ITO 13(3)(4), MUMBAI v. KAMINI KRAFTS, MUMBAI

ITA 1461/MUM/2010 | 2001-2002
Pronouncement Date: 10-12-2010 | Result: Dismissed

Appeal Details

RSA Number 146119914 RSA 2010
Assessee PAN AAAFK1808Q
Bench Mumbai
Appeal Number ITA 1461/MUM/2010
Duration Of Justice 9 month(s) 16 day(s)
Appellant ITO 13(3)(4), MUMBAI
Respondent KAMINI KRAFTS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 10-12-2010
Date Of Final Hearing 01-12-2010
Next Hearing Date 01-12-2010
Assessment Year 2001-2002
Appeal Filed On 23-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NOS. 1461 & 1462/MUM/2010 (ASSESSMENT YEARS: 2001-02 & 2002-03) INCOME TAX OFFICER - 13(3)(4) M/S. KAMINI KRAFTS ROOM NO. 429 4TH FLOOR MAHAVIR DARSHAN 1ST FLOOR AAYAKAR BHAVAN M.K. ROAD VS. BHANDARI STREET MUMBAI 400003 MUMBAI 400020 PAN - AAAFK 1808 Q APPELLANT RESPONDENT CO NOS. 181& 182/MUM/2010 (ASSESSMENT YEARS: 2001-02 & 2002-03) M/S. KAMINI KRAFTS INCOME TAX OFFICER - 13(3)(4) 20 KHETANI INDL. ESTATE 106-07 ROOM NO. 429 4TH FLOOR BAZAR WARD SONAPUR LANE KURLA (W) VS. AAYAKAR BHAVAN M.K. ROAD MUMBAI 400070 MUMBAI 400020 PAN - AAAFK 1808 Q CROSS OBJECTOR APPELLANT IN APPEAL REVENUE BY: SHRI A.K. NAYAK ASSESSEE BY: SHRI I.P. RATHI O R D E R PER BENCH THE APPEALS IN ITA NO. 1461/MUM/2010 AND ITA NO. 14 62/MUM/2010 ARE REVENUE APPEALS AGAINST THE ORDER OF THE CIT(A) XXIV MUMBAI DATED 18.12.2002 FOR ASSESSMENT YEARS 2001-02 AND 2002-03 RESPECTIVELY. THE CROSS OBJECTIONS ARE MAINLY IN SUPPORT OF THE CIT(A )S ORDER WITHOUT PREJUDICE TO THE RATIO FIXED IN THE ORDER AS THE AS SESSEE IS ALSO ADMITTING THAT THE RATIO OF MANUFACTURING TO TRADING CAN BE DECIDE D AT 30 : 65 OR 65 : 35 OR IN ANY OTHER RATIO CONSIDERING THE FACTS ON RECORD THAT THE ASSESSEE PAID 20% OF THE COST OF EXPORT TOWARDS LABOUR CHARGES ON MAN UFACTURED GOODS. ITA NO. 1461/MUM/2010 AND CO NO. 181/MUM/2010 2. THE MAIN ISSUE IN THE REVENUE APPEAL AS WELL AS THE CROSS OBJECTIONS IS WITH REFERENCE TO THE TREATMENT GIVEN BY THE A.O . TO THE EXPORTS OF THE ASSESSEE. THE ASSESSEE CLAIMED 80HHC DEDUCTION IN R ESPECTIVE YEARS AND ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 2 THE 3CD REPORT FURNISHED DOES NOT STATE SPECIFICALL Y WHETHER THE ASSESSEE IS A TRADER EXPORTER OR MANUFACTURING EXPORTER OR MIXE D EXPORTER. IT HAS REPORTED THE ENTIRE TURNOVER AS EXPORT SALES INDICA TING TRADER EXPORTER. ANALYSING THIS AND ALSO THE FACT THAT THE ASSESSEE HAS NO MACHINERY IN THE BALANCE SHEET AND NO CLAIM FOR REPAIRS UNDERTAKEN THE A.O. TREATED THE ASSESSEE AS A TRADER EXPORTER AND ACCORDINGLY DEDUC TION U/S 80HHC WAS RE- WORKED OUT. ASSESSEE CONTESTED THE ISSUE BEFORE THE CIT(A) UNSUCCESSFULLY. THE MATTER WAS CARRIED TO THE ITAT AND THE ASSESSEE RELIED ON THE DECISION OF M/S. PADHROD VS. ITO IN ITA NO. 4191/MUM/2004 WHERE IN IN SIMILAR FACTS TO THE ASSESSEES CASE HELD THAT THE ASSESSEE WAS A MANUFACTURER. CONSIDERING THE FACTS PLACED BEFORE THE ITAT THE I TAT HAS GIVEN AN OPINION THE CASE OF ASSESSEE SEEMS TO BE A CASE OF MIXED EX PORTER AND IN THE FACTS OF THE CASE CONSIDERED IT JUSTIFIED TO SET ASIDE THE I SSUE TO THE FILE OF THE A.O. WITH DIRECTION TO GIVE CLEAR FINDING ON THE ISSUE. 3. IN THE SECOND ROUND OF ASSESSMENT PROCEEDINGS DUE TO THE FLOOD IN THE ENTIRE CITY OF MUMBAI IN JULY 2005 AND ESPECIAL LY IN KURLA AREA FROM WHERE THE ASSESSEE IS OPERATING IT SEEMS THAT ASSE SSEES ENTIRE RECORDS WERE DESTROYED AND NO EVIDENCE COULD BE FURNISHED BEFORE THE A.O. IT WAS SUBMITTED THAT CONCLUSIONS CAN BE REASONABLY DRAWN FROM THE FACTS/DETAILS SUBMITTED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AB OUT THE RATIO OF MANUFACTURING AND TRADING EXPORTS. THE ASSESSEE REL IED ON THE FINDINGS GIVEN BY THE A.O. IN THE ORIGINAL ASSESSMENT ORDER DATED 27.01.2004. HOWEVER THE A.O. DID NOT ACCEPT THE CONTENTIONS AN D TREATED IT AS TRADER EXPORTER ONLY. THE ASSESSEE CARRIED THE MATTER TO T HE CIT(A) AND RELIED ON THE FINDINGS GIVEN BY THE A.O. IN THE ORIGINAL ASSE SSMENT WHICH WERE AS UNDER: - NATURE OF BUSINESS THE ASSESSEE WAS ENGAGED IN THE BUSINESS AS EXPORTE R OF ALL SOURCES OF SCARVES STOLES SHAWLS MADE FROM VARIOUS FABRICS. AFTER RECEIVING AN ORDER FROM THE PARTY THEY FIRST PROCURE GREY FABRICS FRO M THE MARKET AND SENT IT FOR DYING/PRINTING TO THEIR DYERS AND PRINTERS. AFTER R ECEIVING FROM DYERS AND PRINTERS IT GOES FOR CUTTING OF FABRICS ACCORDING TO THE REQUIREMENTS OF THE BUYERS. FURTHER EMBROIDERY AND FRINGES WORK ARE BE ING DONE BY JOB WORKERS . . ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 3 ON THE BASIS OF THE AFORESAID FACTS IT WAS CLAIMED THAT THE ACTIVITY OF THE ASSESSEE HAS BEEN ACCEPTED BY THE ITAT AS OF MANUFA CTURING THOUGH JOB WORK DONE BY OUTSIDERS AND BALANCE AS TRADING EXPOR TS. THE QUANTIFICATION OF TRADING AND MANUFACTURING EXPORT WAS NOT POSSIBL E AS TO HOW MUCH TURNOVER WAS OF MANUFACTURING ACTIVITY/TRADING ACTI VITY SINCE ALL THE RECORDS ARE DESTROYED AND THE ASSESSEE PROPOSED THA T THE CIT(A) MAY DETERMINE 50% AS MANUFACTURING ACTIVITY AND 50% AS TRADING ACTIVITY OR EVEN 35 : 65 OR 65 : 35 OR ANY OF THE RATIO WHICH A RE ACCEPTABLE TO THE ASSESSEE SO LONG AS THE ASSESSEE IS TREATED AS MIXE D EXPORTER. IT WAS FURTHER SUBMITTED THAT PAYMENT OF LABOUR CHARGES WA S AROUND 20% OF THE COST OF GOODS EXPORTED. CONSEQUENT TO THE SUBMISSIO NS THE CIT(A) HAS CONSIDERED IT AS MIXED EXPORTER AND FIXED THE RATIO AT 50 : 50 AND DIRECTED THE A.O. TO CALCULATE THE DEDUCTION. THE FINDINGS O F THE CIT(A) ARE AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE AFORESAID SUBM ISSIONS FACTS OF THE CASE OBSERVATION ABOUT THE NATURE OF BUSINESS IN T HE ORIGINAL ASSESSMENT ORDER DECISION OF ITAT A BENCH MUMBAI IN THE CASE OF M/S. PATHROD AND THE DIRECTION OF THE HON'BLE ITAT AND DRAWN THE CONCLUSION THAT THE PART OF THE EXPORT ACTIVITY IS MANUFACTURING ACTIVITY. SINCE THE RECORDS ARE DESTROYED IN A WELL KNOWN NAT URAL CALAMITY OF 26/07/05 AND LOOKING TO THE QUANTUM OF PAYMENT OF L ABOUR CHARGES I HOLD THAT THE ESTIMATION OF 50 : 50 FOR MANUFACTURI NG AND TRADING EXPORTS IS QUITE REASONABLE. THE AO IS DIRECTED TO RECALCUL ATE THE DEDUCTION CONSIDERING THE 50 : 50 RATIO FOR MFG AND TRADING A CTIVITY. THUS THIS GROUND NO. 1 IS ALLOWED. REVENUE IS AGGRIEVED. 4. WE HAVE HEARD THE LEARNED D.R. AND THE LEARNED COUN SEL. THE LEARNED D.R. REITERATED THE FACT THAT ASSESSEE IS NOT ABLE TO SUBSTANTIATE THAT IT WAS INVOLVED IN MANUFACTURING ACTIVITY AND SUPPORTED WI TH REFERENCE TO THE 3CD REPORT WHEREIN THE AUDITORS HAVE MENTIONED ONLY TRA DING EXPORT. 5. THE LEARNED COUNSEL REFERRED TO THE PAPER BOOK FILE D IN THIS REGARD AND SUBMITTED THAT THERE WAS A MISTAKE IN FORM 10CCAC G IVEN BY THE AUDITORS AND ASSESSEES BUSINESS WAS EXPORT OF GARMENTS. REG ARDING THE NATURE OF BUSINESS THE COUNSEL REFERRED TO THE FINDINGS OF TH E A.O. IN PAGE NO. 1 OF THE ASSESSMENT ORDER IN RESPECTIVE YEARS ABOUT ASSESSEE S BUSINESS. HE FURTHER REFERRED TO THE FINDINGS OF THE A.O. IN THE FIRST A SSESSMENT ORDER AND THAT ONLY IN THE ABSENCE OF MACHINERY IN THE BLOCK OF AS SETS THE A.O. TREATED IT AS TRADER EXPORTER IGNORING THE FACT THAT ASSESSEE WAS PAYING LABOUR CHARGES AND THE BUSINESS ACTIVITY WAS ALSO ACCEPTED BY THE A.O. WHILE ADMITTING THAT THERE WERE CERTAIN READY MADE ITEMS LIKE IMITATION JEWELLERY BAGS BELTS WHICH WAS IN THE NATURE OF TRADING ITEMS IT WAS HI S SUBMISSION THAT THE ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 4 ITAT HAS GIVEN A FINDING THAT IT SEEMS A MIXED EXP ORTER ON THE FACTS PLACED BEFORE THE ITAT EARLIER AND THE ORDERS OF THE ITAT IN THIS REGARD WERE IN TUNE WITH THE FACTS AVAILABLE ON RECORD. 6. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE TAX AUDIT REPORT THERE IS NO FINDING OR SPECIFIC MENTION THAT ASSESS EE IS EXPORTING MANUFACTURING GOODS OR TRADING GOODS EVENTHOUGH THE ENTIRE TURNOVER IN ANNEXURE A IS STATED UNDER THE HEAD EXPORT TURNOV ER IN RESPECT OF TRADING GOODS. HOWEVER IT IS THE CONTENTION OF THE ASSESSE E THAT THEY WERE INVOLVED IN GETTING WORK DONE BY JOB WORK BASIS AND FURTHER THEY PURCHASE RAW MATERIAL AND GIVE IT ON JOB WORK BASIS FOR PRINTING DYING ETC. FOR WHICH AN AMOUNT OF ` 1 78 61 835/- WAS PAID TOWARDS LABOUR CHARGES AND ` 42 04 722/- WAS PAID AS DYING AND PRINTING CHARGES WHICH EXPENDITURE SHOULD NOT ARISE IF THE ASSESSEE IS DIRECTLY TRADIN G IN OUTRIGHT PURCHASE OF GOODS FOR EXPORT. THESE ABOVE FIGURES ARE FOR THE Y EAR ENDING 31.03.2001 OUT OF THE TOTAL TURNOVER OF ` 9 98 57 245/-. SINCE THE A.O. HIMSELF HAD GIVEN A FINDING IN THE ASSESSMENT ORDER THAT THE ASSESSEE W AS ENGAGED IN PROCURING GARMENT FABRICS FROM THE MARKET AND SENDING IT FOR DYING AND THEN FOR CUTTING THERE IS ENOUGH INDICATION / EVIDENCE IN T HE FILE THAT THE ASSESSEE IS NOT A PURE TRADER EXPORTER BUT MIXED EXPORTER OF BO TH MANUFACTURING GOODS AS WELL AS TRADING GOODS. THE ASSESSING OFFICERS F INDING WITH REFERENCE TO THE NATURE OF BUSINESS IN A.Y. 2001-02 IN PAGE NO. 1 IT SELF IS AS UNDER: - THE ASSESSEE WAS ENGAGED IN THE BUSINESS AS EXPORT ERS OF ALL SOURCES OF SCARVES STOLES SHAWLS MADE FROM VARIOUS FABRIC S. AFTER RECEIVING AN ORDER FROM THE PARTY THEY FIRST PROCURE GRAY FABRI C FROM THE MARKET AND THEN SEND IT FOR DYEING/PRINTING TO THEIR DYERS AND PRINTERS. AFTER RECEIVING FROM DYERS AND PRINTERS IT GOES FOR CUTT ING OF FABRICS ACCORDING TO THE REQUIREMENT OF THE BUYERS. FURTHER EMBROIDE RY AND FRINGES WORK ARE BEING DONE BY JOB WORKERS. THE ASSESSEE ALSO TR ADES IN READY PURCHASES AND SALES OF THE ABOVE ITEMS. THE ASSESSE E ALSO EXPORT IMITATION JEWELLERY BAGS BELTS ETC. AS PER THE RE QUIREMENT OF THE BUYER. IN VIEW OF THE FINDINGS IN THE ORDER AND IN THE ABS ENCE OF THE ORIGINAL RECORDS IT CANNOT BE STATED THAT THE ASSESSEE IS N OT A MIXED EXPORTER. HOWEVER THE DIFFICULTY ARISES IN ESTIMATING THE PE RCENTAGE OF MANUFACTURING AND TRADING. THE ASSESSEE HAS NO OBJECTION IN TREAT ING THE MANUFACTURING ACTIVITY AND TRADING ACTIVITY AT 50 : 50 OR 65 : 35 OR 35 : 65 OR ANY OTHER RATIO EVEN AT 20 : 80 DEPENDING ON THE PERCENTAGE OF LABOUR CHARGES IT PAID. ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 5 IT REQUIRES A FINDING THAT THE ASSESSEE IS A MIXED EXPORTER. ACCORDING TO THE CROSS OBJECTION THE ASSESSEE HAS NO OBJECTION IN AD OPTING ANY OTHER RATIO ON THE FACT THAT PRINTING AND DYEING CHARGES AND LABOU R CHARGES WERE PAID AND SHOWN IN THE STATEMENT WHILE CLAIMING THE DEDUCTION ITSELF. IN THE ABSENCE OF ANY EVIDENCE WITH REFERENCE TO THE ACTUAL RATIO OF MANUFACTURING AND EXPORT TURNOVERS WE ARE OF THE VIEW THAT THE RATIO ADOPTE D BY THE CIT(A) AT 50 : 50 IS REASONABLE AND JUSTIFIABLE. THE COST OF LABOUR + PRINTING AND DYEING CHARGES WOULD COME TO ABOUT 25% OF THE EXPENDITURE. ACCORDINGLY WE ARE OF THE VIEW THAT THE TURNOVER OF MANUFACTURING GOODS C AN BE ABOUT 50% AND THE BALANCE CAN BE TRADING OF IMITATION JEWELLERY BAGS ETC. WHICH WERE ALSO UNDERTAKEN ALONG WITH THE EXPORT OF GARMENTS STOLE S SCARVES ETC. THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A) ON THIS REGARD. THE REVENUE APPEAL IN ITA NO. 1461/ MUM/2010 ON THIS ISSUE IS ACCORDINGLY DISMISSED. 7. THE CROSS OBJECTION IS IN SUPPORT OF THE CIT(A)S O RDER BUT ALSO ACCEPTING ANY OTHER RATIO. SINCE THE CIT(A)S ORDER IS UPHELD AND REVENUE APPEAL IS DISMISSED THE CO BECOMES INFRUCTUOUS. AC CORDINGLY THE SAME IS DISMISSED. ITA NO. 1642/MUM/2010 & CO 182/MUM/2010 8. IN THIS REVENUE APPEAL THE ISSUES RAISED ARE SIMILA R TO THE ISSUES RAISED IN A.Y. 2001-02. HERE ALSO THE CIT(A) DETERM INED THE RATIO OF MANUFACTURING TO TRADING ACTIVITY AT 50 : 50. FOR T HE REASONS DISCUSSED IN ITA NO. 1461/MUM/2010 ABOVE THE ORDER OF THE CIT(A) ON THIS ISSUE IS UPHELD AND REVENUE APPEAL IS DISMISSED. 9. IN THE CROSS OBJECTION THE ASSESSEE AS GROUND NO. 1 HAS RAISED THE ISSUE OF RATIO OF MANUFACTURING AND TRADING TURNOVE R AND THIS ISSUE IS ALREADY CONSIDERED IN ITA NO. 1461/MUM/2010 IN DETA IL ALONGWITH THE CO. SINCE THE GROUND IS SIMILAR TO THE GROUND IN CO FOR A.Y. 2001-02 THIS GROUND BECOMES INFRUCTUOUS AS THE CIT(A)S ORDER ON THIS ISSUE WAS CONFIRMED. ACCORDINGLY GROUND NO. 1 IS REJECTED. 10. GROUND NOS. 2 & 3 IN THE CO PERTAINS TO REOPENING O F THE ASSESSMENT UNDER SECTION 147. THE ISSUE ARISES BECAUSE WHILE G IVING EFFECT TO THE ITATORDER WHICH HAS SET ASIDE ORIGINAL ASSESSMENT B ACK TO THE A.O. TO GIVE A ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 6 CLEAR FINDING ABOUT THE RATIO OF MANUFACTURING AND TRADING ACTIVITY THE A.O. COMBINED THE RE-ASSESSMENT PROCEEDINGS INITIATED AF TER REOPENING UNDER SECTION 147. THE NOTICE UNDER SECTION 148 WAS ADMIT TEDLY ISSUED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. AS SEEN FROM THE ASSESSMENT ORDER THE A.O. RECORDED THE REASONS ON 0 7.01.2008 AS UNDER: - I HAVE REASON TO BELIEVE THAT INCOME FOR A.Y. 2002 -03 HAS ESCAPED ASSESSMENT AS A SUM OF RS.2 35 000/- DEBITED TO P & L A/C ON ACCOUNT OF DESIGN DEVELOPMENT CHARGES SHOULD ACTUALLY HAVE BEEN CAPITALISED. EXPENSES INCURRED ON DEVELOPMENT DESIGNS IS CAPITAL IN NATURE SINCE IT BRINGS ENDURING BENEFIT TO THE ASSESSEE FIRM FOR TH E SUBSEQUENT YEARS. 11. SINCE THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) WAS ALREADY COMPLETED ON 25.02.2005 FOR A.Y. 2002-03 THE REOPEN ING ON 07.01.2008 WAS AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEA R. IT WAS ASSESSEES CONTENTION THAT THE A.O. HAS NOT SPECIFIED THAT THE RE WAS FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING COMPLETE DETAILS AND IT WAS ONLY A CHANGE OF OPINION ON EXPENSES INCURRED ON DEVELOPMENT OF DESI GNS TREATING IT AS CAPITAL IN NATURE. A.O. PASSED A COMBINED ORDER DAT ED 26.12.2008 BOTH FOR REASSESSMENT AFTER SETTING ASIDE BY THE ITAT UNDER SECTION 254 AND ALSO UNDER SECTION 147. THE ASSESSEE IS QUESTIONING THAT PART OF THE REOPENING UNDER SECTION 147 IN THESE GROUNDS. 12. IT WAS THE SUBMISSION BEFORE THE CIT(A) THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO SUBMIT VARIOUS DETAILS AND THE ORIGINAL ASSESSMENT HAVING BEEN COMPLETED ALLOWING THE EXPENDITURE IT W AS ONLY A CHANGE OF OPINION. SINCE THE ASSESSMENT WAS REOPENED AFTER FO UR YEARS FROM THE END OF THE ASSESSMENT YEAR IT RELIED ON VARIOUS CASE LA W OF THE JURISDICTIONAL HIGH COURT AS UNDER: - I) IPCA LABORATORIES LTD. VS. DCIT 251 ITR 461 II) PARIKH PETROL CHEMICALS AGENCIES P. LTD. VS. ACIT 2 66 ITR 196 III) CAPRIHANS INDIA LTD. VS. DCIT 266 ITR 566 IV) HINDUSTAN LEVER LTD. VS. ACIT 268 ITR 339 V) DESAI BROTHERS LTD. VS. DCIT 272 ITR 335 VI) MRPL VS. ACIT 282 ITR 561 VII) DEVIDAYAL ROLLING MILLS VS. ACIT 285 ITR 514 VIII) CARTINI INDIA VS. ACIT 291 ITR 355 ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 7 13. THE CIT(A) HOWEVER RELIED ON THE HON'BLE BOMBAY H IGH COURT ORDER IN THE CASE OF AMINS PATHOLOGY LABORATORY 252 ITR 673 STATING THAT THE AO WAS ENTITLED TO REOPEN SINCE CERTAIN ISSUES WERE OV ERLOOKED AND SINCE THIS ISSUE HAS NOT EXAMINED ORIGINALLY THERE WAS NO CHAN GE OF OPINION. ACCORDINGLY HE UPHELD THE ACTION OF THE A.O. UNDER SECTION 147 AND REJECTED THE GROUNDS OF THE ASSESSEE. HOWEVER HE DIRECTED T HE A.O. TO INCREASE THE BUSINESS INCOME DUE TO DISALLOWANCE AND RECALCULATE DEDUCTION U/S 80HHC. THE ASSESSEE IS QUESTIONING THE ISSUE UNDER SECTION 147. 14. WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE AND THE LEARNED D.R. 15. AS SEEN FROM THE SATISFACTION RECORDED AT THE TIME OF INITIATION THE A.O. HAS NOT RECORDED ANY FINDING THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY THE MATERIAL FACTS. IN F ACT THE DESIGN AND DEVELOPMENT CHARGES OF ` 2 35 000/- DEBITED TO P & L ACCOUNT WAS SIMPLY TREATED AS CAPITAL IN NATURE EVEN WHEN THE ASSESSE E HAS SUBMITTED THAT NO RECORDS WERE A AVAILABLE TO SUBSTANTIATE ANY CLAIM THEREIN. ON WHAT BASIS THE A.O. HAS COME TO THE CONCLUSION THAT THIS EXPEN DITURE IS NOT REVENUE EXPENDITURE BUT CAPITAL EXPENDITURE IS NOT AVAILABL E EITHER FROM THE ORDER OR FROM ANY OTHER DOCUMENTS ON THE BASIS OF WHICH THE SAID CONCLUSION WAS DRAWN. ADMITTEDLY THE ISSUE WAS NOT EXAMINED ORIGIN AL ASSESSMENT ORDER. BUT THERE IS NO BASIS FOR THE A.O. TO REOPEN THE AS SESSMENT JUST BECAUSE THERE WAS A CLAIM FOR DESIGN AND DEVELOPMENT CHARGE S IN THE P & L ACCOUNT. THERE IS NO EVIDENCE EVEN TO COME TO A CONCLUSION T HAT THIS EXPENDITURE IS FOR ENDURING NATURE. THE ASSESSEE CONTESTED BY PROV IDING AN ALBUM OF NEW VISION FORECAST WOMENS WEAR SPRING 2002 SHOWING VARIOUS DESIGNS OF SCARVES DEVELOPED FOR EXPORT MARKET AND CONTESTING THAT THE LIFE OF THE DESIGN IS VERY SHORT AND CHANGES VARY FROM SEASON T O SEASON. SINCE THERE IS NO EVIDENCE TO GIVE A FINDING THAT THIS EXPENSE IS INCURRED FOR AN ENDURING BENEFIT THE ACTION OF THE A.O. IN NOT ONLY REOPENI NG THE ASSESSMENT UNDER SECTION 147 AFTER FOUR YEARS BUT ALSO TREATING THE EXPENDITURE AS CAPITAL IN NATURE CANNOT BE SUSTAINED. IN THE ABSENCE OF ANY S ATISFACTION FROM THE A.O. ABOUT THE FAILURE ON THE PART OF THE ASSESSEE THE REOPENING AFTER FOUR YEARS FROM THE END OF ASSESSMENT YEAR CAN NOT BE SUSTAINE D RELYING ON THE PRINCIPLES ESTABLISHED BY THE JURISDICTIONAL HIGH C OURT IN THE CASE OF ITA NOS. 1461&1462 & CO 181&182/MUM/2010 M/S. KAMINI KRAFTS 8 HINDUSTAN LEVER LTD. 268 ITR 332 AND VARIOUS OTHER DECISIONS RELIED UPON BY THE ASSESSEE. SINCE THE REOPENING IS BAD IN LAW THAT PART OF THE ASSESSMENT ORDER PERTAINING TO DISALLOWANCE OF DESI GN EXPENDITURE AS CAPITAL EXPENDITURE IS TO BE SET ASIDE. THE A.O. IS DIRECTE D TO ALLOW THE EXPENDITURE AS CLAIMED. INCIDENTALLY THE ASSESSING OFFICERS C ONTENTION THAT THIS DESIGN EXPENDITURE IS IN CAPITAL NATURE INDIRECTLY SUPPORT S ASSESSEES CONTENTION THAT IT WAS MANUFACTURING AND THE EXPORTS ARE MIXED EXPORTS I.E. BOTH MANUFACTURING EXPORT AND TRADING EXPORT THE ISSUE WHICH WAS CONSIDERED ABOVE IN THE REVENUE APPEALS. GROUND NOS. 2 & 3 ARE THEREFORE UPHELD AND CROSS OBJECTION TO THAT EXTENT IS TO BE ALLOWED. AC CORDINGLY THE CO IS TREATED AS PARTLY ALLOWED. 16. IN THE RESULT BOTH THE REVENUES APPEALS AND CO NO . 181/MUM/2010 ARE DISMISSED AND CO NO. 182/MUM/2010 IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 10 TH DECEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXIV MUMBAI 4. THE CIT XIII MUMBAI CITY 5. THE DR G BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.