AI Drafter 
TaxTMI 
TaxTMI 
2017 (9) TMI 250
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....ue in support of this Appeal, would submit that all questions proposed by the Revenue and framed at pages 17 to 20 of the paper book are substantial questions of law. They arise out of the common order of the Tribunal. 5. Mr. Mohanty would submit that the assessee is a company engaged in the business of trading in bullions and diamonds apart from dealing in small volumes of plastic and clock. The assessee company also enters into transactions at Multi Commodity Exchange and National Commodity Exchange and banks for hedging the bullion transactions. During the year under consideration, the assessee company also entered into transactions of buying and selling of shares, futures and options. The return of income tax was filed on 29th September, 2009 declaring total income at Rs. 5,92,76,713/. In the course of the assessment proceedings, special audit of assessee's books of accounts was conducted under Section 142(2)(A) of the Income Tax Act, 1961 (for short, 'IT Act'). The assessment was completed on 17th August, 2012, on a total income of Rs. 230,53,59,040/. Mr. Mohanty would submit that the questions proposed pertain to the additions made by the Assessing Officer. Sin....
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....tion proposed is on the issue of deduction under Section 10A of the IT Act. In that regard, the Tribunal was required to consider in the light of this provision, whether the assessee has, in terms of Subsection (4) of Section 10A, brought materials before the Tribunal. 12. Section 10A enables the deduction to be claimed. It is a special provision in respect of newly established undertakings in free trade zone, etc. A deduction of profits and gains, as are derived by an undertaking from the export of articles or things or computer software for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or software, as the case may be, shall be allowed from the total income of the assessee. This is subject to the provisions of Section 10A. 13. In that regard, the factual materials have been noted by the Tribunal in sufficient details from running page 214 of the paper book. The assessee's appeal questions the conclusions that are recorded. It must be clarified at the inception that the assessee proposed 19 grounds on which it claimed that the or....
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....08 are much lower than the units consumed in the months of May and June, 2008. Finally, out of the production of 310 kgs of gold medallions, there is no conclusive evidence about the labour charges to the extent of 110 kgs of gold medallions. 18. The Tribunal noted the rival versions and appearing from the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals). 19. In paragraph 10 of its order at running pages 216 and 217, the Tribunal noted the arguments of the assessee's Advocate. The assessee specifically described the process of making medallions and termed it as simple one. It involves consumption of minimum units of electricity. The argument throughout was that once the special auditor was requested to give a report and after an audit, then, his report brings all the facts on record. It was claimed that the assessee's total block of assets is worth Rs. 16,13,797/only. The activity being simple, it does not involve very heavy electricity consumption. No high voltage apparatus was necessary for making the medallions. The power consumption required is only 65.60 units. 20. Out of several reasons which were pressed by the Revenue in terming ....
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....ed requiring heavy machinery or the deployment of existing machinery and plant for days and months together. It is not a complex or complicated procedure. The manufacturing process is simple. It was the Revenue which was, therefore, obliged to falsify this version, and particularly when similar claim of deduction under Section 10A was made in the earlier assessment year and not denied. The Revenue having failed to discharge this burden and obligation on it by law, that the Tribunal concluded that the assessee's version deserves to be accepted. Even if one goes with the test and emerging from the judgment of the Supreme Court in the case of Premier Breweries Ltd. (supra), we do not think such a finding and conclusion of the Tribunal raises a substantial question of law. 24. Similarly, the Tribunal has considered this claim/deduction also on the point of non payment of labour charges. 25. We find that the questions that are proposed, and particularly question 4A does not make any distinction but generally doubts and challenges the conclusion of the Tribunal. In that regard, in paragraphs 13 and 14, the Tribunal found that there was something to be said with regard to the la....
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....essee challenged the addition of Rs. 2.33 crores. Since both appeals were taken together, relevant facts were noted and equally, the argument of the assessee that payment towards customs duty at SEZ, Gandhidham needs to be paid in cash only. That is how the assessee transferred cash from its branches at Coimbatore, Chennai, Mumbai etc. The matter was considered by the special auditors also. 30. The requisite details have been enumerated in paragraph 17 of the order under Appeal. The claim of the assessee, therefore, was considered and in the light of the facts and figures indicated in this paragraph. 31. Thereafter, the Assessing Officer, being not satisfied, issued a showcause notice. He conducted further inquiries. The Assessing officer invokes Section 69C in respect of the total claim of Rs. 4,23,56,727/, which includes the above amount of Rs. 2.33 crores. It was urged that the rest of the cash was transported from Ahmedabad out of the cash balances of the branch office there. The provisions of Section 68 were also invoked. 32. When such findings were challenged before the First Appellate Authority, the Tribunal noted the observations and conclusions in that order of th....
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.... paragraphs 25 and 26. It found that the sum, as above, was finally received by the assessee from M/s. Joshi Bullion Gems and Jewelry Pvt. Limited (JBGJPL) headed by one Mr. Jayesh Desai. The sum was not directly received from the three parties who owed the money to the assessee. That is because the assessee and the said M/s. JBGJPL had entered into an assignment agreement. It is in these circumstances that the Tribunal extensively referred to all the three debtors and their debts, how they were settled and how the 3rd party M/s. JBGJPL came into picture. It also found from the record that said Mr. Jayesh Desai appeared before the Assessing Officer on 12th February, 2013 and explained the business necessity for him to clear the outstanding payments of these three parties and also filed certain documents connected to the sources of the sum aforesaid paid on behalf of the parties. The Commissioner of Income Tax (Appeals) was, however, not satisfied as, according to him, some relevant details were not forwarded even though Mr. Jayesh Desai was granted enough time. 36. That is how the entire order of the Commissioner of Income Tax (Appeals) has been referred with the relevant findin....
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....thout assigning cogent and satisfactory reasons. In the circumstances, the tallying of the stock register in the absence of the discrepancies enables the Tribunal to reverse the concurrent finding when it was proved that the relevant materials have been ignored or brushed aside in rendering such concurrent findings, then, the Tribunal has duly performed its duty as a last fact finding authority, though exercising a power of appeal. 41. We do not, therefore, think that question No.4D is a substantial question of law. 42. As far as the commission payment amounting to Rs. 1,28,75,553/is concerned, once again the Tribunal has, in paragraph 63 of the order under Appeal, noted the rival contentions. It also found during the course of the arguments of the assessee's Advocate/representative that there was substance in the same. The counsel pointed out that the special auditors have analyzed the nexus of certain transactions on sample basis and the transactions (buyer credit facility) with the bank are not examined extensively. If a chance is given, the assessee would be happy to furnish all the transactions and establish the nexus. 43. Once the matter was remanded to the file ....
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.... also considered the report of the special auditors. The special auditors did not find any infirmity in the transaction except that there are no purchase orders for the purchases. The 50 transactions were analyzed by the special auditors, but they did not find anything adverse in the same. Similarly, the assessee has not availed any export benefit in the business of diamond trading. The trading has been carried out in such a manner so as to raise finance and that is not illegal. It is in these circumstances and as a business proposition, the claim was allowed. 48. The ground has also been allowed after rejecting the contention of the departmental representative and for the reasons assigned in paragraph 72 of the order under challenge. 49. In such circumstances, once again, the concurrent finding of fact was reversed and with the above materials. We do not find any perversity in such findings of the Tribunal, nor are they vitiated by any error of law apparent on the face of record. In the circumstances, question No.4F is not a substantial question of law and the Appeal is dismissed as far as question No. 4F is concerned. 50. Insofar as disallowance under Section 40A(2) on i....
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....aised pertaining to disallowance of interest expenses amounting to Rs. 93,19,850/. This issue was referred to the special auditors. The special auditors noted that the assessee received huge interest free loans and advances. Further, the assessee claimed interest expenditure of Rs. 1,50,76,083/. Comment of the special auditors has been highlighted and equally, the response of the assessee. The Tribunal concluded that the Commissioner of Income Tax (Appeals) deleted this addition made by the Assessing Officer by relying upon a binding judgment of this Court. Commissioner of Income Tax (Appeals) held that the Assessing Officer held that there was no material produced by the assessee. However, the assessee mentioned that there are interest free funds of Rs. 38.56 crores as on 31st March, 2009, whereas, the interest free loans advanced during the above year are Rs. 2,29,36,08,880/and which demonstrates that the assessee is having excess interest free funds available for giving interest free loans. Therefore, the allegation of excess cost of Rs. 1,50,76,083/is not a valid one. That is how the Assessing Officer attempted to establish the nexus between the interest free and interest beari....
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....t also reproduced paragraph 51 of the order of the Commissioner of Income Tax (Appeals), deleting the addition. The Tribunal then noted the contentions of the Revenue in paragraph 96 and in paragraph 97 that of the assessee. 54. Thereafter, in paragraph 98, the Tribunal rendered its finding and which is based on the relevant details and facts. The summary of the details of the hedging loss, as pointed out at pages 54 and 55 of the order of the Assessing Officer, would reveal that nothing incriminating or adverse has been found by the Assessing Officer. In the summary and findings of the special auditor also, which has been referred in this paragraph 98, the Tribunal found that these transactions were accepted. They were accepted because these transactions are hedged with trade contracts partly directly and partly on overall basis, but every contract is hedged with trade transactions. The Assessing Officer, according to the Tribunal, has not brought anything on record, and specifically to establish that there is a selective hedging. Meaning thereby, the trading transactions are hedged only selectively. In the Tribunal's opinion, the facts would have to be considered in their ....