ACIT, New Delhi V. M/s. S. Gopal & Co., New Delhi

ITA 2621/DEL/2012

• Counselvise Citation: 262120114 RSA 2012
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 20-11-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 30-05-2012

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SHRI A.N. PAHUJA, AM & SHRI C.M. GARG, JM ITA NOS.2621 TO 2623/DEL/2012 AYS: 2003-04 TO 2005-06 A.C.I.T.,CENTRAL CIRCLE-2, ROOM NO.323, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI V/S . S. GOPAL & COMPANY, 240, OKHLA INDL. ESTATE, PHASE-III, NEW DELHI [PAN : AAJFS 6061 J] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI ADESH JAIN & AKSHAT JAIN, ARS REVENUE BY SHRI RAMESH CHANDER,DR DATE OF HEARING 21-11-2012 DATE OF PRONOUNCEMENT 14-12-2012 O R D E R A.N.PAHUJA:- THESE THREE APPEALS FILED ON 30.05.2012 BY THE REVE NUE AGAINST THREE SEPARATE ORDERS DATED 09-03-2012,20.03.2012 & 21.03.2012 OF THE LD. CIT(A)-III, NEW DELHI FOR THE AYS 2003-04,2004-05 & 2005-06 RESPECTIVELY, RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.2621/DEL./2012[AY 2003-04] 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF ` `3,41,00,000/- MADE BY THE ASSESSING OFFICER OUT OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IB OF THE INCOME-TAX ACT, 1961. 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. ITA NOS.2 621TO 2623/DEL./2012 2 I.T.A. NO.2622/DEL./2012[AY2004-05] 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF ` `4,53,56,754/- MADE BY THE ASSESSING OFFICER OUT OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IB OF THE INCOME-TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSE SSING OFFICER TO TREAT THE SALES AMOUNTING TO ` ` 14,99,17,747/- TO M/S SINGHAL MARKETING IN FINANCIAL YEAR 2003-04 ITSELF. 3. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE HEARING OF THE APPEAL. I.T.A. NO.2623/DEL./2012 [AY2005-06] 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING TH E ADDITION OF ` `7,29,787/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF EXPENDITURE ON SALES PROMOTION. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING TH E ADDITION OF ` ` 4,04,37,786/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNDISCLOSED INCOME. 3. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE HEARING OF THE APPEAL. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEALS F OR THE AY 2003-04 & 2004-05, FACTS, IN BRIEF, AS PER RELEVANT ORDERS FO R THE AY 2003-04 ARE THAT RETURN DECLARING INCOME OF ` ` 56,02,180/- WAS FILED BY THE ASSESSEE ON 02.12.2003 . ITA NOS.2 621TO 2623/DEL./2012 3 SUBSEQUENTLY, A SEARCH U/S 132 OF THE INCOME-TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONDUCTED IN GOPAL ZARDA GROUP OF CASES, INCLUDING THE ASSESSEE ON 15 TH JANUARY, 2009.. CONSEQUENTLY, A NOTICE U/S 153A O F THE ACT WAS SERVED UPON THE ASSESSEE. LATER, ON CHANGE OF JURISDICTION, IN RESPONSE TO ANOTHER NOTICE U/S 153A OF THE ACT ISSUED ON 17.02 .2010,THE ASSESSEE FILED RETURN DECLARING INCOME OF ` ` 56,02,178 ON 12.04.2010 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE CONTINUED ITS BUSINESS OF MANUFACTURING F LAVOURED CHEWING TOBACCO, PAN CHATNI, PAN MASALA, MOUTH FRESHENER ETC. FROM THE FOLLOWING PREMISES: I) 10-C, BAROTIWALA, DIST. SOLAN, HIMACHAL PRADESH; II) 39, BAROTIWALA, DIST. SOLAN HIMACHAL PRADESH; III) 18/5, SITE IV, PPSIDC, SAHIBABAD INDL. AREA, D ISTT. GHAZIABAD, U.P. IV) 18/10, SITE IV, PPSIDC, SAHIBABAD INDL. AREA,, DISTT. GHAZIABD U.P.; V) 266, OKHLA INDL. ESTATE, PHASE-III, NEW DELHI-20 ; VI) 296, FIE, PATPARGANJ INDL. AREA, PATPARGANJ, DE LHI-92 VII) 5998, KHARI BAOLI, DELHI-06 AND VIII) F-91, JAGATPURI, DELHI-51. AND CLAIMED DEDUCTION U/S 80IB OF THE ACT ON THE GR OUND THAT ASSESSEE CARRIED ON THE BUSINESS ACTIVITY ONLY AT BAROTIWALA , A BACKWARD AREA IN HIMACHAL PRADESH. THE ASSESSEE MANUFACTURED ITS PRODUCTS IN TERMS OF A BRAND LEASE AGREEMENT WITH M/S HARI CHAND SRI GOPAL AND PAID A N AMOUNT OF ` ` 54,63,571/- ON ACCOUNT OF ROYALTY IN THE YEAR UNDER CONSIDERATI ON. TO A QUERY BY THE AO, SEEKING I. COPY OF BRAND LEASE AGREEMENT WITH M/S HARI CHA ND SHRI GOPAL. II COMPLETE DETAIL (YEAR-WISE) OF ADDITION TO PLANT & MACHINERY AND ALL THE BILLS IN RESPECT OF MACHINERY ACQUIRED , ITA NOS.2 621TO 2623/DEL./2012 4 III DETAILS OF KEY EMPLOYEES ALONG WITH DETAIL OF T HEIR PAST EXPERIENCE, IV JUSTIFICATION OF GP/ NP IN COMPARISON TO SIST ER CONCERNS DOING SAME TYPE OF THE BUSINESS FROM DELHI OR OTHER NON EXEMPT AREA, V NAME AND ADDRESSES OF CSA( AGENTS) ALONGWITH YE AR-WISE SALE MADE THROUGH THEM IN VALUE AS WELL AS IN QUANT ITY OF EACH TYPE OF PRODUCT VI YEAR-WISE, QUANTITY-WISE, VALUE WISE SALE MADE TO RETAILERS IN PACKS OF 100 GMS OR LESS THAN THAT, AND FOR INDUSTR IAL USERS IN PACK OF ONE KG OR MORE. ABOVE DETAIL SHOULD BE SUBM ITTED FOR EACH TYPE OF PRODUCT IN VALUE AS WELL AS IN QUANTIT Y, VII DETAILS UTILIZATION OF PLANT & MACHINERY OR SAL E THEREOF AFTER DISCONTINUATION OF BUSINESS ACTIVITIES AT BAROTTIWA LA AFTER TERMINATION OF BRAND LEASE AGREEMENT WITH M/S HARI CHAND SHRI GOPAL. IN CASE OF SALE OF PLANT & MACHINERY, P LEASE SUBMIT COMPLETE DETAILS I,E. NAME AND ADDRESS OF TH E PARTIES TO WHOM THE PLANT & MACHINERY HAS BEEN SOLD, VIII DETAILS OF SSI UNITS THROUGH WHOM CARRIED ON THE BUSINESS ACTIVITIES DURING RELEVANT YEAR UNDER CONSIDERATION; THE ASSESSEE DID NOT FURNISH ANY DETAILS. THE REQU EST MADE VIDE ORDERSHEET ENTRY DATED 27.08.2010, 7.9.2010, 14.9.2010 AND SH OW CAUSE LETTER DATED 16.12.2010, WENT UNRESPONDED. ACCORDINGLY, IN THE A BSENCE OF DETAILS DESIRED BY THE AO AND ON THE BASIS OF FACTS FOUND DURING T HE SEARCH AND DURING POST SEARCH INVESTIGATION, THE AO OBSERVED THAT FOLLOWIN G ACTIVITIES WERE UNDERTAKEN BY THE ASSESSEE IN DELHI AND HIMACHAL PRADESH :- DELHI GODOWN 1. VARIOUS TYPES OF RAW MATERIAL/INGREDIENTS SUCH A S AROMATIC CHEMICALS, ATTARS, PERFUMERY COMPOUNDS, NATURAL & SYNTHETIC ESSENTIAL OILS, ETC. ARE PURCHASED. ITA NOS.2 621TO 2623/DEL./2012 5 2. THEN SOME OF THE RAW MATERIALS/INGREDIENTS ARE S ENT TO VARIOUS JOB WORKERS FOR PROCESSING. 