TaxTMI 
TaxTMI 
2012 (4) TMI 397
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....I(9) of the Act. (2) Whether the Tribunal is correct in holding that in accordance with -Section 80-I(9) read with Section 10A(6) the assessee and its supplier Digital Group Worldwide/Overseas need not actually maintain books separately bat deciphering the profit would be sufficient compliance. (3) Whether the Appellate Commissioner is correct in holding that before the books could be rejected, the Assessing Officer has to satisfy himself the provisions of Section 145 of the Act and not Section 80-I(9) read with Section 10A(6) of the Act. 3. At the time of hearing Sri. G. Kamaladhar, Standing counsel appearing for the appellant-revenue, submitted that yet another question viz., 'whether the appellate authorities were correct in holding that the MODVAT credit income as well as value of the closing stock for the current assessment year, as held by the Assessing Officer, is also a question that arises for examination in the above four appeals Sri. Suryanarayana, learned counsel appearing for the respondent-assessee having submitted that this question also arises and may be examined in these appeals for our answer, we are examining the appeals in the context of the....
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....1,058 1,99,22,412 58.1% Profit of STP Unit 28,42,09,546 5,68,72,575 20.01% Profit of the company as a whole including the profit of the above two units 282,11,68,223 37,91,72,831 13.44% Profit of the company excluding profits of these two units 250,26,67,619 30,23,77,844 12.08% ITA. No. 806/2006 1998-99 Total Turnover Profit Shown Rate of Profit Profit of IDC Unit 15,29,69,362 9,19,43,640 60.09% Profit of STP Unit 32,70,06,769 10,07,85,585 30.81% Profit of the company as a whole including the profit of the above two units 3,35,57,90,872 38,20,11,409 11.45% Profit of the company excluding profits of these two units 2,85,57,94,741 18,92,82,184 6.63% is not merely unusually high in comparison to the assessee's non-export business in the other units of the assessee-company, but having regard to the close relationship between the assessee-company and its foreign buyer which was almost in the position of the parent company of the assessee and because of which reason the Assessing Officer opined that the provisions of Section 80-I(9) are to be applied in terms of Section 10A(6....
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....ge rules provided in respect of the entire business activity of the assessee for each year assessment orders were passed on such premise. 9. While looking into the manner of computing of the profits of the assessee, as revealed in the profit and loss account, and noticing that the value of the closing stock has been taken at a lower amount corresponding to the amount of MODVAT credit said to be available to the assessee on the last day of the accounting period, which for the assessment year 1995-96 was noticed at 1,18,61,885/- and after having called upon the assessee to furnish the details of the justification, but the assessee merely contending that as it had not added the corresponding duty amount to its purchases and the expenditure claimed towards the cost of purchase of its raw-material being exclusive of the duty paid for the purpose of preparation of the profit and loss account, but at the same time not producing any commensurate evidence or material to show the actual amount of duties paid by it to this extent i.e., to the extent of 1,18,81,885/- rejected the contention of the assessee and also rejected the method of maintenance of the accounts of the assessee for the p....
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.... view for all the four assessment years of the assessee. 13. It was now the turn of the Revenue to go in appeal before the Tribunal, but the Tribunal as per the common order dated 25.11.2005 dismissed the appeals rejecting the contentions urged on behalf of the Revenue both on the aspect of Section 10-A benefit claimed by the assessee and so also the MODVAT credit aspect. 14. It is because of the failure of the Revenue before the Tribunal, the present appeals and on the questions as above. 15. Adverting to the question relating to Section 10A benefit of the assessee, submission of Sri. G. Kamaladhar, learned standing counsel for the Revenue, is that the assessee had not maintained any separate accounts to indicate the precise profits attributable to the two export units; that the assessee had not placed even any material or books of account relating to these units to indicate either at the manner of arriving at the profits attributable to these units or in any other way, that when the Assessing officer has noticed the close relationship between the assessee and the foreign buyer which is not all in dispute and if the Assessing officer also had noticed the abnormal high pro....
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....trating as to how the order passed by the Assessment Officer is either erroneous in law or on facts, had simply set aside the assessment order on this aspect and therefore, it is not sustainable. 18. It is also submitted that the assessee had not placed any material either before the Assessing Authority or before the Appellate Authority to show that he had actually paid the corresponding excise duty, customs up to the amount of the MODVAT credit which it had claimed as MODVAT credit available to it at the end of the accounting period and therefore, was to be excluded in computing the value of the closing stock; that when the initial payments itself had not been demonstrated, a claim of this nature was not tenable. It is also pointed out that the Assessing Officer found sufficient reasons to reject the manner of maintenance of the accounts for the purpose of arriving at the profits of the assessee and in exercise of the powers u/s.143(2) of the Act, if had rejected the accounting method being of the opinion that such manner was nothing but a device to understate the profits of the assessee and if had made addition of the amount of the duty claimed as a deduction form the value of....
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....tly as in the present situation; that it was a case of customs and excise duty paid and for which deduction had been claimed and the remission order by this Court was only to ascertain whether the amounts have been paid or not and not on the questions as raised in the present appeals which relate to MODVAT credit amount. Mr. Suryanarayana further, submits that the Tribunal has correctly disposed of the appeals on these two aspects and therefore questions raised are required to be answered in favour of the assessee and against the revenue. 23. We have bestowed our attention to the submissions made at the bar, perused the order of the Assessing Authority, Commissioner for Income Tax (appeals) and also of the Income tax Appellate Tribunal. 24. Insofar as the first question is concerned, while it is true that there did exist a close connection between the assessee- company and the foreign buyer and it is not disputed that the other requirement such as the nature of arrangement and the manner of rejection of the profits margin due to export sales as inflated profits attributable to export activities, having not been disclosed by the Assessing Officer arid though considerable re....
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....ing the profits of the assessee that the assessee having followed the standard accounting practice, the Assessing Officer should have accepted the accounts as maintained by the assessee in terms of section 145(1) of the Act and should not rejected the same by invoking Section 145(2) of the Act. We notice that while rejection of the accounts maintained by the assessee in terms of the provisions of Section 145(2), has enabled the Assessing Officer to proceed pass best judgment assessment, but at the same time the order should spell out reasons and the basis for passing a best judgement order. 28. The reason if at all as discernible from the assessment order on this aspect can only be that the Assessing Officer is of the view that the assessee was not entitled for the deduction in terms of Section 43B of the Act as the actual payments had not been made good by placing before the Assessing Officer the commensurate material for the accounting period of excise duty and customs. 29. In this regard submission on behalf of the assessee to the effect that it was not a deduction claimed against the payment, but an available MODVAT credit which was taken out of the value of the closing s....