WE ARE ENCLOSING COPIES OF PURCHASE BILLS. WE HAVE ALSO SUBMITTED COPIES OF ACCOUNT WITH THEIR I TAX / GIR NOS. HEREWITH. AS REGARDS THE TRANSACTIONS OF M/S SHUKRA JEWELLER Y LTD. WAS CONCERNED, THE APPELLANT HAD FURNISHED PHOTO CO PIES OF THE INVOICES OF THE COMPANY TO THE AO BY WAY OF HIS LETTER DATED 27.12.2006. THESE COPIES INVOICES SHOW THAT THE PURCHASER M/S SHUKRA JEWELLERY LTD. HAD IN TU RN SOLD 50T DIAMOND STUDIES SILVER JEWELLERY TO VARIO US ENTITIES IN SURAT. THE COPIES OF THE INVOICES SHO W THAT 50T DIAMOND SILVER JEWELLERY WERE SOLD BY M/S SHU KRA JEWELLERY LTD. TO VENUS EXPORTS, A.V. EXPORTS, MA HAVIR IMPEX DURING NOVEMBER 1997 TO MARCH 1998. THEREFOR E, IT IS SEEN THAT THE APPELLANT HAD SOLD DIAMOND STUD DED SILVER JEWELLERY TO M/S SHUKRA JEWELLERY LTD. AND WHICH IN TURN HAS SOLD THE GOODS TO VARIOUS ENTITIES. M/S SHUKRA JEWELLERY LTD. IS A COMPANY WHOSE RETURN OF INCOME FOR THE AY 1998-99 WAS SCRUTINIZED BY THE ADDL. COMMISSIONER OF INCOME TAX, SPL. RANGE -16, MUMBA I, IN THE COURSE OF WHICH IT HAD STATED THAT IT PURCH ASED DIAMOND STUDDED SILVER JEWELLERY FROM THE APPELLANT . THEREFORE, IT APPEARS THAT THE APPELLANT HAD DEALT WITH IN DIAMOND STUDDED SILVER JEWELLERY DURING THE RELEVAN T ASSESSMENT YEAR. IN THIS CONNECTION IT IS NOTED T HAT THERE IS NO CASE FOR THE AO THAT THE APPELLANT HAD PURCHASED THE DIAMOND STUDDED SILVER JEWELLERY FROM THIRD PARTY AND THEN SUPPLIED IT TO M/S SHUKRA JEWE LLERY LTD. THE COPY OF THE TRADING ACCOUNT FURNISHED BY T HE ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 13 APPELLANT SHOWS THAT THERE WAS NO PURCHASES AT DAM AN DURING THE YEAR. IN FACT, HE EXPLAINED THAT ALL TH E ROUGH DIAMONDS WERE IN HIS STOCK AS AT THE BEGINNING OF T HE YEAR. HE ONLY PURCHASED 2000 GRMS 100T SILVER FO R RS.13,000/- AND 2000 GRAMS OF COPPER ALLOY FOR RS.6 00/-. THE SILVER AND COPPER ALLOY WERE CONSUMED TO MANUFACTURE 3988 GRAMS OF 50T SILVER JEWELLERY STU DDED WITH DIAMOND. AS THE APPELLANT HAS SOLD THE DIAMON D STUDDED SILVER JEWELLERY TO ITS SISTER COMPANY SHUKRA JEWELLERY LTD; DURING THE YEAR (DISCUSSED ABOVE) A ND AS IT HAS BEEN FOUND THAT THE DIAMOND STUDDED SILVER JEWELLERY WAS NOT PURCHASED FROM THIRD PARTIES, THE INESCAPABLE CONCLUSIONS IS THAT IT WAS MANUFACTURED BY THE APPELLANT. AS REGARDS THE REPORTS U/S 80IA AND SEC.44AB IN FORM NO.10CCB AND IN FORM NO.3CD RESPECTIVELY ARE CONCERNED, THE APPELLANT HAS PRODU CED COPIES OF THE REPORT WHICH INDICATE THAT THE CHARTE RED ACCOUNT HAS CERTIFIED THE BUSINESS TO BE COVERED UN DER THE RESPECTIVE SECTIONS. THE COPY OF THE LICENCE T O WORK A FACTORY ISSUED BY THE CHIEF INSPECTOR OF FACTORI ES ADMINISTRATION DAMAN AND DIU SHOWS THAT A LICNECE HAS BEEN GRANTED TO HIM TO RUN FACTORY IN GOLDEN INDUST RIAL ESTATE, DABHOL, DAMAN DURING THE PERIOD 1997 TO 2 001. SIMILARLY, THE CERTIFICATE OF REGISTRATION ISSUED B Y THE SALES TAX OFFICER, DAMAN DATED 22.4.1996 SHOWS THAT THE APPELLANT WAS REGISTERED TO RUN A BUSINESS BY N AME MARK DIAMOND EXPORTS FOR THE PURPOSE OF MANUFACTURING OR SALE OF CUT/ POLISHED SOWN DIAMOND S PRECIOUS AND SEMI PRECIOUS STONES. A LIST OF RAW MATERIALS AS PER THE CERTIFICATE INCLUDED ROUGH DIAMONDS, GOLD AND SILVER METALS PRECIOUS AND SEMI PRECIOUS STONES. IT IS TRUE THAT THE APPELLANT HAS NOT PRODUCED CERTIFICATE FOR VERIFICATION. HOWEVER, TAK ING INTO CONSIDERATION THE FACT THAT THE APPELLANT SOLD 50T DIAMOND STUDDED SILVER JEWELLERY TO M/S SHUKRA JEWELLERY LTD. DURING THE YEAR AND THE FACT THAT T HERE WAS NO EVIDENCE TO SHOW THAT THIS WAS PURCHASED FR OM A THIRD PARTY, IT HAS TO BE CONCLUDED THAT THIS WAS MANUFACTURED BY HER DURING THE YEAR. THEREFORE, TH E APPELLANT IS ELIGIBLE FOR THE DEDUCTION U/S 80IA O F THE IT ACT. 8. NO CONTRARY MATERIAL WAS PLACED ON RECORD BY THE REVENUE AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). FURTHER IT IS NOT THE CASE OF THE REVENUE THAT TH E ASSESSEE ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 14 HAS NOT FULFILLED THE CONDITIONS LAID DOWN U/S 80I A OF THE ACT. IT IS ALSO NOT THE CASE OF THE REVENUE THAT T HE ASSESSEE AFTER PURCHASING THE DIAMOND STUDDED SILVER JEWELLE RY SOLD THE SAME TO M/S SHUKRA JEWELLERY LTD. AS IT IS. THE ASSESSEE CONTENTION THAT THE ASSESSEE HAS PURCHASED SILVER F ROM M/S CALCUTTA ART JEWELLERY, THE PROPRIETOR OF WHICH IS A GOVERNMENT APPROVED VALUER AND SHIFTED HIS OFFICE FROM ZAVERI BAZAR, MUMBAI TO ANDHERI, MUMBAI AND THE CH ANGE OF ADDRESS WAS DULY INFORMED VIDE HIS LETTER DATED 2 7.12.2006 I.E. BEFORE THE COMPLETION OF ASSESSMENT AND THAT T HE ASSESSEE HAS CARRIED ON ACTIVITIES OF MANUFACTURI NG OF DIAMOND STUDDED SILVER JEWELLERY, FILED ALL THE REL EVANT DETAILS VIDE VARIOUS LETTERS INCLUDING THE LETTER DATED 26. 12.2006 WHEREIN THE ASSESSEE HAS PROVED PURCHASES, SALES, CONSUMPTION OF SILVER IN MANUFACTURING OF DIAMOND S TUDDED SILVER JEWELLERY, LIST OF THE WORKERS SHOWING THAT IT HAD EMPLOYED 10 WORKERS IN DIAMOND DIVISION AND 23 WORK ERS IN JEWELLERY DIVISIONS, CLARIFICATION FROM THE CONSULT ANT GIVING ALL RELEVANT INFORMATION IN RESPECT OF AUDIT REPORT, CE RTIFICATE DATED 16.7.1997 FROM SALES TAX DEPARTMENT, DAMAN SH OWING THAT THE ASSESSEE IS REGISTERED UNDER SALES TAX ACT, 1964 W.E.F. 1.11.1996 UNTIL CANCELLED, HAVE NOT BEEN CO NTROVERTED BY THE REVENUE AT ANY STAGE. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE DIAMOND STUDDED SILVER JE WELLERY MANUFACTURED AND SOLD BY THE ASSESSEE WOULD AMOUNT TO ITA NO. 5172/MUM/2009 (ASSESSMENT YEAR : 1998-99 ) 15 MANUFACTURE AS WELL AS PRODUCTION OF A THING OR ARTICLES AS SET OUT U/S 80IA OF THE ACT AND ACCORDINGLY THE O RDER PASSED BY THE LD. CIT(A) IN ALLOWING THE CLAIM OF THE ASS ESSEE DOES NOT CALL FOR ANY INTERFERENCE. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 9. IN THE RESULT, THE REVENUES APPEAL STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER,2011. SD SD (RAJENDRA SINGH) (D. K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 14 TH SEPTEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI