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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: Shri S.S.Viswanethra Ravi
Date of Pronouncement: 22-06-2016 ORDER SHRI S.S.VISWANETHRA RAVI, JM This appeal of the revenue arises out of the order of the CIT-A-XX, Kolkata in Appeal No. 233/CIT(A)-XX/Wd-35(1)/11-12/Kol dated 20-11-2012 against the order of assessment framed by the AO u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The appellant Revenue has raised the following grounds:- “(1) The Ld. CIT(A) has erred in allowing the appeal of the assessee without giving opportunity of hearing to the Assessing Officer(AO), by not serving any hearing notice and not sending the Form No 35, Grounds of Appeal of the assessee, paper-book to the AO.
(2) The Ld. CIT(A) has erred in accepting fresh documents at the appeal proceedings in the form of a lease deed dated 20/08/2007 as mentioned in Page - 2, Para 4(1)(i) of the impugned Appeal Order in violation of Rule 46A of the Income Tax Rules, 1962 and not sending it for remand report of the A O. 1
Assessment Year 2009-10 M/s. Plastic Moulders International
(3) The Ld. CIT(A) has erred in accepting fresh documents at the appeal proceedings in the form of a competent authority's certificate dated 22/08/2008 as mentioned in Page - 4, Para 5(1)(ii) of the impugned Appeal Order in violation of Rule 46A of the Income Tax Rules, 1962.
(4) The Ld. CIT(A) has failed to appreciate that the assessee has not furnished the dates of certificates in the table submitted as mentioned in Page - 2, para 4(1)(ii) of the impugned Appeal Order except the date of License of land dated 03/08/2007, when the date of factory license is 03/01/2009, the date of certificate of stability by the competent person is 12/01/2009 when the assessee claimed to have started full-fledged commercial production on 04/07/2008.
(5) The Ld. CIT(A) has failed to appreciate that, even if, the completion of civil work on 20/06/2008, as appears in a new document cannot certify that the Commercial production was started within two weeks i. e. 4th July, 2008 as a lot of work are needed including installation of machineries, electrical connections, Test Run of Machineries ( page 2 Para 4- l(ii), Line 1,2 &3 of the Appeal Order) and a lot more before the huge commercial production is started.
(6) The Ld. CIT(A) has failed to appreciate that the monthly production as claimed by the assessee stated its almost peak from the very first month though the assessee has claimed to have installed heavy machineries in the end months of the F Y 2008-09 as mentioned in Page - 2, Para - 9 of the Assessment Order and it could not be verified by the AO as no Books of Accounts were produced on repeated opportunities.
(7) The Ld. CIT(A) has failed to appreciate that G P rate of 36% and Net Profit rate of 22% are abnormally high in the first year of business when the depreciation is very high and the assessee did not produce the books of accounts on repeated opportunities of hearing and the assessee cannot get away by not producing the Books of Accounts at any stage.
(8) The Ld. CIT(A) has failed to appreciate that the claim of Deduction u/s 80IE at the assessment stage in a new one and it is totally contradictory to the Hon'ble Apex Court Decision in the case of M/s. Goetze (India) Ltd Vs CIT (2006) 284 ITR 323 (SC).
Assessment Year 2009-10 M/s. Plastic Moulders International (9) Hence it is prayed that the order of the Ld CIT(A) be cancelled and the Assessment order u/s 143(3) be upheld.
(10) The appellant craves leave to add, alter or abrogate any grounds of appeal at the time of hearing.”
3. Ground no’s 1 to 8 raised against the order of CIT-A for violation of Rule 46A of Income Tax Rules for short hereinafter as “Rules”, and for not appreciating how the assessee achieved the gross profit and net profit without there being valid permissions and for not appreciating the fact how the assessee is eligible to claim deduction u/sec 80IE without there being revised return as per the ratio laid down by the Hon’ble Supreme Court 284 ITR 323(SC), thus, with consent of parties, all grounds 1 to 9 read and heard together as one issue for the purpose of answering the same as one issue.
The brief facts of the case are that the assessee is a firm and is a manufacturer of plastic items. The Asessee filed its e-return of income declaring a total income of Rs.38,61,635/-. As it was selected for scrutiny notices U/Sec’s 143(2) dt:23-08-10 and 142(1) were issued.
During such proceedings, according to AO that the assessee remained absent for many times for hearing since 22-09-11 being the date of first hearing and on many such refixations, the AR representing the assessee appeared and filed copy of Tax audited report, balance sheet and profit loss account etc.. Without form no-10CCB on 25-08-2011 and thereafter none appeared. Under question no- 4 stated to have framed U/Sec 142(1) of the Act, wherein the AO sought explanation regarding the eligibility and qualification to claim deduction U/Sec 80IC doubting, how the assessee could achieve production without there being any valid permissions as it was found to have noticed that the assessee was granted factory license on 03-01-09 and stability certificate issued by an Engineer on 12-01-09.
Assessment Year 2009-10 M/s. Plastic Moulders International 6. The another question raised by the AO regarding submission of trade license, sales tax registration, registration and pollution control, approval of directorate of industries and commerce, payment receipts of electricity , insurance. In response to which the assessee submitted only a copy of pollution control board, Assam to which the AO noticed date of such certificate is not legible.
The other information sought by AO to produce the evidence showing the purchase of machinery with bank statement indicating such purchase. The assessee submitted a bill dated 27-10-2008, indicating a value of Rs.10,23,000/- of a plastic molded machine and another bill showing the inward freight dated 9-2-2009 of injection molding machine and the installation charges claimed to have paid on 15-2-2009. Likewise one plastic granular with 25hp motor vide challan no-48 dated 13-10-2008.
From the above it was noticed by the AO that the assessee did not produce any of the information as sought by him on many occasions and he was of the view that how assessee managed to achieve production at 36%, thereon net profit at 22% without there being valid licenses, permissions, form no.10CCB and proper installation of machinery, thereby doubting the tax auditing report denied the deduction of Rs.38,61,365/- u/sec 80IC and added same to the total income of assessee.
In first appeal the CIT-A allowed the appeal filed by the assessee against the assessment order dated 17-11-2011 passed by the AO observing that the AO did not bring on any adverse material against the uniform sales and high rate of profit as shown by the assessee and directed the AO to allow the claim u/sec 80 IE of the Act, the relevant of which is reproduced as under: “The appellant submitted that the return of income was filed electronically. They furnished copy of auditor's report alongwith Form No.10CCB before the A.O. along with other details as called for by the A.O. On1y books of 4
Assessment Year 2009-10 M/s. Plastic Moulders International accounts could not be produced as the same were lying ill the factory unit at Assam. The facts/evidence/documents show that the industrial undertaking was set up in the District of Kamrup (Assam). The section 80IE was inserted in F.Y. 2007-08 w.e.f, from 01.04.2008. The partners of the firm are permanent resident of Kolkata. Date of starting of civil work of the unit was 16.07.2007 and date of completion was 20.06.2008. Date of commencement of commercial production mentioned in the eligibility certification for new unit in Form -IIA is 04.07.2008. Date of no objection certificate by Pollution Control Board, Assam is 18.06.2008. The mistake mentioning the section 80IC instead of 80IE was inadvertent mistake and the same was explained before the A.O. The decision in the Case of Goetze India Ltd. -Vs- CIT, 284 ITR 323(SC) is distinguishable as the facts in both the cases are different. So far uniform sales and high rate of profit is concerned, no further adverse material was brought on record by the A.O to support his view in this regard. In view of the facts and circumstances of the case, I agree with the submission of the appellant and hence, the AO is directed to allow the claim u/s.80IE of the I.T. Act.”
Having aggrieved, the revenue challenged the order of CIT-A before this Tribunal raising the grounds as herein above mentioned. The contention of the appellant revenue is that the CIT-A accepted and admitted the additional evidence produced by the assessee in first appeal thereby violated Rule 46A and the CIT-A also failed to appreciate non filing of form No.10 CCB which is mandated to claim deduction U/sec 80IE of the Act for which the Revenue submitted as under: This is to submit that the copies of the assessee's appeal/petition, grounds of appeal
, hearing notice were not sent to the AO and also no opportunity of hearing was provided to the assessing Officer, no copy of hearing notice was received by the Assessing Officer though it is written in the appeal order that present for the department 'NONE.' The Ld CIT(A) has failed to appreciate that the completion of civil work on 20/06/2008 as appears in a new document cannot certify that the Commercial production was started within two weeks i. e. 4th July, 2008. There are a lot of work are needed including installation of machineries, electrical connections, Test Run of Machineries ( page
2. Para 4- l(ii), Line 1,2 &3 of the Appeal Order) and a lot more before the huge commercial production is started. Rather it would certify that the commercial full-fledged production cannot be started in 4th July, 2008. In para 4.1(ii) f page 2 of the appeal order the assessee's submission is reproduced. It is written by the assessee that after obtaining 5
Assessment Year 2009-10 M/s. Plastic Moulders International approvals from different authorities of Assam, the assessee started construction of factory shed and building. But as per the submission of the assessee the land license was issued by panchayat on 03/08/2007 and the land was registered on 20/08/2007, (page 2 Para 4(1)(i) and 4-1(ii) of the Appeal Order). So how the civil construction can be started on 16/07/2007 (page 6, 1st Para of the Appeal Order) and when and for how long duration all the approvals from different authorities of Assam has been obtained ( page 2 Para 4- l(ii), Line 1,2 &3 of the Appeal Order)?
The Ld CIT(A) has failed to appreciate that in the table submitted by the assessee. and reproduced on ( page 2 Para 4-1(ii), of) the Appeal Order, the date of license of land is given as 03/08/2007 but the dates of other certificates are not given. The date of Certificate of Stability is 03/01/2009, the date of Engineer's certificate is 12/01/2009, the date of certificate of Entitlement is 07/07/2010, No Objection Certificate of Pollution Control Board is not legible etc. No copy of the paper Book was sent to the A O. The AO was not given an opportunity of hearing on the basis of the paper book and the new documents submitted. No Remand Report was called for.
In reply the learned AR submits that all the details produced before the AO except books of accounts for the reason thereto for non-submission that were lying in the factory premises at Guwahati, Assam. The learned AR also submitted that the asessee achieved gross production and net profit thereon at 22% and claimed deduction. Further he produced assessment orders for AY 2011 -12 and 12-13 to show that the assessee was in losses and that the said assessments were completed u/s 143(3) of the Act where the Revenue accepted the loss of Rs. 10,90,295/- and Rs. 5,98,140/- respectively.
Heard rival submissions and perused the material available on record. For violation of Rule 46A of Rules agitating that the CIT-A did not give an opportunity by sending form no-35 and notice of hearing to AO, in this regard, the allegation of the Revenue is that the assessee submitted a copy of Lease Deed for the first time before the CIT-A, basing on which the CIT-A has given relief of Rs.38,61,365/- u/sec 80IC which is clearly evident from the para-4(1)(i) of appellate order regarding Lease
Assessment Year 2009-10 M/s. Plastic Moulders International Deed dt:20-08-07. As rightly pointed out by the Ld. DR that the said document appears to have not on record before AO as can be seen from the order of AO, where he did not make any reference to said lease deed in his order. Therefore, We are of the view that the said document was placed on record for the first time before CIT-A and he could have send the same for the verification of the AO seeking report under remand, where it clearly establishes violation of the Rule 46A of Rules.
Regarding Form no-10CCB, the AO observed that the Form no-10CCB was not filed before him and as the same is evident from his order at para-11 and where as the CIT-A observed that on the submissions of the assessee that all the documents were filed before the AO except, books of account, we find these two findings of both the authorities below are running contrary to each other. Ld. DR submits that the filing of Form no-10CCB is mandatory to claim deduction U/Sec 80IE, but, however, it is pertinent to note, that the assessee claimed such deduction originally U/Sec 80IC and on an objection raised by the AO the assessee sought to rectify the mistake by way of a letter for which, the AO keeping in view the decision of Hon’ble Supreme Court in the case of GOETZE (INDIA) LTD vs CIT reported in 284 ITR 323(SC) where the Hon’ble Court was pleases to hold that the Tribunal has power to entertain a point of law for the first time and the AO has no power to entertain a fresh claim otherwise than by a revised return. The fact remains undisputed that the assessee did not file revised return to rectify the mistake as committed by it claiming deduction U/Sec 80IC instead of U/Sec 80IE, in this regard, the observation of the CIT-A was that the assessee filed all documents before the AO, except books of account and direction thereon to AO to allow the deduction U/Sec 80IE is misdirected, beyond his jurisdiction and contrary to law. However, we find that the facts of the case in GOETZE (INDIA) LTD supra are not applicable in the instant case as in that case no claim was filed in the return of income but assessee sought to claim a deduction by 7
Assessment Year 2009-10 M/s. Plastic Moulders International filing a separate letter to the AO, however in the instant case the assessee filed a claim but under the wrong provision i.e 80IC in place of 80IE of the Act. As explained earlier that there are contradictory observations of lower authorities in their respective orders with regard to the filing of certificate in form no-10CCB, we, therefore, are inclined in the interest of justice to restore this issue to the file of AO for fresh adjudication. We also direct the assessee to cooperate in completing the assessment proceedings. Thus, as indicated above in para no-3, all grounds are allowed for statistical purpose.
Ground No- 10 is general in nature and the same needs no adjudication, accordingly, ground No- 10 is dismissed.
In the result, the appeal of the Revenue is allowed for statistical purposes. 15. Order Pronounced in the Open Court on 22-06-2016