M/s Dharampal Premchand Ltd., Delhi V. DCIT, New Delhi

ITA 5079/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2824 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Keywords: Transfer pricing; Loose papers; Document seized; Documents seized
• Section: 143(3); 153A; 115JB; 80IB; 80G; 12A; 132; 139

Judgement Text

[ 1 ] INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI A.T.VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5079/DEL/2013 (ASSESSMENT YEAR: 2005 - 06) ITA NO. 5080/DEL/2013 (ASSESSMENT YEAR: 2006 - 07) ITA NO. 5081/DEL/2013 (ASSESSMENT YEAR: 2007 - 08) DHARAMPAL PREMCHAND LTD., 4873, CHANDI CHOWK, DELHI PAN:AAACD1952B VS. DCIT, CENT. CIRCLE - 4, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY: SH.G . N. GUPTA, ADV RESPONDENT BY: MS . NANDITA KANCHAN, CIT DR DATE OF HEARING 14.10. 2015 DATE OF PRONOUNCEMENT 08 . 0 1.201 6 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THE SE APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT ( A) - XXXIII , NEW DELHI DATED 21.06.2013 PASSED FOR THE ASSESSMENT YEAR 2005 - 06 TO 2007 - 08 CONFIRMING THE JURISDICTION OF AO U/S 153A AND ALSO CURTAILING PROFIT ELIGIBLE FOR DEDUCTION U/S 80IB /80 IC OF THE ACT. . 2 . THE GROUNDS RAISED BY THE ASSESSEE ARE IDENTICA L IN ALL THE ASSESSMENT YEARS SO, WE ARE TAKING ONLY THE GROUNDS RAISED IN ITA NO. 5079/DE/2013 FOR A. Y. 2005 - 06 WHICH ARE AS UNDER: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XXXIII, NEW DELHI (HEREINAFTER CALLED THE CIT(A) FOR SHORT) ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE LEARNED DEPUTY COMMISSIO NER OF INCOME TAX, CENTRAL CIRCLE - 4, NEW DELHI (HEREINAFTER CALLED THE 2 | P A G E AO FOR SHORT) HAD NO JURISDICTION TO SCALE DOWN THE DEDUCTION ALLOWED U/S 80IB/80IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT FOR SHORT) IN THE ORIGINAL ASSESSMENT ORDER D ATED 14.06.2007 SINCE THE WHITTLING DOWN OF THE DEDUCTION U/S 80IB/80IC OF THE ACT WAS NOT BASED UPON ANY DOCUMENTS SEIZED DURING THE COURSE OF SEARCH ON 21.01.2011.. THE LEARNED CIT ( A) DID NOT APPRECIATE THAT THE SEIZED DOCUMENTS REFERRED BY HIM ARE ALL PARTS OF REGULAR ACCOUNTING TRANSACTIONS WHICH WERE AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT. FURTHER, THE LEARNED CIT ( A) HAS NOT SPECIFIED HOW THE SEIZED DOCUMENTS MENTIONED BY HIM IN THE IMPUGNED ORDER ARE RELEVANT TO WHITTLING DOWN OF THE DEDUCTION U/S 80IB/80IC OF THE ACT. 2.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT COMPANY HAD A CLOSE CONNECTION WITH M/S. S.H. KELKAR& CO. (P) LTD WITHIN THE MEANING OF THAT TERM IN SECTION 80 - 1 A( 10) OF THE ACT. 2.2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ALTHOUGH M/S. DHARAMPAL SATYAPAL LTD HAD A CLOSE CONNECTION WITH THE APPELLANT WITHIN THE MEANING OF THAT TERM IN SECTION 80 - IA(!0) OF THE ACT, THERE WAS NO ARRANGEMENT BETWEEN THE APPELLANT AND M/S. DHARA MPAL SATYAPAL LTD. THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCED TO THE APPELLANT MORE THAN ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN THE ELIGIBLE BUSINESS OF T HE APPELLANT. 2.3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ( A) ERRED IN HOLDING THAT EVEN IF ROYALTY WAS NOT CHARGED FROM THE APPELLANT BY SHRI RAVINDER GUPTA FOR USE OF HIS SECRET FORMULA FOR MANUFACTURING 'SUGANDHI', A RE ASONABLE VALUE OF THE NOTIONAL ROYALTY WAS REQUIRED TO BE REDUCED TO QUANTITY DEDUCTION U/S 80IB/ 80IC OF THE ACT . 2.4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ( A) ERRED IN HOLDING THAT SECTIONS 80 IA ( 10) OF THE ACT APPLI ED TO THE APPELLANT. 3.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING ON THE GROUND OF APPEAL NO. 7, TAKEN BEFORE HIM WHICH READS AS 'THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHO UT PREJUDICE TO THE GENERALITY OF GROUNDS OF APPEAL NO. 1 - 6 ABOVE, THE AO'S ACTION IN HOLDING THAT ONLY 5% OF THE PROFITS ARE ATTRIBUTABLE IN THE MANUFACTURING ACTIVITIES PERFORMED IN THE DAMOWALA/AGARTALA UNITS IS WHOLLY ARBITRARY AND SUBJECTIVE AND HAS N O BASIS EITHER ON FACTS OR IN LAW'. 3.2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ( A) ERRED IN HOLDING DAMOWALA UNIT AND AGARTALA UNIT AT PAR IN DISALLOWING DEDUCTION U/S 80IB/80IC OF THE ACT, ALTHOUGH IT IS UNCONTROVERTED THAT WHEREAS SHRI RAVINDER KUMAR DID NOT VISIT AGARTALA UNIT, HE USED TO TRAVEL TO DAMOWALA UNIT TO PREPARE 'SUGANDHI' THERE. 3.3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO THE GENERALITY OF GROUND OF APPEAL NO. 3.1 A BOVE, THE LEARNED CIT ( A) ERRED IN HOLDING THAT THE APPELLANT WAS ENTITLED TO A DEDUCTION OF RS. 37,68,748/ - ONLY U/S 80IB/80IC OF THE ACT AGAINST A DEDUCTION OF RS. 7,53,74,962 / - ALLOWED IN THE ORIGINAL ASSESSMENT ORDER DATED 14.06.2007. 3 . FOR ASSESSMENT YE AR 2005 - 06 THE ASSESSEE COMPANY DECLARED TOTAL INCOME OF RS. 14,45,90,679/ - AFTER CLAIMING DEDUCTION UNDER CHAPTER VI - A OF THE INCOME 3 | P A G E TAX ACT OF RS. 1307250/ - U/S 80G AND RS. 86250749/ - U/S 80IB/80IC OF THE ACT. RESULTANT NET TAXABLE INCOME IS SHOWN AT RS. 57032680/ - . BOOK PROFIT U/S 115JB HAS BEEN COMPUTED AT RS 130428160 / - AND AS BOOK PROFIT TAX WAS MORE THAN TAX PAYABLE UNDER THE NORMAL PROVISION OF THE COMPUTATION OF TOTAL INCOME TAX U/S 115JB WAS PAID. DCIT, CIRCLE 10(1), NEW DELHI FRAMED ASSESSMENT U/ S 143(3) ON 14.06.2007 AT AN INCOME OF RS 68508470 / - UNDER THE NORMAL PROVISIONS OF THE ACT AND AT RS 10227194 / - UNDER THE PROVISION OF SECTION 115JB OF THE ACT. DURING THE REGULAR ASSESSMENT U/S 143(3) DEDUCTION U/S 80IB WAS RESTRICTED TO RS 75374962 / - AG AINST THE CLAIM OF THE ASSESSEE AT RS 86250749 / - ON ACCOUNT OF INTEREST INCOME OF RS. 10875787/ - CLAIMED BY ASSESSEE OF ELIGIBLE UNITS WHICH ACCORDING TO AO ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE ABOVE ORDER WAS CHALLENGED BEFORE THE LEARNED COMMISSIONER OF INCOME - T AX (APPEALS) BY THE ASSESSEE COMPANY AND VIDE ORDER DATED 02.12.2008, LEARNED COMMISSIONER OF INCOME - T AX (APPEALS) UPHELD THE ACTION OF THE AO. AGAINST THIS AS SESSEE PREFERRED AN APPEAL BEFORE ITAT AND VIDE ORDER DATED 04.09.2009 IN ITA NO. 288/DEL/ 2009, APPEAL OF ASSESSEE WAS PARTLY ALLOWED IN RESPECT OF INTEREST INCOME FROM LOAN TO THE STAFF AND ON LATE PAYMENT RECEIVED FROM CUSTOMERS. ITAT CONFIRMED THE OR DER OF THE LEARNED COMMISSIONER OF INCOME - T AX (APPEALS) ORDER, WHICH RELATES TO INTEREST ON ACCOUNT OF DEPOSITS WITH THE BANK AND GOVT. DEPARTMENT S . 4 . O N 02.01.2012 A SEARCH U/S 132 OF THE ACT WAS CARRIED OUT ON D S GROUP I.E. M/S. DHARAMPAL SATYAPAL WHICH I S ENGAGED IN THE BUSINESS OF MANUFACTURING 4 | P A G E AND TRADING OF CHEWING TOBACCO, A PREMIUM PAN MASALA. IT ALSO INVOLVED IN MANUFACTURING OF FOOD PRODUCTS, BANKING/ HOSPITALITY, RUBBER, STEEL AND EDUCATION BUSINESS. THE ASSESSEE IS ONE OF LIMITED COMPAN IES WHIC H WAS ALSO COVERED IN THAT SEARCH ON DHARAMPAL SATYAPAL GROUP AND THEREFORE NOTICE U/S 153A WAS ISSUED ON 09.01.2012, IN RESPONSE TO WHICH THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 16.01.2012 DECLARED TAXABLE INCOME OF RS 57032680 / - . THIS INCOM E WAS THE SAME INCOME, WHICH WAS OFFERED BY THE ASSESSEE IN RETURN FILED U/S 139 OF THE ACT AND BASED ON WHICH ASSESSMENT U/S 143(3 ) OF THE ACT WAS MADE. 5 . THE ASSESSEE IS MAINLY ENGAGED IN MANUFACTURING OF FLAVORED CHEWING TOBACCO AND KIWAM UNDER THE BRAND NAME BABA. THE MAIN INGREDIENTS FOR PRODUCTION OF CHEWING TOBACCO ARE RAW TOBACCO, PERFUMERY COMPOUNDS, SANDAL, SAFFRON, MENTHOL ETC . THE SILVER FLAKES ARE ALSO USED AS RAW MATERIAL. THE RAW MATERIAL LIKE TOBACCO IS PURCHASE D FROM OPEN MARKET IN FLAKES AND IN THE FORM OF PASTE KNOWN AS KIWAM. THE RAW MATERIAL TOBACCO IS PROPERLY SCREENED FOR ITS SIZE, MOISTURE CONTENTS, DUST ETC. THE OTHER RAW MATERIALS ARE PURCHASE D FROM OPEN MARKET. C OMPOUNDS AND OTHER INGREDIENTS ARE THEN BLENDED FOR DIFFERENT VARIETIES OF TOBACCO AT DIFFERENT MANUFACTURING UNITS MOVED TO THE PRODUCTION AND FILLED IN THE POUCHES AND TINS AS PER THE REQUIREMENT. THE ASSESSEE ALSO MANUFACTURED SCENTED SUPARI, ELLAICHI, PAN CHATNI AND ROSE WATER ETC. THE MANUFACTURING UNITS OF THE ASSESSEE ARE LOCATED AT NOIDA (UP), DAMOWALA (HP), AND AGARTALA IN THE NORTH - EAST REGION. NOIDA 5 | P A G E UNIT IS ENGAGED IN THE PROCESSING OF SILVER AND OTHER UNITS OF THE ASSESSEE MANUFACTURING BABA ZAR DA. SOME OF THE RAW MATERIAL ARE PROCURED WITH THE HELP OF HEAD OFFICE AND AFTER MANUFACTURING OF THE GOODS THEY ARE TRANSFERRED TO VARIOUS DEPOTS OF THE ASSESSEE COMPANY TO BE SOLD BY THE HEAD OFFICE OR MARKETING OFFICE AT NEW DELHI. 6 . A SSESSEE COMPANY IS C LAIMING DEDUCTION U/S 80IB AND 80IC OF THE ACT IN RESPECT OF ITS INCOME FROM MANUFACTURING AT DAMOWALA UNITS LOCATED AT HIMACHAL PRADESH AND AGARTALA UNITS SITUATED IN NORTHEAST . THE NOIDA UNIT OF THE ASSESSEE, WHICH IS NOT AN ELIGIBLE UNIT FOR DEDUCTION, TRANSFERS SILVER FLAKES MANUFACTURED THEREIN TO THE VARIOUS UNITS ELIGIBLE FOR DEDUCTION U/S 80IB AND 80IC. 7 . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) THE ASSESSEE SUBMITTED FORM NO. 10CCB FOR CLAIMING DEDUCTION FOR THESE RESPECTIVE UNITS. IN ORIGINAL ASSESSMENT PROCEEDINGS THE FORM NO. 10CCB SUBMITTED BY THE ASSESSEE DID NOT SHOW THAT THERE IS TRANSFER OF MATERIAL FROM NOIDA UNIT TO THE RESPECTIVE UNITS WHICH ARE CLAIMING BENEFIT U/S 80IB/IC. 8 . DURING THE COURSE OF ASSESSMENT U/S 153 A IT WAS NOTICED THAT COLUMN NO. 20 OF FORM 10CCB WHICH PRESCRIBED THE DISCLOSURE OF TRANSACTION MADE BY THE ELIGIBLE UNDERTAKING WITH A RELATED CONCERNED OF THE ASSESSEE OR ANY OTHER UNDERTAKING OF THE ASSESSEE DOES NOT SHOW MATERIAL TRANSFERRED FROM NOIDA UNIT OF THE ASSESSE E TO THE ELIGIBLE UNITS FOR DEDUCTION. IT WAS FOUND THAT AGAINST THOSE COLUMNS CERTAIN TRANSACTION UNDERTAKEN WITH THE RELATED PERSON 6 | P A G E HAVE BEEN REPORTED SUCH AS TRANSACTION WITH M/S. DHARAMPAL SATYAPAL LTD. FURTHER TRANSACTION WITH ANOTHER UNDERTAKING OF THE ASSESSEE I.E. PURCHASE FROM NOIDA UNIT WHICH IS ENGAGED IN SILVER PROCESSING, HAS NOT BEEN DISCLOSED. IT WAS ALSO NOTED THAT SUCH TRANSACTION BY NOIDA UNITS OF THE ASSESSEE WITH ELIGIBLE UNDERTAKING OF THE ASSESSEE ARE NOT AT ARMS LENGTH PRICE AND T HEREFORE THEY ARE NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80 IA (8) OF THE INCOME TAX ACT. IT WAS ALSO NOTED THAT SHRI RAVINDER GUPTA, CMD OF THE ASSESSEE COMPANY, PREPARES SUGANDHI, WHICH IS AN ESSENTIAL MATERIAL AND KEY TO THE PRODUCTS MANUFACTU RED BY THE COMPANY. IT IS ALSO NOTED THAT SHRI RA V INDRA KUMAR GUPTA KNOW S ITS TRADE SECRET AND VISITS HIMACHAL PRADESH UNITS AT PERIODICAL INTERVALS OF ABOUT TWO MONTHS, HOWEVER, FOR AGARTALA UNITS THE IMPORTANT RAW MATERIAL WERE OBTAINED FROM DHARAMPAL SA TYAPAL LIMITED ACCORDING TO FORMULA LAID DOWN BY SHRI RA V INDRA KUMAR AND FOR PERFUMERY COMPOUNDS/ MATERIAL WERE PROCURED FROM M/S M/S. SH KELKAR & CO. PVT LTD., MUMBAI. M/S SH KELKAR COMPANY ALSO AGREE D NOT TO SUPPLY AND DIVULGE THE COMPOSITION OF THESE MA TERIAL TO ANYBODY OTHER SHRI RA V INDER KUMAR GUPTA. 9 . BASED ON THE ABOVE FACTS THE AO NOTED THAT OUT OF TOT AL TURNOVER OF RS. 154.65 CRORES, AGARTALA UNITS C LOCKED SALE OF RS. 148.03 CRORES UNITS AND DAMOWALA RS. 11.17 CRORE. HE ALSO NOTED THAT VARIOUS GOODS AND SERVICES ARE TRANSFERRED FROM HEAD OFFICE AND OTHER UNDERTAKING TO THE ELIGIBLE UNDERTAKINGS AND ARE NOT AT ARMS LENGTH PRICE AND THEREFORE THE PROFITS OF THE ELIGIBLE UNDERTAKING ARE INFLATED RESULTING INTO THE HUGE CLAIM OF DEDU CTION U/S 80IB/80IC. BASED ON 7 | P A G E THIS THE AO WAS OF THE VIEW THAT THE PROFITS OF THE ELIGIBLE UNDERTAKING HAVE TO BE APPORTIONED BETWEEN THE VARIOUS ACTIVITIES CARR IED OUT BY THE INDIVIDUAL UNITS. ACCORDING TO HIM, LIMITED ACTIVITIES ARE CARRIED OUT OF MIXING AND PACKING AT ELIGIBLE UNITS. FURTHER ACTIVITIES PERFORMED BY THE CORPORATE OFFICE IS ALSO NOT INCIDENTAL ACTIVITY . THEREFORE HE ATTRIBUTED ONLY 5% OF THE PROFITS TO THESE ELIGIBLE UNITS AND 95% OF THE PROFITS ARE ATTRIBUTABLE TO THE NON - ELIGIBLE UNDERT AKING AND THEREFORE HE ALLOWED DEDUCTION OF RS 3547118 / - AND RS 221630 / - FOR AGARTALA AND DAMOWALA UNITS RESPECTIVELY TOTALING TO RS 3768748 / - AS DEDUCTION . 10 . A SSESSEE AGGRIEVED WITH THE ORDER OF THE AO PREFERRED APPEAL BEFORE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) STATING THAT THE AO DID N OT HAVE ANY JURISDICTION TO DISTURB THE DEDUCTION ALLOWED U/S 80IB/ 80IC OF THE ACT AS H IS FINDINGS WERE NOT BASED UPON ANY DOCUMENTS SEIZED DURING THE COURSE OF SEARCH. IT WAS SUBMITTED THAT THERE IS NO INCRIMIN ATING MATERIAL FOUND DURING THE COURSE OF SEARCH, WHICH SUGGESTS SO. HE ARGUED THAT SECTION 80IB ARE MISREAD BY AO AS CONCEPT OF ARMS LENGTH PRICE APPLIED BY AO FOR INTER UNITS TRANSFERS ARE NOT ON THE STATUTE FOR THESE DEDUCTIONS . HE CONTENDED THAT PROVISION OF SECTION 80 IA ( 8) WHICH ONLY PRESCRIBED MARKET RATE AT WHICH THE PRODUCTS ARE TRANSFERRED. IN THE END, HE SUBMITTED THAT ESTIMATE MADE BY AO OF ATTRIBUTION OF 5% OF THE PROFITS TO THE ELIGIBLE INDUSTRIAL UNDERTAKING IS NOT CORRE CT. 8 | P A G E 11 . INN APPEAL BEFORE FIRST APPELLATE AUTHORITY, LD. CIT ( A) VIDE HIS ORDER DATED, 21.06.2013 REJECTED THE CONTENTION OF THE ASSESSEE THAT ADDITION HAS BEEN MADE WITHOUT ANY BASIS OF SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH. LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WAS OF THE VIEW THAT THE LETTER DATED 18.02.2013 BY THE ASSESSEE ITSELF SUGGESTS THAT VARIOUS ANNEXURE OF THE SEIZED MATERIAL CONTAINS DETAILS OF MATERIAL TRANSFER CHALLANS TO NOIDA UNIT, THE MOVEMENT OF RAW TOBACCO SHOWS DETAIL OF PURCHASE FROM SISTER CONCERN, MATERIAL OUTWARD REGISTER, RAW MATERIAL PURCHASE REGISTER ETC. WHICH WERE FOUND DURING THE COURSE OF SEARCH. ACCORDING TO LEARNED COMMISSIONER OF INCOME, TAX (APPEALS) THESE DOCUMENTS, THOUGH NOT REFERRED BY THE AO IN ASSE SSMENT ORDER BUT THE AO TAKEN THEM IN TO CONSIDERATION TO ARRIVE AT THE CONCLUSION IN ASSESSMENT ORDER U/S 153A. ACCORDING TO HIM BECAUSE OF SEIZED DOCUMENTS, THESE FACTS GAVE SPECIFIC KNOWLEDGE TO THE AO. HENCE, HE REJECTED ARGUMENTS OF THE ASSESSEE THA T SECTION 153A ASSESSMENT IS NOT BASED ON SEIZED MATERIAL DURING THE COURSE OF SEARCH. RELYING ON THE DECISION OF HONOURABLE DELHI HIGH COURT IN CASE OF SHRI ANIL BHATIA JURISDICTION CHALLENGED BY THE ASSESSEE U/S 153A WAS REJECTED. 12 . REGARDING MERITS OF THE DEDUCTION THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT IN FORM NO. 10CCB RELEVANT TRANSACTION WITH OTHER INDUSTRIAL UNDERTAKING OF THE ASSESSEE WAS NOT REFLECTED EXCEPT ROLE OF MR. RA V INDER KUMAR GUPTA AS WELL AS P URCHASE FROM M/S DHARAM PAL SATYA PAL LTD, M/.S. SH KELKAR PVT. LTD. DUE TO THIS IS INFLATION IN THE PROFIT DISCLOSED BY 9 | P A G E THE ASSESSEE AND THEREFORE PROVISION OF SECTION 80IB ( 10) IS APPLICABLE IN THE CASE OF THE ASSESSEE AND HENCE HE CONFIRMED THE ATTRIBU TION OF PROFIT OF 5% TO THE ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 80IB AND 80IC. THE ASSESSEE AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HAS PREFERRED THE APPEAL BEFORE US CONTAINING THE GROUNDS OF A PPEAL FOR ALL THREE APPEALS FOR ASSESSMENT YEARS 2005 - 06 TO 2008 - 09 ON IDENTICAL GROUNDS. 13 . BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF SEARCH , REVENUE DID NOT FIND ANY INCRIMINATING MATERIAL, AO, AND CIT ( A) BOTH DID NOT AGREE TO THIS PLEA. HE DREW OUR ATTENTION TO ASSESSMENT ORDER AS WELL AS THE ORDERS OF CIT (A) TO SHOW THAT THERE IS NO REFERENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH REGARDING DEDUCTION CLAIMED BY THE ASSESSEE. HE SUBMITTED THAT DISCREPANCY POINT ED OUT BY THE AO THAT RELEVANT DETAILS WERE NOT DISCLOSED IN FORM NO. 10 CCB BUT COMPLETE DETAILS WERE AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT FRAMED U/S 143(3) OF THE ACT. ACCORDING TO HIM, THERE IS NO MATERIAL FOUND WHICH DISCLOSED THAT ASSESSEES CLAIM U/S 80IB /IC WAS INFLATED. HE FURTHER SUBMITTED THAT THE CONTENTION OF THE AO THAT TRANSACTION ENTERED INTO BY THE ELIGIBLE UNDERTAKING WITH OTHER UNDERTAKING ARE NOT AT ARMS LENGTH AND THEREFORE THE PROVISION OF SECTION 8 OF SECTION 80 IA ARE TR IGGERED IS ALSO NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING SEARCH. HE FURTHER SUBMITTED THAT THE TRANSFER OF VARIOUS GOODS AND SERVICES FROM THE HEAD OFFICE TO OTHER UNDERTAKING RESULTED INTO HUGE PROFIT IN THE HANDS OF THE 10 | P A G E ASSESSEE IS ALSO NOT CULLED OUT FROM ANY DOCUMENTS SEIZED DURING THE SEARCH. HE FURTHER REFERRED TO THE DETAILS OF THE DOCUMENTS MENTIONED BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AT PARA 3.3 OF THE ORDER WHICH ARE PERTAINING TO TRANSFER OF MATERIAL TO NOIDA UNIT AND B ILLS OF TRANSPORTATION OF THOSE MATERIAL ARE ALREADY RECORDED IN THE BOOKS OF ACCOUNTS AND ARE PART OF THE ACCOUNTING RECORDS OF THE FIRM. HE CONTENDED THAT THERE IS NO MENTION IN THE ORDER OF AO AS WELL AS LD. CIT ( A) THAT THESES MATERIAL ARE NOT FORMIN G PART OF REGULAR RECORDS OF THE COMPANY. HE STATED THAT DATES PERTAINING TO THOSE DOCUMENTS ITSELF SUGGESTS THAT THEY ARE NOT RELATED TO THE PERIOD COVERED UNDER THESE THREE ASSESSMENT YEARS UNDER APPEAL . THEREFORE, RELIANCE OF LEARNED COMMISSIONER OF INC OME TAX (APPEALS) THAT THEY ARE THE INCRIMINATING MATERIAL IS NOT CORRECT. HE FURTHER SUBMITTED THAT EVEN LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT THESE ARE THE SEIZED DOCUMENTS PERTAINING TO STOCK TRANSFER AND TRANSFER OF RAW MATERIAL FR OM NOIDA UNIT TO VARIOUS UNITS. THEREFORE, HIS ARGUMENT WAS THAT IN ABSENCE OF ANY SEIZED INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH NO DISALLOWANCE OR ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE U /S 153A OF THE ACT FOR COMPLETED ASSESSMENTS . FOR THIS HE RELIED ON THE DECISION S OF A . HONBLE HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA DATED 28 TH AUGUST 2015, B . HONBLE SPECIAL MUMBAI BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. V. DY. CIT 137 ITD 287, 11 | P A G E C . CIT VS. V. THARMANDAL BUILDERS (P.) LTD. 370 ITR 209, D . CIT V. PUNJAB CONCAST STEELS LTD. 336 ITR 248, E . SRINIVASA FERRO ALLOYS LTD. V. ASSISTANT COMMISSIONER OF INCOME TAX , 368 ITR 424. 14 . FURTHER, ON THE MERITS HE SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESSMEN T PROCEEDING U/S 143(3) OF THE ACT, R ELEVANT DOCUMENTS, WHICH ARE NECESSARY FOR THE PURPOSE BY MAKING AN ASSESSMENT, WAS AVAILABLE WITH THE AO. FOR THIS, HE SUBMITTED THAT DURING THE COURSE OF ORIGINAL PROCEEDING U/S 143(3) THE MATTER WAS REFERRED U/S 144A TO THE A DDITIONAL CIT FOR EXAMINING THE CLAIM OF THE ASSESSEE. DURING THAT ASSESSMENT PROCEEDING HE DREW OUR ATTENTION TO LETTER DATED 06.12.2006 SUBMITTED BEFORE A DDITIONAL CIT WHEREIN AT PARA NO. 5 IT WAS STATED THAT DETAILS OF MISCELLANEOUS IN COME OF NOIDA UNIT OF RS. 23531790/ - WERE SHOWN AND IT WAS SPECIFICALLY STATED THAT IT INCLUDES SILVER PROCESSING CHARGES CHARGED FROM VARIOUS UNITS BY SILVER PROCESSING UNITS SITUATED AT NOIDA. IT WAS ALSO EXPLAINED WITH THESE CHARGES ARE DEBITED TO THE P ROFIT AND LOSS ACCOUNT UNDER THE HEAD PROCESSING CHARGES AND SHOWN AS MISCELLANEOUS INCOME OF NOIDA UNIT. THEREFORE, HE SUBMITTED THAT THERE IS TRANSFER OF GOODS FROM NOIDA UNIT TO OTHER UNITS WAS ALREADY IN THE KNOWLEDGE OF AO. HE FURTHER SUBMITTED THAT VIDE LETTER DATED 19.03.2013 IT WAS SUBMITTED THAT PURCHASE REQUIRED BY ELIGIBLE UNITS ARE COORDINATE D BY THE CORPORA TE OFFICE AND THE ACTUAL BILLS ALONG WITH MATERIAL ARE RECEIVED AT THOSE UNITS AND PURCHASE ARE DEBITED AS PURCHASES BY CREDITING THE UNITS OF THE RESPECTIVE SUPPLIE R S IN 12 | P A G E THE ACCOUNTS OF ELIGIBLE UNDERTAKING. HE SUBMITTED THAT FOR THE PURPOSE OF COORDINAT ION ONLY THE CORPORATE OFFICE IS INVOLVED. THERE IS NO PURCHASE ACCOUNTED FOR BY CORPORATE OFFICE OF THESE MATERIALS. REGARDING THE ALLOCATION OF THE EXPENDITURE OF CORPORATE OFFICE HE SUBMITTED THE DETAILED CHART SHOWING ALLOCATION OF VARIOUS EXPENSES INC URRED BY THE CORPORATE OFFIC E BETWEEN VARIOUS UNITS WHERE 115 ITEMS OF VARIOUS EXPENDITURE INCURRED BY THE CORPORATE OFFICE ARE APPORTIONED AND HE FURTHER SUBMITTED THAT SALES AND ADMINISTRATIVE OFFICE EXPENSES OF 88 ITEMS W ERE ALSO ALLOCATED TO VARIOUS UN ITS DISCLOSING THE ALLOCATION KEYS OF SUCH APPORTIONMENT. THEREFORE, HE SUBMITTED THAT EACH EXPENDITURE INCURRED HAS BEEN APPROPRIATELY APPORTIONED AMONGST THE VARIOUS UNITS BETWEEN ELIGIBLE AND NON - ELIGIBLE UNDERTAKINGS OF THE ASSESSEE TO DETERMINE CORRE CT PROFIT IN THE BEST POSSIBLE MANNER. HE FURTHER SUBMITTED THAT REGARDING THE ROYALTY FOR THE INTELLECTUAL RIGHTS RAV INDER KUMAR GUPTA ALSO STATED THAT HE DOES NOT CHARGE SUCH REMUNERATION FROM COMPANY I.E. M/S. DHARAM PAL PREMCHAND LTD. AND THEREFORE TH ERE IS NO REQUIREMENT OF REDUCING THE PROFITS OF THE ELIGIBLE UNDERTAKING ON THIS ACCOUNT. 15 . REGARDING THE CLOSE CONNECTION BETWEEN M/S. DHARAMPAL SATYAPAL LTD. IT WAS STATED THAT DURING THE FINANCIAL YEAR 2004 - 05 TO 2008 - 09 THE ASSESSEE HAS BROUGHT GOODS F ROM THESE COMPANIES AND THIS COMPANY HAS SUPPL IED THESE GOODS AT THEIR COST PLUS PROFIT AND FOR THIS REASON THE PRICE CHARGED BY THEM IN VARIOUS YEAR IS GENERALLY HIGHER THAN THE PREVIOUS YEAR AS THE COST OF RAW MATERIAL KEEPS ON GOING UP DUE TO INFLATION IN THE COST OF RAW MATERIAL. IT IS 13 | P A G E SUBMITTED THAT THE GOODS BY DAMOWALA UNIT IS ALWAYS PURCHASED AT MARKET VALUE. FURTHERMORE IT WAS ALSO CONTENDED THAT THE PARTIES MENTIONED SOLD GOODS TO THE ELIGIBLE UNITS DID NOT RESULT INTO MORE THAN ORDINARY PROFI T TO THE ELIGIBLE UNDERTAKING AND THEREFORE THE PROVISION OF SECTION 80 IA (10) ARE NOT TRIGGERED. IT WAS FURTHER STATED THAT THE PURCHASE OF GOODS ARE ALSO SHOWN TO BE COMPARABLE QUA PURCHASED FROM DHARAMPAL SATYAPAL LTD. AS WELL AS OTHER PARTIES AND THE ASSESSEE SUBMITTED THIS EXPLANATION BEFORE THE AO VIDE LETTER DATED 04.03.2013. THESE FACTS ARE NOT CONTROVERTED BY AO . 16 . FURTHER, REGARDING PURCHASE MADE FROM M/S. SH KELKAR, COMPANY HE SUBMITTED THAT THERE IS NO ARRANGEMENT BETWEEN THE ASSESSEE AS WELL AS THIS COMPANY, AND THERE IS NO ALLEGATION THAT THE ASSESSEE HAS DERIVED MORE THAN ORDINARY PROFIT . HE FURTHER SUBMITTED THAT AO AS WELL AS LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS READ THE CONCEPT OF ARMS LENGTH PRICING INSTEAD OF MARKET VAL UE OF THE GOODS. IN THE ASSESSMENT YEAR, HE SUBMITTED THAT THERE IS NO INSTANCE OR ALLEGATION, WHICH PROVES THAT THE GOODS ARE NOT PURCHASE D BY THE ELIGIBLE UNITS FROM THESE PARTIES AT A PRICE, WHICH IS LOWER THAN THE MARKET PRICE RESULTING IN TO HIGHER PR OFITS BY THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION. 17 . HE FURTHER SUBMITTED THAT MR. RA V INDER KUMAR GUPTA GOES TO ONLY DAMOWALA UNIT AND NOT TO AGARTALA UNIT OF THE ASSESSEE COMPANY AND FURTHER THERE IS NO SEARCH IN DAMOWALA UNIT WHICH EVEN REMOTELY PROVE THAT ANY PAYMENT MADE TO RA V INDER KUMAR GUPTA. 14 | P A G E 18 . LD. DR SUBMITTED THAT THERE IS AN INCRIMINATING MATERIAL FOUND DURING THE COURSE OF THE SEARCH WHICH ARE SHOWN BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AT PAGE NO. 5 OF THE APPELLATE ORDER SHOW ING TRANSFER OF MATERIAL FROM ONE UNIT TO ANOTHER UNIT AND IN FORM NO 10CCB SUBMITTED BY THE ASSESSEE DID NOT DISCLOSE ANY TRANSACTION BETWEEN INTER UNITS. THEREFORE, THESE DOCUMENTS ARE SEIZED DURING THE COURSE OF SEARCH AND ARE INCRIMINATING MATERIAL, WH ICH WAS NOT BEFORE THE AO AT THE TIME OF MAKING ORIGINAL ASSESSMENT. SHE RELIED ON PAGE NO 43 OF THE PAPER BOOK SUBMITTED STATING THAT THIS PAPER SHOWS TRANSFER OF GOODS TO OTHER UNITS. SHE SUBMITTED THAT THOUGH THE DATES OF THE DOCUMENTS ARE PERTAINING TO FY 2010 - 11 BUT THIS SHOWS THE MODUS OPERANDI OF THE ASSESSEE BY THE TRANSFER OF THE GOODS AND THEREFORE THE ASSESSMENT U/S 153A MADE BY THE AO IS PURELY ON THE BASIS OF SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH. SHE RELIED UPON THE ORDERS OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR THIS AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANIL BHATIA. SHE VEHEMENTLY STATED THAT THE NON - DISCLOSURE IN FORM 10CCB COUPLED WITH SEIZURE OF DOCUMENTS SHOWING TRANSFER OF MATERIAL IS A N INCRIMINATING DOCUMENTS BASED ON WHICH THE ASSESSMENT U/S 153A IS MADE. 19 . REGARDING ATTRIBUTION OF 5% OF ALLOCABLE PROFIT SHE SUBMITTED THAT MAJOR ACTIVITY ARE RELATING TO NOIDA UNIT AND GOOD S PROCUREMENT IS ALSO COORDINATED THROUGH CORPORATE OFFICE AND F URTHER AT THE ELIGIBLE UNITS ONLY ACTIVITY OF MIXING AND PACKING ETC. I S DONE . T HEREFORE, IN VIEW OF THE LIMITED ACTIVITY , 5% IS THE 15 | P A G E APPROPRIATE ATTRIBUTION OF PROFIT MADE BY THE AO AND SHE VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR THIS. 20 . IN REJOINDER , LD . AR SUBMITTED THAT INCRIMINATING DOCUMENTS THAT IS MENTIONED BY THE AO AS WELL AS LEARNED COMMISSIONER OF INCOME - TAX (APPEALS ) WHICH IS AT PAGE NO 43 PAPER BOOK WHICH IS MENTIONED BY THE LD. DR IS AN AMOUNT PERTAINING TO THE CONCERNED TRANSPORT CHARGES WHICH ARE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THIS ARE P ERTAINING TO PAYMENT MADE TO TRANSPORTER HENCE THEY CANNOT BE SAID TO BE ANY INCRIMINATING MATERIAL. HE FURTHER SUBMITTED THAT PG. 43 OF THE PAPER BOOK SUBMITTED BY THE REVENUE WHICH DOES NOT SHOW ANY MATERIAL PERTAINING TO ASSESSMENT YEAR 2005 - 06 . REGARDI NG ALLEGED LIMITED MANUFACTURING ACTIVITY, HE SUBMITTED THAT NO INCRIMINATING DOCUMENTS SHOWS THAT MANUFACTURING ACTIVITY IN FACT AS SUBMITTED BEFORE THE AO IN THE ORIGINAL ASSE SSMENT PROCEEDING IS NOT TAKING PLACE AT THE RESPECTIVE UNITS. REGARDING THE EXTRA PROFIT, HE SUBMITTED THAT THREE YEARS GROSS PROFIT IS ALSO COMPARED FOR FY 2003 - 04 AND 2004 - 05 PERTAINING TO ASSESSMENT YEAR PRIOR TO ASSESSMENT YEAR 2005 - 06, WHICH IS SHOWING DECREASING TREND AND IT, IS ACCEPTED BY AO IN ASSESSMENTS . THEREFORE, HE S UBMITTED THAT TRANSACTION OF THE ASSESSEES ELIGIBLE UNDERTAKING WITH NON - ELIGIBLE UNDERTAKING OR WITH OTHER PARTIES HAS NOT RESULTED INTO MORE THAN ORDINARY PROFITS IN THOSE UNITS. THEREFORE, HE SUBMITTED THAT ASSESSMENT IS NOT BASED ON SEIZED DOCUMENTS AS WELL AS THE PROFIT ATTRIBUTABLE WORK ED OUT BY THE AO @ 5% IS INCORRECT. HE 16 | P A G E SUBMITTED THAT THERE IS NO MATERIAL, WHICH EVEN REMOTELY SUGGEST THAT THE PROFITS SHOWN BY THE ASSESSEES ELIGIBL E UNITS ARE NOT CORRECT. THEREFORE, IT SHOULD BE ALLOWED. 21 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION OF THE ASSESSEE AS WELL AS THE REVENUE. DURING THE COURSE OF HEARING , LD. AR HAS FURNISHED PAPER BOOK RELYING ON VARIOUS SUBMISSIONS MADE DURING THE COURSE OF ORIGINAL ASSESSMENT , PROCEEDING U/S 143(3) , ASSESSMENT PROCEEDING U/S 153A, COPIES OF THE VARIOUS DECISIONS RELIED UPON . LD. DR ALSO SUBMITTED A PAPER BOOK SHOWING MATERIAL SEIZED DURING THE COURSE OF SEARCH AS WELL AS SUBMISSION MADE BY THE ASSESSEE DATED 17.01.2013 AND 04.03.2013 IN RESPONSE TO QUESTIONNAIRE ISSUED BY THE AO ON 30.11.2012. THE BASIC QUESTION S INVOLVED HERE ARE TWO FOLD. A . WHETHER ASSESSMENT U/S 153A MADE BY AO DISTURBING THE COMPLETED ASSESSMENT U/S 143(3) ON THE BASIS O F SOME MATERIAL WHICH ARE UNEARTH ED DURING THE COURSE OF SEARCH WHICH WAS NOT PRODUCED OR ANYTHING ALREADY MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT ? B . CONSEQUENTLY, IF SO , THEN CLAIM OF DEDUCTION U/ S 80IB AND 80IC IS CORRECT OR NOT. IF WE ANSWER THE FIRST QUESTION THAT THE ASSESSMENT U/S 153A AND CONSEQUENT ADDITION HAVE BEEN MADE BASED ON SEIZED DOCUMENT WHICH HAVE BEEN UNEARTH ED DURING THE COURSE OF SEARCH IN AFFIRMATIVE THEN ONLY WE REQUIRE TO GIVEN OUR FINDINGS TO THE SECOND QUESTION ABOUT T HE APPROPRIATENESS OF THE CLAIM OF DEDUCTION U/S 80 IB AND 80 IC OF THE INCOME TAX ACT. 17 | P A G E 22 . WE PROCEED TO DECIDE THE FIRST ISSUE. DURING THE COURSE OF SEARCH, THE MATERIAL RELIED UPON BY THE AO, WHICH WAS FOUND AS PER ANNEXURE A - 4 TO ANNEXURE A - 11. LD. CIT (A) HAS TABULATED THEM AT PARA NO 3.3 OF HIS ORDER - EXTRACTING LETTER DATED 18/02/2013 OF THE ASSESSEE. S. NO. DEPARTMENT PARTY CODE NAME & ADDRESS OF LOCATION PAGES 1. N - 5 M/S. DHARAMPAL PREMCHAND LTD.A - 34/35, SECTOR - 60, NOIDA (U.P.) 1 - 6 2. SN - 7 M/S. DHARAMPAL PREMCHAND LTD.1 - 62, SECTOR - 9, NOIDA (U.P.) 7 TO 8 3. SN - 12A M/S. DHARAMPAL PREMCHAND LTD.H05, NSEZ, NOIDA (U.P.) 9 TO 10 4. D - 3 M/S. DHARAMPAL PREMCHAND LTD.4873, CHANDANI CHOWK, DELHI 11 5. D - 5 M/S. DHARAMPAL PREMCHAND LTD. A - 3,SMA,G.T.KARNALROAD, DELHI 12TO 14 6. AGARTALA M/S. DHARAMPAL PREMCHAND LTD.A.D.NAGAR, AGARTALA 15 7. INDORE M/S. DHARAMPAL PREMCHAND LTD.DEWASNAKA,LASURIAMORI,INDORE 16 THE CIT (A) AS UNDER ALSO EXPLAINS RELEVANCE OF THOSE LOOSE PAPERS : - M/S. DHARAMPAL PREMCHAND LTD., A - 34/35, SECTOR 60, NOIDA. (DOS - 21.01 .2011)(N - 5) ANNEXURE PAGES EXTRACTS OF SEIZED LOSE PAPER A - 4 351 - 400 MATERIAL TRANSFER CHALLANS 13.01.11 TO 20.01.11, NOIDA, DELHI UNITS (FROM S. NOS. 363 TO 400 LEAVES ARE BLANK). A - 5 301 - 350 MATERIAL TRANSFER CHALLANS TO NOIDA, DELHI UNITS - 2.12.2010 TO 12.01. 2011 A - 6 251 - 300 MATERIAL TRANSFER CHALLANS TO NOIDA, DELHI UNITS - 04.10.2010 TO 30.11.2010 - A - 7 ' 151 - 199 MATERIAL TRANSFER CHALLANS TO NOIDA, DELHI - 04.08.2010 TO 30.09.2010 A - 10 43 FREIGHT CARRIERS (P) LTD. SHOWING YEAR WISE PAYMENT AS FREIGHT . A - LL 28 MOVEMENT OF RAW TOBACCO PURCHASED FROM OF VARIOUS SUPPLIERS IN QUANTITY AND VALUE. A - 4 1 - 62 MATERIAL INWARD REGISTER. A - 5 1 - 202 MATERIAL OUTWARD REGISTER. S 67 - 68 COPY OF FORM - 38 - DECLARATION FOR IMPORT OF GOODS IN U.P ; 69 - 74 RAW MATERIAL PURCHASE INVOICES OF M/S. SACHEROM SUNNY CHEMICALS (P)LTD. 18 | P A G E 91 - 94 MATERIAL TRANSFER CHALLAN BOOK NO. 8 AND CHALLAN NO, 360 & 361 DT. 19.01.2011 A - 9 1 - 74 MATERIAL INWARDS REGISTER A - 10 A - 11 1 - 300 MATERIAL INWARDS REGISTER A - 11 01 - 32 MATERIAL OUTWARD REGISTER 23 . W E FIRST ANALYZE THESE MATERIALS WITH RESPECT TO THE PERIOD THEY BELONG TO AS WELL AS THEIR NATURE. THE FIRST ANNEXURE AT PAGE 351 AND 362 THE ANNEXURE ARE THE CHALLANS OF TRANSFER OF GOODS FROM DHARAMPAL SATYPAL, NOIDA UNIT INTO CHALLAN DATED JANUARY FOR DECEMBER 2010 TO FEBRUARY 2011. ANNEXURE A - 5 FROM PAGE NO 301 TO 350 IS ALSO MATERIAL TRANSFER CHALLANS TO NEW DELHI UNI TS FROM 02.12.2010 TO 12.01.2011. ANNEXURE A - 6 IS ALSO RELATING TO MATERIAL TRANSFER CHALLANS TO NOIDA OR DELHI UNITS STARTING FROM 04.10.2010 TO 31.11.2010. ANNEXURE A - 7 IS ALSO MATERIAL TRANSFER CHALLANS TO NOIDA AND DELHI UNIT STARTING FROM 04.08.2010 T O 30.09.2010. PAGE 43 OF ANNEXURE A - 10, WHICH IS RELIED UPON BY THE LD. DR VEHEMENTLY, IS RELATING TO AREA WISE PAYMENTS MADE TO FREIGHT CARRIER PVT. LTD AND WHICH IS PART OF TOTAL TRANSPORT EXPENDITURE INCURRED BY THE ASSESSEE. PAGE 28 OF ANNEXURE A - 11 IS PURCHASE OF TOBACCO IN FY 2009 - 10 FROM VARIOUS SUPPLIERS SHOWING THE QUANTITY AND VALUE OF THE SAME. IT IS NOT RELATED TO PURCHASE FORM ANY OF THE RELATED PARTIES. PAGE 1 TO 62 OF ANNEXURE A - 4 IS THE MATERIAL INWARD REGISTER OF THE ASSESSEE FROM APRIL 2 010 DECEMBER 2010. ANNEXURE A - 5 IS ALSO MATERIAL OUTWARD REGISTER OF THE ASSESSEE COMPANY FOR THE SAME PERIOD. PAGE 53 TO 57, 67 - 74 AND 91 TO 94 OF ANNEXURE - 8 IS DETAILS OF RAW MATERIAL PURCHASE BY THE ASSESSEE FROM VARIOUS PARTIES. THESE BILLS ARE NOT REL ATED TO ANY MATERIAL TRANSFER FROM ELIGIBLE UNITS OR 19 | P A G E TO ELIGIBLE UNITS FROM OTHER UNDERTAKING. ANNEXURE A - 9 AND A - 10 ARE ALSO MATERIAL INWARD REGISTER AND MATERIAL OUTWARD REGISTER FROM APRIL 2010 TO DECEMBER 2010. ANNEXURE A - 11 PAGE NO. 1 TO 32 IS ALSO TH E MATERIAL INWARD REGISTER OF THE ASSESSEE COMPANY FROM DECEMBER 2010 TO JANUARY 2011. FROM THE ANALYSIS OF SEIZED MATERIAL PRODUCED BEFORE US IT IS APPARENT THAT NONE OF THE SEIZED MATERIAL PERTAINED TO THE ASSESSMENT YEAR UNDER APPEAL BUT THEY RELATE TO FY 01.04.2010 TO 31.03.2011. FURTHER, THE DOCUMENTS ARE PERTAINING TO MOVEMENT OF GOODS IN THAT PERIOD. MOST OF THE MATERIAL SEIZED IS RELATED TO SUPPLY FROM OR TRANSFER TO UNRELATED PARTIES. FROM THE SEIZED MATERIAL NEITHER AO AND N OR LD. CIT (A ) COULD SHOW ANY MATERIAL THAT TRANSACTION S ARE FROM RELATED PARTY AND THEY ARE NOT CARRIED ON AT MARKET RATE. FURTHER DURING THE COURSE OF ASSESSMENT U/S 143(3) THE ASSESSEE HAS EXPLAINED ALL ISSUE OF DETERMINATION U/S 80IB AND 80IC IN DETAIL. THE ASSESSEE IS MAINTAINING UNIT WISE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR WORKING OUT DEDUCTION U/S 80IB AND 80IC. IN THE UNIT WISE PROFIT AND LOSS ACCOUNTS OF THOSE UNITS, THERE IS DISCLOSURE OF PURCHASES FROM THE NOIDA UNIT. THIS IS EVIDENT FROM THE LETTER DATED 06.12.2006 SUBMITTED BY THE ASSESSEE BEFORE THE A DDITIONAL CIT IN PROCEEDINGS U/S 143(3) RWS 144A OF THE INCOME TAX ACT. DURING THE COURSE OF THE ORIGINAL ASSESSMENT, ENTIRE ISSUE OF DEDUCTION U/S 80IB AND 80 IC WAS EXAMINED BY AO AND ADDL. CIT AND THEN MATTER REACHED AT THE STAGE OF APPEAL BEFORE ITAT. MERELY BECAUSE IN FORM NO 10CCB SUBMITTED THERE IS OMISSION TO MENTION CERTAIN DETAILS CANNOT BE SAID THAT THE INFORMATION OF INTER UNIT 20 | P A G E TRANSFER AND INFORMATION OF FACILITATION BY DELHI OFFICE IN PROCUREMENT WAS NOT AVAILABLE WITH AO AT THE TIME OF MAKING ASSESSMENT U/S 143(3). IN ANY CASE, THESE FORMS WERE AVAILABLE WITH AO AT THE TIME OF ORIGINAL ASSESSMENT. FURTHER, THIS IS NOT THE FIRST YEAR OF DEDUCTION CLAIMED BY THE ASSESSEE AND ALLOWED BY THE REVENUE. 24 . BASED ON THIS WE HAVE COME TO CONCLUSION THAT : - A . NONE OF THE MATERIAL SEIZED DURING THE SEARCH RELATES TO THE YEAR UNDER APPEAL. B . NONE OF THE MATERIAL FOUND RELATE TO THE GOODS TRANSFER TO ONE UNIT FROM OTHER FOR THE PERIOD. C . NONE OF THE MATERIAL RELATES TO THE PURCHASES FROM SISTER CONCERNS. D . NONE OF THE MATERIAL SUGGEST THAT THE MATERIAL TRANSFERRED TO ELIGIBLE UNDERTAKING IS LESS THAN THE MARKET RATE. E . NONE OF THE MATERIAL SUGGEST THAT THE ELIGIBLE UNITS ARE NOT CARRYING OUT MANUFACTURIN G ACTIVITY, WHICH IS STATED BY ASSESSEE. F . NONE OF THE MATERIAL SHOWS THAT THERE IS INFLATION OF THE PROFIT BY ASSESSEE OF ELIGIBLE UNDERTAKINGS. G . NONE OF THE MATERIAL SUGGEST THAT APPROPRIATION OF PROFIT MADE BY THE ASSESSEE TO DERIVE THE INCOME OF ELIGIBLE UNDERTAKING IS INCORRECT. H . NONE OF THE MATERIAL SUGGEST THAT ELIGIBLE UNITS EARNS MORE THAN ORDINARY PROFITS . 21 | P A G E IN VIEW OF ABOVE, WE CONFIRM THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH IS NOT INCRIMINATING WHICH EVEN REMOTELY SUGGEST THAT ASSESSEE S CLAIM OF DEDUCTION U/S 80IC/80 IB IS INCORRECT. 25 . WE WOULD NOW EXAMINE THIS ISSUE WITH RESPECT TO VARIOUS JUDICIAL PRECEDENTS CITED BEFORE US FOR EXERCISING JURISDICTION BY REVENUE U/S 153A OF THE ACT. HON. DELHI HIGH COURT IN CASE OF CIT V KABUL CHAWLA HAS HELD THAT COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISC LOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. THEREFORE, IT IS NECESSARY THAT DURING SEARCH SOME MATERIAL SHOULD UNEARTH WHICH SHOULD BE INCRIMINATING TO MATERIALLY ALTER THE ALREADY ASSESSED INCOME OF THE ASSESSEE. IN THIS CASE , MATERIALS UNEARTHED BY REVENUE IS NOT AT ALL RELATED TO THE YEARS, WHICH ARE UNDER APPEAL FOR WHICH ASSESSED INCOME U/S 143(3) IS DISTURBED. THOSE DO CUMENTS ALSO DO NOT SHOW ANY METHODOLOGY OR PRACTICE ADOPTED BY THE ASSESSEE, WHICH DEMONSTRATES POSSIBILITY OF ANY MATERIAL ALTERATION IN THE ASSESSED INCOME OF THE ASSESSEE FOR THOSE YEARS. BEFORE US, THE REVENUE COULD NOT POINT OUT ANY MATERIAL RELATE D TO AY 2005 - 06 TO 2007 - 08, WHICH WAS UNEARTHED IN SEARCH PROCEEDINGS. 26 . LD. CIT (A) HAS UPHELD THE JURISDICTION U/S 153A OF THE ACT RELYING UP ON DECISION OF HONORABLE DELHI HIGH COURT IN CASE OF CIT V SHRI ANIL B HATIA IN 22 | P A G E ITA NO 1626/2010 DATED 7 TH AUGUS T 2012 ( 352 ITR 493) ( DELHI). IN THAT CASE, THERE WERE INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH FOR THAT PARTICULAR YEAR WHERE LOAN WAS NOT DISCLOSED IN THE REGULAR RETURN OF THE ASSESSEE. IN THIS CASE, THERE IS NO INSTANCE OF ANY DOCUMENT, WHICH SHOWS THAT PARTICULAR INCOME / EXPENDITURE ASSETS OR LIABILITIES ARE NOT DISCLOSED IN THE RETURN OF INCOME. IN THAT CASE, HON. DELHI HIGH COURT IN PARA NO 23 HELD THAT THEY ARE NOT CONCERNED WITH A CASE WHERE NO INCRIMINATING MATERIAL WAS F OUND DURING THE SEARCH CONDUCTED UNDER SECTION 132 OF THE ACT. THEREFORE, THEY DID NOT EXPRESS ANY OPINION AS TO WHETHER SECTION 153A CAN BE INVOKED EVEN IN SUCH A SITUATION. THAT QUESTION IS THEREFORE WAS LEFT OPEN. HON DELHI HIGH COURT IN CASE OF CIT V KABUL CHAWLA 61 TAXMANN.COM 412 (DELHI) CONSIDERING THE DECISION OF CIT V SHRI ANIL BHATIA 352 ITR 493 (DELHI) HELD IN PARA NO 37 THAT (IV) ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN T HE COURSE OF THE SEARCH, OR OTHER POST - SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL. (V) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASS ESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. 23 | P A G E (VI) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL AS SESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. (VII) COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPER TY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. IN VIEW OF THIS , CIT (A)S RELIANCE ON DECISION OF CIT V ANIL BHATIA IS MISPLACED AS IN THE PRESENT CASE THERE IS NO MATERIAL PERTAINING TO A. Y. 2005 - 06 TO 2007 - 08, WHICH WAS BROUGHT ON RECORD BY REVENUE, WHICH WAS SEIZED DURING THE COURSE OF SEARCH AND IS INCRIMINATING . 27 . THE PRESENT APPEALS CONCERN A.Y. 2005 - 06 TO 2007 - 08. ON THE DATE OF THE SEARCH, THE SAID ASSESSM ENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH RELEVANT TO THOSE ASSESSMENT YEARS , RESPECTFULLY FOLLOWING THE DECISION OF HONOURABLE DELHI HIGH COURT IN CASE OF CIT V KABUL CHAWLA ( 61 TAXMANN.COM 412) ( DELHI ) WE HOLD THAT NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. THEREFORE, GROUND NO 1 OF ALL THE THREE APPEALS ARE ALLOWED. 28 . AS WE HAVE ALREADY DECIDED GROUND NO ONE HOLDING THAT NO ADDITION CAN BE MADE IN IMPUGNED ASSESSMENT YEAR ABSENT ANY INCRIMINATING MATERIAL 24 | P A G E UNEARTHED DURING SEARCH, GROUND NO. 2 AND GROUND NO. 3 OF THE APPEALS ARE NOT ADJUDICATED AND HENCE TREATED AS DISMISSED. 29 . AS ALL THE THREE CAPTIONED APPEALS ARE CONTAINING IDENTICAL GROUNDS AND SIMILAR ISSUES WE DISPOSE THEM OF F BY THIS COMMON ORDER. IN THE RESULT ALL, THE THREE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 . 0 1.201 6 . - SD/ - - SD/ - ( A. T. VARKEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 /01/2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI