DCIT, Nashik V. M/s Aerosys, Nashik

ITA 703/PUN/2010

• Counselvise Citation: 70324514 RSA 2010
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-07-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Retraction
• Section: 143(3); 80IB; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 700 TO 705/PN/2010 (ASSESSMENT YEARS 1997-1998 TO 2002-03) DY. COMMISSIONER OF INCOME TAX, CIRCLE-4, NASHIK. .. APPELLANT VS. M/S. AEROSYS, FLAT NO. 12, UMANG RESIDENCY, ASHWIN NAGAR, CIDCO, NASHIK. .. RESPONDENT PAN NO.AAEFA 0506B ASSESSEE BY : MS. DEEPA KHARE DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 17-07-2012 DATE OF PRONOUNCEMENT : 25-07-2012 ORDER PER BENCH : ITA NOS. 700/PN/2010 TO 704/PN/2010 FILED BY THE RE VENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 23-02-2010 OF THE CI T (A)-I, NASHIK RELATING TO ASSESSMENT YEAR 1997-1998 TO 2001-02. ITA NO. 705/ PN/2010 FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23-02-2 010 OF THE CIT(A)-I, NASHIK RELATING TO ASSESSMENT YEAR 2002-03. SINCE COMMON GROUNDS ARE INVOLVED IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 700/PN/2010 (ASSESSMENT YEAR 1997-98) : 2. M/S. AEROSYS, A PARTNERSHIP FIRM WITH A UNIT AT SILVASSA, IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PCB BOARDS AND CONNECT ED LOOMS FOR THE USE IN FIGHTER AIRCRAFTS MANUFACTURED BY HINDUSTAN AERONAU TICS LTD. THE ENTIRE SALES OF THIS CONCERN IS TO AN ASSOCIATE FIRM M/S. SIGMA ELE CTRO SYSTEMS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. AEROS YS, THE AO CARRIED OUT A SURVEY 2 U/S.133A(1) ON 29-10-2003. ON THE BASIS OF FINDINGS OF THE SURVEY AND ENQUIRIES CARRIED OUT SUBSEQUENTLY THE AO CAME TO THE CONCLUS ION THAT THE ASSESSEE FIRM IS NOT ENTITLED TO DEDUCTION CLAIMED U/S. 80IA OF THE I.T. ACT ON ACCOUNT OF THE FOLLOWING REASONS : A. THE ASSESSEE HAS NOT EMPLOYED 10 OR MORE EMPLOYE ES IN THE MANUFACTURING ACTIVITY AT SILVASSA. B. ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY OF MAN UFACTURING BUT ONLY THE ACTIVITY OF STITCHING OF SLEEVES AND ASSEMBLING OF CABLE LOOMS ARE DONE. C. THE ASSESSEE HAS NOT USED ANY POWER FOR ACTIVITY AS WAS SHOWN FROM THE ELECTRICITY BILLS IMPOUNDED WHICH SHOWS THAT THE BI LL OF ONLY RS 3,626/- WHICH HAS ALSO BEEN CONFIRMED BY SRI UMESH PATEL, THE ASSESSEES E MPLOYEE IN HIS STATEMENT. THUS THE ASSESSEE HAS NOT USED ANY POWER FOR THE ACTIVITY CA RRIED OUT BY IT WHICH REQUIRES THE ASSESSEE TO EMPLOY 20 OR MORE PERSONS, TO BE ELIGIB LE FOR THE DEDUCTION U/S.80IA. 2.1 THE AO ALSO DISALLOWED LABOUR CHARGES AND EXPEN SES ON ACCOUNT OF WAGES ON THE GROUND THAT THE MATERIAL GATHERED DURING THE SURVEY ACTION AND THE CONSEQUENT ENQUIRIES ESTABLISHED THAT NO EXPENSES ON THIS ACCOUNT HAS BEEN INCURRED BY THE ASSESSEE WHO WAS FOUND TO BE IN THE PRACTICE OF ISSUING BEARER CHEQUES TO PARTIES AND WHO WITHDREW THE AMOUNT IN C ASH AND RETURNED THE SAME TO THE ASSESSEE. FOR A.YS 1997-98 TO 2001-02 THE FOLL OWING WERE THE DISALLOWANCE/ADDITIONS MADE ON THE ABOVE ACCOUNTS. SR.NO. A.Y. RETURNED INCOME DISALLOWANCE 80IA (2) DISALLOWANCE LABOUR CHARGES DISALLOWANCE WAGES ETC. (RS.) ASSESSED INCOME (RS.) 1 1997 - 98 NIL 1398849 106282 158135 1663266 2 1998 - 99 NIL 2451559 234382 90660 2776601 3 1999 - 00 NIL 5559402 1311625 128606 6999633 4 2000 - 01 NIL 5537953 1426549 92493 7056995 5 2001 - 02 NIL 9438563 2522707 3 1450 11992720 2.2 IN THE APPEALS THE LEARNED CIT(A) CONFIRMED THE DENIAL OF DEDUCTION U/S.80IA OF THE I.T. ACT AS ALSO THE DISALLOWANCE O F LABOUR CHARGES, WAGES ETC. THE ASSESSEE PREFERRED APPEALS TO ITAT, PUNE AND THE TR IBUNAL VIDE ORDER DATED 30-06- 2008 RESTORED THE ISSUE TO THE FILE OF THE AO BY HO LDING AS UNDER : 3 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS A LSO THE APPLICABLE LEGAL POSITION. WE HAVE TAKEN PARTICULAR NOTE OF THE FAC T THAT THE ENTIRE BASIS OF DISALLOWANCE IS FINDINGS OF THE SURVEY PROCEEDINGS WHICH TOOK PLACE IN THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2004-05. WE HAVE ALSO NOTED THAT THE SURVEY TOOK PLACE AT THE POINT OF TIME WHEN DIWALI VACATIONS WERE ON, AND WHEN SUPERVISOR WAS NOT EVEN PRESENT. IN THE ENTIR E ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS NOT GIVEN ANY OPPORTU NITY TO CROSS EXAMINE UMESH PATEL, ON WHOSE STATEMENT THE ASSESSING OFFIC ER HAS PRIMARILY RELIED UPON. THE STATEMENT GIVEN BY UMESH PATEL WAS LATER RETRACTED, THOUGH THE ASSESSING OFFICER HAS BRUSHED ASIDE THIS RETRACTION AS UNDER PRESSURE. EVEN AS THE ASSESSING OFFICER USED THE STATEMENT GI VEN BY UMESH PATEL, HE DECLINED OPPORTUNITY TO CROSS EXAMINE HIM ON THE GR OUND THAT UMESH PATEL WAS NOT AN OUTSIDER BUT AN EMPLOYEE OF THE ASSESSEE . IT IS WELL SETTLED IN LAW THAT A STATEMENT TAKEN AT THE BACK OF THE ASSESSEE CANNOT BE USED AS AN EVIDENCE AGAINST HIM UNLESS HE IS CONFRONTED WITH T HE SAME AND IS ALLOWED CROSS EXAMINE THE PERSON GIVING SUCH A STATEMENT PR EJUDICIAL TO THE ASSESSEE. THE CROSS EXAMINATION