TaxTMI 
TaxTMI 
2020 (1) TMI 1109
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....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 "Baroda Bushing and Insulator Group" dated 10 September 2009. The assessee was also cove....
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....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 assessee in support of its claim as stated above also filed an affidavit dated 7th of December 2011 which is recorded on pages 16 to 18 of the AO order. 3.4 However, the AO w....
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....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 incorrect to say that the Officer is bound to accept .^ystem of accounting regularly employed by the assessee, the correctness had not been questione d in the past. 5.12 So far as the judicial decisions cited by the assessee is concer....
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....e 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 pertains to sales of CT and PT, the turnover of CT and PT was obtained from the assessee and the same was verified from the books of the assessee firm and the proportionate claim of the deduction u/s. 10B pe rtaining to sales of CT/PT not allowable to ....
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....aken 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 i. The statement furnished by Shri Ketan V. Patel cannot be the sole basis for drawing the inference against the assessee that it is not engaged in the manufacturing activity with respect to CT/ PT products until and unless such statement is based on some corroborative evidences. ii. Similarly, the assessee has furnished documentary evidences such ....
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.... 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 submissions filed in this behalf. Similarly, the "admission" in statement u/s 132(4) of Kirit Patel is also held by me to be based on mis - canvassed position of law and wrong description of evidences and facts by the Authorized Offic er and hence of little evidentiary value. Moreover, the same is already held by me to have been based on induced mistake of law and the same also, vide communicatio....
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....tement 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 needs to be held unsustainable. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us. 6. The learned DR before us submitted that the assessee was not engaged in the manufacturing activity with respect to CT/PT products. The ld. DR further reiterated the contentions by placing his reliance on the order of the AO. 7. On the other hand the learned AR before us filed a ....
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....ote 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 since the same are not backed by credible evidence. Such actions defeat the very purpos e of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2 . I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time....