ACIT, New Delhi V. M/s. Omnipack, New Delhi

ITA 5409/DEL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6750 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: SALIL MEHTA
• Keywords: Business income; Search and seizure; Additional evidence; Fair market value
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI L.P. SAHU, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5409/DEL./2012 (ASSESSMENT YEAR : 2009-10) ACIT, CENTRAL CIRCLE 2, VS. M/S. OMNIPACK, NEW DELHI. 32 24, ANSARI ROAD, DARYAGANJ, NEW DELHI. (PAN : AABFO4256D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, SENIOR ADVOCATE, SHRI ROHIT JAIN, ADVOCATE & SHRI SALIL MEHTA, CA REVENUE BY : SHRI VIJAY VERMA, CIT DR DATE OF HEARING : 05.10.2016 DATE OF ORDER : 27.10.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ASSISTANT COMMISSIONER OF INCOME-TAX , CENTRAL CIRCLE 2, NEW DELHI (HEREINAFTER REFERRED T O AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SE T ASIDE THE IMPUGNED ORDER DATED 14.08.2012 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-III, NEW DELHI QUA THE ASSESSM ENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- ITA NO.5409/DEL./2012 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.38,74,682/- MADE BY THE A.O. OUT OF 80IC, BY TRE ATING THE SAME AS INCOME FROM OTHER SOURCES. 2. THE ORDER OF THE CIT (A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : DURI NG THE SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCO ME-TAX ACT, 1961 (FOR SHORT THE ACT) IN CASE OF GOPAL ZARDA G ROUP ON 15.01.2009 AT THE RESIDENTIAL PREMISES OF SMT. RACH NA AGGARWAL, CERTAIN DOCUMENTS BELONGING TO ASSESSEE WERE SEIZED . AFTER RECORDING SATISFACTION, PROCEEDINGS U/S 153C READ W ITH SECTION 153A OF THE ACT WERE INITIATED AND THE CASE OF THE ASSESSEE WAS PUT UNDER SCRUTINY BY ISSUING A NOTICE U/S 143(2) AND 1 42(1) ALONG WITH QUESTIONNAIRE AND IN RESPONSE THERETO, LD. AR FOR T HE ASSESSEE ATTENDED ASSESSMENT PROCEEDINGS AND FURNISHED REQUI SITE DETAILS. 3. ASSESSEE COMPANY IS INTO THE BUSINESS OF MANUFAC TURING AND SALE OF TIN CONTAINERS AND ALLIED GOODS HAVING BUSI NESS ACTIVITIES AT BANTAKHERI, UTTARAKHAND. ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE DECLARED SALE O F RS.4,97,11,596/-, GROSS PROFIT OF RS.1,52,70,202/- AND NET PROFIT OF RS.75,44,628/- WITH GP RATIO OF 30.72% AND NET PROF IT RATIO OF 15.18%. BUT, IN THE IMMEDIATELY PRECEDING YEAR, TH E ASSESSEE ITA NO.5409/DEL./2012 3 DECLARED SALE OF RS.1,65,57,752/- HAVING GP OF RS.2 4,40,575/- AND NET PROFIT OF RS.51,852/- GIVING GP RATIO OF 14.68% AND NP RATIO OF 0.31% AND THE ENTIRE INCOME OF RS.77,49,364/- HAS B EEN CLAIMED AS DEDUCTION U/S 80IC AS PER AUDIT REPORT IN FORM NO.1 0CCB ALONG WITH CERTIFICATE FROM THE AUDITOR. 4. AO NOTICED THAT ASSESSEE HAS MADE SUBSTANTIAL BU SINESS TRANSACTION WITH M/S. J.J. ENTERPRISES, ITS SISTER CONCERN, BY MAKING PURCHASES OF RS.1,66,99,460/- AND BY MAKING PAYMENT OF PRINTING CHARGES TO THE TUNE OF RS.20,34,142/- AND THE ASSES SEE HAS MADE TOTAL PURCHASE OF RS.3,17,06,551/- OUT OF WHICH 52. 66% PURCHASES HAVE BEEN MADE FROM THE SISTER CONCERNS WHICH IS PA RT OF THE TIN CONTAINER. ASSESSEE DECLARED GP RATE OF 30.72% AND NP RATE OF 15.18% AS AGAINST NP RATE OF 1.67% OF ITS SISTER CO NCERN, M/S. J.J. ENTERPRISES WHICH IS INTO THE SAME LINE OF BUSINESS . AO CAME TO THE CONCLUSION THAT THE SEMI-FINISHED CONTAINER PAR TS ARE BEING SUPPLIED BY M/S. J.J. ENTERPRISES AND AFTER CARRYIN G OUT THE MINOR WORK, THE SAME WAS SOLD BY THE ASSESSEE FIRM AS FIN ISHED PRODUCTS. NO WORK IN PROGRESS IS SHOWN. 5. AO FURTHER NOTICED THAT POWER AND FUEL EXPENSES IS APPROXIMATELY 5% IN CASE OF M/S. J.J. ENTERPRISES A ND 1.15% IN CASE OF ASSESSEE AND LIKEWISE WAGES ACCOUNT FOR ONL Y 1.27% IN CASE OF ASSESSEE FIRM WHEREAS IT IS 3% IN CASE OF SISTER CONCERN CARRYING ITA NO.5409/DEL./2012 4 OUT SIMILAR ACTIVITIES AND AS SUCH, THE ASSESSEE HA S SUPPRESSED THE EXPENDITURE TO INFLATE INCOME AS THE SAME IS EXEMPT U/S 80IC OF THE ACT. AO CONCLUDED THAT AS THE ASSESSEE MADE PURCHA SES TO THE EXTENT OF APPROXIMATELY 50% FROM ITS SISTER CONCERN , THE PROFIT EARNED TO THE EXTENT OF 50% ARE REQUIRED TO BE TREA TED AS A RESULT OF ARRANGEMENT MADE BETWEEN ASSESSEE AND ITS SISTER CO NCERN AND COMPUTED THE INCOME AND ELIGIBLE DEDUCTION U/S 80IC OF THE ASSESSEE AS UNDER :- TOTAL PROFIT DECLARED RS.77,49,364/- 50% OF THE PROFIT HELD TO BE INCOME FROM OTHER SOURCES AS DISCUSSED ABOVE RS.38,74,682/- BUSINESS INCOME OF THE ASSESSEE FROM ELIGIBLE BUSINESS RS.38,74,682/- DEDUCTION U/S 80IC RESTRICTED TO BUSINESS INCOME RS.38,74,682/- 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS ALLOWED THE APPEAL. FEELI NG AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.5409/DEL./2012 5 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER CONTENDED, INTER ALIA, THAT THE BARE PERUSAL OF THE TRADING RESULTS OF THE ASSESSEE COMPANY VIS--VIS M/S. J.J. ENTERPRISE S, ITS SISTER CONCERN, SIMILARLY LOCATED AND INTO THE SAME BUSINE SS LEADS TO THE CONCLUSION THAT THE ASSESSEE COMPANY HAD MADE MAJOR PURCHASES OF SEMI-FINISHED GOODS FROM ITS SISTER CONCERNS, M/S. J.J. ENTERPRISES, SO THE AO HAS RIGHTLY DISALLOWED 50% OF THE DEDUCTI ON U/S 80IC BY INVOKING THE PROVISIONS CONTAINED U/S 80IA (10); TH AT ASSESSEES GROSS PROFIT INCREASED FROM 14.68% TO 30.72% WITH N P 0.3% TO 15.18% DURING THE YEAR UNDER CONSIDERATION WHICH IS UNREASONABLE AND SUFFICIENT TO INVOKE PROVISIONS CONTAINED U/S 8 0IA (10); THAT THE ASSESSEE HAS NOT PLACED EVIDENCE OF FAIR MARKET VALUE OF THE ITEMS PURCHASED BEFORE AO BUT FILED A COST SHEET RE FLECTING GP OF RS.6.4 LAKHS IN THE HANDS OF M/S. J.J. ENTERPRISES ON THE SALES OF ITEMS OF RS.1.67 CRORES TO THE ASSESSEE AND NO APPL ICATION FOR ADDITIONAL EVIDENCE WAS ENTERTAINED BY LD. CIT (A); THAT LOW EXPENDITURE ON WAGES AND POWER CONSUMPTION CHARGES IN CASE OF ASSESSEE AS COMPARED TO ITS SISTER CONCERN, M/S. J. J. ENTERPRISES LEADS TO THE CONCLUSION THAT IT IS A CASE OF BACKWA RD AND FORWARD ITA NO.5409/DEL./2012 6 INTEGRATION OF PROFIT IN ORDER TO AVAIL DEDUCTIONS U/S 80IC AND AS SUCH, APPEAL IS LIABLE TO BE ALLOWED. 9. HOWEVER, ON THE OTHER HAND, THE LD. AR FOR THE A SSESSEE TO REPEL THE ARGUMENT ADDRESSED BY THE LD. DR CONTENDE D INTER ALIA THAT THE AO WITHOUT DEMONSTRATING THAT THE PROFIT E ARNED BY ASSESSEE IS MORE THAN REASONABLE LEADING TO THE SUP PRESSION OF PROFIT AT THE OTHER END INVOKED THE PROVISIONS CONT AINED U/S 80IA (10); THAT THE VIEW TAKEN BY LD. CIT (A) THAT M/S. J.J. ENTERPRISES HAS CLAIMED FULL VALUE OF THE GOODS/RAW MATERIAL SU PPLIED TO THE ASSESSEE HAS NOT BEEN REBUTTED; THAT JUMP IN THE GR OSS PROFIT OF THE ASSESSEE FROM 14.68% TO 30.72% IS DUE TO THE FACT T HAT THE TRADING RESULT WAS FOR A HALF YEAR FOR 2008-09 AND FULL YEA R FOR 2009-10; THAT LESS GROSS PROFIT OF M/S. J.J. ENTERPRISES IS DUE TO THE FACT THAT IT WAS USING OLD TECHNOLOGY WHEREAS THE ASSESSEE HAS P URCHASED NEW TECHNOLOGY BY MAKING INVESTMENT OF RS.1.9 CRORES IN THE PLANT AND MACHINERY AND THE FACT THAT THE ASSESSEE HAS BEEN M AKING HIGHLY SPECIALIZED PRODUCT FOR BIG MULTI-NATIONAL COMPANIE S (MNC); THAT WHEN THE AO HAS ACCEPTED THE PURCHASES U/S 48(1)(II ), IT WAS NOT OPEN FOR HIM TO QUESTION THE SAME; THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT SINCE POWER CONSU MPTION BILL AND WAGES BILLS ARE NEGLIGIBLE, NO BUSINESS ACTIVIT IES ARE BEING CARRIED OUT BY THE ASSESSEE; THAT NO SUCH ADJUSTMEN T CAN BE MADE ITA NO.5409/DEL./2012 7 U/S 153C AS THERE WAS NO INCRIMINATING MATERIAL AGA INST THE ASSESSEE. 10. UNDISPUTEDLY, THE AO HAS INVOKED THE PROVISIONS CONTAINED U/S 80IA (10) OF THE ACT MERELY ON THE BASIS OF COM PARISON MADE IN THE GP RATIO OF ASSESSEE WHICH IS A 80IC UNIT WITH ITS SISTER CONCERN, A NON-80IC UNIT THOUGH GEOGRAPHICALLY LOCA TED NEAR TO THE ASSESSEE. LD. CIT (A) DELETED THE ADDITION MADE BY THE AO BY RETURNING THE FOLLOWING FINDINGS :- 5. FINDING ON GROUND OF APPEAL:- THE SHORT ISSUE TO BE DECIDED IS WHETHER THE ADDITION MADE FOR RS.38,74,682/- ON ACCOUNT OF DISALLOWANCE OF ELIGIBLE PROFIT U/S 80IC BY INVOKIN G PROVISIONS OF SECTION 80IC(10) OF THE IT ACT IS JUS TIFIABLE IN THE FACTS OF THE CASE. FROM THE ASSESSMENT ORDER IT IS OBSERVED THAT THE AO HAS TAKEN INTO ACCOUNT THE FAC T THAT THERE HAS BEEN A INCREASE IN GP RATIO AND NP RATIO OF THE ASSESSEE FIRM AS COMPARED TO THE PREVIOUS FINANCIAL YEAR AND THAT THE ENTIRE INCOME FOR THE YEAR HAS BEEN CL AIMED AS DEDUCTION U/S 80IC. IT HAS ALSO BEEN NOTED BY TH E AO THAT THE ASSESSEE HAS MADE AROUND 52.66% OF THE TOT AL PURCHASES OF RS.3,17,06,551/- FROM M/S JJ ENTERPRIS ES, IT'S SISTER CONCERN, WHICH IS' IN SIMILAR LINE OF B USINESS. THAT SEMI FINISHED CONTAINER PARTS ARE BEING SUPPLI ED BY M/S JJ ENTERPRISES AND AFTER CARRYING OUT MINOR WOR K THE SAME ARE BEING SOLD BY THE ASSESSEE FIRM AS FINISHE D PRODUCT. REFERRING TO THE PROVISION OF SECTION 80IC (10) OF THE ACT, THE O HAS CONCLUDED IN HIS ASSESSMENT ORDE R THAT THE BUSINESS HAS BEEN SO ARRANGED BY THE ASSESSEE T O MAXIMIZE PROFIT AT THE UNIT RUNNING BUSINESS FROM S PECIAL CATEGORY STATE. THAT AS THE PURCHASES TO THE EXTENT OF 50% HAVE BEEN MADE FROM SISTER CONCERN THEREFORE THE PR OFIT EARNED TO THE EXTENT OF 50% ARE TREATED AS RESULT O F SUCH ARRANGEMENT AND HELD NOT REPRESENTING BUSINESS ACTI VITIES ITA NO.5409/DEL./2012 8 CARRIED OUT BY THE ASSESSEE, BUT INCOME FROM OTHER SOURCES. AS AGAINST THE ABOVE FINDING OF THE AO THE SUBSTANCE OF THE SUBMISSION MADE BY THE APPELLANT THROUGH HIS VARIOUS REPLIES IS THAT THE APPELLANT F IRM IS SITUATED IN AN AREA SPECIFIED IN THE 14 TH SCHEDULE OF THE IT ACT AND SATISFIES ALL CONDITIONS AS PRESCRIBED UNDE R SECTION 80IC FOR CLAIMING DEDUCTION THEREIN. THAT T HE APPELLANT HAS ALSO SUBMITTED FORM 10CCB DULY CERTIF IED BY THE CHARTERED ACCOUNTANT, BEFORE THE AO. THAT TH E TRANSACTION WITH M/S JJ ENTERPRISES WAS ENTERED AS PER THE PREVALENT MARKET RATE AND NO CONCESSIONAL PRICE WAS CHARGED BY M/S JJ ENTERPRISES WHICH RESULTS IN MORE THAN ORDINARY PROFITS TO THE APPELLANT. THAT THE APPELL ANT HAD ALSO ENTERED TRANSACTIONS WITH M/S JJ ENTERPRISES I N THE FINANCIAL YEAR PRECEDING TO THE PRESENT FINANCIAL Y EAR AND THE GP RATES OF M/S JJ ENTERPRISES FOR THE FINANCIA L YEAR ENDING 31.03.08 AND 31.03.09 HAS BEEN 14.85% AND 14.80% RESPECTIVELY. FURTHER THE APPELLANT'S PERCEN TAGES OF TRANSACTIONS ENTERED WITH M/S JJ ENTERPRISES WER E SIMILAR IN THE ABOVE REFERRED TO FINANCIAL YEARS AN D THEREFORE THE INCREASE IN GP RATE OF THE APPELLANT FROM 14.68% (FY 2007-08) TO 30.72% ( FY 2008-09) WAS NOT DUE TO TRANSACTIONS ENTERED WITH M/S JJ ENTERPRISES . THAT IT IS DUE TO INTRODUCTION OF LATEST MACHINERY WORTH RS.1,90,75,000/- THAT THE PROFIT OF THE ASSESSEE HA S IMPROVED AND NOT BECAUSE IT IS MAKING PURCHASES FRO M ITS SISTER CONCERN. IT HAS ALSO BEEN SUBMITTED BY THE A SSESSEE THAT THERE IS NO SALES FROM ASSESSEE TO JJ ENTERPRI SES AND THAT THE ASSESSEE IS NOT PURCHASING SIMILAR COMPONE NTS AND GOODS AS HAS BEEN PURCHASED FROM JJ ENTERPRISES AND HENCE NO COMPARISON CAN BE FILED. IT HAS ALSO BEEN ARGUED BY THE ASSESSEE THAT PACKING CHARGES FOR RS.11,59,3 23/- IS DEBITED IN THE MANUFACTURING ACCOUNT OF THE ASSESSE E AND THEREFORE THE AO'S FINDING THAT THERE IS NO PACKING CHARGES PAID BY THE ASSESSEE IS NOT CORRECT. IT HAS BEEN FINALLY CONCLUDED BY THE APPELLANT THAT IT IS MAKIN G A HIGHLY SPECIALIZED PRODUCT FOR BIG MNC'S FOR WHICH IT HAS IMPORTED MACHINERY AND INSTALLED SPECIALIZATION EQUIPMENT WORTH RS.1,93,17,740/- DURING THE YEARS. THAT THE PROFIT HAS BEEN EARNED BY THE APPELLANT MAINLY DUE TO NEW EQUIPMENT AND HIGH SALES PRICES WHICH THEY GOT FROM ITA NO.5409/DEL./2012 9 MNC. THAT HAD THERE BEEN ARRANGEMENT WITH M/S JJ ENTERPRISES THEN THERE WOULD HAVE BEEN FALL IN GP R ATE AS WELL AS NET PROFIT IN CASE OF M/S JJ ENTERPRISES, WHICH IS NOT THE CASE WHEN COMPARED TO FINANCIAL YEAR 2007-0 8. I HAVE CAREFULLY GONE THROUGH THE FINDING OF THE AO AS WELL AS THE SUBMISSIONS OF THE APPELLANT AND IT IS NOTED THAT THE ENTIRE BASIS OF ADDITION MADE BY THE AO IS BASED ON THE PRESUMPTION THAT THE PURCHASES FROM M/ S JJ ENTERPRISES HAS BEEN AT A CONCESSIONAL RATE THAN TH E MARKET RATE. HOWEVER FOR INVOKING THE PROVISIONS OF SECTION 80IC (10) OF THE IT ACT, IT WAS REQUIRED OF THE AO TO BRING OUT COGENT AND HARD REASONS TO SHOW THAT T HE COURSE OF BUSINESS BETWEEN TWO CLOSE CONNECTED PART IES PRODUCED MORE THAN ORDINARY PROFITS IN CASE OF THE APPELLANT. THERE IS NO SPECIFIC FINDING AS TO IN WH AT MANNER M/S JJ ENTERPRISES HAS SOLD GOODS/ITEMS AT A CONCESSIONAL RATE TO THE APPELLANT, AS OTHERWISE TH E GP RATE OF M/S JJ ENTERPRISES WOULD HAVE FALLEN FOR TH E IMPUGNED FINANCIAL YEAR AS COMPARED TO THE PREVIOUS FINANCIAL YEAR. THE AO HAS HINTED IN HIS ASSESSMENT ORDER THAT SEMI FINISHED CONTAINER PARTS ARE BEING SUPPLI ED BY M/S JJ ENTERPRISES AND AFTER CARRYING OUT MINOR WOR K THE SAME ARE BEING SOLD BY THE ASSESSEE FIRM AS FINISHE D PRODUCTS. HOWEVER THERE DOES NOT APPEAR TO BE ANY BASIS FOR MAKING SUCH AN OBSERVATION. RATHER FROM THE COPY OF SUBMISSION FILED BY THE APPELLANT BEFORE THE AO IT IS NOTED THAT THE ASSESSEE HAD SUBMITTED THAT IT MANUF ACTURES TIN CONTAINERS OF VARIOUS SIZES AS PER REQUIREMENT OF BUYER. THE RAW MATERIAL USED