The ITO, Ward-7(1), Ahmedabad V. M/s. Bonsai Phramachem, Himachal Pradesh

ITA 19/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1339 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Additional evidence; Benefit of exemption; Bonafide mistake

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ././ ./ ITA NO. 19/AHD/2012 / ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER, WARD-7 (1), AHMEDABAD VS M/S. BONSAI PHARMACHEM, KISHANPUR-BADDI-NALAGARH ROAD, DIST SOLAN, HIMACHAL PRADESH PAN : AAGFB 6593 F / // / (APPELLANT) / // / (RESPONDENT) REVENUE BY : SHRI PRASOON KABRA, SR DR ASSESSEE(S) BY : SHRI M K PATEL, AR / // / DATE OF HEARING : 27/06/2016 / // / DATE OF PRONOUNCEMENT: 01/07/2016 / // / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD , DATED 25.10.2011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. THE LD. COMMISSIONER OF INCOME-TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF THE CLAIM OF DEDUCT ION OF RS.3,89,93,876/- UNDER THE PROVISIONS OF SECTION 80 IC OF THE I.T. ACT. 2. THE LD. COMMISSIONER OF INCOME-TAX(A) HAS ERRED IN L AW AND ON FACTS IN ADMITTING ADDITIONAL EVIDENCES IN COURSE OF THE APPELLATE PROCEEDINGS IN VIOLATION OF RULE-46A OF THE I.T. RU LES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (A) MAY BE SET ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. ITA NO. 19/AHD/2012 ITO VS. BONSAI PHARMACHEM AY : 2008-09 2 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 1 43(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') WAS FRAMED VIDE ORDER DATED 29.12.2010. WHILE FRAMING THE ASS ESSMENT, THE ASSESSING OFFICER REJECTED THE CLAIM OF DEDUCTION M ADE U/S 80IC OF THE ACT AMOUNTING TO RS.3,89,93,876/- ON THE GROUND TH AT THE ASSESSEE DOES NOT MEET THE REQUIREMENTS OF LAW AS ENVISAGED U/S 80IC OF THE ACT. 2.1 THE ASSESSEE, AGGRIEVED BY THE AFORESAID ORDER OF THE ASSESSING OFFICER, PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CAME T O THE CONCLUSION THAT THE ASSESSING OFFICER HAS MERELY DISALLOWED TH E CLAIM OF THE ASSESSEE ON THE BASIS OF PRESUMPTION. 2.2 AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVEN UE HAS PREFERRED THE PRESENT APPEAL. 3. THE FIRST GROUND IS AGAINST DELETING THE DISALLO WANCE MADE ON ACCOUNT OF REJECTION OF CLAIM U/S 80IC OF THE ACT A MOUNTING TO RS.3,89,93,876/-. 3.1 LD. DR VEHEMENTLY ARGUED THAT THE LD. CIT(A) WA S NOT JUSTIFIED IN DELETING THE DISALLOWANCE. LD. DR SUBMITTED TH AT THE ASSESSING OFFICER HAS EXAMINED THE CLAIM AND HAS GIVEN A FIND ING THAT THE ASSESSEE DOES NOT MEET THE REQUIREMENTS OF LAW FOR CLAIMING THE DEDUCTION U/S 80IC OF THE ACT. LD. DR FURTHER SUBM ITTED THAT FROM THE MODUS OPERANDI OF CLOSING THE BUSINESS OPERATION OF PARTNER-COMPANY AND FORMATION OF BUSINESS IN THE NEWLY CONSTITUTED BUSINESS IN THE ITA NO. 19/AHD/2012 ITO VS. BONSAI PHARMACHEM AY : 2008-09 3 NAME AND STYLE OF ASSESSEE-FIRM IS NOTHING BUT THE SHIFTING OF THE EXISTING BUSINESS TO THE AREA SPECIFIED ELIGIBLE FO R DEDUCTION U/S 80IC OF THE ACT. 3.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE S HRI M. K. PATEL OPPOSED THE SUBMISSIONS OF THE LD. DR AND SUPPORTED THE ORDER OF THE LD. CIT(A). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FINDING OF THE ASSESSING OFFICER IS FACTUALLY INCORRECT AND, A S SUCH, THE DEDUCTION HAS BEEN DISALLOWED BY THE ASSESSING OFFICER PURELY ON THE BASIS OF CONJUNCTION AND SURMISES. HE DREW OUR ATTENTION TO THE PAPER-BOOK TO DEMONSTRATE THAT THERE WAS A NEW UNDERTAKING ESTABL ISHED BY THE ASSESSEE-FIRM AND ALL REQUIREMENTS OF LAW ARE DULY MET WITH BY THE ASSESSEE-COMPANY FOR BECOMING ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IC OF THE ACT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER DECLINED THE CL AIM OF DEDUCTION ON THE BASIS THAT THE ASSESSEE-FIRM HAS BEEN CONSTITUT ED TO DEAL WITH THE PRODUCTS AS THAT OF THE PARTNERS COMPANY M/S. MAHA DEV DRUGS (GUJ) PRIVATE LIMITED, ONE OF THE PARTNERS OF THE ASSESSE E-FIRM, WHICH DISCONTINUED THE BUSINESS AND SHIFTED THE TURNOVER OF ITS BUSINESS TO THE ASSESSEE-FIRM IN WHICH IT HOLDS 10% SHARE OF PR OFITS. THIS SHOWS THAT THE SOLE OBJECT OF SHIFTING THE EXISTING BUSIN ESS OF M/S. MAHADEV DRUGS (GUJ) PRIVATE LIMITED TO THE ASSESSEE-FIRM RE SULTING INTO CLOSING DOWN ITS OWN BUSINESS. THE ASSESSING OFFICER FURTHE R OBSERVED THAT ONE OF THE PARTNERS NAMELY BONSAI PHARMACHEM LIMITE D, DESPITE OF THE TURNOVER OF RS.101.43 LACS IN THE FY 2005-06, S UCH PARTNER HAD ITA NO. 19/AHD/2012 ITO VS. BONSAI PHARMACHEM AY : 2008-09 4 INCURRED A LOSS OF RS.6.93 LACS. ON THE CONTRARY, T HE ASSESSEE-FIRM HAS SHOWN THE GROSS PROFIT OF RS.2,12,84,220/- AND NET PROFIT OF RS.1,22,69,063/- ON THE TOTAL SALE MADE OF RS.3,11, 99,200/- DURING THE PERIOD FROM SEPTEMBER 2006 TO MARCH 2007. FOR THE YEAR UNDER APPEAL, AS PER AUDIT REPORT IN FORM NO.3CD, THE GRO SS PROFIT OF RS.4,91,67,597/- AND NET PROFIT OF RS.3,89,93,876/- ON TOTAL SALE MADE ON RS.9,88,55,292/-. THEREFORE, THE ASSESSING OFFI CER WAS OF THE VIEW THAT THE CLOSING OF EXISTING BUSINESS OF THE PARTNE R COMPANY ON ONE HAND AND CONSTITUTION OF NEW FIRM ON THE SAME LINE OF BUSINESS WITH THE SIMILAR PRODUCTS ON THE OTHER HAND IS NOTHING B UT THE TRANSFER OF EXISTING BUSINESS TO NEW BUSINESS. 4.1 THE ASSESSING OFFICER ALSO OBSERVED THAT GOODS MIGHT HAVE BEEN PRODUCED AT THEIR OWN FACTORY AND MIGHT HAVE BEEN T RANSFERRED TO ASSESSEE-FIRM WITHOUT MAKING ANY ENTRIES IN THE BOO KS OF ACCOUNT. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES, THE ASSESSING OFFICER DECLINED THE CLAIM OF DEDUCTION O F THE ASSESSEE. HOWEVER, ON APPEAL, THE LD. CIT(A), AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE, HAS ALLOWED THE CLAIM OF THE ASSES SEE. 4.2 THE ISSUE BEFORE US FOR ADJUDICATION IS WHETHER THE ASSESSEE-FIRM IS ENTITLED FOR DEDUCTION U/S 80IC OF THE ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE YEAR UNDER APPEAL. AS PER SEC TION 80IC(4) OF THE ACT, FOLLOWING CONDITIONS ARE REQUIRED TO BE FULFIL LED BY THE UNDERTAKING OR ENTERPRISE WHO SEEKS DEDUCTION UNDER SECTION 80IC OF THE ACT:- ITA NO. 19/AHD/2012 ITO VS. BONSAI PHARMACHEM AY : 2008-09 5 (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECO NSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN TH AT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUS INESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. IN THE INSTANT CASE, THE OBJECTIONS OF THE ASSESSIN G OFFICER ARE TWOFOLD THAT THE ASSESSEE HAS ESTABLISHED THE SAME LINE OF BUSINESS WITH SIMILAR PRODUCTS AFTER CLOSING THE EXISTING BU SINESS OF THE PARTNER; THAT IS NOTHING BUT THE TRANSFER OF EXISTING BUSINE SS TO NEW BUSINESS. FURTHER, THE ASSESSING OFFICER DOUBTED THE ACTUAL P RODUCTION BY THE ASSESSEE. THE LD. CIT(A) HAS GIVEN THE FINDINGS OF FACTS IN HIS APPELLATE ORDER IN PARAGRAPH NO.3.3, WHICH READ AS UNDER:- 3.3 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE A.O. DISALLOWED THE CLA IM OF THE APPELLANT BY CONCLUDING THAT IT WAS MANUFACTURING THE SIMILAR PRODUCT AS THAT OF THE PARTNERS COMPANY, IT HAS BEEN CONSTITUTED WITH THE SOLE OBJECT OF SHIFTING THE EXISTING BUSINESS OF THE PARTNER COMPA NY WHICH DID NOT CLAIM ANY DEPRECIATION ON THE FIXED ASSETS AND THE APPELLANT COMPANY DID NOT FURNISH QUANTITATIVE RECONCILIATION OF FINI SHED GOODS AND RAW MATERIAL. THE A.O. HAS ALSO MENTIONED THAT IN ASSES SMENT YEAR 2007- 08, THE APPELLANT HAD CLAIMED DEDUCTION U/S. 10A FO R THE SAME BUSINESS, WHEREAS IN THE CURRENT YEAR, THE APPELLANT HAS CLAI MED DEDUCTION U/S. 80IC. SINCE THE CLAIM WAS NOT MADE IN THE FIRST YEA R ITSELF, THE APPELLANT CANNOT CLAIM IT IN THIS YEAR. DURING THE COURSE OF APPELLATE PROCEEDINGS, APPELLANT HAS SUBMITTED DETAILED INFORMATION REGARD ING ESTABLISHMENT OF THE UNIT AND HAS ALSO FURNISHED PHOTO COPIES OF THE PURCHASE BILLS OF THE MACHINERY. IT HAS ALSO SUBMITTED VARIOUS CERTIF ICATES SUCH AS REGISTRATION UNDER FACTORIES ACT, DRUG LICENSE WITH CHANGE OF NAME, ITA NO. 19/AHD/2012 ITO VS. BONSAI PHARMACHEM AY : 2008-09 6 CERTIFICATE FROM ENVIRONMENT PROTECTION AND POLLUTI ON CONTROL BOARD, REGISTRATION UNDER HP VAT ACT, DECLARATION FOR AVAI LING BENEFIT OF EXEMPTION UNDER CENTRAL EXCISE, NOC FROM FIRE DEPAR TMENT, LEDGER ACCOUNT FROM MACHINERY, PLANT AND UTILITY. THE APPE LLANT HAS SUBMITTED THAT THE UNIT HAS BEEN ESTABLISHED FOR THE FIRST TI ME BY PURCHASING NEW LAND, CONSTRUCTION OF NEW BUILDING, PURCHASE AND IN STALLATION OF NEW PLANT AND BUILDING AND MANUFACTURING ITEMS ELIGIBLE FOR DEDUCTION U/S. 80IC. THE APPELLANT HAS PURCHASED USED MACHINERY ON LY OF RS.2.52 LACS FROM ONE OF THE PARTNERS COMPANY AND WHICH IS BELOW THE PERMISSIBLE LIMIT OF 20% OF TOTAL PLANT AND MACHINERY AS ENVISA GED IN THE ACT. REGARDING THE CLAIM OF DEDUCTION U/S. 10A FOR A. Y. 2007-08, THE APPELLANT HAS SUBMITTED THAT THE SAME WAS A TYPOGRA PHICAL ERROR WHICH IS EVIDENT FROM THE FACT THAT THE AUDIT REPORT IN T HE FORM OF 10CCB CLEARLY MENTIONS THAT THE CLAIM IS MADE U/S. 80IC. IN FACT THE APPELLANT COULD NOT HAVE CLAIMED DEDUCTION U/S. 10A AS THE AP PELLANT DID NOT FULFILL THE CONDITIONS FOR THAT SECTION. THE APPELL ANT FULFILLS THE CONDITIONS U/S. 80IC. THE CHARTERED ACCOUNT HAS ALS O CLARIFIED THE BONAFIDE ERROR. THE APPELLANT HAS FURTHER SUBMITTED THAT IN THE PRESENT YEAR ALSO, THE YEAR OF CLAIM OF DEDUCTION HAS BEEN CLAIMED AS THE SECOND YEAR AND NOT THE FIRST YEAR. IT HAS ALSO BEEN MENTI ONED BY THE APPELLANT THAT THE RETURN FOR THAT YEAR HAS BEEN ACCEPTED BY THE DEPARTMENT. CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT, VARIOUS EVIDENCES SUBMITTED DURING THE COURSE OF APPEAL, I AM OF THE OPINION THAT THE APPELLANT SATISFIES ALL THE CONDITIONS FOR CLAIM OF DEDUCTION U/S. 80IC. THE A. O. HAS MERELY DISALLOWED THE CLAIM OF THE APPELLANT ON THE BASIS OF PRESUMPTION. HE HAS NOT GIVEN ANY MATERIAL FINDING AS TO WHETHER ANY PARTICULAR MACHINERY HAS BEEN SHIFTED T O HIMACHAL PRADESH OR THE APPELLANT HAS NOT IN FACT PRODUCED A NY PRODUCT AT THAT UNIT. ALL THE FINDINGS GIVEN BY THE A. O. ARE ON TH E BASIS OF PRESUMPTIONS AND WITHOUT ANY FACTUAL SUPPORT. REGAR DING THE CLAIM OF DEDUCTION U/S. 10A FOR A. Y. 2007-08, THE APPELLANT HAS DEMONSTRATED THAT IT WAS A BONAFIDE MISTAKE. THE CERTIFICATE ALS O SHOW THAT THE CLAIM WAS U/S. 80IC AND NOT U/S. 10A. IN THE PRESENT YEAR ALSO, THE APPELLANT HAS CLAIMED THE DEDUCTION FOR THE SECOND YEAR. THER EFORE, THE CLAIM OF THE APPELLANT U/S.80IC CANNOT BE DISALLOWED ON THIS GROUND IN THE PRESENT YEAR. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES, THE DI SALLOWANCE OF CLAIM U/S. 80IC MADE BY THE A. O. IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS, THEREFORE, ALLOWED. ITA NO. 19/AHD/2012 ITO VS. BONSAI PHARMACHEM AY : 2008-09 7 4.3 THE ABOVE FINDINGS OF THE LD. CIT(A) ARE NOT CO NTRADICTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE, THE OBJECTIONS OF THE ASSESSING OFFICER THAT THE NEW BU SINESS IS BY TRANSFER OF EARLIER BUSINESS AND NO PRODUCTION HAS BEEN ACTU ALLY MADE BY THE ASSESSEE ARE CONTRARY TO THE RECORD. HENCE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND T HE SAME IS HEREBY UPHELD. THUS, THE GROUND RAISED BY THE REVENUE IS REJECTED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 1 ST JULY, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (KUL BHARAT) JUDICIAL MEMBER AHMEDABAD; DATED 01/07/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, TRUE COPY / // / ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD