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TMI Blog2016 (6) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... ns contained u/s 80-IA (8) & (10) does not arise. We are of the considered view that the AO has invoked the provisions contained u/s 80-IC read with section 80-IA (8) & (10) on the basis of conjectures and surmises only without having an iota of material on record and as such, the question is answered in favour of the assessee. - ITA No.844/Del./2011, ITA No.2081/Del./2011 - - - Dated:- 29-6-2016 - SHRI N.K. SAINI, ACCOUNTANT MEMBER and SHRI KULDIP SINGH, JUDICIAL MEMBER ASSESSEE BY : SHRI K.C. SINGHAL ADVOCATE REVENUE BY : SHRI DEEPAK GARG, SENIOR DR O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : Since identical question of fact and law has been raised in both the aforesaid appeals, the same are being disposed off by way of consolidated order to avoid repletion of discussion. 2. Appellant, Income Tax Officer, Ward 20 (4), New Delhi (hereinafter referred to as the revenue ), by filing the present appeals sought to set aside the impugned order dated 10.11.2010 passed by the Commissioner of Income-tax (Appeals)-III, New Delhi and dated 27.01.2011 passed by the Commissioner of Income-tax (Appeals)-XXII, New Delhi qua the assessment years 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io of MPC unit at Baddi at 38.05% which is higher than that of VJI at 28.57% and net profit ratio of MPC at 36.09% which is higher than that of VJI at 35.09%, though both the above manufacturing units are involved in production of similar cosmetic goods and utilized similar raw material and the only difference is of location of the unit. AO came to the conclusion that margin of profits of MPC as well as KHCD is irreconcilable when examined in the light of the trade logic and normal average existing in the industrial sector and as such, figures of profits of MPC has been artificially inflated for availing undue benefit of profit available u/s 80-IC and assessee was called upon to show cause as to why the net profit of MPC be not considered false. 5. AO also noticed from Form No.10CCB that out of total purchase of ₹ 5,54,57,326/-, the assessee had made substantive purchases from his related concerns and has made all the sales of ₹ 9,60,51,726/- to another of his related concern, namely, M/s. Suchet Agencies on consignment basis and by invoking the provisions contained u/s 80-IC (7) read with section 80-IA (8) and (10) of the Act considered the same as inter-unit transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, AO came to the conclusion that due to inter-unit transfers between the related units at Baddi (MPC) and Delhi, provisions contained u/s 80-IC read with section 80-IA (8) (10) of the Act are applicable and after rejecting the books of account u/s 145 of the Act being not reliable, AO computed the NP at 19.78% for the purpose of deduction u/s 80-IC amounting to ₹ 1,94,53,893/- and out of total deduction claimed by the assessee u/s 80-IC i.e. ₹ 3,72,28,870/-, AO disallowed a sum of ₹ 1,77,74,976/- and thereby made an addition of ₹ 1,77,74,976/-. 10. Assessee carried the matter before the ld. CIT (A) by challenging the assessment orders who has allowed the appeals. Feeling aggrieved, the revenue has come up in appeal before the Tribunal by way of filing the present appeals. 11. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 12. Ld. DR, challenging the impugned orders, contended inter alia that the AO has rightly rejected the books of account and computed the GP r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 2005-06. The Assessing Officer did not point out any discrepancies or infirmities either in the account books of the appellant for this year nor in respect of the opening stock, purchases, sales and the closing stock. There was no finding that the account books of the appellant were not correct and complete nor was the finding that the profits of Baddi unit could not be correctly deduced, to warrant the rejection of account books of the appellant of Baddi Unit and Delhi unit. The Assessing Officer did not dispute the certificate issued by the Chartered Accountant under sub-section (7) of section 80-IA for deduction u/s 80-IC of the Act. Merely, on the basis of comparing the G.P. Rate shown by the other companies of the same group like M/s Vi-John International, Delhi (VJI), M/s. Bio Skin Care (BSC), Delhi, M/s. Vi John Health Care Line (VJHCL), Delhi, M/s. Vi John Beauty Tech. (VJBT), the Assessing Officer has assumed that the appellant had claimed excessive G.P. rate and net profit. Moreover, the comparison made by the A.O. of the G.P. rate shown by the appellant from Baddi unit in Himachal Pradesh with the G.P. rate shown by other sister concerns of Delhi is not fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of assessee unit, which is entitled for deduction u/s 80-IC, with other non 80-IC unit of assessee situated at Delhi, which could not be a ground in itself to reject the books of account; (ii) that since the AO has neither disputed the correctness or completeness of the accounts of the assessee nor disputed the method of accounting, which has otherwise been admitted by the Assessing Officer assessee in the assessment order completed u/s 143(3) qua the AY 2005-06, he was not empowered to reject the books of account; (iii) that when the AO has not disputed trading account or opening stock or the purchases or the sales or the closing stock, which have otherwise been accepted by the excise and taxation department, summarily rejecting the account books without pointing out any defect is not permissible under law; (iv) that the factum of allowing the deduction u/s 80-IC to the assessee to the extent of 23% for AY 2006-07 and to the extent of 19.78% qua AY 2007-08 itself goes to prove that the AO has categorically admitted the correctness of the books of account but preferred to disallow the deduction claimed u/s 80-IC on the basis of presumptive gross profit arrived at on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m unnatural profit ratio of 80-IC unit and non 80- IC unit and is verifiable from the accounts of the assessee s own related concern. 20. However, there is not an iota of material on the file to prove the inter-unit transfers between the related units of the assessee, one situated at Baddi, Himachal Pradesh, and another situated at Delhi. Moreover, when correctness and completeness of the audited books of account has not been disputed, merely disputing the trading result on the basis of higher gross profit ratio is not permissible under law. When AO has also not returned any specific findings that there was some arrangement between the assessee unit, an 80-IC unit and his non 80-IC unit situated at Delhi to carry out such transfer of goods, the question of invoking provisions contained u/s 80-IA (8) (10) does not arise. 21. Identical issue has been dealt with by the coordinate Bench of the Tribunal in case cited as Aquila Software Services Hyderabad (P) Ltd. (supra) wherein the following findings have been returned in favour of the assessee :- Section 10A, read with section 80-IA, of the Income-tax Act, 1961 - Free trade zone Computation of deduction) - Assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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