TaxTMI 
TaxTMI 
2016 (4) TMI 509
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 66,28,827/- made by the Assessing Officer on account of advances received loans as the assessee was unable to prove the genuineness of these advances and by accepting additional evidence in respect of these advances in violation of Rule 47A. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 18,50,000/- made by the Assessing Officer in respect of capital introduced by the partners as the assessee was unable to prove the source of said capital and creditworthiness of partners and by accepting additional evidence in respect of these advances in violation of Rule 46A". 3. The assessee is partnership firm engaged in the business of manufacturing of Tin Containers used in healthcare products and deodorants, etc. 4. As regards the issue raised in ground no.1, the AO has noted that, during the year under consideration, the assessee had shown receiving of fresh loans for sums aggregating to Rs. 57,50,500/- from the three parties, namely:- Sr.No. Name of the Person Amount of loan taken....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id loan amount after observing and holding as under:- "I have carefully considered the findings of the AO in the assessment order, as well as the submissions of the appellant. It is noted that at the time of assessment stage the appellant has submitted the confirmation of all the three parties along with their PAN, but the AO has not made any enquiry either from the AOs of such parties or directly from these parties. He has summarily treated these loans which were owned up by the concerned parties, as unexplained credits on the ground that the appellant could not file the bank statements and other details of source of these deposits. It is further noted that in the remand proceedings the AO had another opportunity to make enquiries in respect of such loans, but he has not made any adverse observation on the fresh evidence filed by the appellant in form of copies of I.T. Returns and balance sheet etc. of three parties. All these parties are regularly assessed to tax, from their accounts filed by the appellant they appears to be the persons of sound financial state, they have not only given confirmation of loan but has also provided their relevant bank statements and balance sheet ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the loan amount, profit & loss account and acknowledgment of income-tax returns. Thus, for proving the nature and source of credit, the following evidences were there in the record before the CIT(A) as well as before the AO (in the remand proceedings): (a) Loan confirmation of the parties including PAN and other details; (b) Bank statements of the parties showing loan amount given to the assessee through account payee cheques; (c) Acknowledgment of income-tax returns of the creditors for AY 2009-10; (d) Audited Balance sheet and profit & loss account of the creditors. On consideration of these evidences, the Ld. CIT(A) has deleted the said addition by holding that, the said loan was genuine and assessee has prima facie discharged its onus. If the assessee has satisfactorily explained the nature and source of Credit by adducing prima facie all the necessary evidence then onus of the assessee gets discharged and onus shift upon the AO to show / prove that such an explanation is not correct. In absence of any enquiry conducted by the AO even when specific mandate was given by the CIT(A) in the remand proceedings, the Department now cannot plead that the onus cast upon the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was also brought to the notice of the CIT(A) that, all these parties are regularly assessed to tax and have been fling their income-taxreturns, the details of which was already given before the AO, therefore, without any enquiry by the AO, the credit balance appearing in the books of the assessee of these parties cannot be treated as unexplained cash credit. 12. The Ld. CIT(A) after considering the entire material on record, deleted the addition after observing and holding as under:- "I have carefully considered the findings of the AO in the assessment order, as well as the submissions of the appellant. It is at the time of assessment stage the appellant has submitted the confirmation of all the five parties along with their PAN, but the AO has not made any enquiry either from the AO of such parties or directly from these parties. He has summarily treated these credits were owned by the concerned parties, as unexplained credits on the ground that the appellant could not fled the other details such as purpose of these advances and when they were settled etc. It is further noted that in the remand proceedings the AO had another opportunity to make enquiries in respect of such adva....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cordingly, the finding given by CIT(A) for deleting the addition is upheld. The AO, when was required to look and examine these evidence, had simply chosen to ignore and raise technical objections. Moreover, the evidences furnished merely corroborates the explanation and evidences filed before the AO. Thus, order of the CIT(A) is confirmed and ground no. 2 is dismissed. 14. In ground no.3, the revenue has challenged the deletion of addition of Rs. 18,50,000/- in respect of capital introduced by the partners. The partners of the assessee-firm, namely M/s Asian Aerosol P Ltd and M/s Shree Laxmi Trust introduced capital of Rs. 5,00,000/- and Rs. 13,50,000/- respectively. In response to the show cause notice by the AO for which the assessee was required to furnish copies of Balance-sheet and income tax records of the partners, the assessee could not furnish these details as noted by the AO. In the first appellate proceeding, the assessee submitted that, both the entities (partners) are regularly assessed to tax for last several years and in support of the said introduction of the capital, they had filed their copy of bank statements and audited financial statements. Apart from that, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xcise and entire raw material consumed and product manufactured are subjected to Central Excise Law. The AO on the perusal of the profit and loss account observed that, the cost of material consumed in ratio to the total sale was 40% in the AY 2009-10, whereas the cost of material consumed for the immediately preceding year was shown at 30% of the sales. He further observed that, the assessee was entitled to claim of deduction under section 80IB and from this year the claim for deduction has been reduced to 25% of the profit therefore such a rise on material consumed is 40% will affect the profit as it will not be much. The AO noted that in response to the show cause notice, the assessee did not justify the high consumption of cost of material and accordingly, he has made the addition of Rs. 71,38,571/- in the following manner:- "Considering the inflation in the prices additional increase in cost upto 3% is justifiable but not more than that. Here the assessee has increased its cost by additional 10% which is not acceptable. So an addition of Rs. 71,38,571/- (being 7% of total sales) is being added to the profits of the business". 19. Before the CIT(A), the working of the cost ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this been the only reason for increase in cost of raw material, the appellant could have submitted it to AO at the time of assessment. The explanation of the appellant appears to be an afterthought which is not supported by convincing documentary evidence. There is abrupt decrease of G.P. from 47.78% last year to 35.7% during the year for which the assessee does not have any cogent explanation. Under these circumstances, the addition made by the AO appears reasonable hence the same is confirmed". 20. Before us, the Ld. Counsel submitted that, the total quantity of raw material purchased in financial year 2007-08 was approximately Rs. 3.78 crores which in this year has risen to Rs. 6.55 crores. The import of tin-plate, which was at Rs. 1.04 Crores has increased to Rs. 3.88 crores in this year. Not only that, there is a huge increase in rate per kilogram unit which is evident from the fact that in financial year 2007-08, the imported tin-plate costs around Rs. 49.41 crores as compared Rs. 67.54 crores in this year. Thus, there is huge difference in rate also. He also furnished comparison of purchase rate between FYs 2007-08 & 2008-09 relevant to AYs 2008-09 and 2009-10, respectivel....