TaxTMI 
TaxTMI 
2020 (1) TMI 1109
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....ng and merit of the case. 2 The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. 2. The sole issue raised by the Revenue in this appeal is that learned CIT (A) has erred in allowing the deduction to the assessee under section 10B of the Act without appreciating evidences available on record. 3. The facts as culled out from the order of the authorities below are that the assessee is a partnership firm and engaged in the business of manufacturing epoxy cast insulators, bushing, epoxy molded components etc. The assessee has its manufacturing unit at 866/1 GIDC, Makarpura, Vadodara, Gujarat. The assessee is a 100% Export Oriented Unit approved by the Development commissioner, Kandla Special Economic Zone, Gandhidham, Ministry of Commerce & Industry vide letter No. KASEZ/100% EOU/II/968/2000-01/211 dated 31st March, 2001 which was extended to 20 August 2011. The assessee has its sister concerns as detailed under: i. Electrical Controls and Systems (ECS) ii. Bharti Electrical iii. Press Metal Products. 3.1 There was a search and seizure operation carried out under section 132 of the Act in the "Bar....
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....4) was retracted and an affidavit dated 7th December 2011 was filed explaining the eligibility for the deduction under section 10B of the Act. vii. There was a specific/identified place to carry out the winding, testing and resin casting activities on such instrument transformers. The income tax officer during search has not taken the videography of the entire factory. viii. There was a direct supervision of the technical qualified staff of the assessee on the manufacturing activities which are carried out at its cost. ix. There was frequent inspection and verification carried out by the custom and central exercise authorities without pointing out any adverse remarks. x. There was a common entrance of the assessee and ECS but there were separate gates for entering into the factory. As such there was no relation between them with regard to the manufacturing operations carried out by them. xi. There is no need to carry out the manufacturing activity on the product from the beginning to the end in its premises. Therefore, any process outsourced to a third party does not restrict the deduction under section 10B of the Act. 3.3 The assesse....
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....tan V. Patel Production-incharge of Bharti Electricals in their respective statements, had made any reference to such low voltage or medium voltage CT and PT. Both of them had made categorical statements in respect of pr oduction of CT and PT without making any such distinction about low voltage or medium voltage CT and PT. Hence, this claim of the assessee is nothing but an afterthought to maximize its gain by way of claiming deduction for which it is not eligible otherwi se. The claim of the assessee on this account is therefore rejected. 5.11 The claim of the assessee that in the previous assessment orders passed u/s 143(3), the assessee was allowed such deduction does not in any manner justify it's contention for the doctrine of res - judicata does not apply to Income Tax proceedings as held by Hon'ble Supreme Court in the case of CIT Vs. British Paints India Ltd. (1991) 188 ITR 44(SC) and in the case of UCO Bank (1993) 200 ITR 68 (Cal.) wherein it was held that it is not only the right but the duty of the Assessing Officer to consider whether or not the books disclose - the true state of accounts and the correct income can be deduced there from. It is incorrec....
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....nt between different concerns of a group for diversion of profit with a motive to claim undue bene fit of deduction l,e case of eligible concern in respect of products not. manufactured by it. In ard,, it would be most relevant to refer to the decision of Hon'ble Kerala High court in the case of C. Dhanapalan vs CIT (2001) 252 ITR 513 (Ker). The principal underlying the decision is that tax specifically imposed has to be met and any exemption being an exception can not be claimed on the basis of a doubt or ambiguity, since the liability imposed by a provision in a taxing statute is the rule and exemption a nd exception. The Hon'ble High Court in this case also referred to the decision of Hon'ble Supreme Court in the case of International Cotton Corporation (P) ltd, vs CTO (1975) 35 STC 1, while referring to aproposition that concessional provisions are to be interpreted rigidly, since concession is not a matter of right. 5.14. In view of above discussion it is evident that the assessee is not eligible for claiming deduction u/s. 10B to the extent it pertains to sale of CT and PT. In order to ascertain the cla im of deduction of the assessee to the extent it per....
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.... Act that the outsourcing of work will amount to disqualification of deduction u/s 10B of the Act. As such, there is no prohibition on outsourcing the work in relation to the manufacturing activity. viii. Further assessee also submitted detailed flow chart of manufacturing process of product CT/PT taken by it. Accordingly assessee prayed for deletion addition made by the AO 5. The learned CIT (A) after considering the submission of the assessee and findings of the AO deleted the addition made by the AO by observing as under: Regarding the Videography i. There cannot be taken any adverse view against the assessee based on video footage without bringing any corroborative or material documentary evidence. ii. The assessee before AO has controverted the video footage and submitted that video recorded by the investigating authority only represents a part of factory premises. This fact has not been contradicted by the AO. iii. The AO drew adverse view without considering or making any verification of evidence submitted by the assessee before him. Regarding the statement of Shri ketan V. Patel employee of Bharti electricals ....
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....past assessments u/s 143(3) of appellant and Bharati, and even the assessment under s. 153A made by the same AO on Bharati and Press-metal without any corresponding adverse view therein r. Nothing has either been commented upon by or could impress the AO enough to look beyond what Authorized Officer questioned the appellant and what he answered. Not only has the AO carried out no enquiry or brought no material to establish the dubious nature, if at all, of these evidences filed by the appellant, the AO has not at all dealt With the evidences and submissions made on the basis thereof. Also, the appellant submitted before the AO that each eli gibility condition was fully satisfied by the appellant and clearly described how. As against these evidences, as mentioned earlier, the AO has simply reiterated the opinions of the Authorized Officer in coming to his decision of denial of exemption u/s 10 B. The statement of Ketan Patel otherwise also has been held by me to be lacking credibility in view of absence of corroborative material. In any case, AO could have drawn no support from that statement without allowing an opportunity to cross - examine or w ithout dealing with the su....
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....the claim of exemption) to link adverse statement to affairs of the appellant during period earlier than that. On this count also, the denial of exemptio n already granted earlier u/s 143(3) for the years under reference, cannot be sustained. I also find a considerable force in this contention also. There is no express or implied mention of the period under reference (FY 02 - 03 to 07 - 08) in the statement of Ketan Patel, and even by wildest stretch of imagination, it is impossible to hold against the appellant on the basis of statement of Ketan Patel for the period under reference.I therefore agree with the submissions made on behalf of the appellant that the statement recorded during FY 09 - 10 and scenario described therein cannot, automatically and without any co - relating evidence, be brought to bear on appellant's affairs during earlier period of FYs 03 - 04 to 07 - 08 relatable to AYs under reference. Even if an adverse view was warranted, the adverse view were justified only for period FY 09 - 10, and the adversity could not have travelled back in clear absence of any incriminating/adverse material for past period. Therefore, on that count also the acti on of the AO n....
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.... machineries are appearing in its financial statement as evident from the submission of the assessee placed on pages 526 to 529 of the paper book. The assessee has also filed the certificates of independent qualified engineers which are placed on pages 809/810 of the paper book in support of his contention that it is engaged in the manufacturing of the alleged products. But no defect of whatsoever was pointed out by the AO. 8.2 We also note that the statements recorded during search and survey cannot be the basis of the addition until and unless such statements are based on corroborative evidences. In this regard we find that CBDT has discouraged its officers to make the addition on the basis of disclosure statement which is based without any corroborative evidence. The relevant extract of CBDT instructions issued vide F. No. 286/98/2013-IT(Inv.II) dated 18th of December 2014 reads as under:- " Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings....