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Income Tax Appellate Tribunal, “G”, BENCH MUMBAI
Before: SHRI RAJENDRA, AM & SHRI RAM LAL NEGI, JM
PER RAM LAL NEGI, JM
This is an appeal preferred by the revenue against order dated 20/10/2014 passed by the Ld. CIT (Appeals)-25, Mumbai for the assessment year 2011-12, whereby the Ld. CIT (A) allowed the appeal filed by the assessee against assessment order dated 27/02/2014 passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
Brief facts of the case are that the assessee, a partnership firm engaged in business of manufacturing trading, export & import ornaments, jewelry, precious stones, diamond & gold manufacture and export from SEZ at Sachin, Surat, filed its return of income for the A.Y. 2011-12 declaring the total income of Rs. 3,56,502/- after claiming the deduction u/s 10AA of the Act amounting to Rs. 60,71,726/-. The return was processes and assessment order u/s 143(3) of the Act was passed determining the total income at Rs. 64,31,730/- after disallowing Rs. 60,71,726/- claimed by the assessee u/s 10AA of the Act. The assessee challenged the impugned order before the Ld. CIT(A) who after hearing the assessee allowed the appeal of the assessee holding that the appellant is entitled to claim exemption u/s 10AA of the Act. The revenue is in appeal against the order passed by the Ld. CIT(A) on the following effective grounds:-
1. "On the facts and in circumstances of the case and in the law the Ld. CIT(A) has erred in allowing the disallowance made by the A.O on account of exemption u/s 10AA of the Income Tax Act, 1961 of Rs. 60,71,726/- as the A.O, during the course of the assessment proceedings, established that the assessee did not carry out any manufacturing activity in the SEZ premises.
2. The Ld. CIT(A) has erred in not appreciating the fact that the disallowance was made on the basis of material facts available on record and enquiry conducted, which was further strengthened by the A.O in the remand report during the appellate proceedings.
3. The Ld. CIT(A) has failed to appreciate that the assessee, during the course of assessment proceedings, could not prove that they had carried out any manufacturing activities in the said premises at SEZ,
Surat in the F.Y. 2010-11 relevant to the assessment year under consideration, the onus lies on the assessee.
4. On the facts and in circumstances of the case, and in the law, the Ld. CIT(A) has erred in law in deleting the disallowance made by the A.O, by placing the reliance on the case laws which are not relevant to the instant case, as the facts of the instant case are entirely different from the cases relied upon.
5. On the facts and in circumstances of the case and in the law, the Ld. CIT(A) has erred in arriving at the decision that the A.O made addition just on the basis of presumption and suspicion; as in the assessment order, the A.O has firmly established the fact that no manufacturing activity was being carried out by the assessee at the SEZ premises.”
The Ld. Departmental Representative (DR) relying on the assessment order, submitted that the impugned order is liable to be set aside as the A.O has established that the assessee did not carry out any manufacturing activities in the SEZ premises at Surat in the F.Y. 2010-11. There was no power connection to undertake manufacturing activities. Moreover, the law relied upon by the Ld. CIT(A) is not applicable to this cases as the facts of the instant case are different from the cases relied upon by him.
On the other hand the Ld. Counsel for the assessee submitted that the assessee firm carried out its manufacturing activities of manufacturing gold medallions from its SEZ unit, Sachin, Surat during the relevant previous year from 27/03/2011 to 29/03/2011. The said activities involved importing of gold bars, processing it into gold medallions, and exporting thereof. The appellant processed 40Kg. gold bars and to establish these facts, relevant documents were placed before the AO. The AO was apprised of the fact that 28/03/2011 a diesel generator was hired on rent from M/s. Sagar Enterprises and the work was carried out for which an amount of Rs. 8500/- was paid by the assessee as rent and cost of diesel used. Since, the findings of the Ld. CIT(A) is based on the evidence on record the same needs no interference. Hence, the revenue’s appeal is liable to be set aside.
The Ld. Counsel further submitted that in order to verify the said facts, AO issued notice u/s 133(6) of the Act to M/s. Sagar Enterprises and M/s. Sagar Enterprises vide letters dated 04/02/2014 and 27/02/2014 confirmed that bill no. 25 of 29/03/2014 for Rs. 8500/- was raised for providing diesel generator on rent and cost of diesel used. Shri. Satish Rawal confirmed vide letter dated 24/12/2013 and 31/01/2014 that laborers were supplied as asked by the assessee firm. In view of the aforesaid facts the A.O has wrongly concluded that no manufacturing activities were undertaken in SEZ unit during the relevant financial year. The Ld. Counsel further submitted that the Mumbai Tribunal has decided the similar issue in favour of the assessee in AICT vs. M/s Gia Exports (ITA No 8080 to 8082/M/2011 for the AYs 2006-07, 2007-08 & 2008-09 respectively.)
We have heard the rival submissions and also gone through the material placed before us including the decision relied upon the assessee. The only issue to be adjudicated in this case is whether the assessee is entitled for exemption u/s 10AA of the Act. The Ld. CIT(A) has decided the issue involved in this case in favour of the assessee holding as under:-
“8. in the present facts of the case, even the A.O is not disputing the fact that the appellant has made exports out of imported goods. I have also taken note of the case law referred by the appellant in its on sister concern case where the ITAT has allowed relief in similar and identical issues. In this context, the appellant relies upon decision of Mumbai ITAT in the case of ACIT v/s Gia Exports, A.Ys 2006-07 to 2008-09, Bench ‘G’, Mumbai, order dated 19/06/2013 wherein under similar facts, it is held in para 14 & 15 of the Order as under (relevant part extracted)-
“It is noticed that to verify the claim of the assessee and explanation, the assessee was asked to submit the complete details of imports and exports made through its unit and approval from Custom and Central Excise Department. Documents relating to shipment import and export clearance invoices of import and export and foreign remittances in the bank accounts. The CIT(A) found that all these documents were submitted before the A.O during the assessment proceedings. The CIT(A) has further observed that he has examined all these documents and no discrepancy was noticed in these papers. Even the A.O has not mentioned any discrepancy in the Import and Export Clearance papers submitted during the course of assessment. It is an undisputed fact that in the SEZ unit no Import or Export can be made without the approval of the Custom and Central Excise department. All the payments and receipts were made through banking channels and no discrepancy was pointed out by the A.O. From these facts, it is clear that the assessee has a unit in SEZ, surat. Raw material was imported and the final department. All the papers relating to the shipment and foreign remittances were in order. The assessee has submitted that there was no Import and Export activity taken place in survey year. Accordingly, the CIT(A) found that there was no case of the A.O to deny the deduction to the assessee. We further noticed that even there is no finding in the order of the A.O that survey party has conveyed to the A.O or in detailed report that there was no export or import of items manufactured by the assessee at the premises. The survey party in fact noted that irregularities or discrepancies at the time of survey and not of the past. The A.O has assumed that in the past as the unit was not functioning, neither there was any employee nor there was any sufficient power consumption to manufacture such a huge quantity. However, the A.O has not taken into consideration the fact that the assessee is manufacturing only heavy kadas, which are purchased by the various parties in aboard.
The items manufactured by the assessee, were not jewellery items but kadas only. In our view, in manufacturing kadas, power consumption is less and employees are also required less. Moreover, the import of gold made by the assessee was subject to Custom clearance and Excise Department, which were cleared after due verification. Approval was there, thereafter material was sold to abroad and again subject to custom and excise clearance which were obtained. Copies of all these details were filed before the A.O as well as before the CIT(A).
Learned DR has contended that learned CIT()A has accepted the additional evidence, however, nowhere we found that learned CIT(A) has accepted any additional evidence. Learned CIT(A),which is superior authority to the A.O has categorically mentioned in his order that all the details filed before him were filed before the A.O also. This fact could not be denied by the learned DR even. Therefore, we see no reason to deny the claim of the assessee for exemption under Section 10A.”
Similar and identical issues were decided in favour of the appellant in the case of M/s. Goenka Diamond & Jewellers Ltd. vs. DCIT, Circle-2, Jaipur vide in the case of M/s. Amar Exports v. Addl. CIT, Range-9, Surat vide Ahmedabad ITAT in ITA no. 436/Ahd.20 and again by the Hon’ble Mumbai ITAT in the case of M/s. Gitanjali Exports Corporation Ltd. vs. ADCIT-5(1), Mumbai in ITA nos. 6947 & 6948/6718 & 6783/6949 & 6950/6758 & 6787/Mum/2011.
10. In view of the above observations, the appellant is entitled to claim exemption u/s 10AA. Accordingly, the AO is directed to allow the exemption of Rs. 60,71,726/-as claimed in the return of income.”
We notice that in this case the assessee has placed on record the copy of letter dated 12.3.2014 from the then officer on special duty, addressed to the ITO14(2)(4) Mumbai, vide which certain information u/s 136 of the Act were supplied. From the contents of the said letter, it can be inferred that the unit was in operation on 28.3.2011 as contended by the assessee. The AO has also mentioned in assessment order that on perusal of details it revealed that the assessee had carried out its business activities from its SEZ unit, Sachin, Surat from 27.3.2011 to 29.3.2011. As per the assessee the process of manufacturing gold medallions from gold bars require few heavy machines and apart from other expenses, it requires two types of direct expenses i.e., labour charges and electricity charges. The AO has disallowed the exemption on the ground that since the assessee failed to establish genuineness of electricity and labour charges the particulars furnished to substantiate its contention that gold medallions were manufactured from gold bars during the relevant period, cannot be accepted.
We further notice that during assessment proceedings the assessee furnished the whereabouts of the firm from whom the assessee had hired generator set to fulfill the requirement of electricity in manufacturing process and the concerned person was examined by the AO. Similarly, AO has examined the person who made available the manpower to the assessee. So, in our considered opinion the assessee has discharged the onus on it to prove that during the relevant previous year, it carried out the business activities from SEZ unit, Sachin to avail the claim of deduction u/s 10AA of the Act.
9. The Ld. CIT(A) has mainly based his findings on the decision of the coordinate Bench rendered in ACIT v/s Gia Exports,(supra) in which the coordinate Bench of the ITAT has decided the similar issue in favour of the assessee and against the revenue. In the said case the AO had denied deduction on the basis of report of survey party without taking into consideration the detailed explanation submitted by the assessee. In the present case also the AO has not accepted the evidence adduced by the assessee to establish that since there was no electricity connection generator was hired and manpower was also arranged to carry out the manufacturing activities. Therefore, in our considered opinion, the impugned order passed by the Ld. CIT(A) is in accordance with the view taken by the coordinate Bench in the aforesaid case and as per the evidence on record. Since, we do not find any legal or factual infirmity in the order passed by the Ld. CIT(A), we uphold the same and dismiss the grounds of appeal of the revenue.
In the result, the revenue’s appeal for Asst. year 2011-12 is dismissed.