Income Tax Appellate Tribunal - Mumbai
Krishnkakumar Vijayshankar Dubey, ... vs Dcit Cir 3, Kalyan on 30 November, 2018
IN THE INCOME-TAX APPELLATE TRIBUNAL "H" BENCH MUMBAI
BEFORE SHRI G.S. PANNU, VICE-PRESIDENT
AND SHRI PAWAN SINGH JUDICIAL MEMBER
ITA No. 1489/Mum/2017 (Assessment Year 2005-06)
Shri Krishnakumar DCIT, Circle - 3
Vijayashankar Dubey, 2nd Floor, Rani Mansion,
407, Navram Kutir, Prabhuram Vs. Murbad Road, Kalyan.
Nagar, Katemanivali,
Kalyan (E)-421306.
PAN: AGVPD4427H
Appellant Respondent
ITA No. 1490/Mum/2017 (Assessment Year 2006-07)
Shri Krishnakumar DCIT, Circle - 3
Vijayashankar Dubey, 2nd Floor, Rani Mansion,
407, Navram Kutir, Prabhuram Vs. Murbad Road, Kalyan.
Nagar, Katemanivali,
Kalyan (E)-421306.
PAN: AGVPD4427H
Appellant Respondent
ITA No. 1491/Mum/2017 (Assessment Year 2007-08)
Shri Krishnakumar DCIT, Circle - 3
Vijayashankar Dubey, 2nd Floor, Rani Mansion,
407, Navram Kutir, Prabhuram Vs. Murbad Road, Kalyan.
Nagar, Katemanivali,
Kalyan (E)-421306.
PAN: AGVPD4427H
Appellant Respondent
ITA No. 1492/Mum/2017 (Assessment Year 2008-09)
Shri Krishnakumar ITI Ward 3(3),
Vijayashankar Dubey, Kalyan.
407, Navram Kutir, Prabhuram Vs.
Nagar, Katemanivali,
Kalyan (E)-421306.
PAN: AGVPD4427H
Appellant Respondent
ITA No. 1493/Mum/2017 (Assessment Year 2009-10)
Shri Krishnakumar ACIT, Circle - 3
Vijayashankar Dubey, 2nd Floor, Rani Mansion,
407, Navram Kutir, Prabhuram Vs. Murbad Road, Kalyan.
Nagar, Katemanivali,
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey
Kalyan (E)-421306.
PAN: AGVPD4427H
Appellant Respondent
ITA No. 1494/Mum/2017 (Assessment Year 2010-11)
Shri Krishnakumar DCIT, Circle - 3
Vijayashankar Dubey, 2nd Floor, Rani Mansion,
407, Navram Kutir, Prabhuram Vs. Murbad Road, Kalyan.
Nagar, Katemanivali,
Kalyan (E)-421306.
PAN: AGVPD4427H
Appellant Respondent
Appellant by : Mr. V. Chandrashekhar with
Mr. Harshad Shah (AR)
Respondent by : Ms. Pooja Swaroop (DR)
Date of Hearing : 30.11.2018
Date of Pronouncement : 30.11.2018
ORDERUNDER SECTION 254(1)OF INCOME TAX ACT
PER PAWAN SINGH, JUDICIAL MEMBER;
1. This group of six appeals by assessee under Section 253 of Income-tax Act are directed against the order of ld. CIT(A)-1, Thane dated 23.11.2016 for Assessment Years 2005-06 to 2010-11. In all appeal, the assessee has raised some common grounds of appeal, the ld. CIT(A) passed the consolidated order for all years, therefore, all appeals were clubbed, heard together and are decided by a consolidated order. In appeal for Assessment Year 2005- 06, the assessee has raised the following grounds of appeal:
1) The Commissioner of Income Tax (Appeals)-l Thane (CIT(A)) has erred in law and on facts by holding that the assessment for A.Y.2005-06 has been validly reopened in accordance with law.2
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey
2) The CIT(A) ought to have held that the Assessment Order passed u/s 143(3) r.w.s. 147 of the Act dated 28th January, 2013 is bad in law and void ab-initio on the following amongst other grounds which are without prejudice to one another:
a) the assessment proceedings are bad in law as no Income chargeable to tax has escaped assessment.
b) the notice u/s 148 has been issued after period of 4 years even when the assessee has disclosed fully and truly all material facts necessary for assessment.
c) the impugned Order has been passed on the basis of change of opinion.
d) the impugned order has been passed on conjectures and surmises and not on the basis of facts and documents furnished to the Assessing Officer.
e) the Order disposing of the objections raised by the assessee against the reasons for reopening assessment has not been passed.
3) The CIT(A) has grossly erred in law and on facts by confirming the disallowance of deduction of Rs.9,65,613/- u/s.80IB(4) of the Act.
The CIT(A) ought to have held that the assessee is entitled to deduction of Rs. 9,65,613/- u/s. 80IB(4) of the Act.
2. Brief facts of the case are that the assessing officer, while completing the assessment for Assessment Year 2009-10 under section 143(3) on 29.12.2011, disallowed deduction under section 80IB(4). The assessing officer while disallowing deduction of 80 IB(10) hold that the assessee have shown the purchases of machinery on 28.03.2004 from Jhajjar Haryana and it was and that the assessee shown its production before 31.03.2004 and that it was not humanly probable to start production within three days. Therefore, the assessee failed to complete the conditions prescribed in section 80IB(4) i.e. undertaking should be manufacturing undertaking and it should have started its manufacturing activities on or before 31.03.2004. The Assessing Officer in this backdrop took the view that there was escapement of income for the year under consideration (for 3 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey AY 2005-06) within the meaning of section 147 of the Act. Accordingly, notice under section 148 dated 30.03.2012 was issued to the assessee. The assessee vide reply dated 25.04.2012 dated 29.12.2010 challenged the validity of re-opening. In the reply, the assessee contended that the assessment was re-opened after four year from the end of Assessment Year. The assessment cannot be re-opened unless the assessee has failed to disclose fully and truly all material facts necessary for assessment. It was contended that assessee disclosed all the material facts fully and truly while filing return of income. The assessee also mentioned that the reasons recorded for re-opening does not mention anything about such failure on the part of assessee. Thus, the assessee claimed that notice under section 148 is bad-in-law and void ab-initio. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer concluded that the claim of deduction under section 80IB(4) by assessee is not allowable. The assessee failed to start the business activities before March 2004. Therefore, the assessee violated the condition laid down in section 80IB(4). The manufacturing before March 2004 is the basic condition for claiming deduction under section 80IB(4) and failure to fulfil the basic condition for deduction under section 80IB(4) is clearly mentioned in the reasons recorded. The satisfaction of Assessing Officer is based on the finding in the assessment proceeding for Assessment Year 2009-10. Therefore, it is not a case of change of opinion.
4
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey
3. The Assessing Officer proceeded to make the re-assessment and disallowed deduction under section 80IB(4) of Rs. 9,65,613/- vide assessment order dated 28.01.2013 passed under section 143(3) r.w.s 147 of the Act. On appeal before the ld. CIT(A), the action of Assessing Officer for re-opening and making disallowance under section 80IB(4) was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
4. We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. Ground No.1 & 2 relates to the validly of re-opening not in accordance with law. The ld. AR of the assessee submits that the assessment was re-opened after four years from the end of relevant Assessment Year. No new material found for re-opening the completed assessment. The assessee made full disclosure at the time of original assessment. The notice under section 148 dated 30.03.2012 was served after four years from the end of assessment year. No fresh material was alleged by the Assessing Officer nor allegation that assessee filed false statement during the original assessment. At the time of passing the assessment order for Assessment Year 2009-10 under section 143(3) on 29.12.2011, the Assessing Officer noted "as a common sense it is humanly improbable to establish a manufacturing unit and sale the finished goods 5 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey within span of three days". Thus, no valid reasons were recorded before making re-opening.
5. The ld. AR of the assessee further submits that Assessing Officer has not disposed off of the assessee's objection. The objection were disposed off only at the time of passing the assessment order under section 143(3) r.w.s 147 on 28.01.2013, which is against the law settled by Hon'ble Apex Court in GKN Driveshafts (259 ITR 19), in decision by jurisdictional High Court in Asian Paints (296 ITR 90) and KSS Petron Pvt. Ld. (ITA No. 224/2014), Kelvinator India (320 ITR 561(SC) and Hindustan Lever vs. R. B. Wadkar (268 ITR 332 (Bom. HC), Karnataka High Court in Dulraj U Jain Vs ACIT (ITA No. 1641of 2018).
6. On the other hand, the ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue further submits that objection of the assessee was disposed of as per the order of assessment and the assessee was aware about the disposal of objection.
7. In the rejoinder submission, the ld. AR of the assessee insisted that the Assessing Officer never communicated the assessee about the disposal of objection which is mandatory on the part of Assessing Officer as per the decision of jurisdictional High Court in Asian Paints (supra) since in separate order was passed in disposing of objection. Therefore, the subsequent action of Assessing Officer is void ab-initio. The ld AR further submits that even during the first appellate stage the assessee demanded the 6 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey copy of the order disposing of the objection, which was not made available to the assessee.
8. On the considering the contention of both the parties, we directed the ld. DR to call the assessment record. On our direction assessment record for Assessment Year 2005-06 to 2008-09 was brought . The record was perused in the presence of ld. DR for the Revenue and ld. AR of the assessee. On perusal of original record, the ld. DR for the Revenue submits that there is no separate order available on record disposing the objection nor there is any reference in the order sheet that the objections raised by the assessee was disposed off by assessing officer. The ld. DR was directed to place on record the copy of order-sheet of assessment record, the ld. DR placed on record the copy of order-sheet. The perusal of order-sheet reveals that there is no reference about the disposal of objection. The assessee was also directed to furnish the return of income for Assessment Year 2004-05 together with the copy of statement of income to ascertain, if the assessee has shown in its statement of income about the starting of manufacturing activities. The ld. AR of the assessee furnished the copy of return of income along with the computation of income and other evidences.
9. The facts for A.Y. 2006-07 to 2008-09 are almost similar except variation of figures of disallowance under section 80IB(4) and various dates.
(a) For AY 2006-07, the ld AR submits that no reasons recorded were supplied to the assessee despite repeated request, this fact was admitted 7 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey by assessing officer in his remand report furnished during first appellate stage, which is discernable at page 25 of the order of ld CIT(A).
(b) For AY 2007-08, the ld AR submits that no reasons recorded were supplied to the assessee despite repeated request, this fact was admitted by assessing officer in his remand report furnished during first appellate stage, which is discernable at page 24 of the order of ld CIT(A).
(c) For AY 2008-09, the ld. AR submits that notice under section 148 was served on 26.02.2014. The assessee filed return of income in response to the said notice on 16.04.2014 and demanded reasons of re-opening. The reasons were supplied after 7 months vide letter dated 28.11.2014. Notice under section 143(2) and 142 was served on 28.11.2014, without disposal of objections. The assessee again filed objection on 15.01.2015 (per page 28 to 39 of PB) to decide the objection. The objections were disposed of as per assessing officer letter dated 28.11.2014 on 10.03.2014. The assessment order was passed on 23.03.2015.
10. We have considered the rival submission of the parties and have gone through the orders of authorities below. It is not in dispute that assessment for the Assessment Year 2005-06 was completed under section 143(3) on 23.01.2007. Notice under section 148 dated 30.03.2012 was issued to the assessee. The assessee vide its application dated 25.04.2012 demanded the reasons recorded. The assessee was furnished following reasons of re- opening:
8
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey In this case, assessee claimed deduction u/s 80IB (4). Whereas during the course of assessment proceedings for A. Y. 2009-10 it was seen that assessee failed to start business activities before March, 2004. Starting manufacturing before March 2004 is basic condition for claiming deduction u/s 80IB(4). As assessee violated the conditions laid down in section 80IB (4) deduction, so claim of deduction is to be rejected.
In view of the above, I have reason to believe that income has escaped assessment within the meaning of section 147 of the I.T. Act for the A.Y. 2005-
06.
11. The assessee vide its application dated 29.010.2012 furnished the detailed reply contending therein that the allegation that assessee has not started manufacturing activities before March 2004 and that assessee not complied the provisions as contained in section 80IB(4) are incorrect, the assessee started manufacturing before 31.03.2004. The assessee further contended that he has furnished all documentary evidence which proved that assessee started manufacturing activities before 31.03.2004. The assessee claimed deduction from Assessment Year 2005-06 as in the Assessment Year 2004-
05, the assessee incurred losses. The Assessing Officer after application of mind allowed the deduction. Therefore, the re-opening is clear change of opinion and is not allowable as per the provision of Income-tax Act. The assessee further objected that assessment cannot be re-opened after four years from the end of relevant Assessment Year unless any income chargeable to tax escaped assessment by reasons of the failures on the part of assessee to disclose fully and truly all material facts necessary for assessment for that Assessment Year. Therefore, the assessment cannot be re-opened unless assessee has failed to disclose fully and truly all material 9 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey fact. The assessee has filed Form 10CCB duly certified on Chartered Accountant giving all necessary particulars for claim under section 80IB(4) for Assessment Year under consideration. The assessee prayed that the notice under section 148 is bad-in-law and void ab-initio as the Assessing Officer has nowhere mentioned that assessee failed to disclose fully and truly all material fact necessary for assessment as there is no such allegation in the reasons furnished to the assessee and that the reasons have no validity.
12. We have noted that the Assessing Officer has not disposed of the objection raised by assessee before passing the assessment order.
13. The Hon'ble Apex Court in GKN Driveshafts (India) Ltd. (supra) made it clear that on receipt of reasons, the assessee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by a speaking order. The judgment is very clear that before proceeding with the assessment proceedings, the Assessing Officer has to pass a speaking order. Therefore, the Assessing Officer is bound to pass an order and thereafter only further proceedings could be taken for passing the assessment order.
14. The Hon'ble jurisdictional High Court in Asian Paints (supra) held that if the Assessing Officer does not accept the objections filed to notice under section 148, he shall not proceed further in the matter for a period of four 10 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey weeks from the date of receipt of service of the said order on objections on the assessee.
15. The Hon'ble Apex Court in Kelvinator India (supra) held that after 1.4.1989 the Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion that there is escapement of income. This judgment has laid emphasis on two more aspects: that there can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of the power.
16. Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. v. R.B. Wadkar (Supra) has held that the reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer 11 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the court, on the strength of affidavit or oral submissions advanced.
17. Further, Hon'ble Bombay High Court in KSS Patron Private Ltd Vs ACIT (supra) held once it is found that the assessment order is without jurisdiction as law laid down by Hon'ble Apex Court in GKN Drivesafts (supra) has not been followed, then there is no reason to restore the issue to the file of assessing officer to pass a fresh order. If this is permitted , it would give a 12 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey fresh licence to the assessing officer to pass order on re-opening, without jurisdiction (without compliance of the law in accordance with procedure) , yet the only consequences would be that of appeal, it would be restored to the assessing officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment to the assessee by reviving stale/old matters.
18. Further, Hon'ble Bombay High Court in Dulraj U Jain Vs ACIT (WP No. 1641 of 2018) held if the reasons do not specify, prima facie, the quantum of tax which has escape assessment but merely states that it would be at least of Rs. 1 lakh. Prime facie, we are of the view that reasons recorded do not indicate reasonable belief of the assessing officer himself to show the impugned notice. Thus prime FSI the impugned notice is without jurisdiction.
19. The Hon'ble Karnataka High Court in CIT versus Chaitanya Properties Private Limited (ITA No. 205 of 2015) held that as per provision of section 147 of the act, where assessment order under section 143(3) has been made in any assessment year and if after expiry of four year from the end of relevant assessment year, action is sought to be taken under section 147, such action can only in cases where income chargeable to tax has escape assessment for such assessment year, by reasons of failure on the part of 13 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey assessee to disclose fully and truly all material facts necessary for the assessment year for that assessment year.
20. Considering the above legal factual discussion and important fact that on perusal of assessment record, which was brought before us, we do not find that the Assessing Officer disposed of the objection raised by assessee against the validity of re-opening in accordance with the law laid down by Hon'ble Apex Court in GKN Driveshafts (supra) Asian Paints (supra), the non-disposal of objection raised by assessee renders the re-assessment as invalid.
21. Even otherwise the reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year, therefore, considering the decisions in of Bombay High Court in Hindustan Liver (supra), the re-assessment proceedings are invalid.
22. Hence, the Ground no.1 & 2 of the appeal raised by assessee are allowed.
23. As we have already held the re-assessment order as invalid. Therefore, the discussion on Ground No.3 became academic.
24. In the result, appeal of the assessee for A.Y. 2005-06 is allowed. ITA No. 1490/Mum/2017 for A.Y. 2006-07, ITA No. 1491/Mum/2017 for A.Y. 2007-08, ITA No. 1492/Mum/2017 for A.Y. 2008-09. 14
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey
25. We have noted that in all these appeals, the Assessing Officer has not followed the mandate of law laid down by Hon'ble Supreme Court in GKN Driveshafts (supra) and Hon'ble Bombay High Court in Asian Paints (supra) as discussed by us in para 26 (supra). Therefore, the re-assessment orders are passed in all cases is held invalid.
26. In the result, appeals for A.Y. 2006-07 to A.Y. 2008-09 are also allowed. ITA No. 1493/Mum/2017 for A.Y. 2009-10.
27. The assessee has raised the following grounds of appeal:
1) The Commissioner of Income Tax (Appeals)-1 (CIT(A)) Thane has grossly erred in law and on facts by coming to the conclusion that the Assessment Order passed u/s.143(3) of the Act dated 29th December, 2011 (the said Assessment Order) is not time barred. The CIT(A) ought to have held that the said Assessment Order is bad in law and void ab initio as the said Assessment Order is time barred.
2) The CIT(A) ought to have held that the said Assessment Order is bad in law and void ab initio also on the ground that no notice u/s.143(2) has been served on the assessee by the Assessing Officer and that the said notice has been served only by the predecessor i.e. by the ITO Ward 3(2) Kalyan.
3) The CIT(A) ought to have held that the said Assessment Order is bad in law and void ab initio also on the ground that the said Assessment Order has been passed on conjectures and surmises and not on the basis of facts and documents furnished to the Assessing Officer.
4) The CIT(A) has grossly erred in law and on facts by confirming the disallowance of deduction of Rs.9,07,211/ - u/s.80IB(4) of the Act.
The CIT(A) ought to have held that the assessee is entitled to deduction of Rs. 9,07,211/- u/s.80IB(4) of the Act.
The aforesaid grounds of appeal are without prejudice to one another.
28. Brief facts of the case are that the assessee is engaged in the Manufacturing and Trading of Wire Mesh in the name & style of M/s Kumar Wire Mesh, filed his return of income for Assessment Year 2009-10 on 26.09.2009 declaring income of Rs. 28,03,137/-. In the return of income, the assessee claimed exemption under section 80IB(4). The return was selected for 15 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey scrutiny. The assessment was completed under section 143(3) on 29.12.2011. During the assessment, the Assessing Officer noted that assessee purchased machinery of Rs. 2,00,000/- on 28.03.2004 and claimed that machine were used for manufacturing of Wire Mesh. The assessee purchased the material on 27.03.2004 from Garg Sales Co. Pvt. Ltd., Jhajjar (Haryana) and was delivered to assessee on 30.03.2004. The assessee has not submitted octroi challan or toll challan which may prove that material was actually came from Jhajjar (Haryana) to Daman within a span of three days. The Assessing Officer in order to verify the claim of the assessee recorded the statement of proprietor of the assessee. In the statement, the proprietor of assessee admitted that production was started in Financial Year 2004-05 and material was purchased on 28.03.2004. On the basis of statement, the Assessing Officer took his view that the assessee failed to fulfill the condition laid down under section 80IB(2) for claiming exemption under section 80IB(4). On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Hence, further aggrieved by the order of ld. CIT(A), the assessee filed the present appeal before us.
29. We have heard the submission of ld. AR of the assessee and ld. DR for the Revenue and perused the material available on record. Ground No.1 relates to passing the assessment order beyond the time limit. The ld. AR of the assessee submits that last date for passing the order was 31.12.2011. The order was served on the assessee on 20.01.2012 i.e. after 20 days of last date 16 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey of passing the assessment order. Therefore, the assessment order was not served within the statutory period provided under section 153 of the Act being time barred and deserves to be quashed.
30. We have noted that the assessment relates to the Assessment Year 2009-10. The assessment order was passed on 29.12.2011 under section 143(3). The time period prescribed during the relevant time was 24 month from the end of relevant Assessment Year. Therefore, the assessment order passed by Assessing Officer on 29.12.2011 is within the period as prescribed under section 153 of the Act. Hence, ground of appeal raised by assessee is dismissed.
31. Ground No.2 relates to non-service of notice under section 143(2) by Assessing Officer. The ld. AR of the assessee has not argued anything in support of this ground of appeal. The perusal of record reveals that the statutory notice under section 143(3) was served by ITO Ward-3(2), Kalyan on 20.08.2010 through registered AD. The assessee failed to bring any contrary law to our notice that the Assessing Officer was required a fresh notice in addition to the notice served by his predecessor. Therefore, we do not find any merit in the grounds of appeal raised by assessee. Hence, dismissed.
32. Ground No.3 relates to passing the assessment order on conjectures and surmises and not on the basis of document furnished by assessee. The ld. 17
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey AR of the assessee submits that not argued anything against this ground. Therefore, this ground is treated as not pressed.
33. Ground No.4 relates to confirming the disallowance of deduction under section 80IB(4). The ld. AR of the assessee submits that the main business activity of assessee is of manufacturing of different kind of Wire Mesh, Grill, Netting, fencing, Iron, Wave Cloth of stainless steel. The ld. AR for the assessee submits that the assessee produced sufficient documentary evidence before the Assessing Officer in order to establish the manufacturing activities commenced before 31.03.2004 which consist of sale invoices to the purchase invoice, invoice for purchase of assets, electricity bills etc. The Assessing Officer disregarded all the documentary evidences. The ld AR further submits that though the assessee started manufacturing activity before 31.03.2004, but the assessee has not claimed deduction under section 80IB(10) for AY 2004-05, as there was loss. The Assessing Officer solely relied upon the answer given by assessee in response to question no. 8 of the statement of assessee, recorded under section 131. The Assessing Officer has not taken note of the fact that the statement was retracted by assessee vide letter dated 28.12.2011. The retraction of the assessee is supported by affidavit of the assessee. The assessee furnished all the condition as prescribed under section 80IB(2) for the purpose of deduction under section 80IB(4).
18
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey
34. The ld. AR of the assessee submits that as per the direction of Tribunal he has furnished the copy of return of income for Assessment Year 2004-05 along with the computation of total income. The assessee has clearly mentioned in Note No.2 to the computation of income that the assessee started new industrial undertaking for manufacturing Wire Mesh at Daman in March 2004. The assessee not availed the benefit of exemption under section 80IB(4) in AY 2004-05, as there was no profit from new industrial undertaking. The ld AR for the assessee submits that unless assessment for AY 2004-05 is disturbed, no subsequent assessment can be disturb. The assessee has placed on record the Provisional Certificate Registration as SSI Unit dated 01.03.2004 (page No. 41 to 46 of PB), Central Sale Tax Registration dated 03.03.2004, Consent to Establish Unit under Water Act 03.03.2004, Water Connection dated 03.03.2004, Power Consent from Electricity Department dated 03.03.2004, Sanction letter from Department of Industry in Daman & Diu for permission to provisionally manufactured additional item dated 10.03.2004. Certificate of Sale Tax Registration dated 12.03.2004, Certificate of Export & Import Code dated 24.03.2004, Sanction of Electricity Connection dated 15.03.2004, Additional Electricity Department Connection dated 15.03.2004, Electricity Bill for March-April dt. May 2004, Electricity Bills for FY 2004-05, Electricity Bill for March- April dt. May 2004, Machineries Purchase Invoice from "Baba Engineering" dt. 28.03.2004, Raw Material Purchase Bill from "Garg Sales 19 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey Co. Pvt. Ltd." dt. 27.03.2004, Sales Invoice to "M/s Ambica Engg & Wires Ind" dt. 31.03.2004, Copy of Statement recorded by AO of appellant on 19.12.2011, Retraction Affidavit of Appellant dated 26.12.2011 and Sales Tax Returns for Mar 2004 & April 2004 to March 2005. The ld. AR for the assessee submits that the assessing officer has not given his finding on the documentary evidences furnished by the assessee. The assessing officer solely based his finding on the answer given in response to question No.8 of the statement of assessee recorded by him. There is no finding of the assessing officer that the assessee has not fulfilled the requisite conditions as prescribed under section 80IB(2) of the Act, for the year under consideration.
35. On the other hand the ld. DR for the revenue supported the order of the authorities below. The ld DR for the revenue further submits that the assessee in his statement recorded under section 131 of the Act clearly admitted that the production may have started in November/ December 2004. The ld DR further submits that the assessee is simply engaged in welding of the wire, which does not amount to manufacturing qualify for deduction under section 80IB(4).
36. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. The perusal of return of income revels that the assessee has shown production in the new industrial under taking from March 2004. However, the assessee has not claimed exemption 20 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey under section 80IB(4) for AY 2004-05 as there was no profit in that assessment year. This fact has been clearly mentioned by the assessee in Note 2 annexed with the computation of income for AY 2004-05. The assessee claimed exemption under section 80IB(4) only from AY 2005-06 onwards. There is no finding of the assessing officer that the assessee is not engaged in manufacturing activities in all subsequent assessment years. Now we are concerned with AY 2009-10.
37. The assessing officer disallowed exemption under section 80IB(4) on two counts i.e (i) the assessee shown the purchase of Machinery on 27th March 2004 from Jhajjar Haryana and the date of delivery of machine is 30th March 2004 and that it was not humanly possible to start production within three days. (ii) Welding of wire is not manufacturing. In our view the starting or not starting of production in the month of March 2004 in newly established unit may be relevant fact for seeking exemption under section 80IB(4)for AY 2004-05. In fact the assessee has not claimed such exemption for AY 2004-05. The assessing officer doubted the production in March 2004 only and reopened the assessment for 2005-06 to 208-09. The assessee for the first time claimed the exemption of section 80IB(4) from AY 2005-06 onwards. There is no allegation of the assessing officer that the assessee not started production in AY 2005-06. The ld CIT(A) confirmed the action of assessing officer holding that the assessee started his business from rented 21 ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey premises and thus not fulfilled the condition of section 80IB(2) of the Act and that business carried out by the assessee is not manufacturing activities.
38. The assessee is engaged in the manufacturing of steel wire mash, this fact is not disputed by the lower authorities. The lower authorities have disputed that mare welding of wire is not part of manufacturing process. The assessee is making new product from steel wire by converting it into a wire mash, which is distinct product and marketable separately from the raw material . The nature of business activity of assessee is also not disputed by the lower authorities. The Hon'ble Madras High Court in CIT Vs Esquire Translam Industries [2012] 25 taxmann.com 98 (Mad) held that conversion of raw material, namely electrical steel in to lamination, which is a distinct commercial product, marketable separately from raw material, amounts to 'manufarure' for the purpose of section 80IB. Therefore, respectfully following the ration of decision of Hon'ble Madras High Court, we are of the view that the assessee is engaged in the business of manufacturing activities and is entitled for the exemption of section 80IB(4) of the Act. The other objection of the lower authorities that the assessee is running his business activity in a rented accommodation is also misconceived as there is no such condition prescribed in the subsection (2) of Section 80IB. in the result the ground No. 4 of the appeal is allowed.
39. In the result the appeal of the assessee is allowed.
ITA No. 1494/Mum/2017 for A.Y. 2010-11. 22
ITA No. 1489 to 1494 Mum 2017-Shri Krishnakumar Vijayashankar Dubey
40. The assessee has raised the following grounds of appeal:
1) The Commissioner of Income Tax (Appeals)-1 (CIT(A)) Thane ought to have held that the Assessment Order passed u/s.143(3) of the Act dated 4th March, 2013 (the said Assessment Order) is bad in law and void ab initio as the said Assessment Order has been passed on conjectures and surmises and not on the basis of facts and documents furnished to the Assessing Officer.
2) The CIT(A) has grossly erred in law and on facts by confirming the disallowance of deduction ofRs.10,04,176/- u/s.80IB(4) of the Act.
The CIT(A) ought to have held that the assessee is entitled to deduction of Rs. 10,04,176/- u/s.80IB(4) of the Act.
The aforesaid grounds of appeal are without prejudice to one another.
41. Ground No. 1 of the appeal is general in nature. The ld AR for the assessee has not made any specific submissions, therefore this ground of appeal is treated as not pressed and thus dismissed.
42. Ground No. 2 identical to the ground No. 4 of appeal for AY 2009-10, which we have decided in favour of the assessee. Thus following the principal of consistency this grounds of appeal is also allowed with similar direction.
43. In the result the appeal of the assessee is allowed.
Order pronounced in the open court on 30 /11/2018.
Sd/- Sd/-
G.S. PANNU PAWAN SINGH
VICE-PRESIDENT JUDICIAL MEMBER
Mumbai, Date: 30 .11.2018
SK
Copy of the Order forwarded to :
1. Assessee 2. Respondent
3. The concerned CIT(A) 4.The concerned CIT
5. DR "H" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai
23