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TMI Blog2019 (11) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of assessment proceedings, could not prove it had carried out any manufacturing activity at its premises at SEZ, Surat in the F.Y. 2011-12 relevant to the assessment year under consideration and the onus to prove the same lied on the assessee. 3. On the facts and in the circumstances of the case and in law, The Ld, CIT(A) has erred in law in deleting the disallowance made by the A.O., by placing reliance on the case laws which are not relevant to the instant case, as the facts of the instant case are entirely different form the cases relied upon. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in arriving at the decision that the A.O. has made addition on the basis of presumption and suspicion only; ignoring the fact that in the assessment order, the AO has firmly established the fact that no manufacturing activity was being carried out by the assessee at the SEZ premises. 5. For the above-mentioned reason and any other reasons that may be urged at the time of hearing, it is requested that the order of the CIT(A) be quashed and that of the A.O. be restored. As evident from grounds of appeal, the revenue is aggrieved by grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79957.854 0.999473 24/03/2012 80 Kg 25/03/2012 24/03/2012 79957.854 0.999473 2.3 It was further observed that import parcels were received at around 2.30 P.M. and all the activities were stated to be completed within a span of 4 hours 30 minutes. Further, the export proceeds were never realized by the assessee even after lapse of 3 years and the rate of profit in export / SEZ business was shown to be substantially higher than the profit in domestic transactions. Another observation was the fact that all importers as well as exporters pertain to almost same area in same country i.e. Dubai whereas the payments were routed through New York and Bahamas and not credited to the accounts of the exporters from whom assessee made imports. The bank account numbers were found to be the same in the case of suppliers namely Solitaire General Trading FZE and Sky Diamond Jewellery FZE. All these factors led Ld. AO to show-cause the assessee to file requisite details of the transactions including copies of import / export orders, procedure regarding finalization of price, electricity consumption, bills of labor charges etc. However, the assessee, as per observation in the quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shape of induction machine, rolling machine, cutting machine, weighing scale, polishing machine, stamping press, design die, packing machines etc. All these machines were sensitive as well as costly machines, each costing minimum of Rs. 10-15 Lacs. However, as against the same, the assessee had machinery of Rs. 7.86 Lacs only as on 01/04/2011 at its SEZ Unit which would be insufficient to undertake such kind of manufacturing volume. 2.7 The perusal of electricity records revealed that the bill amount for different months including month of manufacturing, was for the same figures of Rs. 2130 which was on the basis of minimum charges. Since the manufacturing was stated to be done in the month of March, the bill for that month should have been significantly higher than bill for other months when no manufacturing activity was carried out by the assessee. 2.8 Upon perusal of details obtained from SEZ, it came to light that there was no entry or exit of labor in SEZ area on behalf of the assessee unit. No gate pass was ever issued which would show movement of labor during the stated period of production. 2.9 It was further noted that stamping die would be required to stamp / creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shipment will be done by Solitaire General because it is import). 17.10 Above analysis clearly indicate that the above documents are not reliable. 18 Payment- Most of the payments to be done for imports and to be received for exports are outstanding. 19 In view of the above, the assessee has not been able to discharge its onus of proving the genuineness of the transaction. The assessee has not discharged its onus to prove that manufacture has been done by him in the SEZ unit. From the above, the manufacture (if any) has been done by the Job work provider and has been done outside the SEZ unit. 19.1 In view of the above, it is held that the assessee is not entitled to the deduction u/s 10AA of the Act. 3. Aggrieved, the assessee agitated the denial of aforesaid deduction with success before Ld. first appellate authority vide impugned order dated 20/03/2017. The assessee drew attention to the fact that Ld. AO while doubting manufacturing activity, denied deduction on trading activities also without examining the same. The assessee also explained its entire process of manufacturing and sought to rebut the adverse observations made by Ld. AO in the quantum assessment order, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edallions and sent to customs SEZ, Sachin, Surat on the next day. They are exported on day three. So it is not factually correct to say that the entire process is completed in 4 and a half hours. Moreover, the assessing officer has not given any reason for disbelieving the documents submitted by the appellant which include the airway bills and customs clearances. 3.2.3. The assessing officer on one hand states that the manufacturing has been done by the labour contractor and not the appellant and therefore the appellant is not eligible for deduction under section 10AA. On the other hand, he says that no labourer ever entered the SEZ and therefore, there is no manufacturing; These two are contradictory stands. However, the fact remains that the appellant had imported gold and had exported gold medallions which have passed through the SEZ. The labour contractor had issued bills for labour charges which have not been proved to be false by the assessing officer, Regarding the observation about the manufacturing loss of 245.69 gms, the learned counsel has clarified that this is stock-in-hand and not loss. The 15.09 gms gold has been taken by the labour contractor and the cost of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT Mumbai, vide order dtd. 19/06/2013, on similar facts, held as under: "It is noticed that to verify the claim of the assesses and explanation, the assesses was asked to submit the complete details of imports and exports made through its unit and approval from Custom and Central Excise Department. Documents relating to shipment import and export clearance Invoices of import and export .and foreign remittances in the bank accounts. The CIT(A) found that all these documents were submitted before the AO during the assessment proceedings. The CIT(A) has further observed that he has examined all these documents and no discrepancy was noticed in these papers.,Even the AO has not mentioned any discrepancy in the Import and Export Clearance papers submitted during the course of assessment, It is an undisputed fact that in the SEZ unit o Import or Export can be made without the approval of the 'Custom and Central Excise department. All the payments and receipts were made through banking channels and no discrepancy was pointed out by the A.O. From these facts, It is clear that the assessee has a unit in SEZ, Surat, Raw material was imported and the final product was exported with d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and Jewellers Ltd. vs. DCIT, and the decision of Hon'ble ITAT Mumbai in the case of M/s. Gitanjali Exports Corporation Ltd. vs. Mumbal in ITA nos 6947 and 6948/6949 and 6950/6758 and 6787/MUM/2011. 3.2.10. In view of the facts and circumstances of the case as discussed above the judicial pronouncements on identical Issues cited supra, the deduction under section 10AA claimed by the appellant from the manufacturing activity to the tune of Rs. 12,16,35,706/- is allowed. Further, the appellant had claimed deduction under section 10AA to the tune of Rs. 10,55,74,963/- from the trading activity. The assessing officer has without assigning any reason disallowed the entire deduction claimed of Rs. 22,72,10,669/- instead of restricting the disallowance to the claim made under the manufacturing activity which is Rs. 12,16,35,706/-, There is no adverse finding or observation made by the AO on account of the trading activity of the appellant. Therefore, the AO is directed to allow the claim of the entire deduction which is Rs. 22,72,10,669/-, These grounds of appeal ore allowed. 4. In the result, the appeal is allowed. Aggrieved by aforesaid adjudication, the revenue is under fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal and the powers of first appellate authority were coterminous and coextensive with that of Ld. AO and nothing prevented Ld. CIT(A) to conduct further inquiry in this direction. No such exercise is shown to have been carried by learned first appellate authority and therefore, we are not convinced with the approach of Ld. CIT(A) in granting relief merely because Ld. AO failed to carry out the desired investigations. This would assume all the more importance in view of the fact that the assessee could not file sufficient documentary evidences before Ld.AO during assessment proceedings. The Hon'ble Delhi High Court in the case of CIT V/s Jansampark Advertising & Marketing Pvt. Ltd. [2015 56 Taxmann.com 286], aptly observed as under: - 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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