DCIT, Ambala V. M/s Micro Instruments Co., Ambala Cantt.

ITA 1116/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57573 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Gross profit estimation; Fair market value
• Section: 143(3); 80IB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1116/CHD/2010 ASSESSMENT YEAR 2007-08 DCIT, V M/S MICRO INSTRUMENTS CO., AMBALA. INDUSTRIAL AREA, AMBALA CANTT. PAN: AAAC M-8666K (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI N.K.SAINI ASSESSEE BY : SHRI ASHOK KUMAR GOYAL DATE OF HEARING : 28.12.2011 DATE OF PRONOUNCEMENT : 04.01.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16.06.2010, PASSED BY THE L D. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN DELETING THE ADDIT ION MADE U/S 145(3) AT RS.2,10,97,492/- BY IGNORING THE FACT THAT INVOKING OF PROVISIONS OF SECTION 145(3) WERE VALIDLY INVOKED AS THE ASSESSEE DID NOT MAINTAIN INVENTORY OF OPENING AND CLOSING STOCK WITHOUT WHIC H IT IS NOT POSSIBLE TO DETERMINE THE CORRECT INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 2 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN HOLDING THAT DEDUC TION U/S 80IB AMOUNTING TORS.22,95,197/- IN RESPECT OF NEW UNIT WAS ADMISSIBLE NOTWITHSTANDING THAT THE CONDITIONS LAID DOWN U/S 80IB ARE NOT SATISFIED AND NO DEDUCTION HAS BEEN ALLOWED IN THE ASSESSMENT YEAR 2003-04 ? 3. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT WAS STATED BY THE LD. 'AR' AND LD. 'DR' THAT THE ISSUES IN QUESTION ARE COVERED BY THE DECISION OF THE HON'BLE ITAT IN ASSESSEE'S OWN CASE, AS DECIDED IN ITA NO. 537/CHD/2009, ASSES SMENT YEAR 2006-07, DATED 24.06.2009. 4. THE CIT(A), FOLLOWING THE DECISION OF THE TRIBUN AL, ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. T HE RELEVANT PART OF THE DECISION OF THE CIT(A) IS REPRODUCED HE REUNDER : 4. I HAVE CAREFULLY CONSIDERED ARGUMENTS OF THE COUNSEL FOR THE APPELLANT AND HAVE GONE THROUGH THE ASSESSMENT ORDER. I HAVE ALSO CAREFULLY GONE THROU GH THE ORDER OF MY PREDECESSOR FOR THE ASSESSMENT YEAR 2006-07 DATED 11.3.2009. THE FIRST GROUND OF APPEAL IS REGARDING ADDITION OF RS.22,95,197/- BY DISALLOW ING THE DEDUCTION U/S 80IB OF THE IT ACT. THE AO HAS MADE DISALLOWANCE OF THE DEDUCTION ON THE GROUND THAT SUCH DISALLOWANCE WAS MADE IN THE EARLIER YEAR S AND THE FACTS ARE IDENTICAL. THE COUNSEL HAS ARGUE D THAT SUCH ADDITIONS HAVE BEEN DELETED BY THE HON'BL E ITAT IN THE EARLIER YEARS AND THE AO HAS NOT BROUGH T 3 ANY NEW FACT ON RECORD. THE AO HAS HERSELF MENTIONE D IN THE ASSESSMENT ORDER THAT THE ADDITION HAS BEEN DELETED BY THE HON'BLE ITAT VIDE ITS ORDER NO.129/CHANDI/2007 DATED 31.07.2008 AND THE FACTS OF THE CASE THIS YEAR ARE IDENTICAL. RESPECTFULLY FOLLOWING THE HON'BLE ITAT ORDER IN ITA NO.129/CHANDI/2007 DATED 31.07.2008, THE ADDITION MADE BY THE AO IS ORDERED TO BE DELETED. THIS GROUN D OF APPEAL IS ALLOWED. 5. GROUND NO.2 OF APPEAL IS REGARDING ADDITION OF RS.2,10,97,492/- ON ACCOUNT OF LOW GP RATE. THE AO HAS MADE THE ADDITION ON THE GROUND THAT THERE IS STEEP FALL IN THE GP RATE THIS YEAR AS COMPARED TO THE EARLIER YEARS AND THE ASSESSEE HAS NOT FURNISHED INVENTORY OF CLOSING AND OPENING STOCK AND HAS NOT MAINTAINED STOCK REGISTER. THE AO APPLIED GP RATE O F 30% AS AGAINST THE DECLARED GP RATE OF 19.90%. THE COUNSEL ON THE OTHER HAND, HAS ARGUED THAT SUCH ADDITION HAVE BEEN DELETED BY THE APPELLATE AUTHORITIES IN THE EARLIER YEARS AND NO NEW FACTS H AVE BEEN BROUGHT ON RECORD BY THE AO. MOREOVER, THE REASONS FOR FALL IN GP RATE WERE EXPLAINED TO THE A O DURING THE ASSESSMENT PROCEEDINGS AND IT WAS STATED THAT THE MAIN REASON FOR FALL IN GP RATE WAS THE SH ARP INCREASE IN PRICES OF RAW MATERIAL LIKE COPPER, ALUMINUM ETC. THE COUNSEL FURTHER ARGUED THAT MY PREDECESSOR HAD DISCUSSED ALL THE DETAILS IN HIS OR DER FOR THE ASSESSMENT YEAR 2006-07. 5.1 ON CAREFUL CONSIDERATION OF THE ABOVE FACTS AND SUBMISSIONS, I FIND FORCE IN THE ARGUMENTS OF THE COUNSEL THAT SUCH ADDITION HAVE BEEN DELETED BY THE HON'BLE ITAT IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2003-04 AND MY PREDECESSOR HAD DELETED THE ADDITION VIDE HIS ORDER IN APPEAL NO.59/AMB/08-09 DATED 11.03.2009. SINCE NO NEW FACTS HAVE BEEN BROUGHT ON RECORD BY THE AO, 4 RESPECTFULLY FOLLOWING THE HON'BLE ITAT ORDER FOR T HE ASSESSMENT YEAR 2003-04, THE ADDITION OF RS.2,10,97,492/- MADE BY THE AO IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. IN GROUND NO. 1& 2, BOTH THE PARTIES STATED THAT THE ISSUES ARE COVERED BY THE DECISION OF THE HON'BLE I TAT, CHANDIGARH IN ASSESSEE'S OWN CASE IN ITA NO. 537/CHD/2009, ASSESSMENT YEAR 2006-07, DATED 24.06. 2009. A PERUSAL OF THE SAID DECISION IN ASSESSEE'S OWN CA SE, WHEREIN ANOTHER ORDER IN ASSESSEE'S OWN CASE FOR TH E ASSESSMENT YEAR 2004-05 AND 2005-06 (ITA NO. 1049 & 1050/CHD/2008) HAS BEEN FOLLOWED, COVERS BOTH THE I SSUES RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. THE RELEVANT PART OF THE SAID DECISION IS REPRODUCED HEREUNDER : THESE APPEALS ARE FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED CIT(A) DATED 22.9.2008 ON THE GROUND W HETHER THE LEARNED CIT(A) WAS RIGHT IN HOLDING THAT DEDUCTION UNDER SECTION 80 IB AMOUNTING TO RS. 6,41,175/- AND RS.16,88,816/ - RESPECTIVELY IN RESPECT OF NEW UNIT WAS ADMISSIBLE NOTWITHSTANDING THAT THE CONDITIONS LAID DOWN UNDER SECTION 80 IB ARE NOT SATISFIED AND NO DEDUCTION HAS BEEN ALLO WED IN ASSESSMENT YEAR 2000-01, THE INITIAL ASSESSMENT YEA R AND ALSO WHETHER THE LEARNED FIRST APPELLATE AUTHORITY WAS R IGHT IN DELETING THE ADDITION OF RS.9,68,841/- AND RS. 15,59,039/- RESPECTIVELY MADE UNDER SECTION 145 (3) BY IGNORING THE FACT THA T INVOKING OF PROVISIONS UNDER SECTION 145(3) WAS VALID AS THE AS SESSEE DID NOT MAINTAIN INVENTORY OF OPENING AND CLOSING STOCK , THEREFORE, WITHOUT STOCK REGISTER IT WAS NOT POSSIBLE TO DETER MINE THE CORRECT INCOME OF THE ASSESSEE FOR THE YEAR. 5 2. DURING ARGUMENTS, WE HAVE HEARD SMT. SARITA KUM ARI LEARNED DR AND SHRI SUDHIR SEHGAL LD COUNSEL FOR THE ASSES SEE. AT THE OUTSET, IT WAS POINTED OUT THAT THE IMPUGNED ISSUE S ARE COVERED BY THE DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 20 03-04 IN THE CASE OF ASSESSEE ITSELF (ITA NO. 129/CHD/2007). MR SEHG AL ALSO POINTED OUT THAT GROUND NO. 1 RAISED BY THE REVENUE IS WRON G TO THE EFFECT THAT NO DEDUCTION WAS ALLOWED IN ASSESSMENT YEAR 20 00-01 (INITIAL ASSESSMENT YEAR) AS NEITHER ANY CLAIM WAS MADE BY T HE ASSESSEE NOR IT WAS ALLOWED AS THE PRODUCTION WAS ONLY FOR T WO DAYS. THIS FACTUAL FINDING WAS NOT CONTROVERTED BY THE REVENUE . 