$ * IN HIGH COURT OF DELHI AT NEW DELHI 20. + ITA 625/2010 COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. Rohit Madan, Advocate. versus TONY ELECTRONICS LTD ..... Respondent Through: Mr.Satyen Sethi, Advocate. CORAM: DR. JUSTICE S.MURALIDHAR MR. JUSTICE VIBHU BAKHRU ORDER % 05.10.2015 1. This appeal by Revenue under Section 260A of Income Tax Act, 1961 ( Act ) is directed against order dated 17th July 2009 passed by Income Tax Appellate Tribunal ( ITAT ) in ITA No. 4658/Del/2000 for Assessment Year ( AY ) 1997-98. 2. six issues raised by Revenue are as under: (A) Whether on facts and in circumstances of case, ITAT erred in law and on merits in deleting addition of Rs.85,28,745/- on account of suppressed production and sale of AMT cut at Unit G-3 & G-4? ITA 625/2010 Page 1 of 8 (B) Whether on facts and in circumstances of case, ITAT erred in law and on merits in granting depreciation of Rs.2,46,135/- fixed assets in respect of Namoli Unit? (C) Whether on facts and in circumstances of case, ITAT erred in law and on merits in deleting addition of Rs.23,97,748/- on account suppressed sale of blank audio cassettes from Namoli Unit? (D) Whether on facts and in circumstances of case, ITAT erred in law and on merits in granting deduction u/s 80HH of Income Tax Act, 1961 of Rs.67,37,569/- and 80-1 of Income Tax Act, 1961 of Rs.84,21,961/- in respect of Namoli Unit and deduction u/s 80-IA of Income Tax Act, 1961 of Rs.34,83,289/- in respect of Malanpur Unit? (F) Whether on facts and in circumstances of case, ITAT erred in law and on merits in deleting addition of Rs.2,35,24,595/- on account of undisclosed investment in production in Unit G-5 & G-6? 3. At outset, it requires to be noticed that questions B and D stand covered by decision of this Court in CIT v. Tony Electronics Ltd. [2015] 375 ITR 431 (Del) in favour of Assessee and against Revenue. 4. Question C is covered in favour of Assessee and against Revenue by decision of Supreme Court in JCIT v. Mandideep Engineering ITA 625/2010 Page 2 of 8 &Packing Industries (P) Ltd. (2007) 292 ITR 1 (SC) and decision of this Court in CIT v. SKG Engineering Pvt. Ltd. (2006) 285 ITR 423 (Del) which in turn refers to decisions in CIT v. J.P. Tobacco (1998) 229 ITR 123 (MP) and CIT v. Chokshi Contracts Pvt. Ltd. (2001) 251 ITR 587 (Raj). 5. As far as Question is concerned facts are that during relevant AY Assessee was engaged in manufacture of audio magnetic tapes ( AMT ), assembly of audio cassettes, manufacture of video magnetic tape ( VMT ) and assembly of video cassettes. Assessee had five units. It was producing AMT at Unit I at Noida and VMT in Unit II, also at Noida. Assessee was assembling blank audio cassettes at Unit IV viz., Namoli Unit and blank audio/video cassettes at its Unit V in Malanpur. Daryaganj Unit of Assessee was trading in audio and video cassettes. 6. For AY in question, Assessee had shown production of 1,43,20,025 AMT cuts of various lengths i.e. C-60, C-45 and C-36. Assessing Officer ( AO ) adopted three different methods to examine question whether Assessee had understated its production figures. Using method based on length of polyester film roll, AO concluded that ITA 625/2010 Page 3 of 8 production of AMT C-60 cuts had been understated by 16%. In other words, production was understated by 22,29,256 AMT cuts. Adopting another working method based on weight of polyester film roll, AO concluded that production of AMT C-60 cut had been understated by 4,04,864 cuts. Using third method on basis of consumption of chemicals, AO concluded that 28,42,915 AMT C-60 cuts were produced outside books. Accordingly, addition of Rs. 85,28,745 was made on basis that 28,42,915 must have been sold at Rs.3 per cut. 7. Commissioner of Income Tax (Appeals) [CIT (A)] allowed Assessee s appeal by order dated 20th September 2000 and reversed above order of AO. CIT(A) found that AO had presumed length of entire polyester film roll to be 6100 m, whereas, all rolls were not of that length. Even wastage of batch of roll was presumed to be 14% without making comparison with actual production. There was no reason given by AO as to why details of actual production were ignored. Moreover, manufacturing record was verified by excise authorities and no discrepancy had been noted in relevant statutory registers. Even calculation of excess production based on ITA 625/2010 Page 4 of 8 consumption of chemicals was factually incorrect particularly since chemical was not principal raw material. CIT (A) also noted that AO had made additions by taking sale of AMT cut at Rs.3 per cut, which was inclusive of excise duty of 60 paise. ITAT in impugned order upheld above findings of CIT (A). 8. Having heard learned counsel for parties, Court is of view that opinion of CIT (A), which has been concurred with by ITAT, was essentially based on facts. order of CIT (A) has elaborately discussed said facts in support of its conclusion. With factual findings of both CIT (A) and ITAT being concurrent, Court is of view that no substantial question of law arises for consideration, as far this issue is concerned. 9. Question C relates to addition of Rs.23,97,748 on account of sale of blank audio cassettes produced at Namoli unit. Assessee had been selling different categories of cassettes at price range of Rs.7.50 to Rs.22.10 per cassette. This according to Assessee was its market strategy. bulk of sale was made at two price ranges i.e., Rs.16.45 and Rs.22.10 per cassette. AO concluded that lower priced models ought to have ITA 625/2010 Page 5 of 8 been sold at Rs.17.25 per piece and on that basis made addition of Rs.23,97,748. 10. CIT (A) noted that additions were made without there being any evidence of under-invoicing of sales. additions were made on basis of suspicion. Merely because some of cassettes were sold at higher price, it did not mean that all cassettes ought to have been sold at higher price. Again, CIT (A) noted that Revenue was unable to point out any defect in books maintained by Assessee. 11. Here again, findings of CIT (A) concurred with by ITAT are entirely based on facts. Consequently, no substantial question of law arises in this regard. 12. Question F relates to addition of Rs. 2,35,24,595 on account of alleged undisclosed investment in production of VMT. AO proceeded on basis that weight of VMT E-80 cut, exclusive of wastage, was 90 grams. Inclusive of wastage weight was 104.65 grams. AO concluded that from polyester film roll having weight of 41.99 kg, 550 finished VMT cuts could be produced. On that basis, AO concluded that ITA 625/2010 Page 6 of 8 Assessee had understated its consumption of polyester film roll by 87518 kgs. On that basis, undisclosed investment in 2084 polyester film rolls was computed at Rs1,72,18,008. further sum of Rs.63,06,587 was added on ground that Assessee had shown under consumption of chemicals to extent of 19,876.6 kg. 13. CIT (A) pointed out that even according to AO s own calculations, content of polyester film in VMT cut worked out to 76.34 grams. CIT (A) concluded that polyester film content of 1 VMT E- 180 could not be 90 gm as surmised by AO because that would exceed gross weight of polyester film. very foundation of alleged understatement of consumption was therefore found to be misconceived. 90 gm of VMT comprised polyester film (76.34 grams) and chemicals (14 grams). AO in making addition did not consider weight of chemicals. As result, entire calculation was rendered erroneous. 14. On this aspect as well conclusion of CIT (A) as affirmed by ITAT appears to have turned on facts. Consequently, Court declines to frame question of law on this issue. ITA 625/2010 Page 7 of 8 15. For aforementioned reasons, appeal is dismissed. S.MURALIDHAR, J VIBHU BAKHRU, J OCTOBER 5, 2015 mg ITA 625/2010 Page 8 of 8 COMMISSIONER OF INCOME TAX v. TONY ELECTRONICS LTD