M/S. ART BEAUTY EXPORT,NEW DELHI vs. ITO, NEW DELHI

PER CHANDRAMOHAN GARG, J.M.

Out of captioned four appeals, the three appeals i.e. I.T.A. 5702, 5703

and 2531/Del/2014 for assessment years 2006-07, 2007-08 and 2009-10

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 respectively are the appeals filed by the assessee which arose against the order

of the CIT passed u/s 263 of the Income Tax Act, 1961 dated 16.9.14, 19.9.14,

and 19.3.2014 respectively whereas remaining one appeal i.e. I.T.A. 924/Del/14

for assessment year 2008-09 is the appeal filed by the revenue against the order

of the CIT(A) dated 25.11.13 in Appeal No. 207/13-14.

of common issue viz. whether the activity undertaken by the assessee comes

within the scope and meaning of words “manufacture and production of article

or thing: as used by the legislation in section 10B(2)(i) of the Act. Besides the

aforesaid issue, appeals for assessment year 2006-07, 2007-08 and 2009-10-

also involve consideration of another issue i.e. whether the ld. CIT was justified

in law and on facts in revising the orders of assessment for said three

assessment years passed u/s 143(3)/260A and 143(3)/260A of the Act

respectively by invoking revisional provision of section 263 of the Act.

a partnership firm and is engaged in the business of manufacture and export of

wooden and brass articles, chess boards etc. for which unfinished and some

finished articles are got manufactured from various artisans as per the

instructions of the assessee. After receipt of aforesaid unfinished and semi

finished articles, the assessee converts them into finished products by

undertaking several manufacturing and mechanical process such as rubbing the

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 raw material by sand paper, buffing, handcarving, polishing, antiquing,

packaging, fitting of kundis, pasting of velvet on the coins and boxes,

assembling to form a new game called 3-in one game and 5-in-one game,

staining, painting, etc. Similar activities are also undertaken by the assessee

firm on the brass items which are assembled and polished to covert them in a

finished product ready to use. The assessee firm is a 100% export oriented unit

and profit and gains derived by the assessee firm from aforesaid undertaking

was claimed as eligible for deduction u/s 10B of the Act. For the first

assessment year 2006-07, the Assessing Officer passed assessment order u/s

143(3) of the Act on 15.12.08 wherein the Assessing Officer disallowed the

claim of deduction u/s 10B of the Act on three grounds viz. the assessee firm

has been reconstituted by the reconstruction of business already in existence; ii)

the undertaking of assessee has not been approved by the revenue authorities on

account of not obtaining custom bonding licence; iii) the assessee has been

purchasing the finished handicraft items of other allied items and as per the sale

invoices furnished, the items exported are exactly the same as have been

purchased, in substance and in nomenclature also. And no manufacturing

activity has been undertaken by the assessee within the meaning of section 10B

of the Act. The Assessing Officer also passed assessment order for assessment

year 2007-08 on 30.12.09 wherein following the earlier order for assessment

year 2006-07, the claim of deduction u/s 10B of the Act was again disallowed.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 4. The assessee carried the matter before the CIT and vide consolidated

order dated 30.3.10 for both the assessment years, it was held that the assessee

is entitled to claim deduction u/s 10B of the Act. The CIT reversed the findings

of the Assessing Officer and held that the assessee firm is engaged in the

business of manufacturing for which it purchased several semi finished and

unfinished material on which further processing was carried out to make it

saleable in the international market as different commodities because goods

were manufactured in raw form as per their directions and further the goods

were finished by polishing, cutting, butting etc in the premises of the assessee

firm as ready to use item for the purpose of export.

assessment year 2008-09 u/s 143(3) of the Act on 20.12.10 wherein following

the earlier orders, the claim of assessee being deduction u/s 10B of the Act was

again disallowed. On 3.6.11, the ITAT dismissed the appeal of the revenue for

assessment year 2006-07 and 2007-08 by holding that the CIT(A) is correct in

allowing deduction and also referring to definition under FTP which is wider in

connotation and includes activities of the assessee as manufacturing. It was also

held by the Tribunal that the assembling of the various products in order to

export is also manufacturing as per definition of section 10B of the Act. On

23.12.11, the Assessing Officer passed assessment order for assessment year

2009-10 by making enquiry of the manufacturing activities and after due

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 examination, deduction u/s 10B was allowed. It is also pertinent to note that the

revenue department carried the matter before the Hon'ble High Court against the

order of the Tribunal dated 3.6.11 and the same was upheld by Hon'ble High

Court confirming the concurrent finding of the ld. CIT and the Tribunal that the

assessee firm has not been reconstituted by the reconstruction of the business

already in existence and the assessee is not required to obtain custom bonding

licence. However, in respect of admission of additional evidence, the Hon'ble

High Court held that the additional evidence submitted before the CIT was not

properly verified by the Assessing Officer and the matter was sent back to the

Assessing Officer for limited purpose with following directions:-

“We, therefore, restore this issue to the file of the Assessing Officer to enable him to process the claim of the assessee afresh in the light of the evidence brought on record. It is clarified that the Assessing Officer will examine only the question whether the assessee satisfied the condition stated in section 10(B)(2)(i) of the Act.” 6. As per submissions of the assessee, it was a limited set aside and scope of

assessment in the set aside was limited to record his findings whether the

assessee has satisfied the conditions stated in section 10B(2)(i)of the Act vis-a-

vis additional evidences brought on record during first appellate proceedings. It

was also submitted on behalf of the assessee that the Hon'ble High Court has

neither upset nor adversely commented upon the findings of the CIT(A) and the

Tribunal that the assessee is undertaking manufacturing activity within the

meaning of section 10B(2)(i) of the Act. In pursuance of the order of the

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 Hon'ble High Court, the Assessing Officer passed order u/s 143(3)/260A for

assessment year 2006-07 and 2007-08 on 22.3.2013 after detailed verification of

the additional evidence and other evidences placed before him. The Assessing

Officer also submitted his conclusion by making due inquiry by sending

inspector to the premises of the assessee business firm and finally held that the

assessee is undertaking manufacturing activity within the meaning of section

10B(2) of the Act and thus, the Assessing Officer allowed deduction u/s 10B of

the Act.

assessment year 2009-10 and did not disturb the findings of the Assessing

Officer that the assessee is entitled to deduction u/s 10B of the Act as the

assessee is undertaking manufacturing activity within the provisions of section

10B(2) of the Act on 25.10.13. The CIT(A) allowed the appeal of the assessee

for assessment year 2009-10 allowing the claim of deduction u/s 10B of the Act

for which the revenue has filed I.T.A. No. 924/D/14.

pursuance to the order of Hon'ble High Court, the CIT issued notices u/s 263 of

the Act to revise the orders of the assessment for assessment year 2006-07 and

2007-08 dated 22.3.13 passed u/s 143/260A of the Act in pursuance to the order

of Hon'ble High Court. The CIT also issued notice us/ 263 of the Act against the

assessment order dated 23.12.11 for assessment year 2009-10. Finally, the CIT

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 passed order u/s 263 of the Act on 19.3.13, 16.9.14 and 19.9.14 for assessment

year 2009-10, 2006-07 and 2007-08 respectively by holding that the assessee

only polishes the finished products which cannot be termed as manufacture and

production and denied the exemption u/s 10B of the Act. Now, the aggrieved

assessee is before this Tribunal with three separate appeals challenging the

invocation of revisionary powers of CIT u/s 263 of the Act.

2531/Del/14 for assessment year 2009-10 which read as under:-

“1. That the Ld Commissioner of Income Tax, Delhi - XI has erred in law as well as on facts in cancelling the assessment order allowing the deduction u/s 10 B and directing to reframe afresh the same by holding that assessment was erroneous and prejudicial to the interest of revenue u/s 263 of the IT Act, 1961 because: a) She has ignored that manufacturing activities undertaken by the assessee not only bring changes but also bring into existence into new and distinct article which can no longer be regarded as original commodity and then only is marketable and ready for export. b) She has erred in not applying the definition of "manufacture" applicable as per clause (r) of the Special Economic Zones Act, 2005 as provided under section 10 AA of IT Act to an entrepreneur referred to in clause (j) of that Act in which assessee firm is also covered. c) She has failed to appreciate that assessee firm was granted 100% EOU by Ministry of Commerce under the Foreign Trade Policy as per Scheme of Special Economic Zone by Development Commissioner till that time legislature has not implemented SEZ Act, 2005. d) She has ignored that assessee firm is not only manufacturing as per its design and orders through the artists employed/hired but also engaged in cutting, carving, polishing, buffing, assembling, labeling, repacking etc for which supporting documents were filed by the assessee firm which are "manufacturing" as per Clause 9.37 of Foreign Trade Policy, 2004-2009 which was more or less adopted under section 2 (r) of SEZ Act, 2005. e) She has failed to appreciate that assessment order is not erroneous as the Ld Assessing Officer has made thorough 7

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 enquiry before reaching to the conclusion during the assessment that assessee firm is involved in manufacturing process. f) She has failed to appreciate the limited directions of the Hon'ble Delhi High Court in AY 2006-07 & 2007-08 on which the AO deputed the inspector who made the inspection on site and thereafter allowed the deduction u/s 10 B.

section 263 of the Act for assessment year 2006-07 and 2007-08 in the same

manner as has been done for assessment year 2009-10 and grounds in all three

appeals are almost similar, therefore, we are adjudicating them together.

material placed on record. For the sake of clarity and brevity in our discussion,

it would be appropriate to take note of written submissions of the assessee

challenging the validity of notice and impugned orders us/ 263 of the Act. The

relevant portion of written submissions of the assessee is being reproduced

below:-

“4. It is submitted that in the instant case, learned CIT has revised the orders of assessment for three assessment years i.e. AY 2006-07, 2007-08 and 2009-10 under section 263 of the Act. It is submitted that in so far as the orders of assessment for the AY 2006-07 and 2007-08 are concerned, such orders of assessments were framed under section 143(3)/260A of the Act in view of the judgment of the Hon’ble High Court of Delhi dated 17.09.2012 for the AY 2006-07 8s 2007-08, whereby Hon’ble High Court has remanded the case to the learned AO only to examine the condition as provided in section 10B(2)(i) of the Act in the light of the additional evidences brought on record as it has been held that learned AO did not get sufficient opportunity to verify the additional evidences.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 5. It is submitted that after the set aside by the High Court, learned AO duly verified all the additional evidences furnished by the assessee before learned CIT(A) during appellate proceedings which has also been taken note of in the judgment of the Hon’ble High Court in para 24. The additional evidences furnished by the assessee before the learned CIT(A) during the appellate proceedings were as under: Copy of RTI Application dated 11.01.2010 addressed to Ministry i. of Commerce and Industry, Udvoy, Biawan. New Delhi. ii. Copy of reply dated 19.01.2010 received from EOU Section, Ministry of Commerce and industry, Government of India. Affidavits of suppliers confirming about supplying the iii. unfinished, unassembled and incomplete goods to the Assessee. Exhibits 01 and 02 as Raw Chess Board and Raw Chess Pieces iv. respectively and also Exhibits 03 and 04 as Finished Chess Board and Finished Chess Pieces respectively. 6. It is submitted that out of the aforesaid four additional evidences, documents at si. (i) & (ii) were not related to the issue which was set aside and only documents stated at si. (iii) & (iv) are related to the issue which was set aside. Further, after the set aside, learned AO duly examined the aforesaid documents and none of the aforesaid additional evidences was found as non genuine by the learned AO. That in the set aside proceedings, assessee also filed various replies vide letters dated January 21, 2013 (PB 14), February 25, 2013(PB 15-17), dated Nil (PB 18- 19) and dated 12 & 14 March, 2013 (PB 20- 21). On the basis thereof, learned AO took note of fact that on receipt of specific orders from exporters, asssessee in its factory through its own worker/artisans performed the activities of sanding, handcarving, fitting of kundies, pasting of valvet on the coins and boxes, assembling to form a new game called 3 in 1 game and 5 in 1 game, and was also doing staining, painting, polishing, antiquing and packaging work etc and final product manufactured by the assessee was different than the product purchased by it from its suppliers. That to further examine that whether the assessee is engaged in the manufacturing activity, apart from the extensively examining the documentary evidences and written submissions furnished by the assessee, learned AO also deputed the inspector to make spot enquiries who in his report has stated as under: “these workers were engaged in manufacturing work on sanding machine, buffing machine, cutting machine and bolt fixing

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 machine. Some of the workers were engaged in polishing, colouring, bar coding, assembling and packaging work.... On inspection of work being done there, it seems that the work was involved in finishing job on unfinished items.” 7. That in view of the aforesaid facts, learned AO in his order dated 22.03.2013 passed under section 143(3)/260A of the Act allowed the deduction under section 10B of the Act by holding that activities undertaken by the assessee would amount to manufacture within the meaning of section 10B(2)(i) of the Act. It is submitted that aforesaid order of the learned AO was within the scope of judgment of the Hon’ble High Court as HonTile High Court has set aside the case to the AO only to examine the condition as provided in section 10B(2)(i) of the Act in the light of the additional evidences brought on record. It is therefore submitted that aforesaid order of the learned AO cannot be held to be erroneous either on facts or in law as learned AO has taken a view which was absolutely in accordance with law.

7.1 It is specific submission of the appellant that The learned CIT has exceeded in his jurisdiction and, has passed the impugned orders to revise the orders of assessment, in disregard of the fact and law that, it is not a case where conditions for exercise of powers to Act under section 263 of the Act existed. It is submitted that, in order to assume jurisdiction under section 263 of the Act, the prerequisites are that, order passed by the Assessing Officer should be erroneous and it should be prejudicial to the interests of revenue. The learned Director of Income Tax has to satisfy the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised should be erroneous (ii) it should be prejudicial to the interests of the revenue. Both the conditions must be satisfied. In case the order of the Assessing Officer is erroneous but is not prejudicial to the interests of the revenue, the Commissioner would not be competent to exercise jurisdiction under section 263. The order under section 263 could be considered as erroneous, if such order is based on wrong assumption of facts or incorrect application of law. The order could also be said to be erroneous, if it has been passed without proper application of mind and, in undue haste without making proper inquiry warranted in the facts of the case. It is further submitted that, even if the order is erroneous, that by itself would not be sufficient for invoking the power under section 263 of the 10

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 Act. The other condition, which requires to be satisfied for assumption of jurisdiction under section 263, is that the order should also be prejudicial to the interests of the revenue. The order could be said to be prejudicial to the interests of the revenue if due to an erroneous order of the Assessing Officer, the revenue has lost tax lawfully payable by a person. The expression ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by an Assessing Officer. However, every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue. In a case, where two views are possible and the Assessing Officer has taken a view with which the Commissioner does not agree, the said order cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 8. It is submitted that the order of the learned AO can in no circumstance be held to be erroneous as order of assessments were neither passed on wrong assumption of facts nor by applying incorrect law. In fact, order of assessment is perfectly in accordance with law after detailed examination of the documentary evidences and also by making spot enquiries. Further in the instant case even the learned CIT(A) also before the set aside, after examining the entire evidences placed on record, in his order dated 30.03.2010 has held that assessee is undertaking manufacturing within the meaning of section 10B of the Act. For the sake of convenience, relevant finding of learned CIT(A) is reproduced hereinbelow: 8. On careful perusal of the various documents furnished before me, I find that there was a definite distinction in the way the industrial undertaking owned by the appellant firm operated in the current assessment year as compared to the earlier years. The partnership deed relating to the old firm, which was later reconstituted on 18th May, 2005 w.e.f. 1-4-2005 clearly provided the scope of the business of the firm, which was restricted to trading for exports of handicraftitems. However, vide the new partnership deed, the scope of the business of the appellant firm was enlarged to include manufacturing for the purpose of export of handicraft items. This fact was also clearly brought about and noted by the tax auditors while furnishing the tax audit report under section 44AB. On careful perusal of the profit and loss account for the assessment year 2005-06 and assessment year 2006-07, it can be clearly observed that there were no expenses which were attributable to manufacturing in the P and L account for the previous year relating to assessment year 2005-06. On the other hand, the profit and loss account for the previous year relevant to the assessment year 2006-07 shows expenses in the nature of wages and also manufacturing expenses. Further, a 11

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 careful perusal of the various assets shown in the depreciation chart for the assessment year 2005-06 clearly shows that there was no plant or machinery, which could be utilized for the purpose of manufacturing of handicraft items. On the other hand, the statement of asset for the assessment year 2006-07 clearly shows an addition of machinery of Rs. 35,100 which comprised of various tools/machines used for the manufacture of handicraft items. In the business of manufacturing of Handicraft items, as the name suggest, the main value addition comes through hand-made operations, for which small tools are needed which are, not very expensive. Therefore, even if there is insignificant addition in value terms in the assets, the same were relevant for manufacturing operations and cannot be disregarded summarily. 8.2 The learned appellant counsel also furnished before me a copy of the entire range of bills of purchase of various raw materials, semi-finished material, unfinished material, which were used for the purpose of manufacturing by the appellant firm. The appellant firm also furnished exhibits and samples in order to emphasize the nature of value addition brought about by the appellant firm on such semi-finished items. Some sample exhibits were also furnished to the learned Assessing Officer for obtaining his comments for admission of additional evidence under rule 46A. However, the learned Assessing Officer did not examine the value addition in such samples. The Ministry of Finance, Government of India has clarified the section 2(f) of the Central Excise Act, 1944, to define the term "manufacture" vide trade notice No. 06/2006, dated 24-7-2006, as under:- "2(f) "manufacture" includes any process:- (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the section or chapter notes of the First Schedule to the Central Excise Trrif Act, 1985 (5 of 1985) as amounting to manufacture; or (iii)which, in relation to the goods specified in the "Third Schedule", involves packing or re-packing of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, And the word 'manufacture' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;" 8.4 I find that in the business of export the work orders are placed on the basis of which only goods are manufactured. Looking to the facts of the case, I observe that these goods are 12

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 purchased as per orders giving description of shape, size, design, weight, etc., which were ultimately manufactured for them. The appellant firm not only is clearly engaged in the business of manufacturing for which it purchased several finished and unfinished material on which further, processing was carried out to make it saleable in the international market. Therefore in view of the above facts, it cannot be denied that the appellant firm had not done any "manufacturing" activity during the year for the purpose of export of handicraft items.” 9. It is submitted that against the aforesaid order of the learned CIT(A) revenue preferred an appeal and such finding of the learned CIT(A) was also upheld by the Hon’ble Tribunal in its order dated For the sake of convenience, the finding of the Hon’ble Tribunal is reproduced hereinbelow: “10.2 Coming to the issue about assessee's activity not amounting to 'manufacture' or 'production' or article or things, learned counsel has referred to various purchases from different parties in which different handicraft items and components of games are ordered. Assessee has demonstrated that finished product is a commercially "distinct commodity i.e. 5 indoor games", which are very popular in foreign countries. It is pleaded that individual components are ordered as raw/semi- finished components, which are carved, polished, finished putting various emblems and designs thereon. Thereafter the requisite games are polished, packed in different packings and the finished product works as a distinct and separate commercial commodity i.e. complete set of 5 games whereas purchases are for different items. The scope and meaning of words "manufacture and production of article or thing", as used in section 10B has close relationship with the definition of "manufacture" in SEZ Act and the meaning referred to in Foreign Trade Policy of India. Section 10B, SEZ Act and Foreign Trade Policy are mutually interdependent and the meaning of these words is to be taken in harmonious backdrop and not in contradictory context. 10.3 The Government of India by way of foreign trade policy has defined "manufacture" not only meaning to make, produce, fabricate, assemble, process, calibrate by hand or by machine a new product having distinctive name, character or use should come into existence. The process include processes such as cutting, polishing, blending, repacking, labelling, refurbishing' etc. 10.4 In our view, Hon'ble Supreme Court judgment in the case of Gwalior Rayon Silk Mfg. Co. Ltd. (supra), has thrown guiding light on the interpretation meaning and context. The word "manufacture" uis-a-uis section 10B can be correctly understood while keeping the interdependence and purport of section 10B, Foreign Trade Policy of Government of India and 13

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 SEZ Act. The same principle has been adopted by the Hon'ble Kerala High Court in the case of Tata Tea Ltd. (supra), where, blending, packing and export of tea bag and tea packets was held to be covered and eligible for deduction under section 10B. In our view in this case what assessee purchased were different parts of handicrafts which were meticulously processed as above and then assembled in the form of a distinct commercial commodity i.e. 5 indoor games. The assessee carried out various activities of carving, polishing and bringing the different components into a commercial viable item, called as multiple indoor games which have been exported. The items ordered by the assessee as purchases are totally distinct form and could not have been exported. 10.5 Respectfully following the above authorities and the case laws i.e. Hon'ble Kolkata High Court in the case of Mukherjee & Co. (supra); ITAT Delhi Bench decision in the case of Tech Books Electronics Services (P.) Ltd. (supra ), we hold that the assessee's activities amounted to manufacture or production of an article or thing i.e. multiple indoor games, as contemplated by section 10B.”

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 i. Further in the case of ITO v. Makers Mart reported in 50 Taxmann.com 106 (Jodhpur) (Pgs. 73 - 87), where assessee after purchasing unfinished handicraft goods applied various processes like cutting, polishing, repairing, remaking, etc., and for that purpose, incurred substantial labour expenses, it has been held that it could not be denied exemption under section 10AA on ground that it was not a manufacturing concern. ii. In the case of Madhu Jayanti International Ltd. v. DCIT reported in [2012] 148 TTJ 1 (Kolkata) (SB) (Pg.l - 20), wherein the assessee was engaged in blending and processing of tea. It claimed itself to be a 100 per cent EOU within the meaning of section 10B; accordingly, deduction under section 10B was claimed. Tea was purchased through auction held in Tea Board recognized Auction Centres and, thereafter, tea so purchased was processed in order to remove all dust and foreign substances. After processing, different varieties of tea were blended to make it of 'uniform and consistent' quality. Finally, the blended tea was packed in consumer packets or tea packs. The Assessing Officer, denied the claim of deduction under section 10B. Order of Assessing Officer was confirmed by the Commissioner (Appeals). Deduction was denied on ground that blending and processing undertaken by assessee could not qualify to be called as 'manufacture' as input used was tea and output obtained was also tea. On the aforesaid facts, after careful examination of the statutory provisions, it was held that assessee is engaged in manufacturing and hence entitled to deduction.

iii. That in the case of CIT v. Deco De Trend reported in 360 ITR 1 (Mad.) (Pg. 21 - 26), wherein assessee was engaged in the business of the export of handicraft items of dried flowers and parts of plants. On going through the nature of activity undertaken, the Assessing Authority came to the conclusion that there was no manufacturing activity done, as had been claimed by the assessee. Aforesaid finding of the AO was reversed by the learned CIT(A) and Tribunal. In the appeal filed by the revenue, Hon’ble High Court held as under: “15. We agree with the contentions made by the learned senior counsel appearing for the assessee that the process which the assessee had undertaken satisfies the test of manufacture to qualify for relief under Section 10B of the Income Tax Act. As already narrated in the preceding paragraph, the emphasis of the Revenue is that in the absence of any definition under the Act as 15

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 to what 'manufacture' is, the decision of the Apex Court reported in Tara Agencies (supra) would squarely apply. It is contended that every change is not 'manufacture' and every change in an article as the result of treatment, per se, would not result in 'manufacture'. There is no dispute on this broad principle. However, it is not denied by the Revenue that apart from cleaning and grading, the assessee had taken further processing; that what is purchased as raw material and what is exported as a product for export are totally different items. The process that the assessee had undertaken clearly points out the irreversible nature of the final end product from a raw material purchased and given the above said fact, which the Revenue does not deny, we have no hesitation in accepting the contention of the assessee that there was, in fact, 'manufacture'. 16. We accept the contention of the assessee in this regard drawing support from the decision of the Apex Court reported in Aspinwall & Co. Ltd. (supra) that the word 'manufacture' has to be understood in common parlance, there being no definition of the word 'manufacture' in the Act. Even if one looks at the definition of 'manufacture', as given under Explanation 3 to Section 10B, as it existed prior to its substitution in 2001, we find, the term was defined inclusively that any process or assembling or recording of programme or disc, tape, perforated media or other information storage device are brought under the definition of 'manufacture'. In any event, with the definition of 'manufacture' available as under Explanation 4 to Section 10B of the Income Tax Act, inserted by Finance Act, 2003, with effect from 1.4.2004, which defines 'manufacture or produce' to include the cutting and polishing of precious and semiprecious stones, as is relevant for the assessment years under consideration, the decision relied on by the Revenue is not of any assistance. Learned Standing counsel appearing for the Revenue brought to our attention Section 2(29)BA, inserted under the Finance (No.2) Act 2009, with effect from 1.4.2009, which defines 'manufacture' to mean a change in a non-living physical object or article or thing resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 cutting and polishing of precious and semi-precious stones and the idea of granting exemption/deduction under Section 10B being clear, the relief under Section 10B of the Income Tax Act cannot be denied. 18. In the decision reported in Aspinwall & Co. Ltd. (supra), the Apex Court observed "the word "manufacture" has not been defined in the Income Tax Act. In the absence of a definition, the word "manufacture" has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to manufacturing activity." Thus the Apex Court pointed out that if the commodity can no longer be regarded as the original commodity but instead is recognized as a new and distinct article, then the activity of manufacture can be said to take place. The decision relied on by the Revenue reported in Tara 19. Agencies (supra), however, stands on a different footing. There, the assessee was engaged in purchase of different qualities of tea and blending the same for the purpose of export. On the question as to whether the assessee would be entitled to weighted deduction under Section 35B(1A) of the Income Tax act, the Supreme Court pointed out on facts that the assessee's activity amounted to processing only and the activity did not amount to production or manufacture. Thus the case relied on by the Revenue is distinguishable on facts. 20. Given the admitted fact that what was purchased by the assessee as raw material and exported goods are totally different items and commercially known as a different product, going by the definition 'manufacture' in Explanation 4 to Section 10B of the Income Tax Act, we have no hesitation in agreeing with the contention of the assessee and thereby confirm the order of the Tribunal.”

iv. In the case of Kwal Pro Exports vs. ITO reported in [2009] 123 TTJ 543 (Jodhpur), wherein assessee purchased not only raw materials but also semi-finished goods and articles of like description as that of exported goods on which it carried out machine work in case of wooden articles such as smoothening and shaping structures, surfaces and edges of wooden items and then engraving, embossing, fixing metallic parts and assessories and, thereafter, polishing and painting thereof had also been done. Assessee also fixed artistic parts thereon to give it a commercial look, making it completely distinct in character and 17

w I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 use - Likewise, in metallic items assessee carried more or less similar activities, to make them fascinating and marketable commodities different both in character and use than what these items were originally purchased by assessee. On the aforesaid facts, it was held that assessee is engaged in manufacturing activity and hence entitled for deduction under section 10B of the Act.

v. In the case of Little Bee Impex v. Deputy Commissioner of Income-tax reported in [2015] 56 taxmann.com 201 (Chandigarh - Trib.), it was held that activity of removing moisture from raw honey and thereupon repacking and exporting same to various countries amounted to ‘manufacturing’ activity eligible for exemption under section 10B of the Act.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 iv. Grasim Industries Ltd. vs CIT 321 ITR 92 HC (Bombay) v. CIT vs Sunbeam Auto Ltd. 227 CTR 133 HC (Delhi) vi. CIT vs DLF Power Ltd. 229 CTR 27 HC (Delhi) vii. CIT vs. Ashish Rajpal [2010] 320 ITR 674 (Delhi) viii. CIT vs Vodafone Essar South Ltd. [2013] 212 Taxman 184 elhi) ix. CIT vs. New Delhi Television Ltd [2014] 360 ITR) 44 (Delhi

vi. It is submitted that since the view taken by the assessing officer is in accordance with law as such, same cannot be held to be erroneous. Without prejudice, it is submitted that the view taken by the learned AO that assessee is undertaking manufacturing within the meaning of section 10Bt2)(il of the Act is one of the possible view as such, power exercised by the learned CIT to revise the order of assessment under section 263 is unsustainable in law. “

CIT and before us as reproduced hereinabove and vehemently contended that

the ld. CIT has exceeded his jurisdiction and has passed impugned orders to

revise the orders of assessment in disregard of the fact and law because these

are not the cases where required conditions for assumpiton of jurisdiction and

exercise of powers u/s 263 of the Act are existing. Learned counsel of the

assessee also pointed out that the Assessing Officer called report from the

Inspector about the activities undertaken by the assessee in pursuance to the

directions of Hon'ble High Court and on careful consideration of the same, the

Assessing Officer took a correct view that the activities undertaken by the

assessee on the semi-finished and finished goods are of nature of manufacturing

activity and view taken by the Assessing Officer is reasonable and plausible

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 view which cannot be held as unsustainable or not in accordance with the

provisions of the Act. Ld. Counsel also contended that for invoking revisional

powers u/s 263 of the Act, the CIT has to satisfy twin conditions, namely, the

order of the Assessing Officer sought to be revised should be erroneous and it

should be prejudicial to the interest of the revenue. He further contended that

the order u/s 263 could only be considered as erroneous if such order is based

on wrong appreciation of facts or incorrect appreciation of law and the order

could also be said to be erroneous if it has been passed without proper

application of mind and in undue haste without making proper inquiry

warranted in the facts of the case. Learned counsel of the assessee further

submitted that the assessment order should be said to be prejudicial to the

interest of revenue if due to an erroneous order of the Assessing Officer, the

revenue has lost tax lawfully payable by a person. Learned counsel of the

assessee parted the argument that a final submission that in the present case,

the view taken by the Assessing Officer after due inquiry, as per directions of

the Hon'ble High Court is quite a correct, plausible, reasonable and sustainable

view and there could be no other view possible on the facts and circumstances

of the case and even in a case where two views are possible and the Assessing

Officer has taken a view with which the Commissioner does not agree, the said

order cannot be treated as an erroneous order prejudicial to the interest of the

revenue unless the view taken by the Assessing Officer is unsustainable in law.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 13. Learned Departmental Representative strongly supported the action of the

CIT in issuing notice u/s 263 of the Act and in passing the impugned orders

revising the assessment orders passed by the Assessing Officer in pursuance to

the directions of the Hon'ble High Court. Learned Departmental Representative

submitted that merely because the assessee has undertaken some finishing and

polishing activity on the finished and semi-finished goods, it cannot be said that

the assessee was engaged in manufacturing work or activities. Learned

Departmental Representative submitted that the view taken by the Assessing

Officer was not a plausible and sustainable, view, therefore, the CIT validly

assumed jurisdiction to issue notice u/s 263 of the Act and to pass impugned

orders which deserve to be upheld.

attention towards various orders of Hon’ble Supreme Court, the Hon'ble High

Court and coordinate bench of the Tribunal including order of ITAT, Jodhpur in

the case of ITO vs Makers Mart 50 taxmann.com 106 (Jodhpur-Trib.) and

Divij Exports vs ITO 33 taxmann.com 682 (Jodhpur-Trib.) and submitted

that where the assessee after purchasing unfinished handicraft goods applied

various processes like cutting, polishing, repairing, remaking etc. and for that

purpose, incurred substantial labour and other expenses, then it could not be

denied exemption u/s 10AA of the Act on the ground that it was not a

manufacturing concern. Learned counsel of the assessee also pointed out that

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 in the case of Divij Exports (supra), it was categorically held that where the

assessee was purchasing semi-finished wooden articles which required other

work of beautification and of artistic value and thereafter wooden articles took

shape of antique look, then the assessee was rightly eligible for exemption u/s

10BA of the Act. Learned counsel of the assessee has lastly drawn our

attention towards order of Kolkatta Special Bench in the case of Madhu

Jayanti International Ltd. vs DCIT reported in (2012) 148 TTJ 1

(Kolkata)(SB) and submitted that for the purpose of section 10A, 10AA and

10B ‘manufacture’ is to be considered as defined in section 2(r) of the Special

Economic Zone Act 2005.

could not assist us to show that the case laws/orders of Hon’ble Special Bench

and Coordinate Bench of the Tribunal as discussed supra have been modified or

set aside in any manner by any higher forum.

the issue of invocation of provisional power u/s 263 of the Act and issuance of

notice under this provision, at the very outset, it is relevant to point out that in

the first round of proceedings, original assessment u/s 2006-07 and 2007-08

was completed u/s 143(3) of the Act disallowing the claim u/s 10B of the Act

and subsequently, the assessee raised various grounds before the CIT and the

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 ITAT wherein the assessee succeeded and its claim of deduction u/s 10B of the

Act was directed to be allowed. It is also pertinent to note that the CIT

admitted additional evidence in the form of exhibits of finished and unfinished

products u/s 46A of the Income Tax Rules 1962 and also referred to various

grounds for granting relief. The consolidated order of the first appellate

authority for assessment year 2006-07 and 2007-08 was upheld by the Tribunal

and against this order, the department filed appeal before the Hon'ble Delhi

High Court raising questions on the admission of additional evidence and grant

of deduction u/s 10B of the Act. The Hon'ble High Court admitted the

additional evidence but remanded the matter to the Assessing Officer for

limited purpose to enable him to process the claim of the assessee afresh in the

light of evidence brought on record only to examine as to whether the assessee

satisfied the conditions laid down in section 10B(2)(i) of the Act. On careful

perusal of the paras 25, 26 & 27 of the order of Hon'ble High Court, it is amply

clear that the first two questions of law were decided in favour of the assessee

and against the revenue and the third question was answered in favour of the

revenue subject to the order of their lordships to remit the matter to the file of

the Assessing Officer for limited purpose as stated above.

260 A of the Act in view of the judgement of Hon'ble High Court dated 17.9.12

for assessment year 2006-07 and 2007-08 and duly verified all additional

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 evidence submitted by the assessee before the first appellate authority during

the earlier appellate proceedings which was also noted by their lordships in para

24 of the judgment of Hon'ble High Court. The Assessing Officer considered

affidavits of the suppliers confirming about supplying of unfinished,

unassembled and incomplete goods to the assessee firm and also considered

exhibits showing photographic detail of raw chess board, raw chess pieces and

finished chess board and finished chess pieces respectively. During the

reassessment proceedings in pursuance to the order of Hon'ble High Court, the

Assessing Officer duly examined the relevant documents and the same were

found to be genuine and the Assessing Officer also considered written

submissions and replies of the assessee dated 21.1.13, 25.2.13 and 12.3.13 and

14.3.13 available on pages 14 to 21 of the assessee’s paper book. It is also

pertinent to note that on the basis of examination and verification of the said

documentary evidence and submissions of the assessee, the Assessing Officer

observed and noted that on receipt of specific orders from exporters, the

assessee in its factory through its own workers and artisans performed activities

of sanding, handcarving, fitting of kundis, pasting of velvet on the coins and

boxes, assembling of different games into one to form 3 in 1 game and 5 and

was also doing stoning, painting, polishing, antiquing and packaging etc. and

final product manufactured by the assessee was different than the product

purchased by it from its suppliers. The Assessing Officer went in detail and

deep to further examine as to whether the assessee is engaged in manufacturing 24

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 activities. The Assessing Officer deputed the Inspector to visit factory of the

assessee and to make spot inquiries about the actual work undertaken by the

assessee. For the sake of clarity in our findings, it would be appropriate to

reproduce the report of the Inspector wherein he stated as under:-

“these workers were engaged in manufacturing work on sanding machine, buffing machine, cutting machine and bolt fixing machine. Some of the workers were engaged in polishing, colouring, bar coding, assembling and packaging work.... On inspection of work being done there, it seems that the work was involved in finishing job on unfinished items.” 18. On the basis of foregoing discussion, we observe that the ld. Assessing

Officer, in his reassessment order dated 20.2.13 passed in pursuance to the

directions of Hon'ble High Court, allowed deduction us/ 10B of the Act to the

assessee by holding that the activities undertaken by the assessee would amount

to manufacture within the meaning of section 10B(2)(i) of the Act in the context

of aforesaid proceedings undertaken by the Assessing Officer during

reassessment proceedings carried out in pursuance to the order of Hon'ble High

Court, we appreciate that the Assessing Officer followed directions of Hon'ble

High Court in its letter and spirit and properly and deeply verified and examined

the claim of the assessee on the basis of additional evidence as well as spot

inspection and inquiry report of the departmental Inspector and then concluded

that the activities undertaken by the assessee would amount to manufacture

within the meaning of section 10(B)(2)(i) of the Act on the basis of said

conclusion, the assessee’s claim for deduction u/s 10B of the Act was allowed.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 19. Now, the question before us is that whether the CIT was justified and

validly assumed jurisdiction to issue notice u/s 263 of the Act and in passing

impugned orders under the said provision, revised the reassessment order of the

Assessing Officer dated 23.2.13 and order for assessment year 2009-10. The

main contention of the ld. CIT DR is that the view taken by the Assessing

Officer in reassessment proceedings and in allowing the claim of the assessee

u/s 10B of the Act is not a justified, reasonable and plausible view which was

unsustainable and not in accordance with law, therefore, the CIT assumed

jurisdiction to invoke powers u/s 263 of the Act. The contention of the assessee

in brief is that the view taken by the Assessing Officer is a sustainable,

reasonable and sustainable view as per facts and circumstances of the case and

as per relevant provisions of the Act. Alternatively, the learned counsel of the

assessee has submitted that there is no question of two possible views as the

view taken by the Assessing Officer was the only possible view which could be

taken in the facts and circumstances of the case, however, for the sake of

argument if it is presumed that second view was also possible, then also CIT

was not empowered to invoke provisions of section 263 of the Act where two

views are possible and to support this contention, learned counsel of the assessee

placed his reliance on the decision of Hon’ble Supreme Court in the case of

CIT vs Max India 295 ITR 282 (S.C.) on the judgment of Hon'ble

Jurisdictional High Court of Delhi in the case of CIT vs NDTV 360 ITR

044, CIT vs Honda Siel Power Ltd. (D(Del) 333 ITR 547 and judgment in the 26

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 case of CIT vs DLF Power Ltd. 345 ITR 446 (Del).

Bench has held that for the purpose of section 10A, 10AA and 10B of the Act,

manufacture has to be considered as defined in section 2(r) of the Special

Economic Zones Act, 2005. The relevant part of this order is being respectfully

reproduced as under:-

“The provisions of section 10AA of the Act was inserted on the statute book by the Special Economic Zones Act, 2005 with effect from February 10, 2006. Even prior to the enactment of the said Special Economic Zones Act, special economic zones (including units therein) were all along treated like EQU/FTZ/EPZ for all purposes whatsoever and were dealt within the Exim policy accordingly. Section 2(k) of the Special Economic Zones Act, 2005 defines the expression "existing Special Economic Zone" to mean every Special Economic Zone which is in existence on or before the commencement of the said Act. Section 2(l) defines the expression "existing unit" to mean every unit which has been set up on or before the commencement of the said Act in an existing Special Economic Zone. In other v/ords, admittedly all Special Economic Zones were also being governed by the Exim policy prior to the enactment of the Special Economic Zones Act, 2005. Clause (iii) of Explanation 1 to section 10AA lays down that the expression "manufacture" shall have the same meaning as assigned to it in section 2(r) of the Specia]_Ecpnomic Zones Act, 2005, which definition is as under:

"'Manufacture' means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture,

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 horticulture, pisciculture, poultry, sericulture, viticulture and mining." In Exim policy, the expression "manufacture" is defined, in paragraphs 9.30 and 9.31 thereof almost in the same manner as in the Special Economic Zone Act, 2005, which is as under: '"Manufacture' means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, repacking, polishing and labelling. Manufacture, for the purpose of this policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining.” “We, in view of the above, hold that when the products for which the assessee's unit is recognised as a 100 per cent, export oriented undertaking are tea bags, tea in packets and tea in bulk packs and the assessee, which is exclusively engaged in blending and packing of tea for export, may not be manufacturer or producer of any other article or thing in common parlance. However, for the purpose of sections 10A, 10AA and 10B, we have to consider the definition of the word "manufacture" as defined in section 2(r) of the SpecialEconomic Zones Act, Exim policy, Food Adulteration Rules, 1955, Tea (Marketing) Control Order, 2003, etc. We also find that the definition of "manufacture" as per section 2(r) of the Special Economic Zones Act, 2005 is incorporated in section 10AA of the income-tax Act with effect from February 10, 2006. The hon'ble Kerala High Court in the case of Girnar Industries [2011] 338 ITR 277 (Ker) had held such amendment in section 10AA to be clarificatory in nature. The definition of "manufacture" under the Special \ Economic Zones Act, Exim policy, Food Adulteration Rules and Tea (Marketing) Control Order is much wider than what is the meaning of the term "manufacture" under the common parlance, and it includes processing, blending, packaging, etc. In view of the above and respectfully following the decision of the hon'ble Kerala High Court in the case of Girnar Industries (supra) and Tata Tea Ltd. [2011] 338 ITR 285 (Ker), we hold that the assessee is entitled for exemption under section 10B of the Act on account of blending of tea Similarly, in our view, the indus- trial units engaged in the very same activity, i.e., blending, packing and export of tea in the free-trade zone shall also be entitled to enjoy tax exemption under section 10A of the Act.”

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10

Bench after analysing the relevant provisions of the Act categorically held that

where the assessee after purchasing unfinished handicraft goods applied various

processes like cutting, polishing, repairing, remaking etc. and for the purpose,

incurred substantial labour expenses, then it could not be denied exemption u/s

10AA of the Act on the ground that it was not a manufacturing concern. The

relevant observations and operative part of this order read as under:-

“11. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it appears that AO disallowed the claim of the assessee mainly on the ground that assessee purchased VAT exempted goods amounting to Rs. 3,43,48,670, which were in fact, finished handicraft items, because only handicraft items are VAT free under Sch. I of Rajasthan» Value Added Tax Act, 2003. On the contrary, the claim of the assessee is that the goods purchased by it were unfinished handicraft items, which were also verified by the custom authorities, who clearly remarked on the purchase invoices as "unfinished items". In our opinion, the view taken by the AO was not correct because the assessee purchased unfinished handicraft goods and applied various processes like cutting, polishing, repairing, remaking etc. and for that purpose, incurred expenses amounting to Rs. 56,47,777 for labour, which has not been doubted by the AO. The assessee also incurred electric expenses of Rs. 6,56,987 which was also accepted by the AO. The assessee was engaged in manufacturing activities, this fact is established from various certificates issued by the Government and concerned authorities, who after verification and scrutiny, issued the certificates which are to be issued only to the concerns engaged in manufacturing activities. Those certificates were as under : (i) Copy of registration certificate issued by District Industries

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 Centre, Jodhpur, registering bio. 080151100653 (ii) Registration Certificate granted under the provision of Factories Act, 1948, No. 28531 dt. 22nd Nov., 2010. (iii) Copy of the registration certificate issued by Export Promotion Council for Handicrafts. (iv) Copy of approval issued as per SEZ Act, 2005 by office of the Development Commr., Noida Special Economic Zone, Ministry of Commerce and Industry, Department of Commerce, Government of India. (v) Copy of letter dt. 27th April, 2006 of Development Commr., Noida Special Economic Zone. (vi) Copy of registration granted under the provisions of Rajasthan Sales-tax Act showing the appellant (sic—assessee) as "manufacturer of all types of handicrafts". (vii) Copy of registration certificate issued under the provisions of CST Act. showing the assessee as manufacture of handicrafts. In the present case, it is also admitted fact that in the preceding asst. yrs. 12. 2007-08 and 2008-09. the deduction claimed by the assessee under s. 10AA of the Act was allowed while passing the assessment orders under s. 143(3) of the Act. Copies of the said assessment orders are placed at page Nos. 232 to 249 of the assessee's paper book. In the instant case, nothing is brought on record to substantiate, that there is any change in the facts of the present year vis-a- vis the earlier years. It is relevant to point out that in the assessment order dt. 20th April, 2010 for the asst. yr. 2008-09 passed under s. 143(3) of the Act. copy of which is placed at page Nos. 232 to 236 of the assessee's paper book, the AO while allowing the deduction under s. 10AA of the Act observed as under : "Meanwhile, vide order sheet entry dt. 19th March. 2010, Inspector of this Ward was directed to verify whether the unit is located in Special Economic Zone or not and whether the firm is manufacturing the articles of its own or not. The inspector of this Ward, vide his report dt. 29th March, 2010 has reported that the assessee's factory and production house is situated at G- 185 and 186, F-204 and 205 which is in SEZ, Boranada. He further reported that the assessee manufactures the articles of its own. The submission of the assessee was examined with reference to books of account, purchase bills/vouchers etc. produced/ filed. Considering all the facts and circumstance of the case and after discussion with the learned Authorised Representative of the assessee and partners of the firm, it is found that the assessee is eligible for 100 per cent exemption, being second year of the business." 30

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10

4.1 The assessee was asked vide order sheet noting dt. 12th March, 2009 to establish its case to cover by cl. (iii) of Expln. 1 to s. 10AA(8) of the Act i.e. manufacture shall have the same meaning as assigned to it in el. (r) of s. 2 of the SEZ Act, 2005. The assessee vide letter dt. 23rd March, 2009 has explained as under:-

That assessee is manufacturer of all types of handicrafts. It is labour oriented unit and no heavy machinery is used for production. There is no fixed system of manufacturing; it depends upon the order of export. As and when assessee received the order, he decided the manufacturing process and style of working. Assessee is having good set up for manufacturing different types of handicrafts items. Assessee generally deals with iron handicrafts. A detailed process chart with photos of items showing the steps involved in manufacturing one after another process is enclosed. The steps involved in production and export is as under : (1) Receipt of purchase order from the foreign buyer. (2) Production planning for in-house and at outsides, (3) Issue of Pos and JOs to suppliers and in-house incharges with the specified 'models' each for production of 'semi-finished' goods, which too in different steps. Iron sheets or angles were cut down in the shape of items, which is done by different persons which are specialized in different items as per size and frame and some time these skeletons was purchased directly from supplier to save time and headache of scrap. (4) These cut size items are assembled and engraving and shaping as per requirement of items under supervision" of supervisors. Welding, moundling and giving shapes and attaching small attachments which are needed as accessories and requirement of items. (5) These items were now given for finishing for removing the welding signs and balancing the same. Now these items are polished as per requirement of buyer, i.e., (6) nickel platting powder coating, sand stone blasting or colouring as per requirement.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 (7) Now final polishing is done and by checking the accuracy of item as per requirement and as per order and specification of size and finishing and glass accessories were fitted or final accessories were fitted as per specifications. (8) Special packaging is done as per item and individual item is packed in separate box and than each is packed in big boxes with use of different kind of packing material after labelling and tagging the items. (9) Labelling of boxes and putting it in container for export of the same. That manufacturing of items involved many steps and due to variety of items and style, each and every work of the item cann't be done in-house, hence some part of the work/job is given outside to specialist for adding in the items and which returns the same and next process were done in inhouse. As in export secrecy of the model of item is must and if we lose the same we will lose the order or we will not receive the order second time hence assessee's try to do the work in parts and final finishing and shaping of the item is done in inhouse. Assessee is having good and efficient staff which is sufficient for it working and all the staff is on roll and also having some contractors which are also registered under assessee and working in assessee's premises and PF and ESI liability is taken by the assessee if it is not paid by the contractor. Hence, directly and indirectly assessee gives employment for the manufacturing of its item through contractor also. Contractorship is must in this trade due to large volume of labour turnover. As assessee if keeps the employee on his roll and after two three, months he left and he has to give explanation for the same to the PF and ESI Department, hence it create one more problem. Second in contractorship assessee has to pay only for the work or items which he has completed and no payment without work if there is no work of said type with assessee. Assessee in handicraft industry due to variety of items each person or team of persons are specialized in the special work, which is also as needed from order to order. Hence, assessee prefers contractor over the direct employee, as there is no difference in working both are doing work in assessee's premises.' 4.2 The explanation of the assessee was examined with (he books of account, purchase bills/vouchers and vouchers raised by the contractor. As much as profit and gains raised to the assessee on export sales, the taking of goods commenced from SEZ i.e. vv.e.f. 3rd Jan., 2007, is eligible for 100 per cent deduction, being first year of the business under s. 1OAA of the IT Act, 1961.’

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 14. From the above narrated facts, it is clear that the Department has allowed claim of the assessee for deduction under s. 1 OAA of the Act in the preceding years. Since there is no change in the facts of the year under consideration therefore, on the principle of consistency also, the claim of the assessee was allowable. Furthermore, this issue is covered by the decision of this Bench of the Tribunal in the case of Suraj Exports India (supra). We, therefore, considering the totality of facts as discussed hereinabove, are of the view that learned CIT(A) was fully justified in directing the AO to allow the claim of the assessee under s. 1OAA of the Act. Accordingly, we do not see any merit on this issue in the appeal of Department.”

Jodhpur Bench has also examined similar question in the similar set of facts

and circumstances wherein the assessee challenged the revisional order passed

u/s 263 by the CIT wherein it written submissions held that where the assessee

was purchasing semi/finished wooden articles which required other work of

beautification and of artistic value, thereafter wooden articles took shape of

antique look, then the assessee was rightly allowed exemption u/s 10BA of the

Act. The relevant part of operative part of this order is being reproduced as

under:-

“Thereafter, the learned CIT exercised the powers under s. 263 of the Act by observing that the assessee's business had been mentioned as manufacturing and trading of all kinds of hand made articles or things (handicraft goods) which were of artistic value and which required the use of wood as the main raw material. According to learned CIT. the report of the assessee intimated that it was not only manufacturing but also engaged in trading activity during the relevant period and since the manufacturing activity is the condition precedent for admissibility of exemption under s. 10BA of the Act and the assessee was engaged in trading also, it. was not entitled for exemption under s. 10BA of the Act but such exemption was erroneously allowed by the AO, therefore, the assessment order passed under s. 143(3) on 2bth April, 2007 was erroneous insofar as it was prejudicial to the interest of Revenue. 33

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 The learned CIT also mentioned the details of certain invoices in paras 5.1 to 5.18 wherein it was mentioned that ready wooden items were purchased by the assessee. The learned CIT issued a show-cause notice to the assessee by invoking the provisions of s. 263 of the Act. In response to the notice, the assessee filed written reply on 5th Feb., 2008 and the relevant para No. 2 had been reproduced by learned CIT in para 9 of the impugned order, which reads as under : "2. That we have manufactured or produced all the goods at our factory site which were exported out of country i.e. most of goods have been manufactured at our factory by purchase of wood, wooden article, hardware goods, polishing materials, consumable stores and thereafter seasoning the wood manufacturing of artistic wooden article and things. Further, in some of the cases the parts of wooden articles have been purchased either in agricultures/articles i.e. grooming, shaping or adhesing some more things to make them eligible articles or things by use of consumable and hardware goods and apply the labour. Further thereafter all the polishing work on these manufactured or produced articles has also been done at out factory site, which may be verified from out total payment of wages and salary and labour wood and polish worth Rs. 13,70,844 for a total sale of Rs. 88.73,135 i.e. 14.45 per cent of total sales and 18.57 per cent of cost of goods sold which shows that the production activities have been carried over at our factory site on the goods which have been purchased as rough or raw more purchase of raw or rough articles or things thereafter applying of some more labour work to make the commodity more artistic value which may be verified from purchase invoice and out of sale bill which clearly shows that the goods purchased in raw/rough have not been exported thereafter the artistic work of grooming/digging/adding of some particular has been made and also polishing work has been done. The detailed list of purchase and sales and their vouchers are enclosed. According to cl. (a) of sub-s. (2) of s. lOBA of the IT Act, 1961, which the assessee has to fulfil are as under: 'It manufactures or produces the eligible articles or things without the use of imported raw materials.' After reading the above clause it is clear that the undertaking should manufacture or produce the eligible articles or things. The expression production has wider meaning than the word 'manufacture'. The word 'production' includes the activities of manufacturing by applying human endeavor on some existing raw material to make it valuable. In the instant case, the assessee has done the manufacturing activities to manufacture the eligible articles or things i.e. all hand made articles or things which are of artistic for which wood used as main raw material but in some negligible cases i.e. not more than 15 per cent value of sale price the articles or things have been purchased in raw or rough thereafter the artistic activities have been done by applying the 34

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 labour and polishing work has also been done at out factory site, hence the commodity purchased in raw and rough has been made usable or valuable at our factory site which amounts to production, manufacturer means a different or independent article should be course by applying manufacturing activities whereas in our case it has done so by use wood but in negligible cases not more than 15 per cent rough or new article has been purchased either in loto or in their parts thereafter assembled at our factory site and thereafter artistic work has been done by applying labour to do the grooming work, digging work or adhesing work which tantamounts to a production activity. Every manufacturing activity requires change i.e. different and distinct commodity used should be got changed or be different or distinct commodities whereas the commodities should become the valuable or salable after doing the production activities. Sec. 10BA(2)(a) requires the undertaking to manufacture or produce the eligible article or thing means the undertaking should do either the manufacturing activities or to do production activities. Production of goods is a wider meaning from manufacture of goods, which is having restricted to manufacture of new or distinct commodity whereas production requires application of labour only to make the things or articles as valuable or saleable." 4. The assessee vide reply dt. 5th March, 2008 also filed list of purchase vouchers and confirmations from various parties, who had sold handicraft items to the assessee. In all those confirmations, it was stated that skeleton pieces of wooden handicrafts or rough shape of wooden items were supplied. 5. The learned CIT was not satisfied with the reply of the assessee and observed that the assessee was dealing in wooden items and it was evident from some bills that the assessee had purchased timber and manufactured some articles at his factory but at the same time purchased readymade wooden items of Rs.14,20,725. He further observed that nomenclature of the items in the bills was itself a complete entry to suggest that complete chair/table/almirah/lamp etc. were purchased could not be purchased in parts or pieces. Had it been so i.e. purchased in part the bills would have definitely stated so. The learned CIT was of the view that the confirmation now filed that only parts were purchased was merely an afterthought and make to believe story. The learned CIT also referred to the case law relied upon by the assessee at pp. 9 and 10 of the impugned order. The learned CIT held that the AO had erroneously allowed exemption of Rs. 5,04,428 under s. 10BA and thus assessment order was erroneous as also prejudicial to the interest of the Revenue. Accordingly, while exercising his power under s. 263 of the Act, the learned CIT set aside the order under s. 143(3) dt. 26th April, 2007 passed by the AO and directed him to reframe the assessment. The learned CIT also mentioned that the AO had not examined and made inquiry for investigation of any type for the various expenses i.e. power expenses salary and wages, electrical expenses and telephone expenses. Now the assessee is in appeal. 35

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 6. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO thoroughly examined and investigated the case of the assessee before framing the assessment under s. 143(3) of the Act and only after being satisfied allowed the deduction under s. 10BA of the Act. It was further submitted that the learned CIT only referred to certain invoices which indicated that the assessee purchased few wooden items. It was explained that the assessee purchased the raw items and gave the finishing touch after making the various processes, therefore, the claim of the assessee was allowable since it was a case where the assessee was engaged in the activity of manufacturing and processing and was not engaged in the trading as alleged by learned C1T. The learned counsel for the assessee referred to pp. 2 to 7 of the assessee's compilation which is a copy of reply dt. 5th Feb., 2008 to the learned CIT-II, Jodhpur and submitted that vide para 9 of the said letter it was explained that the assessee manufactured or produced all the goods at his factory site which were exported out of the country and most of the goods had been manufactured at factory by purchase of wood or wooden articles, hardware goods, polishing materials, consumable stores and thereafter seasoning the wood, manufacturing of artistic wood articles and things had been done. It was further stated that it was explained to the learned CIT that in some of the cases the parts of wooden articles or things had been purchased in the raw or rough form thereafter assembled at our factory site and thereafter artistic work and other work of artistic had been done i.e. grooming, shaping or adhesing some more things to make them eligible articles or things by use of consumable and hardware goods and by applying labour. It was contended that the assessee fulfilled the conditions laid down in s. 10BA of the Act and the AO after being satisfied took a possible view, therefore, the action of the learned CIT was not justified. Reliance was placed on the following case laws : Goverdhan Prasad Singhal v. TTO [IT Appeal Nos. 200, 797 & 1. 964 (Jp) of 2008]; Sunil Kumar Pugalia (HUF) v. ITO r20091 120TTJ 1001 (JP); 2. Dy. CIT v. Jaipur Manglam Arts [2009] 28 SOT 57 (JP); 3. Sarnath Infrastructure (P) Ltd. v. Asstt. CIT[2010] 124 ITD71 4. (Luck.) Arts & Crafts Exports v. ITO [2011] 45 SOT 418/10 taxmann.com 5. 294 (Mum.) Dy. CIT v. Manoj Kumar Johri [2012] 18 taxmann.com 130/50 SOT 6. 39 (URO) (Jp); Kwal Pro Exports v. ITO [20091 33 SOT 24 (Jodh.); 7. 8. CIT v. Max India Ltd. [2007] 295 ITR 282/166 Taxman 188 (SC). 7. In his rival submissions, the learned Departmental Representative reiterated the observations made by the learned CIT and strongly supported the impugned order.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 We have considered the submissions of both the parties and 8. carefully gone through the material available on record. In the present case, it is not in dispute that the assessee was engaged in manufacturing and export of goods but learned CIT was of the view that apart from manufacturing and exporting goods, the assessee was engaged in the trading activity. That view was taken on the basis of certain invoices wherein it was mentioned that the assessee purchased wooden articles. The explanation of the assessee before the learned CIT was that those wooden articles were subject to further processing before making them finished goods. In the instant case, the assessment was framed under s. 143(3) of the Act and books of account as maintained by the assessee were subject to the audit under s. 44AB of the Act. The assessee also filed audit report along with return of income. It is not a case that the AO had not examined the books of account and supporting material while framing the assessment under s. 143(3) of the Act. The assessee also furnished report under s. 10BA of the Act in Form No. 5614 which is placed at pp. 21 to 26 of the assessee's compilation. In the said report, no defect was pointed out by the learned CIT, however, he considered the assessment order passed by the AO as erroneous as well as prejudicial to the interest of Revenue only on this basis that at serial No. 5 of Annex. A', appended to Form No. 56H, the business of the assessee was mentioned as "manufacturing and trading" of all kinds of handmade articles or things. But in the instant case, not even a single item was pointed out by the learned CIT wherein the assessee was engaged in the trading. On the other hand, the claim of the assessee was that it was purchasing semi- finished wooden articles which required other work of beautification and of artistic value, thereafter the wooden articles took the shape of antique look. In the present case, it appears that the view taken by the AO was in consonance with the view of the Tribunal Jodhpur Bench 'A' in the cases of Goverdhan Prasad Singhal v. 1TO ITA No. 200/Jp/2008, 964/Jp/2007 and 797/Jp/2008 for the asst. yrs. 2007-08 and 2005-06 and ITA No. 964/.lp/2007 for the asst. yr. 2003-04, order dt. 24th Oct., 2008) (supra)], as well as the view expressed by Tribunal, Jaipur 'A' Bench in the case of Dy. CIT v. Manglam Arts (ITA No. 815/Jp/2007) (supra). Therefore, it can be held that the view taken by AO was one of the possible views on a similar issue. The Hon'ble apex Court in the case of C1T vs Max India Ltd. (supra) held as under : ‘The phrase 'prejudicial to the interests of the Revenue' in s. 263 of the IT Act. 1961, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of the two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law." 9. Since in the present case, the AO had taken one of the possible views, therefore, by keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid referred to case, we are of the view that the assessment order passed by the AO cannot be treated as erroneous or

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 prejudicial to the interest of Revenue. In that view of the matter, we set aside the impugned order passed by learned CIT.”

Tribunal, we have no hesitation to hold that for the purpose of claim u/s 10A,

10AA and 10B of the Act, we have to consider the genuineness of the word

‘manufacture’ as defined in section 2(r) of the Special Economic Zone Act

2005. In the present case, the Assessing Officer in pursuance to the directions of

Hon'ble High Court not only examined and verified additional evidence and all

relevant submissions and documentary evidence of the assessee but also called a

physical spot inspection report by the Inspector of the department wherein it was

informed that the workers of the assessee firm were engaged in manufacturing

work on sanding machine, buffing, cutting and bolt fixing machine. The

Inspector also observed that some of the workers were engaged in polishing,

colouring, assembling and packaging work. After inspection of said work being

done there, the Inspector noted that the work undertaken by the assessee firm

involved finishing job of unfinished items and therefore, these workers were

engaged in the manufacturing work of artistic products. In this situation, on the

facts and circumstances of the present case, we are inclined to hold that the view

taken by the ITAT, Jodhpur Bench in the case of ITO vs Maker Mart (supra)

and in the order of Divij Exports vs ITO (supra) strongly support the contention

of the assessee that where the assessee after purchasing unfinished handicraft goods

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 applied various processes like cutting, polishing, repairing, remarking etc. and

for that purpose, the assessee had incurred substantial labour and other expenses

on packing etc., then it would be presumed that the assessee had undertaken

manufacturing activities and thus, it is eligible for deduction u/s 10B of the Act.

Accordingly, we reach to a conclusion that the view taken by the Assessing

Officer in the reassessment order in pursuance to the directions of Hon'ble High

Court and in passing impugned assessment order for assessment year 2006-07,

2007-08 and 2009-10 was a reasonable, justified and plausible view which could

not be alleged as unsustainable or not in accordance with the provisions of the

Act and therefore, the CIT could not be held as justified in issuing notice u/s 263

of the Act and in passing impugned orders revising and disturbing the

reassessment order passed u/s 143(3), 260A and 143(3) of the Act in pursuance

to the judgment of Hon'ble High Court.

Delhi in the case of CIT vs NDTV 360 ITR 044 (Del) wherein it was held

that where the Assessing Officer did conduct investigation and accepted the

claim for deduction of the assessee on being satisfied that the conditions

stipulated in the relevant provision of the claim have been satisfied, then it

could not be held as a case of ‘no investigation’ and where no further

investigation is required, then the acceptance of the claim by the Assessing

Officer cannot be held as erroneous and thus order of revision u/s 263 of the

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 Act was not valid. In the present case, the Assessing Officer originally

disallowed the claim of the assessee in the first round of proceedings.

Subsequently when the Hon'ble High Court directed the Assessing Officer to

verify and examine the claim of the assessee as to whether the assessee has

undertaken manufacturing activities as required u/s 10B(2)(i) of the Act, then

in pursuance to the said order, the Assessing Officer himself verified and

examined the claim of the assessee and after calling and considering the spot

inspection report of the Departmental Inspector, he held that the activities

undertaken by the assessee in its workshop/factory was manufacturing activity

and thus the Assessing Officer held that the assessee is entitled for claim of

deduction u/s 10B of the Act. In this situation, the CIT was not correct in

invoking provisions of section 263 of the Act as the view taken by the

Assessing Officer in the order passed in pursuance to the directions of Hon'ble

High Court was quite correct, possible and plausible view which cannot be

alleged as unsustainable or not in accordance with the provisions of the Act

and hence the same cannot be labelled as erroneous and prejudicial to the

interest of the revenue.

Jurisdictional High Court also considered and referred to its earlier judgments

in the case of Sunbeam Auto Ltd. 332 ITR 167 (Del) and ITO vs D.G.

Housing Projects Ltd. 343 ITR 329 (Del). In the case of DG Housing

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 (supra), after referring to the decision of Sunbeam Auto (supra), it was held

that the CIT must come to a conclusion that the order is erroneous and is

unsustainable in law. In the present case, the CIT has not satisfied

jurisdictional pre-conditions stipulated in section 263 of the Act. The order u/s

263 of the Act must be clear and must set out the logical ground and reason as

to why the assessment is erroneous and prejudicial to the interest of the

revenue.

relied by the assessee, it was held thus:-

“The phrase “prejudicial to the interests of the revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be termed as prejudicial to the interests of the revenue, for example, when an Income tax officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income tax officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income tax officer is unsustainable in law.” 27. In view of above, in the facts and circumstances of the present case, we

observe that the Assessing Officer adopted a reasonable, correct and plausible

view based on logical analysis of documentary evidence of the assessee and

fortified by the Inspector’s spot and physical inspection report and the same

cannot be held as unsustainable or not in accordance with the provisions of the

Act. The Assessing Officer rightly held that the assessee is undertaking

manufacturing activities and thus it is entitled for deduction/exemption u/s 10B 41

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 of the Act. In our humble understanding, this is not a case of two possible

views but the present case is the case of one acceptable and sustainable view

and in this situation, it cannot be held that the CIT assumed valid jurisdiction to

issue notice and to pass revisional order u/s 263 of the Act. Hence, we are

inclined to hold that the CIT has no valid reason to assume jurisdiction to

invoke section 263 of the Act and thus we hold that the notices and impugned

order to revise reassessment order for assessment year 2006-07, 2007-08 and

2009-10 are bad in law and the action of the CIT was not based on valid

assumption of jurisdiction and thus we quash the same.

2009-10 are quite similar, our conclusion for the grounds of the assessee for

assessment year 2009-10 will apply to assessment year 2006-07, 2007-08

mutatis mutandis. We order accordingly. Finally, impugned notices issued u/s

263 of the Act and orders passed by the CIT u/s 263 of the Act dated 19.3.14

for assessment year 2009-10, dated 16.9.2010 for assessment year 2006-07 and

dated 19.9.2014 for assessment year 2007-08 are hereby quashed. All three

appeals of the assessee are allowed.

Revenue appeal in I.T.A. No. 924/D/2014 for A.Y. 2008-09

New Delhi dated 25.11.2013 in appeal no.207/2013-14 for assessment year

2008-09.

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 30. In this appeal, the department has challenged the first appellate order

wherein he allowed claim of exemption u/s 10B of the Act to the assessee. We

have heard arguments of both the sides and carefully perused the material

placed on record before us. The CIT(A) granted relief to the assessee by

observing and concluding as follows:-

“Subsequently, AO examined and allowed the deduction u/s 10B to the appellant in these two assessment years and therefore, no controversy left remained. It would be apt to mention that during the appellate proceeding, my predecessors sought remand report from the AO because the Hon’ble Delhi High Court has remitted one of the issues on section 10 B (2) (i). Subsequently, the assessing officer has passed orders u/s 143 (3)/ 260 A on 22.03.2013 which were also placed on record before my predecessors. It was argued that in the year in concern the AO has merely followed reasoning given in the assessment orders for AY 2006-07 and 2007-08 for disallowing deduction u/s 10 B. Since, the AO has already granted relief on the directions of Hon’ble Delhi High Court while passing orders u/s 143 (3)/260A and granted deductions u/s 10 B of the IT Act, the controversy raised by the AO for the year in concern also doesn’t survive. Moreover, it is also observed that the AO has also allowed the claim of the appellant u/s 10B in the subsequent assessment year 2009-10. I, therefore, allow the appeal and direct the AO to grant deduction u/s 10B of the IT Act, 1961.” 31. Since by the earlier part of this order, we have held that the Assessing

Officer took a sustainable, reasonable and plausible view in allowing claim of

the assessee u/s 10B of the Act in reassessment order passed in pursuance to the

directions of the Hon'ble High Court, hence, the view taken by the CIT(A) for

2008-09 following the orders for assessment year 2006-07, 2007-08 and 2009-

10 cannot be alleged as perverse or incorrect. The view taken by the CIT(A) in

allowing appeal of the assessee and directing the Assessing Officer to grant

exemption u/s 10B of the Act for assessment year 2008-09 is justified and we

I.T.A.Nos.2531, 5702, 5703 & 924/D/2014 AYs: 2006-07, 2007-08, 2008-09, 2009-10 are unable to see any valid reason to interfere with the first appellate order. Accordingly, we uphold the same and both the main grounds of the revenue being devoid of merits are dismissed.

Order pronounced in the open court on 30.11.2015.

Sd/- Sd/- (L.P. SAHU) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30th November, 2015 ‘GS’