INCOME TAX OFFICER, 15(1)(3), MUMBAI v. M/S. TIMES SQUARE INDUSTRIES, MUMBAI

ITA 2758/MUM/2009 | 2005-2006
Pronouncement Date: 30-09-2011 | Result: Allowed

Appeal Details

RSA Number 275819914 RSA 2009
Assessee PAN AADFT7360B
Bench Mumbai
Appeal Number ITA 2758/MUM/2009
Duration Of Justice 2 year(s) 5 month(s)
Appellant INCOME TAX OFFICER, 15(1)(3), MUMBAI
Respondent M/S. TIMES SQUARE INDUSTRIES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted I
Tribunal Order Date 30-09-2011
Date Of Final Hearing 19-09-2011
Next Hearing Date 19-09-2011
Assessment Year 2005-2006
Appeal Filed On 29-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER AN D SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 2758/MUM./2009 (ASSESSMENT YEAR : 2005-06 ) INCOME TAX OFFICER WARD-15(1)(3) MATRU MANDIR R.NO.18 MUMBAI 400 016 .. APPELLANT V/S TIMES SQUARE INDUSTRIES 320 HAMMERSMITH INDL. PREMISES NARAYAN PATHARE MARG MAHIM (W) MUMBAI 400 016 PAN AADFT7360B .... RESPONDENT REVENUE BY : MR. SUNIL KUMAR SINGH ASSESSEE BY : MR. ANANT N. PAI DATE OF HEARING 19.09.2011 DATE OF ORDER 30.09.2011 O R D E R PER J. SUDHAKAR REDDY A.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 17 TH JANUARY 2008 PASSED BY THE COMMISSIONER (APPEALS)-XV MUMBAI FOR ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:- TIMES SQUARE INDUSTRIES ITA NO.2758/M/2009 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE. HAS NOT VIOLATED THE PROVISIONS OF SEC. 80IB(4) EVEN WHEN IN THE FORM N O.10CCB THE NUMBER OF WORKERS EMPLOYED IS SHOWN AT 8 VIOLATING THE CONDITION U/S. 80IB(2)(IV) WHICH WAS SUBSEQUENTLY BRUSHED ASIDE W ITHOUT ANY PROPER SUPPORTING EVIDENCE AND CORRIGENDUM PASSED BY THE A UDITOR IN FORM NO.10CCB. 2. THE LD. CIT(A) ALSO ERRED ON FACTS AS WELL AS IN LAW IN HOLDING THAT THE ASSESSEE HAS MANUFACTURED NEW PRODUCTS TO QUALIFY DEDUCTION U/S. 80IB(4) IGNORING THE FACT THAT NO NEW PRODUCT CAN BE MANUFACTURED WITHOUT PUNCHING MACHINE AFTER HAVING ACCEPTED THE FACT THAT THE INVOICE REGARDING THE SAID MACHINE FR OM M/S. TARUN ENTERPRISES WAS BOGUS AND FURTHER UNILATERALLY PRES UMING WITHOUT ANY EVIDENCE THAT THE SAID NEW MACHINE WAS PURCHASED IN GREY MARKET WHICH WAS VITAL EVIDENCE IN THIS EASE TO DISENTITLE DEDUCTION U/S. 80IB(4) HIT BY NON-FULFILLING OF CONDITION GIVEN IN SECTION 80IB(2)(II). 3. THE LD. CIT(A) ALSO ERRED IN ACCEPTING THAT THE ASSESSEE HAS CARRIED OUT MANUFACTURING WORK IN THE FACTORY EVEN THOUGH 73% OF THE WORK WAS OUTSOURCED AS ACCEPTED BY THE ASSESSEE HIM SELF AND THE ASSESSEE HAS NOT ESTABLISHED HOW THE OUTSOURCED WOR K IS DONE UNDER CONTROL AND SUPERVISION OF ASSESSEE IN ORDER TO HAV E PROFIT AND GAIN FROM INDUSTRIAL UNDERTAKING WHICH IS ESSENTIAL CON DITION TO BE FULFILLED TO CLAIM DEDUCTION U/S. 80/B (4). 