Himson International Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 1300/AHD/2008

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6964 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 10-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Rejection of books of accounts; Business income; Depreciation; Opportunity of being heard; Question of law; Fair market value; Right to appeal; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 80HHC; 139(5); 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 0 , 0 0 , BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI N.S. SAINI , ACCOUN TANT MEMBER ./ ITA NO . 130 0 /AHD/ 20 08 [ [ / ASSESSMENT YEAR : 2004 - 05 HIMSON INTERNATIONAL PVT LTD HIRALAL COLONY, A.K. ROAD, SURAT PAN : AAACN 7828 A VS THE DCIT, CIRCLE - 1, SURAT ./ ITA NO . 2030 /AHD/ 2008 [ [ / ASSESSMENT YEAR : 2004 - 05 THE ACIT, CIRCLE - 1, SURAT VS HIMSON INTERNATIONAL PVT LTD PAN : AAACN 7828 A / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : SHRI M.K. PATEL , AR REVENUE BY : SMT. SONIA KUMAR, SR. DR. / DATE OF HEARING : 01 / 12 /2014 / DATE OF PRONOUNCEMENT: 12 / 12 /2014 / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME - TAX (APPEALS) - I, SURAT DATED 31.03.2008 FOR ASSESSMENT YEAR 2004 - 05. 2. THE GROUND NO.1 OF ASSESSEES APPEAL READS AS UNDER: - ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 2 - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT ALLOWING RELIEF IN RESPECT O F SEZ UNIT. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE BY RAISING THE ADDITIONAL GROUND OF APPEAL BEFORE THE CIT(A) CLAIMED DEDUCTION U/S 10A FOR THE UNIT LOCATED IN SEZ SACHIN. THIS CLAIM WAS MADE FOR THE FIRST TIME DURING THE COURSE OF APPELL ATE PROCEEDINGS BEFORE THE CIT(A). THIS CLAIM WAS NOT MADE EITHER IN THE RETURN OF INCOME OR BEFORE THE ASSESSING OFFICER. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND REPORT DATED 20.02.2008, THE ASSESSING OFFICER STATE D THAT THE ASSESSEE HAD ADMITTED BEFORE HIM THAT THIS CLAIM WAS NEITHER MADE IN THE RETURN OF INCOME NOR WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. HENCE, THE CLAIM WAS MADE FOR THE FIRST TIME DURING THE APPELLATE PR OCEEDINGS BEFORE THE CIT(A). HENCE, THE ASSESSING OFFICER STATED THAT THIS GROUND WAS NOT ADMISSIBLE AS IT DOES NOT EMANATE FROM THE ASSESSMENT ORDER. THE ASSESSEE, IN THE REJOINDER TO THE REMAND REPORT, SUBMITTED BEFORE THE CIT(A) THAT THE CLAIM FOR DEDU CTION U/S 10A FOR SEZ WAS RAISED FOR THE FIRST TIME DURING THE APPEAL PROCEEDINGS BECAUSE THERE WAS LOSS IN THE RELEVANT UNIT BEFORE THE ADDITIONS WERE MADE. THE DATA RELATING TO THE EXISTENCE OF SEZ UNIT WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. T HE ASSESSEE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF S.R. KOSHTI VS. CIT, 276 ITR 165 (GUJ.) AND SUBMITTED THAT HONBLE GUJARAT HIGH COURT HELD THAT THE AUTHORITIES ARE UNDER OBLIGATION TO ACT IN ACCORDANCE WITH LAW AND TAX C AN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF THE ASSESSEE UNDER A MISTAKE, MISCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED IS OVER ASSESSED BY THE AUTHORITIES UNDER LAW WHO ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY THE LEGITIMATE TAXES DUE A RE COLLECTED. THE ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 3 - ASSESSEE ALSO RELIED ON THE DECISION OF THE KOCHI BENCH OF THE TRIBUNAL IN THE CASE OF THOMAS KURIAN VS. ACIT, 106 ITD 158 (KOCHI) AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT WHEN FRESH CLAIM WAS PUT FORTH U/S 80HHC BEFORE THE APPELLATE AUTHORITY, THE CIT(A) IS DUTY BOUND TO CONSIDER THE SAME. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED VS. CIT, [1991] 187 ITR 688 (SC), WHEREIN THE HONBLE SUPREME COURT HELD THAT , SINCE TAX LIA BILITY WAS ADMITTED, THE INCOME - TAX OFFICER WAS AFFORDED AN OPPORTUNITY OF BEING HEARD, AND THE APPELLANTS CLAIM WAS BASED ON THE SETTLED VIEW OF THE LAW, THE APPELLATE ASSISTANT COMMISSIONER HAD JURISDICTION TO PERMIT THE APPELLANT TO RAISE THE ADDITIONAL GROUND . 4. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, OBSERVED THAT THE ASSESSEE ADMITTEDLY HAD NOT CLAIMED THE DEDUCTION U/S 10A EITHER IN THE RETURN OR DURING THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFIC ER. THE ASSESSEE HAD ALSO NOT MADE A NOTE IN THE COMPUTATION OF INCOME THAT IF THE LOSS OF UNIT BECAME PROFIT DUE TO CERTAIN ADDITIONS THEN THE CLAIM U/S 10A SHOULD BE ALLOWED. THE ENTIRE RETURN INCLUDING THE COMPUTATION OF INCOME IS SILENT ON THE ISSUE OF CLAIM OF DEDUCTION U/S 10A AND THEREFORE MAKING THE CLAIM FOR THE FIRST TIME DURING THE APPELLATE PROCEEDINGS AMOUNTS TO REVISING THE RETURN ON THAT PARTICULAR DATE. HE OBSERVED THAT ACCORDING TO PROVISIONS OF SECTION 139(5), RETURN CAN BE REVISED ONLY W ITHIN ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE ASSESSMENT IS MADE WHICHEVER IS EARLIER. THEREFORE, THE CLAIM COULD HAVE BEEN MADE ONLY UP TO 31.03.2006. HE FURTHER OBSERVED THAT EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS AF TER 31.03.2006, SUCH A CLAIM COULD NOT HAVE BEEN MADE IN VIEW OF THE CLEAR PROVISIONS OF SECTION 139 (5) . HE OBSERVED THAT REGARDING THE DECISION OF THE KOCHI BENCH OF THE TRIBUNAL IN THE CASE OF THOMAS ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 4 - KURIAN (SUPRA), THE TRIBUNAL HAD NOT CONSIDERED THIS ISSUE OF SECTION 139(5) AND THEREFORE, NO SUCH CLAIM CAN BE MADE BY THE APPELLANT AS IT IS TIME BARRED. WITH REGARD TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED (SUPRA), THE CIT(A) OBSERVED THAT IT WAS IN R ESPECT OF ASSESSMENT YEAR 1974 - 75 AND AT THAT TIME, THE TIME LIMIT FOR REVISING THE RETURN U/S 139(5) WAS TWO YEARS FROM THE END OF THE ASSESSMENT YEAR WHICH WAS CO - TERMINUS WITH THE TIME LIMIT FOR FINALIZING THE ASSESSMENT U/S 153 WHICH WAS ALSO TWO YEARS FROM THE END OF THE YEAR. THEREFORE, TILL THE DATE OF ASSESSMENT THE RETURN COULD BE REVISED. THAT LAW IS NO LONGER VALID IN VIEW OF THE AMENDMENT TO SECTION 139(5) WHERE THE LIMIT FOR REVISING THE RETURN WAS REDUCED TO ONE YEAR FROM TWO YEARS AS IT EXIST ED BEFORE THE AMENDMENT. HENCE, THE DECISION OF THE SUPREME COURT WAS NOT APPLICABLE. FURTHER HE OBSERVED THAT IN THE CASE OF S.R. KOSHTI (SUPRA), THE HONBLE GUJARAT HIGH COURT GAVE THE DECISION BECAUSE THE REVISED RETURN WAS FILED WITHIN THE TIME ALLOWE D U/S 139(5); HENCE, THE REL IANCE OF THE ASSESSEE ON THAT CASE IS MISPLACED. THEREFORE, HE DISMISSED THE GROUNDS OF APPEAL OF THE ASSESSEE. 5. BEFORE US, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED VS. CIT (1998) 229 ITR 380 (SC) AND SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD THAT U/S 254 OF THE INCOME - TAX ACT, 1961, THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPOR TUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECT LY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 5 - GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THE ITEM. THERE IS NO REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 25 4 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS - OBJECTIONS BEFORE THE TRIBUNAL. THE TRIBUNAL SHOULD NOT BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS, ALTHOUGH NOT RAISED EARLIER. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO ISSUES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER (APPEALS) IS TOO NARROW A VIEW TO TAKE OF THE POWERS OF THE TRIBUNAL. UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO ALLOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE.' HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN T HE CASE OF CIT VS. JAI PARABOLIC SPRINGS LTD . [2008] 306 ITR 42 (DELHI) AND SUBMITTED THAT THE HONBLE DELHI HIGH COURT HELD THAT THERE WAS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL GROUND WHICH ACCORDING TO THE TRIBUNAL ARISE S IN THE MATTER AND FOR THE JUST DECISION OF THE CASE. THERE WAS NO INFIRMITY IN THE ORDER OF THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IN ITS RETURN OF INCOME HAS NOT CLAIMED ANY ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 6 - DEDUCTION/EXEMPTION U/S 10A OF THE ACT ON THE GROUND THAT THERE WAS NET LOSS FROM THE BUSINESS OF THE ELIGIBLE UNDERTAKING. IN THE ASSESSMENT COMPLETED U/S 143(3) THE ASSESSING OFFICER MADE VARIOUS DISA LLO WANCE S AND ADDITIONS ; AND AS A CONSEQUENCE OF THE SAME, THE BUSINESS INCOME OF THE ASSESSEE WAS ENHANCED BY RS.1,74,85,796/ - . 7. IN APPEAL BEFORE THE CIT(A) , THE ASSESSEE CLAIMED THAT BECAUSE OF THE SAID DISALLOWANCES/ADDITIONS MADE BY THE ASSESSING O FFICER ITS INCOME FROM UNDERTAKING WHICH WAS ELIGIBLE FOR DEDUCTION U/S 10A HAS BEEN DETERMINED AT POSITIVE INCOME AND THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A WHICH THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED. 8. THE CIT(A) HAS NOT ACCE PTED THE ABOVE CLAIM OF THE ASSESSEE ON THE GROUND THAT NO DEDUCTION U/S 10A WAS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME, NO RETURN WAS FILED BY THE ASSESSEE AND THE TIME LIMIT FOR FILING THE REVISED RETURN U/S 139(5) HAS ALREADY EXPIRED. 9. WE FI ND THAT THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE ABOVE STATED REASONS. THE CLAIM OF THE ASSESSEE IS THAT IT COULD NOT CLAIM EXEMPTION U/S 10A AS ACCORDING TO ITS RETURN THERE WAS LOSS FROM THE ELIGIBLE UNIT AND CONSEQUENTL Y FOR THE FIRST TIME OPPORTUNITY TO CLAIM EXEMPTION U/S 10A AROSE ONLY WHEN CERTAIN DISALLOWANCES/ADDITIONS WERE MADE BY THE ASSESSING OFFICER WHICH RESULTED IN POSITIVE INCOME OF THE ELIGIBLE UNDERTAKING. WE FIND THAT THE ASSESSING OFFICER HAS NOT ALLOWED ANY OPPORTUNITY TO THE ASSESSEE FOR CLAIMING EXEMPTION U/S 10A AFTER COMPUTING THE BUSINESS INCOME OF THE ALLEGED ELIGIBLE UNDERTAKING AT A POSITIVE FIGURE FOR THE FIRST TIME. IN OUR CONSIDERED VIEW, WHILE MAKING THE ASSESSMENT U/S 143(3) OF THE ACT, THE ASSESSING OFFICER IS DUTY ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 7 - BOUND TO COMPUTE THE TOTAL INCOME AS PER THE PROVISIONS OF INCOME - TAX ACT AND THEREFORE, IN ALLOWING DEDUCTIONS/EXEMPTIONS ALSO TO THE ASSESSEE WHICH IS STATUTORILY ALLOWABLE TO THE ASSESSEE. IN THE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE FOR DEDUCTIONS U/S 10A OF THE ACT AND THEREAFTER PASSING AN ORDER IN ACCORDANCE WITH THE LAW. NEE DLESS TO MENTION THAT REASONABLE OPPORTUNITY OF HEARING SHOULD BE ALLOWED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE IN ACCORDANCE WITH THE LAW. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO.2 OF THE APPEAL TAKEN BY THE ASSESSEE READS AS UNDER: - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN TREATING TECHNICAL CHARGES A CAPITAL EXPENDITURE WHICH WAS IN FACT A REVENUE EXPENDITURE ALLOWABLE @ 100 %. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID RS. 45,55,000/ - AS TECHNICAL CONSULTANCY CHARGES AND CLAIMED THE SAME IN THE PROFIT AND LOSS ACCOUNT AS REVENUE EXPENDITURE. THE ASSESSING OFFICER ASKED T HE ASSESSEE TO EXPLAIN THE NATURE AND PURPOSE OF THE EXPENDITURE AND TO FILE THE NUMBER OF THE SERVICES RENDERED. THE ASSESSEE REPLIED THAT THIS EXPENDITURE WAS INCURRED FOR IMPROVING THE QUALITY OF MACHINE AND STATED THAT IT HAS FILED COPY OF BILLS AS A P ROOF OF THE SERVICES RENDERED. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS MENTIONED THAT THIS EXPENDITURE WAS INCURRED FOR IMPROVING THE QUALITY OF MACHINE ITSELF AND HENCE WAS INCURRED FOR OBTA INING ENDURING BENEFIT AND HENCE WAS ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 8 - CAPITAL IN NATURE. HE ALSO OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE REGARDING THE PROOF OF SERVICE EXCEPT COPIES OF BILL GIVEN BY THE PARTIES TO THE ASSESSEE. THEREFORE, HE DISALLOWED THE DEDUCTION WHILE AS SESSING THE INCOME OF THE ASSESSEE. 12. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS PAID TO KOREAN COMPANY FOR MANUFACTURING SPECIALIZED MODEL OF MACHINE. T HE MACHINES SO MANUFACTURED WERE EXPORTED TO CHINA AND IRAN. THE ASSESSEE - COMPAN Y MADE PAYMENT OF US DOLLAR 1 LAC AND DEDUCTED TDS @ 20%. NET REMITTANCE OF US DOLLAR 80,000/ - WAS SENT TO THE AUTHORIZED DEALER TO THE RECIPIENT COMPANY. THE ASSESSING OFFICER CONSIDERED THE EXPENDITURE AS CAPITAL IN NATURE AND DISALLOWED THE SAME IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS HELD THAT THE EXPENDITURE HAS PROVIDED ENDURING BENEFIT . IT WAS SUBMITTED THAT THE ASSESSEE EXPORTED THE MACHINES AND THE SALE PROCEEDS HAD BEEN SHOWN AS REVENUE AND HENCE THIS EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITURE IN VIEW OF THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. PREM HEAVY ENGINEERING WORKS PVT. LTD., (2006) 282 ITR 011 (ALL) , WHEREIN IT WAS HELD THAT UNDER THE AGREEMENT TECHNICAL KNOW - HOW WAS TO BE PROVIDED FOR THE PERIOD OF SEVEN YEARS AND NOT PERMANENTLY. IT WAS NOT FOR THE ESTABLISHMENT OF ANY PLANT OR MACHINERY BUT FOR THE MANUFACTURING OF EQUIPMENT AND MACHINERY FOR CANE SUGAR PLANT. THUS, THE TECHNICAL KNOW - HOW RECEIVED BY THE ASSESSEE WAS NOT OF ENDURING N ATURE AND THE PAYMENT FOR ACQUIRING THE TECHNICAL KNOW - HOW WAS IN THE NATURE OF REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE . THE ASSESSEE ALSO SUBMITTED THAT WITHOUT PREJUDICE TO THIS ARGUMENT, THE DEPRECIATION OUGHT TO BE ALLOWED IN RESPECT OF CAPITAL EXPENDITURE. IT WAS ALSO ARGUED THAT NO SUCH MODEL WAS MANUFACTURED IN THE EARLIER YEAR OR SUBSEQUENT YEAR. THIS WAS SPECIALIZED TAILOR MADE MACHINE EXPORTED TO CHINA AND IRAN. THE ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 9 - CIT(A) SENT THE SUBMISSIONS OF THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS COMMENTS AND REMAND REPORT. 13. IN THE REMAND REPORT THE ASSESSING OFFICER VIDE LETTER DATED 20.02.2008 SUBMITTED THAT THE DECISION MAY BE TAKEN ON MERITS OF THE ISSUE. THIS ISSUE WAS BEEN DELIBERATED BY THE THEN ASSESSING OFFICER AT LENGTH IN THE AS SESSMENT ORDER AND THE SAME MAY BE DECIDED ACCORDINGLY. 14. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT OF THE ASSESSING OFFICER, HELD THAT EXCEPT FOR GIVING THE BILL OF TECHNICAL CHARGES THE ASSESSEE WAS NOT ABLE TO GIVE ANY EVIDENCE REGARDING THE NATURE OF THE TECHNICAL CHARGE S . HE OBSERVED THAT THE TECHNICAL CHARGE WAS ONLY IN RESPECT OF PARTICULAR MACHINERY WHICH HAS NOT BEEN PRODUCED IN FUTURE BUT THE TECHNICAL CONSULTANCY AS IT APPEARS FROM THE ASSESSEES SUBM ISSION IS IN RESPECT OF MANUFACTURING M ACHINE. THE TECHNICAL KNOWLEDGE PROVIDED CAN BE USED BY THE ASSESSEE IN FUTURE TO PRODUCE MORE SUCH MACHINERY. HENCE, THE TECHNICAL CONSULTANCY CHARGES ARE CAPITAL IN NATURE AS KNOW - HOW ON WHICH THE ASSESSEE WILL DERI VE BENEFIT OF ENDURING NATURE. THE ASSESSEE HAS MADE AN ALTERNATIVE CLAIM THAT IN CASE THE EXPENDITURE IS TREATED AS CAPITAL EXPENDITURE , THEN DEPRECIATION IS ALLOWABLE IN VIEW OF THE INCOME TAX RULES. THE CIT(A) OBSERVED THAT DEPRECIATION IS ALLOWED ON IN TANGIBLE ASSET S BEING KNOW HOW FROM 01.04.1999. HE ACCORDINGLY ALLOWED DEPRECIATION @ 25% ON THE CONSULTANCY CHARGES AFTER HOLDING IT TO BE CAPITAL IN NATURE. 15. BEFORE US, THE A UTHORIZED R EPRESENTATIVE OF THE ASSESSEE DID NOT RAISE ANY SERIOUS ARGUME NTS. HIS ONLY SUBMISSION WAS THAT THE EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITURE AS IT WAS ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 10 - INCURRED FOR PRODUCTION OF SPECIAL TYPE OF MACHINES FOR EXPORT TO CHINA. 16. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEDUCTION FOR TECHNICAL CONSULTANCY CHARGES OF RS.45,55,000/ - PAID TO A KOREAN COMPANY FOR MANUFACTURING OF MACHINE WHICH WAS EXPORTED TO CHINA. THE CONTENTION OF THE ASSESSEE IS THAT EARLIER IT WAS NOT MAKING EXPORT TO CHINA AND TO MAKE EXPORT TO CHINA AND TO OVERCOME THE COMPETITION, IT HAD TO INCUR SUCH EXPENDITURE TO IMPROVE THE QUALITY OF MACHINE SO THAT THE ASSESSEE COULD MAKE EXPORT TO CHINA. THEREFORE, IT WAS THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT IT WAS REVENUE EXPENDITURE. 18. WE FIND THAT BOTH THE ASSESSING OFFICER AND THE CIT(A) HAVE NOT ACCEPTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE EXPENDITURE INCURRED PROVIDES ENDURING BENEFITS TO THE ASSESSEE AS THE ASSESSEE WITH THE TECHNOLOGY COULD MANUFACTURE MACHINES IN FUTURE ALSO FOR EXPORTS. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE EITHER BEFORE THE LOWER AUTHORITIES OR EVEN BEFORE US COULD NOT BRING ANY MATERIAL TO SHOW THAT THE ASSESSEE HAD INCURRED THIS EXPENDITURE AND THE BENEFIT OF WHICH WILL NOT BE DERIVED BY IT IN FUTURE. NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT NO NEW TECHNICAL KNOW - HOW WAS ACQUIRED BY THE ASSESSEE BY INCURRING THE EXPENDITURE IN QUESTION. THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). IT IS CONFIRMED AND THIS GROUND OF APPEAL OF THE ASSESSEE I S DISMISSED. ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 11 - 19. G ROUND NO.3 OF THE ASSESSEES APPEAL READS AS UNDER: - 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN ALLOWING ONLY 50% OF CERTAIN TRAVELLING EXPENDITURE WAS WHOLLY AN EXCLUSIVELY INCURRED FOR THE PURP OSE OF BUSINESS. 20. GROUND NO.2 OF THE APPEAL OF THE REVENUE READS AS UNDER: - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN REDUCING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF RS.19,46,144/ - OUT OF FOREIGN TRAVELIN G EXPENDITURE TO 50% AND GRANTED RELIEF OF RS.9,73,072/ - . 21. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.50.81 LACS ON ACCOUNT OF FOREIGN TRAVEL ING EXPENSES. ON GOING THROUGH THE DETAI LS FILED BY THE ASSESSEE, HE OBSERVED THAT IN NUMBER OF CASES, THE ASSESSEE DESCRIBED THE TOUR AS FOLLOW - UP ACTION WITH CUSTOMERS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO GIVE FURTHER DETAILS WITH EVIDENCE OF BUSINESS PURPOSE AND ASSESSEE FILED A CHA RT GIVING THE REASONS FOR FOREIGN TRIPS. IN SUPPORT OF NUMBER OF TRAVEL, THE ASSESSEE FILED XEROX COPY OF THE INVOICE OF PURCHASE OF FOREIGN CURRENCY, COPY OF PASSPORT AND A LETTER ADDRESSED TO THE PERSON WHO ARRANGE D FOREIGN CURRENCY FOR THE ASSESSEE. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THESE EVIDENCES AND OBSERVED THAT MERELY FILING OF COPY OF PASSPORT AND A LETTER FOR PURCHASE OF FOREIGN CURRENCY DOES NOT PROVE THAT THE EXPENDITURE RELATES TO BUSINESS PURPOSE OF THE ASSESSEE. ACCORDINGLY, HE MAD E DISALLOWANCE OF RS.19,46,144/ - OUT OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. 22. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE PRODUCED COPIES OF PASSPORT AND PROOF OF CURRENCY BOUGHT BEFORE THE ASSESSING OFFICER. NO SUPPORTING VOUCHERS REGARDI NG TRAVEL TICKET AND OTHER ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 12 - ITEMS WERE PRODUCED AS STATED BY THE ASSESSING OFFICER. THE PASSPORT EN TRIES SHOW THAT THE DIRECTORS DID TRAVEL BUT MERE PURCHASE OF FOREIGN CURRENCY CANNOT LEAD TO ALLOWANCE OF THE ENTIRE EXPENDITURE. HE FURTHER NOTED THAT IT IS TRUE THAT THE DIRECTORS HAVE TRAVELLED AND THAT THERE COULD NOT BE ANY PERSONAL ELEMENT IN THE CASE OF THE COMPANY AS HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON A ND ENGG. CO. VS C IT, 253 ITR 749. HOWEVER, IN THE ABSENCE OF ANY SUPP ORTING VOUCHERS, IT CANNOT BE HELD THAT THE ENTIRE AMOUNT WAS FOR THE PURPOSE OF BUSINESS AND THEREFORE, RESTRICTED THE DISALLOWANCE TO 50%. 23. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES , WHEREAS THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE COULD NOT PRODUCE BILLS AND VOUCHERS IN RESPECT OF FOREIGN TRAVEL EXPENSES OF RS.19,46,144/ - . HE, THEREFORE, DISALLOWED THE ENTIRE AMOUNT OF RS.19,46,144/ - . 25. IN APPEAL BEFORE THE CIT(A), THE ASSESSEE POINTED OUT THAT THOUGH THE RELEVANT TICKETS AND EXPENSE VOUCHERS COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER BUT THE PASSPORT OF THE DIRECTORS AND EVIDENCE OF PURCHASE OF FOREIGN CURRENCIES WERE FILED BEFORE THE ASSESSING OFFICER WHICH PROVED THE FACT OF UNDERTAKING OF FOREI GN TRAVEL BY THE DIRECTORS. CONSIDERING THE ABOVE FACTS, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.9,73,072/ - . ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 13 - 26. BEFORE US, THE AUTHORIZED REPRESENTATIVE CONTENDED THAT THE ABOVE DISALLOWANCE CONFIRMED BY THE CIT(A) WAS NOT JUSTIFIED. HE CONTENDED THAT THE RELEVANT FOREIGN TRAVEL EXPENSES WERE FOR FOLLOW - UP WITH CUSTOMERS. HE SUBMITTED THAT THE ASSESSEE EXPORTED MACHINERIES TO KOREA AND JAPAN FOR WHICH TH E FOREIGN TRAVEL WAS UNDERTAKEN . 27. WE FIND THAT IT IS NOT IN DISPUTE THA T THE FOREIGN TRA VELING EXPENSE IN QUESTION WAS RELATING TO FOREIGN TRAVEL TO KOREA AND JAPAN. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE EXPORTED MACHINERIES TO THESE COUNTRIES. HOWEVER, WE ALSO FIND THAT IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE COULD NOT SUPPORT THE SE EXPENSES BY PRODUCING THE RELEVANT BILLS AND VOUCHERS. IN THE CIRCUMSTANCES , IN OUR CONSIDERED OPINION, IT SHALL MEET THE ENDS OF JUSTICE IF WE RESTRICT THE DISALLOWANCE TO 20% OF RS.19,46,144/ - . THUS, THIS GROUND OF APPEAL OF THE ASSESSEE AS WELL AS REVENUE, BOTH ARE PARTLY ALLOWED. 28. GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF ADDITION OF RS.1,08,96,008/ - MADE ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF G.P. 29. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF TEXTILE MACHINERIES AND SPARE - PARTS. DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS SHOWN SALE S OF RS.10.23 CRORE S AND OTHER INCOME OF RS.2.4 CRORES AS AGAINST THE LAST YEAR SALES OF RS.6.6 E CRORES AND OTHER INCOME OF 2.47 CRORES. THE GP RATE OF THE CURRENT YEAR IS 9.05% AS AGAINST GP RATE OF 6.53% IN THE LAST YEAR. HOWEVER, THE NET PROFIT RATE DU RING THE YEAR IS 10.42 % AS AGAINST THE LAST YEAR NET PROFIT RATE OF 26.25% . THE ASSESSING OFFICER ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 14 - OBSERVED THAT THE NET PROFIT RATE FOR THE YEAR IS EXTREMELY LOW. HE ALSO OBSERVED THAT THE GP RATE OF THE ASSESSEE HAS FALLEN AS COMPARED TO PREVIOUS TO PRE VIOUS YEAR. HE OBSERVED THAT THE ASSESSEE WAS NOT MAINTAINING ANY QUANTITATIVE RECORD OF DAY TO DAY CONSUMPTION OF ITEMS OF RAW MATERIAL DURING THE YEAR. HE OBSERVED THAT THE ASSESSEE HAD MADE PAYMENT OF RS.7.94 CRORES TO PERSONS SPECIFIED AND COVERED BY SECTION 40A(2)(B) OF THE ACT AND THE ASSESSEE DID NOT FILE EVIDENCE SHOWING THAT THE PAYMENTS WERE MADE AT PREVAILING MARKET RATE OF GOODS/SERVICES. HE, THEREFORE, REJECTED THE BOOK RESULT OF THE ASSESSEE AND ESTIMATED THE GROSS PROFIT BY TAKING THE AVERAG E OF LAST TWO YEARS WHICH WORKED TO 32.80% AND THEREBY MADE ADDITION OF THE DIFFERENCE IN GP OF 19.665% WHICH WORKED OUT TO RS.1,08,96,008/ - . 30. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: - 3.5. I HAVE CONSIDERED THE SUBMISSI ON MADE BY THE APPELLANT AND OBSERVATION OF THE AO. FROM THE DETAILED SUBMISSION AS NOTED IN PARA 3.3 ABOVE IT IS CLEAR THAT THE APPELLANT HAS BEEN ABLE TO EXPLAIN THE FALL IN GP BY GIVING DETAILED REASONS WHICH WERE CONFRONTED TO THE A O FOR GIVING HIS REM AND REPORT. DESPITE AN OPPORTUNITY OF EXAMINING THE SAME DURING THE REMAND PROCEEDINGS THE AO HAS SIMPLY RELIED ON THE ASSESSMENT ORDER. IT IS SEEN FROM THE SUBMISSION MADE BY THE APPELLANT AND AS DISCUSSED ABOVE THAT THE GP RATE IN CURRENT YEAR IS HIGHER THAN LAST YEAR AND MUCH HIGHER THAN GP RATE OF NEXT YEAR. HOWEVER, THE AO HAS TAKEN AVERAGE OF GP RATE OF A.Y.2002 - 03 AND A.Y.2003 - 04 WITHOUT ASSIGNING ANY REASON AS TO WHY HE HAS TO TAKE THE AVERAGE OF THE EARLIER TWO YEARS. THE AO HAS NOT TAKEN INTO ACCO UNT THE REASONS AS TO WHY THE GP RATE IN A.Y.2002 - 03 WAS MUCH HIGHER THAN IN A.Y.2003 - 04 AND IN THE CURRENT YEAR. THE APPELLANT HAS STATED THAT DURING THE CURRENT YEAR IT HAD TO PAY RS.45 LACS TO TECHNICAL CONSULTANCY CHARGES TO A KOREAN COMPANY FOR MANUFA CTURING SPECIALLY DESIGNED MACHINES BEING MODEL NO.HDS - VX2 BECAUSE OF WHICH THE GP RATE HAS FALLEN. ON THE TURNOVER OF RS.10.2 CRORES THIS ACCOUNTS FOR FALL IN THE GP RATE BY 4.41%. FURTHER THE APPELLANT ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 15 - COMPANY HAD TO INCUR RS.18 LACS AS AN EXTRA COST FOR LATE DELIVERY CHARGES AS MACHINE TO CHINA WAS NOT DELIVERED IN TIME. THIS HAS ALSO RESULTED IN FALL IN GP RATE BY 1.76%. THE APPELLANT HAS STATED THAT THESE TWO AMOUNTS BY ITSELF HAVE CONTRIBUTED IN THE FALL IN GP RATE BY ALMOST 6.176%. THE AO HAS ENHANCE D THE APPELLANT'S GP TO 19.665% AGAINST THE GP RATE OF 9.05% SHOWN. THE AO HAS THEREFORE INCREASED THE GP RATE BY 10.61% BUT THE ABOVE TWO AMOUNTS BY ITSELF ACCOUNT FOR 6.17%. THE APPELLANT HAS FURTHER STATED THAT IN A.Y.2002 - 03 MAJOR SALES WERE MADE TO BA NGLADESH AND IRAN WHICH CONTRIBUTED TO A VERY HIGHER GP RATE OF MORE THAN 32%. IT WAS STATED THAT THERE WAS NO DEMAND FOR THIS MODEL IN THE CURRENT YEAR AND THEREFORE NEW MODELS WERE MANUFACTURED AND THESE MODELS WERE MAINLY SOLD TO CHINA AND IRAN. IN CHIN A THIS WAS THE FIRST ORDER. TO GET ENTRY TO NON - TRADITIONAL AREA OF CHINA MARKET THE APPELLANT HAD TO OFFER VERY COMPETITIVE RATE. THE VALUE OF SALES TO CHINA WAS RS.6.89 CRORES OUT OF TOTAL SALES OF RS. 10.07 CRORES. IT WAS FURTHER STATED THAT IN A.Y.2002 - 03 THE RAW MATERIAL CONSUMPTION WAS 64% OF THE SALES WHEREAS IN THE CURRENT YEAR THE VALUE OF THE RAW MATERIAL CONSUMPTION WAS 81% OF THE SALES. THIS WAS ONE OF THE MAJOR REASONS FOR LOWER GP RATE IN THE CURRENT YEAR. THE APPELLANT FURTHER ARGUED THAT DUR ING THE YEAR THE PAYMENT TO EMPLOYEES HAD ALSO INCREASED CONSIDERABLY IN A.Y.2002 - 03. THE PAYMENT TO EMPLOYEES WAS ONLY 2.72% OF THE SALES