Referred Sections: Section 80IC(3)(ii) & 80IC(2)(a)(ii) of the I.T. Act Section 131 /133(6) of the Income Tax Act, l961. Section 143(3) of the I.T. Act.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "B" : DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA.No.5950/Del./2015
Assessment Year 2010-2011
M/s. Vasundhara Flavours
The ACIT, Circle 59(1), (Presently known as Gopal
Consumer World), 339,
Room No.101, F-Block, vs Functional Industrial
Estate, Patparganj,
Vikas Bhawan, New Delhi New Delhi 110 092.
PAN AAHFV6205B
(Appellant) (Respondent)
For Revenue : Ms. Ashima Neb, Sr. D.R.
For Assessee : Ms. Rano Jain, Advocate
Date of Hearing : 03.12.2019
Date of Pronouncement : 05.12.2019
ORDER
PER BHAVNESH SAINI, J.M.
This appeal by Revenue has been directed against
the Order of the Ld. CIT(A)-10, New Delhi, Dated
02.06.2015, for the A.Y. 2010-2011, on the following revised
grounds of appeal :
2
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
1. "
2. On the facts and circumstances of the case, Ld.
CIT(A) has erred on facts by not appreciating that
plant and machinery relevant for production was
purchased between 24.11.2009 to 06.01.2010
whereas the assessee had claimed commencement
of business as in form 10CCB which is not
possible.
3. On the facts and circumstances of case, Ld. CIT(A)
had erred in accepting the additional evidences
furnished by the assessee including the evidences
of transporting plant and machinery from Delhi to
Baddi during the course of appellate proceedings
without giving any opportunity to the Assessing
Officer of being heard in this issue.
4. On the facts and circumstances of case, Ld. CIT(A)
has not appreciated the findings of the Assessing
Officer that the assessee did not produce a single
3
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
sample of finished goods or empty pack which
could prove (i) the name of manufacturer (ii) weight
& volume or production (iii) produce ingredients (iv)
date of manufacture of product or batch No. and (v)
chemical composition, which was pre-requisite for
such manufacturing activities.
5. On the facts and circumstances of case, Ld. C1T(A)
has erred in accepting the claim under section
80IC(2)(a)(ii) of assessee whereas the case is not
covered under this section since the assessee
during the assessment proceedings has claimed
that its unit is lactated at `Kasauli' whereas in
Form 10CCB it is evident that the unit is located at
Baddi, Distt. Solan. Thus there is discrepancy in
the claim of the assessee.
6. The appellant craves leave to add, allow or amend
any or all the ground of appeal before or during the
course of hearing of the appeal."
4
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
2. Briefly the facts of the case are that the assessee
firm has filed return of income declaring NIL income. The
assessee is engaged in business of "manufacturing of
Perfumery and Fragrances" at its production unit at
Burnwala, Baddi Distt, Solan (Himachal Pradesh). The A.O.
on perusal of the return of income found that assessee has
claimed deduction of Rs.3,71,26,467/- under section 80IC
of the Income Tax Act from the gross total income. In order
to ascertain the genuineness of the deduction claimed by
the assessee, the Profit & Loss Account, Balance Sheet and
Audit Report filed in Form 10CCB, along with relevant
books of accounts were examined by the A.O. in detail. The
A.O. on examination of details/books of accounts has made
certain observations against the assessee. The observations
made by the A.O. against the assessee were with respect to
incorrect claiming of deduction under section 80IC of the
I.T. Act by furnishing inconsistent information in Form
10CCB Audit Report. It is observed that scrutiny of the
audit report reveal that assessment year under appeal is the
initial year of commencement of business, wherein a claim
5
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
of deduction under section 80IC(3)(ii) & 80IC(2)(a)(ii) of the
I.T. Act has been made by the assessee, while
simultaneously a claim has been made that assessee
manufactures item in "Fourteenth Schedule" as evident
from Column 25(f) of Form 10CCB. However, prima facie, it
was seen that the business of the assessee, i.e.
"Manufacture of perfumery and fragrances" is not one of the
eligible businesses enlisted under the fourteenth schedule of
the I T. Act. It was further seen that the date of
commencement of business as per the Form 10CCB filed by
assessee is 02.11.2009, while examination of schedule of
fixed assets filed reveal that the Plant & Machinery for the
unit was purchased during the period 24.11.2009 to
06.01.2010. It was also seen that Generator was purchased
on 21.12.2009. Therefore, it is apparent that the
information furnished regarding commencement of business
in Form 10CCB is factually incorrect. The assessee,
therefore, required to justify the claim of deduction under
section 80IC of the I.T. Act, 1961, in the light of these facts.
The assessee, in response thereto, reiterated that claim by
6
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
reproducing the relevant portion of the section 80IC of I T.
Act 1961. It was further claimed that as per the provisions
of section 80IC any undertaking or enterprise should either
produce or manufacture articles which are not any article or
thing specified in Thirteenth Schedule or produce of
manufacture articles or things which are article or thing
specified in Fourteen Schedule. The assessee stated that it
has manufactured industrial perfumes and fragrances
which do not fall under any article or things specified in
Thirteen Schedule of the I.T. Act 1961. The assessee further
claimed that it is eligible to claim deduction under section
80IC(2)(a) of the I T. Act. The assessee further submitted
that while filing preparing Form 10CCB, the Chartered
Accountant inadvertently mentioned "Yes" against Para 25(f)
instead of "No" in Para 25(e) of Form 10CCB of the Income
tax Act, 1961. Affidavit of the Auditor was also filed to show
that it was an inadvertent mistake. The A.O, however, did
not accept the contention of assessee and noted that Audit
Report itself disentitle the assessee for making claim of
deduction under section 80IC of the I.T. Act. The A.O. noted
7
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
that Perfumes and Fragrances is not a business enlisted in
Schedule-XIV. Therefore, assessee's case is not even
covered under section 80IC(2)(a)(ii) of the I.T. Act, since
the assessee's business premises located at Buranwala,
Tehsil Baddi, District Solan is not covered under the
Industrial area notified vide Notification Dated 14.11.2003
[as amended by Notification dated 27.08.2008]. Therefore,
the claim of the assessee was also rejected on that count.
The assessee further filed detailed reply before A.O. to show
that the assessee firm has began manufacturing activities
from 06.12.2009 after acquisition of plant and machinery
required for manufacturing the products of the assessee
firm. The Chartered Accountant has mentioned 02.11.2009
as commencement of operation/activity which is the date of
execution of Partnership Deed. Therefore, the Chartered
Accountant has taken the same date of commencement of
operation/activity of the assessee firm. Confirmation of
Chartered Accountant was also filed. It was submitted that
assessee firm has began manufacturing of its product on
06.12.2009 in notified area of Himachal Pradesh. The A.O,
8
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
however, again did not accept the contention of assessee
because the assessee could not have manufactured its final
product since it had not purchased vital plant and
machinery before January, 2010.
2.1. The A.O. further examined the genuineness of the
plant and machinery installed and noted that destination as
per bills of plant and machinery are Baddi, Delhi and
assessee failed to furnish evidence as to how plant and
machinery have been installed at Baddi from Delhi. It was
also noted that it is practically impossible to achieve
turnover of Rs.14 crores in assessment year under appeal
which is the first year. It was also noted that generator was
purchased only on 21.12.2009. The assessee's claim
regarding electricity charges being paid by him is also not
correct since the electricity bill for that period are in the
name of M/s. Flakes n Flavours.
