TaxTMI 
TaxTMI 
2012 (8) TMI 673
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.... are that assessee doing embroidery works and supplying embroidery garments on job work basis, filed its return for the impugned assessment year on 25.10.2004 declaring total income of Rs. 18,49,914/-. In the return, it seems assessee had claimed a deduction of Rs. 7,59,396/- under Section 80-IA of the Act and Rs. 2500/- under Section 80G of the Act. Thereafter assessment was completed after scrutiny on 16.5.2006 under Section 143(3) of the Act, accepting the returned income. Appended to the assessment order was an incometax computation form wherein it was mentioned that deduction of Rs. 7,61,896/- was being allowed to the assessee under Chapter VI-A of the Act. Thereafter, on 9.7.2008, a notice was issued under Section 148 of the Act proposing a re-assessment. To such a notice, assessee filed a letter dated 10.9.2008, mentioning that there was no change to the income as returned originally. During the course of re-assessment proceedings, A.O. required the assessee as to why it could be considered as manufacturing unit entitled for deduction under Section 80-IB of the Act. Reply of the assessee was that it was an industrial undertaking manufacturing embroidery material and doing jo....
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....thin a period of four years from the end of the relevant assessment year. Reliance was placed on the decision of Hon'ble Apex Court interest CIT v. Kelvinator of India Ltd. (320 ITR 561). CIT(Appeals) was appreciative of these contentions. According to him, Assessing Officer had initiated the reopening only based on change of opinion. There were no tangible materials justifying such reopening. He, therefore, held that reopening done under Section 147 of the Act as bad in law. 6. Insofar as second issue, which is regarding nature of activity of the assessee, argument of the assessee before CIT(Appeals) was that it was manufacturing embroidered products and in such process, raw materials like, cloth and thread were converted into final products. As per the assessee, these items had no resemblance with the original material. Reliance was once again placed on the decision of Hon'ble jurisdictional High Court in the case of Taj Fire Works Industries (supra). Assessee also produced certain samples of embroidered products before the CIT(Appeals) in the course of appellate proceedings. CIT(Appeals) came to a conclusion that what assessee did was not a simple value addition, but, on the ....
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....the assessee that it was a manufacturing company, reliance was placed by the learned D.R. on the decision of Hon'ble jurisdictional High Court in the case of CIT v. Veena Textiles P. Ltd. (155 ITR 794). As per the learned D.R., it was clearly held by the Hon'ble jurisdictional High Court that embroidery work resulted only in value addition. The embroidered products were not different from original raw material, and the process undertaken by the assessee did not result in any new or distinguishable product different from the original raw material which were cloth and thread. Reliance was also placed on the decision of Hon'ble jurisdictional High Court in the case of CIT v. S.S.M. Furnishing Centre (155 ITR 791). For his contention that earlier year's summary assessment wherein deduction under Section 80-IB was given, would not act as precedent, reliance was placed on the decision of co-ordinate Bench of this Tribunal in the case of Tamilnadu Chlorates v. JCIT (98 ITD 1). As for the reliance placed by the CIT(Appeals) on the decision of Hon'ble jurisdictional High Court in the case of Taj Fire Works Industries (supra), learned D.R. submitted that this was erroneously done, since ther....
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....ome of the assessee, the Assessing Officer doing an assessment under Section 143(3) of the Act, will in the normal course surely apply his mind to such claim. Unless and until the claim was found to be correct, we cannot say that Assessing Officer would have given such deduction to the assessee. Here, the Assessing Officer had prima facie accepted the claim of the assessee that it was a manufacturing unit. Therefore, he accepted the claim in the original assessment. What was endeavoured through the re-assessment was to take a different view on a change of opinion. Reliance was once again placed on the decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra). Insofar as the issue regarding nature of business of the assessee was concerned, learned A.R. pointed out that judgment of Hon'ble jurisdictional High Court in the case of Veena Textiles P. Ltd. (supra) stood reversed by the decision of Hon'ble Apex Court in the case of S.S.M. Bros. (P) Ltd. & Ors. v. CIT (243 ITR 483). Learned A.R. also submitted that in the case of Veena Textiles P. Ltd. (supra), the issue was grant of development rebate and the Revenue had all along argued that assessee was not doing an....
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....(2) was served on the assessed. In response Shri N. Ravishankar, FCA appeared and the case was discussed with him. After discussion, the assessment is completed as under: Income from House property : Rs 73,290 Income from Business : Rs 17,71,924 Rs 18,45,214 Less: Deduction u/s 80G Rs 2,500 Total Income Rs 18,42,714 Income-tax thereon Rs 6,44,949 Surcharge @ 2.5% Rs 16,124 Rs 6,61,073 Less: TDS Rs 1,05,093 Rs 5,55,980 Less: AT Rs 8,00,000 Refundable Rs 2,44,020 Less: Intt u/s 234C Rs 10,583 Refundable............ Rs 2,33,437 Add: Intt u/s 244 Rs 16,338 Rs 2,49,775 Refund already granted Rs 2,49,775 Balance NIL It is clear from the above that Assessing Officer had specifically allowed 80G claim of Rs. 2500/-, separately in the body of the assessment order itself. When viewed from this angle, can we say that Assessing Officer would have been oblivious of the claim of deduction under Section 80-IB of the Act, that too when the amount of such claim was Rs. 7,59,396/- which was, under any circumstances, substantial vis-à-vis its business profit of Rs. 25,31,319/-. That Assessing Officer had applied his mind sofar a....
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....would amount to giving premium to an authority exercising quasi judicial function to take benefit of its own wrong." 12. As for the reliance placed by the learned D.R. on the decision of Hon'ble Delhi High Court in the case of Honda Siel Power Products Ltd. v. DCIT (2012) 340 ITR 53 (later affirmed by Hon'ble Apex Court in 340 ITR 64), there the rectification proceedings were initiated after the original assessment was completed and it was for this reason their Lordships held that re-opening could not be assailed citing such rectification proceeding as application of mind. Here, on the other hand, rectification was attempted prior to original assessment, and hence, in our opinion, that decision will not further the case of the Revenue in any manner. 13. In the circumstances as mentioned above, in our opinion, the "presumption" as given under Section 114 of Indian Evidence Act will come to the aid of the assessee. 14. First effective ground taken by the Revenue thus stands dismissed. 15. Now coming to the aspect whether assessee was doing a manufacturing activity or not, it is an admitted position that assessee was doing embroidery work on cloth. The A.O. himself has given a fin....