WHEREAS IN THE CURRENT YEAR THE PAYMENT TO THE EMPLOYEES WAS 5.53% OF THE SALES. SIMILARLY, IN A.Y. 2002 - 03 THERE WAS INCREASE IN MANUFACTURING EXPENSES. THE POWER AND FUEL COMPRISED 0.28% OF THE SALES IN A.Y.2002 - 03 WHEREAS IT WAS ALMOST FOUR TIMES AMOUNTING TO 1.04% IN THE CURRENT YEAR. IN VIEW OF THE ABOVE THE APPELLANT HAS STATED THAT THE FALL IN GP RATE IS FULLY EXP LAINABLE. THE APPELLANT HAS CITED SEVERAL DECISIONS OF VARIOUS HIGH COURTS TO SAY THAT MERELY FOR NON MAINTENANCE OF STOCK REGISTER AND FOR LOW PROFIT NO GP ADDITION CAN BE MADE. THE APPELLANT HAS FURTHER STATED THAT PAYMENT TO SISTER CONCERN CANNOT BE HEL D TO BE EXCESSIVE BY THE AO WITHOUT RINGING ON RECORD ANY MATERIAL REGARDING THE FAIR MARKET VALUE AS DECIDED BY HON'BLE ITAT, AHMEDABAD IN THE CASE OF BINIT CORPORATION (SUPRA) AS STATE ABOVE. FURTHER THE APPELLANT HAS SUBMITTED THAT THE MACHINE PRODUCED DURING THE CURRENT YEAR WAS ENTIRELY DIFFERENT AND TAILOR MADE MACHINE THEN THE ONE WHICH WAS PRODUCED IN A.Y.2002 - 03 AND HENCE THE GP RATE OF A.Y.2002 - 03 CANNOT BE MADE BASIS FOR THE CURRENT YEAR'S GP RATE. IT IS CLEAR THAT THE AO HAS NOT BEEN ABLE TO POI NT OUT MATERIAL DEFECTS TO REJECT THE BOOKS OF ACCOUNTS AND HENCE THE RELIANCE ON VARIOUS DECISIONS LIKE BHARAT MILK PRODUCTS (SUPRA) AND AVDHESH PRATAP SINGH ADBUL RAHMAN & ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 16 - BROTHERS ETC. ARE NOT APPLICABLE. THE GP RATE OF THE APPELLANT IS HIGHER THAN THE GP RATE OF LAST YEAR. THE APPELLANT HAS BEEN ABLE TO EXPLAIN WHY THE GP RATE IN A.Y.2002 - 03 WAS MUCH HIGHER. HENCE THE ADDITION MADE BY THE AO IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER PROCEEDED ON THE ASSUMPTION THAT THE GROSS PROFIT RATE DISCLOSED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS 9.05% AND ON THE BASIS OF THIS HE CO NSIDERING GROSS PROFIT RATE DISCLOSED IN THE PRECEDING TWO YEARS AT AN AVERAGE RATE WHICH WORKED OUT TO 19.665% AND THEREFORE, MADE TRADING ADDITION OF RS.1,08,96,008/ - . 32. THE ASSESSEE AT PAGE NO.70 OF THE PAPER - BOOK PLACED A WORKING OF THE GROSS PROFIT RATE OF THE YEAR UNDER CONSIDERATION ALONGWITH COPY OF THE TAX AUDIT REPORT AT PAGE NOS.15 - 37 OF THE PAPER - BOOK FILED BY BEFORE US. THE ABOVE WORKING SHOWS THAT THE GROSS PROFIT RATE DISCLOSED DURING THE YEAR WAS 17.26% AND NOT 9.05% AS ASSUMED BY THE ASS ESSING OFFICER. THUS, IT SHOWS THAT THE ASSESSING OFFICER PROCEEDED IN THE CASE ON A WRONG ASSUMPTION THAT THE GROSS PROFIT RATE DISCLOSED BY THE ASSESSEE DURING THE YEAR WAS 9.05%. FURTHER, WE FIND THAT AS OBSERVED BY THE CIT(A) THE MARKET IN WHICH THE A SSESSEE SOLD ITS GOODS IN EARLIER YEARS WAS DIFFERENT FROM THE MARKET IN WHICH THE ASSESSEE SOLD ITS GOODS DURING THE YEAR UNDER CONSIDERATION AND THIS CHANGE IN THE MARKET CAUSED CHANGE IN THE GROSS PROFIT RATE. IN ABSENCE OF ANY ERROR BEING POINTED OUT BY THE REVENUE IN THE ABOVE STATED FACTS , WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS CONFIRMED AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NOS. 1300 & 2030 /AHD/20 08 HIMSON INTERNATIONAL P LTD - AY 2004 - 05 - 17 - 3 3 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES , WHEREAS THE APPEAL OF THE REVENUE IS P ARTLY ALLOWED . ORDER PRONOUNCED IN THE COURT ON FRIDAY , THE 12 TH OF DECEMBER , 2014 AT AHMEDABAD. SD/ - SD/ - ( G.C. GUPTA ) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMB ER AHMEDABAD; DATED 12 / 12 /2014 * BIJU T , PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / C ONCERNED CIT 4. ( ) / THE CIT(A) - I, SURAT 5. , , / DR, ITAT, AHMEDABAD 6. [ / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD