TaxTMI 
TaxTMI 
2015 (4) TMI 97
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.... of various expenses debited to trading and P&L as the disallowance made by AO is worked @ 12% only. Under such circumstances when assessee failed to maintain the vouchers & bills in respect of expenses debited, the disallowance made by AO was reasonable. 3. The facts are that the assessee had claimed the deduction u/s 80IB of the I.T. Act , 1961, in respect of the profits earned from a Stone Crusher. Accordingly, in the course of the assessment proceedings the assessee was required to justify the claim and furnish necessary documentary evidence to substantiate the claim. In response, the assessee produced copies of the purchase bills of the P&M, Sales Tax Registration, VAT returns, Electricity bills and details of the employees/workers. The Assessee was required to furnish evidence regarding the date of commencement of the production/manufacturing from the competent authority/concerned department. 4. The assessee filed a copy of a DIC registration certificate before the AO. From this certificate, the AO observed: (a) That the Industrial Unit, a stone crusher, had been granted registration by Industries Department(DIC Udhampur) vide No.07/10/0004/PMT/SSI dated 22.9.1971. ....
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....e query letter dated 15.3.2013, specifically required the assessee to furnish explanation on the following points: i) Please state/explain how the unit/stone crusher can be treated as New One as the registration granted by DIC, Udhampur, has been granted in 1971. ii) Please explain as to how the Unit/Stone crusher can be treated as a new Industrial Unit eligible for 80Ib deduction in view of the registration granted way back in 1971 and thus the date of commencement of the business/production being very old and not what prescribed u/s 80IB. iii) Please state/explain how the stone crusher is eligible for deduction u/s 80IB as the same involves mere splitting of stones, which otherwise has been done considerably by engaging labour by you as huge amount has been claimed in the accounts as Stone Splitting. iv) As per the DIC registration copy, it is noticed that the stone crusher was owned by Sh. Jatinder Kumar Sharma upto Mar, 2006. In March,2006, you joined the proprietorship firm of Sh. Jatinder Kumar Sharma as a partner and after a few days became the proprietorship firm owned by you shunting out Sh. Jatinder Kumar. In this regard please explain as to why this may not b....
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....s involving converting of boulders into smaller stones like bajri, etc which is not considered manufacturing for the purpose of 80IB. The case is squarely covered by the decision given by Hon'ble ITAt, Chandigarh in the case of ITO Vs Jitendra Stone Crushing Co 105 ITD 52 wherein it has been held that breaking of boulders into small stones or bajri is not a manufacturing activity. The assessee is not eligible for the deduction as claimed in view of the following case laws; i) ACIT vs. G.T.C Enterprises (ITAT, Chennai) 87 ITD 188 ii) Hindi Nippon Rural Industries P. Ltd. Vs. CIT(Ker) 201 ITR 588 iii) Numpudhiris Pickle Industries (ker) 1993 KLJ (Tax Cases) 198 (e) That nothing has been brought on records which could confirm the date of commencement of the production/manufacture, another important ingredient/condition for allowing deduction u/s 80IB. Section 80IB prescribes time limits for production and eligibility or otherwise for deduction u/s 80IB for a particular assessment year has to be allowed only if there is authentic date of commencement of the production/manufacturing which is no ascertainable in this case. Such date is normally confirmed by the DIC author....
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.... annum of old unit. The installation and expansion is substantial and brought the unit which was is a non operational state in a good working condition with modern and enhanced technology. Hon'ble High Court of Bombay in the case of Gaekwar Foam & rubber Co (1959) 35 ITR 632 observed that if the alternation and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. Thus for instance if ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction or if the very nature of the business is changed that again would not be reconstruction or, if the very nature of the business is changed that again would not be reconstruction. In the present case, the appellant has purchased a virtually closed unit in dilapidated condition and purchased new plant and machinery to make the unit workable. Except for land and building, most of the fixed assets including plant and machinery were newly installed by the appellant. However, the DIC certificate, electric connection and other permissions sought by the older unit were used by the appellant. Having regard to t....
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....ack in 1971 as is evident from the registration granted by Industries Department in the name of one Sh. Jatinder Kumar Sharma S/o Sh. Amar Nath R/o Birwah Bridge Dhanari Udhampur. The assessee has in fact purchased this old stone cursher in 2006 from Sh. Jatinder Kumar. The unit is not a new one and thus eligible for 80Ib deduction. The assessee has not produced any satisfactory material on records to prove the newness of the unit in terms of the provisions of section 80IB. (b) The undertaking is a reconstructed business unit already in existence and not a new one. The original business in this case has not ceased functioning and its identify is not lost. (c) There has been some P&M installed in the old stone crusher and the assessee has not been able to give details of such P&M and continued to argue that the Old P&M was worth nothing but only a scrap. Sh. Jatinder Kumar has admitted to have made heavy repairs and renovation to the P&M few years back of the transfer which negates the claim of the assessee. (d) The running of stone crusher is a business involving converting of boulders into smaller stones like bajri, etc which is not considered manufacturing for the purpos....
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....ership. A sham transaction in no way can be eligible for deduction u/s 80IB." 17. It was on the basis of the above observations/reasons that the AO held the assessee ineligible for deduction u/s.80IB of the Act. 18. The ld. CIT(A), as correctly submitted by the ld. DR, has not considered any of the above said observations of the AO, muchless dealt with then. Therefore, the order under appeal is a non speaking order qua Ground No.1. Accordingly, we remit this issue to the file of the ld. CIT(A), to be decided afresh by considering and dealing with all the aforesaid observations of the AO, on affording adequate opportunity of hearing to the assessee. 19. Apropos Ground No.2 , the AO observed that in the Manufacturing, Trading cum-P&L Account of the assessee as on 31.3.2010, the assessee had shown receipts of Rs. 19,05,705/- under the head "By Carriage" and that an equivalent amount stood debited under the caption "To carriage". The AO further observed that this receipt/ expenditure had also registered a fall as compared to the immediately preceding assessment year. The AO made a disallowance of Rs. 3,00,000/- out of the claim made, since no bills/vouchers/ evidence were prod....