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TMI Blog2021 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ve appeals en masse. 3. Although, these appeals filed by the Revenue for Assessment Years 2008- 09 to 2013-14 contain multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the Revenue. Most of the grounds raised by the Revenue are common and identical. Therefore, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of Revenue. With this background, we summarize and concise the grounds raised by the Revenue as follows: "1. Addition on account of suppressed profit at Unit-I, Vapi and exaggerated profit at Unit-II, Baddi. (i) Addition of Rs. 2,61,43,552/- for AY.2008-09. (ii) Addition of Rs. 2,75,42,684/- for AY.2009-10. (iii) Addition of Rs. 1,80,06,302/- for aY.2010-11. (iv) Addition of Rs. 2,90,04,937/- for AY.2011-12. (v) Addition of Rs. 1,85,17,067/- for AY.2012-13. ( Note: This is ground no.1 in appeal no.286/Ahd/2016 to 290/Ahd2016) 2. No incriminating material / documents were found during the course of search. (i) Assessment Year 2008-09. (ii) Assessment Year 2009-10. (iii) Assessment Year 2010-11. (iv) Assessment Year 2011-12. (v) Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s noteworthy, that as per the provisions of the section 80IC r.w.s 80IA(10) " Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom". During search, unaudited accounts of the assessment year 2013-14 were found and impounded. In the course of assessment proceedings, a perusal and verification of these unaudited accounts for A.Y. 2013-14 of Unit -1 reveals that the Raw Material (RM) consumption in percentage is 51.47% in F.Y.2012-13 relevant to A.Y.2013-14, whereas in earlier years it has been claimed as 70 to 80%. During the assessment stage the assessing officer observed that assessee has in its s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are billed at Vapi Unit and that there is strong likelihood for the assessee to be producing one product at one unit and shifting the same to other unit and showing sale at non-taxable entity and claiming expenses at taxable entity and reducing the taxable profit in Vapi. In view of the above discussion, an addition of Rs. 2,61,43,552/- was made by assessing officer on account of suppressed profits at Unit-1, Vapi and exaggerated profits at Unit-II, Baddi. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in further appeal before us. 7. Learned Departmental Representative (ld. DR) for the Revenue submits that statement of Shri Kantibhai H. Patel working as Prodution Manager at Unit-I, Vapi of the assessee company viz., M/s. Vapi Care Pharma Pvt. Ltd. was recorded. Shri Kantibhai H. Patel has produced month wise production chart for the different years which was duly inventorised. Based on the production data, submitted by Shri Kantibhai H. Patel, Production Manager at Unit-I, Vapi, production at Vapi Unit (Unit-I), on thorough ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is very clear that in considering the figure of purchase for AY 2013-14, AO has missed out purchase of consumables, packing materials and other taxable purchases. Similarly, the AO has not considered figure of packing material closing stock while considering total closing stock. However, in all other years, the AO has correctly added all these purchases in total amount of purchase. Therefore, the distortion in the ratios is compounded. From the perusal of balance sheet as found and seized during search proceedings, all these purchases are recorded therein. However, AO has missed the same in his calculation. Also ratios calculated for F.Y. 2013-14 is clearly not for entire year and in absence of closing stock and data for entire year, it cannot be calculated. But for discussing the ratios, the assessing officer has not pointed out a single instance to establish that purchase of one unit is recorded in other unit. The failure of the department to bring on record even an iota of evidence of such type is all the more glaring when both units were thoroughly subject to search proceedings. 10. Learned CIT(A) noticed that since composition of Products manufactured at Unit 1 and Unit 2 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Baddi Unit is entitled to Excise Duty exemption; the unit cost of electricity in Baddi is lower as compared to that of Vapi unit. Similarly, in F.Y. 2011-12 and 2012-13, AO has taken wrong figures of packing material and misunderstood expenses of packing and forwarding expenses as purchase of packing material. Here again for the earlier years, assessing officer has taken correct figures. However, he himself has deviated in the stated years and miscalculated cost of packing material. As observed earlier when the product mix of unit 1 and Unit 2 is completely different, the ratio of sale cost to packing cost gives no dependable indicator. Packing cost of a medicine selling for Rs. 400 per strip can be of the same range as of a strip selling for Rs. 20/-.Therefore, ld CIT(A) found merit in the argument of the assessee that in the export sales special packing care has to be taken, high