M/s. Sai Infosytem(India)Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Cent.circle-2(2), Ahmedabad

CO 222/AHD/2009

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8860 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 12-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNAN KUMAR
• Keywords: Opportunity of being heard
• Section: 143(3); 153A; 234B; 80IB; 6; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) ITA NO.3504/AHD/2007 (A. Y.: 2004-05) THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD VS. SAI INFOSYSTEM (INDIA) PVT. LTD., MOVIE TOWER, COLLEGE ROAD, PALANPUR P. A. NO. AAHCS 2059 R (APPELLANT) ( RESPONDENT) ITA NO.2505, 2506 AND 2507/AHD/2009 (A. Y.: 2001-02, 2002-03 AND 2003-04) THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD VS. SHRI SUNIL S. KAKKAD, F-103, SATELLITE CENTRE, PREMCHANDNAGAR ROAD, SATELLITE, AHMEDABAD P. A. NO. ACKPK 8595 Q (APPELLANT) ( RESPONDENT) C. O. NO.229, 230 AND 231/AHD/2009 (IN ITA NO.2505, 2506 AND 2507/AHD/2009 - A. Y.: 2001-02, 2002-03 AND 2003-04) SHRI SUNIL S. KAKKAD, F-103, SATELLITE CENTRE, PREMCHANDNAGAR ROAD, SATELLITE, AHMEDABAD P. A. NO. ACKPK 8595 Q VS. THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (CROSS OBJECTOR) ( RESPONDENT) ITA NO.2508, 2509, 2510 AND 2511/AHD/2009 (A. Y.: 2004-05, 2005-06, 2006-07 AND 2007-08) THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD VS. SAI INFOSYSTEM (INDIA) PVT. LTD., SAI CARE, SUPER PLAZA, NEAR SANDESH PRESS ROAD, VASTRAPUR, AHMEDABAD, P. A. NO. AAHCS 2059 R (APPELLANT) ( RESPONDENT) ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 2 C.O. NO.222, 223, 224 AND 225/AHD/2009 (IN ITA NO.2508, 2509, 2510 AND 2511/AHD/2009- A. Y.: 2004-05, 2005-06, 2006-07 AND 2007-08) SAI INFOSYSTEM (INDIA) PVT. LTD., SAI CARE, SUPER PLAZA, NEAR SANDESH PRESS ROAD, VASTRAPUR, AHMEDABAD, P. A. NO. AAHCS 2059 R VS. THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (CROSS OBJECTOR) ( RESPONDENT) ITA NO.2512, 2513, 2514, 2515, 2516 AND 2517/AHD/20 09 (A. Y.: 2001-02, 2002-03, 2003-04, 2004-05, 2006-07 AND 2007-08) THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD VS. SHREE SAI COMPUTECH PVT. LTD., (NAME CHANGED TO E-MALL INFOTECH PVT. LTD.), FF-20, SUPER PLAZA, NEAR SANDESH PRESS ROAD, VASTRAPUR, AHMEDABAD P. A. NO. AADCS 0300 B (APPELLANT) ( RESPONDENT) C. O. NO.215, 216, 217, 218, 219 AND 220/AHD/2009 (IN ITA NO.2512, 2513, 2514, 2515, 2516 AND 2517/AH D/2009 - A. Y.: 2001-02, 2002-03, 2003-04, 2004-05, 2006-07 AND 2007-08) SHREE SAI COMPUTECH PVT. LTD., (NAME CHANGED TO E-MALL INFOTECH PVT. LTD.), FF-20, SUPER PLAZA, NEAR SANDESH PRESS ROAD, VASTRAPUR, AHMEDABAD P. A. NO. AADCS 0300 B VS. THE D. C. I. T., CENT. CIR. 2 (2), ROOM NO.309, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (CROSS OBJECTOR) ( RESPONDENT) ITA NO.2824/AHD/2012 (A. Y.: 2009-10) THE A. C. I. T., CIRCLE 4, 1 ST FLOOR NAVJIVAN TRUST BUILDING, OFFF. ASHRAM ROAD, AHMEDABAD VS. E MALL INFOTECH PVT. LTD., F-20, SUPER PLAZA, NR. SANDESH PRESS, VASTRAPUR, AHMEDABAD 380 054 P. A. NO. AADCS 0300B (APPELLANT) ( RESPONDENT) DEPARTMENT BY SHRI T. P. KRISHNAN KUMAR, CIT DR ASSESSEE BY SHRI S. N. SOPARKAR WITH ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 3 URVASHI SHODHAN, AR DATE OF HEARING: 26-07-2013 DATE OF PRONOUNCEMENT: 23-08-2013 ( )/ ORDER PER BENCH: OUT OF THIS BENCH OF 15 APPEALS FILED BY THE REVENU E AND 13 CROSS OBJECTIONS FILED BY THE ASSESSEE IN RE SPECT OF THREE DIFFERENT ASSESSES FOR VARIOUS ASSESSMENT YEARS, EXCEPT TWO A PPEALS OF THE REVENUE IN ITA NO. 3504/AHD/2007 IN THE CASE OF SAI INFO SYSTEM INDIA PVT. LTD. AND ITA NO. 2824/AHD/2012 IN THE CASE OF E. MALL INDIA PVT. LTD., ALL OTHER APPEALS AND CROSS OBJECTIONS ARE ARISING OUT OF ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER IN COURSE OF THE 15 3A PROCEEDINGS. WITH RESPECT TO THE APPEALS AND CROSS OBJECTIONS WHICH A RE FILED IN RESPECT OF 153A PROCEEDINGS, IT WAS AGREED BY BOTH SIDES BEFOR E US THAT THE FACTS ARE IDENTICAL IN ALL THOSE CASES AND CAN THEREFORE BE D ECIDED ON SIMILAR LINE. WE, THEREFORE, WILL DECIDE THOSE APPEALS AND CROSS OBJECTIONS ON ISSUE BASIS BUT BEFORE THAT, WE PROCEED TO DECIDE THE APP EAL IN ITA NO. 3504/AHD/2007 IN THE CASE OF SAI INFO SYSTEM INDIA PVT. LTD. WHICH HAS ARISEN OUT OF THE ASSESSMENT ORDER FRAMED BY THE AS SESSING OFFICER UNDER SECTION 143(3) ON 28.12.2006 I.E. BEFORE THE DATE O F SEARCH IN THIS GROUP (SEARCH WAS CONDUCTED ON 14.02.2007). IN FACT, FOR THIS VERY ASSESSMENT YEAR, THE ASSESSING OFFICER HAS ALSO FRAMED ONE MOR E ASSESSMENT UNDER SECTION 153A OF THE I.T. ACT AND AGAINST THAT ASSES SMENT ORDER ALSO, THE APPEAL AND CO ARE FIXED BEFORE US AND THE SAME WILL ALSO BE DECIDED IN SUBSEQUENT PARAGRAPHS. 2. THERE MAY BE ONE ARGUMENT THAT WHEN THE SEARCH H AD TAKEN PLACE AND THE APPEAL IS DECIDED BY THE LEARNED CIT(A) AGA INST SUCH ASSESSMENT ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 4 ORDER ON 21.05.2007 I.E. BEFORE THE DATE OF SEARCH, BUT APPEAL IS FILED BEFORE THE TRIBUNAL BY THE REVENUE ON 17.08.2007 I. E. AFTER THE DATE OF SEARCH, WHETHER THE ASSESSMENT PROCEEDINGS CAN BE S AID TO BE PENDING ON THE DATE OF SEARCH AND HENCE, AS PER THE SECOND PRO VISO TO SECTION 153A, SUCH PROCEEDINGS SHALL ABATE?. HOWEVER A DIFFERENT ARGUMENT WAS RAISED BY LEARNED A.R. BEFORE US THAT IN VIEW OF THE FACT THAT ASSESSMENT FOR AY 2004-05 WAS COMPLETED BY THE ASSESSING OFFICER BEFO RE THE DATE OF SEARCH AND DISPUTE WAS RAISED BY HIM REGARDING ALLOWABILIT Y OF DEDUCTION UNDER SECTION 80IB/80IC AND THE SAME WAS ALREADY DECIDED BY CIT(A) BEFORE THE DATE OF SEARCH AND THEREFORE, THE SUBSEQUENT ASSESS MENT ORDER PASSED BY THE ASSESSING OFFICER FOR THIS VERY SAME ASSESSMENT YEAR UNDER SECTION 153A IS NOT VALID BECAUSE ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB/80IC WAS ALREADY DECIDED BY THE CIT(A) IN FAVOUR OF ASSE SSEE BEFORE THE DATE OF SEARCH AND THEREFORE, ON THIS ASPECT OF THE MATTER, NO DIFFERENT VIEW CAN BE TAKEN BY THE ASSESSING OFFICER IN 153A ASSESSMENT A ND FOR THIS, HE PLACED RELIANCE ON THE JUDGMENT OF HON. ALLAHABAD HIGH COU RT RENDERED IN THE CASE OF SHAILA AGARWAL AS REPORTED IN 346 ITR 130. WE HAVE CONSIDERED THESE ARGUMENTS OF LEARNED A.R. OF THE ASSESSEE AND HAVE ALSO GONE THROUGH THIS JUDGMENT OF HON. ALLAHABAD HIGH COURT. WE HAVE ALSO GONE THROUGH VARIOUS TRIBUNAL DECISIONS INCLUDING THE DE CISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF ALL C ARGO GLOBAL LOGISTIC LIMITED VS. DCIT, 137 ITR 287(SB) AND WE DO NOT FIN D ANY MERIT IN THESE CONTENTION OF LEARNED A.R. OF THE ASSESSEE. THE REA SON IS THIS THAT AS PER THE JUDGMENT OF HON. ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. SHAILLA AGARWAL (SUPRA), THE TERM PENDING AND AB ATEMENT USED IN SECOND PROVISO TO SECTION 153A MEANS ONLY THOSE ASS ESSMENT WILL ABATE ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 5 WHICH ARE PENDING BEFORE THE ASSESSING OFFICER AND THOSE ASSESSMENTS WHICH ARE COMPLETED BY THE ASSESSING OFFICER AND PE NDING IN APPEAL CANNOT BE CONSIDERED AS PENDING ASSESSMENT FOR THE PURPOSE OF SECOND PROVISO TO SECTION 153A OF THE I.T. ACT. AS PER TH E DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF ALL C ARGO GLOBAL LOGISTIC LIMITED (SUPRA), EVEN IF THERE IS NO ABATEMENT OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER GETS THE JURISDICTION IN RESP ECT OF INCRIMINATING MATERIAL FOUND IN COURSE OF SEARCH AND HE CAN MAKE ADDITION OR MAKE DISALLOWANCE OF DEDUCTION ON THE BASIS OF SUCH INCR IMINATING MATERIAL, EVEN IF THE ORIGINAL ASSESSMENT HAS NOT ABATED. 3. NOW, THE QUESTION BEFORE US IS THIS AS TO WHETHE R ANY INCRIMINATING MATERIAL WAS FOUND IN COURSE OF SEARCH OR NOT. FOR THIS ASPECT, WE HAD REFERRED TO PARA NO. 7 OF THE ASSESSMENT ORDER FRAM ED BY THE ASSESSING OFFICER, FOR THE SAME ASSESSMENT YEAR UNDER SECTION 153A READ WITH SECTION 143(3) ON 30.12.2008 AND WE FIND THAT IN TH AT PARA OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REFERRE D TO VARIOUS INCRIMINATING MATERIALS SUGGESTING CIRCULAR TRADING TO INFLATE TURNOVER AND THEREBY INFLATING THE PROFIT. IN VIEW OF THIS, WE ARE OF THE CONSIDERED OPINION THAT EVEN THAT ASSESSMENT ORDER FRAMED BY THE ASSES SING OFFICER UNDER SECTION 153A IS A VALID ASSESSMENT TO THE EXTENT AN Y ADDITION/DISALLOWANCE IS MADE BY THE ASSESSING OFFICER ON THE BASIS OF SU CH INCRIMINATING MATERIAL. HOWEVER, WE WILL DEAL THIS ASPECT IN MOR E DETAIL WHEN WE TAKE UP THOSE APPEALS AND COS WHICH ARE BEFORE US IN RESPE CT OF ASSESSMENT PROCEEDINGS UNDER SECTION 153A BUT FOR NOW, WE ONLY HOLD THIS MUCH THAT THE PRESENT APPEAL ARISING OUT OF ASSESSMENT ORDER FRAMED BY THE ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 6 ASSESSING OFFICER BEFORE THE DATE OF SEARCH DOES NO T ABATE AND THEREFORE, WE PROCEED TO DECIDE VARIOUS ISSUES RAISED BY THE R EVENUE IN THIS APPEAL. 4. AS PER GROUND NO. 1, THE ISSUE RAISED BY REVENUE IS THAT LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE DI SALLOWANCE OF DEDUCTION UNDER SECTION 80IB OF RS.2,08,53,560/-. ON THIS COU NT, VARIOUS ARGUMENTS WERE MADE BY BOTH SIDES. ONE OF THE ARGUMENTS OF LE ARNED A.R. OF THE ASSESSEE WAS THAT SO FAR THE ALLOWABILITY OF DEDUCT ION UNDER SECTION 80IB IS CONCERNED, THE ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE JUDGMENT OF HON. GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SUNILBHAI S. KAKKAD IN TAX APPEAL NO. 1827/AHD/2010 DATED 27.09. 2011. WE FIND THAT THIS JUDGMENT OF HON. GUJARAT HIGH COURT IS IN RESP ECT OF ASSESSMENT YEAR 2003-04 AND AS PER THE FACTS OF THAT CASE, THE ASSE SSEE WAS IN THE BUSINESS OF ASSEMBLING OF COMPUTER AND SERVERS AND WAS PROVIDING SERVICES ETC. AND WAS HAVING BUSINESS UNIT AT SILVA SA. IN THAT CASE ALSO, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB I N RESPECT OF THIS ACTIVITY OF ASSEMBLING OF COMPUTER ETC. AND THE SAM E WAS DENIED BY THE ASSESSING OFFICER FOR THE REASON THAT ASSEMBLING OF COMPUTER IS NOT A MANUFACTURING ACTIVITY. IT WAS HELD BY HON. GUJARA T HIGH COURT IN THAT CASE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE JUDGMENT OF HON. GUJARAT HIGH COURT ITSELF RENDERED IN THE CASE OF C IT VS. NATASHA INDUSTRIES IN TAX APPEAL NO. 12/AHD/2010. IT WAS HELD BY HON. GUJARAT HIGH COURT IN THE CASE OF SUNIL KAKKAD (SUPRA) THAT THERE IS NO R EASON TO TAKE ANY OTHER VIEW THEN ALREADY TAKEN IN THE EARLIER JUDGMENT REN DERED IN THE CASE OF CIT VS. NATASHA INDUSTRIES (SUPRA). IN THE PRESENT CASE ALSO, THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB WAS DISAL LOWED BY THE ASSESSING OFFICER MAINLY FOR THIS REASON THAT AS PE R THE ASSESSING OFFICER, ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 7 THE ACTIVITY OF THE ASSESSEE OF ASSEMBLING COMPUTER S IS NOT A MANUFACTURING ACTIVITY. IN OUR CONSIDERED OPINION, ON THIS ASPECT , THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THIS J UDGMENT OF HON. GUJARAT HIGH COURT RENDERED IN THE CASE OF SUNIL KAKKAD (SU PRA) AND BY RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT IN T HE PRESENT CASE ALSO, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB IN RESPECT OF THE ACTIVITY OF ASSEMBLING COMPUTERS ETC. BUT AT THE SA ME TIME, IT MAY BE SEEN THAT IT IS NOTED BY THE LEARNED CIT(A) ON PAGE 13 A ND 14 OF HIS ORDER THAT THESE REASONS ARE ALSO GIVEN BY THE ASSESSING OFFIC ER IN RESPECT OF REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U NDER SECTION 80IB THAT CERTAIN STOCKS WERE SOLD BETWEEN THE UNITS INTER SE AND THESE ARE SOLD AT A MUCH HIGHER RATE IN COMPARISON TO THEIR MARKET RATE . ONE MORE REASON WAS GIVEN BY THE ASSESSING OFFICER AS NOTED BY CIT (A) THAT CERTAIN EXPENSES RELATING TO THE UNIT AT SILVASA AND PARWANOO ARE IN TENTIONALLY DEBITED IN THE BOOKS OF ACCOUNT OF THE HEAD OFFICE SO AS TO MAKE A HIGHER CLAIM UNDER SECTION 80IB. AFTER NOTING DOWN THESE OBJECTIONS OF THE ASSESSING OFFICER, IT WAS HELD OF THE CIT (A) THAT THE APPLICATION OF SEC TION 80IA (8) AND 80IA (10) WOULD COME INTO FORCE ONLY WHEN IT IS AGREED I N PRINCIPLE THAT DEDUCTION UNDER SECTION 80IB/80IC IS ALLOWABLE TO THE ASSESSE E. THEREAFTER, HE HAS GIVEN A FINDING THAT SINCE ALL THE THREE UNITS ARE HELD TO BE SEPARATELY ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB/80IC AND THEREFORE, EVEN IF THERE IS ANY SUCH TRANSFER OF STOCKS AS IS ALLEGED BY THE ASSESSING OFFICER BETWEEN THESE UNITS INTER SE, IT IS NOT GOING TO AF FECT THE OVERALL PROFITS OF THESE UNITS. ON THIS BASIS, LEARNED CIT(A) HAS REJ ECTED THE FIRST OBJECTION OF THE ASSESSING OFFICER BUT IN OUR CONSIDERED OPINION , THE ORDER OF THE CIT(A) ON THIS ASPECT IS NOT SUSTAINABLE BECAUSE EVEN IF A LL THE UNITS ARE ELIGIBLE FOR ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 8 DEDUCTION UNDER SECTION 80IB/80IC, THERE MAY BE SO ME IMPACT ON THE OVERALL PROFITS OF THESE UNITS IF SOME STOCK SO TRA NSFERRED BETWEEN THESE UNITS INTER SE AT A PRICE WHICH IS HIGHER THAN MARK ET PRICE IS LYING IN CLOSING STOCK OF THE BUYING UNIT BECAUSE IN THAT SITUATION, THE BUYING UNIT WILL VALUE THIS CLOSING STOCK AT A PRICE AT WHICH IT HAS PURC HASED FROM THE OTHER UNIT AND SUCH PRICE BEING HIGHER THAN MARKET PRICE, THE OVERALL PROFIT OF THE SELLING UNIT WILL STAND INFLATED ALTHOUGH THE GOODS ARE LYING IN STOCK WITH OTHER UNIT. 5. REGARDING THE SECOND OBJECTION OF THE ASSESSING OFFICER THAT THERE IS DEFECT IN THE APPORTIONMENT OF CERTAIN EXPENSES , I T WAS HELD BY THE CIT(A) THAT THE ASSESSING OFFICER MAY VERIFY THE REASONABL ENESS OR ADMISSIBILITY WITHIN THE PARAMETERS OF SECTION 80IA(8) AND 80IA(1 0) BUT IN OUR CONSIDERED OPINION, LEARNED CIT(A) WAS NOT JUSTIFIED IN RESTOR ING THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AND IN RESPECT OF THI S ISSUE, HE SHOULD HAVE OBTAINED THE REMAND REPORT FROM THE ASSESSING OFFIC ER AND THEREAFTER, THE ISSUE SHOULD HAVE BEEN DECIDED BY HIMSELF. IN THE LIGHT OF ABOVE DISCUSSION, WE FEEL IT PROPER THAT THIS ISSUE REGAR DING QUANTIFYING THE DEDUCTION UNDER SECTION 80IB SHOULD GO BACK TO THE FILE OF LEARNED CIT(A) FOR A FRESH DECISION BECAUSE WE HAVE ALREADY HELD T HAT SO FAR THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB IS CON CERNED, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F HON. GUJARAT HIGH COURT RENDERED IN THE CASE OF SUNIL KAKKAD (SUPRA) AND HENCE, WE RESTORE THE MATTER BACK TO THE FILE OF THE CIT(A) FOR A LIM ITED PURPOSE TO DETERMINE THE QUANTUM OF DEDUCTION ALLOWABLE TO THE ASSESSEE. THE LEARNED CIT(A) SHOULD PASS REASONED AND SPEAKING ORDER ON THE VARI OUS OBJECTIONS RAISED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER I. E. TRANSFER OF STOCK BY ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 9 ONE UNIT TO OTHER UNIT AT A PRICE HIGHER THAN THE M ARKET PRICE, INFLATING THE PROFIT BY CIRCULAR TRADING AND REGARDING DEBITING OF CERTAIN EXPENSES INTENTIONALLY IN THE BOOKS OF ACCOUNT OF THE HEAD O FFICE TO MAKE HIGHER CLAIM OF DEDUCTION UNDER SECTION 80IB. THE LEARNED CIT(A) SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DI SCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. GROUND NO. 1 OF THE REVENUE THUS STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO. 2 OF THE REVENUE IS REGARDING DELETIO N OF VARIOUS EXPENSES DISALLOWED BY THE ASSESSING OFFICER TOTALI NG RS. 12637453 UNDER VARIOUS HEADS. 7. ON THIS ISSUE, THE LD. D.R. SUPPORTED THE ASSESS MENT ORDER WHERE AS LEARNED A.R. SUPPORTED THE ORDER OF THE CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECOR D. IN THE LIGHT OF THIS DECISION OF US REGARDING GROUND NO. 1 OF THE REVENU E THAT THE ASSESSEE IS ELIGIBLE FOR 100% DEDUCTION UNDER SECTION 80IB/80IC , THIS GROUND OF REVENUE HAS BECOME OF ACADEMIC INTEREST ONLY BECAUS E EVEN IF THE DISALLOWANCE IS CONFIRMED IN FULL OR IN PART, THERE WILL BE EQUAL INCREASE IN THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTI ON 80IB/80IC AND AS A RESULT, THERE WILL BE ULTIMATE IMPACT ON TAXABLE IN COME. MOREOVER, THE REASONING GIVEN BY LEARNED CIT (A) FOR DELETING THE DISALLOWANCE IS ALSO COGENT AND WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF LEARNED CIT (A) ON THIS ISSUE. HENCE, WE DECLINE TO INTERFE RE WITH THE ORDER OF LEARNED CIT (A) ON THIS ISSUE MAINLY FOR THIS REASO N THAT THIS ISSUE HAS BECOME OF ACADEMIC INTEREST ONLY. ACCORDINGLY, THI S GROUND OF THE REVENUE IS REJECTED. ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 10 8. IN THE RESULT, THIS APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. 9. NOW WE TAKE UP THE REMAINING 14 APPEALS FILED BY THE REVENUE AND 13 CROSS OBJECTIONS OF THE ASSESSEE. OUT OF THESE, EXCEPT FOR ONE APPEAL OF REVENUE IN ITA NO. 2824/AHD/2012 IN THE CASE OF E. MALL INDIA PVT. LTD. FOR ASSESSMENT YEAR 2009-2010, ALL ARE ARISING OUT OF VARIOUS ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTIO N 153A THIS ONE APPEAL IS ARISING OUT OF ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) DATED 30 TH NOVEMBER, 2011 BUT THE ONLY ISSUE RAISED BY THE REVENUE IN THIS YEAR IS ALSO REGARDING ALLOW ABILITY OF THE DEDUCTION TO THE ASSESSEE UNDER SECTION 80IC OF THE ACT AND HENC E, THIS APPEAL IS ALSO BEING DECIDED TOGETHER WITH OTHER APPEALS OF REVENU E FOR EARLIER YEARS. WE HAVE EARLIER MENTIONED THAT ALL THESE APPEALS OF THE REVENUE AND COS OF THE ASSESSEE WILL BE DECIDED BY US ON ISSUE BASI S AND HENCE, WE FIRST TAKE NOTE OF VARIOUS ISSUES ARISING OUT OF THESE AP PEALS AND CROSS OBJECTIONS. THE SAME ARE AS UNDER:- (A) AS PER THE COS OF THE ASSESSEE, THE ISSUE RAISE D BY THE ASSESSEE IS THAT THE IMPUGNED ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTION 153A READ WITH SECT ION 143(3) OF THE I.T. ACT IN RESPECT OF ALLOWABILITY O F DEDUCTION UNDER SECTION 80IB/80IC IS NOT VALID IN LAW BECAUSE IN EARLIER ORIGINAL ASSESSMENT PROCEEDINGS, THIS VERY ISSUE WA S RAISED AND DECIDED AND THEREFORE, THIS ISSUE HAS ATTAINED FINALITY AND IT CANNOT BE RE-DECIDED IN THE PROCEEDINGS UNDER SE CTION 153A OF THE I.T. ACT. THE SECOND ISSUE RAISED BY THE AS SESSEE IN ALL THESE CROSS OBJECTIONS IS REGARDING CHARGING OF INT EREST UNDER ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 11 SECTION 234A, 234B AND 234C. THIRD ISSUE RAISED BY THE ASSESSEE IS REGARDING INITIATION OF PENALTY PROCEED INGS UNDER SECTION 271(1)(C) OF THE I.T. ACT. (B) IN VARIOUS APPEALS FILED BY THE REVENUE, THE GR IEVANCE OF THE REVENUE IS THIS THAT THE CIT(A) HAS ERRED IN LAW AN D ON FACTS IN HOLDING THAT THE ASSESSEE IS ENGAGED IN MANUFACT URING OF COMPUTERS AND THEREFORE, ELIGIBLE FOR DEDUCTION UND ER SECTION 80IB/80IC OF THE I.T. ACT AND THEREBY DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING THE DE DUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB/80IC OF THE I.T. ACT. THE SECOND GRIEVANCE OF THE REVENUE IS THIS TH AT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THA T EVEN ALTERNATIVE DECISION OF THE ASSESSING OFFICER OF RE DUCING THE AMOUNT OF DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION 80IB/80IC BY INVOKING THE PROVISIONS OF SECTION 80I A(8) OF THE I.T. ACT IS NOT CORRECT. 10. FIRST WE DECIDE THE ISSUES RAISED BY THE ASSESS EE IN THESE CROSS OBJECTIONS. REGARDING THE FIRST ISSUE AS TO WHETHER THE ASSESSING OFFICER CAN EXAMINE AND DECIDE THE ELIGIBILITY OF THE ASSES SEE FOR DEDUCTION UNDER SECTION 80IB/80IC OF THE I.T. ACT IN 153A PROCEEDIN GS, WE WOULD LIKE TO OBSERVE THAT ADMITTEDLY, THE ISSUE REGARDING THE EL IGIBILITY OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB/80IC IS SQUARELY C OVERED IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF HON. GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SUNIL KAKKAD IN TAX APPEAL NO. 1287/AHD /2010 DATED 27.09.2011. OUT OF THESE THREE ASSESSES WHICH ARE BEFORE US IN THE PRESENT PROCEEDINGS, SUNIL KAKKAD IS ONE OF THEM AN D IN RESPECT OF ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 12 REMAINING TWO ASSESSEES ALSO, SHRI SUNIL KAKKAD IS DIRECTOR OF THESE TWO COMPANIES AND IT IS NOT DISPUTED BY THE REVENUE THA T THE FACTS IN THE CASE OF SUNIL KAKKAD FOR A.Y. 2003-04 FOR WHICH THE JUDG MENT OF HON. GUJARAT HIGH COURT IS AVAILABLE BEFORE US WERE DIFFERENT TH AN THE FACTS IN THE CASE OF SUNIL KAKKAD IN VARIOUS YEARS WHICH ARE BEFORE US O R IN THE REMAINING TWO CASES WHICH ARE BEFORE US. HENCE AFTER EXAMINING TH E FACTS OF THE PRESENT CASES IN ITS ENTIRETY AND AFTER CONSIDERING THE ARG UMENTS MADE BY BOTH THE SIDES BEFORE US, WE HOLD THAT THE ISSUE REGARDING A LLOWABILITY OF THE DEDUCTION UNDER SECTION 80IB/80IC IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THIS JUDGMENT OF HON. GUJARAT HIGH COUR T AND THE SAME CANNOT BE RE-DECIDED BY THE ASSESSING OFFICER IN TH E PRESENT PROCEEDINGS. 11. HAVING HELD THAT THE ISSUE REGARDING ELIGIBILIT Y OF ASSESSEE FOR DEDUCTION UNDER SECTION 80IB/80IC IS COVERED IN FAV OUR OF THE ASSESSEE, WE WOULD LIKE TO MENTION THIS ALSO THAT EVEN AFTER ACCEPTING THE ELIGIBILITY OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB/80IC, THE ALTERNATIVE CONTENTION RAISED BY THE ASSESSING OFFICER THAT EVE N IF IT IS ACCEPTED THAT THIS DEDUCTION IS ALLOWABLE UNDER SECTION 80IB/80IC THEN ALSO, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION FOR THE FULL AMOUNT OF PROFIT DECLARED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT BECA USE THE ASSESSING OFFICER HAS NOTED IN PARA NO. 7 ASSESSMENT ORDER OF ALL THESE ASSESSEES IN ALL THESE YEARS THAT INCRIMINATING MATERIAL WAS FOU ND SUGGESTING CIRCULAR TRADING AND INFLATING THE TURNOVER AND PROFIT. THE ASSESSING OFFICER HAS WORKED OUT THE AMOUNT FOR WHICH THE ASSESSEE IS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IB/80IC. ON THIS ASPECT, IT WAS HE LD BY LEARNED CIT(A) THAT EVEN IF IT IS ACCEPTED THAT THERE IS INFLATION OF PRICE IN THE BILLS RAISED BY ONE UNIT ON THE OTHER UNIT, IT WILL HAVE NO IMPACT ON THE OVERALL PROFITS OF ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 13 THESE UNITS BECAUSE ALL THESE UNITS ARE HELD TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB/80IC OF THE I.T. ACT. WE DO NOT FIND ANY MERIT IN THIS FINDINGS OF THE LD. CIT(A) BECAUSE EVEN IF ALL THE UNITS ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB/80IC, THE OVERALL PROF IT WILL STAND INFLATED TO THE EXTENT CLOSING STOCK IS LYING WITH THE BUYING U NIT AS IT WILL VALUE THE CLOSING STOCK OF SUCH ITEMS AT ITS COST PRICE WHICH IS INFLATED PRICE AND HENCE THE OVERALL PROFITS WILL ARTIFICIALLY GO UP B ECAUSE THE SELLING UNIT HAS SOLD IT AT HIGHER PRICE AND THE GOODS ARE NOT ULTIM ATELY SOLD AND IS LYING IN STOCK WITH THE BUYING UNIT. WE ALSO FIND THAT THER E WAS ONE MORE OBJECTION OF THE ASSESSING OFFICER THAT CERTAIN EXPENSES RELA TING TO THE UNITS AT SILVASA AND PARWANOO WERE INTENTIONALLY DEBITED IN THE BOOKS OF ACCOUNT OF THE HEAD OFFICE SO AS TO MAKE A HIGHER CLAIM UNDER SECTION 80IB. IN THIS REGARD, IT WAS HELD BY LEARNED CIT(A) THAT THE ASSE SSING OFFICER MAY VERIFY THE REASONABLENESS OR ADMISSIBILITY OF THESE EXPENS ES WITHIN THE PARAMETERS OF SECTION 80IA(8) /80IA(10) OF THE I.T. ACT BUT WE ARE OF THE CONSIDERED OPINION THAT INSTEAD OF RESTORING THIS M ATTER TO THE FILE OF THE ASSESSING OFFICER, LEARNED CIT(A) SHOULD HAVE OBTAI NED REMAND REPORT FROM THE ASSESSING OFFICER ON THIS ASPECT AND THEN HE SHOULD HAVE DECIDED THIS ISSUE HIMSELF. THEREFORE, WE FEEL THAT ON THI S ISSUE AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB/80IC TO THE EXTENT OF ENTIRE PROFIT DECLARED BY THE ASSESSEE IN ITS PROFI T AND LOSS ACCOUNT OR THE SAME IS TO BE REDUCED AS HAS BEEN DONE BY THE ASSES SING OFFICER AS AN ALTERNATIVE STAND, THE MATTER SHOULD GO BACK TO THE FILE OF LEARNED CIT(A) FOR A FRESH DECISION AND HENCE, ON THIS ASPECT, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER BACK TO HIS F ILE FOR A FRESH DECISION IN ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 14 THE LIGHT OF ABOVE DISCUSSION AFTER AFFORDING REASO NABLE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 12. AS PER ABOVE PARA, TWO ISSUES STAND DECIDED THA T THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB/80IC OF T HE I.T. ACT BUT THE QUANTUM OF SUCH DEDUCTION HAS TO BE RE-DECIDED AS P ER THE ALTERNATIVE STAND TAKEN BY THE ASSESSING OFFICER BY INVOKING TH E PROVISIONS OF SECTION 80IA(8) AND 80IA(10). LD. CIT(A) HAS TO DETERMINE THE QUANTUM OF SUCH DECISION ALLOWABLE TO THE ASSESSEE BY WAY OF A REAS ONED AND SPEAKING ORDER AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 13. WE WOULD ALSO LIKE TO OBSERVE AT THE COST OF RE PETITION THAT WE HAVE HELD THAT THE ASSESSING OFFICER CANNOT RE-DECIDE TH E ELIGIBILITY OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB/80IC BUT THE ASSESSING OFFICER IS WELL WITHIN HIS POWERS TO RE-DECIDE THE QUANTUM OF DEDUCTION ALLOWABLE TO THE ASSESSEE BECAUSE INCRIMINATING MATERIALS WERE F OUND IN COURSE OF THE SEARCH INDICATING INFLATION IN TURNOVER AND PROFIT AND SUCH INFLATED PROFIT CANNOT BE CONSIDERED AS ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IB/80IC. HOWEVER, THE QUANTUM OF SUCH INFLATION IN PROFIT HA S TO BE RE-DECIDED BY LEARNED CIT(A) AS DIRECTED BY US AND IT CANNOT BE A CCEPTED TO BE THE SAME AS HAS BEEN HELD BY THE A.O. AND IN THIS MANNER, T HE FIRST ISSUE RAISED BY THE ASSESSEE IN THE CO AND BOTH THE ISSUES RAISED B Y THE REVENUE IN ITS APPEALS STAND DISPOSED OF. 14. THE SECOND ISSUE RAISED BY THE ASSESSEE IN THE CO IS REGARDING CHARGEABILITY OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE I.T. ACT ITA 3504/AHD/2007, ITA 2505 TO 2517/AHD/2009 & ITA 2824/AHD/2012 C. O. NOS. 215 TO 231/AHD/2009 SAI GROUP, E. MALL AND SUNIL S. KAKKAD . 15 AND ON THIS ISSUE, NOW THIS IS A SETTLED POSITION O F LAW THAT CHARGEABILITY OF INTEREST IS CONSEQUENTIAL AND THUS IT IS HELD ACCOR DINGLY. 15. REGARDING THE THIRD ISSUE IN RESPECT OF INITIAT ION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE IT ACT , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE BECAUSE THE ISSUE RAISED BY TH E ASSESSEE IS PREMATURE. 16. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ALL THE COS OF THE ASSESS EE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 23-08-2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD S.A.PATKI/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER ASTT. REGISTRAR, ITA T, AHMEDABAD