ITO, Parwanoo V. M/s Usha Infra System, Parwanoo

ITA 509/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60917 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: Y K SUD
• Keywords: Business income; Income from undisclosed sources
• Section: 143(3); 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.509/CHD/2012 (ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER, VS. USHA INFRA SYSTEM, WARD PARWANOO. 21-D, SECTOR 1, PARWANOO. PAN: AABFU5560G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI Y.K.SUD DATE OF HEARING : 21.06.2012 DATE OF PRONOUNCEMENT : 27.06.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SHIMLA DATED 28.02.2012 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) HAS ERRED IN DISALLOWING THE DEDUCTION OF RS.2,93,77,171/- CLAIM ED U/S 80IC OF THE ACT. 2. THE LD. CIT(A) ERRED IN STATING THAT IT IS NOT THE CASE OF SPLITTING UP OF THE BUSINESS AND TO HOLD THAT THE P ROCESS ADOPTED BY THE ASSESSEE FOR MANUFACTURING ANCHOR RODS IS A MANUFACTURING PROCESS. 3. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT BOTH THE ISSUES RAISED IN THE APPEAL FILED BY THE REVENUE AR E COVERED IN FAVOUR OF THE 2 ASSESSEE BY THE SEPARATE ORDERS OF THE TRIBUNAL REL ATING TO ASSESSMENT YEARS 2005-06 AND 2007-08. 4. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE ARISING IN THE PRESENT APPEAL IS IN RESPECT OF DEDUCTION CLAIMED U/S 80 IC OF THE ACT IN RESPECT OF THE MANUFACTURING ACTIVITY CARRIED ON ITS OWN BEHALF AND ON BEHALF OF THE THIRD PARTY. THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF FOUNDATION ANCHOR RODS FOR WINDMILLS WITH ITS UN ITS ESTABLISHED AT PARWANOO, H.P. THE ASSESSEE HAD STARTED PRODUCTION W.E.F. 29 .6.2004 I.E. ASSESSMENT YEAR 2005-06 AND THIS WAS THE FOURTH YEAR OF PRODUCTION. SURVEY OPERATION WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 29.12.2005. WHILE COMPLETING THE ASSESSMENT FOR ASSESSMENT YEAR 2006- 07, DEDUCTION U/S 80 IC OF THE ACT WAS NOT ALLOWED TO THE ASSESSEE. THE ASSES SING OFFICER IN VIEW OF THE SAME DID NOT ALLOW THE AFORESAID DEDUCTION TO THE A SSESSEE FOR THE YEAR UNDER APPEAL. THE CIT(A) FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 499/CHD/2009 FOR THE ASSESSMENT YEAR 2005-06 (ORDER DATED 30.11.2009), IN ITA NO.1158/CHD/2009 FOR THE ASSESSMENT YEAR 2006-07 ((ORDER DATED 29.1.2010), IN ITA NO.78/CHD/ 2011 FOR THE ASSESSMENT YEAR 2007-08 ((ORDER DATED 03.03.2011) AND IN M.A.N O.38/CHD/2010 FOR THE ASSESSMENT YEAR 2006-07 (ORDER DATED 22.10.2010) AL LOWED THE CLAIM OF THE ASSESSEE. THE REVENUE IS IN APPEAL AGAINST THE SA ID ORDER OF THE CIT (APPEALS). 6. WE FIND THAT THE ISSUE STANDS COVERED BY THE OR DER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 200 5-06 WHEREIN VIDE ORDER DATED 30.11.2009 IN ITA NO. 499/CHD/2009, THE CLAIM OF THE ASSESSEE REGARDING 3 DEDUCTION U/S 80 IC HAD BEEN ALLOWED BY THE TRIBUNA L VIDE PARAS 23 TO 26, WHICH READS AS UNDER: 23. WE, THEREFORE, HOLD THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE AMOUNTS TO MANUFACTURE AND THE PROFITS EAR NED BY THE ASSESSEE FROM CARRYING ON THE MANUFACTURING ACT IVITY ARE ELIGIBLE FOR THE DEDUCTION U/S 80IC OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION U/S 80IC OF THE ACT ON THE PROFITS OF BUSINESS SHOWN BY THE ASSESSEE. THE GROUND NOS 1 & 2 RAISED BY THE ASSESSEE ARE ALLOWED . 24. THE ASSESSEE HAS ALSO RAISED AN ALTERNATIVE ISS UE THAT THE ASSESSEE IS ENGAGED IN PROCESSING AND AS SUCH E NTITLED TO DEDUCTION U/S 80IC OF THE ACT, WHICH IS APPLICABLE TO THE UNITS ENGAGED IN MANUFACTURING AND PROCESSING. 25. THE HON'BLE SUPREME COURT IN THE CASE OF INDIA CINE AGENCIES VS CIT (SUPRA), HAD HELD AS UNDER: THE WORD PRODUCTION HAS A WIDER CONNOTATION THAN THE WORD MANUFACTURE. WHILE EVERY MANUFACTURE CAN BE CHARACTERIZED AS PRODUCTION, EVERY PRODUCTION NEED NOT AMOUNT TO MANUFACTURE THE WORD PRODUCTION OR PRODUCE WHEN USED IN JUXTAPOSITION WITH THE WORD MANUFACTURE TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. IT ALSO TAKES IN ALL THE BY-PRODUCTS, INTERMEDIATE, PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. 26. IN LINE WITH THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURTS (SUPRA), WE HOLD THAT THE ASSESSEE I S CARRYING ON PRODUCTION AND THE ALTERNATIVE PLEA OF THE ASSESSEE IN GROUND NO. 3 IS ALLOWED. 7. FURTHER, SIMILAR CLAIM IN ASSESSMENT YEAR 2006- 07 HAS ALSO BEEN ALLOWED BY THE TRIBUNAL IN ITA NO. 1158/CHD/2009 ORDER DATE D 29.1.2010 AND IN ASSESSMENT YEAR 2007-08 IN ITA NO. 78/CHD/2011 VIDE ORDER DATED 3.3.2011. 4 THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE EARLIER YEARS AND FOLLOWING OUR EARLIER ORDERS, WE UPHOLD THE ORDER O F CIT(A) IN ALLOWING DEDUCTION U/S 80 IC OF THE ACT. THE GROUND NOS. 1 AND 2 OF APPEAL RAISED BY THE REVENUE ARE THUS DISMISSED. 8. THE REVENUE VIDE GROUND NO.3 HAS FURTHER RAISED THE ISSUE AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF TECHNICAL K NOWHOW CHARGES TAKING THE SAME AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOU RCES, NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. THE LEARN ED A.R. FOR THE ASSESSEE POINTED OUT THAT THIS ISSUE WAS ALSO ADDRESSED BY T HE TRIBUNAL IN ITA NO.499/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06 VIDE PARA 29. FURTHER THE TRIBUNAL IN THE ORDER RELATING TO ASSESSMENT YE AR 2006-07 IN ITA NO.1158/CHD/2009 HAD REFERRED TO THE ESTIMATION OF BUSINESS INCOME BY THE ASSESSING OFFICER AND TRADING BALANCE AS INCOME FRO M UNDISCLOSED SOURCES AND VIDE PARAS 11 AND 12 HELD AS UNDER: 11. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TR IBUNAL AND VIDE PARA 29, IT HAS BEEN HELD THAT THERE IS N O MERITS IN THE EXERCISE CARRIED ON BY THE ASSESSING OFFICER AND THE TOTAL PROFITS SHOWN BY THE ASSESSEE ARE TO BE INCLUDED AS INCOME FROM BUSINESS. THE TRIBUN AL IN PARA 29 HAD OBSERVED AS UNDER :- 29 .WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE HAD SHOWN HIGHER GP AND NP RATE BY COMPARISON TO ITS SISTER CONCERN. THE ASSESSING OFFICER HAD ADOPTED THE NET PROFIT OF THE BUSINESS AT THE RATE OF 7% OF THE TOTAL SALES AND THE EXCESS AMOUNT SHOWN BY THE ASSESSEE WAS ASSESSED AS INCOME FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER HAD NOT ALLOWED THE DEDUCTION U/S 80IC OF THE ACT ON THE BUSINESS INCOME SO DETERMINED. NO DISCREPANCY HAD BEEN POINTED IN THE BOOKS OF 5 ACCOUNT BY THE ASSESSING OFFICER. THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE NOT BEEN REJECTED U/S 145 OF THE I.T. ACT AND MERELY AN ESTIMATION HAD BEEN MADE BY THE ASSESSING OFFICER. THE BASIS FOR ESTIMATION OF THE NET PROFIT RATIO IS COMPARISON OF THE RESULTS OF THE ASSESSEE COMPANY WITH THAT OF ANOTHER CONCERN . THE COMPARISON OF NP & GP OF THE ASSESSEE WITH SISTER CONCERN M/S KAY PEE INDUSTRIES IS NOT CORRECT AS THE PRODUCTS MANUFACTURED BY TWO ARE DIFFERENT. THE BOOKS OF ACCOUNT WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO DEFECT/S IN THE SAME HAD BEEN POINTED OUT BY THE ASSESSING OFFICER EXCEPT FOR THE CONCLUSION THAT THE ASSESSEE HAD SHOWN HIGHER PROFITS. THE ESTIMATION OF PROFITS HAD BEEN MADE ON ASSUMPTION, CONJECTURES & SURMISES BY THE ASSESSING OFFICER. DURING THE SURVEY CARRIED OUT U/S 133A ON 27.12.2005, NO DOCUMENTS WERE FOUND AT THE PREMISES OF THE ASSESSEE, TO SUGGEST INFLATION. THE PLEA OF THE ASSESSEE THAT THE SISTER CONCERN WHOSE NET PROFIT RATE HAS BEEN TAKEN AS THE BASIS FOR WORKING OUT THE RESULTS UNDER APPEAL, WAS ENGAGED IN THE MANUFACTURE OF DIFFERENT ITEMS THOUGH MANUFACTURED SIMILAR ITEMS IN EARLIER YEARS HAD NOT BEEN CONSIDERED. FURTHER, ASSESSEE HAD NOT USED ANY TRADE MARK OF USHA ON ITS PRODUCTS AS THE ANCHOR ROD MANUFACTURED BY THE ASSESSEE DOES NOT CARRY ANY BRAND AND ALSO IT WAS PREPARED AS PER SPECIFICATION OF CUSTOMER M/S SUZLON ENERGY LIMITED. THIS ALLEGATION OF ASSESSING OFFICER IS WITHOUT BASIS. THE JOB WORK CHARGES PAID ARE BACKED BY BILLS ISSUED BY 3 RD PARTIES WHICH ARE VOUCHED AND NO DISCREPANCY HAD BEEN FOUND IN THEM. COMPARISON OF ELECTRICITY CONSUMPTION AND MANUFACTURING ACTIVITY BY ASSESSING OFFICER IS NOT CORRECT AS THE FIRST BILL WAS RAISED IN JULY / 6 AUGUST 2004. WE FIND NO MERITS IN THE EXERCISE CARRIED ON BY THE ASSESSING OFFICER. THE TOTAL PROFITS SHOWN BY THE ASSESSEE ARE TO BE INCLUDED AS INCOME FROM BUSINESS ON WHICH THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80IC OF THE ACT. THE GROUND NOS. 4 & 5 RAISED BY THE ASSESSEE ARE THUS ALLOWED. 12. THE EXERCISE CARRIED OUT BY THE ASSESSING OFFIC ER AND IN WORKING OUT THE EXPENDITURE ON ACCOUNT OF TECHNI CAL KNOW-HOW / GOODWILL OR INTEREST AND SALARY PAID TO THE PARTNERS IS WITHOUT ANY EVIDENCE BROUGHT ON RECORD TO PROVE THE SAID EXPENDITURE BEING INCURRED BY THE ASSESSEE . FURTHER, THE BIFURCATION IN THE INCOME FROM BUSINES S AND INCOME FROM UNDISCLOSED SOURCES HAS BEEN CARRIED OU T BY THE ASSESSING OFFICER ONLY ON PRESUMPTIONS, WHICH H AVE NO BASIS. IN THE ABSENCE OF ANY EVIDENCE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS INCURRED SO CALLED EXPENDITURE AND NOT CLAIMED IT IN ITS BOOKS OF ACCOUNT, WE FIND NO MERIT IN THE SAID ESTI MATION OF INCOME FROM UNDISCLOSED SOURCES. IN LINE WITH OUR R ATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE, IN ASS ESSMENT YEAR 2005-06, WHEREIN THE EXERCISE CARRIED OUT BY T HE THEN ASSESSING OFFICER WAS HELD TO BE WITHOUT MERITS AND THE TOTAL PROFITS SHOWN BY THE ASSESSEE DIRECTED TO BE INCLUDED AS INCOME FROM BUSINESS. IN LINE WITH THE RATIO LAI D DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE, WE DIRECT THE ASSESSING OFFICER TO ASSESS THE TOTAL PROFITS SHOWN BY THE AS SESSEE AS INCOME FROM BUSINESS ON WHICH THE ASSESSEE IS ENTIT LED TO BENEFIT OF DEDUCTION U/S 80IC OF THE ACT. ACCORDIN GLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DEDUCTI ON U/S 80IC OF THE ACT ON THE NET PROFITS SHOWN BY THE ASS ESSEE. THE GROUND NOS. 4 TO 6 RAISED BY THE ASSESSEE ARE A LLOWED. 7 9. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTI CAL TO THE ISSUE RAISED IN THE EARLIER YEARS AND FOLLOWING THE SAME, GROUND NO .3 RAISED BY THE REVENUE IS THUS DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2012. SD/- SD/- (T.R. SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JUNE, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH