AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 1224
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....the case in deleting the addition of Rs. 1,44,97,282/- made by the A.O. on account of excess deduction claimed u/s 80-IC of Income Tax Act, 1961. 2. The Ld. CIT (A) erred in law and on the facts and circumstances of the case in deleting the addition of Rs. 1,44,97,282/- made by the A.O. without appreciating the crucial fact that the assessee had indulged in substantial; inter-unit transactions with its related concerns particularly M/s. Sachet Agencies to whom the entire sales of the assessee's unit at Baddi had been made." ITA No.2081/Del/2011 (AY 2007-08) 1. The Ld. CIT (A) erred in law and on the facts and circumstances of the case in deleting the addition of Rs. 1,77,74,976/- made by the A.O. on account of excess deduction claimed u/s 80-IC of Income Tax Act, 1961. 2. The Ld. CIT (A) erred in law and on the facts and circumstances of the case in deleting the addition of Rs. 1,77,74,976/- made by the A.O. without appreciating the crucial fact that the assessee has indulged in substantial inter-unit transactions with its related concerns particularly M/s. Suchet Agencies to whom the entire sales of the assessee's unit at Baddi had been made." ITA No.844/Del/2011 (AY 2006-07....
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....g the average GP of comparables gave benefit of 23% to MPC as against 38.05% declared by the assessee. AO rejected the books of account of the assessee u/s 145 of the Act being not reliable. 6. AO also considered remaining GP at 15% being inappropriately inflated to claim unwarranted deduction u/s 80-IC and computed the net profit eligible for deduction u/s 80-IC at NP of 21% amounting to Rs. 2,01,71,527/- and disallowed the difference of Rs. 1,44,97,282/- in the net profit as declared by the assessee being not eligible for availing deduction u/s 80-IC and thereby made an addition of Rs. 1,44,97,282/-. ITA No.2081/Del/2011 (AY 2007-08) 7. Briefly stated the facts of this case are : during the scrutiny proceedings, pursuant to the notices issued under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short 'the Act') along with questionnaire, Shri H.K. Batra, Authorized Representative for the assessee put in appearance, filed necessary details and discussed the case. Assessee being proprietor of M/s. Vi-John International, Delhi (VJI) and M/s. Maja Personal Care, Baddi (HP) (MPC) is into the business of manufacturing of cosmetic goods and has declared business income fr....
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....r hand, ld. AR for the assessee to repel the argument addressed by the ld. DR contended inter alia that the AO has arbitrarily rejected the books of account without pointing out any entry being false and defective; that the provisions contained u/s 80-IC read with section 80-IA (8) & (10) are not applicable in this case as not even a single item has been transferred from eligible unit to ineligible unit to claim deduction u/s 80-IC and relied upon the judgments cited as CIT vs. Paradise Holidays 325 ITR 13 (Delhi), CIT vs. Smt. Poonam Rani 326 ITR 223 (Delhi), Pandit Bros. vs. CIT 26 ITR 159 (Punjab) and Aquila Software Services Hyderabad (P) Ltd. vs. DCIT (2015) 61 taxmann.com 106 (Hyderabad - Trib.). 14. Undisputedly, the AO has invoked the provisions contained u/s 80-IC red with section 80-IA (8) & (10) of the Act by rejecting the books of account u/s 145 of the Act merely on the basis of comparison made in the GP ratio of the assessee, which is a 80-IC unit with its non-80-IC unit being run by family member of the assessee. 15. Ld. CIT (A) deleted the addition made by the AO by returning the following findings :- "5. I have carefully considered the submissions made on behal....
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....i was not abnormal in view of the concessions available to Baddi Unit in Himachal Pradesh. After considering the explanation given by the assessee to justify the higher G.P. and net profit of Baddi Unit, I am of the view that the Assessing Officer was not justified in rejecting the trading results shown by the assessee summarily without pointing out either any mistake/deficiency in the accounts or disturbing the figures of sales or purchase as declared by the assessee. He was also not justified in comparing the trading results of assessee's business unit in Baddi (Himachal Pradesh) with the trading results shown by assessee's sister concerns in Delhi because there were considerable differences in business conditions of the two concerns. In the facts and circumstances of the case, I hold that the Assessing Officer was not correct in holding that the G.P. of 23% only was allowable for deduction under section 80-IC in the case of MPC instead of 38.05% as declared by the assessee and disallowing the deduction for the remaining G.P. @ 15.05% and in the process making disallowance/addition of Rs. 1,44,97,282/-. The disallowance of Rs. 1,44,97,282/- made by the Assessing Offic....
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....nting merely on the basis of difference in the ratio of gross profit; (vi) that even otherwise the difference in the gross profit ratio may be due to numerous reasons viz. easy and local availability of the raw material, degrees in demand and supply of the finished goods, increase in the cost of processing, the endeavour of the assessee to earn maximum profit from a unit attracting deduction u/s 80-IC etc. So, difference in the gross profit ratio cannot be a ground in itself to reduce the deductions claimed by the assessee u/s 80-IC; (vii) that the AO without disputing the purchase of raw material, sale of the finished goods and without specifically pointing out that there was inter-unit transfer of finished goods jumped to the conclusion that the trading results are not reliable and thereby rejected the books of account, which is not sustainable in the eyes of law; (viii) that we are of the considered view that the gross profit of the assessee may vary even with his own gross profit of the preceding years and on the basis of which part of deduction cannot be disallowed, what to talk of making comparison of gross profit between the 80-IC unit and non 80-IC unit which are undi....