9911796707
TMI Blog2019 (12) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee at Baddi have not been challenged by the Revenue in the revised grounds of appeal. These facts clearly show that assessee has entered into genuine business activities. Even if sales are made to three parties only, there is nothing wrong against the assessee. It may also be noted here that in respect of some items of manufacture, A.O. has allowed the claim of assessee in scrutiny assessment under section 143(3) for A.Y. 2013-2014 vide Order Dated 31.03.2016 after calling a report from Income Tax Officer, Baddi. Therefore, rule of consistency apply to the facts of the case and Department cannot take a different stand against the assessee in different assessment years. It may also be noted here that it has not been clarified, whether report of the Inspector or statement of Shri Kusum Kumar Sethia was supplied to the assessee for rebuttal ? Therefore, such report and statement cannot be read in evidence against the assessee. It may also be noted here that it is a Departmental Appeal and no documentary evidences have been produced before us to contradict or rebut the finding of fact recorded by the CIT(A) in favour of the assessee. Therefore, in the absence of any evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 6. The appellant craves leave to add, allow or amend any or all the ground of appeal before or during the course of hearing of the appeal. 2. Briefly the facts of the case are that the assessee firm has filed return of income declaring NIL income. The assessee is engaged in business of manufacturing of Perfumery and Fragrances at its production unit at Burnwala, Baddi Distt, Solan (Himachal Pradesh). The A.O. on perusal of the return of income found that assessee has claimed deduction of ₹ 3,71,26,467/- under section 80IC of the Income Tax Act from the gross total income. In order to ascertain the genuineness of the deduction claimed by the assessee, the Profit Loss Account, Balance Sheet and Audit Report filed in Form 10CCB, along with relevant books of accounts were examined by the A.O. in detail. The A.O. on examination of details/books of accounts has made certain observations against the assessee. The observations made by the A.O. against the assessee were with respect to incorrect claiming of deduction under section 80IC of the I.T. Act by furnishing inconsistent information in Form 10CCB Audit Report. It is observed that scrutiny of the audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. noted that Perfumes and Fragrances is not a business enlisted in Schedule-XIV. Therefore, assessee s case is not even covered under section 80IC(2)(a)(ii) of the I.T. Act, since the assessee s business premises located at Buranwala, Tehsil Baddi, District Solan is not covered under the Industrial area notified vide Notification Dated 14.11.2003 [as amended by Notification dated 27.08.2008]. Therefore, the claim of the assessee was also rejected on that count. The assessee further filed detailed reply before A.O. to show that the assessee firm has began manufacturing activities from 06.12.2009 after acquisition of plant and machinery required for manufacturing the products of the assessee firm. The Chartered Accountant has mentioned 02.11.2009 as commencement of operation/activity which is the date of execution of Partnership Deed. Therefore, the Chartered Accountant has taken the same date of commencement of operation/activity of the assessee firm. Confirmation of Chartered Accountant was also filed. It was submitted that assessee firm has began manufacturing of its product on 06.12.2009 in notified area of Himachal Pradesh. The A.O, however, again did not accept the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Kusum Kumar Sethia who has filed income tax return in Gauhati, who has close association with the assessee firm. The statement of Shri Kusum Kumar Sethia was recorded in which he has admitted to have given loan to the assessee firm. It was also noted that in the firms of Shri Kusum Kumar Sethia there are cash deposits in their bank accounts and no evidence have been produced why such cash have been deposited. The A.O. also noted that neither the assessee nor the witness in the case of assessee explained reason or produced the documentary evidences of alleged unsecured loans, sales, advance given and commission etc., paid. Further, statement of assessee is noted in the assessment order in which assessee explained that sale is being made to few parties through limited Consignment Sale Agents [ CSA ] and Dealers for better control of sales instead of numerous Dealers, Distributors. It was further submitted that above firms are CSA of the firm operating in Uttar Pradesh by Shri Kusum Kumar Sethia who is filing income tax return in Gauhati because he is working for gain at Gauhati also. The assessee further explained that CSA is making cash sales as per trade practice. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The unit at Baddi is not equipped with plant machinery to carry out production:- (i) As per the assesee's note submitted vide its letter dated 08/02/2013, there was basic requirements of sufficient items of Plant Machinery (as discussed in Para C examination of genuineness of actual 'Manufacture' of 'Perfumes Fragrances'.) and without the same production of salable goods/items could have not taken place. 4. Definite evidence that Sales claimed by the assessee are not genuine. (i) As discussed above, the assessee did not produce/manufacture Perfumery Fragrances and also failed to produce the sample or evidence of produced goods, the claim of the assessee in respect of sales is bogus and without any documentary evidences of sale bills/vouchers/name of the parties to whom it is made. Therefore, the claim of the assessee for the deduction u/s 80IC of I.T. Act 1961 of ₹ 3,71,26,467/- is disallowed and the same is added back to the income of the assessee. 3. The assessee challenged the addition before the Ld. CIT(A). The detailed written submissions of the assessee on each and every aspect noted by the A.O. were e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexure 8 26.11.2009 Some purchase bill of Raw materials from outside suppliers directly delivered at Buranwala, Baddi, Himachal Pradesh. Copy of bills Annexure 9 26.11.2009 1 (one) S.S. Tank with Fittings (Perfumery Tank) Capacity 1000 Ltr. Copy of bills as Annexure 10 26.11.2009 2 (two) Nos. of Sintex Tank (For Perfumery Mixing) Capacity 2100 Ltr each Copy of bills as Annexure 11 02.12.2009 Declaration filed with Excise Department to claim exemption under Notification No.50/2003 Dated 10.06.2003 Duly acknowledged copy of Letter submitted with Excise Department as Annexure 12. 04.12.2009 Purchase of Hacop Motorised Barrel Pump Copy of bill as Annexure 13 05.12.2009 Purchase of 4/6 (four) Nos of Sintex Tank (For Perfumery Mixing) Capacity 2100 Ltrs each. Copy of bills as Annexure 14 05.12.2009 Purchase of 2 (two) nos. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fourteenth Schedule. And, the commencement of business is 2nd November, 2009 i.e. before installation of necessary plant machinery which has takes place 24th Nov., 2009 to 6th Jan, 2010. And, it is seen from registration accorded by Excise Department vide Reg. no - 02030100434 for business mentioned therein as Manufacturing of Industrial Perfumes Flavoured Pan Chatni (Pan Flavouring Material) while in Form 10CCB column No. 25(i)(c) it is mentioned as manufacturing of Perfumes Fragrances . And, the business premises of the assessee is not located in the area of notified by the CBDT vide Notification No.- S.O. 1296(E) dated 04.11.2003 and also not produced the article mentioned in Schedule - XIV requisite for eligibility of deduction u/s - 80IC(2)(a)(ii) of The Income Tax Act, 1961. The AR of the appellant contended that the appellant has fulfilled and satisfied all the three condition as laid down u/s.80IC of the Act, 1961 which are as under : 1. The appellant firm has manufactured industrial perfumes and fragrances, which does not fall under any article or things specified in Thirteenth Schedule of the Income Tax Act, 1961. 2. The appellant fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtently mention Yes instead of No in Para 25(f) of Form 10CCB of the Income Tax Act, 1961. The AR also furnished an Affidavit of the Auditor dated 22.03.2013 confirming the said fact before the AO during the course of assessment proceedings. The AO further alleged that plea of figures in Audit Report being mistakenly incorrect is only an afterthought on the part of assessee, and ought to be rejected and the assessee cannot alter statutory statement / report as per his whims at later stage claiming these vitals discrepancies to be mere clerical mistake . The AR contended in this respect that the AO himself mentioned in the assessment order that Perfumes Fragrances is not a business enlisted in Schedule - XIV, then how these mistake can be after thought of the appellant. The AR further contended that AO himself satisfied that the article / thing produced by the appellant is not listed in Schedule Thirteenth of the Income Tax Act, 1961. The AR further contended that to claim deduction under the said section it is not compulsory to produce / manufacture article / thing which is listed in Schedule -Fourteenth as there is other provision i.e. 80-IC(2)(b)(ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules in support of Commencement of manufacturing of perfumery, Sales Tax assessment order passed by Assessing Authority. BBN, Baddi - I. Himachal Pradesh, Sales Tax returns and Stock transfer Challans of finished goods along with Declaration under Form - XXVI - A issued by Excise and Taxation Department. Himachal Pradesh and GRs of Transporters and Month wise detail of salary wages paid to workers employees along with their name addresses, electricity bill for consumption of electricity for the manufacturing plant. The same has been furnished before the undersigned and have been duly considered and placed on record. The AR further contended that the A.O. himself acknowledged in the assessment order that assessee produced pair of empty plastic Jar with a label showing the name Gopal Perfumery Compound, 505 and 435. The AR further contended that all purchase and sales made to and from manufacturing undertaking at Buranwala, Himachal Pradesh has to pass through the Himachal Pradesh sales Tax Barrier and at the time of passing the said Barrier, Sales Tax Declaration Form No. - XXVI - A has to be issued which is ample proof to support that the Raw Material had actually b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a question on liberty of business houses. It is pertinent to note that decision in respect of running of business lies solely with the owner, partners or director of that business and no one can interfere in the decision taken by the key person of that business because he is the only person who knows need of its business and how to accomplish the same. It is well settled law that the assessing officer should assess the income of the assessee as per the provisions of the Income tax Act, 196 and should not step into shoes of the assessee and tell how to do business and cited judicial precedent rendered by Hon ble Supreme Court and High Court in support of its contention. The AR submitted various documents in support of its contention that the manufacturing unit is never been shared by M/s Gopal Industries during the course of assessment proceedings such as Lease Agreement dated 09.11.2009 between M/s Flakes N Flavourz for plot bearing khasra No. 117. Baddi - Barotiwala Road, Village Buranwala, Distt. Solan, Himachal Pradesh along with cop}' of patta or registry of land. Addendum to Partnership Deed dated 26.09.2012 along with copies of PAN issued to the appellant in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hence does not contain detailed process along with detail of material such as quantity, composition and plant machinery used at different stage of production, so on the basis of said note, allegation in respect of shortage of plant machinery is bad in law while the appellant has submitted detail of plant machinery installed at its manufacturing unit along with invoices / bills / Transfer challans of fixed assets purchased along with Form XXVI-A declaration under Excise and Taxation Department. Himachal Pradesh in respect of goods / material / capital goods which is an ample proof of transporting capital goods to Buranwala unit, Himachal Pradesh. The A.O. also alleged that that pivotal plant machinery has been purchased in Delhi and no evidence of its transportation to manufacturing unit at Buranwala has been furnished by the appellant, hence, no vital plant machinery installed at manufacturing unit during the year. The AR submitted that on perusal of the invoices and other evidences furnished before the A.O, it is quite evident that the appellant has purchased plant and machinery against Form C , hence the same cannot be considered as purchases made in De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi. Baddi. WEIGHT MEASUREMENT Electronic weighing scale (3,6,30,60,150 KG capacity) 6 23.11.09 Yes Faridabad, Haryana. Baddi. Electronic weighing scale (300 KG to 600 KG capacity) 1 01.02.10 Yes Faridabad, Haryana. 167, FIE Patparganj Delhi. The AR, stated on perusal of the above table, it is quite evident that the purchases of all the pivotal plant and machinery are interstate inter-state purchases against Form C which cannot be issued by Sales Tax Department until and unless purchased goods reaches to the state issuing Form C . The AR further contended that the appellant has produced sales tax declaration Form XXVI-A which is issued at the time of entry of the goods in the state of Himachal Pradesh, without which Form C cannot be issued and it is ample proof of transporting capital goods to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure 11 02.12.2009 Declaration filed with Excise Department to claim exemption under Notification No.50/2003 Dated 10.06.2003 Duly acknowledged copy of Letter submitted with Excise Department as Annexure 12. 04.12.2009 Purchase of Hacop Motorised Barrel Pump Copy of bills as Annexure 13 05.12.2009 Purchase of 4/6 (four) Nos of Sintex Tank (For Perfumery Mixing) Capacity 2100 Ltrs each. Copy of bills as Annexure 14 05.12.2009 Purchase of 2 (two) nos. Monoblock Pumpset. Copy of bills as Annexure 15. 06.12.2009 Commencement of manufacturing of perfumery compound as WIP. Stock Register of finished goods in Form-IV as per Excise Rules as Annexure- 16. 10.12.2009 First Clearance of Final Product from factory First Transfer Challan along with Excise and Taxation Department, Himachal Pradesh declaration Form d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember 2009 to March 2010. The relevant portion is reproduced as under : Month Quantity Manufactured (in kgs) Quantity Dispatched (in Kgs) Value of Dispatched (in lacs) December, 2009 33,477 26,664 402.60 January, 2010 29,171 25,878 373.25 February, 2010 39,067 35,143 544.83 March, 2010 38,404 36,134 545.12 The average value per Kg during the aforesaid four months of production during the Financial Year 2009-10 comes out to around ₹ 1,507/- per Kg. The AR also contended that the appellant also justified its plant and machinery with the production during the year and submitted that the basic manufacturing activity is more or less of manual in nature and the appellant firm by 5th December, 2009 was having 7 (seven) tanks, out of which, 6 (six) Tanks are having th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and asked the appellant to justify huge sales made to few correlated parties and alleged that enquiries reveals that both H.M. sales Corporation and Aman Marketing are proprietorship concern owned by one Kusum Sethia who files his ITR in Guwahati on the basis of some alleged information / documents gathered by him conducting some private enquiry and issuing summon under section 131 / 133(6) of the Income Tax Act, 1961 during the course of assessment proceedings. The AR contended that appellant submitted during the course of assessment proceedings that substantial part of sales being made to few parties concerned. The product manufactured is- an Industrial Product which has sold through limited Consignment Sale Agents (CSA) and dealers for better control of sales and not through numerous dealers, distributors etc as in case of consumer/retail product. The appellant further submitted that sales made to M/s H.M. Sales Corporation and M/s. Aman Marketing are concerned, M/s H.M. Sales Corporation is the dealer of the firm, operating in Delhi and M/s Aftan Marketing is the CSA of the firm operating in Uttar Pradesh, although both are owned by Mr. Kusum Sethia. The Appellant als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd information collected by issuing summon / notice issued under section 131 /133(6) of the Income Tax Act, l961. The AR of the appellant in support of its contention has submitted various documents / evidences vide its various replies such as Detail of party-wise sale purchase, Confirmation from Debtors and Creditors along with Name, Address, PAN, Nature, and outstanding Balance against them, Consignment Sale Agreement of all Consignment Agents of M/s Vasundhara Flavours, Copy of Income tax Return along with Computation of income of Mr. Kusum Kumar Sethia, Sales Tax assessment order passed by Assessing Authority, BBN, Baddi -1, Himachal Pradesh, Sales Tax returns and Stock transfer Challans of finished goods along with Declaration under Form XXVI A issued by Excise and Taxation Department, Himachal Pradesh and GR of Transporter and Bill wise detail of Excise and CST/VAT paid on input purchased which have been duly considered and placed on record. The AR of the appellant further contended in this respect that AO has neither provided copy of report of the inspector, information and material gathered by him during the course of assessment proceedings which were reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt cannot be rejected merely on the basis of inadvertent mistake committed by the tax auditor in Form 10CCB. On a careful perusal of the finding of the A.O. in assessment order and submission along with documents/evidences furnished by the AR in support of its contention as summarized above and also taking into ratio of the decision relied upon by the Appellant, in my considered view the disallowance of claim of deduction u/s 80-IC of the Act without appreciating the documentary evidences such as sales tax and excise records, declaration in Form XXVI - A generated online by the sales tax and excise department when the goods moved in or out from the barrier of Himachal Pradesh, The report of inspector of fire station of Himachal Pradesh who physically verified the unit and the Central Excise department has granted exemption in the case of manufacturing unit situated at the notified area as per notification issued both for the purpose of Central Excise and Income tax. it is seen that the manufacturing unit of the appellant is situated in the notified area and purchases or raw material and inputs w ere brought in, manufacturing activities were carried out and sales were effected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s along with plant and machinery were sent to Baddi unit. The purchases were made against C Form only. The assessee filed various replies before A.O. which were supported by documentary evidences which have not been denied by the authorities below. So no additional evidences were filed before Ld. CIT(A). The assessee manufactures goods as per Law, for which, assessee is entitled for deduction under section 80IC of the I.T. Act. Learned Counsel for the Assessee submitted that A.O. has denied the benefit of deduction under section 80IC on number of reasons i.e., (i) The unit not being situated in a notified area. (ii) The business not being covered under specified business for deduction under section 80IC. (iii) There was a report of the Inspector stating that the items produced at the factory premises were different from the ones claimed by the assessee. (iv) Non physical verification of products by producing empty and filled packages. (v) As claimed by the assessee, the factory was not equipped with proper plant and machinery at the start of production. (vi) The sales made by the assessee were to a related concern and were sham. 5.1. The assessee challenged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department s case is that plant and machinery were purchased between 24.11.2009 to 06.11.2010 whereas the assessee claimed commencement of business on 02.11.2009 in Form 10CCB. The assessee has, however, explained that on 02.11.2009 partnership deed was executed and thereafter, further developments were made by purchasing the plant and machinery and manufacturing activities have been started, the details of which, were noted above. Therefore, there is no illegality in the explanation of assessee that it has started its business activity by executing the partnership deed. Further, this fact has been clarified by the Chartered Accountant before the A.O. 9. On Ground No.3, Revenue challenged that assessee furnished additional evidences before Ld. CIT(A) and no opportunity have been given to the A.O. Learned Counsel for the Assessee has referred to submissions made before Ld. CIT(A), in which, several replies have been referred, which were filed before A.O, which are supported by documentary evidences. Therefore, no additional evidences have been filed before the Ld. CIT(A) so as to give further opportunity to the A.O. to rebut the claim of assessee. Further the impugned order sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances in the light of finding of fact recorded by the Ld. CIT(A), it is clear that assessee produced all documentary evidences before the authorities below to show that it has began to manufacture items of Perfumes and Fragrances in the notified area. The same were supported by documentary evidences i.e., Excise Records and Sales Tax assessment etc., The assessee furnished GRs of transportation and bills etc., and C-Form to show that assessee entered into genuine business activity. Further it may be noted that though A.O. has raised so many objections at assessment stage and Ld. CIT(A) dealt with each and every item, but, Department has filed revised ground only on few items. Thus, the genuineness of the activities of manufacturing conducted by the assessee at Baddi have not been challenged by the Revenue in the revised grounds of appeal. These facts clearly show that assessee has entered into genuine business activities. Even if sales are made to three parties only, there is nothing wrong against the assessee. It may also be noted here that in respect of some items of manufacture, A.O. has allowed the claim of assessee in scrutiny assessment under section 143(3) for A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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