BY US IS TIN PLATES OF VARIOUS SIZES AND THICKNESS. THERE IS NO BATCH FOR MANUFACTURE OF THE PRODUCT. THE WASTAGE AND TIME OF VARIOUS SIZES WILL BE DEPENDING UPON SIZE, SHAPE AN D HEIGHT X AND WEIGHT X BROADNESS OF THE CONTAINER AN D SIZE OF RAW MATERIAL OF THE TIN PLATE AVAILABLE. TH ERE IS NO SPECIFIC MACHINE FOR SPECIFIC PRODUCT BUT THE MACHI NES USED ARE PRESSURE MACHINE, CUTTING MACHINE, WELDING , LOCKING ETC. THUS FROM THE ABOVE DETAILS FILED BY THE APPELLANT IT CANNOT BE STRAIGHT AWAY INFERRED THAT THE NATURE OF ITA NO.5409/DEL./2012 10 MANUFACTURING BY THE APPELLANT IS MINOR. FURTHER TH E FACT THAT THE APPELLANT HAD INSTALLED SPECIALIZED EQUIPM ENT WORTH RS. 1.93 CRORES (DURING FY'S 2007-08 & 2008-0 9) AND WAS SUPPLYING SPECIALIZED PRODUCTS TO MNCS GOES ON TO SHOW THAT IT IS AT THE END OF THE APPELLANT THAT THE VALUE ADDITION TO THE FINAL PRODUCT WAS TAKING PLACE AND WHICH ULTIMATELY RESULTED IN EARNING OF HIGH PROFITS BY T HE ASSESSEE THROUGH BETTER RATES FROM THE MNC'S TO WHO M THESE PRODUCTS WERE BEING SOLD. THUS TAKING INTO CONSIDERATION THE ABOVE FACTS IN TOTALITY IT IS HEL D THAT THE FINDING THE AO IS BASED ON PRESUMPTION AND SURMISE AND THERE HAS NOT BEEN ANY MATERIAL ON RECORD TO SHOW T HAT IT THE FACTUM OF ARRANGEMENT BETWEEN THE ASSESSEE AND MIS JJ ENTERPRISES WHICH HAS PRODUCED MORE THAN ORDINAR Y PROFITS TO THE ASSESSEE WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE ADDITION MADE FOR RS.38,74,682/- IS DIRECTED TO BE DELETED. 11. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE AND THE ARGUMENTS ADDRESSED BY LD. ARS FOR THE PARTIES, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER LD. CIT (A) HAS EARNED IN DELETING THE DISALLOWANCE OF RS.38,74,682/- MADE BY THE AO BY INVOKING PROVISIONS CONTAINED U/S 80IA(10) BY RESTRICTING THE DEDUCTIONS CLAIMED BY THE ASSESSEE U/S 80IC TO 50%? 12. SCRUTINY OF THE ASSESSMENT ORDER AND IMPUGNED O RDER PASSED BY THE LD. CIT (A) DELETING THE ADDITION MADE BY TH E AO IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE LEADS TO THE CONCLUSION THAT AO HAS ARBITRARILY MADE THE ADDITION ON THE BASIS O F CONJECTURES AND SURMISES WITHOUT HAVING AN IOTA OF EVIDENCE ON THE ITA NO.5409/DEL./2012 11 FILE, WHICH HAS RIGHTLY BEEN DELETED BY THE LD. CIT (A) FOR THE FOLLOWING REASONS :- (I) THAT THE AO WITHOUT DEMONSTRATING THE FACT AND COLLECTING ANY EVIDENCE THAT PROFIT EARNED BY THE ASSESSEE IS MORE THAN REASONABLE LEADING TO THE SUPPRESSION OF PROFITS AT THE OTHER END INVOKED THE PROVISIONS CONTAINED U/S 80IA (10) WHICH IS NOT PERMISSIBLE EXCEPT BY COMPLYING WITH THE PROVISIONS CONTAINED U/S 80IA (8), EXPLANATION; (II) THAT WHEN UNDISPUTEDLY THE AO HAS NOT MADE ANY FAIR MARKET VALUE OF THE RAW MATERIAL/GOODS PURCHASED BY THE ASSESSEE FROM ITS SISTER CONCERN, M/S. J.J. ENTERPRISES NOR THE AO HAS COME TO THE CONCLUSION THAT M/S. J.J. ENTERPRISES HAS NOT CLAIMED FULL VAL UE OF THE RAW MATERIAL / GOODS SUPPLIED TO THE ASSESSEE COMPANY, THERE IS NO QUESTION OF BACKWARD AND FORWARD INTEGRATION OF PROFIT; (III) THAT LD. CIT (A) HAS RIGHTLY CONCLUDED AT PAG E 13 THAT THE ASSESSEE HAS TRANSACTED WITH M/S. J.J. ENTERPRI SES AT PREVALENT MARKET RATE AND NO CONCESSIONAL PRICE WAS CHARGED BY M/S. J.J. ENTERPRISES RESULTING INTO MOR E THAN MINOR PROFIT TO THE ASSESSEE AND THIS FACT REM AINS ITA NO.5409/DEL./2012 12 UN-REBUTTED ON THE FILE EVEN DURING APPELLATE PROCEEDINGS; (IV) THAT THE ASSESSEE HAS ALSO TRANSACTED WITH M/S . J.J. ENTERPRISES IN THE PRECEDING FINANCIAL YEARS FOR WH ICH GP RATE OF M/S. J.J. ENTERPRISES WAS 14.58% AND 14.80% RESPECTIVELY, WHICH HAS BEEN ACCEPTED BY THE REVENUE AND IN THE SUCCEEDING YEAR, SOME ADJUSTMENT WAS MADE BUT AGAIN DELETED BY LD. CIT (A). THIS FA CT GOES TO PROVE THAT THE TRANSACTION BETWEEN ASSESSEE AND M/S. J.J. ENTERPRISES FOR PURCHASE OF RAW MATER IAL WAS AT MARKET RATE WHICH CANNOT BE QUESTIONED ON TH E BASIS OF CONJECTURES AND SURMISES; (V) THAT THE AO HAS LOST SIGHT OF THE FACT THAT THE ASSESSEE HAS PURCHASED ADVANCED TECHNOLOGY BY INVESTING RS.1.93 CRORES DURING FY 2007-08 AND 2008-09 AND WAS SUPPLYING SPECIALIZED PROJECTS TO MNC LEADING T O THE VALUE ADDITION TO THE FINAL PRODUCTS WHICH ULTIMATELY YIELDED HIGH PROFIT WHICH CANNOT BE EQUA TED WITH M/S. J.J. ENTERPRISES USING OLD MACHINERY, BUT STRAIGHTAWAY JUMPED TO MAKE COMPARISON OF ASSESSEE WITH ITS SISTER CONCERN, M/S. J.J. ENTERPRISES WHIC H IS NOT PERMISSIBLE WITHOUT COGENT EVIDENCE; ITA NO.5409/DEL./2012 13 (VI) THAT CIT (A) HAS RIGHTLY POINTED OUT THAT IN O RDER TO INVOKE THE PROVISIONS CONTAINED U/S 80IA(1), THE AO WAS REQUIRED TO BRING ON RECORD COGENT REASONS TO SHOW THAT THE COURSE OF BUSINESS BETWEEN THE TWO CLOSE CONNECTED PARTIES PRODUCED MORE THAN ORDINARY PROFIT IN CASE OF ASSESSEE. AO HAS NEITHER BROUGH T ON RECORD ANY SUCH EVIDENCE NOR RECORDED ANY FINDINGS THAT M/S. J.J. ENTERPRISES HAS SOLD GOODS / RAW MAT ERIAL AT CONCESSIONAL RATES IN ORDER TO SUPPRESS THE PROF IT AT THE OTHER END; (VII) THAT THE AO HAS NEITHER MADE COMPARISON OF TH E GOODS/ RAW MATERIAL SUPPLIED TO THE ASSESSEE IN THE MARKET NOR HAS ASSESSED THE FAIR MARKET VALUE. SO WHEN THE AO HAS ACCEPTED THE PURCHASES U/S 48 (1)(I I), IT WAS NOT PERMISSIBLE FOR HIM TO QUESTION THE SAME BY INVOKING PROVISIONS CONTAINED UNDER SECTION 80IA (10); (VIII) THAT THERE IS NOT AN IOTA OF MATERIAL ON FIL E TO PROVE THAT NO BUSINESS ACTIVITY WAS BEING CARRIED OUT IN THE ASSESSEES PREMISES BUT HE HAS MERELY PROCEEDED ON THE BASIS OF SURMISES THAT EXPENDITURE ON POWER AND FUEL WERE VERY LOW IN CASE OF ASSESSEE AS COMPARED TO ITA NO.5409/DEL./2012 14 M/S. J.J. ENTERPRISES WHICH MAY BE DUE TO THE FACT THAT THE ASSESSEE HAS BEEN USING ADVANCED TECHNOLOGY AND WAGES IN CERTAIN CASES ARE NEGOTIABLE ALSO (IX) THAT THE AO WITHOUT DISPUTING THE PURCHASE OF RAW MATERIAL, SALE OF THE FINISHED GOODS AND WITHOUT SPECIFICALLY POINTING OUT THAT THERE WAS INTER-UNIT TRANSFER OF FINISHED GOODS JUMPED TO THE CONCLUSION THAT THE TRADING RESULTS ARE NOT RELIABLE AND THERE BY REJECTED THE BOOKS OF ACCOUNT, WHICH IS NOT SUSTAIN ABLE IN THE EYES OF LAW; (X) THAT WE ARE OF THE CONSIDERED VIEW THAT THE GRO SS PROFIT OF THE ASSESSEE MAY VARY EVEN WITH ITS OWN GROSS PROFIT OF THE PRECEDING YEARS AND ON THE BASIS OF W HICH PART OF DEDUCTION CANNOT BE DISALLOWED, WHAT TO TAL K OF MAKING COMPARISON OF GROSS PROFIT BETWEEN THE 80-IC UNIT AND NON 80-IC UNIT WITHOUT COGENT MATERIAL ON THE FILE; (XI) THAT EVEN IT IS NOWHERE CASE OF THE AO THAT AS SESSEE HAS NOT MAINTAINED STOCK REGISTER OR HAS INFLATED T HE FIGURES OF PURCHASE OF RAW MATERIAL OR HAS INFLATED THE FIGURES OF THE SALE BUT HAS PROCEEDED TO DISALLOW P ART OF THE DEDUCTION MERELY ON THE BASIS OF CONJECTURES ITA NO.5409/DEL./2012 15 AND SURMISES BY ADOPTING PRESUMPTIVE GP RATIO ON TH E GROUND THAT THE BOOKS OF ACCOUNT ARE NOT RELIABLE. 13. APART FROM WHAT HAS BEEN DISCUSSED ABOVE, WE AR E ALSO OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY THE A O U/S 153C/143(3) OF THE ACT IS OTHERWISE NOT SUSTAINABLE BECAUSE NO INCRIMINATING MATERIAL CONCERNING THE ASSESSEE HAS BEEN BROUGHT ON RECORD AND PROVED BY THE AO NOR ANY SATISFACTION NO TE HAS BEEN RECORDED BY THE AO IN THIS CASE BEFORE INITIATING T HE PROCEEDINGS U/S 153C. BARE PERUSAL OF THE ASSESSMENT ORDER GOE S TO PROVE THAT THERE IS NO DOCUMENT HAVING PRIMA FACIE INCRIMINATI NG MATERIAL TO RECORD THE SATISFACTION NOTE IN ORDER TO PROCEED U/ S 153C. RATHER AO MERELY PROCEEDED ON THE BASIS OF DIFFERENCE IN G ROSS PROFIT RATIO BETWEEN THE ASSESSEE AND ITS SISTER CONCERN. SO, THE AO HAS APPARENTLY NO JURISDICTION TO REOPEN THE ASSESSMENT . CONSEQUENTLY, PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON THIS DAY 27 TH OF OCTOBER, 2016. SD/- SD/- (L.P. SAHU) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF OCTOBER, 2016 TS ITA NO.5409/DEL./2012 16 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-III, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.