COMMISSIONER OF INCOME TAX Vs. CONTINENTAL ENGINES LTD

JUDGEMENT

(1.) The Revenue has preferred this appeal against the judgment dated 21 st July, 2009 of the Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal"). Vide the impugned judgment, the Tribunal disallowed the appeal of the Revenue preferred against the order of the CIT(A) in respect of the assessment year 2003-04, 2004-05 and 2005-06. The present appeal is filed by the Revenue in respect of the impugned order relating to assessment year 2003-04 only.

(2.) The assessee filed return of income of 1,67,04,890/-. The case was processed and taken up for scrutiny. Notice under Section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was issued.

(3.) The assessee company is an export oriented unit and is engaged in the manufacturing of machined aluminium cylinder heads which includes cylinder heads, cylinder blocks, dies and moulds, manifolds, etc. During the assessment year 2003-04, the assessee made purchases of 4.93 crores from its sister concerns, M/s. Continental Brakes Ltd. and 5.58 crores from M/s.L.P. Casting Pvt. Ltd. Since the bulk of purchases were made from the sister concerns, the transactions of the assessee were extensively investigated by the Assessing Officer (AO). Notice under Section 133(6) was also sent to ascertain the genuineness and veracity of the purchases made. The assessee is running its business at two places having an old unit at Gurgaon termed as CEL-I? and the second unit at Bhiwadi termed as CEL-II?. The assessee claimed deduction under Section 80HHC of the Act for CEL-I and exemption under Section 10B for unit at Bhiwadi, CELII. The assessee had shown net profit of 8,56,49,780/- on a turnover of 26,49,90,680/-