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TMI Blog2006 (3) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IB was excessive. The Assessing Officer, on the basis of judgment in the case of Gem India Mfg. Co.[ 2000 (12) TMI 7 - SUPREME COURT] recorded his satisfaction that the activity of the assessee in breaking the boulders into small stones was not manufacturing activity. Therefore, he has reasons to believe that the deduction claimed by the assessee was not correct. As such, a part of his income chargeable to income-tax has escaped assessment. In our opinion, in view of the ratio laid down by the Hon'ble jurisdictional High Court in the aforesaid referred to case i.e., the case of Swaraj Engine Ltd.[ 2002 (8) TMI 27 - PUNJAB AND HARYANA HIGH COURT] , the Assessing Officer rightly started the reassessment proceedings. Thus, we set aside the order of the learned CIT (Appeals) and accordingly, this ground of the departmental appeal is allowed. In the result, appeals of the department are allowed. - Member(s) : M. A. BAKSHI., N. K. SAINI. ORDER Per N.K. Saini, Accountant Member . - These two appeals by the Department are directed against the orders of Ld. CIT (Appeals), Palampur, dated 24-2-2005 and 11-2-2004 for the assessment years 2001-02 and 2002-03 respectively. These appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable to the profit gains from the industrial undertaking engaged in infrastructural development, whereas section 80-IB was applicable to industrial undertaking manufacturing and producing article or thing. The Assessing Officer had not taken serious cognizance for the technical mistake committed by the assessee by wrongly mentioning the section 80-IA instead of section 80-IB. The nature of the business of the assessee was that of converting the boulder into stones and bajri. According to the Assessing Officer, there was no manufacturing or production but processing of large pieces of stones into small pieces of stones and the crushing of big stones into small pieces was not an activity which could properly be regarded as manufacture. He opined that the deduction under section 80-IB was not available to the assessee. The reliance was placed on the judgment of Hon'ble Supreme Court in the case of CIT v. Gem India Mfg. Co. [2001] 249 ITR 307. The contention of the assessee before the Assessing Officer was that the business of the assessee amount to an industrial undertaking who was engaged in manufacture or production of any article or thing. Reliance was placed on the following c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Hemsons Industries [2001] 251 ITR 693 (AP), (iv) Aspinwal Co. Ltd. v. CIT [2001] 251 ITR 323 (SC), (v) Kehar Stone Crusher v. General Manager, Distt. Industries Centre, Jabalpur [1990] 79 STC 149 (MP) (FB), (vi) CWT v. Jagdish Singh Sekher [1987] 167 ITR 558 (Pat.), (vii) CIT v. S.L. Aggarwala Co. [1992] 197 ITR 239 (Ori.), (viii) CIT v. J.B. Kharwar Sons [1987] 163 ITR 394 (Guj.), (ix) CIT v. Gogte Minerals (No.2) 225 ITR 605 (Kar.), (x) Ganesh Trading Co. v. State of Haryana [1973] 32 STC 623 (SC), (xi) Asstt. CIT v. Oscar Laboratories (P.) Ltd. [2002] 83 ITD 408 (Chd.), (xii) CIT v. Gem India Mfg. Co. [2001] 249 ITR 307 (SC). It was further submitted that the rebate allowed in an earlier year could not be disallowed in the subsequent year. The reliance was placed on the following case laws: (i) M.M. Patel Sons (P.) Ltd v. ITO [1982] 1 ITD 82 (Nag.), (ii) CIT v. Bhillai Engg. Corpn. (P.) Ltd [1982] 133 ITR 687 (MP), (iii) CIT v. Vegetable Products Ltd [1973] 88 ITR 192 (SC), (iv) Union of India v. Onkar S. Kanwar [2002] 258 ITR 761 (SC) 3.1 The learned CIT (Appeals), after considering the submissions of the assessee observed that the assessee was engaged in crushing of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Onkar S. Kanwar [2002] 258 ITR 761 (SC) (xi) Aspinwall Co. Ltd. v. CIT [2001] 251 ITR 323 (SC), (xii) CIT v. S.L. Aggarwala Co. [1992] 197 ITR 239 (Ori.), (xiii) CIT v. Jalna Seeds Processing Refrigeration Co. Ltd. [2000] 246 ITR 156 (Bom.), (xiv) CIT v. Mysore Minerals Ltd (No. 1) [2001] 250 ITR 725 (Kar.), (xv) CIT v. Hemsons Industries [2001] 251 ITR 693 (AP), (xvi) CIT v. Goverdhanbhai Jethabhai Tobacco Industries (P.) Ltd. [2002] 258 ITR 727 (Guj.). 6. We have heard both the parties and gone through the material available on record along with various citations cited by both parties. The crucial issue to be decided before us is whether the breaking of boulders into stones i.e., 'gitty' is a manufacturing activity or not and whether the assessee is eligible for deduction under section 80-IB or not. 6.1 The deduction under section 80-IB is available to an Industrial Undertaking if it manufactures or produces any article or thing not being any article or thing specified in the list in the Eleventh Schedule. The words 'Industrial Undertaking' has not been defined in the Income-tax Act, however, cropped up many a time before the Hon'ble Supreme Court and various High Courts. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) Ltd. v. Asstt. CIT [2002] 255 ITR (AT) 14, also interpreted the meaning of the word 'manufacturing' in the following words: "Manufacturing normally involves consumption of a particular commodity in the process of manufacturing of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture, is the end result of one or more processes through which the original commodity is made to pass. The nature arid extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes take the commodity to the point where commercially it can no longer be regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place'." The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' taken in bringing into existence new goods by a process which mayor may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods." 6.4 From the combined reading of the ratios laid down in the aforesaid referred to cases, it can be concluded that when the change or a series of changes takes one commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognized as a new and distinct article, then it can be said that ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed case, their Lordships of the Hon'ble Apex Court have held that the stone, as such and 'gitty' and articles of stone are all of similar nature though by size, they may be different. Even if 'gitty', 'kankar', stone, blast etc. may all be looked upon a separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that entry 40 of the Notification is intended to describe the same as not stone at all. In fact the term 'stone' is wide enough to include the various forms such as gitti, kankar, stone blast. 6.7 Similarly, in the case of Lucky Minmat (P.) Ltd. v. CIT [2000] 245 ITR 830, Their Lordships of the Hon'ble Apex Court at page No. 831 while distinguishing the judgment of the Hon'ble Rajasthan High Court in the case of CIT v. Best Chem Limestone Industries (P.) Ltd. [1994] 210 ITR 883 had observed that the conversion into lime and lime dust or concrete by stone crusher could legitimately be considered to be a manufacturing process while the mere mining of lime stone and marble and cutting the same before it was sold in the market could not be so considered. In the present case also, there was cutting of boulders into small piece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. We, therefore, admit this additional ground. 9. The facts related to this issue in brief are that the return of income filed by the assessee on 24-10-2001 for the relevant assessment year was processed on 22-2-2002 and the returned income was accepted. Thereafter, notice under section 148 of the Income-tax Act was issued on 9-12-2003 for reassessment. The main point on which the notice under section 148 was issued "for reassessment was whether the assessee qualified for deduction under section 80-IA/80-IB of the Income-tax Act. The Assessing Officer pointed out that Hon'ble Supreme Court in the case of CIT v. Gem India Mfg. Co. Ltd. [2001] 249 ITR 307 held that where there was no material on record to support the claim that either in common parlance or in commercial parlance, raw diamonds were not the same thing as polished and cut diamonds and they were different entities in the commercial world; the process of cutting and polishing of raw diamonds could not be said to be as result of manufacturing or production. On the same analogy, the Assessing Officer was of the view that the crushing of big s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that above facts were already on the record at the time of processing the return under section 143(1) of the Income-tax Act. The learned CIT (Appeals), therefore, was of the view that the reasons recorded by the Assessing Officer did not bring out any new ground making out an objective satisfaction arrived at by the Assessing Officer. He further observed that it was merely a fresh application of mind to the same set of facts or -merely a change of opinion which did not confer jurisdiction on the Assessing Officer to reassess income under section 147 of the Act. According to the learned CIT (Appeals), all the primary facts were disclosed and there was no omission or failure on the part of the assessee to disclose fully and truly, all material facts for claiming the deduction and necessary for assessment. He further stated that all the information required was available on the record when the original assessment was framed. The Assessing Officer did not found it necessary to require the assessee to justify the claim for deduction at the time of processing return or within 12 months from the end of the assessment year and that the information available on the record clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on record and all the necessary documents were already furnished to the Assessing Officer who had accepted the claim of the assessee while processing the return under section 143(1) of the Income-tax Act. So, the re-opening was not valid as was held by the learned CIT (Appeals). The reliance was placed on the following case laws: (i) Manish Ajmera v. Asstt. CIT [2005] 95 ITD 111 (Chd.), (ii) Marudhar Hotels (P.) Ltd. v. Dy. CIT [2003] 259 ITR 509 (Raj.), (iii) Vipin Khanna v. CIT [2002] 255 ITR 220 (Punj. Har.). 12. We have heard both the parties on this issue and gone through the material available on the record along with the various judicial pronouncements cited by both the parties. In the present case, it is not in dispute that the Assessing Officer processed the return under section 143(1)(a) of the Income-tax Act within one year of filing the return by the assessee. In our considered view, the Assessing Officer while processing the return, is not supposed to express any opinion, but only an intimation is to be sent to the assessee specifying if any tax or interest is due on the basis of such return after adjustment of any tax deducted at source/advance tax paid/tax paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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