9911796707
TMI Blog2015 (2) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... st of machinery, we find no merit in the plea of the Assessing Officer in this regard and upholding the observations of the Commissioner of Income-tax (Appeals), we hold that the assessee was entitled to claim of deduction under section 80-IC of the Act. The manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity. During the appellate proceedings, evidence was filed by the assessee that only 5 per cent. of the total manufactured goods were subjected to printing and bleaching process which admittedly was being carried out at Ludhiana. The learned Departmental representative for the Revenue failed to controvert the said findings of the Commissioner of Income-tax and in the absence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cross- objections filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The Revenue in I. T. A. No. 779/Chd/2008 has raised the following grounds of appeal : "1. That the learned Commissioner of Income-tax (Appeals)-II has erred in deleting the addition of ₹ 97,34,564 out of the total addition of ₹ 1,22,38,136 made by the Assessing Officer on account of disallowance of deduction under section 80-IC of the Income-tax Act. 2. That while allowing relief as mentioned in paragraph 1 above. (i) The learned Commissioner of Income-tax (Appeals) has erred in ignoring the evidence placed on record that all the purchases made by the assessee were made from Ludhiana and delivered at the address of sister concern at Ludhiana and not directly at the place of work at Parwanoo. (ii) The learned Commissioner of Income-tax (Appeals) has grossly erred in ignoring the fact that the printing and bleaching of raw material as well as semi-finished products was carried out at Ludhiana and not Parwanoo thereby putting a question mark on the manufacturing process at Parwanoo thereby creating both question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x) The learned Commissioner of Income-tax (Appeals) has grossly erred in ignoring the evidence obtained from India Industrial Garments Manufacturing Pvt. Ltd. a reputed concern in the field of sewing machine used for knitted purposes which clearly bring out the fact that the assessee concern did not fulfil the minimum sewing machine and labour requirement for carrying out the manufacturing so as to give turnover of ₹ 3.72 crores. (xi) The learned Commissioner of Income-tax (Appeals) has cued in law find facts in ignoring the comparison of O.I, rate drawn between the assessee M/s. Octave Exports and its sister concern namely Octave Apparel, carrying out the same business whereby it is proved that the profits of M/s. Octave Exports are too high to establish the assessee's intention to claim deduction under section 80-IC. (xii) The learned Commissioner of Income-tax (Appeals) has again erred in facts in ignoring the comparison of plant and machinery drawn between the assessee M/s. Octave Exports and the sister concern M/s. Octave Apparel, which shows that the plant and machinery used at M/s. Octave Apparel is 9.1 times more at M/s. Octave Apparels whereas the turnover is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . T. A. No. 762/Chd/2008 has raised the following grounds of appeal : "1. That the worthy Commissioner of Income-tax (Appeals)-II, Ludhiana, has erred in holding that profit of ₹ 25,03,572 included in the profit of ₹ 1,22,38,136 (on which 100 per cent. deduction under section 80-IC was claimed by the appellant and disallowed by the Assessing Officer) was not the profit earned from manufacturing of any goods at Parwanoo and the appellant was therefore, not entitled for any deduction under section 80-IC on the income of ₹ 25,03,572. 2. That the rejection of claim under section 80-IC on the income of ₹ 25,03,572 by the learned Commissioner of Income-tax (Appeals) on the basis that some of vehicles did not cross Parwanoo barrier, is not correct in view of the fact that the appellant filed ST-XXVI-A forms issued by the Himachal Pradesh Excise and Taxation Depart ment duly stamped evidencing that these vehicles did cross the Parwanoo barrier on the respective dates and that goods were trans ported from Ludhiana to Parwanoo by the appellant in such vehicles. 3. That deduction under section 80-IC on ₹ 25,03,572 as per above paragraphs has been disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the premises at part of pages 8 and 9 of the assessment order and has also enclosed the photo copies of purchase bills of plant and machinery as annexure A-4 to the assessment order. As per the Assessing Officer, not more than 13 sewing machines were allegedly installed at Parwanoo unit for manufacturing goods totalling ₹ 3.72 crores by employing workers less than 10. The Assessing Officer also made enquiry from the Himachal Pradesh State Electricity Board, Parwanoo and the sanctioned load was 39.9 KV and the copy of the certificate was enclosed as annexure A-5 to the assessment order. The Assessing Officer observed that the connection load was too low to justify the production of material, i.e., turnover of ₹ 3.72 crores. The Assessing Officer also obtained the details of consumption by the assessee which are tabulated under table 3 at page 10 of the assessment order. As per the Assessing Officer, the facts reflect that the consumption of electricity was too low to justify the production of unit of such high scale. 8. While gathering the information from the Department of Industries and the Himachal Pradesh State Electricity Board, Parwanoo, the Assessing Officer ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer thus questioned as to whether any manufacturing activity was carried out at Parwanoo unit. 10. The Assessing Officer also made enquiries from printing and bleaching house and the statement of the printer was recorded who in-turn submitted that the assessee was delivering the goods and picking up the goods given for printing and in case any delivery had to be made, it was made at Ludhiana office. Similar reply was given in respect of bleaching of the product. The assessee was confronted with this information and the statement of the partner Shri Balbir Kumar, karta of Balbir Kumar, HUF was recorded on January 15, 2007, in which he detailed the manufacturing process carried on and the machinery installed for the abovesaid purposes. He also stated that 30 to 45 labourers were deployed for manufacturing process. The Assessing Officer, in view thereof, observed that there was inconsistency in the statement of the partner as he had stated that there were around 30 sewing machines installed at Parwanoo but as per record, only 13 machines were installed, i.e., on the basis of the evidence collected from the Department of Industries. Further, he has submitted that 30 to 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer was the comparison of the results shown by M/s. Octave Exports, i.e., the assessee before us and its sister concern M/s. Octave Apparels. The Assessing Officer has tabulated the turnover, wages and other expenses incurred by the two concerns under table-10 at page 39 of the assessment order and concluded that the expenses booked at Parwanoo unit were much less than the expenses booked by the sister concern at Ludhiana. As per the Assessing Officer, the expenses booked at Parwanoo unit were too low to justify any working. Further, a comparison between plant and machinery of the two concerns was also made and it was found that the turnover which was one-third of its sister concern, the assessee had done the same work with just one-tenth of the machinery. Further, the net profit shown by the assessee was much higher than its sister concern. As per the Assessing Officer, the above establishes that no work as such, had been carried out at Parwanoo and the assessee was not entitled to the claim of deduction under section 80HHC of the Act. The assessee was accordingly, show caused by the Assessing Officer. The reply of the assessee explaining that it had obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to the claim of deduction under section 80-IC of the Act. In reply to this show-cause notice issued by the Assessing Officer, the assessee stated that "during the year we have claimed deduction under section 80-IC under sub-section (2)(a)(ii). Under this provision of section 80-IC the assessee who manufactured any article or thing not being article specified in Schedule is entitled to the deduction. We are not covered under section other conditions of section 80-IC have been complied with". The Assessing Officer noted that the assessee had changed its claim of deduction under section 80-IC of the Act that it was to be allowed under section 80-IC(2)(a) and not under section 80-IC(2)(b) of the Act, though in the audit report, the assessee had made a claim under section 80-IC(2)(b) and not under section 80-IC(2)(a) of the Act. The Assessing Officer was of the view that because of the legal infirmities in the claim of deduction under section 80-IC of the Act, the assessee has changed its stand. Further, the assessee in the assessment year 2004-05 and also in the assessment year 2006-07 had made a claim of deduction under section 80-IC(2)(b) of the Act not under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax (Appeals), the assessee filed written submissions and various evidences which are reproduced under paragraph 4.2 at pages 14 to 25 of the appellate order. The Assessing Officer also submitted reports vide letters dated April 10, 2008 and April 22, 2008. In rejoinder, the assessee furnished written submissions which were also placed on record by the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), on the perusal of the record and the enquiries made by the Assessing Officer, deliberated upon the issue vide paragraphs 5 onwards. The objections of the Assessing Officer were met with by the Commissioner of Income-tax (Appeals) parawise. The first objection raised by the Assessing Officer was with regard to the enquiries made at Parwanoo where he not only visited the premises of the assessee but also recorded statement of one Shri Kapil Sood who stated that only 10 to 12 workers were working in the concern. The Commissioner of Income-tax (Appeals) considered the explanation of the assessee that it had closed its business at Shed No. 1, Sector 2, Parwanoo where it had taken 6,352 sq.ft. area on lease and the said premises was vacated on M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of consumption of the electricity. The Commissioner of Income-tax (Appeals) observed that simply because the expenses were on the lesser side, it cannot be presumed that no manufacturing activities had been carried out at the unit. Further reliance was placed on the ratio laid down by the Chandigarh Bench of the Tribunal in Shoghi Communications Ltd. v. Deputy CIT in I. T. A. No. 359/Chd/2005, [2006] 9 SOT 489 (Chandigarh), order dated August 4, 2006, reported in and it was held that lower electricity expenses could not be the ground for refusing the claim of deduction under section 80-IC of the Act. In any case, the said lower expenditure cannot give rise to the inference that no manufacturing activity had been carried out by the assessee at Parwanoo unit. 20. Another inference drawn by the Assessing Officer was on account of the photographs and the video clippings of the premises. The said video clippings were of the new premises where the production had stopped on the date when the Assessing Officer visited the premises. In view thereof, when the manufacturing had already stopped, the Commissioner of Income-tax (Appeals) held that same cannot be used as evidence unless the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rips to Ludhiana for the purpose of. The observations of the Assessing Officer in this regard were thus, held to be incorrect and unjustifiable. 23. Further, before the Commissioner of Income-tax (Appeals), the assessee furnished additional evidence in the form of certificate from Knitwear Club (Regd.) Ludhiana under which the assessee had pointed out that printing and bleaching were not the integral part in the manufacturing process of the T-shirts. The said additional evidence was admitted and the Assessing Officer in the remand proceedings had recorded the statement of Shri Charanjeet Singh, secretary, Knitwear Club on April 9, 2008. The Assessing Officer reported that the plea of the assessee that printers that printing and bleaching was not part of the manufacturing process of T-shirts, could not be accepted as in the statement recorded, the said person had submitted that both printing and bleaching was part of the manufacturing activity. The Commissioner of Income-tax (Appeals) observed that printing and bleaching was required wherever it was needed considering the type of T-shirts being manufactured and it was held that the explanation of the assessee nowhere contradicts th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hines to the Director of Industries, HP and relying on the statement of Shri Kapil Sood that the assessee had employed 8 to 10 workers, the Assessing Officer had held that it is not possible to achieve the turnover. The Commissioner of Income-tax (Appeals), in view of the facts and circumstances, considered in the paragraphs above, did not accept the plea of the assessee. Further, during the appellate proceedings, the assessee had furnished a certificate from Indian Industrial Garments Manufacturing (IIGM) Pvt. Ltd. wherein they had certified that the type of machinery which the assessee had installed, was sufficient for manufacturing goods which the assessee had manufactured and sold. The said certificate was admitted by the Commissioner of Income-tax (Appeals) under rule 46A of the Income-tax Rules. The Assessing Officer in the remand report dated April 10, 2008, had stated that the price list of various machine models from IIGM carried no value at all. The Commissioner of Income-tax (Appeals), however held that the adverse inference drawn by the Assessing Officer in this regard was not in order. 26. The next aspect considered by the Commissioner of Income-tax (Appeals) was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer and the Commissioner of Income-tax (Appeals) claimed that it had only 11 hand driven old machines and the value of the said machines was only ₹ 9,500 which was much below 20 per cent. value of the plant and machinery. The Assessing Officer had recorded the statement of one Shri Gurcharan Singh, partner of M/s. Darbar Sales (India) wherein he had stated that the machines could be used for straight stitching and not double stitching quality. The Commissioner of Income-tax (Appeals) observed that the Assessing Officer has not discussed whether the assessee had used only double stitching machines in the manufacture of T-shirts and not the single straight bleaching machine, which was possible by the use of Indian made machines. The claim of the assessee was that it had manufactured the t-shirts using the said Indian machines along with other imported machines installed at Parwanoo. The assessee made request before the Assessing Officer to visit the premises which was not accepted and in the absence of the same, the Commissioner of Income-tax (Appeals) held that there is no justification in the observations of the Assessing Officer in this regard and in computing the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities held that the deduction claimed under section 80-IC of the Act could not be disallowed just because the auditor in the audit report had mentioned that the assessee was carrying on trading of readymade garments. 30. Another aspect noted by the Commissioner of Income-tax (Appeals) was on the basis of evidence filed by the assessee that all the purchasers made enquiries and placed orders at Parwanoo address and goods sold by the assessee were sent through reputed courier from Parwanoo only. In view thereof, the Commissioner of Income-tax (Appeals) held that the conclusion drawn by the Assessing Officer that no manufacturing was done by the assessee at Parwanoo unit could not be accepted. 31. Another aspect noted by the Commissioner of Income-tax (Appeals) was with regard to the enquiries made from the Commissioner, Excise and Taxation, Himachal Pradesh, with regard to the vehicles crossing the sales tax barrier en-route to Parwanoo. The assessee was directed to furnish the complete details of the vehicles and their numbers through which the raw material was transported from Ludhiana to Parwanoo. Certain discrepancies were noted by the Assessing Officer in the said informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 80-IC of the Act on the said income of ₹ 25,03,572. The Commissioner of Income-tax (Appeals) recomputed the deduction under section 80-IC(2)(a)(ii) of the Act at ₹ 97,34,564 as against the claim of the assessee at ₹ 1,22,38,136. 33. The Revenue is in appeal against the relief allowed by the Commissioner of Income-tax (Appeals) in observing that the assessee had carried out manufacturing activities and was entitled to the claim of deduction under section 80-IC of the Act except on the addition made on account of the non-passing of the vehicle through barrier through which raw material was passed on from Ludhiana to Parwanoo. 34. The learned Departmental representative for the Revenue placed reliance on the order of the Assessing Officer and elaborately took us through various paragraphs of the assessment order to point out that elaborate exercise was carried out by the Assessing Officer to collect the information and the same established that the assessee was not carrying on any manufacturing activity. The learned Departmental representative for the Revenue further pointed out that the assessee changed its stand that deduction was covered under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee through tempo load. Kindly refer to pages 59 to 68 of the paper book. Similar is the sample copies attached at pages 87 to 91 of the paper book. Thus, no fault can be found of the delivery of the material at Ludhiana. 2. 2(ii) Job work of printing and bleaching 5.7, 5.8 and 5.9 (a) Only 5 per cent. of the T-shirts were there, where the printing and bleaching was carried out and this is an undisputed fact, therefore, the contention of the Assessing Officer that after manufacturing of T-shirts at Parwanoo, it could not be economically viable to sent the goods to Ludhiana and then again to Parwanoo is not correct. Thus, the Assessing Officer having overlooked this fact for rejection of manufacturing activity on this issue was not proper. (b) Regarding the fact that without bleaching and printing, it cannot lead to manufacturing is not correct. In this regard, the finding has been given in paragraph 5.9 of the order of the Commissioner of Income-tax (Appeals), that the bleaching is required only for manufacturing of super quality T‑shirts and printing was also required of a very negligible quantity and, therefore, it was held by the Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals) in paragraph 5.21, 5.22 and 5.23 as under : (a) The finding given in paragraph 5.21 is that the number is incorrect. The correct number is PB-10-K-9515 as per barrier receipt and this vehicle had crossed Parwanoo Barrier and, therefore, no adverse view can be taken. (b) The Commissioner of Income-tax in paragraph 5.22 had doubted that the vehicle did cross the barrier and though, the type of vehicle has not been mentioned correctly, but the appellant had computerised receipt No., builty, octroi receipt and computerised time of passing the vehicle, which clearly proves that the goods had been transported to Parwanoo. (c) The finding of the Commissioner of Income-tax (Appeals) is in paragraph and the Commissioner of Income-tax has held that the vehicle had passed the Parwanoo barrier and, thus, the transporting of raw material is there and mere mentioning of light commercial vehicle, which are, in tempos will not justify the observation of the Assessing Officer. (d) Reference may be made to the chart at pages 252 to 306 which explains that each and every vehicle has crossed the barrier. 5. 2(v) Statement of Sh. Kapil Sood, (passerby) 5.1 (a) The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought in by the Assessing Officer. The Commissioner of Income-tax (Appeals) relied upon the judgment of the Income-tax Appellate Tribunal, jurisdictional Bench in the case of Soghi Communication Ltd., that lesser electricity is not a ground for holding that no manufacturing activity has been carried out. 8. 2(viii) Video clipping of new premises 5.4 The assessee had furnished the evidence of shifting to the new premises and of closing the manufacturing activity and, therefore, the video clipping made in September, 2006 cannot be the evidence that no manufacturing activity had been carried out in 2004-05, since such video clipping were clicked in September, 2006 when production had been stopped in March 2006 and the shifting had also taken place at that time to new premises. Besides, in video clippings, which were shot in September 2006, all the sewing machines can be seen very clearly at the new premises. 9. 2(ix) Statement of persons recorded outside parwanoo's unit 5.1 The Commissioner of Income-tax has dealt with this issue elaborately and without any identity of the persons, there is no evidentiary value of such statements. Our con-tentions are same as per ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t invited the Assessing Officer to oversee the production at Parwanoo and also the fact that the finding of the Assessing Officer with regard to the double stitching has not been found to be correct and neither there is any evidence on record and, therefore, it was held by the Commissioner of Income-tax (Appeals) in paragraph 5.15 that the finding of the Assessing Officer is only on the basis of surmises and conjectures. 14. 2(xiv) Stock register (a).We have given the closing stock and opening stock list and all our purchases and sales are fully vouched and books of account cannot be rejected if there is no stock register. Reliance is being placed on the various judgments. (b) Regarding the bills of transportation of goods, it is submitted that we have all the computerised receipts and also sales were made to different parties and for which, the papers are there at pages 124 to 136 and the list of sale is at pages 207 to 214 along with relevant bills of courier at pages 215 to 217 and which have not been doubted by the Department. 15. 2(xv) Value of old machines 5.15 of the Commissioner of Income-tax (Appeals) The appellant has proved beyond any doubt that value of old ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004, the excise duty on garments were rolled back. In respect of the enquiries made from the Commissioner, Excise and Taxation Department regarding the plea of the assessee that the said trucks had crossed the barrier, it was pointed out by the learned authorised representative for the assessee that the Commissioner of Income-tax (Appeals) has failed to plead the case of the assessee that certain goods, vehicles had crossed the barrier at Mohali, Punjab. 39. We have heard the rival contentions and perused the record. The assessee had set up its unit at Parwanoo in the assessment year 2004-05 for the manufacture and sale of readymade garments. The assessee was manufacturing the said items at Ludhiana and thereafter, it had taken on lease the shed at Parwanoo. There was an exemption from excise duty and other duty and further the assessee was entitled to claim of deduction under section 80-IC of the Act on the profits earned by the assessee at the unit established in Himachal Pradesh. Prior to starting the manufacturing activities, the assessee obtained various registrations for the said firm at Parwanoo, H.P. and the copies of the said registration certificates are placed in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment year 2005-06. 42. The Assessing Officer, in this regard raised two objections. The first objection was that no such machinery was shifted to the Parwanoo unit and the second objection was the value of the machinery. The Commissioner of Income-tax (Appeals) has dealt with both the issues and has given a finding that the necessary evidence of crossing barrier between Kalka and Parwanoo in respect of the 11 hand driven machines was filed before the Assessing Officer and the Commissioner of Income-tax (Appeals) both, which in-turn established the transport of the said machinery. The existence of the machinery stands established from the declaration of the assessee in the balance-sheet filed for the assessment year 2002-03 onwards. In the entirety of the said facts and circumstances and in the absence of any evidence found to the contrary that the machinery originally held by the assessee had either been sold or stolen, once unit has been transferred from Ludhiana to Parwanoo, we find merit in the plea of the assessee that the said machinery has been transferred to the manufacturing unit. The Assessing Officer, on the one hand, had rejected the plea of the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no manufacturing activity had been carried out. However, the assessee furnished complete details including the receipts of the raw material crossing Excise and Taxation barrier between Kalka and Parwanoo which in-turn established the claim of the assessee that it had transferred the raw material from Ludhiana to Parwanoo which in-turn was utilised for manufacturing garments. Further, the manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity. 45. Another aspect noted by the Assessing Officer was that the job work of printing and bleaching was carried out at Ludhiana. As the complete procedure was not being carried out in Himachal Pradesh, the assessee was not entitled to the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the assessee was unfounded. 48. The Commissioner of Income-tax (Appeals), on the other hand, has elaborately considered the aspects of the manufacturing activities carried on by the assessee and the pleas raised by the assessee and the additional evidence filed by the assessee, which in-turn was confronted to the Assessing Officer, and had come to a finding that in addition to the 13 machines reported to the Director of Industries, Himachal Pradesh, the assessee was also using 11 old hand driven machines which in-turn were transferred from Ludhiana to Parwanoo. Further, the requisite number of workers, i.e., about 30 was being maintained by the assessee. The Assessing Officer had relied on statement of one Shri Kapil Sood who had stated that the unit of the assessee had less than 10 workers, could not be used against the assessee as the Assessing Officer has failed to allow cross-examination to the assessee and hence, the said plea of the Revenue is dismissed. 49. The Assessing Officer also compared the results shown by the assessee and the results shown by the sister concern and observed that the assessee had shown lesser expenditure and higher profit. However, as pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find no merit in the plea of the Assessing Officer that only 13 machines were installed in the Parwanoo unit of the assessee. 52. Another objection raised by the Assessing Officer was with regard to the claim of deduction under section 80-IC of the Act vis-avis the sub-section to be applied. In the audit report furnished along with the return of income, the assessee had declared that it was eligible for deduction under section 80-IC(2)(b) of the Act. However, Schedule XIV of the Act prohibited the manufacture of garments as being eligible for deduction under section 80-IC(2)(b) of the Act. Consequently, the assessee was show caused as to why the deduction claimed under section 80-IC(2)(b) of the Act should not be withdrawn from the assessee. The plea of the assessee before the Assessing Officer and the Commissioner of Income-tax (Appeals) was that by an inadvertent error, the auditor in the audit report had reported the deduction claimed under section 80-IC(2)(b) of the Act. However, the unit being established in Himachal Pradesh, the assessee was entitled to the claim of deduction under section 80-IC(2)(a)(ii) of the Act. We find merit in the claim of the assessee in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was found to be incorrect and consequently profit to the extent of ₹ 25,03,572 was worked out to be not eligible for deduction under section 80-IC of the Act. The relevant paragraph 6 in this regard of the Commissioner of Income-tax (Appeals) reads as under : "6. In view of the above discussions, though the conclusions of the Assessing Officer that no manufacturing activities were carried out by the appellant at Parwanoo and that further the appellant was not legally entitled to deduction under section 80-IC could not be accepted, in the place of the discrepancies with regard to some vehicles remaining unexplained, as discussed in the preceding paragraphs, it has to be considered that the material claimed to have been trans ported by these vehicles was not available for manufacturing goods at Parwanoo. As per the details given in annexure 'A' to this order, the total of the raw material claimed to be transported through these vehi cles come to ₹ 45,33,495. The appellant has shown gross profit of 37 per cent. for the assessment year under consideration. The cost of raw material of ₹ 45,33,495 would correspond to sales of ₹ 67,66,410. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Revenue and also the grounds of appeal raised by the assessee. I. T. A. No. 1283/Chd/2010-assessment year 2006-07 (Revenue's appeal) 58. The Revenue in I. T. A. No. 1283/Chd/2010 has raised the following grounds of appeal : "1. That the learned Commissioner of Income-tax (Appeals)-I, Ludhiana has erred law and on facts in deleting the addition of ₹ 74,76,594 made by the Assessing Officer on account of disallow ance of deduction under section 80-IC of the Income-tax Act, 1961 relying on the order of the learned Commissioner of Income-tax (Appeals)-II, Ludhiana in the assessee's own case for the assessment year 2005-06 without going into the facts of the case. 2. That while allowing relief as mentioned in paragraph 1 above : (i) The learned Commissioner of Income-tax (Appeals) has erred in law and on facts by not giving any credence to the statement of Sh.Kapil Sood wherein the person has stated that only 10-12 workers worked in the unit of M/s. Octave Exports and the unit usually remained closed and there was no work/manufacturing. (ii) The learned Commissioner of Income-tax (Appeals) has erred in facts by ignoring that only 13 sewing machines w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical to the issue raised in the assessment year 2005-06. We have already adjudicated the issue in the paragraphs hereinabove in relation to the claim of deduction under section 80-IC of the Act. 61. The similar claim of deduction under section 80-IC of the Act was denied to the assessee by the Assessing Officer following the same line of reasoning as in the assessment year 2005-06. However, the Assessing Officer had made enquiries in respect of the vehicles crossing the barrier carrying raw material from Ludhiana to Parwanoo and no discrepancy was found in the said material being shifted from Ludhiana to Parwanoo. In the absence of any evidence found that the goods had not crossed the barrier, the Commissioner of Income-tax (Appeals) had allowed the claim of deduction under section 80-IC of the Act on same reasoning but in entirety, though in the assessment year 2005-06, partial disallowance was made in the hands of the assessee. In view of our holding that the assessee is engaged in the manufacturing activities carried out at its Parwanoo unit and allowing the deduction under section 80-IC of the Act partly, in view of the discrepancies found in the crossing of barrier for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