2.2. The A.O. further examined the genuineness of
actual manufacture of Perfumes and Fragrances. Assessee
submitted the detailed process of manufacturing which is
noted in the assessment order. The A.O. further found
9
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
certain discrepancies in the same and further noted that
assessee has insufficient material to carry out production as
claimed. The assessee does not have gas burner required for
production. Sale bills/invoices produced by assessee do not
mention brand name or chemical name of items being sold.
An Income Tax Inspector was deputed to examine the facts
and spot who was furnished his report Dated 27.02.2013 in
which it was submitted that the premises belong to M/s.
Gopal Group of Industries who is in the business of
Chewing Tobacco, Pan Chatni etc., and there is no
manufacturing of Perfumes and Fragrances. The A.O. also
noted that assessee was asked to produce an empty pack of
finished goods for verification. In response to the query,
assessee produced a pair of empty plastic jar fixed with
plain label showing the name of "Gopal Perfumery
Compound". The assessee failed to explain why it is
producing the product of Gopal Industries instead of
producing the product of M/s. Vasundhara Flavours i.e.,
assessee. The A.O. also noted that assessee failed to
produce empty pack of manufacturing goods as is claimed
10
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
in the audit report. The A.O. further noted that assessee has
made sales to three firms i.e., (i) H.M. Sales Corporation,
Delhi (ii) Aman Marketing and (iii) Radha Rani Impex, Delhi.
The A.O. noted that these companies belong to one Shri
Kusum Kumar Sethia who has filed income tax return in
Gauhati, who has close association with the assessee firm.
The statement of Shri Kusum Kumar Sethia was recorded in
which he has admitted to have given loan to the assessee
firm. It was also noted that in the firms of Shri Kusum
Kumar Sethia there are cash deposits in their bank
accounts and no evidence have been produced why such
cash have been deposited. The A.O. also noted that neither
the assessee nor the witness in the case of assessee
explained reason or produced the documentary evidences of
alleged unsecured loans, sales, advance given and
commission etc., paid. Further, statement of assessee is
noted in the assessment order in which assessee explained
that sale is being made to few parties through limited
Consignment Sale Agents [ "CSA" ] and Dealers for better
control of sales instead of numerous Dealers, Distributors.
11
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
It was further submitted that above firms are CSA of the
firm operating in Uttar Pradesh by Shri Kusum Kumar
Sethia who is filing income tax return in Gauhati because
he is working for gain at Gauhati also. The assessee further
explained that CSA is making cash sales as per trade
practice. The assessee was given further opportunity to
explain as to why deduction under section 80IC cannot be
denied. The assessee filed detailed reply to show that it is
engaged in genuine business activity and made a right claim
of deduction under section 80IC of the I.T. Act. The A.O.
further did not accept the contention of assessee and noted
that assessee has changed the name of firm M/s.
Vasundhara Flavours to M/s. Gopal Consumer World
during the pendency of the assessment proceedings without
intimating to the A.O. The A.O. on the basis of all these
facts and material on record, denied the claim of assessee
under section 80IC of the I.T. Act in a sum of
Rs.3,71,26,467/-. The crux of the findings of the A.O. are
reproduced as under :
12
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
"In view of the above facts and discussion, it is clearly
established that the assessee is ineligible for claim of
deduction U/s 80IC of the Income Tax Act, due to
following reasons, discussed elaborately in above
paragraphs :
1. Assessee does not fulfill fundamental criteria:-
(i) Neither the assessee's business premises is
located in the area notified by the CBDT vide
Notification No-S.O 1269(E) dated 04.11.2003
requisite for eligibility of deduction
U/s.80IC(2)(a)(ii) nor is it covered under
specified businesses enlisted in Schedule-XIV
to be eligible for deduction U/s80IC(b)(ii) of
the Income Tax Act.
(ii) Not produced/manufactured item/article as
claimed and also not produced any
evidence/sample in physical form of salable
manufactured goods.
(iii) The assessee could not prove its
distinguished entity at the registered office
13
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
and business address i.e. 240, Okhla
Industrial Estate Phase-III, New Delhi-110020
is also shared by its sister concern M/s Gopal
Industries. The manufacturing unit at Khasra
No. 117, Baddi Barotiwala Road, Village
Burnwala Distt. Solan (HP) is also shared by
M/s Gopal Industies, its sister concern.
2. No Product in name of "perfumes & fragrances"
produced:-
(i) The assessee not only failed in producing a
sample of its product i.e. "Perfumery &
Fragrances" with all necessary packing mode
but also failed in producing the
bills/vouchers of sales which can proves the
description of item sold and to whom it is
sold.
(ii) The assessee also failed to produce the
evidences of produced goods pack showing
the prescribed details on it under Consumer
Act and other Acts.
14
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
3. The unit at Baddi is not equipped with plant
& machinery to carry out production:-
(i) As per the assesee's note submitted vide its
letter dated 08/02/2013, there was basic
requirements of sufficient items of Plant &
Machinery (as discussed in Para "C"
examination of genuineness of actual
'Manufacture' of 'Perfumes & Fragrances'.)
and without the same production of salable
goods/items could have not taken place.
4. Definite evidence that Sales claimed by the
assessee are not genuine.
(i) As discussed above, the assessee did not
produce/manufacture "Perfumery &
Fragrances" and also failed to produce the
sample or evidence of produced goods, the
claim of the assessee in respect of sales is
bogus and without any documentary
15
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
evidences of sale bills/vouchers/name of the
parties to whom it is made.
Therefore, the claim of the assessee for
the deduction u/s 80IC of I.T. Act 1961 of
Rs.3,71,26,467/- is disallowed and the same
is added back to the income of the assessee."
3. The assessee challenged the addition before the
Ld. CIT(A). The detailed written submissions of the assessee
on each and every aspect noted by the A.O. were explained
before the Ld. CIT(A) to show that assessee is entitled for
deduction under section 80IC of the I.T. Act. It was also
highlighted that assessee falls in notified area of Himachal
Pradesh and assessee manufacture goods so as to entitle
the claim of deduction under section 80IC of the I.T. Act. It
was also highlighted that documentary evidences including
Excise Records and Others were produced before A.O. and
that all explanations were supported by documentary
evidences. No statement of Shri Kusum Kumar Sethia or
report of Inspector was provided to assessee for rebuttal. It
16
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
was submitted that assessee filed all details along with
replies. Therefore, no additional evidences have been filed.
The assessee submitted sufficient documentary evidences
before the A.O. i.e., bills of transportation for plant and
machinery from Delhi to Baddi and the plant and machinery
have been installed at Baddi for manufacturing purposes.
Further all other Forms in respect of movement of goods
were furnished. The assessee filed detailed explanation of
events occurred before the first clearance i.e., on
10.12.2009 made by assessee firm as under :
Date of Event Event / Activity Evidence
/ Activity
02.11.2009 Partnership Deed of Partnership Deed as
"Vasundhara Flavours" Annexure 2.
executed to carry on the
business in Himachal.
09.11.2009 Factory premises in Buranwala Lease Agreement as
(H.P.) was taken on lease vide Annexure 2.
lease deed dated 09.11.2009
13.11.2009 First purchase was made Copy of bill as
Annexure 5.
Central Sales Tax
Registration
19.11.2009 Registration with Department Certificate and HP
of Excise and Taxation, Value Added Tax
Himachal Sales Tax, Himachal Registration
Pradesh. Certificate issued by
the Department of
Excise and Taxation,
Himachal Pradesh as
Annexure 6.
17
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
20.11.2009 Purchase of 5/6 (five) Copy of Bills as
Electronic Scales Annexure-7.
Purchase bill of Packaging Copy of bills
24.11.2009 material from outside Annexure 8
suppliers directly delivered at
Buranwala, Baddi, Himachal
Pradesh.
Some purchase bill of Raw Copy of bills
26.11.2009 materials from outside Annexure 9
suppliers directly delivered at
Buranwala, Baddi, Himachal
Pradesh.
1 (one) S.S. Tank with Copy of bills as
26.11.2009 Fittings (Perfumery Tank) Annexure 10
Capacity 1000 Ltr.
2 (two) Nos. of Sintex Tank Copy of bills as
26.11.2009 (For Perfumery Mixing) Annexure 11
Capacity 2100 Ltr each
Declaration filed with Excise Duly acknowledged
02.12.2009 Department to claim copy of Letter
exemption under Notification submitted with
No.50/2003 Dated Excise Department
10.06.2003 as Annexure 12.
04.12.2009 Purchase of Hacop Motorised Copy of bill as
Barrel Pump Annexure 13
Purchase of 4/6 (four) Nos of Copy of bills as
05.12.2009 Sintex Tank (For Perfumery Annexure 14
Mixing) Capacity 2100 Ltrs
each.
05.12.2009 Purchase of 2 (two) nos. Copy of bills as
Monoblock Pumpset. Annexure 15.
Commencement of Stock Register of
06.12.2009 manufacturing of perfumery finished goods in
compound as WIP. Form-IV as per
Excise Rules as
Annexure-16.
First Transfer
Challan along with
10.12.2009 First Clearance of Final Excise and Taxation
Product from factory Department,
Himachal Pradesh
declaration Form
dated 10/12/2009
and GR of
transporter `The
18
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Nalagarh Truck
Operators' Union,
Nalagarh, HP' as
Annexure-2.
3.1. The assessee, therefore, highlighted that assessee
started all manufacturing activities proved through
documentary evidences. The assessee, therefore, claimed
that it is entitled for deduction under section 80IC of the I.T.
Act, 1961. The Ld. CIT(A) considering all documentary
evidences on record, allowed the deduction of claim of
assessee under section 80IC of the I.T. Act. The findings of
the Ld. CIT(A) in paras 6 to 8 of the appellate order are
reproduced as under :
"6. Findings on Ground of Appeal No.1 & 2 :
I have considered the grounds raised by the
appellant in the Appeal and the facts of the case. I have
also considered the assessment order, written
submission and oral arguments of Ld. A.R. of the
appellant along with paper book for proper disposal of
the appeal, which are placed on record.
19
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The appellant has raised grounds against the
disallowance of deduction of Rs.3,71,26,467/- claimed
under section 80-IC of the Income Tax Act, 1961 made
by AO only on the basis of conjectures and surmises and
also on various redundant grounds in violation of settled
law that beneficial legislation should have liberal
construction with a view to implementing the legislative
intent.
Now I deal with point-wise issues raised by the AO
in his order to reject the claim of deduction made by the
appellant under section 80-IC of the Income tax Act,
1961 and submission of the AR along with
documents/evidences on the same :
The AO alleged in the assessment order that
inconsistent information furnished in Form 10CCB.
The appellant has claimed deduction u/s 80-
IC(2)(a)(ii) & 80-IC(3)(ii) while, as per Form 10CCB filed
before the AO, on perusal of point no 25(f) of Form
20
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
10CCB, it revealed that the item manufactured fall in
the item enlisted in Fourteenth Schedule.
And, the commencement of business is 2nd
November, 2009 i.e. before installation of necessary
plant & machinery which has takes place 24th Nov.,
2009 to 6th Jan, 2010.
And, it is seen from registration accorded by
Excise Department vide Reg. no - 02030100434 for
business mentioned therein as "Manufacturing of
Industrial Perfumes & Flavoured Pan Chatni (Pan
Flavouring Material) while in Form 10CCB column No.
25(i)(c) it is mentioned as manufacturing of "Perfumes
& Fragrances".
And, the business premises of the assessee is not
located in the area of notified by the CBDT vide
Notification No.- S.O. 1296(E) dated 04.11.2003 and
also not produced the article mentioned in Schedule -
XIV requisite for eligibility of deduction u/s -
80IC(2)(a)(ii) of The Income Tax Act, 1961.
21
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The AR of the appellant contended that the
appellant has fulfilled and satisfied all the three
condition as laid down u/s.80IC of the Act, 1961 which
are as under :
1. The appellant firm has manufactured industrial
perfumes and fragrances, which does not fall
under any article or things specified in
Thirteenth Schedule of the Income Tax Act,
1961.
2. The appellant firm has started business on
02.11.2009 and begun manufacturing industrial
perfumes and fragrances on 06.12.2009.
3. Manufacturing unit of the appellant firm is
located at Khasra No. 117. Hudbust 201.
Buranwala, Baddi Barotiwala Road, PO
Barotiwala, Kanungo Circle Patta. Tehsil
Kasauli, District Solan, Himachal Pradesh which
is a notified industrial area as per the
notification No.S.O.1269(E) dated 04.11.2003
(as amended by Notification dated 27.08.2008).
22
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Hence, the profit on the product
manufactured by the appellant firm in the
notified area is eligible to claim deduction under
section 80-IC(2)(a)(ii) and 80-IC(3)(ii) of the
Income tax Act, 1961.
The AR further contended that unit of the
appellant at Buranwala is eligible under the
same Industrial Policy for availing exemptions
under provision of Central Government
levies/tax i.e. (1) Income Tax & (2) Excise Duty.
The notified area is common for the above two
exemptions. The Excise Duty exemption is being
allowed for the same unit of the assessee, but
surprisingly, the other exemption of Income Tax
is being denied by the AO.
The AR of the appellant has furnished
various documents / evidences in support of
manufacturing unit located in the notified
industrial area as per the notification No. S.O.
23
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
1269(E) dated 04.11.2003 (as amended by
Notification dated 27.08.2008) before the AO
during the course of assessment proceedings
which cannot be disregarded such as
Notification dated 04.11.2003 issued by
Ministry of Finance, Department of Revenue,
Central Board of Direct taxes. Lease Agreement
dated 09.11.2009 between M/s Flakes N
Flavours for plot bearing khasra No. 117. Baddi
- Barotiwala Road. Village Buranwala, Distt.
Solan, Himachal Pradesh along with copy of
patta or registry of land, Central %les Tax
Registration Certificate, HP Value added tax
registration certificate issued in the name of unit
Buranwala and Inspector report dated
26.12.2009 of Himachal Pradesh Fire Service
physically verified the unit of the appellant at
Buranwala. The same has been furnished
before the undersigned and have been duly
considered and placed on record.
24
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The AR contended that appellant has
manufactured Industrial Perfumes & fragrance,
not being an activity or article or thing specified
in Thirteenth Schedule of the Income Tax Act,
1961, however, in preparing Form 10CCB, the
Chartered Accountant inadvertently mention
"Yes" instead of "No" in Para 25(f) of Form
10CCB of the Income Tax Act, 1961. The AR
also furnished an Affidavit of the Auditor dated
22.03.2013 confirming the said fact before the
AO during the course of assessment
proceedings.
The AO further alleged that plea of figures in
Audit Report being mistakenly incorrect is only
an afterthought on the part of assessee, and
ought to be rejected and the assessee cannot
alter statutory statement / report as per his
whims at later stage claiming these vitals
discrepancies to be mere "clerical mistake".
25
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The AR contended in this respect that the AO
himself mentioned in the assessment order that
"Perfumes & Fragrances" is not a business
enlisted in Schedule - XIV, then how these
mistake can be after thought of the appellant.
The AR further contended that AO himself
satisfied that the article / thing produced by the
appellant is not listed in Schedule Thirteenth of
the Income Tax Act, 1961. The AR further
contended that to claim deduction under the
said section it is not compulsory to produce /
manufacture article / thing which is listed in
Schedule -Fourteenth as there is other provision
i.e. 80-IC(2)(b)(ii) of the Income Tax Act, 1961 for
the same. Hence both are separate provisions to
claim deduction under section 80-IC,
independent of each other and both cannot be
combined. The AR of the appellant also cited
judgment pronounced by jurisdictional Hon'ble
ITAT of Delhi bench in the case of Assistant
26
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Commissioner of Income Tax v Sobhagia
Clothing Co.
The AR further contended that mere
inadvertent mistake committed by a Chartered
Accountant should not be the basis for
disallowing deduction otherwise allowable to
the appellant as it is well settled law vide
plethora of judgments of the Hon'ble Supreme
Court and High Courts that beneficial
legislation should have liberal construction with
a view to implementing the legislative intent.
The AO has raised another objection in his
assessment order that the appellant has not
produced manufactured article/thing as
claimed and also not produced any
evidence/sample in physical form of salable
manufactured goods.
The AR contended in this respect that the
appellant has produced before the AO both
27
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
empty as well as filled packs of finished goods
vide its reply dated 22.03.2013. The AR of the
appellant in support of its claim of deduction
under section 80-IC of the Income Tax Act, 1961
has submitted replies time to time along with
relevant supporting evidences which clearly
established that the manufacturing activities
carried out at the manufacturing unit of the
appellant located in notified area of Himachal
Pradesh.
The AR further contended that the appellant
vide its reply dated 08.02.2013, 22.03.2013
and 26.03.2013 furnished various document in
support of manufacturing activities carried out
at manufacturing unit under the notified area
before the AO during the course of assessment
proceedings and also before the undersigned
such as Declaration filed with Excise
Department to claim exemption under
Notification No 50/2003 dated 10.06.2003
28
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
along with detail of Plant & Machinery installed
therein, Capacity of the Plant of the appellant,
detail and type of Raw Material used. Detail of
Packing Material etc. and duly acknowledged
copy of letter submitted with Excise department,
Return filed with Commissionerate of Central
Excise, Chandigarh in respect of finished goods
actually manufactured and moved out from the
manufacturing unit. Stock register of finished
goods maintained in Form - IV as per Excise
Rules in support of Commencement of
manufacturing of perfumery, Sales Tax
assessment order passed by Assessing
Authority. BBN, Baddi - I. Himachal Pradesh,
Sales Tax returns and Stock transfer Challans
of finished goods along with Declaration under
Form - XXVI - A issued by Excise and Taxation
Department. Himachal Pradesh and GRs of
Transporters and Month wise detail of salary &
wages paid to workers employees along with
29
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
their name & addresses, electricity bill for
consumption of electricity for the manufacturing
plant. The same has been furnished before the
undersigned and have been duly considered
and placed on record.
The AR further contended that the A.O.
himself acknowledged in the assessment order
that assessee produced pair of empty plastic
Jar with a label showing the name Gopal
Perfumery Compound, 505 and 435.
The AR further contended that all purchase
and sales made to and from manufacturing
undertaking at Buranwala, Himachal Pradesh
has to pass through the Himachal Pradesh
sales Tax Barrier and at the time of passing the
said Barrier, Sales Tax Declaration Form No. -
XXVI - A has to be issued which is ample proof
to support that the Raw Material had actually
been brought to the undertaking of the
30
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
appellant at Buranwala, Himachal Pradesh and
that the Finished Goods have moved out from
undertaking of the appellant at Buranwala,
Himachal Pradesh. The AR further contended
that all these Forms are generated online by the
respective departments at respective places.
The AO also raised his objection in the
assessment order that it has not proved its
distinguished entity at the registered office and
business address i.e. 240, Okhla Industrial
Estate Phase - III, New Delhi - 110020 and the
manufacturing unit at Khasra No. 117, Baddi,
Barotiwala Road, Village Burnwala Distt. Solan
(HP) is also shared by its sister concern M/s
Gopal Industries.
The AR contended that as regard premises
at Khasra No. 117, Baddi Barotiwala Road,
Village Burnwala Distt. Solan (HP) and at 240,
Okhla Industrial Estate Phase - III, New Delhi -
31
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
110020 taken on lease by the appellant
company from M/s Flakes N Flavours and Sh.
Sri Gopal Gupta respectively, the same have
never been shared or taken on lease by M/s
Gopal Industries during the financial year
under consideration.
The AR further contended that M/s Gopal
Industries does not have any manufacturing
and registered / business office at both the
alleged premises during the financial year
under consideration while it has business
address 296 and 467, F.I.E. Patparganj
Industrial Area Delhi - 92 which is corroborated
from the Invoices / bills raised by M/s Gopal
Industries during the financial year under
consideration and submitted before the AO
during the course of assessment proceedings.
The AR further contended that the AO during
the course of assessment proceedings also
32
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
asked the appellant to explain its business
relation with M/s Gopal Consumer World. In
response, of which the appellant submitted
before the AO that the appellant firm M/s
Vasundhara Flavours vide Addendum dated
26th September, 2012 to its Partnership Deed
dated 2nd November, 2009 changed the name of
the firm from "Vasundhara Flavours" to "Gopal
Consumer World". Apart from the change of
name, everything else remains the same. The
change in the name of the firm is also reflected
in its PAN number, which remained same with
the changed name.
The AR further contended that doubt raised
by the AO in his order on change of appellant
firm's name from M/s Vasundhara Flavours to
M/s Gopal Consumer World is a question on
liberty of business houses. It is pertinent to note
that decision in respect of running of business
lies solely with the owner, partners or director
33
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
of that business and no one can interfere in the
decision taken by the key person of that
business because he is the only person who
knows need of its business and how to
accomplish the same. It is well settled law that
the assessing officer should assess the income
of the assessee as per the provisions of the
Income tax Act, 196 and should not step into
shoes of the assessee and tell how to do
business and cited judicial precedent rendered
by Hon'ble Supreme Court and High Court in
support of its contention.
The AR submitted various documents in
support of its contention that the manufacturing
unit is never been shared by M/s Gopal
Industries during the course of assessment
proceedings such as Lease Agreement dated
09.11.2009 between M/s Flakes N Flavourz for
plot bearing khasra No. 117. Baddi -
Barotiwala Road, Village Buranwala, Distt.
34
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Solan, Himachal Pradesh along with cop}' of
patta or registry of land. Addendum to
Partnership Deed dated 26.09.2012 along with
copies of PAN issued to the appellant in the
name of M/s Vasundhara Flavours as well as
Gopal Consumer World which are duly
considered and placed on record.
The AO has raised two objections in his
assessment order, (i) the assessee not only
failed in producing sample of its product i.e.
Perfumer & Fragrance" with all necessary
packing mode but also failed in producing bills
vouchers of sales which can proves the
description of item sold and to whom sold (ii)
The assessee also failed to produce the
evidences of produced goods pack showing the
prescribed details on it as prescribed under
Consumer Protection Act and other Acts.
35
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The AR contended that appellant has
produced before the A.O. sample of empty pack
as well as filled packed of finished goods
bearing label which contained the information
of the product as per the norms of the Industry
such as name of the product, weight & volume,
date of manufacturing, expiry date,
manufacturing company details etc. and the
same is acknowledged by the A.O. in the
assessment order that assessee has produced
a pair of empty plastic Jar fixed with plain label
showing the name "Gopal Perfumery
Compound", 505 and 435.
The AR further contended that the appellant
has produced the sale and purchase
bills/invoices which contained all the detail of
article / thing sold during the financial year
such as name of item sold, quantity, value etc.
The AO further contended that the appellant
has manufactured Industrial Perfumery and
36
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Fragrance hence, Consumer Protection Act is
not applicable to the appellant. The AO
contended that as per section 2(d) of Consumer
Protection Act, 1986, a consumer is a person
who buys or hires goods or services for a
consideration, i.e. free services are not covered
under the said Act and most importantly, it
excludes a person who buys or hires goods or
services for commercial purpose / activity.
The AO further alleged in his order that unit
at Baddi is not equipped with plant & machinery
to carry out production as per the assessee's
note submitted vide its letter dated 08/02/2013,
there was basic requirements of sufficient items
of plant & machinery and without the same
production of saleable goods/items could have
not taken place.
The AR contended in this respect that note
on manufacturing process submitted by the
37
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
appellant before the AO is not exhaustive and just
gives the broad outline of process flow of
manufacturing, hence does not contain detailed
process along with detail of material such as
quantity, composition and plant & machinery used
at different stage of production, so on the basis of
said note, allegation in respect of shortage of plant
& machinery is bad in law while the appellant has
submitted detail of plant & machinery installed at
its manufacturing unit along with invoices / bills /
Transfer challans of fixed assets purchased along
with Form XXVI-A declaration under Excise and
Taxation Department. Himachal Pradesh in
respect of goods / material / capital goods which
is an ample proof of transporting capital goods to
Buranwala unit, Himachal Pradesh.
The A.O. also alleged that that pivotal "plant
& machinery" has been purchased in Delhi and no
evidence of its transportation to manufacturing
unit at Buranwala has been furnished by the
38
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
appellant, hence, no vital plant & machinery
installed at manufacturing unit during the year.
The AR submitted that on perusal of the
invoices and other evidences furnished before the
A.O, it is quite evident that the appellant has
purchased plant and machinery against Form "C",
hence the same cannot be considered as
purchases made in Delhi. The AR also furnished
the detail in support of its contention which
reproduced as under :
Item Purchased Quantity Date Purchases Place of Destination
against Purchase as per bill
Form "C"
Plant and Machinery
Motorised 1 24.11.09 Yes Pune Baddi
Barrel Pump
Monoblock 2 12.11.09 Yes Delhi Baddi
Pumpset
Stacker Loose 1 21.01.10 Yes Faridabad, 167, FIE
Haryana. Patparganj
Delhi.
S.S. Tank with 1 24.11.09 Yes Faridabad, 167, FIE
Fittings 1000 Haryana. Patparganj
Ltr Delhi.
Sintex 2100 Ltr 2 24.11.09 Yes Delhi. 167, FIE
Patparganj
Delhi.
Sintex 2100 Ltr 2 30.11.09 Yes Delhi. 167, FIE
Patparganj
Delhi.
Sintex 2100 Ltr 2 30.11.09 Yes Delhi. Baddi.
Storage Tank 1 04.01.10 Yes Delhi. Baddi.
Storage Tank 3 06.01.10 Yes Delhi. Baddi.
39
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
GENERATOR
D.G. Set 1 21.12.09 Yes Delhi. Baddi.
Generator 1 21.12.09 Yes Delhi. Baddi.
WEIGHT & MEASUREMENT
Electronic 6 23.11.09 Yes Faridabad, Baddi.
weighing scale Haryana.
(3,6,30,60,150
KG capacity)
Electronic 1 01.02.10 Yes Faridabad, 167, FIE
weighing scale Haryana. Patparganj
(300 KG to 600 Delhi.
KG capacity)
The AR, stated on perusal of the above
table, it is quite evident that the purchases of
all the pivotal plant and machinery are inter-
state inter-state purchases against Form "C"
which cannot be issued by Sales Tax
Department until and unless purchased goods
reaches to the state issuing Form "C". The AR
further contended that the appellant has
produced sales tax declaration Form XXVI-A
which is issued at the time of entry of the
goods in the state of Himachal Pradesh,
without which Form "C" cannot be issued and
it is ample proof of transporting capital goods
40
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
to the manufacturing unit at Buranwala,
Himachal Pradesh.
The AR also contended that the appellant in
support of its contention that it has installed
sufficient plant and machinery has submitted,
the detail of event and activity taken place
before the first clearance (i.e., on 10/12/2009)
of finished goods from the manufacturing unit.
The AR also furnished the details of events
occurred before the first clearance (i.e., on
10.12.2009) made by the assessee firm which
are reproduced as under :
Date of Event / Activity Evidence
Event /
Activity
02.11.2009 Partnership Deed of Partnership Deed as
"Vasundhara Flavours" Annexure-2.
executed to carry on the
business in Himachal Pradesh
09.11.2009 Factory premises in Buranwala Lease agreement as
(H.P) was taken on lease vide Annexure 2.
lease deed dated 09.11.2009.
13.11.2009 First purchase was made. Copy of bill as
Annexure 5.
Registration with Department of Central Sales Tax
19.11.2009 Excise and Taxation, Himachal Registration
Pradesh Sales Tax, Himachal Certificate and HP
Pradesh. Value Added Tax
Registration
41
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Certificate issued by
Department of Excise
and Taxation,
Himachal Pradesh as
Annexure 6.
20.11.2009 Purchase of 5/6 (five) Electronic Copy of bills as
Scales. Annexure -7
24.11.2009 Purchase bill of Packaging Copy of bills as
material from outside suppliers Annexure 8
directly delivered at Buranwala,
Baddi, Himachal Pradesh.
26.11.2009 Some purchase bill of Raw Copy of bills as
materials from outside suppliers Annexure 9
directly delivered at Buranwala,
Baddi, Himachal Pradesh.
26.11.2009 1 (one) S.S. Tank with Fittings Copy of bills as
(Perfumery Tank) Capacity Annexure 10
1000 Ltr.
26.11.2009 2 (two) Nos. of Sintex Tank (For Copy of bills as
Perfumery Mixing) Capacity Annexure 11
2100 Ltr each
02.12.2009 Declaration filed with Excise Duly acknowledged
Department to claim exemption copy of Letter
under Notification No.50/2003 submitted with Excise
Dated 10.06.2003 Department as
Annexure 12.
04.12.2009 Purchase of Hacop Motorised Copy of bills as
Barrel Pump Annexure 13
05.12.2009 Purchase of 4/6 (four) Nos of Copy of bills as
Sintex Tank (For Perfumery Annexure 14
Mixing) Capacity 2100 Ltrs
each.
05.12.2009 Purchase of 2 (two) nos. Copy of bills as
Monoblock Pumpset. Annexure 15.
06.12.2009 Commencement of Stock Register of
manufacturing of perfumery finished goods in
compound as WIP. Form-IV as per Excise
Rules as Annexure-
16.
10.12.2009 First Clearance of Final Product First Transfer Challan
from factory along with Excise and
Taxation Department,
Himachal Pradesh
declaration Form dated
10/12/2009 and GR of
transporter `The
Nalagarh Truck
Operators' Union,
Nalagarh, HP' as
Annexure-2.
42
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The AR further contended that plant &
machinery purchased after commencement of
production i.e. 06/12/2009 was storage tanks,
aluminum sheets and M.S. frame etc. which were
used for increasing the production capacity of the
undertaking and other miscellaneous purpose in
response to the allegation made by the AO in the
assessment order that some vital item like Storage
tank" and "stacker" were purchased in the month
of January, 2010 only, therefore, commercial
production could not have started prior to
January, 2010.
The AR contended that as regard to no
Monoblock Pump is purchased before starting
manufacturing process, the appellant has two
Monoblock Pumps instead of one and also having
one Barrel pump.
43
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The AO also pointed out that the appellant
does not have Gas Burner, the appellant has
purchased Gas Burner before the commencement
of production which is not capitalized. The AR
also contended in respect of allegation made by
the AO that mixing tanks fitted with nozzle to be
connected to Monoblock Pump, since there in only
one Monoblock pump, at one time only one set of
chemicals in one tank could be processed while
the appellant firm is having two Monoblock
Pumpsets which were used to circulate the
mixture of various ingredients in the tank in order
to get a homogenized mixture.
The AR of the appellant in support of its
contention has submitted various documents /
evidences which were submitted before the AO
during the course of assessment proceedings as
well as before the undersigned which have been
duly considered and placed on record.
44
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The A.O. has also alleged in the assessment
order that at very beginning stage of production
with this minimal plant & machinery it is
impossible to produce such huge production and
to make the sale of Rs. 14.73 crore in just three
month of the very first year of production in
response of which the AR of the appellant
submitted that product manufactured by the
appellant firm is a high value Industrial Perfumes.
The product being an Industrial product, sold in
bulk which has been corroborated from the
details/documents submitted by the appellant
during the course of assessment proceedings
such as month-wise detail of quantity
manufactured and dispatched, during the months
December 2009 to March 2010. The relevant
portion is reproduced as under :
Month Quantity Quantity Value of
Manufactured Dispatched (in Dispatched (in
(in kgs) Kgs) lacs)
December, 2009 33,477 26,664 402.60
January, 2010 29,171 25,878 373.25
February, 2010 39,067 35,143 544.83
March, 2010 38,404 36,134 545.12
45
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
The average value per Kg during the
aforesaid four months of production during the
Financial Year 2009-10 comes out to around
Rs.1,507/- per Kg.
The AR also contended that the appellant
also justified its plant and machinery with the
production during the year and submitted that the
basic manufacturing activity is more or less of
manual in nature and the appellant firm by 5th
December, 2009 was having 7 (seven) tanks, out
of which, 6 (six) Tanks are having the capacity of
2000 - 2100 Ltrs each and 1 (one) with capacity
of 1000 Ltr., for use during the manufacturing.
The total capacity available for production by 5th
December, 2009 of Perfumery Compound being
around 13,600 Ltrs per day and the same got
increased with the additions of tanks thereafter to
21,000 Ltrs during the financial year under
consideration. Hence, there was more than
46
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
sufficient capacity to manufacture Perfumery
compound and fair enough capacity to take care
of the monthly production.
The AR further contended that the appellant
has installed sufficient plant & machinery and is
having production capacity of Perfumery compound
around 13,600 Ltrs per day (i.e. 408000 ltrs per
month), however the appellant has merely
produced / manufactured 33,400 kg in the month
of December, 2009, 29,171 kg in January, 2010,
39,067 kg in February, 2010 and 38,404 kg in
March, 2010. Hence, doubt raised by the AO in his
impugned order is baseless without considering the
facts of the appellant's case
The A.O. further alleged in the assessment
order that the sales claimed by the appellant are
not genuine and bogus as the assessee did not
produce/manufacture "Perfumery & Fragrance"
and also failed to produce evidence of goods, so
47
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
produced and also failed to produce documentary
evidence i.e. bills / vouchers and name of the
parties to whom sale of goods has been so
produced has been made.
The AR contended that the appellant has
submitted various details / documents such as
party-wise sales, party-wise purchase, details of
sundry creditors and sundry debtors along with
their address before the AO during the course of
assessment proceedings. The appellant also
produced sales bills / voucher etc. along with Sales
Tax declaration Form No. XXVI-A, as these are
online forms which are generated at the time of
goods passing the Sales Tax Barrier at Himachal
Pradesh, and GR of the transporter before the AO
for the purpose of Verification. The appellant has
also produced books of account, original bank
statements and vouchers along with supporting
evidences for the verification of the learned
assessing officer during the course of assessment
48
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
proceedings. The appellant had also submitted
copy of assessment order of Himachal VAT
department, Himachal Pradesh assessing
sales/stock transfers for the relevant financial
year. However, the AO failed to appreciate the
same and asked the appellant to justify huge sales
made to few correlated parties and alleged that
enquiries reveals that both H.M. sales Corporation
and Aman Marketing are proprietorship concern
owned by one Kusum Sethia who files his ITR in
Guwahati on the basis of some alleged information
/ documents gathered by him conducting some
private enquiry and issuing summon under section
131 / 133(6) of the Income Tax Act, 1961 during
the course of assessment proceedings.
The AR contended that appellant submitted
during the course of assessment proceedings that
substantial part of sales being made to few parties
concerned. The product manufactured is- an
Industrial Product which has sold through limited
49
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Consignment Sale Agents (CSA) and dealers for
better control of sales and not through numerous
dealers, distributors etc as in case of
consumer/retail product. The appellant further
submitted that sales made to M/s H.M. Sales
Corporation and M/s. Aman Marketing are
concerned, M/s H.M. Sales Corporation is the
dealer of the firm, operating in Delhi and M/s Aftan
Marketing is the CSA of the firm operating in Uttar
Pradesh, although both are owned by Mr. Kusum
Sethia. The Appellant also furnished copy of
Consignor Sale Agreement, copies of Ledger
account of the sales made to the parties etc.
The AR further contended that the appellant
vide its reply dated 26.03.2013 submitted three
concern i.e. M/s Naman Sales Corporation, Delhi,
M/s H. M. Sales Corporation, Delhi and M/s Aman
Marketing, Kanpur are the three different
proprietorship Shri Kusum Sethia. The appellant
further submitted that as regard to M/s Naman
50
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Sales corporation appellant has taken interest
bearing unsecured loan in the normal course of
business much before the first sale of the appellant
firm, hence question of re-routing or
accommodation entry does not arise at all. The
appellant further submitted that as regard to M/s
H.M. Sales Corporation, the appellant has made
sales of Rs.4,54,81,348/- and M/s H.M. Sales
Corporation has been making payment in its
running account during the course of business. In
the said running account at the time of year
closing, there has been a credit balance of
Rs.1,00,00,000/-. The appellant further submitted
that appellant has made sales to M/s Aman
Marketing of Rs.71,62,000/- during the financial
year under consideration and the amount as
shown is not the commission, but the sale proceeds
received by the appellant.
The AR further contended that the AO has
relied on some report of an Inspector who has
51
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
visited the alleged manufacturing unit of the
appellant at Buranwala, Himachal Pradesh and
various information / material gathered by him
during the course of assessment proceedings and
alleged in his order on the basis of said report
that the said premises belongs to Gopal Group of
Industries who is in the business of chewing
Tobacco, Pan Chatni etc. and after making local
enquiries from the neighborhood it is revealed that
at this premises there was never any type of
manufacturing of Perfumery & Fragrance, Rather
products under brand name `Gopal Zarda" were
being Produced and transported from this
premises.
The AR further contended that in the light of
detail submission along with documentary
evidences the AO erred in alleging in his
assessment order that the appellant is re-routing
his own unaccounted cash without examining and
correlating the detail and explanations filed by the
52
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
appellant before him during the course of
assessment proceedings and without providing
copies of the statement recorded, documents and
information collected by issuing summon / notice
issued under section 131 /133(6) of the Income
Tax Act, l961.
The AR of the appellant in support of its
contention has submitted various documents /
evidences vide its various replies such as Detail of
party-wise sale & purchase, Confirmation from
Debtors and Creditors along with Name, Address,
PAN, Nature, and outstanding Balance against
them, Consignment Sale Agreement of all
Consignment Agents of M/s Vasundhara Flavours,
Copy of Income tax Return along with Computation
of income of Mr. Kusum Kumar Sethia, Sales Tax
assessment order passed by Assessing Authority,
BBN, Baddi -1, Himachal Pradesh, Sales Tax
returns and Stock transfer Challans of finished
goods along with Declaration under Form XXVI
53
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
A issued by Excise and Taxation Department,
Himachal Pradesh and GR of Transporter and Bill
wise detail of Excise and CST/VAT paid on input
purchased which have been duly considered and
placed on record.
The AR of the appellant further contended in
this respect that AO has neither provided copy of
report of the inspector, information and material
gathered by him during the course of assessment
proceedings which were relied upon by himself nor
confronted the same to the appellant on the basis
of which adverse view against the appellant was
taken which is in violation of principle of natural
justice and bad in law. The AR further contended
that the appellant has made specific request by
filing its letter dated 03.10.2013 before the AO to
provide copy of the inspector report along with
statement of Kusum Kumar Sethia along with
material / evidences collected u/s 131 / 133(6) of
54
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
I T Act, 1956 but the AO failed to provide copy of
the same till date.
The AR further contended that it is well
settled law that Income tax Officer can collect
materials to facilitate assessment even by private
enquiry. But if he desires to use the material
collected, the assessee must be informed of the
material and must be given an opportunity to
explain it. Non - confrontation of evidence is
against the principles of natural justice, hence
assessment order is liable to be quashed. The AR
also relied on the various judicial precedents. The
AO has not built up the case.
7. In my considered view, the appellant
has furnished and also produced relevant
documentary evidence to justify its claim of
deduction under section 80-IC of the Income tax
Act, 1961 before the AO but the same is rejected
merely on the basis of an inadvertent mistake
55
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
committed by the Tax Auditor in Form 10CCB
without considering ^he legal position that
deduction / benefit allowable to the appellant
should not be denied as beneficial legislation
should have liberal construction with a view to
implementing the intent. On perusal of the
documentary evidences. Notification issued by the
CBDT (Notification No S.O. 1269(E) dated
04.11.2003 as amended by Notification dated
27.08.2008) and Thirteenth Schedule of the
Income tax Act, 1961, it is quite evident that the
manufacturing unit is situated under the notified
area and manufactured article / thing not being
an article / thing not being an article/thing
mentioned in the negative list of Thirteenth
Schedule, hence the appellant has fulfilled the
requisite conditions of section 80-IC of the Act
eligible to claim deduction in the said section.
Here it is relevant to mention that as regard
to various allegations (point wise) mentioned in the
56
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
assessment order and detailed submission along
with evidences furnished before the undersigned,
dealt in supra, the claim of the appellant cannot be
rejected merely on the basis of inadvertent
mistake committed by the tax auditor in Form
10CCB.
On a careful perusal of the finding of the A.O.
in assessment order and submission along with
documents/evidences furnished by the AR in
support of its contention as summarized above
and also taking into ratio of the decision relied
upon by the Appellant, in my considered view the
disallowance of claim of deduction u/s 80-IC of
the Act without appreciating the documentary
evidences such as sales tax and excise records,
declaration in Form XXVI - A generated online by
the sales tax and excise department when the
goods moved in or out from the barrier of Himachal
Pradesh, The report of inspector of fire station of
Himachal Pradesh who physically verified the unit
57
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
and the Central Excise department has granted
exemption in the case of manufacturing unit
situated at the notified area as per notification
issued both for the purpose of Central Excise and
Income tax. it is seen that the manufacturing unit
of the appellant is situated in the notified area and
purchases or raw material and inputs w ere
brought in, manufacturing activities were carried
out and sales were effected from the said
manufacturing unit of the appellant situated at
notified area of Himachal Pradesh. The AO in this
case has undertaken an effort to somehow
establish his hypothesis to reject the claim of the
appellant and has not appreciated facts correctly.
Considering the entire facts & circumstance
and ratio of the case laws cited by the appellant
which were squarely applicable in the case of the
appellant, claim of 80IC deserves to be allowed.
8. As a result, the appeal is allowed."
58
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
4. The Ld. D.R. relied upon the Order of the A.O.
and referred to various pages of the impugned order and
submitted that assessee did not file evidence of
transportation of the goods from Delhi to Baddi before the
A.O. The Ld. CIT(A) did not give an opportunity to the A.O.
to make rebuttal to the additional evidences. There is a
difference in name of purchase material. The factory
premises of the assessee is not situated in a notified area.
The Income Tax Inspector reported that assessee did not
manufacture the Perfumes and Fragrances at the premises.
The destination of purchases of the plant and machinery is
at Delhi only. There is no gas burner and sales are made to
the Associated Enterprises only, which creates doubt. There
are cash deposits in the account of the purchaser. The Ld.
D.R. referred to the conclusion of the A.O. as reproduced
above to show that A.O. has rightly made the addition in the
matter. The Ld. D.R, therefore, submitted that matter may
be remanded to the Ld. CIT(A) for passing the order afresh,
by giving opportunity of being heard to the A.O.
59
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
5. On the other hand, Learned Counsel for the
Assessee reiterated the submissions made before the
authorities below and submitted that all observations of the
A.O. have been met by the assessee before the Ld. CIT(A)
through documentary evidences. Learned Counsel for the
Assessee submitted that Ld. CIT(A) decided the appeal on
several points. However, the Department is challenging the
Order of the Ld. CIT(A) only on few grounds. Therefore,
appeal of Revenue is not maintainable and is liable to be
dismissed. The assessee explained the date of
commencement of business because partnership deed was
executed on 02.11.2009. Learned Counsel for the Assessee
submitted that Head of the Office is situated in Delhi, so,
bills were prepared in the name of assessee at Delhi
address. All the documentary evidences along with plant
and machinery were sent to Baddi unit. The purchases were
made against `C' Form only. The assessee filed various
replies before A.O. which were supported by documentary
evidences which have not been denied by the authorities
below. So no additional evidences were filed before Ld.
60
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
CIT(A). The assessee manufactures goods as per Law, for
which, assessee is entitled for deduction under section 80IC
of the I.T. Act. Learned Counsel for the Assessee submitted
that A.O. has denied the benefit of deduction under section
80IC on number of reasons i.e.,
(i) The unit not being situated in a notified area.
(ii) The business not being covered under specified
business for deduction under section 80IC.
(iii) There was a report of the Inspector stating that
the items produced at the factory premises were
different from the ones claimed by the assessee.
(iv) Non physical verification of products by
producing empty and filled packages.
(v) As claimed by the assessee, the factory was not
equipped with proper plant and machinery at the
start of production.
(vi) The sales made by the assessee were to a related
concern and were sham.
61
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
5.1. The assessee challenged all these issues before
the Ld. CIT(A) raising specific grounds against each. The Ld.
CIT(A) reproduced all the submissions of the assessee along
with material and has given finding in favour of the
assessee. The Revenue has raised only few grounds, but, did
not challenge the finding of fact recorded by the Ld. CIT(A)
even in the revised grounds of appeal. Therefore, appeal of
the Revenue may be dismissed. Learned Counsel for the
Assessee submitted that even in the case of lessor at the
same premises in question, the Department has granted
deduction under section 80IC of the I.T. Act, vide Order
Dated 27.11.2008 under section 143(3) of the I.T. Act. Copy
of the Order is placed on record. Learned Counsel for the
Assessee also filed copy of Notification Dated 27.08.2008 to
show that factory unit of the assessee falls within the
notified area. Therefore, assessee is entitled for deduction
under section 80IC of the I.T. Act. Learned Counsel for the
Assessee also placed on record the assessment order in the
case of assessee (Now M/s. Gopal Consumer World) under
section 143(3) Dated 31.03.2016, in which, the A.O. has
62
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
discussed the issue of deduction under section 80IC and
noted that the Ld. CIT(A) has allowed the claim of assessee
for A.Y. 2010-2011, in which, appeal of the Department is
pending before the Tribunal and similarly in A.Y. 2012-
2013, claim of assessee has been denied by A.O, in which,
assessee is in appeal. The A.O. examined the issue of
deduction under section 80IC on the same facts in detail
and after calling report from the Income Tax Officer, Baddi,
which is reproduced in this Order, the claim of assessee for
deduction under section 80IC for Perfumery Compound,
Pan and Chatni have not been disallowed. Further for items
mentioned at Sl.Nos. 4 to 7 which were not manufactured at
Baddi unit, the claim of assessee has been denied under
section 80IC in sum of Rs.90,50,123/- only. Learned
Counsel for the Assessee, therefore, submitted that since
claim of assessee under section 80IC have been allowed in
A.Y. 2013-2014 in respect of same items for Rs.20.25 crores
by the Ld. CIT(A), therefore, claim of assessee has been
rightly allowed by the Ld. CIT(A).
63
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
6. We have considered the rival submissions and
perused the material available on record.
7. Ground No.1 is general in nature and do not call
for any adjudication.
8. On Ground No.2, the Department's case is that
plant and machinery were purchased between 24.11.2009
to 06.11.2010 whereas the assessee claimed
commencement of business on 02.11.2009 in Form 10CCB.
The assessee has, however, explained that on 02.11.2009
partnership deed was executed and thereafter, further
developments were made by purchasing the plant and
machinery and manufacturing activities have been started,
the details of which, were noted above. Therefore, there is
no illegality in the explanation of assessee that it has
started its business activity by executing the partnership
deed. Further, this fact has been clarified by the Chartered
Accountant before the A.O.
9. On Ground No.3, Revenue challenged that
assessee furnished additional evidences before Ld. CIT(A)
64
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
and no opportunity have been given to the A.O. Learned
Counsel for the Assessee has referred to submissions made
before Ld. CIT(A), in which, several replies have been
referred, which were filed before A.O, which are supported
by documentary evidences. Therefore, no additional
evidences have been filed before the Ld. CIT(A) so as to give
further opportunity to the A.O. to rebut the claim of
assessee. Further the impugned order shows that despite
notifying the hearing of the appeal, none appeared from the
side of the Department before the Ld. CIT(A). Therefore, no
fault could be found with the Ld. CIT(A) in deciding the
issue in favour of the assessee.
10. On Ground No.4, the claim of the Revenue was
that assessee did not furnish the documentary evidences as
well as sample of finished goods with empty pack etc.,
Learned Counsel for the Assessee referred to page-34 of the
Order of the Ld. CIT(A) in which reply of the assessee Dated
22.03.2013 have been referred to, in which the assessee
explained that it is producing the empty pack as well as
filed part of manufacturing goods before A.O. during
65
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
assessment proceedings for the purpose of verification. It
was clarified that A.O. has not raised any suspicion or
doubt on the genuineness of the said sample of
manufactured goods and also failed to confront his
dissatisfaction over the claim of assessee of manufacturing
all the above items in notified area. The assessee also
claimed that it has submitted the goods, produce of his
Industrial Perfumes and Fragrances, which is for the
purpose of industrial use only before A.O. and the A.O. did
not doubt the same. The assessee further referred to
Consumer Production Act in the reply to show that there is
no violation on the part of the assessee. The Assessee's
Counsel has referred to every portion of the reply filed before
the Ld. CIT(A) to show that all the items i.e., plant and
machinery purchased at Delhi were transported to Baddi
which were supported by documentary evidences. Since
assessee has Registered Office at Delhi and bills are issued
at Delhi address for plant and machinery, there is no
illegality in the same. The assessee has filed detailed
explanation to show that it has began manufacturing
66
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
activity in notified area. Therefore, it was entitled for
deduction under section 80IC of the I.T. Act, 1961.
11. On Ground No.5, Revenue challenged that unit of
the assessee is not covered by the notified area. The
assessee has filed copy of the relevant Notification to prove
that its unit falls in notified area of Himachal Pradesh so as
to entitle for deduction under section 80IC of the I.T. Act.
The same submissions were already made before the Ld.
CIT(A), which have not been disputed by the Ld. D.R.
through any genuine material on record.
12. Considering the totality of the facts and
circumstances in the light of finding of fact recorded by the
Ld. CIT(A), it is clear that assessee produced all
documentary evidences before the authorities below to show
that it has began to manufacture items of Perfumes and
Fragrances in the notified area. The same were supported
by documentary evidences i.e., Excise Records and Sales
Tax assessment etc., The assessee furnished GRs of
transportation and bills etc., and C-Form to show that
assessee entered into genuine business activity. Further it
67
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
may be noted that though A.O. has raised so many
objections at assessment stage and Ld. CIT(A) dealt with
each and every item, but, Department has filed revised
ground only on few items. Thus, the genuineness of the
activities of manufacturing conducted by the assessee at
Baddi have not been challenged by the Revenue in the
revised grounds of appeal. These facts clearly show that
assessee has entered into genuine business activities. Even
if sales are made to three parties only, there is nothing
wrong against the assessee. It may also be noted here that
in respect of some items of manufacture, A.O. has allowed
the claim of assessee in scrutiny assessment under section
143(3) for A.Y. 2013-2014 vide Order Dated 31.03.2016
after calling a report from Income Tax Officer, Baddi.
Therefore, rule of consistency apply to the facts of the case
and Department cannot take a different stand against the
assessee in different assessment years. It may also be noted
here that it has not been clarified, whether report of the
Inspector or statement of Shri Kusum Kumar Sethia was
supplied to the assessee for rebuttal ? Therefore, such
68
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
report and statement cannot be read in evidence against the
assessee. It may also be noted here that it is a Departmental
Appeal and no documentary evidences have been produced
before us to contradict or rebut the finding of fact recorded
by the Ld. CIT(A) in favour of the assessee. Therefore, in the
absence of any evidence against the assessee on record, it is
difficult to take a contrary view as have been taken by the
Ld. CIT(A). In view of the above discussion, we do not find
any infirmity in the finding of fact recorded by the Ld. CIT(A)
to allow the claim of assessee for deduction under section
80IC of the I.T. Act. We, therefore, confirm the Order of the
Ld. CIT(A) and dismiss the appeal of the Revenue.
13. In the result, appeal of the Revenue dismissed.
Order pronounced in the open Court.
Sd/- Sd/-
(B.R.R. KUMAR) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 05th December, 2019
VBP/-
69
ITA.No.5950/Del./2015 M/s. Vasundhara Flavours
(Presently known as Gopal Consumer World, New Delhi.
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT "B" Bench
6. Guard File
// BY Order //
Asst. Registrar : ITAT Delhi Benches :
Delhi.
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