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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI PAVAN KUMAR GADALE
Per Rajesh Kumar, Accountant Member:
The above titled appeals have been preferred by the Revenue against the order dated 30.05.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09, 2009-10, 2010- 11, 2011-12, 2012-13, 2013-14 & 2014-15.
The facts in brief are that the assessee filed the return of income on 30.09.2008 declaring total income of Rs.16,88,64,927/-. The case of the assessee was selected under scrutiny and assessment was framed under section 143(3) vide order dated 10.12.2010 assessing the total income at Rs.22,42,03,520/-. Thereafter, the case of the assessee was 2 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. reopened under section 147 of the Act by issuing notice under section 148 of the Act after recording reason to believe that income of assessee has escaped assessment. A survey action under section 133A of the Act was conducted on the various business premises at various places on 02.01.2015 by DDIT (Inv.), Unit-2(1), Mumbai and the said reopening of the case as stated above was done on the basis of survey conducted as stated above. During the course of survey the a physical inventory of plants and machineries of two manufacturing units namely Pantnagar Unit 1 & 2 was taken and it was found that value of per-used plant and machinery was more than 20% of the total value of plant and machinery and consequently the assessment was re-opened u/s 147 of the Act. Similar discrepancies were also found in respect of Pantnagar Unit 2 where the plant and machinery was found short. The unit at Pantnagar Unit No.1 was started in A.Y. 2007-08 and Pantnagar Unit No.2 was started in A.Y. 2009-10. The assesse claimed the deduction under section 80IB/80IC of the Act which was allowed in the first year of operation in the assessment framed under section 143(3) of the Act. In this brief backround the case of the assessee is being adjudicated ground wise in the following paras and first we will adjudicate .AY.2008-09.
The various grounds raised
in 1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the assessee's failure to explain with documentary evidences the discrepancies found at premises and that in Audit Report Form 10CCB in form of excess machinery of Rs.1,93,23,298/- and depreciation claim of it (of Rs.2,10,48,677/-). Further, Ld.CIT(A) ignored the admissions of the Assessee's
3 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. Directors & employee made vide sworn statements recorded u/s. 133A of the Income Tax Act, 1961, which are vital documents." "2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in granting relief to the assessee company by allowing profit rate of 12% of the purchases made from the bogus entities, as the suppressed profit element embedded in such purchases, instead of disallowing the entire bogus purchases as done by the A.O"
3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in granting relief after the judgment of N K Proteins Vs DCIT dated 16.01.2017 in which the Supreme Court has held that entire undisclosed income generated out of bogus transaction deserved to be added to the total income. Hence, the entire bogus purchases should be disallowed and added to the total income of the assessee." "4. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in granting relief to the assessee in respect of disallowance of Rs.9,97,57,577/- u/s.80IB and addition of claim of various expenses in view of the crucial & incriminating evidences unearthed & gathered and the modus operandi detected during the course of survey proceedings and also the admission made by the 2 Directors and employee, vide sworn statement 133A of the Act after being confronted with the evidences gathered. 5. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the claim of various expenses and deductions, deduction of Rs.9,97,57,577/- u/s.80IB without appreciating the facts that assessee company had violated the conditions specified in Section 80IB of the Act, in respect of these Units." "The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the A.O. be restored."
The issue raised in ground No.1 is against the order of Ld. CIT(A) in allowing the depreciation of Rs.2,10,48,677/- which was not available physically at the unit no. 1 and also deleting the addition in respect of unexplained excess machinery of Rs.1,93,23,298/- found at the unit no.2 vis a vis form 10CCB which could not be explained by the assessee.
The facts in brief are that during the course of survey, the survey team found excess machinery of Rs.1,93,23,298/- at the assessee’s business premises upon physical stock taking of plant and machinery and the assessee was accordingly asked to explain as to why the same should not be added to the income of the assessee which was replied by the assessee by submitting
4 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. that during the course of survey, the survey team found some discrepancies in the value of machinery at the premises of the assessee on Pantnagar Unit No.1 & Pantnagar Unit No.2 vis a vis the value of plant and machinery reported in form 10CCB. The assessee submitted that the value of plant & machinery was correctly reported in form 10CCB and is as per the audited books accounts and the discrepancy might be arising because of non consideration of expenses which have been capitalized in the Panth Nagar Unit No.1. The AO rejected the explanation of the assessee as not tenable as the discrepancy was not explained with documentary evidences. According to the AO, the value as taken during the survey by the survey team was confronted not only to the manger but also to the director of the respondent company. Accordingly, the AO treated the same as unexplained investment and added the same under section 69 of the Act. Similarly, the AO noted that during the course of survey proceedings, some discrepancies by way of short plant & machinery at Panth Nagar Unit No.1 to the tune of Rs.6,01,39,077/- vis a vis value as appearing in form 10CCB on which the AO disallowed depreciation to the tune of Rs. 2,10,48,677/-. The details of discrepancies are extracted as under for the sake of ready reference:
Pantnagar A.Y. Total value of Total value of Difference machinery as machinery per 10CCB found at the reports filed by time of survey the assessee (after allowing Rs. 20% depreciation) Rs. Unit-1 2008-09 8,64,16,518 2,62,77,441 6,01,39,077 Unit-2 2008-09 NIL 1,93,23,298 Excess
5 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. 6. According to the AO, the value of plant & machinery was inflated by the assessee and thus claimed excess depreciation thereon amounting to Rs.2,10,48,677/- and added the same to the income of the assessee in the assessment framed under section 143(3) read with section 147 of the Act vide order dated 30.03.2016.
In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by deleting the unexplained investment of Rs.1,93,23,298/- and disallowance of depreciation of Rs.2,10,48,677/- by observing and holding as under: “Ground No.2.
I have gone through the facts of the case and the submission made by the appellant in this regard. I find merit in appellant's contention that the AO has not provided any basis for the valuation of machinery done by him during the course of survey proceedings. Further, I am also inclined to agree with the AR that it is not possible to value machinery physically found at premises of appellant in 2008 during a survey conducted in 2015. The appellant had recorded it's plant and machinery based on the audited figures of it's books of accounts and the detailed break up of fixed assets were also filed by it in the form of Tax audit reports. The AO has not doubted the genuineness of the books of accounts of the appellant and he has not rejected the books of accounts by passing an order u/s. 145 of the Act. Further, he has also not doubted the quantitative details of the plant and machinery. The books of accounts of assessee were impounded by the department during course of survey proceedings wherein details of purchase of plant and machinery alongwith detail of parties and payment thereof were available. In my opinion, the AO has not taken any efforts to examine the authenticity of the same and has not even rejected the books of accounts of the assessee. Further, reliance placed by the AO on the statement of the director, I am inclined to agree with the submission of the appellant that there are serious lacunas in the statement and the same is not backed up by any corroborative evidence. It is a well decided judicial principle that no addition can be made by the AO merely on basis of a statement, in the absence of any corroborative evidence to substantiate the same. Hence, the reliance on the statement is misplaced. In such circumstances, I find it erroneous to doubt the valuation of plant and machinery, that too without any basis whatsoever. Hence, the addition made by the AO on this ground is hereby deleted and this ground of appeal of the appellant is hereby allowed. Ground No.3. I have gone through the facts of the case and the submission made by the appellant in this regard. I find merit in appellant's contention that the AO has not provided any basis for the valuation of machinery done by him during the course of survey
6 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. proceedings. Further, I am also inclined to agree with the AR that it is not possible to value machinery physically found at premises of appellant in 2008 during a survey conducted in 2015. The appellant had recorded it's plant and machinery based on the audited figures of it's books of accounts and the detailed break up of fixed assets were also filed by it in the form of Tax audit reports. The AO has not doubted the genuineness of the books of accounts of the appellant and he has not rejected the books of accounts by passing an order u/s. 145 of the Act. Further, he has also not doubted the quantitative details of the plant and machinery. The books of accounts of assessee were impounded by the department during course of survey proceedings wherein details of purchase of plant and machinery alongwith detail of parties and payment thereof were available. In my opinion, the AO has not taken any efforts to examine the authenticity of the same and has not even rejected the books of accounts of the assessee. Further, reliance placed by the AO on the statement of the director, I am inclined to agree with the submission of the appellant that there are serious lacunas in the statement and the same is not backed up by any corroborative evidence. It is a well decided judicial principle that no addition can be made by the AO merely on basis of a statement, in the absence of any corroborative evidence to substantiate the same. Hence, the reliance on the statement is misplaced. In such circumstances, I find it erroneous to doubt the valuation of plant and machinery, that too without any ba^is whatsoever. Hence, the addition made by the AO on this ground is/hereby deleted and this ground of appeal of the appellant is hereby allowed.”
The Ld. D.R. submitted before the Bench that the Ld. CIT(A) allowed the depreciation and deleted the unexplained investment in the plant & machinery without appreciating the facts in correct perspective specially when glaring discrepancies were found during the course of survey action on the business premises of the assessee at various places especially Pantnagar Unit 1 & 2. As regards the findings of the survey team during the course of survey on Panth Nagar Unit No.1 & Panth Nagar Unit No.2, the Ld. D.R. while referring to the audit report in form 10CCB submitted that a difference of Rs.6,01,39,077/- was found between the value of plant & machinery as per form 10CCB and total value of plant & machinery found at the time of survey upon physical inventory being taken. The Ld. D.R. submitted that in A.Y. 2008-09 the total value of plant and machinery as per form 10CCB report was Rs.8,64,16,518/- whereas the total plant & machinery found on physical taking at 7 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. the time of survey (WDV after allowing depreciation @ 20%) was Rs.2,62,77,441/- resulting into excess plant & machinery on which the assessee has claimed depreciation of Rs.2,10,48,677/-. The Ld. D.R. submitted that practically the machinery was not operational at the sight of Pantnagar Unit No.1 and therefore assessee has claimed excess depreciation which was rightly disallowed by the AO. Similarly, in respect of Pantnagar Unit No.2 the total plant & machinery as per form 10CCB was reported as nil whereas the total value of plant & machinery found physically after allowing 20% of depreciation was Rs.1,93,23,298/- meaning thereby that excess machinery was found physically at Pantnagar Unit No.2 which was also could not be explained by the manager in-charge of the plant as well as director of the respondent assessee company when confronted by the survey team and therefore rightly added as unexplained explanation. The Ld. D.R. submitted that these discrepancies were found when plant & machinery at these two units was physical taken with reference to bills and vouchers as produced by the assessee before the survey team as the facilitated by the assessee staff. Therefore the findings of Ld. CIT(A) is obviously wrong and against the facts on record that there are no corroborative evidences. The Ld. D.R. also contended that Ld. CIT(A) has observed that the machinery was installed approximately seven years prior to the date of survey when these units were commissioned and therefore it is not practically possible to count the machinery exactly as some machinery was fully depreciated, some sold and some even written off. The Ld. D.R. also objected to the findings of Ld. CIT(A) that AO has not doubted the genuineness of books of 8 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. accounts as no rejection has been made of the books of accounts under section 145(3) of the Act. He also rebutted the finding of Ld. CIT(A) on the issues of lack of corroborative evidences and excessive reliance on statements recorded during survey. Under these circumstances the Ld. D.R. prayed that the order of Ld. CIT(A) may be set aside and AO may be restored.
The Ld. A.R., on the other hand, strongly objected and opposed the arguments of the Ld. D.R. by submitting that both these units at Pantnagar Unit No.1 & 2 were commissioned in A.Y. 2007-08 and 2009-10 respectively. The Ld. A.R. while relying heavily on the order of Ld. CIT(A) submitted that the books of accounts of the assessee were regularly audited and reports in form 10CCB were filed wherever the claim under section 80IC/section 80IB were made. The Ld. A.R. ,referring to para No.6 of the assessment order, submitted that unit No.1 was commissioned in A.Y. 2008-09 and there was no discrepancy of excess depreciation as noted by the AO in para 6. The Ld. A.R. submitted that there is bound to be some difference in the value of machinery as per form 10CCB report and machinery found at the time of survey which is written down value of the plant & machinery after adding the additions and deleting the sales/written off machinery beside reducing the transfer to other units. The Ld. A.R. referred to page No.46 & 47 of the paper book giving the yearwise details of machinery such as opening balance, addition/deletion, depreciation claimed, additional depreciation and closing WDV. The Ld. Counsel submitted that the survey team has failed to consider all these factors/reasons due to which there was difference between the value of plant & machinery as per form 10CCB and value as 9 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. found at the time of survey (after allowing 20% depreciation). The Ld. A.R. also submitted that Ld. CIT(A) has taken into account all these facts and also the reasoning given by the assessee to explain the amount of difference which was in fact not there at all. The Ld. A.R. submitted that it is not possible to compare the plant & machinery which was commissioned in the assessment year 2008-09 when the unit was commissioned and put to use that too by taking a physical inventory in 2015 at the time of survey. Therefore the disallowance of depreciation on so called excess/inflated plant & machinery was rightly deleted by the Ld. CIT(A) for the want of corroborative evidences being brought on record by the AO. Similarly, the Ld. A.R. in respect of Pantnagar Unit No.2 submitted that assessee has not claimed any deduction under section 80IC/section 80IB of the Act and therefore total value of plant & machinery as per form 10CCB was reported as nil whereas the total value of plant & machinery as found at the time of survey was calculated at Rs.1,93,23,298/- and describing the same as excess plant & machinery which according to the AO is excess and unexplained. The Ld. A.R. described the reasoning and finding as very ridiculous and fallacious as the plant No 2 was functional and how there can be no plant & machinery when the survey was conducted. The Ld. A.R. submitted that the AO has failed to appreciate the issue in right perspective. The Ld. CIT(A), on the other hand, after taking into account the contentions of the assessee rightly deleted the addition as being based on wrong facts and notions of the AO. The Ld. A.R. therefore prayed that ground No.1 of the Revenue’s appeal may kindly be dismissed.
10 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd.
We have heard the rival contentions of both the parties and perused the material on record. We find that the addition made by the AO on account of excess claim of depreciation of Rs.2,10,48,677/- on the inflated plant & machinery of Rs.6,01,39,077/- as found by the survey team the detail whereof is given in para 6 of the assessment order. We note that in this case in respect of unit No.1 the total value of plant & machinery as per form 10CCB was Rs.8,64,16,518/- whereas total value of machinery taken at the time of survey was Rs.2,62,77,441/- after providing depreciation of 20% which has resulted into this difference. We have also examined the yearwise details of plant & machinery filed by the assessee along with details of addition, deletion, depreciation, additional depreciation and net WDV yearwise and also the findings of the order of Ld. CIT(A) that no corroborative evidences were brought on records by the AO to support these additions, appear to be convincing and plausible. We do agree with the contentions of the Ld. A.R. that the unit No.1 at Pantnagar which was commissioned in A.Y. 2008-09 ,the total value of machinery reported therein and found at the time of survey that too in 2015 after approximately seven years can not match with value reported in form 10CCB. Considering all these facts ,we earnestly hold that the addition was rightly deleted by Ld. CIT(A). Similarly, in respect of unit No.2 the machinery as per form 10CCB was found as nil whereas physical inventory during survey showed value of machinery of Rs.1,93,23,298/- which was treated as unexplained by the AO. We find reasoning in the contentions of the assessee that form 10CCB is filed in respect of those units for which the profit is claimed under section 80IC/section 80IB of the Act and not the 11 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. other units where no such claim was made. In unit No.2 the assessee has not claimed any deduction under section 80IC/section 80IB and therefore value of machinery was reported as nil in Form 10CCB. However, the unit was functional and operational and there was plant & machinery. So upon the physical inventory being taken by the survey team, the plant & machinery was bound to be there which was used in the manufacturing process of the unit. The Ld. CIT(A) has given a correct findings and passed reasoned order by deleting the addition by holding that the assessee has not doubted the genuineness of the books of accounts or rejected the books of accounts under section 145(3) of the Act. The Ld. CIT(A) also recorded that purported statements recorded during the course of survey which were not backed up by any corroborative evidences. In view of these facts, we are inclined to dismiss the ground No.1 by upholding the order of Ld. CIT(A).
The ground No.2 & 3 raised by the Revenue are in respect of partly deleting the addition to the extent of 88% by Ld. CIT(A) thereby sustaining 12% of the bogus purchases as made by the AO on account of purchases being non genuine and mere accommodation entries.
During the course of survey action it was found that the assessee has taken accommodation entries from the below mentioned parties. The assessee has taken accommodation entries from following parties. The party mentioned at serial no. 1 belonged to Shri Pravin Jain group. Shri Pravin Jain and his group is in the business of giving bogus accommodation bills as revealed during search action us/ 132 of the I.T. Act on Shri
12 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. Pravin Jain and other related parties. The other parties from S.no. 2 to 4 are declared and listed as bogus hawala parties in the Sales Tax website. The details of bogus purchases by the respondent assesse are as under:
Sr.no. Name of the concern F.Y. 2007-08 1 M/s. Ostwal Trading India Pvt. Ltd (Pravin Rs. 35,59,629/- Jain) 2 M/s. Shreeji Enterprises Rs. 4,99,653/- 3 M/s. Shreeji Sales Rs. 32,729/- 4 M/s. Balaji Enterprisess — Rs. 2,93,917/- Total Rs. 43,85,928/-
The director of the respondent company Shri Anil Jain in the statement recorded at the time of survey on 03.01.2015 offered the said purchases of Rs.43,85,928/- as income in the hands of the respondent assessee. Even in the post survey proceedings, the statement of Bharat Vagheria, Director Finance of the company was recorded on 20.01.2015 in which he agreed for the disallowance of the said purchases. During the course of assessment proceedings, the AO called upon the assessee to produce the purchase bills, invoices, delivery challans, goods receipt notes and transport challans etc. to prove the genuineness of the purchases. The assessee was also asked to produce the parties failing which to show cause as to why these purchases should not be treated as sham expenditure and added to the income of the assessee. In compliance , the assessee furnished copies of ledger accounts, invoices, bank statements etc. in support of its claim. The assessee submitted
13 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. before the AO that these purchases were genuine and not bogus as the assesse actually received the materials purchased and made the payments through banking channels. The AO also issued notices under section 133(6) of the Act which were returned unserved. Finally, the AO treated the purchases as bogus and added the entire amount to the income of the assessee.
In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by relying on the decision of Hon’ble Gujarat High Court in the case of CIT Vs Simit P. Sheth(2013)356ITR451(Guj) and CIT Vs Bholanath Palyfab Ltd. (2013)355ITR290(Guj) and came to the conclusion that undoubtedly the purchases were bogus but the entire purchases can not be added to the income of the assesse. The ld CIT(A) concluded on the basis of above decisions that only the profit element could be added and accordingly directed the AO to apply profit rate of 12% thereby partly allowing the appeal of the assesse on this issue.
After hearing the rival parties and perusing the material on record, we find that in the statements recorded during the course of survey Shri Anil Jain, director and Mr. Bharat Vargheria , Director, Finance of the said company offered the said purchases as additional income in the hands of the assessee, however, this was not offered in the return of income on the ground that the said purchases were not bogus and in fact represented the actual purchases made from these parties. The Ld. D.R. strongly argued before us that this is a case of manufacturing company and therefore the rate of GP can not be 14 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. applied as this can be done where goods were purchased and sold in the normal course of business of trading. Therefore, the order of Ld. CIT(A) is wrong whereas the Ld. A.R., on the other hand, strongly defended the order of Ld. CIT(A) as the same is a reasoned order passed after following the decision of Hon’ble Gujarat High Court in the case of Simit P. Sheth (supra). After considering all these facts and circumstances, we are of the opinion that Ld. CIT(A) has rightly directed the AO to add a profit margin on the said bogus purchases which could not be proved by the assessee before the AO as the addition of entire purchases would lead to unrealistic and impracticable profits in the hands of the assessee. We do not find nay merit in the contention of the DR that profit rate can be applied to a trading company and not manufacturing company. Moreover, the assessee is a very big company who is filed return of income of Rs.16,88,64,927/- and to book bogus purchases of such a small quantum seems to be not correct. The assessee has purchased the goods which were paid by account payee cheque and supported by necessary bills vouchers, deliver challans etc. We note that the AO has not brought any evidence on record to back the statements given during the course of survey as the statements in itself have no evidentiary value unless other corroborating evidences are brought on record. Therefore, we are inclined to uphold the order of Ld. CIT(A) on this ground by dismissing the ground No.2 & 3 of the Revenue.
The issue raised in ground No.4 & 5 is against the allowance of deduction by Ld. CIT(A) which was rejected by the AO on the ground that assessee is not fulfilled the condition as envisaged in section 80IB/section 80IC of the Act.
The facts in brief are that during the course of survey on the Pantnagar Unit No.1 it was found by the survey team that the preconditions as envisaged under section 80IB/section 80IC of the Act were not satisfied. During the course of survey on 02.01.2015 a physical inventory of plant & machinery installed at the unit was taken and it was found that there were inter unit purchases/transfers pre-used plant & machinery in the unit No.1 which accounted for more than 20% of the total value of plant & machinery. According to survey team the plant & machinery found at the time of survey after allowing depreciation of 20% was Rs.2,62,77,441/- whereas the total value of pre-used interunit transferred machinery after depreciation was Rs.1,61,84,487/- and thus the pre-used machinery accounted for 61.59% of the total value of machinery in Pantnagar Unit No.1 as given by the AO in para 5.1 of the assessment order.
The AO also noted that during the course of survey the issue of contravention of explanation to section 80IB(2)(iii)(c) of the Act was confronted to Shri Anil Jain, Director who in his statement recorded dated 03.01.2015 admitted that assessee company has transferred plant & machinery from other units to another units and the value of pre used plant & machinery in Pantnagar Unit No.1 & 2 was more than 20% of the total value of plant & machinery in those units. The AO noted that Shri Anil Jain in his sworn statement has agreed for withdrawal of deduction under section 80IB of the Act with regard to Pantnagar Unit No.1. Finally the AO issued show cause notice to the assessee during the course of assessment proceedings as to 16 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. why the deduction under section 80IB of the Act in respect of Pantnagar Unit No.1 of Rs.9,97,57,557/- should not be rejected. The assessee replied to the said show cause notice by submitting that deduction claimed under section 80IB/section 80IC of the Act in respect of Pantnagar Unit No.1 can not be disallowed as the value of pre-used machinery is less than 20% of the total machinery. The assessee also submitted the list of plant & machinery purchased by the assessee from various parties for Pantnagar Unit No.1 for the instant year and explained that the total WDV of machinery purchased was amounting to Rs.8,64,16,517/- in Pantnagar Unit No.1 whereas the used machinery was nil. The assessee submitted the copies of bills of purchases in respect of machinery purchased and contended that there was no violation of provisions of 80IB/80IC of the Act and therefore, the assessee is eligible for deduction under section 80IB/section 80IC of the Act. On the statement of Shri Anil Jain, director of the company, the the ld AR submitted that he has agreed to withdraw the deduction under section 80IB/section 80IC as per the rules and regulations of the Act. Since the assessee has submitted the bills and vouchers pertaining to plant & machinery and also submitted that pre-used plant & machinery was nil, therefore, assessee is eligible for deduction under section 80IB/80IC of the Act. However, the AO rejected the contentions and submissions of the assessee by observing that assessee did not fulfill the conditions as envisaged under section 80IB/section 80IC of the Act and consequently rejected the claim of the assesse amounting to Rs. 9,97,57,577/-.
17 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd.
In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: “Ground No.5.& 6 As can be seen from the tables submitted by the appellant, the total inter unit transfers of pre used plant anbTrnachinery was less than 20%. The AO failed to bring any material on record to prove that the assessee was not eligible to claim the benefits of deduction u/s. 80IC of the Act. He has failed to point out any defects in the details filed with him by the assessee. He has merely relied on a statement recorded u/s. 133(A) of the Act which itself was not incriminating in the first place. Thus, in view of the facts of the case, I hold that the AO has erred in disallowing the deduction u/s. 80IC of the Act. Hence, the addition made by the AO on this ground is hereby deleted and the appeal on this ground is allowed.
In view of the above mentioned Para, I hold that since the facts of the case are identical to the assessment year 2012-13, I hereby delete the addition made in the hands of the appellant.”
After hearing the rival contentions of both the parties and perusing the material on record, we find that the first year of claim and allowance of deduction under section 80IB/section 80IC of the Act was A.Y. 2007-08. The claim of deduction was allowed by the AO under section 80IB/section 80IC of the Act in the first year of operation in the assessment as framed under section 143(3) of the Act, a copy of which is filed in the paper book. The undisputed facts are that the claim of deduction in the first year of operation i.e A.Y. 2007-08 in respect of Pantnagar Unit No.1 has not been disturbed by the Revenue whereas the deduction in the subsequent years including A.Y. 2008-09 was rejected on the basis of survey conducted on the various units of the assessee including Pantnagar Unit No.1 in which the survey team recorded a finding that the value of old and pre used plant & machinery which was transferred from various units was more than 20% of the total value of plant & machinery and therefore assessee is not eligible for the deduction under section 80IB/section 80IC. After hearing both the parties and perusing the material on record, we find
18 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. that the AO has not brought anything on record to corroborate that statement as recorded during the course of survey whereas the assessee has filed all purchase bills, total value of plant & machinery and also the fact that there was no pre used plant & machinery transferred from other units to Pantnagar Unit No.1 and therefore there is a merit in the contention of the assessee that the conditions as envisaged by section 80IB/section 80IC are duly satisfied and there is no violation of the same. We do agree with the finding of the AO that Shri Anil Jain during the course of survey has agreed to withdraw his claim but as submitted during the course of assessment that withdrawal was made subject to the rules and regulations and terms & conditions as contained in Income Tax Act. We note that Ld. CIT(A) after taking into consideration of all these facts and evidences has allowed the claim of the assessee under section 80IB/section 80IC whereas the AO has relied heavily on the finding of survey team without giving any finding on the various evidences filed during the course of assessment proceedings by the assessee. We also find merit in the contention of the assessee that once the claim of deduction under section 80IB/section 80IC is allowed in financial year the same can not be disturbed in the subsequent year unless there is change in facts. Under these circumstances, we do not find any merit in the ground No.4 & 5 filed by the Revenue and therefore the same are dismissed by upholding the order of Ld. CIT(A).
In the result, the appeal of the Revenue is dismissed.
The issues raised in these appeal i.e. to 6211/Mum/2017 are identical to ones as decided by us in . Similarly issues raised in ITA No. 6212 and 6213/Mum/2017 are also same as decided by us in ITA No. 6207/Mum/2017 A.Y.2008-09 except issue of deletion of disallowance u/s 14A of the Act which is decided separately. Therefore our decision in ITA No. 6207/Mum/2017 A.Y.2008-09 would ,mutatis mutandis, apply to these as well.
2.3. The issue raised in ground No.6 in A.Y. 2013-14 is against the deletion of disallowance of Rs.2,89,83,197/- by Ld. CIT(A) as made by the AO under section 14A of the Act read with Rule 8D of IT Rules.
The facts in brief are that the AO during the course of assessment proceedings that assessee has made investments in shares and securities. During the year the assesse received dividend on these investments and claimed the same as exempt without attributing any expenses to earning of such exempt income exempt income yielding securities. The AO invoked the provision of section 14A and computed the disallowance as prescribed under rule 8D of IT Rules at Rs.2,89,83,195/-.
In the appellate proceedings Ld. CIT(A) deleted the disallowance by observing and holding as under:
“6. I have gone through the facts of the case and the submission made by the assessee `in this regard. The AO, while applying the provisions of Section 14A has failed to appreciate that the assessee had made investments in various foreign and domestic subsidiary companies. The appellant has rightly contended that dividends
20 6208, 6209, 6210, 6211, 6212 & 6213/M/2017 M/s. Time Technoplast Ltd. earned from foreign companies are liable to tax in India as per provisions of Income Tax Act, 1961 and hence such investments cannot be covered by provisions of Section 14A of Income Tax Act. Further, it is also observed that the appellant’s own funds are more than the total investments in exempt assets. Once again, respectfully following the decision of the Hon’ble Jurisdictional Bombay HC in the case of HDFC Bank, I hereby hold that the addition on account of 14A r.w.r. 8D is bad in law and deserves to be deleted. This ground of appeal of the assessee is hereby allowed for statistical purposes.”
26. After hearing the rival contentions of both the parties and perusing the material on record, we find that the Ld. CIT(A) allowed the appeal of the assessee on the ground that assessee’s own funds were far more than the investments in share and securities. We note that assessee’s own funds in the current year are Rs.70,128.05 lakhs whereas the investments in the exempt income yielding security are Rs.9,063.06 lakhs. Thus the Ld. CIT(A) has rightly deleted the disallowance by following the decision of Jurisdictional High Court in the case of CIT vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom.). The Ld. CIT(A) also noted that assessee has made investments in various foreign companies that dividends whereof are taxable and therefore liable to be excluded while computing disallowance under section 14A read with rule 8D. In view of these facts, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground No.6 of the Revenue.
27. The issues raised in ground No.7 is against the order of Ld. CIT(A) deleting the addition of Rs.2,89,83,195/- as disallowed by the AO while computing the book profit under section 115JB. Since we have already decided the issue in favour of the assessee by upholding the order of Ld. CIT(A) and dismissing the ground raised by the Revenue, this issue being consequential and therefore ground No.7 is dismissed.
Appeal of the Revenue is dismissed.
The issue raised in ground No.6 & 7 in A.Y. 2014-15 is identical one as decided by us in ground No.6 & 7 in ITA No.6212/M/2017 A.Y. 2013-14. Therefore, our decision in ground No.6 & 7 in ITA No.6212/M/2017 A.Y. 2013-14, would mutatis mutandis apply to ground Nos.6 & 7 of this appeal as well. Accordingly, ground Nos.6 & 7 are dismissed.
In the result, all the appeals of the Revenue are dismissed.
Order pronounced in the open court on 08.10.2021.