TMI Blog2009 (8) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded is jurisdiction in going beyond the subject matter of the assessment, rendering his order illegal and liable to be set aside? 5. On the facts and in law, whether the Ld. CIT (A) was bound to follow the Hon ble ITAT order dated 19.10.07 passed in the appellant s own case in IT No.4530/Del/03 along with CO No.119(Del)/06 for A.Y. 2000-01 and ITA No.3283(Del)/04 ITA No. 3901(Del)/04 for A.Y. 2001- 02, which had already decided the said issue of transfer o profit, in appellant s favour at page 20 para 3.3 and had become final as no appeal was filed against it by the department? 6. On the facts and in law, whether, considering the fact that the department not having filed an appeal to the high court against the aforesaid ITAT order, thus, rendering finality to the said order, the CIT (A) was justified in doing indirectly what he could not do directly, i.e., shift the profit of the two units on estimation? 7. That the appellant craves leave to add, amend, alter, substitute, delete or withdraw any of the grounds of appeal on or before the date of disposal of the appeal. 2. The assessee company is engaged in the business activity of manufacturing and sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stock transferred to Kala Amb Unit 6,65,52,250 x 2,76,76,415/23,36,16,877 Further, it was also noticed from the working of overhead expenses that the following expenses were not considered in the working of overheads:- i) Director s remuneration of ₹ 6,54,550/- ii) Staff Welfare (Corporate) office expenses amounting to ₹ 79,505/- iii) Repair maintenance Charges (vehicles) ₹ 11,68,025/-. The working of overheads is computed as under:- a) Factory overheads of Faridabad Unit as furnished ₹ 24874837/- b) Other overheads as furnished ₹ 31081188/- c) Director s remuneration ₹ 654550/- d) Staff welfare ₹ 79505/- f) Repairs Maintenance charges (vehicles) ₹ 1168025/- Total (A) ₹ 57858105/- Raw materials Consumed in Faridabad (B) ₹ 147057380/- Total overheads percentage = A/B = 39.34% 9. The assessee has taken factory overhead @ 17% and other overhead @ 22% and added to the direct material cost to work out the total material cost as against the total overhead of 39.34% as worked out above. The price of the material transferred by the assessee has been undervalued and is revalued as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to his order to show that the assessee has been claiming higher profit in the exempted unit and thereby the Ld. CIT (A) has enhanced the addition to a sum of ₹ 95,00,347/- ignoring the ITAT decision in the case of assessee for earlier years and by making his own calculations. It is against these findings of Ld. CIT (A) the assessee is aggrieved, hence, in appeal. 4. After narrating the facts, it was vehemently pleaded by Ld. AR that so as it relates to adjustment of profit made on account of excise duty relating to unfinished goods transferred by the assessee from its Faridabad unit to Kala Amb unit, the Assessing Officer in his remand report has accepted that such adjustment was not warranted and Ld. CIT (A) has also deleted the same and, therefore, the question remains only regarding other adjustment made by the Assessing Officer, which are covered in favour of the assessee by the decision of ITAT for Assessment Year 2000-02 and 2001-02 a copy of which is placed at pages 96 to 131 of the paper book. It was pleaded that it is against all principles of judicial propriety that Ld. CIT (A) has ignored the said decision of ITAT and has proceeded to decide the issue on his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was concluded by the Assessing Officer that the goods transferred were net of excise and, in these circumstances, excise duty was added to the cost of goods. Ld. CIT (A) has also accepted such facts and, therefore, the main adjustment made by the Assessing Officer in respect of excise duty is no more the issue and the only issue remains before the Tribunal is regarding allocation of other expenses which have been taken into account by Ld. CIT (A) for holding that excess profit was shown by the assessee in its Kala Amb unit to claim higher deduction. It may be mentioned here that this issue is not a virgin issue as similar type of additions were being made by the department to the income of the assessee in earlier years also i.e., Assessment Year 2000- 2001 and 2001-02. The assessee has been following consistent method of transferring the semi finished goods from its Faridabad unit to Kala Amb unit and no discrepancy whatsoever has been found by the Assessing Officer in such computation except what is pointed out by the Assessing Officer in respect of excise duty, director s remuneration, staff welfare and repair and maintenance of vehicles. It may be pointed out here that simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of Himachal Pradesh unit and this amount were taken as profits of Faridabad unit. 3.2 In reply, the learned counsel explained that the assessee had transferred goods of the value of ₹ 1,25,46,983/- from Faridabad unit to Himachal Pradesh unit. It was explained to the A.O. that the products manufactured by the assessee are subject to levy of excise duty and, thus, the goods cannot leave Faridabad factory without proper documentation. Such documents were placed before the Assessing Officer. However, the Assessing Officer observed that semi-finished goods were transferred from Faridabad unit to Himachal Pradesh unit. Both the units are engaged in manufacture of identical products and thus, such transfer was undertaken to save sales-tax as lower rate is applicable in Himachal Pradesh. It was further mentioned that the value addition to the semi-finished goods made at Himachal Pradesh unit was ₹ 56,10,060/- although the unit incurred expenditure of ₹ 94,982/- only. Thus, the ratio of expenditure to net sales was 0.425% in Himachal Pradesh unit while such ratios were 11.30% and 9.20% in units I and II respectively at Faridabad. In the light of these facts, he c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o show that there was any market for sale of waste hot gas in India. There was also no evidence that such gas could be packaged or transported. Such gas, if not used, has to be discharged in the open atmosphere. It may be that a market may develop in future for such gas, but the price of such gas on the date of transfer in the open market was nil. Therefore, no adjustment could be made to the profits under the aforesaid provision. On the basis of this case, it was argued that the Assessing Officer did not bring any evidence on record to show that goods were transferred at less than fair market value. 3.3 We have considered the facts of the case and rival submissions. We find that the Assessing Officer has not stated his case properly in respect of impugned reduction of ₹ 7,27,311/- from the profits of Himachal Pradesh unit. The learned D.R. pointed out that this was on account of substantial value addition in spite of very little expenses incurred in the Himachal Pradesh unit. The Assessing Officer does make a mention of transfer of goods from Faridabad unit to Himachal Pradesh unit and ratio of manufacturing expenses to net sales in various units. He has also discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T in first line of para 3.3 on page 19. Te issue was regarding cost of transferred goods. The ITT mentioned that A.O. has not made out proper case in respect of reduction of Kala Amb (Himachal Pradesh unit) profit. This has been repeated in last sentence on page 19 which continued on next page. As about the issue of allocation of expenses of ₹ 12,06,853 again the issue was examined on specific facts in that year. The details of expenses (on page 22 of the order) were separately discussed by the ITAT and finally part of the expenses allocated was upheld on page 26. There is no dispute with the legal finding. However the issue needs examination of facts and if more and proper facts are gathered in a different year, obviously a different working of allocation of expenses can be justified. It may be mentioned that the issue under consideration is not a pure legal issue which, once decided by a higher judicial forum cannot be deviated by lower authorities. This is an issue of facts and actually only of mathematical working of correct working of Kala Amb unit. The relevant facts i.e., quantum ratios of expenses, their specific purpose etc. are different indifferent years hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of CIT(A). However, ld. CIT(A) did not give much weight to such submission of the assessee and he observed that there were certain other expenses just like annual maintenance charges, research and development facilities etc. which were not taken into account while computing the income and these expenses were debited only to Faridabad unit. Ld. CIT(A) has arrived at a conclusion that exceptionally higher profit was shown by the assessee in Kala Amb unit just to claim higher deduction. He observed that exact calculation could be made only if verification of all vouchers is carried out may be in some special audit and in absence of availability of such details i.e. expenses on certain activities like for AMC, R D etc. are not separately identified, an estimate is required to be made. It is observed by him that the effect of making estimate of expenses under all heads which are to be allocated to Kala Amb unit will have the ultimate effect of reducing the profit of that unit. It is in this manner ld. CIT(A) has proceeded to estimate the profit and it is observed by him that the net profit which has been shown by the assessee in respect of Kala Amb unit @ 15.97% as against net prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry relief was given by the ITAT vide its order dated 19th October, 2007, the department has not filed any appeal against this issue and thus, the order of the Tribunal has become final. This has so been specifically stated in ground no. 5. We do not appreciate the manner in which ld. CIT(A) has deviated from the earlier findings given by appellate authority in assessee s own case. The issue is same. Deviating from earlier years is not in the interest of justice as per well-established principles of law. Decision of higher appellate authority is binding on CIT(A) as well. Ld. CIT(A) has not made out any case to justify himself for deviating with the earlier decision in the case of assessee by his predecessor as well as by this Tribunal. We have already reproduced the relevant portion of order of ITAT vide which such issue was decided in favour of assessee. We have no reason to differ with the such findings of ITAT in assessee s own case. Therefore, there is no justification in the order of CIT(A) vide which the impugned enhancement has been made. The same is deleted. 11. In the result, the appeal filed by the assessee is allowed. 12. The order pronounced in the open court on 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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