The Alidhara Texpro Engineers Pvt.Ltd., Surat V. The Addl.CIT, Circle-1, Surat

ITA 3290/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50630 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 14-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Gross profit estimation; Rejection of books of accounts; Depreciation; Set aside
• Section: 80IB; 207

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND A.K. GARODIA, A.M . M/S ALIDHARA TEXPRO ENGINEERS (P) LTD., PLOT NO.B-52, ROAD NO.3, UDHYOGNAGAR, UDHNA, SURAT. ADDL.CIT, RANGE-1, SURAT. APPELLANT VS. RESPONDENT APPELLANT BY :- SHRI RASESH SHAH, AR RESPONDENT BY:- SHRI VINOD TANWANI, SR.DR DATE OF HEARING 14/9/2011. DATE OF PRONOUNCEMENT - O R D E R PER D.K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-I, SURAT, DATED 28/10/2009 RAISING FOLLOWING GROUNDS :- (1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN REJECTING BOOKS OF ACCOUNTS U/S 145(3) OF THE I.T. ACT. (2) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN ESTIMATING GP AT THE RATE OF 21.13% AND THERE BY ERRED IN MAKING ADDITION OF RS.16,47,501/- FOR ALLEGED LOW G P. ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 2 (3) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION U/S 80IB TO THE EXT ENT OF RS.43,869/- ON VATAV KASAR INCOME OF RS.1,48,231/-. (4) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION U/S 80IB TO THE EXT ENT OF RS.1,32,531/- BY REWORKING WRITTEN DOWN VALUE OF AS SETS. 2. THE FIRST AND SECOND GROUNDS RELATE TO REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF ADDITION @ 21.13% AND TH EREBY MAKING ADDITION OF RS.16,47,501/-. THE FACTS OF THE CASE A RE THAT THE ASSESSEE COMPANY IS MANUFACTURER OF TEXTILE MACHINERIES AND PARTS. THE ASSESSEE FILED RETURN OF INCOME ON 21.04.2007 DECLARING TOTA L INCOME AT RS.1,77,13,480/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSEE HAS SHOWN GP RATE OF 19.13% ON TURNOVER OF RS.16,47,50,195/- AS AGAINST GP RATE OF 20.62% ON TURNOVER OF RS.17,3 1,03,258/- SHOWN IN THE LAST YEAR. THE AO STATED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS VARIOUS DISCREPANCIES WERE NOTICED THAT THERE ARE V ARIATIONS IN THE REMARKS OF THE AUDITOR AND SUBMISSIONS MADE BY THE ASSESSEE IN RESPONSE TO SPECIFIC QUERIES RAISED BY HIM, WHICH ARE AS UNDER :- SL. NO. ASPECT OF BUSINESS COMMENT IN THE AUDIT REPORT SUBMISSION OF THE ASSESSEE 2 PHYSICAL VERIFICATION OF THE INVENTORY THE MANAGEMENT HAS CONDUCTED PHYSICAL VERIFICATION OF INVENTORY AT REASONABLE INTERVALS. THE PROCEDURE OF PHYSICAL VERIFICATION OF INVENTORY FOLLOWED BY MANAGEMENT AT REASONABLE AND ADEQUATE IN RELATION TO THE SIZE OF THE COMPANY AND THE NATURE OF ITS BUSINESS. THE COMPANY IS MAINTAINING PROPER RECORDS OF INVENTORY AND NO MATERIAL OF AS BEING A TECHNOLOGY ORIENTED BUSINESS, CONTINUOUS DEVELOPMENT OF THE TECHNOLOGY IS NECESSARY AND THAT ENTAIL FREQUENT CHANGES IN THE DESIGN OF VARIOUS COMPONENTS AND ASSEMBLIES. SO THE FREQUENT CHANGES DUE TO INNOVATION ALSO MAKE IT IMPRACTICABLE TO KEEP THE RECORD AT EVERY STAGE. PRACTICALLY IT IS NOT POSSIBLE TO KEEP THE RECORD OF MATERIAL AT EACH AND THE EVERY STAGE, AS THERE IS NO FIX SET OF RAW MATERIAL REQUIREMENT FOR THE FINAL PRODUCT. ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 3 DISCREPANCIES WERE NOTICED ON PHYSICAL VERIFICATION. 2.1 FROM THE ABOVE, THE AO STATED THAT THERE IS NO CONTROL OVER THE EXPENSES AND THE MANAGEMENT IS TAKING DECISIONS AT ITS OWN SWEET WILL. THE STATUTORY REGISTERS LIKE FIXED ASSET REGISTER U NDER THE COMPANY LAW WAS NOT MAINTAINED. THE AO, THEREFORE, REJECTED THE BOOKS OF ACCOUNT FOR FOLLOWING REASONS - (1) NO DAY-TO-DAY STOCK REGISTER IS MAINTAINED RELATING TO ISSUE OF SPARES TO THE MACHINE SHOP (2) DURING THE YEAR UNDER REVIEW, THE RATIO OF RAW MATE RIAL CONSUMED HAS INCREASED WHICH HAVE RESULTED INTO REDUCTION OF GRO SS PROFIT. (3) EVEN THOUGH THE ASSESSEE HAS GIVEN THE DETAILS OF I TEMS OF PURCHASE VIDE SUBMISSION DATED 01.12.2008, IT HAS NOT GIVEN THE O PENING STOCK, PURCHASE DURING THE YEAR, CONSUMPTION DURING THE YEAR AND TH E CLOSING STOCK DETAILS CONTAIN MERELY VALUE OF ITEMS AS AGAINST THE PURCHA SE OF 1336 ITEMS OF PURCHASE AND 393 ITEMS OF ASSEMBLY/SELF MANUFACTURI NG AND JOB BASIS AND CLOSING STOCK/WIP HAVE BEEN GROUPED UNDER HEADS OF ITEMS. FURTHER DETAILS OF STOCK LYING WITH THE JOB WORKERS HAS BEEN GIVEN ON THE BASIS OF THE VALUE ONLY MAKING ITS VERACITY UNVERIFIABLE. WHILE EVALUATING THE SEMI- FINISHED GOODS, IT IS CLAIMED THAT APPROXIMATELY 60 % OF THE MACHINES WAS COMPLETED. HOWEVER, NO CERTIFICATE IN THIS REGARD H AS BEEN OBTAINED MAKING THE VALUATION UNSCIENTIFIC AND UNRELIABLE. (4) THE ASSESSEE HAS PAID SALES COMMISSION OF RS.6,61,2 00/- TO ALIDHARA TEXTILE ENGINEERS (P) LTD. A PERSON COVERED U/S 40A (2)(B). HOWEVER, THE ASSESSEE HAS NOT SUBMITTED ITS JUSTIFIABILITY THAT IT WAS REASONABLE OR THAT ITS SISTER CONCERN HAD RENDERED ANY SERVICE, ESPECIALLY IN VIEW OF THE FACT THAT THE BUSINESS OF BOTH THE SISTER CONCERNS ARE SAME. 2.2 IN VIEW OF THE ABOVE, THE AO ISSUED A SHOW CAUS E NOTICE AS TO WHY GROSS PROFIT ADDITION BE NOT MADE. THE ASSESSEE REP LIED THAT THE REASON FOR FALL IN GP IS DUE TO INCREASE IN COST OF RAW MATERI AL. DUE TO SEVERE COMPETITION IT IS NOT POSSIBLE TO INCREASE THE VALU E OF SALES PRICE. WITH RESPECT TO THE OBSERVATION OF THE AO FOR MAINTAININ G DAY-TO-DAY STOCK REGISTER, THE ASSESSEE STATED THAT IT HAD MAINTAINE D COMPLETE STOCK RECORDS ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 4 AS PER THE EXCISE RULES. THE ASSESSEE HAS PURCHASED DIFFERENT ITEMS OF RAW MATERIALS. THE QUANTITIES OF THE PURCHASES ARE RECORDED SEPARATELY ITEM-WISE IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS TAKEN INVENTORY AT THE END OF THE YEAR OF ALL THE RAW MATERIALS. THERE WAS NO CLOSING STOCK OF WORK IN PROGRESS ON 31.03.2006. THE CONSUMPTION IS WORKED OUT IN RESPECT OF EACH ITEMS OF RAW MATERIAL, ON THE BASIS OF OPENING STOCK + PURCHASE CLOSING STOCK. IT WAS FURTHER STATED THAT THE MANAGEMENT HAS CARRIED OUT PHYSICAL VERIFICATION OF INVENTORIES AT REASONABLE INTERVALS AND THERE IS NO DISCREPANCY FOUND BY THE AO. REGARDING QUANTITATIVE AND QUALITATIVE RECORDS, THE ASSESSEE STATED THAT THE M ACHINE MANUFACTURED ARE OF TAILORED MADE AND AS PER THE REQUIREMENT OF PART Y AND SUCH TYPE OF DETAILS CANNOT BE MAINTAINED. THE AO DID NOT ACCEPT THE ABOVE EXPLANATION AND STATED THAT THE ASSESSEE HAS NOT PR OPERLY EXPLAINED THE FAIL IN GP RATE AS WELL AS FALL IN SALES. THE ASSES SEE DID NOT MAINTAIN STOCK RECORDS. THE REAL REASON FOR FALL IN GP IS ATTRIBUT ABLE TO RISE IN RATIO OF RAW MATERIAL CONSUMPTION THIS REMAINS UNVERIFIABLE IN A BSENCE OF DAY TO DAY STOCK RECORDS. THE AO, THEREFORE, REJECTED THE BOOK S OF ACCOUNT FOLLOWING THE DECISION OF THE HONBLE ITAT, MUMBAI IN THE CAS E OF SAMIR DIAMONDS EXPORTS LTD. 71 ITD 75 WHEREIN THE HONBLE ITAT MUMBAI STATED AS UNDER :- AT THIS POINT WE MAY OBSERVE THAT WHAT IS MEANINGF UL FOR THE INCOME-TAX OFFICER TO FIND OUT THE CORRECT PROFITS OF AN ASSESSEE, MAY BE MEANINGLESS FOR THE ASSESSEE (AND WHICH WE HAVE MENTIONED CANNOT AND IS NOT MEANINGLE SS IN THE CASE OF THIS PARTICULAR ASSESSEE), BUT IT IS FOR THE AO TO DETERMINE WHETHE R THE BOOKS OF ACCOUNT ARE CORRECT AND COMPLETE ACCORDING TO HIS SATISFACTION OR NOT. WE MAY QUOTE FROM SECTION 145(2) OF THE INCOME-TAX ACT (AS IT STOOD AT THE RELEVANT TIME) WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETE NESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE NO METHOD OF ACCOUNTING HAS BEEN REGULARLY EMPLOYED BY THE ASSESSEE, THE AO MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. OF COURSE THE APPELLATE AUTHORITIES ARE ENTITLED TO JUDGE AS TO W HETHER THE AO WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE BOOKS OF ACCOUNT WERE NOT CORRECT AND COMPLETE, BUT IT MAY NOT GIVE A SIMILAR AUTHORITY TO AN ASSESSEE TO TELL THE AO THAT WHAT THE AO WAS ASKING WAS MEANINGLESS. AS MENTIONED ABOVE, THE WAY IN WHICH THE ASSESSEE SHOULD HAVE ACTUALLY MAINTAINED THE LOTS OF ITS DIAMONDS, AS ADMITTED BEFORE THE CIT(A) ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 5 MENTIONED EARLIER, WOULD ONLY CONFIRM THAT THE ASSE SSEE HAD BEEN, IN FACT, NOTING DOWN AND MAINTAINING THE DETAILS REQUIRED BY THE AO WHEN IT RECEIVED BACK THE CUT AND POLISHED DIAMONDS FORM THE LABOUR PARTIES AND W HEN IT WAS SORTING THEM IN DIFFERENT LOTS, SIZES, QUALITY ETC. FROM THIS ALSO WHETHER THAT THE ASSESSEE HAD WITHHELD THE COMPLETE AND CORRECT DETAILS REGARDING ITS ACCO UNTS FROM THE ASSESSING OFFICER AND HENCE, SO FAR AS THE AO WAS CONCERNED THE ACCOUNTS WITH HE WAS ALLOWED TO EXAMINE WERE NOT CORRECT AND COMPLETE, HENCE HE WAS JUSTIFI ED IN INVOKING THE PROVISIONS OF SECTION 145(2) OF THE INCOME-TAX ACT. 2.3 THE AO ALSO RELIED ON THE DECISION OF THE HONB LE ALLAHABAD HIGH COURT IN THE CASE OF AWADHESH PRATAP SINGH ABDUL RE HMAN AND BROTHERS 210 ITR 406 AND IN THE CASE OF HARI SHANKAR GOPAL H ARI 97 ITR 716, WHEREIN THE HONBLE HIGH COURT STATED AS UNDER :- IT IS DIFFICULT TO CATALOGUE THE VARIOUS TYPES OF DEFECTS IN THE ACCOUNT BOOKS OF AN ASSESSEE WHICH MAY RENDER REJECTION OF ACCOUNT BOOKS ON THE GROUND THAT THE ACCOUNTS ARE NOT COMPLETE OR CORRECT FROM WHICH THE CORRECT PROFIT CANNOT BE DEDUCED. WHETHER THE PRESENCE OR THE ABSENCE OF A STOCK REGISTER IS MATERIAL OR NOT WOUL D DEPEND UPON THE TYPE OF THE BUSINESS. IT IS TRUE THAT THE ABSENCE OF A STOCK REGISTER OR CASH M EMOS IN A GIVEN SITUATION MAY NOT PER SE LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE FALSE OR INCO MPLETE. HOWEVER, WHERE THE ABSENCE OF A STOCK REGISTER, CASH MEMOS, ETC. IS COUPLED WITH OT HER FACTS SUCH AS THAT VOUCHERS IN SUPPORT OF THE EXPENSES AND PURCHASES MADE ARE NOT FORTHCOMING AND THE PROFITS ARE LOW, IT MAY GIVE RISE TO A LEGITIMATE INFERENCE THAT ALL IS NOT WELL WITH THE BOOKS AND THE SAME CANNOT BE RELIED UPON TO ASSESS THE INCOME, PROFITS OR GAINS OF AN ASSESS EE. 2.4 THE AO ALSO RELIED ON THE DECISION OF THE HONB LE HIGH COURT IN THE CASE OF BHARAT MILK PRODUCTS 128 ITR 682 AND RE LIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF K.Y.PIL LLAIAH & SONS 63 ITR 411. 2.5 AFTER REJECTING THE BOOKS OF ACCOUNT, THE AO MA DE GP ADDITION OF 1% CONSIDERING THAT IN ASST. YEAR 2005-06 THE SPECI AL AUDIT HAS ADOPTED THE GP RATE OF 21.13%. HE, THEREFORE, MADE ADDITION OF RS.16,47,501/-. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL WHEREI N IT WAS STATED THAT THERE ARE NO SIGNIFICANT DEFECTS POINTED OUT IN THE BOOKS OF ACCOUNT. THE AO HAS MADE A GENERAL OBSERVATION THAT AS AGAINST T HE PURCHASE OF 1336 ITEMS OF PURCHASES AND 379 ITEMS OF ASSEMBLY/SELF M ANUFACTURING, CLOSING STOCK HAVE BEEN GROUPED UNDER VARIOUS HEADS OF ITEM S. THIS DOES NOT ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 6 INDICATE THAT THERE IS SUPPRESSION OF CLOSING STOCK . THE AO HAS FOUND NO EVIDENCE IN THIS REGARD. THE ASSESSEE STATED THAT I T HAS MAINTAINED BOOKS OF ACCOUNT AND STOCK REGISTER AS PER THE EXCISE RUL ES AND THE INVENTORY WAS TAKEN AT THE END OF THE ACCOUNTING YEAR BY REDU CING GP MARGIN FROM THE APPROXIMATELY SALE VALUE. THE ASSESSEE STATED T HAT ON THESE FACTS THE BOOKS OF ACCOUNT MAY NOT BE REJECTED IN VIEW OF THE DECISIONS IN THE CASE OF (I) MALINI RAMJIVAN JAGANNATH 207 CTR 19 (RAJ), (II) ASHOKE REFRACTORIES (P) LTD. 279 ITR 457 (CAL) AND (III) S . VEERIAH REDDIAR 38 ITR 152 (KER). THE ASSESSEE STATED THAT JUST BECAUS E THERE IS FALL IN GP RATE NO ADDITION CAN BE MADE. THE ASSESSEE ARGUED T HAT WITHOUT PREJUDICE TO THE ABOVE IF THE ADDITION IS CONFIRMED EITHER PA RTLY OR FULLY, DEDUCTION U/S 80IB SHOULD BE ALLOWED AT THE RATE APPLICABLE. 3.1 THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO B Y OBSERVING AS UNDER :- 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. WITH RESPECT TO THE PROCEDU RE OF MAINTENANCE OF BOOKS OF ACCOUNT AND FACTUAL SITUATION REGARDING ST OCK REGISTER AND CONSUMPTION REGISTER, THE FACTS IN THE CURRENT YEAR ARE EXACTLY THE SAME AS IN THE LAST YEAR. IN THE LAST YEAR THE REJECTION OF BOOKS OF ACCOUNT AND GP ADDITION WAS CONFIRMED BY THE CIT(A) BY MAKING THE FOLLOWING REMARKS:- 3.3.