M/s Fewa Electrical Corporation, Una V. ITO, Una

ITA 995/CHANDI/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2025 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SUDARSHAN JCIT DR
• Keywords: Depreciation; Principle of natural justice; Condonation of delay
• Section: 143(3); 40(b); 143(1); 80IA; 80IC; 80IC; 2(A); 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH .., !' '# $, % &' BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO. 995/CHD/2017 ASSESSMENT YEAR : 2010-11 M/S FEWA ELECTRICAL CORPORATION, KRISHAN NAGAR, HOSHIARPUR ROAD, GAGRET, THE AMB, DIST: UNA THE ITO UNA (H.P.) PAN NO: AABFF4735C APPELLANT RESPONDENT !' ASSESSEE BY : SHRI SANDEEP VIJH, C.A #!' REVENUE BY : SHRI ARVIND SUDARSHAN (JCIT DR) $ %! & DATE OF HEARING : 03/02/2020 '()*! & DATE OF PRONOUNCEMENT : 20/03/2020 &(/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), PALAMPUR (H.P) DT. 06/03/2017. 2. THE REGISTRY HAS POINTED OUT THAT THE APPEAL IS BARRED BY LIMITATION BY ONE DAY. THE ASSESSEE FILED APPLICATION DT. 14/08/2017 FOR CONDONATION OF DELAY STATING THEREIN AS UNDER: RE: CONDONATION OF DELAY IN FILING THE APPEAL FOR A SSESSMENT YEAR 2010-11. ITA NO. 995/CHANDI/2017 RESPECTED SIR, THE ORDER OF THE WORTHY CIT(A), PALAMPUR FOR THE AB OVE MENTIONED ASSESSMENT YEAR WAS RECEIVED IN THE OFFICE OF OUR C OUNSEL ON 14/4/2017 AND THE APPEAL BEFORE THE TRIBUNAL WAS FILED ON 14/6/2017 I .E. LATE BY ONE DAY. THE APPEAL MEMO WAS GOT PREPARED IN TIME AND WAS HANDED OVER BY THE OFFICE OF OUR COUNSEL TO OUR ACCOUNTANT SH. JASWINDER KUMAR O N 24/5/2017 FOR ONWARD 2 SUBMISSION AT THE ITAT, CHANDIGARH BENCH. THE CHALL AN TOWARDS THE FEE OF THE TRIBUNAL HAD ALSO BEEN DEPOSITED ON 24/5/2017. THER E WAS THUS ADEQUATE TIME TO FILE THE APPEAL AT THE TRIBUNAL. HOWEVER THE ACCOUN TANT COULD NOT ATTEND TO WORK FROM 26/5/2017 UP 13/6/2017 SINCE HIS GRANDFATHER G OT ILL AND HE UNEXPECTEDLY WENT ON LEAVE. IT WAS ONLY WHEN HE ATTENDED THE OFF ICE ON 14/6/2017 THAT HE REALIZED THAT THE APPEAL MEMO HAD NOT BEEN FILED. H E WAS IMMEDIATELY ASKED TO TRAVEL TO CHANDIGARH AND FILE THE APPEAL. IT WAS UN DER THESE CIRCUMSTANCES THAT THERE WAS A DELAY OF ONE DAY IN FILING THE APPEAL. AFFIDAVIT OF SH. JASWINDER KUMAR CONFIRMING THESE FACTS IS ALSO BEING ENCLOSED ALONG WITH THIS PETITION. WE WOULD ALSO LIKE TO DRAW YOUR ATTENTION TO THE DE CISION OF THE SUPREME COURT IN THE CASE OF COLLECTOR OF LAND ACQUISITION VS. MST. KATIJI REPORTED AT 167 IT R 471 WHEREIN IT WAS HELD THAT COURTS SHOULD HAVE LIBERAL AND PRAGMATIC APPROACH WHILE CONDONING DELAY. IT WAS ALSO OBSERVED THAT AT THE WORST THAT COULD HAPPEN WITH THE CONDONATION OF DELAY WAS THAT THE ISSUE WO ULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, IT IS HUM BLY PRAYED THAT THE DELAY OF ONE DAY IN FILING THE APPEAL MAY PLEASE BE CONDONED. THANKING YOU YOURS FAITHFULLY SD/- FEWAL ELECTRICAL CORPORATION, GAGRET, DISTRICT UNA, HIMACHAL PRADESH, (PARTNER) 3. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTS OF THE AFORESAID APPLICATION AND REQUE STED TO CONDONE THE DELAY. THE LD. DR BY CONSIDERING THE DELAY OF ONLY ONE DAY DID NOT OPPOSE THE AFORESAID APPLICATION, THEREFORE THE DELAY OF ONE D AY IS CONDONED AND THE APPEAL IS ADMITTED. 4. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , HAS ERRED IN UPHOLDING AN ORDER WHICH IS BAD IN LAW ON ACCOUNT OF VIOLATION O F PRINCIPLES OF NATURAL. 2.(A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS),HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT PROFITS TO THE EXTENT OF 2% OF SALES AT RS. 16,41,874/- WERE NOT ELIGIBLE FOR DEDU CTION U/S 80CC IN VIEW OF THE PROVISIONS OF SECTION 801C. THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) HAS NOT APPRECIATED THAT THE ASSESSING OFFICER HAD P RESUMED PROVIDING OF 3 TECHNICAL KNOW HOW BY RELATED CONCERN. THERE IS NO MATERIAL ON RECORD TO SUGGEST SUCH AN ALLEGATION. THE SUBMISSIONS ON THE ISSUE AS WELL AS THE LEGAL POSITION HAVE ALSO NOT BEEN APPRECIATED. 2.(B) THE ACTION OF ASSESSING OFFICER IN EXCLUDING A SUM OF RS. 16,41,874/-FOR THE PURPOSES OF SECTION 80IC WITHOUT APPRECIATION THAT ADEQUATE OPPORTUNITY TO REBUT THE CHARGE WAS NOT ALLOWED DURING THE ASSTT. PROCEEDINGS. THE ADDITION OF RS. 16,41,874/- IS BAD ON ACCOUNT OF VIOLATION OF T HE PRINCIPLES OF NATURAL JUSTICE ALSO. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 1,68,593/- ON ACCOUNT OF AMOUNT STA TED TO BE CHARGED IN EXCESS FROM SISTER/RELATED CONCERN IN RESPECT OF SALE OF G OODS. THE SUBMISSIONS MADE ON THE ISSUE HAVE NOT BEEN PROPERLY APPRECIATED. 5. GROUND NO.1 IS GENERAL IN NATURE WHILE THE GRIEV ANCE OF THE ASSESSEE VIDE GROUND NO. 2(A) AND(B) RELATES TO THE DENIAL OF DED UCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) AMOUNTING TO RS. 16,41,874/-. 6. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT TH E ASSESSEE DERIVED ITS INCOME FROM MANUFACTURING OF ELECTRIC ITEMS AND SALES THER EOF, RETURN OF INCOME WAS E- FILED DECLARING AN INCOME OF RS. 26,495/- AFTER CLA IMING DEDUCTION UNDER SECTION 80IC OF THE ACT, 1961 AMOUNTING TO RS. 3,04,41,985/ - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. LATER ON THE CASE WAS SE LECTED FOR SCRUTINY. THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE DECLARED GROSS PROFIT @ 41.12% AND NET PROFIT @ 35. 14%. HE ALSO NOTICED THAT IN THE PRECEDING YEARS THE NET PROFIT RATE WAS 32.72% AND THAT THE ASSESSEE HAD NOT DEBITED ANY EXPENSES ON ACCOUNT OF TECHNICAL KN OW HOW AND NO EXPENSES ON ACCOUNT OF MARKET/CUSTOMER BASE OR GOODWILL WERE DEBITED. THE ASSESSEE SUBMITTED THAT THE PARTNER SHRI MOHINDER SETHI SO E XPERIENCED PERSON HAVING AMPLE KNOWLEDGE AND HE WAS LOOKING AFTER THE BUSINE SS OF THE ASSESSEE. THEREFORE, NO EXPENSE ON ACCOUNT OF TECHNICAL KNOW HOW HAD BEEN INCURRED / DEBITED. THE A.O. OBSERVED THAT THERE WAS NO PLAUSI BLE EXPLANATION REGARDING USING OF CUSTOMER / MARKET BASE OR GOODWILL OF SIST ER CONCERN. THE A.O. WAS ALSO 4 OF THE VIEW THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE PROFIT AMOUNTING TO RS. 16,41,874 /- BY OBSERVING AS UNDER: 7. NORMALLY, PAYMENT OF ROYALTY OR FEES FOR TECHNIC AL SERVICES, CUSTOMER BASE, GOOD-WILL IS MADE AT A PROPORTION OF THE SALES ACHI EVED BY UTILIZING THESE SERVICES FREE OF COST. IT IS GENERALLY KNOWN THAT SUCH PROPORTION IS IN THE RANGE OF 2% TO 5% OF SALES. HOWEVER, ON ACCOUNT OF TECHNICAL KNOW HOW, C USTOMER/MARKET BASE, GOODWILL, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, MINIMUM RATE OF 2% IS APPLIED TO WORK OUT THE PROFITS EARNED BY THE ASSESSEE WHICH W ERE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN ITS ELIGIBLE BU SINESS DUE TO THE REASON THAT THE COURSE OF BUSINESS BETWEEN THE ASSESSEE FIRM AND PE RSONS CLOSELY CONNECTED TO IT IS SO ARRANGED THAT IT RESULTS IN MORE THAN ORDINARILY EX PECTED PROFITS IN THE ELIGIBLE BUSINESS. BUT WHILE APPLYING THE RATE OF 2%, THE SA LES OF COPPER WIRE AMOUNTING TO RS. 43,27,395/- ARE TO BE DEDUCTED AS PROFIT ARISIN G THERE FROM HAS ALREADY BEEN HELD NOT TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-I C OF THE I.T. ACT, 1961 AS PER PARAGRAPHS 5.1 TO 5.6. THUS, THE PROFITS WHICH ARE HELD TO BE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IC, ON THIS ACCOUNT, COMES TO RS. 16,41, 874/- (8,64,21,123 - 43,27,395 = 8,20,93,728 X 2% = 16,41,874). THEREFORE, ADDITION OF RS. 16,41 ,874/- IS MADE TO THE TOTAL TAXABLE INCOME OF THE ASSESSEE. DEDUCTION UNDER SECTION 80-IC OF T HE I.T. ACT, 1961 SHALL NOT BE AVAILABLE ON THIS AMOUNT OF PROFIT. 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: THE FIRST PART OF THE THIRD GROUND OF APPEAL IS THA T THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT PROFITS TO THE EXTENT OF 2% O F SALES (EXCLUDING SALE OF INSULATED COPPER WIRE) AT RS. 16, 41,874/-ARE NOT E LIGIBLE FOR DEDUCTION U/S 80-IC IN VIEW OF THE PROVISION OF SECTION 80-1 A( 10). THE B ASIC INGREDIENT OF INVOKING SECTION 801 A (10) IS MISSING IN THIS CASE AND NO A LTERATION TO THE INCOME ELIGIBLE FOR DEDUCTION U/S 80-IC COULD THEREFORE BE DONE. TH E ASSESSEE FIRM IS IN THE BUSINESS OF MANUFACTURE OF ELECTRICAL ITEMS SINCE T HE ASSESSMENT YEAR 2007-08 AND RIGHT FROM THE FIRST ASSESSMENT YEAR ALL ASSESS MENTS WERE COMPLETED U/S 143(3) WITHOUT MAKING ANY ADJUSTMENT TOWARDS ANY RO YALTY OR FEE FOR TECHNICAL SERVICES. THE PARTNERS OF THE FIRM HAVE SUFFICIENT EXPERIENCE TO MANUFACTURE THE VARIOUS ITEMS. IT IS PERTINENT TO MENTION THAT EVEN M/S FINE SWITCHES P. LTD. HAS NOT TAKEN ANY TECHNICAL SUPPORT OF SERVICES FROM OUTSID E. WHEN IN THE EARLIER YEARS IT AS ACCEPTED THAT THE ASSESSEE COULD MANUFACTURE HIS OWN PRODUCTS, THERE IS NO REASON THAT A DIFFERENT APPROACH SHOULD BE ADOPTED IN THIS ASSESSMENT YEAR. THE SENIOR PARTNER SH. MOHINDER KUMAR SETHI HAS BEEN IN THIS LINE OF BUSINESS AS A PARTNER IN DIFFERENT CONCERNS SINCE 1973. IT WAS MAINLY ON ACCOUNT OF FALL IN THE RATIO OF DE PRECIATION AND INTEREST THAT THE N. P. RATIO OF THE YEAR UNDER ASSESSMENT IMPROVED. THERE WAS THUS NO REASON TO LINK UP THE IMPROVEMENT IN THE N. P. RATIO WITH PRO BABLE EXPENSE ON ROYALTY/EXPENSE ON TECHNICAL KNOWHOW, GOODWILL ATTR IBUTABLE TO M/S FINE SWITCHES PVT. LTD. IT IS ALSO PERTINENT TO MENTION THAT THE FIRM HAS ADEQUATE TECHNICAL STAFF TO CARRY OUT ITS MANUFACTURING ACTI VITY WITHOUT SUPPORT FROM ANY OTHER CONCERN. THE ASSESSEE HAS BEEN IN THIS LINE O F BUSINESS SINCE ITS FIRST 5 ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2007-08 AND NO SUCH ADDITION HAS BEEN MADE IN ANY OF THE EARLIER ASSESSMENT YEARS WHERE A SSESSMENT WAS COMPLETED U/S 143(3). COPY OF THE ASSESSMENT ORDER FOR ALL TH E EARLIER ASSESSMENT YEARS STAND ENCLOSED ABOVE AT PAGE NO. 77 TO 89 ABOVE. NO TECHN ICAL KNOWHOW HAS BEEN PROVIDED BY M/S FINE SWITCHES OR ANY OTHER CONCERN TO THE ASSESSEE AND THE ASSESSING OFFICER IS ONLY PRESUMING IT. NO MATERIAL /EVIDENCE HAS BEEN PLACED ON RECORD TO SUBSTANTIATE THIS CONTENTION. AS FAR AS S ALARY TO PARTNERS IS CONCERNED, IT IS TO BE ALLOWED U/S 40(B) IN TERMS OF PARTNERSHIP DEED AND IF THERE IS NO PROVISION FOR SALARY IN THE PARTNERSHIP DEED AS IS THE CASE H ERE, SALARY CANNOT BE ALLOWED. THE FOURTH GROUND OF APPEAL IS THAT THE LEARNED ASS ESSING OFFICER HAS ERRED IN COMPUTING THE EXCESS AMOUNT ALLEGEDLY CHAR GED FROM THE SISTER/RELATED CONCERN AT RS. 1,68,593/- ON THE BAS IS OF SELECTIVE TRANSACTIONS ONLY AND CONSEQUENTLY DENYING THE BENE FIT OF DEDUCTION U/S 80/IC ON THE SAME BY HOLDING THAT THIS AMOUNT I S NOT ELIGIBLE TO THE BENEFIT U/S 80-IC. THE ISSUE WAS NOT CONFRONTED TO THE ASSESSEE AND AS SUCH THE ADDITION MADE IN VIOLATION OF THE PRINCIPLES OF NATURAL JUST ICE DESERVES TO BE DELETED ON THIS SCORE ITSELF. 8. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITION BY OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, THE REASON ING OF LD. AO AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. UPON CAREFUL CONSIDER ATION OF THE ISSUE, IT IS HELD THAT LD AO HAS RIGHTLY INVOKED PROVISIONS OF SECTION 80IA (10) OF THE ACT IN VIEW OF THE FACTS OF THE CASE. NO SALARY/INTEREST HAS BEEN PAID TO PARTNERS. THE EXPLANATION OF THE APPELLANT THAT NO REMUNERATION WAS PAID TO THE PARTNERS AS THERE WAS NO PROVISION IN THE PARTNERSHIP DEED FOR THE SAME IS N OT ACCEPTABLE AS IT IS NOT NORMAL TO HAVE SUCH A PARTNERSHIP DEED. THE PARTNER SHIP DEED HAS BEEN DELIBERATELY DRAWN IN A MANNER TO INFLATE THE PROFI TS FROM THE ELIGIBLE BUSINESS. ON ONE SIDE, IT IS STATED THAT NO EXPENSE WAS INCURRED BY THE APPELLANT ON PAYMENT OF TECHNICAL KNOW HOW OR TECHNICAL ADVICE AS ITS PA RTNER SH. MOHINDER SETHI PROVIDED THE TECHNICAL SUPPORT AND ON THE OTHER HAN D NO REMUNERATION HAS BEEN PAID TO HIM. ABOUT 35% OF THE SALES HAVE BEEN MADE EITHER TO OR THROUGH A RELATED CONCERN, M/S FINE SWITCHES PVT. LTD. THE AO HAS RIGHTLY HELD THAT THE APPELLANT HAS USED THE MARKET OR CUSTOMER BASE AND GOODWILL OF ITS RELATED CONCERN. FURTHER, AS GIVEN IN DETAIL IN PARA 8 OF T HE ASSESSMENT ORDER, AVERAGE PRICE AT WHICH GOODS WERE SOLD TO THE SISTER CONCER N IS MORE THAN THE AVERAGE PRICE AT WHICH GOODS WERE SOLD TO NON-RELATED PARTI ES. THE ARGUMENT OF THE APPELLANT THAT IT WAS DONE TO FETCH CUSTOMERS AND T HAT DUE TO IT, ITS VOLUME OF SALES HAS INCREASED ANYWAYS ESTABLISHES THAT THE GO ODS WERE SOLD TO THE RELATED PARTY AT MORE THAN MARKET VALUE. IN VIEW OF THE FOR EGOING, IT IS HELD THAT LD. AO HAS RIGHTLY CONCLUDED THAT THE AFFAIRS OF THE ELIGI BLE BUSINESS HAVE BEEN SO ARRANGED THAT IT HAS GENERATED MORE THAN ORDINARY P ROFITS. SECTION 80IA(10) EMPOWERS THE ASSESSING OFFICER TO E STIMATE SUCH MORE THAN ORDINARY PROFITS AS MAY BE REASONABLY DEEMED TO HAV E BEEN DERIVED IN THIS MANNER. THE AO IN THIS CASE HAS ESTIMATED THE SAME @ 2% OF THE SALES WHICH CANNOT IN ANY WAY BE TERMED AS EXCESSIVE OR UNREASO NABLE. LD AO HAS RIGHTLY HELD THAT PROFIT TO THE EXTENT OF 2% OF SALES IS NO T ELIGIBLE FOR DEDUCTION U/S 80IC. 6 SINCE GROUND OF APPEAL 2 ABOVE HAS BEEN ALLOWED, TH E SUM OF RS.43,27,395/- ON ACCOUNT OF SALE OF COPPER WIRE IS NOT TO BE REDUCED AGAIN FROM GROSS SALES OF RS.8,64,21,123/-. THEREFORE, THE DISALLOWANCE OF DE DUCTION U/S 80IC AMOUNTING TO RS.17, 28,422/- (2% OF RS.8,64,21,123/-) IS UPHELD. 9. NOW THE ASSESSEE IS IN APPEAL. 10. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT NEITHE R THE A.O. NOR THE LD. CIT(A) APPRECIATED THE FACT IN RIGHT PERSPECTIVE AND THE I MPUGNED ADDITION HAS BEEN MADE / SUSTAINED. IT WAS SUBMITTED THAT THE A.O. HI MSELF HAD ADMITTED THAT NO TECHNICAL HELP HAD ACTUALLY BEEN TAKEN FROM OUTSIDE . 11. OUR ATTENTION WAS DRAWN TO CLAUSE A OF PARA NO. 6.1 AT PAGE NO. 5 OF THE ASSESSMENT ORDER. IT WAS FURTHER SUBMITTED THAT NO TECHNICAL HELP FROM ANY OUTSIDE CONCERN WAS REQUIRED SINCE ONE OF THE PARTN ERS WAS HAVING EXPERIENCE OF MANY YEARS AND THE WORKERS AS WELL AS SUPERVISOR S HAD BECOME EXPERIENCED THEREFORE NO ADJUSTMENT UNDER SECTION 80IA(10) WAS PERMISSIBLE FOR SOME HYPOTHETICAL EXPENSES WHEN NO TECHNICAL HELP FROM A NY OUTSIDE CONCERN WAS TAKEN. IT WAS ALSO STATED THAT THE BANK INTEREST HA D COME DOWN AS COMPARED TO THE PRECEDING YEARS WHICH INCREASED THE NET PROFIT AND THIS EXPLANATION WAS GIVEN TO THE A.O. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. IT WAS ALSO STATED THAT DUE TO FALL IN THE RATIO OF DEPRECIATIO N AND INTEREST TO THE SALE ALSO IMPROVED THE NET PROFIT RATIO WHICH WERE IGNORED BY THE A.O. IT WAS ALSO SUBMITTED THAT THE INITIAL ASSESSMENT YEARS I.E; A. Y. 2007-08 THE SIMILAR ISSUE WAS RAISED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO THE SAID ASSESSMENT YEAR THE REFERENCE WAS MADE TO PAGE NO. 33 OF THE ASSESSMENT ORDER DT. 29/12/2009 PASSED UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2007-08 WHEREIN AFTER CONSIDERING THE SIMILAR EXPLANATION NO DISALLOWANCE WAS MADE BY THE A.O. IT WAS FURTHER SUBMITTED THAT FOR THE A.Y. 2008-09 AS WELL AS 2009-10 THE A.O. ACCEPTED THE SUBMISSION OF THE A.O. AND NO DISALLOWANCE 7 WAS MADE ON A SIMILAR ISSUE AND EVEN IN THE SUBSEQU ENT YEAR NO SUCH ADDITION HAD BEEN MADE. THE REFERENCE WAS MADE TO PAGE NO. 7 9 TO 86 OF THE ASSESSEES COMPILATION WHICH ARE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2012-13 TO 2014-15. IT WAS STATED THAT EVEN ON THE BASIS OF PRINCIPLES OF CONSISTENCY THE DISALLOWANCE MADE BY THE A.O. AND S USTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 12. IN HIS RIVAL SUBMISSIONS THE LD. SR. DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT APPEARS THAT THE A.O. ONLY ON THE BASIS OF PRESUMPTION MADE THE DISALLOWA NCE BY OBSERVING THAT THE ASSESSEE MIGHT HAVE INFLATED NET PROFIT RATE BY NOT PAYING THE TECHNICAL KNOW HOW FEE AND DECLARING THE HIGHER NET PROFIT RATE. H OWEVER HE IGNORED THIS EXPLANATION OF THE ASSESSEE THAT INCREASE IN THE HI GHER RATE FOR THE YEAR UNDER CONSIDERATION WAS DUE TO LOW EXPENSES ON ACCOUNT OF INTEREST AND LESSER AMOUNT OF DEPRECIATION. THE ASSESSEE ALSO EXPLAINED THAT ONE OF THE PARTNER NAMELY SHRI MOHINDER SETHI WAS EXPERIENCED AND THAT NO EXPENSE ON ACCOUNT OF ROYALTY / TECHNICAL KNOW HOW HAD BEEN INCURRED B Y THE ASSESSEE. THE CLAIM OF THE ASSESSEE THAT NEITHER IN THE PRECEDING YEAR NOR IN THE SUCCEEDING YEAR SUCH DISALLOWANCE HAS BEEN MADE IN THE SIMILAR CIRCUMSTA NCES HAS NOT BEEN REBUTTED. THEREFORE, CONSIDERING THE TOTALITY OF TH E FACT AS DISCUSSED HEREIN ABOVE WE ARE OF THE VIEW THAT THE IMPUGNED DISALLOW ANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED, ACCORDINGLY THE SAME IS DELETED. 14. THE NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE SUSTENANCE OF ADDITION OF RS. 1,68,593/- ON ACCOUNT AMOUNT STATED TO BE CHARG ED IN EXCESS FROM SISTER / RELATED CONCERN. 8 15. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS OF SALE MADE TO SISTER / REL ATED CONCERN AND TO THE OUTSIDER DURING THE YEAR UNDER CONSIDERATION. ON SCRUTINIZIN G THE DETAILS THE A.O. OBSERVED THAT THE ASSESSEE HAD MADE SALES TO ITS RE LATED / SISTER CONCERN AT HIGHER RATE THAN TO THE OUTSIDERS THE DETAILS HAS B EEN GIVEN BY THE A.O. AT PAGE NO. 8 OF THE ASSESSMENT ORDER, FOR THE COST OF REPE TITION THE SAME IS NOT REPRODUCED HEREIN. THE A.O. WAS OF THE VIEW THAT TH E AMOUNT OF RS. 1,68,593/- EARNED BY THE ASSESSEE BY CHARGING HIGH SALE RATE F ROM SISTER / RELATED CONCERN WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC O F THE ACT, HE THEREFORE, MADE THE ADDITION OF THE SAID AMOUNT. 16. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUSTAINED THE ADDITION MADE BY THE A.O. 17. NOW THE ASSESSEE IS IN APPEAL. 18. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DIFFERENCE IN SALES WAS ONLY TO THE EXTENT OF 0.64% WHICH IS NEGLIGIBLE. IT WAS SUBMITTED THAT THE RATES MENTIONED BY THE A.O. WERE THE AVERAGE RATE AND THE A.O. SELECTED ONLY CERTAIN TRANSACTION WITHOUT CONFRONTING THE SAME TO THE ASSESSEE THEREFORE THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WAS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 19. IN HIS RIVAL SUBMISSION THE LD. DR SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 20. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES IT APPEARS THAT THE A.O. WITHOUT POINTING OUT ANY SPECIFIC DIFFERENCE I N THE RATES MADE THE ADDITION BY TAKING THE AVERAGE RATE ALTHOUGH THE VARIATION W AS ONLY 0.64% EVEN THE EXPLANATION OF THE ASSESSEE THAT DIFFERENT RATES WE RE PREVAILING AT DIFFERENT POINT OF TIME WHEN SALES WERE MADE TO THE OUTSIDER WAS NO T CONSIDERED. WE THEREFORE 9 ARE OF THE VIEW THAT THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED, ACCORDINGLY, THE SAME IS DELETED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 20/03/2020) SD/- SD/- '# $ .., (SANJAY GARG ) ( N.K. SAI NI) % &'/ JUDICIAL MEMBER / VICE PRESIDENT AG DATE: 20/03/2020 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR