2009 (10) TMI 946 - AT - Income Tax

Tribunal rules in favor of assessee, dismissing Revenue's challenges and upholding deduction under section 10B.

The Tribunal allowed the assessee's appeal by directing the deletion of the addition for transport expenses and closing stock. It dismissed the Revenue's ... - Issues Involved:1. Addition of transport expenses.2. Addition to closing stock.3. Validity of assessment framed on legal grounds.4. Claim of deduction under section 10B of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Addition of Transport Expenses:The assessee challenged the addition of Rs. 98,61,526/- made by the Assessing Officer (A.O.) for transport expenses, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that complete details were submitted, and no defects were found. Payments were made by account payee cheques, and tax was deducted at source. The discrepancy was due to TDS not considered by the parties and differences in recording bill dates. The Tribunal found that the assessee maintained regular books of accounts, confirmed transactions, and provided Permanent Account Numbers for the parties. The Tribunal held that the addition was unjustified and directed its deletion.2. Addition to Closing Stock:The assessee contested the addition of Rs. 13,50,126/- to closing stock, reduced from Rs. 8,54,64,296/- by CIT(A). The A.O. based the addition on seized documents, which the assessee claimed were erroneous due to software issues. The A.O. accepted the software error but still made the addition. The Tribunal noted that no excess stock was found during the search, and the A.O. had used the same closing stock in the subsequent assessment year. The Tribunal found the addition unjustified and directed its deletion.3. Validity of Assessment Framed on Legal Grounds:The assessee argued that the assessment was invalid as no opportunity was granted before approval under section 153D, and the transfer of the case was not communicated. The Tribunal, referencing section 127(3), held that no opportunity was required for transfers within the same city. The CIT(A) had found that the Additional CIT approved the assessment in compliance with section 153D. The Tribunal dismissed the ground, finding no merit in the assessee's arguments.4. Claim of Deduction Under Section 10B:The Revenue challenged the CIT(A)'s decision to allow the assessee's claim for deduction under section 10B. The A.O. argued that the assessee was not engaged in manufacturing, the unit was formed by splitting up or reconstructing an existing business, and profits were inflated. The Tribunal found that the assessee was engaged in the production of iron ore, which qualifies as manufacturing. The Tribunal noted that the 100% EOU was a new unit with separate books and no evidence of splitting up or reconstruction. The Tribunal also found no justification for the A.O.'s profit bifurcation, as separate audited accounts were maintained. The Tribunal upheld the CIT(A)'s decision to allow the deduction under section 10B.Separate Judgments Delivered:None mentioned.Conclusion:The Tribunal partly allowed the assessee's appeal, dismissed the Revenue's appeals, and dismissed the assessee's cross-objection.