TaxTMI 
TaxTMI 
2014 (4) TMI 530
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....n of Shri Dinesh Sharma wherein he was found 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 machin....
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....in the circumstances of the case, the CIT(A) has erred in law 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....
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....irecting the Assessing Officer not to disallow any deduction u/s 80IC on the "Job work income" from 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 As....
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....tion of AO in making disallowance of an amount of Rs.3,16,096/- invoking the provisions of Section 14A of the Act. 5. On the facts 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....
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.... the hearing of the appeal." Cross Objection No.418/Del/2012 "1. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law 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 pro....
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....se. Accommodation bills were obtained amounting Rs.8,48,640/- and Rs.36,24,660/- during A.Y. 05-06 and A.Y. 06-07 respectively from these parties of Dinesh Sharma. Payments of these bills 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, ....
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....- was booked in the P & L Account of D-06 Unit. This issue has also been discussed in the order of A.Y. 05-06 in the case of the assessee. It has been concluded that the said entry of loss on sale of machinery 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 f....
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....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 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 tim....
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.... 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 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 re....
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....he assessee during the assessment proceedings has filed all necessary details and evidences as were called by the assessing officer. The assessee during the appellate proceedings has analyzed the same facts and has put the same in the columnar form based on the 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 honou....
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....n has arisen, has observed as under: "It must be grasped that the judiciary is respected not on account of its power to legalize on technical grounds by because it is capable of removing injustice and I expected to do so." III. If evidences goes to the route of the 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 rejec....
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....ed what he has stated in the assessment order. He has not rebutted any of the contention raised by us in the written submission. This clearly demonstrates that he has no material whatsoever to rebut the submissions made by the assessee on this issue. 14. In para (v) the AO has referred 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 ....
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....eport has accepted the fact in para 8 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 the 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. 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....
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....eby that the value of the old machineries comes to Rs.20,57,421/-. The third issue is value of the new machineries. The assessee has submitted a complete list of the new machineries. The assessee has submitted evidences, including affidavits, confirmations. These confirmations have been cross-verified by the AO during assessment 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% ....
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....to the assessee by holding as under : - "On a consideration of the findings of the AO and the submission of the appellant, it is observed that the contention of the appellant is essentially two fold. While the appellant's primary submission is that there was no transfer of old machinery from their Delhi unit to Baddi unit and accordingly the claim for deduction u/s 80IC of the IT Act is allowable in terms of this section, 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 ....
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....h. Rajender Singh the Director of M/s Tabmac Tools P. Ltd. has in his statement recorded on 18.12.09 under oath vide S. 131 of the Act (much after the date of search and during the assessment proceedings) has categorically admitted to have provided "mere bills" and not supplied any goods to the assessee for an amount of Rs.68,900/-. This is yet another evidence which confirms that old machineries have been indeed been transported 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 b....
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....al valuer as regards their valuation and the age of the machineries has to be taken with a pinch of salt as the same is at best only an approximation of the age of machinery installed in a running plant. It is also important to note that the A.O. is considering the inspection report in which has been completed within two hours who has not been subjected to cross-examination by the assessee. As regards the other factual inaccuracies in the 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 obtaini....
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....ce value. As the correctness inspection report of the valuer regarding the age of machinery installed at Baddi Unit cannot be treated as conclusive proof of their age therefore the answer to this contentious question would have to be found from the list of purchases of the machineries installed at Baddi and the suppliers thereof. As stated above, the A.O. has given adverse finding of fact in specific cases of purchases of machineries from Krishna 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 ....
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....y which have been shifted to Baddi unit from Delhi by way of accommodation bills from D-6 Unit. The assessee has submitted a detailed list of machineries based on A.O.'s conclusive finding regarding the machineries of the value of Rs. 54 lacs (as per accommodation bills) which have been so shifted. The appellant has submitted that the value of such machineries on WDV basis comes to Rs.20,57,421 as per the Income Tax Act as it is this WDV which should 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 addit....
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....ever circumstances warranting exercise of such powers exist. In view of the fact that no new evidence has been filed by the appellant and these are mere alternate submissions the objection of the AO with respect to the admissibility of the new documentary evidences, in the nature of old & previous purchase bills for machinery based on which these alternate arguments are being made, is not appropriate and therefore the copy of these earlier years bills corresponding to the purchases 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....
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....ese details are part of the Income Tax return of each assessment year. In sub-para (iv) the assessing officer has given justification for the rejection of the books of account. In this regard the AO has merely repeated what has been stated in the assessment order. In para (v) the AO has referred 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 I have already 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 conclu....
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....The valuer has found that the total value of the machinery at Baddi unit was Rs.6,36,52,889/- and out of that the value of the old machinery was Rs.5,72,01,279/-. He further submitted that the above valuation report is corroborated from the seized material found during the course of the search as well as with the statement of the various employees recorded during the course of search. In this regard, learned DR further submitted that computation of the value of the accommodation bills at Rs.54,00,000/- taken by the CIT(A) is not correct. Finally, the 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 ....
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....ues. 20. It was further submitted that assessee had made repeated requests to the AO to provide a copy of the statement of Mr. Dinesh Sharma, Shri Surender S. Bagga, Shri S.K. Mehndiratta and Mr. D.V. Sardana as is evident from the letter dated 7.12.2009. The assessee has also asked for cross-examination of Mr. Dinesh Sharma in support of its contention. Thus the adverse inference drawn by Assessing Officer and confirmed by CIT (A) about accommodation bills of Rs.54 lakhs is not justified. 21. With regard to the other new machinery, the assessee vide letter 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 clea....
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....s denied the deduction. The main issues were whether the assessee has shifted old machineries from its Delhi unit to Baddi unit and obtained accommodation entry for machinery. In support of this allegation, the Assessing Officer has relied upon the statement of Mr. Dinesh Sharma, Proprietor of M/s Krishna Machine Tools and M/s Shri Krishna Machine Tools. In this statement Mr. Dinesh Sharma has admitted that he has issued accommodation bills for the purchase of certain plant and machinery without making actual supply of such plant and machinery to the assessee. The assessee 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 ....
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....nation 2 of Section 80IC states that where in the case of an undertaking any machinery or plant or any part thereof previously used for any purpose if transferred to any business and the total value of the machinery or plant so transferred does not exceed 20% of the total value of the machinery or plant used in business, then the condition specified for claiming exemption under Section 80IC shall be deemed to have been complied with. 32. The implication of the above explanation is that there is no bar on using old machineries in an eligible unit but the value of old plant and machinery 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....
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....ut three years when these machineries were acquired. Apparently these machineries cannot be said to be new at the time of inspection. The production has started in the year 2005. The fact that such large numbers of machines were inspected within a short period. The time period of inspection has not been controverted neither by the AO in the remand report nor by ld. DR during the course of the hearing before us. Such inspection report cannot be taken as perfect and cannot be relied upon. We further notice that the CIT(A) has also taken note of the fact that the valuation report is not 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....
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....transportation charges have been filed. The appellant also filed Affidavits duly notarized from the suppliers of the machineries, in which the suppliers have confirmed to have made the sales of machineries as per the bills issued by them as also the mode and the lorry number by which such machinery was transported. It has also been confirmed in the affidavits that the payments as shown in the bills has been received by these supplier parties through account payee cheques (the cheque nos. and debit notes have been also recorded.) Further the statement of account of these suppliers with the 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....
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....purchases of Rs.2,57,65,050/- bills to the extent of Rs.53,23,540/- are accommodation bills and rest of the machineries i.e. Rs.2,04,41,510/- is the machinery purchased during the year by the assessee. 39. Having reached at the value of the new machinery the other issue remains for consideration is value of the old machinery shifted from Delhi unit to the Baddi unit. 40. As held above, some of the old plant and machinery from Delhi unit has been shifted from Delhi unit to Baddi unit. In this regard, it is noticed that the CIT(A) during the appellate proceedings has examined the record and worked out the value of the old machinery 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 appellan....
