ACIT CENT. CIR. - 14, MUMBAI V. M/s. WOCKHARDT VETERINARY LTD.( NOW WOCKHARDT LTD), MUMBAI

ITA 5496/MUM/2008

• Counselvise Citation: 549619914 RSA 2008
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-04-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 01-09-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income; Depreciation; Opportunity of being heard; Additional evidence; Block assessment

Judgement Text

1 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI D. MANMOHAN, HONBLE VICE PRESIDENT AND SHRI R.K. PANDA, A.M. ITA NO.5496/MUM/2008 ASSESSMENT YEAR : 1999-2000 THE A.C.I.T. CENT. CIR. 14. ROOM NO.1102, 11 TH FLOOR, OLD CGO ANNEXE BLDG., MUMBAI-400 020 VS. M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) WOCKHARDT TOWERS, BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI-400 051 PAN NO: AAACW0524C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. NAYAK RESPONDENT BY : SHRI KANCHAUN KAUSHAL, SHRI DHANESH BAFANA, SHRI ALIASGER RAMPURWALA & MS. SHITAL BHANDEKAR O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 26.06.2008 PASSED BY THE CIT(A) CENTRAL III, MUMB AI RELATING TO ASSESSMENT YEAR 1999-2000. 2. THE GROUNDS APPEALS NO. 1 & 2 BY THE REVENUE RE ADS AS UNDER :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S.80IA AS CLAIMED BY THE ASSESSEE. WHER EAS THE A.O. HAD ALLOCATED ONLY RS.69.57 LAKHS AS EMPLOYEE COSTS ATTRIBUTABLE TO 2 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) DAMAN UNIT, THE LD. CIT(A) HAS REDUCED THIS FIGURE OF RS.69.57 LAKHS TO RS.32.16 LAKHS, ENHANCING THE FIGURE OF ELIGIBLE PROFIT FOR DEDUCTION U/S.80IA. 2. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS BY ACCEPTING THE ASSESSEES CLAIM OF OPERATING AND OTHER EXPENSES AT TRIBUTABLE TO DAMAN UNIT AT RS.94.74 LAKHS, AS AGAINST RS.168.46 LAKHS DETERMINED BY THE AO. THIS HAS ENHANCED THE FIGURE OF ELIGIBLE PROFIT FOR PURPOSES OF BENEFIT U/S.80IA. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF PHARMACEUTICAL PRODUCTS. IT HAS TWO UNITS, ONE SITUATED AT DAMAN AND THE OTHER ONE AT CHIKALTHANA (AURANGABAD) . THE ASSESSEE IN RESPECT OF ITS MANUFACTURING DONE AT THE DAMAN UNIT HAS CLAIMED DEDUCTION U/S. 80IA, THE UNIT BEING AN ELIGIBLE INDUSTRIAL UN DERTAKING UNDER THE PROVISIONS OF THE SAID SECTION. THE OTHER UNIT I.E. AT CHIKALTHANA IS A NON- ELIGIBLE UNIT FOR THE PURPOSE OF THE SAID SECTION. BESIDES THE MANUFACTURING ACTIVITIES AT THESE PLACES, THE ASSESSEE IS ALSO GE TTING PRODUCTS MANUFACTURED ON LOAN AND LICENSE BASIS THROUGH ITS SISTER CONCER NS. THE ASSESSEE HAS ALSO SHOWN RECEIPT FROM TRADING OF THE PHARMACEUTICAL PR ODUCTS. THE AO NOTED THAT THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HA S CLAIMED DEDUCTION U/S.80IA AT RS.2,25,59,938/-. HE NOTED THAT A SEARC H AND SEIZURE ACTION IN CASE OF VARIOUS GROUP CONCERNS OF M/S. WOCKHARDT LT D. WAS CONDUCTED WHICH INCLUDES THE ASSESSEE ALSO. THE ASSESSEE AGREED THA T THE DEDUCTION U/S. 80IA WAS NOT CORRECTLY WORKED OUT AND IN FACT AN EXCESS AMOUNT OF RS.86.36 LAKHS WAS CLAIMED AS DEDUCTION, WHEREAS THIS AMOUNTS SHOU LD NOT HAVE BEEN CLAIMED AS DEDUCTION. THE ASSESSEE THEREAFTER, FURNISHED A REVISED WORKING OF COMPUTATION OF THE PROFIT OF THE DAMAN UNIT, ACCORD ING TO WHICH THE ASESSEE IS ELIGIBLE TO DEDUCTION U/S. 80IA ON RS.125.58 LAKHS. 4. IN ORDER TO VERIFY THE REVISED WORKING FURNISHED BY THE ASSESSEE, THE AO ASKED THE ASSESSEE TO FURNISH THE BREAK UP OF SALES MATERIAL CONSUMED AND THE VARIOUS EXPENSES INCURRED SEPARATELY IN RESPECT OF DAMAN UNIT, CHIKALTHANA 3 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) UNIT AND THE PRODUCTS MANUFACTURED THROUGH SISTER C ONCERN ON LOANS AND LICENSE BASIS. THE ASSESSEE IN RESPONSE TO THE SAME FURNISHED SEPARATE FIGURES FOR SALES AND COST OF MATERIAL CONSUMED AND THE BIF URCATION OF EXPENSES. THE AO STUDIED THE VARIOUS DETAILS FURNISHED BEFORE HIM AND NOTED THAT THE ASSESSEE ALLOCATED THE EXPENSES IN SUCH A WAY THAT THE EXPENSES ARE MINIMIZED FOR THE ELIGIBLE UNIT TO MAXIMIZE THE PROFIT FROM S UCH UNIT FOR CLAIMING HIGHER DEDUCTION U/S.80IA. IN RESPECT OF NON-ELIGIBLE BUSI NESS, THE ASSESSEE HAS ALLOCATED HIGHER EXPENSES SO AS TO MINIMIZE THE TAX LIABILITY. THE METHOD ADOPTED BY THE ASSESSEE IS BASELESS AND, THEREFORE, CANNOT BE ACCEPTED. THE AO THEREAFTER RECASTED THE PROFIT OF THE DAMAN UNIT AN D CHIKALTHANA UNIT AND THE SUPPORTING MANUFACTURERS THROUGH WHOM THE ASSESSEE GETS ITS PRODUCTS MANUFACTURED, AND CALCULATED THE LOSS OF RS.10.64 L AKHS FROM DAMAN UNIT, AS AGAINST PROFIT OF RS.125.58 LAKHS DETERMINED BY THE ASSESSEE ON THE BASIS OF THE REVISED CALCULATION. WHILE DOING SO HE ALLOCATE D THE EMPLOYEE COST AT RS.69.57 LAKHS FOR THE DAMAN UNIT AND RS.168.46 LAK HS AS OTHER EXPENSES OF DAMAN UNIT. THE DETAILS OF THE SAME ARE AS FOLLOWS :- (RS. IN LACS) DAMAN CHIKALTHANA TRADING/LEAVE LICENSING TOTAL SALES 673.23 246 1,289.58 2,208.81 LESS : EXPENSES - COST OF MATERIAL CONSUMED 412.79 157.04 753.17 1,323 EMPLOYEE COST 69.57 34.71 10.56 114.84 OTHER EXPENSES 168.46 61.56 227.7 457.72 I NTEREST & BANK CHARGES 26.64 9.74 51.03 87.41 PBT ( - )4.43 ( - )17.05 247.12 225.84 ADD: DEPRECIATION AS PER BOOKS 1.75 4.74 6.49 LESS: DEPRECIATION AS PER I.T. ACT 8.21 16.68 24.89 ADD: ITEMS CONSIDERED SEPARATELY 0.25 0.57 0.82 LESS : DIVIDEND EXEM PT 0.6 PROFIT AVAILABLE FOR DEDUCTION ( - )10.64 ( - )28.42 247.06 208.2 4 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) 5. IN APPEAL BEFORE THE LD. CIT(A), APART FROM DETA ILED ARGUMENTS, THE ASSESSEE FURNISHED CERTAIN ADDITIONAL EVIDENCES TO SUBSTANTIATE THE JUSTIFICATION OF THE REVISED WORKING FOR CLAIM OF DEDUCTION U/S.8 0IA OF THE DAMAN UNIT. THE LD. CIT(A) SENT THE ADDITIONAL EVIDENCES TO THE AO AND CALLED FOR A REMAND REPORT. AFTER OBTAINING THE SAME THE LD. CIT(A) CON FRONTED THE SAME TO THE ASSESSEE. AFTER OBTAINING THE COMMENTS OF THE ASSES SEE HE HELD THAT THE DEDUCTION U/S.80IA TO THE EXTENT OF RS.105 LAKHS SH OULD HAVE BEEN ALLOWED TO THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) READS AS UNDER :- 3.7 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE REMAND REPORT OF THE AO AND THE ORAL AND WRITTEN SUBMISSIONS MADE BY THE APPELLANTS REPRESENTATIVE. IT IS EVIDENT THAT THE AO HAS, IN ARRIVING AT HIS CONCLUSIONS, DISREGARDED THE REVISED WORKING S SUBMITTED BY THE APPELLANT IN THE COURSE OF THE ASSESSMENT PROCE EDINGS. FURTHER, THERE IS NO BASIS ON WHICH THE AO HAS : (A) ALLOCATED A MERE 10% OF THE EMPLOYEE COSTS TO THE O THER BUSINESS WHILE ALLOCATING 90% (ON TURNOVER BASIS) TO THE MAN UFACTURING BUSINESSES; (B) ALLOCATED THE OPERATING AND OTHER EXPENSES ON TURNO VER BASIS, DISREGARDING THE ACTUAL EXPENSES INCURRED IN EACH O F THE UNITS. THE APPELLANT HAS PLACED ON RECORD THE BASIS ON WHI CH THE EXPENDITURE WAS CLAIMED BY IT IN THE REVISED WORKIN GS IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE UNDISPUTED FACTS ARE THAT: (I) THE APPELLANT HAD, IN ITS REVISED WORKING SUBMITTED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, ALLOCATED 30. 47% OF EMPLOYEE COSTS ON TURNOVER BASIS TO THE DAMAN UNIT WHILE ONLY 30 OUT OF THE TOTAL 130 (I.E. 23%) EMPLOYEES W ORKED IN THE DAMAN UNIT. (II) THE APPELLANT HAD, IN ITS REVISED WORKING SUBMITTED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, CLAIMED AN EX PENSE OF RS.94.74 LAKHS AS OPERATING AND OTHER EXPENSES. OF THESE, THOSE EXPENSES WHICH PERTAINED TO ONLY A PARTICULAR BUSINESS WERE CLAIMED ON ACTUAL BASIS, WHILE THE REST WERE C LAIMED ON TURNOVER BASIS. (III) THERE WAS NO COGENT BASIS ON WHICH THE REALLOCATION WAS MADE BY THE AO. (IV) THE AO, IN HIS REMAND REPORT, HAS, IN RESPECT OF TH E ADDITIONAL EVIDENCE SOUGHT TO BE SUBMITTED BY THE APPELLANT, S TATED THAT THE COPIES OF THE DOCUMENTS PROVIDED BY THE APPELLA NT ARE IN ORDER BEING COPIES OF THE DOCUMENTS FROM ITS RECORD S. 5 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) 3.8 IN VIEW OF THE ABOVE, I FIND THAT THE DEDUCTION UNDER SECTION 80-IA TO THE EXTENT OF RS.125.58 LAKHS OUGHT TO HAV E BEEN ALLOWED TO THE APPELLANT ON THE BASIS OF THE REVISED WORKINGS FILED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DR WHILE OPPOSING THE ORDER OF THE LD. C IT(A) SUBMITTED THAT THE BASIS OF CALCULATION OF EMPLOYEE COST OF DAMAN UNIT BY THE LD. CIT(A) IS INCORRECT. ACCORDING TO THE LD. DR THE VARIOUS MANU FACTURING EXPENSES WHICH ARE DIRECTLY ATTRIBUTABLE CANNOT BE ADJUSTED ON TUR NOVER BASIS. THE LD. CIT(A) HAS NOT POINTED OUT ANY DISTINGUISHABLE FEATURE AND MERELY ACCEPTED THE CONTENTION OF THE ASSESSEE. THE EMPLOYEES WERE MAIN LY ENGAGED IN THE MANUFACTURING ACTIVITY. THEREFORE, THE ORDER OF THE LD. CIT(A) BEING NOT IN ACCORDANCE WITH LAW SHOULD BE REVERSED AND THE ORDE R OF THE AO BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND, SUBMITTED THAT THERE IS NO BASIS ON THE PART OF THE AO FOR ALLOCATING 90 % OF THE EMPLOYEE COST TO THE MANUFACTURING UNITS AND 10% TO NON-MANUFACTURING UN ITS. HE SUBMITTED THAT THE ASSESSEE HAS ALLOCATED THE EXPENSES ON THE BASI S OF TURNOVER WHEREAS THE AO HAS NOT JUSTIFIED SUCH REALLOCATION. HE SUBMITTE D THAT OUT OF THE 130 EMPLOYEES WORKING IN THE COMPANY, 80 EMPLOYEES WERE CORPORATE AND FIELD FORCE EMPLOYEES, EMPLOYED OUTSIDE DAMAN AND CHIKALT HANA I.E. THE MANUFACTURING UNITS. THE SERVICE RENDERED BY THE FI ELD FORCE EMPLOYEES WERE IN RELATION TO THE SALES OF THE ASSESSEE AND WERE IN N O MANNER RELATED ONLY TO THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE. ONLY 30 EMPLOYEES WERE IN DAMAN UNIT. MAXIMUM EMPLOYEE COSTS WERE INCURRED ON THE FIELD FORCE WHICH WAS FOR THE BENEFIT OF THE BUSINESS AS A WHOLE WHIC H ALSO INCLUDES THE NON- MANUFACTURING BUSINESS OF THE ASSESSEE. THEREFORE, THE ALLOCATION OF EMPLOYEES COSTS ON THE BASIS OF TURNOVER IS FAIR. SO FAR AS R ESEARCH AND DEVELOPMENT 6 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) EXPENSES IS CONCERNED, HE SUBMITTED THAT THE SAME D OES NOT RELATE TO ANY ITEM MANUFACTURED AT THE DAMAN UNIT, THEREFORE, THE ALLO CATION OF THE SAME TO DAMAN UNIT IS INCORRECT. FOR THIS PROPOSITION, HE R ELIED ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.3991/MU M/2005 ORDER DATED 24/02/2006 FOR THE A.Y. 2001-02. HE SUBMITTED THAT THE EXPENSES ON ACCOUNT OF FREIGHT AND FORWARDING HAVE BEEN ALLOCATED ON AC TUAL BASIS, WHEREAS THE AO HAS ALLOCATED THE SAME ON TURNOVER BASIS. SIMILARLY , POWER & FUEL, STORES AND SPARES, TRAINING AND DEVELOPMENT HAVE BEEN ALLOCATE D ON TURNOVER BASIS, WHEREAS THE AO HAS ALLOCATED THE SAME ON TURNOVER O F RESPECTIVE MANUFACTURING UNITS. THE LICENSE FEES, EFFLUENT TRE ATMENT ETC. HAVE BEEN ALLOCATED ON ACTUAL BASIS. SINCE THE METHOD ADOPTED BY THE ASSESSEE IS SCIENTIFIC ONE, THEREFORE, THE SAME SHOULD BE UPHEL D. HE HOWEVER SUBMITTED THAT HE HAS NO OBJECTION IF THE ALLOCATION OF EXPEN DITURE ON ACCOUNT OF RESEARCH AND DEVELOPMENT IS RESTORED TO THE FILE OF THE AO F OR VERIFICATION. HE SUBMITTED THAT THE EXPENSE RELATING TO A PARTICULAR UNIT HAS BEEN ALLOCATED TO THE SAME AND THE AO HAS NOT BEEN ABLE TO POINT OUT ANY MISTA KE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE PAPER BOOK FILED BEFORE US. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS. THE ONLY DISPUTE IN THE IMPUGNED ASSESSMENT YEAR IS RELATING TO THE ALLOCATION OF EXPENSES BETW EEN THE ELIGIBLE AND NON- ELIGIBLE BUSINESS UNITS. WE FIND THE ASSESSEE IN TH E ORIGINAL RETURN OF INCOME HAS CLAIMED THE DEDUCTION OF RS.2,25,59,938/- U/S.8 0IA OF THE ACT. SUBSEQUENTLY DUE TO THE SEARCH IN THE GROUP CONCERN S, THE ASSESSEE REVISED ITS CLAIM OF DEDUCTION U/S.80IA CLAIMING RS.125.58 LAKH S U/S.80IA OF THE ACT. WE FIND THE AO WHILE COMPUTING THE DEDUCTION U/S.80IA DETERMINED A LOSS OF RS.10.64 LAKHS AS AGAINST RS.125.58 LAKHS PROFIT DE CLARED BY THE ASSESSEE ON ACCOUNT OF THE DAMAN UNIT WHICH IS AN ELIGIBLE UNIT . THE AO WHILE DOING SUCH 7 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) RECONCILIATION HAS ALLOCATED A MERE 10% OF THE EMPL OYEE COSTS TO THE OTHER BUSINESSES AND ALLOCATED 90% OF THE EMPLOYEE COST T O THE MANUFACTURING BUSINESSES ON THE BASIS OF TURNOVER. SIMILARLY HE A LLOCATED THE OPERATING AND OTHER EXPENSES ON TURNOVER BASIS AS AGAINST THE ACT UAL EXPENSES INCURRED IN EACH OF THE UNITS AS CLAIMED BY THE ASSESSEE. ACCOR DING TO THE ASSESSEE SINCE 30 OUT OF THE TOTAL 130 EMPLOYEES WERE IN DAMAN UNI T AND SINCE IT HAD ALLOCATED ABOUT 32% EXPENSES ON TURNOVER BASIS TO T HE DAMAN UNIT, THEREFORE, THE SAME IS JUSTIFIED. SIMILARLY IT IS THE SUBMISSI ON OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE OPERATING AND OTHER EXPENSES WHIC H PERTAIN TO A PARTICULAR UNIT HAS BEEN CLAIMED ON ACTUAL BASIS AND REST OF T HE EXPENSES HAVE BEEN CLAIMED ON TURNOVER BASIS WHICH SHOULD HAVE BEEN AC CEPTED BY THE AO. 10. IN OUR OPINION, WHENEVER ANY EXPENDITURE IS ATT RIBUTABLE TO A PARTICULAR UNIT, THE SAME HAS TO BE ALLOCATED TO THAT PARTICUL AR UNIT ON THE BASIS OF ITS ACTUAL EXPENSES AND NO RESORT SHOULD BE TAKEN FOR T HE ALLOCATION ON THE BASIS OF THE TURNOVER. HOWEVER, IF ANY, PARTICULAR EXPEND ITURE DOES NOT RELATE TO ANY PARTICULAR UNIT AND IS COMMON FOR ALL THE UNITS AND NO PARTICULAR METHOD CAN BE ARRIVED AT TO ALLOCATE THE EXPENDITURE, THEN THE SAME, IN OUR OPINION, HAS TO BE ALLOCATED ON THE BASIS OF THE TURNOVER. HOWEVER THE SAME IN THE INSTANT CASE APPEARS TO HAVE NOT BEEN FOLLOWED. IN OUR OPINION, THE MATTER REQUIRES FRESH ADJUDICATION AT THE LEVEL OF THE AO. THE EMPLOYEE C OST FOR THE EMPLOYEES EMPLOYED AT DAMAN UNIT HAS TO BE CONSIDERED ON ACTU AL BASIS. AT THE SAME TIME, SOME PROPORTIONATE HEAD OFFICE EXPENDITURE ON ACCOUNT OF EMPLOYEE COST HAS ALSO TO BE ALLOCATED TO THE DAMAN UNIT. SIMILAR LY THE EXPENDITURE FOR RESEARCH AND DEVELOPMENT NEEDS TO BE ALLOCATED TO T HE PARTICULAR MANUFACTURING UNIT. FREIGHT AND FORWARDING EXPENSES IN OUR OPINION, HAS TO BE ALLOCATED TO THE RESPECTIVE UNIT ON ACTUAL BASIS. W E DO NOT FIND ANY FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT POWER AND FUEL EXPENDITURE SHOULD BE ALLOCATED ON THE BASIS OF THE TURNOVER. I N OUR OPINION, THE SAME HAS 8 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) TO BE ALLOCATED ON ACTUAL BASIS, SINCE IT CAN BE CO RRECTLY DETERMINED. SIMILARLY, WHOLE STORES AND SPARES FOR THE MANUFACTURING UNIT CAN BE ALLOCATED ON ACTUAL BASIS. TRAINING AND DEVELOPMENT EXPENDITURE IN OUR OPINION, HAS TO BE ALLOCATED ON TURNOVER BASIS SINCE IT IS FOR THE ENT IRE BUSINESS. SIMILARLY, LICENSEE FEE, LOAN AND LICENSE CHARGES AND EFFLUENT TREATMENT IN OUR OPINION, HAS TO BE ALLOCATED ON ACTUAL BASIS. SINCE THE ALLO CATIONS OF EXPENSES REQUIRE VERIFICATION AT THE LEVEL OF AO IN THE LIGHT OF OUR ABOVE OBSERVATION, WE DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION OF THE ISSUE. THE AO WHILE DECIDING THE ISSUE AFRESH SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND NOS. 1 & 2 RAISED BY THE RE VENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 11. THE GROUNDS OF APPEAL NO. 3 READS AS UNDER :- 3. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF BOGUS PURCH ASES ON PROTECTIVE BASIS CONSIDERING THAT THE ISSUE HAS BEE N TAKEN UP ON SUBSTANTIVE BASIS IN THE BLOCK ASSESSMENT, WHEREAS NO ADDITION ON THIS ACCOUNT HAD BEEN MADE IN THE BLOCK ASSESSMENT. 12. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO AS KED THE ASSESSEE TO PRODUCE THE PARTIES FROM WHOM PURCHASES OVER RS.10,000/- HA VE BEEN MADE. HE ALSO ASKED THE ASSESSEE TO PRODUCE M/S. VITARA CHEMICALS LTD. AND M/S. VINTAGE PHARMACEUTICALS LTD. SINCE THE ASSESSEE EXPRESSED I TS INABILITY TO PRODUCE THE ABOVE PARTIES, THE AO MADE AN ADDITION OF RS.35,58, 042/- TO THE TOTAL INCOME OF THE ASSESSEE U/S.69C OF THE I.T. ACT ON PROTECTI VE BASIS, ON THE GROUND THAT THE SAME WILL HAVE TO BE CONSIDERED ON SUBSTANTIVE BASIS IN THE BLOCK ASSESSMENT. 13. IN APPEAL, THE LD. CIT(A) DELETED THE SAME ON T HE GROUND THAT THE ISSUE HAS BEEN TAKEN UP ON SUBSTANTIVE BASIS IN THE BLOCK ASSESSMENT. 9 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) 14. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 15. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE ADMITTEDLY HAS NOT COMPILED TO THE DIRECTION GIVEN BY THE AO FOR PRODU CTION OF THE PARTIES FROM WHOM IT HAS PURCHASED GOODS WORTH MORE THAN RS.10,0 00/-. WE FIND THE LD. CIT(A) HAS NOT ADJUDICATED THE ISSUE ON MERIT AND D ELETED THE ADDITION ON THE GROUND THAT THE ISSUE HAS BEEN TAKEN UP ON SUBSTANT IVE BASIS IN THE BLOCK ASSESSMENT. IT IS THE CASE OF THE REVENUE THAT NO S UCH ADDITION ON THIS ACCOUNT HAS BEEN MADE IN THE BLOCK ASSESSMENT AND, THEREFOR E, THE ISSUE HAS TO BE DECIDED ON MERIT INDEPENDENT OF THE BLOCK ASSESSMEN T. 16. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE REVE NUE. SINCE THE ASSESSEE HAS NOT COMPILED TO THE REQUIREMENTS OF THE AO AND SINCE THE LD. CIT(A) HAS NOT DECIDED THE ISSUE ON MERIT, THEREFORE, WE IN TH E INTEREST OF JUSTICE DEEM IT PROPER TO RESTORE THE SAME TO THE FILE OF AO FOR FR ESH ADJUDICATION. THE AO SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND NO. 3 RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THIS 30 TH DAY OF JUNE, 2011. SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 30/06/2011 10 ITA NO.5496/MUM/2008 M/S. WOCKHARDT VETERINARY LTD. (NOW KNOWN AS WOCKHARDT LTD.) COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, G - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI