AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 336
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....sideration and ignored the other circumstantial evidences 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 i....
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....he assessee is a director. The assessee did not produce the register of labour, ESIC details. 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.....
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....ld CIT(A) has erred in not upholding the rejection of the books of account. Coming to the second ground of appeal of 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 ....
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....the fact that the cheques issues were already expired and no cognizance of the same was taken in the books. Vide reply dated 19.12.2011, 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 m....
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....refore, covered under clause (d) of rule 46A of the income Tax Rules." 3.2 In this regard, it is submitted that assessee never produced complete bills and vouchers before the A.O. though the Ld. A/R were 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 l....
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....s year. In case there in any evidence with the department for such treatment the same may kindly be given to me for my further submission." 10. I have gone through the facts of the case, perused the assessment order dated 22.12.2011 and considered the submissions made by the 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....
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.... placed on record by the appellant were not disproved by the Assessing Officer in any manner. From the details submitted, I also find that these parties have also been paid in the subsequent period and that too through the banking channels only. 10.3 The Assessing Officer did not bring on record any adverse finding with 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 an....
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....s. During the course of the appeal proceedings, the appellant demonstrated the raw material and the finished manufactured product which show that the polyester net is the raw material and the finished product is the camouflage net manufactured after various processes carried out on the same. 11. With regard to the observations of the 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. ....
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.... the AO noted that all but one bill were raised in the name of Superior Fabric Pvt. Ltd., another company owned by assessee. This fact has again not been disputed in the present submission and the evidences (copies of bills raised by M/s KB. Singh Enterprises Security at page No.288 to 298 of volume II) furnished by assessee infact prove the AO correct. As 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 l....
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....er the end of three F.Ys. Moreover, part of the goods purchased (approx. Rs. 14 lakhs) from Texco India has also been returned back in subsequent year which itself creates a doubt on the utilization thereof in the production activities. Accordingly, the AO has rightly disallowed deduction U/s80IC of the Income-tax Act, 1961." 13. In the above context, I have also examined the 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 t....
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....are Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North Eastern States;, (b) which has begun or begins to manufacture or produced any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any articles or thing, 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....
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....oard, may, by notification in the official gazette, specify in accordance with the scheme framed and notified by the Central Government. (ii) "Industrial Estate" means such estates, which the Board, may be notified in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. (iii) "Industrial Growth 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. (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 th....
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.... 5. Copies of Electrical bills for Electric connection installed at Langha Road, Unit of the appellant. 6. Copy of letter issued by Office of the Superintendent, Central Excise Range, Dehradun, certifying the exemption availed by the unit of the assessee located at Khasra No. 1388, Langha Road, Industriat Area, Charba, Dehradun, engaged in manufacture and clearances of "PVC Pregarnished Anti Ilf Camouflage Net with Superstructure (Army Camouflage Tent with Support System of PVC Poles) etc." 7. Copy of Notification No 50/2003CE dated 10.6.2003." 15.1 In addition to the above, the appellant 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 tr....
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....n, mould, produce, process, put together, shape, tune out etc." Manufacture' or 'production' or 'process' have different meanings and are to be read in an ordinary meaning but they convey broader sense. "Manufacturing" of goods normally involves a creation of something (e.g. making or assembling machines, clothing etc.) or the shaping, stamping or forming of an object out of something (e.g. steel rails, wire rails, wood moldings etc). Production means the process and methods employed to transform tangible inputs (ideas, information and knowledge) into goods and services. Processing of goods usually refers to a technique of 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....
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....which may be strategically placed to cover hot areas of a concealed object in order to produce a multi spectral camouflage system. The membrane material is a fabric coated with laminated synthetic materials or polyster coated with polyvinyl chloride. The appellant is using polyster coated with polyvinyl chloride (PVC) as its membrane raw material. Therefore from this process, it is understood that manual labour was deployed in the process of tailoring and seaming with a chemical binder. The manual labour which was deployed by M/s. KB Singh Enterprises Security was paid through the banking channel. It is also understood that the manufacturing activity 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 act....
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....e also placed the same in the paper book. They are in form 3CB u/s 44AB and in form 10CCB u/s 80IC duly signed by the Chartered Accountant. c) The undertaking should be new and should not be formed by splitting up or reconstruction of an existing business. This fact is affirmed by the certificate issued by member secretary, department of Industries, which stated that the unit is a "new industrial undertaking" and commenced its commercial production w.e.f. 4.2.2008. Besides, this electrical installation approval dated 12.2.2008, given by the Executive Engineer, Electricity Distribution 'Divison (R), U.P.C.L. Dehradun, amply shows that it is a new unit. d) The industrial 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 s....
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....unts does not empower the ld AO to invoke the provisions of section 145(3) of the Act. Furthermore, the ld CIT(A) has also given valid reasons for allowing the claim of the assessee u/s 80IC of the Act. The ld Departmental Representative could not controvert the fact pointed by the ld AR that on similar facts the assessee was allowed deduction for Assessment Year 2008-09 and Assessment Year 2010-11. In view of this we do not find any infirmity in the order of the ld CIT (A), accordingly, ground No. 1 and 2 of the appeal of the revenue are dismissed. 12. Ground No. 3 of the appeal of the revenue is that ld CIT(A) should have restricted the amount of addition to Rs. 6219406/- as per the remand report 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 ....
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....t Delhi by way of inspection. It was explained that if the services of M/s. Trimurti Petrochemical Allied & Services Pvt. Ltd. would not have been availed, the appellant would have suffered a great loss by way of rejection of goods. The appellant further submitted that had the goods would have been sold at Rs. 16.55 crores than the profit earned would also been tax free in the hands of the appellant since the same would have arrived to the appellant being earned from the exempted unit and in any case there was no loss to revenue as M/s Trimurti Petrochemical Allied & Services Pvt. Ltd. had paid Tax on Income earned by them in these transactions for amounting to Rs. 16,68,000/-. 25.3 The A.O asked the appellant to justify the 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 A....
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....ed for deduction U/s 80-IC. The assessee further claimed that by routing the transaction though Trimurti Petrochemicals & Alied Services Pvt. ltd., the assessee has infact not gained any tax benefit. 7.3 I have examined the above submission of assessee and also verified the facts of the case/evidences now furnished. The sale of'PVC Pregarnished Anti I.R. Camouflage Net' with 'Super Structure' Size 11x11 and 4 x 4 x Vz to M/s Trimurti Petrochemicals & Alied Services Pvt. Ltd. @ Rs. 30,500/- and Rs. 8,750/- per net respectively is undisputed. Similarly, the value of purchases by assessee's Delhi Unit is also undisputed. The assessee has now furnished copy of audited balance sheet & P&L A/c of M/s Trimurti Petrochemicals & Alied Services 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 t....
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....spute on the fact the transaction has been routed through M/s Trimurti Petrochemicals & Alied Services Pvt. Ltd. and excess cost of Rs. 55,83,496/- (Rs.14,40,75,746/- - Rs. 13,84,92,250/-) has been incurred in routing the transaction. Thus, undoubtedly through this sham transaction, the assessee has reduced profit to the extent of Rs. 55,83,496/- and it is requested that addition to this exent may kindly be confirmed. 7.5 There is another issue for the remaining quantity which is as under:- Item name Quantity sold by Rate sold by ... Amount of sale value Quantity purchased Difference Rate purchased Amount of Purchase Dehradun Unit Dehradun Unit by Dehradun Unit by Delhi Unit value for the extra quantity Camouflage net (Big) 4012 30500 122366000 4529 517 (4529- 4012) 31730 16404410 Camouflage net (Small) 1843 8750 16126250 1840 9102 Total 5855 138492250 5855 16404410 Admittedly, the 517 pieces of camouflage net were sold by assessee in previous year to Trimurti Petrochemical Allied Services L....
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.... could not have been approved and assessee would have been put into a great loss. It was also requested to Ld. A.O. vide letter dated 19.12.2011 (PB 621-625) that appellant is in no way connected with M/s Trimurti Petro Chemical Allied Services P. Ltd. and having furnished the names and address of the directors of M/s Trimurti Petro Chemical Allied Services P. Ltd., it was requested to Ld. A.O. that summons be issued to these two directors and their statements may please be recorded. It was also explained to Ld. AO that the said amount has been offered as income in the income tax return by M/s Trimurti Petro Chemical Allied Services P. Ltd. placed at PB 861. Therefore, when there is no tax benefit available to the appellant in this transaction, no motive can be attributed to the assessee. Rather it is the assessee which has lost in terms of tax advantage by entering into transaction with M/s Trimurti Petro Chemical Allied Services P. Ltd. But that was a business expedient decision, given the contribution of M/s Trimurti Petro Chemical Allied Services P. Ltd., in the development of the appellant's business. It is quite strange that when appellant made request to Ld. A.O....
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....the purchases made by Delhi unit is also not disturbed as the purchases made by Delhi unit from M/s Trimurti Petrochemical Allied & Services Pvt. Ltd. was sold to Delhi unit which include their opening stock. In view of the above observations, the addition of Rs. 2.02 crores is hereby deleted. 17. The ld DR could not point out that if the deduction u/s 80IC of the Act is allowed to the assessee whether this addition would be tax neutral or not. Furthermore, in fact the other party would be chargeable to tax at a higher rate than whatever tax payable by the assessee on profits of her Dehradun unit. The ld CIT(A) has given a reason that there is no loss to the revenue and there is no direct benefit to the assessee with respect to this addition. We also find that if any addition is made in the profit of taxfree units same will increase the reduction under respective section applicable to that unit. In view of this we do not find any infirmity in the order of ld CIT(A) in deleting the above addition wholly. In the result ground No. 3 of the appeal of the revenue is dismissed. 18. Accordingly, appeal filed by the revenue is dismissed. 19. Now we come to the cross objec....
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....he previous year, on or before the due date specified in sub-section (1) of section 139; or. (B) In any other case, on or before the last day of the previous year. Perusal of the above shows that in cases where amount has been credited/paid upto February, 2009, the amount of TDS was required to be deposited by the end of the F.Y. i.e. 31.03.2009.4s per the copy of TDS return furnished by assessee as additional evidence / paper book at page 751 to 755, only an amount of Rs. 8,56,815/- has been paid / credited on 31.03.2009 to M/s K.B. Singh Enterprises Security and as such in accordance to sub-clause (A) of clause (ia) of section 40(a), the benefit for payment /deposit of tax by due date can only be given to the extent of this amount. 4s per the documents at page No.752 to 755, the assessee has made payment/credited the amount of Rs. 11,58,685/- before 28th February, 2009 and has paid / deposited the tax in the month of June, 2009, no benefit for deposit of tax by due date can be given in accordance to sub-clause (B) of clause (ia) of section 40(a) of the Income-tax Act, 1961. It is also a matter of record that the assessee has not submitted (in the present submiss....
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....e was deposited in June, 2009 and also that the bills were raised not in the name of the assessee i.e. M/s Superior Fabrics but issued in the name of M/s Superior Fabrics P. Ltd. First, it is submitted that TDS deposited in June, 2009 i.e. before the due date of filing of return does not give rise to disallowance u/s 40(a)(ia) as held in the following judicial decisions:- * CIT vs. Virgin Creations (Cal)(HC) * Alpha Projects vs. DCIT IT A 2869/Ahd/2011 dated 23.3.2012 * Raja Mahendri Shippping & Oil Field Services Ltd. vs. Addl. CIT ITA 352/vizag/2008 dated 13.4.2012 * Piyush C. Mehta vs. ACIT ITA 1321/Mum/2009 dated 11.4.2012 Moreover, name of the assessee's proprietary concern was wrongly mentioned by the supplier M/s K.B. Singh Enterprises and it was requested to Ld. A.O. vide letter dated 05-12-2012 at PB 278-286 to summon him for clarification but the request of the assessee was not complied with and adverse inference was drawn on that basis. Enclosed in the paper book at PB 478-577 is letter dated 08.12.2011 in which it was submitted that bills of M/s KB Singh Enterprises were paid by account payee cheques (PB 234) iss....
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....ch no benefit or deposit of tax can be given in accordance to sub-clause (B) of clause (ia) of section 40(a) of the Income Tax Act. 20.1 I have considered the facts of the case, the written submissions of the AR of the appellant and the findings of the Assessing Officer. I have also perused the case laws relied upon by the AR of the appellant. The Hon'ble Special Bench of ITAT Mumbai has taken a contrary view in the case of Bharati Shipyard Limited vs. Deputy CIT (2011) 132 ITD 53 / 141 TTJ 129/13 taxmann.com 101 (Mum.). The Flon'ble President of the ITAT Mumbai, on a reference made by a Division Bench, had constituted the Special Bench of three Members by posting the following question for their consideration and decision: ""Whether on the facts and in the circumstances of the case, the amendment brought out by the Finance Act, 2010 to section 40(a)(ia) w.ef. 01.04.2010, is remedial and curative in nature and is, therefore, retrospective in nature." 20.2 The Hon'ble Special Bench while answering the question posed before them in negative, in favour of the department and against the assessee, have held that the amendment brought out by the Finance Act, 20....
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....ed the above loss. On appeal before the ld CIT(A) the above issue is dealt with in para No. 33-36 as under:- "33. Ground No. 2 and 11 relates to the disallowance of expenses of Rs. 19,77,745/- incurred in Ghaziabad Unit. 33.1 in these grounds, the appellant has challenged the action of Assessing Officer in disallowing the loss of Rs. 19,77,745/- and further action of the Assessing Officer in calculating the income from Ghaziabad unit at Rs. 5,83,82,404/-. In the course of the assessment proceedings, the Assessing Officer observed that the appellant had shown interest on FDR income as income from business and had shown a net profit of Rs. 48,02,714/- . The profit of Rs. 48,02,714/- was worked out by the appellant in the Profit and Loss Account after considering the interest from FDRs and interest from saving bank account which amounted to Rs. 67,80,460/-(67,38,618 + 41,842/-) and if this amount was excluded there would be a loss from the business of Rs. 19,77,745/-. Since the appellant failed to produce sale/ purchase register and any bills/ vouchers for the expense at Ghaziabad unit the Assessing Officer disallowed the loss of Rs. 19,77,745/- and assessed income o....
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.... Officer in the remand report at para 8.7 and 8.8 the disallowance made u/s 14A at an aggregate amount of Rs. 8,72,137/- (i.e. Rs. 5,67,020/- as interest under rule 8D(2)(ii) and Rs. 3,05,117/- as the administrative expenses in terms of Rule 8D(2)(iii). Appellant submitted that since interest received was Rs. 67 lakhs which was far more than the interest paid of Rs. 25,17,394/- nothing should be taken out from the interest paid for the purpose of disallowance under section14A read with rule with rule 8D. 36. I have perused the assessment order and other details filed by the appellant. I have also considered the written submissions made by the appellant, remand report of the Assessing Officer and rejoinder filed by the appellant thereto. On perusal of the material on record, I find that the Assessing Officer had examined the bills and vouchers with complete books of accounts of the appellant and confirmed in the remand report that the expenses claimed by the appellant were verifiable. However, the Assessing Officer pointed out that substantial investment was made in shares and securities and tax free bonds which attracted the disallowance under section 14A read with rule 8D....