WAS GIVEN BY THE CIT(A) IN TH E COURSE OF SOME OTHER PROCEEDINGS RELATING TO PENALTY UNDER SECTION 271(1 )(C), AND IN THE COURSE OF CROSS EXAMINATION, UMESH PATEL ADMITTED THAT HE WAS ONE OF THE WORKERS IN THE UNIT AND HIS STATEMENT WAS RECORDED AS SUPERVIS ORS AND OTHERS WERE NOT AVAILABLE DUE TO DIWALI VACATIONS. UMESH PATEL ALS O SUBMITTED THAT WHILE MAKING STATEMENTS ABOUT THE NUMBER OF WORKERS, HE D ID NOT TAKE INTO ACCOUNT THE WORKERS SUPPLIED BY CONTRACTORS. AS WE HAVE NO TED EARLIER IN THIS ORDER, SO FAR AS THE RELEVANT LABOUR CONTRACTORS WERE CONC ERNED, THE ASSESSING OFFICER HAS EXAMINED THE SAME BUT BRUSHED ASIDE THE EXAMINATION ON THE GROUND THAT THESE CONTRACTORS APPEARED TO BE TUTORE D. THE CIT(A) ACCEPTS THAT ONE OF THE FOUNDATIONS OF THE DISALLOWANCE IS DISCREET ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER, BUT THEN SUCH D ISCREET ENQUIRIES PER SE CANNOT BE MATERIAL ENOUGH TO DECLINE THE DEDUCTION. WHAT IS FOUND IN A LATER YEAR, INCIDENTALLY IN A YEAR IN WHICH EVEN DEDUCTI ON UNDER SECTION 80IA (2) WAS NOT CLAIMED AND IN WHICH THE PARTNERSHIP DID NO T EVEN SUBSIST, CANNOT BE SUFFICIENT MATERIAL TO DISREGARD THE BOOKS OF ACCOU NTS, SALARY REGISTERS, CASH BOOKS AND OTHER EVIDENCES FOR EARLIER YEARS. THE A SSESSING OFFICER HAS PROCEEDED TO DECLINE THE DEDUCTION ON THE GROUND TH AT WHAT WAS THE POSITION FOUND AT THE TIME OF SURVEY MUST HAVE BEEN EXACTLY THE SAME AS IN THE RELEVANT PREVIOUS YEAR, BUT, EVEN IF THAT BE SO, TH E ASSESSING OFFICER DOES NOT TAKE INTO ACCOUNT THE FACT THAT HE HAS HIMSELF EXAM INED THE LABOUR CONTRACTORS FOR THIS YEAR AND THE ASSESSING OFFICER FOUND NO INFIRMITIES IN THE STAND OF THE ASSESSEES. THERE IS ALSO NO DISPUTE A BOUT THE POSITION THAT TAXES WERE DULY DEDUCTED AT SOURCE FROM PAYMENTS MADE TO THESE LABOUR CONTRACTORS. THE FINDINGS IN A LATER PERIOD THAT S OME OF THE PAYMENTS MADE TO THE LABOUR CONTRACTORS WERE IMMEDIATELY WITHDRAW N FROM THE BANK, AND PURPORTEDLY RETURNED TO THE ASSESSEE, CANNOT BE REA SON ENOUGH TO ASSUME THAT THE PAYMENTS MADE TO THE LABOUR CONTRACTORS IN THIS PERIOD MUST BE BOGUS PAYMENTS. SUCH A CONCLUSION IS LEGALLY UNJUS TIFIABLE. THE MAIN BASIS FOR HOLDING THAT THERE WERE LESS THAN 10 PERSONS EM PLOYED AS AT THE RELEVANT POINT OF TIME IS THE STATEMENT GIVEN BY UMESH PATEL , THE FACT THAT DIARY OF MANOJ SAULENKE DOES NOT REFLECT PAYMENTS TO MORE TH AN 3-4 PERSONS AND THAT THE BOOKS OF ACCOUNTS ARE UNRELIABLE. NONE OF THES E REASONS IMPRESS US. THE STATEMENT GIVEN BY UMESH PATEL WAS NOT ONLY LAT ER RETRACTED BUT WAS ALSO FOUND TO BE INCONSISTENT IN THE CROSS EXAMINAT ION, THE PAYMENTS HAVING BEEN MADE BY MANOJ TO 3-4 PERSONS IS NOT REALLY CON CLUSIVE ABOUT THE 4 NUMBER OF WORKERS NOT ONLY BECAUSE HIS DIARY WAS NO THING MORE THAN A PETTY CASH BOOK WHICH TOOK INTO ACCOUNT THE PAYMENTS MADE BY THE SUPERVISOR BUT ALSO BECAUSE IT DID NOT TAKEN INTO ACCOUNT THE WORK ERS ENGAGED THROUGH THE LABOUT CONTRACTORS AND TO WHOM PAYMENTS WERE MADE B Y OTHERS, AND, FINALLY, THE BOOKS OF ACCOUNTS AND SALARY REGISTERS HAVE BEE N REJECTED BASED ON SUBJECTIVE PERCEPTIONS OF THE ASSESSING OFFICER. I N THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD R ECORDED THE STATEMENTS OF THE PARTNER AND ANOTHER WORKER, BOTH OF WHOM CON FIRMED THAT THE NUMBER OF PERSONS ACTUALLY WORKING AT THE UNIT WERE MORE T HAN 10. THE PAYMENT VOUCHERS ARE BOOKS OF ACCOUNTS SHOWING PAYMENTS TO THESE WORKERS WERE PRODUCED BEFORE THE ASSESSING OFFICER, AND THE PAYM ENTS TO MANY OF THEM WERE MADE THROUGH CHEQUES. IT IS NOW WELL SETTLED IN LAW THAT EVEN THE WORKERS EMPLOYED THROUGH THE LABOUR CONTRACTORS ARE TO BE INCLUDED IN THE DEFINITION OF THE EMPLOYEE, AS IS HELD BY HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. PRITHVIRAJ BHOORCHAND(280 ITR 94). IN VIEW OF ALL THESE REASONS, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS NOT JUSTIFIED IN PROCEEDING ON THE BASIS THAT THE NUMBER OF WORKERS AT SILVASSA UNIT WERE LESS THAN 10. THE OTHER ISSUE IS WHETHER OR NOT CI T(A) WAS JUSTIFIED IN HOLDING THAT NO MANUFACTURING OF PCB ACTUALLY TOOK PLACE AT SILVASSA. WE HAVE NOTED THAT EXCISE RECORDS SHOW THAT MANUFACTUR ING ACTIVITY TOOK PLACE AT SILVASSA, AND THAT THERE WAS IN FACT TRANSFER OF RAW MATERIAL FROM NASHIK TO SILVASSA. THERE IS NO DISPUTE THAT THESE GOODS WERE SUPPLIED TO SIGMA ELECTRO SYSTEMS AND, IN THE COURSE OF ASSESSMENTS O F SIGMA ELECTRO SYSTEMS, THESE PURCHASES HAVE BEEN ACCEPTED. IT HAS NOT BEE N THE CASE OF THE REVENUE THAT THE PCBS WERE ACTUALLY MANUFACTURED BY SIGMA E LECTRO SYSTEMS AND NOT BY THIS ASSESSEE. IT IS CLAIM OF THE ASSESSEE THAT OCTROI WAS NOT APPLICABLE ON PURCHASES AND THAT ON SALES OCTROI WAS THE LIABILIT Y OF THE BUYER, AND, THEREFORE, THE ASSESSEE CANNOT BE IN A POSITION OF FURNISHING CORROBORATIVE EVIDENCE BY WAY OF OCTROI PAYMENT RECORDS. NOTHING HAS BEEN BROUGHT ON RECORD BEFORE US TO CONTROVERT THE FACTUAL ELEMENTS EMBEDDED IN THESE ARGUMENTS. THERE IS NO MATERIAL ON RECORD, SAVE AN D EXCEPT FOR THE STATEMENT OF UMESH PATEL, WHICH INDICATES THAT THE MANUFACTURING OF PCBS DID NOT TAKE PLACE IN SILVASSA. NOT ONLY THIS STAT EMENT PERTAINS TO A LATER PERIOD, THIS STATEMENT HAS BEEN RETRACTED BY UMESH PATEL AND CHALLENGED IN CROSS EXAMINATION, EVEN A STATEMENT IN SURVEY PROCE EDINGS, AS IN CONSISTENTLY HELD BY THE COORDINATE BENCHES AND BY THE HONBLE KERALA HIGH COURT IN PAUL MATHEWS CASE (263 ITR 101), HAS NO E VIDENTIARY VALUE. AS AGAINST THIS, THERE ARE EXCISE RECORDS AND OTHER ST ATUTORY RECORDS INDICATING THAT THE PRODUCTION OF PCBS ACTUALLY TOOK PLACE IN SILVASSA. THERE MAY NOT BE CONCLUSIVE EVIDENCE TO PROVE THIS TO THE HILT, B UT THERE IS NO EVIDENCE TO DISLODGE THE CLAIM OF THE ASSESSEE, SUPPORTED BY EX CISE AND OTHER STATUTORY RECORDS AS ALSO BY THE EVIDENCE OF PURCHASE OF RAW MATERIAL ETC. THAT THE PRODUCTION OF PCBS TOOK PLACE IN SILVASSA. WE ARE THUS UNABLE TO SUSTAIN THIS OBJECTION OF THE REVENUE EITHER. AS REGARDS T HE ASSESSING OFFICERS OBSERVATIONS ABOUT UNREASONABLY HIGHLY PROFITS IN T HIS UNIT, WE HAVE NOTED THAT THE PRODUCT IN QUESTION IS SAID TO BE HIGH TEC HNOLOGY IMPORT SUBSTITUTE PRODUCT AND THAT ENTIRE PRODUCTION IS SOLD TO A SIS TER CONCERN. IT IS NOT REALLY UNUSUAL TO HAVE HIGHER PROFIT IN SUCH HIGH TECHNOLO GY PRODUCTS, AND, IN ANY EVENT, IN CASE THE PRICE OF THE PRODUCT IS EXCESSIV E OR UNREASONABLE, THE REMEDY LIES IN INVOKING SECTION 40A(2) IN THE HANDS OF THE SISTER CONCEREN WHICH IS BUYER OF ENTIRE PRODUCTION. NO DOUBT, A H IGH PROFIT RATE DOES RAISE DOUBTS ABOUT BONAFIDES OF THE ENTIRE ARRANGEMENTS B UT THE REMEDY DOES NOT LIE IN DECLINING THE DEDUCTION UNDER SECTION 80IB(2 ). WE HAVE ALSO NOTED 5 THAT RIGHT FROM THE INITIAL STAGES WHEN THE ASSESSI NG OFFICER NOTICED THIS HIGH PROFIT RATE, HE HAD STRONG DOUBTS ABOUT THE ADMISSI BILITY OF DEDUCTION UNDER SECTION 80IA AND EVEN HE FOUND NOTHING WRONG IN THE STATEMENTS OF THE LABOUR CONTRACTORS, HE BRUSHED ASIDE THE STATEMENTS AS TUTORED. THE SUSPICION, HOWSOEVER STRONG AND UNDERSTANDABLE, SHO ULD NOT BE ALLOWED TO AFFECT OBJECTIVITY OF THE ASSESSING OFFICER, BECAUS E, IN THE ULTIMATE ANALYSIS, IT IS HIS OBJECTIVE ANALYSIS WHICH MATTERS. IN VIE W OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE O F THE CONSIDERED VIEW THAT THE CIT(A) WAS INDEED NOT JUSTIFIED IN DECLINING TH E DEDUCTION UNDER SECTION 80 IA (2) PRIMARILY ON THE BASIS OF STATEMENT OF UM ESH PATEL, DIARY NOTINGS OF MANOJ SAULANKI WHICH REFLECTED PAYMENTS TO 4 WOR KERS ONLY, AND ASSESSING OFFICERS PERCEPTIONS THAT THE PROFIT BEI NG SHOWN BY THE ASSESSEE WAS UNREASONABLY HIGH AND EXCESSIVE. NONE OF THESE FACTORS, ON THE FACTS OF THE CASE, WERE GERMANE TO DECIDING ASSESSEES ELIGI BILITY TO DEDUCTION UNDER SECTION 80 IA (2). IT CANNOT BE OPEN TO THE ASSESS ING OFFICER TO PRESUME THAT FACTS PREVAILING IN THE LATER YEARS MUST ALSO BE TA KEN TO HAVE PREVAILING IN PRECEDING YEARS AS WELL. BUSINESS SITUATIONS CAN N EVER BE SO STATIC TO HAVE THIS KIND OF CONSISTENCY IN FACTS OF EACH YEAR. TH E CONDITION LAID DOWN UNDER SECTION 80 IA(2) REGARDING EMPLOYMENT OF MORE THAN 10 WORKERS HAS TO BE EXAMINED WITH RESPECT TO EACH YEAR, AS IS HELD BY A COORDINATE BENCH IN THE CASE OF VINTAGE CARDS & CREATIONS VS. ACIT (59 ITD 563). HAVING HELD SO, HOWEVER, WE MAY ALSO ADD THAT WHILE THE ASSESSING O FFICER NEED NOT BE GUIDED BY THE FACTORS AS DISCUSSED ABOVE, IT IS IND EED HIS RIGHT, AS ALSO DUTY, TO OBJECTIVELY EXAMINE AS TO WHETHER OR NOT A PARTI CULAR DEDUCTION SUCH AS UNDER SECTION 80 IA(2) IS ADMISSIBLE ON THE FACTS O F THE CASE. WE, THEREFORE, DEEM IT FIT AND PROPER TO VACATE THE FINDINGS ON TH E INADMISSIBILITY OF THE CLAIM WHICH ARE ESSENTIALLY BASED ON THE SURVEY FIN DINGS, AND WE ALSO DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE O F THE ASSESSING OFFICER TO ADJUDICATE DENOVO ON THE ADMISSIBILITY OF DEDUCTION UNDER SECTION 80 IA ON THE BASIS OF MATERIAL ON RECORD AND THE APPLICABLE LEGAL POSITION. WE HAVE NOTICED THAT THE ASSESSING OFFICER WAS SO MUCH SWAY ED BY THE SURVEY FINDINGS THAT HE DID NOT SEE ANY NEED TO EXAMINE TH E MATERIAL ON RECORD, AND DECIDE ON THE BASIS OF THIS MATERIAL, WHETHER OR NO T THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(2). WE, THEREFOR E, REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPO SES OF DECIDING AFRESH ON THE BASIS OF MATERIAL ON RECORD AND IN THE LIGHT OF OUR ABOVE OBSERVATIONS, THE ADMISSIBILITY OF THE AFORESAID CLAIM OF DEDUCTI ON UNDER SECTION 80 IB (2). 3. IN THE SUBSEQUENT SET-ASIDE PROCEEDINGS THE AO A GAIN DENIED THE BENEFIT U/S.80IA DEDUCTION ON THE FOLLOWING GROUNDS : 1. THE PCBS FOUND AT THE BUSINESS PREMISES DURING THE COURSE OF THE SURVEY PROCEEDINGS WERE THE STOCK OF PCBS TRANSFERRED FROM THE OLD PARTNERSHIP FIRM OF SRI VIJAY PATIL AND SRI SANJAY PATIL MANUFACTURED BY THE SAID ERSTWHILE FIRM. 2. THE ABOVE FACTS WERE CONFIRMED BY SRI UMESH PATE L, THE ASSESSEES EMPLOYEE, IN HIS STATEMENT RECORDED DURING THE SURVEY/ENQUIRY PR OCEEDINGS. HE ALSO CONFIRMED THAT ONLY THE WORK OF STITCHING OF SLEEVES ETC. ARE CARR IED OUT AT THE SILVASSA UNIT AND ALL OTHER ITEMS ARE PURCHASED FROM OUTSIDE AGENCIES. 3. THE ABOVE FACTS ARE CORROBORATED BY THE FINDINGS THAT ONLY 4 TO 5 WORKERS ARE WORKING AT THE SILVASSA UNIT AND NO ELECTRIC POWER IS USED IN THE UNIT. 6 4. THE FACT THAT SRI UMESH PATEL RETRACTED HIS STAT EMENT IS AN AFTERTHOUGHT AS HIS STATEMENT WAS RECORDED WITHOUT ANY COERCION OR INFL UENCE AS CERTIFIED BY HIMSELF DURING THE PROCEEDINGS. FURTHER THE MUSTER AND SALARY REG ISTER SUBMITTED DURING THE PROCEEDINGS IS AN AFTERTHOUGHT ONLY DONE TO ACCOMMO DATE BOGUS EMPLOYEES. FURTHER THE CASH VOUCHERS PRODUCED ARE NOT REFLECTED IN THE CAS H BOOK IMPOUNDED. 5. DURING THE SURVEY PROCEEDINGS IT WAS SEEN THAT T HE SILVASSA UNIT WAS NOT EQUIPPED WITH THREE PHASE ELECTRIC CONNECTION. FUR THER, THE BILL OF RS. 3,626/- ONLY FOUND DURING THE PROCEEDINGS PROVED THAT THE ELECTR IC CONSUMPTION IS NOT ENOUGH TO MANUFACTURE OR PRODUCE THE ITEMS STATEDLY MANUFACTU RED/PRODUCED. 6. SRI UMESH PATIL THE EMPLOYEE IN HIS STATEMENT RE CORDED DURING THE SURVEY CONFIRMED THAT NO MANUFACTURING ACTIVITIES ARE CARR IED OUT AT THE SILVASSA UNIT. 7. IN CASE OF NON USE OF POWER, TO FULFIL THE CONDI TION OF SECTION 80IA OF THE I.T. ACT THE ASSESSEE SHOULD HAVE EMPLOYED 20 OR MORE WORKER S, WHICH IS NOT SO. 8. SRI UMESH PATIL THE EMPLOYEE WHOSE STATEMENT WAS RECORDED DURING THE PROCEEDINGS DEPOSED THAT ONLY HIMSELF AND 4 OTHERS ARE EMPLOYED IN THE UNIT OUT OF WHICH ONE OF THEM IS A SWEEPER. 9. CASH VOUCHERS IMPOUNDED DURING SURVEY INDICATE T HAT SALARY HAS BEEN PAID ONLY TO THE 4 SAID EMPLOYEES. THE VOUCHERS SUBSEQUENTLY PRODUCED HAVE NO EVIDENTIARY VALUE. 10. THE CLAIM OF THE ASSESSEE THAT LABOUR WAS EMPLO YED THROUGH LABOUR CONTRACTOR WAS PROVED OTHERWISE DURING ENQUIRIES AS THE PAYMEN TS MADE TO THE LABOUR CONTRACTORS THROUGH BEARER CHEQUES WERE RETURNED BACK TO THE AS SESSEE BY THE PAYEES. 4. IN APPEAL THE LEARNED CIT(A) ALLOWED THE CLAIM O F THE ASSESSEE BY HOLDING AS UNDER : 6. I HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AO PASSED U/S. 143(3) R.W.S. 254 OF THE ACT, SUBMISSION OF THE APPELLANT, ORDERS OF HON BLE ITAT, PUNE DATED 30-06-2008 AND OTHER RELEVANT RECORD. THE FIRST GROUND RAISED BY THE APPELLANT IS THAT THE AO IS NOT JUSTIFIED IN DISALLOWING DEDUCTION U/S.80IA OF THE ACT CLAIMED BY THE APPELLANT. THE AO HAS DISALLOWED THE DEDUCTION U/S.80 IA HOLDING THAT THE APPELLANT HAS NOT EMPLOYED REQUIRED NUMBER OF WORKERS IN THE MANUFACTURING ACT IVITY AS REQUIRED BY PROVISIONS OF SECTION 80 IA, I.E., 10 WORKERS WHEN THE MANUFACTUR ING ACTIVITY IS CARRIED OUT USING ELECTRICITY AND 20 WORKERS WITHOUT USING ELECTRICIT Y. 6.1 AS REGARD THE ISSUE WHETHER THE MANUFACTURING A CTIVITY WAS CARRIED OUT BY THE APPELLANT WITHOUT POWER, THE AO HAS CLAIMED THAT TH E ELECTRICITY BILLS PAID BY THE APPELLANT FIRM WERE ON LOWER SIDE AND THE MANUFACTU RING ACTIVITY CARRIED OUT BY THE APPELLANT IS WITHOUT POWER. IN THIS REGARD, THE AP PELLANT VIDE SUBMISSION DATED 27-01- 2010 CLAIMED AS UNDER : (I) THE ELECTRICITY REQUIRED FOR THE MANUFACTURING PROCESS IS VERY LESS AS THE SAME IS REQUIRED ONLY FOR SOLDERING AND TESTING THE EQUIPMENTS. (II) THE PRICE AT WHICH ELECTRICITY IS SUPPLIED AT SILVASSA IS VERY LOW BEING INDUSTRIAL ZONE IN BACKWARD AREA. (III) THE 3 PHASE POWER CONNECTION AS WELL AS SINGL E PHASE CONNECTION IS AVAILABLE IN THE FACTORY AT SILVASSA. IT IS PERTIN ENT TO NOTE HERE THAT CONSIDERING THE LOAD OF CONSUMPTION OF ELECTRICITY FOR SOLDERIN G AND FOR TESTING THE EQUIPMENTS THE 3 PHASE METER DOES NOT MOVE. EVEN BILL FOR SIN GLE PHASE IS ALSO VERY LESS CONSIDERING THE POWER REQUIRED AT 25 VOLTAGE OR LES S. (IV) THERE ARE 35 POWER POINTS UNDER THE TABLES FOU ND IN ACTION U/S.133A AT SILVASSA FACTORY, WHICH ARE REQUIRED FOR SOLDERING AND TESTING EQUIPMENTS. 7 (V) THOUGH THE CONSUMPTION AND ELECTRICITY REQUIREM ENT IS LESS THE MANUFACTURING ACTIVITY CANNOT BE CARRIED OUT WITHOU T THE AID OF POWER. WHILE DECIDING THE SAID ISSUE, MY PREDECESSOR IN OR DER DATED 29-09-2005 HELD AS UNDER. THE AO IN HIS ASSESSMENT ORDER HAS NOT DISALLOWED THE APPELLANTS CLAIM OF EXPENDITURE ON ACCOUNT OF POWER. SO THE CLAIM OF A PPELLANTS PROCESS BEING DRIVEN BY POWER COULD NOT BE REFUTED BY THE AO AND HENCE, ON THIS ACCOUNT THE APPELLANT SUCCEEDS. THIS FINDING OF MY PREDECESSOR WAS NOT CONTESTED BY THE AO IN FURTHER APPEAL WITH THE HONBLE ITAT. THE HONBLE ITAT HAS ALSO TAKEN NOTE OF AOS CONTENTION ABOUT USE OF POWER, HOWEVER THE SAME WAS NOT APPROV ED BY THE HONBLE ITAT. CONSIDERING ALL THE ABOVE CLAIMS, COUNTER-CLAIMS AN D DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS CARRIED OUT MANUFACTURI NG ACTIVITY WITH THE AID OF POWER, PARTICULARLY IN VIEW OF THE FACT THAT ACTIVITY OF S OLDERING AND TESTING OF EQUIPMENT CANNOT BE CARRIED OUT WITHOUT THE AID OF THE POWER. THERE FORE THE MINIMUM NUMBERS OF WORKERS REQUIRED TO BE EMPLOYED BY THE APPELLANT FIRM TO CL AIM THE DEDUCTION U/S. 8IA OF THE ACT IS 10. 6.2 AS REGARDS CONTENTION OF THE AO THAT THE APPELL ANT HAS MANUFACTURED ONLY CABLE LOOMS AT SILVASSA, IT IS NOTICED THAT THE HONBLE I TAT, PUNE HAS REJECTED THIS CONTENTION OF THE AO IN ITS ORDER DATED 30-06-2008 AND HAS GIV EN FINDING AS UNDER : THERE MAY NOT BE CONCLUSIVE EVIDENCE TO PROVE THIS TO THE HILT, BUT THERE IS NO EVIDENCE TO DISLODGE THE CLAIM OF THE ASSESSEE SUPP ORTED BY EXCISE AND OTHER STATUTORY RECORDS AS ALSO BY THE EVIDENCE OF PURCHA SE OF RAW MATERIAL ETC. THAT THE PRODUCTION OF PCB TOOK PLACE IN SILVASSA. WE ARE T HUS UNABLE TO SUSTAIN THE OBJECTION OF THE REVENUE EITHER. IN VIEW OF THE ABOVE FACTS, THE CONTENTION OF THE A O THAT APPELLANT HAS MANUFACTURED ONLY CABLE LOOMS AT SILVASSA IS NOT CORRECT. THE APPELL ANT FIRM HAS ALSO MANUFACTURED PCBS AT SILVASSA. 6.3 AS REGARDS THE CONTENTION OF THE AO THAT THE AP PELLANT HAS NOT EMPLOYED ANY PERSON THROUGH LABOUR CONTRACTOR, IT IS NOTICED THA T THE HONBLE ITAT, PUNE HAS DELETED TOTAL DISALLOWANCE IN RESPECT OF SALARIES TO WORKER S AND PAYMENTS TO LABOUR CONTRACTORS VIDE ITS ORDER DATED 30-06-2008 FOR THE A.YS. 1997- 1998 TO 2001-2001. THEREFORE THE CONTENTION RAISED BY THE AO THAT THE APPELLANT FIRM HAS EMPLOYED NO PERSON THROUGH LABOUR CONTRACTORS IS REJECTED. 6.4 THE NEXT ISSUE TO BE DECIDED IS WHETHER THE APP ELLANT HAS EMPLOYED 10 WORKERS IN MANUFACTURING ACTIVITY AS REQUIRED BY PROVISIONS OF SECTION 80IA OF THE ACT. ON PERUSAL OF THE RELEVANT RECORDS, IT IS NOTICED THAT THE APP ELLANT HAS CLAIMED SALARY PAYMENT TO 10 OR MORE WORKERS DURING THE FINANCIAL YEARS RELEVANT TO THE ASSESSMENT YEARS UNDER APPEAL. THE AO HOWEVER HELD THAT THE APPELLANT HAS EMPLOYED ONLY 4 TO 5 WORKERS AND HAS DISALLOWED THE PART OF SALARY CLAIMED BY THE AP PELLANT. THE HONBLE ITAT, PUNE, VIDE ITS ORDER DATED 30-06-2008 HELD THAT THE CLAIM OF THE APPELLANT ABOUT EMPLOYMENT OF WORKERS IS CORRECT AND ACCORDINGLY THE DISALLOWANCE OUT OF SALARY TO WORKERS WAS DELETED. IN VIEW OF THE ABOVE DECISION OF THE HON BLE ITAT AND ALSO VARIOUS FINDINGS GIVEN BY THE HONBLE ITAT IN ITS ORDERS, I HOLD THA T THE APPELLANT FIRM HAS EMPLOYED 10 OR MORE WORKERS OF ITS OWN IN THE MANUFACTURING ACTIVI TY. 6.5 IN RESPECT OF THE ISSUE OF EMPLOYMENT OF WORKER S IN THE MANUFACTURING PROCESS, IT IS ALSO NOTICED THAT THE HONBLE ITAT, PUNE IN PARA 5 PAGE NO. 7 OF ITS ORDER DATED 30- 06-2008 FOR THE A.Y. 2001-2002 HAS GIVEN THE FINDIN G THAT IT IS NOW WELL SETTLED IN LAW THAT EVEN THE WORKERS EMPLOYED THROUGH THE LABOUR C ONTRACTORS ARE TO BE INCLUDED IN THE DEFINITION OF THE EMPLOYEE AS IS HELD BY HONBLE GU JARAT HIGH COURT IN THE CASE OF CIT VS. PRITHVIRAJ BHOORCHAND (280 ITA 94). FURTHER, THE HONBLE ITAT, PUNE, VIDE ITS ORDERS DATED 30-06-2008 FOR THE A.YS. 1997-1998 TO 2001-2002 DELETED THE DISALLOWANCE OF PAYMENTS TO THE LABOUR CONTRACTORS. ON PERUSAL OF THE RELEVANT RECORDS, IT IS NOTICED THAT THE APPELLANT HAS CLAIMED TO HAVE EMPLOYED 15 TO 30 WORKERS DURING THE YEARS UNDER APPEAL THROUGH LABOUR CONTRACTORS. IN VIEW OF THE DECISION AND FINDINGS ON THE ISSUE GIVEN BY HONBLE ITAT, PUNE, I HOLD THAT IN ADDITIO N TO OWN 10 OR MORE WORKERS THE 8 APPELLANT HAS ALSO EMPLOYED ABOUT 15 TO 30 WORKERS THROUGH LABOUR CONTRACTORS IN THE MANUFACTURING ACTIVITY, WHICH ARE ALSO TO BE COUNTE D FOR ARRIVING AT THE REQUIRED NUMBER OF WORKERS FOR CLAIMING DEDUCTION U/S. 80IA OF THE ACT. IN VIEW OF THE ABOVE FACTS, I HOLD THAT THE APPELLANT HAS EMPLOYED MUCH MORE THAN 10 W ORKERS IN THE MANUFACTURING ACTIVITY. 6.6 IN VIEW OF THE ABOVE DISCUSSION AND RESPECTIVEL Y FOLLOWING THE FINDINGS AND DIRECTIONS GIVEN BY HONBLE ITAT, PUNE, I HOLD THAT THE APPELLANT FIRM IS ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT FOR THE ASSESSMENT Y EARS UNDER APPEAL. THE AO IS DIRECTED ACCORDINGLY. 5. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A),-I, NASHIK IS JUSTIFIED IN ALLOWING THE DEDUCTION U/S.8 0IA CLAIMED BY THE ASSESSEE AT RS. 13,98,849/-? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN HOLDING THAT PRINTED CIRCUI T BOARDS (PCBS) WERE MANUFACTURED BY THE ASSESSEE AT THE SILVASSA UNIT? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE H AD USED ELECTRIC POWER AT THE SILVASSA UNIT FOR MANUFACTURE OF PCBS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE H AD EMPLOYED 10 OR MORE WORKERS IN THE MANUFACTURING UNIT AT SILVASSA? 5. THE ASSESSEE PRAYS THE ORDER OF THE ASSESSING OF FICER MAY BE RESTORED. 6. THE ASSESSEE PRAYS TO ADDUCE SUCH FURTHER EVIDEN CE TO SUBSTANTIATE HIS CASE. 7. THE ASSESSEE PRAYS LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCASION DEMANDS . 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO DISALLOWED THE CLAIM OF D EDUCTION U/S.80IA ON THE GROUND THAT (A) ASSESSEE HAS NOT EMPLOYED 10 OR MOR E PERSONS IN THE MANUFACTURING ACTIVITY AT SILVASSA (B) ASSESSEE HAS NOT CARRIED O UT ANY ACTIVITY OF MANUFACTURING BUT ONLY THE ACTIVITY OF STITCHING OF SLEEVES AND A SSEMBLING OF CABLE LOOMS AND (C) ASSESSEE HAS NOT UTILISED ANY POWER FOR THE ACTIVIT Y CARRIED OUT BY IT, THEREFORE, THE ASSESSEE IS REQUIRED TO EMPLOY 20 OR MORE PERSONS T O BE ELIGIBLE FOR THE DEDUCTION U/S.80IA. WE FIND THE AO IN THE ORIGINAL ASSESSMEN T HAD DISALLOWED LABOUR CHARGES, WAGES ETC. ON THE GROUND THAT THE SAME IS BOGUS AND THE ASSESSEE HAS NOT 9 EMPLOYED MORE THAN 3 TO 4 PERSONS. THE FINDING OF THE AO WAS UPHELD BY THE LEARNED CIT(A) AND ON FURTHER APPEAL THE TRIBUNAL H AD DELETED THE DISALLOWANCE. WE FIND ON APPEAL BY THE REVENUE, THE HONBLE HIGH COURT IN ITA NO. 4672/2010 ORDER DATED 01-03-2011 DISMISSED THE APPEAL BY THE REVENUE BY HOLDING AS UNDER : 1. THE BASIC QUESTION RAISED IN THIS APPEAL IS AS UNDER : WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS THE ASSESSEES CLAIM OF PAYMENT TO LABOUR CONTRACTOR AND SALARY AND WAGES PAID TO THE WORKERS/SUPERVISORS 2. THE ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN THE LIGHT OF THE STATEMENT OF A WORKER/SUPERVISOR RECORDED DURING THE SURVEY PROCEE DINGS. THE TRIBUNAL IN PARA-5 OF ITS ORDER HAS RECORDED A FINDING OF FACT THAT THE STATE MENT GIVEN BY THE WORKER WAS RETRACTED AND DURING THE CROSS-EXAMINATION BEFORE THE CIT(A) IT WAS FOUND THAT THE STATEMENT WAS INCONSISTENT WITH THE FACTS ON RECORD. THE TRIBUNA L HAS FURTHER RECORDED A FINDING OF FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER HAS RECORDED STATEMENTS OF THE PARTNER AND ANOTHER WORKER, BOTH OF WHOM CONFIRMED THAT THE NUMBER OF PERSONS ACTUALLY WORKING AT THE UNIT WERE MORE T HAN 10. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE PAYMENT VOUCHERS AND BOOKS OF ACCOUNTS SHOWING PAYMENTS TO THESE WORKERS WERE PRODUCED BEFORE THE ASSESSING OF FICER AND PAYMENTS TO MANY OF THEM WERE MADE THROUGH CHEQUES. 3. IN THESE CIRCUMSTANCES, THE DELETION OF THE ADDI TIONS MADE BY THE ASSESSING OFFICER CANNOT BE FAULTED. IN THE RESULT, WE SEE N O MERITS IN THE APPEAL AND THE SAME IS DISMISSED. FROM THE ABOVE AND IN VIEW OF THE ORDER OF THE CIT( A) AT PARA 6.4 OF HIS ORDER IT CAN BE CONCLUDED THAT THE ASSESSEE HAS EMPLOYED 10 OR MORE WORKERS DURING THE YEAR. 7. AS REGARDS THE OBJECTION OF THE AO THAT ASSESSEE HAS MANUFACTURED ONLY CABLE LOOMS AT SILVASSA WE FIND THE TRIBUNAL HAD AL READY DISCUSSED THE ISSUE WHICH HAS BEEN REPRODUCED BY THE LEARNED CIT(A) AT PARA 6 .2 OF HIS ORDER ACCORDING TO WHICH THE ITAT WAS UNABLE TO SUSTAIN THE OBJECTION OF THE REVENUE ON THIS ISSUE. THEREFORE, WE FIND NO REASON TO TAKE A VIEW OTHER T HAN THE VIEW TAKEN EARLIER BY THE TRIBUNAL ON THIS ISSUE. 7.1 AS REGARDS THE OBJECTION OF THE AO THAT ASSESSE E HAS NOT UTILISED POWER WE FIND THIS ISSUE ALSO HAS BEEN THOROUGHLY ADJUDICATE D BY THE LEARNED CIT(A) AT PARA 6.1 OF HIS ORDER ACCORDING TO WHICH IN THE ORIGINAL ASSESSMENT ORDER THE AO HAS NOT DISALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF EXPENDITURE TOWARDS ELECTRICITY. 10 THIS FINDING OF THE CIT(A) ON THIS ISSUE EARLIER WA S NOT CHALLENGED BY THE REVENUE. THEREFORE, IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LEARNED CIT(A) AT PARA 6.1 OF HIS ORDER WE FIND NO REASON TO TAKE A CONTRARY VIEW ON ACCOUNT OF CONSUMPTION OF ELECTRICITY. 7.2 IN THIS VIEW OF THE MATTER AND IN VIEW OF THE D ETAILED ORDER PASSED BY THE LEARNED CIT(A) ALLOWING THE CLAIM OF DEDUCTION U/S. 80IA IN THE LIGHT OF THE DIRECTION OF THE ORDER OF THE TRIBUNAL WHICH IN OUR OPINION IS A REASONED ONE WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY THE SA ME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO. 701/PN/2010 TO 704/PN/2010 (ASSESSMENT YEAR S 1998-99 TO 2001-02) : 8. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS RAISED BY THE REVENUE IN THE ABOVE APPEALS ARE IDENTICAL TO GROUNDS OF APPEAL IN ITA NO. 700/PN/2010 FOR ASSESSMENT YEAR 1997-98. WE HAVE ALREADY ADJUDICA TED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWI NG THE SAME RATIO, THE GROUNDS RAISED BY THE REVENUE FOR THE ABOVE YEARS ARE ALSO DISMISSED. ITA NO. 705/PN/2010 (ASSESSMENT YEAR 2002-03) : 9. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN MANUFACTURING ACTIVITY AT SILVASSA. THE ASSESSE E FIRM HAS CLAIMED DEDUCTION U/S. 80IB AT 25% OF THE MANUFACTURING PROFIT. THE AO HO WEVER HELD THAT THE ASSESSEE HAS NOT EMPLOYED 10 OR MORE WORKERS IN THE MANUFACT URING ACTIVITY AND DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE FIRM AT RS. 2 4,46,191/-. THE AO HAS ALSO DISALLOWED PART OF THE SALARY TO WORKERS AND PAYMEN TS TO LABOUR CONTRACTORS CLAIMED BY THE ASSESSEE. 9.1 IN APPEAL, THE CIT(A) VIDE ORDER DATED 29-09-20 05 DIRECTED THE AO TO VERIFY THE CLAIM OF DEDUCTION OF RS. 24,46,191/- OF THE AS SESSEE AS PER PROVISIONS OF SECTION 80IB(4) OF THE ACT AND ALLOW THE SAME IF FO UND TO BE IN ORDER. THE CIT(A) 11 ALLOWED RELIEF OF RS. 55,650/- ON ACCOUNT OF PAYMEN T OF STITCHING AND ENGRAVING JOB WORK AND CONFIRMED THE BALANCE ADDITION OF RS. 56,7 5,391/- TOWARDS PAYMENTS TO LABOUR CONTRACTORS. 9.2 THE AO AND THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL AND THE ITAT VIDE ORDER DATED 30-06-2008 CONFIRMED THE RELIEF GR ANTED BY CIT(A) IN RESPECT OF DEDUCTION U/S. 80IB(4) OF RS. 24,46,191/- AND PAYME NT OF STITCHING AND ENGRAVING JOB WORK OF RS. 55,650/-. AS REGARDS DISALLOWANCE OF PAYMENTS TO LABOUR CONTRACTORS OF RS. 56,75,391/-, THE TRIBUNAL CONFIR MED THE ADDITION OF RS. 44,05,741/- AND SET ASIDE THE BALANCE ADDITION OF R S. 12,88,634/- TO THE FILE OF THE AO. 9.3 IN THE SETTING ASIDE PROCEEDINGS THE AO AGAIN D ISALLOWED THE DEDUCTION U/S.80IB(4) CLAIMED BY THE ASSESSEE THE AO ALSO DIS ALLOWED THE JOB WORK EXPENSES AND STITCHING CHARGES OF RS. 55,650/-. FURTHER THE AO CONFIRMED THE ADDITION OF RS. 12,85,634/- ON ACCOUNT OF PAYMENT TO LABOUR CON TRACTORS WHICH WAS SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE AO. 10. IN APPEAL THE LEARNED CIT(A) PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER : 4. THE FIRST GROUND OF APPEAL IS AGAINST THE DISAL LOWANCE OF DEDUCTION CLAIMED BY THE APPELLANT U/S.80IB OF THE ACT. THE AO HAS DISALLOWED THE DEDUCTION REITERATING THE CONTENTIONS OF THE PREDEC ESSOR AO AS APPEARING IN HIS ASSESSMENT ORDER. THE AO DISALLOWED DEDUCTION U/S.80IB CLAIMED BY THE APPELLANT HOLDING AS UNDER IN PARA 06.2 OF THE ORDE R U/S.143(3) R.W.S. 254 OF THE ACT. I) PERSONS EMPLOYED AT THE MANUFACTURING UNIT WERE LESS THAN 10 EVEN WHEN ELECTRIC POWER WAS NOT USED BY ASSESSEE. II) WITHOUT PREJUDICE TO THE ABOVE FINDINGS, ASSESS EE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITY AT THE BUSINESS PREMISES IN SILVASSA BUT HAS ONLY CARRIED OUT ASSEMBLING OF CABLE LOOMS. III) THERE WERE NO PERSONS EMPLOYED THROUGH LABOUR CONTRACTORS. 12 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT FILED WRITTEN SUBMISSION DATED 27-01-2010 AND ARGUED THE CASE. T HE CONTENTIONS OF THE APPELLANT ARE SUMMARIZED AS UNDER : A. THE CIT(APPEALS) HAS DIRECTED THE AO TO VERIFY T HE CLAIM OF THE APPELLANT U/S.80IB(4) OF THE ACT AND THE AO AFTER RECORDING S TATEMENTS OF VARIOUS WORKERS ALLOWED THE DEDUCTION U/S.80IB(4) OF THE ACT WHILE GIVING EFFECT TO CIT(APPEAL)S ORDER. B. THE HONBLE ITAT HAS CONFIRMED THE RELIEF GRANTE D BY THE AO AS PER THE DIRECTIONS OF CIT(APPEALS)/RELILEF GRANTED BY CIT(A PPEALS) IN RESPECT OF DEDUCTION U/S.80IB(4) OF THE ACT. C. IN VIEW OF SUBMISSION IN RESPECT OF A.YS 1997-98 TO 2001-2002 AND VARIOUS FINDINGS GIVEN BY HONBLE ITAT, PUNE, IN IT S ORDERS DATED 30-06-2008 IN RESPECT OF ABOVE MENTIONED YEARS, THE DISALLOWANCE U/S.80IB(4), HOLDING THAT REQUIRED NUMBER OF WORKERS WERE NOT EMPLOYED, IS NO T JUSTIFIED. 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER OF THE AO AND HIS PREDECESSOR, THE ORDER OF HONBLE ITAT AND THE SUBM ISSIONS OF THE APPELLANT. THE RELEVANT PORTION OF THE ORDER OF TH E HONBLE ITAT SUPPORTING THE CLAIM OF THE APPELLANT THAT THE RELIEF GRANTED BY CIT(APPEALS) WAS CONFIRMED BY HONBLE ITAT IS REPRODUCED BELOW : AS REGARDS THE PAYMENTS OF STITCHING OF SLEEVES ET C, AS THE CIT(A) RIGHTLY NOTES, THE STATEMENT RELIED UPON BY THE ASSESSING OFFICER HIMSELF SHOWS BONAFIDES OF THE EXPENDITURE AND THE CIT(A) HAS RIGHTLY DELETED THAT DISALLOWANCE. AS REGARDS DEDUCTION UNDER SECTION 80IB @25% ON THE GROUND THA T THE NUMBER OF WORKERS IN SILVASSA WERE LESS THAN 10 BUT OVERALL WORKERS, INC LUDING IN NASHIK, WERE MORE THAN 10, WE SEE NO INFIRMITY IN THIS EITHER. THE S TATEMENTS RECORDED IN THE SURVEY PROCEEDINGS, WHICH ARE HEAVILY RELIED UPON BY THE R EVENUE, ALSO JUSTIFY THIS INFERENCE. THE STATEMENT RECORDED IN THE COURSE OF THE SURVEY PROCEEDINGS MAY NOT HAVE MUCH EVIDENTIARY VALUE AGAINST THE ASSESSE E, BUT THERE IS SUFFICIENT CORROBORATIVE MATERIAL ON RECORD TO SUGGEST THAT TH E NUMBER OF EMPLOYEES IN THE SILVASSA UNIT AT THE RELEVANT POINT OF TIME MAY NOT BE MORE THAN 10, AND THE ASSESSEE HIMSELF HAS REVISED THE CLAIM IN QUESTION. IN THIS VIEW OF THE MATTER, WE CONFIRM THE ACTION OF THE CIT(A) IN RESTRICTING THE CLAIM OF DEDUCTION OF THE ASSESSEE AS MDE UNDER SECTION 80IB. 6.1 IN VIEW OF THE FACT THAT THE THEN AO HAS ALLOWE D DEDUCTION U/S.80IB(4) AT 25% OF THE PROFIT AFTER RECORDING STATEMENTS-ON- OATH OF THE WORKERS AND AFTER VERIFYING PROVISIONS OF SECTION 80IB(4) AS DI RECTED BY THE CIT (APPEALS) AND AS THE HONBLE ITAT, PUNE HAS CONFIRM ED THE RELIEF GRANTED BY BY PREDECESSOR IN RESPECT OF DEDUCTION U/S.80IB(4), THE AO IS NOT JUSTIFIED IN DISALLOWING THE DEDUCTION U/S.80IB OF THE ACT. THE AO HAS IGNORED THE DECISION OF HONBLE ITAT, PUNE WHICH IS BINDING ON HIM. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWI NG THE DECISION OF HONBLE ITAT, PUNE THE DISALLOWANCE OF DEDUCTION CL AIMED BY THE APPELLANT U/S.80IB, IS DELETED. 6.2 AS REGARDS THE DISALLOWANCE OF PAYMENTS TO LAB OUR CONTRACTORS AMOUNTING TO RS. 13,41,284/- IT IS NOTICED THAT THE HONBLE ITAT, PUNE VIDE ORDER DATED 30-06-2008 CONFIRMED THE RELIEF GRANTED BY THE CIT (APPEALS) AMOUNTING TO RS. 55,650/- AND HENCE ADDITION MADE B Y THE AO TOWARDS THE SAME IS DELETED. 13 7.1 AS REGARDS REMAINING DISALLOWANCE OF PAYMENTS TO LABOUR CONTRACTORS AMOUNTING TO RS. 12,85,6234/-, IT IS NOTICED THAT T HE AO HAS NOT POINTED-OUT IN THE ASSESSMENT ORDER THAT THIS AMOUNT PAID TO LA BOUR CONTRACTORS WAS ALSO RECEIVED BACK FROM THE LABOUR CONTRACTORS AND HENCE THE SAME WAS BOGUS. THE APPELLANT HAS FAIRLY POINTED-OUT THAT OUT OF TH IS AMOUNT OF RS. 12,85,634, THERE IS NOTHING IN THE SEIZED MATERIAL ABOUT AN AM OUNT OF RS. 3,60,000/- THAT THE AMOUNT IS RECEIVABLE FROM THE CONTRACTORS. THE APPELLANT CLAIMED THAT THE SAID NOTING IS ABOUT AMOUNT RECEIVABLE AND NOT AMOUNT RECEIVED. THE APPELLANT FURTHER CONTENDED THAT THE SAID INCORRECT NOTING WAS MADE BY THE SUPERVISOR LATE SHRI MANOJ SALUNKE AND THE APPELLAN T IS NOT CONCERNED WITH THE SAME. THE CONTENTION OF THE APPELLANT IN RESPE CT OF THE AMOUNT OF RS. 3,60,000/- IS NOT ACCEPTABLE IN VIEW OF THE NOTING FOUND IN SEIZED MATERIAL. THE ADDITION OF RS. 3,60,000/- ON ACCOUNT OF PAYMEN T TO LABOUR CONTRACTORS IS THEREFORE CONFIRMED. 7.2 AS REGARDS REMAINING AMOUNT OF RS. 9,25,634/-, AID TO OTHER LABOUR CONTRACTORS THE APPELLANTS CONTENTION THAT IN RESPE CT OF THIS AMOUNT NO NOTINGS WERE FOUND IN SEIZED MATERIAL IS FOUND TO B E ACCEPTABLE. NO SUCH MENTION IS THERE IN ORIGINAL ORDER U/S.143(3) OF TH E ACT PASSED BY THE THEN AO IN RESPECT OF THE AMOUNT OF RS. 9,25,634/- PAID TO LABOUR CONTRACTORS WHREAS THERE IS MENTION OF THE OTHER AMOUNTS RECEIV ED BACK BY THE APPELLANT FROM LABOUR CONTRACTORS OF RS. 44,05,741/- AND RS. 3,60,000/-. IT IS ALSO NOTICED THAT SIMILAR PAYMENTS TO LABOUR CONTRACTORS IN EARLIER YEARS WHICH WERE NOT FOUND TO BE RECEIVED BACK BY THE APPELLANT ARE HELD TO BE GENUINE AND ALLOWABLE BY HONBLE ITAT, PUNE VIDE ITS ORDERS DATED 30-06-2008 FOR THE A.YS 1997-98 TO 2001-2002. IN VIEW OF THE ABOV E FACTS AND DISCUSSION, THE DISALLOWANCE OF PAYMENT TO LABOUR CONTRACTORS A MOUNTING TO RS. 9,25,634/- IS DELETED. THE SECOND GROUND IS PARTLY ALLOWED. 8. AS THE FIRST AND SECOND GROUNDS ARE DECIDED AS ABOVE, THE THIRD GROUND NEEDS NO ADJUDICATION. 11. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A),-I, NASHIK IS JUSTIFIED IN ALLOWING THE DEDUCTION U/S.8 0IB AND GRANTING RELIEF TO THE ASSESSEE ON THIS ACCOUNT OF RS. 49,17,668/-. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN HOLDING THAT PRINTED CIRCUI T BOARDS (PCBS) WERE MANUFACTURED BY THE ASSESSEE AT THE SILVASSA UNIT? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE H AD USED ELECTRIC POWER AT THE SILVASSA UNIT FOR MANUFACTURE OF PCBS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE H AD EMPLOYED 10 OR MORE WORKERS IN THE MANUFACTURING UNIT AT SILVASSA? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN ALLOWING RELIEF TO THE ASSE SSEE OF RS. 9,25,634/- ON ACCOUNT TOF LABOUR CHARGES DISALLOWED BY THE AO? 14 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A),-I, NASHIK WAS JUSTIFIED IN IGNORING THE FACT THAT THE ASSESSEE DID NOT ACTUALLY PAY THE LABOUR CHARGES, WHICH WAS RECEIVED BACK IN CASH BY THE ASS ESSEE FROM THE LABOUR CONTRACTORS? 7. THE ASSESSEE PRAYS THE ORDER OF THE ASSESSING OF FICER MAY BE RESTORED. 8. THE ASSESSEE PRAYS TO ADDUCE SUCH FURTHER EVIDEN CE TO SUBSTANTIATE HIS CASE. 9. THE ASSESSEE PRAYS LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCASION DEMANDS . 12. AFTER HEARING BOTH THE SIDES WE FIND NO INFIRMI TY IN THE ORDER OF THE CIT(A). AS REGARDS THE ISSUE OF ELECTRICITY CONSUMPTION AND EMPLOYMENT OF 10 OR MORE WORKERS IN THE MANUFACTURING UNIT WE FIND THE ISSUE HAD ALREADY BEEN DISCUSSED IN ITA NO. 700/PN/2010 FOR ASSESSMENT YEAR 1997-98 AND THE IDENTICAL GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWI NG THE SAME RATIO, THE OBJECTION OF THE REVENUE ON THIS ISSUE IS DISMISSED. 13. SO FAR AS THE OTHER ISSUES RAISED BY THE REVENU E IN THE GROUNDS WE FIND THE LEARNED DR COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE LEARNED CIT(A) WHILE ALLOWING THE CLAIM OF DEDUCTION U/S. 80IB OF THE AC T. IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) IN HIS ORDER WHICH IN OUR OPINION IS A REASONED ONE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE CIT(A) WE ARE NOT INCLINED TO INTERFERE WITH TH E ORDER OF THE CIT(A). THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMI SSED. 14. IN THE RESULT ALL THE APPEALS FILED BY THE REVE NUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 25 TH DAY OF JULY 2012 (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 25 TH JULY 2012 SATISH 15 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, NASHIK 4. THE D.R, A PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE