The ITO, Ward-2,, Vapi v. M/s. NROX Specialities, Dadra Silvassa, D & N.H.

ITA 1071/AHD/2007 | 2004-2005
Pronouncement Date: 09-09-2010 | Result: Dismissed

Appeal Details

RSA Number 107120514 RSA 2007
Assessee PAN AAEFN6151B
Bench Ahmedabad
Appeal Number ITA 1071/AHD/2007
Duration Of Justice 3 year(s) 5 month(s) 26 day(s)
Appellant The ITO, Ward-2,, Vapi
Respondent M/s. NROX Specialities, Dadra Silvassa, D & N.H.
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-09-2010
Date Of Final Hearing 19-08-2010
Next Hearing Date 19-08-2010
Assessment Year 2004-2005
Appeal Filed On 13-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI MUKUL SHRAWAT JM &SHRI A N PAHUJA AM ITA NOS.1071 AND 1072/AHD/2007 AND ITA NO.1622/AHD/2009 (ASSESSMENT YEARS:-2004-05 2005-06 AND 2006-07) INCOME-TAX OFFICER WARD- 2 VAPI V/S M/S NROX SPECIALITIES SURVEY NO.327/1 DEMNI ROAD SANTOSH TILES COMPOUND DADRA SILVASSA D & N.H. [PAN: AAEFN 6151 B] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K M MAHESH DR ASSESSEE BY:- SHRI M K PATEL AR O R D E R A N PAHUJA: THESE THREE APPEALS FILED BY THE REVENUE AGAINST T WO SEPARATE ORDERS DATED 29-11-2006 FOR THE ASSESSMEN T YEARS 2004- 05 & 2005-06 AND DATED 26-02-2009 FOR THE AY 2006- 07 OF THE LD. CIT(APPEALS) VALSAD RAISE THE FOLLOWING COMMON G ROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S. 80I B AMOUNTING TO RS.2 30 881/- FOR THE AY 2004-05 RS.1 02 44 215/- FOR THE AY 2005-06 AND RS.72 34 132/- FOR THE AY 06-07 TO THE ASSESSE E WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND L AW THE ID. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT CONSIDER ING THE FACT THAT CONDITIONS LAID DOWN U/S. 80IB[IV] HAS NOT BEEN FUL FILLED IN THE CASE OF ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT D ISTINGUISHING THE RATIO LAID DOWN IN THE DECISIONS RELIED ON BY THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER JUST SIMPLY HOLDING THAT THE FACTS OF THE ABOVE DECISIONS ARE DIFFERENT THAN THE CASE OF ASSESSEE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT A PPRECIATING THE FACTS THAT THE ASSESSMENT WAS FRAMED BASED ON THE MATERIA L FOUND AND ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 2 IMPOUNDED DURING THE COURSE OF SURVEY PROCEEDINGS C ARRIED OUT U/S 133A PARTICULARLY THE WAGES REGISTER WHICH SHOWED ONLY F OUR WORKERS IN VIOLATION OF THE CONDITIONS LAID DOWN U/S. 80IB(V) FOR AVAILI NG THE DEDUCTION. 5.* IT IS THEREFORE PRAYED THAT THE ORDER OF THE L EARNED CIT(A) BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. 6.* THE APPELLANT CRAVES TO ADD ALTER OR AMEND AN Y GROUNDS OF APPEAL. 5**. ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S. 80I B ON THE DISALLOWANCE U/S40A(IA) AS THE DISALLOWANCE BEING TECHNICAL IN NATURE AND ASSESSEE IS ENTITLED TO DEDUCTION OF SUCH DISALLOWANCE IN NEXT YEAR ON P AYMENT BASIS.THIS WOULD LEAD DOUBLE BENEFIT TO THE ASSESSEE. 6.** IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. 7.** THE APPELLANT CRAVES TO ADD ALTER OR AMEND AN Y GROUNDS OF APPEAL. * RELEVANT FOR THE AYS 2004-05 & 2005-06 ** RELEVANT ONLY FOR THE AY 2006-07 2 ADVERTING TO COMMON GROUND NOS.1 TO 4 IN THESE TH REE APPEALS FACTS IN BRIEF AS PER RELEVANT ORDERS FOR THE AY 2004-05 ARE THAT RETURN DECLARING NIL INCOME FILED ON 31-10-2004 BY THE ASSESSEE AFTER CLAIMING DEDUCTION OF RS.2 30 881/- U/S 80IB OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT] W AS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY ON THE BASIS OF F INDINGS IN A SURVEY CONDUCTED ON 9-03-06 U/S 133A OF THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE-FIRM THE ASSESSMENT FOR THE AY 2004- 05 WAS RE-OPENED U/S 147 OF THE ACT WITH THE SERV ICE OF A NOTICE U/S 148 OF THE ACT ON 21-04-06. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE SUBMITTED VIDE A LETTER FILED ON 22-05-06 THAT THE RETURN FILED ORIGINALLY ON 31-10-04 MAY BE TREATED AS RETU RN IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. DURING THE SURVEY I T WAS FOUND THAT THE ASSESSEE STARTED MANUFACTURING CHEMICALS IN TH E YEAR UNDER CONSIDERATION IN ITS UNIT LOCATED AT SILVASA A SCH EDULED BACKWARD AREA AND CLAIMED DEDUCTION U/S 80IB ON THE PROFITS OF THE SAID INDUSTRIAL UNDERTAKING.. THE PARTNER OF THE FIRM S HRI NANDU GUPTA IN ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 3 HIS STATEMENT RECORDED ON OATH U/S 133A(3)(III) OF THE ACT ADMITTED THAT THEIR FIRM WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT SINCE IT DID NOT FULFILL THE CONDITION OF EMPLOYME NT OF TEN OR MORE WORKERS IN THE MANUFACTURING PROCESS CARRIED ON WIT H THE AID OF THE POWER. INTER ALIA THE MUSTER REGISTER FOUND DURING THE SURVEY REVEALED ONLY 3 WORKERS AND A MANAGER. IN HIS STATE MENT SHRI NANDU GUPTA ADMITTED THAT ONLY 4 WORKERS WERE WORKI NG ON THE DAY OF SURVEY IN HIS FACTORY AND THAT HE HE DID NOT KN OW ANYTHING ABOUT THE CONDITIONS OF CLAIMING OF DEDUCTION U/S 80IB OF THE ACT NOR HIS C.A. INFORMED REGARDING FULFILLMENT OF BASIC CONDI TIONS FOR AVAILING BENEFITS U/S 80IB OF THE ACT. INTER ALIA IT WAS AL SO ADMITTED BY HIM THAT IN THE PREVIOUS YEARS ALSO THE NUMBER OF WORK ERS EMPLOYED WERE LESS THAN 10 AND IN THE EVENT OF DENIAL OF DE DUCTION HE WOULD PAY ADVANCE-TAX IN THE CURRENT YEAR. 2.1 IN HIS STATEMENT SHRI ABHAV KUMAR SINGH OF FICE WORKER STATED THAT. - HE HAS BEEN WORKING SINCE LAST 8 MONTHS. - HE WORKED IN THE OFFICE AS MANAGER. - HE RECEIVED MONTHLY SALARY OF RS.5500/-. - BOOKS OF ACCOUNTS AND OTHER FILES WERE KEPT IN THE MUMBAI OFFICE. - THERE WERE ONLY 3 WORKERS WORKING SINCE LAST 2 YE ARS. - THEY WERE PAID MONTHLY SALARY OF RS.3000/- EACH. - THEIR MAIN WORK WAS LOADING AND UN-LOADING OF THE MATERIALS. - THESE THREE WORKERS OPERATED THE MACHINES AS PER HIS DIRECTION - PAYMENTS OF SALARY WAS MADE BY THE MUMBAI OFFICE. 2.2 IN THEIR STATEMENTS THE THREE WORKERS STATE D THAT: * THEY HAVE BEEN WORKING HERE SINCE LAST 2 YEARS. * THEY DO LOADING AND UN-LOADING WORK. * THEY WERE PAID MONTHLY SALARY OF RS.3000/- EACH. * THEY WERE THE ONLY WORKERS WORKING IN THE FACTOR Y SINCE LAST 2 YEARS. ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 4 2.3 IN THE LIGHT OF AFORESAID STATEMENTS OF THE O NE OF THE MAIN PARTNER OF THE ASSESSEE-FIRM THEIR MANAGER AND T HE THREE WORKERS THE AO WAS OF THE OPINION THAT THE ASSESSEE FIRM D ID NOT FULFILL THE CONDITION STIPULATED IN SECTION 80IB(2)(IV) OF THE ACT. HOWEVER DURING THE COURSE OF REASSESSMENT PROCEEDINGS IN RESPONSE TO A LETTER DATED 05-06-06 THE ASSESSEE SUBMITTED WITH THEIR LETTER DATED 24/05/2006 NOTARIZED TRUE COPIES OF THE AFFIDAVITS DATED 27-03-2006 OF THE AFORESAID FIVE PERSONS WHOSE STATEMENTS WE RE RECORDED DURING THE COURSE OF SURVEY . IN HIS AFFIDAVIT SHR I NANDU GUPTA STATED THAT: HE WAS IN MUMBAI WHEN THE SURVEY PARTY STRUCK HIS PREMISES AND HE WAS INFORMED AT 4:30PM. HE REACHED THE PREMISES AT 10:00 PM. AS PER THE MUSTER ROLL FOUND BY THE SURVEY PARTY THERE WERE FIVE WORKERS. THERE WERE ALSO SEVEN ADDITIONAL WORKERS AS PER M USTER ROLL KEPT IN THE MUMBAI OFFICE AND THIS FACT WAS I NFORMED BY HIM TO THE ADDITIONAL C.I.T. THE SURVEY PARTY PRESSURIZED HIM TO MAKE THE STAT EMENT TO THE EFFECT THAT THE FIRM WAS HAVING ONLY FOUR WO RKERS AND REFUSED TO TAKE INTO CONSIDERATION HIS STATEMEN T THAT THERE WERE ADDITIONAL SEVEN WORKERS AS INFORMED TO THE ADDITIONAL C.I.T. THIS HAPPENED AFTER THE ADDITIONA L C.I.T. LEFT. HE WAS THREATENED BY THE SURVEY PARTY TO BE PROSE CUTED IF HE DIDN'T SURRENDER. THE PRESSURE TACTICS AND THREATENING BY THE SURVE Y PARTY WAS FROM 11:00 P.M. TO 4:00 A.M. >> HE WAS EXHAUSTED AND TIRED AND NOT ALLOWED T O SLEEP. THE STATEMENT WAS WRITTEN BY THE INSPECTOR AS DIR ECTED BY THE I.T.O. WITHOUT TAKING COGNIZANCE TO WHAT HE WAS STATING. ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 5 THE STATEMENT TO THE EFFECT THAT 'THERE WERE ONLY FOUR WORKERS ON MUSTER ROLL AND THAT IS AT ALL HE DID NO T FALL UNDER SECTION 80IB THAN HE WOULD PAY TAX FOR HIS YE AR' WAS NOT MADE BY HIM AND HE WAS PRESSURIZED AND THREATENED TO SIGN. AT THE TIME OF RECORDING THE STATEMENT HE WAS SUR ROUNDED BY FOUR PERSONS AND HE WAS NOT IN HIS PROPER FRAME OF MIND. SAID STATEMENT IS RETRACTED BY HIM AND WAS NEVER MADE BY HIM. 2.4 IN HIS AFFIDAVIT SHRI ABHAY KUMAR SINGH STAT ED THAT HE WAS THREATENED AND PRESSURIZED BY THE SURVEY P ARTY. HE WAS MADE TO SIGN THE STATEMENT. HE WAS THREATENED TO BE PROSECUTED. THE SAID STATEMENT WAS NOT GIVEN BY HIM AND THE S AME IS RETRACTED. 2.5 LIKEWISE THE THREE WORKERS IN THEIR AFFIDAVIT S AVERRED THAT * THAT WE THE WORKERS WERE MADE TO STAND SEPARATE LY IN THE COMPOUND OF NROX SPECIALTIES AND THE MANAGER WA S TAKEN TO A ROOM. * THAT THEY WERE FRIGHTENED TO SEE A!! THAT WAS HAP PENING. * THAT THEY WERE THREATENED BY THE IT PEOPLE AND TO OK THEIR SIGNATURE ON THE PAPER ON WHICH SOMETHING WAS WRIT TEN IN HINDI. * THAT THEY DID NOT KNOW WHAT WAS WRITTEN IN THOSE PAPERS AND WHY THEIR SIGNATURES WERE TAKEN. * THAT THEY HAD NO OPTION BUT TO SIGN SINCE THEIR MANAGER WAS NOT WITH THEM AND THEY WERE TREATED VERY ROUGHL Y AND THREATENED OF POLICE CASE. 2.6 THE ASSESSEE FURTHER SUBMITTED ON 15-06-06 A S TATEMENT OF MONTHWISE SALARY AND WAGES PAID UNDER THE HEAD 'PER SONA! COST' AND XEROX COPY OF MUSTER ROLLS WHICH WERE LYING IN THE FIRM'S ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 6 MUMBAI OFFICE. IN THEIR ANOTHER SUBMISSION DATED 1 8-08-2006 THE ASSESSEE POINTED OUT THAT THEIR UNDERTAKING EMPLOYE D MORE THAN 10 WORKERS TO WHOM SALARY & WAGES REFLECTED IN THE P & L ACCOUNTS FOR THE A.Y. 2004-2005 & 2005-2006 WERE PAID. IT WAS P LEADED THAT THE IT AUTHORITY HAS NO POWER TO EXAMINE A PERSON ON OA TH DURING THE COURSE OF SURVEY AND THUS THE STATEMENT ON OATH OB TAINED U/S. 133A OF THE ACT DID NOT HAVE ANY EVIDENTIARY VALUE. IN S UPPORT THE ASSESSEE RELIED UPON DECISIONS IN PAUL MATHEWS & SO NS V/S CIT (129 TAXMAN 416) (KER) KURUNNEM VELIL FINANCIERS ( P.) LTD V/S. DCIT[ ITAT COCHIN BENCH] AND CIRCULAR NO. F NO/ 286 /2/2003-IT (INV) DATED 10-03-2003 ISSUED BY THE CBDT. 1 3. HOWEVER THE AO DID NOT ACCEPT THE AVERMENT S IN THE COPIES OF THE AFFIDAVITS FILED BY THE AFORESAID FIVE PERSONS PRESENT DURING THE SURVEY ON THE GROUND THESE WERE MERE AFTER THOUGHT S. WHILE REFERRING TO THE ADMISSION IN THE STATEMENTS OF THE AFORESAID PERSONS AS ALSO DOCUMENTS FOUND DURING THE SURVEY AND REFER RING TO DECISIONS IN ASSTT. CIT VS. MRS. SUSHILADEVI S. AGA RWAL [1994] 50 ITD 524(AHMEDABAD) KAPOOR SONS VS. ITO 46 ITD 49 7(CHD.) C1T VS. BIJU PATNAYAK 190 ITR 296(ORISSA) AND ACIT VS. YESHVIR GOYAL & ANOTHER 226 ITR 843(AP) THE AO DENIED THE CLAIM FOR DEDUCTION OF RS.2 30 811/- U/S 80IB OF THE ACT ON THE GROUND THAT THE ASSESSEE DID FULFILL CONDITION STIPULATED IN SEC. 8 0IB(2)(IV) OF THE ACT THE NUMBER OF WORKERS DURING THE RELEVANT PERIOD BE ING BELOW 10. INTER ALIA THE AO OBSERVED THAT THERE WAS NOTHING TO SUGGEST THAT THE ADMISSION IN THE AFORESAID STATEMENTS WERE M ADE UNDER DURESS AND PRESSURE AND RETRACTION OF STATEMENTS AF TER A LAPSE OF 3 MONTHS FROM THE DATE OF SURVEY WAS AN AFTERTHOUGHT . 4. LIKEWISE THE AO DENIED THE CLAIM FOR DEDUCTIO N U/S 80IB OF THE ACT IN THE AYS 2005-06 & 2006-07. IN THE AY 2006-07 THE ASSESSEE VIDE THEIR SUBMISSION DATED 23.12.2008 PLEADED INT ER ALIA THAT ONLY ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 7 FEW WORKERS WERE FOUND DURING THE SURVEY BECAUSE OF COMPULSORY SHUT DOWN OF POWER SUPPLY IN THE AREA AND THAT LAB OUR OFFICER VISITED THEIR FACTORY ON 14.11.2005 AND CERTIFIED MORE TH AN 10 WORKERS. 5 ON APPEAL THE LD. CIT(A) AFTER HAVING A REMAND R EPORT FROM THE AO ON THE WRITTEN SUBMISSIONS FILED BEFORE HIM ALLOWED THE CLAIM OF THE ASSESSEE VIDE HIS COMMON ORDER DATED 29-11 -2006 FOR THE AYS 2004-05 AND 2005-06 IN THE FOLLOWING TERMS: 11 I HAVE PERUSED THE ASSESSMENT ORDER. FROM A PE RUSAL OF THE ASSESSMENT ORDER THE FOLLOWING FACTS AND ARGUME NTS CAN BE OBSERVED; A. THE BOOKS OF ACCOUNTS PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE TEST CHECKED AND CROSS VERIFIED BY THE ASSESSING OFFICER. B. A STATEMENT ON OATH OF MR. NANDU GUPTA THE PART NER OF THE APPELLANT FIRM THE FACTORY MANAGER AND 3 OTHER WORKERS WERE RECORDED DURING THE COURSE OF SURVEY CONDUCTED IN THE BUSINESS PREMISES OF THE APPELLANT FIRM ON 09.03.2006. C. THE MUSTER ROLL FOUND IN THE BUSINESS PREMISES O N 09-03- 2006 CONTAINED THE NAME OF 4 WORKERS. D. THE PARTNER OF THE APPELLANT FIRM FACTORY MANAG ER AND 3 OTHER WORKERS RETRACTED THE STATEMENTS ALLEGEDLY RECORDED DURING THE LATE HOURS OF 09.03.2006 BY FIL ING NOTARIZED COPIES OF AFFIDAVIT. E. THE RETRACTION WAS MADE OF CONFESSIONS REGARDING NUMBER OF WORKERS AS ALSO ALL OTHER FACTS. F. THE APPELLANT FIRM ALSO SUBMITTED THAT THE STATE MENTS OF PARTNER OF THE APPELLANT FIRM FACTORY MANAGER AND 3 OTHER WORKERS WERE RECORDED FORCIBLY UNDER THREAT W HEN THEY WERE NOT IN THEIR PROPER FRAME OF MIND. G. THE SURVEY ACTION WAS CARRIED OUT ON 09.03.2006 AND ALL THE AFFIDAVITS WERE PREPARED AND NOTARIZED ON 27.03 .2006 AND SUBMITTED TO THE ASSESSING OFFICER ON 29.05.200 6. ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 8 H. THE APPELLANT FIRM MADE FURTHER SUBMISSION ON 15.06.2006 GIVING THE STATEMENT OF MONTH WISE SALAR Y AND WAGES PAID UNDER THE HEAD 'PERSONAL COST' ALONG WITH XEROX COPY OF MUSTER ROLL WHICH WAS STATED TO BE LYING IN THE APPELLANT FIRM'S MUMBAI OFFICE FOR VER IFICATION ON THE DATE OF SURVEY ACTION. I. THE APPELLANT FIRM SUBMITTED BEFORE THE ASSESSIN G OFFICER THAT THERE WAS ANOTHER MUSTER REGISTER WHICH CONTAI NED THE NAME OF 7 ADDITIONAL WORKERS WHICH WAS LYING IN THE MUMBAI OFFICE ON THE DATE WHEN THE SURVEY ACTION WA S CARRIED OUT. J. THE APPELLANT FIRM ALSO SUBMITTED BEFORE THE ASS ESSING OFFICER THAT THERE WAS COMPULSORY SHUT DOWN BY THE ELECTRICITY DEPARTMENT ADMINISTRATION OF DADRA AND NAGAR HAVELI DURING THE DAY SURVEY WAS CONDUCTED. K. IN THE SUBMISSION DATED 18.08.2006 THE APPELLANT FIRM RETRACTED ITS ARGUMENTS ON THE FOLLOWING POINTS:- - THAT THEIR UNDERTAKING EMPLOYED MORE THAN 10 WORKERS - THAT THE SALARIES AND WAGES PAID TO MORE THAN 10 WORKERS ARE REFLECTED IN THE PROFIT AND LOSS ACCOUNTS FOR THE AY 2004-05 AND 2005-06 WHICH WAS ALREADY FILED WITH THE DEPARTMENT WELL BEFORE THE SURVEY ACTION. - THAT THE SALARIES AND WAGES ARE PAID IN TWO SEPARATE HEADS I.E. 'WAGES/SALARIES' AND 'PERSONAL COST' - 'PERSONAL' MEANS 'EMPLOYEES STAFF ACCORDING TO THE OXFORD DICTIONARY L.. THE APPELLANT FIRM ALSO SUBMITTED THAT THE INCO ME TAX AUTHORITY HAS NO POWER TO EXAMINE A PERSON ON OATH DURING THE COURSE OF SURVEY ACTION U/S 133A AND THE SAID POWER TO EXAMINE A PERSON ON OATH IS CONFERRED ON T HE AUTHORIZED OFFICER ONLY U/S 132(4) OF THE INCOME TA X ACT DURING SEARCH AND SEIZURE. IN SUPPORT OF THEIR ARGU MENT THE APPELLANT FIRM SUBMITTED AND HAS RELIED UPON TH E FOLLOWING JUDICIAL DECISIONS; ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 9 - KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS & SONS VS. CIT {129 TAXMAN416) - ITAT COCHIN BENCH IN THE CASE OF KURUNNEM VELIL FINANCIERS (P.) LTD. VS. DCIT - CBDT CIRCULAR NO F. NO./286/2/2003-IT(INV.) DATE D 10.03.2003 12 THE APPELLANT FIRM HAS SUBMITTED IN THE STATEMEN T OF FACTS THAT THE ASSESSING OFFICER'S ATTENTION WAS DR AWN TO THE FACT THAT THE TOTAL OF 'WAGES AND SALARIES' AND 'PE RSONAL COST' PAID TO THE WORKERS MENTIONED IN BOTH THE MUSTER RE GISTERS HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE AP PELLANT FIRM ALSO SUBMITTED THE ATTENDANCE SHEET DULY CERTI FIED BY THE LABOUR OFFICER DADRA ALONG WITH THE PAYMENT VOUCHE RS OF THE WORKERS WHICH SHOWS THAT THE APPELLANT FIRM HAS EMP LOYED MORE THAN 10 WORKERS. IT WAS ALSO BROUGHT TO MY NOT ICE THAT THE ASSESSING OFFICER HAS DISALLOWED THE SAID CLAIM OF THE APPELLANT FIRM MERELY ON THE GROUND THAT THE STATEM ENT ON OATH WAS RECORDED AT THE TIME OF SURVEY OF MR. NANDU GUP TA THE PARTNER OF THE FIRM AND 4 WORKERS INCLUDING THE FAC TORY MANAGER WHEREIN IT HAS BEEN ADMITTED BY THEM THAT THERE ARE LESS THAN 10 WORKERS. . 17. THE ASSESSING OFFICER HAS NO WHERE IN THE ASSES SMENT ORDER DISPUTED THE PAYMENT OF WAGES AND SALARIES TO MORE THAN 10 WORKERS AS SUBMITTED BY THE APPELLANT FIRM DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. FROM THE REMAND R EPORT MADE AVAILABLE TO ME AND THE RECORDS AVAILABLE IN T HIS OFFICE IT IS OBSERVED THAT THE ASSESSING OFFICER HAS NOT OBTA INED ANY INDEPENDENT EVIDENCE AS TO THE NUMBER OF WORKERS EI THER FROM THE LABOUR OFFICER OR FROM SOME OTHER SOURCES. ON T HE OTHER HAND THE APPELLANT FIRM SUBMITTED BEFORE ASSESSING OFFICER THAT ON THE DAY OF POWER SHUT DOWN BY THE ELECTRICITY DE PARTMENT THE FACTORY REMAINS CLOSED AND ALL THE WORKERS DO N OT COME TO THE FACTORY ON THAT DAY. THE APPELLANT FIRM HAS ALS O SUBMITTED BEFORE THE ASSESSING OFFICER VIDE THEIR LETTER DATE D 17.08.2006 LOAD SHEDDING SCHEDULE OF 66/11KV DADRA SS BY THE E XECUTIVE ENGINEER ELECTRICITY DEPARTMENT DADRA & NAGAR HAV ELI THAT ON THE DAY THE SURVEY WAS CONDUCTED THERE WAS NO POWER SUPPLY. IT WAS ALSO SUBMITTED THAT THE SKILLED WORKERS WERE SENT TO COLLECT RAW MATERIALS. THE THEN ASSESSING OFFICER H AS NOT MENTIONED ANYWHERE IN THE ASSESSMENT ORDER AS TO TH E CIRCUMSTANCES OR DIRECT EVIDENCES AVAILABLE TO DISB ELIEVE THE INDEPENDENT EVIDENCES SUBMITTED BY THE APPELLANT FI RM. EVEN ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 10 IN THE REMAND REPORT THE PRESENT ASSESSING OFFICER STATED IN POINT NO. 10 OF THE REMAND REPORT THAT THE THEN ASS ESSING OFFICER HAS NOT DENIED THESE FACTS. 18 THE APPELLANT FIRM VIDE LETTER DATED 18.08.2006 INFORMED THE ASSESSING OFFICER THAT THE AMOUNT OF SALARY AND WAGES PAID TO MORE THAN 10 WORKERS WERE REFLECTED IN THE PROFI T AND LOSS ACCOUNT ALREADY IN RECORD WITH THE INCOME TAX DEPAR TMENT BEFORE THE SURVEY WAS CONDUCTED ON 09.03.2006. ON 21.08.2006 THE APPELLANT FIRM SUBMITTED TO THE ASSE SSING OFFICER THAT ALL REQUIRED RECORDS PERTAINING TO LAB OUR EXCISE SALES TAX FACTORY EXPENSES ETC ARE MAINTAINED / KE PT AT THEIR DADRA FACTORY AND SENT TO MUMBAI OFFICER FOR VERIFI CATION AS AND WHEN REQUIRED. THE APPELLANT FIRM ALSO SUBMITTE D THAT THE MUSTER ROLL CUM WAGES REGISTER FOR ALL THE 12 MONTH S DURING THE ACCOUNTING PERIOD WAS SUBMITTED TO THE ASSESSING OF FICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AS SESSING OFFICER HAS NOT CONSIDERED THESE INDEPENDENT EVIDEN CES AND HAS ALSO NOT GIVEN ANY REASONS FOR NOT CONSIDERING SUCH EVIDENCES IN THE BODY OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS NOT DISPUTED THE ACCURACY AND VERACITY OF THE AUDITED ACCOUNTS SUBMITTED BY THE APPELLANT FIRM IN SUPPORT OF ITS RETURN OF INCOME ANYWHERE IN THE ASSESSMENT ORD ER. 26. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SUBMISSION PUT FORTH BY THE APPELLANT IN THE APPEAL MEMORANDUM AND WRITTEN AND ORAL SUBMISSIONS MADE BY THE APPELLANT DURING THE COURSE OF HEARING ON THE PROCE EDINGS BEFORE ME AND THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSING OFFICER AND THE APPELLANT FIRM. ON CONSID ERATION OF THE FACTS OF THE CASE IN TOTALITY IT CAN BE FOUND T HAT THE ONLY REASON AND EVIDENCE IN THE HANDS OF THE ASSESSING O FFICER TO MAKE THE IMPUGNED DENIAL OF DEDUCTION U/S 80IB TO T HE APPELLANT FIRM WAS ON THE BASIS OF A SOLE EVIDENCE I.E. THE CONFESSIONS MADE BY THE APPELLANT FIRMS PARTNER AN D 4 OTHER WORKERS INCLUDING THE FACTORY MANAGER DURING THE CO URSE OF SURVEY PROCEEDINGS. THE ASSESSING OFFICER HAS THERE AFTER NOT ATTEMPTED TO INQUIRE INTO THE FACTUAL ASPECTS OF TH E CASE IN AN INDEPENDENT MANNER AND ESTABLISH THE SAME BY BRINGI NG COGENT FACTS ON RECORD. THE CBDT CIRCULAR QUOTED BY THE APPELLANT FIRM IS VERY PERTINENT AT THIS JUNCTURE. THE APPELLANT FIRM HAD FILED THE PROFIT AND LOSS ACCOUNT ALONG WI TH ITS RETURN OF INCOME MUCH BEFORE THE DATE OF SURVEY. THE APPEL LANT FIRM ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 11 HAD FURNISHED ATTENDANCE AND WAGES REGISTER AND REC ONCILED THE SAME WITH THE WAGES SALARIES STYLED EMPLOYEE' S COST IN ITS PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECTS IN THE AUDITED ACCOUNTS OF THE APPELLANT FIRM. NO EVIDENCE OBTAINED FROM INDEPENDE NT INQUIRY HAS BEEN PLACED ON RECORD BY THE ASSESSING OFFICER IN SUPPORT OF HIS ASSUMPTION DERIVED FROM THE STATEMENT RECORD ED DURING THE COURSE OF SURVEY PROCEEDINGS. EVEN THE RETRACTI ON IN THE FORM OF AFFIDAVITS HAS NOT BEEN CONFRONTED WITH ANY OTHER INDEPENDENT EVIDENCES SUBMITTED BY THE APPELLANT FI RM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. A SURVEY IS D EFINITELY AN INCURSION INTO THE PRIVACY OF THE CITIZEN AND TH E SURVEY PROCEEDINGS HAVE TO BE CONDUCTED AS MENTIONED BY TH E CBDT IN ITS INSTRUCTION F. NO. 286/2/2003 - IT (INV) DAT ED 10.03.2003 IN A DILIGENT MANNER AND THE EVIDENCES SHALL BE OBT AINED. FROM THE FACTS AVAILABLE ON RECORD AND AS STATED BY THE ASSESSING OFFICER THERE ARE NO EVIDENCES AGAINST THE APPELLAN T FIRM OTHER THAN CONFESSIONS MADE BY THE PARTNER OF THE APPELLA NT FIRM FACTORY MANAGER AND 3 OTHER WORKERS. 27. NOW I WOULD LIKE TO DELVE INTO EACH OF THE GROU NDS OF APPEAL RAISED BY THE APPELLANT FIRM. 27.2.1 IN GROUND NO. 2 THE APPELLANT FIRM HAS CONT ENTED THAT THE ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS BY DISALLOWING DEDUCTION U/S. 80IB OF THE INCOME TAX A CT. IN GROUND NO. 3 THE APPELLANT FIRM CONTENDED THAT THE ASSESSING OFFICER HAS WRONGLY HELD THAT THE ARGUMENTS MADE BY THE APPELLANT FIRM WHILE RETRACTING THE DISCLOSURE MADE ARE FALSE AND WITHOUT ANY SUBSTANCE. IN GROUND NO. 5 THE APPE LLANT FIRM CONTENTED THAT THE ASSESSING OFFICER HAS ERRED IN L AW AND ON FACTS BY NOT TAKING INTO CONSIDERATION THE PROOF AD DUCED BY THE APPELLANT TO THE EFFECT THAT THERE ARE MORE THAN 10 WORKERS AND THAT THE SAID CONDITION AS STIPULATED UNDER SECTION 80IB OF THE ACT IS COMPLIED WITH. ALL THESE GROUNDS ARE TAKEN U P TOGETHER AND ADJUDICATED AS UNDER. 27.2.2 THE APPELLANT HAS BEEN DENIED DEDUCTION U/S . 80IB SOLELY ON THE GROUND THAT IT HAS EMPLOYED LESS THAN 10 WORKERS. AS GIVEN IN THE PRECEDING PARAGRAPHS THERE IS NO EVIDENCE ON RECORD OR OTHER COGENT FACTS TO SUPPORT THE VIEW OF THE ASSESSING OFFICER. ON THE CONTRARY THE APPELLAN T FIRM HAD PLACED ON RECORD ITS WAGES REGISTER AND WORKINGS FO R PERSONAL COST AND WAGES WITH THE NUMBER OF WORKERS BEFORE TH E ASSESSING OFFICER. ON THE BASIS OF THIS FACT OF THE CASE AND THE ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 12 JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT FIR M I HOLD THAT THE APPELLANT FIRM CANNOT BE DENIED BENEFIT OF DEDU CTION U/S. 80IB SOLELY ON THE BASIS OF CONFESSIONAL STATEMENTS RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS. THE ASSESS ING OFFICER IS DIRECTED TO GRANT DEDUCTION U/S. 80IB TO THE APP ELLANT FIRM. THUS THE APPELLANT SUCCEEDS ON THESE GROUNDS OF APP EAL. 27.3.1 IN GROUND NO.4 THE APPELLANT FIRM HAD CONTEN DED THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT NO STATEMENT CAN BE RECORDED ON OATH UNDER THE PROVISI ONS OF SECTION 133A OF THE ACT IN GROUND NO. 6 THE APPELLA NT FIRM CONTENDED THAT THE ASSESSING OFFICER HAS WRONGLY RE LIED ON THE DECISIONS WHICH ARE IN RESPECT OF SECTION 131 AID 1 32(4) OF THE ACT. BOTH THE GROUNDS OF APPEAL ARE TAKEN UP TOGETH ER AND ADJUDICATED AS UNDER. 27.3.2 THIS GROUND OF APPEAL IS CONCERNED WITH THE POWER OF THE ASSESSING OFFICER TO RECORD STATEMENTS ON OA TH U/S. 133A OF THE ACT. THE APPELLANT FIRM HAS RELIED UPON SEVERAL JUDICIAL DECISIONS IN SUPPORT OF HIS CLAIM AND THE SAME HAS BEEN DISCUSSED BY ME IN THE PRECEDING PARAGRAPHS. S IMILARLY THE ASSESSING OFFICER HAS RELIED ON SEVERAL JUDICIA L DECISIONS BUT THE APPELLANT FIRM HAS NOT BROUGHT OUT CLEARLY BEFORE ME HOW THE ASSESSING OFFICER HAS WRONGLY RELIED UPON O N THE DECISIONS WHICH ARE IN RESPECT OF SECTION 131 AND 1 32(4) OF THE ACT. 27.3.3 ASSESSMENT PROCEEDINGS ARE QUASI-JUDICIAL PR OCEEDINGS AND IT IS THE INHERENT POWER OF THE ASSESSING OFFIC ER TO RECORD STATEMENTS USEFUL FOR ANY PROCEEDINGS UNDER THE ACT AND USUALLY RELIES ON JUDICIAL DECISIONS IN SUPPORT OF HIS CONCLUSIONS IN THE ASSESSMENT ORDER. SINCE I HAVE A DJUDICATED THE ONLY ISSUE IN THIS APPEAL I.E. ACTION OF THE A SSESSING OFFICER IN DENYING DEDUCTION U/S. 80IB ON THE BASIS OF MERITS OF THE CASE I DO NOT DEEM IT NECESSARY TO ADJUDICATE T HIS GROUND OF APPEAL WHICH ARE JUST GENERAL STATEMENTS AND NOT FULL AND COMPLETE GROUNDS OF APPEAL. THUS THESE GROUNDS OF A PPEAL ARE DISMISSED. 6. FOLLOWING HIS AFORESAID DECISION THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE IN THE AY 2006-07 ALSO. 7. THE REVENUE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE CARRYI NG US THROUGH THE ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 13 IMPUGNED ORDERS SUPPORTED THE FINDINGS OF THE AO AN D FURTHER CONTENDED THAT STATEMENTS WERE RECORDED IN A CORD IAL ATMOSPHERE DURING THE COURSE OF SURVEY AND THERE IS NOTHING T O SUGGEST THAT ANY COERCION OR PRESSURE TACTICS WERE ADOPTED. THE PAR TNER OF THE FIRM PRESENT DURING THE SURVEY NEVER DISCLOSED THAT THE IR BOOKS WERE IN MUMBAI WHILE THE AVERMENTS MADE IN THE AFFIDAVITS WERE ME RE AN AFTER THOUGHT. WHILE ARGUING THAT NO SKILLED WORKER WAS REQUIRED IN THE MANUFACTURING PROCESS OF CHEMICALS SINCE THE ASSESSEE WAS MERELY BLENDING CE RTAIN CHEMICALS THE LD. DR POINTED OUT THAT THE THREE WORKERS PRESENT DURING THE SURVEY ADMITTED THAT THEY WERE MERELY LOADING OR UNLOADING THE CHEMICALS. .SI NCE THE AFFIDAVITS WERE NOT CORROBORATED BY ANY INDEPENDENT EVIDENCE THE LD. C IT(A) WAS NOT JUSTIFIED IN RELYING UPON THESE SELF SERVING AFFIDAVITS THE LD . DR ARGUED. 8. ON THE OTHER HAND THE LD. AR ON BEHALF OF TH E ASSESSEE SUPPORTED THE FINDINGS OF THE LD. CIT(A) AND FURTHER CONTENDED TH AT SALARY AND WAGES PAID TO MORE THAN 10 WORKERS WERE ALREADY DEBITED IN THEIR ACCOUNTS FOR THE AY 2004- 05 & 2005-06. THESE ACCOUNTS HAD BEEN ENCLOSED WITH THEIR RETURNS FILED PRIOR TO SURVEY FOR THESE TWO ASSESSMENTS YEARS .EVEN IN THE AY 2006-07 SALARY AND WAGES OF MORE THAN RS. 10 LACS WERE PAID. WHILE INV ITING OUR ATTENTION TO PAGE 14-15 OF THE PAPER BOOK FOR THE AY 2006-07 THE LD . AR POINTED OUT THAT 9.3.2006 BEING A THURSDAY POWER WAS SHUT DOWN IN THE AREA DUE TO WEEKLY OFF AND THEREFORE THEIR FACTORY WAS CLOSED. HE ADDED THAT THIS FACT HAS BEEN ACCEPTED BY THE AO IN HIS REMAND REPORT. WHILE REFE RRING TO PAGES 68-69 & 146 TO149 OF THE PAPER BOOK THE LD. AR ADDED THAT V ERACITY OF THEIR AUDITED ACCOUNTS HAS NOT BEEN DOUBTED NOR ANY DISALLOWANCE ON ACCOUNT OF SALARY AND WAGES HAD BEEN MADE. EVEN WHEN AFFIDAVITS OF THE F IVE PERSONS PRESENT DURING THE SURVEY WERE FILED THE AO DID NOT MAKE ANY FUR THER ENQUIRIES. IN NUTSHELL THE LD. AR RELIED UPON THE FINDINGS OF THE LD. CIT(A) I N THE LIGHT OF DECISION DATED 30.7.2010 OF THE ITAT IN JAY PACKAGING IN ITA NOS. 2264-67 /AHD./2005 & 3047/AHD./2004 FOR THE AYS 1998-99 TO 2002-03. ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 14 9. IN HIS REJOINDER THE LD. DR WHILE INVITIN G OUR ATTENTION TO PAGE 15 OF THE PAPER BOOK FOR THE AY 2004-05 CONTENDED THAT THERE WAS NO LOAD SHEDDING IN THE FACTORY AREA ON THE DAY OF SURVEY AS SUBMITTED BY THE LD. AR. THEREFORE ALL THE WORKERS WERE PRESENT ON THAT DAY AS ADMITTED BY THE AFORESAID FIVE PERSONS IN THEIR RESPECTIVE STATEMENTS. AS REGARDS VISIT OF LABOUR OFFICER THE LD. DR POINTED OUT THAT VERIFICATION WAS ONLY FOR ONE DAY I.E.14.11.2005. WHILE REFERRING TO PAGE 69 OF THE PAPER BOOK THE LD. DR ARGUED THAT EVEN WITH THE SAME NUMBER OF EMPLOYEES PRODUCTION INCREASED TO RS. 15 CRORES. SINCE AVERMENTS IN THE AFFIDAVIT WER E NOT CORROBORATED BY ANY INDEPENDENT EVIDENCE THESE SELF SERVING DOCUMENTS COULD NOT BE RELIED UPON THE LD. DR REITERATED. 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE AO DENIED DEDUCTION U/S 80IB OF THE ACT ONLY ON THE GROUND THAT THE INDUSTRIAL UNDERTA KING OF THE ASSESSEE EMPLOYED LESS THAN 10 WORKERS IN THESE THR EE ASSESSMENT YEARS WHILE THE LD. CIT(A) CONCLUDED OTHERWISE. UND ISPUTEDLY SALARY AND WAGES DEBITED TO THE AUDITED ACCOUNTS FOR THESE THREE ASSESSMENT YEARS WERE FOR MORE THAN 10 WORKERS. IN THESE CIRCUMSTANCES THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE WAS NO EVIDENCE ON RECORD TO SUPPORT THE VIEW OF THE AO WHILE THE ASSESSEE HAD PLACED ON RECORD I TS WAGES REGISTER AND WORKING FOR PERSONNEL COST AND WAGES A LONG WITH THE NUMBER OF WORKERS . THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE COULD NOT BE DENIED BENEFIT OF DEDUCTION U/S. 80IB OF THE ACT SOLELY ON THE BASIS OF CONFESSIONAL STATEMENTS RECORDED DU RING THE COURSE OF SURVEY PROCEEDINGS. THE LD. DR DID NOT PLACE A NY MATERIAL BEFORE US CONTROVERTING THE FINDINGS OF FACTS RECO RDED BY THE LD. CIT(A) THAT SALARY AND WAGES OF MORE THAN 10 WORKER S WAS DEBITED TO THE AUDITED ACCOUNTS FOR THESE THREE ASSESSMENT YEARS WHILE WE FIND THAT THE AO DID NOT MAKE EVEN A WHISPER IN HI S ORDERS ON THE VERACITY OF AUDITED ACCOUNTS NOR DISALLOWED ANY POR TION OF SALARY AND ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 15 WAGES IN ANY OF THESE THREE ASSESSMENT YEARS. AS IS EVIDENT FROM THE DETAILS PLACED BEFORE US THE ASSESSEE DEBITED AN AMOUNT OF RS. 52 293/- TOWARDS SALARY AND WAGES IN THE MONTHS OF FEBRUARY AND MARCH 2004 IN RESPECT OF 10 WORKERS (PAGE 69 & 146 OF THE RELEVANT PAPER BOOK) WHILE AN AMOUNT OF RS.3 05 150/- WAS D EBITED IN RESPECT OF 15 WORKERS IN THE PERIOD RELEVANT TO TH E AY 2005-06(PAGE 68 & 186 OF THE RELEVANT PAPER BOOK). SIMILARLY FOR THE PERIOD RELEVANT TO THE AY 2006-07 AN AMOUNT OF RS.10 24 034/- WAS DEBITED IN RESPECT OF 16 WORKERS(PAGE 29 TO 68 OF T HE RELEVANT PAPER BOOK. THE RELEVANT DETAILS FOR THIS EXPENDITURE WIT H SUPPORTING DOCUMENTS WERE PLACED BEFORE US VIDE A SEPARATE LE TTER FILED ON 26.8.2010 AFTER THE HEARING. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES ESPECIALLY WHEN NO MATERIAL HAS BE EN HAS BEEN BROUGHT TO OUR NOTICE IN ORDER TO ENABLE US TO HAV E A DIFFERENT VIEW IN THE MATTER WE ARE NOT INCLINED TO INTERFERE WI TH THE FINDINGS OF THE LD. CIT(A). WE FIND THAT A SIMILAR VIEW WAS TAKEN BY THE ITAT IN THEIR DECISION DATED 30-07-2010 BY THE ITAT IN THE CASE OF M/S JAY PACKAGING SILVASSA IN ITA NOS.2264 TO 2267/AHD/200 5 AND 3047/AHD/2004 FOR AYS 1998-99 TO 2002-03 IN THE FOL LOWING TERMS: 6. WE HAVE HEARD BOTH THE SIDES AND IN THE LIGHT O F COMPILATION-FILED EXAMINED THE FACTS OF THE CASE IN DEPTH. DURING THE COURSE OF HEARING FROM THE SIDE OF THE RESPONDENT-ASSESSEE THE PHOTOCOPIE S OF VARIOUS REGISTERS OF THE YEARS INVOLVED HAVE BEEN FURNISHED. IT HAS A LSO BEEN DEMONSTRATED THAT THE CERTIFICATE WHICH WAS EARLIER ISSUED BY TH E DIC DADRA NAGAR & HAVAELI SILVASSA WAS DEFECTIVE WHICH WAS LATER ON AMENDED AND THE SAID AMENDED CERTIFICATE HAS ALSO BEEN PLACED ON RECORD ON PAGES 96 TO 105 OF THE COMPILATION. IN ADDITION TO THESE TWO EVIDEN CES THE RESPONDENT HAS ALSO DRAWN OUR ATTENTION ON THE REMAND REPORT DATED 14/05/2004 COPY OF THE SAME PLACED ON PAGE NOS.141 TO 146 IN THE COMPI LATION TO DEMONSTRATE THAT AS PER THE DIRECTIONS OF LEARNED C IT(APPEALS) THE FACTS HAVE BEEN RE-EXAMINED AND THE CONTENTIONS OF THE AS SESSEE WERE NOT DISCARDED. CONSIDERING ALL THESE FACTS WE ARE OF TH E VIEW THAT THE TWO REASONS ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM WERE CONCLUSIVELY DEMONSTRATED TO BE ILL-FOUN DED. THE CERTIFICATE OF THE DIRECTORATE OF INDUSTRIES WAS AMENDED THROUGH W HICH THE STRENGTH OF THE STAFF WAS CERTIFIED AS TWELVE (12) IN NUMBER. THE OTHER ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 16 REASON FOR DISALLOWANCE IS THE NUMBER OF WORKERS AS STATED BY ONE OF THE SUPERVISOR OF THE FIRM. IN THIS CONTEXT THE CONFUS ION WAS ALLEGED TO BE MISUNDERSTANDING OF THE LANGUAGE HOWEVER TO OVERCO ME THIS FALLACY OTHER EVIDENCES SUCH AS. SALARY REGISTER ETC. WERE PROD UCED BEFORE THE AUTHORITIES BELOW AS AN CORROBORATIVE EVIDENCE. WE HAVE NOTED THAT VIDE PARAGRAPH NO.3 THE LEARNED CIT(APPEALS) HAS .GIVEN A CATEGORICAL FINDING THAT ONCE THE BOOKS OF ACCOUNT WERE AUDITED AND NOWHERE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE AUTHENTICITY O F THE AUDITED BOOKS OF ACCOUNT WERE CHALLENGED BY THE ASSESSING OFFICER T HEN HOW THE ASSESSING OFFICER HAD REJECTED THE SALARY EXPENDITU RE AND HELD THE SAME AS BOGUS CLAIM. OTHERWISE ALSO WHETHER THE WORKERS WERE TEMPORARILY EMPLOYED OR PERMANENTLY EMPLOYED BUT IF THE NUMBER OF TOTAL WORKERS EXCEEDS THE PRESCRIBED NUMBER OF WORKERS THEN THE LAW IN THIS REGARD IS CLEAR THAT THE ASSESSEE SHOULD BE ENTITLED FOR THE CLAIM OF DEDUCTION U/S.80IB OF THE I.T. ACT 1961. A REPORT OF A CHAPT ERED ENGINEER IS ALSO RELEVANT THROUGH WHICH IT WAS CERTIFIED THAT CONSID ERING THE NUMBER OF MACHINES NATURE OF MANUFACTURING ACTIVITY THE REQUIRED NUMBER OF MANPOWER SHOULD NOT BE LESS THAN THE WORKERS EMPLOY ED BY THE ASSESSEE. RATHER THE ASSESSING OFFICER WAS ASKED T O EXAMINE THE SAID REPORT BUT AS PER LEARNED CIT(APPEALS) THE ASSESS ING OFFICER HAS AVOIDED TO EXAMINE CERTAIN FACTS. THEREFORE LEARNE D CIT(APPEALS) HAS STATED AT PARAGRAPH NO.34 THAT IN THE ABSENCE OF AN Y FINDING FROM THE ASSESSING OFFICER HE HAD NO OTHER ALTERNATIVE BUT T O ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE MACHINES IN QUESTION WERE USED WITH THE DEPLOYMENT OF 10 OR MORE WORKERS. NOT ONLY THE ABOV E EVIDENCES WHICH WERE CONSIDERED BY LEARNED CIT(APPEALS) BUT HE HAS ALSO ASKED THE ASSESSEE TO QUOTE CERTAIN COMPARABLE CONCERNS ENGAG ED IN THE SIMILAR TYPE OF MANUFACTURING ACTIVITIES. ON FURNISHING OF THE NAMES THE ASSESSING OFFICER WAS DIRECTED TO EXAMINE THE ASSESSMENT RECO RDS OF THOSE CONCERNS. IT WAS ALSO ASKED TO FURNISH THE REPORT A BOUT THEIR TOTAL TURNOVER NUMBER OF WORKERS EMPLOYED LABOUR CHARGES INCURRED AND THE DETAILS IN RESPECT OF TEMPORARY WORKERS AND PERMANENT WORKERS EMPLOYED BY THEM. HOWEVER NO INFORMATION WAS FURNISHED TO LEARNED CI T(APPEALS). THE LEARNED CIT(APPEALS) WAS VERY CRITICAL IN HIS REMAR KS THAT THE ASSESSING OFFICER HAS NOT BOTHERED TO COMPLY CORRECTLY WITH T HE DIRECTIONS AND AVOIDED THE INFORMATION ASKED FOR THEREFORE CONSI DERING THE PRODUCTION SHOWN BY THE ASSESSEE THE DEPLOYMENT OF WORKER OUG HT NOT TO BE LESS THAN THE PRESCRIBED NUMBER OF WORKERS. CONSIDERING ALL THESE FACTS AND THE CORROBORATIVE EVIDENCES PLACED ON RECORD WE FIND N O DECEITFULNESS IN THE FINDINGS ON FACTS GIVEN BY THE LEARNED CIT(APPEALS) . WITH THE RESULT THIS GROUND OF THE REVENUE IS DISMISSED. 10.1 SINCE WE HAVE ADJUDICATED THE ISSUE CONSIDER ING THE FACTS AND CIRCUMSTANCES OF THE CASE IN RELATION TO NUMBER OF WORKERS EMPLOYED IN THE INDUSTRIAL UNDERTAKING OF THE ASSE SSEE WE DO NOT ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 17 CONSIDER IT NECESSARY TO EXPRESS ANY OPINION ON THE EVIDENTIARY VALUE OF STATEMENTS OF THE AFORESAID FIVE PERSONS RECORDED DURING THE SURVEY OR THEIR SUBSEQUENT RETRACTION OR EVEN ON THE DECISIONS RELIED ON IN THAT CONNECTION SINCE THE SAID ISSU E DOES NOT EVEN EMERGE FROM THE IMPUGNED ORDERS THE LD. CIT(A) HA VING REFRAINED FROM RECORDING ANY FINDINGS ON THIS ASPECT AS IS E VIDENT FROM PARA 27.3.1. TO 27.3.3 OF HIS ORDER FOR THE AYS 2004-05 & 2005-06 AS ALSO THE IMPUGNED ORDER FOR THE AY 2006-07. IN FACT TH E LD. CIT(A) DISMISSED THESE GROUNDS OF THE ASSESSEE. 10.2 IN VIEW OF THE FOREGOING WE DO NOT FIND A NY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) AND THEREFORE REJECT CO MMON GROUND NOS. 1 TO 4 IN THESE THREE APPEALS 11. GROUND NO.5 IN THE APPEAL OF THE REVENUE RELAT ES TO DIRECTIONS OF THE LD. CIT(A) FOR ALLOWING DEDUCTION U/S 80IB O N THE INCOME COMPUTED FROM THE BUSINESS OF THE INDUSTRIAL UNDER TAKING WHILE GIVING EFFECT TO HIS ORDER. SINCE THE ASSESSEE DE DUCTED LESS TAX AT SOURCE ON THE AMOUNT PAID TO TRANSPORTERS OR FOR JOB WORK THE AO DISALLOWED THE CLAIM FOR DEDUCTION OF AN AMOUNT OF RS. 9 86 987/- IN TERMS OF PROVISIONS OF SEC. 40A(IA) OF THE ACT. ON APPEAL THE ASSESSEE SOUGHT DEDUCTION U/S 80IB ON THE AMOUNT SO DISALLOWED. THE LD. CIT(A) ACCORDINGLY ALLOWED THE CLAIM OF TH E ASSESSEE. 12. THE LD. DR OR EVEN THE LD. AR DID NOT MAKE A NY SUBMISSIONS BEFORE US ON THIS GROUND. THE REVENUE IN THEIR GROU ND HAVE DISPUTED THE FINDINGS OF THE LD. CIT(A) ON THE PLEA THAT DIS ALLOWANCE BEING TECHNICAL IN NATURE AND THE ASSESSEE BEING ENTITLE D TO DEDUCTION IN THE NEXT YEAR ON PAYMENT BASIS THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB ON THE AMOUNT SO DISAL LOWED. ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 18 13. WE HAVE GONE THROUGH THE FACTS OF THE CASE. W E FIND THAT THE TRIBUNAL WHILE ADJUDICATING A SIMILAR ISSUE VIDE T HEIR ORDER DATED 18- 09-2009 IN THE CASE OF CHIRAG PLAST IN ITA NO.2196/ AHD/2009 FOR THE AY 2005-06 CONCLUDED AS UNDER:- 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM ITS INDUSTRIAL UNDER TAKING. THE LEARNED AO FOUND THAT A SUM OF RS.1 25 073/- IS NOT ALLOWABLE AS BUSINESS EXPENDITURE OF THE YEAR UNDER CONSIDERATION BECAUSE OF THE PROV ISIONS OF SECTION 40(A)(IA) ARE THAT DEDUCTION IN RESPECT OF THIS BUS INESS EXPENDITURE WILL BE ALLOWED TO THE ASSESSEE IN THE SUBSEQUENT YEAR WHEN TDS IN RESPECT OF THIS EXPENDITURE IS DEPOSITED BY THE ASSESSEE. HOWE VER THE LEARNED ASSESSING OFFICER HAS TREATED THIS AMOUNT OF DISALL OWABLE EXPENDITURE AS INCOME FROM OTHER SOURCES AND THEREBY NOT ALLOWED D EDUCTION UNDER SECTION 80IB IN RESPECT OF THAT AMOUNT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO CONFIRMED THE ABOVE ACTIO N OF THE LEARNED ASSESSING OFFICER ON THE GROUND THAT ALLOWANCE OF D EDUCTION UNDER SECTION 80IB IN THE YEAR WILL TANTAMOUNT TO DOUBLE DEDUCTIO N TO THE ASSESSEE. WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT BUSINESS EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOW IN THE YEAR UNDER CON SIDERATION DUE TO APPLICATION OF PROVISIONS OF SECTION 40(A)(IA). THU S IN OTHER WORDS THE SAID AMOUNT IS DEEMED AS EXPENDITURE NOT INCURRED BY THE ASSESSEE FOR COMPUTING ITS BUSINESS INCOME. THUS AS THE EXPENDI TURE OF ELIGIBLE UNIT STANDS DISALLOWED CONSEQUENTLY THE SAME RESULTS IN INCREASE OF THE PROFIT OF THE ELIGIBLE UNIT. THE DEDUCTION UNDER SECTION 8 0IB IS ALLOWABLE IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE INDUS TRIAL UNDERTAKING. SUCH PROFITS AND GAINS ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 28 TO 44AC WHICH INCLUDES SECTION 40(A)(IA) ALSO. THEREFORE ANY DISALLOWANCE OF BUSINESS EXPENDITURE OF THE ELIGIBL E UNIT WILL LOGICALLY RESULT IN ENHANCEMENT OF DEDUCTION ALLOWABLE UNDER SECTION 80IB OF THE ACT. THE FEAR EXPRESSED BY THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) IN OUR CONSIDERED OPINION IS UNFOUNDED AND BASELESS. D URING THE YEAR AS THE EXPENDITURE OF THE ELIGIBLE BUSINESS IS DISALLOWED THE ASSESSEE'S BUSINESS INCOME DERIVED FROM THE ELIGIBLE BUSINESS OF THE IN DUSTRIAL UNDERTAKING STANDS AT INCREASED FIGURE AND THEREFORE THE ASSES SEE WILL BE ELIGIBLE FOR DEDUCTION OF ENHANCED AMOUNT UNDER SECTION 801B O F THE ACT. HOWEVER IN THE SUBSEQUENT YEAR IN WHICH TDS IS PAID BY THE ASSESSEE THE EXPENDITURE WILL BE ALLOWED AS DEDUCTION FROM THE E LIGIBLE PROFITS OF THE SUBSEQUENT YEAR AND THEREBY THE ELIGIBLE PROFIT OF THE INDUSTRIAL UNDERTAKING WILL BE REDUCED IN THE SUBSEQUENT YEAR AND CONSEQUE NTLY THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB AT THE REDUCED AMOUNT ONLY. THUS THERE CANNOT BE A DOUBLE DEDUCTION TO THE ASS ESSEE. IN VIEW OF THE ABOVE WE SET ASIDE THE ORDERS OF THE LOWER AUTHORI TIES AND DIRECT THE ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 19 LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB IN RESPECT OF ENTIRE PROFIT DERIVED FROM INDUSTRIAL UN DERTAKING AFTER TAKING INTO CONSIDERATION THE PROVISIONS UNDER SECTION 40(A)(IA ). THUS THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 13.1 SIMILAR FINDINGS HAVE BEEN RECORDED IN AY 20 06-07 IN THE CASE OF THE AFORESAID ASSESSEE. HONBLE KARNATAKA H IGH COURT IN THE CASE OF CIT VS.HMT LTD. 203 ITR 811(KAR) HELD THAT FO R THE PURPOSES OF SECTIONS 80J AND 80HH OF THE ACT PROFITS AND GAINS OF NEW U NDERTAKINGS ARE NOT COMMERCIAL PROFITS BUT ONLY SUCH PROFITS AS ARE COM PUTED IN THE MANNER LAID DOWN UNDER THE ACT IN PURSUANCE OF SECTION 80AB AS IF E ACH UNDERTAKING WAS A SEPARATE ASSESSEE . WE FIND THAT THE DELHI BENCH OF THE TRIBUNAL IN THE CASE KOMAL EXPORTS VS ACIT 19 SOT 602 (DEL.) ) IN THE CONTEXT OF PROVISIONS OF SEC 80HHC OF THE ACT HELD AS UNDER:- 11. IN THE INSTANT CASE WE FOUND FROM THE RECORD THAT THE TAX PAYER IS AN EXPORTER AND HAD FILED A RETURN AT LOSS OF RS.47 27 650/-. THE TAX PAYER BEING EXPORTER IS ELIGIBLE TO CLAIM DEDUCTION U/S 8 0HHC SUBJECT TO THE CONDITIONS STIPULATED IN THE SAID SECTION. SINCE TH E DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ONLY WHEN THERE IS POSITIVE GROS S TOTAL INCOME THE TAX PAYER OBVIOUSLY COULD NOT HAVE CLAIMED DEDUCTION UN DER SECTION 80HHC WHILE FILING THE RETURN OR BEFORE THE A.O. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. IT IS SEEN THAT AS AGAINST THE LOSS RE TURNED AT RS.47 27 650/- ASSESSMENT HAS BEEN MADE AS POSITIVE INCOME OF RS.3 3 37 050/-. THEREFORE THE CLAIM OF THE TAX PAYER REGARDING THE DEDUCTION UNDER SECTION 80HHC NEEDS TO BE RE-COMPUTED WITH REFERENCE TO THE FINALLY ASSESSED INCOME. WE DIRECT ACCORDINGLY. 13.2 SIMILAR VIEW WAS TAKEN BY THE ITAT MUMBAI BENCH IN THE CASE OF M/S. ZENITH RUBBER & PLASTIC WORK 35 TTJ 259. 13.3 ON A SIMILAR ISSUE IN THE CONTEXT OF CL AIM FOR DEDUCTION U/S 80HHC OF THE ACT ON THE ADDITIONS TO THE INCOME MADE BY THE AO HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. BAWA SKIN COMPANY 294 ITR 537(PUNJAB & HARYANA) HELD THAT IF THE PROFITS SO A RRIVED AT BY THE ASSESSING OFFICER ARE RELATED TO THE BUSINESS OF THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MER CHANDISE TO WHICH SECTION ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 20 80HHC IS APPLICABLE THEN THE APPELLANT IS COMPLETE LY JUSTIFIED TO MAKE THE CLAIM OF DEDUCTION OF SUCH PROFITS AS DETERMINED BY THE A SSESSING OFFICER. 14. IN VIEW OF THE FOREGOING AND IN THE LIGHT OF AFORESAID DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT WE HAVE NO HESITATIO N IN UPHOLDING THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB ON THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING DETERMINED ON APPEAL EFFECT AFTER TAKING INTO CONSIDERATION THE PROVISIONS UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE GROUND NO.5 IN TH E APPEAL IS ALSO DISMISSED. 15. GROUND NO. 5 IN THE APPEALS FOR THE AY 2004- 05 & 2005-06 AS ALSO GROUND NO. 6 IN THE APPEAL FOR THE AY 2006-07 BEING MERE PRAYER DO NOT REQUIRE ANY SEPARATE ADJUDICATION AN D ARE THEREFORE DISMISSED. 16. NO ADDITIONAL GROUND HAVING BEEN RAISED IN T ERMS OF RESIDUARY GROUND NO. 6 IN THE APPEALS FOR THE AY 2004-05 & 20 05-06 AS ALSO GROUND NO. 7 IN THE APPEAL FOR THE AY 2006-07 THES E GROUNDS ARE ALSO DISMISSED. 17. IN THE RESULT ALL THE THREE APPEALS ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9-09-2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 9-09-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S NROX SPECIALITIES SURVEY NO.327/1 DEMNI ROA D SANTOSH TILES COMPOUND DADRA SILVASSA D & N.H. 2. ITO WARD-2 VAPI AJIT NAGAR CHALA VAPI 3. CIT CONCERNED ITA NOS.1071 & 1072/AHD/2007 ITA NO.1622/AHD/2009 21 4. CIT(A) VALSAD 5. DR BENCH-C ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD