TaxTMI 
TaxTMI 
2013 (4) TMI 573
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....ng additions/disallowances confirmed by the Ld. CIT(A): (a) Credit appearing in the capital account brought to tax under 'other sources' : Rs. 14,96,230/-. (b) Addition relating to shortage of stock : Rs.1,85,60,113/- (c) Disallowance of claim of payments relating to group gratuity scheme : Rs. 1,01,111/- (d) Denial of deduction u/s. 80HHC of the Act. (e) Denial of deduction u/s. 80IB of the Act. 4. The facts relating to the case are stated in brief. The assessee is engaged in the business of processing of raw cashew nuts and export of cashew kernels. She filed her return of income for the year under consideration on 31-03-2004 declaring a total income of Rs.6,22,169/- after claiming deductions u/s. 80HHC and u/s. 80IB of the Act. Subsequently, the Assessing Officer noticed that the deductions claimed u/s. 80HHC and 80IB were excessive. Accordingly, she re-opened the assessment by issuing notice u/s. 148 of the Act on 24-08-2005. The Assessing Officer later completed the assessment by determining the total income at Rs.1,92,70,240/- making various additions. The assessee challenged all the additions before the Ld. CIT(A), but could not succeed. Hence, the assessee....
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.... worked out to 21.50% of the total purchases. The Assessing Officer considered it to be very much on the higher side. When questioned, the assessee submitted that the purchases, production and closing stock are all supported by purchase invoices and stock registers. Accordingly, it was submitted that the shortage of stock declared by the assessee is the actual shortage due to driage loss and transit loss. On further analysis, the Assessing Officer noticed that the shortage declared by the assessee worked out to be 1.8% on imported items and 45.8% on local purchases. The Assessing Officer referred to three comparable cases, namely, K.R. Ushasree of Sai Exports, A. Abdul Azees and A. Ramachandran and noticed that the deficit stock declared by those assessees was less than 1%. The assessing officer further noticed that the assessee had shown the quantity of bags processed at 39564 bags for sales tax purposes, where as she has shown the processed quantity at 32072 bags for income tax purposes. Hence, the assessing officer came to the conclusion that the shortage of stock claimed by the assessee was very much on the higher side. The Assessing Officer, accordingly, limited the claim of s....
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....new explanations and accordingly objected to the admission of the additional grounds. 10. After the receipt of the remand report, the Ld CIT(A) posted the case for hearing on 18.02.2009. In the meantime, the assessing officer again reopened the assessment of the year under consideration in order to rework the deduction u/s 80HHC of the Act in view of the decision of Hon'ble Supreme Court in the case of CIT Vs. K.Ravindranathan Nair (295 ITR 228). In the return filed in response to the notice issued u/s 148 of the Act, the assessee offered the value of high sea sales as her income. Hence, the assessee filed a letter before Ld CIT(A) seeking permission to withdraw the additional grounds urged before him. The assessee also stated that the additional grounds may be treated as not pressed. 11. The Ld. CIT(A) noticed that the assessee has been shifting her stands very often by making altogether new claims, viz., (a) first it was claimed that the shortage was due to driage loss and transit loss; (b) Later it was submitted that the delivery of the import was taken by the sister concern; (c) when the assessing officer called for the books of accounts of the sister concern in order to ....
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....e theory of high sea sales and accordingly determined the value of 6141 bags, on the basis of average sales rate, at Rs.1,85,60,113/-. We find merit in the stand taken by the Ld. CIT(A) since:- (a) the transaction of alleged high seas sales have been entered with the sister concern of the assessee. (b) the alleged transactions of high seas sales/purchases have not been recorded in the books of the assessee as well as in the books of the sister concern. (c) the high seas sales invoice as well as high seas sales agreement are self- generated documents within the control of the assessee and hence lacks credence. No external documents were brought on record in support of claim. (d) The claim of the assessee that it had declared the value of high seas sales in the return filed in response to the subsequent 148 notice also needs to be rejected, as the re-opening of assessment is always for the benefit of the revenue. Accordingly, we uphold the order of Ld CIT(A) on this issue. 14. The next issue relates to the claim of payment to group gratuity scheme. The assessee submitted before the Assessing Officer that she had incurred a sum of Rs.1,01,111/- towards payment of gro....
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....med the order of the Assessing Officer on this issue. 18. We have heard the rival contentions on this issue and perused the record. Before us also, the assessee failed to show that she is eligible for deduction under sec. 80IB of the Act, even after exclusion of incidental incomes, which are not related to the manufacturing activity. Accordingly, we confirm the order of the Ld. CIT(A) on this issue. 19. Now we shall take up the appeal numbered as ITA 388/Coch/09. The issue relating to deduction u/s 80HHC of the Act is available in both the appeals. We shall first set out the facts relating to the deduction u/s 80HHC of the Act as available in the appeal numbered as ITA 387/Coch/2009. In the first round of reopening, the assessing officer noticed following errors in the computation of deduction u/s 80HHC of the Act:- (a) Loss arising on manufactured goods was not set off against the profits and the same was not in accordance with the decision of Hon'ble Supreme Court in the case of IPCA Laboratories (266 ITR 521). When this mistake was pointed out to the assessee, she accepted the proposal of the assessing to carry out necessary corrections. In addition to the above, the....
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....which weighed with the High Court for taking a different view, is that rent, commission, interest and brokerage do not possess any nexus with export turnover and, therefore, the inclusion of such items in the profits of the business would result in a distortion of the figure of export profits. The High court has relied on a decision of this court in CIT v. K. Ravindranathan Nair (2007) 295 ITR 228 (SC) in which the issue raised before this court was entirely different from the issue raised in this case. In that case, the assessee owned a factory in which he processed cashew nuts grown in his farm and he exported the cashew nuts as an exporter. At the same time, the assessee processed cashew nuts which were supplied to him by exporters on job work basis and he collected processing charges for the same. He, however, did not include such processing charges collected on job work basis in his total turnover for the purpose of computing the deduction u/s. 80HHC(3) of the Act and as a result this turnover of collection charges was left out in the computation of profits and gains of business of the assessee and as a result ninety per cent of the profits of the assessee arising out of the r....
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....n amount equal to" a percentage of the income mentioned in this section. The Constitution Bench held that the court must construe sec. 80M on its own language and arrive at its true interpretation according to the plain natural meaning of the words used by the Legislature and so construed the words "such income by way of dividends" in sub-sec. (1) of sec. 80M must be referable not only to the category of income included in the gross total income but also to the quantum of the income so included. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in Explanation (baa), the words, "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and gains of business or profession" referred to in the first part of Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assesse....
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....elate to denial of deduction claimed u/s 80IB of the Act and non-consideration of additional income relating to high sea sales. As stated earlier, the assessing officer, in the first round of re-opening of assessment, rejected the claim of deduction u/s 80IB of the Act as he found that the profit derived from manufacturing activities was NIL after excluding incidental income. In the first round of reassessment, the assessing officer also made addition relating to deficit stock. When the appeal against the said assessment order was pending before Ld CIT(A), the assessment was re-opened again to rework the deduction u/s 80HHC of the Act. In the return filed in response to the notice issued for the second time u/s 148 of the Act, the assessee appears to have claimed deduction u/s 80IB of the Act again and also disclosed additional income relating to alleged high sea sales discussed in the preceding paragraphs. It is pertinent to note that deficit stock noticed by the assessing officer in the first round of reassessment proceeding was sought to be explained by the assessee as "High sea sales" effected by it and which was omitted to be accounted in the books of accounts. Thus, the amoun....