IN THE ITAT MUMBAI BENCH ‘E ‘
SteelFab Engineering Corpn. (India)
Assistant Commissioner of Income-tax
IT APPEAL NO. 494 (MUM.) OF 2006
C.O. NO. 15(Mum.) OF 2009
[ASSESSMENT YEAR 2000-01]
APRIL 13, 2012
Amit Shukla, Judicial Member
This appeal has been filed by the assessee against order dated 19.08.2005 passed by CIT-XII, Mumbai for the quantum of assessment for the Assessment Year 2000-01.
2. The appeal is barred by limitation by 91 days. Along with the appeal, the appellant has filed a petition for condonation of delay accompanied by an affidavit of partner Shri Chirag Pramod Shah. The reasons for condonation of delay has given by the appellant on the following grounds :-
“1. The Order of the CIT(A) dated 19th August, 2005 was served at our office & was received by Shri Girish B. Doshi. He did not note down the date of communication of the order.
2. As Shri Girish B Doshi, proceeded on unscheduled leave for certain personal reason, he did not communicate the receipt of the order to any of the partners/responsible persons of our firm.
3. Only on 17th January, 2006, when he returned from leave, did he inform receipt of the order.
4. Immediately thereafter the order of the CIT(A) was forwarded along with the relevant papers to our Chartered Accountant Shri Vijay Kothari for drafting of grounds of appeal.
5. On the basis of the records available, Shri Vijay Kothari drafted the grounds of appeal to be filed before Hon’ble ITAT & returned the papers on 19th January, 2006.
6. Under these facts, which are stated hereinabove, we are now filing this appeal.
We have to submit & request that the delay in filing of the appeal be condoned. The lapse on the part of the appellant in not filing the appeal within the prescribed time was unintentional & entirely due to inadvertence. We hence pray that the delay be condoned & the appeal be admitted. For such act of kindness we shall ever be obliged to Your Honours.”
An affidavit of Shri Girish B. Doshi has also been filed stating that he had a serious chest pain followed with sweating in and around that time and was, therefore, taken for urgent medical treatment. As per the medical advice, for complete bed rest, he had moved to Pune at his brother’s place. During the course of hearing, the learned AR appearing on behalf of the assessee also produced medical files of Shri Girish Doshi. In view of the averments made in the affidavits and under the facts and circumstances, we condone the delay and admit the appeal for adjudication on merits.
3. The appeal has been preferred on the following grounds of appeal:
“1. The learned Commissioner of Income Tax (Appeals) erred in not granting deduction u/s 80-IB of the Income Tax Act, 1961 of Rs. 69,32,870/-.
2. The learned Commissioner of Income Tax (Appeals) erred in holding that the appellant was not eligible for deduction u/s. 80-IB only for the reason that the appellant had filed a revised return of income withdrawing the claim of deduction u/s.80-IB.”
4. The facts in brief are that, the assessee had filed its return of income for the Assessment Year 2000-01 on 31.10.2000 declaring taxable income of Rs. 4,507/-, after claiming deduction u/s.80IB of the Income Tax Act. Such a return of Income was accepted u/s.143(1). Later on, a survey u/s.133A was conducted at the office and factory premises of the assessee on 12.12.2003. In pursuance thereof, the assessment was reopened by issuance of notice u/s.148 dated 16.01.2004 after recording the “reasons” (the copy of which has been placed in the paper book from pages 43 to 44A). After the notice was served upon the assessee, it vide letter dated 15.10.2004 intimated to the Assessing Officer that the return filed originally should be treated as “return” in response to notice u/s.148. Thus in terms of letter dated 15.10.2004, the assessee filed its ‘return’ in response to the notice u/s.148 based on original return, wherein the claim for deduction u/s.80IB was made. Subsequently on 09.03.2005, such a return was revised, whereby the entire claim made u/s.80IB was withdrawn by the assessee. The so called ‘revised return’ was accompanied by a letter dated 07.03.2005 giving the reasons for withdrawing the claim (the copy of which has been placed in the paper book at pages 75 to 76).
5. The assessee is a partnership firm which was formed as per the Partnership Deed dated 15.12.1998. It is engaged in the business of manufacturing of pre-fabricated steel buildings from the factory situated at Silvasa. The Assessing Officer noted that in the balance sheet as on 31.03.1999, relevant to the Assessment Year 1999-2000, the assessee has disclosed a machinery for a value of sum of Rs. 5,25,155/-, installed in factory premises at Silvasa. As per the assessee, the business had started in the Assessment Year 1999-2000 itself, from the premises taken on rent. However, in the return filed for the Assessment Year 2000-01, the assessee had made a claim for deduction u/s. 80IB for the first time. In the Schedule of fixed assets accompanying the balance sheet as on 31.03.2000, there was an addition of Rs. 29,61,117/- which included an addition towards factory, building, land, plant and machinery. From the details of additions made in the fixed assets specifically on plant and machinery, the Assessing Officer took note of the fact that the same have been purchased from August, 1999 till March, 2000. The details of machinery purchased have been elaborately given in a tabular form by the Assessing Officer in para 8 of the assessment order.
6. In order to verify the genuineness of the purchase of the machinery of Rs. 5,25,155/- purchased in the Assessment Year 1999-2000, the Assessing Officer conducted an enquiry from where it was gathered that the entire machinery was purchased from one M/s. Jyoti Traders, Ahmedabad. From the bills of purchase and the details of payment of cheque, he carried out further enquiry from the bank from where it was revealed that the above cheques were issued to M/s. Jigson Engineers (one of the sister concern of M/s. Jyoti Traders). On being confronted, it was submitted by the assessee that the purchase of the machinery from M/s. Jyoti Traders was made through its sister concern M/s. Jigson Engineers and the said party have in turn made the payment to M/s. Jyoti Traders. Further discrepancy was noted that, M/s. Jigson Engineers have not made any payment to M/s. Jyoti Traders either by cheque or by cash and in fact the said party had filed the revised return for the Assessment Year 1999-2000 on 10.06.2004 disclosing income of Rs. 5,20,000/-only to cover the cash payment to M/s. Jyoti Traders. The Assessing Officer also found that M/s. Jyoti Traders have not maintained any books of accounts to indicate that the payment has been received by them in cash to the said supply of plant and machinery. Even no return of income for the Assessment Year 1999-2000 have been filed before the department.
7. After pointing out discrepancy in purchase of machinery in the A.Y. 1999-2000, he further proceeded to examine, whether the business had started from the new industrial undertaking. It has been observed by the Assessing Officer that the assessee had started its business from a lease premises 102/11, Madhubon Dam Road, Rakholi, Silvasa taken from M/s. Steel Fab Engineering Corporation (Silvasa) (a different unit), which was carrying on a similar business and it had closed its business as on 31.03.1999. The machinery which was used by M/s. Steel Fab Engineering Corporation (Silvasa) was sold to the sister concern M/s. Steel Fab Engineering Corporation (Kashmira, Mumbai) (again a different unit) for a sum of Rs. 4,63,890/-. The Assessing Officer after enquiry has even doubted the said purchase and shifting of machinery from Silvasa to Kashmira. From the entire information gathered as above, he came to the conclusion that the assessee had not started the manufacturing activities from the beginning of the year but only when the new machinery alleged to have been purchased by them upto March 2000. The crux of the finding of the Assessing Officer as summarized by him in paras 9 and 10 of the assessment order is that the assessee may have used the old machinery found during the survey operation, in the period under consideration i.e. Financial Year 1999-2000, however, the new factory building and new machinery purchased were not ready for use before 01.04.2000.
8. Based on the above background, the Assessing Officer observed that it was only after being apprised by the various enquiries conducted in this regard, the assessee came forward and filed a revised return of income on 09.03.2005, withdrawing the claim of Section 80IB as was made in the original return of income. Finally, on the strength of such revised return and the letter accompanying the said return (the contents of which have been reproduced at pages 6 and 7 of the assessment order), the Assessing Officer came to the conclusion that the assessee is not eligible for deduction u/s.80IB of the Act which itself has been withdrawn by the assessee in the revised return. Thus the claim for deduction for a sum of Rs. 69,42,870/- was withdrawn and added to the taxable income of the assessee.
9. Before the CIT(A), the assessee contended that the condition precedent for claiming deduction under Section 80IB stands satisfied in its case. The submissions of the assessee to this effect have been incorporated from pages 3 to 10 of the appellate order. The sum and substance of contention of the assessee are that:-
(i) On the first condition that “the industrial undertaking of the assessee has not been formed by reconstruction or splitting of business already in existence”, the assessee submitted that;
(a) it has come into existence vide partnership deed dated 15-12-1998 for carrying out the activity of manufacturing pre-fabricated steel building for which it was granted certificate from Small Scale Industries and also got separate registration of Sales Tax, Excise, Pollution Control, Provident Fund etc.;
(b) there was another concern namely, Steelfab Engineering Corporations, Silvasa (SECS), which was engaged in the business of manufacturing of steel tubular structures and steel scaffolding, which were distinct and separate product from what is manufactured by the assessee;
(c) the said firm on its own had set up statutory registration under various authorities and different Act and even the constitution of partners were different; and
(d) both SECS and SEC firms are having independent machineries and equipments for carrying out of manufacturing activities and there was no common customer also.
Thus, on these facts, it was contended that it is neither a case of splitting nor reconstruction of business already in existence.
(ii) As regard to the second condition that “the new industrial undertaking is not formed by the transfer to a new business of machinery or plant previously used for any purpose.” The assessee contended that;
(a) it had filed bills, transport receipts and other evidences to show that the new plant machineries have been purchased;
(b) prior to assessment year 2000-20001, i.e. for the assessment year 1999-2000 it was carrying out manufacturing activities from the machines purchased from M/s Jyoti Traders and in support of which all the relevant documents and confirmation was filed which include, invoice copies received from Sales Tax Department, guarantee certificate issued by M/s Jyoti Traders, delivery challan for machinery purchase and account confirmation from M/s Jyoti Traders. (The other set of evidences have been discussed in para 3 of page 6 of the appellate order.)
(c) further it was never the case of the AO that the plant and machineries which were owned by the assessee were either not new or they were previously used for any other purposes;
(iii) Lastly, with regard to the last condition, it was submitted that the manufactured product is pre-fabricated building which does not fall in the list of 11 Schedule and it had employed more than 10 workers.
Based on above submissions, it was vehemently contended that the assessee firm is eligible for deduction under Section 80IB.
10. So far as the comments given by the AO in the assessment order, the assessee submitted that it has given elaborate rebuttal of each and every finding and enquiry of the AO, which has been discussed at pages 7 & 8 of the appellate order which need not to be reiterated.
11. Finally, on the issue of denial for deduction under Section 80IB on the ground that it has withdrawn the claim through its revised return, it was submitted that the revised return itself was invalid as the return filed in response to the notice under Section 148 cannot be revised as per law and hence, cognizance of revised return cannot be taken for denying the benefit of claim. In support of this proposition, reliance was placed on the decision of CIT v. Banshidhar Jalan & Sons,  207 ITR 488 (Cal.). Further the assessee has also rebutted the contents of the letter dated 7-3-2005, whereby the claim for deduction under Section 80IB was withdrawn. The reasoning for such rebuttal have been given at pages 9 & 10 of the appellate order.
12. The learned CIT(A) though agreed that the assessee seems to fulfill all the conditions stipulated under Section 80IB of the Act, however, decided the matter against the assessee on the ground that the assessee itself has withdrawn the claim under Section 80IB suo motu by filing revised return on 9-3-2005, and therefore, the action of the AO is justified. Thus, the assessee’s claim under Section 80IB was rejected. The relevant findings of the learned CIT(A) are reproduced hereinbelow :-
“3.3 I have considered the detailed submissions of the appellant. I have also gone through the assessment order. There is a survey action on the assessee’s office as well as the factory premises u/s 133A of the IT Act, 1961. The appellant was issued a notice u/s 148 of the IT Act. However, the appellant has not filed any return in response to this notice but wrote a letter dated 15.10.2004 filed on 28.10.2004 stating that original return filed on 31.10.2000 should be treated as return in response to notice u/s 148. After the detailed inquiries and investigation made by the Assessing Officer, he came to the conclusion that appellant’s claim u/s 80-IB is not allowable. The appellant suo-motu filed a return on 09.03.2005 withdrawing its claim u/s 80-IB of the IT Act. In appellate proceedings before me, it is argued that the return filed by the appellant is not a valid return and the Assessing Officer should not have taken cognizance of the revised return filed on 09.03.2005. This argument of the appellant cannot be accepted now. The appellant is aided and advised by competent CAs and tax consultants. The revised return filed on 09.03.2005 must have been filed after consulting the appellant’s CA. However, after perusing the Appellant’s submissions, I notice that the Appellant seems to fulfil all the conditions stipulated in section 80IB of the I.T. Act, 1961 but since the Appellant itself suo moto has withdrawn his claim u/s 80 IB by filing revised return on 9.3.2005, I decline to interfere in the matter. Accordingly, the action of the Assessing Officer is upheld and the Appellant’s claim u/s. 80IB is rejected.”
13. Learned Senior Counsel appearing on behalf of the assessee after taking us through the submissions made before the CIT(A) and the relevant facts of the case, contended that the revised return filed on 9-3-2005 was an invalid return as once the return has been filed in response to notice under Section 148, the same cannot be revised specifically for withdrawing the claim made in the original return. After referring to provisions contained under Sections 139(5) & 139 (9), submitted that only a mistake or defect in the return can be rectified and the withdrawal of the claim is neither an omission nor a wrong statement. In support of this contention, he relied upon the decision in the case of CIT v. Andhra Cotton Mills Ltd.,  219 ITR 404/88 Taxman 176 (AP) & Banshidhar Jalan & Sons case (supra).
14. Most important, he drew our attention to a vital fact on the record that based on same survey operation, reopening under Section 147 was done for the subsequent years i.e. in the assessment year 2001-2002, 2002-2003, 2003-2004 and 2004-2005, wherein the reasons for reopening in the years were same i.e. claim for deduction under Section 80IB. In the assessment passed u/s.143(3) read with Section 148, the said claim of Section 80IB has been accepted by the AO in the order passed on the same date i.e. 25-3-2005 for all the assessment years (Copy of all such assessment orders have been placed in the paper book from pages 144 to 159).
15. Lastly, he submitted that even if the claim for deduction under Section 80IB was withdrawn in terms of letter dated 7-3-2005 filed along with the revised return dated 9-3-2005, the same will not preclude the assessee to make a claim before appellate authorities under Section 80IB, in view of the settled principle of law that ‘jurisdiction cannot be conferred by consent’. In support of this principle, he cited following case laws :-
(i) CWT v. N.A. Nariolwalla  126 ITR 344/ 5 Taxman 102 (Bom.)
(ii) CIT v. Ramsukh Motilal  27 ITR 54 (Bom.) and
(iii) P.V. Doshi v. CIT  113 ITR 22 (Guj.)
Further on the proposition that merely because the income is returned on an erroneous impression or misconception of law, the AO cannot make assessment on such return, reliance was placed on the following decisions :-
(i) CIT v. Bharat General Reinsurance Co. Ltd.  81 ITR 303 (Delhi.);
(ii) P.T. Sheo Nath Prasad Sharma v. CIT  66 ITR 647 (Allahabad);
(iii) Shankar R. Mhatre v. Asstt. CIT  117 ITD 241 (Mum.); and
(iv) Nirmala L. Mehta v. A. Balasubramaniam, CIT  269 ITR 1/139 Taxman 394 (Bom.).
16. On the strength of these decisions, he argued that surrendering of claim through a letter or withdrawing the claim by way of an invalid revised return, there cannot be estoppel for assessee for making the claim before the appellate authorities, which if otherwise is allowable on facts and circumstances of the case.
17. Per Contra, learned Senior D.R. submitted that firstly, all the case laws as have been referred to by the ld. counsel are not applicable and secondly, when the assessee itself has suo motu revised the return for withdrawing the claim, it cannot be now, at this stage, be allowed to take the plea for the claim under Section 80IB. The surrender or withdrawal of claim by the assessee was not a voluntary action but was done only when the AO has carried out enquiry and brought sufficient material on record to hold that the assessee was not eligible for deduction under Section 80IB during the year. He drew our attention to various categorical finding given by the Assessing Officer and submitted that the conclusion drawn by the CIT(A) is absolutely correct, even though he has not given any comment on any of the reasoning given by the AO. He, thus, heavily relied upon the findings given by the AO.
18. At the stage of hearing and after a lapse of more than 3 years from the date of the filing of the appeal by the assessee, the department came with a “Cross Objection” challenging the observation of the CIT(A) that “after perusing the Appellant’s submissions, I notice that the Appellant seems to fulfill all the conditions stipulated in section 80IB of the I.T. Act, 1961”. This Cross Objection has been filed to negate said the observations of the CIT(A), which otherwise goes against the finding of the A.O.
19. The grounds for condonation of delay in filing of Cross Objection as have been given in the affidavit filed by Mr. P. Radhakrishnan DCIT 12 (3), Mumbai, are reproduced herein below :-
“Aggrieved by the CIT(A) order the assessee filed appeal before ITAT on 20.01.2006. The Sr. Assistant Registrar vide letter No.Sr.AR/ITAT-VII/B Bench/08-09 dated 26.11.2008 stated to file the cross objection to the CIT(A)’s observation and the same has been from on 14.01.2009 before the Hon’ble ITAT.
As per the letter dated 12.10.2009, the Senior AR of the Deptt. has directed the Appellant under the Affidavit for the condonation of delay in filing the cross objection as the same is filed on the following reasons :-
(a) The appeal before Hon’ble ITAT was filed by he assessee on 20.01.2006 and the communication regarding of the filing an appeal by the assessee before the Hon’ble ITAT was received in this office on 15.01.2007 and therefore the delay is 728 days.
(b) The Sr.A.R., ITAT-VII ‘B’ Bench vide letter No.Sr.AR/ITAT/-VII/’B’ Bench/08-09, dated 26.11.2008 directed the Department to file cross objection for the observation made by the ld.CIT(A) on page 10 of order as quoted herein below :
“the Appellant seems to fulfill all the conditions stipulated in section 80IB of the I.T. Act, 1961 but since the Appellant itself suo moto has withdrawn his claim u/s 80IB by filing revised return on 9.3.2005, I decline to interfere in the matter.”
(c) In pursuance of Sr.A.R. letter dated 26.11.2008, the Department vide letter dated ACIT 12(3)/ITAT/2008-09 dated 13.01.2009 filed the Cross objection before CIT (DR), ITAT on 14.01.2009.
(d) As soon as the AO received the direction of the Sr. A.R. to the cross objection the same has been filed with the reasonable time after obtaining the approval from the CIT-12, Mumbai on 14.01.2009, before the Hon’ble ITAT.
It is submitted that the cross objection has been filed before the Hon’ble ITAT against the following observation of the CIT(A) in the order dated 19.08.2005.
“the Appellant seems to fulfill all the conditions stipulated in section 80IB of the I.T. Act, 1961 but since the Appellant itself suo moto has withdrawn his claim u/s 80IB by filing revised return on 9.3.2005, I decline to interfere in the matter.”
While making the above observation, no specific reasons were given by the Ld. CIT(A). However, in this case, there was survey u/s.133A and A.O. has conducted thorough enquiries and came out to the conclusion that the assessee’s claim u/s.80IB was not allowable. The assessee has also filed the revised return on 09.03.2005 withdrawing the claim u/s.80IB.
In view of the above fact I respectfully say, submit and maintain that the Department have a good case on merits to succeed in the facts and circumstances of the case, I say that the Appellant are public authorities acting in public revenue interest and exercising the powers under the Income-tax Act, and the rules framed thereunder, I say and respectfully submit that the balance of inconvenience is in favour of the Appellant and no prejudice would be caused to the Respondents if the subject appeal is restored to the file and decided on its merits by this Hon’ble Tribunal.
In the aforesaid circumstances, I respectfully submit that no prejudice is caused to the assessee by condoning the delay as the issue involves is on facts and therefore the present Affidavit taken out by the appellant for the condonation of delay of the subject appeal may be made absolute.”
20. From the contents of the affidavit given above, it is not understood what are the reasons for condonation of delay. What has been given is not an averment for reasons for delay but the grounds for challenging the observation of the CIT(A). We are, therefore, not inclined to accept the delay in filing of the Cross-Objection as no cogent reason or reasonable cause has been explained in the affidavit for condoning the delay. In the result, Cross-Objection filed by the Department is dismissed.
21. The learned Senior DR alternatively submitted that even if the cross-objection are not admitted, still the department is free to challenge the observations of the CIT(A) prejudicial to the Department, under Rule 27 of the Income Tax Tribunal Rules, 1963. On the other hand, learned Senior Counsel on behalf of the assessee submitted that this rule is meant for the assessee and not for the department and only option for the department was to file cross-objection in terms of sub-section (4) of Section 253 and since the cross-objection has been filed belatedly without giving any cogent reason for condonation of delay, the Department is debarred from challenging the finding of the CIT(A) at this stage.
22. We have heard the arguments of both the parties at length and carefully gone through the findings given by the AO as well as by the CIT(A) and also perused the facts and material placed on record.
23. First of all, we will advert to the issue as to whether under Rule 27, the Department can challenge the finding of the CIT(A), stating that “the assessee seems to fulfil all the conditions stipulated in Section 80IB”, even though in final conclusion, he had decided the issue against the assessee. Rule 27 provides that “the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” This rule enables the respondent to challenge any of the finding decided against him, even though he has neither come in any appeal nor has filed any Cross Objection, as in the final conclusion, the issue has been decided in his favour. We are unable to agree with the contention of the learned Senior Counsel that this rule is only meant for the assessee and not for the department. The rule per se does not distinguish between the department and the assessee as it gives the right to the respondent, which can be department also and it is permissible for the department as a respondent to defend the order of CIT(A) on any other ground which has been decided against it. Rules 11 & 27 are procedural mechanism, which gives discretion to the Tribunal to allow any party to an appeal, whether the appellant or respondent, to raise a new point or new contention, provided no new facts are required to be brought on record for disposing of such new point and also an opportunity is given to the other side to meet the point. The said Rule does not in any way circumscribe the powers of the Tribunal to entertain such plea or ground raised by the respondent. Since no new facts are required to be examined in this case and are infact arising from the findings of the Assessing Officer, we, therefore, permit the Senior D.R to canvass the case of the department based on the observations given by the learned CIT(A). Both the parties were, thus, heard on merits and the pleadings on this score raised by the learned DR for Department.
24. Now, the following issues are required to be decided by us :-
(i) Firstly, whether, if an assessee has given up or surrendered the claim for deduction under Section 80IB by way of a letter before the Assessing Officer, can be permitted to raise and rake up the issue before the appellate authorities ?, and
(ii) Secondly, whether on facts and circumstances of the case, the assessee is eligible for deduction under Section 80IB ?
25. From the facts as have been discussed in the foregoing paragraphs, it is evident that the assessee has filed letter dated 7-3-2005, wherein the assessee has withdrawn its claim of deduction of Rs. 69,28,363/- under Section 80IB, which was accompanied by revised return filed on 9-3-2005. The reasons for surrendering the claim and offering it for taxation was that the assessee will not be able to satisfy with the evidence the acquisition of new machineries purchased by it for the new business and will not be able to substantiate or establish the claim on the standard of proof which is required and acceptable to the Department. The said claim was withdrawn also with a view to avoid protracted litigation and that no penalty and prosecution proceedings under Section 271(c) will be initiated.
26. From the perusal of the assessment order, it is seen that the AO has dealt with the claim of 80IB on merits and has also based his findings on the basis of offer letter as above made by the assessee filed along with the revised return. Before the CIT(A), the assessee challenged the finding of the Assessing Officer that the conditions required for claiming deduction under Section 80IB stands fully satisfied and all such evidences and enquiry as done by the AO will not render the claim of the assessee infructuous. A detail rebuttal was given by the assessee before the CIT(A) and the claim for 80IB was strongly pleaded for.
27. It is quite a settled proposition that any claim for deduction under Income Tax Act are dependent upon the conditions laid down under the provisions of the Act and there are requisite formalities which are required to be done as per the law. Once these conditions are fulfilled, the assessee is entitled for statutory deduction or claim to which he is entitled to. Mere consent or acquiescence by the assessee cannot take away the otherwise a legitimate claim to which he is entitled to. It is an admitted position of law that an admission or acquiescence cannot be a foundation for assessment where the income is returned under erroneous impression or misconception of law. It is otherwise open to the assessee to demonstrate and satisfy the authorities concerned that his particular income was not taxable or claim for deduction is otherwise lawfully allowable to him. The decision of Mumbai Bench in the case of Shankar R. Mhatre, (supra) wherein the ratio and principle laid down by the Hon’ble Bombay High Court in the case of Nirmala L. Mehta (supra), was referred and relied upon clearly clinches the issue that acquiescence cannot take away from an assessee, the relief which he is entitled to when the tax is levied or calculated without authority of law. If in law, an item is not taxable, no amount of admission can be made taxable. In view of the said principle, we hold that even though the assessee has surrendered its claim before the Assessing Officer, the same can be challenged on merits if it has a strong case for such a claim based on facts and material on record and conditions relevant for claiming such deduction stands fulfilled. The other case laws as relied upon by the Ld. Senior Counsel on the proposition that “Jurisdiction cannot be conferred by consent” will not be applicable as we are not dealing with the issue of Jurisdiction. Hence, they are not discussed and dealt with.
28. Now, we proceed to deal with the merits of the claim of assessee under Section 80IB. In this case, the assessee has come into existence vide partnership deed dated 15-12-1998, to carry on the business of manufacturing of pre-fabricated building material. For the purpose of its business activities, it has opened up a factory, situated at Silvasa. It had purchased machinery for value of sum of Rs. 5,25,155/- and carried out its manufacturing activities in the assessment year 1999-2000. The Assessing Officer, though through his enquiry has disputed the very purchase of the said machinery, however, his findings in enquiry are not conclusive in proving that such a machinery did not exist in the assessment year 1999-2000 for the reason that firstly, all the bills and invoices relating to purchase of machinery have not been disputed except for the fact that payment made to M/s Jyoti Traders from where the purchases have been made are not opened for verification. Once, the Sales Tax Department after verification of invoices, has granted registration and machineries are appearing in the balance sheet of the assessee as on 31-3-1999, filed along with the return for the assessment year 1999-2000, it cannot be held that the purchase of machinery itself were bogus. Secondly, the Assessing Officer himself has admitted that old machinery was found in the survey operation at the factory premises during the financial year 1999-2000 i.e. AY 2000-2001 and has also observed that it may have used it for the production purpose. From this, it can be safely inferred that the assessee was engaged in manufacturing of building material situated at Silvasa even in the assessment year 1999-2000.
29. In the impugned assessment year, the Assessing Officer has denied the claim on the ground that most of the new plants and machineries were purchased during the relevant year only and that to be from 4th February, 2000 to 27th March, 2000 and, hence, these machineries were not ready for use as on 1-4-2000. Therefore, the claim under Section 80IB for manufacturing the products from an industrial undertaking during this year, is not fulfilled. Once it has been accepted that the assessee was engaged in the manufacturing of building material in the assessment year 1999-2000 and there is no contrary evidence to show that it has ceased to carry on such activities in the relevant year, we are unable to concur with the finding of the AO simply on the ground that the new machines were purchased in the last quarter of the financial year and the assessee did not carry out any manufacturing activities in this year. The new plants and machineries even if it is accepted that it was installed in the last quarters of the financial year has gone to enhance the capacity of the assessee which is evident from the fact that the assessee’s income from such manufacturing activities has increased in this year. Very important fact which deserves our attention is that the Assessing Officer has not denied the fact that income shown by the appellant is from manufacturing of building material only and not from any other sources. There is no such finding while denying the claim under Section 80IB by the AO that the income which has been shown by the appellant are from other business activities and not from manufacturing business carried out from Silvasa. What heavily weighed in the mind of the AO was that the assessee’s firm has been formed by reconstruction on splitting of business already in existence i.e. Steelfab Engineering Corporation (SECS), Silvasa, which is a different unit altogether. This premise of the Assessing Officer gets negated from the fact that Steelfab Engineering Corporation (SECS), Silvasa was engaged in a different product altogether with different set up of partners having different statutory registration under various authorities and different Act.
30. Another very vital fact is that the assessee has been held to be carrying on manufacturing activities of pre-fabricated steel buildings in the subsequent years for which the claim under Section 80IB has been allowed by the Assessing Officer himself in the order passed under Section 143(3) read with Section 148 for the assessment years 2001-2002, 2002-2003, 2003-2004 and 2004-2005. The reconstruction and splitting of business is one time affair and it cannot be held that in the subsequent years there was no reconstruction or splitting of business already in existence and in the impugned year there was reconstruction of splitting of business. The conditions which are applicable for allowing exemption/claim under Section 80IB in the subsequent year cannot be said to be non-existence in the impugned assessment year. Thus, the first condition that “the industrial undertaking of the assessee has not been formed by reconstruction or splitting of business already in existence”, stands fulfilled.
31. Now, coming to the second condition that “the new industrial undertaking is not formed by the transfer to a new business of machinery or plant previously used for any purpose”, also stands satisfied, which is evident from the fact that the Assessing Officer himself has admitted that the new plant and machinery has been purchased and it is not his case that the assessee was previously using its new plant and machinery. The last condition that it manufactures Article not included in Eleventh Schedule and has employed more than 10 workers is not in dispute. Thus, all the conditions laid down under Section 80IB stands fully satisfied in the case of the assessee and claim for deduction under Section 80IB cannot be denied in this year based on the findings given by the Assessing Officer or by the virtue of surrender of claim before the Assessing Officer. It is a duty casts upon the Assessing Officer or to the appellate court to see that if a deduction or a claim for exemption is statutory allowable, then the same has to be allowed, if the assessee fulfils the prescribed conditions required under the statute.
32. In view of our findings, we, accordingly reverse the findings of the Assessing Officer as well as the CIT(A) and direct the Assessing Officer to allow the claim for deduction under Section 80IB in the impugned year also as have been allowed in the subsequent years by the Department, as there is no change of facts and circumstances.
33. There was one more issue, which was argued by the Ld. Senior Counsel and also pleaded before CIT(A) that the return filed in response to notice under Section 148 cannot be revised. Since we have allowed the claim of Section 80IB on merits, therefore, we are not inclined to adjudicate this issue as it has become purely academic.
34. Resultantly, appeal filed by the assessee is allowed and the Cross Objection filed by the Department is hereby dismissed as discussed above.