TMI Blog2016 (8) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... With TAX APPEAL NO. 1719 of 2010 With TAX APPEAL NO. 1720 of 2010 With TAX APPEAL NO. 1816 of 2008 TO TAX APPEAL NO. 1817 of 2008 - - - Dated:- 12-8-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR NITIN K MEHTA, ADVOCATE FOR THE OPPONENT : MR TUSHAR P HEMANI, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) By way of these appeals under section 260A of the Income-tax Act, 1961, the appellant has challenged the order of the Income-tax Appellate Tribunal, whereby the Tribunal has reversed the order of the Commissioner of Income-tax (Appeals) by holding the the issues in favour of the assessee. 2. These appeals were admitted by this court for consideration of the following substantial questions of law: Tax Appeal No. 1181 of 2008: Whether the Appellate Tribunal is right in law and on facts in disposing of the revenue s appeal relating to computation of deduction under section 80-HHC by considering enhanced income of ₹ 1,06,51,980/- as having become infructuous on the ground that the assessee s appeal in regard to enhancement had been allowed? Tax Appeal No. 1182 of 2008: (1) Whether the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y appreciated the fact that the assessee has tried to convert the expenses which are not shown and has taken advantage of section 80-HHC of the Income-tax Act by claiming 100% export benefits and has tried to show the income which was contrary to the norms which are fixed in the business. He has taken us to the order of the Commissioner of Income-tax (Appeals) and contended that the Commissioner of Income-tax (Appeals) has enhanced the addition by ₹ 1,06,51,980/- making the total addition to ₹ 1,95,62,054/- and directed to recompute deduction under section 80-HHC of the Act by considering enhanced income of ₹ 1,06,51,980/-. However, in further appeal before the Tribunal, the Tribunal has deleted the addition made on account of inflated purchases of ₹ 1,95,62,054/- by following its decision in the case of M/s. Gujarat Woolen Felt Mills in ITA No. 887/Ahd/2002 dated 28.2.2006. The learned counsel for the revenue has taken us to the order of the Tribunal, particularly, at page Nos. 206 to 212 of the paper book which is reproduced hereinbelow: From the above ground, the only issue emerged as under: `Rs. 63,04,605/- on account of deficit in consumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the standard norms and these inputs are also mentioned at the bottom of export sales invoice. In reply to question No. 8 he has again confirmed that production of the item is as per the standard norms and the inputs are used as per the standard usage mentioned at the bottom of sales bills. If there would have been any variation in the consumption of raw material he would have mentioned the same before the AO. Even otherwise for the formulation of medicine the standard input output ratio will have to be adhered to. He has not mentioned in any of the reply to the question that there was any variation between the standard input and output ratio in the consumption of raw material. Therefore, his statement who controls the production certifies that the consumption of raw material has been in accordance with the standard input output ratio. The appellant s submission that the consumption depends on various factors like efficiency of the plant and process involved is only an afterthought because the production manager who is the in-charge of production has nowhere mentioned that there is even slight variation in consumption from the standard input out ratio. The appellant has also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment from undisclosed sources and the appellant has shown more consumption of certain items to the extent of ₹ 1,32,57,449/- which has not been consumed and therefore, the purchase to this extent have been inflated to reduce the profit of the company. Thus the total addition which is liable to be made is ₹ 1,95,62,054/-. After considering the addition of ₹ 89,10,074/-, the income which is to be further enhanced is ₹ 1,06,51,333/-. Therefore, the AO is directed to enhance the income by ₹ 1,06,51,980/-. Accordingly, this ground is dismissed with direction to enhance the income by ₹ 1,06,51,980/-. The learned counsel of the assessee referred the Tribunal s decision, wherein the Tribunal in the case of M/s. Gujarat Woolen Felt Mills (supra) has held vide para 5 as under: 5. We have heard the parties and considered the rival submissions. It is true that no records have been maintained by the assessee after carding stage that by itself is not a ground for making addition and treating the production at the carding stage as final. The difference of 11,506 kg. Is due to wastage in the production approximately 13% of the production and looking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No. 1181 of 2008 is consequential to Tax Appeal No. 1182 of 2008. If Tax Appeal No. 1182 of 2008 is dismissed, this appeal becomes infructuous. 7. We have heard learned counsel for the parties. In view of the observations made by the Tribunal, we are of the opinion, that the assessee was manufacturing pharmaceutical medicines which are being exported. The assessee was maintaining the norms which are prescribed by the Government of India for a particular pharmaceutical medicine which is to be exported. Since there was a variation in the ratio, the Assessing Officer made addition based on the statement of the General Manager, in-charge production. In our view, the Assessing Officer has based his addition on the basis of the documents which are not available on the record and based on the statement of the General Manager, in-charge Production. Whether the assessee has followed the prescribed norms is not within the purview of the Income-tax Authority. In our view, the Tribunal has rightly held that the CIT(A) was wrong in relying on the input out consumption ratio. In our view, the Assessing Officer and the Commissioner of Incometax (Appeals) have gone on different directio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
