TaxTMI 
TaxTMI 
2015 (2) TMI 14
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....med sundry creditors without appreciating the facts that the notices U/S 133(6) sent to the parties from whom so called confirmations were filed by the assessee were returned un- served with the postal remark that the partied are not known 'incomplete address'. Therefore the confirmations filed by the assessee are not reliable. 3. That the order of the Ld. CIT(A) be set-aside and that of the AO be restored. ii) I.T.A.No. 2418/Del/2013: "1.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the entire addition of Rs. 3,69,73,180/- made by Ld. A.O. and that too by holding that sufficient opportunity of hearing was provided by Ld. AO. 2. That in any view of the matter and in any case, the action of Ld. CIT(A) in sustaining the part of total addition of Rs. 3,69,73,1801- made by Ld. A.O. is bad in law and again t the facts and circumstances of the case.  ....
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....f the place from where the sale was made but merely mentioned the destination address as F-15, Hardwar which is not possible to deliver. 5. The assessee failed to furnish the details of input VAT. 6. The assessee also failed to establish the electricity bill in accordance with its claimed manufacturing activities. 7. The assessee has claimed as windup its activity that even no one could investigate the actual activity of the assessee at the Unit situated at Hardwar. The assessee has furnished some bills for the machinery purchased which could not be verified from the premises as the business has been claimed as closed and also seen that bills furnished by the assessee there is no stamping of Chunigi or Chowki of Trade Tax department.' In the ledger copy of machinery the payment have been show from Canara Bank which bank account is not appear in the balance sheet. 8. Assessees have no ESI registration in support of labour engaged and payment to them an also no any bills voucher fi....
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....t. 4. The A.O. further observed that the assessee had declared sundry creditors at Rs. 5,48,89,899/-. The assessee was required to furnish complete postal address and confirmation form sundry creditors. In compliance, assessee furnished postal address and also filed confirmation letters on the letter head of the parties. The A.O. suspected these confirmations and, therefore, issued notices u/s 133(6) to the creditors for confirmation of balances. In response to the notices, only 5 parties responded wherein he found certain discrepancies but did not make any addition on account of differences as he had already made addition earlier in respect of such differences out of purchases. In respect of other parties from whom confirmations were not received, the A.O. show caused the assessee as to why the amount of Rs. 4.65.11.519/- representing credit balances of those parties be not disallowed on account of bogus liability. In compliance to the same, nobody appeared or field any submission and, therefore, the A.O. made addition on account of unconfirmed credits. 5. The A.O. further made disallowances for violations provisions of Section 40(a)(ia) for payments made by assessee on acco....
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....with for your verification as Annexure 5. 6. The appellants had been carrying on manufacturing activities in notified area. A certificate to this effect issued by the Lekhpal (Tehsildar, Haridwar) is being attached herewith as Annexure 6. 7. The appellant firm has obtained a certificate from the chartered engineer who had personally visited the factory of the appellant at F-15 Industrial Area Hardwar and had verified the installation of plant & machinery and raw material at the unit. Copy of the certificate dated 30.03.2008 given by the Chartered Engineer is being attached herewith for your reference as Annexure 7. 8. The appellant was getting job work done for a small part of the entire manufacturing process which is called Torrid Core (T-IO) which involves winding three types of wires on a bare core where number of turns given to each wire depends on the wattage of the mounted PCB ordered by the customer. The entire manufacturing process is done on a conveyor belt which is worked upon by severa....
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.... 7. Ld. A.R. was asked to comment on this report. The rejoinder to remand report is reproduced as under: "1. As regards the point No.1 of the page 2 of the assessment order I shall like to submit that the details of stocks were submitted during the course of assessment proceedings and this fact has been confirmed by the Ld. I.T.O. in point No.1 of his comments dated 23.01.2013 submitted to your goodself. 2. As regards the point No.2 of the assessment order, we shall like to clarify that the manufacturing process was explained in detail during the hearing of the appeal before your goodself on 10.01.2013 and 11.01.2013, Sir certificate dated 14.06.2006 was furnished during the course of assessment proceedings confirming that the factory is situated at F-15, Village Mayapur, Khasra No.45, this fact was also confirmed by Mr. Ganga Saran Gupta, owner of the said premises in his oath statement that manufacturing was carried out and plant and machinery was also installed, both the above certificate and oath statement are already on the assessment records. Further, we had al....
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....7 of the assessment order we shall like to submit that the factory of the appellant firm has been shifted to F- 32 Industrial Area Haridwar in June 2010. Further as per the Oath Statement of Ganga Saran Gupta (Owner of the premises at F-15 industrial Area Haridwar) was recorded in which he mentioned that the manufacturing had been carried out and plant & machinery were installed. Further as regards the additions to machinery we shall like to submit that the during the year under consideration no additions were made to the plant & machinery the additions were made in the earlier years and payment for the same has been made from Canara bank account. The copy of ledger account of the Plant & Machinery along with bills of purchases has been submitted during the assessment proceedings and available on file and the same is further submitted before your goodself vide reply dated 10.01.2013. The Canara Bank account is not appearing in the balance sheet as the same has been closed prior to the c consideration. 8. As regards the Point no. 8 of the assessment order we shall like to submit that the details of Labour & wages has been filed dur....
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....otal expenses of the appellant firm were Rs. 17,70,23,840/- and the job work expense of Rs. 14,53,890/- amounts to only 0.82% of the total expenses incurred and claimed by the appellant firm. Therefore, the finding of the Ld. A.O. that the appellant firm has been doing the business on job work basis does not hold good as it is against the facts and circumstances of the case and material available on record. The appellant firm has been getting done a very small part of the manufacturing process from outside and the same has already been explained in detail during the course of hearing before your goodself." 8. Considering the entirety of facts and circumstances of the case, Ld. CIT(A) allowed relief to the assessee on account of deduction u/s 80-IC of the Act. Regarding the addition made by A.O. by disallowing a part of purchases on account of difference in purchases claimed and as confirmed by parties, the Ld. CIT(A) allowed part relief to the assessee by holding as under: "4.0 second ground challenges the addition of Rs. 3,69,73,180/-- by disallowing certain purchases on the ground that the purchases were ....
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....that the assessment order was passed without providing a final opportunity to the appellant. Now my submission with regard to the above addition of Rs. 3,69,73,180/- is as under: I shall like to bring on the record the fact that the Ld. Assessing officer has calculated the wrong amount in the column no. 3 of the above table as the purchases claimed by the appellant is different from the amount calculated by the Ld. Assessing officer.' The Ld. Assessing officer failed to appreciate the fact that the credit total of the Ledger account submitted by the appellant includes the opening balance carried forward from the preceding financial year. There is one more fact which 1 shall like to bring on record that the amount given in the column no. 4 of the above table is also not correct as it is the year end balance of ledger account as submitted by the party and not the amount of sales confirmed by the party during the financial year 2008-09. The Actual purchase from the above parties as claimed by the appellant and amount confirmed by the party is given in the table hereunder: S.No. Party Amt. claimed as per asstt order Amt. actually claimed as per Laxmi El.books Amou....
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....unt of purchases claimed by not taking into account the opening balance and also ignored the debit note entries and take the final total of the ledger account as the amount claimed as purchases instead of the actual purchases during the year reflected in the ledger account. Further in the case of M/s Apex Industries the Ld. Assessing officer has taken the Debit total as reflected in the ledger account of the party. M/s Apex industries confirmed NIL sales as entire sales made by it is to Plot No. 36 New DLF Industrial Area Faridabad only. Therefore it is evident from the above facts that the amount claimed by the appellant has been wrongly calculated by the Ld. Assessing officer and actually there is no difference between amount of purchases as shown by us and amount of sales shown by the above parties except for a few reconciliation entries which are given in the reconciliation attached with the Confirmation from parties. Further the Ld. Assessing officer also failed to appreciate the fact the amount confirmed by the parties is the closing net balance of amount billed by them to F-i 5 industrial Area Haridwar only and not the entire sales made by them to M/s Laxmi Electronics....
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....ame by holding as under: "5.0 The third ground challenges the addition made of Rs. 4,65,1 1,519/- out of sundry creditors on the ground that the enquiry letters sent to them came back unserved. The Ld. ARs contended that this addition was not made on factually correct premises since, as per their information, the confirmations were received. To get a clear picture on this issue, the Ld. AO was asked to confirm this fact through this office letter dated 10.01.20l3 and the Ld. AO did confirm that the said confirmations were available on record. In view of this fact, the addition made is deleted since it was made on a wrong premise." 10. The last grievance of the assessee is regarding addition on account of violation of provisions of Section 40(a)(ia) of the Act. Ld. CIT(A) has upheld the addition by holding as under: "6.0 The fourth ground challenges the addition of s.5,20,550/- made U/S 40(a)(ia) of the Act. The Ld. ARs have averred as under:- &....
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....ies are in appeal before us. 12. Ld. D.R. first took up its appeal and took us to various objections raised by A.O. in his assessment order and submitted that against various objections of A.O. Ld. CIT(A) after recording submissions of the assessee has given relief to the assessee by passing a non speaking order. It was submitted that there was hardly any plant and machinery installed in the factory premises and invited our attention to paper book page 50-52 to invite our attention to the nature of plant and machinery as per bills and submitted that during financial yeas 2007-08 and 2008-09, there was no fresh addition of plant and machinery and WDV as on 31.03.2009 was Rs. 2,76,886/-. He further submitted that plant and machinery included double sided PCB Machine worth Rs. 40,000/- and one wave soldering machine worth Rs. 3.68 lacs and one automatic cut and bend machine worth Rs. 21,000/-. It was submitted that the assessee had declared a turnover of Rs. 17.33 crores which is not possible with such type of machinery and, therefore, it was submitted that the unit was only a paper unit. To further strengthen his argument that the unit was only a paper unit he invited our attentio....
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....the A.O. has never confirmed about confirmations of sundry creditors. It was submitted that the assessee never filed these confirmations and in support of his arguments, Ld. D.R. took us to written submissions of assessee placed at paper book page 73 wherein vide point (d) Ld. A.R. had submitted before Ld . CIT(A) that confirmations from creditors could not be submitted at the time of assessment. In view of above, Ld. D.R. submitted that on the one hand, assessee had been saying that they could not file confirmations from creditors whereas Ld. CIT(A) is saying that confirmations were already there as per A.O.'s confirmation whereas in fact, there was no such confirmations by A.O. either in remand report or otherwise. Therefore, the findings of Ld. CIT(A) are perverse and need to be reversed. Ld. D.R. after arguing the case, wanted to file written submissions also for which Ld. A.R. had no objection provided he was also provided an opportunity to reply to written submissions. Therefore, Ld. D.R. and Ld. A.R. were permitted to file written submissions. 15. Ld. A.R. on the other hand submitted that Ld. CIT(A) has made factual findings as to the fact that assessee was a manufacturin....
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.... years were made u/s 143(1) but the fact remained that assessee had claimed deduction in those years and these were allowed and, therefore, it was argued that on the basis of consistency also deduction cannot be denied. Reliance in this respect was placed on the following case laws: i) CIT Vs Delhi Presss Patra Prakashan Ltd 355 ITR 14 ii) Subhash Chander Sehgal Vs DCIT 1126/Del/2008 dt. 27.02.2009 88 ITD 313. iii) ITO Vs Ganga Beach Resorts in I.T.A.No. 764/Del/2013 b Delhi Tribunal on 27.09.2013 16. In view of entire facts and circumstances, Ld. A.R. submitted that Ld. CIT(A) had allowed the claim correctly. 17. Arguing upon the 2nd ground of appeal, Ld. A.R. submitted that the A.O. had made addition on account of sundry creditors as notices u/s 133(6) were received back which was deleted by Ld. CIT(A) on the basis of confirmation by A.O. that confirmations from creditors were available in the file. Ld. A.R. invited our attention to page 72-75 where it had submitted the detailed reconciliations before Ld. CIT(A). He further took us ....
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....guing upon grounds 3 & 4, Ld. A.R. submitted that disallowance u/s 40(a)(ia) would increase the income of assessee and thereby increased income will again be qualified for deduction u/s 80-IC. 19. Without prejudice, Ld. A.R. submitted that Section 194C was not applicable as there was no written or oral contract and individual payments were less than Rs. 20,000/- each. It was submitted that in the absence of contract between the assessee and the owner of the vehicles, the provisions of Section 40(a)(ia) were not applicable. Reliance in this respect was placed on the following case laws: i) CIT vs D Ratiram 535 DTR 382 ii) CIT Vs Bhagwati Steels 47 DTR 75 iii) C K Thakur Vs ACIT 129 TTJ 01 iv) R P Creation Co. Vs ACIT 30 DTR 569 v) DCIT Vs Satish Agarwal & Co. 317 ITR 196. vi) BHEIL Vs ITO 74 DTR 132 20. Replying to assessee's appeal, Ld. D.R. submitted that the purchase claimed by assessee were higher in the books of accounts of assessee as compared to confirmations received....
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.... submitted that the factory premises were taken on rent and electricity meter was in the name of owner Mrs. Ashok and sub meter was installed in the factory premises and as per the agreement, the assessee was to pay electricity charges on the basis of reading of sub meter. It was further submitted that apart from electricity expenses ,the assessee had spent an amount of Rs. 16.52 lacs as generator expenses as the area in which assessee's unit is established faced severe power cuts and most of the time generator had to be used resulting into heavy expenses. Regarding argument of Ld. D.R. regarding Research and development expenses, Ld. A.R. submitted that R&D was carried out to develop and manufacture the different sizes of the products for different customers according to their specifications. However, in the absence of ledger account of this expenditure, he was not in a position to explain the actual nature of expenditure. Regarding argument of Ld. D.R. that non submissions of documents seized during excise search action, itself creates doubt about the unit, the Ld. A.R. submitted that the quantum of record seized as noted in the panchnama itself substantiates the appellant's cont....
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....ent order placed at paper book pages 37-39 has noted that assessee had a manufacturing unit wherein the assessing authority have noted the amount of purchases and input credit of Vat amounting to Rs. 34.95 lacs has been given to the assessee. The VAT authorities have further assessed the assessee and after giving input credit had calculated the amount of vat payable along with interest due thereon. All these documents including VAT assessment order establish that there was manufacturing unit and assessee had made sales from this manufacturing unit. Moreover, we find that the A.O. during remand proceedings had made the following observations as is apparent from copy of remand report placed at paper book pages 4-17. i) This is a fact that assessee was situated at F-15, Industrial Area, Hardwar but the same was found locked on the date of visit of Income Tax Inspector. The factory was shifted to F-32 Industrial Area, Hardwar in the month of June 2010. ii) That statement of Shri Gangasharan Gupta owner of premises of F-15 Industrial Area, Hardwar was recorded on 16.11.....
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....on also, the claim of assessee cannot be denied unless it is denied in the initial year which has not been done in the present case. Therefore, keeping in view of entire facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A) and, therefore, ground No.1 of appeal is dismissed. 26. Ground No.2 of appeal relates to the fact that Ld. CIT(A) had deleted the disallowance made on account of sundry creditors ignoring the fact that notices, issued to creditors, had returned unserved. In this respect, we find that Ld. CIT(A) on 10.01.2013 had written a letter to ITO Hardwar wherein he had asked the A.O. to confirm as to whether the confirmations were placed in the file or not. We find that A.O. on 10.01.2013 itself had confirmed to Ld. CIT(A) Dehradun that the necessary confirmation were there in the file. Regarding argument of Ld. D.R. that assessee itself had stated that confirmations could not be filed vide its letter dated 23.11.2012, we find that the date of confirmations obtained by Ld. CIT(A) from A.O. is vide letter dated 10.01.2013 which is after the date of submissions and we find that A.O. had confirmed the fact that confirmations were on record and a ....