TaxTMI 
TaxTMI 
2016 (2) TMI 197
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....f Income Tax, Central Circle-4, New Delhi (hereinafter called the AO for short) had no jurisdiction to scale down the deduction allowed u/s 80IB/80IC of the Income Tax Act, 1961 (hereinafter called the Act for short) in the original Assessment Order dated 14.06.2007 since the whittling down of the deduction u/s 80IB/80IC of the Act was not based upon any documents seized during the course of search on 21.01.2011.. The learned CIT (A) did not appreciate that the seized documents referred by him are all parts of regular accounting transactions which were available at the time of original assessment. Further, the learned CIT (A) has not specified how the seized documents mentioned by him in the impugned order are relevant to whittling down of the deduction u/s 80IB/80IC of the Act. 2.1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the appellant company had a close connection with M/s. S.H. Kelkar& Co. (P) Ltd within the meaning of that term in Section 80-1 A( 10) of the Act. 2.2. That on the facts and in the circumstances of the case, the learned CIT(A) failed to appreciate that although M/s. Dharampal Satyapal Ltd had a close ....
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....shown at Rs. 57032680/-. Book profit u/s 115JB has been computed at Rs. 130428160/- and as book profit tax was more than tax payable under the normal provision of the computation of total income tax u/s 115JB was paid. DCIT, Circle 10(1), New Delhi framed assessment u/s 143(3) on 14.06.2007 at an income of Rs. 68508470/- under the normal provisions of the Act and at Rs. 10227194/- under the provision of section 115JB of the Act. During the regular assessment u/s 143(3) deduction u/s 80IB was restricted to Rs. 75374962/- against the claim of the assessee at Rs. 86250749/- on account of interest income of Rs. 10875787/- claimed by assessee of eligible units which according to AO are not eligible for deduction u/s 80IB of the Act. The above order was challenged before the learned Commissioner of Income-Tax (Appeals) by the assessee company and vide order dated 02.12.2008, learned Commissioner of Income-Tax (Appeals) upheld the action of the AO. Against this assessee preferred an appeal before ITAT and vide order dated 04.09.2009 in ITA No. 288/Del/2009, appeal of assessee was partly allowed in respect of interest income from loan to the staff and on late payment received from customer....
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....h and Agartala units situated in Northeast. The Noida Unit of the assessee, which is not an eligible unit for deduction, transfers silver flakes manufactured therein to the various units eligible for deduction u/s 80IB and 80IC. 7. During the assessment proceedings u/s 143(3) the assessee submitted form No. 10CCB for claiming deduction for these respective units. In original assessment proceedings the form No. 10CCB submitted by the assessee did not show that there is transfer of material from Noida Unit to the respective units which are claiming benefit u/s 80IB/IC. 8. During the course of assessment u/s 153A it was noticed that column No. 20 of Form 10CCB which prescribed the disclosure of transaction made by the eligible undertaking with a related concerned of the assessee or any other undertaking of the assessee does not show material transferred from Noida Unit of the assessee to the eligible units for deduction. It was found that against those columns certain transaction undertaken with the related person have been reported such as transaction with M/s. Dharampal Satyapal Ltd. Further transaction with another undertaking of the assessee i.e. purchase from Noida Unit which i....
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.... not based upon any documents seized during the course of search. It was submitted that there is no incriminating material found during the course of search, which suggests so. He argued that section 80IB are misread by AO as concept of "arm‟s length price" applied by AO for inter units transfers are not on the statute for these deductions. He contended that provision of section 80 IA (8) which only prescribed Market rate at which the products are transferred. In the end, he submitted that estimate made by AO of attribution of 5% of the profits to the eligible industrial undertaking is not correct. 11. Inn appeal before First Appellate Authority, ld. CIT (A) vide his order dated, 21.06.2013 rejected the contention of the assessee that addition has been made without any basis of seized material found during the course of search. Learned Commissioner of Income-tax (Appeals) was of the view that the letter dated 18.02.2013 by the assessee itself suggests that various annexure of the seized material contains details of material transfer challans to Noida unit, the movement of raw tobacco shows detail of purchase from sister concern, material outward register, raw material purcha....
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....223;s length‟ and therefore the provision of section 8 of section 80 IA are triggered is also not based on any incriminating material found during search. He further submitted that the transfer of various goods and services from the head office to other undertaking resulted into huge profit in the hands of the assessee is also not culled out from any documents seized during the search. He further referred to the details of the documents mentioned by learned Commissioner of Income-tax (Appeals) at Para 3.3 of the order which are pertaining to transfer of material to Noida Unit and bills of transportation of those material are already recorded in the books of accounts and are part of the accounting records of the firm. He contended that there is no mention in the order of AO as well as ld. CIT (A) that theses material are not forming part of regular records of the company. He stated that dates pertaining to those documents itself suggests that they are not related to the period covered under these three assessment years under appeal. Therefore, reliance of learned Commissioner of Income tax (Appeals) that they are the incriminating material is not correct. He further submitted ....
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....unted for by corporate office of these materials. Regarding the allocation of the expenditure of corporate office he submitted the detailed chart showing allocation of various expenses incurred by the corporate office between various units where 115 items of various expenditure incurred by the corporate office are apportioned and he further submitted that sales and administrative office expenses of 88 items were also allocated to various units disclosing the allocation keys of such apportionment. Therefore, he submitted that each expenditure incurred has been appropriately apportioned amongst the various units between eligible and non-eligible undertakings of the assessee to determine correct profit in the best possible manner. He further submitted that regarding the royalty for the intellectual rights Ravinder Kumar Gupta also stated that he does not charge such remuneration from company i.e. M/s. Dharam Pal Premchand Ltd. and therefore there is no requirement of reducing the profits of the eligible undertaking on this account. 15. Regarding the close connection between M/s. Dharampal Satyapal Ltd. it was stated that during the Financial Year 2004-05 to 2008-09 the assessee has b....
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....ime of making original assessment. She relied on page no 43 of the paper book submitted stating that this paper shows transfer of goods to other units. She submitted that though the dates of the documents are pertaining to FY 2010-11 but this shows the modus operandi of the assessee by the transfer of the goods and therefore the assessment u/s 153A made by the AO is purely on the basis of seized material found during the course of search. She relied upon the orders of the learned Commissioner of Income tax (Appeals) for this and the decision of Hon‟ble Delhi High Court in the case of Anil Bhatia. She vehemently stated that the non-disclosure in form 10CCB coupled with seizure of documents showing transfer of material is an incriminating documents based on which the assessment u/s 153A is made. 19. Regarding attribution of 5% of allocable profit she submitted that major activity are relating to Noida Unit and goods procurement is also coordinated through corporate office and further at the eligible units only activity of mixing and packing etc. is done. Therefore, in view of the limited activity, 5% is the appropriate attribution of profit made by the AO and she vehemently su....
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....leted assessment u/s 143(3) on the basis of some material which are unearthed during the course of search which was not produced or anything already made known in the course of original assessment? b. Consequently, if so, then claim of deduction u/s 80IB and 80IC is correct or not. If we answer the first question that the assessment u/s 153A and consequent addition have been made based on seized document which have been unearthed during the course of search in affirmative then only we require to given our findings to the second question about the appropriateness of the claim of deduction u/s 80 IB and 80 IC of The Income tax Act. 22. We proceed to decide the first issue. During the course of search, the material relied upon by the AO, which was found as per annexure A-4 to annexure A-11. Ld. CIT (A) has tabulated them at para no 3.3 of his order-extracting letter dated 18/02/2013 of the assessee. S. No. Department Party Code Name & Address of location Pages 1. N-5 M/s. Dharampal Premchand Ltd.A-34/35, Sector-60, Noida (U.P.) 1-6 2. SN-7 M/s. Dharampal Premchand Ltd.1-62, Sector-9, Noida (U.P.) 7 to 8 3. SN-12A M/s. Dharampal Premchand Ltd.H05, NSEZ, Noida (U.P.) ....
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....st of the material seized is related to supply from or transfer to unrelated parties. From the seized material neither AO and nor Ld. CIT (A) could show any material that transactions are from related party and they are not carried on at market rate. Further during the course of assessment u/s 143(3) the assessee has explained all issue of determination u/s 80IB and 80IC in detail. The assessee is maintaining unit wise profit and loss account and balance sheet for working out deduction u/s 80IB and 80IC. In the unit wise profit and loss accounts of those units, there is disclosure of purchases from the Noida Unit. This is evident from the letter dated 06.12.2006 submitted by the assessee before the Additional CIT in proceedings u/s 143(3) rws 144A of The Income tax Act. During the course of the original assessment, entire issue of deduction u/s 80IB and 80 IC was examined by AO and Addl. CIT and then matter reached at the stage of appeal before ITAT. Merely because in form no 10CCB submitted there is omission to mention certain details cannot be said that the information of inter unit transfer and information of facilitation by Delhi office in procurement was not available with AO ....
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....any material alteration in the assessed income of the assessee for those years. Before us, the revenue could not point out any material related to AY 2005-06 to 2007-08, which was unearthed in search proceedings. 26. Ld. CIT (A) has upheld the jurisdiction u/s 153A of the act relying up on decision of Honorable Delhi High court in case of CIT V Shri Anil Bhatia in ITA no 1626/2010 dated 7th August 2012 ( 352 ITR 493) ( Delhi). In that case, there were incriminating documents found during the course of search for that particular year where loan was not disclosed in the regular return of the assessee. In this case, there is no instance of any document, which shows that particular income / expenditure assets or liabilities are not disclosed in the return of income. In that case, Hon. Delhi High court in para no 23 held that they are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. Therefore, they did not express any opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore was left open. Hon Delhi High court in case of CIT V Kabul Chawla 61 Taxmann.com 412 (Delhi)....