TaxTMI 
TaxTMI 
2016 (9) TMI 1144
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....jurisdiction to make such additions. 3. That in view of the facts and circumstances of the case erred on facts, the CIT(A) has erred on facts and in law in upholding the action of the AO in rejecting the books of accounts without pointing out any error in the regular books of account maintained by the appellant. In any case the books have been illegally and wrongly rejected and the said rejections of books of account cannot be justified by any material on record. 4. The AO/ CIT(A) has erred in fact and in law in treating the Cash Sales as income from other sources and also erred in not allowing deduction U/s 80IC to the appellant. 5. That in view of the facts and circumstances of the case CIT(A) erred on facts and in law in uphold the action of the assessing officer in not allowing the deduction U/s 80IC. The CIT(A) has also failed to appreciate that the appellant has fulfilled all the condition of the said section and the deduction U/s 80IC is allowable out of profits of eligible unit. 6. The CIT(A), in view of the facts and circumstances of the case erred on facts and in law in uphold the additions of Rs. 7,77,86,000/- u/s 68 in respect of cash sales proceeds deposite....
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....he deduction u/s 80IC of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] is against the CBDT Instructions. The ld. AR pointed out that the ld. CIT(A) also erred in upholding the rejection of books of accounts without pointing out any error in the books of accounts maintained by the assessee, thus the impugned addition is not sustainable in law and in the facts of the case. The ld. AR also pointed out that the authorities below failed to appreciate that the appellant fulfilled all the conditions of section 80IC of the Act and the same is allowable out of profits of eligible unit and profits includes profits from cash sales also as there is no distinction between cash and credit sales in the acid test of allowability of deduction u/s 80IC of the Act. 4. Per contra, the ld. DR of the Revenue strongly supported the action of the A.O and it was contended that the cash sales was not proved and hence the A.O was quite justified in making disallowance in this regard and the first appellate authority upheld the order of the A.O by considering all relevant facts of the case as well as legal propositions on the issue, 5. On careful consideration of the abov....
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....d in the paper book including pages 121 to 125 and 190 to197. Therefore, these cannot be considered as supportive to the claim of the assessee. 8. At the outset, we may point out that as per section 145(3) of the Act, the A.O is empowered to reject books of accounts of the assessee in certain conditions viz (i) where the A.O is not satisfied about the correctness or completeness of the accounts of the assessee or (ii) wherein the method of accounting provided in sub-section (1) of section 145 of the Act has not been regularly followed by the assessee or the ld. CIT(A), (iii) income has not been computed in accordance with the standards notified under sub section (2) of the said provision, then only the A.O may make assessment in the manner as provided in section 144 of the Act after rejecting ht books of accounts of the assessee. 9. In the present case, from the relevant operative para 3.1 and 4.1 of the A.O, we note that the A.O has not shown his intention by issuing any show cause to the assessee before rejecting the books of accounts. We also observe that the A.O has not leveled any allegation, as per mandate of section 145(3) of the Act, to establish that any of the condition....
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.... for afresh de novo adjudication after affording due opportunity of being heard to the assessee. 11. Next question posed to us for adjudication is that whether the A.O was justified in denying deduction u/s 80-IC of the Act pertaining to cash sales treating the same as income from other sources. The ld. AR pointed out that there is no condition in the Act that the assessee would not be eligible for deduction on cash sales. The ld. AR vehemently pointed out that the A.O regularly allowed deduction u/s 80IC of the Act on both kinds of sales either cash or credit and there is no valid reason to deny the same only on the cash sales for the period under consideration. The ld. AR also showed us details and particulars showing that the cash and credit sales for all purposes, including deduction u/s 80IC of the Act have been accepted in earlier years from A.Y 2005-06 to 2007-08 and also in the subsequent years. i.e from A.Y 2010-11 to 2013-14 and also filed copies of assessment orders framed u/s 143(3) of the Act for A.Y 2010-11, 2011-12 and 2013-14 to show that there was credit and huge cash sales in earlier and subsequent A.Ys and deduction u/s 80IC of the Act has been consistently and ....
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....DFC Bank. The ld. AR also contended that the allegation of the A.O that all cash bills have been prepared are also not sustainable because in the accounts duty is segregated and if one person is doing cash billing the naturally all cash bills would be prepared by that person. The ld. AR also contended that if all cash bills have been prepared by a person, then it cannot be presumed that these bills relating to various days have been prepared in a day and thus it also cannot be assumed that the same lacks the genuineness of regular sale invoice. The ld. AR vehemently pointed out that the cash deposit to a bank 40 Km away from the assessee's office cannot be a valid basis to doubt cash sales and to make disallowance of cash sales. The ld. AR also pointed out that the assessee deposited proceeds of cash sales as per convenience and security reasons to HDFC Bank and sales tax etc was also paid thereon. Thus, it cannot be doubted only because the amount was not deposited into a nearby bank account. The ld. AR further contended that in para 4.1(e) , the A.O made bald allegations without bringing out any event or comparable of similar entity by wrongly holding that the assessee has shown ....
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....ting the amount 2% of total sales as income from eligible unit have been made without considering the entire relevant evidence and explanation of the assessee and the issue of cash sales detailed verification and examination of all related documentary and circumstantial evidence. The AO shall also consider the percentage of the consumption of fuel and raw materials in proposition to finished goods and will also take into consideration the percentage of gross profit ratio of other similar unit, if any, in the similar factual conditions. We may point out that without considering the relevant evidence, details and explanation alongwith earlier and subsequent year financial results and GP ratio of the assessee and similar unit in similar location the Aon cannot make disallowance and addition and it is also on the assessee to justify and explain the situations wherein huge cash sales was made and cash was deposited to bank account which is 40 KM away from the office of the assessee. The assessee may also submit all other relevant details pertaining to transportation, commercial tax payment and purchasers to establish its claim of cash sales. With these directions issue involved in groun....