ITO 14(3)(4), MUMBAI V. SHREE JEWELS, MUMBAI

ITA 7579/MUM/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9687 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 24-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI LD
• Assessee Lawyers: REEPAL TRALSHAWALA LD
• Keywords: Opportunity of cross examination; Third party statement; Onus to prove
• Section: 143(3); 10AA; 133A

Judgement Text

SHREE JEWELS AY:2008-09,2009-10 & 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NOS.7579 & 7580/MUM/2012, 2422/MUM/2014 & 6175/MUM/2014 ( / ASSESSMENT YEARS: 2008-09, 2009-10 & 2010-11) INCOME TAX OFFICER 14(3)(4) 6 TH FLOOR EARNEST HOUSE NARIMAN POINT MUMBAI-400 021 / VS. SHREE JEWELS 199/201, 3 RD FLOOR GOLD COIN BUILDING SHEIKH MEMON STREET ZAVERI BAZAR MUMBAI 400 002 ! ./ ./ PAN/GIR NO.ABHFS-0073M ( !# /APPELLANT ) : ( $!# / RESPONDENT ) & ./I.T.A. NOS.7450&7451/MUM/2012 & 2379/MUM/2014 ( / ASSESSMENT YEARS: 2008-09, 2009-10 & 2010-11) SHREE JEWELS 199/201, 3 RD FLOOR GOLD COIN BUILDING / VS. INCOME TAX OFFICER 14(3)(4) 6 TH FLOOR EARNEST HOUSE 2 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 SHEIKH MEMON STREET ZAVERI BAZAR MUMBAI 400 002 NARIMAN POINT MUMBAI-400 021 ! ./ ./ PAN/GIR NO.ABHFS-0073-M ( !# /APPELLANT ) : ( $!# / RESPONDENT ) REVENUE BY : RAM TIWARI, LD. DR ASSESSEE BY : REEPAL TRALSHAWALA, LD. AR / DATE OF HEARING : 14/07/2017 / DATE OF PRONOUNCEMENT : 31 /07/2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE FOR ASSESSMENT YEARS [AY] 2008-09, 2009-10 & 2010-11 WHICH ASSAILS SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-25 [CIT(A) ] DATED 30/10/2012 & 30/01/2014. THE REVENUE HAS FILED ANOTHER APPEAL FO R AY 2008-09 AGAINST ORDER OF LD. CIT(A) DELETING PENALTY U/S 271(1)(C). SINCE, THE ISSUES ARISES OUT OF COMMON SET OF FACTS, WE TAKE UP THE SAME BY WAY OF THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. FIRS T, WE TAKE UP REVENUES APPEAL ITA NO. 7579/MUM/2012 & ASSESSEES APPEAL IT A NO. 3 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 7450/MUM/2012 FOR AY 2008-09 WHICH CONTEST THE ORDE R OF LD. CIT(A) DATED 30/10/2012 QUA ALLOWANCE OF DEDUCTION U/S 10AA TO THE ASSESSEE. 2. BRIEFLY STATED, THE ASSESSEE BEING RESIDENT FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING & EXPORT OF GOLD COINS AND MEDALLIONS WAS ASSESSED FOR AY 2008-09 U/S 143(3) OF THE INCOME TA X ACT ON 28/12/2010 AT RS.3,11,80,770/- AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 21/09/2008. THE ASSESSEE REFLECTED TURNOVER OF RS.3 2.33 CRORES AND REFLECTED NET PROFIT OF RS.3.12 CRORES WHICH TRANSL ATES INTO NP RATE OF 9.64%. THE ASSESSEE CLAIMED DEDUCTION U/S 10AA FOR ENTIRE PROFIT AGAINST MANUFACTURING UNIT LOCATED AT SEZ, SACHIN, SURAT BEING ELIGIBLE UNIT / LOCATION ENTITLED FOR DEDUCTION U/S 10AA. THIS DEDU CTION HAS BEEN DENIED BY LD. AO AND THE SAME IS THE SUBJECT MATTER OF THIS A PPEAL. 2.1 THE ASSESSEES BUSINESS PREMISES AT MUMBAI & SURAT WERE SUBJECTED TO A SURVEY ACTION U/S 133A ON 21/09/2010. IT WAS F OUND THAT THE MUMBAI PREMISES WAS BEING USED ONLY AS CORRESPONDENCE ADDR ESS WHEREAS THE SURAT UNIT WAS FOUND LYING UNATTENDED AND LOCKED. THE SA ID UNIT WAS FOUND TO BE IN DILAPIDATED CONDITION AND NO EMPLOYEE CONN ECTED WITH THE UNIT WAS FOUND AT ITS PREMISES AND LOCKS AT THE GATES WERE F OUND IN RUSTED CONDITION. THE SURVEY TEAM FOUND 2-3 JUNKED MACHINES LYING IN THE PREMISES AND THE UNIT WAS IN SHABBY CONDITION. A STATEMENT OF A PERS ON NAMELY VIMAL SURTI, ACCOUNTANT OF GLOBAL PROSERVE LTD. (A UNIT JUST ADJACENT TO ASSESSEES UNIT) WAS RECORDED WHEREIN HE SPECIFICALLY STATED THAT NO BUSINESS ACTIVITY WAS BEING CARRIED OUT FROM THE SAID UNIT IN THE LAST 2 YEARS WHICH CREATED SERIOUS 4 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 DOUBT ON ASSESSEES CLAIM U/S 10AA AND CONSEQUENTLY , THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE DATED 13/12/2010 TO EXPLAIN HIS STAND. 2.2 IN REPLY, THE ASSESSEE CONTROVERTED THE STAND O F REVENUE AND EXPLAINED THAT THE ASSESSEE CEASED HIS BUSINESS OPE RATIONS MUCH BEFORE THE DATE OF SURVEY WHICH IS CORROBORATED BY THE FAC T THAT THE ASSESSEE VIDE ITS LETTER DATED 08/02/2010 HAD ALREADY REQUESTED T HE DEVELOPMENT COMMISSION OF SURAT SEZ FOR DE-BONDING (CLOSURE) OF THE SAID UNIT AND THEREFORE, THE BUSINESS PREMISES WERE LOCKED AND MA CHINES WERE FOUND IN RUSTED CONDITIONS. NEVERTHELESS, NO ADVERSE INFEREN CE COULD BE DRAWN ON THE BASIS OF THE GIVEN FACTS SINCE THE PRESENCE OF MACHINES AT THE UNIT, BY ITSELF, CORROBORATES THE STAND OF THE ASSESSEE THAT MANUFACTURING ACTIVITY WAS BEING CARRIED OUT AT THE SAID UNIT IN THE PAST. THE ASSESSEE ALSO DISPUTED THE STAND OF REVENUE IN PLACING RELIANCE O N THE STATEMENT OF A THIRD PERSON WITHOUT CONFRONTING THE SAME TO THE ASSESSEE AND REQUESTED FOR THE CROSS EXAMINATION OF THE CONCERNED PERSON. 2.3 HOWEVER, NOT CONVINCED, LD. AO APPRECIATED THE PRODUCTION PROCESS AND ELECTRICITY REQUIREMENTS TO MANUFACTURE GOLD COIN / MEDALLIONS AND CORRELATED THE ELECTRICITY CONSUMPTION VIS--VIS DA TE OF PURCHASE / SALE REFLECTED BY THE ASSESSEE AND INFERRED THAT NO MANU FACTURING ACTIVITY WAS BEING CARRIED OUT BY THE ASSESSEE AT THE SAID UNIT. 2.4 THE LD. AO FURTHER CORROBORATED THE SAME BY DRA WING ADVERSE INFERENCES FROM THE STATEMENT OF SHAILESH JAIN PROP. S.L.INDUSTRIES WHO WORKED AS LABOUR CONTRACTOR FOR THE ASSESSEE AND FI NALLY CAME TO CONCLUSION 5 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 THAT SINCE NO MANUFACTURING ACTIVITY WAS CARRIED OU T BY THE ASSESSEE, DEDUCTION U/S 10AA WAS NOT AVAILABLE TO HIM. 2.5 THE LD. AO, IN THE ALTERNATIVE, NOTED THAT THE DECLARED NP RATE OF 9.64% WAS ON THE HIGHER SIDE AND UPON COMPARISON OF THE SAME WITH NP DECLARED BY FIVE OTHER ASSESSEE IN SIMILAR LINE OF BUSINESS CAME TO CONCLUSION THAT THE PROFIT IN THIS LINE OF BUSINESS COULD NOT BE MORE THAN 2%. FINALLY, APPLYING THE PROVISIONS OF SECTION 10AA(9) READ WITH SECTION 80IA(10) THE LD. AO, IN THE ALTERNATIVE, PROPOSED DEDUCTION ONLY TO THE EXTENT OF 2% OF THE TURNOVER ACHIEVED BY THE ASSESS EE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 30/10/2 012 AND RAISED VARIOUS CONTENTIONS. THE ASSESSEE VEHEMENTLY PROTES TED THE ACTION OF AO AND IN SUPPORT, SUBMITTED IMPORT / EXPORT DOCUMENTS , DOCUMENTS RELATING TO MOVEMENT OF GOODS TO AND FROM STRONG ROOM OF SEZ FR OM ASSESSEES PREMISES, CUSTOM APPROVALS, COMPUTATION OF ELECTRIC ITY CONSUMPTION FROM EXPERT, CONFIRMATION OF LABOR CONTRACTOR, CONFIRMAT ION OF GOVERNMENT APPROVED VALUER WHO HAD CHECKED THE PURITY OF GOLD MEDALLIONS AT ASSESSEES PREMISES ETC. CONSEQUENTLY, REMAND REPOR T WAS CALLED FROM LD. AO WHO, WHILE CONTESTING THE STAND OF THE ASSESSEE, JUSTIFIED THE DENIAL OF EXEMPTION. 3.1 THE ASSESSEE PLACED RELIANCE ON MANY JUDICIAL P RONOUNCEMENTS STANDING IN HIS FAVOR UNDER IDENTICAL SET OF FACTS AND CIRCUMSTANCES AND STRESSED THAT IT HAD ALREADY INTIMATED THE DEVELOPMENT COMMISSIONER OF SURAT SEZ ON 08/02/2010 FOR DE-BONDING (CLOSURE) OF THE UNIT AND RECEIVED 6 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 COMMUNICATION DATED 15/04/2010 FROM THE MINISTRY OF COMMERCE AND INDUSTRY IN RESPECT OF CLOSURE OF UNIT IN SEZ WHICH EXPLAIN ED THE CONDITION OF FACTORY PREMISES AT THE TIME OF SURVEY ON 21/09/201 0. 3.2 THE ASSESSEE ALSO POINTED OUT THE PAYMENT MADE BY HIM TOWARDS ELECTRICITY CHARGES FROM TIME TO TIME AND POSSIBILI TY OF DEFAULT IN THE PHASE- III ELECTRICITY METERS INSTALLED AT THE SAID UNIT. HE FURTHER CONTROVERTE D THE STAND OF REVENUE BY POINTING OUT THAT LABOR CONTRAC TOR WAS DULY PAID FOR THE JOB WORK THROUGH BANKING CHANNELS AFTER DEDUCTION O F DUE TDS AND THEREFORE, NO ADVERSE INFERENCE COULD BE DRAWN AGAI NST THE ASSESSEE. 3.3 THE ASSESSEE FURTHER POINTED OUT THAT THE ASSES SEE WAS OBLIGED TO FILE ANNUAL PROGRESS REPORT [APR] OF THE UNIT ON MANUFACTURING CARRIED OUT TO THE DEVELOPMENT COMMISSIONER WHICH CONTAINED COMPLETE QUANTITATIVE DETAILS OF IMPORT / EXPORT / FOREX EARNED BY THE UN IT AND PLACED ON RECORD THE COPIES OF APR IN SUPPORT OF THE CONTENTION THAT THE MANUFACTURIN G ACTIVITY, IN FACT , WAS CARRIED AT THE SAID UNIT BY THE ASSESSEE. 3.4 REGARDING ESTIMATION OF PROFIT, THE ASSESSEE JU STIFIED THE DECLARED NP OF 9.64% AND CONTENDED THAT ALL TRANSACTIONS WERE W ITH UNRELATED THIRD PARTIES AND EXPORT REALIZATION WAS IN FOREIGN CURRE NCY AND ALL IMPORT / EXPORT TRANSACTIONS WERE SUBJECT TO STRICT GOVERNMENT REGU LATIONS AND APPROVED BY INDEPENDENT GOVERNMENT AGENCIES AT VARIOUS STAGES. THE ASSESSEE ALSO DISTINGUISHED THE LINE OF BUSINESS CARRIED OUT BY T HE FIVE COMPARABLE PARTIES SELECTED BY LD. AO AND JUSTIFIED THE PROFIT DECLARE D BY HIM. 3.5 FINALLY, AFTER ELABORATE DISCUSSION, LD. CIT(A) AGREED WITH VARIOUS CONTENTIONS OF THE ASSESSEE AND CONCLUDED THE MATTE R AS FOLLOWS:- 7 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 5. I HAVE GONE THROUGH WRITTEN SUBMISSIONS CAREFULL Y AND ALSO THE ASSESSMENT ORDER AND SUBSEQUENT REMAND REPORTS OF THE AO AS WELL AS ORDE R OF LD. CIT(A) AND HON'BLE ITAT AS RELIED UPON BY THE LD. AR. THERE IS MERIT IN THE CONTENTION MADE BY THE LD. ARS THAT MANUFACTURING ACTIVITY DID TAKE PLACE IN THE SEZ UN IT OF THE ASSESSEE IN INSTANT YEARS FOR ON/ FACTS DISCUSSED HEREAFTER AS DIVULGING FROM REC ORDS. 1) IT IS EVIDENT THAT THE APPELLANT HAD ON 8/2/2010 WRITTEN A LETTER TO THE DEVELOPMENT- COMMISSIONER OF SURAT SEZ INTIMATING THE DEBONDING (CLOSURE) OF THE UNIT IN SEZ. THE APPELLANT HAD ALSO RECEIVED A COMMUNICATION FROM MI NISTRY OF COMMERCE AND INDUSTRY DATED 15/4/2010 IN RESPONSE TO ITS LETTER DATED 8/2 /2010 FOR CLOSURE OF BUSINESS ACTIVITY IN SEZ UNIT. THE SEZ UNIT WAS CLOSED ON 8/2/2010 AN D THE SURVEY ACTION TOOK PLACE ON 21/9/2010. DURING THE COURSE OF SURVEY NO INDISCRIM INATING DOCUMENTS WERE FOUND. THE FACT THAT MACHINERIES AND MANUFACTURING WERE FOUND AT THE SEZ UNIT OF THE APPELLANT IN SPITE OF DEBONDING OF THE SEZ UNIT (I.E. AFTER A GA P OF MORE THAN 8 MONTHS OF CLOSURE) ITSELF SPEAKS THAT MANUFACTURING ACTIVITIES WERE CA RRIED OUT IN THE SEZ PREMISE. THE SAME HAVE BEEN ACCEPTED BY AO THAT MACHINERY WERE F OUND AT THE UNIT DURING THE SURVEY ACTION. THE AO HAS MENTIONED IN THE ASSESSME NT ORDER THAT THE UNIT WAS LYING UNATTENDED AND LOCKS WERE BADLY RUSTED AND THE UNIT WAS IN A DILAPIDATED CONDITION BUT THE AO CHOSE TO IGNORE AND COMMENT ON THE VITAL POI NT MADE BY THE APPELLANT THAT THE UNIT WAS DEBONDED (CLOSED) FROM 8TH FEBRUARY 2010, MUCH BEFORE THE SURVEY ACTION TOOK PLACE ON 21/09/2010. 