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE AO. IT IS VERY STRANGE THAT EVEN WHEN THE SPECIAL AUDIT HAS BEEN ORDERED THE APPELLANT CHOSE TO NOT PRODUCE ALL THE BOOKS OF ACCOUNT, MAINLY STOCK REGISTER AND DAY TO DAY CONSUMPTION RE GISTER BEFORE THE SPECIAL AUDITOR. THE ATTITUDE OF THE APPELLANT REMAINS TO B E SAME AS BEFORE THE ORIGINAL AUDITOR. THE ORIGINAL AUDITOR HAD MADE VAR IOUS REMARKS, WHICH WERE CONTRARY TO THE SUBMISSION MADE BY THE APPELLANT, W HICH SHOWS THAT THE ORIGINAL AUDITOR HAS NOT REFERRED TO VARIOUS STOCK REGISTERS, FIXED ASSET REGISTER AND OTHER RECORDS. THE APPELLANT DID NOT PRODUCE TH ESE STOCK REGISTER AND DAY TO DAY CONSUMPTION REGISTER BEFORE THE SPECIAL AUDI TOR ALSO. HENCE IT IS CLEAR THAT THE BOOKS OF ACCOUNT HAVE BEEN RIGHTLY REJECTE D FOR THE THREE REASONS GIVEN BY THE AO AND QUOTED ABOVE. HAVING REJECTED T HE BOOKS OF ACCOUNT, THE GP RATE HAS BEEN INCREASED BY ONLY 1.48% AGAINST TH E FALL IN 2.88%. NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE PR OCEEDINGS BEFORE THE SPECIAL AUDITOR, THE APPELLANT COULD GIVE ANY REASO N WITH EVIDENCE FOR THE FALL ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 7 IN GROSS PROFIT RATE. DURING THE APPELLATE PROCEEDI NGS ALSO A GENERAL SUBMISSION HAS BEEN MADE FOR FALL IN GP RATE. NO EV IDENCE HAS BEEN GIVEN AND NO DOCUMENTS HAVE BEEN GIVEN TO SUPPORT ITS CONTENT ION. HENCE THE GP RATE SUGGESTED BY THE SPECIAL AUDITOR AND ADOPTED BY THE AO IS CORRECT. THE ADDITION MADE BY THE AO IS, THEREFORE, SUSTAINED. THE FACTS REMAIN THE SAME AS IN THE LAST YEAR BECAU SE THE AUDIT REPORT SAYS THAT THE PHYSICAL VERIFICATION ARE TAKEN AT VA RIOUS INTERVALS WHEREAS IN THE SUBMISSION THE APPELLANT HAS STATED THAT IT IS PRACTICALLY NOT POSSIBLE TO RECORD EACH AND EVERY STAGE. THIS SHOWS THAT THE STOCK HAS NOT BEEN PROPERLY MAINTAINED. THERE IS A SUBSTANTIAL IN CREASE IN THE CONSUMPTION RATIO OF RAW MATERIAL AS COMPARED TO LA ST YEAR. THIS HAS NOT BEEN EXPLAINED BY THE APPELLANT BY GIVING DOCUMENTA RY EVIDENCE. THEREFORE, THE BOOKS OF ACCOUNT HAVE BEEN RIGHTLY R EJECTED IN THIS YEAR. HAVING REJECTED THE BOOKS OF ACCOUNT, THE AO HAS FO LLOWED THE REASONABLE BASE FOR ADOPTING THE GP RATE. THE LAST YEARS GP RATE WAS AS SHOWN BY THE ASSESSEE WAS AT 20.67% WHEREAS ON THE SPECIAL AUDITORS REPORT THIS WAS ADOPTED AT 21.65% IN THE CURRENT YE AR. THE AO HAS ADOPTED EVEN BELOW WHAT WAS ADOPTED BY THE AUDITORS . THE AO HAS INCREASED THE GP RATE ONLY 1% WHICH IS REASONABLE A ND FAIR. THESE GROUNDS OF APPEALS ARE, THEREFORE, DISMISSED. AGGRIEVED BY THIS ORDER OF LD. CIT(A) THE ASSESSEE HAS COME IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING THE LD. COUNSEL OF THE AS SESSEE SUBMITTED THAT LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO BY FO LLOWING HIS EARLIER ORDER FOR ASST. YEAR 2005-06. HE FURTHER SUBMITTED THAT AGAINST THE ORDER OF LD. CIT(A) FOR ASST. YEAR 2005-06, THE ASSESSEE FILED APPEAL BEFORE THE HONBLE TRIBUNAL AND THE HONBLE TRIBUNAL VIDE ITS ORDER IN ITA NO.3496/AHD/2008 DATED 12.08.2011 HAS SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES O WN CASE FOR ASST. YEAR 2005-06, THIS APPEAL OF THE ASSESSEE MAY KINDLY BE ALLOWED. ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 8 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE AO NOTED THAT SPECIAL AUDITORS HAD FOUND THE ACCOUNTS OF THE ASSE SSEE TO BE UNRELIABLE ON ACCOUNT OF VARIOUS DISCREPANCIES. THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNT AND THEREFORE, HE HAD RIGHTLY REJE CTED THE BOOKS OF ACCOUNT AND MADE THE GP ADDITION. LD. CIT(A) UPHELD THE ACTION OF AO BY OBSERVING THAT ON IDENTICAL FACTS THE ISSUE WAS EARLIER DECIDED AGAINST THE ASSESSEE. THEREFORE, THE ORDERS OF AO AND THE L D. CIT(A) BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT TH E FACTS OF THIS YEAR ARE IDENTICAL TO EARLIER YEAR AND THE LD. CIT(A) HAS CO NFIRMED THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESS EE AND ESTIMATING THE GP BY FOLLOWING HIS EARLIER ORDER FOR ASST. YEAR 20 05-06. WE FURTHER FIND THAT THE ORDER PASSED BY THE LD. CIT(A) FOR ASST. Y EAR 2005-06 HAS BEEN SET ASIDE BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 3496/AHD/2008 DATED 12.08.2011 BY OBSERVING AS UNDER :- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT AS PER THE NOTE GIVEN BY THE SPECIAL AUDITORS IN ANNEXURE 1 TO THE AUDITORS REPORT WHICH IS AVAILABLE ON PAGE 34 OF TH E PAPER BOOK IN ALIDHARA TEXTOOL ENGINEERING PVT. LTD., IT IS SEEN THAT IT WAS STATED BY THE SPECIAL AUDITORS THAT THE ACCEPTABLE GP RATE BEING SUGGESTED BY HIM IS 29.65% AS AGAINST GP RATE DECLARED BY THE ASSESSEE @ 28.66% AND WORKING FOR THIS HAS BEEN DONE AFTER CONSIDERING IN CREASE IN THE PRICES OF RAW MATERIAL ETC. HENCE,, IT IS SEEN THAT THIS IS ADMITTED BY THE SPECIAL AUDITORS ALSO WITH WHICH THE A.O. IS ALSO IN AGREEM ENT THAT TO THE EXTENT OF INCREASE IN PRICE OF RAW MATERIAL, THE FALL IN G P STANDS EXPLAINED. THE WORKING HAS NOT BEEN PROVIDED BY THE SPECIAL AUDITO RS REGARDING IMPACT OF INCREASE IN PRICE OF RAW MATERIAL ON THE GP. WE , THEREFORE EXAMINE THIS IMPACT. 8. THE PRICES OF RAW MATERIAL ARE NOTED BY THE AUDI TORS ON PAGE 97 OF THE PAPER BOOK. IT IS NOTED THAT THE QUANTITY OF R AW MATERIAL CONSUMED IN THE PRESENT YEAR IS RS.37,76,171/- AND THE TOTAL VA LUE OF SUCH CONSUMPTION ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 9 IS RS.1895.73 LACS. IN THE PRECEDING YEAR, THE QUA NTITY OF CONSUMPTION OF RAW MATERIAL IS REPORTED 3056549 AND THE VALUE OF C ONSUMPTION REPORTED IS RS.1405.31 LACS. HENCE, THE AVERAGE PRICE OF RA W MATERIAL CONSUMED IN THE PRESENT YEAR IS RS.50.20 WHEREAS THE SAME WA S RS.45.98 IN THE PRECEDING YEAR. THE INCREASE IN RATE IS RS.9.19 WH ICH AMOUNTS TO AROUND 20%. THE VALUE OF PRODUCTION ON THE BASIS OF SALE + CLOSING STOCK (-) OPENING STOCK OF FINISHED GOODS AS NOTED BY THE SPE CIAL AUDITORS ON PAGE 34 OF THE PAPER BOOK IS RS.7579.40 LACS IN THE PRE SENT YEAR AND RS.7386.48 LACS IN THE PRECEDING YEAR. VALUE OF TH E TOTAL RAW MATERIAL CONSUMED IN THE PRESENT YEAR IS RS.3807.56 LACS AND THE AMOUNT IN THE PRECEDING YEAR IS RS.3561.37 LACS. AS PER THE DETA ILS APPEARING ON PAGE 97 OF THE PAPER BOOK, THE VALUE OF RAW MATERIAL CON SUMPTION IN BOTH THE YEARS IS AFTER INCLUDING IMPORTED PARTS AND INDIGEN OUS PART AND IF WE CONSIDER ONLY RAW MATERIAL CONSUMPTION, THE VALUE T HEREOF IN THE PRESENT YEAR IS RS.1895.73 LACS AND RS.1405.31 LACS IN THE PRECEDING YEAR. PERCENTAGE OF RAW MATERIAL CONSUMPTION TO VALUE OF PRODUCTION IN THE PRESENT YEAR IS TO THE EXTENT OF AROUND 25% I.E. RS .1895.73 LACS TO RS.7579.40 LACS. THE INCREASE IN THE PRICE OF RAW MATERIAL IN THE PRESENT YEAR HAS BEEN WORKED OUT ABOVE AT 9.19% FROM RS.45. 98 IN THE LAST YEAR TO RS.50.20 IN THE PRESENT YEAR. HENCE, THE IMPACT ON GP ON ACCOUNT OF 9.19% INCREASE IN PRICE OF RAW MATERIAL IN THE PRES ENT YEAR COMES TO AROUND 2.30% BEING 9.19% OF 25%. THE TOTAL FALL IN GP RATE IS OF 2.44% FROM 31.10% IN THE PRECEDING YEAR TO 28.66% IN THE PRESENT YEAR AS NOTED BY THE SPECIAL AUDITORS ON PAGE 34 OF THE PAP ER BOOK. OUT OF THIS TOTAL FALL IN GP OF 2.44%, 2.30% FALL IS ON ACCOUNT OF INCREASE IN PRICE OF RAW MATERIAL IN THE PRESENT YEAR TO RS.50.20 AS AGA INST RS.45.98 IN THE PRECEDING YEAR. THERE ARE TWO OTHER FACTORS, WHICH ARE EFFECTING THE FALL IN GP IN THE PRESENT YEAR. THERE IS INCREASE IN TH E EXPENSES ON ACCOUNT OF SALARY AND WAGES TO THE EXTENT OF RS.80.70 LACS IN THE PRESENT YEAR AS AGAINST RS.61.53 LACS IN THE PRECEDING YEAR AND ALS O ON ACCOUNT OF OTHER MAINTENANCE EXPENSE WHICH ALSO INCREASED TO RS.1537 .04 LACS IN THE PRESENT YEAR AS AGAINST RS.1465.70 LACS IN THE PREC EDING YEAR. THE PERCENTAGE OF SALARY AND WAGES EXPENSES TO VALUE OF PRODUCTION IS 1.06% IN THE PRESENT YEAR AS AGAINST 0.83% IN THE PRECEDI NG YEAR AND HENCE, THERE IS NEGATIVE IMPACT OF 0.23% ON GP IN THE PRES ENT YEAR ON ACCOUNT OF INCREASE IN SALARY AND WAGES. SIMILARLY, OTHER MAINTENANCE EXPENSES IN THE PRESENT YEAR IS TO THE EXTENT OF 20.28% OF T OTAL VALUE OF PRODUCTION AS AGAINST 19.84% IN THE PRECEDING YEAR. THIS HAS ALSO RESULTED IN NEGATIVE IMPACT OF GP IN THE PRESENT YEAR TO THE EX TENT OF 0.44%. HENCE, WE FIND NEGATIVE IMPACT ON GP IN THE PRESENT YEAR O N ACCOUNT OF INCREASE IN PRICE OF RAW MATERIAL @ 2.30% AND SIMILAR IMPACT ON GP IN THE PRESENT YEAR ON ACCOUNT OF SALARY AND WAGES IS OF 0 .23% AND ON ACCOUNT OF OTHER MAINTENANCE EXPENSE IS 0.44% AND THE TOTAL NEGATIVE IMPACT ON ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 10 GP IN THE PRESENT YEAR ON ACCOUNT OF THESE THREE RE ASONS IS 2.97% WHEREAS THE FALL IN GP REPORTED BY THE ASSESSEE IS ONLY 2.44%. ON THIS ANALYSIS IT IS SEEN THAT THE ENTIRE FALL IN THE GP IN THE PRESENT YEAR IS TO BE CONSIDERED AS EXPLAINED BEING ON ACCOUNT OF INCREA SE IN PRICE OF RAW MATERIAL, AND INCREASE IN EXPENSES ON ACCOUNT OF SA LARY AND WAGES AND OTHER MAINTENANCE EXPENSES. THE SPECIAL AUDITOR HI MSELF HAS STATED ON PAGE 34 OF THE PAPER BOOK BEING ANNEXURE 1 TO THE AUDITORS REPORT THAT INCREASE IN PRICE OF RAW MATERIAL AND OTHER CONSUMA BLES HAS BEEN CONSIDERED FOR THE PURPOSE OF FALL IN GP RATE. THE REASON FOR REJECTING THE BOOKS OF ACCOUNT AND RECOMMENDING ESTIMATION OF PROFIT IS ON ACCOUNT OF NON MAINTENANCE OF STOCK RECORD AND HENC E, THERE IS NO ALLEGATION EITHER OF THE SPECIAL AUDITOR OR OF THE A.O. THAT THE EXPENSES REPORTED BY THE ASSESSEE ON ACCOUNT OF SALARY AND WAGES AND OTHER MAINTENANCE EXPENSE ARE NOT CORRECT AND HENCE,, THE NEGATIVE IMPACT ON GP ON THESE TWO ACCOUNTS ARE ALSO TO BE ACCEPTED AS EXPLAINED FALL IN GP AND IF WE CONSIDER ALL THESE THREE FACTORS, WE FIND THAT THE ENTIRE FALL IN GP REPORTED BY THE ASSESSEE OF 2.44% FROM 31.10 % T O 28.66% IS FOUND TO BE EXPLAINED AND HENCE, THERE IS NO REASON FOR M AKING ADDITION ON ACCOUNT OF ALLEGED LOW GP. 9. SIMILARLY IN THE 2 ND CASE I.E. IN THE CASE OF ALIDHARA TEXPRO ENGINEERING PVT. LTD., WE FIND THAT THE FALL IN GP REPORTED BY THE ASSESSEE IS OF 3.31% FROM 22.94% IN THE PRECEDING YEAR TO 19 .63% IN THE PRESENT YEAR AS PER THE WORKING OF THE SPECIAL AUDITOR AVAI LABLE ON PAGE 61 OF THE PAPER BOOK. IN THIS CASE ALSO, IT HAS BEEN REPORTE D BY THE SPECIAL AUDITORS THAT GP RATE RECOMMENDED BY THE SPECIAL AUDITORS OF 21.65% HAS BEEN WORKED OUT AFTER CONSIDERING INCREASE IN PRICE OF R AW MATERIAL AND HENCE, IN THIS CASE ALSO, INCREASE IN PRICE OF RAW MATERIA L HAS TO BE FACTORED IN FOR THE ALLEGED FALL IN THE GP. SIMILARLY, IN THIS CASE ALSO, THERE IS ADVERSE IMPACT ON GP IN THE PRESENT YEAR ON ACCOUNT OF INCR EASE IN SALARY AND WAGES AND OTHER MANUFACTURING EXPENSES AND IN THIS CASE ALSO, IT IS NOT THE CASE OF THE A.O. OR OF THE SPECIAL AUDITOR THAT THE EXPENSE REPORTED BY THE ASSESSEE COMPANY ON ACCOUNT OF SALARY AND WAGES AND OTHER MAINTENANCE EXPENSES ARE NOT CORRECT BECAUSE IN THI S CASE ALSO, THE ONLY ALLEGATION IS REGARDING NON MAINTENANCE OF PROPER S TOCK RECORDS. IN THIS CASE, THE ADVERSE IMPART ON GP ON ACCOUNT OF INCREA SE IN SALARY AND WAGES IS TO THE EXTENT OF 0.89% AND THE ADVERSE IMP ACT ON ACCOUNT OF INCREASE IN OTHER MANUFACTURING EXPENSES IS TO THE EXTENT OF 0.64%. SIMILARLY, THE ADVERSE IMPACT ON GP ON ACCOUNT OF I NCREASE IN THE PRICES OF RAW MATERIAL IS TO THE EXTENT OF 0.32% AND THE A DVERSE IMPACT ON GP ON ACCOUNT OF INCREASE IN RATES OF IMPORTED PARTS I S TO THE EXTENT OF 0.89% AND TAKING TOGETHER, THE NEGATIVE IMPACT ON GP IN T HE PRESENT YEAR IS TO THE EXTENT OF 2.74%. THE ACTUAL FALL IN GP REPORTE D IN THAT CASE IS 3.31%. ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 11 FOR THE REMAINING SMALL FALL IN GP OF 0.57%, WE ARE OF THE CONSIDERED OPINION THAT WHEN THE MAXIMUM PART OF FALL IN GP IS FOUND TO BE EXPLAINED, FOR SUCH A SMALL FALL IN GP OF 0.57%, IT IS NOT JUSTIFIED TO REJECT THE BOOK RESULTS MERELY ON THE BASIS OF THIS ALLEGA TION THAT DAY TO DAY STOCK REGISTER HAS NOT BEEN MAINTAINED. THIS IS AD MITTED POSITION OF THE FACT THAT THE ASSESSEE IS FOLLOWING THE SAME BASIS OF ACCOUNTING AND IS MAINTAINING SIMILAR RECORDS IN ALL EARLIER YEARS AL SO. AS PER THE TRIBUNAL ORDER OF THIS VERY ASSESSEE IN ASSESSMENT YEAR 2003 -04 AND 2004-05 IN I.T.A. NO. 925 AND 3777/AHD/2007 AND 1042 AND 7591/ AHD/2007 DATED 11.06.2010 WHICH IS AVAILABLE ON PAGES 1-31 OF THE PAPER BOOK, IT IS SEEN THAT IN ASSESSMENT YEAR 2003-04 ALSO, ADDITION OF R S.10 LACS WAS MADE BY THE A.O. ON ACCOUNT OF LOW GP. IN THAT YEAR ALSO, IT WAS STATED BY THE A.O. THAT THE ASSESSEE IS REQUIRED TO MAINTAIN QUAN TITATIVE RECORDS IN VIEW OF THE TRIBUNAL DECISION RENDERED IN THE CASE OF DC IT VS SAMEER DIAMOND EXPORTS PVT. LTD. 71 ITD 75, BUT THIS ADDI TION IN THAT YEAR WAS DELETED BY THE TRIBUNAL. IN THAT YEAR, IT WAS HELD BY THE TRIBUNAL THAT ALL THE ITEMS OF THE ASSESSEES PRODUCTION ARE EXCISABL E AND THE A.O. HAD NOT POINTED OUT ANY DEFECT IN THE EXCISE REGISTER OR AN Y OTHER RECORD OF THE ASSESSEE AND HENCE, THE GP ADDITION IS NOT JUSTIFIE D WITHOUT BRINGING ANY OTHER ADVERSE MATERIAL ON RECORD. IN THE PRESENT Y EAR ALSO, THE ASSESSEE IS MAINTAINING EXCISE RECORDS ALTHOUGH IT IS STATED BY THE SPECIAL AUDITOR THAT THE EXCISE RECORDS WERE NOT PRODUCED BEFORE TH EM BUT IF REQUIRED, THE A.O. COULD HAVE ASKED THE ASSESSEE TO PRODUCE THOSE RECORDS BUT THE A.O. HAS NOT DONE SO AND HE HAS PROCEEDED TO MAKE GP ADD ITION ON THE BASIS OF RECOMMENDATION OF SPECIAL AUDITOR ALONE WITHOUT EXAMINING THE EXCISE RECORDS. HENCE, IN OUR CONSIDERED OPINION, FOR S UCH A SMALL VARIATION IN GP, IT IS NOT JUSTIFIED TO REJECT THE BOOKS OF ACCO UNT AND MAKE GP ADDITION SIMPLY ON THE BASIS OF THIS OBJECTION THAT COMPLETE QUALITATIVE RECORDS ARE TO BE MAINTAINED BY THE ASSESSEE, SPECIALLY WHEN SI MILAR RECORDS ARE BEING MAINTAINED BY THE ASSESSEE SINCE VERY BEGINNI NG AND THE GP ADDITION IN THE EARLIER YEARS HAS BEEN DELETED BY T HE TRIBUNAL AND THE ADDITION WAS RECOMMENDED BY THE SPECIAL AUDITORS MA INLY ON THIS BASIS THAT EXCISE RECORDS WERE NOT PRODUCED BEFORE THEM, ALTHOUGH THIS IS THE SUBMISSION OF THE ASSESSEE THAT THE SAME WERE NEVER DEMANDED AND THE A.O. ALSO DID NOT ASK THE ASSESSEE TO PRODUCE THE E XCISE RECORDS. IT IS NOT ACCEPTABLE THAT THE EXCISE RECORDS WERE NOT MAINTAI NED BY THE ASSESSEE. CONSIDERING ALL THESE FACTS IN ITS ENTIRETY, WE ARE OF THE CONSIDERED OPINION THAT NO GP ADDITION IS JUSTIFIED IN THE CAS E OF THIS ASSESSEE ALSO. IN VIEW OF THE ABOVE, WE DECIDE THE ISSUE IN FAVOUR OF ASSESSEE AND ALLOW THE GROUND RAISED BY THE ASSESSEE. ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 12 7. GROUND NO.3 RELATES TO DISALLOWANCE OF DEDUCTION U/S 80IB TO THE EXTENT OF RS.43,869/- ON VATAV KASAR INCOME OF RS.1 ,46,231/-. IN THE ASSESSMENT ORDER THE AO STATED THAT THE ASSESSEE HA S SHOWN VATAV KASAR INCOME OF RS.1,46,231/- IN THE PROFIT AND LOSS ACCO UNT AS OTHER INCOME. THE ASSESSEE HAS INCLUDED THE ABOVE INCOME FOR CALC ULATING DEDUCTION U/S 80IB. THE AO STATED THAT THIS INCOME IS NOT DERIVED FROM INDUSTRIAL UNDERTAKING AND HENCE DEDUCTION COULD NOT BE ALLOWE D U/S 80IB IN RESPECT OF THIS INCOME. THE AO IN THIS REGARD FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD., STERLING FOODS 237 ITR 579, HINDUSTAN LEVER LTD. 23 9 ITR 297, PANDIAN CHEMICALS 262 ITR 278 AND K. RAVINDRANATHAN NAIR 26 2 ITR 669. 8. IN APPEAL BEFORE LD. CIT(A) THE ASSESSEE SUBMITT ED THAT VATAV KASAR INCOME IS DERIVED FROM INDUSTRIAL UNDERTAKING BECAU SE IT IS AN ACCOUNT OF SHORT PAYMENTS AND RATE DIFFERENCE OF PURCHASES SHO WN BY THE ASSESSEE. THE LD. CIT(A) FOLLOWING THE DECISION OF EARLIER YE AR DISALLOWED THE DEDUCTION U/S 80IB AND DISMISSED THE APPEAL ON THIS GROUND. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT SIMILAR ISSUE HAS BEEN DECIDED ON IDENTICAL FACTS BY THE TR IBUNAL IN THE CASE OF ASSESSEE AND ITS SISTER CONCERN FOR ASST. YEAR 2005 -06, THEREFORE, THIS YEAR ALSO THE ISSUE BE DECIDED IN FAVOUR OF ASSESSEE. 10. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF LOWER AUTHORITIES AND SUBMITTED THAT LD. CIT(A) BY FOLLOW ING EARLIER ORDER ON ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 13 IDENTICAL ISSUE HAS UPHELD THE ADDITION THEREFORE, THERE IS NO NEED TO INTERFERE IN HIS ORDER. HIS ORDER BE UPHELD. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RECORD, WE FIND THAT A SIMILAR ISSUE CAME UP BEFORE THE TRIBUN AL AND THE TRIBUNAL HAS DECIDED THE SAME ON IDENTICAL FACTS BY OBSERVING AS UNDER :- 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING THE ALLOWBAILITY OF 80IB DEDUCTION IN RES PECT OF VATAV KASAR INCOME, WE ARE OF THE CONSIDERED OPINION THAT IT IS BY NOW A SETTLED LEGAL POSITION THAT ENTRIES IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE IS NOT CONCLUSIVE AND HENCE, MERELY BECAUSE THE ASSESSEE H AS RECORDED THE VATAV KASAR INCOME SEPARATELY INSTEAD OF REDUCING T HE SAME FORM THE COST OF PURCHASE, IT CANNOT BE SAID THAT THIS VATAV KASA R INCOME IS NOT THE INCOME OF INDUSTRIAL UNDERTAKING. IT HAS ALSO BEEN EXPLAINED BEFORE US THAT THE VATAV KASAR INCOME IS ON ACCOUNT OF SHORT PAYMENT AND RATE DIFFERENCE OF PURCHASE AND HENCE, THE SAME IS REQUI RED TO BE REDUCED FORM THE COST OF PURCHASE. IF THIS IS DONE, THERE IS NO CASE OF ANY DISALLOWANCE U/S 80IB WITH REGARD TO VATAV KASAR IN COME. WE, THEREFORE, DIRECT THE A.O. NOT TO REDUCE THIS VATAV KASAR INCO ME FROM THE BUSINESS PROFITS OF THE ASSESSEE FOR THE PURPOSE OF CALCULAT ING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IB OF THE ACT. GROUND NO.4 I S PARTLY ALLOWED IN BOTH THE CASES. FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE DIREC T THE A.O. NOT TO REDUCE THIS VATAV KASAR INCOME FROM THE BUSINESS PR OFITS OF THE ASSESSEE FOR THE PURPOSE OF CALCULATING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IB OF THE ACT. GROUND NO.3 IS PARTLY ALLOWED. 12. GROUND NO.4 RELATES TO DISALLOWANCE OF DEDUCTIO N U/S 80IB TO THE EXTENT OF RS.1,32,531/- BY REWORKING WRITTEN DOWN V ALUE OF ASSETS. IN ASSESSMENT ORDER THE AO HAS STATED THAT AS IN EARLI ER YEARS THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB WITHOUT CLAIMING DEP RECIATION. THE AO HAS FOLLOWED THE DECISION OF THE HONBLE ITAT, SPEC IAL BENCH IN THE CASE OF VAHID PAPER CONVERTERS 98 ITD 165 AND COMPUTED D EDUCTION U/S 80IB ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 14 AFTER ALLOWING DEPRECIATION. THE LD. CIT(A) HAS DIS MISSED THE GROUND RAISED BY THE ASSESSEE BY STATING THAT THE DECISION OF JURISDICTIONAL ITAT, SPECIAL BENCH, AHMEDABAD IN THE CASE OF VAHID PAPER CONVERTERS IS SQUARELY APPLICABLE. THE DECISION OF AO IS CORRECT AND ACCORDINGLY BE DISMISSED THIS GROUND OF ASSESSEE. 13. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. THE SAME MAY BE ALLOWED NOW. 14. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE CLAIM OF ASSESSEE BY FO LLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF VAHID PAPER CONVERTERS (SUPRA). THEREFORE, THE ORDER OF LD. CIT(A) BE UPHELD. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE MATERIAL ON RECORD, WE FIND THAT IDENTICAL ISSUE HA S BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASST. YEAR 2005 -06 BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF VAHID PAPER CONVERTERS (SUPRA). THEREFORE, WE FIND NO REASON TO INTERFERE IN THE OR DER OF LD. CIT(A) AND THE SAME IS UPHELD. THIS GROUND OF ASSESSEE IS DISM ISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 23/9/2011 SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 23/9/2011. MAHATA/- ITA NO.3290/AHD/2009 ASST. YEAR 2006-07 15 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 14/9/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 19/9/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..