TaxTMI 
TaxTMI 
2013 (10) TMI 513
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...., 2011. It emerges out that assessment of this year was transferred to learned JCIT by the Learned CIT, Dehradun. He issued fresh notices under sec. 143(2) and 142(1) on 12th September, 2011. In response to the notice, the representatives of the assessee had appeared and submitted the requisite information from time to time. Learned Assessing Officer has passed the assessment order on 30.12.2011. 3. It emerges out from the assessment order that Assessing Officer noticed a total turnover of Rs.100,31,28,153 which has resulted net profit of Rs.36,68,35,903. Assessee has claimed deduction under sec. 80-IC and in support of its claim, it has submitted Form No. 3CD and Form No. 10CCB along with the return. Learned Assessing Officer has observed that assessee has been claiming deduction under sec. 80-IC on the ground that it has been engaged in the business of manufacturing and export of handmade, hand-tuffed carpet at its industrial undertaking situated at Plot No.11, Sector 4, Sidhcul Haridwar. It has been claiming deduction under sec. 80-IC since assessment year 2005-06. This is the 5th consecutive assessment year of such claim. Learned Assessing Officer had a suspicion that a turn....
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....y one broken machine for latex work. The capacity as stated by workers working on it, was only 40 to 45 pieces per day of average carpet area of 1.60x2.30 Sqr Meter. 3 There were only 4 workers engaged in binding work & drying the Latexing carpet base through sunlight. 4 There were five workers who were engaged in scissoring process and there were only seven scissors at the premises for this work and two were not even usable. Hence only five were in working condition. 5 There were only three workers engaged in combing and only five combs were available for this work. 6 There were two workers who were engaged in Clipping work. There were only three clipping machine in the premises for this work. 7 At that time there were four weaving machines (Khaddi) only at the premises and three were out of order Only one machine was in working condition upon which one labour was simulating some work. He has stated that only five to six meter of weaving can be made by him in a single day. He has also denied working over time. There was only one light upon the overhead ceiling for his machine and the rest were not having any light. 8 There was only one weighing ....
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....supplied by the assessee and on the basis of information available on record was issued to the assessee by the undersigned in response to which the assessee filed certain other details/information from time to time. In this connection, the statement of the Managing Partner, Sh. Ashish Gupta who was conversant with all the affairs of the firm was also recorded in the presence of the Assessee's counsel, Sh. Pankaj Gupta, CA On the basis of above and also other materials on record the following information/observations/conclusions inter alia came to light. IV. From the stage-wise flow chart and other details of production and job work etc. furnished by the assessee it could be made out that most of the activities such as spinning and weaving had been done outside the state of Uttrakhand. Even the dyeing process was done by outside agencies and not at Haridwar. The assessee also failed to produce the basic records for the verification of the daily production at Haridwar on the plea that the same were prepared on computer only. The negligible infrastructure including some hand driven machines lying at Haridwar cannot result in huge production shown by the com....
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....sp; 3. On perusal of the records of the firm and from the statement of Mr. Ashish Gupta, it come to the knowledge of the department that the assessee shifted the entire turnover of old M/s Sharda Exports, Meerut to the new firm of Haridwar without performing any activity at Haridwar and also the assessee transferred the same business to the Delhi firm. However, as usual the business was carried out only from Meerut. Mr. Ashish Gupta in his statement accepted that the goodwill of M/s Sharda Exports remained unchanged whenever a firm was either dissolved or transferred into a new one under the same name in the same business. 4. Since, major factor/assets of M/s Sharda Exports is its goodwill that is why M/s Sharda Exports, Haridwar had shown to have achieved sale of more than Rs.30 crore within a short period of five months in the initial year. Since, the major assets of the firms inter alia the goodwill of the firm remained common and not transferred in writing and was not possible to be. 5. The assessee did not provide the data of turnover of M/s Sharda Ex....
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....ed to Mr. Gupta and he accepted that there is nothing contrary to with him and he is in agreement with the statement of these job workers who have stated that these activities were performed outside the Haridwar. 10. Mr. Gupta in his statement dated 23.12.2011 claimed that job workers were doing business in his premises situated at Haridwar but failed to disclose name of even a single person. Therefore, claim of assessee is not tenable at all. 11. It has been stated that data of accounts is being maintained electronically and no books of account were maintained manually at three different sites and duly synchronized with each other's and further that, as usual, the computer personnel prepares the backup of the data which is being stored on a regular interval. But the assessee did not produce soft copy of the data but instead claimed that the data for A.Y. 2005-06 has been corrupted. Therefore, the Assessee's contention did not appear genuine at all which clearly establishes that the assessee has intentionally hiding the true affairs of its business. The assessee has claimed that ....
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....t the entire production sheet of the assessee is a desk-work only to hoodwink the revenue. 14. Further, it was noticed that the partners created a new firm in the same name with different PAN-ABOFS0079G in the year 2009 with head office Delhi with all the family members excluding female member of the family. Mr. Gupta has even denied of any information regarding this new firm as per his reply to question No.37. However, it is worth noting that this new firm has shown its branch office in the premises of the undertaking situated at Haridwar, whereas all the assets and liabilities were transferred to a single person i.e. Shri Jitender Kumar Gupta after dissolution of the old firm at Haridwar on 1.04.2009. 15. Mr. Gupta accepted that the turnover of Rs.30 crore was achieved in a short period of five months in the initial year of the firm, which was not sufficient in comparison of the promoters which should have been more than the results of the firm shown at Haridwar. This acceptance clearly shown that the goodwill of the old firm is being regularly encashed by the assessee. &nbs....
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....y pointed out, the assessee claimed weaving completely outside the Uttrakhand state but claimed Latexing, binding, carving and embossing, clipping and finishing at Haridwar. But various job workers claimed performing of these activities for the assessee outside Haridwar. The assessee showed clipping through the job work by M/s Pee Gee Enterprises, M/s Poornima Creations and M/s Sharda International Pvt. Ltd but none of these persons have been found to be existing concerns at Haridwar. 20. The assessee had shown electricity expenses of Rs.2,32,906/- which includes electricity consumed by the persons residing in the quarters at Haridwar in the premises of firm which expenses are very small fraction in comparison to the so-called manufacturing activity at Haridwar. The Assessee's claim of generator expenses which have been claimed against the generator installed at M/s Avant Grade Carpets Pvt. Ltd at Meerut shows that the assesses did not perform any business activities at Haridwar. 21. The assessee declared addresses of only three employees relating to Uttrakhand state out of total....
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....sp; 25. As per chart of electricity expenses claimed by the assessee, surprisingly there is uniformity in the payment of monthly electricity charges which was not in consonance with the statement of Mr. Gupta where he stated that the carpet manufacturing is not uniform during the year. This fact proves that no machinery has been employed to consume the electric power for manufacturing but the electric connection was there for general power consumption in the unit only. 26. Further, the assessee did not perform any manufacturing work himself but through the outer agencies and through various persons. Therefore, there remains no reason for granting the benefit of manufacturing activities to the assessee concern. This is because the work which was not done by the assessee primarily did not entitle him for claiming deduction u/s 80-IC itself. 27. In the light of above facts and circumstances detailed above the entire deduction claimed u/s 80-IC by the assessee was required to be disallowed." 4. On receipt of show-cause notice, assessee has....
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....concluded that no manufacturing was undertaken at Haridwar by the assessee and accordingly deduction u/s 80-IC was disallowed. Subsequently, on 23.02.2012 a survey operation has been conducted at the business premises of the assessee at Haridwar, Meerut and Delhi Units and it has been evidently found that the assessee actually had not been manufacturing /producing article / things at Haridwar since F.Y 2004-05 but obtaining it from various job work contractors from outside the eligible state of Uttrakhand state. 3. During the course of survey operation it has been found that the claim of the assessee that manufacturing /production is being performed at Haridwar and the goods are exported from Haridwar is not true in the light of material facts gathered during the course of survey operation in this case detailed hereunder: SI. No. Detail of impounded documents Description Page numbered bold marked with this letter Conclusion to be derived 1 Annexure -63 Party-A, at Gagol Road Unit Dyeing unit register 1-2 Since, the register has been found at Gagol Road, Meerut unit of the assesee therefore, it may be concluded that Dyeing op....
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....ssee for Meerut and for the work.......... 13 Annexure -32 Party-A, at Gagol Road Unit-7 Form of Registration with ROF & other documents 41-45 Shows that the partners has created a New firm under the same name showing different head offices on 01-01-2009 and also shows the address of old firms as unit address. This shows mens rea of the assessee. 14 Annexure -28 Party-A, at Gagol Road Unit-7 Forms in the name of Sharda Exports, Haridwar 46-49 Shows that various forms for state permission is being obtained at Meerut and used at Meerut though belong to Haridwar Unit. Though it is...... 15 Annexure -27 Party-A, at Gagol Road Unit, Meerut Purchase Vouchers of Sharda Exports, SF Delhi 50-52 Shows that Buyer is being shown as Sharda Export -Hardwar but address is Rithani Industrial Area, Meerut (UP). The modus operandi clearly reflects of assessee. 16 Annexure -26 Party-A, at Gagol Road Unit, Meerut Registration of New firm -Regd No FIEO/NR/10557/2009-2010/279 with federation of Indian export Organization (Ministry of Commerce & Ind) 53-55 Shows that the same object of the firm and nothing changed 17 Annexure -25 Party-A, ....
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....son at Haridwar, who receives the most of the notices/ letters of the department on behalf of assessee at Hardwar but his daily attendance is being shown in the register maintained at Meerut. 25 Annexure -68 Party-A, at Gagol Road Unit, Meerut Purchase vouchers/ bills 92-96 Purchase of Dyes and others made at Meerut and not at Haridwar. 26 Annexure -1 to 6 Party-A, at Gagol Road Unit, Meerut Invoice folders of Haridwar 97-108 Invoices shows that exports is being made from various city/ ports but the assessee putting remarks on these invoices as from Haridwar to Delhi & abroad etc but these challans founds/invoices found from Meerut unit and not from Hardwar. Even not a single invoices of such type found from Haridwar during the survey operation which shows that manipulation is being done at Meerut. 27 Annexure - A8 Party-D, at Rithani Unit, Meerut Daily Production Register for Binding 109-110 Shows that the binding work is being performed at Meerut unit whereas the assessee claimed this activity at Haridwar 28 Annexure - A7 Party-D, at Rithani Unit, Meerut Challan Book register for Binding Activity 111-112 Shows that the b....
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....y. 42 Annexure -B12 Party-D, at Rithani Unit, Meerut Job work register obtained from various contractors. 146-148 Job work register obtained from various contractors situated outside eligible state. 43 Annexure -B10 Party-D, at Rithani Unit, Meerut Register for latex to Binding. 149-150 Performed at Meerut but claimed at Haridwar. 44 Annexure -B7 Party-D, at Rithani Unit, Meerut Binding Register 151-152 Performed at Meerut but claimed at Hardwar. 45 Annexure -B6 Party-D, at Rithani Unit, Meerut Binding Register 153-154 Performed at Meerut but claimed at Hardwar. 46 Annexure -B3 Party-D, at Rithani Unit, Meerut Binding to Finishing Register 155-157 This Shows that these activities are being performed at Meerut only but claimed by the assessee for Hardwar. 47 Annexure -B2 Party-D, at Rithani Unit, Meerut Binding to Finishing Register 158-160 This Shows that these activities are being performed at Meerut only but claimed by the assessee for Hardwar. 48 Annexure -C9 Party-D, at Rithani Unit, Meerut Ledger- Job Work 161-166 The ledger of various parties situated at Panipat shows that....
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...., Meerut Test for Foreign Destination. 201-202 Shows that even tags is being affixed at Meerut only which are the final stage, which proves that final goods are being exported only from Meerut. 61 Annexure -A25 Party-C, at Rithani Unit, Meerut Certificates along with invoices containing certificates that carpets of various types are being exported from Meerut to Navi Mumbai. 203-208 Showing that Meerut to Mumbai carpets transported through Road and from Sea to overseas through vessel. Thus claim of assessee that goods are being transported from Haridwar is proved non genuine. 62 Annexure -A24 Party-C, at Rithani Unit, Meerut Container/ Truck inspection report-Showing the inspection before stuffing/loading and after stuffing/ Loading the 209-219 Container/ Truck inspection report- Shows that the stuffing and Loading is being done at Meerut not at Haridwar. Since inspection is the last activity of manufacturing process which are being done at Meerut, therefore it prove that final product is being exported only from Meerut and not from Haridwar. 63 Annexure -A23 Party-C, at Rithani Unit, Meerut Challans for Finished Carpets from T.C to R....
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....erut Container A-11, Register Packing Department. 256-258 Payment to contractor's loaders shows that loading carpers into containers performed at Meerut and not at Haridwar. 74 Annexure -A10 Party-C, at Rithani Unit, Meerut Carpet Received Register 259-261 Shows that local job work obtained from Meerut and not from Haridwar. 75 Annexure -A9 Party-C, at Rithani Unit, Meerut Buyers Orders 262-263 Buyers orders even received at Meerut. 76 Annexure - A8 Party-C, at Rithani Unit, Meerut Carpet Received register - Finishing 264-267 Shows that finishing are being performed at Meerut and the finishing material obtained from job workers. Therefore this activity not performed at Haridwar as claim of assessee. 77 Annexure -A7 Party-C, at Rithani Unit, Meerut Carpet Received register - P& S Department 268-272 That this activity also performed at Meerut and not at Haridwar. 78 Annexure -A6 Party-C, at Rithani Unit, Meerut Register- Packing Department 273-278 Packing is being done at the large level at Meerut therefore after packing no further requirement of any further action for the same is required at Haridwar....
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....endance maintained at Meerut. This shows that manipulation has been made at Meerut and no actual working was in operation at Hardwar since very beginning of Hardwar Unit. 86 Annexure -3 Party-A, at Partapur, Meerut Attendance register for the period from April 2008 to March 2009 304-311 Detail of the top of the attendance pages shows that work force is for Haridwar Unit but attendance maintained at Meerut. This shows that manipulation has been made at Meerut and no actual working was in operation at Haridwar since very beginning of Haridwar Unit. Even some persons are same as claimed at Hardwar Unit and found during survey 87 Annexure -4 Party-A, at Partapur, Meerut Cash/ Credit memo books of Nandlal Carpets, Muzzaffarnagar found from the premises of the assessee for the period of F.Y 2005-06 312-316 Manipulation by the assessee as same blank memo also placed in the books and the reason for availability of original books of other party shows the intention & working of the assessee. 88 Annexure -5 Party-A, at Partapur, Meerut Bill books of M.L Carpets found from the premises of the assessee for the period of F.Y 2005-06 317-325 Manipulati....
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....s. This shows that the assessee nowhere maintained attendance register from the year 2006 to 2009 but it has no working staff at Haridwar unit beside the staff as mentioned in para 93 above. 96 Annexure -A10 Party-at Haridwar Register 355-356 Shows that the main person leaving at the unit, Haridwar namely Mr. Rajneesh of category of loader and none other, his writing also proves that his education which do not appears of such level as work claimed to be performed from Haridwar Unit. 97 Annexure -A11 Party-at Haridwar Register 357-358 Shows that 13 persons are available there. 98 Annexure -A12 Party-at Haridwar Register- Packing 359-363 Shows that the register is maintained to disguise the revenue only as there is blank receipts also available in between the issued receipts. 99 Annexure -A18 Party-at Haridwar Staff salary records from March 2005 to December -2008 364-366 Shows salary detail of the person of Haridwar for the month March 2005 to December 2008. This shows that during this period only average number of employee were 12 persons at a time at Haridwar unit. Which were not enough to earn turnover in more that 100 c....
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....orts the huge production as claimed by the assessee. 105 Party-Hardwar premises covered : M/s Sharda Exports, Haridwar Statement of Mr. Laxman Prashad at Hardwar recorded during the course of survey proceedings. 381-381 Mr. Laxman Prasad, stated for designing & packing but the designing is claimed through outsourced a pre-stage performed by job work contractors. Carpets design claimed (No scope for designing work at Haridwar). 106 Party-Haridwar premises covered : M/s Sharda Exports, Haridwar Statement of Mr. Hari Yadav Supervisor at Hardwar recorded during the course of survey proceedings. 382-382 Hari Yadav, worker, stated that goods comes from Meerut and after packing it is sent back. 107 Party-Hardwar premises covered : M/s Sharda Exports, Haridwar Statement of Mr. Manna Lal Supervisor at Hardwar recorded during the course of survey proceedings. 384-384 Manna Lal Gupta stated that goods comes from Meerut and some manufactured here. Only packing material was available at Hardwar as per godown detail. Finished carpet stocked in the premises. 108 Party-Haridwar premises covered : M/s Sharda Exports, Haridwar Document regarding ....
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..... x. He has stated that he is not sure that dyeing performed at Hardwar or not however dyeing is being done at Gagol Road Unit (but in earlier claim of dyeing was for Haridwar Unit). xi. He has denied of having knowledge of performing work such as Latexing, binding, carving, embossing or clipping for Hardwar. xii. Knowledge of goodwill of the firm on dissolution denied for. Shown inability of producing books of account of New & Old Sharda Exports at this time. Accepted of Not Knowing the name of even a single person who has left the Sharda Exports after dissolution. xiii. He accepted M/s M.G. Enterprises, a firm relating to their business (This firm is doing all the finishing & Packing work at Meerut for Sharda Exports and not from the Haridwar Unit as perused from the information on impounding papers). xiv. Confirmation made with Mr. Aditya Gupta regarding shipment only from Rithani Unit for which he has stated "I could say something in this regard only after personnel enquiry." 110 Party- A Premises covered: M/s Sharda Exports, Gagol Road Partapur, Meerut. Statement recorded of Mr. Sushil Kumar, Supervisor of the firm, during the course of survey proceedin....
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....otal 55 employees at Gopal Road Partapur, list attached. Packing division - Total 55 employees at Gagol Road Partapur, list attached. Account office- 17 persons Labour list shows -204 labour at Gagol Road Unit. 412-421 This working strength is huge in comparison to Hardwar unit, where main work has shown as performed. 114 Party- A Premises covered: M/s Sharda Exports, Gagol Road Partapur, Meerut. List of Machinery found during the course of survey operation. 422-422 10 Machine (3 Niddle) and 22 Machine (4 Niddle),07 Binder Machine , 60 Bathmat machine,07 Dyeing Machine (small size) , 09 Dyeing Machine (big size), 01 Hydro machine, 1 boiler and 1 ETP plant found at Gagol Road. ( In comparison with family facility available at Hardwar will play vital role on it, where one dyeing machine available and hand machine for tufting). 115 Party- C Premises covered: M/s Sharda Exports, Rithani, Meerut. Statement of Sh Rajesh Ranjan, HOD, Packing, Sharda Exports. 423-428 From the statement it is found that the main work at the premises surveyed is packing and dispatch of carpets. The carpets are manufactured at Meerut unit and Panipat unit of the asses....
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....Pvt Ltd is main business entities of this group. we obtain job work. when machine purchased is not known to him. All machinery seven eight year old. 121 Party- D Premises covered: M/s Sharda Exports, Rithani, Meerut. Statement of Mr. Gurnam Singh, Executive Shipping Deptt. 443-446 Mr. Gurnam Singh, Executive Shipping Deptt: stated 90 % export from Rithani and about 10% from Gagol unit and only 1-2% from Hardwar Unit. Statements shows that production is being done from Rithani unit and not from Haridwar unit. Mr. Gurnam Singh, Executive, Shipping deptt, M/s Sharda Exports, Rithani Meerut has stated in his statement dt 23-02-2012 during survey in response to Q No 9 that 90% export of firm is being done from Rithani and rest 10% from Partapur unit and from Haridwar unit only 1-2% exported from Hardwar (statement of Mr. Gurnam Singh is annexed from page 17 to 20 to this proposal). 122 Party- D Premises covered: M/s Sharda Exports, Rithani, Meerut. Statement of Mr. Sohan Gautam, Employee 447-448 He has stated in reply of Q No 5& 6 that Latexing, binding, tufting and packing are being done at Rithani unit then after loaded into containers. This shows that....
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....nbsp; " ............... was in actually related to the Financial Year 2010-11 relevant (sic) to assessment Year 2011-2012 from 01.04.2010 to 31.03.2011 and again it is evident to mention (sic) that on these dates the assessee firm M/s Sharda Exports Haridwar was not in existence (sic) and all these documents are not related to the assessee firm M/s Sharda Exports Hardwar. Since it has started its business on 18-10-2004 and closed down its business on 01-04-2009, moreover they are not related to A.Y 2009-2010." Similarly, response to serial numbers 85 and 87 to 92 contain the stock phrase: "............Here it is most respectfully submitted that all these records which I.T.O Ward 2 Hardwar referring (sic) is not related to the assessee i.e. M/s Sharda Exports, Haridwar and (sic) not to the relevant assessment year 2009-2010." Finally response to Serial numbers 5,10,14,72,84,and 95 to 124 may be extracted individually since they pertain to specific responses to the ld. AO's report :- "SI No.5: Reply by the Assessee's On the pages 12-15 the dates ....
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....siness from 18-10-2004 and this fact is already mentioned everywhere and therefore all these records which I.T.O Ward 2 Haridwar referring does not relate to the assessee and not to the relevant assessment year 2009-2010. "SI No.95: Reply by the Assessee's Here the Learned I.T.O Ward 2 Haridwar is mistaking by comparing two different months i.e. January 2006 with January 2009 while it is April 2009 and no details is related to the Assessment Year 2009-2010. SI No.96: Reply by the Assessee's In the pages from 355-356, the learned I.T.O Ward 2 Haridwar is making a wrong conclusion, it is not the name of the Loader/ Worker but it is the name of the Loader in charge. So the conclusion drawn by the learned I.T.O Ward 2 Haridwar is wrong and far from the facts of the case M/s Sharda Exports Hardwar for assessment year 2009-10. SI No.98: Reply by the Assessee's On the pages 359-363 belongs to packing department and the materials are being issued accordingly. So all the conclusions drawn by the learned I.T.O Ward 2 Haridwar ....
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....tatement of Mr. Rajneesh Kumar Tyagi recorded on 23-02-2012, he has clearly mentioned that all the raw material, dyed yarn is received from Meerut warehouse and all the labour is from outside. Moreover any statement of any person which is recorded in the absence of the assessee and without giving the cross examination opportunity of the witness to the assessee is not binding on the assessee. Moreover in his statement nowhere he has claimed that Sharda Exports Haridwar the assessee is not doing any manufacturing activity at Haridwar. so any inference drawn on the basis of such statement is illegal/not justified and not true on the assessee firm M/s Sharda Exports, Hardwar for the assessment year 2009-2010. SI No.105: Reply by the Assessee's On the page 381 containing statement of Mr. Laxman Prashad, in this connection the assessee M/s Sharda Exports, Hardwar most respectfully submitted that any statement of any person which is recorded in the absence of the assessee and without giving the cross-examination opportunity of the witness to the assessee is not binding on the assessee. Moreover in his statement nowhere he has claimed....
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.... of today i.e. on 23-02-2012 and not of the old firm M/s Sharda Exports Haridwar from the year 2004-2005 to 2009-2010. And in the Q.No 14, he answered clearly that finishing work is not done at Gagol unit Meerut, and in the Q. No 17, he answered and manufacturing is looked after by Shri Ashish Gupta and he has no specific information about it. So the inference drawn by the learned I.T.O Ward 2 Haridwar is wrong and far from the facts and not related to assessment year 2009-2010. SI No.110: Reply by the Assessee's On the pages from 395-398 containing statement of Mr. Sushil Kumar, in this connection the assessee most respectfully submitted that our firm M/s Sharda Exports, Haridwar is started its business from 18-10-2004 and close down its business on 01-04-2009 and any statement of any person which is recorded in the absence of the assessee and without giving the cross-examination opportunity of the witness to the assessee is not binding on the assessee and any statement of any person belonging to the present firm i.e. M/s Sharda Exports Meerut or Delhi is not applicable on the facts of the assessee and any inference drawn on ....
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....e drawn on the basis of such statement is totally illegal and far from the facts of the assessee. SI No. 113: Reply by the Assessee's On the pages 412-421 containing working strength found during the survey conducted on 23-02-2012 is not related to the assessee firm M/s Sharda Exports Haridwar for the assessment year 2009-2010 therefore any inference drawn on the basis of such statement is totally illegal/unjust and far from the facts of the assessee M/s Sharda Exports Hardwar. SI No. 114: Reply by the Assessee's On the page 422 containing list of machinery, the assessee is not able to understand what inference the learned I.T.O Ward-2 Hardwar is trying to draw from list of machinery found during the survey conducted on 23-02-2012 while the firm of the business has already been closed down its business as on 01-04-2009 and inference drawn on these papers is not related to the assessee is totally baseless and not true. SI No. 115: Reply by the Assessee's On the pages from 423-428 containing statement of Sh. Rajesh Ran....
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....onu Sharma, in this connection the assessee most respectfully submitted that our firm M/s Sharda Exports, Haridwar started its business from 18-10-2004 and close down its business on 01-04-2009 and any statement of any person which is recorded in the absence of the assessee and without giving the cross-examination opportunity of the witness to the assessee is not binding on the assessee and any statement of any person belonging to the present firm i.e. M/s Sharda Exports Meerut or Delhi is not applicable on the facts of the assessee and any inference drawn on the basis of such statement is totally illegal and far from the facts of the assessee. SI No. 119: Reply by the Assessee's On the page 439 containing statement of Mrs. Pooja Chaudhry, in this connection the assessee most respectfully submitted that our firm M/s Sharda Exports, Haridwar started its business from 18-10-2004 and close down its business on 01-04-2009 and any statement of any person which is recorded in the absence of the assessee and without giving the cross-examination opportunity of the witness to the assessee is not binding on the assessee and any statemen....
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.... any statement of any person belonging to the present firm i.e. M/s Sharda Exports Meerut or Delhi is not applicable on the facts of the assessee and any inference drawn on the basis of such statement is totally illegal and far from the facts of the assessee. SI No. 123: Reply by the Assessee's On the pages from 449-451 containing statement of Mr. Devraj, in this connection the assessee most respectfully submitted that our firm M/S Sharda Exports, Haridwar started its business from 18-10-2004 and close down its business on 01-04-2009 and any statement of any person which is recorded in the absence of the assessee and without giving the cross-examination opportunity of the witness to the assessee is not binding on the assessee and any statement of any person belonging to the present firm i.e M/s Sharda Exports Meerut or Delhi is not applicable on the facts of the assessee and any inference drawn on the basis of such statement is totally illegal and far from the facts of the assessee. SI No. 124: Reply by the Assessee's These list of employee's are mandatory for P.F and E.S....
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....uring is done as per the specifications provided by and under the control of the appellant firm. It has been demonstrated that the control and command of the business centre at SIDCUL HARIDWAR is located at Meerut and thus as a logical consequence to this the activity performed by the job workers as well as all other related functions, would be controlled from Meerut and not from HarIdwar. This means that whatever " manufacturing " processes are taking place in the production of carpet, are taking place not only outside the 80-1C designated geographical area but also is not even controlled from Haridwar to apportion to it the benefit of connectivity for claiming vicarious responsibility of a manufacturer of goods as required u/s 80-1C of the Act. (vi) It is seen that the product that enters the business premises at Hardwar on way to the eventual buyer does not have any generic or commercial name different from the final products viz. Carpets mats etc. Thus even if for the sake of argument we accept the appellant's argument that the " intermediate " product is subjected to critical " intermediate " product is produced which has a commercially distinguisha....
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....since the control and command was always working from outside this unit. (viii) There is another factual point that needs to be considered. It is seen that there was another Sharda Exports functioning from Okhla Industrial Estate, phase-3, Delhi. This concern existed between 01.04.2000 to 28.02.2009. This concern was virtually operating coterminous with the appellant concern and also involved in the production of carpets and mats. While the naming of firms involved in the carpets trade under the umbrella banner of " Sharda Exports" might make it convenient to the appellant in terms of brand recognition and marketing, but it also leads to a situation where it is observed that it convenient to the appellant in terms of brand recognition and marketing, but it also leads to a situation where it is observed that most internal vouchers have simply printed " Sharda Exports" without distinguishing between the two Sharda Exports doing business simultaneously. Also, it is seen that the suppliers or job workers also bill, in some cases, to simply " Sharda Exports " this raises a doubt even about the business entity which is purportedly claiming to authorize the job....
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....nbsp; ** (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or ** ** ** (b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning &nbs....
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....; ** ** ** (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the mark....
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....p; (12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger - (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. (12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007. ** ** **" 8. From the bare perusal of the se....
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....ction 80-IA of the Act (extracted supra). 9. The primary issue required to be determined, is when assessee came into existence and whether geographically it is located with the notified area contemplated in sub-clause (ii) of sec. 80-IC(2)(a) or (2) (b). It emerges out from the record that assessee partnership firm came into existence on Ist of December 2003. It is situated at Plot No.11 Sector 4, Sidcul, integrated industrial estate, Haridwar. It had commenced the production on 18th October 2004. The A.O. himself admitted that deduction under sec. 80-IC was granted to the assessee continuously since assessment year 2005-06. 10. The next step which is essential for examining the case of an assessee about the admissibility of deduction under sec. 80-IC is whether it manufactures or produces any article or things. Expression "manufacture" has been defined in section 2(29BA) which read as under: "(29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation of the object or article or thing into a new and distinct object or article....
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....e of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step to....
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..... It brings something into existence, which is different from that, which originally existed. The new product is a different commodity physically as well as commercially. The Hon'ble Court also explained broader test to determine whether manufacture is there or not, it is propounded that when a change or series of changes are brought out by application of processes which take the commodity to the point where, commercially, it cannot be regarded as the original commodity but is, instead recognized as a distinct and new article that has emerged as a result of the process. 14. Hon'ble Delhi High Court has also considered this issue in the case of CIT v. Jackson Engg Ltd. [2012] 341 ITR 518. In this case, assessee was manufacturing diesel generating set. Learned Assessing Officer has concluded that assembling of diesel generating set does not constitute manufacturing. Hon'ble High Court has held that assembling of diesel generating set tantamounts to manufacture/production and is eligible for deduction under sec. 80-IA of the Act. Similarly, Hon'bkle Gauhati High Court in the case of CIT v. Tech Electronic reported in 341 ITR 533 has considered a similar issue, wherein it has been h....
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.... 2. Report u/s 44AB - Tax Audit Report for the year ended 31st March, 2009 - i.e. for Asstt. Year 2009-2010. 3. Report u/s 80-/ IC on Form No. 10CCB for the year ended 31st March 2009 i.e. for Asstt. Year 2009-2010. That the Report u/s 80-IC on Form No. 10CCB has been obtained after audit of the eligible undertaking by the Chartered Accountant as required under Section 80-IA (7) (Rule 18BBB) and the said Report has been submitted along with the Return of Income." 16. In the light of above factual position, as well as the position of law we have discussed, more particularly, keeping in view the past history, we are of the view that as far as objections of the Assessing Officer that binding latexing packing, tufting, levelling, embossing and finishing are to be considered as a manufacturing activity of the assessee. This activity was not even disputed by the Assessing Officer himself since assessment year 2005-06. In the last four years, deduction under sec. 80-IC has been granted to the assessee treating this activity as a manufacturing act....
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.... April 2009. It closed down its business from this date. The alleged spot inquiry got conducted through ITO, OSD, Haridwar was conducted after the month of September, 2011 i.e. almost after two and half years of closure of the business. According to the assessee, learned Assessing Officer has observed that on a local inquiry conducted through ITO, OSD, Haridwar, it was found that no such business was ever carried out at the said location. The learned counsel for the assessee pointed out that during the course of assessment proceedings, assessee has asked the Assessing Officer to disclose the basis of this observation. Learned DR on the other hand pointed out that in the reasons stated by the Assessing Officer, he has disclosed the basis. The objection of the assessee is that after the closure of the business, if the ITO made the inquiry from tea-vendors, rikshaw-pullers, it is meaningless. Had he approached the Pollution Authority, local sales-tax authorities, district industry office or other government agencies? It reveals from the record that no such exercise was carried out. In our opinion, the prosecuting agency needs not to explain the assessee the manner of investigation, bu....
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....pon the replies of the job workers obtained under sec. 133(6) who have alleged that they were doing the job work at their premises outside Haridwar. The reply qua reasons No. 9 of the assessee is available on page 18 of the assessment order. The assessee has alleged that these replies were received during the assessment year 2005-06. The vendors have nowhere said that these services are not given by them at Haridwar. Learned Assessing Officer has drawn incorrect inference from the replies. Learned Assessing Officer has considered this reply and made analysis on page 24 of the order. He observed that letters were issued to different persons under sec. 133(6) of the Act, who have done job work for the assessee. 25 letters have been received back undelivered. 7 concerns have responded to the letters. They have confirmed the job work done for the assessee. Learned Assessing Officer did not consider their replies as worthy of credence on the ground that they have sent the copies of their replies to the assessee. Their replies are similarly worded. On an analysis of this detail, we fail to understand the approach of the Assessing Officer. He is using this material against the assessee. W....
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....sp; (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule(1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner(Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity- &nbs....
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..... In paragraph 4.2 of the learned First Appellate Authority has observed that as far as the material available in report at Sr. Nos. 1 to 4, 6 to 9, 11 to 13, 15 to 71, 73 to 83, 93, 94 & 97 are concerned, the assessee has given a common reply that these documents are not related to the assessee firm because, it has closed the business. In the paper book, assessee has placed on record its reply on all the issues. In the report of the Assessing Officer, Sr. No. 1 talks about register pertaining to dying unit. It is annexure 63. The conclusion derived by the Assessing Officer is that this register has been found at the Gogal Road, Meerut Unit of the assessee, therefore, it may be concluded that dyeing operation is being performed at Meerut rather then Haridwar as claimed by the assessee. The reply of the assessee is available on page 206 of the paper book. It submitted that on page Nos. 1 and 2, dates mentioned are January 2012. Therefore, it is a register for dyeing unit. It does not relate to the business of the assessee which discontinued w.e.f. Ist of April 2009. Learned CIT(Appeals) has simply ignored this reply on the ground that it is a stock reply. When a business was discont....