TaxTMI 
TaxTMI 
2010 (12) TMI 662
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....e for this year was filed and the same was processed under section 143(1). Thereafter the Assessing Officer issued notice under section 148 of the Act on March 9, 2007. The issuance of notice was objected to by the assessee by filing various letters. Thereafter after considering the objection of the assessee, the assessee was provided a copy of reasons recorded for initiation of proceedings. It was further submitted that the Assessing Officer has reopened the assessment on the basis of the hon'ble Supreme Court decision in the case of Lucky Minmat P. Ltd. v. CIT [2000] 245 ITR 830 that mining of limestone and marble blocks and cutting and sizing them are not manufacturing activities and, therefore, not entitled for special deduction under section 80HH. The Assessing Officer further observed that the hon'ble Supreme Court in another case, i.e., CIT v. Gem India Manufacturing Co. [2001] 249 ITR 307 has held that cutting and polishing uncut raw diamonds do not amount to manufacture or production of articles or thing and the assessee was not entitled to special deduction under the Income-tax Act. Therefore, the notice was issued under section 148. The learned Commissioner of Income-tax....
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....; After considering the submissions and perusing the material on record, we are of the view that the Assessing Officer was justified in initiating proceedings under section 147/148. The contention of the learned authorised representative that this is the third year of operation of manufacturing activity and in the earlier two years the deduction claimed by the assessee has already been allowed, therefore, for the year under consideration the reopening is on change of opinion cannot be based for reopening of the assessment, in our considered view are not acceptable. In the earlier year the decision of the hon'ble Supreme Court in the case of Lucky Minmat P. Ltd. [2000] 245 ITR 830 was not available. This decision came after passing the order under section 143(1) and within the time allowed the Assessing Officer issued notice under section 147/148 based on the judgment of the hon'ble Supreme Court. Therefore, in our view the Assessing Officer was within his jurisdiction to start the reopening proceedings. In the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456, the hon'ble Supreme Court has observed that if there is material or basis for reopening of the assessment, reope....
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....ssee had submitted to the Assessing Officer on August 20, 2007 that if a commodity produced in natural state is not usable and consumable in its natural form then it requires some activity to make it usable and, therefore, the activity which brings into usable or marketable stage for end use amounts to an activity of manufacture or process. Accordingly, block won from mines as such is not usable for any purpose unless it is brought to usable condition. Admittedly, in the impugned case too, the stone blocks won through mining activity were purchased by the assessee and then by applying the process of sawing, using state of the art high technology machinery power and very skilled work force, the stone block is sawn and cut to make the same usable and consumable. Reliance was placed on the decision of the hon'ble Rajasthan High Court in the case of Arihant Tiles and Marbles P. Ltd. [2007] 295 ITR 148; 211 CTR 169 wherein on identical facts the deduction under section 80-IA/80-IB was allowed. Regarding the decision of the hon'ble Supreme Court in the case of Lucky Minmat P. Ltd. [2000] 245 ITR 830, it was explained that in the case of Lucky Minmat the issue involved was claim of deduct....
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....re similar, therefore, the order of the Commissioner of Income-tax (Appeals) is liable to be reversed. It was further submitted that even the learned Commissioner of Income-tax (Appeals) has not examined how all other conditions for claiming deduction under section 80-IB are satisfied. In reply, learned counsel for the assessee stated that it is wrong to suggest that facts of the assessee's case are similar to the facts involved in the case of Lucky Minmat P. Ltd. [2000] 245 ITR 830. The hon'ble Rajasthan High Court has clearly held that the decision in the case of Lucky Minmat P. Ltd. [2000] 245 ITR 830 is distinguishable from the facts involved in the case of Arihant Tiles and Marbles P. Ltd. [2010] 320 ITR 79. The facts of the assessee's case are identical to the facts in case of Arihant Tiles and Marbles. The decision of the hon'ble Rajasthan High Court in the case of Arihant Tiles and Marbles P. Ltd. [2007] 295 ITR 148 have been affirmed by the hon'ble Supreme Court reported in 320 ITR 79, giving a very clear finding that the activity of sawing of marble blocks into marble slabs is manufacturing activity. The assessee was also doing the activity of sawing of marble b....
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....duct from earth, but it is not usable for any purpose. Therefore, to make it usable, various processes could be applied to bring it to the stage, which would amount to manufacturing. After it has been brought to that stage, further processing it merely for the purpose of making its marketability easy or smooth would not amount to manufacturing process. In the facts and circumstances of the case, conversion of marble blocks into slabs and tiles amounts to manufacture of thing or article within the meaning of section 80-IA/80-IB entitled to claim deduction thereunder. The hon'ble Supreme Court has examined the decision of the hon'ble Rajasthan High Court. While affirming the decision of the hon'ble Rajasthan High Court, the hon'ble Supreme Court has held as under: "In the present case, the court is not only concerned with the word 'manufacture', but also concerned with the connotation of the word 'production' in section 80-IA which has a wider meaning as compared to the word 'manufacture'. Further, when one refers to the word 'production', it means manufacture plus something in addition thereto. The process undertaken by each of the respondents includes not only c....
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....tion 80-IA of the Income-tax Act, 1961". This distinction explained by the hon'ble Supreme Court has also not been taken into consideration by the Department while agitating that the decision in the case of Lucky Minmat P. Ltd. [2000] 245 ITR 830 is applicable in the facts of the present case. The hon'ble apex court in the case of Arihant Tiles and Marbles P. Ltd. [2010] 320 ITR 79 has further explained and held that why sawing of marble stones and thereafter converting into slabs is manufacturing activity. It has been observed by the hon'ble court as under: "If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. Each of the respondents is paying excise duty, some of the respondents are job-workers and the activity undertaken by them has been recognised by various Government authorities as manufacture. To say that the activity will not amount to manufacture or production under section 80LA, will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable ....
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....peal of the Department are against deleting the trading addition of Rs.6,77,148, deleting addition of Rs.6,18,840 made by the Assessing Officer on account of unexplained sundry creditors and deleting addition of Rs.1,86,417 made by way of disallowance out of stone cutting expenses. These disallowances were made by the Assessing Officer by observing that the assessee could not file details in support of the claim. The Assessing Officer observed that trade creditors remain unexplained as none could be produced. The Assessing Officer further made addition on account of trading result that turnover of the assessee could not be verified and the gross profit rate also remained unverifiable. Therefore, by invoking the provisions of section 145(3) while passing order under section 144, the Assessing Officer enhanced the turnover to Rs.1.15 crores against turnover of Rs.1.12 crores declared by the assessee and applied a gross profit of 25 per cent, against 19.58 per cent, shown by the assessee which resulted in an addition of Rs.6,77,142. An addition of Rs.6,18,840 was made on account of trade creditors, sundry creditors by treating the same as income from undisclosed sources. &nb....