TMI Blog2012 (7) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 143(3) of the Act at an income of ₹ 31,300 after allowing deduction under s. 10BA of the Act. Thereafter, the learned CIT exercised the powers under s. 263 of the Act by observing that the assessee's business had been mentioned as manufacturing and trading of all kinds of hand made articles or things (handicraft goods) which were of artistic value and which required the use of wood as the main raw material. According to learned CIT, the report of the assessee intimated that it was not only manufacturing but also engaged in trading activity during the relevant period and since the manufacturing activity is the condition precedent for admissibility of exemption under s. 10BA of the Act and the assessee was engaged in trading also, it was not entitled for exemption under s. 10BA of the Act but such exemption was erroneously allowed by the AO, therefore, the assessment order passed under s. 143(3) on 26th April, 2007 was erroneous insofar as it was prejudicial to the interest of Revenue. The learned CIT also mentioned the details of certain invoices in paras 5.1 to 5.18 wherein it was mentioned that ready wooden items were purchased by the assessee. The learned CIT issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying human endeavor on some existing raw material to make it valuable. In the instant case, the assessee has done the manufacturing activities to manufacture the eligible articles or things i.e. all hand made articles or things which are of artistic for which wood used as main raw material but in some negligible cases i.e. not more than 15 per cent value of sale price the articles or things have been purchased in raw or rough thereafter the artistic activities have been done by applying the labour and polishing work has also been done at out factory site, hence the commodity purchased in raw and rough has been made usable or valuable at our factory site which amounts to production, manufacturer means a different or independent article should be course by applying manufacturing activities whereas in our case it has done so by use wood but in negligible cases not more than 15 per cent rough or new article has been purchased either in toto or in their parts thereafter assembled at our factory site and thereafter artistic work has been done by applying labour to do the grooming work, digging work or adhesing work which tantamounts to a production activity. Every manufacturing activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary and wages, electrical expenses and telephone expenses. Now the assessee is in appeal. 6. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO thoroughly examined and investigated the case of the assessee before framing the assessment under s. 143(3) of the Act and only after being satisfied allowed the deduction under s. 10BA of the Act. It was further submitted that the learned CIT only referred to certain invoices which indicated that the assessee purchased few wooden items. It was explained that the assessee purchased the raw items and gave the finishing touch after making the various processes, therefore, the claim of the assessee was allowable since it was a case where the assessee was engaged in the activity of manufacturing and processing and was not engaged in the trading as alleged by learned CIT. The learned counsel for the assessee referred to pp. 2 to 7 of the assessee's compilation which is a copy of reply dt. 5th Feb., 2008 to the learned CIT-II, Jodhpur and submitted that vide para 9 of the said letter it was explained that the assessee manufactured or produced all the goods at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and books of account as maintained by the assessee were subject to the audit under s. 44AB of the Act. The assessee also filed audit report along with return of income. It is not a case that the AO had not examined the books of account and supporting material while framing the assessment under s. 143(3) of the Act. The assessee also furnished report under s. 10BA of the Act in Form No. 56H which is placed at pp. 21 to 26 of the assessee's compilation. In the said report, no defect was pointed out by the learned CIT, however, he considered the assessment order passed by the AO as erroneous as well as prejudicial to the interest of Revenue only on this basis that at serial No. 5 of Annex. A', appended to Form No. 56H, the business of the assessee was mentioned as manufacturing and trading of all kinds of handmade articles or things. But in the instant case, not even a single item was pointed out by the learned CIT wherein the assessee was engaged in the trading. On the other hand, the claim of the assessee was that it was purchasing semi-finished wooden articles which required other work of beautification and of artistic value, thereafter the wooden articles took th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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