JUDGMENT : K.S. Jhaveri, J. 1. By way of these appeals under section 260A of the Income-tax Act, 1961, the appellant has challenged the order of the Income-tax Appellate Tribunal, whereby the Tribunal has reversed the order of the Commissioner of Income-tax (Appeals) by holding the issues in favour of the assessee. 2. These appeals were admitted by this court for consideration of the following substantial questions of law: Tax Appeal No. 1181 of 2008: "Whether the Appellate Tribunal is right in law and on facts in disposing of the revenue's appeal relating to computation of deduction under section 80-HHC by considering enhanced income of Rs. 1,06,51,980/- as having become infructuous on the ground that the assessee's appeal in regard to enhancement had been allowed?" Tax Appeal No. 1182 of 2008: (1) "Whether the Appellate Tribunal is right in law and on facts in deleting the addition made on account of inflated purchase of Rs. 1,95,62,054/-?" (2) "Whether the Appellate Tribunal is right in law and on facts in deleting the entire addition of Rs. 2,12,92,907/- made on account of recalculation of transfer price of arm's length price?" Tax Appeal No. 1719 of 2010: (A) "Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 1,53,44,220/- made on account of inflation of purchase of raw materials?" (B) "Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 45,22,659/- made under section 69 of the Act on account of unexplained investment in the purchase of raw materials?" (C) "Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance of 90% of interest received by the assessee from the profit of the business for the purpose of quantifying the deduction under section 80-HHC of the Act?" (D) "Whether the Appellate Tribunal is right in law and on facts in accepting the assessee's claim for inclusion of 90% of income from the sale of advance license while quantifying business profit under section 80-HHC of Rs. 1,92,500/-?" Tax Appeal No. 1720 of 2010: "Whether the Appellate Tribunal is right in law and on facts in cancelling the penalty of Rs. 91,90,445/- levied under section 271(1)(c) of the Act?" Tax Appeal Nos. 1,92,500/-?" Tax Appeal No. 1720 of 2010: "Whether the Appellate Tribunal is right in law and on facts in cancelling the penalty of Rs. 91,90,445/- levied under section 271(1)(c) of the Act?" Tax Appeal Nos. 1816 of 2008 and 1817 of 2008: "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) and thereby deleting the penalty levied under section 271(1)(c) on the issue of adjustment made under section 92(A)(1) of the Act?" 3. Learned advocate appearing for the revenue Mr. Mehta has submitted that he has not prepared in respect of question No. 2 in Tax Appeal No. 1182 of 2008 and therefore, he requires some time to prepare question No. 2. Tax Appeal No. 1816 of 2008 is filed against the penalty order issued by the Assessing Officer in respect of adjustment of Rs. 2,12,92,907/-. Since Tax Appeal No. 1182 of 2008 on this issue is kept on 31.8.3016, Tax Appeal No. 1816 of 2008 is not heard today. 4. Learned advocate appearing for the revenue Mr. Mehta has taken us to the order passed by the Assessing Officer and contended that the Assessing Officer has rightly appreciated the fact that the assessee has tried to convert the expenses which are not shown and has taken advantage of section 80-HHC of the Income-tax Act by claiming 100% export benefits and has tried to show the income which was contrary to the norms which are fixed in the business. He has taken us to the order of the Commissioner of Income-tax (Appeals) and contended that the Commissioner of Income-tax (Appeals) has enhanced the addition by Rs. 1,06,51,980/- making the total addition to Rs. 1,95,62,054/- and directed to recompute deduction under section 80-HHC of the Act by considering enhanced income of Rs. 1,06,51,980/-. However, in further appeal before the Tribunal, the Tribunal has deleted the addition made on account of inflated purchases of Rs. 1,95,62,054/- by following its decision in the case of M/s. Gujarat Woolen Felt Mills in ITA No. 887/Ahd/2002 dated 28.2.2006. The learned counsel for the revenue has taken us to the order of the Tribunal, particularly, at page Nos. 206 to 212 of the paper book which is reproduced hereinbelow: "From the above ground, the only issue emerged as under: 'Rs. The learned counsel for the revenue has taken us to the order of the Tribunal, particularly, at page Nos. 206 to 212 of the paper book which is reproduced hereinbelow: "From the above ground, the only issue emerged as under: 'Rs. 63,04,605/- on account of deficit in consumption of some of the raw materials as compared to Standard input output norms prescribed by the Government of India for quantifying the export benefits given to exporters added as on account of unexplained investment in the purchase of raw materials. Rs. 1,32,57,449/- on account of excess consumption of some of the raw materials as compared to standard input output norms prescribed by the Government of India for quantifying the export benefits given to exporters added as inflated purchases of raw materials.' At the outset, the learned counsel of the assessee fairly stated that the issue is squarely covered in favour of the assessee by the decision of the ITAT Bench-C Ahmedabad in ITA No. 887/Ahd/2002 for A.Y. 1997-98 dated 28.2.2006 in the case of M/sk. Gujarat Woolen Felt Mills. On the other hand the learned DR relied on the order of the lower authorities. 4.1 First of all, we have gone through the facts narrated by the CIT(A) in para 2.2 which reads as under: "2.2 I have considered the submissions of the appellant, remand report of the AO and facts of the case carefully. From the facts on record, it is clear that the appellant is manufacturing medicines which are being exported. The quality control of these drugs is of high standards and the composition of the drugs will have to be maintained as per the prescribed norms and of internationally quality. For a particular medicine which is to be exported the Government of India has prescribed the input ratio of various raw materials which have been printed on the various sale invoices which have been mentioned by the appellant. As there was lot of variation in the ratio, to know the exact consumption of the raw material the statement of the General Manager (Works) namely Shri R.S. Sharma who is in-charge of production was recorded. As he was the in-charge of production his statement would determine the actual consumption of various raw material for the production of particular medicine. The statement has been reproduced in the assessment order on page 10 & 11. As he was the in-charge of production his statement would determine the actual consumption of various raw material for the production of particular medicine. The statement has been reproduced in the assessment order on page 10 & 11. He has categorically stated in reply to various question which have been put up by the AO that the consumption of raw materials is exactly in accordance to the input out ratio prescribed by the Government and printed in the sale invoices. In reply to question No. 5, 6, and 8 he has categorically mentioned that the production of export items is as per the standard norms and these inputs are also mentioned at the bottom of export sales invoice. In reply to question No. 8 he has again confirmed that production of the item is as per the standard norms and the inputs are used as per the standard usage mentioned at the bottom of sales bills. If there would have been any variation in the consumption of raw material he would have mentioned the same before the AO. Even otherwise for the formulation of medicine the standard input output ratio will have to be adhered to. He has not mentioned in any of the reply to the question that there was any variation between the standard input and output ratio in the consumption of raw material. Therefore, his statement who controls the production certifies that the consumption of raw material has been in accordance with the standard input output ratio. The appellant's submission that the consumption depends on various factors like efficiency of the plant and process involved is only an afterthought because the production manager who is the in-charge of production has nowhere mentioned that there is even slight variation in consumption from the standard input out ratio. The appellant has also not proved with any other evidence that the consumption has been different because of factors mentioned by it. Therefore, the consumption of raw material will have to be compared vis-à-vis the standard input output ratio and there is no justification of giving margin of 10% considering the statement of General Manager. After comparing the standard input and output ratio and actual consumption, it was found that there was a deficiency of certain raw material of Rs. 63,04,605/- and there was excess consumption shown by the appellant of other raw materials as Rs. 1,32,57,449/-. After comparing the standard input and output ratio and actual consumption, it was found that there was a deficiency of certain raw material of Rs. 63,04,605/- and there was excess consumption shown by the appellant of other raw materials as Rs. 1,32,57,449/-. As the deficit and excess is of different raw materials, there cannot be offset against each other as has been done by AO in the assessment order. The appellant's another argument that record are being examined by the excise department and sales tax department is of no relevance because the excise department is only concerned with the