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II. In this connection, the assessee company submits the following details about the records available with Assessing Officer, inquiries made by him and replies and details submitted by the assessee company:
(a) As per the provisions of section 80IC (7) and 80IE(6) read with section 80IA (7), every undertaking claiming deduction under the said provisions is required to get its accounts audited by a Chartered Accountant and furnish the report of such audit in Form no. 10CCB along with the return of income.
regarding eligibility of claim u/s. 80IC and 80IE of the Act viz. 
                                         a.             location of the undertaking,
                                         b.             commencement of commercial production,
                                         c.             articles     manufactured    or   produced     i.e.
pharmaceutical products (schedule XIV, part C, sr. no. 12) etc. Thereafter, the AO asked the assessee company to provide the details of other operating income of Baddi & Sikkim Unit and to explain its eligibility for claim u/s. 80IC and 80IE of the Act respectively.

hearing but merely not mention in the assessment order.

(c) Further, the Assessing Officer has made in-depth inquiries regarding the amount of expenditure debited to P&L account of Baddi & Sikkim unit of the assessee company, the basis of allocation of various expenses and amount claimed as deduction u/s. 80IC and 80IE of the Act. Thereafter, not being satisfied by the replies of the assessee company, the Assessing Officer has proceeded to modify the claim of deduction u/s. 80IC & 80IE of the Act on account of other operating incomes and rejected the basis of allocation of expenses of the assessee company to both the eligible units and allocated the expenditure as per his calculations and made certain disallowance in this matter in his assessment order at various para mentioned in point 5.2(111) supra.

that the AO failed to make inquiry regarding the manufacturing process and nature of medicines being manufactured and thus alleged that assessment order is vitiated for this reason. In this connection, we take note of the reply dated 10 t h December, 2016 placed by assessee before the AO touching the aforesaid issue. As pointed out on behalf of the assessee, the books of accounts of Baddi unit and Sikkim units are maintained separately and the allocation of common expenditure is made on rational basis consistently followed year after year. The AO has examined the issue reasonably and had also posed several queries to the assessee in the course of the assessment proceedings towards basis of allocation of common expenses and R&D expenses and also discovery costs of R&D expenses and capital expenditure on R&D etc. The eligibility for claim of deduction under s.80IC of the Act (Baddi unit) and 80IE of the Act (Sikkim unit) was also verified. Thus, the AO was clearly live to the issue and there was active application of mind in as much as the AO indulged in re- allocation of expenses and re-determination of amount eligible of deduction under s.80IC and 80IE of the Act. Significantly, the AO made disallowance of Rs.27.47 Crores in relation to Baddi unit and Rs.70.87 Crores in relation to Sikkim unit. To dwell further, it is also the case of the assessee that Baddi unit came in existence way back in AY 2006-07 and has been subjected to scrutiny year after year. Thus, there appears no perceptible occasion for the AO to revisit the facts concerning manufacturing process etc. threadbare as raised. The Sikkim unit is also in operation since AY 2012-13 and thus, this is not the first year of operation. We also note that the assessment made on similar basis was accepted in the earlier year as well as in subsequent I T A N o . 1 6 4 / Ah d / 1 8 [ T o r r e n t P h a r m a c e u t i c a l s L t d . v s . D C I T ] A. Y . 2 0 1 4 - 1 5 - 38 -