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TMI Blog2017 (7) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... 38.05% and substituting it with a rate of 23%. What the AO appears to have done in the present case is to reject an explanation given by an Assessee as to the difference in the selling price of the products manufactured by it at its Baddi unit compared to that at Delhi unit. The AO proceeded on the basis that the sales were to related parties thus giving an unfair advantage to the Assessee. The above approach of the AO was rightly found by the CIT(A) to be not justified. Without pointing out the error, if any, in the accounts or disturbing the figures of sales or purchases, to compare the trading results of business of two units and simply reject was clearly not a “reasonable basis”, as contemplated by the proviso to Section 80-IA (8) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions of law for consideration: (i) Did the ITAT fall into error in holding that invocation of Section 145 of the Income Tax Act, 1961 ('the Act') in the facts of this case was not justified? (ii) Is the impugned order erroneous inasmuch as it interprets Section 80IA (8) and (10) of the Act. 3. The facts in brief leading to the filing of these appeals are that the Respondent-Assessee was the Proprietor of M/s Vi-John International, Delhi and M/s Maja Personal Care, Baddi, Himachal Pradesh (H.P.) which are engaged in the manufacturing of cosmetic goods. 4. In relation to AY 2006-07, the Assessee filed a return income on 31st October 2006 declaring an income of ₹ 2,02,760/-. During the course of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee before the Commissioner of Income Tax (Appeals) [CIT(A)]. By orders dated 26th December 2008 (for AY 2006-07) and 10th November 2010 for AY 2007-08 the CIT (A) allowed the appeals of the Assessee. The CIT(A) held that the AO was not justified in rejecting the trading results shown by the Assessee summarily without pointing out either any mistake/deficiency in the accounts or disturbing the figures of sales or purchase as declared by the Assessee . According to the CIT(A) there were considerable differences in the business environment of the Assessee's concerns in Delhi and at Baddi in H.P. Consequently, the CIT(A) was of the view that the AO was not correct in slashing the GP rates in both the areas and substituting it by that deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Jain, learned the Senior Standing counsel for the Revenue and Mr. Gautam Jain, learned counsel for the Assessee, the Court is of the view that the orders of the CIT(A) and the ITAT suffer from no legal infirmity. The reasons for this conclusion follow. 10. Under Section 80-IA(8) of the Act, one of the pre-requisites for the AO to not grant the deduction as claimed by the Assessee in his return is where the AO finds that the consideration at which transfers were made of goods and services of the eligible business as recorded in its accounts does not correspond to the market values of such goods. The Proviso to Section 80- IA (8) further states: that where, in the opinion of the Assessing Officer, the computation of the profits an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances, the ITAT s conclusion that the AO s order was passed on conjectures and surmises cannot be said to be erroneous. 13. When there are audited accounts of an entity and the calculation of the GP ratios hinges upon their analysis, the AO should not lightly undertake an exercise that would amount to negating those accounts. 14. The questions framed by this Court are answered thus: Question (i) is answered in the negative by holding that the ITAT did not err in holding that invocation of Section 145 of the Act in the facts of this case was not justified. Question no. (ii) is answered in the negative by holding that the impugned order of the ITAT in its interpretation of Section 80-IA (8) and (10) of the Act is not err ..... X X X X Extracts X X X X X X X X Extracts X X X X
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