TaxTMI 
TaxTMI 
2014 (4) TMI 530
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....ound to be providing accommodation entries to various concerns in Delhi and NCR through its concerns M/s. Krishna Machine Tools and Shri Krishna Machine Tools. Assessee was also found to have obtained accommodation bills for machineries. Consequent to this investigation, a search and seizure operation was carried out at the premises of assessee on 14.02.2008 and survey u/s 133A of the Act on 03.03.2008. Notices u/s 153A were issued. The assessee company got incorporated in the year 1987 and the manufacturing activities were carried out from Delhi. The company also established production unit for production of Allopathic Pharma products at Baddi which came into operation with effect form 03.05.2005. The assessee company also did job work for CIPLA Limited and others. During the search operation, some material was found that assessee has shifted some machinery from its Delhi unit to Baddi unit which was also admitted in the statements recorded during the search operation. A survey was also carried out at Baddi unit and a valuation report was also obtained by revenue authorities to ascertain the value of the machineries at Baddi unit. The machinery was valued at Rs.6,36,52,889/- and o....
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....and on facts in directing the Assessing Officer to recomputed the depreciation thus, giving a relief of Rs.23,93,587/- to the assessee out of total disallowance of Rs.27,00,000/- made by the Assessing Officer on account of depreciation c1aimed on Delhi Unit. 9 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.24,98,104/- made by the Assessing Officer on account of unaccounted investment and expenses. 10 On the facts and in the circumstances of the case, the CIT(A) bas erred in law and on facts in deleting the addition of Rs.30,48,737/- made by Assessing Officer on account of income of D-6 Unit, Delhi. 11 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of Rs.12,00,000/- made by the Assessing Officer on account of scrap sale. 12 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in restricting the disallowance to Rs.1,36,000/- out of total disallowance of Rs.10,11,000/- made by the Assessing Office u/s 14A of the Income tax Act, 1961. 13 The order of the CIT(A) is erroneous and is not tenable on....
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....rom manufacturing activity carried out at Baddi Unit. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.1,02,40,635/- made by the Assessing Officer on account of suppression of production. 4. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the Assessing Officer was not justified in holding that the assessee had suppressed wages expenses of Rs.62,26,820/-. 5. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in restricting the addition to Rs.2,000/- out of total addition of Rs.9,00,000/- made by the Assessing Officer on account of obtaining accommodation bills of machinery. 6. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.47,97,439/- made by the Assessing Officer on account of investment in plant and machinery. 7. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in directing the Assessing Officer to recompute the depreciation thus, deleting the disallowance of Rs.2,62,321/- out of tota....
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....cts and circumstances of the case, the learned CIT(A) has erred in sustaining addition of Rs.10,00,171/- as unexplained investment u/s 69B of the Act on account of construction cost at Plot No.43-44, HPSIDC, Baddi as per the report of DVO Chandigarh. 6. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the AO has erred in reviewing the assessment proceedings for the year under consideration without there being any adverse material on record. (ii) That the above said additions are otherwise untenable since reassessment under Section 153A consequent to search is to be confined only to the incriminating material belonging to the assessee found during the course of the search. 7. The respondent craves leave to add, amend or alter any of the grounds of cross objection." ITA No.4073/Del/2012 "1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of Rs.14,40,38,568/- made by the Assessing Officer on account of deduction u/s 80lC of the Income tax Act, 1961. 2. On the facts and in the circumstances of the case, the ....
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....aw in confirming the action of AO in making disallowance of an amount of Rs.26,26,000/- invoking the provisions of Section 14A of the Act. 2. On the facts and circumstances of the case, the learned CIT(A) has erred in sustaining addition of Rs.13,33,033/ as unexplained investment u/s 69B of the Act on account of construction cost at Plot No.43-44 HPSIOC, Baddi as per the report of DVO Chandigarh. 3. On the facts and circumstances of the case, the learned CIT(A) has erred in sustaining addition of Rs.7,30,355/- on account of suppressed scrap receipt. 4. The respondent craves leave to add, amend or alter any of the grounds of cross objection." ITA No.3287/Del/2013 6. One of the common issues in all these three appeals of revenue is with regard to deduction u/s 80IC of the Act. It is Gr. No.4 in ITA No.3287/Del/ 2013 and Gr. No.1 in ITA Nos.4072 & 4073/Del/2012. The facts involved in this ground are also relevant in many other grounds, hence being decided first. 7. During the course of the assessment proceedings, the AO confronted the assessee with the material found during the course of the search and survey and also with the valuation report obtained during survey operation. A....
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....s to Krishna Machine & Tools were made during A.Y. 0607 of Rs.15,00,000/- and in A.Y. 08-09 Rs.20,55,560/- and balance amount of Rs.69,100/- was adjusted by way of debit note. Sri Krishna Machine & Tool was paid during A.Y. 06-07 and A.Y. 08-09 amount of Rs. 5,50,000/-, Rs.2,88,775/- respectively and balance amount of Rs.9,865/- was adjusted by way of debit note. In normal course the machine supplier do take advance money and only then they supply machine. But in this case payment pattern itself proves that they are accommodation bills. (3) At the last even payment was not made to Sh. Krishna Machine & Tools amounting to Rs.69,100/- which was adjusted from the account of M/s Krishna Machine & Tools after three years from the date of the purchase. It could be seen from its ledger in the books of the assessee. 9.3 It is found that there were two type of accommodation bill provider in the case of the assessee. (i) Those who are not doing any manufacturing activity and merely providing bills, (ii) Those who are actually doing manufacturing work but have provided assessee accommodation bill to the assessee, in order to secure there business interest with the assessee. Common pattern....
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....inery was introduced to create a smoke screen on for shifting of machineries by the assessee from its Delhi Unit to its Baddi Unit." 8. Based on the above finding the Assessing Officer concluded as under:- "13. In view of the above and discussion made in the preceding paras of this order, it is established that the assessee company has formed its Baddi Unit by transferring its Plant & Machinery from its Delhi Unit. As per section 80IC of the Act, a new unit should be formed. Instead of that, the assessee shifted Plant &Machinery of its old unit at Delhi and installed these used and old Machineries at another unit in tax free area at Baddi (HP) which is not permissible as per conditions laid down under section 80IC of the Act. 13.2 Incontrovertible evidence of accommodation bills of more than Rs. 54 lacs of machinery purchase as introduced by the assessee has been found by the Department during AY 2005-06 and 2006-07. Further unassailable evidence of shifting of machinery from D-6, Delhi Unit to Baddi Unit is in the possession of the department. As per statements on oath recorded (Mr. D.V. Sardana) D-6, Delhi Unit was closed in May, 2006. The assessee itself claims that the Baddi....
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.... the above referred assessment years exceeds 20% of the total value of machinery or plant used in such new business. The substance of the finding in the assessment order is that the assessee has obtained accommodation bills from one M/s Krishna Machines and Tools, M/s Shri Krishna Machines and Tools and certain other parties for plant & machinery which has not bee actually purchased and that such machinery as shown in these accommodation bills have actually been shifted from appellant's already existing unit located at D-6, Udhyog Nagar Industrial Area, New Rohtak Road, Delhi - 110041, which was no longer used for production activities. The above finding of the AO is based on certain seized material in form of accommodation bills where the words "bill only" or "no material transfer" has been written. Further, the fact of physical transfer of machineries from D-6 Unit at Delhi is also found corroborated from the statements recorded from the employees at the time of search, which has been referred to in the assessment order. Reliance has also been placed on the statement recorded of Sh. Dinesh Sharma, the main person controlling the accommodation bill providing companies/ concerns. F....
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....respect of the plant and machinery which in fact was old and was being earlier used at D-6, Delhi unit comes only to Rs. 54 lacs. The argument of the assessee is that even if such plant and machinery is treated as old in nature it is the depreciated value of such machinery, shifted to Baddi Unit which should be appropriately taken for working out eligibility u/s 80IC, at Rs. 20,57,421/-, as seen from the enclosed chart. In support of this claim the appellant in the chart has given the name of the original supplier of such machineries together with the original value and the depreciated value of such machine as on 31.03.2005 and 31.03.2006 (partly) and therefore the appellant has submitted a reworking of the total value of new machines and old machines as on the end of financial year31.03.2006, 31.03.2007 and 2008 and has submitted that the eligibility for exemption u/s 80IC is available to the assessee as per the said reworking. You are required to go through the submission and the enclosures as well as the copy of bills submitted by the appellant and offer your comments on the same. You may also offer your comments on the valuation aspect of the machineries by the accrued valuer ....
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....e records available with the assessing officer. The assessing officer is wrongly assuming that the assessee has submitted additional evidences. On going through the Annexures which have be enclosed therein your honour will notice that the assessee has submitted a chart showing yearwise details of the old machines as alleged by the learned assessing officer in Annexure A-2. In Annexure A-3 the same machines have been stated again as alleged by the learned assessing officer and a working of the written down value has been done. Thus this is an analysis of the allegations of the AO. Further the value of these machines is as per the records for each of the assessment years and also referred to in the search and seized record and the statements which have been curled out by the assessee and put in here. Accordingly the assessing officer was not justified in objecting to this analysis as additional evidence. 6. Further your honour will appreciate that the assessing officer in the assessment order has made an allegation that the value of the old machines is more than the prescribed percentage for availing exemption under Section 80-IC of the Act. It is not the case of the AO that he has ....
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....e matter and is essential for rendering substantial justice then the same is required to be admitted.-Bonanza Stock Brokers vs. ITO (ITA No. 1002/Del/06)(ITAT) Abhay Technoplast (HUF) vs. ITO (ITA No. 565/Del/07)(ITAT). IV. Hon'ble Supreme Court in the case of Collector Land Katiji, 167 ITR 471 (SC) also held that when technical consideration are pitted against the cause of substantial justice, the latter must prevail. V. Additional Evidence if in the interest of justice, and renders assistance to the authority in passing order, may be admitted-held in Dwarka Prasad V/s ITO 63ITD. 7. The assessing officer in para 5.2 has referred to certain judgments to the accepted preposition that it is assessee who has to substantiate its return and claim of deduction. The AO has stated that burden is not discharged by any fantastic explanation. Here is a case where the assessee has justified its claim and the AO is rejecting the same as fantastic which is being contested by the assessee. 8. In para 5.3 the assessing officer stated that the written down value is not acceptable for the reason that the specification strips were not found on the machines and in the absence of the same the life ....
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....to the valuation done by Mr. Umesh Johar of M/s Johar & Associates and on this basis he has stated that the correctness of inspection and valuation is beyond doubt. In this connection in our written submission we have raised the following issues:- i) Who is the approved valuer? Mr. Umesh Johar or Mr. A.K. Govil. In this regard there is an inspection report dated 9th May, 2008 signed by Mr. Umesh Johar and there is a valuation report dated 23rd June, 2008 signed by Mr. A.K. Govil. On the report signed by Mr. Umesh Johar there is no registration number appearing of an approved valuer. It is a fact on record that Mr. A.K. Govil has not visited nor inspected the Baddi unit. If that be the case how come Mr. A.K. Govil has valued the machinery as there is no answer to this in the remand report. ii) Secondly what is the basis for present day replacement nowhere is coming in the report. Is it based on the quotations obtained from the suppliers or is it an arbitrary estimate? There is no answer to this. How can the machinery has been valued at a replacement value when the law is clear that the machinery has to be valued at cost. iii) On going through the inspection report the life span o....
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....e arithmetical calculations of WDV submitted in this chart appears to be correct. This statement of the AO in this para 8 that the description and the calculation is correct proves beyond doubt that old machineries are limited to this chart only and for which the valuation as worked out by the assessee is correct and the valuation done by the valuer on the basis of which the AO has denied deduction under Section 80 IC is incorrect and cannot be relied upon. (h) It is important to note that the description of the machineries having been tallied there is no reason to doubt about the machines particularly on the basis that the strips were not available. In view of the above facts it is submitted that the AO has not appreciated the issue which is being contended before your honour. Your honour will appreciate the basis for denying deduction under Section 80IC is that assessee has shifted its old plant and machinery from Delhi to Baddi unit. This allegation is being made on the basis of certain documents found during the course of the search and the statement recorded. Further based on this statement a survey has been carried out on the basis of which an inspection was carried out and....
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....t stage and nothing adverse has been pointed out. Accordingly there cannot be any dispute to the extent of these new machineries at Baddi unit. In these circumstances the case of the assessee squarely falls within the eligibility prescribed under Section 80IC as has been explained in the written submission as under:- The total value of the machinery for A.Y. 2006-07 will be as under:- Total machineries as per books : Rs.2,57,65,050/- Less: Machineries in which there is an allegation That the bills are not genuine : Rs. 53,23,540/- New machineries for which there is no dispute : Rs.2,04,41,510/- Old machineries as per list enclosed : Rs. 20,40,750/- Total value of machineries : Rs.2,24,84,260/- % of old machineries : 9.09% Your honour will appreciate that the percentage of the old machinery is much less than 20% prescribed under Explanation 2 to Section 80IC of the Act. In view of above facts the assessee is eligible for exemption under Section 80IC of the Act. We may further submit that the above computation is for the assessment year 2006-07. In the assessment year 2007-08 the assessee has made a further addition of new machinery of Rs.9693657/-. There is no dispu....
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....ction, the alternate argument of the appellant is that even if part of the machinery installed at Baddi (which as per the accommodation bills purchased, is for a total consideration of Rs.54 lacs) is taken as old still the appellant's claim is allowable in terms of the provisions of Section 80IC, as the value of old plant and machinery installed at Baddi vis- à-vis the newly installed plant and machinery remains within 20%. A. From the assessment order it is noted that the main points on basis of which the AO has given his finding regarding shifting of old plant and machinery from Delhi Unit to Baddi Unit are as follows:- i. Statements recorded of Sh. Dinesh Sharma, the proprietor of M/s Krishna Machine Tools and M/s Shri Krishna Machine Tools who during the course of earlier searches conducted on him by Central Excise Authorities and Income Tax Department had admitted to have provided "only accommodation bills" for purchase of certain plant and machinery without having actually supplied any such machinery to the assessee company. The copy of statement of Sh. Dinesh Sharma has been provided to the appellant, who has failed to controvert the same. ii. During the course of ....
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....d from Delhi Unit and installed at Baddi Unit under the garb/cover of new machinery. v. Apart from the above, the AO has also brought on record the fact that in all such cases where accommodation bill have been purchased, the payment patter consistently shows that there has been unreasonable and undue time lag in making payment, extending to more than 2 years, which is not a normal feature of business when genuine purchases are made. vi. Thus on a combined and cumulative analysis of the above facts, as brought out in detail by the AO in the assessment order, I am of the firm considered view and in absolute agreement with the AO's finding that certain old machineries from D-6, Udyog Vihar, Delhi have been passed off as new machinery installed at Baddi by purchasing accommodation bills from various parties, as referred to in the assessment order. As to the question of the value of such old machineries passed off as new, it is observed from para 13.2 of the assessment order that the AO has himself categorically held that incontrovertible evidence of accommodation bills of more than Rs.54 lacs of machinery purchases, as introduced by the assessee, has been found by the department dur....
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....e valuation report it is firstly observed that the Departmental Valuer has recorded the present day replacement value of the machinery i.e. the value on the date of inspection i.e. 3.3.2008 and thereafter a discounted value has been worked out as on 31st March, 2005. No basis of working of this discounted value has been stated. Further Para 9 of the valuation report reflects that the valuer has taken quotation/verbal confirmation from the suppliers for estimating the valuation as on 3.3.2008. No such quotation has been made part of the report, nor has it been stated that from which supplier and for which brand the verbal quotation for machinery has been taken. The subject valuation report suffers from yet another defect. The purpose of obtaining this valuation report was to value the old machineries which according to A.O. had been installed at Baddi Unit. This would entail that such finding has to be taken to its logical end i.e. the cost of these machineries as on the date of acquisition has to be ascertained and thereafter depreciation upto the date on which the machinery has been shifted to Baddi Unit has to provided for. However, instead the impugned valuation report takes in....
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.... Machine Tools, Sri Krishna Machine & Tools and certain other bills of other suppliers and held that these bills are accommodation bills. In para 13 of the assessment order the AO has given a categorical finding that the assessee has taken accommodation bills of Rs.54 lacs. However there is no categorical and firm positive adverse finding of fact as regards the other purchases of the machineries, (apart from the valuation report of the departmental valuer which for the reasons discussed above, cannot be regarded as conclusive). Accordingly, as regards the other purchases of machineries a reasonable view as regards their age has to be taken based on other evidences on record. It is seen from the assessment order that during the course of the assessment proceedings the assessee had submitted complete list of machineries and the list of suppliers along with their name and address and a photocopy of their purchase bills. The assessee has submitted confirmation/affidavits from each of these suppliers. The assessee also submitted evidences in support of the fact that the machinery had in fact moved from the respective suppliers either to Baddi Unit or after having been received at Delhi....
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.... be logically substituted for the purposes of calculation of the percentage of old machinery vis-à-vis new machinery. For this purpose the assessee has submitted six annexures, which as under:- i) Annexure - A (i) - Statement showing party wise detail of old machines as alleged by the A.O. ii) Annexure - A (ii) Statement showing machine wise detail of the old Machines as alleged by the A.O. iii) Annexure - A (iii) Statement showing detailed year wise calculation of the WDV of old machines as alleged by the AO. iv) Annexure - A(iv) Statement showing machine wise addition of Plant & Machinery at Baddi Unit in comparison with valuation made by the Department Valuer. v) Annexure - A(v) Statement showing year wise addition to Plant & Machinery installed at Baddi. vi) Annexure -A(vi) Copies of the corresponding old bills of the old machineries as alleged by the AO. (i) All the above said annexures along with written submission of the assessee was forwarded to the AO for his comments vide letter dated 07.07.2011. Subsequently the copy of the AO's remand report received thereon was provided to the appellant for his counter comments. The appellant's rejoinder is summarized as ....
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....rchases of accommodation bills for machineries for the value of Rs. 54 lacs and their computation for calculating their WDV as on 31.03.05 and statement showing addition to plant and machinery along with other documents submitted are admitted for purposes of deciding the issue at hand. Additionally, these documents go to the basic premise of the issue in question and are otherwise relevant for deciding the alternate Ground of Appeal No.10-(iv), taken by the appellant. (ii) With regard to adoption of WDV of the machineries transferred from D-6 Delhi Unit to Baddi Unit, the AO in his remand report has on merits, made the following comments:- In para 5.3 of the remand report the AO has stated that the written down value is not acceptable for the reason that the specification strips were not found on the machines and in the absence of the same the life span could not be exactly determined. Further in sub-para (ii) it has been stated that in the absence of the specification strips on the machines, it is now not verifiable as copies of the bills submitted before your goodself are for the same machines which have been shifted to Baddi unit by the assessee. Because on the bills the numbe....
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....spelled out the reasons in the preceding paras as to why the Inspection & Valuation report of the Approved valuer cannot be made the basis for determining the age & value of the machineries installed at Baddi for 80IC purposes. The AO in the remand report has accepted the fact in para 8 of his remand report that the list of the machineries submitted by the assessee for calculating the written down value reveals that the description of the machines mentioned is the same and is in accordance with valuation report. Further the AO in para 8 has also admitted the fact that the arithmetical calculations of WDV submitted in this chart appears to be correct. From this statement of the AO it is concluded that the WDV of the old machineries as computed & submitted by the appellant are correct. As regards the other machineries installed at Baddi Unit, a finding has already been given in the proceeding paras that n view of the affidavits & other documents / copy of accounts, confirmation of suppliers / payment in cheques to the suppliers/ transportation bills & the fact that the description of machines as written on the bills tallies with the machineries found at Baddi Unit, during the surve....
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....he learned DR relied on the order of the Assessing Officer and pleaded that the order of CIT (A) may be set aside. 16. Learned AR submitted that the order passed by the AO was arbitrary. It has been passed by ignoring the facts and the contention as brought out by assessee vide its submissions made on 27.11.2009, 30.11.2009, 7.12.2009, 11.12.2009 and 24.12.2009. In these submissions, assessee has clarified each and every issue raised by Assessing Officer. 17. With regard to the valuation of machinery, the learned AR submitted that the process followed for inspection and valuation is completely flawed. Our attention was drawn to the photographs taken at the time of the inspection to highlight the point that the whole process of inspection has been completed in 2 hours, as can be seen from the time recorded on the first photograph and the time recorded on the last photograph. It was submitted that these photographs were provided in a CD by the department itself. It was further contended that the Valuer has simply taken the value of the machinery as on date and then applied the discounted cash flow method to work out the value as on 31st March, 2006, instead of finding out the origi....
