ACIT, Jaipur V. M/S SANKALP INTERNATIONAL, Jaipur

ITA 714/JPR/2012

• Counselvise Citation: 71423114 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Keywords: Business income; Opportunity of being heard
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 714/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. CUKE VS. M/S SANKALP INTERNATIONAL, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAKFS 4376 D VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : MRS. NEENA JEPH (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 18/03/2015 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 10/04/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 16/05/2012 PASSED BY THE LEARNED CIT(A)-II, JAIPUR FOR A.Y. 2009-10 RESPECTIVE GROUNDS OF APPEAL ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN:- (I) DELETING THE ADDITION OF RS. 88,57,732/- MADE BY THE A.O. ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK . ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 2 (II) DELETING THE ADDITION OF RS. 26,24,549/- MADE BY THE A.O. BY REJECTING THE CLAIM OF ASSESSEE REGARDING EXEMPTIONS U/S 10BA. 2. THE FIRST GROUND OF APPEAL IS AGAINST DELETING TH E ADDITION OF RS. 88,57,732/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF UNDER VALUATION OF CLOSING STOCK. THE LD. ASSESSING OFFICE R OBSERVED THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND TRADING OF WOODEN FURNITURE AND HANDICRAFT ITEMS AND WIND POWE R PLANT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29/9/2009 DE CLARING A TOTAL INCOME OF RS. 3,89,52,800/- ALONGWITH AUDIT REPORT. THIS CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED AS THE ACT). THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DISCLOSED CLOSING STOCK ON THE BASIS OF PHYSICA L VERIFICATION DONE BY THE PARTNERS OF THE FIRM. NO GOODS HAD BEEN DISCLOS ED BY THE ASSESSEE IN TRANSIT, THEREFORE, THE LD. ASSESSING OFFICER AS KED TO GIVE THE DETAILS OF SALE BILL ALONGWITH GOODS EXPORTED. IT FOUND THAT THE ASSESSEE EXPORTED GOODS UP TO 31/3/2009. SOME GOODS WERE IN T RANSIT AND EXPORTED IN THE SUBSEQUENT YEAR. THE ASSESSEE SUBMI TTED BEFORE THE ASSESSING OFFICER THAT THE CLOSING STOCK WAS VALUED ON THE BASIS OF SALE BILL ISSUED, THEREFORE HE GAVE THE REASONABLE OPPOR TUNITY OF BEING HEARD AS TO WHY GOODS IN TRANSIT HAS NOT BEEN INCLUDED IN THE CLOSING STOCK. THE APPELLANT HAD FURNISHED THE DETAILS OF DATE OF I NVOICES, FREIGHT ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 3 EXPENSES, TERMINAL HANDLING CHARGES, FUMIGATION CHA RGES ETC. IT IS NOTICED THAT FUMIGATION CHARGES AT THE PORT FOR EXP ORT OF THE GOODS WORTH RS. 88,57,732/- HAD BEEN CHARGED ON THE SAME D ATE OF INVOICE. IN OTHER WORDS, THE GOODS HAD ALREADY BEEN REMOVED F ROM THE BUSINESS PREMISES OF THE ASSESSEE AND WERE LYING AT THE PORT FOR SHIPMENT. FUMIGATION CAN BE CLAIMED ONLY AFTER THE GOODS HAVE REACHED THE PORT. THE ASSESSING OFFICER REPRODUCED THE FUMIGATION CHAR GES IN SCHEDULE ON PAGE 8 OF THE ASSESSMENT ORDER. IT HAS BEEN HELD TH AT GOODS WORTH RS. 88,57,732/- WERE NOT PRESENT AT THE BUSINESS PREMISE S OF THE ASSESSEE AND AS SUCH THEY COULD NOT BE PHYSICALLY AVAILABLE FOR STOCK TAKING BY THE PARTNERS ON 31/3/2009. THUS, THESE GOODS WERE NO T THE PART OF THE CLOSING STOCK AS DECLARED BY THE ASSESSEE. HE FURTH ER HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO FURNISH ANY COGENT RE PLY IN THIS REGARD AND HIS STAND THAT THESE HAD BEEN TAKEN IN THE CLOS ING STOCK AS ON 31/3/2009 WAS NOT ACCEPTABLE. THUS, FROM THE ABOVE DI SCUSSION, THE FOLLOWING FACTS HAVE BEEN EMERGED. (A) FIRSTLY, THE AUDIT REPORT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION REVEALS THAT NO STOCK HAS BEEN DECLAR ED EITHER TO BE LYING IN TRANSIT OR TO BE LYING FOR CLEARANCE OF CUSTOMS. ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 4 (B) SECONDLY, AS IT IS AN ADMITTED FACT THAT THE I NVENTORY WAS VALUED ON THE BASIS OF THE PHYSICAL VERIFICATION MA DE BY THE PARTNERS ON ESTIMATE BASIS WHEREAS THE GOODS WERE NOT PHYSICALLY PRESENT FOR STOCK TAKING. THEREFORE, HE MADE ADDITION OF RS. 88,57,732/- IN T HE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT IT WAS A CONSISTENT PRA CTICE OF THE ASSESSEE FIRM TO INCLUDE THE GOODS LYING AT THE POR T IN THE CLOSING STOCK AT THE END OF THE YEAR. IN THE CURRENT YEAR ALSO, T HE CLOSING STOCK OF RS. 2,65,09,500/- AS ON 31/03/2009 INCLUDED THE STOCK L YING AT THE PORT. HOWEVER, SUCH STOCK WAS VALUED AFTER DEDUCTING GP FRO M THE INVOICE VALUE. THUS, AFTER EXCLUDING GP FROM THE INVOICE VAL UE OF RS. 88,57,732/-, THESE GOODS WERE VALUED AT RS. 66,82,27 3/- IN THE CLOSING STOCK. THE GOODS LYING THE PORT AND NOT EXPORTED, WER E VERIFIABLE FROM THE INVOICED ISSUED BY THE ASSESSEE FIRM AND IT WAS NOT NECESSARY TO CARRY OUT PHYSICAL INSPECTION OF THESE GOODS. FURTH ER THE FUMIGATION WAS CARRIED AT THE FACTORY PREMISES OF THE ASSESSEE FIR M AT THE TIME OF LOADING OF GOODS IN THE CONTAINER AND NOT AT THE PO RT. THE ENTIRE ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 5 CONTAINER WAS SEALED OFF AT THE FACTORY PREMISES ITS ELF AFTER THE FUMIGATION. THERE IS NO NECESSITY AS PER ACCOUNTING STANDARD TO SHOW THE GOODS IN TRANSIT SEPARATELY IN THE BOOKS OF ACC OUNT. THE ASSESSEE HAD CLAIMED TOTAL FREIGHT EXPENSES, TERMINAL HANDLI NG EXPENSE AND FUMIGATION CHARGES OF RS. 3,28,034/- FOR THE PERIOD 21/3/2009 TO 31/3/2009 WHEN THESE GOODS WERE DISPATCHED TO THE PO RT. OUT OF TOTAL AMOUNT OF RS. 3,28,034/- AN AMOUNT OF RS. 1,86,906/ - WAS PAID DURING THE YEAR ITSELF AND THE REMAINING AMOUNT WAS PAID IN THE NEXT YEAR. AND OUTSTANDING AMOUNT OF RS. 1,86,906/- WAS NOT CLAIMED AS AN EXPENDITURE IN THE BOOKS OF ACCOUNT AND INSTEAD OF IT, IT HAS BEEN SHOWN PREPAID EXPENDITURE. ALTERNATIVELY, THE ASSESS EES CLAIM BEFORE THE CIT(A) WAS THAT IF THE ASSESSING OFFICER INCREAS ED THE CLOSING STOCK, IT AUTOMATICALLY INCREASES THE OPENING STOCK OF THE SUBSEQUENT YEAR, THEREFORE, THERE IS NO REVENUE LOSS. THE FIRM HAS D ISCLOSED CLOSING STOCK OF GOODS LYING AT THE PORT IN THE YEAR ENDING ON 31 /3/2008 AT RS. 6,83,253/-, & RS. 40,71,281 AS ON 31/3/2007 AFTER R EDUCING G.P.. CONSISTENTLY THIS YEAR ALSO, THE ASSESSEE HAS SHOWN CLOSING STOCK OF GOODS LYING AT PORT AT RS. 66,82,273/- IN THE CLOSI NG STOCK. THEREFORE, HE DELETED THE ADDITION OF RS. 88,57,732/- MADE BY THE ASSESSING OFFICER. ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 6 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER. AT THE OUTSET, THE LD. AR FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUPPORTED HIS ORDER AND RE LIED UPON THE VARIOUS CASE LAWS AS UNDER:- (I) CIT VS. EXCEL INDUSTRIES LTD. 358 ITR 295. (II) CIT VS. SATISH ESTATE PVT. LTD. (2014) 226 TAXM AN 11. HE FURTHER ARGUED THAT THE ADDITIONS WERE MADE ON DI FFERENT FOOTINGS BY THE ASSESSING OFFICER IN PRECEDING YEARS, WHICH HAS BEEN DELETED BY THE HONBLE ITAT. THEREFORE, HE PRAYED TO DISMISS THE APP EAL FILED BY THE REVENUE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESS EE HAD FOLLOWED THE CONSISTENT METHOD OF VALUATION OF CLOSING STOCK LYI NG AT THE PORT. IT VERIFIED THE CLOSING STOCK ON THE BASIS OF LAST SAL E BILLS NO SHIPMENT HAD BEEN MADE DURING THE YEAR. IT REDUCES THE G.P. ON T HE SALE BILLS AFTER FOLLOWING THIS METHOD CONSISTENTLY. THE APPELLANT HAD INCLUDED NET AMOUNT OF GOODS IN THE CLOSING STOCK. THE LD. CIT(A) HAD ANALYSED ALL THE FACTS OF THE CASE INCLUDING THE CASE LAWS REFERR ED BY THE ASSESSEE IN DETAIL, ACCORDINGLY WE UPHOLD THE ORDER OF THE LD CI T(A). ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 7 6. THE SECOND GROUND OF APPEAL IS AGAINST DELETING T HE ADDITION OF RS. 26,24,549/- MADE BY THE ASSESSING OFFICER BY RE JECTING THE CLAIM OF ASSESSEE REGARDING EXEMPTIONS U/S 10BA OF THE ACT. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED DEDU CTION U/S 10BA OF THE ACT AT RS. 26,24,549/-. THE ASSESSING OFFICER G AVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE AND ASKED TO FURNISH THE DETAILS OF ELIGIBLE MANUFACTURING ITEMS ON WHICH IT CLAIMED EXEMPTION U/S 10BA OF THE ACT. THE ASSESSEES REPLY HAS BEEN REPRODUCED BY THE ASSESSING OFFICER AT PAGE 3 OF THE ASSESSMENT ORDER. THE LD. A SSESSING OFFICER FURTHER GAVE OPPORTUNITY ON AUDIT REPORT NOT FURNI SHED U/S 56H, AUDITOR HAD NOT CERTIFIED WHETHER THE ASSESSEE HAD RECEIVED THE CONVERTIBLE FOREIGN EXCHANGE WITHIN THE PERIOD, ELIGIBLE ARTICLE OR THINGS HAD NOT BEEN SPECIFIED AND DETAILS OF MANUFACTURING AND TRA DE ITEMS. THE ASSESSEE ALSO HAD NOT MAINTAINED ITEMWISE DETAILS OF GOODS MANUFACTURED. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT NO STOCK INVENTORY OR ANY DETAIL OF SUCH ELIGIBLE ARTICLE OR THING WERE BEING MAINTAINED BY THE ASSESSEE. IT IS NOT POSSIBLE FOR THAT, SINCE THE GOODS ARE MIXED WITH OTHER GOODS, WHICH HAD BEEN PURCHASED BY IT AS FINISHED GOODS. THE ASSESSEE PURCHASED RAW MATERIAL TO THE EXT ENT OF RS. 2,37,06,530/- AND HAD MANUFACTURED ELIGIBLE GOODS O UT OF WHICH HE MADE EXPORT. ALL THEIR EXPORT HAD BEEN REALIZED. IT IS FURTHER HELD BY THE ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 8 ASSESSING OFFICER THAT THE YEAR UNDER CONSIDERATION , THE ASSESSEE CLAIMED DEDUCTION U/S 10BA OF THE ACT ON ESTIMATE B ASIS, WHICH