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TMI Blog2016 (2) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 IB is incorrect. - Decided in favour of assessee - ITA No. 5079/Del/2013, ITA No. 5080/Del/2013, ITA No. 5081/Del/2013 - - - Dated:- 8-1-2016 - SHRI A.T.VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh.G. N. Gupta, Adv For The Respondent : Ms. Nandita Kanchan, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These appeals filed by the assessee are directed against the order of learned CIT (A)-XXXIII, New Delhi dated 21.06.2013 passed for the assessment year 2005-06 to 2007-08 confirming the jurisdiction of AO u/s 153A and also curtailing profit eligible for deduction u/s 80IB /80 IC of the act. . 2. The grounds raised by the assessee are identical in all the assessment years so, we are taking only the grounds raised in ITA No. 5079/De/2013 for A. Y. 2005-06 which are as under:- 1. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals)-XXXIII, New Delhi (hereinafter called the CIT(A) for short) erred in rejecting the contention of the appellant that the learned Deputy Commissioner of Income Tax, Central Circle-4, New Delhi (hereinafter called the AO for sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacturing activities performed in the Damowala/Agartala units is wholly arbitrary and subjective and has no basis either on facts or in law . 3.2. That on the facts and in the circumstances of the case, the learned CIT (A) erred in holding Damowala Unit and Agartala Unit at par in disallowing deduction u/s 80IB/80IC of the Act, although it is uncontroverted that whereas Shri Ravinder Kumar did not visit Agartala Unit, he used to travel to Damowala Unit to prepare 'Sugandhi' there. 3.3. That on the facts and in the circumstances of the case and without prejudice to the generality of ground of appeal no. 3.1 above, the learned CIT (A) erred in holding that the appellant was entitled to a deduction of ₹ 37,68,748/- only u/s 80IB/80IC of the Act against a deduction of ₹ 7,53,74,962/- allowed in the original assessment order dated 14.06.2007. 3. For Assessment Year 2005-06 the assessee company declared total income of ₹ 14,45,90,679/- after claiming deduction under chapter VI-A of the income Tax Act of ₹ 1307250/- u/s 80G and ₹ 86250749/- u/s 80IB/80IC of the Act. Resultant net taxable income is shown at ₹ 57032680/-. Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er flakes are also used as raw material. The raw material like tobacco is purchased from open market in flakes and in the form of paste known as kiwam. The raw material tobacco is properly screened for its size, moisture contents, dust etc. The other raw materials are purchased from open market. Compounds and other ingredients are then blended for different varieties of tobacco at different manufacturing units moved to the production and filled in the pouches and tins as per the requirement. The assessee also manufactured scented supari, Ellaichi, Pan Chatni and rose water etc. The manufacturing units of the assessee are located at Noida (UP), Damowala (HP), and Agartala in the North-East Region. Noida Unit is engaged in the processing of silver and other units of the assessee manufacturing Baba Zarda. Some of the raw material are procured with the help of head office and after manufacturing of the goods they are transferred to various depots of the assessee company to be sold by the head office or marketing office at New Delhi. 6. Assessee Company is claiming deduction u/s 80IB and 80IC of the Act in respect of its income from manufacturing at Damowala Units located at Himachal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Damowala ₹ 11.17 crore. He also noted that various goods and services are transferred from head office and other undertaking to the eligible undertakings and are not at arm‟s Length Price and therefore the profits of the eligible undertaking are inflated resulting into the huge claim of deduction u/s 80IB/80IC. Based on this the AO was of the view that the profits of the eligible undertaking have to be apportioned between the various activities carried out by the individual units. According to him, limited activities are carried out of mixing and packing at eligible units. Further activities performed by the corporate office is also not incidental activity. Therefore he attributed only 5% of the profits to these eligible units and 95% of the profits are attributable to the non-eligible undertaking and therefore he allowed deduction of ₹ 3547118/- and ₹ 221630/- for Agartala and Damowala units respectively totaling to ₹ 3768748/- as deduction. 10. Assessee aggrieved with the order of the AO preferred appeal before learned Commissioner of Income-tax (Appeals) stating that the AO did not have any jurisdiction to disturb the deduction allowed u/s 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the attribution of profit of 5% to the eligible industrial undertaking for the purpose of deduction u/s 80IB and 80IC. The assessee aggrieved with the order of learned Commissioner of Income Tax (Appeals) has preferred the appeal before us containing the grounds of appeal for all three appeals for Assessment Years 2005-06 to 2008-09 on identical grounds. 13. Before us, the ld. AR of the assessee submitted that during the course of search, revenue did not find any incriminating material, AO, and CIT (A) both did not agree to this plea. He drew our attention to assessment order as well as the orders of CIT (A) to show that there is no reference of any material found during the course of search regarding deduction claimed by the assessee. He submitted that discrepancy pointed out by the AO that relevant details were not disclosed in Form No. 10 CCB but complete details were available at the time of original assessment framed u/s 143(3) of the Act. According to him, there is no material found which disclosed that assessee‟s claim u/s 80IB /IC was inflated. He further submitted that the contention of the AO that transaction entered into by the eligible undertaking wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding u/s 143(3) the matter was referred u/s 144A to the Additional CIT for examining the claim of the assessee. During that assessment proceeding he drew our attention to letter dated 06.12.2006 submitted before Additional CIT wherein at Para No. 5 it was stated that details of miscellaneous income of Noida Unit of ₹ 23531790/- were shown and it was specifically stated that it includes silver processing charges charged from various units by silver processing units situated at Noida. It was also explained with these charges are debited to the profit and loss account under the head processing charges and shown as miscellaneous income of Noida Unit. Therefore, he submitted that there is transfer of goods from Noida Unit to other units was already in the knowledge of AO. He further submitted that vide letter dated 19.03.2013 it was submitted that purchase required by eligible units are coordinated by the corporate office and the actual bills along with material are received at those units and purchase are debited as purchases by crediting the units of the respective suppliers in the accounts of eligible undertaking. He submitted that for the purpose of coordination only the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8223;. He further submitted that AO as well as learned Commissioner of Income tax (Appeals) has read the concept of arm‟s length pricing‟ instead of market value of the goods. In the assessment year, he submitted that there is no instance or allegation, which proves that the goods are not purchased by the eligible units from these parties at a price, which is lower than the market price resulting in to higher profits by the industrial undertaking eligible for deduction. 17. He further submitted that Mr. Ravinder Kumar Gupta goes to only Damowala Unit and not to Agartala Unit of the assessee company and further there is no search in Damowala Unit which even remotely prove that any payment made to Ravinder Kumar Gupta. 18. Ld. DR submitted that there is an incriminating material found during the course of the search which are shown by learned Commissioner of Income-tax (Appeals) at Page No. 5 of the appellate order showing transfer of material from one unit to another unit and in form no 10CCB submitted by the assessee did not disclose any transaction between inter units. Therefore, these documents are seized during the course of search and are incriminating materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted by AO in assessments. Therefore, he submitted that transaction of the assessee‟s eligible undertaking with non-eligible undertaking or with other parties has not resulted into more than ordinary profits‟ in those units. Therefore, he submitted that assessment is not based on seized documents as well as the profit attributable worked out by the AO @ 5% is incorrect. He submitted that there is no material, which even remotely suggest that the profits shown by the assessee‟s eligible units are not correct. Therefore, it should be allowed. 21. We have carefully considered the rival contention of the assessee as well as the revenue. During the course of hearing, Ld. AR has furnished paper book relying on various submissions made during the course of original assessment, proceeding u/s 143(3), assessment proceeding u/s 153A, copies of the various decisions relied upon. Ld. DR also submitted a paper book showing material seized during the course of search as well as submission made by the assessee dated 17.01.2013 and 04.03.2013 in response to questionnaire issued by the AO on 30.11.2012. The basic questions involved here are two fold. a. Whether assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January for December 2010 to February 2011. Annexure A-5 from page no 301 to 350 is also material transfer challans to New Delhi Units from 02.12.2010 to 12.01.2011. Annexure A-6 is also relating to material transfer challans to Noida or Delhi Units starting from 04.10.2010 to 31.11.2010. Annexure A-7 is also material transfer challans to Noida and Delhi Unit starting from 04.08.2010 to 30.09.2010. Page 43 of Annexure A-10, which is relied upon by the ld. DR vehemently, is relating to area wise payments made to Freight Carrier Pvt. Ltd and which is part of total transport expenditure incurred by the assessee. Page 28 of Annexure A-11 is purchase of Tobacco in FY 2009-10 from various suppliers showing the quantity and value of the same. It is not related to purchase form any of the related parties. Page 1 to 62 of annexure A-4 is the material inward register of the assessee from April 2010 December 2010. Annexure A-5 is also material outward register of the assessee company for the same period. Page 53 to 57, 67-74 and 91 to 94 of Annexure-8 is details of raw material purchase by the assessee from various parties. These bills are not related to any material transfer from eligible u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking is less than the market rate. e. None of the material suggest that the eligible units are not carrying out manufacturing activity, which is stated by assessee. f. None of the material shows that there is inflation of the profit by assessee of eligible undertakings. g. None of the material suggest that appropriation of profit made by the assessee to derive the income of eligible undertaking is incorrect. h. None of the material suggest that eligible units earns more than Ordinary profits‟. In view of above, we confirm that the material found during the course of search is not incriminating which even remotely suggest that assessee‟ s claim of deduction u/s 80IC/80 IB is incorrect. 25. We would now examine this issue with respect to various judicial precedents cited before us for exercising jurisdiction by revenue u/s 153A of the Act. Hon. Delhi high court in case of CIT V Kabul Chawla has held that Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi) In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. (vii) Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. In view of this, CIT (A)‟s reliance on decision of CIT V Anil Bhatia is misplaced as in the present case there is no material pertaining to A. Y. 2005-06 to 2007-08, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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