actual production and levy of excise duty rather than to examine the excess of deficiency of the raw materials which has been worked out only on the basis of standard input output ratio. Appellant's another argument that it did not have any motive in suppressing the income because most of the income is exempt under section 80-HHC of the I.T. Act is also of no relevance because the income will have to be computed on the basis of accounts and records maintained by the appellant and not on the basis of motive of the appellant and benefit of section 80HHC will be given as per provisions of the Act. The appellant has also not proved with any other evidence that the consumption has been different because of factors mentioned by it. The fact remains that the appellant has not been in a position to explain the deficiency and the alleged extra consumption of raw material vis-à-vis the standard input output ratio in view of the statement of the production manager who has strictly confirmed that the raw material has been consumed as per standard input output ratio." On these facts, the CIT(A) finally enhanced the addition vide para 2.2.3, by observing as under: "2.2.3 From the facts on record and the above discussion, it is clear that the appellant had shown less consumption of certain input raw material of rs. 63,04,605/- and the only inference is the same have been purchased from outside the books of account and the same is liable to be added as the investment from undisclosed sources and the appellant has shown more consumption of certain items to the extent of Rs. 1,32,57,449/- which has not been consumed and therefore, the purchase to this extent have been inflated to reduce the profit of the company. 1,32,57,449/- which has not been consumed and therefore, the purchase to this extent have been inflated to reduce the profit of the company. Thus the total addition which is liable to be made is Rs. 1,95,62,054/-. After considering the addition of Rs. 89,10,074/-, the income which is to be further enhanced is Rs. 1,06,51,333/-. Therefore, the AO is directed to enhance the income by Rs. 1,06,51,980/-. Accordingly, this ground is dismissed with direction to enhance the income by Rs. 1,06,51,980/-." The learned counsel of the assessee referred the Tribunal's decision, wherein the Tribunal in the case of M/s. Gujarat Woolen Felt Mills (supra) has held vide para 5 as under: "5. We have heard the parties and considered the rival submissions. It is true that no records have been maintained by the assessee after carding stage that by itself is not a ground for making addition and treating the production at the carding stage as final. The difference of 11,506 kg. Is due to wastage in the production approximately 13% of the production and looking to the standard fixed by the Handbook of the procedures, the percentage of wastage cannot be said to be excessive. In these circumstances, particularly in the absence of any specific material to show that the assessee has made a false claim of wastage, which in any case is within the parameters laid down under the Excise Duty Exemption Scheme, no addition can be made to the income of the assessee. The conclusion of the Assessing Officer, as observed by the CIT(A) is based on the production register upto the carding stage is incomplete or partial stage of the material and the addition made on the basis of such incomplete and partial effect cannot be justified. The CIT(A), in our opinion, was right in allowing the claim of the assessee." 42. It is seen from the above facts as narrated in the order of the CIT(A), which are undisputed, as well as the case law relied on by the learned counsel for the assessee, we are of the view that the CIT(A) has adopted the norms prescribed under the standard input and output ratio of consumption by the assessee-company has clearly demonstrated that it would be better of had it imported the raw material as per the input output norms. The assessee-company has claimed that it has consumed less than what is prescribed under the input output norms. The CIT(A) has wrongly relied on the input output consumption ratio and the facts in the present case are exactly identical what was before the Tribunal in the case of M/s. Gujarat Woolen Felt Mills (supra). Respectfully following the said decision of the Tribunal, we delete the addition and allow this issue of the assessee's appeal." 4.1 In view of above, the learned counsel for the revenue has contended that the Tribunal has wrongly deleted the addition made by the Assessing Officer without appreciating the facts in proper perspective and therefore, the view taken by the Tribunal is required to be reversed. 5. Learned counsel for the assessee Mr. Hemani has contended that the Tribunal has after appreciating the facts and considering the decision in the case of M/s. Gujarat Woolen Felt Mills (supra) rightly deleted the addition made by the Assessing Officer. He further contended that the decision of the Tribunal in M/s. Gujarat Woolen Felt Mills (supra) is not challenged before any higher forum, the Tribunal has rightly followed its decision and deleted the addition. 6. Tax Appeal No. 1181 of 2008 is consequential to Tax Appeal No. 1182 of 2008. If Tax Appeal No. 1182 of 2008 is dismissed, this appeal becomes infructuous. 7. We have heard learned counsel for the parties. In view of the observations made by the Tribunal, we are of the opinion, that the assessee was manufacturing pharmaceutical medicines which are being exported. The assessee was maintaining the norms which are prescribed by the Government of India for a particular pharmaceutical medicine which is to be exported. Since there was a variation in the ratio, the Assessing Officer made addition based on the statement of the General Manager, in-charge production. In our view, the Assessing Officer has based his addition on the basis of the documents which are not available on the record and based on the statement of the General Manager, in-charge Production. Whether the assessee has followed the prescribed norms is not within the purview of the Income-tax Authority. In our view, the Tribunal has rightly held that the CIT(A) was wrong in relying on the input out consumption ratio. In our view, the Assessing Officer and the Commissioner of Income-tax (Appeals) have gone on different directions. Whether the assessee has followed the prescribed norms is not within the purview of the Income-tax Authority. In our view, the Tribunal has rightly held that the CIT(A) was wrong in relying on the input out consumption ratio. In our view, the Assessing Officer and the Commissioner of Income-tax (Appeals) have gone on different directions. Therefore, the view taken by the Tribunal is required to be accepted. In that view of the matter, we answer issue No. 1 in Tax Appeal No. 1182 of 2008 in favour of the assessee and against the revenue. 7.1 So far as issue No. 2 of Tax Appeal No. 1182 of 2008 is concerned, since learned counsel for the revenue is not ready with the matter, he requested for some time. Hence we have not decided this issue and the matter is adjourned to 31.8.2016 on that point. Tax Appeal No. 1816 of 2008 arises out of a consequential penalty order passed by the Assessing Officer in respect of the adjustment made in international transaction relating to export of finished goods. Since Tax Appeal No. 1182 of 2008 is kept on 31.8.2016 for deciding this issue, Tax Appeal No. 1816 of 2008 is also kept on 31.8.2016. 7.2 Tax Appeal No. 1181 of 2008 is consequential to Tax Appeal No. 1182 of 2008. Since we have answered issue No. 1 in Tax Appeal No. 1182 of 2008 in favour of the assessee, Tax Appeal No. 1181 of 2008 becomes infructuous and hence the same is dismissed. 7.3 So far as Tax Appeal No. 1719 of 2010 is concerned, in view of the decision in Tax Appeal No. 1182 of 2008 on the point of first question, we answer questions (A) and (B) in favour of the assessee and against the revenue. So far as issue No. (C) is concerned, this issue is covered by the decision of this court in Tax Appeal No. 2030 of 2009 in the case of Assistant Commissioner of Income-tax, Bharuch Circle v. Gujarat Narmada Valley Fertilizers Co. Ltd., decided on 5.7.2016, we answer this question in favour of the assessee and against the revenue. As regards question No. (D), in view of the decision of the Apex Court in the case of Topman Exports v. Commissioner of Income-tax reported in (2012) 342 ITR 49 (SC), we answer the same in favour of the assessee and against the revenue. As regards question No. (D), in view of the decision of the Apex Court in the case of Topman Exports v. Commissioner of Income-tax reported in (2012) 342 ITR 49 (SC), we answer the same in favour of the assessee and against the revenue. In that view of the matter, the appeal is dismissed. 7.4 So far as Tax Appeal No. 1720 of 2010 is concerned, since we have dismissed Tax Appeal No. 1719 of 2010, we dismiss this appeal by answering the question in favour of the assessee and against the revenue. 7.5 So far as Tax Appeal No. 1817 of 2008 is concerned, it arises out of the consequential penalty order passed by the Assessing Officer based on the addition made on account of variation in stock. The Tribunal has deleted the addition made by the Assessing Officer on this count and in Tax Appeal No. 1182 of 2008, we have answered this issue in favour of the assessee and against the revenue. In that view of the matter, we answer question in Tax Appeal No. 1817 of 2008 in favour of the assessee and against the revenue. The appeal is therefore dismissed.