TaxTMI 
TaxTMI 
2013 (8) TMI 328
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.... at Rs. 2,70,24,920/-. The appeal of the assessee was dismissed by the CIT (A). 3. The facts as available from the relevant documents and orders on record are that the assessee firm was formed on 28.05.2003 by Shri Uma Shankar, Shri Pranay Shanker Garg and M/s Advance Valves Pvt. Ltd. (the present assessee). The firm set up a 100% EOU in SEZ area in the name and style of M/s Advance Valves Global. This unit was engaged in the business of manufacture of industrial valves. It started manufacture/production from F.Y. 2003-04. The assessee firm had also acquired through a slump sale a proprietorship concern of one of the partners Shri Pranay Shanker Garg. This proprietorship concern, called Advance Valves Company, was located in Gagret, District Una, HP. Advance Valves Company was engaged in the manufacture of valves. It started operations from 20.09.1999 and was claiming deduction u/s 80IB of the Act. During the year under consideration, the assessee firm claimed exemptions u/s 10A of the Act on the profit of the business of the SEZ Unit, i.e., M/s Advance Valves Global and deduction u/s 80IB of the Act on the profit of the business of the Gagret unit, i.e., Advance Valves Company ....
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....it of the assessee firm was formed by transfer to a new business, all machinery, or plant which was previously being used in the business run by Shri Pranay Shanker Garg, deduction u/s 80IC of the Act was not available in respect of the Gagret unit. The Assessing Officer, as such, disallowed deduction claimed of Rs. 2,67,90,071/- u/s 80IC of the Act. 6. The Assessing Officer further observed that during the year, the SEZ unit of the assessee, i.e., M/s Advance Valves Global had made sale of Rs. 24,45,589/- to M/s UNS Enterprises, a sister concern; that in the auditor's report, the arm's length price of the said transaction had been computed at Rs. 22,98,584/-. The Assessing Officer asked the assessee to explain the basis of working out the arm's length price, as also to explain as to why, in accordance with Section 10A (7) read with Section 80IA(10) of the Act, the difference of Rs. 1,46,735/- be not treated as the assessee's income, not being profit eligible for exemption u/s 10A of the Act. The assessee maintained that it was charging the same amount from its related concern, as was being charged from other customers. The Assessing Officer, however, did not find the invoices o....
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....C (8) (v), according to which, "initial assessment year" means the assessment year relevant to the previous year in which the undertaking or enterprise begins to manufacture or produce articles or things or commences operation or completes substantial expansion; that since the assessee had completed substantial expansion during F.Y. 2004-05, relating to Assessment Year 2005-06, Assessment Year 2005-06 was its initial assessment year for claim of deduction u/s 80IC of the Act; that as per Section 80IC (8) (ix), "substantial expansion" means increase in the investment in the Plant & Machinery by at least 50% of the book value of the Plant & Machinery, before deducting the depreciation in any year, as on the first day of the previous year in which substantial expansion is undertaken; that thus, increase in the value of Plant & Machinery has to be taken into account from the first day of the previous year in which the substantial expansion has started; that as per Section 80IC (8)(v), initial assessment year means the year in which substantial expansion is completed; and that therefore, the initial assessment year for claim of deduction in the case of the assessee was Assessment Year 2....
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....ntial expansion to the extent of 50% in F.Y. 2004-05, relevant to the year under consideration, over the investment in Plant & Machinery and so, the assessee did not qualify for deduction u/s 80IC of the Act on this score also, as held by the Assessing Officer and confirmed by the Ld. CIT (A); that the Ld. CIT (A) also failed to appreciate that though the Ld. CIT (A), in the quantum appeal, had held that deduction u/s 80IC of the Act could not be denied to the assessee on the first ground taken by the Assessing Officer, i.e., that the Gagret unit of the assessee firm was formed by transfer to a new business, machinery or plant previously used in the business run by Shri Pranay Shanker Garg, disallowance of deduction u/s 80IC was confirmed by the Ld. CIT (A) on the ground of the assessee not having carried out substantial expansion of the unit by 31.03.2005, i.e., to the extent of 50% of the value of the Plant & Machinery as on 01.04.2004; that the Ld. CIT (A) has erred in failing to consider that it was in these circumstances that the penalty in question was rightly imposed on the assessee. The Ld. DR has placed reliance on 162 ITR 481 (Patna), 327 ITR 510 (Del) and 328 ITR 44 (Del....
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....m 10CCB, wherein, the assessee's CA certified that the undertaking satisfied the conditions stipulated in, inter alia, Section 80IC of the Act. Attention has then been drawn to APB 143- 183, which is a copy of the written submissions dated 08.06.2011 filed by the assessee before the CIT (A), in the appellate proceedings in the penalty matter and to pages 188-189 of the APB, containing a summary of the contentions raised by the assessee before the Ld. CIT (A) in its supplementary submissions dated 03.08.2011. Reliance has been placed on the following case laws for the proposition that no concealment penalty is leviable where the exemption is claimed on the basis of certificate issued by the CA:- i) 'CIT vs. S. Dhanabai', 309 ITR 268 (Del); ii) 'CIT vs. Kas Movie (P) Ltd' (ITA No.793 of 2011) (Del); iii) 'CIT vs. Deep Tools (P) Ltd.', 274 ITR 603 (P&H); iv) 'CIT vs. Ved Parkash Likhi and Sons (HUF)' (ITA No.458 of 2010) (P&H); v) 'CIT vs. S.D. Rice Mills', 275 ITR 206 (P&H); vi) 'HCIL Arsspl Triveni (JV) vs. ACIT' (ITA Nos.4579 & 4580/Del/2010) (Delhi ITAT); vii) 'ACIT vs. DSL Software Ltd.', 147 TTJ 67; viii) 'Rudolph Staudinger vs. ACIT' (2007) 18 SOT 115; a....
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....essing Officer had failed to show as to how the assessee had furnished an explanation which it had not been able to substantiate and failed to prove it was bona fide; and that the Assessing Officer's view for disallowing claim u/s 80IC of the Act was altogether different from the view on the basis of which the penalty had been proposed. 16. It would be appropriate to here reproduce the relevant portion of the CIT (A)'s order:- "Thus, I agree with appellant's contention that all the material facts were available in the return of income and audit reports, and especially in auditor's reports in form No.10CCB, wherein the auditor had given a report favouring appellant's claim for deduction u/s 80IC. From those material facts, A.O. had not made out any case of 'insubstantial expansion. My predecessor CIT (A), although gave a new finding; did so by utilizing and analyzing the same data/facts, as reported by appellant itself. Thus, no material facts were concealed. To that extent, I agree that explanation 1 to Section 271 (1)(c) does not apply to the present case. I also find from a carefully perusal of penalty order that A.O. has failed to elaborate and establish as to how "appe....
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....sessment order for Assessment Year 2004-05 was set aside by the Ld. CIT (A) and the assessee's claim of deduction was upheld vide order dated 04.02.2008 (APB 31-60), observing that there had been no splitting up/re- construction of the business already in existence and that since deduction u/s 80IB of the Act was admissible to an industrial undertaking, there was no reason for denying the claim made. The Tribunal, vide order dated 23.04.2010 (APB 61-69), affirmed the said order passed by the CIT (A) for Assessment Year 2004-05. 18. For Assessment Year 2005-06, i.e., the year under consideration, however, the deduction u/s 80IC of the Act was disallowed by the CIT (A), not on the ground of old machinery having been used in the business, but on the ground of the assessee having failed to comply with the requirement of substantial expansion. This ground, it is pertinent to note, had never been invoked by the Assessing Officer for making the disallowance for the year. This disallowance was not challenged by the assessee before the Tribunal. However, this fact of the addition not having been challenged before the Tribunal, by itself does not lead to any inevitable conclusion of levia....
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...., it has been held that when the original basis of initiation of penalty proceedings is altered or modified by the appellate authority, the authority initiating penalty proceedings has no jurisdiction thereafter to proceed on the basis of the findings of the appellate authority. In holding so, the Hon'ble Calcutta High Court followed 'Shadiram Bal Mukand', 84 ITR 183 (All), 'Dwarka Prasad Subhas Chandra', 94 ITR 154 (All) and 'Lakhdhir Lalji 85 ITR 77 (Guj). Similar is the decision of the Special Bench of the Tribunal in 'Gujarat Credit Corporation vs. ACIT', 302 ITR (AT) 250. 21. Moreover, even on the issue of disallowance of deduction u/s 80IC on the ground that the assessee had not carried out the requisite expansion under the said Section, there is a difference of opinion between the assessee and the department and the claim of the assessee in this regard has not been shown to be mala fide. The assessee nurtured a bona fide belief that it had carried out substantial expansion by making necessary investment in Plant & Machinery during the period from 01.04.2002 to 31.03.2005 and that it was, thus, eligible to claim deduction u/s 80IC of the Act in respect of the profits earne....