ITO 25(3)(2), MUMBAI V. DINESH J SHAH, MUMBAI

ITA 855/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1132 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SRAVANAN
• Assessee Lawyers: RAHUL K HAKANIAR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 855/MUM/2014 ASSESSMENT YEAR: 2006-07 ITO 25(3)(2) VS. MR. DINESH H SHAH C-11 ROOM NO. 306 42 TANAY SKY BUILD VILLAGE NE AR PRATYAKSHAKAR BHAVAN BHATIA SCHOOL SAIBABA NAGAR BANDRA KURLA COMPLEX KANDIVALI (WEST) MUMBAI 400051 MUMBAI - 400067 PAN NO. AAQPS1808N (APPELLANT) (RESPONDENT) REVENUE BY: SHRI J. SRAVANAN, DR ASSESSEE BY : SHRI RAHUL K. HAKANI,AR DATE OF HEARING : 02/02 /2017 DATE OF PRONOUNCEMENT: 25/04/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) R.W.S 254 OF THE INCOME TAX ACT, 1 961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING CLAIM OF DEDUCTION U/S 80I B(4) OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) GROSSLY ERRED IN NOT CONSIDERING THE FACT TH AT THE ASSESSEE WAS ITA NO. 855/MUM/2014 2 AFFORDED NUMBER OF OPPORTUNITIES DURING THE ASSESS MENT PROCEEDINGS TO FURNISH EVIDENCES TO SUBSTANTIATE HIS CLAIM OF D EDUCTION U/S 80IB(4) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) GROSSLY ERRED IN ADMITTING THE ADDITIONAL EV IDENCE WITHOUT ALLOWING THE ASSESSING OFFICER TO EXAMINE ADDITIONA L EVIDENCE IN CONTRAVENTION OF RULE 46A OF I.T. RULE. 3. WE BEGIN WITH THE BACKGROUND OF THE CASE. THE ASSES SEE FILED HIS RETURN OF INCOME FOR THE A.Y. 2006-07 ON 27.10.2006 SHOWING TOTAL INCOME OF RS.1,87,500/-. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 31.12.2008 DETERMINING THE TOTAL INCOME AT RS.29,40,549/- BY DISALLOWING CLAIM OF DEDUCTION OF RS.27,53,049/- MADE BY THE ASSESSEE U/S 80IB(4) OF THE ACT. THE CI T(A) VIDE ORDER DATED 17.06.2009 ALLOWED THE CLAIM OF DEDUCTION MAD E BY THE ASSESSEE. THE DEPARTMENT FILED AN APPEAL AGAINST THE ORDER OF THE CIT(A) BEFORE THE ITAT. THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 49 59/MUM/2010 DATED 15.12.2010 RESTORED THE MATTER TO THE FILE OF THE A O FOR FRESH ADJUDICATION. THE AO DENIED THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 80IB(4) ON THE GROUND THAT (I) THE BILLS PRODUCED BY THE AS SESSEE IN THE NAME OF ROSHNI ELECTRICALS AND VIKAS ELECTRICALS ARE NOT GE NUINE, (II) THE ASSESSEE FAILED TO ESTABLISH THAT A NEW DISTINCT MATERIAL WA S PRODUCED, (III) THE ITEMS SOLD WERE SS FABRICATED PARTS ONLY AND ITEMS PURCHASED WERE SS SHEETS , (IV) GOODS WORTH RS.79.32 LACS WERE MANUFA CTURED DURING THE F.Y. 2005-06 FOR WHICH ELECTRICITY AMOUNTING TO RS. 9,306/- FOR THE PERIOD OF 12 MONTHS WAS ONLY CONSUMED (V) THE ASSES SEE FAILED TO SUBMIT ANY EVIDENCE AS TO THE IDENTITY AND ADDRESS OF THE WORKERS EMPLOYED IN THE FACTORY AT SILVASSA, (VI) THE ASSES SEE FAILED TO SUBMIT ANY EVIDENCE OF DISPATCHING THE MANUFACTURED GOODS FROM HIS FACTORY TO SISTER CONCERN M/S SPECTRUM SCIENTIFIC PVT. LTD., ( VII) THE ASSESSEE FAILED ITA NO. 855/MUM/2014 3 TO SUBMIT EVIDENCE OF HAVING STARTED PRODUCTION BY 31.03.2004 AND (VIII) THE SALE TAX EXEMPTION CERTIFICATE FILED BY THE ASSESSEE CANNOT BE RELIED UPON AS IT WAS MADE ON THE BASIS OF SELF DEC LARATION. THE AO THUS DENIED THE CLAIM OF EXEMPTION OF RS.27,53,049/- MAD E BY THE ASSESSEE U/S 80IB(4) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND FROM THE ORDER OF TH E LD. CIT(A) THAT THE ASSESSEE FILED DURING THE COURSE OF APPELLATE PROCE EDINGS (I) INVOICE OF ROSHNI ELECTRICALS DATED 15.03.2004, INVOICE OF VIK AS ELECTRICALS DATED 15.03.2004 AND INVOICE OF MONARCH ENTERPRISES DATED 25.03.2004, (II) AFFIDAVITS OF THE PROPRIETOR OF VIKAS ELECTRICALS A ND ROSHNI ELECTRICALS, (III) STATEMENT OF PURCHASE OF MACHINERY, (IV) LETT ER DATED 26.03.2004 FROM ELECTRICITY DEPARTMENT FOR POWER SANCTION INCL UDING ELECTRICITY BILL FOR THE MONTH OF MARCH 2004 TO MAY 2004, (V) TRANSP ORTERS BILL RAISED BY G.N. TRANSPORT DATED 31.03.2004. THE LD. CIT(A) GAVE AN OPPORTUNITY TO THE AO TO SUBMIT A REPORT ON THE VERACITY OF THO SE DOCUMENTS. THE AO FILED AN ONE LINE REPLY THAT THE CASE OF THE ASSES SEE DOES NOT FALL UNDER THE PURVIEW OF ANY OF THE CONDITIONS LAID DOWN IN R ULE 46A. THE LD. CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE ON THE GROUND THAT (I) THE ASSESSEE HAS MANUFACTURED SS FABRICATED PARTS F ROM SS SHEETS WITH THE USE OF POWER ; THE MANUFACTURING PROCESS ITSELF INDICATES VARIOUS PROCESSES CARRIED OUT ON SS SHEETS BEFORE IT IS CON VERTED INTO SS FABRICATED PARTS; THE FABRICATED PARTS ARE THE RESU LT OF TRANSFORMATION FROM SS SHEETS WHICH ARE DIFFERENT IN SIZE, SHAPE, CONTOUR AND UTILITY AND COMMERCIALLY DIFFERENT PRODUCT DISTINCT FROM THE RA W MATERIALS, (II) IN THE PROCESS OF USING THE SS SHEETS TO MAKE INTO TRA YS FOR THE RAILWAYS PANTRY, THE NATURE AND CHARACTER OF THE ORIGINAL SH EETS ARE BEING SUBSTANTIALLY ALTERED AND IT CANNOT BE SAID THAT A NEW PRODUCT IS NOT BEING GENERATED, (III) A PERUSAL OF THE MONTHLY MUS TER REGISTER AND THE ITA NO. 855/MUM/2014 4 FIELD REPORT DATED 17.12.2007 GIVEN BY THE INCOME T AX INSPECTOR AFTER VISITING THE PREMISES CLEARLY INDICATES THAT THE AS SESSEE SATISFIED THE CONDITIONS OF HAVING MORE THAN 10 WORKERS AT SITE, (IV) THE SUB-SECTION NOWHERE MANDATES AS TO HOW MUCH PERCENTAGE OF POWER TO THE OUTPUT NEEDS TO BE CONSUMED FOR THE PROCESS TO QUALIFY FOR THE SAID DEDUCTION AND (V) THE INVOICE OF ROSHNI ELECTRICALS AND VIKA S ELECTRICALS, THE AFFIDAVIT OF THE PARTIES AS WELL AS THE FIELD REPOR T OF THE INCOME TAX INSPECTOR CLEARLY INDICATES THAT MACHINERY AND TOOL S EXISTED ON THE PREMISES. THE LD. CIT(A) RELIED ON THE JUDGMENT OF THE HON'B LE MADRAS HIGH COURT IN CIT VS. ZAINAB TRADING P LTD. (2011) 333 ITR 144, WHEREIN IT HAS BEEN HELD THAT CONVERSION OF CORRUGATED SHEETS INTO BOXES CONSTITUTES MANUFACTURE. 5. BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS MENTIONED HERE-IN-ABOVE AT P ARA 4, THE LD. CIT(A) HAD SENT A COPY OF THE DOCUMENTS FILED BY TH E ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS TO THE AO TO EXAMIN E AND SEND A REPORT. THE AO, INSTEAD OF GIVING HIS COMMENT HAS STATED TH AT IT DOES NOT FALL UNDER THE PURVIEW OF ANY OF THE CONDITIONS LAID DOW N IN RULE 46A. AS THIS WAS ORIGINALLY SET ASIDE BY THE TRIBUNAL TO TH E FILE OF THE AO, THE LD. CIT(A) HAS RIGHTLY ADJUDICATED THE MATTER IN THE LI GHT OF THE DOCUMENTS FILED BEFORE HER. WE FIND THAT THERE IS MERIT IN TH E ORDER OF THE LD. CIT(A) THAT (I) THE ASSESSEE HAS MANUFACTURED SS FABRICATE D PARTS FROM SS SHEETS WITH THE USE OF POWER, (II) THE FABRICATED P ARTS ARE THE RESULT OF TRANSFORMATION FROM SS SHEETS WHICH ARE DIFFERENT I N SIZE, SHAPE, ITA NO. 855/MUM/2014 5 CONTOUR AND UTILITY AND IT IS A COMMERCIALLY DISTIN CT PRODUCT FROM THE RAW MATERIAL, (III) THE ASSESSEE WAS AN UNDERTAKING EMPLOYING 10 OR MORE WORKERS. WE FIND THAT THE LD. CIT(A) HAS PROPERLY ARRIVED A T A FINDING HAVING EXAMINED THE DOCUMENTS AND ALSO THE REPORT O F THE INCOME TAX INSPECTOR DATED 17.12.2007. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/04/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 25/04/2017 RAHUL, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI