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Deputy CIT, Central Circle-13, New Delhi Versus M/s. Super Plastic Coats (P) Ltd. and Vica-Versa

2016 (5) TMI 295 - ITAT DELHI

Validity of assessment u/s 153A - Held that:- In the assessment year 2002-03 return has been processed under sec. 143(1) accepting the claimed deduction. No new fact has been revealed during the assessment years under consideration during the course of search. In other words, no incriminating material was found on the date of the search to justify the initiation of proceedings under sec. 153A of the Act. We thus respectfully following the ratio laid down by the Hon'ble jurisdictional High Court .....

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or the assessment years under consideration framed in furtherance to the said initiation of proceedings under sec. 153A of the Act are held as void and the same are accordingly quashed. - Decided in favour of assessee

Denial of deduction under sec. 80IB - activities not amounting to manufacturing - Held that:- There is no dispute that activities of the assessee on the films purchased by it from Jindal Polyester Ltd. go through different activities like anti-static/corona treatment/quo .....

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id raw-films purchased from Jindal Polyester Ltd. It has not been rebutted by the Revenue that the raw-material is of such quality that no printing can be done on the same and it is possible only after the output made by the assessee through the above discussed process of the films which become ready for the metallic quoting on which final printing takes place. Thus, we find that the end-product has different identity after the manufacturing process of the assessee. Besides, in the earlier asses .....

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e.

Addition made on account of sales treated as unexplained receipts - Held that:- CIT(Appeals) has accepted the submissions of the assessee with this finding that Mr. Yadav was acting as commission agent for purchasing and supplying the bank draft/pay orders to various parities against cash including the assessee and that there was no business of the assessee company other than trading and manufacturing of poly films and related products. Thus, it is not sustainable to hold that the .....

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HRI I.C. SUDHIR AND SHRI O.P. KANT For The Assessee : Shri Ved Jain, Adv. , Ashish Chadha & Abhishek Jain, CAs For The Department : Shri Rajiv Malhotra, CIT( DR) ORDER PER I.C. SUDHIR: JUDICIAL MEMBER At the outset of hearing, the Learned AR pointed out that the appeal for the assessment year 2005-06 preferred by the Revenue is having tax effect below ₹ 10 lacs, hence, these are not maintainable in view of CBDT Circular No. 21/2015 dated 10.12.2015. The Learned CIT(DR) did not rebut th .....

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eting the addition made by the Assessing Officer on account of denial of deduction claimed by the assessee under sec. 80IB of the Act. 3. The submissions of the Learned AR remained that these appeals are also not maintainable since the assessment year 2001-02, the benefit of the claimed deduction under sec. 80IB of the Act was being allowed to the assessee. He submitted that in the assessment year 2001-02, the assessment was ultimately framed under sec. 147/143(3) of the Act and the claim was al .....

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ed AR submitted further that in the assessment years 2006-07 and 2007-08 besides the issue of eligibility of deduction under sec. 80IB, the Revenue has also raised the issue of validity of addition made by the Assessing Officer on account of credits against non-existent sales through Shri Ravinder Yadav, deleted the Learned CIT(Appeals) is covered by the decision of Delhi Bench of the ITAT in the case of DCIT vs. Northern Strips Ltd. - ITA Nos. 1269 to 1271/Del/2013 (assessment years 2006-07 to .....

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under sec. 153A of the Act, questioned by the assessee in its appeals for the assessment years 2002-03, 2003-04 to 2008-09 goes to the root of the matter, hence, we preferred to adjudicate upon it first. 5. In support of the grounds raising the issue of validity of initiation of proceedings under sec. 153A of the Act, the Learned AR submitted that search operation under sec. 132 of the Act was carried out at the premises of the assessee on 28.8.2008 but no incriminating material was found durin .....

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ards. He submitted that the Learned CIT(Appeals) has rejected the grounds raised before him on the issue with this finding that once proceedings under sec. 153A /153C of the Act are initiated, proceedings under sec. 143/147 of the Act abate and revive only when order under sec. 153A/153C is annulled. He placed reliance on the following decisions: i) CIT vs. Kabul Chawla - [2016] - 380 ITR 573 (Delhi); 28.8.2015 (Delhi HC); ii) Principal CIT vs. Mureje Paper Mills Ltd. - [2016] - 380 ITR 571 (Del .....

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leased to summarize the following requirements for the validity of invocation of the provisions laid down under sec. 153A of the Act: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to fi .....

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aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the ev .....

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rch) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 15 .....

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on the date of search, the assessment based on the return of income originally filed for the year is not pending. Fulfillment of both these two requirements in the present case for initiation of proceedings under sec. 153A of the Act are absent. For the assessment year 2003-04, the assessee has filed its original return of income on 27.11.2003. The Assessing Officer selected the case for scrutiny and called for specific details in respect of deduction under sec. 80IB of the Act and after examin .....

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e assessment year 2001-02, the claimed deduction under sec. 80IB of the Act after examining the manufacturing activity done by the assessee has been allowed in the assessment framed under sec. 147/143(3) of the Act on 30.11.2006. In the assessment year 2002-03 return has been processed under sec. 143(1) accepting the claimed deduction. No new fact has been revealed during the assessment years under consideration during the course of search. In other words, no incriminating material was found on .....

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date of the search. The invocation of the provisions of section 153A of the Act is thus held as invalid and void-ab-initio. In consequence, the assessments for the assessment years under consideration framed in furtherance to the said initiation of proceedings under sec. 153A of the Act are held as void and the same are accordingly quashed. The grounds Nos. 1 to 5 of the appeals preferred by the assessee for these assessment years i.e. 2003-04 to 2008-09 involving the issue on the validity of i .....

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d that the assessee has got good case even on the merits of the additions upheld by the Learned CIT(Appeals) questioned in the appeals preferred by the Revenue. 10. In all these appeals preferred by the Revenue, as discussed above, a common issue regarding eligibility of the deduction claimed by the assessee under sec. 80IB of the Act allowed by the Learned CIT(Appeals) has been questioned by the Revenue for the assessment years 2003-04 to 2007-08. 11. In support of the grounds involving the iss .....

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CIT(DR) submitted that no new product is made out by the activities of the assessee on the films after purchasing it from Jindal. The Learned AR on the other hand submitted that the case of the assessee of treating the raw-material in such a way that characteristic and use of the raw-material completely changes and the input and output are totally different character has been accepted by the Department itself in the assessment years 2001-02 and 2002-03 as well. In the assessment year 2001- 02, t .....

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from its stand taken on the issue in absence of any change in the facts of the case in the subsequent years. The Learned CIT(Appeals) without appreciating this material aspect has deleted the disallowance. He submitted that through coronation and anti-static treatment, the normal POPP Film gets quoted/treated in such a way that the new product becomes more useful and has more strength, thus, the process amounts to manufacture. The assessee by its manufacturing process treats them and makes them .....

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supplied to customers who do the metallic quoting on the said seeds on which the final printing takes place. By the assessee s process, the plain film changes its character which at first does no catch fire and at the same time becomes printable. The Learned AR pointed out that for the above activity, the assessee has set up a factory making investment of ₹ 1,20,87,285 in the plant and machinery besides other investments in generators, fittings etc. These machinery consists of antistatic .....

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only when such manufacturing process is involved. The Learned AR submitted that the Assessing Officer in the present case has made his own belief which is against the facts of the case and is wholly based on the so-cause notice issued by the Excise Department which was duly responded and the explanation of the assessee has been accepted by the excise authorities. The decision relied upon by the Assessing Officer for disallowing the claim having distinguishable facts are also not relevant and di .....

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the issue is comprehensive and reasoned one and it is also based upon the ratios laid down in several decisions followed by him. There is no dispute that activities of the assessee on the films purchased by it from Jindal Polyester Ltd. go through different activities like anti-static/corona treatment/quoting; slitting/cutting/rebinding of treated films; packing of finished products, finished goods (corona treatment films) and then dispatch. Thus, the films used as raw-material is converted int .....

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ly after the output made by the assessee through the above discussed process of the films which become ready for the metallic quoting on which final printing takes place. Thus, we find that the end-product has different identity after the manufacturing process of the assessee. Besides, in the earlier assessment years 2001-02 and 2002-03, the Revenue itself has accepted the claimed deduction under sec. 80IB of the Act of the assessee on the same manufacturing process and when there is no change i .....

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ssessment years 2006-07, 2007-08 and 2008-09 is regarding the validity of action of the Learned CIT(Appeals) in deleting the addition made on account of sales treated as unexplained receipts. 14. At the outset of hearing, the Learned AR pointed out that the issue raised has already been decided by the Delhi Bench of the ITAT in favour of the assessee in the case of DCIT vs. Northern Strips Ltd. and Ors. - ITA Nos. 1269, 1270 and 1271/Del/2013 (assessment years 2006-07 to 2008-09) vide order date .....

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of cash in the bank account and got demand draft and pay order issued in the name of different parties. The Learned CIT(Appeals) without appreciating this material aspect of the issue has deleted the addition made by the Assessing Officer on account of unexplained receipts. 16. On having gone through the orders of the authorities below, we find that on being asked by the investigating agency, Mr. Yadav stated that he used to work for M/s. Swastik Pipes Ltd., he was getting the cash from the emp .....

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ed from his bank account to the bank account of the above three entities and consequently asked each of these companies to furnish the details of the treatment being given about the receipts of such money in their books of account. The assessee company had stated that they had received these moneys by way of demand draft/pay orders which were issued from the bank account of Mr. Ravinder Yadav but these moneys had been duly accounted for in the books of account as sales and details in this regard .....

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