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....der:- vii. That the observation that the condition of the machinery is more than five years old has been made in a mechanical manner. viii. That the inspection has been done by the valuer within two hours without allowing cross examination and verification. ix. No basis for taking present day value as suggested by the valuer has been indicated in the report. Neither any quotation taken by the valuer from suppliers of such machinery has been made part of the report. x. Total the assessee is having relevant bills with suppliers name and specification which clearly establishes the fact that the machineries are new. xi. The assessee has also 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....
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....d DR could not dispute these facts before us. 45. In view of these facts, the CIT(A) was correct in holding that the value of old plant and machineries is Rs.20,42,750. Thus the value of the new machinery comes to Rs.2,04,41,510/- and the value of the old machineries shifted from Delhi unit to Baddi unit comes to Rs.20,42,750/- and total value of the machinery comes to Rs.2,24,84,260/-. 46. Since the value of the old machinery is less than 20% of the total value of the machinery, therefore, it cannot be said that the assessee has failed to comply with the condition laid down in section 80IC of the Act. 47. In view of these factual matrix, we hold that the CIT(A) 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 ....
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....of Section 80IC. 53. We have considered the submissions and we notice that under the law for claiming exemption under Section 80IC assessee is required to get the accounts audited and submit the report in the prescribed form. There is no dispute about the fact that the assessee has got the accounts audited and submitted the report in the prescribed form. Having complied with the provisions of the Act, the deduction cannot be denied merely on the ground that during the course of the hearing, Assessing Officer noticed certain errors or discrepancies in the audit report. Having complied the conditions of obtaining report and submitting along with returns, the deduction on this reasoning 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:....
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....ount is restricted to this limit only. As per facts of the case and payment pattern by the assessee to the bill provider concerns of Mr. Dinesh Sharma, such unaccounted cash receipt (in lieu of the cheque issued for accommodation bills) of the assessee company is estimated at Rs.21 lacs, Rs.9 lacs and Rs.24 Lacs for the period of AY 06- 07, AY 07-08 and AY 08-09 respectively. 15.20 Thereby an addition of Rs.21,00,000/- is made in the year under consideration that is A.Y. 2006-07 to the total income of the assessee on account of unaccounted cash receipt against cheque issued for accommodation bills." On the same ground, addition of Rs.9 Lakh has been made in the assessment year 2007-08 and Rs.24 Lakh in the assessment year 2008-09. 56. The CIT(A) has deleted 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 est....
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....of payment for such bills. Since these were accommodation bills, the assessee would not have made any actual payment and hence the AO was not right in making addition on account of the payment made for accommodation bills as these payments have been made from the regular books of account. However, we are in agreement with the CIT(A) that the assessee would have definitely incurred certain expenditure in taking such accommodation bills. The CIT (A) has estimated the same at 2% and we find this estimation as fair and reasonable. We do not find any reason to interfere with the order of the CIT (A). These grounds of the revenue's are dismissed in all three years. 60. In ground no.2 of the assessment year 2006-07 and ground no.4 of assessment years 2007-08 and 2008-09 are in 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....
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....d what records are being maintained for those expenses by your company? Ans. We play them I cash for their work days, but I cannot explain about the mode of accountancy for those expenses. Q. I am showing you Annexure A-17 and A-23 in which you have kept personal profiles of 80 persons in Annexure A- 23 and of 160 persons in Annexure A-17. Please explain for what purpose these have been kept by your company. Ans. These are the persons to whom the company had provided temporary employment in the past and their profiles have been kept by the company for use in the future. They have been paid wages in cash as per their days of workings, but I am not aware how these expenses have been accounted for by the company. The accountant would be able to explain properly. However, these parsons do not find their names 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....
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.... work of Rs. 2.94 Cr. 2007-08 Rs. Rs. 55.02 Cr & Job 3.20% 1,94,34,680 work of Rs. 5.36 Cr. 2008-09 Rs. Rs. 53.69 Cr. and job 4.20% 12,41,75,258 work of Rs. 2.78 Cr. Average ration of wages to the turnover at Baddi Unit comes to around 2.86% only. The suppression of wages expenses is at much higher side during A.Y. 06-07 & 07-08. Relevant evidences (A-20 & A-21 of WB-5) as discussed earlier in the order were found during search on 14/02/2008. 15.11 In view of the detailed discussion made in earlier paragraphs, it is clear that the assessee has not declared the true expenditure on wages and deflated the same to arrive at higher profits as the income was exempt u/s 80IC of the Act. The assessee company was having only 26% Himachali Employees and it was required to show 70% of the employees as Himachali as per direction of State Govt. Accordingly payment 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....
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.... basis for estimation made by the A.O. loses it's rationale. Moreover no positive evidence of payment of unaccounted wages has been found during the search. So on this account also no addition to income is justified. In view of the above facts the addition to income for Rs. 1,15,89,750/- as unexplained expenditure for suppressed wages, is directed to be deleted." Similar findings have been given by the CIT(A) while deleting the addition for assessment year 2007-08. 62. Addition for the assessment year 2008-09 has been deleted by the CIT(A) on the following reasoning:- "I have considered the finding of the AO and the submission made by the assessee on this issue. It is a fact on record that the entire addition on account of suppression of wages is based on comparison of percentage of wages to turnover vis-à-vis Delhi unit and Baddi Unit. Taking into account the average percentage of wages 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 again....
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....en cognizance of the PF and ESIC documents filed before the AO in support of the contention that the wages have been duly accounted for. 66. We have considered the rival submissions. On going through the facts we notice that the AO assumed that there were workers, the names of which were not recorded in the wages register. On the basis of this, he has assumed that assessee has made payment outside the books of account to these workers. Firstly we hold that the CIT(A) has rightly observed that this is related to the assessment year 2008-09 and not to earlier assessment years i.e. 2006-07 and 2007-08. During the course of the hearing the learned DR was asked to clarify whether there is any material or evidence of any unaccounted payment being made to any worker on account of wages during the assessment year 2006-07 and 2007-08. The learned DR clarified that that there is no evidence other than spot verification 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....
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....ary 732327 1053115 435749 February 530392 475114 28856868 March 650192 578365 Total 72,91,213 10240635 44486782 Grand Total 6,21,18,630/- In response to explain the said discrepancy, the assessee has submitted that there is no suppression of production in its case. However, the assessee admitted the discrepancy but termed it as wastage. According to the assessee its transfer value was Rs. 72,03,880/- only. The assessee has claimed that in its industry the same is not suppression of production but normal loss of the production process. It is merely wastage generated in the production process. Explanation of the assessee cannot be accepted as discussed in earlier Para during the discussion rejection of book result of the assessee. In view of the fact that no wastage has been claimed in the auditor's report, wherein specific detail is required to be submitted. The assessee has submitted its reply just before end of the assessment proceeding, and no meaningful verification/investigation is possible. However, fact remains that the assessee is not disclosing its actual production and merely termed as wastage....
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.... assessment order is that such production wastage is not reported and does not form part of the auditor's report. The other reason is that the appellant's reply on this normal production loss has been submitted at the fag end of the assessment proceedings and no meaningful verification is possible at this stage. On a perusal of the submissions made by the appellant it is seen that the assessee has been maintaining production register which is prescribe under Schedule-U of Drugs and Cosmetics Act in which day to day entries relating to the quantitative details of raw material used in the production process and the final product is maintained. Apart from some calculation mistakes, which have been explained by the assessee, nothing has been noted from the said statutory production/ manufacturing records which can lead to the inference of suppression of production is such records. The appellant has also detailed the manufacturing process from which it is observed that certain amount of wastage/ production loss is a necessary feature of the appellants' production process, which cannot be entirely ruled out. Moreover, even under the Drug Price control order 1995 and Drugs and Cosmetic....
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....ssions made by both sides. The assessee has explained its production process in detail and the wastage/loss arising in the process has been quantified at each level. During the course of the hearing, revenue could not point out any error or defect in the explanation given by the assessee. Further it is also a matter of fact that no adverse material or evidence was found during the course of search or survey that the assessee has suppressed any production nor any material was found with regard to any sale of such production outside the books of account. In view of the above facts, we uphold the finding of the CIT (A) for deleting the addition. 72. Ground no.5 of assessment year 2006-07 and ground no.2 of assessment years 2007-08 and 2008-09 is relating to denial of the benefit of deduction under section 80IC in respect of the job work income from manufacturing activity carried out at Baddi unit. In this regard the AO has stated that job work income cannot be treated as income derived from manufacturing activity and accordingly he has denied the benefit of deduction in respect of the job work charges. The CIT(A) has rejected the above contention of the AO by giving the following f....
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....ties for whom these job works have been done were filed before the AO. The major work has been done by the assessee for a pharmaceutical company, CIPLA Ltd. The assessee has also submitted complete details of the process and the work starting from the conversion of power to tablets and capsules. Thus the assessee has done complete manufacturing process. Only raw material was supplied by the respective parties. This nature of job work is as good as manufacturing. Hence we uphold the order of the CIT (A) on this issue. 75. Ground no.6 of each of the assessment year is regarding deletion of addition made by the Assessing Officer on account of unexplained investment in plant and machinery as under:- A.Y. 2006-07 : Rs.47,97,439 A.Y. 2007-08 : Rs.47,97,439 A.Y. 2008-09 : Rs.47,97,439 The above said addition has been made by the AO on the basis of following finding:- "Approved Government Valuer, Mr. Umesh Johar of Johar & Associates has valued the plant and machinery installed at Baddi unit and submitted his report to the Department. As per his report out of total machinery installed at the Baddi premises of the assessee company component of old machinery was found at 88....
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....of the assessee company with regard to Plant & Machinery is not correct. (iii) It is also established that the assessee company has shifted its Plant & Machinery from its D-6/ J-13 Unit of Delhi to its Baddi Unit during the later part of the A.Y. 05-06. Finally Delhi Unit of D-6 was also closed in May, 2006 as per statement of D.V. Sardana of the assessee company. The assessee company has claimed its production for the first time at its Baddi Unit during May, 2005 only. When down value of Plant & Machinery at D-6 Unit of Delhi was Rs. 1,60,50,810/- as on 01-04-2005 as per the Companies Act. The assessee has shifted sizeable part of Plant & Machinery of the assessee company from its D-6 Unit to its Baddi Unit during A.Y. 05- 06 and A.Y. 06-07. Few of the machineries could not be shifted as found during course of search on 14-02-2008 because of non availability of space at its Baddi Unit. In the circumstances, I have estimated in all fairness and according to the fact of the case that plant & Machinery of WDV of Rs.1,35,00,000/- was transferred from D-6 Unit and then installed at Baddi Unit. As such the assessee company was not required to make any investment against these Plant &....
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....the course of survey at Baddi unit was found as unrecorded in the books maintained by the assessee. Further to this it has also been held in the finding given in Ground of Appeal No. 10 that Sh. Umesh Johar was not a Govt. Approved Valuer as seen from the list of approved valuers, as obtained from the office of CCIT, Delhi-1 and filed by the assessee. For this reason too, the valuation report cannot be relied upon. In view of above discussion addition of Rs. 47,97,439/- on account of estimated unexplained investment in Plant and Machinery at Baddi is unjustified, as the same is based on surmise, conjecture and estimation of value of a plant/machinery. Accordingly, this ground of appeal is allowed and the A.O. is directed to delete the addition." 76. Before us it was submitted by the learned DR that the CIT(A) was not justified in deleting the addition. The AO has adopted scientific basis for making the above addition. The learned AR on the other hand has submitted that the addition made by the AO is absolutely arbitrary and unjustified and against the facts. It was submitted that the valuation done by the approved valuer is based on the current market price and that too witho....
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....und in the case of the assessee. It has been informed by Sh. Dinesh Sharma the controller of M/s Sri Krishna Machine & Tools and its sister concerned that he merely provides bills and does not supply any goods. There is ample evidence showing that the machinery was not installed and bills were in the form of accommodation entry only. It is also found that the assessee was using old machines instead of new. It has been proved beyond doubt that the assessee has acquired bills only, from various parties. From the discussion made above it is found that the assessee has acquired bills for amount of Rs. 54,00,000/- accordingly depreciation as claimed by the assessee is reduced to the extent of depreciation claimed is required to be reduced. Value Depreciation WDV 2006-07 54,00,000/- 8,10,000/- 45,90,000/- 2007-08 45,90,000/- 6,88,500/- 39,01,500/- 2008-09 39,01,500/- 5,85,225/- 33,16,275/- 15.27 Accordingly an addition of Rs.8,10,000/- is made to the income of the assessee on account of wrong claim of excess depreciation. " The CIT(A), however, has given relief on the ground that machinery to the extent of Rs.20,42,750/- were shifted from the Delhi....
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....42,750/- obviously needs to be deducted while making disallowance. Accordingly we hold that the CIT(A) was justified in restricting the disallowance to the net of the amount of accommodation bills i.e. Rs.54 Lakh - value of the machinery shifted to the Baddi unit. Accordingly this ground of appeal is dismissed. 80. Ground no.8 of assessment year 2006-07 is relating to the relief of Rs.23,93,587/- given by the CIT(A) in respect of the disallowance of depreciation made by the AO on Delhi Unit. In this regard the AO has stated as under :- "15.28 As discussed above 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 for Baddi unit. Further unassailable evidence of shifting of machinery from D- 6, Delhi Unit of Baddi Unit is in the possession of the Department. Mr. S. Banga has stated that four section of production system were shifted to Baddi unit from Delhi unit. As per statements on oath recorded (Mr D.V. Sardana) D-6, Delhi Unit was closed in May, 2006. As such corresponding depreciation on plant and machinery and on other assets is required ....
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....eginning preparation of a building for pharma production normally takes much longer time and more investment than ordinary factory building due to regulation/inspection of the Drug authorities. But the assessee could not substantiate this aspect in its case that the persons who have performed the ejection work of machines from D-6 unit and the persons who have installed these machines at Baddi. Building improvement Rs.35,01,896, shown was not found sufficient enough for preparation of building for pharma production. No expense for erection of machine was shown in the balance sheet. During the assessment proceeding part of the Building improvement was claimed as expense for erection of machines amounting Rs.22,27,301. The assessee company was found doing construction work and making investment in plot no. 43 and 44 HPSIDC Indl. Area Baddi. Investment for the period was shown at Rs.45,62,763. The said property was referred for valuation to the Distt. Valuation Officer Chandigarh. As per DVO of Income Tax Department its investment was reported at Rs.48,75,092 in the Plot No. 43 & 44 of HPSIDC Baddi. As such the excess and out of books investment of the assessee for the period comes to....
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....VO. Even this difference as valued by the DVO is less than 6% which is not significant enough as this report is also at best an estimate. Likewise, the DVO, Chandigarh has value the construction cost at Plot No. 43 & 44 HPSIDC, BADDI at Rs. 48,75,092/- on account of building improvement for the AYs. 2005-06 to 2007-08 taken together as against the expenses of Rs. 45,62,763/- recorded in the books of accounts which indicates that the actual expenses incurred are largely in consonance with the report of the DVO. This difference as valued by the DVO is around 6% which is not significant enough as this report is also at best an estimate. Thus in my considered opinion there is no justification for making an addition of Rs. 24,98,104/- on account of estimated building improvement / erection charges carried out at property No. 43/44 & 35 HPSIDC, Baddi. Accordingly, the AO is directed to delete the addition of Rs. 24,98,104/- made on this account." 82. The learned DR relied on the order of the Assessing Officer. On the other hand, the learned AR has supported the order of the CIT(A). In this regard it was submitted that there is no basis whatsoever for estimating the investment at Rs....
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....lready been disallowed in the preceding para. Loss on sale of plant and machinery amounting Rs. 39,42,380 was disallowed in preceding Para. It is not revenue loss. It was also disallowed by the assessee in its computation of income. Total turnover shown by the assessee during this period in D-6 unit of Delhi was at Rs. 12,19,49,514. It also reflect absence of majority of machines and plant at Delhi unit. The assessee has not submitted detail of machines used by it during this period. In the given circumstances it has been concluded that the book result of the D-6 unit is unreliable and income of this unit is needs to be estimated. On the basis of facts and circumstances of the case I hereby estimate the income of the assessee representing its D-6 unit, in absence of its major plant and machinery, at Rs. 30,48,737 at the net profit rate of 2.5% of the turnover declared. An addition of Rs.27,00,000, has already been made on account of excess depreciation claimed by the assessee company in this unit which is over and above of this estimation. Accordingly I hereby made an addition of Rs. 30,48,737 to the total income of the assessee for the period under consideration." The CIT(A) ha....
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....he sale of scrap of Baddi is not being fully accounted for by the assessee. The documents seized during the course of search reveals that such scrap sales was being made on regular basis and as the assessee has been carrying out the same business activity and no scrap sales have been declared in earlier years in this unit, it goes on to show that the assessee has been utilizing this modus operandi to generate unaccounted cash. The detail of the document seized as per Annexure A-20 & A-21 of party WB-5 pertaining to sale of scrap of AY 2007-08 and AY 2008-09, is as under: (i) A-20 Rs. 3,61,433/- (ii) A-21 Rs. 3,68,922/- Total Rs. 7,30,355/- On being confronted, the assessee claimed that the scrap sale is used for the welfare of the labor. 15.16 Reply of the assessee is evasive. It has not explained why scrap sale was not included in sale receipt of the assessee. The assessee has also not submitted total detail of Scrap Sale of the period. In absence of detail supplied by the assessee company, its Scrap Sale is estimated as per fact & period of the case. The assessee company was doing construction & installation work during A.Y. 06-07 and A.Y. 07-08 hence Scrap Sale wo....
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....lfare activities. 89. We have considered the rival submissions. From the facts it is apparent that some scrap is being generated. Evidences were found during the assessment year 2008-09 to the extent of Rs.7,30,355/-. Accordingly it cannot be assumed that there was no scrap in the preceding two years i.e. 2006-07 and 2007-08. The contention of the learned AR though appears to be attractive but we are not inclined to accept the same. The scrap having been generated, the assessee was duty bound to account for the same in the books of account. However, as regards estimation at Rs.12 Lakh each in the preceding two years we are of the view that when the scrap value in the assessment year 2008-09 was Rs.7,30,355/- it shall not be appropriate to estimate the value in preceding years at Rs.12 Lakh each. Accordingly we estimate the same at Rs.7 Lakh each. Accordingly these grounds in assessment years 2006-07 and 2007-08 in the Revenue appeal is allowed partly. The ground of revenue's appeal in assessment in assessment year 2008-09 is dismissed and ground no.3 in assessee's CO No.418/Del/2012 is also dismissed. 90. Ground no.12 in revenue's appeal and ground no.4 in CO No.353/Del/2012 ....
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....rt of its contention that the assessee has got its own funds which are far more than the investment made by the assessee company. 92. We have considered the submission made by the learned DR as well as AR and we have also gone through the assessment order and the order passed by the CIT(A). It is a settled law that Rule 8D is prospective and is not applicable for the assessment years 2006-07 and 2007-08. On going through the financials of the assessee it is also a fact that the assessee company has got its substantial own funds which are far more than the investment made by it. Accordingly we are in agreement with the CIT(A) that no interest expenses can be attributable to the investment made for earning exempt income. As regards the estimation of administrative expenses we find that the CIT(A) has adopted a reasonable basis. Accordingly we uphold the order of the CIT(A) on this issue. 93. In ground no.1 in cross objection no.418/Del/2012 for Assessment Year 2008-09, the issue is regarding disallowance sustained by the CIT(A) of Rs.26,26,000/- under the provisions of Section 14A of the Income Tax Act. The said disallowance has been made by the AO by invoking the provisions....
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....n obtained long time back. Further the AO has ignored the fact that the financial charges of Rs.52.91 Lakh includes bank charges of Rs.14.12 Lakh, interest on car loans of Rs.73,846/-, delayed payment charges of Rs.22,58,038/-. It was further submitted that the investment taken by the AO at Rs.23.64 Crore included certain investments on which income were not exempt under the provisions of Chapter III of the Act. On this basis it was submitted that the disallowance sustained by the CIT(A) is ignoring the facts of the case. The learned DR on the other hand supported the order of the CIT(A). It was submitted that Rule 8D is applicable for assessment year 2008-09. 95. We have considered the rival submissions. We are in agreement with the contention of the learned DR that the provisions of Rule 8D are applicable from assessment year 2008-09. However we are of the view that the assessee has got its own funds which are quite substantial as compared to the investment made. This fact has been recognized by the CIT(A) in the preceding assessment year where he has held that no disallowance is called for on account of interest. The facts of this year are not different and accordingly so ....
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....n is remain same, which is not possible. Any assessee would not make investment without earning any gain. Report of the DVO has evaluated the fair market value of the sold property. There is no reason to believe that the assessee would sale its property below the market rate. AS search it has been concluded that the assessee company has suppressed it short - term capital gain by Rs. 4,71,000/- (Rs. 2,27,000 + Rs. 2,44,000). Accordingly I hereby make an addition of Rs. 4,71,000/- to the total income of the assessee on account of suppressed short- term capital gain." The CIT(A) has deleted the said addition by giving the following findings:- "The estimated value at the time of the sale on 06/11/06 of 25 Bigha land situate at village panaga near EPIP pahse-1 Jharmajri Baddi assessed by the Valuer is Rs. 64,77,000/- as against the actual sale price of Rs. 62,50,000/-. The difference is of 3.63% is not significant. Similarly, estimated value of the 21 bigha land situate at Village kunjhal near EPIP Phase-I, Jharmajhri, Baddi at the time of sale on 14/02/07 assessee by the Valuer is Rs. 48,44,000/- as against actual sale price of Rs. 46,00,000/-. This difference is of 5.3% which is....
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....above addition has been made by the AO on the ground that the profits at the Baddi unit have been inflated. The above said addition has been made on the ground that the profits of the Baddi unit are as normally high. 100. The CIT(A) has deleted the said addition by giving the following findings:- "I have carefully considered the observation of the AO and submissions of the assessee. In my considered opinion the AO has no basis for presuming that in the initial years of setting of Baddi Unit, the expense on account of labour, professional charges, salary and transportation of material would be on higher side. No evidence to this effect has been found during the search/survey proceedings. Moreover if one takes in to account the effect of saving in excise duty of Rs. 17,19,68,201, the reduction in advertisement expenses of Rs. 5,47,83,874 and increase in job work income of Rs. 5.36 crore, there will be no basis to hold inflating of income on the part of the assessee company, in order to avail section 80IC benefit. Thus in my considered view the above said observation of the AO is held as based on surmise, conjecture and guess work and accordingly is directed to be deleted. Howev....
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....ce of a valid search the proceedings initiated under section 153A are liable to be quashed. It has been further contended that in the absence of any incriminating material belonging to the assessee being found during the course of the search, the reassessment proceedings are in fact invalid. 104. We have gone through the facts and we notice that there is no dispute to the fact that a search was carried on the assessee under section 132(1) and incriminating material was found during the course of the search. The AO therefore has issued notice under section 153A and the assessee has filed return in response thereto. The assessment has been framed as per the procedure prescribed under the law. We do not find any fault in assumption of jurisdiction by the AO and the consequent order and the procedure followed thereafter. Accordingly these grounds of cross objection are rejected. 105. In assessment year 2007-08, in ground no.5 the assessee has challenged the addition of Rs.10,00,171/- confirmed by the CIT(A). The AO has made the said addition on the basis of the following reasoning:- "15.32 The assessee company was found doing construction work in plot no. 43 and 44 HPSIDC Indl....