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TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 1419
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....earned Assessing Officer under section 143(3) of the Income-tax Act, 1961 dated January 29, 2016 was erroneous and prejudice to the interests of the Revenue. 3. In the facts and in the circumstances of the case the learned Principal Commissioner of Income-tax, Jaipur-II, Jaipur has erred in holding that the learned Assessing Officer has erred in granting deduction under section 10AA on the stated sales of the SEZ unit under the given facts. 4. The assessee craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. 2. The assessee filed its return of income on September 30, 2013 declaring a total income of Rs. 71,79,770. The assessee claimed exemption under section 10AA which was allowed by the Assessing Officer while completing the assessment under section 143(3) on January 29, 2016. Subsequently, the learned Principal Commissioner of Income-tax on examination of assessment record noted that the Assessing Officer has allowed the claim of deduction under section 10AA of the Act without proper examination of the matter and particularly the eligibility for claiming deduction under section 10AA on account of the SEZ unit set up by ....
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....sed representative has referred to the purchase bills and sales vouchers which were duly approved by the SEZ authorities and submitted that when all the transactions of purchase and sale at the SEZ unit were carried out after approval of the SEZ authorities, then there was no question of suspecting the purchases and sales made by the assessee from the SEZ unit. The Assessing Officer thoroughly examined the claim of the assessee and the relevant record. The assessee filed the replies dated July 13, 2015 and July 21, 2015 before the Assessing Officer in respect of the query raised by the Assessing Officer. All these replies filed by the assessee are available in the assessment record. The assessee specifically explained the business address of the firm at H-115, SEZ-II, Sitapura, Jaipur and also filed the copy of LOA for SEZ to show the setting up of a new unit at the SEZ. The agreement for purchase and sale of SEZ was also furnished. The Assessing Officer after making necessary enquiry and examination of the relevant record was satisfied with the claim of the assessee. The learned authorised representative has further contended that it is not a case of splitting up of business alrea....
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....ob with their own tools. The assessee, however, purchased the machinery and tools such as polish machine and other tools required for the manufacturing activity. He has referred the list of articles and tools which were purchased by the assessee. Thus the learned authorised representative has submitted that the assessee produced the entire relevant record in support of the claim of manufacturing done by the assessee at the SEZ unit and sale of the finished goods which is duly approved by the SEZ authorities. The purchases made by the assessee have not been disputed even by the learned Principal Commissioner of Income-tax though he has doubted only the manufacturing activity done by the assessee within the short span of time. Since the assessee got all the jewellery manufactured through various artisans/workers, therefore, raising the objection and doubt by the learned Principal Commissioner of Income-tax is without any basis. The Principal Commissioner of Income-tax has misunderstood the facts regarding purchase and sale of the goods by considering only the gross weight of the sold jewellery without considering the net weight of the gold. Hence the learned authorised representative....
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....r. However, when the Assessing Officer has not conducted any enquiry then the said order passed by the Assessing Officer suffers from error and liable to be set aside. He has relied upon the impugned order of the learned Principal Commissioner of Income-tax. 5. We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has accepted the returned income while passing the scrutiny assessment order dated January 29, 2016. However, the Assessing Officer has stated in the assessment order that a notice under section 142 as well as under section 142(1) along with a query letter was issued to the assessee. In compliance, the assessee attended through its authorised representative and filed the necessary details on various queries made by the Assessing Officer. The relevant part of the Assessing Officer's order is as under : "The case was selected for scrutiny and notice under section 143(2) was issued on September 3, 2014 by the Assistant Commissioner of Income-tax, Circle-5, Jaipur which was served on September 9, 2014. On change of incumbent again notices under section 142(1) along with a query letters were issued on June 17, 2015, i....
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.... Bank, C Scheme, Jaipur (001205000369) and ICICI Bank (001205030972). (Page No. 9) 8. N.A. 9. That the most of work of manufacturing process is done manually so the assessee is not maintained any register of assets. 10. The assessee is used mainly gold, silver, diamond, precious and semi-precious stone as raw material for gold and silver jewellery. During the financial year the assessee has purchased raw material more than Rs. 10 lakh from the following suppliers. (pages 10 to 11) (a) Sheeta Manufacturing Pvt. Ltd. (b) Mohan Lal Mahendra Kumar Jewelers 11. The assessee is engaged in business of trading and manufac turing of silver and gold jewellery studded with diamond and stone. The main customer of the assessee is Jahangir Singh Noor and Sanscage Ltd. 12. N.A 13. N.A 14. That during the financial year there is no loan raised by the assessee-firm. 15. N.A 16. N.A 17. N.A 18. That the turnover, gross profit, gross profit rate for the last three year are as under : A. Y. Turnover Gross profit G. P. rate 2013-14 12472590.00 4009917.18 32.15% 2012-13 0.00 0.00 0.00 2011-12 264240.00 39604.00 14.99% The GP rate is better in comparison to ear....
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....details of the partnership firm, nature of busi ness of trading and manufacturing and further the SEZ unit of the assessee at Sitapura, Jaipur. Thus the assessee has explained the facts that the original business of the partnership firm was being carried out from the premises A-129, Janta Colony, Jaipur and a new SEZ unit was set up at H- 115, SEZ-II, Sitapura, Jaipur. The assessee also produced LOA of SEZ and manufacturing process being done manually. Therefore, the assessee was not maintaining any register of assets. The comparative turnover details were also produced by the assessee along with all the relevant details of purchase bills, sale invoices, manufacturing charges paid to the artisans/ workers. The learned Principal Commissioner of Income-tax after comple tion of assessment under section 143(3) invoked the provisions of section 263 by issuing the show-cause notice dated March 13, 2018. The learned Principal Commissioner of Income-tax noted that the partnership firm was not new and, therefore, it has not come into existence for the first time in the year under consideration, rather it was already existing and was engaged in the same business of trading and manufacturing ....
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....old weight of jewellery sold vide bill dated May 31, 2012 at 686.770 gms. However, the pure gold weight of the said jewellery was 402.399 gms as against the purchases of 509.89 gms vide bill dated May 23, 2012. These details are also shown in the sale invoices that the gold content is only 402.399 gms as per the bill dated May 31, 2012 as against the weight of the gold taken by the learned Principal Commissioner of Income-tax at 686.770 gms. Thus the difference in the weight taken by the learned Principal Commissioner of Income-tax is due to the purity of gold. It is apparent from the sale invoice itself that the weight of the pure gold in the jewellery was only 402.399 gms as against the weight of 686.770 gms. The relevant details of the difference of the gold and the pure gold weight as well as other metals and stones in the jewellery exported by the assessee during the year are as under : Bill No. and date Gold net weight Gold 995 weight Metal weight Weight taken by Pr. CIT (This is weight 3+4) (1) (2) (3) (4) (5) 01/2012-13 31-5-2012 686.770 402.399 284.371 696.770 EX03/12-13 18-1-2013 290.258 170.071 120.187 290.258 EX03/2012-13 11-2-2013 110.360 64.663 ....
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....uiry in respect of the claim made by the assessee which makes the order erroneous and prejudicial to the interests of the Revenue. The learned Principal Commissioner of Income-tax has not given a concluding finding that the claim of the assessee is not allowable but the matter was set aside to the record of the Assessing Officer for re-doing the same. Thus once the entire record relevant to the claim of deduction under section 10AA was available on the assessment record and the Assessing Officer has conducted an enquiry as it is evident from the assessment record and even the assessment itself manifest the conducting of enquiry by the Assessing Officer, it is not a case of lack of enquiry on the part of the Assessing Officer though it may be a case of inadequate enquiry on the part of the Assessing Officer. Once the case in hand does not fall in the category of lack of enquiry, the order passed by the Assessing Officer after considering the relevant record and making an enquiry cannot be said to be erroneous and prejudicial to the interests of the Revenue. The learned Principal Commissioner of Income-tax can invoke the provisions of section 263 only when it is found that the order ....
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....sking the Assessing Officer to re-do the assessment. This view is supported by the decision of the hon'ble Delhi High Court in the case of ITO v. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) wherein the hon'ble High Court has held in paragraph 18 as under (page 340) : "18. It is in this context that the Supreme Court in Malabar Indus trial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) ; 109 Taxman 66 (SC), had observed that the phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to the Revenue ; or two views were possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax may not agree ; the said orders cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the C....