Tribunal upholds assessment reopening, allows stone cutting deduction, dismisses appeals on procedural grounds.

The tribunal upheld the reopening of the assessment under sections 147/148, citing a change in law regarding manufacturing activities. The deduction under section 80-IB was allowed for stone cutting activities. The trading addition was deleted due to lack of procedural compliance. The addition on unexplained sundry creditors was also deleted for lack of evidence. The disallowance of stone cutting expenses was overturned. The tribunal dismissed both parties' appeals, affirming the Commissioner's decisions.

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Issues Involved:
1. Reopening of the assessment under sections 147/148.
2. Disallowance of deduction under section 80-IB.
3. Deletion of trading addition.
4. Deletion of addition on account of unexplained sundry creditors.
5. Deletion of addition by way of disallowance out of stone cutting expenses.

Issue-wise Detailed Analysis:

1. Reopening of the assessment under sections 147/148:
The assessee challenged the reopening of the assessment by issuing a notice under sections 147/148. The assessee argued that the reasons recorded by the Assessing Officer were illegal and merely a change in opinion. The assessee pointed out that in previous years, the deduction claimed was allowed, and the reopening was based on a change of opinion. The Assessing Officer reopened the assessment based on the Supreme Court's decision in Lucky Minmat P. Ltd. v. CIT and CIT v. Gem India Manufacturing Co., which held that certain activities did not qualify as manufacturing. The tribunal held that the Assessing Officer was justified in reopening the assessment based on the Supreme Court's decision, which was not available in earlier years. Thus, the reopening of the assessment was not considered bad in law, and the cross-objection by the assessee was rejected.

2. Disallowance of deduction under section 80-IB:
The Assessing Officer disallowed the deduction claimed under section 80-IB, relying on the Supreme Court's decisions in Lucky Minmat P. Ltd. and Gem India Manufacturing Co. The assessee argued that the activities of sawing and cutting stone blocks into slabs and tiles amounted to manufacturing, fulfilling the conditions for deduction under section 80-IB. The Commissioner of Income-tax (Appeals) allowed the deduction, considering the decision in Arihant Tiles and Marbles P. Ltd., which held that such activities constituted manufacturing. The tribunal upheld the Commissioner's decision, noting that the facts of the assessee's case were similar to those in Arihant Tiles and Marbles P. Ltd., and all conditions for deduction under section 80-IB were satisfied.

3. Deletion of trading addition:
The Assessing Officer made a trading addition by enhancing the turnover and applying a higher gross profit rate, citing unverifiable turnover and gross profit. The Commissioner of Income-tax (Appeals) deleted the addition, observing that the Assessing Officer did not follow the prescribed procedure under sections 144 and 145 and had no material basis for enhancing the turnover. The tribunal found no infirmity in the Commissioner's decision, noting that the accounts were audited with no defects pointed out, and there was no reason to disturb the declared turnover.

4. Deletion of addition on account of unexplained sundry creditors:
The Assessing Officer added an amount as unexplained sundry creditors, treating it as income from undisclosed sources. The Commissioner of Income-tax (Appeals) deleted the addition, stating that the Assessing Officer did not follow the prescribed procedure. The tribunal upheld the Commissioner's decision, noting that there was no material evidence to treat the sundry credits as ingenuine.

5. Deletion of addition by way of disallowance out of stone cutting expenses:
The Assessing Officer disallowed a percentage of stone cutting expenses without any basis. The Commissioner of Income-tax (Appeals) deleted the disallowance, observing that the Assessing Officer did not follow the prescribed procedure. The tribunal upheld the Commissioner's decision, noting that the disallowance was without any basis.

Conclusion:
The tribunal dismissed both the Department's appeal and the assessee's cross-objection, confirming the actions of the Commissioner of Income-tax (Appeals) in all respects. The order was pronounced in the open court on December 10, 2010.

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