TMI Blog2015 (2) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals), we hold that the assessee was entitled to claim of deduction under section 80-IC of the Act. The manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity. During the appellate proceedings, evidence was filed by the assessee that only 5 per cent. of the total manufactured goods were subjected to printing and bleaching process which admittedly was being carried out at Ludhiana. The learned Departmental representative for the Revenue failed to controvert the said findings of the Commissioner of Income-tax and in the absence of the same, we find no merit in the order of the Assessing Officer in holding that the assessee was not entitled to the claim of deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and the Revenue and the cross- objections filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The Revenue in I. T. A. No. 779/Chd/2008 has raised the following grounds of appeal : 1. That the learned Commissioner of Income-tax (Appeals)-II has erred in deleting the addition of ₹ 97,34,564 out of the total addition of ₹ 1,22,38,136 made by the Assessing Officer on account of disallowance of deduction under section 80-IC of the Income-tax Act. 2. That while allowing relief as mentioned in paragraph 1 above. (i) The learned Commissioner of Income-tax (Appeals) has erred in ignoring the evidence placed on record that all the purchases made by the assessee were made from Ludhiana and delivered at the address of sister concern at Ludhiana and not directly at the place of work at Parwanoo. (ii) The learned Commissioner of Income-tax (Appeals) has grossly erred in ignoring the fact that the printing and bleaching of raw material as well as semi-finished products was carried out at Ludhiana and not Parwanoo thereby putting a question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee neither any movement of vehicle for transport of goods has been seen nor any guard/chowkidar has been seen functioning at the place. (x) The learned Commissioner of Income-tax (Appeals) has grossly erred in ignoring the evidence obtained from India Industrial Garments Manufacturing Pvt. Ltd. a reputed concern in the field of sewing machine used for knitted purposes which clearly bring out the fact that the assessee concern did not fulfil the minimum sewing machine and labour requirement for carrying out the manufacturing so as to give turnover of ₹ 3.72 crores. (xi) The learned Commissioner of Income-tax (Appeals) has cued in law find facts in ignoring the comparison of O.I, rate drawn between the assessee M/s. Octave Exports and its sister concern namely Octave Apparel, carrying out the same business whereby it is proved that the profits of M/s. Octave Exports are too high to establish the assessee's intention to claim deduction under section 80-IC. (xii) The learned Commissioner of Income-tax (Appeals) has again erred in facts in ignoring the comparison of plant and machinery drawn between the assessee M/s. Octave Exports and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 80-IC(2)(a)(ii) whereas the assessee did not fulfil the condition laid down for claim of deduction under section 80-IC(2)(a)(ii), i.e., it is not located in any of the noti fied area. 5. The assessee in I. T. A. No. 762/Chd/2008 has raised the following grounds of appeal : 1. That the worthy Commissioner of Income-tax (Appeals)-II, Ludhiana, has erred in holding that profit of ₹ 25,03,572 included in the profit of ₹ 1,22,38,136 (on which 100 per cent. deduction under section 80-IC was claimed by the appellant and disallowed by the Assessing Officer) was not the profit earned from manufacturing of any goods at Parwanoo and the appellant was therefore, not entitled for any deduction under section 80-IC on the income of ₹ 25,03,572. 2. That the rejection of claim under section 80-IC on the income of ₹ 25,03,572 by the learned Commissioner of Income-tax (Appeals) on the basis that some of vehicles did not cross Parwanoo barrier, is not correct in view of the fact that the appellant filed ST-XXVI-A forms issued by the Himachal Pradesh Excise and Taxation Depart ment duly stamped evidencing that these vehicles did cross the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions at Parwanoo, eligibility certificate had to be obtained from the Department of Industries and the total details of machinery to be installed had to be submitted. The Assessing Officer tabulated the list of machinery installed in the premises at part of pages 8 and 9 of the assessment order and has also enclosed the photo copies of purchase bills of plant and machinery as annexure A-4 to the assessment order. As per the Assessing Officer, not more than 13 sewing machines were allegedly installed at Parwanoo unit for manufacturing goods totalling ₹ 3.72 crores by employing workers less than 10. The Assessing Officer also made enquiry from the Himachal Pradesh State Electricity Board, Parwanoo and the sanctioned load was 39.9 KV and the copy of the certificate was enclosed as annexure A-5 to the assessment order. The Assessing Officer observed that the connection load was too low to justify the production of material, i.e., turnover of ₹ 3.72 crores. The Assessing Officer also obtained the details of consumption by the assessee which are tabulated under table 3 at page 10 of the assessment order. As per the Assessing Officer, the facts reflect that the consumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the goods were delivered at the sister concern of the assessee which was engaged in the same line of business. Further, the goods were knitted cloth, shirting and woven fabrics for carrying out the alleged manufacturing activity. The Assessing Officer thus questioned as to whether any manufacturing activity was carried out at Parwanoo unit. 10. The Assessing Officer also made enquiries from printing and bleaching house and the statement of the printer was recorded who in-turn submitted that the assessee was delivering the goods and picking up the goods given for printing and in case any delivery had to be made, it was made at Ludhiana office. Similar reply was given in respect of bleaching of the product. The assessee was confronted with this information and the statement of the partner Shri Balbir Kumar, karta of Balbir Kumar, HUF was recorded on January 15, 2007, in which he detailed the manufacturing process carried on and the machinery installed for the abovesaid purposes. He also stated that 30 to 45 labourers were deployed for manufacturing process. The Assessing Officer, in view thereof, observed that there was inconsistency in the statement of the partner as he had sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were required whereas in the case of the assessee, there were only 13 sewing machines and the assessee has shown a turnover of ₹ 3.72 crores which was impossible to achieve by using 13 sewing machines. 13. Another exercise carried on by the Assessing Officer was the comparison of the results shown by M/s. Octave Exports, i.e., the assessee before us and its sister concern M/s. Octave Apparels. The Assessing Officer has tabulated the turnover, wages and other expenses incurred by the two concerns under table-10 at page 39 of the assessment order and concluded that the expenses booked at Parwanoo unit were much less than the expenses booked by the sister concern at Ludhiana. As per the Assessing Officer, the expenses booked at Parwanoo unit were too low to justify any working. Further, a comparison between plant and machinery of the two concerns was also made and it was found that the turnover which was one-third of its sister concern, the assessee had done the same work with just one-tenth of the machinery. Further, the net profit shown by the assessee was much higher than its sister concern. As per the Assessing Officer, the above establishes that no work as such, had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y manufactured for claim of deduction under section 80-IC of the Act. In the case of the assessee, the specific item lies at S. No. 9 of paragraph C of Schedule XIV and the listed items is woven fabric and as such the assessee was not entitled to the claim of deduction under section 80-IC of the Act. In reply to this show-cause notice issued by the Assessing Officer, the assessee stated that during the year we have claimed deduction under section 80-IC under sub-section (2)(a)(ii). Under this provision of section 80-IC the assessee who manufactured any article or thing not being article specified in Schedule is entitled to the deduction. We are not covered under section other conditions of section 80-IC have been complied with . The Assessing Officer noted that the assessee had changed its claim of deduction under section 80-IC of the Act that it was to be allowed under section 80-IC(2)(a) and not under section 80-IC(2)(b) of the Act, though in the audit report, the assessee had made a claim under section 80-IC(2)(b) and not under section 80-IC(2)(a) of the Act. The Assessing Officer was of the view that because of the legal infirmities in the claim of deduction under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iming deduction under section 80-IC. So the claim of the assessee of deduction under section 80-IC of the Income-tax Act needs to be disallowed on legal grounds as well as the factual aberrations which have already been discussed in the body of the order above. 17. Before the Commissioner of Income-tax (Appeals), the assessee filed written submissions and various evidences which are reproduced under paragraph 4.2 at pages 14 to 25 of the appellate order. The Assessing Officer also submitted reports vide letters dated April 10, 2008 and April 22, 2008. In rejoinder, the assessee furnished written submissions which were also placed on record by the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), on the perusal of the record and the enquiries made by the Assessing Officer, deliberated upon the issue vide paragraphs 5 onwards. The objections of the Assessing Officer were met with by the Commissioner of Income-tax (Appeals) parawise. The first objection raised by the Assessing Officer was with regard to the enquiries made at Parwanoo where he not only visited the premises of the assessee but also recorded statement of one Shri Kapil Sood who stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of the assessee and held that it could not be presumed that only the machines installed as per the information given to the Director of Industries, Himachal Pradesh, were the only machinery at Parwanoo unit. 19. Another adverse inference drawn by the Assessing Officer was on account of consumption of the electricity. The Commissioner of Income-tax (Appeals) observed that simply because the expenses were on the lesser side, it cannot be presumed that no manufacturing activities had been carried out at the unit. Further reliance was placed on the ratio laid down by the Chandigarh Bench of the Tribunal in Shoghi Communications Ltd. v. Deputy CIT in I. T. A. No. 359/Chd/2005, [2006] 9 SOT 489 (Chandigarh), order dated August 4, 2006, reported in and it was held that lower electricity expenses could not be the ground for refusing the claim of deduction under section 80-IC of the Act. In any case, the said lower expenditure cannot give rise to the inference that no manufacturing activity had been carried out by the assessee at Parwanoo unit. 20. Another inference drawn by the Assessing Officer was on account of the photographs and the video clippings of the premises. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer on account of enquiries made from the printer and bleaching house which carried the job work at Ludhiana. The explanation of the assessee in this regard was that only approximately 5 per cent. of the T-shirts were sent for printing or bleaching and there was no question of making too many trips to Ludhiana for the purpose of. The observations of the Assessing Officer in this regard were thus, held to be incorrect and unjustifiable. 23. Further, before the Commissioner of Income-tax (Appeals), the assessee furnished additional evidence in the form of certificate from Knitwear Club (Regd.) Ludhiana under which the assessee had pointed out that printing and bleaching were not the integral part in the manufacturing process of the T-shirts. The said additional evidence was admitted and the Assessing Officer in the remand proceedings had recorded the statement of Shri Charanjeet Singh, secretary, Knitwear Club on April 9, 2008. The Assessing Officer reported that the plea of the assessee that printers that printing and bleaching was not part of the manufacturing process of T-shirts, could not be accepted as in the statement recorded, the said person had submitted that both pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing process employed by the assessee. The Assessing Officer had concluded on the basis of the said enquiries that for the purpose of achieving the turnover claimed to have been made by the assessee, minimum of 26 machines and 30 workers were required. However, in view of the intimation of 13 machines to the Director of Industries, HP and relying on the statement of Shri Kapil Sood that the assessee had employed 8 to 10 workers, the Assessing Officer had held that it is not possible to achieve the turnover. The Commissioner of Income-tax (Appeals), in view of the facts and circumstances, considered in the paragraphs above, did not accept the plea of the assessee. Further, during the appellate proceedings, the assessee had furnished a certificate from Indian Industrial Garments Manufacturing (IIGM) Pvt. Ltd. wherein they had certified that the type of machinery which the assessee had installed, was sufficient for manufacturing goods which the assessee had manufactured and sold. The said certificate was admitted by the Commissioner of Income-tax (Appeals) under rule 46A of the Income-tax Rules. The Assessing Officer in the remand report dated April 10, 2008, had stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old machines being more than 32 per cent. of the total value of machinery as on March 31, 2003 at ₹ 3,94,500 was more than 20 per cent. of the value of the total machinery and hence, the assessee did not qualify for deduction under section 80-IC of the Act. However, the assessee before the Assessing Officer and the Commissioner of Income-tax (Appeals) claimed that it had only 11 hand driven old machines and the value of the said machines was only ₹ 9,500 which was much below 20 per cent. value of the plant and machinery. The Assessing Officer had recorded the statement of one Shri Gurcharan Singh, partner of M/s. Darbar Sales (India) wherein he had stated that the machines could be used for straight stitching and not double stitching quality. The Commissioner of Income-tax (Appeals) observed that the Assessing Officer has not discussed whether the assessee had used only double stitching machines in the manufacture of T-shirts and not the single straight bleaching machine, which was possible by the use of Indian made machines. The claim of the assessee was that it had manufactured the t-shirts using the said Indian machines along with other imported machines installed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out any trading of readymade garments during the year but was only engaged in the manufacture of garments and as such was entitled to deduction under section 80-IC of the Act. The Commissioner of Income-tax (Appeals) in the absence of any evidence on record to show that the assessee had carried out trading activities held that the deduction claimed under section 80-IC of the Act could not be disallowed just because the auditor in the audit report had mentioned that the assessee was carrying on trading of readymade garments. 30. Another aspect noted by the Commissioner of Income-tax (Appeals) was on the basis of evidence filed by the assessee that all the purchasers made enquiries and placed orders at Parwanoo address and goods sold by the assessee were sent through reputed courier from Parwanoo only. In view thereof, the Commissioner of Income-tax (Appeals) held that the conclusion drawn by the Assessing Officer that no manufacturing was done by the assessee at Parwanoo unit could not be accepted. 31. Another aspect noted by the Commissioner of Income-tax (Appeals) was with regard to the enquiries made from the Commissioner, Excise and Taxation, Himachal Pradesh, with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f raw material of ₹ 45,33,495 as per the Commissioner of Income-tax (Appeals) would correspond to sales of ₹ 67,66,410. Thereafter, gross profit rate of 37 per cent. to the said sale was applied to compute the profit at ₹ 25,03,572 and it was held that the assessee was not entitled to claim of deduction under section 80-IC of the Act on the said income of ₹ 25,03,572. The Commissioner of Income-tax (Appeals) recomputed the deduction under section 80-IC(2)(a)(ii) of the Act at ₹ 97,34,564 as against the claim of the assessee at ₹ 1,22,38,136. 33. The Revenue is in appeal against the relief allowed by the Commissioner of Income-tax (Appeals) in observing that the assessee had carried out manufacturing activities and was entitled to the claim of deduction under section 80-IC of the Act except on the addition made on account of the non-passing of the vehicle through barrier through which raw material was passed on from Ludhiana to Parwanoo. 34. The learned Departmental representative for the Revenue placed reliance on the order of the Assessing Officer and elaborately took us through various paragraphs of the assessment order to point out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings from some of the parties, who had categorically stated that the goods were delivered at Ludhiana, though, the bills had been issued in the name Parwanoo unit with address of Parwanoo and the parties have confirmed the supply of the goods and even on the bill, the address is of Parwanoo. Reliance is being placed at annexure A-10, placed at pages 21 to 32 of the Assessing Officer s order and this modus operandi of the assessee is proved from the documentary evidences in respect of the fact that different items of raw material were collected at Ludhiana Office and sent by the assessee through tempo load. Kindly refer to pages 59 to 68 of the paper book. Similar is the sample copies attached at pages 87 to 91 of the paper book. Thus, no fault can be found of the delivery of the material at Ludhiana. 2. 2(ii) Job work of printing and bleaching 5.7, 5.8 and 5.9 (a) Only 5 per cent. of the T-shirts were there, where the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 252 to 253 and which has been doubted by the Assessing Officer, with remarks along with evidence up to page 306, which are documentary evidences and cannot be brushed aside. We have in our paper book at pages 59 to 91 given the computerised barrier receipts of Punjab and Himachal Pradesh along with copy of the relevant bills in respect of purchase of raw material and these computerised receipts are documentary evidences and cannot be brushed aside. Then again various other discrepancies are there in the information given by the Himachal barrier, goes to prove that information cannot be relied upon. How and under what circumstances, the information was given by Himachal authorities is not known to the assessee and that was confronted only at the fag end of limitation period, we have evidences that each vehicle crossed the barrier with matching entries of time with Mohali barrier. 4. 2(iv) Crossing of barriers at Parwanoo 5.21, 5.22 and 5.23 Our contentions are same as above and besides that regarding certain vehicles, the finding has been given by the Commissioner of Income-tax (Appeals) in paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Besides, that the Assessing Officer has himself considered this as a minor evidence and also statement of Sh. Kapil Sood as recorded by the Assessing Officer as per annexure A-3 is totally misleading in the sense that in his statement, he has given contradictory fact. 6. 2(vi) Installation of machinery and enquiries from the Director of Industries, HP 5.2 (a) When the unit was started initially, 13 machines were installed and subsequently, more machines were sent through transportation as per evidence of the same in the shape of declaration issued by the Excise and Taxation Department and evidence of passing such machines through barrier filed, copies of the bills, wherein type of passing the vehicle is also mentioned and finding of the Assessing Officer on the basis of his visit in September, 2006 is not relevant. The information to the industries department of 13 machines was given initially at the time of starting the unit and later on, there is no provision for giving the information of installation of more machines from ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 5.13 (a) Here again, IIGM had certified that 26 machines and 30 workers are required for the turnover as achieved by the appellant and the Assessing Officer on the basis of such unreliable statement of Sh. Kapil Sood had concluded that on 8 to 10 workers are there and the number of machines 13 only and which facts have been proved to be wrong by the Commissioner of Income-tax (Appeals) on the basis of evidence on record. (b) Reliance is being placed at pages 138 to 143. 11. 2(xi) Regarding G.P. of sister concern Regarding profit earned by the assessee viz-a-viz Octave Apparels. The finding has been given by the Commissioner of Income-tax (Appeals) in paragraph 5.13 and reliance is being placed on the order of the Income-tax Appellate Tribunal, Chandigarh Bench in the case of Shiva Export. Further, profits are reasonable taken into consideration the fact that there was no excise duty. 12. 2(xii) Comparison of machinery, viz., Sales (a) Comparison of machinery bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansportation of goods, it is submitted that we have all the computerised receipts and also sales were made to different parties and for which, the papers are there at pages 124 to 136 and the list of sale is at pages 207 to 214 along with relevant bills of courier at pages 215 to 217 and which have not been doubted by the Department. 15. 2(xv) Value of old machines 5.15 of the Commissioner of Income-tax (Appeals) The appellant has proved beyond any doubt that value of old machine in 2001 was only ₹ 1,400 to ₹ 1,500 per sewing machine as per photographs also and, thus, no case of disallowance of deduction under section 80-IC. 16. 2(xvi) T-shirts could not be prepared without bleaching and printing 5.7, 5.8, 5.9 of the Commissioner of Income-tax (Appeals) Already covered in ground No. II 37. Another plea raised by the learned authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has failed to plead the case of the assessee that certain goods, vehicles had crossed the barrier at Mohali, Punjab. 39. We have heard the rival contentions and perused the record. The assessee had set up its unit at Parwanoo in the assessment year 2004-05 for the manufacture and sale of readymade garments. The assessee was manufacturing the said items at Ludhiana and thereafter, it had taken on lease the shed at Parwanoo. There was an exemption from excise duty and other duty and further the assessee was entitled to claim of deduction under section 80-IC of the Act on the profits earned by the assessee at the unit established in Himachal Pradesh. Prior to starting the manufacturing activities, the assessee obtained various registrations for the said firm at Parwanoo, H.P. and the copies of the said registration certificates are placed in the paper book and the list is as under : (i) State Sales Tax No. SOL/111/7671 dated October 7, 2003 ; (ii) Central Sales Tax No. SOL/CST/7626 dated October 7, 2003 ; (iii) Release of electrical connection of 39.900 K.W on December 17, 2003 ; (iv) No objection certificate from Pollu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d two objections. The first objection was that no such machinery was shifted to the Parwanoo unit and the second objection was the value of the machinery. The Commissioner of Income-tax (Appeals) has dealt with both the issues and has given a finding that the necessary evidence of crossing barrier between Kalka and Parwanoo in respect of the 11 hand driven machines was filed before the Assessing Officer and the Commissioner of Income-tax (Appeals) both, which in-turn established the transport of the said machinery. The existence of the machinery stands established from the declaration of the assessee in the balance-sheet filed for the assessment year 2002-03 onwards. In the entirety of the said facts and circumstances and in the absence of any evidence found to the contrary that the machinery originally held by the assessee had either been sold or stolen, once unit has been transferred from Ludhiana to Parwanoo, we find merit in the plea of the assessee that the said machinery has been transferred to the manufacturing unit. The Assessing Officer, on the one hand, had rejected the plea of the assessee that it had not transferred any machinery to Parwanoo unit, but on the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed complete details including the receipts of the raw material crossing Excise and Taxation barrier between Kalka and Parwanoo which in-turn established the claim of the assessee that it had transferred the raw material from Ludhiana to Parwanoo which in-turn was utilised for manufacturing garments. Further, the manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity. 45. Another aspect noted by the Assessing Officer was that the job work of printing and bleaching was carried out at Ludhiana. As the complete procedure was not being carried out in Himachal Pradesh, the assessee was not entitled to the claim of deduction under section 80-IC of the Act. During the appellate proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals), on the other hand, has elaborately considered the aspects of the manufacturing activities carried on by the assessee and the pleas raised by the assessee and the additional evidence filed by the assessee, which in-turn was confronted to the Assessing Officer, and had come to a finding that in addition to the 13 machines reported to the Director of Industries, Himachal Pradesh, the assessee was also using 11 old hand driven machines which in-turn were transferred from Ludhiana to Parwanoo. Further, the requisite number of workers, i.e., about 30 was being maintained by the assessee. The Assessing Officer had relied on statement of one Shri Kapil Sood who had stated that the unit of the assessee had less than 10 workers, could not be used against the assessee as the Assessing Officer has failed to allow cross-examination to the assessee and hence, the said plea of the Revenue is dismissed. 49. The Assessing Officer also compared the results shown by the assessee and the results shown by the sister concern and observed that the assessee had shown lesser expenditure and higher profit. However, as pointed out by the learned authorised representative for the assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only 13 machines were installed in the Parwanoo unit of the assessee. 52. Another objection raised by the Assessing Officer was with regard to the claim of deduction under section 80-IC of the Act vis-avis the sub-section to be applied. In the audit report furnished along with the return of income, the assessee had declared that it was eligible for deduction under section 80-IC(2)(b) of the Act. However, Schedule XIV of the Act prohibited the manufacture of garments as being eligible for deduction under section 80-IC(2)(b) of the Act. Consequently, the assessee was show caused as to why the deduction claimed under section 80-IC(2)(b) of the Act should not be withdrawn from the assessee. The plea of the assessee before the Assessing Officer and the Commissioner of Income-tax (Appeals) was that by an inadvertent error, the auditor in the audit report had reported the deduction claimed under section 80-IC(2)(b) of the Act. However, the unit being established in Himachal Pradesh, the assessee was entitled to the claim of deduction under section 80-IC(2)(a)(ii) of the Act. We find merit in the claim of the assessee in this regard that after establishing the unit in Himachal Pradesh t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit to the extent of ₹ 25,03,572 was worked out to be not eligible for deduction under section 80-IC of the Act. The relevant paragraph 6 in this regard of the Commissioner of Income-tax (Appeals) reads as under : 6. In view of the above discussions, though the conclusions of the Assessing Officer that no manufacturing activities were carried out by the appellant at Parwanoo and that further the appellant was not legally entitled to deduction under section 80-IC could not be accepted, in the place of the discrepancies with regard to some vehicles remaining unexplained, as discussed in the preceding paragraphs, it has to be considered that the material claimed to have been trans ported by these vehicles was not available for manufacturing goods at Parwanoo. As per the details given in annexure 'A' to this order, the total of the raw material claimed to be transported through these vehi cles come to ₹ 45,33,495. The appellant has shown gross profit of 37 per cent. for the assessment year under consideration. The cost of raw material of ₹ 45,33,495 would correspond to sales of ₹ 67,66,410. Applying the gross profit rate of 37 per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal raised by the assessee. I. T. A. No. 1283/Chd/2010-assessment year 2006-07 (Revenue's appeal) 58. The Revenue in I. T. A. No. 1283/Chd/2010 has raised the following grounds of appeal : 1. That the learned Commissioner of Income-tax (Appeals)-I, Ludhiana has erred law and on facts in deleting the addition of ₹ 74,76,594 made by the Assessing Officer on account of disallow ance of deduction under section 80-IC of the Income-tax Act, 1961 relying on the order of the learned Commissioner of Income-tax (Appeals)-II, Ludhiana in the assessee's own case for the assessment year 2005-06 without going into the facts of the case. 2. That while allowing relief as mentioned in paragraph 1 above : (i) The learned Commissioner of Income-tax (Appeals) has erred in law and on facts by not giving any credence to the statement of Sh.Kapil Sood wherein the person has stated that only 10-12 workers worked in the unit of M/s. Octave Exports and the unit usually remained closed and there was no work/manufacturing. (ii) The learned Commissioner of Income-tax (Appeals) has erred in facts by ignoring that only 13 sewing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons before the appeal is finally heard or disposed of. 60. The issue raised in the present appeal is identical to the issue raised in the assessment year 2005-06. We have already adjudicated the issue in the paragraphs hereinabove in relation to the claim of deduction under section 80-IC of the Act. 61. The similar claim of deduction under section 80-IC of the Act was denied to the assessee by the Assessing Officer following the same line of reasoning as in the assessment year 2005-06. However, the Assessing Officer had made enquiries in respect of the vehicles crossing the barrier carrying raw material from Ludhiana to Parwanoo and no discrepancy was found in the said material being shifted from Ludhiana to Parwanoo. In the absence of any evidence found that the goods had not crossed the barrier, the Commissioner of Income-tax (Appeals) had allowed the claim of deduction under section 80-IC of the Act on same reasoning but in entirety, though in the assessment year 2005-06, partial disallowance was made in the hands of the assessee. In view of our holding that the assessee is engaged in the manufacturing activities carried out at its Parwanoo unit and allowing the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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