JAGKUMAR & CO. P.LTD, MUMBAI V. ITO WD 2(2)(1), MUMBAI

ITA 6123/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2736 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 15-01-2015
• Assessment Year: 1996-1997
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL J, BENC H MUMBAI BEFORE SHRI G.S.PANNU, AM & SHRI SANJAY GARG, JM ./ ITA NOS.6151 TO 6153 & 6123/MUM/2011 ( ! ! ! ! / ASSESSMENT YEARS :1994-95 TO 1997-98) JAGKUMAR & CO. PVT. LTD., 10/11, PROSPECT CHAMBERS, ANNEXE-317-21, D.N.ROAD, FORT, MUMBAI-400001 VS. ITO WARD-2(2)(1), MUMBAI '# $ ./ % ./PAN/GIR NO. : AAACJ 1367 N ( #& /APPELLANT ) .. ( '(#& / RESPONDENT ) )* + ++ + , , , , /ASSESSEE BY : SHRI SAMEER G. DALAL ' + ++ + , , , , /REVENUE BY : SHRI AKHILENDRA YADAV + *$ / DATE OF HEARING : 04/08/2015 -.! + *$ /DATE OF PRONOUNCEMENT 06/11/2015 /0 /0 /0 /0 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER : THIS ORDER SHALL GOVERN THE DISPOSAL OF FOUR APPEAL S, FILED BY THE ASSESSEE, ARISING OUT OF THE ORDER, PASSED BY THE C OMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)], MUMBAI, RELATING TO ASSESSMENT YEARS 1994-95 TO 1997-98, ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN DISALLOWING THE CLAIM OF THE APPELLANT FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 2. THE APPELLANT SUBMITS THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE SALARY REGISTER WAS NOT AUTHENTIC AND IN C ONCLUDING THAT THE APPELLANT HAD FAILED TO BRING ANY MATERIAL ON RECORD TO REBUT THE STATEMENT OF THE DIRECTOR MADE DURING THE SURVEY OPERATIONS IGNORING THE SUBMISSION MADE IN APPELLATE PROCEEDINGS AND IN HOLDING THAT THE ORDER OF THE PTO A GOVERNMENT AUTHORITY WAS SELF SERVING AND THA T THE CONDITIONS OF S.80IA WERE THUS NOT SATISFIED. ITA NOS.6151-6153 & 6123/11 2 2. AS THE ISSUE INVOLVED IN ALL THE FOUR APPEALS I S COMMON, THEREFORE, ALL THE APPEALS HAVE BEEN HEARD AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. FOR THE SAKE OF BREVITY , WE SHALL TAKE INTO CONSIDERATION THE FACTS STATED IN ITA NO.6123/MUM/2 011 (AY : 1996- 97). 2. SUCCINCT FACTS GIVING RISE TO THE APPEAL ARE THA T THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF VARIOUS ITEMS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30-11-1996 DECLARING TOTAL INCO ME AT NIL FOR A.Y.1996-97. THEREAFTER THE ASSESSMENT WAS COMPLETE D U/S.143(3) OF THE ACT BY THE ASSESSING OFFICER (HEREINAFTER REFER RED TO AS THE AO) DETERMINING TOTAL INCOME AT RS.33,02,041/- AFTER DI SALLOWING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IA O F RS.33,02,041/-. AGAINST THIS ORDER, THE ASSESSEE PREFERRED APPEAL B EFORE THE CIT(A), WHEREBY THE CIT(A) PASSED AN EX-PARTE ORDER CONFIRM ING THE DISALLOWANCE MADE BY THE AO. ON FURTHER APPEAL BEFO RE THE TRIBUNAL, THE MATTER WAS RESTORED BACK TO THE FILE OF CIT(A) VIDE ORDER DATED 31- 5-2004, PASSED IN ITA NO.5784/MUM/1999. THIS TIME, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY ALLOWING THE DEDUCTION U/S.80IA OF THE ACT, AGAINST WHICH THE DEPARTMENT CAME BEFOR E THE TRIBUNAL, WHEREIN THE TRIBUNAL VIDE ORDER DATED 28-4-2009, PA SSED IN ITA NO.718/MUM/2006, RESTORED THE APPEAL OF THE REVENUE TO THE FILE OF AO TO VERIFY AS TO WHETHER THE EMPLOYEES/WORKERS SHOWN BY THE ASSESSEE WERE INTEGRALLY CONNECTED WITH THE MANUFACTURING OR PRODUCTION PROCESS ITA NOS.6151-6153 & 6123/11 3 OF THE ASSESSEE. HOWEVER, THE AO KEPT ON ITS DECISI ON AS WAS BEFORE BY HOLDING THAT THE ASSESSEE FAILED TO FURNISH CLAS SIFICATION (DESIGNATION) OF THE EMPLOYEES/WORKERS AS TO WHETHE R THE EMPLOYEES/WORKERS WERE INTEGRALLY CONNECTED WITH TH E MANUFACTURING OR PRODUCTION PROCESS. ON FURTHER APPEAL BEFORE THE CIT(A), THE ACTION OF THE AO WAS UPHELD. NOW, THE ASSESSEE IS IN TURN TO APPEAL BEFORE THE TRIBUNAL, AGITATING THE ORDERS OF THE AUTHORITI ES BELOW. 3. LD. AR SUBMITTED THAT THE WORKERS WERE EMPLOYED FOR THE PURPOSE OF MANUFACTURING PROCESS AT THE SILVASSA UN IT. IT WAS FURTHER CONTENTION OF LD. AR THAT THE WORKERS WERE LOW PAID PERSONS OF SALARY OF ABOUT RS.5000/- OR LESS AND NO PARTICULARS DESIGNAT IONS WERE ASSIGNED TO THEM. IT WAS ALSO ARGUED BY LD. AR THAT THE WORD S USED IN THE SECTION IS WORKERS AND SUCH PERSON, BEING LOW PAI D EMPLOYED IN MANUFACTURING UNIT NORMALLY DO NOT HAVE ANY PARTICU LAR DESIGNATION AT ALL AND FOR THIS REASONS THERE ARE NO RECORDS IN SU PPORT OF THE DESIGNATION, HOWEVER, WORKERS NAME ARE ALREADY FIGU RING IN THE DETAILS SUBMITTED BEFORE THE LOWER AUTHORITIES. LD. AR FURT HER SUBMITTED THAT THE EMPLOYMENT OF WORKERS IN THE UNIT ITSELF WAS SO LELY FOR THE PURPOSE OF CARRYING OUT MANUFACTURING/PROCESSING ACTIVITY A ND BY VIRTUE OF THIS FACT WORKERS WERE INTEGRALLY CONNECTED WITH THE PRO CESS. THE LD. A.R. HAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAD BEEN REGISTERED AS SSI UNIT. IT OBTAINED THE REGISTRATION CERTIFIC ATION UNDER THE EXCISE LAWS AS THE GOODS MANUFACTURED BY IT WERE CHARGEABL E TO EXCISE DUTY. ITA NOS.6151-6153 & 6123/11 4 THE ASSESSEE COMPANY HAD ALSO BEEN REGISTERED WITH SALES TAX AUTHORITIES AND WITH PROFESSIONAL TAX AUTHORITIES. IN ITS RETURN FILED BEFORE THE PROFESSIONAL TAX AUTHORITIES ON 27.09.96 FOR THE PERIOD FROM 01.04.95 TO 31.03.96, THE MONTHWISE DETAIL OF THE W ORKERS WAS SUBMITTED AND THAT THE MONTHLY RETURNS CLEARLY SHOW ED THE NUMBER OF WORKERS OF THE EACH MONTH. THE TOTAL LIABILITY FOR PAYMENT OF PROFESSIONAL TAX WAS SHOWN AT RS.5,565/-. THE COMP ANY WAS FACING GREAT FINANCIAL DIFFICULTIES AND THE COMPANY COULD NOT MAKE THE FINANCIAL PROFESSIONAL TAX. SUBSEQUENTLY, THE PROFESSIONAL T AX AUTHORITIES PASSED THE ASSESSMENT ORDER FOR THE PERIOD 01.04.93 TO 31.03.01 AND ASSESSED THE PROFESSIONAL TAX LIABILITY. THE PROFE SSIONAL TAX LIABILITY ASSESSED FOR THE YEAR UNDER CONSIDERATION EXACTLY M ATCHED WITH THE LIABILITIES DISCLOSED IN THE RETURN FILED BY THE AS SESSEE UNDER THE PROFESSIONAL TAX ACT. THE LD. A.R. HAS FURTHER INV ITED OUR ATTENTION TO THE ORDER OF THE TRIBUNAL DATED 28.04.2009 VIDE WHI CH THE TRIBUNAL HAD REMANDED THE MATTER BACK TO THE FILE OF THE AO FOR THE LIMITED PURPOSE TO VERIFY WHETHER THE EMPLOYEES/WORKERS SHOWN BY TH E ASSESSEE WERE INTEGRALLY CONNECTED WITH MANUFACTURING OR PRODUCTI ON PROCESS. THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL IS REPRO DUCED AS UNDER: 7. ON THE RIVAL SUBMISSIONS OF THE PARTIES, WE FIND THAT THE CONTROVERSY IS REVOLVING AROUND THE COMPLIANCE OF O NE CONDITION I.E. IN RESPECT OF EMPLOYING TEN OR MORE WORKERS IN THE MANUFACTURING OR PRODUCTION. AS PER CLAUSE (IV) TO SECTION 80-IA(2) ONE OF THE CONDITIONS IS THAT ASSESSEE SHOULD EMPLOY TE N OR MORE WORKERS IN THE MANUFACTURING OR PRODUCTION OF THE A RTICLES OR GOODS. IN FACT THE TRIBUNAL HAS TAKEN VERY MUCH WI DER VIEW IN THE CASE OF SHRI FRAGNANCE_P. LTD. (SUPRA) BY HOLDING T HAT ALL THE ITA NOS.6151-6153 & 6123/11 5 EMPLOYEES/WORKERS CONNECTED WITH THE MANUFACTURING PROCESS INCLUDING THE WORKERS WHICH ARE INDIRECTLY HELPING THE PROCESS ALSO FORMS THE INTEGRAL PART OF THE MANUFACTURING PROCESS OR P RODUCTION. WE FIND THAT THIS CONTROVERSY IS NOT ARISING FROM THE ORDER OF THE LD CIT(A) OR THE A.O. IN RESPECT OF THE DECISION RELIED ON BY THE LD D.R. IN THE CASE OF THE SHRI FRAGNANCE P. LTD. (SUPRA), THE CONTROVERSY WAS BASED ON SPECIFIC ISSU E OF CLASSIFICATION OF THE WORKERS BUT THE A.O. HAS NO OCCASION TO EXAMINE THI S ASPECT. IN OUR OPINION, AS HELD BY THE HON'BLE HIGH COURT OF BOMBA Y IN THE CASE OF ORMERODS PVT. LTD. (SUPRA), EVEN THOUQH PRIMA FADE THE ASSESSEE HAS MADE THE SUBSTANTIAL COMPLIANCE OF A CONDITION OF EMPLOYING MINIMUM TEN WORKERS IN THE MANUFACTURING AND PRODUCTION OF GOOD S BUT NOTHING HAS BEEN PRODUCED BEFORE US TO SHOW THAT SAID EMPLOYEES/WORK ERS WERE INTEGRALLY CONNECTED WITH MANUFACTURING PROCESS AS HELD IN THE CASE OF SHRI FRAGNANCE PVT. LTD. (SUPRA). WE THEREFORE CONSIDER IT TO REST ORE THIS ISSUE FOR LIMITED PURPOSE TO VERIFY WHETHER THE EMPLOYEES/WORKERS SHO WN BY THE ASSESSEE WERE INTEGRALLY CONNECTED WITH THE MANUFACTURING OR PRODUCTION PROCESS. THE A.O. IS DIRECTED TO GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER PRINCIPLES OF NATURAL JUSTICE. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO. 4. A PERUSAL OF THE ABOVE REPRODUCED OBSERVATION OF THE TRIBUNAL REVEALS THAT THE TRIBUNAL HAS CATEGORICALLY HELD AN D DISTINGUISHED THE CASE OF SHRI FRAGRANCE PVT. LTD. VS. ITO 20 SOT 40, HOLDING THAT THE CONTROVERSY AS TO THE ISSUE OF CLASSIFICATION OF WO RKERS IS NOT ARISING FROM THE FACTS OF THE PRESENT CASE. IT HAS ALSO BE EN OBSERVED BY THE TRIBUNAL THAT IN THE CASE OF SHRI FRAGRANCE PVT. L TD. (SUPRA), THE TRIBUNAL HAD TAKEN A VERY MUCH WIDER VIEW BY HOLDIN G THAT ALL THE EMPLOYEES/WORKERS CONNECTED WITH THE MANUFACTURING PROCESS INCLUDING THE WORKERS WHICH ARE INDIRECTLY HELPING THE PROCESS AND ALSO FORMS THE INTEGRAL PART OF THE MANUFACTURING PROCES S OR PRODUCTION. THE TRIBUNAL WHILE RESTORING THE ISSUE BACK TO THE FILE OF THE AO HAS CATEGORICALLY HELD THAT THIS CONTROVERSY WAS NOT IN VOLVED IN THE CASE AND THE MATTER WAS RESTORED FOR THE LIMITED PURPOSE TO VERIFY WHETHER THE EMPLOYEES/WORKERS SHOWN BY THE ASSESSEE WERE IN TEGRALLY ITA NOS.6151-6153 & 6123/11 6 CONNECTED WITH MANUFACTURING PRODUCTION PROCESS. H OWEVER, WE FIND FROM THE ORDER OF THE AO THAT THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE AGAIN RELYING IN THE CASE OF SHRI FRAGRANC E PVT. LTD. (SUPRA) BY OBSERVING THAT THE ASSESSEE HAD FAILED TO FURNIS H THE CLASSIFICATION (DESIGNATION) OF EMPLOYEES/WORKERS. THUS, THE AO H AS ACTED AGAINST THE DIRECTIONS GIVEN BY THE TRIBUNAL. WE FIND THAT THE LD. CIT(A) HAS ALSO OVERLOOKED THIS ASPECT OF THE MATTER. IN VIEW OF THIS, THE MATTER NEEDS RECONSIDERATION AT THE HANDS OF THE AO. WE, THEREFORE, RESTORE THE MATTER TO THE FILE OF THE AO TO DECIDE THE SAME STRICTLY AS PER THE DIRECTIONS GIVEN IN THE ORDER OF THE TRIBUNAL DATED 28.04.09. NEEDLESS TO SAY THAT THE AO WILL GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND THEN TO DECIDE THE ISSUE BY WA Y OF A SPEAKING ORDER. SINCE THE FACTS AND ISSUES INVOLVED IN ALL THE CAP TIONED APPEALS ARE IDENTICAL IN NATURE, HENCE THE SAME ARE DISPOSE D OF WITH THE IDENTICAL DIRECTIONS. 5. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSES SEE ARE HEREBY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06/11/20 15. SD/- SD/- G.S.PANNU SANJAY GARG $ /' $ /' $ /' $ /' / ACCOUNTANT MEMBER /' /' /' /' / JUDICIAL MEMBER MUMBAI ; 1/ DATED 06/11/2015 '. .3 /PKM , . / PS ITA NOS.6151-6153 & 6123/11 7 /0 /0 /0 /0 + ++ + '*38 '*38 '*38 '*38 98!* 98!* 98!* 98!* / COPY OF THE ORDER FORWARDED TO : /0 /0 /0 /0 / BY ORDER, : :: : / ; ; ; ; ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. #& / THE APPELLANT 2. '(#& / THE RESPONDENT. 3. <* ( ) / THE CIT(A), MUMBAI. 4. <* / CIT 5. 8 => '* , , / DR, ITAT, MUMBAI 6. >? @ / GUARD FILE. (8* '* //TRUE COPY//