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TMI Blog2015 (12) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... ShriL K S Dehia ORDER PER B.R. BASKARAN (AM) The appeal filed by the assessee is directed against the order dated 20.2.2014 passed by Ld CIT(A)-34, Mumbai and it relates to the assessment year 2010-11. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the rejection of the claim for deduction u/s 10B of the Act. 2. The facts relating to the issue cited above are discussed in brief. The assessee is a partnership firm formed with the objective of manufacture of Diamond studded gold jewellery. The assessee is approved as 100% EOU by the Development Commissioner, SEEPZ, SEZ, Government of India, vide letter of Permission No. PER:16(2008)/ SEEPZ/EOU/IA-II/34/08-09/10046 dated 15.12.2008 for manufacture and export of Plain/or studded handmade jewellery studded with diamonds, precious, semi precious and non-precious stones manufactured out of gold, silver, platinum metal. During the year under consideration, the assessee claimed deduction u/s 10B of the Act to the tune of ₹ 14.31 crores. The assessing officer examined the said claim of the assessee and took the view that the assessee has not carried out any manufacturing activity and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done by the assessee. As held by the Hon‟ble ITAT in para 20 of the order, Income Tax proceedings are Civil Proceedings and governed by preponderance of probabilities. In the case of the assessee, no designs or jewellery were found during survey, nor could be produced by the assessee. The assessee failed to give address of parties, which are claimed to have been doing labour work for precious diamond jewellery, when they could not be traced by the Inspectors. The expenses for job work are that meagre as compared to turnover and shown as paid by cash. Hence, if we apply all these evidences to test of human probability, it emerges that no manufacturing activity was carried out by the assessee. Hence, applying the preponderance of probabilities and entire circumstances as discussed above, it is proved beyond doubt that the assessee did not carry out any manufacturing activity and hence not eligible for deduction u/s 10B of the Act. 3. The assessing officer, in the alternative, has taken the view that the activities claimed to have been carried on by the assessee cannot also be considered as eligible manufacturing activity as per the definition of the term manufacture given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the AO. The Ld CIT(A) also referred to the statements recorded from employees of the assessee and observed that all the workers of the assessee are actually employed in another concern named M/s Blackstone Gem Jewellery, Surat. Accordingly the Ld CIT(A) dismissed the appeal of the assessee. Aggrieved, the assessee has filed this appeal before us. 5. The Ld A.R submitted that the assessee is manufacturing only handmade diamond jewellery of standard designs and hence it does not require huge machineries. He submitted that the assessee has been granted permission by SEEPZ, SEZ only to manufacture and export Plain or studded Handmade Jewellery only. He further submitted that the assessee is importing diamonds and the gold bars are purchased locally. He submitted that the import of diamonds is carried out at the control and supervision of Customs and Excise authorities and they affix their signatures in the purchase register maintained by the assessee. Accordingly he submitted that the import of diamonds stand proved by the assesee. The Ld A.R invited our attention to the copies of purchase register to prove the above said submissions. He further submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gold jewellery so manufactured. He further submitted that the Superintendent of Central Excise has conducted audit with regard to MOT charges, which is paid to the Central excise department for deputing an officer to accompany the goods at the time of its movement outside the official hours. The relevant audit report is attached at page 380 of the paper book. He submitted that the MOT charges so paid further vindicate the point that the assessee has actually manufactured jewellery. He further submitted that the Central Excise department has accepted that the assessee is manufacturer of jewellery. Accordingly he submitted that the tax authorities are not justified in rejecting the explanations given and evidences furnished by the assessee. The Ld A.R further placed his reliance on the following case law:- i) ITO V/s AAR ESS Exim (P) Ltd (2013) 157 TTJ 98 (Delhi_Tribunal); ii) Girnar Industries V/s CIT (2011) 338 ITR 227 (Kerala High Court); iii) ITO V/s Ektara Exports (P) Ltd (2006) 152 Taxman 18 (Kolkata Tribunal); iv) CIT V/s M/s Ektara Exports (P) Ltd ITA No.657 of 2008 (Calcutta High Court): and v) T.Two International (P) Ltd. V/s ITO (2010) 122 ITR 255 (Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of height and width of the diamond so that they can manufacture the gold portion accordingly. However, the labourer who was produced before the bench admitted that no such details are given to him. He further submitted that the four workers who were claimed to be fitting the diamonds were found to be the employees of another firm named M/s Blackstone Gem Jewellery located at Surat. He further submitted that the survey operations conducted by the revenue proved that the assessee did not carry on any manufacturing activity. The manager of the assessee firm, Shri M.H. Gandhi, admitted that he was not aware of manufacturing activity and he could not furnish the labourer details. He further submitted that the paper documents maintained by the assessee only show the receipt and outgo of the materials/goods and they are not sufficient to prove the manufacturing activity‟ in terms of sec. 10B of the Act. 10. He further submitted that the assessing officer has taken alternative view that the manufacturing work done through job work given to outsiders who carry out the work at outside the premises of the assessee would not fall under the category of manufacturing under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption that there was no manufacturing activity. The Ld A.R further submitted that the jewellery so manufactured has been duly exported under the supervision of Customs authorities. Accordingly he submitted that the activities carried on by the assessee would fall in the category of manufacturing . 15. We notice that the tax authorities have not expressed any adverse view on the import of diamonds, purchase of gold and export of jewellery. The ld. AR has further submitted that the import of diamonds and export of jewellery are monitored by Central Excise and Customs Authorities. He has also submitted that the import of diamonds, purchase of jewellery have duly been established by the assessee with the help of Bond Register and DPCC Register maintained as per the provisions of the Central Excise and Customs Act. Before us, the assessee also furnished copies of bond register, DPCC register; Finished goods register to substantiate the claim of purchase of diamonds and gold and manufacture of jewellery. A perusal of the said documents would show that the assessee has duly recorded the details relating to the same and they have also been inspected by the Central Excise and cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be low, then an addition towards suppression of expenditure, having regard to the fair market value of such services, may be called for and the same would not give rise to the presumption that the assessee did not carry on any manufacturing activity. Similarly the non-accounting of consumables in the books of account may also warrant an addition. However, it is pertinent to note that the assessing officer has not rejected the books of accounts nor did he point out any defects in the books of account, meaning thereby, even though the assessing officer had commented upon the expenditure incurred by the assessee, he did think it necessary to examine about the adequacy of expenditure booked by the assessee. 18. The tax authorities have also pointed out that the assessee could not furnish copies of standard designs of jewellery and hence they have taken adverse view. However, the fact that the assessee has exported jewellery has not been disputed and hence the non-furnishing of designs may not, in our view, militate against the assessee. The ld D.R also referred to the report given by the Tax auditor, wherein the activities of the assessee was stated to have been stated as tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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