Income Tax Appellate Tribunal - Amritsar
Sh. Puneet Sehdev,, Jammu vs The Addl. Commissioner Of Income-Tax,, ... on 7 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR.
BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER
AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER
CO No. 15/(Asr)/2012
(Arising out of ITA No.153/Asr/2012)
Assessment Year: 2008-09
Shri Puneet Sahdev, vs. Additional Commissioner of
Prop.M/s. Puneet Bangle House, Income Tax, Range-2,
Jain Bazar, Jammu. Jammu.
[PAN: AQKPS 6682C]
(Appellant) (Respondent)
Appellant by : Sh. P. N. Arora (Advocate)
Respondent by: Sh. Alok Kumar (CIT-D.R.)
Date of Hearing: 15.11.2018
Date of Pronouncement: 07.12.2018
ORDER
Per Sanjay Arora, AM:
This is a Cross Objection by the Assessee arising out of the captioned appeal by the Revenue, agitating the part allowance of the assessee's appeal contesting his assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 16.12.2010 for the Assessment Year (AY) 2008-09, by the CIT(A), Jammu ('CIT(A)' for short) vide his order dated 29.02.2012.
2. It may be relevant to notice the background facts of the case, i.e., before we delineate the issue at hand. The assessee-individual is engaged in conversion of 24 carat (pure) gold, also called bullion, into 22 carat gold, i.e., as used for making 2 CO No.15/Asr/2012 (AY 2008-09) Puneet Sahdev v. Addl. CIT gold ornaments, by introducing 'impurities' in the form of copper and silver. The Assessing Officer (AO), in assessment, denied the assessee's claim for deduction u/s.80IB on the principal ground of the said conversion being not 'manufacture', relying on the decision in the case of Tungabhadra Industries Ltd. vs. CTO [1960] 11 STC 827 (SC). The other factors, also responsible for the said denial include the non-satisfaction of the other conditions of sec. 80-IB. In appeal, the ld. CIT(A) accepted the assessee's claim in view of the decision by the Hon'ble Delhi High Court in Lovlesh Jain (in ITA No. 1223 of 2011 dated 20.12.2011, reported at [2012] 67 DTR 232), holding the conversion of gold into gold ornaments to be a 'manufacture'. The other objections raised by the AO were also met by him. He, however, restricted the same to 95% of the profit disclosed by the assessee for the year, Rs.34.22 lacs, the income at which the assessment was thus made by the AO. This was for the reason that the assessee, in his view, apart from the said conversion, also carried on other activities, viz. repairs and alteration of the old (customers') jewellery, etc. In fact, purchases of 6148 gms. of gold, out of a total purchase of 37,377 gms. thereof, were not verifiable, also indicating some other activity being undertaken. Both the assessee and the Revenue filed appeals against his order; the Revenue against the acceptance of the claim for deduction u/s.80-IB, and the assessee against its' restriction to 95%, i.e., against 100%, of the profit. The Revenue's appeal, however, also listed for hearing along with, being not maintainable in view of section 268A read with Instruction No.3 of 2018, dated 11.07.2018 by the CBDT, stands dismissed in limine by us on 15.11.2018. The assessee's Cross Objection (CO), which survives, raises the following ground:
"1. The Ld. CIT(A) is not justified in concluding that 5 per cent of profits declared by the assessee is not derived from the eligible business of the assessee and not allowing deduction u/s.80IB on such profit as the assessee does not carry out any business other than manufacture of jewellery and ornaments and there being no material on record that the assessee has carried out any other activity."3 CO No.15/Asr/2012 (AY 2008-09)
3. We have heard the parties, and perused the material on record. 3.1 The relevant findings by the ld. CIT(A) read as under:
"Regarding unverified purchases, it is seen from records that for a total sale of 37,443 gms. cash purchases were only 6148 gms whereas 31229 gms. were supported by bills. This purchase of 6148 gms is not verifiable due to assessee's inability to produce the parties. Looking to the nature of business of assessee it could hardly be digested that the assessee would only purchase 24 kg. (carat) gold and convert it into ornaments and refuse to do other jobs like repairing of old jewellery and minor alterations in customers' jewellery, etc. The fact that purchases to this extent are not verified coupled with the fact that all such purchases were shown below Rs.20,000/- looks highly improbable and no explanation for this is available from the side of assessee. In view of this, it is an inescapable conclusion that a certain percentage of the income is to be treated as 'income from business which is not eligible for deduction u/s.80-IB of IT Act not being in the nature of manufacturing. Provisions of proviso to section 80IA(8) says that when the computation of profits from eligible business presents exceptional difficulties the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Invoking this provision, in my opinion the most reasonable and fair estimate would be to treat 5% of such profits as not attributable to eligible business and to be taxed separately. Held accordingly."
3.2 During hearing, ld. CIT-DR, Shri Alok Kumar, was asked by the Bench of the basis on which the ld. CIT(A) claims the assessee to be, apart from manufacture of jewellery, also undertaking jobs for modification and repair of jewellery, which no doubt jewellers normally do. He would submit it to be an admitted fact by the assessee. Though, the ld. counsel, Shri Arora, did not rebut this assertion by the ld. CIT-DR, we do not observe any such admission by the assessee on record, having carefully perused the assessment and the impugned order as well. And which, therefore, becomes a matter of presumption, and which cannot be; the assessee in fact categorically denying it per his sole ground. Rather, as appears to be the case, the assessee has only reflected sales of 22 carat gold and/or gold ornaments; the latter being also claimed before the first appellate authority. There is, accordingly, no basis to say that the assessee has undertaken job work as well - which cannot be said to be a matter of rule, and impute a part of 4 CO No.15/Asr/2012 (AY 2008-09) Puneet Sahdev v. Addl. CIT the existing profit from the regular business thereto, i.e., as done by the ld. CIT(A), who has not enhanced the assessee's income, as contended by Shri Arora before us. Rather, where the ld. CIT(A) had some basis to hold the assessee as also undertaking repair/modification work, he ought to, stating so, i.e., including the said basis, estimate the additional income on which, arising not from manufacture or production, section 80-IB would, without doubt, not hold. In doing so, he could explicitly or implicitly reject the assessee's accounts, since accepted by the AO.
3.3 Continuing further, true, the impugned order is premised on the manufacture of jewellery, a fact brought forth, as it appears, for the first time before the first appellate authority, who has also not sought to bifurcate the profits between the two stated activities, i.e., conversion of gold and the manufacture of jewellery. This aspect of the matter, however, could only be germane to the Revenue's appeal, since held as not maintainable. Similarly, the argument with reference to unverifiable purchases, emphasized by the ld. CIT-DR during hearing, is irrelevant in the context of the assessee's CO - the only issue raised thereby being the maintainability of the restriction of the deduction u/s. 80-IB on the assessee's profit from the disclosed activity/s of manufacture and sale of converted gold and gold ornaments. And which we have, in the absence of any material suggesting job work, not disclosed in accounts, answered in the negative. The unverifiable purchases, it needs to be appreciated, are also of the assessee's disclosed business. The reference by the counsels to the subsequent orders in the assessee's case, i.e., in first appeal, for AY 2006-07 (PB pgs. 126-139) and AY 2009-10 (appeal for which year was also fixed alongwith), is, for the same reason, of no consequence. We may though hasten to add that there is no mention of the assessee being involved in the said job work activity in the said orders, for us to, as the final fact finding authority, take cognizance thereof.
5 CO No.15/Asr/2012 (AY 2008-09)4. In view of the foregoing, we have no hesitation in, accepting the assessee's plea, hold the restriction of the assessee's claim for deduction u/s. 80-IB to 95% thereof by the ld. CIT(A) as not proper. The question of the reasonability of the said restriction, also argued before us by the ld. CIT-DR, in that view of the matter, does not arise. We decide accordingly, and the assessee succeeds.
Order pronounced in the open court on December 07, 2018
Sd/- Sd/-
(N. K. Choudhry) (Sanjay Arora)
Judicial Member Accountant Member
Date: 07.12.2018
pkk.
Copy of the order forwarded to:
(1) The Appellant: Shri Puneet Sahdev Prop. M/s. Puneet Bangle House, Jain Bazar, Jammu.
(2) The Respondent: Additional Commissioner of Income Tax, Range-2, Jammu.
(3) The CIT(Appeals), Jammu (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order