TMI Blog2015 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... The original business in this case has not ceased functioning and its identify is not lost. There has been some P&M installed in the old stone crusher and the assessee has not been able to give details of such P&M and continued to argue that the Old P&M was worth nothing but only a scrap. Sh. Jatinder Kumar has admitted to have made heavy repairs and renovation to the P&M few years back of the transfer which negates the claim of the assessee. The running of stone crusher is a business involving converting of boulders into smaller stones like bajri, etc which is not considered manufacturing for the purpose of 80IB. The case is squarely covered by the decision given by in the case of ITO Vs Jitendra Stone Crushing Co [2006 (3) TMI 210 - ITAT CHANDIGARH-A ] wherein held that breaking of boulders into small stones or bajri is not a manufacturing activity. In respect of new Industrial Unit, once completed and ready for production, a Certificate of Registration is grated by the district DIC authorities certifying the date of production etc. The registration granted by the DIC authorities in this case dates back to 1971 and the date of commencement of the production is to be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 80IB when the new machinery has not been installed in place of and the appellant has made substantial investment in the plant and machinery. ii. On the facts and circumstances whether the ld. CIT(A) was right in reducing the quantum of addition on account of carriage expenses by 50% without giving any concrete basis. iii. On the facts and circumstances whether the ld. CIT(A) was right in reducing the addition made on account of various expenses debited to trading and P L as the disallowance made by AO is worked @ 12% only. Under such circumstances when assessee failed to maintain the vouchers bills in respect of expenses debited, the disallowance made by AO was reasonable. 3. The facts are that the assessee had claimed the deduction u/s 80IB of the I.T. Act , 1961, in respect of the profits earned from a Stone Crusher. Accordingly, in the course of the assessment proceedings the assessee was required to justify the claim and furnish necessary documentary evidence to substantiate the claim. In response, the assessee produced copies of the purchase bills of the P M, Sales Tax Registration, VAT returns, Electricity bills and details of the employees/workers. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase bills and details of the parties from whom the purchases of Plant and machinery were conducted stands already submitted and verified, it was during the year 07-08 the assessee went into production. The returned filed by the assessee before the Commercial Tax Department showing nil sales during 2006-07 and the sales during 07-08 is the evidenced that the assessee started sales during the year 2007-08..... 6. Again, the A.O., vide query letter dated 15.3.2013, specifically required the assessee to furnish explanation on the following points: i) Please state/explain how the unit/stone crusher can be treated as New One as the registration granted by DIC, Udhampur, has been granted in 1971. ii) Please explain as to how the Unit/Stone crusher can be treated as a new Industrial Unit eligible for 80Ib deduction in view of the registration granted way back in 1971 and thus the date of commencement of the business/production being very old and not what prescribed u/s 80IB. iii) Please state/explain how the stone crusher is eligible for deduction u/s 80IB as the same involves mere splitting of stones, which otherwise has been done considerably by engaging labour by you as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and its identify is not lost. (c) There has been some P M installed in the old stone crusher and the assessee has not been able to give details of such P M and continued to argue that the Old P M was worth nothing but only a scrap. Sh. Jatinder Kumar has admitted to have made heavy repairs and renovation to the P M few years back of the transfer which negates the claim of the assessee. (d) The running of stone crusher is a business involving converting of boulders into smaller stones like bajri, etc which is not considered manufacturing for the purpose of 80IB. The case is squarely covered by the decision given by Hon'ble ITAt, Chandigarh in the case of ITO Vs Jitendra Stone Crushing Co 105 ITD 52 wherein it has been held that breaking of boulders into small stones or bajri is not a manufacturing activity. The assessee is not eligible for the deduction as claimed in view of the following case laws; i) ACIT vs. G.T.C Enterprises (ITAT, Chennai) 87 ITD 188 ii) Hindi Nippon Rural Industries P. Ltd. Vs. CIT(Ker) 201 ITR 588 iii) Numpudhiris Pickle Industries (ker) 1993 KLJ (Tax Cases) 198 (e) That nothing has been brought on records which could confirm the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which was registered with DIC Udhampur in 1971. The plant and machinery of the old unit was not in a workable condition and accordingly the same was scrapped and permission was sought from the DIC for installation of new machinery in place of old machinery. The appellant made substantial investment in the plant and machinery which resulted in the increase in installed capacity of the unit to 60000MT per annum from the capacity of 12000MT per annum of old unit. The installation and expansion is substantial and brought the unit which was is a non operational state in a good working condition with modern and enhanced technology. Hon'ble High Court of Bombay in the case of Gaekwar Foam rubber Co (1959) 35 ITR 632 observed that if the alternation and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. Thus for instance if ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction or if the very nature of the business is changed that again would not be reconstruction or, if the very nature of the business is changed that again would not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eventh Schedule. (d) Manufactures or production should be started within a stipulated time limit. (e) It should employ 10/20 workers. (f) Return of income should be submitted on or before due date. 16. In the assessment order, the AO observed that none of the above conditions of Section 80IB of the Act stood fulfilled by the assessee. It was observed that: (a) The stone crusher/industrial unit under consideration has been set up way back in 1971 as is evident from the registration granted by Industries Department in the name of one Sh. Jatinder Kumar Sharma S/o Sh. Amar Nath R/o Birwah Bridge Dhanari Udhampur. The assessee has in fact purchased this old stone cursher in 2006 from Sh. Jatinder Kumar. The unit is not a new one and thus eligible for 80Ib deduction. The assessee has not produced any satisfactory material on records to prove the newness of the unit in terms of the provisions of section 80IB. (b) The undertaking is a reconstructed business unit already in existence and not a new one. The original business in this case has not ceased functioning and its identify is not lost. (c) There has been some P M installed in the old stone crusher and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hunting out Sh. Jatiner Kumar. No satisfactory documentary evidence has been furnished by the assessee regarding the sale/transfer of this working unit. No sale deed has been produced nor any disclosure of the purchase of the unit/stone crusher has been made, thereby casting a doubt on the genuineness of the transaction/purchase itself. Thus it is fairly a sham transaction in which an existing unit has been acquired/purchased in the guise of partnership. A sham transaction in no way can be eligible for deduction u/s 80IB. 17. It was on the basis of the above observations/reasons that the AO held the assessee ineligible for deduction u/s.80IB of the Act. 18. The ld. CIT(A), as correctly submitted by the ld. DR, has not considered any of the above said observations of the AO, muchless dealt with then. Therefore, the order under appeal is a non speaking order qua Ground No.1. Accordingly, we remit this issue to the file of the ld. CIT(A), to be decided afresh by considering and dealing with all the aforesaid observations of the AO, on affording adequate opportunity of hearing to the assessee. 19. Apropos Ground No.2 , the AO observed that in the Manufacturing, Trading cum-P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. CIT(A), rendering the order under appeal an non-speaking order in this regard. 25. Such an order is unsustainable in law, as it is well settled that all orders of quasi-judicial Authorities must be speaking and reasoned orders. Accordingly, this issue is also remanded to the file by the ld. CIT(A), to be decided afresh by passing an speaking order, on providing due opportunity of hearing to the assessee. 26. So far as regards Ground No.3, the AO has made disallowance of ₹ 3,00,000/- by observing as under: The assessee has also debited major expenses under the head Wages, Machine Running Maintenance., Tipper expenses, Staff welfare, Establishment, etc in the accounts. Despite giving reasonable time assessee could not produce complete supporting vouchers for these expenses. Keeping in view the relevant facts and circumstances of the case, an adhoc disallowance ₹ 3,00,000/- is made out of these expenses to plug leakage of taxable profits on account of possible inadmissible, unverifiable personal and other non business expenses included, therefore, an addition of ₹ 3,00,000/- is made to the total income on this account. 27. The ld. CIT(A) re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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