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....ter dated 7.12.2009 brought to the notice of the Assessing Officer that it has filed a detailed chart with regard to the installation of the machineries in the Baddi Unit for all the three years incorporating complete description of the machineries, suppliers of the machineries, their complete name and address, details of the transportation (Builty/GR number and date), details of the installation, foundation/erection charges and the transportation charges. The assessee has also submitted copies of the bills along with excise documents in Form No.26A issued by the Excise and Taxation Department, Himachal Pradesh evidencing clearance of the machineries from the border. It has also filed copies of the sales tax registration certificate, excise registration certificate, confirmation and affidavit of the suppliers of the machineries. 22. It was further contended that vide letter dated 24.12.2009 the assessee has produced the machinery suppliers viz. Mr. Rahul Khurana of M/s Sainath Boilers & Pneumatics and Mr. Atul Sharma of M/s Precision Gears (Indore) Ltd., and these suppliers have clarified that the installation was carried out by deputing their own engineers and installation team w....
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....see has challenged the action of the AO in drawing adverse inference on the ground that Mr. Dinesh Sharma was not proprietor of one of this concern and further no cross examination was allowed despite repeated requests. We have gone through the facts and we notice that though opportunity of cross examination was not allowed by the AO despite assessee repeatedly asking for the same. But we are of the view that assessee has not been able to controvert the allegation arising thereof as can be seen from the statement of the employees recorded during the search as well as the other material brought on record by the AO to support this allegation. 27. The statement of the three senior executives of the assessee company viz., Mr.P. Mukundan, Distribution Manager, Mr. D.B. Sardana, Administration Manager and Mr. S.S. Banga, G.M. (:Production) were recorded during the course of the search. All these three officials in the initial statement have confirmed that some of the old plant and machinery from the Delhi unit was shifted to the Baddi unit. Though these persons have retracted these statements later on but the fact remains that in the initial statement all these three persons have confir....
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....chinery should not exceed 20% of the total value of the plant and machineries. Accordingly it is important to find out the value of the new plant and machinery as well as the value of the old plant and machinery and then to workout the exact percentage of the old plant and machinery. In this regard we notice that the AO has worked out the percentage of the old plant and machinery on the basis of the valuation report whereby the valuer has placed the value of the total machineries at Rs.7,63,15,000 /- as on the valuation date i.e. 9th May 2008. As per this valuation report which has been quoted extensively by the AO in the assessment order, the above valuation has been carried out for the purpose of determining the current day (9th May, 2008) market value of the plant and machinery based on the verbal information collected from the market and the value as on 31st March, 2005has been derived by the process of de-escalation as per the wholesale price index of Reserve Bank of India. By applying this methodology the total present market value of the plant and machinery installed at Baddi unit has been computed at Rs.7,63,15,000/- and the discounted value as on 31st March, 2005 has been ....
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.... supported by any material, documents or evidence for estimating the value as on the date of the inspection. No reference has been given to any quotation. Similarly, no reference has been made about any suppliers for which assessee submitted full details. 34. In our considered view, the correct approach would have been to find out the value of the machinery, the time of purchase and the date when assessee has acquired these machineries was relevant rather than valuing on a later date and then discounting back the same with wholesale price index. Assessee has carried out such exercise. The calculation of the same has not been disputed by the Assessing Officer in its remand report. The contention of the learned AR that the whole process of inspection and valuation is flawed, hence cannot be relied is justified. The other objections raised by the learned AR on the credibility of the inspection and the valuation report which the learned DR has not been able to rebut. The revenue has failed to clarify the specific issues raised with regard to relevancy of the valuation report. In view of these facts, we uphold the order of the CIT(A) on this issue. 35. The next issue is value of the n....
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....assessee company have also been confirmed and filed. IN these affidavits the Income Tax PAN and the office where these suppliers are assessed to tax are also stated. I have gone through the above documents submitted by the appellant(which were also filed before the AO) and also checked the ledger account of the suppliers of the machinery in order to verify unusual delay, if any, in payment. From the verification of the above it is prima facie observed that the payments in these cases have either been made in advance or within a reasonable credit period, which shows that these purchases (apart from purchases for Rs. 54 lacs) are prima facie genuine in nature." During the course of the hearing the learned DR could not controvert the above finding of the CIT(A).Voluminous details in this regard were filed before us in the form of paper book. We have perused these documents as well and we notice that there is nothing in these documents on the basis of which it can be doubted that assessee has not purchased these machineries. During the financial year 2005-06 i.e. assessment year 2006-07, the total value of the machineries at the Baddi unit as per the books of account is 54 ITA Nos.32....
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....y shifted to Baddi unit. The CIT(A) forwarded the detailed computation to the AO for examination. 41. The CIT(A) called for clarification of specific points as under:- "The appellant has made a detailed submission dated 23.06.2011 with respect to the issue of exemption disallowed in his case u/s 80IC of the IT Act. On a perusal of the assessment order and from the submission made by the appellant it is observed the exemption u/s 80IC has been denied on the ground that the total value of old machinery or plant or parts installed at the appellant's unit at Baddi (Himachal Pradesh), during the above referred assessment years exceeds 20% of the total value of machinery or plant used in such new business. The substance of the finding in the assessment order is that the assessee has obtained accommodation bills from one M/s Krishna Machines and Tools, M/s Shri Krishna Machines and Tools and certain other parties for plant & machinery which has not bee actually purchased and that such machinery as shown in these accommodation bills have actually been shifted from appellant's already existing unit located at D-6, Udhyog Nagar Industrial Area, New Rohtak Road, Delhi - 110041, which was n....
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.... adduced evidence relating to the transportation and installation expenses of such new plant and machinery which has not been controverted by the AO. xii. That the assessee has submitted the complete list of machineries and the list of suppliers alongwith photocopy of their bills as well as confirmation / affidavit from each of the supplier, some of whom were also examined by the AO at the time of assessment and who have confirmed having supplied new plant and machinery. Accordingly, the assessee/ appellant has in his submission concluded that the dispute relating to accommodation bills in respect of the plant and machinery which in fact was old and was being earlier used at D-6, Delhi unit comes only to Rs. 54 lacs. The argument of the assessee is that even if such plant and machinery is treated as old in nature it is the depreciated value of such machinery, shifted to Baddi Unit which should be appropriately taken for working out eligibility u/s 80IC, at Rs. 20,57,421/-, as seen from the enclosed chart. In support of this claim the appellant in the chart has given the name of the original supplier of such machineries together with the original value and the depreciated value of....
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....was justified in holding that the value of the old machinery is less than 20% and assessee is eligible for deduction under section 80IC. 48. For assessment year 2007-08, a similar exercise has been carried out by the CIT(A) after taking into the additional facts for the year. In the assessment year 2007-08, the assessee has further made an addition of machinery of Rs.96,93,657/-. There is no dispute about the addition of these machineries during the period relevant to Assessment Year 2007-08. The total value of the machineries after excluding the value of the machinery for which accommodation bills were obtained comes at Rs.3,00,51,967/-. The value of the old machinery shifted from Delhi unit to Baddi unit comes to Rs.20,57,421/-. Thus the value of the old machinery is less than 20%. In view of these facts, the CIT(A) was justified in holding that the assessee has complied with the condition laid down for deduction under section 80IC of the Act. 49. Similarly for the assessment year 2008-09, the assessee has further made addition to machinery of Rs.53,66,819/-. The value of the new machinery comes to Rs.3,54,18,786/- after excluding Rs.54,06,740/- for which the assessee has obtai....
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....ing cannot be denied. 54. In view of the above facts, we uphold the order of the CIT(A) allowing deduction under Section 80IC to the assessee. 55. Ground no.1 of assessment year 2006-07 and ground no.5 of assessment years 2007-08 and 2008-09 are in respect of the additions made by the AO on account of the accommodation bills which has been restricted by the CIT(A) to 2% of the total value of the accommodation bills. In this regard the AO has made addition for the various assessment years as under:- A.Y. 2006-07 : Rs.21 Lakh A.Y. 2007-08 : Rs. 9 Lakh A.Y. 2008-09 : Rs.24 Lakh Total : Rs.54 Lakh In this regard the Assessing Officer has stated as under :- "14.4 There are ample instances of procuring accommodations bills for machineries for which cash was received back against the issuance of cheques. Few of such examples as under:- S. No. Name of the party A.Y. 1 M/s Krishna Machine & Tools/ Sri Krishna Machine & Tools 2005-06 & 2006-07 2 M/s Multitech Instrument Company Pvt. Ltd. 2005-06 3 M/s Malhotra Compressors 2006-07 4 M/s Tabmach Tools Pvt. Ltd. 2006-07 5 M/s A.R. Enterprises 2005-06 6 M/s Accura Engg. 2005-06 The department conducted a survey ....
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....eted the above additions by giving following finding:- "In this regard I have already considered the findings of the AO and submissions of the assessee company and held for reasons discussed in finding given with respect to Ground of appeal No.10 that accommodation bills to the tune of Rs.54 lacs have been purchased by the assessee for which as per the established market practice commission is paid. This is reasonably estimated at 2% of the total bills of Rs.53 lacs have been purchased during the year and works out at Rs.1,06,000/-. Since this amount has been not paid from explained sources of income therefore the same is added to income u/s 69 of the I.T. Act. As regards the issue of addition to income for Rs.21,00,000/- on account of alleged cash receipt in lieu of the cheques issued for purchase of accommodation bills of machineries is concerned the receipt back of cash against the cheque issued from books of account cannot be treated as income as it amounts to conversion of one form of asset to other. Thus the appellant party succeeds on this ground and AO is accordingly directed to rework the addition made on this account in accordance with the above findings." 57. It has be....
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....n respect of the deletion made by the CIT(A) of the addition made by the AO on account of suppression of wages as under:- A.Y. 2006-07 : Rs.1,15,89,750/- A.Y. 2007-08 : Rs. 62,26,820/- A.Y. 2008-09 : Rs. 26,47,992/- In this regard the AO in the assessment order has stated as under :- "14.5 During the course of search proceedings various evidences have been found which indicate that one shift of approx. 108 workers was not fully entered in the books of accounts. Only 12 workers were shown in the register, as such 96 workers were not shown in the register. It is apparent that the assessee was suppressing its wages expenses at Baddi Unit. During the course of search at Baddi, statement of Sh. S.K. Mendiratta, GM was recorded on oath; relevant extract of the statement is reproduced as under : "Q8. Now I am showing you list of workers as per Annexure 3 containing nine pages prepared today morning showing the workers home, token no. of salary drawn by him/her and signed by them. Please tell after seeing your salary register, pages 1 to 68 of Annexure A-10 for Dec., 07 and Jan., 08 whether these workers are shown in the same? Ans. I have seen the list of workers of night duty pr....
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....s in the Salary register of the company. Q. I am showing you Annexure A-18 (Page 20-28) on which heading is given as "Employee Salary Register for the month of July, 2006" and cash is shown to have been paid to the persons detailed in this list. Please state whether or not these persons find their names on the pay rolls of company? Ans. I cannot explain anything about this. Q. You please see your salary register/ pay roll and then explain about the matter asked above? Ans. I have seen the salary register of the company and accordance to that the name of said persons do not appear in salary register/ Pay roll of the company. Q. Do you want to anything else? Ans. No. The assessee was accorded opportunity to explain the source of expenditure made on wages in respect of the labour which was not found to be on salary register of the company. The assessee has submitted that these workers were newly recruited so these were not entered in the salary register. The contention of the assessee is not tenable. The assessee has tried to find out ways and means to cover up such unaccounted expenditure made outside the books of account by depositing ESI/PF for the month of Feb 2007, however....
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....to non Himachli workers were made out of books and was reason of suppressed wages. In view of the same and keeping in view the expenditure under this head claimed in other (non exempt) units, I estimate the expenditure @ 4, 4.25 and 4.75% in the year 2006-07, 2007-08 and 2008-09 respectively. On the basis of the same, difference in wages is treated to be made out of undisclosed sources and treated as part of unaccounted income of the assessee. The Working of addition is as under :- Period Turnover Rs. Percentage of Wages Percentage of Wages to the Turnover to the Turnover 2006-07 Rs. 38.52 Cr & job 1.20% 49,94,250 4 1,65,84,000 work of Rs. 2.94 Cr. 2007-08 Rs. 55.02 Cr & Job 3.20% 1,94,34,680 4.25 2,56,61,500 work of Rs. 5.36 Cr. 2008-09 Rs. 53.69 Cr. and job 4.20% 2,41,75,258 4.75 2,68,23,250 work of Rs. 2.78 Cr. 15.12 Accordingly an addition of Rs. 1,15,89,750/- is made in the year under consideration that is A.Y. 2006-07 on account of unexplained expenditure incurred for suppressed wage expenses." On the similar reasonings, addition has been made in assessment year 2007- 08 and 2008-09. 61. The CIT(A) has deleted the addition for the assessment year 2006-07 by making ....
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....ages to turnover for A.Y. 2006-07, 2007-08 & 2008-09 of 5.00% at Delhi unit, the AO has held that for Baddi Unit the percentage of wages to turnover is estimated to be 4.75% instead of the actual percentage to wages for Baddi unit as per books of account of the assessee at 4.2%. As against this estimation made by the AO, which forms the basis of addition, the appellant has argued that the wages scale of Delhi and Baddi are not comparable for the reason that minimum wages per month at Delhi is for Rs. 3633/- while minimum wages per month for Baddi is Rs. 3,000/-, which is only 82% of the minimum wages at Delhi. Thus if the above said factor is taken into account the basis for estimation made by the A.O. loses it's rationale. With regard to non-entering of the names of the 96 workers in the shift of 108 workers the assessee has submitted that these workers were newly recruited in the month of February, 2008 itself. In support of it, PF and ESIC document have been filed before the AO, vide reply dated 11.11.2009. I have examined the same and in my considered opinion that the wages on account of the shift is duly accounted for in the month of march 2008, which was the first month when ....
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....ation carried out during the assessment year 2008-09. The AO probably has extrapolated the same to the preceding two assessment years i.e. 2006-07 and 2007-08. In the absence of any material found during the course of the survey or in the absence of any evidence on suppression of wages in the assessment years 2006-07 and 2007- 08 we are of the view that the CIT(A) was right in deleting the addition. 67. The AO has made a tabulated chart of the wages paid in Delhi and wages paid at Baddi in absolute terms but he has ignored the fact that the wages scale of Delhi and Baddi are not comparable. If these facts are taken into consideration the very basis for making the addition by the AO becomes unsustainable. We are also in agreement with the finding given by the CIT(A) that the assessee has submitted necessary documents relating to PF and ESIC in respect of the 96 workers who were found working during the course of the survey. The explanation given by the assessee has not been understood by the AO in the right perspective. In view of the above, we uphold the order of the CIT(A) and these grounds of appeals are dismissed. 68. Ground No.3 in assessment year 2006-07, 2007-08 and 2008-09....
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....verification/investigation is possible. However, fact remains that the assessee is not disclosing its actual production and merely termed as wastage. Income from sale of such wastage has not been shown. It is apparent that the assessee has also incurred unaccounted expenses for wages in its Baddi Unit to circumvent the state regulation of employment. For such unaccount expense the assessee has to generate income out of books. Contention of the assessee is not accepted on following ground: * The assessee company is flagship concern of the group for revenue generation. * Evidence of suppression of wages for the assessee company has been found and worked out. * Evidences of suppression of production was gathered by the department in search. Reply of the assessee has reached this office only the during last week of assessment proceeding. Therefore, no meaning full enquiry is possible at this stage. 15.14 The assessee claimed of loss on production is not supported by documentary evidence, in its case and was not part of auditors report submitted along with returns of income of the respective years. It is also found that the assessee company is suppressing its wage expenses as discus....
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.... production process, which cannot be entirely ruled out. Moreover, even under the Drug Price control order 1995 and Drugs and Cosmetics Act, 1940 and rules framed there under, a wastage/production loss which is less than 4%, is within permissible limits. In the facts of the instant case the percentage production loss comes to less than 1% which is well within the limit prescribed by the Drugs Control Act. Moreover, no evidence has been found during the course of search which shows that the assessee has been manufacturing unaccounted tablets resulting in unaccounted sales thereof and that these unaccounted tablets are produced as a result of bogus claim of wastage by the assessee(already observed above as well within the reasonable limits). In view of all these facts taking into totality in my considered view the AO's finding relating to unaccounted sales arising out of suppressed production calculated for Rs. 72,91,213/-, is directed to be deleted." 70. The learned DR has supported the order of the AO. He submitted that CIT(A) was not justified in deleting the addition made by the AO. On the other hand, the learned AR submitted that the addition made by the AO was in total disrega....
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....f deduction in respect of the job work charges. The CIT(A) has rejected the above contention of the AO by giving the following findings:- "I have considered the submission of the assessee with regard to above observation made by the AO. Complete details of the job work charges with names & address of the parties were filed before the AO. During the year under consideration job work charges for Rs.2,93,84,240/- was received from three parties including largely from Cipla Ltd. The assessee has submitted that complete work starting from the conversion of powder to tablet / capsules was undertaken. All this work was done on loan license basis. Thus complete manufacturing process has been undertaken. Only the raw material was supplied by the respective party. With regard to admissibility of deduction u/s 80IC on job work the assessee further submitted as under :- - The above said nature of job work very much involved production of article or thing as required u/s 80IC of the Act. - That section 80IC nowhere stipulates that the manufacturing work should be limited only for self. The appellant also placed reliance on the case of CIT vs. Taj Fire Works Industries 288 ITR 92 wherein it ....
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....alled at the Baddi premises of the assessee company component of old machinery was found at 88.72% and rest were treated as new. As per this report total value of plant and machinery at the Baddi unit was as on 31-03-2005 was estimated at Rs.5,72,01,279/- out of which value of new plant and machinery was estimated at Rs.64,51,610/-. As such the value of old Plant & Machinery as per valuation report comes to Rs.5,07,49,669/- as on 31-03-2005. Further value of the same plant and machinery found installed at Baddi as in March 2008 was reported by the Approved Government Valuer Rs.6,85,87,500. The assessee company has shown all its Plant & Machinery, equipments etc. as on 31-03-2008 gross value as per books was Rs. 4,06,95,182/-. The difference of the Rs.2,78,92,318/- was pointed out to the AR and this issue was confronted to the assessee company. 15.22 According to the assessee company, it did not accept the findings of the report of Mr. Umesh Johar. According to the assessee value of Plant & Machinery as on 31-03-2006 was Rs.2,54,85,590/- and as on 31-03-2007 it was Rs.3,53,28,358/- and as on 31-03-2008 it was Rs.4,06,95,182/-. The assessee has further submitted that the company ha....
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.... was not required to make any investment against these Plant & Machinery. 15.24 Accordingly the contention of the assessee in respect of the valuation report and its investment in value of the Plant & Machinery do not have any merit and is rejected. It has been established that assessee has obtained accommodation bills for which it has issued the cheque and received cash against the same. Such capitalization n the books of assessee is unreliable, incorrect and false. In the circumstances investment of the assessee company in Plant & Machinery is required to be determined on the basis of facts available on the record. Total value of Plant & Machinery at Baddi Unit in March 2008 was valued at Rs. 6,85,87,500. The assessee company has shown all its Plant & Machinery, equipments etc. as on 31-03-2008 gross value as per books was Rs.4,06,95,182/-. The difference in both of them is Rs.2,78,92,318/-. It is further found that the assessee company has shifted its plant and machinery of Delhi unit to Baddi unit and its value is estimated is at Rs. 1,35,00,000/-. In all fairness the amount of unaccounted investment in plant and machinery should be reduced by this amount for which the assesse....
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....based on the current market price and that too without any basis. Addition in respect of any unexplained investment is to be made on the basis of actual investment made in the plant and machinery. It is not the case of the Revenue that assessee has purchased any machinery outside the books of accounts and has not accounted for in the books of account. It was also submitted that the stand of the Revenue is in fact contrary. The Revenue on the one hand is making an allegation that the assessee has shifted old plant and machinery from Delhi unit to Baddi unit and not purchased the new machinery and on the other hand the AO is making an allegation that the assessee has purchased machinery from unaccounted sources and made an unexplained expenditure of Rs.1,43,92,318/-. It was further submitted that during the course of the search and survey nothing was found even to raise a doubt that assessee has made any investment in plant and machinery from any unexplained source. 77. We have considered the rival submissions and we are in agreement with the contention of the learned AR. In fact this addition of the AO contradicts his own stand which he has taken while denying the benefit of deduct....
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.... Delhi unit to Baddi unit. Accordingly, the disallowance of depreciation has to be limited to the net of accommodation bills of machinery Rs.54 Lakh - 20,42,750/- and accordingly the CIT(A) has computed the disallowance on the net amount of Rs.53,57,250. In this regard the findings of the CIT(A) are as under:- "The import of the detailed finding in Grounds of Appeal No. 10 is that machinery having WDV of Rs. 20,42,750 was shifted from D-6 Delhi unit to Baddi Unit 31/03/2006. Therefore in my considered view the assessee company is entitled to claim depreciation on this WDV for Rs. 20,42,750 instead of depreciation of RS. 8,10,000 on plant and machinery having accommodation bills of Rs. 54 lacks. The AO is accordingly directed to recompute the depreciation, in terms of the above finding. The ground of appeal is accordingly partly allowed." 79. The ld. DR placed reliance on the order of the Assessing Officer. On the other hand, the learned AR submitted that the disallowance sustained by the CIT(A) itself is not justified in view of the contention that the allegation of the accommodation bills per se has not been substantiated by the Revenue. In this regard he referred to various doc....
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.... be disallowed for AY 2005-06 and AY 2006-07. The assessee itself claims that the Baddi Unit was started in May, 2006. The WDV of Plant & Machinery as on 31.03.2005 of D-6 Unit as per Companies Act was Rs. 1,60,50,810/-. Majority of these machineries had been shifted to the Baddi Unit. Corresponding depreciation for the period (for six month) was disallowed from the books of Delhi unit for AY 2005-06. During AY 2006-07 in Delhi unit total Depreciation claimed by the Assessee Company was Rs. 44,17,953/-. It includes for machinery & plant of Delhi-6 & H-18 both along with other assets. The assessee could not submitted its claim of depreciation for its D-6 Unit separately, despite repeated request. In the circumstances depreciation of D-6 as per Income Tax is estimated in the ratio of value of Plant & Machinery as per Company Act. Value of Plant & Machinery as per Company Act for D-6 Unit and H-18 Unit was shown at total of Rs.1.41 crore. During AY 2005-06 depreciation component of D-6 was estimated at 77.66% of total depreciation. As such depreciation of Unit D-6 is estimated at 77.66% of the total depreciation. Accordingly depreciation amount of D-6 comes to Rs. 44,17,953X 77.66% = ....
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....,329 (Rs.48,75,092 - Rs.45,62,763/-). In response to the same it was submitted by the assessee company that it has not made any investment out of books. 15.30 The claim of the assessee in this respect is grossly suppressed. When assessee was asked about detail of erection work it has divided its building improvement expense in two parts. The assessee was doing the building improvement and erection work simultaneously. It can be fairly estimated on the basis that major part of the machines of D-6 unit were shifted to the Baddi unit. It need fair amount of expenses for there ejection from D-6 unit, installation at Baddi and preparations of factory building at Baddi for pharma production and related expenses/investments. In the circumstances and facts of the case investment made and expenses incurred in this process including excess investment in plot no 43 and 44 as discussed above is estimated at Rs.60,00,000 during the period under consideration. As the assessee has shown building improvement Rs.35,01,896, hence the difference of the both Rs.24,98,104 (Rs.60,00,000 - Rs.35,01,896) is added to the total income of the assessee on account of unaccounted expense incurred during the pe....
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....sidered the rival submissions and we notice that the Assessing Officer has referred the matter to the District Valuation Officer, who has valued the investment at Rs.48,75,092/- as against Rs.45,62,763/- as per the books of account. The difference in the value as per valuer's report and the value as per books of account is less than 6%. Valuation after all is not a science and this difference being less than 10% we are of the view that the CIT(A) was justified in deleting the addition. This ground of appeal is accordingly rejected. 84. Ground no.10 is regarding deletion of addition of Rs.30,48,737/- made by the AO on account of income of Delhi unit. The addition has been made by the AO on the following reasoning:- "15.32 During the period under consideration the assessee company has claimed loss of Rs.51,64,292, on its D-6 unit of Delhi. As discussed above in preceding paras that incontrovertible evidence of accommodation bills of more than Rs. 54 lacs of machinery purchase as introduced by the assessee has been found by the Department during AY 2005- 06 and 2006-07. Further unassailable evidence of shifting of machinery from D-6, Delhi Unit to Baddi Unit is in the possession of ....
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....ng following finding:- "I have considered the observation of the AO and the submission of the assessee. During the year under consideration the assessee company has claimed loss of Rs. 51,64,292 on it's D-6 Unit on a turnover of Rs. 12,19,49,514 for this unit. It is observed that there is no basis for estimating the above said income and rejection of books of accounts, without pointing out any positive evidence that the assessee company has suppressed receipt from this unit or inflated the expenditure. In my considered view there is no justification for estimating the income of Rs. 30,48,777 being 2.5% of turnover. Thus the Ground of Appeal is allowed and the AO is directed to delete the addition made under this head." 85. The learned DR relied on the order of the AO while the learned AR has placed reliance on the order of the CIT(A). It was submitted that the AO has arbitrarily applied a net profit rate of 2.5% and there is no basis for rejecting the books of account and no evidence was found of any sale or purchases being made outside the books of account. 86. We have considered the rival submission. We are in agreement with the contention of the AR that the AO has made the ad....
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....at the sale from Scrap A.Y. 06-07, A.Y. 07-08 and A.Y. 08-09 is Rs.12 lacs, Rs.12 lacs and Rs.10 lacs respectively. Thereby an addition of Rs.12,00,000/- is being made in the year under consideration that is A.Y. 2006-07, to the total income of the assessee on account of suppressed receipt from sale of scrap." The CIT(A) has deleted the addition. In the assessment year 2006-07 and 2007-08 on the ground that these additions are based on estimation as no incriminating material was found in the year under consideration. The CIT(A) has further held that in the case of a search addition to income are confined to the evidence found during the search and other information gathered during the investigation. In assessment year 2008-09 the CIT(A) sustained part addition to the extent of Rs.7,30,335/- on the ground that the seized document shows that there was scrap income to the extent of Rs.7,30,355/-. 88. The learned DR has submitted that the CIT(A) was not justified in deleting the addition in the assessment year 2006-07, 2007-08 and restricting the addition to Rs.7,30,355/- for assessment year 2008-09. He submitted that since evidence has been found for assessment year 2008-09 regardin....
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....O No.417/Del/2012 for AY 2007-08 and ground no.1 in CO No.418/Del/2012 for Assessment Year 2008-09 are regarding disallowance under section 14A of the Act. In Assessment Year 2006-07, the Assessing Officer has made disallowance of Rs.10,11,000/- and the CIT(A) has restricted the same to Rs.1,36,000/-. In assessment year 2007-08, the AO made a disallowance of Rs.13,21,000/- and the CIT(A) has restricted the same to Rs.3,16,096/-. The assessee has also filed cross objections regarding sustaining of disallowance of Rs.1,36,000/- for Assessment Year 2006-07 and Rs.3,16,096/- for Assessment Year 2007-08. In both these assessment years, the AO has made the disallowance applying the Rule 8D. The CIT(A) has reduced the same by holding that Rule 8D is not applicable for both these assessment years. In this regard the findings of the CIT(A) are as under:- "As regards the addition made by way of disallowance u/s 14A for Rs. 10,11,000/- is concerned the appellant submitted that as per the decision of Godrej & Boyce Manufacturing Co Ltd 328 ITR 81 (Bombay HC) and certain other decisions as cited in the submission, Rule 8D has been held as prospective in operation and is therefore applicable fo....
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.... investment of Rs.236447559/- for earning exempted income. The assessee has shown Financial expense of Rs.5291529/-. The total investment for earning exempted income is Rs.236447559/- and proportionate interest is to be disallowed u/s 14A. The disallowance u/s 14A is computed as under as per rule 8D which is computed as under : Disallowance Under Rule 8D (i): NIL Disallowance Under Rule 8D (2)(ii). As computed below: Particulars 31-03-2008 31-03-2007 Fixed Assets Rs. 11.27 Crs Rs. 9.39 Crs Investments Rs. 23.64 Crs Rs.17.90 Crs Current Assets Rs. 39.73 Crs Rs.36.52 Crs Rs. 74.64 Crs Rs.63.81 Crs Total Average Assets: (74.64 Crs. + 63.81 Crs)/2 = Rs. 69.22 Crs. A. Total Average investment: Rs. 20.77 Crs. B. Total Finance Charges: Rs. 52.92 Lacs C. Total Average Assets: Rs. 69.22 Crs. Disallowance Under Rule 8D (2)(ii) : A x B / C = Rs. 15.88 Lac. Disallowance Under Rule 8D (2)(iii): Total Average investment: Rs. 20.77 Crs. Disallowance expenses @ 0.5% of average investment: Rs. 10.38 Lac. 15.33 Total disallowance u/s 14A. (A+B+C) (Nil + Rs. 15.88 Lac + Rs. 10.38 lac) i.e. Rs. 26,26,000/-." The CIT(A) has confirmed the said disallowance by giving t....
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....f the investment needs to be done by excluding those investments whose income or loss shall be chargeable to tax. Accordingly we direct the AO to verify this contention of the assessee and to exclude such investment while computing disallowances on account of administrative expenses under Rule 8D. This ground of appeal is allowed for statistical purpose. 96. Ground no.8 of assessment year 2007-08 in revenue appeal is regarding deletion of addition of Rs.4,71,000/- made by the AO on account of short term gain on the basis of DVO report. The above addition has been made by the AO on account of the following reasoning:- "15.30 During the period under consideration it is found that the assessee company has sold its two properties namely (i) 25 Bigha land situate at Village panga near EPIP, Phase-I, Jharmajri, Baddi, (ii) 21 Bigha land situate at Village Kunjar near EPIP Phase-I, Jharmajri, Baddi. These two properties were sold for a sale consideration of Rs. 62,50,000/- and Rs. 46,00,000/- respectively on 06-11-2006 and 14-02-2007. These properties were purchased by the assessee company in the assessment year 2005-06 in the same amount. To verify the genuineness of the sale considera....
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....ted at village Panga near EPIP Phase-I, Jharmajhri, Baddi and 21 bigha land situated at village Kunjhal near EPIP Phase-I, Jharmajhri, Baddi is not only based on insignificant difference in valuation/ estimation of sale price but also relates to sale of land and is not related to cost of construction as in the case of Plot No. 43 & 44 HPSIDC, BADDI. Accordingly, the AO is directed to delete the addition of Rs. 471000/- (Rs. 227000+244000) made on these two transactions." 97. On going through the above we notice that the Assessing Officer has referred the matter to the Valuation Officer. The difference in the value as per the valuation report and the actual sale consideration was around 5.3%. Further there is no material on record to show that the assessee has received any amount over and above the actual sale consideration. This issue stand settled by the judgment of the jurisdictional High Court in the following cases whereby it has been held that in the absence of any material to the effect that the assessee in fact has received any amount over and above the sale deed, no addition can be made merely on the basis of valuation report. (i) CIT vs. Mahesh Kumar 196 Taxman 415 (Del)....
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....e order of the AO. On the other hand, the learned AR has relied upon the order of the CIT(A). It was further submitted by the AR that the above addition has been made most arbitrarily. It was submitted that the assessee has made purchases and sales from reputed parties, there is no evidence whatsoever of inflating the sale. In this regard the assessee has submitted detailed explanation about the profitability at the Baddi unit and the assessee has been making sales to reputed pharmaceutical companies. The learned AR further submitted that the additions made by the AO are contradictory. This addition made by the AO contradicts his own stand whereby in the assessment order at one place he is making an allegation of suppressing of production and consequent suppression of profit and at the other hand he is making an allegation of inflating the income and that too without bringing any material or evidence in support thereof. 102. We have considered the rival submissions. We notice that this addition has been made by the AO by indulging into surmises and without bringing any material or evidence in support of said addition. It is a matter of fact that the assessee has made sales to var....
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.... was reported at Rs. 1,56,11,574/- in the Plot No.43 & 44 of HPSIDC Baddi during the period under consideration. As such the excess and out of books investment of the assessee for the period comes to Rs.10,00,171/- (Rs.1,56,11,574 - Rs. 1,46,11,403/-). In response to the same it was submitted by the assessee company that it has not made by investment out of books." The CIT(A) has confirmed the same by giving the following findings :- "It is observed that the DVO, Chandigarh has valued the construction cost at Plot No. 43 & 44 HPSIDC, BADDI at Rs. 15611574/- as against the expenses of Rs. 14611403/- recorded in the books of accounts which indicated that the expenses incurred on cost of construction are more that what is disclosed by the assessee in his books of account. Accordingly this difference in investment for Rs. 10,00,171/- is upheld as unexplained investment u/s 69 B of the I.T.Act." 106. It was submitted by the learned AR that no addition can be made merely on the basis of the allegation. The assessee has invested Rs.1,46,11,403/- as against which the valuation has been done by the valuer at Rs.1,56,11,574/-. The difference of Rs.10,00,171/- is less than 10%. Further val....