Shri Govind Singh,, New Delhi v. DCIT, New Delhi

ITA 2157/DEL/2009 | 2004-2005
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 215720114 RSA 2009
Bench Delhi
Appeal Number ITA 2157/DEL/2009
Duration Of Justice 11 month(s) 9 day(s)
Appellant Shri Govind Singh,, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 30-04-2010
Date Of Final Hearing 08-02-2010
Next Hearing Date 08-02-2010
Assessment Year 2004-2005
Appeal Filed On 21-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI A.D. JAIN AND SHRI B.P. JAIN ITA NO. 2157(DEL)2009 ASSESSMENT YEAR: 2004-05 SHRI GOVIND SINGH DY.CO MMISSIONER OF INCOME TAX 702-703 ANSAL CHAMBER-II V. CIRCLE 24(1) NEW DELHI. 6-BHIKAJI CAMA PLACE N.DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SALIL AGGARWAL ADVOCATE RESPONDENT BY: SHRI JAY ANT MISHRA CIT(DR) ORDER PER A.D. JAIN J.M. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 004-05. THE EFFECTIVE GROUNDS RAISED ARE AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX DELHI- VIII NEW DELHI HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN FRAMING AN ORDER UNDER SECTION 263 OF THE ACT DATED 19.03.2009. 2. THE LD. CIT DELHI-VIII NEW DELHI HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80 IB OF THE ACT OF RS. 9 79 423/-. 2. THE ASSESSSEE INDIVIDUAL IS PROPRIETOR OF M/S. G.S. ENTERPRISES ENGAGED IN THE BUSINESS OF ASSEMBLING FABRICATING PROCESS ING AND PACKAGING OF ALL TYPES OF SHAVING PRODUCTS INCLUDING SHAVING RAZORS BLADE S AND BRUSHES ON CONTRACT 2 MANUFACTURING BASIS. IN THE RETURN OF INCOME FILED FOR THE YEAR THE ASSESSEE DECLARED TOTAL INCOME OF RS. 38 06 313/- AFTER CLAI MING DEDUCTION U/S 80 IB OF THE INCOME TAX ACT AMOUNTING TO RS.9 79 423/-. THE A O ALLOWED THE CLAIM OF THE ASSESSEE U/S 80 IB OF THE ACT AND DETERMINED THE TO TAL INCOME OF THE ASSESSEE AT RS. 40 50 300/-.THE LEARNED CIT OBSERVED THAT THE A SSESSEE HAD ACCEPTED THE OFFER OF GILLETTE INDIA LTD. (GIL FOR SHORT) FOR PACKING AND SEALING OF RAZORS AND CARTRIDGES FOR AND ON ITS BEHALF AND WAS USING MACHINES AND TOOLS FOR PACKING AND SEALING OF RAZORS AND CARTRIDGES FOR GI L. IT WAS OBSERVED THAT THE AGREEMENT BETWEEN THE ASSESSEE AND GIL CLEARLY SHOW ED THAT THE ASSESSEE WAS ENGAGED ONLY IN THE ACTIVITY OF JOB WORK OF PACKING /PACKAGING OF ALL TYPES OF SHAVING PRODUCTS INCLUDING SHAVING RAZORS BLADES A ND BRUSHES ON CONTRACT MANUFACTURING BASIS AND WAS NOT MANUFACTURING OF AR TICLES OR THINGS AS REQUIRED UNDER THE PROVISIONS OF SECTION 80 IB OF THE I.T. A CT IN ORDER TO BE ELIGIBLE FOR DEDUCTION THEREUNDER; THAT NO RAW-MATERIALS WERE PU RCHASED BY THE ASSESSEE SINCE THE ASSESSEE WAS ONLY PACKAGING VARIOUS COMPONENTS SUPPLIED BY HIS PRINCIPAL GIL; THAT THIS PROVED THAT THE ACTIVITY OF THE ASSE SSEE WAS MAINLY OF JOB WORK AND THE ASSESSEE WAS DERIVING INCOME FROM PACKING ACTIV ITIES DONE ON CONTRACT MANUFACTURING BASIS FOR GIL; THAT U/S 80 IB OF THE ACT THE ASSESSEE COULD CLAIM DEDUCTION ONLY IF IT MANUFACTURED OR PRODUCED ANY A RTICLE OR THING WHICH THE ASSESSEE WAS NOT DOING; THAT THE PRODUCTS BEFORE P ROCESSING AND AFTER PROCESSING 3 WERE NOT TWO ITEMS HAVING DIFFERENT IDENTITIES; AND THAT THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE INASMUCH AS THE CONDITIONS PRESCRIBED U/S 80 IB OF THE ACT WERE NOT SATISFIED. 3. IT WAS ON THE ABOVE BASIS THAT THE LD. CIT DISAL LOWED DEDUCTION OF RS. 9 79 423/- U/S 80 IB OF THE ACT TO THE ASSESSEE. THE AO WAS DIRECTED TO GIVE EFFECT TO THE SAID DISALLOWANCE AND TO CALCULATE TH E TAX AND INTEREST PAYABLE BY THE ASSESSEE ON THE TOTAL INCOME TO BE RECOMPUTED AFTER GIVING EFFECT TO THE LD. CITS ORDER. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. CHALLENGING THE IMPUGNED ORDER THE LEARNED COUN SEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT HAS GONE WRONG IN FRAMIN G THE ORDER U/S 263 OF THE ACT WITHOUT SATISFYING THE MANDATORY PRE-CONDITION S OF THE PROVISIONS THEREOF INASMUCH AS THE ORDER OF ASSESSMENT WAS NEITHER ERR ONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE; THAT THE LD. CIT HAS ERRED IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80 IB OF THE ACT AMOUNTING TO RS.9 79 423/- FAILING TO APPRECIATE THAT THE ENTIRE OPERATIONAL AND PRODUCTIONAL BUSINE SS ACTIVITIES UNDERTAKEN BY THE ASSESSEE TO ULTIMATELY PRODUCE SHAVING SYSTEMS AMOU NTS TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING AS CONTEMPLATED UNDER THE PROVISIONS OF SECTION 80 IB OF THE ACT; THAT THE LD. CIT FAILED T O APPRECIATE THAT THE CLAIM OF DEDUCTION U/S 80 IB OF THE ACT HAS BEEN ALLOWED TO THE ASSESSEE RIGHT FROM 4 ASSESSMENT YEAR 1996-97 IN ASSESSMENTS MADE UNDER B OTH SECTIONS 143(1) AS WELL AS 143(3) OF THE ACT AND THAT SO THERE WAS NO BASI S EITHER IN LAW OR ON FACTS TO HOLD THAT THE ASSESSEE WAS NOT ENTITLED TO SUCH DED UCTION; THAT THE LD. CIT FAILED TO APPRECIATE THE REPLIES FILED BY THE ASSESSEE AND TH E EVIDENCE FURNISHED IN SUPPORT THEREOF OR THE CASE LAWS RELIED ON BY THE AS SESSEE; THAT AS PER THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1998-99 (COPY AT PAGES 15 0-151 OF THE ASSESSEES PAPER BOOK (APB FOR SHORT) IT HAS BEEN HELD THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS ACTIVITY OF ASSEMBLY/MANUFACTURE OF SH AVING SYSTEMS/RAZORS ON JOB WORK FOR GIL AS IN THE YEARS PRIOR TO 1998-99; TH AT AGAIN BY VIRTUE OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2003-04 (COPY AT APB 152-155); THAT THE ASSESSEES CLAIM HAD BEEN ALLOWED; THAT FOR ASSESSM ENT YEAR 2005-06 ALSO THE CLAIM WAS ALLOWED THOUGH U/S 143(1) OF THE ACT; TH AT THE AGREEMENTS (APB 73 TO 78 AND 79 TO 85) HAVE BEEN OVERLOOKED BY THE LD. CI T; THAT THE PROCESS OF MANUFACTURE CARRIED ON BY THE ASSESSEE WAS LAID BAR E BEFORE THE LD. CIT VIDE THE ASSESSEES REPLY DATED 2.9.2008 (APB 1-45 RELEVANT PORTION AT PAGES 27 TO 28 OF THE APB) TO THE NOTICE U/S 263 OF THE ACT; THAT IT HAS ALSO NOT BEEN CONSIDERED THAT THE ASSESSEE IS NOT SUBJECT TO EXCISE DUTY AS EVID ENCED BY THE ASSESSEES EXCISE RETURNS (APB 219-266); THAT THE PHOTOGRAPH OF THE I NDUSTRIAL UNIT OF THE ASSESSEE SHOWING THE MANUFACTURING PROCESS OF THE ASSESSEE ( APB 71-72) AND TO DEMONSTRATE THE MANUFACTURING PROCESS OF THE ASSESS EE; THAT THE DETAILS OF THE 5 MACHINERY USED BY THE ASSESSEE FOR ITS MANUFACTURIN G PROCESS WERE ALSO MADE AVAILABLE BEFORE THE LD. CIT WHICH THE LD. CIT AGA IN FAILED TO CONSIDER; THAT THE LD. CIT HAS ALSO FAILED TO APPRECIATE THAT THE ASSE SSEE WAS SUBJECT TO ESI (CERTIFICATE AT APB 213); THAT THE REGISTRATION AN D LICENCE TO WORK A FACTORY GRANTED TO THE ASSESSEE BY THE STATE OF RAJASTHAN (APB 214)SHOWS THAT THE ASSESSEE WAS EMPLOYING PERSONS AND USING POWER SUBJ ECT TO THE FACTORIES ACT 1948; AND THAT ALL THESE EVIDENCES HAVING BEEN DULY BEEN CONSIDERED BY THE AO THERE WAS NOTHING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN THE ASSESSMENT ORDER AS WRONGLY MADE OUT BY THE LD. CI T. 6. PER CONTRA THE LD. DR SUPPORTING THE IMPUGNED ORDER HAS SUBMITTED THAT THE LD. CIT HAS RIGHTLY OBSERVED THE ASSESSMENT ORD ER TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE INASMU CH AS BEFORE ALLOWING DEDUCTION CLAIMED BY THE ASSESSEE U/S 80 IB OF THE ACT THE A O DID NOT MAKE ANY ENQUIRY; THAT THE FACTS WERE NOT EXAMINED BY THE AO; THAT TH E ASSESSEE WAS ONLY DOING THE JOB WORK OF PACKING/PACKAGING FOR GIL; THAT NO RAW- MATERIAL WAS EMPLOYED BY THE ASSESSEE IN THIS PROCESS; THAT THEREFORE THE O RDER OF THE LD. CIT BEING ON FORCE IT REQUIRES NO INTERFERING FOR THE PROPOSITI ON THAT WHERE NO ENQUIRIES CARRIED OUT BY THE AO INVOCATION OF THE PROVISION OF SECTI ON 263 OF THE ACT AND HOLDING THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE IS VERY MUCH IN ORDER THE LD. DR HAS RELI ED ON 33 ITR 182(SC) 67 ITR 6 84(SC) 88 ITR 323 AND 99 ITR 375 (DEL). FOR THE PROPOSITION THAT IF THE VIEW OF THE AO IS UNSUSTAINABLE INVOCATION OF THE PROV ISION OF SECTION 263 OF THE ACT IS CORRECT THE LD. DR HAS PLACED RELIANCE ON MALA BAR INDUSTRIES 243 ITR 83 (SC). 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. FROM THE RECORD IT IS SEEN THAT THE ASSESSEE HAS MAINTA INED THAT HIS PROPRIETORY CONCERN IS AN INDUSTRIAL UNDERTAKING BEING A SMALL SCALE UN IT FOR ASSEMBLING FABRICATING PROCESSING MANUFACTURING AND PACKAGING OF ALL TYPE S OF SHAVING SYSTEMS INCLUDING SHAVING RAZORS AND SHAVING BLADES AT BHIW ADI INDUSTRIAL AREA BHIWADI DISTRICT ALWAR RAJASTHAN. THE UNIT WAS SET UP I N ASSESSMENT YEAR 1996-97. THE ASSESSEE ENTERED INTO AN AGREEMENT ON 23.5.1995 WITH GIL FOR ASSEMBLING AND PACKING OF SHAVING PRODUCTS RAZORS AND CARTRID GES FOR GIL ON CONTRACT MANUFACTURING BASIS FOR THEIR BRANDED PRODUCTS. FOR ASSESSMENT YEAR 1996-97 THE ASSESSEE CLAIMED DEDUCTION U/S 80IA OF THE ACT WHICH WAS ALLOWED THOUGH U/S 143(1) OF THE ACT. FOR ASSESSMENT YEAR 1998-9 9 THE ASSESSEES CLAIM U/S 80 IA OF THE ACT WAS AGAIN ALLOWED IN SCRUTINY ASSESS MENT. FOR ASSESSMENT YEAR 2003-04 THE ASSESSEE CLAIMED DEDUCTION U/S 80 IB O F THE ACT WHICH WAS ALLOWED UNDER SCRUTINY. FOR ASSESSMENT YEAR 2004-05 AGAI N THE ASSESSEES CLAIM U/S 80 IB OF THE ACT WAS ALLOWED UNDER SCRUTINY. IT IS O NLY FOR THE YEAR UNDER 7 CONSIDERATION THAT THE CLAIM OF THE ASSESSEE HAS BE EN DISALLOWED U/S 263 BY THE LD. CIT THOUGH THE SAME WAS ALLOWED IN THE ASSESSM ENT ORDER. 8. THE QUESTION ARISING FOR CONSIDERATION IS AS TO WHETHER THE ASSESSEE IS OR IS NOT CARRYING ON A MANUFACTURING ACTIVITY SO AS TO E NTITLE DEDUCTION U/S 80 IB OF THE ACT TO BE GRANTED . 9. IT IS SEEN THAT THE OPERATIONAL AND OTHER ACTIVI TIES CARRIED ON BY THE ASSESSEE RELATE TO THE RECEIPT/USE OF INDIVIDUAL ITEMS OF CO MPONENTS INTERMEDIATE MATERIALS AND OTHER PARTS AND ITEMS. THE INDIVIDU AL ITEMS OF THE COMPONENTS INTERMEDIATE MATERIALS AND OTHER PARTS AND ITEMS I NTER ALIA CONSIST OF MOULDED PLASTIC COMPONENTS LIKE HANDLES AND OVERCAPS STAIN LESS STEEL BLADES AND PLASTIC BLADE CARTRIDGES METAL COMPONENTS LIKE BACK AND SL IDE AND SPRINGS PAPER AND PAPER BOARD ARTICLES PVC POLY BAGS CORRUGATED BOX ES AND OTHER CARTONS AND BOPP TAPES AND OTHER PACKAGING MATERIALS. IT IS TH ESE ITEMS WHICH ARE ASSEMBLED TO FORM A SINGLE PRODUCT THROUGH A SPECIALIZED AND SKILLED PROCESS INCLUDING THE USE OF SOPHISTICATED PNEUMATIC PRESS. THE END PROD UCT IS DISTINCTIVELY TRANSFORMED AND IS DIFFERENT FROM THE VARIOUS CONST ITUENTS COMPRISING IT. THE ITEM SO MANUFACTURED IS NECESSARILY REQUIRED TO BE PACKED IN A SPECIAL WAY WHICH PRIMARILY IS AN ESSENTIAL PROCESS OF PRODUCTI ON OF THE ITEMS PRODUCED TO BE COMMERCIALLY CONSIDERED AS SALEABLE WITH SEPARAT E PROPERTIES IN ITS USE AS A FINISHED PRODUCT. THE PACKAGING TECHNIQUE EMPLOYED IS A NEW PACKAGING 8 TECHNIQUE KNOWN AS BLISTER PACKAGING WHICH PROCE SS ENSURES THAT THE PRODUCT MAINTAINS AND/OR RETAINS THOSE ESSENTIAL QUALITIES STANDARDS AND PROPERTIES REQUIRED FOR ITS SALABILITY INCLUDING A LONGER SHEL F. THE ENTIRE PROCESS OF PRODUCTION CARRIED OUT BY THE ASSESSEE ULTIMATELY R ESULTS IN THE PRODUCTION/MANUFACTURE OF A SHAVING SYSTEM. 10. THE PROCESS OF CONTRACT MANUFACTURING UNDERTAKE N BY THE ASSESSEE AS EXPLAINED TO THE AUTHORITIES BELOW IS AS FOLLOWS:- 1. THE ASSESSEE WOULD RECEIVE VARIOUS COMPONEN TS OF METAL ALLOYS PLASTIC ETC. NAMELY RAZOR CAPE BACK AND SLIDE PLATFORM PLASTIC MOULDED HANDLES TWIN BLADE CARTRIDGES METAL SPRINGS ALUMINIUM INSERTS BRASS FINGERS TOP PLATES BUTTON ASSEMBLY PAPER AND PAPER BOARDS CORRUGATED BOXES PVC POLY BAGS BOPP TAPES AND OTHER PACKAGING MATERIAL ETC. FROM S UPPLIERS AND ALSO FROM GIL. THE SUPPLY OF SAID COMPONENTS WERE SUPPORTED BY EXCISE INVOICES ISSUED BY THE SUPPLIERS. THESE COMPONENTS WOULD FALL UND ER DIFFERENT EXCISE TARIFF HEADINGS. SINCE ASSESSEE WAS ENGAGED IN CONTRACT MANUFACTURING THE S AID COMPONENTS WERE RECEIVED ON BEHALF OF GIL WHEREBY A SSESSEE WAS STATED TO BE CONSIGNEE AND THE DELIVERY IS EFFECTED AT THE FACTO RY PREMISES OF THE ASSESSEE AT E-127 INDUSTRIAL AREA BHIWADI DISTRICT ALWAR RA JASTHAN. SOME OF THESE INVOICES RECEIVED DURING THE IMPUGNED ASSESSMENT YE AR 2004-05 ARE PLACED AT PAGE 207-220 OF PB FOR YOUR KIND CONSIDERATION. T HESE INVOICES WILL REVEAL: 1. THE INVOICES REVEAL THE DESCRIPTION OF COMPONENTS W HICH WERE USED BY ASSESSEE FOR ASSEMBLING TO MANUFACTURE SHAVING RAZO RS AND BLADES BY USING MECHANICAL AND MANUAL PROCESS. 2. THAT THEY ARE SUBJECTED TO EXCISE DUTY AND VAT AS P ER LAW. 3. THEY ARE CLASSIFIED UNDER EXCISE TARIFF HEADING AS PER EXCISE LAW. 4. THE INVOICES STATED ASSESSEE AS CONSIGNEE WHILE GIL IS BUYER. 9 5. THE DELIVERY ADDRESS IS STATED TO BE E-127 BHIWADI INDUSTRIAL AREA BHIWADI DISTRICT ALWAR RAJASTHAN 301019 THE FACTO RY OF THE ASSESSEE WHICH IS DULY REGISTERED UNDER VARIOUS LAWS AS APPL ICABLE TO THE ESTABLISHMENT AND OPERATION OF FACTORY IN THE STATE OF RAJASTHAN INDIA AS WELL CENTRAL LAWS. 6. THESE COMPONENTS WERE THEN CHECKED FOR QUALITY CONT ROL THE SPRINGS ARE FIXED ON TO THE BACKEND SLIDE AND THE TWO ARE P LACED ON TO THE PLASTIC HANDLE. THEN THESE THREE ARE PLACED ON TO THE DIE IS PLACED ON THE PHEUMATIC PRESS. IT IS ASSEMBLED BY SKILLED OP ERATORS (WHO WERE ON ROLLS WITH GSE) USING DIES/FIXTURES ON PNEUMATIC PR ESSES. THE PRESS IS OPERATED TO PRESSURE FIT TO FORM A FIXED HEAD HANDL E. THE CARTRIDGE IS FIXED TO FORM A RAZOR. THESE RAZORS WERE THEN BLI STER SEALED USING PVC BLISTERS AND HEAT SEAL LACQUER COATED PRINTED C ARDS OF BOARD ON BLISTER SEALING MACHINES WHICH ARE PROPELLED BY PNE UMATIC AND HYDRAULIC CYLINDERS. THE SEALED CARDS IN THE END WERE PACKED INTO CORRUGATED SHIPPERS. IN SOME CASES THERE WAS ELEC TROPLATING WAS DONE BY SENDING TO KJ AUTO AT DARUHERA HARYANA. GSE WAS FULLY RESPONSIBLE FOR THE QUALITY CONTROL AND HAD TO ADHE RE TO SPOILAGE NORMS AS PER AGREEMENT AND IN CASE OF SPOILAGE EXCEEDING PRESCRIBED NORMS HAD TO BORNE THE LOSS . THERE WERE FOUR VARIETIES OF SHAVING RAZORS AND BLADES MANUFACTURED NAMELY FIXED HEAD RAZORS THREE PIECE RAZORS VECTOR RAZOR AND PRESTO RAZOR AT THE AFORES AID INDUSTRIAL UNIT OF G.S. ENTERPRISES AT E-127 BHIWADI INDUSTRIAL AR EA BHIWADI DISTRICT ALWAR RAJASTHAN 301019 AND THE EXACT MANU FACTURING PROCESS WILL DEPEND UPON THE TYPE OF THE SHAVING RAZOR AND BLADE MANUFACTURED BUT BROADLY THE PROCESS WILL REMAIN THE SAME AS STA TED ABOVE. 7. THE FINISHED SHAVING RAZORS AND RAZOR BLADES FAL LS IN CENTRAL EXCISE HEADING 8212. THE FINISHED GOODS WERE DISPATCHED BY GSE PER DIRECTION OF GIL AFTER CLEARANCE FROM THE FACTORY G ATE OF THE ASSESSEE AND DUE PROVISIONS OF EXCISE DUTY. THE ASSESSEE W AS DULY FILING RETURN WITH EXCISE DEPARTMENT AND THE SAME FOR THE IMPUGNE D ASSESSMENT YEAR 2004-05 ARE PLACED AT PAGE 169-204 OF PB 10 ITA 2157(DEL)09 11. DURING THE YEAR THE ASSESSEE RECEIVED COMPONEN TS FROM VARIOUS MANUFACTURERS ON BEHALF OF GIL AS PER THE TERMS OF THE AGREEMENT DA TED 22.10.2002 AS WELL AS THE AGREEMENT DATED 23.5.95. THEREAFTER THE ASSESSEE ASSEMBLED THESE COMPONENTS THROUGH MACHINES AND/OR MANUAL PROCESSES AS DETAILED ABOVE TO MAKE A DIFFERENT COMMERCIAL COMMODITY NAMELY SHAVING RAZORS AND RAZOR BLADES ON BEHALF OF GIL. THESE COMMODITIES WERE ALTOGETHER DIFFERENT ARTICLES FAL LING UNDER CENTRAL EXCISE TARIFF HEADING 8212. THE PROCESS CARRIED ON BY THE ASSE SSEE WAS THUS NOTHING BUT A MANUFACTURING ACTIVITY PRODUCING ALTOGETHER NEW CO MMERCIAL ARTICLES I.E. SHAVING RAZORS AND RAZOR BLADES. 12. ALL THE ABOVE FACTS WERE DULY TAKEN INTO CONSID ERATION BY THE AO WHILE PASSING THE ASSESSMENT ORDER. THE FACTS UNDENIABLY REMAINED THE SAME AS THOSE IN THE EARLIER YEARS WHEN DEDUCTION WAS GRANTED TO THE ASSESSEE. 13. THE LD. CIT IN THE IMPUGNED ORDER HAS OBSERVE D INTER ALIA THAT THE ASSESSEE BEING ENGAGED IN PACKING/SEALING RAZORS AND CARTRIDGES D OES NOT MANUFACTURE OR PRODUCE ANY ARTICLE OR THING THEREBY NOT SATISFYING THE CONDIT IONS REQUIRED BY SECTION 80 IB OF THE ACT; THAT THE ASSESSEE WAS NOT PRODUCING ANY COMPONENT/R AW-MATERIAL; THAT THE COMPONENTS SUPPLIED BY ASSESSEES PRINCIPAL WERE BEING PACKED AND SEALED BY THE ASSESSEE ON A CONTRACT MANUFACTURING BASIS; THAT ONE OF THE CONDI TIONS FOR BEING ELIGIBLE FOR DEDUCTION U/S 80 IB WAS THAT THE MACHINERY OR PLANT BEING USE D FOR THE PURPOSE OF MANUFACTURING AN ARTICLE OR THING IS OWNED BY THE INDUSTRIAL UNDERTA KING CLAIMING DEDUCTION; THAT THE 11 ITA 2157(DEL)09 ASSESSEE WAS USING MACHINES AND TOOLS BELONGING TO GIL AND IT COULD NOT BE SAID THAT THE ASSESSEE WAS USING HIS OWN PLANT AND MACHINERY FOR THE PURPOSE OF MANUFACTURING; THAT THE ASSESSEES STAND THAT DEDUCTION U/S 80 IA OF THE AC T WAS ALLOWED IN THE EARLIER ASSESSMENT YEARS WAS NOT TENABLE IN VIEW OF THE SETTLED POSITI ON OF RES JUDICATA BEING NOT APPLICABLE TO INCOME TAX PROCEEDINGS; THAT THE AO DID NOT MAKE FU RTHER ENQUIRIES BEFORE ACCEPTING THE STATEMENT MADE BY THE ASSESSEE IN THE RETURN OF INC OME REGARDING ANY MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE WHICH WAS ESSE NTIAL FOR CLAIMING EXEMPTION U/S 80 IB OF THE ACT; AND THAT THE AO DID NOT APPRECIATE THE FACTS INVOLVED IN THE CASE I.E. THAT THE ASSESSEE WAS ONLY ENGAGED IN THE ACTIVITY OF PACKIN G OF MATERIALS AND NOT MANUFACTURE. 14. WE DO NOT FIND OURSELVES AT ONE WITH THE FINDIN GS RECORDED BY THE LD. CIT(A). FIRSTLY AS SEEN HEREINABOVE THE ACTIVITY CARRIED ON BY THE ASSESSEE IS CERTAINLY A PROCESS OF MANUFACTURE. THE PROCESS CARRIED ON BY THE ASSESS EE RESULTS IN AN ARTICLE WHICH IS ENTIRELY DISTINCT FROM THE RAW-MATERIAL . THIS EVIDENTLY IS THE PRIMARY CONDITION OF CLAIMING AND BEING ALLOWED DEDUCTION U/S 80 IB OF THE ACT. IT IS NOT THAT THE ASSESSEE IS MERELY PACKING OR SEALING RAZORS AND CARTRIDGES. RATHER THE ASS ESSEES MANUFACTURING PROCESS ALSO INCLUDES JOB WORK OF PACKING OF COMPONENTS/MATERIAL S. 15. APROPOS THE OBJECTION OF THE LD. CIT THAT THE M ACHINERY USED BY THE ASSESSEE WAS NOT OWNED BY THE ASSESSEE BUT WAS OF GIL WHICH ALSO DI SENTITLES THE ASSESSEE TO CLAIM DEDUCTION U/S 80 IB WE FIND THAT THERE IS NO SUCH CONDITION RAISED BY SECTION 80IB OF THE ACT. THE ONLY CONDITION AS PER SECTION 80 IB(2)(I I) IS THAT THE INDUSTRIAL UNDERTAKING IN ORDER TO CLAIM DEDUCTION U/S 80 IB MUST NOT BE FOU ND BY THE TRANSFER OF A NEW BUSINESS 12 ITA 2157(DEL)09 MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. THE LD. CIT HAS REFERRED TO CLAUSES 1 TO 4 OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE GIL. 16. CLAUSES 1 TO 4 OF THE AGREEMENT DATED 23.5.95 ENTERED INTO BY THE ASSESSEE WITH GIL ARE AS FOLLOWS:- 1. ISP MANUFACTURES AND SELLS STAINLESS STEEL RAZO R BLADES SHAVING SYSTEMS AND OTHER SHAVING PRODUCTS. 2. GSE HAS ADEQUATE FACILITIES INCLUDING EQUIPMENT AND MANPOWER FOR ASSEMBLING AND PACKING OF A VARIETY OF SHAVING PRODUCTS IN ITS FAC TORY SITUATED AT PLOT NO. E-127 INDUSTRIAL AREA BHIWADI 301019 AND HAS OFFERED T HESE FACILITIES TO ISP. 3.ISP IS DESIROUS OF USING THESE FACILITIES OFFERED BY GSE FOR ASSEMBLING AND FOR PACKING OF SHAVING PRODUCTS AS LISTED IN SCHEDULE UPON TERM S AND CONDITIONS APPEARING HEREINAFTER. PARTIES MAY ADD OR DELETE THE PRODUC TS LISTED IN THE SAID SCHEDULE FROM TIME TO TIME. NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVE NANTS HEREIN EXPRESSED THAT THE PARTIES HERETO AGREES AS FOLLOWS: 1. NATURE OF CONTRACT/ASSEMBLY/PACKING. ISP & GSE ARE TWO INDEPENDENT CONTRACTING PARTIES. THE AGREEMENT BETWEEN THE PARTIES IS ONE ON PRINCIPLE TO PRINCIPLE BASIS AND SHALL BE CONSTRUED AS SUCH FOR ALL PURPOSES. 2 ASSEMBLING/PACKING 2.1 GSE SHALL ASSEMBLE/PACK THE SAID PRODUCTS IN ITS FACTORY MENTIONED ABOVE AND OR WITH THE PRIOR APPROVAL OF I SP AT SUCH OTHER PLACES WHERE IT HAS SUFFICIENT ASSEMBLING PACKING FACILITIES. IN A SSEMBLING/PACKING OF THE SAID PRODUCTS GSE SHALL CONFIRM STRICTLY TO THE DRAWINGS SPECIFICATIONS AND INSTRUCTIONS PROVIDED BY THE ISP AND SHALL STRICTLY ADHERE TO TH E SCHEDULE OF DELIVERY SPECIFIED BY THE ISP FROM TIME TO TIME. 2.2 THE DRAWINGS SPECIFICATIONS AND INSTRUCTIONS SHALL REMAIN THE SOLE AND EXCLUSIVE PROPERTY OF ISP AND SHALL BE TR EATED AS CONFIDENTIAL DURING THE TERMS OF THIS AGREEMENT. 13 ITA 2157(DEL)09 2.3 GSE SHALL NOT USE THE DRAWINGS SPECIFICATIONS A ND INSTRUCTIONS PROVIDED BY ISP FOR ANY PURPOSES OTHER THAN ASSE MBLING/ AND PACKING OF THE SAID PRODUCTS FOR ISP. 3. SUPPLY OF MATERIAL 3.1 ISP SHALL SUPPLY GSE INCLUDING ALL PACKAGING ASSEMBLING MATERIALS AND OTHER SUPPLIES FROM TIME TO TI ME FOR ASSEMBLING/ PACKING OF THE SAID PRODUCTS . 3.2 GSE SHALL PROVIDE FACILITIES FOR PROPER STORAGE OF THE SAID PRODUCTS AND ALSO ALL MATERIALS TO BE USED IN THE ASSEMBLING/ PACKING OF THE SAID PRODUCTS. GSE SHALL ALSO KEEP SUCH RECORDS OF RECEIPT ISSUE CONSUMPTION AND STOCK OF ALL T HE ABOVE MATERIALS AND THE SAID PRODUCTS AS DESIRED BY IS P. 3.3 THE PROPERTY IN THE SAID PRODUCTS AND SUCH MATER IALS PACKAGING AND OTHER MATERIALS AND WORK IN PROGRESS SHALL ALWAYS REMAIN WITH ISP AND GSE SHALL HAVE NO RIGHT OR LIEN OF WHATSOEVER NATURE AND CAUSE ON THE SAME. 3.4 GSE SHALL HOLD IN TRUST FOR ISP AND BE A BAILEE FO R CONSIDERATION OF THE RAW MATERIALS/PACKAGING MATERIALS ARTICLES LABELS CARTONS BOXES OR ANY OTHER PROPERTY WHETHER MOVABLE OR IMMOVABLE THAT MA Y BE GIVEN HANDED OVER OR ENTRUSTED TO OR OTHERWISE COME INTO ITS CUSTODY OR POSSESSION OR ON ACCOUNT OF ISP AND SHALL BE LIABLE TO MAKE GOODS ANY LOSS CAUSED T O ISP AS A RESULT OF PILFERAGE THEFT ROBBERY OR DAMAGE OR DESTRUCTION OF SUCH GOO DS WHILST THESE WILL BE IN CUSTODY OF GSE. IT IS EXPRESSLY AGREED THAT PROPERTY IN SU CH GOODS SHALL ALWAYS REMAIN WITH ISP AND GSE SHALL CONDUCT ITS BUSINESS IN A MANNER SO AS TO GIVE A CLEAR INDICATION TO THE THIRD PARTIES THAT THE PROPERTY IN SUCH GOOD S BELONGED TO ISP GSE SHALL RENDER TO ISP PROPER ACCOUNT FOR ALL SUCH PROPERTY AND ISP SHALL BE ENTITLED TO PUT GSE TO THE STRICT PROOF THEREOF. GSE SHALL NOT SELL TRAN SFER ALIENATE MORTGAGE CHARGE HYPOTHECATE PLEDGE OR OTHERWISE CREATE ANY ENCUMBR ANCES ON ALL OR ANY OF THE SAID PROPERTY OR ALLOW ANY OF THE SAID PROPERTY TO BE SU BJECTED TO ANY ATTACHMENT LIEN DISTRAIT OR SUBJECT TO TRANSFER POSSESSION OR CUST ODY BY AN OFFICER OF COURT LIKE A RECEIVER OR OF ANY REVENUE AUTHORITY IN ANY PROCEED INGS TO WHICH IT MIGHT BECOME A PARTY OR WHICH MIGHT OTHERWISE BE AGAINST IT BY TH IRD PARTY. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT ANY VIOLATION OF THIS CLAUSE BY ANY ACT OR OMISSION WHETHER VOLUNTARY OR INVOLUNTARY ON THE PA RT OF GSE SHALL BE A GROUND AND 14 ITA 2157(DEL)09 SUFFICIENT CAUSE FOR ISP TO FORTHWITH DETERMINE THE AGREEMENT AND TAKE POSSESSION OF ALL THE SAID PROPERTY WITHOUT INTERVENTION OF THE C OURT. 3.4.1. GSE WILL PROVIDE TO ISP AN INVENTORY STATEME NT OF ALL ISP ITEMS IN STOCK AT GSE EVERY MONTH ON THE LAST DAY OF THE MONTH THIS INVENTORY STATEMENT SHALL BE VERIFIED BY ISP AND ISP SHALL GIVE A WRITTEN ACCEPT ANCE OF THE INVENTORY STATEMENT WITH PHYSICAL STOCKS BY THE 3 RD DAY OF EACH MONTH. 4. JOB CHARGES 4.1 ISP SHALL PAY A MUTUALLY AGREED JOB CHARGES AS AGREED FROM TIME TO TIME. 4.2 GSE SHALL CLAIM ALL BENEFITS OF MODVAT ON GOODS SUPPLIED TO IT BY ISP DIRECTLY OR THROUGH THE SUPPLIERS/JOB WORKERS AND S HALL KEEP COMPLETE RECORD OF THE SAME. ALL SUCH BENEFITS CLAIMED SHALL BE ADJUSTED AGAINST EXCISE DUTY PAID BY GSE ON CLEARANCE OF SAID FINISHED PRODUCTS. THE NET JOB CHARGES/EXCISE DUTY ARRIVED AT AFTER ADJUSTING THESE BENEFITS/CREDITS SHALL BE PAID IN S UCH MANNER AS ENUMERATED IN THIS AGREEMENT. 4.3 ANY CHANGE IN EXCISE DUTY OR LEVY/EXEMPTION O F ANY OTHER DUTY OR TAX AS APPLICABLE AT THE TIME OF SUPPLY SHALL BE TO ISPS ACCOUNT. 17. CLAUSES 1 TO 4 (APB 80 TO 81) OF THE AGREEMENT DATED 22.10.2002 BETWEEN THE ASSESSEE AND GIL READ AS FOLLOWS:- 1. PRINCIPAL TO PRINCIPAL CONTRACT GIL AND GSE ARE TWO INDEPENDENT CONTRACTING PARTIES NOT CONNECTED WITH EACH OTHER IN ANY MANNER. THIS AGREEMENT BEING EXECUTED BETW EEN THE PARTIES IS ON A PRINCIPAL TO PRINCIPAL BASIS AND SHALL BE CONSTRUED AS SUCH. 2. ASSEMBLY AND PACKAGING 2.1 GSE SHALL UNDERTAKE ASSEMBLING AND PACKAGING IN IT S FACTORY MENTIONED ABOVE AND I OR WITH THE PRIOR APPROVAL OF GIL AT SU CH OTHER PLACES WHERE IT HAS SUFFICIENT ASSEMBLY AND PACKING FACILITIES. IN ASSEMBLING AND PACKAGING OF THE SAID PRODUCTS GSE SHALL CONFORM S TRICTLY TO THE 15 ITA 2157(DEL)09 DRAWINGS SPECIFICATIONS AND INSTRUCTIONS PROVIDED BY GIL AND SHALL ADHERE TO THE SCHEDULE OF DELIVERY SPECIFIED BY GIL FROM TIME TO TIME. 2.2 THE DRAWINGS SPECIFICATIONS AND INSTRUCTIONS SHAL L REMAIN THE SOLE AND EXCLUSIVE PROPERTY OF GIL AND SHALL BE TREATED AS C ONFIDENTIAL BY GSE BOTH DURING THE TERM OF THIS AGREEMENT AND AT ALL T IMES HEREAFTER. 2.3 GSE SHALL NOT USE THE DRAWINGS SPECIFICATIONS AND INSTRUCTIONS PROVIDED BY GIL FOR ANY PURPOSE OTHER THAN ASSEMBLING AND PA CKAGING OF THE SAID PRODUCTS FOR GIL. 3. SUPPLY OF MATERIAL 3.1 GIL SHALL SUPPLY TO GSE MATERIALS FOR ASSEMBLIN G AND PACKAGING OF THE SAID PRODUCTS. 3.2 GSE SHALL PROVIDE AND ENSURE FACILITIES FOR PR OPER STORAGE OF THE SAID PRODUCTS AND ALSO ALL MATERIALS SUPPLIED B Y GIL TO BE USED IN THE ASSEMBLING AND PACKAGING THE SAID PRODUCTS. GSE S HALL ALSO KEEP SUCH RECORDS OF RECEIPT ISSUE CONSUMPTION AND STOCK O F ALL THE ABOVE MATERIALS AND THE SAID PRODUCTS AS DESIRED BY GIL. 3.3 THE PROPERTY IN THE SAID PRODUCT AND OTHER M ATERIALS IN WORK IN PROGRESS SHALL ALWAYS REMAIN WITH GIL. GSE S HALL HAVE NO RIGHT OR LIEN OF WHATSOEVER NATURE ON THE SAM E. 3.4 GSE SHALL HOLD IN TRUST FOR GIL AND BE A BAILE E FOR CONSIDERATION FOR THE PACKAGING MATERIALS OR ANY OTHER PROPERTY WHETHER MOVABLE OR IMMOVABLE THAT MAY BE GIVEN HANDED OVER OR ENTRUSTED TO OR WHICH OTHERWISE MAY COME INTO ITS CUSTODY OR POSSESSION ON ACCOUNT OF GIL. GSE SH ALL MAKE GOOD ANY LOSS CAUSED TO GIL ARISING OUT OF DAMAGE DESTRUCTION OR PILFERAGE OR NEGLIGENCE/WILLFUL ACTIONS BY GSE EMPLOYEES. IT I S EXPRESSLY AGREED THAT PROPERTY IN SUCH GOODS SHALL ALWAYS REMAIN WITH GIL . GSE SHALL CONDUCT ITS BUSINESS IN A MANNER SO AS TO GIVE A CLEAR INDICATI ON TO THIRD PARTIES THAT THE PROPERTY IN SUCH GOODS BELONGS TO GIL. GSE SHALL RE NDER TO GIL PROPER ACCOUNT FOR ALL SUCH PROPERTY AND GIL SHALL BE ENTI TLED TO PUT GSE TO THE STRICT PROOF THEREOF. GSE SHALL NOT SELL TRANSFER ALIE NATE MORTGAGE CHARGE HYPOTHECATE PLEDGE OR OTHERWISE CREATE ANY ENCUMBR ANCES ON ALL OR ANY OF THE SAID PROPERTY OR ALLOW ANY OF THE SAID PROPERTY TO BE SUBJECTED TO ANY ATTACHMENT LIEN DISTRAIT OR BE SUBJECT TO TRANS FER POSSESSION OR CUSTODY BY AN 16 ITA 2157(DEL)09 OFFICER OF COURT LIKE A RECEIVER OR OF ANY REVENUE AUTHORITY IN ANY PROCEEDINGS TO WHICH IT MIGHT BECOME A PARTY OR WHICH MIGHT OTHERW ISE BE BROUGHT AGAINST IT BY A THIRD PARTY. 3.5 NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEM ENT ANY VIOLATION OF THIS CLAUSE BY ANY ACT OF COMMISSION OR OMISSION WHETHE R VOLUNTARY OR INVOLUNTARY ON THE PART OF GSE SHALL BE A GOOD AND SUFFICIENT C AUSE FOR GIL TO FORTHWITH DETERMINE THIS AGREEMENT AND TAKE POSSESSION OF ALL THE SAID PROPERTY WITHOUT THE INTERVENTION OF THE COURT. 3.6 GSE WILL PROVIDE TO GIL AN INVENTORY STATEMENT OF ALL GIL RAW MATERIAL FINISHED GOODS AND WORK IN PROCESS AT ITS PREMISES EVERY MONTH ON THE LAST DAY OF THE MONTH. THIS INVENTORY STATEMENT SHALL BE V ERIFIED BY GIL AND GIL SHALL GIVE A WRITTEN ACCEPTANCE OF THE INVENTORY STATEMEN T WITH PHYSICAL STOCKS BY THE 3 RD DAY OF EACH SUBSEQUENT MONTH. 4. CHARGES 4.1 GIL AND GSE SHALL MUTUALLY AGREE UPON CHARGES TO BE PAID BY GIL TO GSE FOR CARRYING OUT ITS OBLIGATIONS WHICH SHALL BE DESCRIB ED FULLY IN THE RATE CONTRACT AS ISSUED FROM TIME TO TIME PURSUANT TO THIS AGREEM ENT. THESE CHARGES SHALL INCLUDE THE COST OF THE RAW MATERIALS PROCURED BY G SE DIRECTLY AND USED IN THE FINISHED GOODS. 4.2 GIL SHALL MAKE PAYMENT OF BILLS WITHIN SUCH TIME FR OM THE DATE OF RECEIPT OF THE SAME SUBJECT TO DEDUCTION OF TAX AT SOURCE AS INDI CATED IN ANY PURCHASE ORDER. 4.3 GSE SHALL CLAIM ALL BENEFITS OF MODVAT ON GOODS SUP PLIED TO IT BY GIL DIRECTLY OR THROUGH THE SUPPLIERS/JOB WORKERS AND SHALL KEEP A COMPLETE RECORD OF THE SAME. 18. FROM THE ABOVE CONTENTS OF BOTH THE CONTRACT AG REEMENTS NOTHING MAKES OUT THAT THE ASSESSEES INDUSTRIAL UNDERTAKING WAS FORMED BY TRA NSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE TO A NEW BUSINESS. THE OBJEC TION OF THE LD. CIT IN THIS REGARD IS THEREFORE NOT SUSTAINABLE AND IS REJECTED AS SUCH. 17 ITA 2157(DEL)09 19. COMING TO THE NEXT OBJECTION RAISED BY THE LD. CIT THE SAME IS THAT THE AO SHOULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE S TATEMENTS MADE BY THE ASSESSEE AND HIS RETURN AND THAT NO ENQUIRIES WERE CONDUCTED BY THE AO REGARDING ANY MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE. IN THIS REGA RD IT IS PATENT ON RECORD THAT THE ASSESSEE HAD LAID THERE AS ABOVE BEFORE THE LD. AO ALL THE NECESSARY DETAILS REGARDING HIS ACTIVITIES . IT WAS AFTER CONSIDERING THESE DETAILS THAT DEDUCTI ON WAS ALLOWED TO THE ASSESSEE BY THE AO MORE PARTICULARLY IN VIEW OF THE FACT THAT SUCH DED UCTION HAD BEEN ALLOWED TO THE ASSESSEE IN THE EARLIER YEARS AS DISCUSSED HEREINBEFORE. 20. COMING TO THE CASE LAWS CITED BY THE PARTIES I N CIT V. RAJEEV GRINDING MILLS 279 ITR 86 (DEL) IT HAS BEEN HELD THAT WHERE IN THE I MMEDIATELY PRECEDING TWO ASSESSMENT YEARS THE ADDITION WAS MADE ON ACCOUNT OF GRINDING LOSS AND SUCH ADDITION WAS DELETED IN FIRST APPEAL AND THE GRINDING LOSS DECLARED BY THE SUBSEQUENT ASSESSMENT YEARS WAS ALSO ACCEPTED BY THE REVENUE. AS SUCH THE REVENUE COU LD NOT DISPUTE THE GRINDING LOSS ONLY FOR THE ASSESSMENT YEAR IN QUESTION ON THE GROUND OF EX CESSIVE CLAIM THEREBY MAKING AN ESTIMATED ADDITION. THE TRIBUNAL WAS HELD JUSTIFI ED IN DELETING THE ADDITION IN TOTO. 21. APROPOS THE LD.CITS OBJECTION REGARDING RES JU DICATA NOT APPLICABLE TO INCOME TAX PROCEEDINGS THERE CAN POSSIBLY BE NO TWO VIEWS ABO UT DISPROPOSITION. HOWEVER IT IS ALSO TRITE THAT WHEN THE FACTS AND CIRCUMSTANCES REMAIN THE SAME OVER THE YEARS THE DEPARTMENT IS NOT AT LIBERTY TO TAKE A VIEW DIFFERENT FROM THA T TAKEN IN THE EARLIER YEARS. 18 ITA 2157(DEL)09 22. IN CIT V. J.K. CHARITABLE TRUST 308 ITR 161( SC) IT WAS HELD THAT WHERE THE FACT SITUATION IS THE SAME AS IN THE EARLIER YEARS THE REVENUE CANNOT APPEAL IF NO APPEAL HAS BEEN FILED FOR THE EARLIER YEARS. 23. IN CIT V. PAUL BROTHERS 216 ITR 548(BOM) IT HAS BEEN HELD THAT SPECIAL DEDUCTIONS UNDER SECTIONS 80 HH AND 80 J OF THE ACT CANNOT BE WITHDRAWN IN A SUBSEQUENT YEAR. 24. IN CIT V. NATRAJ STATIONERY PRODUCTS P.LTD. 312 ITR 22(DEL) IT WAS HELD INTER ALIA THAT THE TRIBUNAL HAD CORRECTLY HELD THE ASSE SSEE TO BE ENTITLED U/S 80 IB(3)(I) OF THE ACT IN REGARD TO THE OTHER INDUSTRIAL UNDERTAKINGS THE PROVISIONS OF WHICH ARE IN PARI MATERIA WITH THE PROVISIONS OF SECTION 80 IA(2)(IV) OF THE ACT AS OBTAINING IN THE INITIAL YEAR. 25. IN SMT. TARA DEVI AGGARWAL V. CIT WEST BENGAL 88 ITR 323(SC) IT HAS BEEN HELD ON THE FACTS OF THAT CASE THAT THERE WERE MA TERIALS BEFORE THE COMMISSIONER TO JUSTIFY HIS FINDING THAT THE ORDER OF ASSESSMENT FOR THE YE AR 1960-61 WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. H EREIN HOWEVER THIS IS NOT THE FACT SITUATION. AS DISCUSSED THE ACTIVITY OF THE ASSE SSEE IS THAT OF MANUFACTURE. BESIDES IN THE EARLIER YEARS ON THE SAME FACTS DEDUCTION WAS ALLOWED TO THE ASSESSEE. IT CLEARLY IS NOT A CASE OF NO ENQUIRY BY THE AO. 26. IN GEE VEE ENTERPRISES V. ADDL. CIT DELHI-I 99 ITR 375(DEL) IT HAS BEEN HELD THAT IT IS AN APPEAL OF THE AO TO INVESTIGATE THE F ACT AND THE COMMISSION CAN REGARD THE GROUND ON THE ERRONEOUS GROUND THAT IN THE FACTS OF THE CASE THE AO SHOULD HAVE MADE 19 ITA 2157(DEL)09 FURTHER ENQUIRY BEFORE ACCEPTING THE STATEMENT MADE BY THE ASSESSEE IN HIS RETURN. HEREIN AS ABOVE IT HAS NOT BEEN MADE OUT AS TO HOW IT IS A CASE OF NO ENQUIRY PARTICULARLY WHEN IN THE EARLIER YEARS THE DEDUCTION CLAIMED U/S 80 IB HAS BEEN ALLOWED TO THE ASSESSEE UNDER SCRUTINY AND THE FACTS REMAINED CONSISTENTLY THE SA ME IN THE YEAR UNDER CONSIDERATION ALSO. 27. IN MALABAR INDUSTRIAL CO. LTD. V. CIT 243 IT R 83(SC) WHERE AN AMOUNT WAS RECEIVED BY THE ASSESSEE AS COMPENSATION FOR DELAY IN PAYMENT FOR RUBBER PLANTATION AND THE AO FAILED TO ASSESS THE AMOUNT THE CIT WAS HEL D JUSTIFIED IN PASSING AN ORDER OF REVISION TO ASSESS SUCH AMOUNT AS INCOME FROM OTHER SOURCES. CLEARLY THE FACTS IN THE PRESENT CASE ARE AT ENTIRE VARIANCE WITH THOSE PRES ENT BEFORE THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD.. THE PRESENT IS NOT AT ALL A CASE OF NO ENQUIRY BY THE AO THE FACTS REMAINING THE SAME AS IN THE EARLIER YEAR S WHERE UNDER SCRUTINY THE DEDUCTION CLAIMED U/S 80 IB WAS ALLOWED. 28. IN RAMPYARI DEVI SARAOGI V. CIT WEST BENGAL 67 ITR 84 (SC) WHERE THERE WAS AMPLE MATERIAL TO SHOW THAT THE AO HAD MADE THE ASS ESSMENT IN UNDUE HASTE WITHOUT ANY EVIDENCE OR ENQUIRY THE COMMISSIONER WAS HELD TO H AVE RIGHTLY EXERCISED REVISIONAL JURISDICTION. EVIDENTLY THE PRESENT IS NOT A CASE OF EITHER UNDUE HASTE ON THE PART OF THE AO OR THE DEDUCTION HAVING BEEN ALLOWED TO THE ASSE SSEE WITHOUT ANY EVIDENCE OR ENQUIRY AS ABOVE. 29. IN CIT V. MCMILLAN &CO. 33 ITR 182(SC) IT W AS HELD INTER ALIA THAT THE AO EVEN WHEN HE ACCEPTS THE METHOD OF ACCOUNTING HE I S NOT BOUND BY THE FIGURE OF PROFITS SHOWN IN THE ACCOUNT AND IF AND WHEN AN APPEAL IS T AKEN BY THE ASSESSEE THE FIRST 20 ITA 2157(DEL)09 APPELLATE AUTHORITY CAN RE-EXAMINE THE BOOKS OF ACC OUNT TO TEST THE CORRECTNESS OF THE ASSESSMENT MADE. OBVIOUSLY THESE ARE NOT THE FACT S OF THE CASE AT HAND. HERE THE AO ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 8 0 IB OF THE ACT SINCE THE ACTIVITY OF THE ASSESSEE WAS THAT OF MANUFACTURE AND SUCH DEDUCTION HAD BEEN ALLOWED TO THE ASSESSEE IN THE EARLIER YEARS UNDER SCRUTINY ASSESSMENT. 30. IN VIEW OF THE ABOVE FINDING FORCE IN THE GRIE VANCE SOUGHT TO BE RAISED BY THE ASSESSEE WE HEREBY ACCEPT THE SAME. THERE IS NOT HING ERRONEOUS MUCH LESS PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN THE ASSESSMENT ORD ER. THE ORDER OF THE CIT PASSED U/S 263 OF THE ACT IS QUASHED AND THAT PASSED BY THE AO IS REVIVED. 31. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.4.2010. SD/- SD/- (B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 30.04.2010 *RM COPY FORWARDED TO: 1. SHRI GOVIND SINGH 702-703 ANSAL CHAMBER-II 6-BHIKAJI CAMA PLACE N.DELHI. 2. DCIT CIRCLE 24(1) NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY DEPUTY REGISTRAR