WAS 9% OF TOTAL TURNOVER COMPARED TO PRECEDING YEAR, IT WAS 5% OF TOTAL TURNOVER. THE PERCENTAGE TO DETERMINE THE ELIGIBLE A RTICLE OR THING WAS ONLY IMAGINARY METHOD. THE C.A. HAS HIMSELF FURNISHE D THE CERTIFICATE ONLY ON THE BASIS OF ESTIMATE. THE COPY OF BILLS PR ODUCED BY THE ASSESSEE ALSO REVEALED THAT THE GOODS HAD BEEN PURC HASED FROM OUTSIDE, WHICH IS CONTRARY TO THE PROVISIONS OF SECT ION 10BA. THUS, THERE IS NO EVIDENCE AND JUSTIFICATION FOR PRODUCING AND MANUFACTURING OF ELIGIBLE GOODS. ACCORDINGLY, THE LD ASSESSING OFFIC ER DISALLOWED THE CLAIM OF RS. 26,24,549/-. 7. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD ALLOWED THE APPEAL BY OBSERVING THAT THE APPELLANT IS ENGAGED I N BUSINESS OF EXPORTS OF THOUSANDS OF ITEMS SUCH AS FRAMES, MIRRO R FRAMES, MIRROR DRESSING, WINDOW MIRRORS, BLANKET BOXES, BEDSIDE, BED HEAD, COFFEE TABLES, T.V. CABINETS, CAB TALL, SIDE BOARD, LAMP T ABLES, CONSOLE TABLES, BED, DINNING, TV/VCD UNIT, WRITING DESK, CARVING CHA IRS, WARDROBE, FILE BOXES, CANDLE HOLDERS, WINE RACKS, READ STOOLS, CD R ACKS, DRESSER, KEY BOXES, LID TRUNK, DISH RACKS, BOOK SHELF, ROUND TAB LES ETC. FURTHER ALL THESE ITEMS WERE SOLD IN DIFFERENT SIZES, DIFFERENT CARVING WORK AND WITH ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 9 DIFFERENT ATTACHMENTS. EACH AND EVERY ITEM BEING UN IQUE, THEREFORE, MAINTENANCE OF THE DAY TO DAY STOCK REGISTER WAS NOT FEASIBLE. MAJORITY OF GOODS EXPORTED BY THE ASSESSEE FIRM WERE PURCHAS ED OUT RIGHTLY FROM THE MARKET HOWEVER, A SMALL PORTION OF EXPORTS COMPR ISED OF MANUFACTURED GOODS ALSO. THE C.A. HAD SPECIFIED IN A NNEXURE-A THAT CONVERTIBLE FOREIGN EXCHANGE OF RS. 3,45,57,460/- WA S RECEIVED AS AGAINST TOTAL EXPORT TURNOVER OF RS. 38,23,27,376/- WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE PREVIOUS YEAR. THE C.A. ALSO GIVEN BASIS FOR COMPUTATION OF EXEMPTION U/S 10BA I.E. THE COST OF RAW MATERIAL PURCHASED FOR MANUFACTURING WAS APPROXIMATELY 9% OF THE TOTAL TURNOVER. NO EXEMPTION U/S 10BA WAS CLAIMED IN RELAT ION TO EXPORT OF TRADED GOODS. BY APPLYING GP RATE OF 24.56% ON EXPO RT OF MANUFACTURED GOODS, THE PROFITS WERE WORKED OUT AT R S. 84,85,820/-. AFTER REDUCING PROPORTIONATE EXPENSES OF RS. 58,61, 271/- FROM THE ELIGIBLE PROFITS, THE EXEMPTION U/S 10BA WAS CLAIMED AT RS. 26,24,549/-. THEREFORE, HE FOUND THE ASSESSING OFFICER OBSERVATIO N THAT THE AUDITORS HAD NOT GIVEN THE BASIS OF CALCULATION FOR EXEMPTIO N U/S 10BA WAS TOTALLY ERRONEOUS AND NOT BORNE OUT FROM THE RELEVA NT RECORDS. THE ELIGIBLE ARTICLES OR THINGS EXPORTED BY THE ASSESSE E FIRM WERE ITSELF SPECIFIED IN THE EXPORT INVOICES, THEREAFTER ASSESS EES CLAIM U/S 10BA OF THE ACT WAS ON THE BASIS OF SCIENTIFIC METHOD AND ON THE BASIS OF FACTS ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 10 AND FIGURES. THE LD ASSESSING OFFICER ALSO RELIED UP ON THE HONBLE ITAT DECISION IN ITA NO. 815/JP/2007 ORDER DATED 20/06/2 008 IN THE CASE OF M/S MANGALAM ARTS FOR A.Y. 2004-05 ON LIBERAL INTER PRETATION OF THE PROVISIONS OF ENCOURAGE OF EXPORT WHEREIN THE HONB LE ITAT ALSO CONSIDERED THE HON'BLE SUPREME COURT DECISION IN TH E CASE OF MYSORE MINERALS LTD. VS. CIT 239 ITR 775 AND BAJAJ TEMPO LTD. VS. CIT 196 ITR 188. THEREFORE, HE ALLOWED THE DEDUCTION CLAIMED B Y THE ASSESSEE U/S 10BA OF THE ACT AT RS. 26,24,549/-. 8. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR FOR THE ASSESSEE SUBMITTED AS UNDER:- 1. THE ASSESSEE IS ENGAGED IN EXPORT OF MANUFACTURED AS WELL AS TRADE ITEMS. MAJORITY OF THE ITEMS SOLD ARE TRADING ITEMS. ONLY FEW ITEMS ARE MANUFACTURED. THEREFORE, THE ASSESSEE, CON SIDERING THE QUANTUM OF RAW MATERIAL PURCHASED AND OTHER MANUFACT URING EXPENSES INCURRED THEREON, ESTIMATED THE RATIO OF T RADE GOODS EXPORTED AND MANUFACTURED GOODS EXPORTED AS 91: 9. THE AUDITOR ALSO ON THE BASIS OF THESE ESTIMATED BIFURCATIONS G IVEN HIS REPORT ON THE CLAIM OF EXEMPTION U/S 10BA. 2. THERE IS NO DENIAL OF THE FACT ASSESSEE HAS PURCHASE D RAW MATERIAL OF RS.2.37 CRORES. THIS RAW MATERIAL HAS BEE N USED BY THE ASSESSEE IN THE MANUFACTURING OF ELIGIBLE ARTIC LE/THING. THIS IS ONLY A SMALL FRACTION OF THE TOTAL COST OF GOODS SO LD. THEREFORE ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 11 ASSESSEE HAS CLAIMED DEDUCTION U/S 10BA ON THE PROP ORTIONATE BASIS. IN LAST YEAR ALSO THE ASSESSEE HAS CLAIMED T HE DEDUCTION ON THE SIMILAR BASIS WHICH HAS BEEN ALLOWED IN THE ASSE SSMENT FRAMED U/S 143(3). ALL THESE FACTS HAS NOT BEEN APP RECIATED BY THE AO IN THE CORRECT PROSPECTIVE. HE MADE VARIOUS OBSERVATIONS WHICH ARE IRRELEVANT OR INCORRECT AS CAN BE NOTED FR OM THE FOLLOWING:- (I) IN LAST YEAR ASSESSEE CONSIDERED THE TURNOVER OF EL IGIBLE ARTICLE OR THING AS 5% OF THE TOTAL TURNOVER SINCE THE COST OF THE RAW MATERIAL PURCHASED WAS APPROXIMATELY 5% OF TH E TOTAL PURCHASE. DURING THE YEAR THE COST OF RAW MAT ERIAL PURCHASED IS APPROXIMATELY 9% OF THE TOTAL PURCHASE AND THEREFORE THE VALUE OF THE ELIGIBLE ARTICLE OR THIN G IS CONSIDERED AS 9% OF THE TOTAL TURNOVER. (II) THE FINDING OF THE AO THAT THE COPY OF THE BILLS REV EAL THAT GOODS ARE PURCHASED FROM OUTSIDE WHICH IS CONTRADICT ORY TO THE PROVISIONS OF SECTION 10BA IS IRRELEVANT. THE AS SESSEE HAS PURCHASED THE GOODS FROM OUTSIDE BOTH IN RESPEC T OF THE SEMI FINISHED ITEMS AND THE RAW MATERIAL. COPY OF SAMPLE BILLS OF RAW MATERIAL WHICH ARE USED FOR MANUFACTURING OF ELIGIBLE ARTICLE OR THINGS ARE AT. THESE RAW MATERIAL IS USED FOR MANUFACTURING OF THE ELIGIBLE GOODS AS IS EVIDENT FROM THE ACCOUNTS IN AS MUCH AS IN SCHED ULE 12 ON THE RAW MATERIAL PURCHASES ASSESSEE HAS INCURRED EXPENDITURE ON SEASONINGS CHARGES, SEASONING MATERI AL, WAGES AND LABOUR ETC.. ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 12 (III) OF COURSE THE ASSESSEE HAS NOT MAINTAINED BIFURCATI ON OF MANUFACTURING AND TRADE ITEMS DEALT BY HIM, THEREFO RE ON A REASONABLE AND CONSERVATIVE BASIS IT HAS CLAIMED DE DUCTION U/S 10BA BASED ON THE RATIO OF RAW MATERIAL PURCHASE D TO THE TRADED GOODS PURCHASED. IN FACT ASSESSEE HAS NO T CONSIDERED THE EXPENDITURE ON MANUFACTURING IN WORKI NG OUT THIS RATIO TO BE ON A CONSERVATIVE SIDE, OTHERWI SE THE RATIO WOULD HAVE BEEN MORE AS CAN BE PERCEIVED FROM THE FOLLOWING TABLE:- PARTICULARS 31/03/09 SALES 382327376 LESS: GROSS PROFIT 93883079 COST OF GOODS SOLD 288444298 DETAILS OF EXPENSES INCURRED ON MANUFACTURING: (A) RAW MATERIAL PURCHASES 23706530 (B) SEASONING CHARGES 214114 (C) SEASONING MATERIAL 310873 (D) WAGES AND LABOUR CHARGES (ESTIMATED AT 10% OF RAW MATERIAL) 2370653 (E) FREIGHT INWARDS (BASED ON % OF RAW MATERIAL ON TOTAL PURCHASES ) 105459 (F) FINISHING CHARGES (ESTIMATED AT 15% OF RAW MAT ERIAL) 3555979.5 (G) FINISHING MATERIAL (ESTIMATED AT 20% OF THE RAW MATERIAL ) 4741306 TOTAL COST OF GOODS MANUFACTURED 35004914.5 PERCENTAGE OF TOTAL COST OF GOODS MANUFACTURED BASED ON TOTA L COST OF THE GOOS SOLD 12.14% PERCENTAGE OF TOTAL COST OF GOODS MANUFACTURED BASE D ON TOTAL SALES 9.16% STATEMENT INDICATING WORKING OF % OF MANUFACTURING ACTIVITY IN TOTAL ACTIVITY (IV) THE CIT(A) HAS APPRECIATED THE FINDING OF AO THA T THE AUDITOR HAS NOT GIVEN THE BASIS OF CALCULATION FOR ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 13 EXEMPTION U/S 10BA IS TOTALLY ERRONEOUS AND NOT BOR NE OUT FROM THE RELEVANT RECORDS. THE FACT THAT THE GOODS WE RE MANUFACTURED AND EXPORTED IS NOT DENIED. THE CLAIM O F EXEMPTION U/S 10BA ON PROPORTIONATE BASIS IS REASON ABLE AND THEREFORE HE RIGHTLY DIRECTED THE AO THAT ASSES SEE IS ENTITLED TO EXEMPTION U/S 10BA. IN VIEW OF THE ABOVE THE ORDER OF THE CIT(A) BE UPHE LD BY DISMISSING THE GROUND OF THE DEPARTMENT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD . CIT(A) HAD VERIFIED THE CALCULATION MADE BY THE C.A. FOR CLAIM ING EXEMPTION U/S 10BA OF THE ACT WITH REFERENCE TO GOODS MANUFACTURED AND GOODS TRADED. THE PERCENTAGE OF INCOME FOR DEDUCTION U/S 1 0BA WAS CALCULATED ON THE BASIS OF RAW MATERIAL PURCHASED AN D GOODS TRADED DURING THE YEAR UNDER CONSIDERATION, WHICH WAS 9% OF TOTAL EXPORT. THE APPELLANT HAD REALIZED FOREIGN EXCHANGE TO THE TUNE OF RS. 3,45,57,460/- AS AGAINST TOTAL TURNOVER OF RS. 38,2 3,27,376/- WITHIN 6 MONTHS FROM THE END OF THE PREVIOUS YEAR. THE LD CIT( A) ON THE BASIS OF GP RATE OF 24.56% ON EXPORT MANUFACTURED GOODS AND PROFITS WERE WORKED OUT AT RS. 84,85,820/-. AFTER REDUCING PROPOR TIONATE EXPENSES OF RS. 58,61,271/-, THE LD CIT(A) ALLOWED THE DEDUCTI ON U/S 10BA OF THE ACT ON RS. 26,24,549/- AFTER VERIFYING THE FACTS AN D FIGURES. SIMILAR ITA 714/JP/2012_ ACIT VS. SANKALP INTERNATIONAL 14 DEDUCTIONS WERE CLAIMED BY THE APPELLANT IN PRECEDIN G YEAR, WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER HIMSELF IN SCR UTINY ASSESSMENT MADE U/S 143(3) OF THE ACT. ACCORDINGLY, WE UPHOLD T HE ORDER OF THE LD CIT(A). 10. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 10/04/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED 10 TH APRIL, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-4, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S SANKALP INTERNATIONAL, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDR @ VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 714/JP/2012). VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR