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Issues involved:
The issues involved in the judgment are: 1. Whether the Appellate Tribunal erred in deleting the disallowance made on account of process loss and suppression of production and sales? 2. Whether the Appellate Tribunal erred in directing to allow separate relief under sections 80HH and 80I of the Income Tax Act? Issue 1: Disallowance on account of process loss and suppression of production and sales: The Assessing Officer suspected that the assessee company artificially inflated its process loss to generate surplus for unaccounted sales based on a statement by the company's Director. The company's process loss was claimed at 3.05%, higher than the usual 2%. The CIT(Appeals) reduced the additions made by the Assessing Officer, considering 2% as reasonable. The tribunal, after examining various factors including Gross Profit rate and process loss for several years, concluded that the Assessing Officer's decision lacked evidence or basis. The tribunal noted the fluctuating nature of process loss and the impact of raw material quality on process loss and Gross Profit rate. The tribunal also considered reports from the supplier of machinery supporting the range of process loss. The High Court upheld the tribunal's decision, emphasizing the need for concrete evidence to support the Assessing Officer's conclusions. Issue 2: Relief under sections 80HH and 80I of the Income Tax Act: The High Court relied on the decision of the Apex Court in the case of Joint Commissioner of Income tax v. Mandideep Eng. and PKG. IND.P.Ltd., which confirmed that deductions could be claimed under both sections 80HH and 80I on the gross total income. The High Court cited various judgments where this view was consistently upheld by different High Courts. As the Department had not filed special leave petitions against these judgments, the High Court dismissed the appeal, stating that the Department cannot take a contrary view on the same point. Therefore, the High Court ruled against the Revenue on this issue as well. In conclusion, the High Court dismissed the Tax appeal, upholding the decisions of the tribunal on both issues raised in the case.
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