3. THEN ALL THE RAW MATERIALS/INGREDIENTS PURCHASED AND RECEIVED FROM JOB WORKERS ARE CODED IN VARIOUS GROUPS SO THA T RAW MATERIALS/INGREDIENTS ARE NOT INDIVIDUALLY IDENTIFI ABLE. 4. AII THE CODED RAW MATERIALS / INGREDIENTS ARE TR ANSFERRED TO FACTORY AT BURANWALA, HIMACHAL PRADESH, WHERE THEY ARE PUT TO PROCESS OF BLENDING ACCORDING TO THE FORMULATIO N FOR VARIOUS KIND OF CHEWING TOBACCO TO BE USED IN MANU FACTURE OF FINAL PRODUCT I.E. CHEWING TOBACCO. NIANUFACTURING PROCESS OF CHEWING TOBACCO AT BADDI/BAROTIWALA 1. VARIOUS TYPES OF RAW MATERIALS / INGREDIENTS SUC H AS RAW TOBACCO, GLYCERIN, SILVER, MENTHOL, AROMATIC CHEMIC ALS, SAFFORN, TOBACCO EXTRACT (SADA KIWAM) ARE PURCHASED DIRECTLY FROM THE SUPPLIERS. SOME OF THE RAW MATERIALS/INGRE DIENTS ARE ALSO RECEIVED FROM DELHI GODOWN. 2. THEN RAW TOBACCO IS SIEVED IN VIBRATING SCREEN T O GET REQUIRED SIZE OF RAW TOBACCO FLAKES . 3 SILVER IS GOT CONVERTED INTO SILVER FLAKES FROM J OB WORKER. 4. THE PERFUMERY RAW MATERIALS/INGREDIENTS ARE MIXE D IN DIFFERENT PROPORTIONS TO MAKE PERFUMERY MIXTURE(S) AS PER THE FORMATION REQUIRED FOR SPECIFIC VARIETY OF CHEWING TOBACCO TO BE MANUFACTURED. 5. THEN PERFUMERY MIXTURE(S) ARE FURTHER MIXED WITH TOBACCO EXTRACT, GRINDED SPICES, AROMATIC CHEMICALS, PERFUM ED WATER ETC. IN A MIXER TO MAKE IN PROCESS KIWAM CALLED I PK 6. A FINAL BLEND I.E. ADDITIVE MIXTURE IS THEN PRE PARED BY MIXING IPK WITH OTHER AND FURTHER PERFUMERY MIXTURE (S), G RINDED SPICES, AROMATIC CHEMICALS, MENTHOL, SAFFRON ETC. I N VARIOUS PROPORTION AS PER FORMULATION REQUIRED FOR SPECIFIC VARIETY OF CHEWING TOBACCO TO BE MANUFACTURED. 7. SIEVED RAW TOBACCO FLAKES, ADDITIVE MIXTURE & GL YCERIN ARE THEN PUT IN A MIXER/BLENDER AND MIXED TO MANUFACTUR E FINAL PRODUCT I.E. FLAVORED CHEWING TOBACCO. ITA NOS.2 621TO 2623/DEL./2012 6 8. SILVER FLAKES ARE THEN MIXED IN MANUFACTURED CHE WING TOBACCO IN MIXER/BLENDER IN SOME OF THE VARIANTS. 9. THE MANUFACTURED FLAVORED CHEWING TOBACCO (WITH OR WITHOUT SILVER FLAKES) IS PACKED IN VARIOUS PACKAGING LIKE TIN/POUCH/JAR OF DIFFERENT SIZES WITH THE HELP OF V ARIOUS PACKAGING MACHINES. 10. THESE TINS/POUCHES/JARS ARE PACKED IN CORRUGATE D BOXES WHICH ARE FURTHER PACKED IN MASTER CARTONS/LAMINATE D BAGS BEFORE BEING DISPATCHED FROM FACTORY. 2.1 THE AO FURTHER OBSERVED THAT OUT OF EIGHT OFFI CES, SIX WERE LOCATED IN DELHI AND ITS ADJOINING AREAS. THE MAJOR ACTIVI TIES WERE DONE ELSEWHERE AND GOODS WERE TRANSFERRED FOR REPACKING TO HIMACHAL PR ADESH. THE BUSINESS TRANSACTIONS WERE SO ARRANGED THAT PROFIT MARGINS D ECLINED SUBSTANTIALLY ON THE SAME BUSINESS TRANSACTED BETWEEN THEM PRODUCED TO T HE ASSESSEE FIRM MORE THAN ORDINARY PROFITS THAT MIGHT BE EXPECTED TO ARI SE IN SUCH BUSINESS AS APPARENT FROM THE FACT THAT PROFIT MARGINS DECLINED SUBSTANTIALLY ON TRANSFER OF TOBACCO BUSINESS FROM THE ASSESSEE FIRM TO ITS SUCC ESSOR M/S FLAKES-N-FLAVOURZ AND THEN TO M/S GOPAL CORPN. LTD. ,AFTER EXHAUSTING TIME BOUND DEDUCTION U/S 80IB OF THE ACT. SINCE THE ASSESSEE FAILED TO SUBS TANTIATE THE FACT THAT TRANSFER OF GOODS FROM DELHI UNITS TO HIMACHAL UNIT, CLAIMING D EDUCTION U/S 80IB, HAD BEEN MADE AT MARKET VALUE, THE AO WHILE REFERRING TO PRO VISIONS OF SECTION 80IA (8) OF THE ACT OBSERVED THAT THE ASSESSEE DID NOT SUBSTANT IATE ITS CLAIM AS TO WHICH EXPENDITURE IS UNDERTAKEN BY THE ASSESSEE IN THE BA CKWARD AREA IN HIMACHAL PRADESH NOR THE ASSESSEE FURNISHED DETAILS OF MANUF ACTURING ACTIVITY, ENERGY CONSUMPTION, WORKERS USED FOR MANUFACTURING ACTIVIT Y IN RESPECT OF VARIOUS MANUFACTURING BASES OF THE ASSESSEE. SINCE THE CON TROL, POLICY DECISIONS AND KEY FUNCTIONS LIKE PURCHASES OF RAW MATERIAL AND SA LES WERE BEING UNDERTAKEN AT DELHI AND NO SEPARATE EXPENDITURE PERTAINING TO VA RIOUS OFFICES AT DELHI WAS REFLECTED AND APPORTIONED TO THE BUSINESS ACTIVITIE S CARRIED OUT FROM DELHI OR BAROTIWALA , WHILE REFERRING TO STATEMENT OF SHRI G OPAL GUPTA RECORDED DURING THE SEARCH WHEREIN SHRI S. GOPAL REVEALED THAT THEY MA NUFACTURED ZARDA IN THE NAME OF THE ASSESSEE IN BAROTIWALA TILL 2002-03 AND THEREAFTER, STOPPED ITA NOS.2 621TO 2623/DEL./2012 7 MANUFACTURING ACTIVITY DUE TO EXPIRY OF BRAND LEASE AGREEMENT WITH M/S HARI CHAND SHRI GOPAL, THE AO CONCLUDED AS UNDER:- 5.5. IN THIS CONTEXT IT WOULD NOT BE OUT OF PLACE TO MENTION HERE THAT IN THE AUDITORS REPORT U/S 10 CCB TOO THE REGISTERED OFFICE HAS BEEN SHOWN AT 240, OKHLA INDUSTRIAL ESTATE PHAS E-III, NEW DELHI WHICH IS THE OFFICE ADDRESS OF VARIOUS OTHER CONCERNS OF GOPAL GROUP. THE ADDRESS OF UNDERTAKING HAS BEEN GIVEN AT BAROTIWALA, DISTT SOLAN, HIMACHAL PRADESH. NUMBER OF WORKERS HA VE BEEN SHOWN AT 178, AND TOTAL EXPENDITURE ON WAGES HAD BE EN DECLARED AT RS.90,79,474/- I.E. RS.51,008/- PER WORKER WITH AVERAGE SALARY OF RS.4250/-PER MONTH. FURTHER DETAILS OF EMPLOYEES WO RKING IN THE UNDERTAKING HAVE NOT BEEN PROVIDED IN SPITE OF SPEC IFICALLY BEING ASKED FOR WHICH CLEARLY SHOWS THAT EXPENDITURE ON T HEIR SALARIES WERE BORNE BY OTHER UNITS SO AS TO INFLATE THE PROF IT OF THE UNDERTAKING. FURTHER AN UNDERTAKING SHOULD BE INDEP ENDENT FOR CARRYING OUT THE BUSINESS ACTIVITIES FROM THE STAGE OF PURCHASE OF THE GOOD TO MANUFACTURE AND MARKET THE SAME WHICH I S NOT IN THE CASE OF ASSESSEE FIRM. THE ASSESSEE FIRM IS HAVING TWO LST NO., ONE FOR THE DELHI OFFICE AND OTHER FOR HIMACHAL PRA DESH AND MAJOR SALES ARE UNDERTAKEN AT OKHLA OFFICE FROM WHERE THE GOODS ARE SOLD TO VARIOUS CSA AND LOCAL SALES IN DELHI ARE CONDUCT ED FROM THE OFFICE AT KHARI BAOLI. FURTHER IN SPITE OF SPECIFIC OPPORTUNITIES THE ASSESSEE HAS FAILED TO FURNISH DETAILS OF EMPLOYEES BASED AT VARIOUS UNITS ,INTER UNIT TRANSFER AND COMPARABLE R ATE AT WHICH THE ITEMS TRANSFERRED ARE SOLD TO OTHER PARTIES, DETAIL S OF SALES MADE FROM DELHI AND HIMACHAL PRADESH. AS AFTER CONSIDERI NG ALL THE ASPECT OF THE CASE IT HAS BEEN HELD THAT THE ASSESS EE FIRM HAS CLAIMED EXCESSIVE DEDUCTION U/S 80 LB,ON A MOST CON SERVATIVE ESTIMATE THE 15% OF THE PROFIT OF THE UNIT CAN BE A TTRIBUTED TO BUSINESS ACTIVITIES BEING RUN IN NON SPECIFIED AREA ON THE BASIS OF SALIENT FEATURES OF THE CASE. UNDER THE CIRCUMSTANC ES 15% OF THE NET PROFIT OF RS.22.74 CRORES (AS CLAIMED BY THE AS SESSEE EARNED FROM BACKWARD AREA) I.E. RS.3.41 CRORES IS HELD TO BE PERTAINING TO OTHER UNITS BEING RUN IN NON SPECIFIED AREA AND NOT ELIGIBLE FOR DEDUCTION U/S 80-IB. AS A RESULT OF THE SAME ADMIS SIBLE DEDUCTION IS RESTRICTED TO RS.19,33,93,711/- ( 22,74,93,711-3 ,41,00,000). AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F INCOME, PENALTY U/S 271(1) (C) IS ATTRACTED AND BEING INITI ATED. 2.2 ACCORDINGLY THE AO RESTRICTED THE CLAIM OF DE DUCTION U/S 80IB OF THE ACT TO ` 19,33,93,711/-. ITA NOS.2 621TO 2623/DEL./2012 8 3. LIKEWISE, IN THE AY2004-05, THE AO RESTRICTED T HE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT TO ` ` 25,70,21,608/- AND DISALLOWED AN AMOUNT OF ` `4,53,56,754/- WHILE EXCLUDING INCOME OF ` 4,04,37,786/-PERTAINING TO THE AY 2005-06. 4. ON APPEAL, THE LD.CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE IN THE AY 2003-04, HOLDING AS UNDER:- 4. ON A CAREFUL CONSIDERATION OF THE FINDING OF T HE AO AND THE SUBMISSION FILED BY THE APPELLANT IT IS SEEN THAT T HE BASIC REASON FOR ESTIMATING THAT THE CLAIM OF DEDUCTION U/S 80 IB , TO THE EXTENT OF 15% OF THE PROFIT OF THE UNIT, IS NOT TO BE ALLOWED TO THE APPELLANT BY THE A.O. IS THAT 15% OF THE PROFIT OF THE UNIT CAN BE ATTRIBUTED TO BUSINESS ACTIVITIES BEING RUN IN NOT SPECIFIED AREA ON THE BASIS OF SALIENT FEATURES OF THE CASE. ON THE OTHER HAND THE CASE OF THE APPELLANT IS THAT IT IS HAVING ONLY ONE MANUFACTURI NG UNIT AT BAROTIWALA, SOLAN, H.P. AND THAT ONLY ADMINISTRATIV E OFFICES AND GODOWN IS SITUATED AT DELHI. THAT THERE HAS BEEN NO INTER UNIT TRANSFER MADE DURING THE FINANCIAL YEAR UNDER CONSI DERATION. THAT THE APPELLANT IS MANUFACTURER OF TOBACCO PRODUCTS A ND IS LIABLE TO REGISTER IT'S MANUFACTURING UNDERTAKING WITH EXCISE DEPARTMENT. REFERRING TO FORM 10CCB WITH REFERENCE TO WHICH THE AO HAS OBSERVED THAT THE APPELLANT HAS TWO LST NUMBERS ONE FOR DELHI OFFICE AND OTHER FOR HP AND THAT MAJOR SALES ARE UN DERTAKEN AT OKHLA OFFICE, AT DELHI , THE APPELLANT HAS SUBMITTE D THAT IN THE SAME FORM 10CCB IT IS MENTIONED THAT THE APPELLANT HAS O NLY ONE MANUFACTURING UNIT AT BADDI, SOLAN. IN PARA 17 OF H IS SUBMISSION THE APPELLANT HAS STATED THAT IT HAS DEBITED ALL EXPENS ES IN THE P & L ACCOUNT PERTAINING TO MANUFACTURING UNIT AT BADDI A ND THE ADMINISTRATIVE AND SALES OFFICES AT DELHI AND THERE FORE THERE IS NO INFLATION OF EXPENSES AT ADMINISTRATIVE AND SALES O FFICES AT DELHI AND NO DEFLATION OF EXPENSES OF MANUFACTURING UNIT AT BADDI, TO CLAIM ADDITIONAL DEDUCTION U/ 80IB OF THE IT ACT. I T HAS BEEN SUBMITTED THAT EVEN IF THE ALLEGATION OF THE AO IS CONSIDERED TO BE CORRECT THE ELIGIBLE PROFIT OF THE APPELLANT WILL R EMAIN SAME RESULTING IN SAME DEDUCTION U/S 80IB AS THE APPELLANT HAS ONL Y ONE MANUFACTURING UNIT AND ALL THE EXPENSES ARE CHARGED AGAINST THE SALE OF MANUFACTURED TOBACCO PRODUCTS. IN PARA 19 & 20 OF THE SUBMISSION THE APPELLANT HAS REFERRED THAT THE CASE OF THE APPELLANT WAS EARLIER ASSESSED U/S 143(3) OF THE IT ACT AND T HE THEN AO HAD ALLOWED THE DEDUCTION CLAIMED BY THE APPELLANT U/S 80 IB (4) AND THAT NO NEW EVIDENCE HAS BEEN UNEARTHED IN RESPECT OF EXCESSIVE DEDUCTION U/S 80IB BY THE APPELLANT OR IN RESPECT O F EXISTENCE OF ITA NOS.2 621TO 2623/DEL./2012 9 ANY OTHER MANUFACTURING UNIT OTHER THAN BADDI UNIT DURING THE COURSE OF SEARCH. FROM THE ABOVE DISCUSSION THE ESTABLISHED POSITION EMERGING IN THE FACTS OF THE CASE ARE THAT WHILE THE ASSESSEE D OES HAVE ADMINISTRATIVE OFFICES AT DELHI AND AS WELL AS A GO DOWN BUT THEN THE BASIC MANUFACTURING PROCESS OF CHEWING TOBACCO IS C ARRIED OUT AT BADDI, SOLAN HP. IN FACT THE DETAILED STEPS INVOLVE D IN THE SAID MANUFACTURING PROCESS HAS BEEN HIMSELF NARRATED BY THE AO IN THE ASSESSMENT ORDER. IN FACT THE A.O. NOTES THAT 'VARIOUS TYPES OF RAW MATERIALS/ INGREDIENTS SUCH AS RAW TOBACCO, GLYCERIN, SILVER, MENTHOL, AROMATIC CHEMICALS, SAFFRON, TOBACCO EXTRACT (SADA KIWAM) ARE PURCHASED DIRECTLY FROM THE SUPPLIERS. SOME OF THE RAW MATERIALS/ INGREDIENTS ARE ALSO RECEIVED FROM DELHI GODOWN. NOW THE QUESTION TO BE ANSWERED IS WHETHER BECAUSE OF THE FACT THAT CERTAIN RAW MATERIAL IS PURCHASED AT DELHI AND STORED IN GODOWN AND UPON PROCESSING OF SOME OF SUCH RAW MATE RIAL WHICH ARE CODED IN VARIOUS GROUPS (SO THAT THEY ARE NOT I NDIVIDUALLY IDENTIFIABLE) BEFORE THEY ARE TRANSFERRED TO FACTOR Y AT BAROTIWALA COULD BE REASON ENOUGH TO RESTRICT THE CLAIM OF DED UCTION U/S 80 IB OF THE IT ACT. IN MY CONSIDERED VIEW MERELY BECAUSE PURCHASES OF S OME RAW MATERIAL IS MADE AT DELHI AND MAJOR SALES ARE BOOKE D FROM DELHI OFFICES IS NOT SUFFICIENT OR RELEVANT REASON TO RES TRICT THE CLAIM OF DEDUCTION U/S 80 1B. IN FACT THE ENTIRE MANUFACTURI NG PROCESS TAKES PLACE AT BADDI AND IT IS ON ACCOUNT OF THIS MANUFAC TURING ACTIVITY ALONE BY THE SOLE UNIT OF THE ASSESSEE THAT THE FIN AL MARKETABLE COMMODITY COMES IN EXISTENCE RESULTING IN PROFIT TO THE APPELLANT. TO PUT IT DIFFERENTLY, THE ANCILLARY, PERIPHERAL AN D ADJUNCT ACTIVITIES CARRIED OUT AT PRE MANUFACTURING STAGE AND SUBSEQUE NTLY FOR EFFECTING SALES PER SE WOULD NOT RESULT INTO ANY PR OFIT TO THE UNIT AS THE ASSESSEE DOES NOT INDULGE IN SALES OF RAW MATER IAL OR PRE- MANUFACTURED PRODUCTS. IN FACT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE WAS EARNING PROFIT OUT OF THE SAL E OF RAW MATERIAL PURCHASED IN THE INITIAL STAGES AT DELHI OR SUBSEQU ENTLY PROCESSED AND SOLD IN THE MARKET. RATHER THE AO HIMSELF HAS H IMSELF NOTED IN HIS ORDER THAT UPON PROCESSING OF SOME OF THE RAW M ATERIAL THESE ARE PACKED IN 'CODED FORM' BEFORE BEING SENT TO BAD DI FOR CARRYING OUT THE MANUFACTURING PROCESS. THUS THERE IS NO PRO FIT DERIVED BY THE ASSESSEE WHICH IS INDEPENDENT FROM THAT OF THE MANUFACTURING PROCESS CARRIED OUT BY THE UNDERTAKING AT BADDI. RA THER THE PROFIT IS DERIVED BY THE ASSESSEE ON ACCOUNT OF THE VALUE ADD ITION MADE ITA NOS.2 621TO 2623/DEL./2012 10 THROUGH MANUFACTURING OF CHEWING TOBACCO WITH TAKES PLACE AT BADDI. MOREOVER THERE IS NO PROVISION IN SECTION 80IB TO S UGGEST THAT THE UNDERTAKING SHOULD BE INDEPENDENT IN CARRYING OUT T HE BUSINESS ACTIVITIES FROM THE STAGE OF THE PURCHASE OF THE GO ODS TO IT'S MANUFACTURE AND MARKETING AND THEN ONLY FULL DEDUCT ION U/S 80IB COULD BE ALLOWED. IN VIEW OF THE ABOVE FACTS THE ESTIMATED DISALLOWAN CE OF 15% OF THE PROFIT OF THE UNIT MADE U/S 80IB IS HELD TO BE BASE D ON CONJECTURE AND SURMISES, WHICH IS NOT TENABLE UNDER THE LAW. THERE IS ALSO SUBSTANCE IN THE ARGUMENT OF THE APPE LLANT THAT IN HIS CASE ASSESSMENT ORDER U/S 143(3) FOR THE INSTANT AS SESSMENT YEAR WAS EARLIER PASSED ON 14.02.06 WHERE IN THE CLAIM O F DEDUCTION U/S 80IB WAS ALLOWED UPON VERIFICATION AND THAT NO ADVE RSE EVIDENCE HAS BEEN FOUND DURING THE SEARCH WHICH BRINGS OUT T HE FACT THAT EXCESSIVE DEDUCTION HAS BEEN CLAIMED U/S 80IB BY TH E APPELLANT AND THEREFORE THIS TANTAMOUNTS TO MERE CHANGE OF OP INION WITHOUT ANY COGENT EVIDENCE AND THEREFORE THE FINDING OF TH E AO IS BAD IN LAW. HOWEVER NO SEPARATE FINDING ON THIS ASPECT BEI NG GIVEN AS ON MERITS THE CLAIM OF DEDUCTION IN FULL IS ALLOWABLE TO THE APPELLANT, AS PER THE ABOVE DISCUSSION. THE AO IS THEREFORE DIREC TED TO DELETE THE ADDITION TO INCOME MADE FOR RS.3,41.,00,000/-. 5. SIMILARLY, IN THE AY 2004-05, THE LD. CIT(A) ALL OWED THE CLAIM OF THE ASSESSEE, HOLDING AS UNDER:- THE APPELLANT FURTHER CONTENDED THAT IN VIEW OF TH E FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND THE DECISION CITED ABOVE, THE LEARNED ASSESSING OFFICER ERRED BOTH IN FACT AND LAW IN ARBITRARILY MADE AD HOC DISALLOWANCE @15% OF DEDUCT ION OF RS.4,53,56,754/- CLAIMED UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 ONLY ON THE BASIS OF CONJECTURE, SURMISES AND SUSPICION WITHOUT BRINGING IN ANY MATERIAL ON RECORD THAT ANY OTHER MANUFACTURING UNDERTAKING WAS EXISTED AND SITUATED AT NON - SPECIFIED AREA OTHER THAN MANUFACTURING UNDERTAKING SITUATED AT BADDI, SOLAN, HIMACHAL PRADESH. THE LEARNED ASSESSI NG OFFICER ALSO ERRED IN LAW IN MAKING PARTIAL DISALLOWANCE OF DEDUCTION AS NO NEW EVIDENCE HAS BEEN UNEARTHED IN RESPECT OF EXCES SIVE DEDUCTION CLAIMED UNDER SECTION 80-IB BY THE APPELL ANT OR IN RESPECT OF EXISTENCE OF ANY OTHER MANUFACTURING UNI T OTHER THAN BADDI UNIT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION ITA NOS.2 621TO 2623/DEL./2012 11 CARRIED OUT UNDER SECTION 132 OF THE INCOME TAX ACT , 1961 BY MERELY CHANGE OF OPINION WHEN THE CASE OF THE APPEL LANT WAS ALSO ASSESSED UNDER SECTION 143(3) FOR THE SAID ASSESSME NT YEAR AND THE THEN LEARNED ASSESSING OFFICER ALLOWED DEDUCTIO N UNDER SECTION 80-IB IN FULL. THEREFORE, ESTIMATED DISALLOWANCE OF RS.8,57,94,540/- (RS.8,57,94,540/-, BEING SUM OF DISALLOWANCE OF DED UCTION OF RS.4,04,37,786/- ON ACCOUNT OF REJECTION OF SALE AN D 15% AD HOC DISALLOWANCE OF DEDUCTION OF RS.4,53,56,754/-) ON A CCOUNT OF AD HOC PARTIAL DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 MADE ARBITRARILY ONLY ON THE B ASIS OF CONJECTURE, SURMISES AND SUSPICION IS BAD IN LAW AN D DISALLOWANCE OF RS.8,57,94,540/-LIABLE TO BE DELETED. FROM THE SECOND PART OF THE ASSESSMENT ORDER (START ING FROM PARA 6 ONWARDS) OF THE AO IT IS OBSERVED THAT THE BASIC RE ASON FOR ESTIMATING THAT THE CLAIM OF DEDUCTION ULS 80 1B, T O THE EXTENT OF 15% OF THE PROFIT OF THE UNIT, IS NOT TO BE ALLOWAB LE TO THE APPELLANT IS THAT 15% OF THE PROFIT OF THE UNIT CAN BE ATTRIBUTE D TO BUSINESS ACTIVITIES BEING RUN IN NOT SPECIFIED AREA ON THE B ASIS OF SALIENT FEATURES OF THE CASE. ON THE OTHER HAND THE CASE OF THE APPELLANT IS THAT IT IS HAVING ONLY ONE MANUFACTURING UNIT AT BA ROTIWALA, SOLAN, H.P. AND THAT ONLY ADMINISTRATIVE OFFICES AND GODOW N IS SITUATED AT DELHI. THAT THE APPELLANT IS MANUFACTURER OF TOBACC O PRODUCTS AND IS LIABLE TO REGISTER IT'S MANUFACTURING UNDERTAKING W ITH EXCISE DEPARTMENT. REFERRING TO FORM 10CCB WITH REFERENCE TO WHICH THE AO HAS OBSERVED THAT THE APPELLANT HAS TWO LST NUMB ERS ONE FOR DELHI OFFICE AND OTHER FOR HP AND THAT MAJOR ')ALES ARE UNDERTAKEN AT OKHLA OFFICE, AT DELHI, THE APPELLANT HAS SUBMITTED THAT IN THE SAME FORM 10 CCB IT IS MENTIONED THAT THE APPELLANT HAS ONLY ONE MANUFACTURING UNIT AT BADDI, SOLAN. IN HIS SUBMISSI ON THE APPELLANT HAS STATED THAT IT HAS DEBITED ALL EXPENSES IN THE P & L ACCOUNT PERTAINING TO MANUFACTURING UNIT AT BADDI AND THE A DMINISTRATIVE AND SALE OFFICES AT DELHI AND THEREFORE THERE IS NO INF LATION OF EXPENSES AT ADMINISTRATIVE AND SALES OFFICES AT DELHI AND NO DEFLATION OF EXPENSES OF MANUFACTURING UNIT AT BADDI, TO CLAIM A DDITIONAL DEDUCTION U/S 80M OF THE IT ACT. IT HAS BEEN SUBMIT TED THAT EVEN IF THE ALLEGATION OF THE AO IS CONSIDERED TO BE CORREC T THE ELIGIBLE PROFIT OF THE APPELLANT WILL REMAIN SAME RESULTING IN SAME DEDUCTION U/S 80M AS THE APPELLANT HAS ONLY ONE MANUFACTURING UNIT AND ALL THE EXPENSES ARE CHARGED AGAINST THE SALES OF MANUF ACTURED TOBACCO PRODUCTS. IN LAST PARA OF THE SUBMISSION TH E APPELLANT HAS REFERRED THAT THE CASE OF THE APPELLANT WAS EARLIER ASSESSED U/S 143(3) OF THE IT ACT AND THE THEN AO HAD ALLOWED TH E DEDUCTION CLAIMED BY THE APPELLANT U/S 80M (4) AND THAT NO NE W EVIDENCE HAS BEEN UNEARTHED IN RESPECT OF EXCESSIVE DEDUCTION U/ S 80 1B BY THE ITA NOS.2 621TO 2623/DEL./2012 12 APPELLANT OR IN RESPECT OF EXISTENCE OF ANY OTHER M ANUFACTURING UNIT OTHER THAN BADDI UNIT DURING THE COURSE OF SEARCH. FROM THE ABOVE DISCUSSION THE ESTABLISHED POSITION EMERGING IN THE FACTS OF THE CASE ARE THAT WHILE THE ASSESSEE DOES HAVE ADMINISTRATIVE OFFICES AT DELHI AND AS WELL AS A GO DOWN BUT THEN THE BASIC MANUFACTURING PROCESS OF CHEWING TOBACCO IS C ARRIED OUT AT BADDI, SOLAN HP. IN FACT THE DETAILED STEPS INVOLVE D IN THE SAID MANUFACTURING PROCESS HAS BEEN HIMSELF NARRATED BY THE AO IN THE ASSESSMENT ORDER. IN FACT THE A.O. NOTES THAT 'VARI OUS TYPES OF RAW MATERIALS/ INGREDIENTS SUCH AS RAW TOBACCO, GLYCERI N, SILVER, MENTHOL, AROMATIC CHEMICALS, SAFFRON, TOBACCO EXTRA CT (SADA KIWAM) ARE PURCHASED DIRECTLY FROM THE SUPPLIERS. S OME OF THE RAW MATERIALS/ INGREDIENTS ARE ALSO RECEIVED FROM DELHI GODOWN.' NOW THE QUESTION TO BE ANSWERED IS WHETHER BECAUSE OF T HE FACT THAT CERTAIN RAW MATERIAL IS PURCHASED AT DELHI AND STOR ED IN GODOWN AND UPON PROCESSING OF SOME OF SUCH RAW MATERIAL WH ICH ARE CODED IN VARIOUS GROUPS ( SO THAT THEY ARE NOT INDIVIDUAL LY IDENTIFIABLE) BEFORE THEY ARE TRANSFERRED TO FACTORY AT BAROTIWAL A COULD BE REASON ENOUGH TO RESTRICT THE CLAIM OF DEDUCTION U/S 80 IB OF THE IT ACT. IN MY CONSIDERED VIEW MERELY BECAUSE PURCHASES OF S OME RAW MATERIAL IS MADE AT DELHI AND MAJOR SALES ARE BOOKE D FROM DELHI OFFICES IS NOT SUFFICIENT OR RELEVANT REASON TO RES TRICT THE CLAIM OF DEDUCTION U/S 80IB. IN FACT THE ENTIRE MANUFACTURIN G PROCESS TAKES PLACE AT BADDI AND IT IS ON ACCOUNT OF THIS MANUFAC TURING ACTIVITY ALONE BY THE SALE UNIT OF THE ASSESSEE THAT THE FIN AL MARKETABLE COMMODITY COMES IN EXISTENCE RESULTING IN PROFIT TO THE APPELLANT. TO PUT IT DIFFERENTLY THE ANCILLARY, PERIPHERAL AND ADJUNCT ACTIVITIES CARRIED OUT AT PRE MANUFACTURING STAGE AND SUBSEQUE NTLY FOR EFFECTING SALES PER SE WOULD NOT RESULT INTO ANY PR OFIT TO THE UNIT AS THE ASSESSEE DOES NOT INDULGE IN SALES OF RAW MATER IAL OR PRE- MANUFACTURED PRODUCTS. IN FACT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE WAS EARNING PROFIT OUT OF THE SAL E OF RAW MATERIAL PURCHASED IN THE INITIAL STAGES AT DELHI OR SUBSEQU ENTLY PROCESSED AND SOLD IN THE MARKET. RATHER THE AO HAS HIMSELF N OTED IN HIS ORDER THAT UPON PROCESSING OF SOME OF THE RAW MATER IAL THESE ARE PACKED IN 'CODED FORM' BEFORE BEING SENT TO BADDI F OR CARRYING OUT THE MANUFACTURING PROCESS. THUS THERE IS NO PROFIT DERIVED BY THE ASSESSEE WHICH IS INDEPENDENT FROM THAT OF THE MANU FACTURING PROCESS CARRIED OUT BY THE UNDERTAKING AT BADDI. RA THER THE PROFIT IS DERIVED BY THE ASSESSEE ON ACCOUNT OF THE VALUE ADD ITION MADE THROUGH MANUFACTURING OF CHEWING TOBACCO WITH TAKES PLACE AT BADDI. ITA NOS.2 621TO 2623/DEL./2012 13 MOREOVER THERE IS NO PROVISION IN SECTION 80 IB TO SUGGEST THAT THE UNDERTAKING SHOULD BE INDEPENDENT IN CARRYING OUT T HE BUSINESS ACTIVITIES FROM THE STAGE OF THE PURCHASE OF THE GO ODS TO IT'S MANUFACTURE AND MARKETING AND THEN ONLY FULL DEDUCT ION ULS 80 IB COULD BE ALLOWED. IN VIEW OF THE ABOVE FACTS THE ESTIMATED DISALLOWAN CE OF 15% OF THE PROFIT OF THE UNIT MADE U/S 80 1B IS HELD TO BE BAS ED ON CONJECTURE AND SURMISES, WHICH IS NOT TENABLE UNDER THE LAW. THERE IS ALSO SUBSTANCE IN THE ARGUMENT OF THE APPE LLANT THAT IN HIS CASE ASSESSMENT ORDER U/S 143(3) FOR THE INSTANT AS SESSMENT YEAR WAS EARLIER PASSED ON 27.09.06 WHERE IN THE CLAIM O F DEDUCTION U/S 80 IB WAS ALLOWED UPON VERIFICATION AND THAT NO ADV ERSE EVIDENCE HAS BEEN FOUND DURING THE SEARCH WHICH BRINGS OUT T HE FACT THAT EXCESSIVE DEDUCTION HAS BEEN CLAIMED U/S 80M BY THE APPELLANT AND THEREFORE THIS TANTAMOUNTS TO MERE CHANGE OF OP INION WITHOUT ANY COGENT EVIDENCE AND THEREFORE THE FINDING OF TH E AO IS BAD IN LAW. HOWEVER NO SEPARATE FINDING ON THIS ASPECT IS BEING GIVEN AS ON MERITS THE CLAIM OF DEDUCTION IN FULL IS ALLOWAB LE TO THE APPELLANT, AS PER THE ABOVE DISCUSSION. THE AO IS THEREFORE DI RECTED TO DELETE THE ADDITION TO INCOME MADE FOR RS.4,53,56,754/-. 6. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE CARRYI NG US THROUGH THE ASSESSMENT ORDER AND FINDINGS IN THE IMPUGNED ORDER CONTENDED THAT THE ASSESSEE DID NOT FURNISH THE RELEVANT DETAILS DESIRED BY THE AO DESP ITE SUFFICIENT OPPORTUNITY ALLOWED; EVEN DETAILS RELATING TO PRODUCTION, MANUF ACTURING EXPENSES AND WORKERS IN THE VARIOUS BUSINESS PREMISES OF THE ASS ESSEE, WERE NOT FURNISHED. IN THE ABSENCE OF THESE DETAILS, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE ON ACCOUNT OF DEDUCTION U/S 80IB OF TH E ACT. ON THE OTHER HAND, THE LD. AR ON BEHALF OF THE ASSESSEE WHILE SUPPORTING THE FINDINGS OF THE LD. CIT(A) CONTENDED THAT THE ASSESSEE FURNISHED ALL THE RELEV ANT DETAILS BEFORE THE AO AS EVIDENT FROM PAGES 62 TO 83 OF THE PAPER BOOK FOR T HE AY 2003-04 & PAGE 62 TO 92 OF THE PB FOR THE AY 2004-05. TO A QUERY BY THE BENCH, THE LD. AR DID NOT REPLY AS TO WHETHER THEIR CLAIM FOR DEDUCTION U/S 8 0 IB IN THE INITIAL ASSESSMENT YEAR WITH 2000-01 AND SUBSEQUENTLY IN AYS 2001-02 TO 2002-03 WAS ALLOWED IN ITA NOS.2 621TO 2623/DEL./2012 14 SCRUTINY ASSESSMENT . WHILE REFERRING TO THE FINDI NGS OF THE LD. CIT(A), THE LD. AR VEHEMENTLY ARGUED THAT THE ASSESSEE HAD CONSOLIDATE D ACCOUNTS AND THEIR INDUSTRIAL UNDERTAKING WAS FUNCTIONING ONLY FROM B AROTIWALA ONLY. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AT THE OUTSET, WE FIND THAT THE ASSESSEE FURNISHED TH E RELEVANT DETAILS BEFORE THE AO AS EVIDENT FROM PAGES 62 TO 83 OF THE PAPER BOO K FOR THE AY 2003-04 & PAGE 62 TO 92 OF THE PB FOR THE AY 2004-05. THE LD. DR DID NOT SPECIFICALLY POINT OUT AS TO WHICH PARTICULAR DETAIL RELEVANT FOR DEDUCTIO N U/S 80IB OF THE ACT WAS NOT FURNISHED BEFORE THE AO OR THE LD. CIT(A)NOR EXPLAI NED AS TO HOW DEDUCTION U/S 80IB WAS ALLOWED IN THE ORIGINAL ASSESSMENT COMPLET ED ON 14.2.2006 IF DETAILS WERE NOT AVAILABLE. INDISUPTABLY, THE AO RESTRICTED THE CLAIM FOR DEDUCTION U/S80IB OF THE ACT ON THE GROUND THAT THE ASSESSE E CARRIED ON A PORTION OF BUSINESS ACTIVITIES OF THE INDUSTRIAL UNDERTAKING IN NON-SPECIFIED AREA & ACCORDINGLY, DISALLOWED 15% OF THE PROFITS OF THE I NDUSTRIAL UNDERTAKING . THERE IS NO APPARENT BASIS FOR ESTIMATING 15% OF THE PROFITS OF THE INDUSTRIAL UNDERTAKING FOR DISALLOWING THE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT. ON THE OTHER HAND , THE ASSESSEE CLAIMED THAT IT WAS HAVING ONLY ONE M ANUFACTURING UNIT AT BAROTIWALA, SOLAN, H.P. AND MERELY ADMINISTRATIVE OFFICES AND GODOWN WERE SITUATED AT DELHI NOR THERE WAS ANY INTER UNIT TRAN SFER DURING THE FINANCIAL YEARS UNDER CONSIDERATION AS A RESULT OF MANUFACTURE OF TOBACCO PRODUCTS. THE DEDUCTION U/S 80IB OF THE ACT HAS BEEN ALLOWED SIN CE THE AY 2000-01 AND THE AO HIMSELF ALLOWED THE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT FOR THE YEAR UNDER CONSIDERATION IN HIS ORDER DATED14.2.2006 U/S 143(3 ) OF THE ACT FOR THE AY 2003- 04,BEING THE FOURTH YEAR OF SUCH CLAIM. LIKEWISE TH E CLAIM FOR DEDUCTION U/S 80IB OF THE ACT WAS ALLOWED IN THE AY 2004-05 VIDE ORDER DATED 27.9.2006 I.E AFTER THE SEARCH IN A SCRUTINY ASSESSMENT U/S 143(3) OF THE A CT. THE ASSESSEE ALSO CLAIMED THAT AS A RESULT OF SEARCH, NO MATERIAL WA S FOUND, SUGGESTING ANY EXCESSIVE CLAIM OF DEDUCTION U/S 80IB OF THE ACT,. NECESSITATING DISALLOWANCE. MOREOVER, THE LD. CIT(A) FOUND THAT THE ASSESSEE HA D ONLY ADMINISTRATIVE OFFICES AND A GODOWN AT DELHI WHILE THE ENTIRE BASIC MANUF ACTURING PROCESS OF CHEWING ITA NOS.2 621TO 2623/DEL./2012 15 TOBACCO WAS CARRIED OUT AT BAROTIWALA , SOLAN HP. A CCORDINGLY, THE LD. CIT(A) CONCLUDED THAT MERELY BECAUSE PURCHASES OF SOME RAW MATERIAL WAS MADE AT DELHI AND MAJOR SALES WERE BOOKED FROM DELHI OFFICE S, WAS NOT SUFFICIENT TO RESTRICT THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT . SINCE THE INDUSTRIAL UNDERTAKING IN BAROTIWALA , SOLAN ALONE GENERATED THE PROFITS ON ACCOUNT OF THE VALUE ADDITION MADE THROUGH MANUFACTURING OF CHEWING TOBACCO WH ILE THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE VIOLATED THE CONDITIONS S TIPULATED U/S 80IB OF THE ACT, THE ESTIMATED DISALLOWANCE OF 15% OF THE PROFITS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 80IB OF THE ACT, IS W ITHOUT ANY BASIS. NEITHER THE AO BROUGHT OUT IN HIS RESPECTIVE ASSESSMENT ORDERS NOR THE LD. DR PLACED BEFORE US ANY MATERIAL FOUND DURING THE SEARCH, REVELAING THAT THE ASSESSEE CARRIED ON MANUFACTURING ACTIVITIES AT DELHI OR ANY OTHER PLAC E. IN THE ABSENCE OF ANY BASIS, ESPECIALLY WHEN THE LD. DR DID NOT PLACE ANY MATERI AL, CONTROVERTING THE FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFF ERENT VIEW IN THE MATTER , WE ARE NOT INCLINED TO INTERFERE. HERE WE MAY POINT OUT TH AT HONBLE GUJRAT HIGH COURT IN THE CONTEXT OF PROVISIONS OF SEC. 80J OF T HE ACT HELD IN THE CASE OF SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES VS. CIT,123 ITR 669(GUJ) THAT THE TRIBUNAL WAS PERFECTLY JUSTIF IED IN TAKING THE VIEW THAT IF THE RELIEF OF TAX HOLIDAY WAS GRANTED TO THE ASSESSEE- COMPANY FOR THE ASSESSMENT YEAR 1968-69, THE ASSESS EE WAS ENTITLED TO CONTINUANCE OF THAT RELIEF FOR THE SUBS EQUENT FOUR YEARS AND THE ITO WOULD NOT BE JUSTIFIED IN REFUSING TO C ONTINUE THE ALLOWANCE FOR THE ASSESSMENT YEAR UNDER REFERENCE, I.E., 1969-70, WITHOUT DISTURBING THE RELIEF FOR THE INITIAL YEAR. SIMILAR VIEW WAS TAKEN IN CIT VS. BHILLAI ENGINEERING CORPORATION PV T. LTD.,133 ITR 687(MP) . IT IS WELL SETTLED THAT THE A.O. HAS NO POWER TO WI THDRAW RELIEF WITHOUT DISTURBING THE RELIEF GRANTED IN THE EARLIER YEARS AS HELD IN CIT VS. INDIA FORGE & DROP STAMPINGS LTD., 240 ITR-208 (MAD) AND GLAXO SM ITHKLIN CONSUMER HEALTHCARE LTD. V. ACIT 112 TTJ-94 (CHD.). IN VIEW OF THE FOREGOING, GROUND NO.1 IN THE APPEALS FOR THE AYS 2003-04 & 2004-05 IS DIS MISSED. ITA NOS.2 621TO 2623/DEL./2012 16 8. GROUND NO.2 IN THE APPEAL FOR THE AY 2004-05 REL ATES TO EXCLUSION OF SALES OF ` 14,99,17,747/- TO M/S SINGHAL MARKETING RELATABLE . THE AO NOTICED THAT SALES OF 1 ` 4,99,17,747/- TO M/S SINGHAL MARKETING. WERE MADE D URING THE PERIOD 28 TH MARCH,2004 TO 31 ST MARCH,2004 AND THE ASSESSEE DID NOT MAKE ANY SALES TO M/S SINGHAL MARKETING, EARLIER. THE SAID FIRM WAS A PRO PRIETARY CONCERN OF SRI GOPAL GUPTA & SONS,HUF. .SRI GOPAL GUPTA WAS THE MAIN PAR TNER OF THE ASSESSEE FIRM, HAVING 40% SHARE. IN ORDER TO ASCERTAIN THE GENUINE NESS OF THE SALES, THE AO ISSUED SUMMONS TO M/S SINGHAL MARKETING, SEEKING DE TAILS MENTIONED ON PAGE 3 OF THE ASSESSMENT ORDER, WHICH INCLUDE COPY OF THEI R IT RETURN FOR THE AY 2004- 05,COPY OF A/C OF THE ASSESSEE ,DETAILS OF THEIR ST OCK AND STOCK REGISTER AS ALSO THEIR BANK STATEMENTS ETC..HOWEVER, NONE APPEARED O N BEHALF OF THE FIRM BEFORE THE AO BUT CERTAIN DETAILS WERE FILED, WHICH REVEAL ED THAT NO TRANSPORT COST OF GOODS WAS ADMITTED WHILE SAID FIRM CLAIMED TO HAVE TAKEN SPACE ON RENT IN THE SAME PREMISES WHERE STOCK OF ASSESSEE WAS LYING. TH E SAID FIRM WAS NOT CARRYING ON MUCH BUSINESS ACTIVITY AND OUT OF TOTAL PURCHASES OF ` 16,89,85,265/- ,PURCHASES TO THE EXTENT OF ` 15 CRORES WERE MADE AT THE FAG END OF THE YEAR. THE SAID FIRM WAS NOT HAVING ADEQUATE WORKFORCE NOR INF RASTRUCTURE TO EFFECT QUANTUM OF BUSINESS TO THE EXTENT OF PURCHASES CLAIMED TO H AVE MADE FROM THE ASSESSEE. IN THESE CIRCUMSTANCES, THE AO OBSERVED THAT TRAN SACTION WAS SHAM, IN ORDER TO AVAIL DEDUCTION U/S 80IB OF THE ACT, THE TIME LIMI T FOR AVAILING DEDUCTION U/S 80IB BEING EXPIRING AND THE BRAND AGREEMENT WITH HARI CH AND SHRI GOPAL HAVING EXPIRED. WHILE REFERRING TO PROVISIONS OF SEC. 80IA (10) OF THE ACT, THE AO CONCLUDED THAT SALES TO M/S SINGHAL MARKETING WERE MADE ACTUALLY IN THE FY 2004-05 AND ACCORDINGLY, REDUCED THE DEDUCTION U/S 80IB OF THE ACT IN RELATION TO THE AFORESAID SALES AND ADDED THE PROFIT ON SUCH SA LES IN THE AY 2005-06. 9. ON APPEAL, THE LD. CIT(A) UPHELD THE CLAIM OF T HE ASSESSEE IN THE AY 2004-05 AS UNDER:- I HAVE CAREFULLY GONE THROUGH THE REASONING & FIND ING OF THE AO AND THE SUBMISSION OF THE APPELLANT AND AM OF THE C ONSIDERED VIEW THAT NO POSITIVE EVIDENCE HAS BEEN BROUGHT ON RECOR D BY THE AO TO ITA NOS.2 621TO 2623/DEL./2012 17 HOLD THAT THE SALE OF FINISHED PRODUCTS MANUFACTURE D BY THE APPELLANT( THE FACT OF FINAL PRODUCT HAVING BEEN MA NUFACTURED IS NOT IN DOUBT) DURING THE YEAR TO M/S SINGHAL MARKETING IS A SHAM TRANSACTION. THE FACT THAT NO MARKETING ACTIVITY HA S BEEN CARRIED OUT BY M/S SINGHAL MARKETING DURING FY 2003-04 AND THAT THIS CONCERN DOES NOT HAVE ADEQUATE WORK FORCE/ INFRASTRUCTURE I S NOT REASON ENOUGH TO HOLD THAT THE SALE TRANSACTION IS A SHAM TRANSACTION. IN THIS CONNECTION IT IS OBSERVED THAT THE AO HAS TREA TED THE ABOVE SALES AS HAVING BEEN MADE TO M/S SINGHAL MARKETING IN FY 2004- 05, WHEN THE INFRASTRUCTURE AND WORKFORCE OF M/S SI NGHAL MARKETING REMAINED THE SAME AS BEFORE, GOES ON TO SHOW THAT I SSUE OF EXISTENCE OF INFRASTRUCTURE AND WORKFORCE IS NOT A MATERIAL FACT EVEN BEFORE THE A.O. IN THE SUCCEEDING FINANCIAL YEAR. S O FAR AS THE ISSUE OF TRANSPORTATION OF GOODS IS CONCERNED IT IS OBSERVED THAT THE PREMISES OF THE APPELLANT AND M/S SINGHAL MARKETING ARE LOCATED AT THE SAME PLACE THAT IS 240, OKHLA INDUSTRIAL ESTATE , PHASE-III, NEW DELHI AND A RENT OF RS. 88,000/- HAS BEEN DEBITED A S AN EXPENDITURE IN THE BOOKS OF M/S SINGHAL MARKETING. THUS FROM THESE FACTS NON OCCURRENCE OF TRANSPORTATION COST IN ITSE LF IS ALSO NOT A FACTOR TO HOLD THE SALE TRANSACTION A SHAM TRANSACT ION. HERE AGAIN SINCE THE IMPUGNED SALES HAVE BEEN ACKNOWLEDGED TO BE EFFECTED BY THE APPELLANT TO M/S SINGHAL MARKETING DURING FY 2004-05 ( SANS TRANSPORTATION COST) GOES ON TO SHOW THAT THE AO HI MSELF HAS NOT TREATED OCCURRENCE OF TRANSPORTATION COST AS A RELE VANT FACTOR IN THE SUCCEEDING FINANCIAL YEAR. FURTHER IT IS A FACT ON RECORD THAT THE APPELLANT AND M/S SINGHAL MARKETING ARE TWO SEPARAT E LEGAL ENTITIES AND IN THE BOOKS OF ACCOUNTS OF BOTH THESE PARTIES THE RIGHTS AND OBLIGATIONS ARISING OUT OF THE IMPUGNED SALES HAVE BEEN DULY RECORDED WHICH SHOWS THAT THE ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP IN THE SAID GOODS HAVE BEEN TRANSFERRED T O THE BUYER AND THE SELLER RETAINS NO EFFECTIVE CONTROL OF THE GOOD S TRANSFERRED. AS REGARDS INVOKING OF PROVISION OF SECTION 80IA (10) BY THE AO IS CONCERNED IT IS HELD THAT NO EVIDENCE HAS BEEN BROU GHT ON RECORD BY THE AO TO SHOW THAT MORE THAN ORDINARY PROFITS H AVE ARISEN TO THE ASSESSEE ON ACCOUNT OF THE BUSINESS TRANSACTED BETWEEN THE ASSESSEE AND M/S SINGHAL MARKETING. IN FACT THE AO HAS APPLIED THE SAME PROFIT RATIO AS HAS ARISEN IN ASSESSEE'S N ORMAL BUSINESS TRANSACTION ON THE IMPUGNED SALES MADE TO THE SISTE R CONCERN, WHICH GOES ON TO SHOW THAT THE AO HAS ACCEPTED THAT THERE HAS NOT BEEN MORE THAN ORDINARY PROFITS TO THE ASSESSEE, WH ICH IS A PREREQUISITE FOR INVOKING SECTION 801A(10) . THE AP PELLANT'S EXPLANATION FOR EFFECTING THE SALES TO IT'S SISTER CONCERN AS IT'S 'BRAND LEASE AGREEMENT' WAS EXPIRING ON 31.03.04 IS QUITE PLAUSIBLE. IN FACT IN THIS SEARCH CASE NO EVIDENCE HAS BEEN FOUND TO SUGGEST THAT THE IMPUGNED SALE TRANSACTION IS SHAM. RATHER TO H OLD THE TRANSACTION AS SHAM AND RECOGNIZING THE VERY SAME S ALES IN NEXT ITA NOS.2 621TO 2623/DEL./2012 18 FINANCIAL YEAR TANTAMOUNTS TO REWRITING THE APPELLA NT'S BOOKS, WHICH IS NOT PERMISSIBLE UNDER THE LAW IN THE FACTS OF TH E CASE. ACCORDINGLY, THE A.O. IS DIRECTED TO TREAT THE SALE S TO M/S SINGHAL MARKETING FOR RS.14,99,17,747/- ,IN F.Y. 2003-04 IT SELF. 10. IN THE AY 2005-06, THE AO INCLUDED AN AMOUNT O F ` ` 16,89,25,92,707/- ON ACCOUNT OF AFORESAID SALES MAD E TO M/S SINGHAL MARKETING IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2004-05 AND ADDED AN AMOUNT OF `4,04,37,786/- ON ACCOUNT OF PROFIT ATTRI BUTABLE TO THE AFORESAID SALES @23.92%. 11. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION HOLDING AS UNDER:- 5. FINDING ON GROUND OF APPEAL NO. 2:- IN THIS GROUND OF APPEAL THE APPELLANT HAS CONTESTE D THE ADDITION MADE BY THE AO FOR RS.4,04,37,786/- ON ACCOUNT OF U NDISCLOSED INCOME TO THE ASSESSEE ON ACCOUNT OF SALES MADE BY M/S SINGHAL MARKETING. IT IS OBSERVED THAT THIS ADDITION TO INC OME IS A DIRECT RESULT OF APPLICATION OF NET PROFIT RATIO OF 23.92% BY THE AO ON THE SALES MADE BY THE APPELLANT TO M/S SINGHAL MARKETIN G IN THE PRECEDING FINANCIAL YEAR THAT IS FY 2003-04 WHEREIN THE AO HAS HELD THAT THE SALES OF RS. 16,89,85,265/- AS REFLEC TED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN FY 2003-04 WAS ACTUALLY A SHAM TRANSACTION AND HELD THIS SALE HAVING BEEN MADE IN FY 2004-05. FOR THE DETAILED REASONING GIVEN IN THE FINDING PAR T IN THE APPELLATE ORDER NO. 829/1 0-11 DATED 20.03.2012 IN CASE OF TH E APPELLANT FOR AY 2004-05 IT IS HELD THAT SINCE THE IMPUGNED SALE TRANSACTION HAS BEEN HELD TO HAVE BEEN MADE IN FY 2003-04 ITSELF TH EREFORE THERE IS NO BASIS FOR UPHOLDING THE ADDITION TO INCOME FOR R S.4,04,37,786/- IN CASE OF THE APPELLANT IN THE PRESENT ASSESSMENT YEAR. ACCORDINGLY, THE ADDITION MADE FOR RS.4,04,37,786 I S DIRECTED TO BE DELETED. THE GROUND OF APPEAL NO.2 IS ACCORDINGLY A LLOWED. 12.. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A) IN THE TWO ASSESSMENT YE ARS. THE LD. DR WHILE CARRYING US THROUGH THE ASSESSMENT ORDER AND FINDINGS IN THE IMPUGNED ORDER CONTENDED THAT SALES TO SISTER CONCERN M/S SINGHAL MARKETING WERE SHAM. ON THE OTHER ITA NOS.2 621TO 2623/DEL./2012 19 HAND, THE LD. AR SUPPORTED THE FINDINGS OF THE LD. CIT(A) AND CONTENDED THAT THE AO DID NOT INVOKE THE PROVISIONS OF SEC. 40A(2)(A) OF THE ACT. IN HIS REJOINDER, THE LD. DR POINTED OUT THAT PROVISIONS OF SEC. 80IA(1 0) ITSELF EMBED PROVISIONS OF SEC. 40A(2)(A) OF THE ACT AND FURTHER RELIED UPON D ECISIONS IN LACHMINARAYAN MADAN LAL VS. CIT, 86 ITR 439 (SC); SWADESHI COTTON MILLS COMPANY LIMITED VS. CIT,63 ITR 57 (SC); AND LAKSHMIRATAN COTTON MILLS C OMPANY LIMITED . VS. CIT, 73 ITR 634 (SC). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE AO TREAT ED THE TRANSACTIONS OF SALE TO M/S SINGHAL MARKETING SHAM, IN ORDER TO AVAIL DEDUC TION U/S 80IB IN THE AY 2004- 05 AND ACCORDINGLY, ADDED THE PROFIT ON THESE SALES IN THE AY 2005-06 WHILE REDUCING THE DEDUCTION U/S 80IB IN RELATION TO THES E SALES IN THE AY 2004-05.ON APPEAL, THE LD. CIT(A) FOUND THAT M/S SINGHAL MARK ETING HAD SAME WORK FORCE/ INFRASTRUCTURE IN THE AY 2005-06 AS WAS AVAILABLE I N THE AY 2004-05. REGARDING TRANSPORTATION OF GOODS, THE LD. CIT(A) CONCLUDED T HAT THE PREMISES OF THE ASSESSEE AND M/S SINGHAL MARKETING WERE LOCATED IN THE SAME PREMISES AT 240, OKHLA INDUSTRIAL ESTATE, PHASE-III, NEW DELHI AND A RENT OF ` 88,000/- HAS BEEN DEBITED AS AN EXPENDITURE IN THE BOOKS OF M/S SINGH AL MARKETING. SINCE THE ASSESSEE AND M/S SINGHAL MARKETING WERE TWO SEPARAT E LEGAL ENTITIES AND IN THE BOOKS OF ACCOUNTS OF BOTH THESE PARTIES, THE RIGHTS AND OBLIGATIONS ARISING OUT OF THE IMPUGNED SALES WERE RECORDED AND ALL SIGNIFICAN T RISKS AND REWARDS OF OWNERSHIP IN THE SAID GOODS HAD BEEN TRANSFERRED TO THE BUYER AND THERE WAS NO EVIDENCE THAT SELLER RETAINED EFFECTIVE CONTROL OV ER THE GOODS TRANSFERRED AND THE PROVISIONS OF SEC. 80IA(10) WERE FOUND NOT APPLICAB LE, THE LD. CIT(A) UPHELD THE CLAIM OF THE ASSESSEE IN THE AY 2004-05 AND DELETED THE ADDITION MADE IN THE AY 2005-06. IN FACT, DURING THE COURSE OF SEARCH NO MATERIAL HAS BEEN FOUND, REVEALING THAT TRANSACTION WITH M/S SINGHAL MARKETI NG WAS SHAM WHILE THE LD. CIT(A) FOUND THAT ALL THE DISCREPANCIES POINTED OU T BY THE AO HAVE BEEN RECONCILED. CONSIDERING THE TOTALITY OF FACTS AND C IRCUMSTANCES OF THE CASE, ESPECIALLY SINCE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, ITA NOS.2 621TO 2623/DEL./2012 20 CONTROVERTING THE AFORESAID FINDINGS OF FACTS RECOR DED BY THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER , WE ARE NOT INCLINED TO INTERFERE. WE HAVE GONE THROUGH THE DECISIONS IN 86 ITR 439 (S C);63 ITR 57 (SC); AND73 ITR 634 (SC) RELIED UPON BY THE LD. DR AND AR E OF THE OPINION THAT THESE ARE NOT OF ANY ASSISTANCE TO THE REVENUE. THEREFORE , GROUND NO.2 IN THE APPEALS FOR THE AY 2004-05 & 2005-06 ARE DISMISSED. 14. NEXT GROUND NO.1 IN THE APPEAL FOR THE AY 20 05-06 RELATES TO DISALLOWANCE OUT OF SALES PROMOTION EXPENSES. THE AO DISALLOWED 50% OF THE SALE PROMOTION EXPENSES ON THE GROUND THAT THE SAID EXPENDITURE WA S DISPROPORTIONATE VIS--VIS SALES IN THE YEAR UNDER CONSIDERATION, AS EVIDENT F ROM THE FOLLOWING DETAILS:- A.Y. SALE EXPENDITURE ON SALES PROMOTION % OF EXPENDITURE IN RATIO TO SALE 2003-04 11422.39 33.44 0.29 2004-05 14325.92 - - 2005-06 153.76 14.59 9.48 15. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOW ANCE, HOLDING AS UNDER:- 4. FINDING ON GROUND OF APPEAL NO. 1:- FROM THE ASSESSMENT ORDER IT IS NOTED THAT THE AO H AS DISALLOWED 50% OF THE SALES PROMOTION EXPENDITURE CLAIMED FOR RS.14,59,5741- ( WHICH WORKS OUT TO RS.7,29,787/-) ON THE GROUND T HAT WHILE THE SALES DURING THE YEAR HAVE ALMOST BECOME NEGLIGIBLE , IN COMPARISON TO THE SALES SHOWN IN THE PRECEDING YEAR AND THEREFORE THE EXPENDITURE MADE UNDER THE HEAD SALES PROMOTION ARE NOT JUSTIFIED AS NOT INCURRED SOLELY AND EXCLUSIVELY TO EARN THE INCOME. THE APPELLANT'S ARGUMENT IS THAT ALL BOOKS OF ACCOU NTS AND VOUCHERS ALONGWITH SUPPORTING EVIDENCES TO THE EFFE CT THAT EXPENSES WERE EXPENDED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS WERE PRODUCED WHICH INCLUDES THAT UNDER TH E HEAD 'SALES PROMOTION.' THAT THE AD HOC DISALLOWANCE OF 50% UND ER THE HEAD SALES PROMOTION EXPENSES HAS BEEN MADE ONLY ON THE BASIS OF DOUBT, SUSPICION, CONJECTURE AND SURMISES WITHOUT B RINGING ANY MATERIAL ON RECORD THAT THE SAID EXPENSES WERE NOT EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS . THAT THE AO HAS NOT DOUBTED THE GENUINENESS OF EXPENSES CLAIMED UNDER THE ITA NOS.2 621TO 2623/DEL./2012 21 HEAD OF SALES PROMOTION WITHOUT POINTING OUT ANY SP ECIFIC INSTANCE OF DISALLOWABLE NATURE. IN THIS REGARD RELIANCE HAS BEEN PLACED ON THE RATIO OF VARIOUS DECISIONS CITED IN THE APPELLA NT'S SUBMISSION. I FIND MYSELF IN AGREEMENT WITH THE APPELLANT'S SUB MISSION, THAT AS NO SPECIFIC INSTANCE OF NON ALLOWABLE NATURE OF THE EXPENSES UNDER THE HEAD SALES PROMOTION HAS BEEN CITEDBY THE APPEL LANT THE ASSESSING OFFICER IS DIRECTED THE DELETE TO DELETE THE ADDITION MADE FOR `7,29,787/-. 16. THE REVENUE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED THE ORDER OF T HE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDINGS IN THE IMPUGNED ORDER. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE AO DISA LLOWED 50% OF THE SALES PROMOTION EXPENDITURE ON THE GROUND THAT THE EXPE NSES S DURING THE YEAR WERE INCOMMENSURATE VIS A VIS SALES IN COMPARISON TO TH E EXPENSES AND SALES SHOWN IN THE PRECEDING YEARS. ON APPEAL, THE LD. CIT(A) A LLOWED THE CLAIM, THERE BEING NO SPECIFIC INSTANCE OF EXPENDITURE HAVING NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS . IN THE THIS VIEW OF THE MATTER, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CI T(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE. THEREFORE, GROUND NO.1 IN THE APPEAL OF THE REVENUE FOR THE AY 2005-0 6 IS DISMISSED. 18. GROUND NO.2 IN THE APPEAL OF THE REVENUE FOR THE AY 2003-04 & GROUND NO.3 IN THEIR APPEALS FOR THE AYS 2004-05 & 2005-06 ,BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDI TIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.3 IN THE APPEAL FOR THE AY 2003- 04 & GROUND NO.4 IN THE APPEALS FOR THE AYS 2004-05 & 2005-06,ACCORDINGLY,ALL THESE GROUNDS ARE DISMISSED. ITA NOS.2 621TO 2623/DEL./2012 22 19. NO OTHER PLEA OR ARGUMENT WAS RAISED BEFORE U S. 20. IN THE RESULT, THESE THREE APPEALS ARE DISMI SSED. SD/- SD/- (C.M. GARG) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. A.C.I.T.,CENTRAL CIRCLE-2, ROOM NO.323, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN.,NEW DELHI 3. CIT CONCERNED. 4. CIT(A)-III, NEW DELHI 5. DR, ITAT,G BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT