TMI Blog2020 (1) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... ly audited which were filed during the assessment proceedings and no defect whatsoever was pointed out by the Assessing Officer in such books of accounts. On one hand the Assessing Officer has accepted the books of account and, on the other hand, he is making the addition merely on the basis of the statement obtained under Section 132(2)/133A which was immediately retracted after the date of survey. In such facts and circumstances, the Assessing Officer should have rejected the books of account under Section 145(3) of the Act as he disbelieved the purchase bills and sales bills which were not entered in the books of accounts of the assessee as on the date of survey. But, the Assessing Officer has not done so; which implies that the Assessing Officer has accepted the books of accounts and financial statement of the assessee. Assessee during the year has paid the job worker the labour charges to its associated concern as evident from the copies of the ledgers. Therefore, the finding of the AO that there was no labour charge paid by the assessee is based on wrong assumption of facts. There was goods movement register maintained by the assessee for transferring the goods on job w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istry of Commerce Industry vide letter No. KASEZ/100% EOU/II/968/2000-01/211 dated 31st March, 2001 which was extended to 20 August 2011. The assessee has its sister concerns as detailed under: i. Electrical Controls and Systems (ECS) ii. Bharti Electrical iii. Press Metal Products. 3.1 There was a search and seizure operation carried out under section 132 of the Act in the Baroda Bushing and Insulator Group dated 10 September 2009. The assessee was also covered under such search and seizure operation. During the course of search, the statement of Shri Kirit Dalsukhbhai Patel, partner of the firm was recorded under section 132(4) of the Act. The partner of the firm agreed that the deduction under 10B has been wrongly claimed with respect to manufacturing activity of the products namely current transformers (CT) and potential transformers (PT). 3.2 Accordingly the assessee agreed to make a disclosure of ₹ 6 crores subject to the verification of the aggregate deduction claimed in the assessment years beginning from 2004-05 to 2010-11. However, the assessee did not offer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise authorities without pointing out any adverse remarks. x. There was a common entrance of the assessee and ECS but there were separate gates for entering into the factory. As such there was no relation between them with regard to the manufacturing operations carried out by them. xi. There is no need to carry out the manufacturing activity on the product from the beginning to the end in its premises. Therefore, any process outsourced to a third party does not restrict the deduction under section 10B of the Act. 3.3 The assessee in support of its claim as stated above also filed an affidavit dated 7th of December 2011 which is recorded on pages 16 to 18 of the AO order. 3.4 However, the AO was not satisfied with the contention of the assessee by observing that i. The onus lies on the assessee to substantiate its claim based on documentary evidence that it is carrying out the manufacturing activity on its products namely CT/PT. ii. There were certain irregularities in the process of production of CT/PT as observed during the search proceedings which were also admitted by the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore rejected. 5.11 The claim of the assessee that in the previous assessment orders passed u/s 143(3), the assessee was allowed such deduction does not in any manner justify it's contention for the doctrine of res - judicata does not apply to Income Tax proceedings as held by Hon'ble Supreme Court in the case of CIT Vs. British Paints India Ltd. (1991) 188 ITR 44(SC) and in the case of UCO Bank (1993) 200 ITR 68 (Cal.) wherein it was held that it is not only the right but the duty of the Assessing Officer to consider whether or not the books disclose - the true state of accounts and the correct income can be deduced there from. It is incorrect to say that the Officer is bound to accept .^ystem of accounting regularly employed by the assessee, the correctness had not been questione d in the past. 5.12 So far as the judicial decisions cited by the assessee is concerned, it is pertinent to mention 'here that, these decisions are clearly distinguishable to the facts and circumstances of the assessee's case. The Hyderabad Tribunal has held in the case of Synergies Casting Ltd, v, DC/7 (ITA No. 864 1364/Hyd/2010) that the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of a doubt or ambiguity, since the liability imposed by a provision in a taxing statute is the rule and exemption a nd exception. The Hon'ble High Court in this case also referred to the decision of Hon'ble Supreme Court in the case of International Cotton Corporation (P) ltd, vs CTO (1975) 35 STC 1, while referring to aproposition that concessional provisions are to be interpreted rigidly, since concession is not a matter of right. 5.14. In view of above discussion it is evident that the assessee is not eligible for claiming deduction u/s. 10B to the extent it pertains to sale of CT and PT. In order to ascertain the cla im of deduction of the assessee to the extent it pertains to sales of CT and PT, the turnover of CT and PT was obtained from the assessee and the same was verified from the books of the assessee firm and the proportionate claim of the deduction u/s. 10B pe rtaining to sales of CT/PT not allowable to the assessee. Aggrieved assessee preferred an appeal to the ld. CIT-A. 4. The assessee before learned CIT submitted as under: i. The AO in his order heavily relied upon statement of partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The learned CIT (A) after considering the submission of the assessee and findings of the AO deleted the addition made by the AO by observing as under: Regarding the Videography i. There cannot be taken any adverse view against the assessee based on video footage without bringing any corroborative or material documentary evidence. ii. The assessee before AO has controverted the video footage and submitted that video recorded by the investigating authority only represents a part of factory premises. This fact has not been contradicted by the AO. iii. The AO drew adverse view without considering or making any verification of evidence submitted by the assessee before him. Regarding the statement of Shri ketan V. Patel employee of Bharti electricals i. The statement furnished by Shri Ketan V. Patel cannot be the sole basis for drawing the inference against the assessee that it is not engaged in the manufacturing activity with respect to CT/ PT products until and unless such statement is based on some corroborative evidences. ii. Similarly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO enough to look beyond what Authorized Officer questioned the appellant and what he answered. Not only has the AO carried out no enquiry or brought no material to establish the dubious nature, if at all, of these evidences filed by the appellant, the AO has not at all dealt With the evidences and submissions made on the basis thereof. Also, the appellant submitted before the AO that each eli gibility condition was fully satisfied by the appellant and clearly described how. As against these evidences, as mentioned earlier, the AO has simply reiterated the opinions of the Authorized Officer in coming to his decision of denial of exemption u/s 10 B. The statement of Ketan Patel otherwise also has been held by me to be lacking credibility in view of absence of corroborative material. In any case, AO could have drawn no support from that statement without allowing an opportunity to cross - examine or w ithout dealing with the submissions filed in this behalf. Similarly, the admission in statement u/s 132(4) of Kirit Patel is also held by me to be based on mis - canvassed position of law and wrong description of evidences and facts by the Authorized Offic er and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained. I also find a considerable force in this contention also. There is no express or implied mention of the period under reference (FY 02 - 03 to 07 - 08) in the statement of Ketan Patel, and even by wildest stretch of imagination, it is impossible to hold against the appellant on the basis of statement of Ketan Patel for the period under reference.I therefore agree with the submissions made on behalf of the appellant that the statement recorded during FY 09 - 10 and scenario described therein cannot, automatically and without any co - relating evidence, be brought to bear on appellant's affairs during earlier period of FYs 03 - 04 to 07 - 08 relatable to AYs under reference. Even if an adverse view was warranted, the adverse view were justified only for period FY 09 - 10, and the adversity could not have travelled back in clear absence of any incriminating/adverse material for past period. Therefore, on that count also the acti on of the AO needs to be held unsustainable. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us. 6. The learned DR before us submitted that the assessee was not engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the paper book. The assessee has also filed the certificates of independent qualified engineers which are placed on pages 809/810 of the paper book in support of his contention that it is engaged in the manufacturing of the alleged products. But no defect of whatsoever was pointed out by the AO. 8.2 We also note that the statements recorded during search and survey cannot be the basis of the addition until and unless such statements are based on corroborative evidences. In this regard we find that CBDT has discouraged its officers to make the addition on the basis of disclosure statement which is based without any corroborative evidence. The relevant extract of CBDT instructions issued vide F. No. 286/98/2013-IT(Inv.II) dated 18th of December 2014 reads as under:- Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpos e of Search/Surve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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