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ELECTRI CAL MOTORS, ELECTRICAL FANS AND SALES THEREOF. FOR ASSESSMENT YEAR 2004-05, THE ASSESSEE DECLARED TOTAL INCOME OF RS. 45,91,250/- IN ITS RETURN FILED ON 1.111.2004 WHICH WAS ALSO ACCOMPANIED WITH AUDIT REPORT, AUDITED STATEMENT OF ACCOUNTS. THE ASSESSEE CLAIM ED RS. 6,41,175/- AS DEDUCTION UNDER SECTION 80 IB. THE P LEA OF THE LEARNED ASSESSING OFFICER IS THAT SINCE SIMILAR DEDUCTION A MOUNTING TO RS. 16,22,661/- WAS DISALLOWED, THEREFORE, THE IMPUGNED DEDUCTION IS ALSO DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. FOR ASSESSMENT YEAR 2005-06, THE ASSESSEE DECLARED TOTA L INCOME OF RS. 1,00,98,060/-, WHICH WAS PROCESSED ON 23.12.2005, U NDER SECTION 143 (1) OF THE ACT. THE ASSESSEE CLAIMED RS. 16,88 ,816/- AS DEDUCTION UNDER SECTION 80 IB. THE CLAIM WAS DISAL LOWED ON IDENTICAL LINES AS MENTIONED FOR ASSESSMENT YEAR 2004-05. HO WEVER, WE HAVE FOUND AND ALSO AS ARGUED BY THE LEARNED COUNSE L FOR THE ASSESSEE THAT THE TRIBUNAL VIDE ORDER DATED 31.7..2 008 FOR ASSESSMENT YEAR 2003-04, ALLOWED THE CLAIM OF THE A SSESSEE, THEREFORE, WE ARE REPRODUCING HEREWITH THE RELEVAN T PORTION OF THE AFORESAID ORDER:- 2. THE APPELLANT IS A PARTNERSHIP FIRM WHICH IS EN GAGED IN THE BUSINESS OF MANUFACTURING ELECTRIC MOTORS, E LECTRIC FANS AND SALES THEREOF. FOR THE ASSESSMENT YEAR UND ER CONSIDERATION IT FILED A RETURN OF INCOME DECLARING AN INCOME OF RS.86,21,400/- WHICH INCLUDED A CLAIM OF DEDUCTI ON UNDER SECTION 80IB OF THE INCOME TAX ACT,1961 (IN SHORT THE ACT ) IN RESPECT OF UNIT II AMOUNTING TO RS.16,22,661/-. THE RETURN 6 OF THE ASSESSEE WAS SUBJECT TO SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT AND THE ASSESSING OFFICER HAS PASSED AN ORDER THEREOF WHEREBY THE TOTAL INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT RS.1,21,66,830/-. IN THE SAID ASSESSMENT, THE ASSESSING OFFICER HAS INTER-AL IA DENIED THE CLAIM OF DEDUCTION UNDER SECTION 80IB, REJECTED THE TRADING RESULTS, MADE DISALLOWANCES OUT OF DEPRECIA TION, EXPENSES ON FOREIGN TRAVEL, INTEREST, CAR RUNNING & TELEPHONE, ETC. ALL THE ADDITIONS MADE WERE CHALLEN GED IN APPEAL BEFORE THE CIT(A) UNSUCCESSFULLY. THE CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE AND THE ORDER OF THE ASSESSING OFFICER HAS BEEN SUSTAINED. AGAINST SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 3. IN THE SAID BACKGROUND WE HAVE HEARD THE SUBMISSIONS OF THE RIVAL COUNSELS WITH RESPECT TO E ACH OF ISSUES RAISED IN APPEAL AND PERUSED THE RECORD TO W HICH OUR ATTENTION HAS BEEN DRAWN IN THE COURSE OF THE HEARI NG. 4. THE GROUND NOS. 1 (A) TO 1(D) IN THE MEMO OF APP EAL RELATE TO THE ACTION OF THE CIT(A) IN SUSTAINING TH E DENIAL OF DEDUCTION UNDER SECTION 80IB OF THE ACT TO THE ASSE SSEE. THE FACTUAL POSITION IN THIS REGARD IS DISCUSSED BY THE ASSESSING OFFICER IN PARAS 10 AND 11 OF THE ORDER. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS TW O UNITS. IN UNIT I IT WAS MANUFACTURING 2 POLE ELECTRIC MOT OR AND ELECTRIC FANS WHILE IT MANUFACTURED 4 POLE ELECTRI C MOTOR INLET AND OUTLET VALVE IN UNIT II. ON BEING ASKED TO JUST IFY THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RELAT ION TO THE PROFITS AND GAINS OF UNIT II THE ASSESSEE FILED THE RELEVANT DETAILS AND ALSO SUBMITTED THAT THE CLAIM OF THE AS SESSEE UNDER SECTION 80IB WAS DISCUSSED IN THE ASSESSMENT PROCEEDINGS OF THE EARLIER YEARS AND ALLOWED AS SUC H. FROM THE DISCUSSION MADE IN THE ASSESSMENT ORDER IT APPE ARS THAT THE ASSESSING OFFICER CONDUCTED A VERIFICATION EXER CISE IN THIS REGARD. THE ASSESSING OFFICER NOTICED THAT NO SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED FOR THE UNIT II; T HAT THE PARTNERS OF THE BOTH THE UNITS ARE SAME; THAT NO SE PARATE WAGE/SALARY REGISTER HAS BEEN MAINTAINED FOR UNIT I I; THAT NO SEPARATE POWER CONNECTION WAS OBTAINED FOR UNIT II; THAT THE JOB WORK CHARGES CLAIMED IN THE TWO UNITS WERE SO MANIPULATED TO CLAIM HIGHER DEDUCTION UNDER SECTION 80IB; THAT THE UNIT II COULD NOT BE SAID TO BE AN INDEPEN DENT UNIT BUT WAS ONLY AN EXTENSION OF THE BUSINESS OF THE IN DUSTRIAL UNDERTAKING IN UNIT I. HE THEREFORE DENIED THE CLAI M OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE CIT(A) HAS ALSO SUSTAINED SUCH DENIAL ON THE REASONING SIMILAR TO T HAT ADOPTED BY THE ASSESSING OFFICER. 5. BEFORE US, THE LD. REPRESENTATIVE FOR THE APPELL ANT FIRM SUBMITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE CLAIM OF DEDUCTION IN THIS YEAR FOR THE REASONS MENTIONED IN THE ASSESSMENT ORDER; FOR, IN THE EARL IER ASSESSMENT YEARS OF 2001-02 AND 2002-03 THE CLAIM U NDER SECTION 80IB HAS BEEN DULY EXAMINED AND ALLOWED TO THE ASSESSEE WITH REGARD TO THE PROFITS AND GAINS OF UN IT II. IT WAS SUBMITTED THAT FOR THE ASSESSMENT YEAR 2001-02, THE CLAIM 7 WAS EXAMINED IN THE COURSE OF ASSESSMENT PROCEEDING S UNDER SECTION 143(3) OF THE ACT AND ALLOWED. IT WAS SUBMITTED THAT ONCE THE RELIEF UNDER SECTION 80IB H AS BEEN ALLOWED TO THE ASSESSEE IN THE INITIAL YEAR, THEN I T IS NOT OPEN FOR THE ASSESSING OFFICER TO EXAMINE SUCH QUESTION AGAIN AND DECIDE TO DENY THE RELIEF, ESPECIALLY IN A SITU ATION WHEREBY THE RELIEF ALLOWED IN THE INITIAL YEAR IS N OT DISTURBED. IT WAS EXPLAINED THAT THE INITIAL ASSESSMENT YEAR F OR THE CLAIM OF 80IB RELIEF IN QUESTION WAS ASSESSMENT YEAR 2001 -02 WHEREIN SUCH RELIEF STOOD ALLOWED. FOR THE SAID PRO POSITION THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISION S:- I) SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CIT 123 ITR 669 (GUJ) II) CIT VS. PAUL BROTHERS 216 ITR 548 (NAG.) III) CIT VS. P. MUNCHERJI & CO. (1987) 167 ITR 671 (BOM.) IV) RUSSEL PROPERTIES (P) LTD. VS. A. CHOWDHURY, ADDL. CIT (1977) 109 ITR 229 (CAL) V) K. N. AGARWAL VS. CIT (1991) 189 ITR 769 (ALL) 6. APART FROM THE AFORESAID THE LD. REPRESENTATIVE HAS RELIED UPON THE SUBMISSIONS MADE BEFORE THE CIT(A) WITH REGARD TO THE CLAIM OF DEDUC TION UNDER SECTION 80IB TO THE EFFECT THAT THE SAME IS OTHERWI SE ALSO ALLOWABLE TO THE ASSESSEE AS IT FULFILLS ALL THE CO NDITIONS PRESCRIBED IN THE SAID SECTION. 7. ON THE OTHER HAND THE LD. D. R. HAS PRIMARILY RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES IN SUPPORT OF THE CASE OF THE REVENUE. THE REASONS TO DENY THE CL AIM HAVE BEEN REITERATED BEFORE US ON THE SAME LINES AS NOTICED BY US EARLIER IN PARAGRAPH 4 ABOVE. 8. WE HAVE CAREFULLY EXAMINED THE RIVAL STANDS WITH REGARD TO THE CLAIM OF THE ASSESSEE FIRM FOR R ELIEF UNDER SECTION 80IB OF THE ACT IN RELATION TO UNIT II. SEC TION 80IB GOVERNS DEDUCTION IN RESPECT OF PROFITS AND GAINS F ROM CERTAIN INDUSTRIAL UNDERTAKINGS FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THE SECTION. SUB-S ECTION 2 DEALS WITH THE CONDITIONS WHICH ARE REQUIRED TO BE FULFILLED BY AN INDUSTRIAL UNDERTAKING IN ORDER TO BE ELIGIBLE F OR THE RELIEF. THE ASSESSEE INITIALLY CLAIMED DEDUCTION UNDER SECT ION 80IB FOR THE IMPUGNED UNIT IN THE ASSESSMENT YEAR 2001-0 2 AND THE SAME WAS ALLOWED. IN THIS ASSESSMENT YEAR THE C LAIM OF THE ASSESSEE WAS IN CONTINUATION OF THE CLAIMS MADE IN THE EARLIER ASSESSMENT YEARS FOR THE IMPUGNED ASSESSMEN T YEAR FALLS WITHIN THE NUMBER OF ASSESSMENT YEARS AS SPEC IFIED IN THE SECTION IN WHICH THE CLAIM IS ELIGIBLE. THE REV ENUE HAS SOUGHT TO DENY THE CLAIM IN THIS YEAR ON THE GROUND THAT THE UNIT II DOES NOT FULFILL THE CONDITIONS SPECIFIED I N THE SECTION. IT 8 IS ALSO A PERTINENT FACT POSITION THAT THE CLAIM AL LOWED TO THE ASSESSEE IN THE INITIAL ASSESSMENT YEAR OF 2001-02 AND THEREAFTER IN THE ASSESSMENT YEAR 2002-03 HAS NOT B EEN WITHDRAWN. THIS ASPECT HAS BEEN PLEADED BY THE ASSE SSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). BEFORE US THIS ASPECT HAS BEEN REITERATED AND WE FI ND NO CONTROVERTION FROM THE REVENUE EITHER AT THE STAGE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES OR EVEN BE FORE US. THUS, FACTUALLY SPEAKING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB STANDS ADMITTED IN THE INITIAL ASSESSMENT YEAR AND ALSO THEREAFTER UP TO THE ASSES SMENT YEAR PRIOR TO THE YEAR UNDER CONSIDERATION. ON THI S FACTUAL MATRIX, WE FIND NO JUSTIFICATION FOR THE ASSESSING OFFICER TO DENY THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB. THE IMPLICATION OF THE EARLIER ASSESSMENT MAD E FOR THE INITIAL ASSESSMENT YEAR UNDER SECTION 143(3) IS THA T THE ASSESSEE HAS FULFILLED THE CONDITIONS PRESCRIBED IN THE SAID SECTION. THEREAFTER IT IS NOT OPEN FOR THE ASSESSIN G OFFICER TO RE-EXAMINE THE ISSUE ALL OVER AGAIN AND COME TO A D IFFERENT CONCLUSION IN A SUBSEQUENT YEAR WITHOUT JUSTIFYING SUCH DEPARTURE. IN THE ASSESSMENT ORDER, WE DO NOT FIND ANY DISCUSSION BY THE ASSESSING OFFICER ON THIS ASPECT INSPITE OF THE FACT THAT THE APPELLANT ASSESSEE HAD TAKEN A SP ECIFIC POSITION BASED ON THE RELIEF ALLOWED IN THE PAST. F URTHER, THE CLAIM ACCEPTED BY THE ASSESSING OFFICER IN THE ASSE SSMENT YEARS 2001-02 AND THEREAFTER IN 2002-03 HAVE NOT BE EN DISTURBED. CLEARLY IN A SUCH A SITUATION THE ONUS W HICH WAS ON THE REVENUE HAS NOT BEEN DISCHARGED. WE ARE CONS CIOUS OF THE LEGAL POSITION THAT IN SO FAR AS THE JUSTIFI CATION FOR THE CLAIMS OF EXEMPTION/TAX RELIEFS ARE CONCERNED THE O NUS IS ON THE ASSESSEE TO ESTABLISH AND JUSTIFY THE CLAIMS. S O HOWEVER IN A SITUATION LIKE THE PRESENT SITUATION WHAT WE A RE TRYING TO SAY IS THAT THE ASSESSING OFFICE OUGHT TO HAVE JUS TIFIED HIS DEPARTURE FROM THE EARLIER ACCEPTED POSITION WHEREB Y SIMILAR CLAIM HAS BEEN ACCEPTED IN THE PAST. IT IS IN THIS BACKGROUND THAT WE ARE OF THE OPINION THAT THE ONUS WAS ON THE ASSESSING OFFICER TO JUSTIFY THE DENIAL OF DEDUCTIO N UNDER SECTION 80IB IN VIEW OF THE PAST HISTORY. IN OUR CO NSIDERED OPINION THE ERRONEOUS APPROACH OF THE LOWER AUTHORI TIES IN THIS REGARD STANDS CLEARLY MANIFESTED IN VIEW OF TH E JUDGMENTS OF THE HONBLE HIGH COURTS OF GUJARAT AND BOMBAY IN SAURASHTRA CEMENT & CHEMICAL INDUSTRIES L TD. (SUPRA) AND PAUL BROTHERS (SUPRA) RESPECTIVELY. THE REFORE, IN THIS BACKGROUND WE FIND NO JUSTIFICATION TO UPHOLD THE STAND OF THE INCOME TAX AUTHORITIES TO DENY THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB IN RELATI ON TO THE PROFITS AND GAINS OF UNIT II. ACCORDINGLY ON THIS G ROUND THE ASSESSEE SUCCEEDS. AS FAR AS THE CONTENTION REGARDING DELETING THE ADD ITION MADE UNDER SECTION 145(3) OF RS. 9,68,841/- AND RS.15,59,039/- RESPECTIVELY BY INVOKING THE PROVISI ONS OF SECTION 145(3) IS CONCERNED, THE TRIBUNAL HAS ALSO DELIBERATED UPON THIS ISSUE FOR ASSESSMENT YEAR 200 3-04, THE RELEVANT PORTION OF THE AFORESAID ORDER IS REPR ODUCED HEREWITH:- 9 9 THE GROUND NOS. 2(A) TO 2(D) IN THE MEMO OF APPE AL RELATE TO THE ACTION OF THE CIT(A) IN SUSTAINING AN ADDITION OF RS.14,75,940/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF TRADING RESULTS. IN BRIEF THE DISPUTE RELATES TO TH E ACTION OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC TION 145 OF THE ACT TO REJECT THE TRADING RESULTS DECLARED IN T HE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE REASONS STA TED BY THE ASSESSING OFFICER TO REJECT THE BOOK RESULTS AR E AS FOLLOWS. THE ASSESSING OFFICER NOTICED THAT THE G. P. RATE IN THE PRESENT YEAR HAD DECLINED TO 28.5% AS AGAINST 3 4.04% AND 33.28% IN THE PRECEDING ASSESSMENT YEARS OF 200 2-03 & 2001-02 RESPECTIVELY. THE EXPLANATION FURNISHED B Y THE ASSESSEE WITH REGARD TO THE DECLINE IN THE G. P. RA TE HAS NOT BEEN ACCEPTED BY THE ASSESSING OFFICER. SECONDLY TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MAD E PAYMENTS BY WAY OF JOB CHARGES TO M/S MICRO MOTION PVT. LTD., A SISTER CONCERN AND SUCH PAYMENTS HAVE NOT B EEN DULY REPORTED IN THE AUDIT REPORT ANNEXED WITH THE RETUR N OF INCOME. FURTHER THE ASSESSING OFFICER FOUND NO JUST IFICATION FOR INCURRING OF SUCH EXPENDITURE. CONSIDERING THE ABOVE REASONS, THE ASSESSING OFFICER INFERRED THAT THE AC COUNT BOOKS MAINTAINED BY THE ASSESSEE DID NOT REFLECT TH E TRUE AND CORRECT PICTURE OF THE TRADING RESULTS AND HENC E REJECTED THE SAME BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT. THE ASSESSING OFFICER COMPUTED THE GROSS PROFI T BY APPLYING A G. P. RATE OF 30% ON THE SALES AS DECLAR ED BY THE ASSESSEE AND THE DIFFERENCE AMOUNTING TO RS.14,75,9 40/- WAS ADDED TO THE INCOME RETURNED BY THE ASSESSEE. I N APPEAL BEFORE THE CIT(A) THE ASSESSEE MADE VARIED SUBMISSIONS. ACCORDING TO THE ASSESSEE ITS BOOKS OF ACCOUNT ARE AUDITED AND ALL PURCHASES/SALES ARE FULLY VOUCH ED; THAT THE DECLINE IN G. P. RATE WAS ON ACCOUNT OF REDUCTI ON IN SALE PRICE DUE TO SUPPLIES FROM CHINA AND INCREASE IN GE NERATOR EXPENSES, MANUFACTURING EXPENSES AND JOB WORK CHARG ES; THAT THE PRODUCT OF THE ASSESSEE IS SUBJECT TO EXCI SE AND COMPLETE RECORD IN THIS REGARD WAS MAINTAINED AND I NSPECTED BY THE EXCISE AUTHORITIES. THE AFORESAID SUBMISSION S OF THE ASSESSEE HAVE NOT FOUND FAVOUR WITH THE CIT(A) AND THE ADDITION MADE BY THE ASSESSING OFFICER HAS SINCE BE EN SUSTAINED. AGAINST SUCH SUSTENANCE OF ADDITION THE ASSESSEE IS IN APPEAL BEFORE US. 10. BEFORE US THE LD. REPRESENTATIVE FOR THE APPELLANT FIRM SUBMITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE TRADING RESULTS DECLARED IN THE BOOKS OF ACCOUNT. THE LD. REPRESENTATIVE POINTED OUT THAT THE DECLINED IN G. P. RATE WAS FULLY EXPLAINED IN THE C OURSE OF ASSESSMENT PROCEEDINGS BY WAY OF WRITTEN COMMUNICAT IONS, COPIES OF WHICH HAVE BEEN PLACED IN THE PAPER-BOOK AT PAGES 43 TO 49. IT WAS EXPLAINED THAT THE SALE PRIC ES OF THE PRODUCTS HAD DECLINED DUE TO COMPETITION FROM CHINE SE MARKET. THE ASSESSEE HAS ALSO REFERRED TO THE PAPER -BOOK WHEREIN ARE PLACED COPIES OF THE INVOICES RAISED ON FEW CUSTOMERS SHOWING THE DECLINE IN SALE PRICES THIS Y EAR IN COMPARISON TO THE SALES IN THE PRECEDING YEARS. OUR REFERENCE HAS BEEN INVITED TO PAGES 74 TO 117 IN TH IS REGARD. 10 SECONDLY IT IS SUBMITTED THAT EXPENSES HAVE ALSO RI SEN IN THE YEAR UNDER CONSIDERATION AND THIS ASPECT HAS BEEN A DMITTED BY THE ASSESSING OFFICER HIMSELF IN PARA 3.2 OF THE ORDER. THE LD. COUNSEL EXPLAINED THE INCREASE IN GENERATOR EXP ENSES ALSO. IT WAS EXPLAINED THAT THE MANUFACTURING PROCE SS OF THE ASSESSEE REQUIRED UNINTERRUPTED REGULATED ELECTRIC POWER SUPPLY AND THEREFORE THE ASSESSEE HAD NOT AVAILED O F ANY REGULAR POWER CONNECTION BUT WAS ENTIRELY DEPENDENT ON THE POWER SUPPLIED BY ITS OWN GENERATOR. THE PRICES OF DIESEL HAD INCREASED IN THE YEAR UNDER CONSIDERATION. THE LD. COUNSEL FURTHER DREW OUR ATTENTION TO PAGE 118 OF T HE PAPER- BOOK WHEREIN IS PLACED AN ANALYSIS OF ALL THESE FAC TORS ON THE G. P. RATE, WHICH SHOW THAT THE AFORESAID FACTORS H AD EFFECTED THE G. P. RATE BY AS MUCH AS 7%. THUS THE DECLINE IN THE G. P. RATE BY MERE 5.54% IN COMPARISON TO TH E IMMEDIATE PRECEDING YEAR WAS QUITE JUSTIFIED. EVEN WITH REGARD TO THE JOB WORK CHARGES PAID TO M/S MICRO MO TION PVT. LTD., IT WAS SUBMITTED THAT THE EXPENDITURE WAS INC URRED, AS IN THE PAST YEARS FOR THE WORK ACTUALLY UNDERTAKEN FOR THE ASSESSEE. THE LD. COUNSEL CONTENDED THAT THE ASSES SING OFFICER WAS WRONG IN OBSERVING THAT THE JOB CHARGES WERE UNVERIFIABLE FOR THE REASON THAT THE PAYEE CONCERN WAS ALSO FILING ITS RETURN OF INCOME REGULARLY. IN THIS CONN ECTION THE WRITTEN SUBMISSIONS MADE TO THE ASSESSING OFFICER H AVE BEEN REFERRED TO. INFACT THE LD. COUNSEL POINTED OU T THAT THE PAYEE CONCERN WAS ALSO FILING ASSESSED WITH THE SAM E ASSESSING OFFICER. IT WAS POINTED OUT THAT THE SAID CONCERN HAD DULY ACCOUNTED FOR THE INCOMES EARNED FROM THE ASSESSEE AND THERE IS NO DISPUTE ON THIS ASPECT. TH E OTHER ARGUMENTS TAKEN BEFORE THE CIT(A) HAVE BEEN REITERA TED EVEN BEFORE US. IN NUTSHELL, IT IS SUBMITTED THAT T HERE WAS NO JUSTIFICATION WITH THE ASSESSING OFFICER TO REJECT THE TRADING RESULTS AND RESORT TO ESTIMATION OF THE GROSS PROFI T. 11. ON THE OTHER HAND LD. D. R., APART FROM RELYIN G ON THE ORDERS OF THE LOWER AUTHORITIES POINTED OUT THAT THE ASSESSEE COULD NOT FURNISH THE REQUISITE QUANTITATI VE STOCK DETAILS AND THEREFORE THE ASSESSING OFFICER WAS JUS TIFIED IN REJECTING THE TRADING RESULTS DECLARED BY THE ASSES SEE. 12. IN REPLY THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS MAINTAIN ING COMPLETE QUANTITATIVE RECORDS AS PRESCRIBED BY THE EXCISE AUTHORITIES AND THE STAND OF THE REVENUE ON THIS AS PECT WAS UNTENABLE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. SECTION 145(3) OF THE ACT EMPOWERS AN A SSESSING OFFICER TO REJECT THE TRADING RESULTS DECLARED BY AN ASSESSEE. IF THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OF COMPLETENESS OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING AS NOTIF IED IS NOT FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER IS EMPOWERED TO REJECT THE RESULTS SO DECLARED AND MAK E AN ASSESSMENT TO THE BEST OF HIS JUDGEMENT. IN THE PR ESENT CASE, THE ASSESSING OFFICER NOTED THAT THE GP RATE DECLARED WAS LOW IN COMPARISON TO THE TWO PRECEDING ASSESSME NT 11 YEARS. THE SECOND OBJECTION RELATES TO THE NON-REP ORTING OF PAYMENTS MADE TO A SISTER CONCERN COVERED WITHIN TH E MEANING OF SECTION 40A(2)(B) OF THE ACT. THIRDLY, THE ASSESSING OFFICER HAS ALSO NOT FOUND ANY JUSTIFICAT ION FOR INCURRING PAYMENT OF JOB WORK CHARGES TO THE SAID S ISTER CONCERN. THE POINT TO BE EXAMINED IS AS TO WHETHER THERE ARE ANY JUSTIFIED REASONS FOR THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. I N THIS CONNECTION, WE FIND THAT NONE OF THE OBJECTIONS BRO UGHT OUT BY THE ASSESSING OFFICER ARE STRONG ENOUGH TO NEGAT E THE BOOK RESULTS DECLARED BY THE ASSESSEE. FIRSTLY WIT H REGARD TO THE FALL IN GP RATE, WE FIND THAT THE ASSESSEE HAD FURNISHED A DETAILED EXPLANATION. THE ASSESSEE HAD EXPLAINED T HE DECREASE IN SALE PRICE AS ALSO ITS REASONS. THE RE ASONS WERE ALSO SUBSTANTIATED ON THE BASIS OF THE SALE BI LLS OF THE RESPECTIVE YEARS SHOWING FALL IN PRICES OF FINISHED PRODUCTS OF THE ASSESSEE. IN FACT, IN ITS WRITTEN COMMUNICATIO N TO THE ASSESSING OFFICER PLACED AT PAGE 43 TO 45 OF THE PA PER BOOK, THE ASSESSEE ALSO POINTED OUT THAT THE FALL IN SALE PRICE WAS ALSO A SUBJECT MATTER OF EXAMINATION BY THE EXCISE AUTHORITIES WITH NO ADVERSE FINDINGS. FURTHER, THE ASSESSEE EXPLAINED THE INCREASE IN EXPENSES THIS YEAR IN COM PARISON TO THE EARLIER YEARS. IN FACT, WE FIND THAT THE AS SESSING OFFICER HIMSELF HAS ADMITTED THAT THE PURCHASE PRIC E OF THE RAW MATERIALS HAVE RISEN DURING THE YEAR UNDER CONSIDERATION. WE, THEREFORE, ON THE BASIS OF THE MATERIAL ON RECORD ARE SATISFIED WITH THE EXPLANATION RENDERED BY THE ASSESSEE WITH REGARD TO THE FALL IN GP RATE IS PLAU SIBLE AND COULD NOT BE A GROUND TO REJECT THE BOOKS OF AC COUNT. SIMILARLY, NON-REPORTING OF TRANSACTIONS WITH A CON CERN COVERED U/S 40A(2)(B), AT BEST, CAN BE ATTRIBUTED T O THE AUDITORS OF THE ASSESSEE AND CANNOT BE A GROUND TO REJECT THE RELIABILITY OF THE ACCOUNT BOOKS. FURTHER, WIT H REGARD TO THE INCURRING OF JOB WORK PAYMENTS TO THE SISTER CO NCERN, WE FIND THAT THE ASSESSEE HAD EXPLAINED THE REASONS FO R MAKING THE PAYMENT. IT HAS BEEN EXPLAINED THAT EARLIER TH E JOB WORK WAS BEING GOT DONE FROM OUTSIDE PARTIES AND IN VIEW OF THE SECRECY AND CONFIDENTIALITY OF THE MANUFACTURING P ROCESS, THE SAME WAS NOW BEING UNDERTAKEN FROM THE SISTER CONCERN. IT IS SUBMITTED THAT NO UN-REASONABLE EXP ENDITURE HAS BEEN INCURRED ON JOB WORK PAYMENTS TO THE SISTE R CONCERN IN AS MUCH AS IT WOULD HAVE INCURRED SUCH EXPENDITURE EVEN IF THE JOB WORK WAS GOT DONE FROM OTHER PARTIES. WE FIND THAT THERE IS NO NEGATION TO THE F ACT POSITION THAT THE WORK HAS BEEN INDEED BEEN UNDERTAKEN FOR T HE ASSESSEE BY THE SISTER CONCERN M/S MICRO INSTRUMENT S PVT.LTD. THE ASSESSEE HAS EXPLAINED EVEN BEFORE TH E LOWER AUTHORITIES THE CIRCUMSTANCES IN WHICH THE PAYMENTS HAVE BEEN MADE. THERE IS NOTHING UNREASONABLE IN THIS R EGARD. IN ANY CASE, EVEN FOR APPLYING THE PROVISIONS OF S ECTION 40A(2)(B), IT IS FOR THE ASSESSING OFFICER TO MAKE OUT A CASE THAT THE EXPENDITURE INCURRED IS EXCESSIVE OR UNREA SONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF SUCH SERV ICES. NO EFFORT IN THIS REGARD HAS BEEN MADE BY THE ASSESSIN G OFFICER. THEREFORE, CONSIDERING THE AFORESAID, WE DO NOT FIN D ANY JUSTIFICATION FOR THE ASSESSING OFFICER TO INVOKE T HE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECT THE RELIABI LITY OF THE 12 ACCOUNT BOOKS MAINTAINED BY THE ASSESSEE. THUS, TH E ADDITION MADE BY COMPUTING THE GROSS PROFIT ON ESTI MATE BASIS IS HEREBY SET ASIDE. ACCORDINGLY, THE ASSESS EE SUCCEEDS ON THIS GROUND IF THE FACTS OF THE AFORESAID ORDER ARE KEPT IN JUXTAPOSITON WITH THE FACTS OF THE PRESENT APPEAL, THE SAME WERE ARGUED BY THE RESPECTIVE COUNSEL TO BE IDENTIC AL. EVEN OTHERWISE, THE LEARNED FIRST APPELLATE AUTHORITY WH ILE COMING TO A PARTICULAR CONCLUSION HAD FOLLOWED THE AFORESA ID DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2003-04. THERE FORE, RESPECTFULLY FOLLOWING THE AFORESAID ORDER, WE HAVE NOT FOUND ANY MERIT IN THE APPEALS OF THE REVENUE, CONSEQUENT LY DISMISSED. 6. IN VIEW OF THE DETAILED FINDINGS IN ASSESSEE'S O WN CASE AS REPRODUCED ABOVE, ON THE IDENTICAL GROUNDS, THES E GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 7. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION. HENCE, THE SAME ARE DISMISSE D. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JAN.,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 4 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH