ASSISTANT COMMISSIONER OF INCOME TAX Vs. OCTAVE EXPORTS
INCOME TAX APPELLATE TRIBUNAL
ASSISTANT COMMISSIONER OF INCOME TAX
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Sushma Chowla, Member (J) -
(1.) THE assessee and the Revenue has filed cross -appeals against the order of CIT(A), dt. 16th June, 2008, relating to asst. yr. 2005 -06 against the order passed under s. 143(3) of the IT Act, 1961 (in short 'the Act') Further, the Revenue has filed an appeal against the order of CIT(A), dt. 20th Aug., 2010 relating to asst. yr. 2006 -07 against the order passed under s. 143(3) of the Act. The assessee has filed cross -objections against the appeal filed by the Revenue relating to asst. yr. 2006 -07. All the three appeals of the assessee and Revenue and the cross -objections filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.
(2.) THE Revenue in ITA No. 779/Chd/2008 has raised the following grounds of appeal:
"1. That the learned CIT(A) -II has erred in deleting the addition of Rs. 97,34,564 out of the total addition of Rs. 1,22,38,136 made by the AO on account of disallowance of deduction under s. 80 -IC of the IT. Act.
2. That while allowing relief as mentioned in para 1 above.
(i) The learned CIT(A) has erred in ignoring the evidence placed on record that all the purchases made by the assessee were made from Ludhiana and delivered at the address of sister concern at Ludhiana and not directly at the place of work at Parwanoo.
(ii) The learned CIT(A) has grossly erred in ignoring the fact that the printing and bleaching of raw material as well as semi -finished products was carried out at Ludhiana and not Parwanoo thereby putting a question mark on the manufacturing process at Parwanoo (hereby creating both the question of law as well as fact. From this an important question arises as to whether printing and bleaching is a part of manufacturing process or not?
(iii) The learned CIT(A) has erred ignoring the evidence brought on record to establish that a number of vehicles carrying the allegedly raw material did not cross the barrier at Parwanoo and as such the AO was more than justified in holding that no raw material reached Parwanoo.
(iv) The learned CIT(A) has erred in law and facts by not taking cognizance of the fact that a number of vehicles alleged to be used by the assessee for transportation of raw material were of class like motorcycle/tractor/mini bus or the vehicle did not exist at all.
(v) The learned CIT(A) has erred in law and facts by not giving any credence to the statement of Shri Kapil Sood wherein the person has stated that only 10 -12 workers worked in the unit of octave imports and the unit usually remained closed as there was no working/manufacturing.
(vi) The learned CIT(A) has erred in facts by ignoring that only 13 sewing machines were put into operation at the unit of M/s. Octave Exports, at Parwanoo and substantiated by the enquiry from Department of Industries, Parwanoo.
(vii) The learned CIT(A) has erred in facts in ignoring/not giving any value to the evidence brought on record by AO in form of report of Himachal Pradesh State Electricity Board which states that the electricity consumption is too low to justify a turnover of more than Rs. 3.72 crores.
(viii) The learned CIT(A) has grossly erred in devaluing the evidence in the form of photographs and video clips showing the unit to be closed and further showing that the space available in the unit is too small to carry out any work for a turnover reaching Rs. 3.72 crores.
(ix) The learned CIT(A) has totally ignored the statement of persons recorded outside the assessee's unit at Parwanoo where it has been stated that no work has been carried out at the business premises of the assessee, neither any movement of vehicle for transport of goods has been seen nor any guard/Chowkidar has been seen functioning at the place.
(x) The learned CIT(A) has grossly erred in ignoring the evidence obtained from India Industrial Garments Manufacturing (P) Ltd., a reputed concern in the field of sewing machine, used for knitted purposes which clearly bring out the fact that the assessee concern did not fulfill the minimum sewing machine and labour requirement for carrying out the manufacturing so as to give turnover of Rs. 3.72 crores.
(xi) The learned CIT(A) has erred in law and facts in ignoring the comparison of rate drawn between the assessee, M/s. Octave Exports and its sister concern, namely. Octave Apparel, carrying out the same business whereby it is proved that the profits of M/s. Octave Exports are too high to establish the assessee's intention to claim deduction under s. 80 -IC.
(xii) The learned CIT(A) has again erred in facts in ignoring the comparison of plant and machinery drawn between the assessee, M/s. Octave Exports and the sister concern, M/s. Octave Apparel, which shows that the plant and machinery used at M/s. Octave Apparel is 9.1 times more at M/s. Octave Apparels whereas the turnover is only 3.53 times more.
(xiii) The learned CIT(A) has erred in not giving any credence to the evidence put on record by the AO to establish that no old sewing machine as such existed at Parwanoo, against the assessee's claim that eleven old machines were used at Parwanoo.
(xiv) The learned CIT(A) has grossly erred in partly allowing the appeal of the assessee when the books of accounts of the assessee had already been rejected on the ground that there was no stock register maintained by the assessee and the bills for the transportation of goods were not found to be genuine.
(xv) The learned CIT(A) has erred in law when it has been proved on record that if any old sewing machine was used in business at Parwanoo its value was more than 32 per cent of total value of plant and machinery which is against the provisions of law and claim of deduction under s. 80 -IC as it contravenes the Expln. 2 to sub -s. (3) of s. 80 -IA which has to be read along with cl. (ii) of sub -s. (4) of s. 80 -IC.
(xvi) The learned CIT(A) has erred in law in partly allowing the appeal of the assessee when it has been clearly brought on record that whole of the manufacturing process has not been carried out at Parwanoo with printing and bleaching has been carried out at Ludhiana."
The Revenue in ITA No. 779/Chd/2008 has also raised the additional grounds of appeal, which read as under:
1. That the learned CIT(A) has erred in allowing the deduction under s. 80 -IC(2)(a)(ii) whereas the assessee had claimed deduction under s. 80 -IC(2)(b) in the assessment year under consideration as well as in the asst. yr. 2004 -05 and asst. yr. 2006 -07.
2. That the learned CIT(A) erred in allowing the deduction under s. 80 -IC(2)(a)(ii) as the assessee was manufacturing item other than those mentioned in the Sch. XIV.
3. That the learned CIT(A) has erred in allowing deduction under s. 80 -IC(2)(a)(ii) whereas the assessee did not fulfill the condition laid down for claim of deduction under s. 80 -IC(2)(a)(ii) i.e., it is not located in any of the notified area."
(3.) THE assessee in ITA No. 762/Chd/2008 has raised the following grounds, of appeal:
"1. That the worthy CIT(A), Ludhiana, has erred in holding that profit of Rs. 25,03,572 included in the profit of Rs. 1,22,38,136 (on which 100 per cent deduction under s. 80 -IC was claimed by the appellant and disallowed by the AO) was not the profit earned from manufacturing of any goods at Parwanoo and the appellant was therefore, not entitled for any deduction under s. 80 -IC on the income of Rs. 25,03,572.
2. That the rejection of claim under s. 80 -IC on the income of Rs. 25,03,572 by the learned CIT(A) on the basis, that some of vehicles did not cross Parwanoo barrier, is not correct in view of the fact that the appellant filed ST -XXVI -A forms issued by the Himachal Pradesh Excise and Taxation Department duly stamped evidencing that these vehicles did cross the Parwanoo barrier on the respective dates and that goods were transported from Ludhiana to Parwanoo by the appellant in such vehicles.
3. That deduction under s. 80 -IC on Rs. 25,03,572 as per above paras has been disallowed against the facts and circumstances of the case.";
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