Case: Commissioner of Income Tax Vs. Supreme Graphics Creations Private Limited &amp; Another

2.Search of the business premises of the assessee was carried out under Section 132 of the Act on 16.10.1996 and the search proceedings was completed on 13.12.96. The notice under Section 158BC of the Act was served on the assessee on 11.1.1997 for the block assessment period8. The assessing officer passed the assessment order under Section 158BC(c) of the Act on 17.12.1997 and held that the total undisclosed income was Rs.26,25,020 and therefore tax thereon was quantified at Rs.15,75,012. This order was challenged before the I.T.A.T., Panaji in appeal under Section 253 of the Act and the appeal filed by the assessee has been allowed in terms of the impugned order.3.The Assessing Officer noted that the following operations as part of the process of making cartons were carried out in the premises of the assessee:(a) The printed sheets are brought to the factory of the assessee company and laminated to make the surface of the sheets smooth and attractive; (b) The laminated sheets are punched which makes the laminated paper converted into cartons; and (c) The punched paper is pasted with glue to convert into a carton.4.However, the assessing officer noted that the following two operations were not carried out in the premises of the assessee, namely (a) raw material paper was purchased from M/s. ITC Bhadrachalam Paper Boards Ltd.; and (b) the said paper is printed at the factory of the sister concern of the assessee company M/s. Neographics India.5.Under these circumstances, the assessing officer held that the assessee was not engaged in any manufacturing operations so as to claim the deduction. His reasoning was summarised in the following wordsemploys a change but every change is not manufacture and yet every change of an article is a result of treatment, labour and manipulation. But something more is necessary and there must be transformation of a new and different article must emerge having a distinct name, character or use. Thus the activities undertaken by the assessee company with the use of machinery does produce some change in the paper used as a raw material but does not bring into existence a new substance which is required to call the process of lamination and punching as manufacture."6.In appeal the Tribunal did not agree with the reasoning given by the assessing officer and while setting aside the said reasoning, the Tribunal by referring to the decisions of the Supreme Court in the case of Empire Industries Ltd. And others v. Union of India and others (A.I.R. 1986 S.C. 662), Laminated Packings (P) Ltd. Collector of Central Excise, Guntur (1990 (4) S.C.C. 51) and Union of India and another v. Babubhai Nylchand Mehta (A.I.R. 1991 S.C. 407) held that the assessees manufacturing of printed, laminated and waxed cartons was very similar to the activities carried out and covered in the above decisions. It also noted that no concealed income was found during the search operations.

Reasoning:
8.We have no doubt in our mind that the Tribunal has considered the nature of operations carried out by the assessee and by relying upon the three decisions of the Supreme Court (supra), reached to a conclusion that the assessee was carrying out a manufacturing process for making the laminated cartons. The reasoning given by the Tribunal cannot be faulted with, as it does not suffer from any errors. The Tribunal has rightly discarded the view taken by the assessing officer.