qualify material has to be ensured and therefore the cost of packing in export may be higher than the cost in indigenous sales. Further Vapi unit has higher percentage of liquid product sale as compared to liquid product of unit 2. The cost of packing in bottles used for packing liquid material is muc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on assessee's record, which was all before the AOs when they assessed the case after scrutiny for Asst. Years 2008-09, 2009-10 and 2010-11, where the AO's had substantively accepted assessee's results. Therefore, Ld CIT(A) held that additions were based merely only on computation/comparison of financial cost to sales of both the units, without any incriminating evidence, ignoring the prominent facts about the different products mix at the two Units, without rebutting/dealing with the factual explanations of the assessee giving reasons for different profit margins at the two units, without bringing and iota of evidence to substantiate the allegation that the assessee is producing one product at one unit and shifting the same to other unit and showing sale at non-taxable entity and claiming expenses at taxable entity and reducing the taxable profit in Vapi; cannot be sustained. We have gone through the above noted findings of ld CIT(A) and noted that there is no infirmity in the order passed by the ld CIT(A), hence, conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A).The concise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill have to be computed by the LD AOs as a fresh exercise. (iii) The LD AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The LD AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". (iv) Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the LD AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search proceeding as well as during the assessment proceedings, all the details, bills and voucher were filed by the assesse. Under section 153A of the Act, assessment has to be made in relation to material found during the search. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A in unabated assessment. As no incriminating material was found during the search and records maintained by assessee are verified and approved by different government authorities, hence assessing officer cannot make addition merely on the basis of assumptions. Based on this factual position, we dismiss the concise and summarized ground no.2 raised by the Revenue. 16. The summarized and concise ground no.3 raised by the Revenue is reproduced below for ready reference: "3. Suppressed receipts from job work. (i) Addition of Rs. 3,00,94,336/-, it covers ground nos.3, 4 & 5 raised by the Revenue, for AY.2008-09. (ii)Addition of Rs. 15,67,85,969/-, it covers ground nos.4, 5 & 6 raised by the Revenue for AY.2011-12. (iii)Addition of Rs. 4,32,56,166/-, it covers gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has allowed the appeal of the assessee. Aggrieved, by the order of the ld. CIT(A), the Revenue is in appeal before us. 19. Ld. DR for the Revenue submits that during the course of search certain documents were found and inventorised as pages 187 and 189 which prima facie pertained to job work being undertaken by the assessee. Further, during the course of search, statement of Shri Kamlesh Mehta, executive director of the assessee company viz., M/s. Vapi Care Pharma Pvt. Ltd. was recorded u/s 132(4), wherein he has stated that in Baddi unit there is no job work or L2L type of manufacturing carried out. However, a verification of impounded material and impounded backup of computers and impounded back up of Hard Drives found on the premises of Veritas Bioventions Pvt. Ltd. reveals that job work was being undertaken in successive years at Baddi unit and same is indicated in the sales tax assessment forms of Baddi unit found in different premises. From the seized material and evidences found during the course of search and Mirror Images of data in Hard Disc /Scanned Copies of the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the "Assessable Value" of the goods removed (there is a apparent mistake wherein the value as per Excise Invoice No. 1140 dated 14.03.2007 amounting to Rs. 51,22,215/- has been taken in F.Y. 2007-08 instead of F.Y. 2006-07; thereby increasing the value in F.Y. 2007-08 and decreasing it in F.Y. 2006-07 by like amount) from the factory premises of Unit 2. This value doesn't reflect the labour charges charged by the assessee to the manufacturer but it reflects the total assessable value of the goods removed from the factory as defined in Rule 11 of Central Excise Rules, 2002. The provisions of the said Rule 11 (1) of Central Excise Rules, 2002, inter alia, reads as follows: "No excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent....." And the provisions of the said Rule 17 (2) of Central Excise Rules, 2002, inter alia, reads as follows: "The invoice shall be serially numbered and shall contain the registration number, address of the concerned Central Excise Division, name of the consignee, description, classification, time and date of removal, mode of transport and vehicle registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged to have shown the assessable value as the job work charges.Clearly, the AO has arbitrarily, without any factual or legal evidence or material on record has just erroneously compared the actual job work charges income as per Profit and Loss A/c and assessable value of the goods for which job work was performed by assessee as per tax invoices/papers found during the course of search. The AO has thereafter on skewed logic, worked out year wise difference between the two and alleged that the assessee has not offered labour income to this extent for taxation. This erroneous justification/basis of the addition made by the AO is held inherently misconceived and is rejected. 23. About the second issue (b) above, arising out of the assessee's claim that it had done job work, exclusively for Zydus Cadila Health Care Ltd. In F.Y. 2006-07 and 2007-08 and they have not booked the revenue because the client company, Zydus Cadila disputed the rate at which the work was charged (Rs. 8 per strip). It is claimed that the bills raised were returned and the assessee consequently did not book the revenue. It is further claimed that, the dispute was finally settled in F.Y. 2009-10 (A.Y. 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). 24. We note that another related issue raised during the appellate proceedings are against denial of deduction u/s 80IC on alleged Job Work Income i.e. ground no. 4 for Assessment Years 2008-09 and ground no. 5 in both A. Yrs. 2011-12 and 2012-13. The ld CIT(A) held that law is very clear that the deduction under section 80IC is allowable in respect of income arising from the goods manufactured in eligible industrial undertaking. Nowhere, it is stated that the goods must be manufactured by the assessee for himself or on his own behalf. The ld CIT(A) relied on the judgment of Hon`ble Delhi High Court in the case of Commissioner of Income-tax Vs. Delhi Press Patra Prakashan Ltd. [2013] 34 taxmann.com 3 and the Hon`ble Punjab and Haryana High Court in the case of Saimbhi Cycles & Auto Industries, Ludhiana, 47 taxmann.com 369, wherein it held that deduction under section 80-IB is to be allowed even on income earned from job work carried out. Therefore, it is held that the deduction u/s 80IC of the Act would be allowable to the Baddi Unit even if it has done 'manufacturing' on job work (which is the case here) and not on its own account. Therefore, ld CIT(A) has allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessing officer has analyzed the above chart and noted that production made in Unit-1 of Vapi Care Pharma Pvt. Ltd is much more, even when calculated at the average lowest price of per strip i.e. @ 0.56 paise, than what is shown in the statement of accounts and audit report filed with the return of income in all the three years i.e. F.Y. 2010-11, 2011-12 & 2012-13. The sales shown in the statement of accounts nearly matches with the sales shown as per Tally ERP9. Sales Register found in the back up taken of the computer system found and seized/impounded during the course of search. In the crux of the matter, from all the above analysis of the material found and seized/impounded and statement taken of Shri Kantibhai H Patel during the course of search and post search proceedings, it is seen that Vapi Care Pharma P Ltd Unit-I, Vapi suppressed its production in the statement of accounts. Hence, AO held that it is safely presumable that the said unaccounted production has been sold out in the open market, which is unaccounted in the books of accounts. In view of the above, assessing officer issued a show cause notice dated 11.03.2016 as to why the above should not be added to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where each of the strips contained 2,4,6,10,30,100 and even more tablets/capsules; it is clear that Assessing Officer has compared total tablets/capsules (considering the same as total strips) with total number in actual quantity column without taking into account the difference in units in which production quantity was given and sale data is maintained. Based on the above data, the ld CIT(A) noted that the approach of the department in taking figures from the production manager and arbitrarily taking the figures of lakhs of capsules/tablets as strips; without any indication or clarification is not acceptable, not only this, the department against all natural justice failed to consider the explanations of the assessee and even the affidavit of the production manager clarifying the issue. 28. We note that assessee has produced both the sets of data before ld CIT(A) and explained before ld CIT(A) that how assessing officer has taken wrong units; and also explained in detail how the data given by production manager matches with production records of assessee company. It is noted that the excise records of the assessee are audited from time to time and no discrepancies related to prod ..... X X X X Extracts X X X X X X X X Extracts X X X X
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