AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 392
X X X X Extracts X X X X
X X X X Extracts X X X X
....y applied section 80IA 10) r.w.s. 10B(7) and allowed relief on the reasonable profits u/s. 10B and subjected the rest of the cash introduced or unexplained expenditure as income subject to taxation under the head other sources. 5. The CIT(A) ought not to have ignored the provisions of 10B(7) and 80IA(10), given the fact that the AO established the bogus purchases in the impugned case and the sales disclosed cannot be presumed to be true and correct when purchases are bogus. 6. The CIT(A) ought to have noticed that when the purchases are bogus, the sales disclosed to that extent are also to be disbelieved and accordingly the excess consideration disclosed cannot be on account of export of goods etc., and accordingly on such income no deduction u/s. 10B is admissible. 7. The CIT(A) ought to have carried out investigation or got it done through the AO as to how and why sales figures can be accepted as genuine and are eligible for relief u/s. 10B when the purchases are proved to be bogus. 8. In the facts and circumstances of the case it may be considered to remand the matter back to the CIT(A) or to the AO so as to examine the genuineness of the sales which cannot be accepted given....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ults of investigations on the other similar sundry creditors thereby disproved the claim of the assessee that the purchases were properly recorded and the sundry creditors were real creditors. Therefore, the CIT(A) rejected this contention of the assessee. 7. The CIT(A) observed that, in view of the above, the Assessing Officer was justified in concluding that either the purchases were made from some unknown parties by making payment in cash or the said creditors were only brought in as accommodating parties. The Assessing Officer has made detailed investigation into the sundry creditors and made a cogent analysis of the investigations into the sundry creditors and purchases. He was of the opinion that the Assessing Officer has really gone to the root of the credits appearing in the books and he brought out the trends adopted by the Assessee in introducing the credits and drawn to a logical conclusion. The perseverance of the Assessing Officer in bringing the bogus creditors to tax deserves appreciation and he was not inclined to interfere with the assessment order and therefore, the disallowance made in the assessment order was confirmed by the CIT(A). 8. The CIT(A) observed tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The CIT(A) observed that the assessee's contention that the opening balance of sundry creditors have been taken into account by the Assessing Officer for making the addition has been carefully considered and that the AO, in the remand report, has also submitted that the amount in question need to be taxed in the respective years and, therefore, in the assessment order, the AO at page 29 has stated that "the assessee, however, may take a plea that the respective purchases have to be added back in the relevant years. Hence, the assessments for the previous years are being reopened to tax the respective purchases on a protective basis." In view of the above, the CIT(A) directed the AO to allocate the disallowance of Rs. 9,74,49,000 among the years during which time the credits were introduced and tax accordingly. 12. The CIT(A) observed that the Assessee has also claimed deduction u/s 10B. He observed that in the assessment order at page 31, the Assessing Officer stated that "addition is made towards the creditors no longer payable/unaccounted expenditure for acquiring raw granite blocks on which exemption u/s 10B is not allowable. Even if the exemption is to be given at a later dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deed made to be real and actual, but unnamed suppliers. Thus the addition is linked to purchases for which expenditure was admittedly incurred. As the assessee is a 100% EOU, 90% of the profit derived from the export is eligible for deduction u/s 10B of the IT Act. The contention in the above grounds of appeal is, therefore, not tenable. 16. The AR submitted that even on the alternative inference of the learned AO that the purchases were made at lower rates but the expenditure on purchases was inflated by resorting to spurious credits, the result would be that there was an inflation of expenditure. This observation of the AO has not been accepted by the assessee. Before the learned CIT(A), the assessee submitted that "In fact the assessee utilized highly qualitative blocks, which are known as Black Galaxy, Black Pearl, Madurai Gold, Classic Paradise, Kashmir White, Kashmir Gold, Spicy Black, Black Paradiso, Vyara, T. Brown, etc. the cost of which would be within the range of Rs. 75,000/- CBM to Rs. 35,000/- CBM and the aggregate cost of these items amounted to Rs. 400.42 lakhs. This apart, the assessee imported raw granites from various countries to the tune of Rs. 488.57 lakhs Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the present appeal was filed on 07-03-2012. But for the assessment years 2005-06, 2006-07 and 2007-08 the assessments were reopened and reassessments completed on 31-07-2012 in the case of the assessee by bringing to tax the spurious cash credits of each of the years. In the orders for the assessment years 2006-07 and 2007-08, deduction u/s 10B with reference to the additions with Unit 2 (which is a new unit) was allowed. For 2005-06, unit I was not eligible for deduction u/s 10B, as the eligibility period had expired. In this regard, the principle of consistency is very much applicable. In the case of Radha Soami Satsang vs CIT (193 ITR 321), the Hon'ble Supreme Court held that "Where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year (Head Note)". Therefore in this view also the grounds 1 & 2 of appeal are not tenable. 19. The AR submitted that there are also the following judgements having a bearing on the issue of the profits from exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of gross profit. It is submitted that the assessee cannot demand estimation of gross profit to suit his convenience when specific additions are made in the AO". 22. The AR submitted that the AO is now totally changing the stand which was different from that was made in the remand report. Further the AO is trying to make out a new ground without it is being dealt with by him in the assessment order and without making any representation to that effect in the hearing before CIT(A) where the Addl. CIT personally appeared. As submitted above, it was held by the Gujarat High Court in the case of Simit P Sheth (supra) that only profits from bogus purchases can be added to the business profits and not the entire bogus expenditure. In any case, the AO, having rejected the plea of the assessee for estimating the profits, the AO cannot now change his stand before the Tribunal. 23. The AR submitted that all the above grounds are about application of provisions of Sec 10B(7) r.w.s. 80IB(10). Sec 8018(10) provides for adjustment of the deduction claimed where the assessee arranges the transactions of the eligible Industrial undertaking with another person in such a manner that it gets a h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of section 10B are with regard to granting of deduction to 100% exported oriented undertaking on account of export of articles or things or computer software. The income resulting on account of additions u/s. 68/69 of the Act cannot be considered as income derived from export activities though it is income of export oriented unit. The reliance placed by the learned AR on various case-law is totally misplaced. In those cases, addition is not on account of section 68, even if it is u/s. 68, it does not necessarily follow that such credit represents business income of the assessee as a general practice unless there is clear evidence that it represents business receipts. In the present case, it relates to granting of deduction with regard to profit/grain derived from export oriented unit and unless it is proved that it is from export deduction u/s. 10B cannot be granted. The contention of the assessee is not acceptable in view of the clear provisions of section 10B of the Act and the impugned additions cannot be said to be business receipts. 27. This is because the source of income is income from other sources and the Department does not have to locate any particular source of incom....