TMI Blog2018 (4) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Excise Authorities. The A.O. in the remand report admitted that the documents submitted by the assessee before Ld. CIT(A) were evident that manufacturing was being done at the premises of the assessee. Admission of the A.O. that assessee is manufacturing hot mix masala and thereafter, it is exported by assessee, supported by documents, the Ld. CIT(A) correctly deleted the addition. - Decided in favour of assessee. Addition on waste of 46401 kg not proved - Held that:- The excise records have been checked and verified by the Excise Authorities. CIT(A) found that assessee has maintained the in-put stock register and stock register of the finished goods. Therefore, there were no justification to disbelieve the wastage claimed by the assessee. A.O. did not reject the books of account of the assessee and has not pointed out any of the specific defects in the books of account and records maintained by assessee. The assessee explained that there is a natural loss in the process of production of hot mix masala which is supported by laboratory report. Also there is no evidence on record to prove any sales made by assessee outside the books of account.- Decided in favour of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(2) on 27th October, 2006 which was served upon the assesses. The A.O. asked the assessee to file details. The A.O. considered the issue of claim of exemption under section 10B of the I.T. Act, 1961. The assessee claimed deduction of ₹ 1,57,41,762 under section 10B on export of hot mix masala claimed to have been manufactured by the assessee. The A.O. denied the exemption under section 10B of the I.T. Act and held that since the assessee has been found not to be engaged in manufacturing activity and found to export item which are not manufactured by it, its claim of deduction of ₹ 1,57,41,762 under section 10B was not allowable and the same was accordingly, disallowed and addition was accordingly, made. 5.1. Further, the A.O. considered the issue of suppression of sales. The assessee submitted that difference of 46,401 Kg. is because of natural loss which happens during the cleaning, staining, grinding, packing etc. The A.O. however, did not allow claim of assessee. It was, therefore, noted that assessee has not accounted for the same income in respect of disposal of 46,401 Kg of finished products. Therefore, the income amounting to ₹ 73,89,823 (bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 143(2) of the Act, within the prescribed time. The A.O. in the assessment order did not mention as to when the notice dated 27th October, 2006 was served and merely mentioned the date of issue. Thus, the notice under section 143(2) having been served beyond 31st October, 2006, and therefore, the jurisdiction assumed by the A.O. is nullity and so is the present assessment order under appeal. The assessee relied upon several decisions in support of the proposition that service of notice under section 143(2) within the statutory period is mandatory and in the absence of same, the assessment order would be illegal and void abinitio. The burden is upon the Revenue to prove service of the notice. The decisions relied upon by assessee includes the decisions of the Hon ble Delhi High Court in the cases of Nulon India Ltd., 216 CTR 142 in which it was held that service has to be proved by the Revenue by leading positive evidence and that there is no presumption that notice must have been served upon it within 24 hours. and CIT vs. Lunar Diamonds Ltd., 197 CTR 312 (Del.) in which it was held that Tribunal having held that the Revenue has failed to prove that the notice under section 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for its counter comments. The assessee filed the counter comments vide letter dated 13th June, 2009. The relevant portion of the same is reproduced in the appellate order in which the assessee briefly explained that A.O. did not give opportunity at assessment stage. Therefore, additional evidence as above may be admitted. The A.O. did not mention in the assessment order that notice dated 27th October, 2006 under section 143(2) have been served through affixture. This fact is disclosed for the first time in the remand report. It was submitted that assessee was consistently submitted that notice sent by registered post on 30th October, 2006, at 12.12 P.M. was received by assessee on 2nd November, 2006. It is a jurisdictional notice. Therefore, it should be served upon the assessee up to 31st October, 2006. The assessee challenged the service of the notice, within the period. A.O. has not brought any evidence on record to prove that notice dispatched on 30th October, 2006 at 12.12. P.M was served upon assessee by 31st October, 2006. Therefore, jurisdiction assumed by the A.O. based upon notice dated 27th October, 2006 by registered post, is invalid. It appears that A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictional Delhi Bench in the cases of Ram Singh Mathur vs. ITO 112 TTJ 989 (Del.), Chandra Agencies vs. ITO 89 ITD 1 (Del.) and decision of Calcutta High Court in the case of Rameswar Sirkar vs. ITO 88 ITR 374 (Cal.) (HC) and decision of Hon ble Madras High Court in the case of Kiran Machines vs. ITO 295 ITR 4 (Madras) (HC) and etc. 9. The Ld. CIT(A) as regards the additional evidences found that assessee has filed copy of the letter sent by registered post to the A.O. and in support of it, filed copy of the register receipt. Both these were provided to the A.O. for his comments. In fact, registered receipt is the record of the post office and the letter of the assessee is already part of the assessment record. The Ld. CIT(A), accordingly, admitted the additional evidences. We may note here that as regards admission of the additional evidences, there is no challenge to the same in the Departmental Appeal. 10. The Ld. CIT(A) as regards the service of the notice under section 143(2) within the period of limitation noted that income tax is a fiscal statute and its purpose is to collect revenue for the State. Therefore, the procedural irregularity are not treated as fatal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee also filed additional evidences before Ld. CIT(A) with regard to the fact that assessee challenged the service of the notice under section 143(2) through letter which was sent by registered post and the UPC. The assessee highlighted in these additional evidences that notice under section 143(2) have not been served upon the assessee within the period prescribed under the law. The additional evidences were referred to the A.O. for filing the remand report. The Ld. CIT(A) admitted the additional evidences and also noted in his findings letter of the assessee is already part of the record. It would mean that the assessee after receipt of the notice under section 143(2) belatedly on 2nd November, 2006 made a representation to the A.O. submitting therein that notice under section 143(2) have not been served upon the assessee within the statutory period. The Ld. CIT(A) also reproduced the relevant portion of letter in para 3.4 of the impugned order. The A.O. did not discuss the objection of the assessee challenging the service of the notice under section 143(2) in the assessment order. There is no challenge to the admission of the additional evidences by the Ld. CIT(A) in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal remanded the matter to the Commissioner (Appeals). The Commissioner (Appeals) in the second round, allowed the appeal on the ground that there was no evidence to show that notice under section 143(2) of the Act had been served on the assessee before November 30, 1997, i.e., within one year of the filing of the return. Therefore, he held the assessment void. This finding was affirmed by the Tribunal. On appeal: Held, dismissing the appeal, that a concurrent finding had been recorded by the Commissioner (Appeals) and the Tribunal on the question of date of service of notice. The notice was not served within the stipulated time. Mere giving of dispatch number would not render the finding perverse. In the absence of notice being served, the Assessing Officer had no jurisdiction to make assessment. Absence of notice was not curable under section 292BB of the Act. 15. In the present case, the A.O. was having no proof of service of notice under section 143(2) of the Act upon the assessee on or before 31st October, 2006. The Ld. CIT(A) noted in his findings that Income Tax Act is a fiscal statute and its purpose is to collect revenue for the State. Therefore, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Court-house, and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit. [(1A) Where the Court acting under sub-rule (1) orders service by an advertisement in a newspaper, the newspaper shall be a daily newspaper circulating in the locality in which the defendant is last known to have actually and voluntarily resided, carried on business or personally worked for gain.] (2) Effect of substituted service.-Service substituted by order of the Court shall be as effectual as if it has been made on the defendant personally. 15.2. Before adopting the mode to serve the assessee through affixture, the A.O. should be satisfied that there is a reason to believe that assessee is keeping out of way for the purpose of avoiding service or that for any other reason the notice cannot be served in the ordinary way, the A.O. shall order the notice to be served by affixture a copy thereof in some conspicuous place in the Court House and also upon some conspicuous part of the house in which the assessee is known to have last resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d bad in law. There is no other evidence available on record to prove that assessee has been served with notice under section 143(2) within the statutory period. It was the presumption of the authorities below that assessee has been served with notice through registered post in ordinary course of business. It was the presumption of the A.O. that notice has been served upon the assessee, which is rebutted by the assessee through evidence and material on record. The presumption cannot take place of legal proof particularly when the notice through registered post was dispatched only 30th October, 2006 and as per law it has to be served on or before 31st October, 2006. The A.O. in the remand report has referred to provisions of Section 292BB of the Finance Act, 2008 in support of his contention that when assessee appeared in the proceedings before A.O, it shall be deemed that any notice under any provision of the Act, has been duly served upon him, in accordance with law and assessee shall be precluded from taking any objection in any proceeding or enquiry under this Act that notice has not been served upon him in time. It may be noted that proviso to this Section provides that nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection raised by the Revenue, were replied with evidences by the assessee, which were not considered by A.O. The assessee, therefore, pleaded that deduction under section 10B of the Act may be allowed. The written submissions of the assessee is reproduced in the appellate order in which assessee briefly explained that assessee was in the business of manufacturing of hot mix masala and exported the same after manufacturing, which is proved by documentary evidence like Audited Balance- Sheet, Registration under Central Excise, Details of the Stock, Manufacturing Process, Installed Capacity of Grinding Machine and the production done by assessee, explaining manufacturing activity, Payment of Visit and Inspection Charges of Excise Officials etc., which are noted in detail, in the appellate order. The assessee also moved application for admission of additional evidence, which were, challan from the supplier of the machinery with copy of the bill of machinery, confirmation for payment of electricity charges, genset bill, lab report regarding the wastage, annual return attested by Central Excise Department, monthly return filed with Excise Authorities showing manufacturing with copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 01.06.2004 and not on 11.6.2004. In fact, on 11.06.2004, the invoice relating to the sale of the machine was made and that is how AO recorded a finding as to how hot mix masala could be manufactured prior to that date. On the contrary, it is established that machine was supplied to the appellant on 01.06.2004 and production was made from 02.06.2004. (iv) The appellant has submitted that the generator was hired and hire charges was composite one including the consumption of diesel. The appellant has also explained in its letter dated 26.12.2007 about the consumption of electricity and there is nothing unusual or abnormal in it. Hence, the appellant s explanation is acceptable in this regard. (v) In respect of quantum of production vis-a-vis consumption of electricity, the appellant has submitted that the consumption of electricity as per the working of the AO comes to 2,291 units and not 5,400 units. It is further noticed that details of wages were given to the AO on 14.12.2007 and copies of vouchers were also produced. Hence, I find no substance in the allegation of the AO that investment proposed before Development Commissioner, SEZ, Noida was estimated at ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue are accordingly dismissed. 21. On Ground No.3, the Revenue challenged the deletion of addition of ₹ 73,89,823. The A.O. made the above addition by holding that claim made by assessee regarding waste of 46401 kg was not proved and according to A.O. it must have been sold outside the books of account. The assessee challenged the addition before Ld. CIT(A) and filed the written submissions supported by large number of documents to show that it was a natural loss/wastage in the business of assessee. The Ld. CIT(A) accepted the contention of assessee and deleted the addition. The findings of the Ld. CIT(A) in paras 5.2 and 5.3 of the order are reads as under : 5.2. I have carefully considered the issue with reference to assessment order and written submissions placed on record by the assessee and I find that in this business, there are several processes like cleaning, staining, grinding, packing etc. Hence, the wastage is bound to occur at every stage. The fact of the excise records having been checked and verified by the excise authority cannot be giossed over. I find that the appellant had maintained the input stock register and stock register of finished goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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