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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the revenue. The relevant 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, 1961 (the ‘Act’).
The grounds of appeal filed by the revenue read as under:-
1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing claim of deduction u/s 80IB(4) of the I.T. Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not considering the fact that the assessee was afforded number of opportunities during the assessment proceedings to furnish evidences to substantiate his claim of deduction u/s 80IB(4) of the Act.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in admitting the additional evidence without allowing the Assessing Officer to examine additional evidence in contravention of Rule 46A of I.T. Rule.
3. We begin with the background of the case. The assessee 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 CIT(A) vide order dated 17.06.2009 allowed the claim of deduction made by the assessee. The Department filed an appeal against the order of the CIT(A) before the ITAT. The Tribunal vide its order in dated 15.12.2010 restored the matter to the file of the AO 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 assessee in the name of Roshni Electricals and Vikas Electricals are not genuine, (ii) the assessee failed to establish that a new distinct material was produced, (iii) the items sold were SS fabricated parts only and items purchased were SS sheets , (iv) goods worth Rs.79.32 lacs were manufactured 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 assessee failed to submit any evidence as to the identity and address of the workers employed in the factory at Silvassa, (vi) the assessee 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 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 declaration. The AO thus denied the claim of exemption of Rs.27,53,049/- made by the assessee u/s 80IB(4) of the Act.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find from the order of the Ld. CIT(A) that the assessee filed during the course of appellate proceedings (i) invoice of Roshni Electricals dated 15.03.2004, invoice of Vikas Electricals dated 15.03.2004 and invoice of Monarch Enterprises dated 25.03.2004, (ii) affidavits of the proprietor of Vikas Electricals and Roshni Electricals, (iii) statement of purchase of machinery, (iv) letter dated 26.03.2004 from Electricity Department for power sanction including electricity bill for the month of March 2004 to May 2004, (v) transporter’s 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 those documents. The AO filed an one line reply that ‘the case of the assessee does not fall under the purview of any of the conditions laid down in Rule 46A.’ The Ld. CIT(A) allowed the appeal filed by the assessee on the ground that (i) the assessee has manufactured SS fabricated parts from SS Sheets with the use of power ; the manufacturing process itself indicates various processes carried out on SS sheets before it is converted into SS fabricated parts; the fabricated parts are the result of transformation from SS sheets which are different in size, shape, contour and utility and commercially different product distinct from the raw materials, (ii) in the process of using the SS sheets to make into trays for the railways pantry, the nature and character of the original sheets are being substantially altered and it cannot be said that a new product is not being generated, (iii) a perusal of the monthly muster register and the field report dated 17.12.2007 given by the Income Tax Inspector after visiting the premises clearly indicates that the assessee 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 Vikas Electricals, the affidavit of the parties as well as the field report of the Income Tax Inspector clearly indicates that machinery and tools existed on the premises.
The Ld. CIT(A) relied on the judgment of the Hon'ble 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.
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).
We have heard the rival submissions and perused the relevant material on record. As mentioned here-in-above at para 4, the Ld. CIT(A) had sent a copy of the documents filed by the assessee during the course of appellate proceedings to the AO to examine and send a report. The AO, instead of giving his comment has stated that it does not fall under the purview of any of the conditions laid down in Rule 46A. As this was originally set aside by the Tribunal to the file of the AO, the Ld. CIT(A) has rightly adjudicated the matter in the light of the documents filed before her. We find that there is merit in the order of the Ld. CIT(A) that (i) the assessee has manufactured SS fabricated parts from SS sheets with the use of power, (ii) the fabricated parts are the result of transformation from SS sheets which are different in size, shape, contour and utility and it is a commercially distinct 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 at a finding having examined the documents and also the report of the Income Tax Inspector dated 17.12.2007.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 25/04/2017