2) THE MACHINERIES FOR MANUFACTURING WERE FOUND AT THE PREMISE OF THE ASSESSEE. THE SAME HAS BEEN ACCEPTED BY THE AO IN THE ASSESSMENT ORDER AND REMAND REPORTS WHICH IS ALSO EVIDENCED BY PHOTOGRAPHS TAKEN BY SURVEY OF FICIALS. THE SAID FACTS HAVE BEEN FORTIFIED BY STATEMENTS RECORDED ON OATH ON 21/9/10 AND 24/10/2012 OF LABOUR CONTRACTORS DECLARATION AND OPERATIONS CARRIED OUT THROUGH THE SAME MACHINES. THERE IS FORCE IN THE ARGUMENT OF THE LD.AR THAT IMPORT AND EXPORT TAKES PLACE ONLY WHEN THERE IS ORDER IN HAND AND THEREFORE THE MACHINES REMAIN IDL E IN REMAINING PERIOD FOR WANT OF ORDER OF EXPORT OF GOLD MEDALLION. 3) THE ASSESSEE WAS GIVEN PERMISSION BY THE DEVELOP MENT COMMISSIONER, A GOVT. AUTHORITY, TO CARRY OUT MANUFACTURING INSIDE SEZ. T HE ASSESSEE CANNOT CARRY OUT ANY OTHER ACTIVITY INSIDE THE SEZ AS PER PERMISSION/APP ROVAL LETTER OF DEVELOPMENT COMMISSIONER. THE APPELLANT HAS STATED THAT THERE W ERE IN ALL FIVE TRANSACTION OF IMPORT AND EXPORT DURING THE LIFE TIME OF THE PARTNERSHIP FIRM AND THE SAME HAS BEEN RECONFIRMED BY A LETTER DATED 20/12/2010 FROM THE O FFICE OF THE DEVELOPMENT COMMISSIONER THAT FIVE TRANSACTIONS TOOK PLACE FROM A.Y. 2008/09 TO A.Y. 2010/11 PROVING ONCE AGAINST THAT MANUFACTURING ACTIVITY TO OK PLACE IN SEZ, SACHIN. 4) EACH AND EVERY MOVEMENT (IMPORT AND EXPORT) OF T HE UNIT INSIDE THE SEZ IS UNDER THE DIRECT CONTROL OF CUSTOMS AND SEZ AUTHORI TIES, THE 'UNIT IS NOT ALLOWED TO HANDLE THE IMPORTED GOODS BEFORE IT REACHES THE STRONG ROOM OF THE SEZ CONTROLLED BY GOVT. AUTHORITIES. THE UNIT HAS TO GI VE THE GOODS BACK TO THE STRONG ROOM FOR EXPORT AND THE UNIT HAS NO FURTHER ROLE IN SHIPPING OF GOODS TO THE BUYER. SUCH MOVEMENTS ARE CLEARLY AUTHENTICATED IN DOCUMEN TS OF THESE GOVT. AGENCIES I.E.TO SAY CUSTOMS AND SEZ AUTHORITY. 8 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 5)DURING THE COURSE OF SURVEY ACTION IN SEZ UNIT AT SACHIN, THE AO HAD RECORDED A STATEMENT OF ONE THIRD PARTY I.E. ONE MR. VIMAL SUR TI PURPORTEDLY TO BE AN ACCOUNTANT OF AN ADJACENT UNIT, WHO IN HIS STATEMENT HAS STATED T HAT HE HAS NEVER SEEN ANY BUSINESS ACTIVITY BEING CARRIED OUT FOR THE PAST TWO YEARS. THE AO HAS RELIED ON A THIRD PARTY STATEMENT WHO IS NOWHERE CONNECTED WITH THE BUSINES S ACTIVITY OF THE APPELLANT AND IN SPITE OF REPEATED REQUESTS WHICH ARE ON RECORDS, TH E AO HAS NOT GIVEN A COPY OF THE STATEMENT RECORDED ON OATH NOR HAS GIVEN ANY OPPORT UNITY TO THE APPELLANT TO CROSS EXAMINE THE SAID PARTY. THE SAID STATEMENT HAS NO E VIDENTIARY VALUE AND CANNOT BE USED AGAINST THE APPELLANT IN THE ABSENCE OF ANY CR OSS EXAMINATION OF THE SAID UNKNOWN PARTY. THE APPELLANT IS UNAWARE WHETHER THE SAID MR . VIMAL SURTI WAS LOCATED IN THE SEZ ALL THE TIME AND HOW CAN HE BE SURE THAT THERE IS N O ACTIVITY BEING CARRIED OUT IN THE UNIT WHEN HE IS NOT A PART OF THE APPELLANTS BUSINESS IN ANY WAY. HOWEVER IT IS A FACTUAL DATA THAT THE LAST MANUFACTURING ACTIVITY DID TAKE PLACE IN THE MONTH OF 22 & 23 JUNE 2009 AND THE STATEMENT SEEMS TO BE RECORDED ON 21 ST SEPTEMBER 2010, THUS AROUND ONE AND A QUARTER YEAR HAD ELAPSED SINCE THE LAST MANUFACTU RING ACTIVITY DID TAKE PLACE. THUS, IN ANY CASE THE STATEMENT OF THE SAID MS. VIMAL SURTI HAS NO MUCH RELEVANCE ON THE ISSUE IN LIGHT OF APPARENT AND PATENT FACTS OF THE CASE, SIMILARLY A STATEMENT ON OATH WAS RECORDED AT MUMBAI OF ONE MR. MAHENDRA P. JAIN AT M UMBAI ADDRESS DURING THE SURVEY ACTION ON 21/9/2010. THE APPELLANT HAS NOT BEEN PRO VIDED WITH A COPY OF THE STATEMENT TO COMMENT ON THE SAME TILL DATE. HOWEVER FROM THE GIST OF THE FINDINGS WHICH THE AO HAS CHOSE TO DISCLOSE, THE FOLLOWING FACTS CAN BE D EDUCED AS UNDER:- THAT MR. MAHENDRA P JAIN IS A DISTANT RELATIVE OF SRI MUKESH JAIN, ONE OF THE PARTNERS OF THE APPELLANT. THAT NO BUSINESS ACTIVITY OF THE APPELLANT WERE U NDERTAKEN FROM THE SAID PREMISE AT THE TIME OF SURVEY WHICH IS A FACT AS TH E APPELLANT HAD CLOSED BUSINESS. THAT TINE WERE CERTAIN DOCUMENTS TYING IN A SMALL ALMIRAH WHICH WERE KEPT IN HIS PREMISE BY SHRI MUKESH JAIN, ONE OF THE PARTNER S OF THE APPELLANT. THAT THE AO HAS HIMSELF AGREED THAT THE DOCUMENTS FOUND WERE COUPLE OF SALE AND PURCHASE INVOICES AND AUDIT REPORT OF THE APPEL LANT. THUS, THIS STATEMENT ALSO IMPLIEDLY FORTIFIES THE S TAND OF THE ASSESSEE. THE APPELLANT HAS EXPLAINED THE ELECTRIC CONSUMPTIO N AND ALSO POINTED OUT THAT WHENEVER THERE IS A MANUFACTURING ACTIVITY UNDERTAK EN THE ELECTRIC CONSUMPTION HAS BEEN RECORDED BY THE ELECTRIC COMPANY IN THE SAME M ONTH OF PRODUCTION OR IN THE SUBSEQUENT MONTH. ALSO IT HAS BEEN POINTED OUT THAT THE ELECTRIC METER WERE FAULTY AND THE APPELLANT HAD PAID RS. 9,100/- AS ENERGY CHARGE S AND RS, 900/-AS RECONNECTION CHARGES ON 19/7/2007. SIMILARLY THE APPELLANT HAD P AID RS. 13,900/- (RS.13,000/- PLUS RS. 900/-) AS ENERGY CHARGES AND RS.1,100/- ( RS. 9 00/- PLUS ITS. 200/-) AS RECONNECTION CHARGES ON 29/7/2009. THUS THE ELECTRIC COMPANY HAD CHARGED FOR ALL THE ELECTRICITY CONSUMPTION AMOUNTS FROM THE APPELLANT DUE TO FAULT Y READINGS IN THE METER. 6) SEVERAL GOVT. AGENCIES IN INDIA AND ABOARD ARE I NVOLVED IN IMPORT AND EXPORT CARRIED OUT BY THE ASSESSEE INCLUDING RBI. ALL THE PAYMENTS OF THE IMPORT AS WELL AS EXPORT HAD BEEN ROUTED THROUGH BANKING CHANNEL OF THE RBI. 9 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 7) THERE WERE TOTAL THREE TRANSACTIONS OF PURCHASE, MANUFACTURING AND SALE DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAD GIVEN THE FLOW OF EACH OF SUCH PURCHASE AND SALE TRANSACTION SUPPORTED BY DOCUMENTARY EVIDE NCES WHEREIN MORE THAN ONE GOVT. AGENCIES ARE INVOLVED. IT IS EVIDENT THAT A P ROCESS OF MANUFACTURE WAS CARRIED OUT AT THE SEZ, PREMISE OF THE ASSESSEE AS THE DOCUMENT ARY AND CIRCUMSTANTIAL EVIDENCES CLEARLY ESTABLISH THAT GOLD BARS WERE IMPORTED AND AFTER DUE PROCESS OF MANUFACTURING GOLD MEDALLION WERE EXPORTED IN BOTH ASSESSMENT YEA RS. 8) PROPER DEDUCTION OF TDS FOR PAYMENT TO THE LABOU R CONTRACTOR WAS MADE WHO HAD CONFIRMED HIS JOB WORK AT THE PREMISE OF THE ASSESS EE BY AN AFFIDAVIT AS WELL AS STATEMENT ON OATH BEFORE THE AO AS WELL AS DURING T HE COURSE OF APPELLATE PROCEEDING. 9) THE LD.AR HAD SUBMITTED THAT GOVT. RECOGNIZED AP PROVED VALUER M/S SALIM J. DAGINAWALA HAD VISITED ASSESSEE PREMISE IN SACHIN SEZ FOR CHECKING PURITY OF MEDALLION MANUFACTURED BY THE ASSESSEE WHICH ITSELF PROVES MANUFACTURING ACTIVITY AT THE SEZ BY AN INDEPENDENT PERSON, MORE SO WHEN HE I S A RECOGNIZED GOVT. APPROVED VALUER. ON BEING ASKED, THE ASSESSEE FURNISHED RELE VANT DOCUMENT FROM HIM WHICH CLEARLY STATES THAT HE HAD CHECKED THE PURITY OF GO LD MEDALLION OF THE ASSESSEE AT UNIT NO. 404 ON PLOT NO.248 ON EACH OCCASION. 10)THE AO COULD NOT REBUTE CONVINCINGLY ANY OF THE SUBMISSIONS OF THE APPELLANT IN THE REMAND REPORTS LIKE DOCUMENTS AND EVIDENCES RELATED TO SEZ AUTHORITY AND CUSTOM AUTHORITY CATEGORICAL CONFIRMATION OF LABOUR CONTRA CTOR. ETC. EVEN OTHERWISE IT IS UNDISPUTED THAT MANUFACTURING ACTIVITY WAS LIMITED FOR THREE TRANSACTIONS ON THREE DIFFERENT DAYS. THE NATURE AND SCOPE OF ACTIVITY IS NOT SUCH THAT OPERATIONS SHOULD REMAIN IN CONTINUITY FOR MONTHS OR FOR A WHOLE YEAR . THEREFORE THE ELECTRIC CONSUMPTION WOULD BE MINIMAL AS APPLICABLE FOR RESPECTIVE DAYS. 11) THE AO WAS NOT ABLE TO ESTABLISH THE CLOSE CONN ECTION SO AS TO TAKE THE RECOURSE OF SECTION 80IA(10). THE ASSESSEE HAD PROVED BY FACTS AND ALSO GIVING AN AFFIDAVIT (ON BEING ASKED) THAT NONE OF HIS PURCHASE (IMPORT) AND SALE (EXPORT) PARTIES WERE RELATED TO THE ASSSESSEE. 12) THE VALUE ADDITION IN EXPORT BILLS IS DIVULGING WHICH IS ALSO DULY APPEARING IN CUSTOMS DOCUMENTS. 13) THE LD.AR HAD SUBMITTED THREE APPELLATE ORDERS OF CITS(A) AND ONE ITAT ORDER. THE FACTS AND ISSUES WERE SIMILAR. IN ONE OF THE AP PELLATE ORDER IN THE CASE OF GIA EXPORTS, THE FACTS WERE ALMOST IDENTICAL WHEREIN TH E LD. CIT(A)-41, MUMBAI HAD UPHELD THE DEDUCTION US/ 10AA IN THAT CASE BUSINESS ACTIVI TY WAS IN THE SAME SEZ I.E. SACHIN,SURAT WHEREIN SURVEY / SEARCH ACTION WAS CAR RIED OUT AND SEARCH ACTION CARRIED OUT IN PARENT CONCERN WHEREIN THE SAID PARTY / ASSE SSEE WAS PARTNER. IN VIEW OF SUCH PATENT FACTS, IT IMMENSELY TRANSPIR ES THAT MANUFACTURING HAD TAKEN PLACE AT ASSESSEE'S PREMISE IN SEZ IN INSTANT ASSESSMENT YEA RS BEYOND DOUBT AND THEREFORE THE ASSESSEE QUALIFIES FOR DEDUCTION U/S 10AA OF THE AC T IN INSTANT ASSESSMENT YEARS. 10 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 3.6 HOWEVER, HAVING HELD SO, LD. CIT(A) RESTRICTED THE DEDUCTION U/S 10AA TO 8% OF THE TURNOVER, BEING ESTIMATED PROFIT FROM THE MANUFACTURING UNIT AFTER APPRECIATING THE PROVISIONS OF SECTION 44AD. 3.7 AGGRIEVED, BOTH ASSESSEE AS WELL AS REVENUE IS IN APPEAL BEFORE US. THE REVENUE IS AGGRIEVED BY GRANT OF DEDUCTION U/S 10AA WHEREAS THE ASSESSEE IS AGGRIEVED BY PROFIT ESTIMATION @8% AS A GAINST HIGHER PROFITS DECLARED BY HIM. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] JUSTIFI ED THE STAND OF LD. AO AND CONTENDED THAT THE COMPLETE ONUS TO PROVE THE M ANUFACTURING ACTIVITY WAS ON ASSESSEE AND LD. AO WAS JUSTIFIED IN HIS CON CLUSION SINCE THE SURVEY ACTION REVEALED THAT THE UNIT WAS LYING UNAT TENDED IN DILAPIDATED CONDITION WHICH CONTROVERTS THE CLAIM OF THE ASSESS EE. OUR ATTENTION WAS ALSO DRAWN TO THE FACT THAT THE NATURE OF MANUFACTU RING ACTIVITY CARRIED OUT BY ASSESSEE REQUIRED HEAVY ELECTRICITY CONSUMPTION WHEREAS THE SAME WAS VERY MINIMUM AND HENCE NOT JUSTIFIED AND THEREFORE, CAST SERIOUS DOUBTS ON THE CLAIM OF THE ASSESSEE. 4.1 PER CONTRA, THE LD. COUNSEL FOR ASSESSEE [AR] VEHEMENTLY SUPPOR TED THE STAND TAKEN BY LD. CIT(A) AND CONTENDED THAT TH E WHOLE MANUFACTURING ACTIVITY CARRIED OUT BY ASSESSEE WAS SUBJECT TO STR ICT GOVERNMENT CONTROL AND REGULATIONS OVER VARIOUS STAGES AND THEREFORE, THE SAME COULD NOT BE DOUBTED. THE ASSESSEE CONTROVERTED EACH AND EVERY S TAND OF THE REVENUE BY SUBMITTING RELEVANT DOCUMENTS / INFORMATION FROM TIME TO TIME AND THEREFORE, NO ADVERSE INFERENCE COULD BE DRAWN AGAI NST THE ASSESSEE. 11 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 4.2 REGARDING PROFIT ESTIMATION, THE LD. AR DREW OU R ATTENTION TO THE FACT THAT ALL TRANSACTIONS WERE WITH UNRELATED THIRD PAR TIES SUPPORTED BY PURCHASE / SALE DOCUMENTS AND BENEFIT COULD NOT BE DENIED ME RELY ON THE BASIS OF DOUBTS / CONJECTURES OR SURMISES. THE ACCOUNTS OF T HE ASSESSEE WERE SUBJECTED TO AUDIT AND THE REVENUE COULD NOT POINT OUT EVEN SINGLE INSTANCE OF SUPPRESSION IN SALES / PURCHASE / EXPENSES FIGUR E REFLECTED BY THE ASSESSEE AND THEREFORE THERE WAS NO OCCASION / JUST IFICATION TO ESTIMATE THE PROFIT AND ASSESSEE WAS ENTITLED FOR FULL DEDUCTION OF PROFIT AS REFLECTED BY HIM. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AFTER GOING THROUGH THE SAME AND AFTER W EIGHING THE RESPECTIVE CONTENTIONS, WE FIND THAT LD. CIT(A) HAS CLINCHED T HE ISSUE IN THE RIGHT PERSPECTIVE SINCE THE WHOLE MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE WAS IN SEZ WHICH WAS SUBJECT TO STRICT GOVERNMENT CONTROL AND REGULATIONS AT VARIOUS STAGES. THE MOVEMENT OF GOOD S WAS WELL DOCUMENTED AND UNDER GOVERNMENT MONITORING. FURTHER , THE ASSESSEE HAS CARRIED OUT ONLY THREE IMPORT AND EXPORT TRANSACTIO NS DURING THE YEAR AND MANUFACTURING ACTIVITY HAS TAKEN PLACE ONLY FOR FEW DAYS AT THE SAID UNIT AND THE TRANSACTIONS ARE WELL SUPPORTED BY VARIOUS IMPO RT / EXPORT DOCUMENTS AND SUBJECT TO CUSTOM APPROVALS AND CLEARANCES AT V ARIOUS STAGES. THE PROGRESS OF THE UNIT WAS SUBJECT TO REPORTING TO GO VERNMENT AGENCY BY WAY OF ANNUAL PROGRESS REPORT . THE REVENUE COULD NOT POINT OUT ANY DISCREPANCIES IN THE DOCUMENTS WHICH IS QUITE EVIDE NT FROM THE ASSESSMENT ORDER AND OBSERVATIONS / CONCLUSIONS DRAWN BY LD. A O. 12 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 5.1 THE REVENUE HAS DOUBTED THE CLAIM OF THE ASSESS EE ON THE BASIS OF SURVEY ACTION WHICH WAS CARRIED OUT ON 21/09/2010 W HEREAS THE ASSESSEE HIMSELF HAS POINTED OUT THAT THE UNIT WAS ALREADY C LOSED BY HIM MUCH EARLIER VIDE HIS LETTER DATED 08/02/2010 WRITTEN TO THE DEVELOPMENT COMMISSIONER . THE REPLY RECEIVED FROM THE MINISTRY VIDE LETTER DA TED 15/04/2010 IS PLACED ON RECORD WHICH SUPPORTS THE CONTENTION OF THE ASSE SSEE. THIS IS FURTHER CORROBORATED BY THE FACT THAT THE ASSESSEES TURNOV ER IN AY 2011-12 & 2012-13 HAS FALLEN DRASTICALLY AND THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S 10AA IN AY 2011-12 & 2012-13 BUT, IN FACT, SOLD THE MACHINERY IN AY 2011-12. THEREFORE, WE FIND THE SAM E IN TUNE WITH THE CONTENTIONS / CONDUCT OF THE ASSESSEE. 5.2 THE ANOTHER FACTOR WHICH HAS LED THE LD. AO TO DISBELIEF THE STAND OF THE ASSESSEE IS ELECTRICITY CONSUMPTION. HOWEVER, W E FIND THAT THE ASSESSEE HAS CARRIED OUT ONLY THREE IMPORT TRANSACT IONS DURING THE YEAR AND THE UNIT HAS RUN ONLY FOR VERY FEW DAYS. THE ASSESS EE HAS DEPOSITED ELECTRICITY CHARGES FROM TIME TO TIME AS OBSERVED B Y LD. CIT(A). FURTHER, LD. AO HIMSELF HAS NOTED THAT THERE WAS SOME ELECTRICIT Y CONSUMPTION IN PHASE-1 AND PHASE-III ELECTRICITY METERS BUT THE SAME IS NOT IN TUNE WIT H MANUFACTURING PATTERN CARRIED OUT BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED HIS POSITION BY POINTING OUT THE POSSIBIL ITY OF DEFAULT IN PHASE-III METERS. THEREFORE, THE STAND OF THE REVENUE, IN ITS ELF, IS NOT FINAL AND CONCLUSIVE AND SUBJECT TO SUBJECTIVE INTERPRETATION . IT IS SETTLED POSITION THAT NO ADDITIONS COULD BE MADE MERELY ON THE BASIS OF M ERE DOUBTS / CONJECTURES / SURMISES. THEREFORE, THE BENEFIT OF T HE SAME HAS TO BE GIVEN 13 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 TO THE ASSESSEE PARTICULARLY WHEN ALL THE OTHER FAC TORS STAND IN ASSESSEES FAVOR. 5.3 AS FAR AS THE ESTIMATION OF PROFIT IS CONCERNED , WE FIND THAT THE ACCOUNTS OF THE ASSESSEE WERE SUBJECT TO AUDIT AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE. NO DISCREPANCIES HAVE BEEN POINTED IN THE SAME AND THE ASSESSEE HAS ALREADY SUBMITTED THAT ALL THE TRANSACTIONS WERE WITH UNRELATED THIRD PARTIES. THE REVENUE HAS NOT DOUBTE D THE SALE / PURCHASE / EXPENSES FIGURES REFLECTED BY THE ASSESSEE. THEREFO RE, COMPARING THE SAME, IN VACCUM WITH THE PROFIT MARGINS OF THIRD PARTIES , WITHOUT DOUBTING THE ASSESSEES FIGURES, IS NOT JUSTIFIED. THEREFORE , WE FIND NO JUSTIFICATION IN ESTIMATING THE PROFIT MARGINS EARNED BY THE ASSESSE E AND THEREFORE, INCLINED TO CONCUR WITH THE STAND OF THE ASSESSEE. 5.4 OUR ABOVE VIEWS ARE FURTHER FORTIFIED BY THE DE CISION OF THIS TRIBUNAL RENDERED IN ACIT VS. GIA EXPORTS [ITA NO. 8080 TO 8082/MUM/2011 ORDER DATED 19/06/2013] WHERE SIMILAR VIEW HAS BEEN TAKEN AND SIMILAR CONCLUSIONS HAVE BEEN DRAWN. 6. THEREFORE, WE ARE INCLINED TO DISMISS THE REVENU ES APPEAL AND ALLO ASSESSEES APPEAL. WE HELD SO. 7. NOW, WE TAKE UP ASSESSEES APPEAL ITA NO.7451/MU M/2012 AND REVENUES APPEAL ITA NO. 7580/MUM/2012 FOR AY 2009- 10. IN THIS AY, THE ASSESSEE SUFFERED SIMILAR DISALLOWANCE U/S 10AA FOR RS.233.59 LACS. THE LD. CIT(A), VIDE IMPUGNED ORDER DATED 30/10/2012, W HILE ALLOWING THE CLAIM OF THE ASSESSEE, HAS RESTRICTED THE SAME TO 8%. THE ORDER OF LD. CIT(A) IS COMMON ORDER FOR AY 2008-09 & 2009-10. SINCE, THE I SSUE IS IDENTICAL IN ALL 14 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 RESPECT WITH AY 2008-09 EXCEPT FOR FIGURES AND MINO R VARIATIONS, OUR OBSERVATIONS / CONCLUSIONS MUTATIS MUTANDIS APPLY TO THE SAME. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISSED WHEREAS THE A SSESSEES APPEAL STANDS ALLOWED. 8. THE ASSESSEES APPEAL ITA NO.2379/MUM/2014 AND R EVENUES APPEAL ITA NO. 2422/MUM/2014 FOR AY 2010-11 CONTEST SIMILA R ISSUE ON IDENTICAL SET OF FACTS. IN THIS AY, THE ASSESSEE SUFFERED SIM ILAR DISALLOWANCE U/S 10AA FOR RS.152.48 LACS. THE LD. CIT(A), VIDE IMPUGNED O RDER DATED 30/01/2014 WHILE ALLOWING THE CLAIM OF THE ASSESSEE, HAS RESTR ICTED THE SAME TO 8%. SINCE, THE ISSUE IS IDENTICAL WITH AY 2008-09 IN AL L RESPECT EXCEPT FOR FIGURES AND MINOR VARIATIONS, OUR OBSERVATIONS / CONCLUSION S MUTATIS MUTANDIS APPLY TO THE SAME. RESULTANTLY, THE REVENUES APPEAL STAN DS DISMISSED WHEREAS THE ASSESSEES APPEAL STANDS ALLOWED. 9. ITA NO.6175/MUM/2014 IS REVENUES APPEAL FOR AY 2008-09 AGAINST THE ORDER OF LD. CIT(A) ORDER DATED 03/07/2014 QUA DELETION OF PENALTY U/S 271(1)(C). THE ASSESSEE WAS SADDLED WITH PENALTY OF RS.18.05 LACS ON 18/03/2014 AGAINST DENIAL OF EXEMPTION U/S 10AA. TH E SAME HAS BEEN DELETED BY LD. CIT(A) BY PLACING RELIANCE ON THE DE CISION OF HONBLE SUPREME COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [322 ITR 1 58]. SINCE, WE HAVE ALREADY DECIDED THE QUANTUM ADDITION IN ASSESSEES FAVOR AS ABOVE, THERE IS NO REASON TO DELVE INTO THE CORR ECTNESS OF IMPOSITION OF PENALTY. RESULTANTLY, THE REVENUES APPEAL STANDS D ISMISSED. 15 SHREE JEWELS AY:2008-09,2009-10 & 2010-11 10. IN NUTSHELL, ALL THE FOUR APPEALS FILED BY THE REVENUE STANDS DISMISSED WHEREAS ALL THE THREE APPEALS FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. SD/- SD/- (C. N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 31 .07.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. &. , . , / DR, ITAT, MUMBAI 6. /0 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI