TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 336
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....s relied upon by AO for disallowing the claim. 3. The CIT(A) erred by not restricting the amount of addition to Rs. 62,19,406/- as calculated by the AO in his remand report on account of sham transactions behind inflated purchases." 3. The assessee has raised the following grounds of appeal in CO No. 234/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 disallowance of Rs. 20,76,219/- fully as made by Ld. AO u/s 40(a)(ia) and further erred in restricting the same to the extent of Rs. 1,85,685/- and that too without considering the submission of the assessee. 2. That having regards to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the disallowance of Rs. 19,77,745/- fully as made by Ld. AO and further erred in restricting the same to the extent of Rs. 3,15,117/- under rule 8(D)(2)(iii) and donation paid and that too without giving adequate opportunity of hearing. 3. That having regards to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in treating the interest inc....
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....ils. The assessee further did not produce the production and manufacturing process chart and quantitative details of each of the raw material. Further, most of the purchases are made of raw material are from sister concern. The ld Assessing Officer further noted that at many days the stock of finished goods was Nil. No details of wastage were also produced. On two occasions the assessee has shown sales of net but was not having the stock of the finished goods for the sale. In view of the above facts the ld Assessing Officer stated that entire operation of manufacturing is a mala fide manner to claim undue deduction u/s 80IC of the Act. According to the ld AO instead of showing the trading transaction of the net the assessee has shown manufacturing transaction. Therefore, he disallowed the deduction u/s 80IC of the Act. After that the ld Assessing Officer computed the profit at Dehradun unit disallowing the job work expenses of Rs. 2076219/- paid to KB Singh Securities where TDS was not paid in time and further the bills were in the name of sister concern. Further, disallowances were made of Rs. 193489/- u/s 40A(3) of the Act. Therefore, accordingly, he computed the profit of Dehrad....
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.... the revenue regarding not allowing deduction u/s 80IC of the Act because of the reason that as per the finding of the AO the assessee is not carrying on manufacturing activities. 8. The ld Departmental Representative vehemently supported the order of the ld Assessing Officer and submitted that when the books of accounts shows the glaring defects they have been correctly rejected by the ld Assessing Officer. He submitted that the ld CIT(A) without looking at the books of accounts has held that rejection of the books of accounts is not proper. With respect to the deduction u/s 80IC of the Act he submitted that assessee is carrying on merely trading activities and assessee could not prove that assessee had adequate machinery, manpower as well as the manufacturing process to prove the manufacturing. He referred to the order of the ld Assessing Officer extensively and submitted that there are valid reasons to show that the assessee is not carrying on manufacturing activities. 9. The ld AR vehemently submitted that nothing specific was brought on record of the ld AO and therefore, there is no reason to reject the books of account by the ld AO. He vehemently supported the order of the ....
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...., the appellant submitted as under. "Kindly refer to the order sheet entry dated 15.12.2011 whereby we have been directed to file details and explanation in respect of three points. Necessary compliance is as under: 1. So far as the account of cheques issued but not presented is concerned, the same is an old account carried out from the earlier year. Opening balance was Rs. 57830819/- out of which cheques of rupees 8307976/- were encashed in this year leaving a balance of Rs. 50778113/-. This being an old account coming from the last year as per the balance sheet and accepted in the last year, there is no question of any application of section 145(3] which is applicable in the following three situations. (a) When the AO is not satisfied about the correctness or completeness of the account. (b) The method of accounting as provided in section 145(1) and (2) has not been regularly followed. (c) The AO can make the assessment in a manner provided in section 144. No defect or discrepancy in my books of account has been found. Correctness or completion of the account is not under challenge. The provision of section 145(1) or (2) have also been followed and therefore ....
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....time & again repeatedly asked to produced complete bills & vouchers but assessee failed in this regard till the date of final discussion of the case. Therefore, the claim that "complete books of accounts with complete bills and vouchers were produced by the assessee during the course of assessment proceedings" is not factually correct. The assessee was show caused vide note sheet dt. 30.11.2011 (refer to scanned ordersheets above) pointing out discrepancies in the books of the assessee and asking for as to why books of the assessee should not be rejected U/s 145(3) of the Income-tax Act, 1961. Therefore, it is very much clear <6 evident that assessee was show caused regarding rejection of books of account U/s 145(3) of the Income-tax Act, 1961 (scanned ordersheets above of this report may kindly be referred). This shows that assessee was confronted regarding the issue and duly show caused for the same as well. Therefore, the contention of the assessee that "No show cause letter was issued by the Ld. AO before rejecting books of accounts, as such assessee was under a bonafide impression that the Id. AO is satisfied with the books and bills / voucher produced." is incorrect and may k....
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....appellant. I have also examined the remand report submitted by the Assessing Officer and the rejoinder filed by the appellant. I have also called for the assessment record for the year under consideration and perused the same. The main issue in this ground is pertaining to the rejection of books of accounts of the appellant invoking the provisions of sec. 145(31 of the Income Tax Act and thereby disallowing the claim of the appellant u/s 80IC of the IT Act, 1961. On perusal of the material on record, I find that nothing specific which is adverse was brought on record by the Assessing Officer to invoke the provisions of section 145(3) of the IT Act. The provisions laid down in section 145(3) is reproduced here as under. "145. (1) Income chargeable under the head "Profit and gains of business or profession" or "Income from other sources" shall, subject to the provisions of subsection (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assesses or in respect of any class of income....
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....ith regard to the maintenance of books of accounts to state or to show that there was a change in the method of accounting followed by the appellant as provided in section 145(1) and 145(2) or in the manner in which the appellant was regularly following the accounting principles. It is also pertinently mentioned here that after rejecting the books of accounts, the assessment was not framed by the Assessing Officer as per the provisions laid down in section 144 of the IT Act but was framed u/s 143(3). The Assessing Officer did not bring any adverse material on record with corroborative evidences to state that the appellant settled her liabilities outside the books of accounts or that the liabilities did not exist or that such liabilities were fictitious. In the absence of any such finding, this observation of the Assessing Officer is based on doubts, surmises and conjectures. In case, if the Assessing Officer found that there was a cessation of liabilities in some manner, the same should have been dealt with by invoking and applying the provisions of sec. 41 of the IT Act, 1961 but no such action was found to be taken by the Assessing Officer. I have also examined the order sheets r....
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....Assessing Officer for disallowing the deduction u/s 80IC of the IT Act, 1961, I have examined in detail and also discussed at length with the AR in the course of the appeal proceedings. The Assessing Officer stated that the appellant had only a machinery worth Rs. 78,758/- Which included three power presses. It was further observed by the Assessing Officer that only 31 employees were engaged by the appellant for production/manufacture and the wage register was not produced for verification, payments to labour and employees were made in cash, appellant was not registered with ESI/PF authorities and the use of labourers were provided by M/s. KB Singh Enterprises Security. The Assessing Officer doubted the bills pertaining to M/s. KB Singh Enterprises Security, the bills were raised in the name of the appellant as M/s. Super Fabrics Private Ltd. instead of M/s. Superior Fabrics and therefore the Assessing Officer opined that the expenses were not incurred by the appellant. According to the Assessing Officer, the appellant neither had machinery, nor the labour and most of the purchases were made from the sister concern and were recorded prior to the date of receipt of goods i.e. the bi....
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....s far as the assessee's claim that payment have been made through account payee cheque, I would like to argue that making payment through account payee cheque is not proving the case of assessee that these laborers were actually performed their work in the unit of assessee situated at Dehradun. The assessee vide her present submission also could not prove conclusively that the 31 labourers were actually used / deployed in manufacturing activities in her Dehradun Unit. 4.2 As far as the entry in stock register and entering date prior to the date of receipt of goods, the assessee has explained that in the stock register, the date mentioned for raw material is the date of bill and not the date of receipt of goods. It is important to point out that in the same submission, the assessee agreed that there is hardly any time left of one or two days when the supplier send the material, raises the bill and receipt of goods by assessee. This admission atleast prove that the stock register is not maintained in a proper manner so as to give a correct picture of availability of raw material as on the date of utilization thereof towards consumption for production. 4.3 The AO has also ob....
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.... detailed submissions made by the AR. On perusal of the material on record, the remand report and rejoinder thereto, I am of the considered opinion that there was no discrepancy in the books of account of the appellant, that would invite the action of the Assessing Officer to reject the books of account of the appellant. It may not be out of place to mention here that these books of account were again examined by the Assessing Officer in the remand proceedings, and no note worthy mistake was pointed out by the Assessing Officer, rather the Assessing Officer himself admitted that purchases made from M/s. Super Caltech Pvt. Ltd. and sales made to M/s. Trimurti Petro Chemical Pvt. Ltd. admittedly were different products. Therefore, the action of the Assessing Officer in rejecting the books of account of the appellant by invoking the provisions of section 145(8) of the Act is not based on well founded ground is held as bad in law. Therefore the book results are admitted for the purpose of computation of income. 14. Regarding the disallowance made by the Assessing Officer u/s 80 IC of the Act, to carry on the discussion further, at the outset, one has to elaborate the provisions of s....
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....ng, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning. (i) on the 23rd day of December, 2002 and ending before the 1st of April (2007) in the State of Sikkim; or (ii) on the T" day of January, 2003 and ending before the t' day of Apri4 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or (Hi) on the 241" day of December, 1997 and ending before the Isi day of April, 2007, in any of the North- Eastern States. (3) The deduction referred to in sub-section (1) shall be- (i) in the case of any undertaking or enterprises referred to in sub-clauses (i) and (iii) of clause (a) or sub¬clause (i) and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for the assessment years commencing with the initial assessment year; (ii) in the clause of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment and thereafter twenty five percente....
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.... Government. (iv) "Industrial Park" means such parks, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. (v) "Initial assessment year" means the assessment year relevant to the previous year in which the undertaking or the enterprise begins to manufacture or produce articles or things, or commences operation or completes substantial expansion; (vi) "Integrated Infrastructure Development Centre" means such centres, which the Board, may, by notification in the Official Gazette, specify, in accordance with the scheme framed and notified by the Central Government; (vii) "Software Technology Park" means any part set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry; (ix) "Substantial Expansion" means increase 'in the investment in the plant and machinery by at least fifty percent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of previous year in which the substantial expansion is undertaken; (x) "Theme Park" means such park, which ....
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....llant also submitted the copies of the bills issued by M/s. KB Singh Enterprises Security for supply of labour on contractual basis to the appellant at her factory at 1388, Langha Road, Tehsil Vikas Nagar, Distt. Dehradun during the year under consideration. Evidence of tax deducted at source from time to time on the payment made to M/s. KB Singh Enterprises Security, confirmation of account from M/s. KB Singh Enterprises showing that the payments were made through cheques other than a nominal payment of Rs. 60,000/- in cash was furnished by the appellant. Copies of the transport documents for transport of raw materials purchased to Dehradun and bills for transport of finished manufactured goods from Dehradun which were sold were furnished. Copies of corresponding purchase and sale bills which bears the stamp of the govt, agencies justify the transportation of raw material and finished goods. After examining all the above evidences brought on record by the appellant, the Assessing Officer did not rebut anyone of them in his remand report, rather the Assessing Officer himself admitted that the items procured by the appellant as raw material and sold by the appellant as a finished pr....
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.... preparation, handling or other activity designed to effect a physical or a chemical change in an article or substance other than natural growth for e.g. galvanizing iron, creosoting fence posts, dehydrating foods, homogenizing and pasteurizing dairy products etc. In all the above processes, the end product is entirely different from the rawmaterial used. In view of the above discussion that the product is different from the raw material, it is seen that the manufacturing of "PVC Pre Garnished Anti IR Camouflage Net" falls under the definition of "manufacture" or "production". The Assessing Officer has made an incorrect observation regarding the activity undertaken by the appellant. He also did not bring any adverse material on record contrary to that of the appellant and formed an opinion without any basis to substantiate his view. The Assessing Officer did not point out any discrepancies in the different stages of flow chart submitted by the appellant to state that she was not engaged in the manufacture of PVC Pre Garnished Anti IR Camouflage Net. In the absence of any such finding or reason, it is unjustified to deny the business activity undertaken by the appellant. 15.5 ....
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....ctivity of the appellant does not involve a detailed procedure of manufacturing of a final product from raw material and it is a mostly labour oriented work. 15.6 The above evidences placed on record clearly show that the appellant was well within the norms that make her eligible to claim deduction u/s 80IC. The Assessing Officer did not bring on record any adverse material to deny the claim of the appellant. He has not issued summons u/s 131 of the IT Act, 1961 or issued a commission to enquire about the appellant's manufacturing activity at Dehradun. In the absence of any such finding, it is unjustified to disallow the claim of the appellant u/s 80IC. In my considered opinion, the appellant is running a unit in a notified area which is approved and periodically inspected by the various government agencies like Industries Department, Central Excise Department etc. The appellant periodically is filing the returns to the Central Excise Department regarding this manufacturing activity, a sample of the same placed on record. These agencies did not point out any irregularities or discrepancies regarding the appellant's business activity, instead affirmed the existence of a new unit ....
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....al undertaking should be setup in certain special category of states. The appellant set up his unit at Khasra No. 1388, Langha Road,Charba, Dehradun, which is a notified area as per the notification issued and published in Gazette of India. e) The industrial undertaking should manufacture/produce specified goods. The appellant is producing "PVC Pregarnished Anti IR Camouflage Net" which is not covered under Schedule 13 of the Income Tax Act." 16. To sum up in the present case, it is seen that the appellant's new unit is set up in a notified industrial area of Uttranchal and commenced production with effect from 25.02.2008 which has been certified by the department of Industries, Govt, of Uttranchal. The appellant has filed her return of income within the specified time limit u/s 139(1) of the IT Act, 1961 i.e. 30.09.2009. The appellant submitted an audit report in Form 3CB u/s 44AB of the IT Act, 1961. This audit report is also supported by an audit report u/s 80IC in Form 10CCB duly signed by the Chartered Accountant. Flowever, the Assessing Officer, some how doubted the claim of the appellant u/s 80IC and did not consider any of the submissions made by the appellant in supp....
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....rt of the Assessing Officer. this issue has generated from the addition of Rs. 20265206/- made by the ld Assessing Officer on account of suppression of profits made through transaction with M/s. Trimurti Petro Chemicals and Allied services ltd. The brief facts shows that the total sales made by the appellant to M/s. Trimurti is Rs. 14.53 crores and that party sold the same goods to the Delhi Unit of the assessee for Rs. 16.55 crores. The claim of the assessee was that the said party was engaged in several services such as procuring the order and Liasoning with defense department. It was further explained that if the services of that party had not been availed, assessee would not have got this supply contract. Even otherwise, if the sale price is taken at Rs. 16.55 crores then the full profit would have been tax free u/s 80IC of the Act. The ld AO rejected the contention and made an addition of Rs. 20265026/- in the hands of the assessee. 13. Before the ld CIT(A) assessee reiterated the same submissions. The ld AO submitted a remand report in detail to which the assessee submitted a rejoinder and the ld CIT(A) deleted the addition vide para No. 28 of the order. 14. The revenue agi....
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....he involvement of M/s. Trimurti Petro chemical allied & Services Pvt. Ltd. In reply to the same, the appellant submitted before the A.O that there was no direct evidence for such services rendered by M/s Trimurti Petrochemical Allied & Services Pvt. Ltd. and stated that the appellant would file an affidavit from M/s. Trimurti Petrochemical Allied & Services Pvt. Ltd. to support the services rendered by them, if required. The appellant also requested the Assessing Officer to summon the directors of the said Company in case of any doubt as there was no malafide intention on the appellant to reduce the taxable income and if there would be any intention to avoid any tax this transaction would not have been taken place. However the Assessing Officer did not believe the submission made by the appellant and made the impugned addition of Rs. 2,02,65,026/- (Rs. 16,55,86,576-14,53,21,550) being the difference between purchases shown at Delhi office and sales made from Dehradun office. According to Assessing Officer, the appellant could have at the best paid commission for any such service rendered by such M/s Trimurti Petrochemical Allied & Services Pvt. Ltd. 26. In the remand report su....
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....s Pvt. Ltd. (at page 867 & 868) according to which, the company has made purchases of Rs. 13,98,77,173/-. It has also been observed that in the year under consideration, M/s T^ivYi11K+,' rhomimh & Alied Services Pvt. Ltd. has made total sales of Rs. 16,04,52,850/-. To verify the contention of assessee, quantitative details of sale made by Superior Fabric Dehradun and purchases made by Superior Fabrics Delhi Unit during the year under consideration was looked into. Following is the abstract of quantitative details of sale & purchase by both the units:- Details of sales of Dehradun Unit for the F.Y. 2008-09 A.Y. 2009-10 Item name Quantity Rate Amount Camouflage net (Big) 4012 30500 122366000 Camouflage net (Small) 1843 8750 16126250 138492250 Debit notes 6793500 5855 Scrap sales 35800 Total sales 145321550 Details of purchases of Delhi Unit for the F.Y. 2008-09 A.Y. 2009-10 Item name Quantity Rate Amount Camouflage net (Big) 4529 31730 143705170 Camouflage net (Small) 1840 9102 16747....
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.... 16404410 Admittedly, the 517 pieces of camouflage net were sold by assessee in previous year to Trimurti Petrochemical Allied Services Ltd. and as such the cost pertaining to these pieces was also booked in A.Y. 2008-09 but it is also true that the assessee has paid extra amount on re-purchase of additional 517 Camouflage Net of big size from Trimurti Petrochemical Allied Services Ltd. The difference for this quantity comes to Rs. 6,35,910/- (Rs.31,730/- - Rs. 30,500/- = Rs.l,230/-x 517) which is also covered under inflated cost/ sham transaction. To this extent, the addition made by AO is further correct and may kindly be upheld." 27. In the course of the appeal proceedings, the appellant submitted as under: "Ld. A.O. made addition of Rs. 2,02,65,206/- to the income of Delhi unit (Para-4 at Page 30-36 of the assessment order) on the ground that purchases have been inflated by the said amount. According to Ld. A.O., appellant in her Delhi Unit purchased the same product from M/s Trimurti Petro Chemical Allied Services P. Ltd. for Rs. 16,55,86,576/- whereas the said purchases were made by M/s Trimurti Petro Chemical Allied Services P. Ltd. from appellant'....
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....rvices P. Ltd., in the development of the appellant's business. It is quite strange that when appellant made request to Ld. A.O. to get this fact verified from M/s Trimurti Petro Chemical Allied Services P. Ltd. and its directors, its request was not acted upon and yet adverse inference was drawn by Ld. A.O. Therefore having regard to the pleadings made and evidences adduced by the appellant, it is prayed that the addition made by Ld. A.O. to the profits of Delhi Unit may please be deleted. In the rejoinder submitted, Appellant submitted that A.O himself admitted that addition should be restricted to Rs. 55,83,496/- and Rs. 6,35,910/- instead ofRs. 2,02,65,206/-. However the appellant stressed on the submissions made and stated that if these nets were sold directly to the Defence its profit of Dehradun unit would have been larger and routing the sale through M/s Trimurti Petrochemical Allied and Services Pvt. Ltd. does not have any consequences. Appellant further stated thatA.O's contention of the addition ofRs. 6,35,910/- is misplaced." 28. I have considered submissions made by the appellant, Assessing Officer's report and the appellant's rejoinder thereto....
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....issed. 18. Accordingly, appeal filed by the revenue is dismissed. 19. Now we come to the cross objection filed by the assessee wherein, the first ground relates to the disallowance u/s 40a(ia) of Rs. 1185685/-. The brief facts of the issue has been discussed by the ld CIT(A) in para No. 17 to 20 as under:- "17. Ground no. 1(e) pertains to the disallowance of job work charges and addition of Rs. 20,76,210/-. 17.1 In the course of the assessment proceedings, the Assessing Officer observed that the appellant paid a sum of Rs. 20,76,210/- to M/s. KP Singh Enterprises Security for which the TDS was deducted but deposited only in June 2009 and hence liable for disallowance u/s 40(a)(ia) of the Income Tax Act, 1961 except for the month of March, 2008. Further, since the bills were raised in the name of the company, M/s. Superior Fabrics Pvt. Ltd. and the appellant paid the amount as a Director of the said company and that the expenses pertained to the company M/s. Superior Fabrics Ltd. the Assessing Officer observed that the expense did not relate to the appellant and therefore he disallowed the claim of expenses of Rs. 20,76,210/-. 18. In the remand report, the Assessing Office....
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....essee has not submitted (in the present submission) the date of payment / credit for the remaining amount and as such, the AO has rightly invoked the provision of section 40(a)(ia). However, the assessee can be given benefit to the extent of Rs. 8,56,815/- only. The Id. A/R in course of verification proceeding contended that even if the disallowance of Rs. 1.58 lacs is to be made in Dehradun Unit's income, the same will be tax neutral since the entire income is exempt U/s 80IC. However, this plea of assessee is not a justification for allowing any expenditure which is otherwise liable to be disallowed in accordance to the provision of the Income-tax Act, 1961. 5.3 The AO also observed that since the bills were not raised in the name of assessee's proprietorship concern, rather have been found to be issued in the name of Superior Fabrics Pvt. Ltd., the expenses of third party is not allowable. To this, the assessee claims that the entire paytment have been made through account payee cheque and as such, the disallowance is not called for. In this regard, it is submitted that the assessee has annexed copies of bills at page No.288 to 298 perusal of which reveals that only a bil....
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....m the head office at Delhi. Therefore, the disallowance was made by Ld. AO without any basis and it is requested that the disallowance may please be deleted." In the rejoinder submitted appellant further stated that as per the case laws mentioned, assessee is entitled for the deduction of entire amount. The AO has not disputed that the payments have been made to M/s. K.B. Singh Enterprises vide account payee cheques and that no summons was issued to the supplier for seeking all clarifications." 20. I have examined the details filed by the appellant and perused the assessment order, remand report of the Assessing Officer and considered the submissions made by the appellant and the rejoinder to the remand report. I have also examined the various evidences discussed by the Assessing Officer and the appellant with regard to the bills issued by M/s. KB Singh Enterprises Security in the name of M/s. Superior Fabrics Pvt. Ltd. On perusal of the material on record, I find that though the name was mentioned as M/s. Superior Fabrics Pvt. Ltd., the address mentioned on the bill was 1388, Langha Road, Industrial Area, Dehradun, Uttranchal. It seems that the Assessing Officer did not appr....
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....rom 1.4.2010, is not remedial and curative in nature and therefore, the amendment carried out by the Finance Act, 2010 with retrospective effect from 1.4.2010 cannot be held to be retrospective from the assessment year 2005-06. Therefore, respectfully following the order of the Flon'ble Mumbai Special Bench, I also hold that the said amendment to section 40(a)(ia) cannot be held to be retrospective with effect from 1.4.2005, the date on which section 40(a)(ia) has been inserted by the Finance (No.2) Act, 2004. Thus, the action of the Assessing Officer in making the impugned disallowance u/s 40(a)(ia) of the Income-tax Act, 1961 was justified. Accordingly, the addition of Rs. 20,76,219/- made by the Assessing Officer is restricted to Rs. 11,85,685/- and direct the Assessing Officer to pass a consequential order accordingly." 20. The ld AR stated that if the TDS is paid before the due date of filing of return the disallowance cannot be made. For this he relied upon the decision of Hon'ble Delhi High Court in CIT Vs. Rajinder Kumar 362 ITR 241. He submitted that on the sum of Rs. 1185685/- tax has been deducted and paid before the due date of filing of the return. He referred to....
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....sallowed ) Nil Income from Other Sources Rs. 67,80,459/- Unexplained liabilities Rs. 5,07,78,113/- 5.75.58.572/- Addition Income from House property (as shown in the computation) Rs. 8,23,832/- Rs. 5.83.82.404/- Therefore, the Assessing Officer assessed the income from Ghaziabad unit in the above manner at Rs.5,83,82,404/-. 34. In the remand report, the Assessing Officer stated as under. "8. Disallowance of expenses of Rs. 19,77,745/- incurred in Ghaziabad Unit 8.1 As per para '7' of the assessment order, the AO has disallowed the business expenditure debited in P&L A/c of assessee's Ghaziabad unit amounting to Rs. 19,77,745/-. /4s per the P&L A/c of the Ghaziabad Unit, the assessee has brought over the gross profit of Rs. 7,087/- on total turnover of Rs. 16,84,630/-. Further, other income such as interest on FDR/Bank A/c and also rent have also been credited in P&L A/c and net profit of Rs. 48,02,714/- has been shown. Since despite providing ample opportunities, the assessee did not produce evidences with regard to purchase/sale and also bills & vouchers for expenses at Ghaziabad Unit, the AO disallowed the entire expenses to ....
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....7,020/- and administrative expenses of Rs. 3,05,117/-. On the contrary the appellant argued that no disallowance be made in respect of the interest which worked out amounting to Rs. 5,67,020/- as the appellant had paid an interest amounting to Rs. 25,17,394/- as against interest received and declared Rs. 67 lakhs which was far more than the interest paid of Rs. 25,17,394/- and more over the interest debited in P&L Ale was in respect of funds utilized for income earned from exempted unit of Dehradun. I find force in the argument of the appellant and as such no disallowance is made in respect of interest paid since the appellant paid interest of Rs. 25,17,394/- which included interest of Rs. 19,20,389/-. The balance interest debited by the appellant was in respect of Ghaziabad Unit. Assessee had also declared interest income in her Ghaziabad unit amounting to Rs. 67.80 lacs. In view of these fact no disallowance is attracted u/s 14A read with rule 8D(2)(ii). However, since the assessee is silent with regard to disallowance proposed by the Assessing Officer under rule 8D(2)(iii) amounting to Rs. 3,05,117/- and donation paid of Rs. 10,000/-, I therefore, restrict the addition made by t....