ACIT, Jaipur V. NIRMAL GLASSTECH INDUSTRIES, Jaipur

ITA 963/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2130 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Rejection of books of accounts; Gift; Double taxation relief; Additional evidence
• Section: 143(3); 80IB; 145; 56; 68

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 DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 963/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. CUKE VS. M/S NIRMAL GLASSTECH INDUSTRIES, F-370, ROAD NO. 9F, VKI, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGFN 8138 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 46/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 963/JP/2016) M/S NIRMAL GLASSTECH INDUSTRIES, F-370, ROAD NO. 9F, VKI, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AAGFN 8138 G IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 18/04/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/04/2017 VKNS'K@ ORDER PER: KUL BHARAT, J.M. ITA NO. 963/JP/2016 FILED BY THE REVENUE AND C.O. NO. 46/JP/2016 FILED BY THE ASSESSEE ARISE AGAINST THE ORDER DATED 22/08/2016 PASSED BY THE LD. CIT(A)-2, JAIPUR FOR THE A.Y. 2012-13. ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 2 2. THE APPEAL OF THE REVENUE AND THE ASSESSEES C.O. ARE BEING HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE AND BREVIT Y, A COMMON ORDER IS BEING PASSED. 3. FIRST WE TAKE REVENUES APPEAL IN ITA NO. 963/JP/ 2016, WHEREIN THE REVENUE HAS TAKEN ONLY ONE EFFECTIVE GROUND OF APPE AL, WHICH IS AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.99,48,209/- U/S 68 OF THE ACT. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE CA SE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESS MENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TH E ACT) WAS FRAMED VIDE ORDER DATED 26/3/2015. WHILE FRAMING THE ASSES SMENT, THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST AT RS. 8,15,533/-, ADDITION U/S 68 OF THE ACT AT RS. 99,48 ,209/-, LUMP SUM DISALLOWANCE OUT OF EXPENSES AT RS. 3,00,000/- AND D ISALLOWANCE OF DEDUCTION CLAIMED U/S 80IB OF THE ACT AT RS. 7,23,2 99/-. 5. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, PARTLY ALLOWED THE APPEAL. WHILE PARTLY ALLOWING THE APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE BY INVOKING THE PROVISIONS OF ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 3 SECTION 68 OF THE ACT. HOWEVER, CONFIRMED THE ADDITI ON MADE ON ACCOUNT OF DEDUCTION U/S 80IB OF THE ACT AND RESTRICTED THE DISALLOWANCE OF RS. 2.00 LACS OUT OF RS. 3.00 LACS AS MADE ON DISALLOWAN CE OF LUMP SUM TRADING ADDITION. 6. NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN C.O. BEFORE US. THE LD SR.DR HAS SUPPORTED THE ORDER OF THE ASSESSIN G OFFICER AND VEHEMENTLY ARGUED THAT THE LD. CIT(A) WAS NOT JUSTIFI ED IN DELETING THE ADDITION. HE SUBMITTED THAT AS PER THE CERTIFICATE OF THE BANKER, THE AMOUNT WAS RECEIVED BY THE ASSESSEE. HE SUBMITTED TH AT THERE IS NO BUSINESS EXPEDIENCY WHEREBY MR. NIRMAL MUNDRA MIGHT HAVE GIVEN FINANCIAL ASSISTANCE TO THE ASSESSEE FIRM. 7. ON THE CONTRARY, THE LD AR SHRI P.C. PARWAL HAS V EHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A) AND REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. LD. COUNSEL SUBMITTED THA T THE ASSESSING OFFICER HAS GROSSLY ERRED IN TREATING THE TRANSACTION AS BE LONGING TO THE ASSESSEE. HE SUBMITTED THAT THE ASSESSING OFFICER DISREGARDED THE FACTS AND WELL ESTABLISHED ACCOUNTING PRACTICES. HE SUBMITTED THAT THE CAPITAL ACCOUNT IS UNDER THE OWNERSHIP OF THE PARTNER. IF THE PARTNER H AS BROUGHT IN FRESH CAPITAL BY RAISING FUNDS FROM THIRD PARTY FOR WHICH CHEQUE WAS ISSUED IN THE NAME OF THE FIRM, THE PARTNERS CAPITAL ACCOUNT WOULD BE CREDITED AND ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 4 THE MONEY SHALL BROUGHT TO THE BANK OF THE FIRM. HE SUBMITTED THAT THERE IS NO REQUIREMENT OF LAW OR ACCOUNTING PRINCIPLES AN D PRACTICES THAT THE MONEY SHOULD FIRST COME IN THE BANK ACCOUNT OF THE PARTNER AND THEN FROM THAT BANK ACCOUNT TO THE BANK ACCOUNT OF THE PARTNE RSHIP FIRM. HE SUBMITTED THAT TO SAVE TIME AND INCONVENIENCE, THE PARTNER WAS WELL WITHIN HIS RIGHT TO MAKE ARRANGEMENT FOR DIRECT REMI TTANCE OF THE FUNDS TO THE BANK ACCOUNT OF THE PARTNERSHIP FIRM. HE SUBMIT TED THAT THE FACT THAT THE AMOUNT IS NOT THE UNDISCLOSED INCOME OF THE FIR M AND IS A FOREIGN REMITTANCE RECEIVED FROM M/S GEMS EXPORTS LTD. ON B EHALF OF NIRMAL MUNDRA IS VERIFIABLE FROM THE CONFIRMATION OF MRS. MUKESH MUNDRA ON BEHALF OF M/S GEMS EXPORTS LIMITED. HE SUBMITTED TH AT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. CIT(A) HA S GIVEN A FINDING OF FACT IN PARAGRAPH NO. 3.3 OF HIS ORDER, WHICH IS AS UNDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER NOTICED THAT AN AMOUNT OF RS.99,48,209/- HAS BEEN ADDED TO THE PARTNERS CAPIT AL ACCOUNT IN THE FIRM. THE AUTHORIZED REPRESENTATIVE STATED THE SAME TO HAVE B EEN RECEIVED FROM M/S GEMS EXPORTS LTD., HONG KONG WHICH WAS A FAMILY CON CERN OF THE PARTNERS AUNTY MRS. MUKESH MUNDRA, A CONFIRMATION FROM M/S G EMS EXPORTS LTD., HONG KONG WAS FILED. THE ASSESSING OFFICER OBJECTED TO T HE SAME BEING ON PLAIN PAPER ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 5 AND SIGNED BY MRS. MUKESH MUNDRA WHEREAS THE NAME P RINTED ON THE SAME WAS OF SHRI ASHOK MUNDRA. IN RESPONSE TO FURTHER QU ERIES BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED FOREIGN INWARD REMI TTANCE CERTIFICATE FROM THE BANK, THE ASSESSING OFFICER DID NOT ACCEPT THE SAME HOLDING THAT IT WAS ISSUED BY THE CENTRAL BANK OF INDIA AND THE BENEFICIARY WA S M/S NIRMAL GLASSTECH AND NOT SHRI NIRMAL MUNDRA. FURTHER, THE ASSESSING OFFI CER HELD THAT THE AUTHORIZED REPRESENTATIVE DID NOT FURNISH EITHER THE BALANCE S HEET OR THE CASH FLOW AND ONLY FURNISHED AN AFFIDAVIT STATING THAT THE AMOUNT WAS RECEIVED AS FINANCIAL ASSISTANCE. IT WAS CONCLUDED THAT THE ADDITION MADE IN THE CAPITAL ACCOUNT OF SHRI NIRMAL MUNDRA IS THE UNACCOUNTED MONEY OF THE ASSESSEE FIRM M/S NIRMAL GLASSTECH PVT. LTD. AND THE SAME WAS TREATED AS THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE I.T. ACT, 1961. IT WAS FURT HER HELD THAT SINCE NOTHING HAS BEEN MENTIONED REGARDING INTEREST THE SAME CAN ALSO BE TREATED AS GIFT RECEIVED AND CAN BE ADDED AS THE INCOME OF THE ASSE SSEE UNDER SECTION 56 OF THE I.T. ACT, 1961. IN THE PRESENT PROCEEDINGS, THE AUTHORIZED REPRESE NTATIVE SUBMITTED THAT SHRI NIRMAL MUNDRA PARTNER OF THE ASSESSEE FIRM RECEIVED THE SUM AS FINANCIAL ASSISTANCE FROM M/S GEMS EXPORTS LTD. HONG KONG, A FAMILY CONCERN OF HIS AUNT, MRS. MUKESH MUNDRA. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS ALREADY FILED CONFIRMATION OF FINANCIAL ASSISTANCE RECEIVED AND F IRC CERTIFICATE AS ALSO AN AFFIDAVIT OF SHRI NIRMAL MUNDRA STATING THAT THE SA ME AMOUNT WAS RECEIVED AS FINANCIAL ASSISTANCE. SINCE THE AFFIDAVIT HAD NOT B EEN ACCEPTED BY THE ASSESSING OFFICER AS THE BALANCE SHEET OF M/S GEMS EXPORTS LT D. HAD NOT BEEN FURNISHED, THE AUTHORIZED REPRESENTATIVE IN THE PRESENT PROCEE DINGS, MOVED AN APPLICATION UNDER RULE 46A TO ADMIT ADDITIONAL EVID ENCE IN THE FORM OF THE BALANCE SHEET OF M/S GEMS EXPORT LTD. AND THE OUTWA RD REMITTANCE ADVICE ISSUED BY THE HSBC BANK. CONSIDERING THE CIRCUMSTAN CES, THE ADDITIONAL EVIDENCE WERE ADMITTED AND FORWARDED TO THE ASSESSI NG OFFICER FOR HIS COMMENTS. IN THE REMAND REPORT RECEIVED ON 23.03.20 16, RELEVANT PARAS REPRODUCED BELOW, WHEREIN HE HAS REJECTED THE DOCUM ENTS STATING THAT THE SAME ARE NOT AUDITED AND AUTHENTICATED AND HENCE VE RACITY CANNOT BE ASCERTAINED. ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 6 WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT T HE ASSESSEE WAS PROVIDED SUFFICIENT OPPORTUNITY TO PRODUCE INCOME D ETAILS OF M/S GEMS EXPORTS LIMITED, HONG KONG BUT THE ASSESSEE FAILED TO SUBMIT ANY DETAILS. NOW THE ASSESSEE HAS SUBMITTED DETAILS/ DO CUMENTS BEFORE YOUR GOODSELF IN THIS MATTER IT IS SUBMITTED THAT THESE DOCUMENTS ARE NOT AUTHENTICATED BY ANYONE. THESE ARE NOT AN AUDITED D OCUMENTS. VERACITY OF THESE DOCUMENTS CANNOT BE ASCERTAINED AS INQUIRY REGARDING FOREIGN COMPANIES CAN ONLY BE CARRIED OUT BY THE DIT, FT & TR, NEW DELHI. AS HONG KONG IS NOT HAVING DTAA WITH INDIA THEREFORE, ANY ENQUIRY FROM HONK KONG IS NOT POSSIBLE. UNDER THESE CIRCUMSTANCES IT IS SUBMITTED THAT THES E ARE ONLY TYPED PAPERS, NOT AUTHENTICATED BY ANYBODY AND NOT VERIFI ABLE FROM ANY DOCUMENT, THEREFORE, CANNOT BE ACCEPTED. UNDER THES E CIRCUMSTANCES THE ADDITIONS MADE BY THE AO DESERVE TO BE UPHELD. IT IS SEEN THAT AN AMOUNT OF RS. 17,31,600/- HKD HA S BEEN SENT TO M/S NIRMAL GLASSTECH AS PER THE OUTWARD REMITTANCE ADVICE ISSU ED BY HSBC BANK WITH TRANSACTION DATE 27.05.2011 AND PAYMENT BEING RECEI VED BY CENTRAL BANK OF INDIA ON 01.06.2011, AS PER DETAILS FURNISHED BY TH E ASSESSEE. FURTHER, THE ACCOUNTS OF M/S GEMS EXPORT LTD. SHOWING A TURNOVER OF HKD RS.21,37,76,249/- HAVE ALSO BEEN SUBMITTED AND THE AMOUNT APPEARS IN THE BALANCE SHEET AS AMOUNT DUE TO A DIRECTOR. IN THE REMITTANCE CERTI FICATE OF THE BANK, THE PURPOSE HAS BEEN SHOWN AS FINANCIAL ASSISTANCE AND IT WAS SUBMITTED THAT THIS FINANCIAL ASSISTANCE IS INTEREST FREE AND HAS NOT B EEN REPAID SO FAR. THUS, THE DOCUMENTS EVIDENCING THE REMITTANCE INCLUDE THE FOR EIGN INWARD REMITTANCE CERTIFICATE OF HSBC BANK, REMITTANCE ADVICE AND CER TIFICATE FROM CENTRAL BANK OF INDIA WHERE THE AMOUNT HAS BEEN RECEIVED CONTAINING THE ENTIRE DETAILS OF THE TRANSACTION. THE DOCUMENTS IN RESPECT OF THE PARTY FORWARDING TH IS FINANCIAL ASSISTANCE INCLUDE CONFIRMATION OF MRS. MUKESH MUNDRA, AFFIDAV IT OF NIRMAL MUNDRA, BALANCE SHEET OF GEM EXPORT LTD. DULY SHOWING THE E NTRY AND BANK ACCOUNT OF GEM EXPORT LTD. IN VIEW OF THE DETAILS AS ABOVE WHI CH SUPPORT THE CREDITWORTHINESS AND THE DETAILS OF TRANSACTION, TH E AMOUNT RECEIVED AS FINANCIAL ASSISTANCE BY SHRI NIRMAL MUNDRA APPEARS TO BE GENUINE. THE ASSESSING OFFICER DISALLOWED THE AMOUNT IN ABSENCE OF FURTHER DETAILS EVEN THOUGH THE BANK CERTIFICATE AND CONFIRMATION HAD BE EN PROVIDED TO HIM IN THE ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 7 ASSESSMENT PROCEEDINGS AND THE DETAILS OF M/S GEM E XPORTS LTD. AND BANK DETAILS DURING THE REMAND PROCEEDINGS. IN VIEW OF T HE ABOVE DETAILS, THE AMOUNT DOES NOT APPEAR TO BE THE UNDISCLOSED INCOME OF THE FIRM ITSELF AS OPINED BY THE ASSESSING OFFICER. IN VIEW OF THE ABO VE, THE ADDITION MADE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. THE ABOVE FINDING ON FACT IS NOT REBUTTED BY THE REV ENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. WE FIND MERIT INTO THE CONTENTIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT THE PARTNER CAN BRING FRESH CAPITAL BY RAISING FUNDS FROM THIRD PARTY DIRECTLY TO THE ACCOUNT OF T HE FIRM. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER O F THE LD. CIT(A) AND THE SAME IS HEREBY CONFIRMED. THE GROUND RAISED IN THE R EVENUES APPEAL IS DISMISSED. 9. NOW WE TAKE C.O. OF THE ASSESSEE BEING C.O. NO. 46 /JP/2016. IN THE C.O., THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION U/ S 8-IB OF RS. 7,23,299/-. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LUMP SUM TRADING ADDITION OF RS. 2,00,000/- TO THE TRADING RESULTS DECLARED BY THE ASSESSEE. 10. GROUND NO. 1 OF THE C.O. IS AGAINST DISALLOWANCE U/S 80IB OF THE ACT. THE LD AR OF THE ASSESSEE HAS REITERATED THE SU BMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE LD AR HAS SUBMITTED AS U NDER:- ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 8 1. IT IS SUBMITTED THAT THE LOWER AUTHORITIES HAVE ERR ED IN NOT CORRECTLY INTERPRETING THE PROVISIONS OF SUB-SECTION (1) AND SUB-SECTION (3) O F SECTION 80-IB. IT IS AN ADMITTED FACT THAT PRODUCTION OR MANUFACTURING BEGAN IN NOVE MBER 2001 FALLING IN FINANCIAL YEAR 2001-02. 2. INITIAL ASSESSMENT YEAR AS PER SUB-SECTION (14) M EANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE INDUSTRIAL UNDERT AKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLE OR THINGS. GOING BY THIS DEFINITION , THE INITIAL ASSESSMENT YEAR IN THE CASE OF THE APPELLANT FIRM WOULD BE 2002-03. HOWEVE R, IT DOES NOT DISENTITLE THE APPELLANT TO CLAIM DEDUCTION U/S 80-IB(3) OF THE AC T IN ASSESSMENT YEAR 2012-13 FOR THE FOLLOWING REASONS:- (I) IT IS LAID DOWN IN SUB-SECTION (1) THAT DEDUCTION S HALL BE ALLOWED FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN SECTION 80-IB (EMPHASIS ADDED). SUB-SECTION (3) LAYS DOWN THAT THE AMOUNT OF DEDUCT ION SHALL BE FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR. THERE ARE TWO LIMBS OF THIS BENEFICIAL PROVISION. T HE FIRST IS THAT THE DEDUCTION IS AVAILABLE FOR TEN CONSECUTIVE ASSESSMENT YEARS. IT MEANS THAT ONCE THE ASSESSEE STARTS CLAIMING THE DEDUCTION THEN THE BEN EFIT SHALL BE AVAILABLE FOR CONTINUOUS TEN YEARS WITHOUT ANY BREAK AND GAP. THE ASSESSEE DOES NOT HAVE AN OPTION TO OMIT CERTAIN YEARS AND SPREAD OVER THE PERIOD OF DEDUCTION FOR MORE THAN TEN CONSECUTIVE ASSESSMENT YEARS. THE SEC OND LIMB IS THAT THE WINDOW TO TAKE BENEFIT OF THE DEDUCTION OPENS FROM THE INITIAL ASSESSMENT YEARS. THE OPENING OF THE WINDOW BEGINS IN THE INIT IAL ASSESSMENT YEAR. IT IS, HOWEVER, NOT MANDATORY UNDER THE EXISTING LAW TO CL AIM THE BENEFIT OF DEDUCTION NECESSARILY IN THE INITIAL ASSESSMENT YEA R. IF THE ASSESSEE HAS LOSS IN THE INITIAL ASSESSMENT YEAR OR THE IMMEDIATELY SUCC EEDING YEAR(S), THE ASSESSEE MAY START CLAIMING THE DEDUCTION FROM THE ASSESSMEN T YEAR IN WHICH PROFITS ARE EARNED. ONCE THE CYCLE OF CLAIMING DEDUCTION HAS ST ARTED, THEN THE ASSESSEE HAS NO OPTION TO GO BEYOND TEN CONSECUTIVE ASSESSMENT Y EARS RECKONING FROM THE YEAR IN WHICH DEDUCTION WAS CLAIMED FOR THE FIRST T IME. (II)IT IS A BENEFICIAL PROVISION. THE BENEFIT HAS B EEN GRANTED BY THE LEGISLATURE TO INCREASE INDUSTRIALIZATION. IT CANNOT BE INTERPRETE D IN A RESTRICTIVE MANNER. SUCH INTERPRETATION WILL DEFEAT THE INTENTION OF THE LEG ISLATURE. IF THE ASSESSEE HAS LOSS AND HAS NO OCCASION TO CLAIM THE DEDUCTION, TH E ASSESSEE CANNOT BE BARRED FROM CLAIMING THE DEDUCTION FROM THE SUBSEQUENT YEA RS. (III) SUB-SECTION (1), THE SOURCE SUB-SECTION TO ALLOW TH E DEDUCTION, SPECIFICALLY LAYS DOWN THAT THE DEDUCTION SHALL BE ALLOWED FOR S UCH NUMBER OF ASSESSMENT YEARS (EMPHASIS ADDED) AS SPECIFIED IN THIS SECTION . AS THE DEDUCTION IS ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 9 ADMISSIBLE FOR TEN ASSESSMENT YEARS, THE NUMBER TEN CANNOT BE REDUCED TO A LOWER FIGURE BY ADOPTING RESTRICTIVE AND NARROW INT ERPRETATION. THE NUMBER IS QUALIFIED ONLY BY THE REQUIREMENT THAT THE TEN ASSE SSMENT YEARS SHOULD BE CONSECUTIVE. THE EXPRESSION NUMBER HAS BEEN QUALIFI ED BY THE WORD SUCH. IT MEANS THE NUMBER CANNOT BE DECREASED ON THE GROUND THAT THE ASSESSEE DID NOT CLAIM THE DEDUCTION IN THE INITIAL ASSESSMENT YEAR, FOR WHATEVER REASON. (IV) THERE IS NO REQUIREMENT OF THE PROVISIONS OF SUB-SE CTION (3) TO INCLUDE THE INITIAL ASSESSMENT YEAR IN THE BLOCK OF TEN ASSESSM ENT YEARS IS FURTHER PROVED BY THE LANGUAGE OF SUB-SECTION (9) OF SECTION 80-IB . IN SUB-SECTION 9, IT IS LAID DOWN THAT THE DEDUCTION SHALL BE FOR A PERIOD OF SE VEN CONSECUTIVE ASSESSMENT YEARS, INCLUDING THE INITIAL ASSESSMENT YEAR (EMPHA SIS ADDED). IT IS ABUNDANTLY CLEAR THAT FOR THE ASSESSEE CLAIMING DEDUCTION IN T ERMS OF THE PROVISIONS OF SUB SECTION (9), IT IS COMPULSORY FOR THE ASSESSEE TO I NCLUDE THE INITIAL ASSESSMENT YEAR IN THE PERIOD OF SEVEN CONSECUTIVE ASSESSMENT YEARS. IF THE ASSESSEE DOES NOT INCLUDE THE INITIAL ASSESSMENT YEAR THEN HE WOU LD BE LEFT WITH SIX CONSECUTIVE ASSESSMENT YEARS ONLY. (V) THE ASSESSEE HAS BEEN CLAIMING DEDUCTION IN TERMS O F THE PROVISIONS OF SUB- SECTION (3) IN WHICH IT IS NOT COMPULSORY TO INCLUD E THE INITIAL ASSESSMENT YEAR IN THE PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS. AS SUBMITTED ABOVE, THE EXPRESSION BEGINNING WITH MERELY OPENS A WINDOW AND AT THE SAME TIME ALLOW THE ASSESSEE TO START CLAIMING DEDUCTION IN A LATER YEAR, THOUGH HOWEVER ONCE THE CLAIM IS MADE IT SHALL RUN FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS. (VI) THAT THE APPELLANT ASSESSEE HAS RIGHTLY CLAIMED THE DEDUCTION FOR THE ASSESSMENT YEAR 2012-13 IS FURTHER PROVED BY THE LA NGUAGE OF SUB-SECTION (2) OF SECTION 80E, WHERE IT IS LAID DOWN THAT THE DEDU CTION SHALL BE ALLOWED IN RESPECT OF THE INITIAL ASSESSMENT YEAR AND SEVEN AS SESSMENT YEARS IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR. NO SUCH LAN GUAGE HAS BEEN USED BY THE LEGISLATURE IN SUB-SECTION (3) OF SECTION 80-IB OF THE ACT. THUS, THE APPELLANT WAS WELL JUSTIFIED TO START CLAIMING DEDUCTION FROM ASSESSMENT YEAR 2003-04. (VII) AS PER SECTION 80-I(5), THE DEDUCTION SHALL BE ALLO WED IN RESPECT OF THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH MANUFACTURING OR PRODUCTION BEGAN (INITIAL ASSESSMENT YEAR) AND EACH OF THE SEVEN ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR. (VIII) IN SUB-SECTION (2) OF 80-IA IT IS SPECIFICALLY LAID DOWN THAT THE DEDUCTION SHALL BE FOR THE FIRST FIVE ASSESSMENT YEARS. ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 10 FROM THE PROVISIONS OF THE ACT REFERRED TO ABOVE, T HE LEGISLATURE HAD MADE IT SPECIFICALLY CLEAR THAT THE INITIAL ASSESSMENT YEAR NECESSARILY FORMS PART OF THE TAX HOLIDAY PERIOD. THE LANGUAGE OF SUB- SECTION (3) OF SECTION 80-IB IS LI BERAL ENOUGH TO ALLOW THE ASSESSEE TO START CLAIMING DEDUCTION FROM A YEAR LATER THAN THE INITIAL ASSESSMENT YEAR. COMPARISONS OF THE LANGUAGE AND THE EXPRESSIONS USED GO TO PROV E THE ABOVE SUBMISSION. HENCE, THE ASSESSEE HAS RIGHTLY CLAIMED THE DEDUCTION U/S 80-I B IN THE YEAR UNDER CONSIDERATION. IN VIEW OF ABOVE, THE AO BE DIRECTED TO ALLOW THE C LAIM OF DEDUCTION U/S 80-IB FOR THE YEAR UNDER CONSIDERATION. 11. ON THE CONTRARY, THE LD DR HAS VEHEMENTLY SUPPO RTED THE ORDER OF THE LD. CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE LD. CIT(A) HAS GIVEN A FIND ING ON FACT BY OBSERVING AS UNDER:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. THE ASS ESSEE HAS CLAIMED DEDUCTION U/S 80IB FOR AN AMOUNT OF RS. 7,23,299/- AS PROFITS DERIVED FROM ELIGIBLE UNDER T AKING PERFECT GLASS ACCESSORIES THE ASSESSING OFFICER DIS ALLOWANCE THE SAME AS THE INITIAL ASSESSMENT YEAR BEING 2002- 03 THE DEDUCTION WOULD HAVE BEEN CLAIMED TILL ASSESSMENT YE AR 2011-12 AND NOT 2012-13. THE AUTHORIZED REPRESENTATI VE CONTENDED THAT SINCE THE ASSESSEE HAD COMMENCED THE CLAIM OF DEDUCTION FROM ASSESSMENT YEAR 2003-04, IT WAS ELIGIBLE TO CLAIM THE DEDUCTION UPTO THE ASSESSMENT YEAR 2012-13. IN VIEW OF THE PROVISIONS OF SECTION 80IB( 3) AND 80IB(14)(C) WHICH DEFINES THE INITIAL ASSESSMENT YE AR AND ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 11 ALSO AS THE AUDIT REPORT ITSELF CERTIFIES THAT THE OPERATION OF THE UNDERTAKING COMMENCED FROM NOV, 2001 AND THUS T HE INITIAL ASSESSMENT YEAR BEING ASSESSMENT YEAR 2002- 03, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CORREC T AND UPHELD. THE GROUND OF APPEAL IS DISMISSED. THIS FINDING OF FACT IS NOT CONTROVERTED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AS THE ENTITLEMENT OF DEDUCTION WOULD BE FROM THE ASSESSMENT YEAR 2002-03. SINCE IN THE AUDIT REPORT ITSELF, IT IS CERTIFIED THAT THE OPERATION OF THE UNDERTAKING COMMENCED FROM NOVEMBE R, 2001. ACCORDINGLY, THIS GROUND OF THE ASSESSEES C.O. IS DISMISSED. 13. GROUND NO. 2 OF THE C.O. IS AGAINST CONFIRMING THE AD HOC DISALLOWANCE. THE LD COUNSEL FOR THE ASSESSEE HAS SUB MITTED THAT THERE IS NO BASIS FOR MAKING AD HOC DISALLOWANCE. HE REITERAT ED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF, WHICH IS REPRODUCED HEREUN DER:- 1. THE ASSESSEE IS MAINTAINING DAY TO DAY BOOKS OF ACC OUNTS. THE SAME ARE SUBJECT TO TAX AUDIT. THE SALES AND PURCHASES OF THE ASSESSEE ARE DULY SUPPORTED BY THE BILLS AND VOUCHERS. NO EXPENSE IN CASH HAS BEEN INCURRED IN V IOLATION OF THE PROVISIONS OF SECTION 40A(3)OF THE ACT. IN RUNNING BUSINESS, THER E IS ALWAYS NEED TO INCUR SOME EXPENSES IN CASH AND IT DOES NOT ENTITLE THE LOWER AUTHORITIES TO TAKE AN ADVERSE VIEW REGARDING THE DECLARED PROFITS. THE LOWER AUTHORITI ES HAVE NOT POINTED OUT ANY EXPENSE DEBITED IN THE TRADING OR PROFIT AND LOSS A CCOUNT WHICH IS NOT FOR THE PURPOSES OF THE BUSINESS OF ASSESSEE. THE AO HAS NO T REJECTED THE BOOKS OF THE ASSESSEE BY INVOKING PROVISION OF SECTION 145(3). T HE RAJASTHAN HIGH COURT IN CASE OF CIT VS. MAHARAJA SHREE UMED MILLS LTD. 192 ITR 5 65 HAS HELD THAT FALL IN GROSS PROFIT RATE CANNOT BE LOOKED INTO WHEN AO HAS NOT R EJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND WITHOUT MAKING THIS AS A BASE, IT COULD NOT BE SAID THAT THE ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 12 EXPENDITURE HAD BEEN INFLATED. HENCE, THE LUMP SUM TRADING ADDITION MADE BY THE AO AND CONFIRMED BY CIT(A) IS UNCALLED FOR. 2. THE POSITION OF THE SALES AND THE GROSS PROFIT FOR THE YEAR AS COMPARED TO THE EARLIER YEARS IS TABULATED AS UNDER:- A.Y. TURNOVER GROSS PROFIT G.P. RATE 2010-11 36871766 16281017 44.15% 2011-12 30314614 13501560 44.53% 2012-13 41875434 18469922 44.10% IT IS NORMAL BUSINESS PRACTICE THAT ASSESSEE IS MAI NLY INTERESTED IN VOLUME OF THE PROFIT EARNED INSTEAD OF THE RATE. THIS VOLUME CAN BE ACHIEVED ONLY BY INCREASING THE SALES BY REDUCING THE MARGIN. DURING THE YEAR ASSES SEE HAS INCREASED SALES FROM RS.3.03 CRORES TO RS.4.18 CRORES AND THE OVERALL GR OSS PROFIT HAS BEEN INCREASED FROM RS.1.35 CR TO RS.1.85 CRORES THOUGH THE G.P. RATE H AS DECLINED SLIGHTLY BY 0.43%. IN THE VARIOUS CASES IT HAS BEEN HELD THAT SIMPLY BECA USE THERE IS DECLINE IN THE G.P. RATE DUE TO SUBSTANTIAL INCREASE IN THE TURNOVER, THE TR ADING ADDITION IS NOT JUSTIFIED. FOR THIS PURPOSE RELIANCE IS PLACED ON THE FOLLOWING CA SES:- MADAN LAL V. INCOME TAX OFFICER 99 TTJ 538 (JD.) IT WAS HELD THAT THE ESTIMATION OF THE INCOME HAS T O BE MADE ONLY ON THE BASIS OF SOME LOGIC AND THE PAST HISTORY IS THE BEST GUIDE E XCEPT IN CASES WHERE THE ASSESSEE IS LIABLE TO EXPLAIN THAT THE FIGURES OF THE PAST Y EAR CANT BE APPLIED IN THE RELEVANT YEAR. THE ASSESSEE HAS EXPLAINED THE FALL IN THE G. P. RATE BY REFERRING TO STEEP INCREASE IN TURNOVER WHICH WAS ACHIEVED BY REDUCING THE SELLING PRICE AND GIVING MORE DISCOUNT. ACCORDINGLY, IT WAS HELD THAT THE G. P. RATE DECLARED BY THE ASSESSEE COULD NOT BE DISTURBED IN THE ABSENCE OF ANY SPECIF IC DEFECT IN THE BOOKS OF ACCOUNTS. CIT V. GOTAN LIME KHANIZ UDYOG 256 ITR 243 (RAJ.) MERE REJECTION OF BOOKS OF ACCOUNTS BY RESORTING TO SECTION 145 DID NOT NECESSARILY LEAD TO THE ADDITION TO THE RETURNED INCOME OR A DI FFERENT FIGURE OF INCOME. HENCE SIMPLY BECAUSE SECTION 145 IS APPLICABLE SHOULD NOT BE ACRITERIA FOR MAKING TRADING ADDITION MORE PARTICULARLY WHENPURCHASES AND SALES ARE FULLY VOUCHED AND NO DISCREPANCIES AS SUCH WAS FOUND IN THE BOOKS OF ACC OUNTS MAINTAINED BY THE ASSESSEE. MALANI RAMJIVAN JAGANNATH VS. ACIT 207 CTR 19 (RAJ. ) IT WAS HELD THAT IN EACH TRADING ACCOUNT, ONLY FOUR ENTRIES WERE THERE OF OPENING STOCK AND PURCHASES ON DEBIT SIDE, SALES AND CLOSIN G STOCK ON CREDIT SIDE. THE QUANTUM AND VALUE OF PURCHASES AND SALES HAD NOT BE EN IN DISPUTE IN AS MUCH AS THEY WERE HELD TO BE FULLY VOUCHED. VALUE OF OPENING STO CK ALSO CANNOT BE DISPUTED AS IT CAME FROM CLOSING STOCK OF PREVIOUS YEAR. THE INVEN TORIES OF CLOSING STOCK WERE ALSO NOT FOUND TO BE INCORRECT. THAT IS TO SAY ACTUAL ST OCK POSITION WAS NOT IN DISPUTE. THE PREVIOUS YEARS BOOKS OF ACCOUNTS WERE NOT FOUND TO BE INCORRECT. IN THE FACE OF ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 13 THESE UNDISPUTED FACTS AND CIRCUMSTANCES, THE TRIBU NAL COULD NOT HAVE INTERFERED WITH THE ORDER OF CIT (A). IN DOING SO, IT HAD IGNO RED ALL ADMITTED FACTS IN THE FACE OF WHICH THERE WAS NO OCCASION FOR THE AO TO HAVE RESO RTED TO ESTIMATE METHOD. THERE BEING NO DISPUTE ABOUT THE SALES AND PURCHASES, NON MAINTENANCE OF STOCK REGISTER LOST ITS SIGNIFICANCE SO FAR AS ARRIVING AT GP RATE IS CONCERNED. THEREFORE, THE CIT(A) WAS RIGHT IN HIS REASONING ABOUT ADMITTED STATE OF AFFAIRS. RESORTING TO ESTIMATE OF GP RATE WAS FOUNDED ON NO MATERIALITY. MERE DEVIATI ON IN GP RATE CANNOT BE A GROUND FOR REJECTING BOOKS OF ACCOUNTS AND ENTERING REALM OF ESTIMATE AND GUESSWORK. LOWER GP RATE SHOWN IN THE BOOKS OF ACCO UNTS DURING CURRENT YEAR AND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY THE AO AS WELL AS CIT(A) AS WELL AS THE TRIBUNAL. THEREFORE FALL IN GP RATE LOST ITS SIGNIFICANCE. HAVING ACCEPTED THE REASON FOR FALL IN GP RATE NAMELY STIFF COMPETITION IN MARKET AND ALSO THAT HUGE LOSS CAUSED IN PARTICULAR TRANSACTION, NEITHER THE REJEC TION OF BOOKS OF ACCOUNTS WAS JUSTIFIED NOR RESORTS TO SUBSTITUTION OF ESTIMATE G P BY RULE OF THUMB MERELY FOR MAKING CERTAIN ADDITIONS. THEREFORE, THE FINDINGS A RRIVED AT BY THE TRIBUNALS SUFFERS FROM BASIC DEFECT OF NOT APPLYING HIS MIND TO THE E XISTING MATERIAL WHICH WERE RELEVANT AND WENT TO THE ROOT OF THE MATTER. WHEN A LL THE DATA AND ENTRIES MADE IN THE TRADING ACCOUNT WERE NOT FOUND TO BE INCORRECT IN A NY MANNER, THERE COULD NOT HAVE BEEN ANY OTHER RESULT EXCEPT WHAT HAS BEEN SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. THEREFORE, THE ORDER OF THE TRIBUNAL CANN OT BE SUSTAINED. IN VIEW OF ABOVE, THE LUMPSUM TRADING ADDITION OF R S.2,00,000/- CONFIRMED BY THE CIT(A) IS UNCALLED FOR AND BE DELETED. 14. ON THE CONTRARY, THE LD DR HAS VEHEMENTLY SUPPO RTED THE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT. THE ASSESSEE HAS BEEN MAINTAINING DETAILS. LD. AR HAS RELIED UPON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MAHARAJA SHREE UMED MILLS LTD. 1 92 ITR 565 AND IN THE CASE OF RAMJIVAN JAGANNATH VS. ACIT 207 CTR 19 ( RAJ), WHEREIN IT HAS BEEN HELD THAT THE GROSS PROFIT RATE CANNOT BE LOOKED INTO WHEN THE ITA 963/JP/2016 & CO 46/JP/2016_ ACIT VS. M/S NIRMAL GLASSTECH 14 ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT OF THE ASSESSEE AND WITHOUT MAKING THIS AS A BASE, IT COULD NOT BE S AID THAT THE EXPENDITURE HAS BEEN INFLATED. IN THE PRESENT CASE, ADMITTEDLY, THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT. HE HAS NOT GIVEN THE BASIS FOR MAKING AD HOC DISALLOWANCE, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. THIS GR OUND OF THE ASSESSEES C.O. IS ALLOWED. 16. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D AND THE ASSESSEES C.O. IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/04/2017. SD/- SD/- FOE FLAG ;KNO DQY HKKJR (VIKRAM SINGH YADAV) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 ST APRIL, 2017 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE A.C.I.T., CIRCLE-4, JAIPUR.. 2. IZR;FKHZ@ THE RESPONDENT- M/S NIRMAL GLASSTECH INDUSTRIES, JAI PUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 963/JP/2016 & CO 46/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR