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10-01-2020, Auro Gold Jewellery, Section 271(1)(c), 132, Tribunal Mumbai

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7 months 13 hours ago #12041 by amit
Section - 271(1)(c), 132, 153A, 10A, 133A
Order Date - 10-01-2020
Favouring - Partly
Court - Tribunal Mumbai
Appellant - Auro Gold Jewellery Pvt. Ltd.
Respondent - DCIT
Justice - SAKTIJIT DEY JM & MANOJ KUMAR AGGARWAL AM
Citation - 120Taxpundit105
Appeal No. - ITA no.830/Mum./2017
Asstt. Year - 2009–10

Order

PER : SAKTIJIT DEY. J.M.

The aforesaid appeals have been filed by the same assessee challenging three separate orders, all dated 30th September 2016, passed by the learned Commissioner of Income Tax (Appeals)–53, Mumbai, confirming imposition of penalty under sections 271(1)(c) and 271AAA of the Income Tax Act, 1961 (for short "the Act") for the assessment years 2006–07, 2008–09 and 2009–10.

ITA no.828/Mum./2017
Assessment Year – 2006–07

2. This appeal is against imposition of penalty under section 271(1)(c) of the Act.

3. Brief facts are, the assessee, a resident company, is engaged in manufacturing and trading of gold jeweLlery and bullion. For carrying out the aforesaid activities, the assessee has set–up two units in Mumbai and two export oriented units in Sachin Special Economic Zone (SEZ), Surat. In addition, the assessee also has two retail outlets. A search and seizure operation under section 132 of the Act was conducted in assessee’s case on 25th September 2008. Pursuant to such search and seizure action, proceeding under section 153A of the Act was initiated. In response to the notice issued under section 153A of the Act, the assessee filed its return of income on 26th May 2009, declaring loss of ` 31,77,157. While completing the assessment, the Assessing Officer made various additions, including, addition on account of disallowance of deduction claimed under section 10A of the Act. Since, the subject matter of imposition of penalty under section 271(1)(c) of the Act is on the basis of the disallowance of deduction claimed under section 10A of the Act, we will discuss facts relating to this issue only. During the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction under section 10A of the Act in respect of the profit earned from its units located in the SEZ, proceeded to verify the authenticity of assessee’s claim. He observed, in course of survey conducted under section 133A of the Act in the SEZ units, it was found that most of the time the units remained closed. The plant and machineries are rusted and not functioning. There was no trace of any manufacturing activities. There was no permanent employee in these units He observed, the machineries which are in good condition are also not capable of huge production of such high value addition in the time frame available. Power consumption was also not sufficient to support the huge production shown. Thus, on the basis of the aforesaid analysis of the facts, he observed that the profit shown from the SEZ units against which the assessee has claimed deduction under section 10A of the Act is not correct. Referring to a quotation given by another entity engaged in similar activity, the Assessing Officer observed that making charges for coins are at 0.074% of the gold value, whereas, the assessee has reported making charges of 9% to 14%. Thus, the Assessing Officer observed that high profit margin shown from the SEZ unit is not correct and accordingly he disallowed assessee’s claim of deduction under section 10A of the Act. The assessee challenged the aforesaid decision of the Assessing Officer before learned Commissioner(Appeals). After considering the submissions of the assessee, learned Commissioner (Appeals), though, in principle held that the assessee has carried on genuine manufacturing and export activities from its SEZ units, hence, eligible to claim deduction under section 10A of the Act. However, he doubted the allocation of expenditure between SEZ and non–SEZ units as per assessee’s accounts. Therefore, he was of the view that the assessee has allocated more expenditure to non–SEZ units compared to SEZ units. Accordingly, he allocated expenditure to SEZ and non–SEZ unit on the basis of their respective turnover. Due to such re–allocation of expenditure by learned Commissioner (Appeals), the income of the assessee got enhanced from the returned income. On the basis of additions sustained by learned Commissioner (Appeals) on account of deduction claimed under section 10A of the Act, the Assessing Officer issued show cause notice under section 274 r/w section 271(1)(c) of the Act calling upon the assessee to explain why penalty should not be imposed for furnishing inaccurate particulars of income. Though, the assessee objected to the initiation of penalty proceedings, however, the Assessing Officer rejecting the explanation of the assessee passed an order imposing penalty of ` 19,31,604, under section 271(1)(c) of the Act. Though, the assessee challenged the imposition of penalty under section 271(1)(c) of the Act

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