TaxTMI 
TaxTMI 
2015 (4) TMI 676
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....erequisite as per provisions of section 80IC(2)(a) of the IT Act, 1961 was not satisfied for eligibility of deduction of Rs. 2,65,13,712/- claimed and allowed u/s 801C. (ii) As per the provisions, new machinery to a minimum extent of 80% of the total machinery was to be used in the manufacturing activity by M/s. Fortune at Baddi, Himachal Pradesh. No verification had been made that new machinery was used in the manufacturing process. Besides, it was also seen that as per the depreciation chart the value of machinery was only Rs. 69,274/- which did not appear adequate to carry out the magnitude of manufacture as would appear appropriate vis-a-vis the high turnover declared at Rs. 5,62,51,944/-. (iii) Manufacturing is done in the name of M/s Fortune a Baddi, Himachal Pradesh. Export is carried out in the name of M/s Da Milano, Gulmohar Park, New Delhi. Other related concerns involved in the trading process within the meaning of section 40A(2)(b) as per form No. 10CCB(column 28) were M/s Orient Express and M/s Sundaram Enterprises. Total sales to these parties ran into several crores of rupees. No attempt had been made by the AO to verify whether the sales were made at the prevailin....
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....vity carried out by any of them had been abandoned in favour of the Baddi Unit since in such a case it would mean that those existing business/businesses had been reconstructed at Baddi, Himachal Pradesh to avail tax benefit in violation of the provisions of section 80IC(4)(i). (ix) No effort was made by the AO to verify the actual existence of manufacturing activity vis-a-vis factory, value of machinery, consumption of power for manufacture by the assessee, evidence of freight inward of raw materials/freight outwards of manufactured goods through transport bills showing the destinations etc. Neither had any effort been made to draw a comparison between infrastructure available and magnitude of manufacture leading to the massive turnover. Thus, existence of actual manufacture as mandatory u/s 80IC(2)(a) which necessarily merited thorough verification, had not been verified. (x) The sales expenses of Rs. 7,08,974/- shown in the P&L a/c under the head 'indirect expenses' was salary paid to six persons as per the details filed. The direct expenses were the packing expenses and the fabrication expenses comprising only job work expenses. This led to the conclusion that n....
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.... an assessment order erroneous. Making due investigation but thereafter taking a patently erroneous view, also makes an assessment order erroneous. A line of distinction should be drawn between patently erroneous view and accepting one of the possible views. Only the former makes an assessment order erroneous and not the later. In other words, if there is a debatable issue and the AO has taken one of the possible and legally sustainable views, then that aspect goes outside the realm of revision. Another situation of an erroneous order may be when investigation was made by the AO, but the circumstances suggest that further investigation was warranted, which the AO failed to make. This would also make the assessment order erroneous. But the mere fact that the AO chooses not to incorporate certain issues in the assessment order on which he gets satisfied during the course of hearing after proper examination, cannot be lead to the passing of an erroneous assessment order. If material on record suggests that the AO did embark upon the investigation and got satisfied and further there is nothing to prompt further investigation, then the assessment order cannot be characterized as erroneo....
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....e conditions for availability of deduction u/s 80IC have been considered by the AO and found to be satisfied, then it is not open to any authority to reconsider such prerequisite conditions in the subsequent years as well. There is no dearth of judicial precedents for this proposition. In view of the fact that the pre-requisite conditions can be examined in the first year of the claim, which were duly found to have been fulfilled in the preceding year, we are of the considered opinion that this objection of the ld. CIT that the assessee did not undertake substantial expansion, is bereft of any force. The same is, therefore, dismissed. 7. The second objection of the ld. CIT is that new machinery to the minimum extent of 80% of total machinery was to be used in the manufacturing activity by M/s Fortune at Baddi, Himachal Pradesh, being the eligible unit. Here again, we find that the ld. CIT is discussing about the eligibility conditions for claim of deduction u/s 80IC, which cannot be re-visited in the second year. 8.1. Objection nos. 3 and 4 of the ld. CIT are that the assessee made sales to its related concerns, namely, M/s Orient Express, M/s Sundaram Enterprises and M/s Fortune....
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....n taken by the ld. CIT is not sustainable. 10. Objection no. 6 of the ld. CIT is about the payment of Electricity expenses. The ld. CIT observed that the AO did not examine whether the electricity charges were direct manufacturing expenses or the amounts reimbursed to the parties who carried out job work. The assessee tendered before the ld. CIT that there was no reimbursement of expenses incurred by any third party and all the expenses incurred and claimed were for self, inasmuch as the assessee had sanctioned load of 58 kw and the electricity charges paid were for the consumption of electricity at the undertaking alone. Copies of bills were also enclosed to the ld. CIT. Since these details have not been refuted by the ld. CIT, the inference has to be drawn in favour of the assessee that the electricity expenses were in respect of its own unit and as such the AO was justified in accepting the assessee's claim on this aspect of the matter. 11.1. Objection no. 7 of the ld. CIT is that the assessee had eligible unit of M/s Fortune at Baddi, Himachal Pradesh and another at Kapashera, Delhi. He observed that in respect of Kapashera unit there was a loss of Rs. 65,326/-, whereas in re....