9911796707
TMI Blog2016 (6) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s. l0B - Held that:- Assessee had already submitted that various permissions obtained from Kandla Economic Zone of Ministry of Commerce & Industries. The copies of invoices of new machineries obtained and installed in EOU Unit of Masar Plant for manufacturing Co-enzyme Q 10 have been placed on page nos. 51 to 173, certified to be before Assessing Officer at relevant point of time. Assessing Officer has made relevant enquiries in this regard, same were replied on behalf of assessee. Even with regard to export, enquiries were made which were replied by assessee. Even rate difference of domestic sale and export was stated before Assessing Officer inter alia submitting that there was a big quality difference in both sales i.e. domestic and foreign with regard to one consignment to France at lower rate it was not sale but sample sale in which amount is not material. It was done on minimum price just for the sake of custom clearance. Assessee can not show zero amount of sale of these sample, so nominal cost was taken for custom purpose. In such a situation, provisions of Section 263 of the Act is not justified and same is set aside. Similar issue arose in A.Y. 2008-09, 2009-10, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e care of issue raised in ground nos. 6 & 9. So, order of Assessing Officer cannot be said to be erroneous as to be prejudicial to the interest of Revenue to make it fall in provisions of Section 263 of the Act. Same is set aside. Documentary evidence found during the course of search in respect of investment in offshore entities like USA and Dubai etc. - Held that:- All records found as discussed above in preceding para and records were not belonged to assessee company. The said contention of assessee was accepted by Assessing Officer after due consideration of the facts because in assessment proceedings, explanation for all documents were seized and submitted. In response to the queries, submissions were made to the Assessing Officer on 24.12.2013 with regard to capital advances made by Sterling Port Limited as placed on Page 37-38 of paper book part II. Assessment of said Sterling Port Limited was also completed by same Assessing Officer and all related documents and explanations were filed in said assessment. The said transaction is nothing to do with the assessee Sterling Biotech Limited. Even projection/estimation of project at Nigeria has nothing to do with assessee. Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri Vijay Mehta, A.R. For the Revenue : Shri Manjunathaswamy, D.R. ORDER Per Bench These seven appeals filed by assessee against the orders of Principal Commissioner of Income-tax (Appeals)-I, Mumbai for A.Ys. 2006-07 to 2012-13 on the point of Section 263 of the Act. Since, most of the issues involved in all the appeals are similar therefore, they are heard together and being disposed of by way of this consolidated order. 2. In ITA No.2750/Mum/2016 for A.Y. 2006-07, assessee has filed the appeal on the following grounds: 1. The order passed by the learned Pr. CIT is illegal, bad in law, ultra vires and contrary to the provisions of the law and facts and without appreciating the facts of the case in their proper perspective and without application of mind and is in gross violation of the principle of natural justice. 2. On the facts and circumstances of the case, the learned Pr. CIT erred in assuming jurisdiction u/s. 263 of the I T Act, in respect of order passed by assessing officer with prior approval of the Additional Commissioner of Income Tax by treating the same erroneous and pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interest of revenue. 10. On the facts and circumstances of the case, the learned Pr. CIT erred in setting aside assessment order passed u/s. 143(3) read with Section 153A on 31/0312014 by Assessing Officer for de novo assessment. 3. At the outset of hearing, Ld. Authorized Representative pointed out that first two grounds being general in nature, so, same will be taken care by us in following paras. 4. In this case along with other entities, including family members controlling the affairs of the group, search and seizure operations u/s.132 of the Act was undertaken on 28.06.2011. The relevant assessment u/s.143(3) r.w.s. 153A of the Act framed on 31.03.2014 determining total income of assessee at ₹ 49,25,01,170/- as against return of income of ₹ 38,16,47,426/-. Book profit u/s.115JB was assessed at ₹ 1,51,12,09,970/-. 5. On verification of assessment records including seized material, CIT noticed that assessment order passed by the DCIT was found to be prima facie erroneous in so far as prejudicial to the interest of Revenue. Therefore, proceedings u/s.263 of the Act were initiated by issuance of notice dated 07.03.2016 requesting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of a few parties in this regard and some of these confirmations are apparently signed by the same person. (iii) As per the returns filed by the assessee huge purchases were claimed to have been made from certain concerns stationed at Dubai. The Assessing Officer accepted the claim of the assessee that these purchases represents the purchases of the assessee's trading division at UAE, without verifying the audit report of such offshore branch. In the annual returns filed by the assessee company also, no such segment reporting or results of offshore branch were shown. (iv) During the course of search at the premises 202, Suvidhi Apartments Goregaon (West) owned by Shri. Ramanulyer, Director M/s Sterling International Ltd., (as per annexure I, part of core documents)a list of 151 entities with their seals and other documentary evidence were found and seized. A similar list of 16 entities was also found from the premises at 4th floor, Chavda Commercial Centre, Link road, Malad (W), Mumbai which is also part of core documents (Annexure 1- pages 80 to 81), In these companies Shri Chetan Sandesara has substantial interest. These companies form a part of the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iries as warranted by the facts and circumstances of the case and that the assessment has been completed without examining all the aspects which were required to be looked into for determining the assessee's income based on the documents and other evidences detected as a result of search action on 28.06.20011 as well as the statements of various persons recorded at the time of search and during post search proceedings wherein there is clear admission of suppression of income, inflation of expenses and routing such unaccounted amount through various bogus / paper entities, and thus the assessment is rendered erroneous in so far as it is prejudicial to the interest of revenue as envisaged in section 263 of the I.T. Act. 4. In view of the above, you are hereby required to show- cause as to why the assessment order passed by the A. O. on 31.03.2014 be not set aside for de novo consideration as per the provisions of section 263 of the Act. For this purpose your case is fixed for hearing on 17.03.2016 at 11.00 a.m. You may appear on the stipulated date and time either in person, or through your authorized representative. If you do not wish to avail the opportunity of being heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us and prejudicial to the interest of the revenue. In the case of Duncan Brothers reported in (209 ITR 44) it has been categorically held that an order of the Commissioner (u/s. 263 of the Act) not bringing any cogent material on record and based only on hypothesis is unsustainable. In order to invoke section 263, two conditions are to be satisfied simultaneously i.e. the order passed by the AO has to be erroneous the order so passed should be prejudicial to the interest of the revenue. If any one of the conditions is not fulfilled, the order cannot be set aside u/s. 263. In the instant case, the AO has examined all the issues related to the determination of the income and has taken one of the possible views and therefore, the order passed by the AO cannot be considered as erroneous. Where two views are possible and the AO has taken one view in the assessment order with which the CIT does not agree, the order cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in Law. In this connection, attention is invited to the decision of the Supreme Court in the case of Malabar Industrial Co. Ltd. (243 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above since the order is not erroneous exercise of the jurisdiction by CIT under section 263 is not called for. The asessee also relies on the decisions in the case of CIT v. Greenworld Corporation (314 ITR 81)(SC) and CIT v. Gokuldas Exports (333 ITR 214)(Kar). The assessee would also like to relies on the decision of Hon'ble Gujarat High Court in the case of CIT v. Arvind Jewellers (2003)259 ITR 502 (Guj) which has followed the Supreme Court decision in case of Malabar Industrial Co. Ltd. It has been held by the High Court as under: Coming to the facts of the present case, it is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanations in pursuance of the notices issued under Section 142(1) as well as Section 143(2) of the Act and after considering the materials and explanation, the Income- tax Officer has come to a definite conclusion. The Commissioner of Income-tax did not agree with the conclusion reached by the Income-tax Officer. Section 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the Income-tax Officer is erroneous and prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined the applicability of provisions of section 69 of the Act which he had failed to do. In this connection, it is submitted that during the course of assessment proceeding u/s 153A, the Assessing Officer (AO) had asked for the explanation in respect of various notings made in the loose papers/note books/pad found during the search carried out in various premises of the assessee and in the absence of such explanation, the AO had sought to consider these expenses as unexplained and added to the total income. The assessee had given a detailed explanation for each and every page of the loose paper/documents/note book. These were examined by the AO. The AO had examined the applicability of provisions of Section 69 of the Act. However, after thoroughly considering the explanation of the assessee, the AO thought it fit not to invoke the said provision. Hence it is submitted that your contention that the Assessing Officer had not examined the applicability of Section 69 is not justified. The show cause reads as under: ii) Assessee's claim of deduction u/ s. 10 B of the Act on its export of Co-enzyme Q10 from Massar Plant was allowed by the AO without causing necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the confirmation from the customers as well as supplier for Dubai trading which were duly submitted by the assessee company. The assessee had also filed copies of account of all these parties during the course of assessment proceeding U/s 153A of the Act. Thus the AO has verified the transactions which were carried out in Dubai. Moreover, no incriminating material has been found in this regard during the search. The show cause is absolutely silent as to how there is a loss of revenue in the instant case. The show cause reads as under: iv) During the course of search at the premises 202, Suvidhi Apartments Goregaon (West) owned by Shri Rarnani Iyer, Director MIs Sterling International Ltd., (as per annexure I, part of core documents) a list of 151 entities with their seals and other documentary evidence were found and seized. A similar list of 16 entities was also found from the premises at 4th floor, Chavda Commercial Centre, Link road, Malad (W), Mumbai which is also part of core documents (Annexure l - pages 80 to 81). In these companies Shri. Chetan Sandesara has substantial interest. These companies form a part of the aforesaid 151 companies. The C.A. of the group, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on a website Technogelconsultant.com . The AO has erred in presuming that since the sale of gelatin is mostly to MNCs. In this connection, it is submitted that during the course of the assessment proceedings, the AO had called for a technical note on the manufacturing process. The assessee had submitted the stage-wise manufacturing process right from purchase of raw material viz Bovine Bones from Bone Miller, crushing, demineralization, liming, deliming, extraction, conductivity, till the manufacture of final products namely gelatine. The DCP is generated at the stage of Bone acidulation itself. The assessee company had also submitted month-wise quantity of Bone charging, gelatine production, DCP production, recovery percentage, etc at each stage. The assessee company had also submitted last page of RG-1 register of gelatine to substantiate the production of Gelatin for all the years. The Assessing Officer had thoroughly examined and verified these details / documents before coming to the conclusion that the waste was to the extent of 5% and not 30% as claimed by the assessee. Hence it cannot be said that the conclusion of the AO was merely based on presumption, though even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order cannot be held as erroneous and prejudicial when two views are possible and Assessing Officer has adopted one of the possible views. 8. CIT observed that search and seizure operation has been under taken by the investigation wing after being satisfied that there is concealment of income by the group. Thereafter, a report has been forwarded to the assessment unit after compilation of evidence gathered and observations made during the search and seizure operation in respect of the concealed income of the group. The subsequent assessment u/s 153A of the Act was a legal process for assessing the assessees total income including the concealed income on the basis of seized material and the observations made during the search and seizure operation. Therefore, CIT rejected the general argument of assessee, regarding the fact that no incriminating material has been referred in show cause notice, was also without any basis, as the particular Annexures of the seized material and the name of the premises from where documents have been seized, as well as the content of these documents have been clearly referred in the show cause notice. CIT observed that in this particular case revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash transactions found recorded in the seized material (Annexure 1 to 14 of M/s. Sterling Biotech Limited, Sandesara Estate, Vadodra and Annexure I to 21 of PMT Machines Ltd, at 20/B, Khatau Building, Fort, Mumbai). In this regard, CIT found from the assessment order that he has not made any enquiries to find out the source of the cash receipts as well as its application. Therefore, Assessing Officer's findings that the cash transactions recorded in the seized material were sourced from unaccounted sale of by-products by the assessee and allowing it to be telescoped against the undisclosed income of the assessee, without establishing any nexus between the generation of cash and its application, was clearly erroneous and prejudicial to the interest of revenue, as the source of cash utilized in such transactions was not substantiated. Therefore, the Assessing Officer ought to have examined the applicability of provisions of section 69 of the Act, which he had failed to do. In this regard, assessee s stand before CIT has been that it had given explanation for each and every page of the loose papers/documents/note books and the same had been examined by the Assessing Officer. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has been that average loss being shown year after year was in range of 30%. This was evident from the enclosed Annexure and year wise details of consumption and production of gelatin and DCP and consequent loss. Ld. Authorized Representative drew our attention to the show cause notice issued dated 14.03.2014 by the concerned Assessing Officer placed at page no.16 to 19 of the paper book I which is reproduced as under: Please refer to proceedings of assessment and the detailed technical note submitted by you on the manufacturing process of Gelatin. Please also take note of statement u/s 131 recorded on 28/06/2011 from Shri M. Mallan, Assistant Manager (Production) at the Ooty factory and that of the President and CEO of the assessee, Shri Deepak Korpal, being in-charge of manufacturing and Operations at Vadodara factory manufacturing Gelatin. In their statements u/s 131 recorded in the course of survey at the factory premises they have submitted in detail the manufacturing process being carried out at these factories. 2. A perusal of details of manufacturing available on records reveals that the average loss being shown year after year is in the range of 30%. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the assessee company and part of these transactions are noted in cash. The transactions are primarily in nature of expenses incurred. You are requested to furnish evidences to show that each of the transactions noted in seized Annexure A-1 to A-14 are recorded in your regular books of accounts failing which the cash expenses revealed from these evidences will be considered as unexplained and added to your total income by treating it as undisclosed income. 6. During the course of survey action u/s 133A in the case of your associate entity namely M/s PMT Machines Ltd. at 20/B, Khattau Building, Alka Dinesh Modi Marg, Fort, Mumbai on 28.06.2016, various loose papers and other Incriminating documents were found and impounded and inventorized as per Annexure A-1 to A- 23. In the course of assessment proceedings in the case of M/s PMT Machines Ltd. a detailed show cause was issued calling for the explanation and evidences in respect of documents impounded therefrom. In response to the same a reply is received from M/s PMT Machines Ltd. vide letter dated __________ wherein it has been stated that some of the documents impounded from premises of M/s PMT Machines Ltd, pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries made by concerned Assessing Officer in this regard at assessment proceedings. Ld. Authorized Representative has drawn our attention towards assessment order for A.Y. 2008- 09 in assessee s own case, which is placed at page no.74 to 101. Special attention was drawn to page 90 of the same, wherein at para 8.1 basis of wastage has been drawn on the analogy of manufacturing of gelatin from website i.e. Technogeloconsultant .com which offers a complete portfolio of consulting service for the veterinary pharmaceutical market and slaughterhouses such as market survey, launches of products product positioning and repositioning product customizations and import optimization of portfolio prospecting and development of local partners (importers) filed trials and laboratory tests technical training corporate sales for gelatin and slaughter house as consultant. According to Assessing Officer, this site gives a complete detail of process evolved in manufacturing gelatin and resultant wastage that occurs in such process. The sum and substance is that all basis for reaching a certain conclusion by Assessing Officer has been elaborated by him. Further, in assessment order, no incriminating m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,33,52,586 48,41,24,139 9,53,59,000 38,87.65,139 2010-11 2009-10 38,87,65,139 17,36,29,050 56,23,94,189 5.80,47,000 50,43,47,189 2011-12 2010-11 50,43,47,189 18,72.95,867 69,16,43,056 22,43,59,000 46,72,84,056 2012-13 2011-12 46,72,84,056 19,39,03,543 66,11,87,599 5,17,14,000 60,94,73,599 18. In this background, it cannot be said that no inquiry has been made with regards to source of cash received. We find that Hon ble Bombay High Court in case of CIT vs. Jawanmal Gemaji Gandhi (1985) 151 ITR 353 (Bom) held that secret profits or undisclosed income of an assessee earned in an earlier assessment year can constitute a fund, though concealed, from which assessee may draw subsequently. In the instant case, assessee acquired gold during the later half of assessment year and it could be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prised in ₹ 9,77,010/- was relatable to Unit II. Under these circumstances, the Commissioner has chosen to merely set aside the issue without first establishing any error in the assessment made by the Assessing Officer on this count. It is also trite law that before an order can be termed as erroneous, it has to be established as to what is the error of fact or law that is sought to be made out by the Commissioner. Infact, the Commissioner is expected to examine the record and furnish his opinion precisely to justify the provisions of section 263 of the Act. In this background, ld. Authorized Representative submitted that CIT cannot choose to set aside the issue without first establishing any error in the assessment order made by the Assessing Officer on this count. It is also trite law that before an order could be termed as erroneous, it has to be established as to what is the error of fact or law that is sought to be made out by the Commissioner. In this background, we are of the view that the Commissioner is expected to examine the record and arrive at his opinion to justify the provision of Section 263 of the Act which has not been done in this case, which is not ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous and also as to be prejudicial to the interest of the revenue. Simply mentioning the fact that assessment order is erroneous and so far as it is prejudicial to the interest of the revenue, is not sufficient. CIT having examined the records and the contentions of the assessee before him, has to give a specific finding only then he can set aside the assessment order, which has not been done in this case before us. So, the impugned order passed by CIT(A) u/s. 263 of the Act setting aside the assessment cannot be sustained as the Assessing Officer has duly examined the issue during the course of the assessment proceedings. CIT under the provisions of Section 263 of the Act cannot be said to be sitting as a reviewing authority and cancel the assessment without pointing out how the assessment order is erroneous or prejudicial to the interest of the revenue. 22. Regarding amendment to Section 263 of the Act, we find that ITAT B Bench in ITA Nos. 2690 2691/Mum/2016 For A.Ys. 2007-08 2008-09 in case of Shri Narayan Tatu Rane vs. ITO in similar set of facts has observed as under: 19. The law interpreted by the High Courts makes it clear that the Ld Pr. CIT, before holding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis- -vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant. 23. We also find that Hon ble Bombay High Court in case of CIT vs. Fine Jewellery (India) Limited 372 ITR 303 ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Assessing Officer has allowed the deduction u/s.10A of the Act and on its export of Co-enzyme Q-l0 from Massar Plant without making necessary enquiry to ascertain the veracity of assessee's claim. In this regard, assessee has submitted that it has started selling co-enzyme Q-10 from Financial Year 2007-08 corresponding to Assessment Year 2008-09. Since, it is a matter of fact, Assessing Officer was directed to verify the assessee's claim in this regard, and if there is no such activity during the year, no further action was required on this issue as directed by CIT. Thus, CIT has given direction for verification without pointing out any fault i.e. no claim of Section 10B of the Act for the year under consideration was ever made by the assessee. Such direction of CIT for verification of claim, which in fact has not been made, is not justified. So, the order of CIT on the issue of verification of claim u/s.10B of the Act is not justified because same has not been claimed for A.Y. 2006-07 2007-08 as there was no sale by assessee as discussed above. So, invoking of provisions of Section 263 of the Act in these years on this issue is not justified. 26.1 In A.Y. 2008-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. No documentary evidence regarding the custom clearance, assessed value and or the proof of Foreign Inward Remittance Certificate in respect of the said export sale has been gathered by the Assessing Officer. Further, blank letter heads of Richmond Overseas P. Ltd., UAE were found and seized from the premises of assessee group during the course of search, which ought to have raised reasonable doubts in the mind of Assessing Officer before allowing substantial sums as deduction u/s. l0B of the Act. Therefore, the Assessing Officer had clearly failed to carry out necessary verifications and inquiries into the claim. Thus, the order of Assessing Officer was found clearly hit by Clause (b) of newly inserted Explanation 2 below sub-section (1) of Section 263 of the Act. 26.3 Before us, the stand of assessee has been that Assessing Officer had issued notice dated 0508.2013 calling for Form 14 IO which is placed at page nos. 33 to 39. Assessee had purchased land, building and machineries from Torrent Gujarat biotech Limited (hereinafter called as TGBL ) in the month of March, 2006. Assessee used part of land building purchased from TGBL to manufacture pharm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assessing Officer, assessee submitted an explanation on 19.02.2014 that the export quality that of Co-enzyme Q10 was different from the product sold in the domestic market. Production process was also submitted and inter alia stated that in domestic market, Co- Q10 sold was of EP grade and that for exports was USP grade as detailed on page nos.178 to 180. Assessee also submitted extracts of website for the international prices of Co- enzyme Q10 prevailing in that period were placed on page nos.181-182 to substantiate the amount of transaction. It shows that Assessing Officer has made all relevant enquiry. In this regard, same was properly responded by assessee as discussed above. 26.4 We find that enquiry with regard to new machinery was made by Assessing Officer at assessment stage. Assessee has started manufacturing of Co-enzyme Q 10 with the help of newly imported Machinery. It was made clear before Assessing Officer that this unit was registered as 100% EOU being new one. Assessee has used part of land and building earlier acquired from TGBL. The machinery purchased from TGBL are such that it could be used only for manufacturing of other pharma product, but it could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by assessee company, no such segment reporting or results of offshore branch were shown. In this regard, the stand of assessee has been that assessee has a branch office in Dubai, UAE, since 2006 and assessee is carrying out trading business of Gelatin/DCP in UAE in accordance with the valid laws and regulations. It was claimed that in respect of the said trading activity, assessee has neither sent any material from India nor imported any material from Dubai to India and It was claimed that the Assessing Officer has verified all these transactions and no incriminating material has been found in this regard during search. According to CIT, no segment reporting has been done while finalizing the audited report of the assessee company. According to him, certified audited results of offshore branch were not verified by the Assessing Officer. CIT observed that Assessing Officer ought to have called for the audited accounts of the offshore branch of the assessee company for verification of the assessee s claim in this regard which he has failed to do. 27.1 In this regard, assessee drew our attention to the page no.25 of paper book no.I i.e. letter dated 19.02.2014 addressed to De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is with regards to list of 151 entities with their letter head and stamps and other documentary evidences found and seized during search operation from two different premises. During search operation Shri Ramani Iyer, Director of the group companies, had submitted that these documents belong to SBL group companies and that the premises wherefrom they were seized was being used by assessee. However, later on during course of assessment proceedings after due analysis of details another claim was made contending that most of these companies are clients of Shri H. S. Hathi and assessee do not have any relation with these companies. According to CIT, the Assessing Officer simply accepted the changed stand on this issue, without any verification, in spite of fact that at initial stage Shri Ramani Iyer, the Director of the group companies accepted that these are companies belonging to SBL group and the list of these companies along with the stamps and letter heads of these companies have been seized from the assessee's premises. According to CIT, this was an important piece of evidence which needed further investigation, which the Assessing Officer failed to do and assesse s co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese are all the details of the companies belonging to the clients of M/s H. S. Hathi Co., Chartered Accountants. Some of the Companies belong to our promoter group companies and some of them belong to the clients of M/s H.S. Hathi Co., Chartered Accountants. As office of M/s H.S. Hathi Co. was under renovation Mr. Hemant Hathi, Partner of M/s. H. S. Hathi Co., has requested to Mr. Chetan Sandesara to make an accommodation for keeping the files and other records, for which Mr. Chetan Sandesara has taken a flat of Mr. Ramani Iyer to keep the above documents on temporary basis. Sandesara group along with its promoter companies are being the clients of H.S. Hathi Co., there were Memorandum and Articles of other companies were also found along with our group concerns in the premises of M. Ramani iyer which all put together were 151 companies in the list. With regard to transactions of Sterling Biotech Limited with other companies we state that we do have any transaction neither in sales nor in purchases. With regard to the group companies we state that these being investing companies there are certain dividend payments from our company group companies may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er entry by the in house C.A. CIT has ignored these aspects. Ld. Authorized Representative drew our attention to Annexure-2, notice u/s.142(1) of the Act dated 05.08.2013 and attention drawn towards question nos.1, 2 3 which reads as under: Q.1 During the course of search it is found that M/s Sterling Group has subscribed to share capital of S.B.L. in F.Y. 2005-06. The list of the name of the Company of the 18 concerns are listed below. Sr.No. Name of the Company 1. Aditi Hospitals Pvt. Ltd. 2. Anula Properties P.Ltd. 3. Blue Mark Mercantile Ltd. 4. Bullworth Investrade P. Ltd. 5. Doral Trading P. Ltd. 6. Helicopter Services P. Ltd. 7. Jaico Textiles P Ltd. 8. Jangpriya Investments P. Ltd. 9. Modi Capital Finance (India)Ltd. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 45Crores in the year ending 31.03.2003 (Annexure - 1A-6). Further we enclose herewith board resolution for receiving share application money dated 30th April, 2005 (Annexure - 1A-1). However due to management decision in the F.Y. ended 31.03.2007 it was decided to refund the share application money back to all 18 companies instead of allotment of equity shares. Copy of the Board resolution passed at the meeting of the board of directors held on 15th November, 2006 for refund of the said money is enclosed herewith (Annexure 1A - 2). sterling Biotech Limited has refunded the application money to the concerned applicant companies through account payee cheques. We have herewith enclosed the copies Share Application Forms given by applicant companies and a copies of Bank statements of our company and the applicant companies highlighting the payments made/received for your kind perusal and records (Annexure - 1A-4). Further we are enclosing herewith balance sheet of Sterling Biotech Limited for the year ended 31.03.2007 showing effect of refund of share application money (Annexure 1A-5). We have also enclosed the balance sheet, ITR acknowledgements copies of all the 18 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey. 28.5 This gives the details of investors and also details of refund of the same to 18 companies as discussed above and was available before Assessing Officer at relevant point of time. It shows that 18 companies belong to assessee and transactions with the same have been clearly specifically asked in assessment proceedings and same were replied by the assessee. So, CIT was not justified in invoking provisions of Section 263 of the Act with regard to transactions with 18 parties as discussed above because same were duly verified at assessment level. Regarding remaining other than 18 out of 151, same did not belong to assessee as discussed above because same belong to client of M/s. H. S. Hathi Co. who was using the premises in question on temporary basis as discussed above. In any case the share applications money of ₹ 45 crore had been received from 18 companies in A.Y. 2003-04 which is beyond the assessment years under consideration. This take care of issue raised in ground nos. 6 9. So, order of Assessing Officer cannot be said to be erroneous as to be prejudicial to the interest of Revenue to make it fall in provisions of Section 263 of the Act. Same is set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit Price Total Price Mobile Harbor Cranes 2000 TPH for multipurpose cargo berth Design, engineering, procurement, supply and Erection Total Order Value (Ex CGS, Dahej) ₹ 35,51,00,000 Rs.71,02,00,000 Advance Towards start of works Rs.28,40,80,000 Total Advance Due Rs.28,40,80,000 BankDetails Bank Name Axis Bank Ltd Branch Goregaon Link Road Branch, Mumbai Account No 910020017038117 RTGS Code UTIB0000219 This shows that letter of Burnish Infrastructure Private Limited dated May 10,2011 was addressed to Sterling Port Limited and this document reveals the facts that advances have made by Sterling Port Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made such big investment in offshore entities and details of same were submitted during course of proceedings u/s.153A of the Act. The documents as discussed in para 29.1 reveals that Burnish Infrastructure Private Limited was having transaction with Sterling Port Limited towards start of works of ₹ 28,40,80,000/-. According to the details at page nos. 39- 40 of paper book II, said company was engaged in the business of developing port at Dahej (Gujarat). All details in this regard had been appreciated by Assessing Officer indicating that said transaction was between Burnish Infrastructure Pvt. Ltd. and Sterling Port Limited not with assessee. All records found as discussed above in preceding para and records were not belonged to assessee company. The said contention of assessee was accepted by Assessing Officer after due consideration of the facts because in assessment proceedings, explanation for all documents were seized and submitted. In response to the queries, submissions were made to the Assessing Officer on 24.12.2013 with regard to capital advances made by Sterling Port Limited as placed on Page 37-38 of paper book part II. Assessment of said Sterling Port Limited w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the internet information also does not mention about the accepted yield of gelatin, the main product. The exercise resorted to by the Assessing Officer in estimating the yield and consequent suppression of sale does not stand on any factual or logical footing, when all the relevant materials and data was at his disposal. He should have carried out proper examination of seized data and in particular manufacturing report, before arriving at any conclusion in this regard. His failure to do so and the method of estimation as discussed above clearly resulted in the assessment order being totally erroneous and prejudicial to the interest of revenue. 30.1 In this regard, the stand of assessee has been that wastage at 30% was reduced to 5% by Assessing Officer. Ld. Authorized Representative relied on the written submission filed on page no.105 of the paper book II and he drew our attention to the page no.41 of the paper book II inter alia submitted that Deputy Commission of Income Tax called for information and same was submitted by assessee vide letter dated 06.02.2014 which reads as under: During the course of hearing of the above company your good self has called for certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and same is set aside. 31. Next issue pertains to A.Y.2010-11, 2011-12 2012-13 with regards to block of assets. With regards to addition to block of assets from other parties has been submitted party- wise with relevant invoices and documents at assessment stage. CIT observed that no such evidences like invoices etc. were found on the record indicating necessary enquiry having been carried out in this regard. Considering the facts that inflation of capital asset has been admitted by assessee, Assessing Officer ought to have carried out due verification of addition with regard to fixed assets during the relevant year in all other instances as well. Therefore, contention of assessee was not found acceptable and provision of Section 263 of the Act was invoked by CIT. 31.1 Before us, In this regard, ld. Authorized Representative drew our attention to order of Assessing Officer inter alia questionnaire was issued with regards to fixed assets by Assessing Officer as details on page nos.12 to 18 of the paper book duly certified before the Assessing Officer. In response to above questionnaire, assessee submitted details before the Assessing Officer as detailed on page nos. 190 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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