M/s K.K. Apparels,, Ludhiana v. ACIT,, Solan

ITA 83/CHANDI/2008 | 2002-2003
Pronouncement Date: 17-10-2016 | Result: Allowed

Appeal Details

RSA Number 8321514 RSA 2008
Assessee PAN STHAN1200U
Bench Chandigarh
Appeal Number ITA 83/CHANDI/2008
Duration Of Justice 8 year(s) 8 month(s) 10 day(s)
Appellant M/s K.K. Apparels,, Ludhiana
Respondent ACIT,, Solan
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 17-10-2016
Date Of Final Hearing 22-03-2016
Next Hearing Date 22-03-2016
Assessment Year 2002-2003
Appeal Filed On 07-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA ACCOUNTANT MEMBER ITA NOS.83 84 & 85/CHD/2008 (ASSESSMENT YEARS : 2002-03 2003-04 & 2004-05) M/S K.K. APPARELS VS. THE A.C.I.T. C/O 68 SARABHA NAGAR CIRCLE SOLAN. LUDHIANA. PAN: AADFK-0883-E (APPELLANT) (RESPONDENT) APPELLANT BY : S/ SHRI SUDHIR SEHGAL & SHRI ASHOK GOYAL RESPONDENT BY : SHRI MANOJ MISHRA CIT DR DATE OF HEARING : 20.07.2016 DATE OF PRONOUNCEMENT : 17.10.2016 O R D E R PER ANNAPURNA GUPTA A.M . : ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF COMMISSIONER O F INCOME TAX (APPEALS) SHIMLA DATED 27.11.2007 PERTA INING TO ASSESSMENT YEARS 2002-03 2003-04 AND 2004-05 PRIMARILY CHALLENGING THE DENIAL OF DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). SINCE THE ISSUE INVOLVED IN ALL THE THREE A PPEALS IS IDENTICAL THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OFF BY THIS COMMON ORDER. 2 2. FOR THE SAKE OF CONVENIENCE WE WILL TAKE UP T HE APPEAL OF THE ASSESSEE IN ITA NO.83/CHD/2008 AND TH E DECISION GIVEN IN THIS APPEAL WILL APPLY TO OTHER A PPEALS OF THE ASSESSEE IN ITA NO.84/CHD/2008 AND ITA NO.85/CHD/2008 MUTATIS MUTANDIS. ITA NO.83/CHD/2008 : 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE ORDER OF LEARNED COMMISSIONER ON INCO ME (APPEALS) IS DEFECTIVE BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS IS NOT JUSTIFIED IN UPHOLDING THE LEARNED ASSESSING OFFICE R IN HOLDING THAT THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/ S 80-IB OF THE INCOME TAX ACT 1961. THE SAID DISALLOWANCE DESERV ES TO BE RESTORED AS THE INDUSTRIAL UNIT SATISFIES ALL THE R EQUISITE CONDITIONS FOR CLAIMING DEDUCTION U/S 80-IB OF THE I.T. ACT 1961. 3. THAT ANY OTHER GROUND OF APPEAL WHICH MAY BE TAK EN UP AT THE TIME OF HEARING WITH KIND PERMISSION. 4. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURER AND DEALER IN READYMADE GARMENTS. IN THE IMPUGNED ASSESSMENT YEAR THE ASS ESSEE FILED RETURN OF INCOME DECLARING NIL INCOME AFTER C LAIMING DEDUCTION UNDER SECTION 80IB OF THE ACT AMOUNTING T O RS.6 37 66 587/-. A SURVEY UNDER SECTION 133A OF T HE ACT WAS CONDUCTED IN THE FACTORY PREMISES OF THE ASSE SSEE ON 3 7.8.2003 TO VERIFY WHETHER THE ASSESSEE FULFILLED T HE CONDITIONS FOR CLAIMING EXEMPTION UNDER SECTION 80I B OF THE ACT AND ALSO THE VERACITY OF ITS TRANSACTIONS. VARIOUS ANOMALIES WERE DETECTED DURING THE COURSE OF SUVEY VIS-- VIS NUMBER OF WORKERS AND THE NATURE OF THE BOOKS OF ACCOUNT MAINTAINED AFTER CONSIDERING WHICH THE ASS ESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE OF DEDUC TION UNDER SECTION 80IB OF THE ACT BY HIGHLIGHTING THE F OLLOWING DISCREPANCIES: I) FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECLARED NET PROFIT AT RS. 6 37 66 587/- ON TOTAL TURNOVER OF RS. 14 71 75 806/- YIELDING NET PROFIT RATE AT 43.3.% WHICH AS PER THE LD. ASSESSIN G OFFICER WAS ABNORMALLY HIGH. II) THE ASSESSEE STARTED SELLING THE GOODS IN ASSESSMENT YEAR 2002-03 ON 3.01.2001 AND HAS SHOWN THE ENTIRE PROFITS IN ASSESSMENT YEAR 2002-03 BY NOT SELLING EVEN A SINGLE PIECE OF ITS GOODS WHICH WERE MANUFACTURED SINCE NOVEMBER 2000. III) GENUINENESS OF BUSINESS AND BOOKS ARE DOUBTFUL. IV) FAILURE TO SATISFY PRE-REQUISITE CONDITION REGARDING SUBMISSION OF REPORT IN FORM NO.10CCB & 10CCAC. V) APPLICATION OF SUB-SECTIONS (8) & (10) OF SECTION 80IA OF THE ACT. 4 VI) IN-ADEQUATE EXPENDITURE ON ELECTRICITY WAGES FREIGHT AND OCTROI ETC. VII) EMPLOYMENT OF LESS THAN 10/20 WORKERS DURING THE YEAR. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LEARNED CIT (APPEALS) WHERE THE ASSESSEE FILED DETA ILED SUBMISSIONS WHICH WERE FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS AND AFTER CONSIDERING WHIC H THE LEARNED CIT (APPEALS) UPHELD THE DENIAL OF DEDUCTIO N BY HOLDING AS FOLLOWS: 8. I H AVE CONSIDERED THAT FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE REPLY OF THE ASSESSEE AND THE REMAND RE PORT OF THE LD. A.O. THE APPELLANT IS NOT ELIGIBLE FOR THE DEDUCTION U/S 80IB OF THE ACT IN VIEW OF THE FOLLOWING FACTS A ND DISCUSSION:- I) NON-PAYMENT OF EXCISE DUTY. THE APPELLANT HAS SUBMITTED THAT NO EXCISE DUTY IS CHARGEABLE IN RESPECT OF GOODS MANUFACTURED BY IT. THIS ACCEPTANCE BY THE ASSESSEE IN ITSELF PROVES THAT IT WAS NOT IN THE BUSINESS OF MANUFACTURING GOODS. II) MANUFACTURING ACTIVITY. THE ASSESSEE HAS FAILED TO EXPLAIN HOW ITS ACTIVITIES AMOUNTED TO MANUFACTURING TO THE SATISFACTION OF THE LD A.O. A S WELL AS THE UNDERSIGNED. THE CONSUMPTION OF ELECTRICITY IS TOO MEAGRE AT RS. 1 20 055/- TO JUST IFY HUGE TURNOVER OF RS.14 71 75 807/-. MONTHLY CONSUMPTION OF THE ELECTRICITY COMES TO RS 10 000/- MONTH. THE CONNECTED LOAD WAS ONLY 16 KWS AND THE ACTUAL CONSUMPTION WAS LESS THAN 1200 UNIT PER MONTH WHICH IS NOT SUFFICIENT EVEN FOR NORMAL NON- MANUFACTURING USE IF ELECTRICITY FOR BULBS TUBE LIG HTS AND FANS ETC. WHICH DOES NOT JUSTIFY MANUFACTURING OPERATION WITH THE AID OF POWER. THUS THE ASSESSEE 5 HAS FAILED TO PROVE THAT THE MANUFACTURING IF ANY WAS CARRIED OUT WITH THE AID OF POWER. III) EMPLOYMENT OF LESS THAN 10/20 WORKERS IN CONTRAVENTION OF PROVISION OF SUB-CLAUSE (IV) OF SECTION 80IB(2) OF THE ACT. KEEPING IN VIEW THE MEAGRE CONNECTED LOAD OF 16 K.W. AND MEAGRE ELECTRICITY EXPENSES OF RS.10 000/- PER MONTH THE ASSESSEE FAILS TO JUSTIFY THE USE OF POWER FOR MANUFACTURING. THEREFORE THE REQUISITE CONDITION FOR EMPLOYMENT OF WORKERS BECOMES 20 U/S 80IB(2)) OF THE ACT. AT THE TIME OF SURVEY ON 7/8/2003 ONLY FOUR REGULAR WORKERS WERE FOUND TO HAVE BEEN EMPLOYED. ONLY TWO REGULAR WORKERS WERE EMPLOYED DURING F. Y. 2001-02. NO WAGES REGISTER WAS FOUND DURING THE SURVEY. THE APPELLANT'S REPLY BEFORE THE UNDERSIGNED WAS THAT 15-16 WORKERS WERE EMPLOYED DOES NOT HELP THE ASSESSEE IN THIS REGARD. THE APPELLANT'S PLEA THAT CONTRACTOR'S LABOUR SHOULD BE DEEMED TO BE ASSESSEE'S WORKERS AS PER ASSESSEE'S REPLY DATED 20/03/2007 IS NOT ACCEPTABLE KEEPING IN VIEW THE SPECIFIC PROVISIONS OF SECTION 80IB(IV) SPECIFYING THE REQUISITE NOS. OF WORKERS FOR ELIGIBILITY U/S 80IB . TOTAL EXPENSES UNDER THE HEAD WAGES AT RS.9 90 000/- DO NOT JUSTIFY EMPLOYMENT OF THE WORKERS + OTHER STAFF CLAIMED AT 45. IV) SECURITY SERVICE CHARGES IT IS NOTICED THAT NO SECURITY SERVICE CHARGES WERE DEBITED FOR FINANCIAL YEAR 2000-01 AND ONLY RS. 5 558/- HAVE BEEN DEBITED FOR THE A.Y 2002-03 WHICH LEADS TO THE INFERENCE THAT NEITHER THE MANUFACTURING ACTIVITY WAS CARRIED OUT NOR THE STOCKS OF RAW MATERIAL AND FINISHED GOODS WERE MAINTAINED IN THE ASSESSEE'S FACTORY TO THE EXTENT CLAIMED. 6 V) GENUINENESS OF BUSINESS AND BOOKS OF ACCOUNT. APART FROM MEAGRE EXPENSES DEBITED THE BOOKS WERE NOT FOUND GENUINE FOR THE FOLLOWING REASONS: (A) THE BOOKS WERE PRODUCED ONLY AFTER NUMBER OF OPPORTUNITIES GIVEN BY THE ID. A. O. AFTER T HE ENTRIES WERE ALTERED TO INCORPORATE THE DISCREPANC IES IN THE IMPOUNDED DOCUMENT. (B) THE ASSESSEE DID NOT HAVE SEPARATE WAGES AND SALARY REGISTER. EXPENSES WERE NOT DEBITED FOR MANY NON-BUSINESS ACTIVITIES SUCH AS PURCHASE S SALES ACCOUNTS COLLECTION ACCOUNTS BANKING FU NCTIONS SECURITIES OFFICE EXPENSES ETC. (C) FOREIGN TRAVELLING EXPENSES RS. 36 22 059/- WERE NOT VERIFIABLE FROM THE IMPOUNDED BOOKS OF THE ASSESSEE NEITHER THE COMPLETE DETAILS WERE GIVEN. (D) DEALING OF THE ASSESSEE WITH THE THIRD PARTIES WAS NOT VERIFIABLE DUE TO RECEIVING BACK OF LETTERS U /S 133(6) OF THE ACT FROM THE FOLLOWING PARTIES WITH TH E REMARK THAT THEY HAVE CLOSED BUSINESS. (I) M/S. GANESH FABRICS LUDHIANA (II) M/S. FLEX TRADING LUDHIANA. (E) THE DEPARTMENT OF REVENUE INTELLIGENCE SEARCHED THE PREMISES OF THE ASSESSEE IN SEPT. 2004 IN CONNECTION WITH HIGHLY INFLATED EXPORT PRICE OF GOOD S LESSER DECLARATION OF VALUE BY IMPORTERS THAN THE SALE PRICE DECLARED BY THE ASSESSEE. THE ASSESSEE EVEN REFUNDED RS.15 LACS ON ACCOUNT OF EXCESS EXPORT INCENTIVE CLAIMED BY IT. THIS CONFIRMS THE DOUBT ABOUT NOT ONLY THE GENUINENESS OF BUSINESS BUT BOOKS AS WE LL. THE GOODS SENT TO DUBAI WORTH RS. 20 000/- IN INDIAN CURRENCY WERE CLAIMED TO BE WORTH RS.30 - RS.40 LACS 7 WHICH FURTHER CONFIRMS THE NON GENUINE NATURE OF ASSESSEE'S BUSINESS AND BOOKS. (F) THE EXPENSES UNDER THE HEAD FREIGHT OCTROI AND CARTAGE AT RS.72 435/- EXPORT FORWARDING EXPENSES AT RS.74 547/- AND PACKING EXPENSES AT RS.91 403/- ARE ALSO NOT COMMENSURATE WITH THE HUGE TURNOVER OF RS.14.71 CRORES IN THE ASSESSMENT YEAR 2002-03.TOTAL MANUFACTURING EXPENSES OF RS.15 55 635/-COMES TO 1.05% OF TURNOVER WHICH ARE TOO MEAGRE TO JUSTIFY H UGE TURNOVER OF RS.14.71 CRORES CONFIRMING THE DOUBT AB OUT GENUINENESS OF BUSINESS OF THE ASSESSEE. (G) THE TOTAL INVESTMENT OF THE ASSESSEE IN FIXED ASSETS IS RS.4 46 000/-WHICH REPRESENTS PLANT AND MACHINERY AS UNDER:- I) LAND RENTED II) BUILDING RENTED III) PLANT & MACHINERY RS.4 46 000/- IV) OTHER FIXED ASSETS NIL THE INVESTMENT OF RS.4 46 000/- DOES NOT JUSTIFY THE HUGE TURNOVER OF RS.14.71 CRORES BY ANY STRETCH OF IMAGINATION COUPLED WITH MEAGRE ELECTRICITY AND OTHER EXPENSES. (H) THE ASSESSEE IS SHOWING EXORBITANT PROFIT/AT 43.3% ON TURNOVER OF RS. 14.71 CRORES IN ASSESSMENT YEAR 2002-03 CRORES AT NALAGARH AS UNDER WITH PARTNERS VISITING THE FACTORY ONLY ONCE/TWICE A MON TH. TOTAL INCOME AT NALAGARH IS SHOWN AS UNDER FROM A. Y. 2002-03 TO A. Y. 2004-05 AS UNDER:- A.Y. TOTAL INCOME 2002-03 6 37 66 587 2003-04 1 37 68 524 2004-05 6 63 72 607 ON THE OTHER HAND THE SISTER CONCERN AT LUDHIANA M/ S. A. K. EXPORTS HAS DECLARED THE PROFITS FOR THE A. Y. 8 2002-03 AT 0.15%.OTHER SISTER CONCERNS HAVE RETURNE D MEAGRE INCOME AS UNDER: SR.NO. NAME TOTAL INCOME 1. M/S A.K. EXPORTS RS.34 480/- 2. M/S KIRPAL; ENTERPRISES RS.10 800/- 3. M/S KIRPAL EXPORTS RS.74 50 738/- LESS: EXEMPTION U/S 10A RS.68 71 893/- TOTAL INCOME RS.5 78 850/- THE IMPLICATION IS THAT THE HUGE TURNOVER/INCOME AT NALAGARH IS ONLY A DEVICE TO DIVERT THE PROFIT OF S ISTER CONCERN AT LUDHIANA WHERE THE PARTNERS ARE BASED TO CLAIM 100% TAX HOLIDAY BY ROUTING THE SALES VIA NALAGARH. VI) TRANSACTIONS WITH SISTER CONCERNS THE ASSESSEE IS ENGAGED IN TRANSACTIONS WITH SISTER CONCERNS NAMELY M/S A. K. EXPORTS LDH. M/S KIRPAL EXPORTS FALTA. THE ASSESSEE SOLD GOODS WORTH OF RS.14 71 75 806//- IT IS HELD THAT SISTER CONCERN WAS MANUFACTURING THE GARMENTS AT LUDHIANA AND THE SAME WERE SOLD FROM LUDHIANA BUT THE BILLS WERE ISSUED ON THE STATIONERY OF THE ASSESSEE M/S A.K. APPARELS. SISTER CONCERNS OF THE ASSESSEE HAVE SHOWN MEAGER PROFIT OF 0.15% AS COMPARED TO 43.3/ SHOWN BY THE ASSESSEE. THE ASSESSEE'S TRANSACTIONS WITH SISTER CONCERN ARE LISTED BELOW:- SR.NO. NAME AMOUNT 1 . A. K. EXPORTS 29 72 500.00 2. KIRPAL ENTERPRISES 1 13 45 000.00 3. KIRPAL EXPORTS 13 21 38 155.00 THEREFORE THE PROVISIONS OF SUB-SECTION (8) &(10) OF SECTION 80IA ARE CLEARLY APPLICABLE IN THE CASE OF THE 9 ASSESSEE WHICH PROVIDE FOR ADOPTING A REASONABLE BASI S FOR COMPUTING THE PROFIT OF THE ASSESSEE. VII) NON-FURNISHING OF FORM NO.LOCCB & 10CCAC THE ASSESSEE HAS FAILED TO FURNISH REPORTS IN FORM N O. L0CB AND 10CCAC WHICH IS ESSENTIAL FOR CLAIMING THE DEDUCTION U/S 80IB OF THE ACT. THE ASSESSEE HAD NOT HING TO SAY IN THIS REGARD BEFORE THE UNDERSIGNED. 9. KEEPING IN VIEW ALL THE FACTS AND DISCUSSI ON ABOVE THE ASSESSEE IS HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S 80IB O F THE ACT AND INCOME EARNED BY THE ASSESSEE IS TREATED AS INCOME FROM OT HER SOURCES AT RS.6 37 66 587/-. 6. AGGRIEVED BY THE SAME THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. IN THE COURSE OF HEA RING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE STA TED THAT ITS LIMITED PRAYER IN THE PRESENT APPEAL WAS THAT T HE MATTER BE RESTORED BACK TO THE LD.CIT(A) FOR FRESH CONSIDERATION SINCE THE SUBMISSIONS AND EVIDENCES GIVEN BY THE ASSESSEE IN SUPPORT OF ITS CONTENTION HAVE NOT BEEN DEALT WITH BY THE LEARNED CIT (APPEALS) HIS ORDER BEING LACONIC AND CRYPTIC. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO VARIOUS DOCUMENTS AN D EVIDENCES FILED BOTH BEFORE THE CIT (APPEALS) AND T HE ASSESSING OFFICER IN SUPPORT OF ITS SUBMISSIONS AND PLACED BEFORE US IN A VOLUMINOUS PAPER BOOK. 7. THE LEARNED D.R. ON THE OTHER HAND RELIED UPO N THE ORDER OF THE CIT (APPEALS) AND SPECIFICALLY POI NTED OUT TO THE FACT THAT SINCE THE ASSESSEE INDULGED IN TRA NSACTIONS 10 WITH SISTER CONCERNS AS POINTED OUT BY THE LD.CIT (APPEALS ) VIOLATING THE PROVISIONS OF SECTION 80IA (8) & (10) HAD NOT FURNISHED FORM NO.10CCB AND 10CCAC A ND HAD FAILED TO PROVE THAT IT WAS INDULGING IN MANUFA CTURING ACTIVITIES THE LD. CIT (APPEALS) HAD RIGHTLY DENIE D DEDUCTION UNDER SECTION 80IB OF THE ACT. 8. AFTER HEARING THE SUBMISSIONS MADE BY BOTH THE PARTIES AND GOING THROUGH THE ORDERS OF THE AUTHORI TIES BELOW AS ALSO VOLUMINOUS DOCUMENTS PLACED BEFORE US WE WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SUBMISSIONS MADE BY THE ASSESSEE IN SUPPORT OF ITS CONTENTION THAT IT WAS ELIGIBLE TO C LAIM DEDUCTION UNDER SECTION 80IB OF THE ACT HAVE NOT B EEN ADEQUATELY CONSIDERED BY THE CIT (APPEALS) WHILE PA SSING THE IMPUGNED ORDER. 9. A PERUSAL OF THE ORDER OF THE CIT (APPEALS) REVEALS THAT THE DENIAL OF CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT HAS BEEN UPHELD PRIMARILY FOR THE FOLLOWING REASONS : I) THAT THE ASSESSEE WAS NOT INDULGING IN MANUFACTURING ACTIVITY WHICH WAS EVIDENT FROM THE FACT THAT; A) IT WAS NOT PAYING ANY EXCISE DUTY; B) THE CONSUMPTION OF ELECTRICITY WAS MEAGER TO JUSTIFY A HUGE TURNOVER; C) NO SECURITY CHARGES WERE PAID; 11 D) INVESTMENT IN PLANT & MACHINERY WAS TOO LESS TO JUSTIFY THE HUGE TURNOVER OF THE ASSESSEE. II) THAT THE ASSESSEE EMPLOYED LESS THAN 10-20 WORKERS IN CONTRAVENTION OF THE PROVISIONS OF SUB- CLAUSE(IV) OF SECTION 80IB OF THE ACT. III) THAT THE BUSINESS OF THE ASSESSEE AS ALSO ITS BOOKS OF ACCOUNT WERE NOT GENUINE SINCE THE ASSESSE E PRODUCED BOOKS ONLY AFTER A NUMBER OPPORTUNITIES MANY NON-BUSINESS EXPENSES WERE FOUND DEBITED FOREIGN TRAVELING EXPENSES WERE NOT VERIFIABLE DEA LING WITH THIRD WAS NOT VERIFIABLE EXPORTS WERE FOUND INFLATED THE ASSESSEE HAD SIPHONED PROFITS FROM I TS SISTER CONCERN M/S A.K. EXPORTS TO ITS IMPUGNED BUSINESS SINCE IT HAD SHOWN HUGE PROFITS IN THIS BUSINESS AND MEAGER PROFITS IN THE BUSINESS OF THE SISTER CONCERN. IV) THE ASSESSEE WAS INDULGING IN TRANSACTIONS WITH SISTER CONCERNS M/S A.K. EXPORTS AND M/S KIRPAL EXPORTS IN VIOLATION OF THE PROVISIONS OF SECTION 80IA(8)AND (10) OF THE ACT. V) THE ASSESSEE HAD FAILED TO FURNISH REPORT IN FORM NOS.10CCB AND 10CCAC WHICH WAS ESSENTIAL FOR CLAIMING DEDUCTION UNDER SECTION 80IB OF THE ACT. 10. DURING THE COURSE OF HEARING BEFORE US LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO NUME ROUS REPLIES AND EVIDENCES FILED BOTH BEFORE THE ASSESSI NG OFFICER AS WELL AS THE CIT (APPEALS) TO PROVE THAT THE ASSESSEE WAS IN FACT INDULGING IN MANUFACTURING AC TIVITIES AND HAD EMPLOYED THE REQUISITE NUMBER OF WORKERS TO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IB OF T HE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE 12 NUMEROUS SUBMISSIONS MADE BEFORE THE CIT (APPEALS) AND PLACED AT PAPER BOOK PAGES 51 TO 131. MORE SPECIFIC ALLY WITH REGARD TO THE ALLEGATION OF THE NON-PAYMENT OF EXCISE DUTY THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT IT WAS SUBMITTED A NUMBER OF TIMES TO THE LEAR NED CIT (APPEALS) THAT SINCE THE ASSESSEE WAS NOT CHARG EABLE TO EXCISE DUTY IN RESPECT OF THE GOODS MANUFACTURED THE SAME WAS NOT BEING PAID. RELEVANT EXTRACT OF THE EX CISE DUTY ACT WAS ALSO PLACED BEFORE THE CIT (APPEALS). AS FOR THE LOW CONSUMPTION OF ELECTRICITY THE LEARNED COU NSEL FOR THE ASSESSEE POINTED OUT THAT IN A NUMBER OF COMMUNICATIONS IT WAS EXPLAINED TO THE CIT (APPEALS ) THAT CONSIDERING THE NATURE OF BUSINESS CARRIED ON BY TH E ASSESSEE AND ALSO THE FACT THAT GENERATOR WAS INSTA LLED AT THE PREMISES OF THE ASSESSEE AND GENERATOR EXPENSES WERE ALSO INCURRED THE POWER CONSUMED WAS ENOUGH TO CAR RY ON THE ACTIVITY OF THE ASSESSEE. AS FAR AS NO SECU RITY SERVICE CHARGES THE LEARNED COUNSEL FOR THE ASSESS EE DREW OUR ATTENTION TO THE FACT THAT IT WAS EXPLAINED TO THE CIT (APPEALS) THAT SUCH SERVICES WERE NOT REQUIRED BY T HE ASSESSEE AND DID NOT ANY WAY REFLECT ON THE FACT TH AT IT WAS NOT INDULGING IN MANUFACTURING ACTIVITY. FOR T HE LOW INVESTMENT IN PLANT & MACHINERY THE LEARNED COUNSE L FOR THE ASSESSEE DREW OUR ATTENTION TO THE DETAILS OF P LANT & MACHINERY WHICH WERE USED BY THE ASSESSEE IN ITS BUSINESS. COPIES OF BILLS WERE SUBMITTED TO THE AUTHORITIES BELOW THE NATURE OF BUSINESS EXPLAINED TO THE CIT (APPEALS) AND STATED THAT BY VIRTUE OF ALL THES E THINGS 13 IT WAS DULY EXPLAINED TO THE CIT (APPEALS) THAT THE INVESTMENT IN PLANT & MACHINERY WAS ENOUGH FOR THE TURNOVER ACHIEVED BY IT. WITH REGARD TO THE NUMBER OF WORKERS EMPLOYED THE LEARNED COUNSEL FOR THE ASSES SEE POINTED OUT THAT TIME AND AGAIN IT WAS POINTED OUT TO THE CIT (APPEALS) THAT THERE WERE MORE THAN 40 WORKERS EMPLOYED. THE LEARNED COUNSEL FOR THE ASSESSEE STA TED THAT THE WAGES REGISTER SHOWING 35 TO 40 WORKERS EMPLOYED THE FORM SUBMITTED TO THE INDUSTRY DEPART MENT SUBMITTING THE NUMBER OF WORKERS EMPLOYED THE STATEMENT RECORDED OF 35-40 EMPLOYEES DURING SURVEY ADMITTING THAT THEY WORKED FOR THE ASSESSEE & THE C ANTEEN RECORDS SHOWING THE NUMBER OF WORKER WHO WERE BEING PROVIDED CANTEEN SERVICES WERE ALL FURNISHED TO TH E CIT (APPEALS) TO PROVE THAT IT EMPLOYED THE REQUISITE N UMBER OF EMPLOYEES TO BE ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE LEARNED COUNSEL FOR T HE ASSESSEE ALSO DREW OUR ATTENTION TO THE ORDER OF CH IEF JUDICIAL MAGISTRATE SOLAN H.P. IN A COMPLAINT FIL ED BY THE ACIT (TDS) AGAINST THE ASSESSEE WHEREIN THE CJM IN HIS ORDER HAD NOTED THAT SHRI KAILASH PATI MISHRA H AD APPEARED BEFORE HIM FROM THE INCOME TAX OFFICE AND HAD STATED THAT AT THE TIME OF SURVEY THERE WERE 44 WOR KERS AND THEIR STATEMENTS WERE RECORDED. THE LEARNED CO UNSEL FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE OBSERVATION OF THE CJM IN HIS ORDER THAT SHRI BHUPI NDER SAINI HAD ALSO BEEN EXAMINED AND HE HAD STATED THAT AT THE TIME OF SURVEY THERE WERE 42-45 WORKERS. THE L EARNED 14 COUNSEL FOR THE ASSESSEE STATED THAT THIS ALSO PROV ED THAT THE ASSESSEE WAS EMPLOYING MORE THAN 40 WORKERS AT THE TIME OF SURVEY. 11. HAVING GONE THROUGH THE VOLUMINOUS DOCUMENTS WE FIND THAT THE ASSESSEE HAD MADE DETAILED SUBMISS IONS TO CONTROVERT THE ADVERSE OBSERVATIONS OF THE AO AN D IN SUPPORT OF ITS CONTENTION THAT IT WAS ELIGIBLE TO C LAIM DEDUCTION U/S 80IB OF THE ACT AND ALSO SUPPORTED TH E SAME WITH EVIDENCES BUT THE ORDER OF THE LD CIT(A) WE FIND HARDLY HAS ANY MENTION REFERENCE OR DISCUSSI ON OF THE EXPLANATION OR DOCUMENTS SUBMITTED BY THE ASSES SEE. THE LEARNED CIT (APPEALS) HAS BASED HIS FINDINGS O N PRESUMPTIONS THAT SINCE THE ELECTRICITY CONSUMPTION IS LOW NO SECURITY CHARGES HAVE BEEN INCURRED THE BO OKS OF ACCOUNTS ARE NOT GENUINE EXPENSES INCURRED ON FREI GHT AND OCTROI ARE MEAGER INVESTMENT IN PLANT AND MACH INERY IS TOO LOW NO MANUFACTURING ACTIVITY COULD HAVE BE EN UNDERTAKEN OR THAT THE TOTAL EXPENSES UNDER THE HE AD WAGES DO NOT JUSTIFY THE EMPLOYMENT OF WORKERS AND STAFF AS CLAIMED BY THE ASSESSEE. IT IS TRITE LAW THAT AN Y FINDING OF FACT ARRIVED AT BY ANY AUTHORITY HAS TO BE BASED ON EVIDENCES AND NOT MERE SURMISES AND CONJECTURES MOR E SO WHEN EVIDENCES CONTROVERTING THE FINDINGS HAVE BEEN PRODUCED BEFORE THE AUTHORITY CONCERNED. IN SUCH CIRCUMSTANCES THE EVIDENCES HAVE TO BE DULY DEALT W ITH BY WAY OF A SPEAKING ORDER AND THE FINDING OF FACT ARR IVED AT DULY SUBSTANTIATED. 15 12. IN VIEW OF THE ABOVE WE CONSIDER IT FIT TO RE STORE THE ISSUE OF ELIGIBILITY OF CLAIM OF THE ASSESSEE TO DEDUCTION U/S 80 IB BACK TO THE FILE OF THE CIT (A PPEALS) TO CONSIDER IT AFRESH IN THE LIGHT OF EVIDENCES FI LED BY THE ASSESSEE AND THEREAFTER PASS A DETAILED SPEAKING O RDER. WE MAY ADD THAT THE ASSESSEE BE GRANTED DUE OPPORTU NITY OF HEARING. 13. THE APPEAL OF THE ASSESSEE IN ITA NO.83/CHD/2008 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.84/CHD/2008 : ITA NO.85/CHD/2008 : 14. IT IS RELEVANT TO OBSERVE HERE THAT THE FACT S AND CIRCUMSTANCES OF THESE TWO CASES ARE SIMILAR TO THA T IN ITA NO.83/CHD/2008 AND THE FINDINGS GIVEN IN ITA NO.83/CHD/2008 SHALL APPLY TO THESE TWO CASES ALSO WITH EQUAL FORCE. 15. WE MAY ADD THAT IN BOTH THE ABOVE APPEALS THE ASSESSEE HAS BESIDES CHALLENGING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB ALSO RAISED A GROUND AGAINST THE DENIAL OF DEDUCTION UNDER SECTION 80IB TO MISCELLANEOUS INCOME EARNED BY IT. SINCE WE HAVE RESTORED THE ISSUE OF ALLOWABILITY OF DEDUCTION UND ER SECTION 80IB TO THE CIT (APPEALS) AND THE OTHER GR OUND BEING CONNECTED TO IT WE DIRECT THE SAME ALSO TO B E DECIDED ALONGWITH IT. 16 16. THE APPEALS OF THE ASSESSEE IN ITA NO.84 & 85/CHD/2008 ARE THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH OCTOBER 2016 *RATI/RKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR ITAT CHANDIGARH