PRINCIPAL COMMISSIONER OF INCOME TAX 1versusASIAN TILES LTD.

    C/TAXAP/576/2018                           ORDER




IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                R/TAX APPEAL No. 576 of 2018
                           With
                R/TAX APPEAL No. 577 of 2018
                           With
                R/TAX APPEAL No. 578 of 2018
                           With
                R/TAX APPEAL No. 579 of 2018
                           With
                R/TAX APPEAL No. 580 of 2018
                           With
                R/TAX APPEAL No. 581 of 2018
                           With
                R/TAX APPEAL No. 582 of 2018
                           With
                R/TAX APPEAL No. 583 of 2018
                           With
                R/TAX APPEAL No. 584 of 2018
                           With
                R/TAX APPEAL No. 585 of 2018
                           With
                R/TAX APPEAL No. 586 of 2018
                           With
                R/TAX APPEAL No. 587 of 2018
                           With
                R/TAX APPEAL No. 588 of 2018
                           With
                R/TAX APPEAL No. 589 of 2018
                           With
                R/TAX APPEAL No. 590 of 2018
                           With
                R/TAX APPEAL No. 621 of 2018
                           With
                R/TAX APPEAL No. 622 of 2018
                           With
                R/TAX APPEAL No. 623 of 2018
                           With
                R/TAX APPEAL No. 624 of 2018
                           With
                R/TAX APPEAL No. 625 of 2018


                          Page 1 of 5
        C/TAXAP/576/2018                                  ORDER



                                With
                     R/TAX APPEAL No. 626 of 2018
==============================================================
        PRINCIPAL COMMISSIONER OF INCOME TAX 1
                        Versus
                    ASIAN TILES LTD.
==============================================================
Appearance :
Mr MANISH BHATT, Sr Advocate with Mrs MAUNA M BHATT, Advocate for the
PETITIONER
Mr B S SOPARKAR, Advocate for the RESPONDENTS
==============================================================

          CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI
                    and
                    HONOURABLE Mr. JUSTICE B.N. KARIA
                    11th June 2018

COMMON ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI)

      This group of appeals is filed by the Revenue and arises out of
the common judgment of the Income Tax Appellate Tribunal,

Ahmedabad [“Tribunal” for short] dated 5th May 2017 and

concerns two sets of assesses identically positioned. These assesses

were subjected to search and seizure operations by the Income-tax

authorities. The Excise preventive team also had carried out

inspection and found prima facie evidence of clandestine removal

of goods to evade excise duty. The Assessing Officer completed the

assessment at the stage where the show cause notice issued by the

Excise Department was still pending. According to the learned

counsel for the Revenue, the Assessing Officer placed reliance on

material seized during the search and only incidentally referred to

                                Page 2 of 5
        C/TAXAP/576/2018                                ORDER



the material collected by the Excise Department which formed

basis of the show cause notice. At the end of the assessment, the

Assessing Officer made additions on the basis of estimated gross

profit on the clandestinely disposed of goods manufactured by the

assesses. He also made additions in the nature of unexplained

investments.

      The assesses carried the matter in appeal.       CIT [A] gave

partial relief. Firstly, he held that not the gross profit but the net

profit be brought to tax. While doing so, more significantly, he

noticed that the assesses were eligible for deduction under Section

80IB of the Income-tax Act, 1961 and held that even the additional

income would be eligible for such deduction.

      Both the sides carried the issue before the Tribunal. The
Tribunal, by impugned judgment though confirmed clandestine

removal of goods and suppressed profit, reduced the addition to 1%

of the disclosed sales. The Tribunal maintained direction to the

Assessing Officer for giving deduction under Section 10B of the Act

to such additional income.

      Revenue has filed two sets of appeals before us which are
arising out of the said judgment of the Tribunal.

      We have heard learned advocates for the parties at a
considerable length. Prima facie, we are not in agreement with the


                               Page 3 of 5
        C/TAXAP/576/2018                                ORDER



approach adopted by the Tribunal. If for some reason, Tribunal was

of the opinion that no additions could have been made in absence

of reliable material on record, the Tribunal could have so stated. If

on the other hand, the Tribunal believed that there was diversion of

income by the assessee, the additions made by CIT [A] atleast ought

to have been confirmed. The Tribunal, after recording factors for

and against the assessees has, as if tried to balance the equities,

reduced the additions to 1% of disclosed sales. In our prima facie

view, this exercise of the Tribunal limiting the additions has no

basis. There was no co-relation between the estimated undisclosed

sales and the sales disclosed by the assesses.

      In the facts of the present case, however, we are not inclined
to examine the appeals of the Revenue any further. This is so

because the CIT [A] and the Tribunal have directed that even the

additions would qualify for deduction under Section 80IB of the

Act. If the entire income of the assessee is exempt and there is no

other source which the Revenue could trace such income to, the

entire exercise would be revenue neutral. Whether one per cent as

directed by the Tribunal, or the net profit as held by the CIT [A], or

even the gross profit; as desired by the Assessing Officer, would

yield no tax to the revenue since whatever additions that may be

made or sustained would qualify for deduction under Section 80-IB


                               Page 4 of 5
          C/TAXAP/576/2018                             ORDER



of the Act.

      Rest of the additions primarily are based on facts. CIT [A] has
given elaborate reasons to that limited extent. CIT [A] has

confirmed the additions and investments, which the Tribunal has

subsumed the same in general directions.

      In the result, all these Tax Appeals are dismissed only on this
ground.



                                                    [Akil Kureshi, J.]


                                                       [B.N Karia, J.]
Prakash




                              Page 5 of 5