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF MANUFACTURING OF CORRUGATED BOXES AND HAVING IT FAC TORY AT DAMAN. THE ISSUE IN APPEAL IS ALLOWABILITY OF CLAIM UNDER SECT ION 80IB OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT). DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE A SSESSEE HAS NOT PURCHASED PUNCHING MACHINE WORTH ` 1 06 640 FROM M/S. TARUN ENTERPRISES AS CLAIMED BY IT. MR. SANDEEP KOTHARI OF M/S. TARUN ENTERPRISES HAS STATED BEFORE THE ASSESSING OFFICER THAT HE HAS NOT SOLD T HE SAID PUNCHING MACHINE TO THE ASSESSEE AND THAT HE HAS GIVEN BLANK BILLS. ON BEING QUESTIONED THE ASSESSEE SUBMITTED THAT HIS MANAGER HAS PURCHASED T HE PUNCHING MACHINE FROM GREY MARKET AND WITHOUT HIS KNOWLEDGE HAS FRAU DULENTLY PRODUCED THE BILLS OF M/S. TARUN ENTERPRISES. IT WAS SUBMITTED T HAT THE ASSESSEE HAD IN FACT PURCHASED A PUNCHING MACHINE AND THAT IT WOUL D NOT BE POSSIBLE TO PRODUCE CARTOON PVC BOXES TRAYS ETC. WITHOUT TH IS MACHINE. THE A.O. FURTHER FOUND THAT NUMBER OF EMPLOYEES WERE ONLY EI GHT AS AGAINST MINIMUM TIMES SQUARE INDUSTRIES ITA NO.2758/M/2009 3 TEN EMPLOYEES REQUIRED BY THE ACT. FURTHER THE ASS ESSING OFFICER REJECTING THE SUBMISSIONS OF THE ASSESSEE AND GAVE FINDING TH AT ONLY 27% OF THE MANUFACTURING WORK WAS CARRIED OUT IN ASSESSEES PR EMISES AND THAT THE BALANCE 73% HAS BEEN OUT-SOURCED. ACCORDINGLY HE D ENIED THE EXEMPTION. 3. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER BE FORE THE FIRST APPELLATE AUTHORITY WHEREIN THE COMMISSIONER (APPE ALS) RECORDED THAT THE ASSESSEE NOT ONLY PRODUCED THE PHOTOGRAPHS OF THE P UNCHING MACHINE BUT ALSO INVITED THE ASSESSING OFFICER TO VISIT THE FAC TORY AND VERIFY AS TO WHETHER THE PUNCHING MACHINE IS AVAILABLE OR NOT. HE THUS HELD THAT MACHINERY WAS EXISTING AND CLAIM UNDER SECTION 80IB CANNOT BE DEN IED BASED ON THE FACT THAT THE BOGUS BILL WAS OBTAINED FROM M/S. TARUN EN TERPRISES. ON THE NUMBER OF EMPLOYEES THE COMMISSIONER (APPEALS) OBSERVED T HAT THE AUDITED REPORT DISCLOSED EIGHT EMPLOYEES WHEREAS THE ASSESSEE HAD PRODUCED MUSTER ROLL BEFORE THE ASSESSING OFFICER AND BEFORE HIM AND IN THE ABSENCE OF ANY CONTRARY EVIDENCE THE NUMBER OF EMPLOYEES WOULD BE ACCEPTED AS THIRTEEN. AS REGARDS OUT-SOURCING THE COMMISSIONER (APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT ONLY PRINTING WORK WAS OUT-SOURCED AND THAT RELIEF CLAIMED UNDER SECTION 80IB CANNOT BE DENIED ON THIS COUNT. AS REGARDS DEPRECIATION ON PUNCHING MACHINE HE COMMISSIONER ( APPEALS) HELD THAT AS THE PROFIT IS EXEMPT UNDER SECTION 80IB GRANT OF D EPRECIATION DOES NOT MAKE A DIFFERENCE AND HENCE DIRECTED THE SAME BE ALLOW ED. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LEARNED DEPARTMENTAL REPRESENTATIVE MR. SUNIL KUMA R SINGH ON BEHALF OF THE REVENUE TOOK THIS BENCH THROUGH THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE COMMISSIONER (APPEALS) HAS WRONGLY DIRECTED ALLOWANCE OF RELIEF UNDER SECTION 80IB FOR THE REA SON THAT (I) THE ASSESSEE HAD NOT PURCHASED PUNCHING MACHINE AND BOGUS BILL W AS OBTAINED FROM M/S. TARUN ENTERPRISES; (II) THERE IS NO POSSIBILITY OF THE ASSESSEE MANUFACTURING GOODS WITHOUT PUNCHING MACHINE; (III) INITIALLY TH E ASSESSEE STATED THAT IT WAS MANUFACTURING CORRUGATED BOXES BUT LATER SUBMIT TED THAT IT IS TIMES SQUARE INDUSTRIES ITA NO.2758/M/2009 4 MANUFACTURING CARTOONS PVC BOXES TRAYS ETC.; (IV ) THAT THE NUMBER OF EMPLOYEES WERE EIGHT AS MENTIONED IN FORM NO.10CCB AND HENCE THE REQUIREMENTS OF SECTION 80IB(2)(IV) HAVE NOT BEEN SATISFIED; (V) THAT THE MAJOR PORTION OF THE MANUFACTURE IS BEING DONE OUTS IDE THE PREMISES OF THE FACTORY. 5. LEARNED COUNSEL ON THE OTHER HAND FILED AN APPLIC ATION FOR ADMISSION OF ADDITIONAL EVIDENCE CONSISTING OF AFFIDAVIT DATE D 20 TH OCTOBER 2010 SWORN BY MR. JANARDHAN MALALA STATING THAT THE PUNCHING MACHINE WAS SUPPLIED BY HIM. IT WAS SUBMITTED THAT THE ASSESSEE HAD IN FAC T PURCHASED THE MACHINERY FROM MR. JANARDHAN MALALA AND INSTEAD OF SHOWING THIS BILL THE MANAGER OF THE ASSESSEE OBTAINED THE BILL FROM SOME OTHER PERSONS. LEARNED COUNSEL RELIED ON THE DECISION OF MUMBAI C BENCH OF THE TRIBUNAL IN ITO V/S OXFORD INDUSTRIES ITA NO.2761/MUM./2009 ORDER DATED 30 TH DECEMBER 2010 AND SUBMITTED THAT UNDER SIMILAR CIRCUMSTANCE S THE ADDITIONAL EVIDENCE WAS ADMITTED AND THE MATTER WAS RESTORED T O THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH. ON MERITS HE SUBM ITTED THAT MUSTER ROLL OF THE EMPLOYEES HAVE BEEN SUBMITTED TO PROVE THAT THE NUMBER OF EMPLOYEES WERE MORE THAN TEN AND THIS FACT WAS NOT CONTRADICT ED WITH EVIDENCE BY THE ASSESSING OFFICER. AS REGARDS OUT-SOURCING HE SUBM ITTED THAT ONLY PRINTING WORK WAS OUT-SOURCED AND RELIED ON CERTAIN DECISION S FOR THE PROPOSITION THAT EVEN IN CASE OF OUT-SOURCING RELIEF UNDER SECTION 80IB HAS TO BE ALLOWED. HE ACCORDINGLY PRAYED FOR RESTORING THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER AS HAS BEEN DONE BY A CO-ORDINATE BENCH OF THE TRIBUNAL IN ITO V/S M/S. OXFORD INDUSTRIES I.E. ASSESSEES SISTER CONC ERN ITA NO.2761/MUM./ 2009 ORDER DATED 30 TH DECEMBER 2010. 6. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN CASE OF RESTORING THE ISSUE BACK TO THE FILE OF ASSESSING O FFICER THE ASSESSING OFFICER SHOULD HAVE LIBERTY TO EXAMINE ALL OTHER ASPECTS AL SO. 7. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD WE FIND TIMES SQUARE INDUSTRIES ITA NO.2758/M/2009 5 THAT THE TRIBUNAL IN OXFORD INDUSTRIES I.E. ASSESS EES SISTER CONCERN UNDER SIMILAR CIRCUMSTANCES VIDE PARAS-7 8 AND 9 HELD AS FOLLOWS:- 7. WE HAVE CONSIDERED THE ISSUE. FIRST OF ALL ADMIS SION OF ADDITIONAL EVIDENCE IS GOVERNED BY RULE 29 OF THE APPELLATE TR IBUNAL RULES WHICH IS AS UNDER: - 29. THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLE D TO PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENT ARY BEFORE THE TRIBUNAL BUT IF THE TRIBUNAL REQUIRES A NY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMIN ED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT TO PASS O RDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE OR IF THE INCOME- TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SU FFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE EITH ER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM THE TRIBUNAL FOR REASONS TO BE RECORDED MAY ALLOW SUC H DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED O R AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. 8. IN THIS CASE THE TRIBUNAL HAD NOT REQUIRED ANY DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE FILED. THE ASSESSEE HAS NEVER EXPLAINED WHY THIS EVIDENCE WAS NOT FURNISHED BEFORE THE A.O. WHEN THE MATTER WAS IN ADJUDICATION BEFORE THE A.O. AND NOT EVEN BEFORE THE CIT(A) EVENTHOUGH THE CIT( A) FOR THE REASONS BEST KNOWN TO HIM HAS DIRECTED THE A.O. TO ALLOW THE DEPRECIATION WITHOUT ESTABLISHING THE PURCHASE OF M ACHINERY. IN THIS REGARD WE ARE UNABLE TO ADMIT THE ADDITIONAL EVIDEN CE AS THE ASSESSEE HAS NOT SUBMITTED THE REASONS FOR FAILURE ON ITS PA RT TO SUBMIT BEFORE THE REVENUE AUTHORITIES. THEREFORE THE AFFIDAVIT D ATED 26.10.2010 COULD NOT BE ADMITTED AS ADDITIONAL EVIDENCE IN THI S PROCEEDINGS. 9. HAVING SAID SO AS SEEN FROM THE RECORD THE ASS ESSEE IS CONTINUOUSLY SHIFTING ITS STAND WITH REFERENCE TO M ANUFACTURING PRODUCT NUMBER OF EMPLOYEES AND PURCHASE OF MACHIN ERY. THE LEARNED COUNSEL DURING HIS ARGUMENT SUBMITTED THAT THE A.O. WAS ASKED TO INSPECT THE FACTORY/MACHINERY AND EXAMINE WHETHER THE ASSESSEE IS IN THE MANUFACTURING ACTIVITY OR NOT W HICH THE A.O. HAS NOT DONE. THE SAME ASPECT WAS ALSO CONSIDERED BY TH E CIT(A) BUT WITHOUT GIVING AN OPPORTUNITY TO THE A.O. OR WITHOU T RESTORING THE ISSUE TO HIS EXAMINATION BY WAY OF REMAND HE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. CONSIDERING THE FACTS OF THE CASE WE ARE OF THE OPINION THAT THE ISSUE REQUIRE RE-EXAMINATION BY THE A.O. N OT ONLY TO EXAMINE WHETHER THE ASSESSEE IS IN THE MANUFACTURING ACTIVI TY OR NOT BUT ALSO TO SEE WHETHER THE ASSESSEE HAS INDEED PURCHASED THE M ACHINERY AND IF SO FROM WHICH SOURCE AT WHAT COST AND WHETHER THER E WERE REALLY MANUFACTURING ACTIVITIES SO AS TO ALLOW THE CLAIM U NDER SECTION 80IB. IN VIEW OF THIS THE MATTER IS RESTORED BACK TO THE A. O. TO CONSIDER IT AFRESH. ACCORDINGLY ORDERS OF THE A.O. AND CIT(A) A RE SET ASIDE ON THE TIMES SQUARE INDUSTRIES ITA NO.2758/M/2009 6 ISSUE AND THE ASSESSMENT IS RESTORED TO THE A.O. TO DO IT DE NOVO ACCORDING TO LAW. NEEDLESS TO SAY THAT THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY IN SUPPORT OF ITS CONTENTIONS INCLUDING ITS LATEST CONTENTION ABOUT SUPPLIER OF SO CALLED PUNCHING MAC HINERY BY WAY OF AFFIDAVIT FILED BEFORE US AS ADDITIONAL EVIDENCE. R EVENUES GROUNDS ARE ALLOWED. 8. KEEPING IN VIEW THE AFORESAID DECISION OF THE TRIBU NAL IN ASSESSEES SISTER CONCERNS CASE CITED SUPRA WE RESTORE THE I SSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DENNOVO ADJUDICATION 9. IN THE RESULT REVENUES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2011 SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 30 TH SEPTEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR I BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI