ITO 14(3)-4, MUMBAI V. RIALTO EXIM, MUMBAI

ITA 5800/MUM/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1513 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J R BHATT
• Keywords: Earning of tax free income
• Section: 44AD; 143(3); 10AA; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5764/M/2012 ASSESSMENT YEAR: 2009-10 M/S. RIALTO EXIM, 907, JEWEL WORLD, KALBADEVI ROAD, MUMBAI 400 002 PAN: AAKFR3441G VS. INCOME TAX OFFICER, WARD 14(3)(4), 7 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI (APPELLANT) (R ESPONDENT) ITA NO.5800/M/2012 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER-14(3)- 4, 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021 VS. M/S. RIALTO EXIM, 105, PARIMAL PLAZA, 1 ST FLOOR, 9, BHULESHWAR ROAD, BHULESHWAR, MUMBAI 400 002 PAN: AAKFR3441G (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI J.R. BHATT, A.R. REVENUE BY : SHRI T. KIPGEN, D.R. DATE OF HEARING : 20.02.2019 DATE OF PRONOUNCEMENT : 14.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER APPEAL BY THE REVENUE HAVE BEEN PREFERRED AGA INST THE ORDER DATED 19.07.2012 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2009-10. ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 2 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN ALLOWING THE INCOME U/S 10AA BY ESTIMATING THE NET PROFIT AT 8% AGAINST 10.89% OF N ET PROFIT AS SHOWN IN THE BOOKS OF ACCOUNTS OF THE APPELLANT WITHOUT FINDING ANY FA ULTS IN THE FINANCIAL RECORDS AND/OR REJECTING THE BOOKS OF ACCOUNTS AS PER PROVI SIONS OF SECTION 145 OF THE INCOME TAX ACT SO AS TO ESTIMATE NET PROFIT AND AS SUCH DIRECTION BE GIVEN TO RESTORE THE NET PROFIT AS SHOWN IN THE REGULAR BOOK S OF ACCOUNTS. 2. APPELLANT RESERVES THE RIGHT TO ADD, AMEND, MODI FY OR ALTER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEED INGS. 3. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: THE LD. CIT(A) HAS ERRED IN LAW AS WELL ON THE FAC T IN DIRECTING TO RESTRICT THE N.P. @ 8% BY IGNORING THE FACT THAT THE 'A' HAS NEVER COND UCTED MANUFACTURING ACTIVITIES IN THE PREMISES SITUATED IN SEZ WHICH IS ENTITLED F OR THE DEDUCTION U/S. 10AA. 2. FURTHER, THE LD. CIT(A) HAS ERRED IN LAW AS WE LL ON THE FACT BY IGNORING THE FACT THAT THE 'A' IS ONLY INVOLVED IN THE TRADING BUSINE SS WHEREIN THE PROFIT SHOULD NOT BE MORE THAN 2% OF THE TOTAL TURNOVER AFTER COMPARE D WITH THE OTHER ASSESSEE ENGAGED IN THE SAME LINE OF BUSINESS HAVING THE PRO FIT RATIO RANGING 0.19% TO 5.96% 3. FOR THESE AND ANY OTHER REASONS THAT MAY BE UR GED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) BE QUASHED A ND THAT OF THE A.O. BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE, A PART NERSHIP CONCERN, IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF MEDALLIONS FROM GOLD BARS AND THE MANUFACTURING PLA NT/FACILITY WAS LOCATED IN SACHIN SEZ, SURAT. DURING THE YEAR , THE ASSESSEE EARNED PROFIT OF RS.10,13,80,419/- FROM THE SAID PL ANT IN SEZ. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10AA O F THE ACT AMOUNTING TO RS.10,13,80,419/- BY FILING RETURN OF INCOME ON 21.09.2009 DECLARING INCOME AT NIL. THE CASE OF TH E ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND STATUTORY NOTICES WERE DULY ISSUED AND SERVED UPON THE ASSESSEE. THE AO N OTICED FROM THE DETAILS FILED BY THE ASSESSEE THAT DURING THE Y EAR THE GP AND NP WERE 11% AND 10.89% RESPECTIVELY. THE GOLD BARS WERE ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 3 IMPORTED FROM THE UAE AND THE PRODUCTS PRODUCED WER E ALSO EXPORTED TO THE PARTIES IN UAE. THUS ALL TRANSACTI ONS OF SALES AND PURCHASES WERE SUBJECT TO CUSTOM BARRIERS AND S CRUTINY. A SURVEY WAS CONDUCTED ON SEZ UNITS OF THE ASSESSEE F IRM ON 21.09.2010 AND DURING THE COURSE OF SURVEY AO NOTED THAT UNIT WAS CLOSED AND AO CAME TO THE CONCLUSION THAT THERE WAS NO MANUFACTURING ACTIVITY BEING CARRIED OUT FROM THE S AID UNIT AND THUS DENIED THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10AA OF THE ACT. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE AO ALSO NOTED THAT ELECTRIC CONSUMPTION OF UNIT S DURING THE YEAR WAS VERY LOW WHICH DID NOT JUSTIFY THE AMOUNT AND QUANTUM OF THE MANUFACTURING OF GOODS WHICH WERE CL AIMED TO HAVE BEEN EXPORTED BY THE ASSESSEE. THUS ACCORDING TO THE AO NO MANUFACTURING ACTIVITIES WERE CARRIED OUT AT THE SEZ. APART FROM THE ABOVE, THE AO ALSO MADE COMPARISON OF THE GROSS PROFIT MARGIN OF THE ASSESSEE WITH THE OTHER UNITS AND TRI ED TO JUSTIFY THAT THE GP OF THE ASSESSEE IS VERY HIGH VIS--VIS THE OTHER UNITS IN THE SIMILAR LINES OF BUSINESS. THE AO, WITHOUT PREJUDICE, ALSO NOTED THAT EVEN IF THE ASSESSEE IS ENTITLED TO EXE MPTION UNDER SECTION 10AA BUT THE SAME SHOULD BE RESTRICTED TO 2 % OF THE TURNOVER. FINALLY, THE AO REJECTED THE CLAIM OF DE DUCTION UNDER SECTION 10AA AND ASSESSED THE INCOME OF THE ASSESSE E AT RS.10,13,80,420/- BY FRAMING ASSESSMENT UNDER SECTI ON 143(3) OF THE ACT VIDE ORDER DATED 28.12.2010. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 6. HAVING HELD THAT MANUFACTURING ACTIVITY TOOK PL ACE IN THE SEZ PREMISE OF THE ASSESSEE IN INSTANT YEAR, ANOTHER ISSUE ARISES AS T O REASONABLENESS OF PROFIT DISCLOSED BY THE ASSESSEE. THE AO HAD TAKEN AN ALTE RNATIVE PLEA THAT IF AN APPELLATE AUTHORITY FINDS THAT MANUFACTURING ACTIVITY HAD TAK EN PLACE IN THE SEZ, THE G.P. ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 4 SHOULD BE RESTRICTED AT 2% AS AGAINST 11% DECLARED BY THE ASSESSEE AND DEDUCTION TO BE ALLOWED ACCORDINGLY. THE AO HAD RELIED ON CER TAIN INSTANCES AS MENTIONED IN THE ASSESSMENT ORDER. AS MENTIONED EARLIER, THERE I S NO EVIDENCE ON RECORDS THAT ASSESSEE HAD ANY CONNECTION WITH IMPORTER OR EXPORT ER. THERE IS NO EVIDENCE OR ALLEGATION THAT THERE WAS UNDER INVOICING OF IMPORT OR OVER INVOICING OF EXPORT. DURING THE COURSE OF ASSESSMENT PROCEEDING, EXAMINA TION OF FIVE PARTIES WHOSE FINANCIAL DATA WAS RELIED BY AO WAS ASKED FOR, WHIC H WAS NOT GIVEN BY THE AO EVEN THOUGH THERE WAS A TIME OF MORETHAN ONE YEAR AVAILA BLE FOR ASSESSMENT FOR GETTING BARRED BY LIMITATION. THE ASSESSEE HAD SUCCESSFULLY ESTABLISHED THAT COMPARISON DONE BY THE AO OF THE 5 PARTIES WAS NOT PROPER. THR EE PARTIES WERE DOING TRADING OF GOLD COINS ( PURCHASE AND SALE OF GOLD COINS) WHER EAS ASSESSEE IS NOT ENGAGED IN TRADING OF GOLD COINS BUT INVOLVED IN MANUFACTURING OF GOLD MEDALLION FROM GOLD BARS IMPORTED FROM ABROAD AND THERE IS A VALUE ADDI TION TO THE END SALE PRODUCT IN THE CASE OF APPELLANT. MOREOVER THE INSTANCES RELIE D UPON BY THE AO RELATES TO LOCAL TRADING AND NOT OF EXPORT. THE RATE OF PROFIT IN EX PORT AND DOMESTIC SALE INVARIABLY DIFFERS. SIMILARLY RATE OF PROFIT IN RETAIL AND WHO LESALE VARIES. IN CASE OF ONE PARTY I.E. TO SAY RSBL THE AO HAD PICKED UP SELECTIVE DATA FRO M THE MCX DATA FOR DETERMINING PURCHASE OF GOLD BARS AND MAKING SUCH WEIRD ASSUMPT ION THE SAME CANNOT BE COMPARED TO ACTUAL RESULTS, SIMILAR DATA IS PICKED UP BY THE AO IN RESPECT OF M/S NIBR BOLIAN PVT. LTD., THE DETAILS OF WHICH WERE NO T DISCLOSED TO THE ASSESSEE. THESE COMPARISONS AND ITS AUTHENTICITY DID NOT INSPIRE CO NFIDENCE. THE LD. AR HAD RELIED ON RATE OF PROFIT IN DEALINGS BY BANKS IN TRADING O F GOLD COINS (SBI AND HDFC) WHICH WAS AVAILABLE ON BANKS WEBSITE ON DAILY BASIS WHICH SHOWS GP IN THE RANGE OF 11% TO 15%. THE LD.AR HAD ALSO RELIED ON GP OF MANUFACT URING UNIT IN SEZ OF ANOTHER PARTY I.E. TO SAY RIDDHI SIDDHI BULLION WHICH WAS M ORE THAN 15% AND THE SAME IS NOT DENIED BY THE AO. THE AO HAD NOT POINTED OUT ANY DE FECTS OR IRREGULARABLE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE SO AS TO RESTRICT THE PROFIT AT MEAGER LEVEL OF 2%. THERE SEEMS NO JUSTIFICATION OR LOGIC FOR ARRIVING AT FIGURE OF 2% WHICH IS BASED ON INCORRECT BASIS. AT THE SAME TIME NP @ 10.89% AS DI SCLOSED BY THE ASSESSEE APPEARS TO BE HIGH, MOREOVER THERE IS NO MUCH VARIA TION BETWEEN GP (11%) AND NP (10.89%) WHICH NORMALLY AND GENERALLY DID NOT HAPPE N. IN SUCH DOLDRUMS STATE OF AFFAIRS LEGISLATIVE PRESUMPTION REDRESS THE ISSUE. AS REGARDS THE REASONABILITY OF NET PROFIT THE IT ACT 1961 ITSELF HAD GIVEN INDICATION OF PRESUMPTIVE PROFIT WHERE BY COMPUTATION OF NP 8% ( SAY U/S 44AD AND ALSO DTC PR OVISIONS) IS CONSIDERED JUST AND REASONABLE. THE STATUE ITSELF HAD PRESUMED NP @ 8% NORMALLY AND GENERALLY. THEREFORE IN ABSENCE OF ANY CONTRARY RELIABLE FACTS , IT WOULD BE REASONABLE TO CONSIDER NORMAL PROFIT @ 8% FROM ORDINARY BUSINESS OPERATIONS OF MANUFACTURING OF GOLD MEDALLION. APPLYING THIS CRITERIA, IT WOULD BE JUST AND PROPER TO ALLOW DEDUCTION U/S 10AA OF THE ACT RESTRICTING TO NP @ O F 8% AFTER EXCLUSION OF FOREIGN EXCHANGE GAIN, AN EXTRAORDINARY AND EXCEPTIONAL ITE M OF PROFIT FOR WHICH DISCUSSION IS MADE HEREAFTER IN GR. NO. 4. ACCORDINGLY THE AO SHALL COMPUTE DEDUCTIONS U/S10AA. IN TERMS OF DISCUSSION (HEREINAFTER REFE RRED TO AS THE AO) ABOVE THE APPEAL IS PARTLY ALLOWED IN RESPECT OF GROUND NO.1, 2 AND 3. 6. THE LD. A.R., AT THE OUTSET, SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. RSBL J EWELS IN ITA ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 5 NO.1923/M/2014 A.Y. 2010-11 WHEREIN THE TRIBUNAL UN DER THE SIMILAR SET OF FACTS HELD THAT THE ASSESSEE IS ENTI TLED TO EXEMPTION UNDER SECTION 10AA AND THERE IS NO JUSTIF ICATION FOR TAKING THE GP @ 2% AS AGAINST 10.77% OF THE ASSESS EE. THE LD. A.R. THEREFORE, PRAYED BEFORE THE BENCH THAT IN VIE W OF THE SAID ORDER OF THE COORDINATE BENCH, THE APPEAL OF THE AS SESSEE MAY BE ALLOWED AND THAT OF THE REVENUE SHOULD BE DISMISSED . 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AO AND GROUNDS OF APPEALS FILED BY THE REVENUE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISION CITED BY THE LD. A.R. DURING THE COURSE OF HEARING. WE F IND THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE MATERIALLY SA ME VIS--VIS THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN THE CA SE OF ITO VS. RSBL JEWELS (SUPRA) WHEREIN THE CO-ORDINATE BENCH O F THE TRIBUNAL HAS TAKEN A VIEW THAT ONCE IT IS HELD BY T HE APPELLATE AUTHORITY THAT THERE IS A MANUFACTURING ACTIVITY CA RRIED OUT AT THE SEZ BY THE ASSESSEE THEN THE PROFIT OF THE ASSE SSEE CAN NOT BE DISTURBED AS THE AO HAS FAILED TO POINT OUT ANY DEFECTS OR DEFICIENCY IN THE SAID ORDER. THE OPERATIVE PART I S REPRODUCED AS UNDER: 2.1.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT ASSESSEE HAS CARRIED OUT MANUFACTURING ACTIVITY IN SEZ UNIT IN THE YEAR UNDER CONSIDERATION. THE MAIN ISSUE ON WHICH DEDUCTION HA S BEEN DISALLOWED IS CONSUMPTION OF ELECTRICITY. REGARDING THIS, LEARNED AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO PAGE NO.37 OF THE PAPER BOOK WHERE IN ON 11TH AUGUST, 2009 TO 13TH SEPTEMBER, 2009, CONSUMPTION IS SHOWN TO BE 20 UNITS AND IN THIS BACKGROUND, IT WAS SUBMITTED THAT IT WAS SUFFICIENT CONSUMPTION OF ELECTRICITY FOR CARRYING OUT MANUFACTURING OF MEDALLIONS FROM 25KG. OF GOLD IMPORTED BY ASSESSEE. THE SAID MEDALLIONS WERE EXPORTED WHICH IS NOT IN D ISPUTE. OTHER FACTS ARE ALSO NOT IN DISPUTE. IN THIS REGARD, LEARNED AUTHORIZED REPR ESENTATIVE DREW OUR ATTENTION TO THE ORDER OF ITAT G BENCH IN ITA NOS.5811 & 6653/ MUM/2013 FOR A.Y 2009-10 IN ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 6 CASE OF RIDDI SIDDHI BULLIONS LTD. VS. ACIT, WHEREI N VIDE PARA 12, TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UND ER: 12. DECISION OF THE TRIBUNAL - CLAIM OF EXEMPTION U/S L0A OF THE ACT: WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE OF BONA FI DE OF THE MANUFACTURING ACTIVITY AT SEZ, SURAT FOR EARNING EXEMPT INCOME OF RS. 6.43 CRS AS WELL AS THE UNDER VALUATION OF THE PURCHASE OF GOLD BARS WH ILE BRINING INTO SEZ, SURAT. IN THIS REGARD, PROMINENT ISSUES FOR ADJUDIC ATION ARE THE ASSESSEE'S ABILITY TO EARN THE EXEMPT INCOME OF RS 6.43CR WITH MANUFACTURING ACTIVITY OF TWO DAYS AT SEZ, SURAT, DISCREPANCY WITH REGARD TO CONSUMPTION OF MINIMUM UNITS OF ELECTRICITY AND NON CLAIMING OF LA BOUR CHARGES INVOLVING MIS. S.L. INDUSTRIES TO THE EXTENT OF 110 KGS OF GO LD MEDALLIONS. SO FAR AS ELECTRICITY CONSUMPTION IS CONCERNED, IT IS THE CLA IM OF THE ASSESSEE THAT FOR USE OF PLANT AND MACHINERY WORTH RS. 16.14 LAKHS, A ROUND 65.60 UNITS @ 8.2 UNITS PER 8 HRS, IS ENOUGH. THE BOOKS OF ACCOUNTS S UPPORTS THE SAME IN FAVOUR OF THE CLAIM OF THE ASSESSEE AND THE CONSUMP TION IS ONLY AROUND 130 UNITS, WHICH IS REPORTED IN THE ELECTRICITY METERS. ALL OTHER DISCUSSIONS ON THIS ISSUE IS DEBATABLE AND THE SAME IS INCONCLUSIV E. IT IS A FACT THAT THE TOTAL UNITS CONSUMED IN THOSE TWO MONTHS OF SEPTEMBER, 20 08 (943 UNITS) ANDOCTOBER, 2008 (870 UNITS) EXPLAINS THE CONSUMPTI ON OF ELECTRICITY IN THOSE TWO MONTHS. THEREFORE, THIS DISCREPANCY IN EL ECTRICITY CONSUMPTION IS INCONCLUSIVE AND IT CANNOT BE STATED THAT THE MACHI NERY WAS NOT PUT TO USE. IT IS NOT THE CASE OF THE REVENUE THAT THE PROCESS OF MAKING GOLDMEDALLIONS INVOLVES HIGH VOLTAGE PLANT AND MACHINERY REQUIRING HUGE AMOUNT OF ELECTRICITY. AO HAS NOT BROUGHT ANY INCRIMINATING M ATERIAL TO SUGGEST THAT THE ASSESSEE SUPPRESSED ANY ELECTRICITY CONSUMPTION OUTSIDE THE BOOKS. SIMILAR CLAIMS U/S10A OF THE ACT RE MADE IN EARLIER AYS SINCE 205-06 AND THE SAME ARE NOT DENIED TOO. THEREFORE, ON THIS ISSUE, CONSIDERING THE ABSENCE ANY INCRIMINATING EVIDENCES AGAINST THE ASSESSEE, W E APPROVE THE CONTENTION OF THE ASSESSEE. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACT S BEING SIMILAR, SO, FOLLOWING SAME REASONING, WE ARE OF THE VIEW THAT ASSESSEE WO ULD HAVE MANUFACTURED MEDALLIONS 25KG. BY CONSUMING 20 UNITS AS CLAIMED B Y ASSESSEE. IN VIEW OF THIS, ORDER OF CIT(A) ON THE ISSUE IS UPHELD, WHEREBY HE HAS ALLOWED THIS CLAIM OF ASSESSEE. 2.2 COMING TO THE ISSUE OF NET PROFIT. ASSESSEE FIR M HAS SHOWN TURNOVER OF RS.3,81,14,722/- ON WHICH GROSS PROFIT WAS SHOWN AT RS.41,05,538/- @ 10.77% AND NET PROFIT WAS SHOWN AT RS.35,48,810/- @ 9.31%. A S URVEY U/S.133 OF THE ACT WAS CONDUCTED IN ASSESSEES CASE ON 21.09.2010. THE SUR VEY PARTY VISITED THE SEZ UNIT AT SACHIN, SURAT AND STATED THAT BOOKS OF ACCOUNTS WER E NOT MAINTAINED BY ASSESSEE, THEREFORE, AMOUNT OF GROSS PROFIT AND NET PROFIT CO ULD NOT BE ASCERTAINED. THE SURVEY PARTY FURTHER REPORTED THAT CERTAIN OTHER PA RTIES INVOLVED IN SIMILAR BUSINESS ACTIVITIES HAD DECLARED GROSS PROFIT @ 1% TO 4% APP ROXIMATELY OF TURNOVER WHICH IS LOW AS COMPARED TO THOSE SHOWN BY ASSESSEE. ACCORDI NGLY, HE RESTRICTED THE SAME TO 2% OF TOTAL TURNOVER. IN APPEAL, CIT(A) GRANTED RELIEF TO ASSESSEE. ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 7 2.2.1 SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE FOR THE REASON AS IN ITS GROUND OF APPEAL ABOVE. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 2.2.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD, WE FIND THIS ISSUE BEFORE US IS REGARDING REASONABLENESS OF THE PROFIT DISCLOSED BY ASSESSEE. ASSESSING OFFICER HAS TAKEN ALTERNATIVE PLEA THAT I F AN APPELLATE AUTHORITY FINDS THAT MANUFACTURING ACTIVITY TOOK PLACE IN SEZ, GROSS PRO FIT BE RESTRICTED AT 2% AS AGAINST 10.77% DECLARED BY ASSESSEE AND DEDUCTION TO BE ALL OWED ACCORDINGLY. ASSESSEE HAD PRODUCED RELEVANT RECORDS CALLED FOR AND REQUIS ITE MATERIAL AND DOCUMENTS, WHEREAS ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO DOUBT THE MANUFACTURING ACTIVITY UNDERTAKEN BY ASSESSEE AT IT S SEZ UNIT. AS DISCUSSED ABOVE, ACCOUNTS OF ASSESSEE WERE SUBJECTED TO AUDIT WHICH MEANS THAT STATUTORY AUDITOR HAS LOOKED INTO PURCHASES AND SALES INVOICES AND AL SO ALL THE CUSTOM AND OTHER DOCUMENTS. THERE IS NO QUALIFICATION IN AUDITORS R EPORT WHICH POINTED OUT ANY DEFICIENCY, WHICH ONLY STRENGTHENED THE FACT AS PUR CHASES AND SALES ARE GENUINE. ASSESSING OFFICER HAS NOT POINTED OUT ANY FAULT OR DEFECT BROUGHT ON RECORD ANY DEFECTS FOUND IN BOOKS OF ACCOUNT SO AS TO RESTRICT THE PROFIT AT 2%. IN THIS BACKGROUND, THERE WAS NO JUSTIFICATION FOR ARRIVING AT A FIGURE OF 2% SPECIALLY WHEN BASIS OF WHICH 2% IS CALCULATED ITSELF NOT JUSTIFIE D. IN VIEW OF ABOVE, THERE WAS NO JUSTIFICATION FOR ARRIVING AT FIGURE OF 2% ITSELF B ASED ON INCORRECT BASIS. ACCORDINGLY, CIT(A) RIGHT DIRECTED THE ASSESSING OFFICER TO ALLO W DEDUCTION U/S.10AA AS CLAIMED BY ASSESSEE. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. 3. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSE D. 9. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISI ON OF THE CO- ORDINATE BENCH OF THE TRIBUNAL, ALLOW THE APPEAL OF THE ASSESSEE. 10. SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E, THE APPEAL OF THE REVENUE HAS BECOME INFRUCTUOUS AND IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.03.2019. * KISHORE, SR. P.S. ITA NO.5764/M/2012 & ITA NO.5800/M/2012 M/S. RIALTO EXIM 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.