TaxTMI 
TaxTMI 
2022 (9) TMI 1102
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....ITAT has erred in upholding the decision of the CIT(A) of deleting the addition made under Section 68 of the Income Tax Act, 1961 ('the Act') without appreciating the findings of the Assessing Officer and without considering the creditworthiness of the companies with whom assessee company had executed large scale transactions. 3. He further states that the ITAT has erred in deleting the addition made under Section 37(1) of the Act without appreciating the facts clearly mentioned in the Assessment Order and without considering that assessee has claimed and received excess incentive on the basis of erroneous declaration. 4. A perusal of the paper book reveals that the CIT(A) noted the objection of the assessee that sufficient opportunity wa....
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....ry creditors do not support their creditworthiness, is not based on proper appreciation of the facts. The CIT (A) also perused the details of sale, purchase, trade payables and trade receivables for the financial year under consideration of the said sundry creditors and came to the conclusion that there are corresponding purchases against sales declared by them for the financial year under consideration and there are also trade payables outstanding as on 31st March, 2014, which shows that the said companies also having trade payable against purchases of goods, therefore, the allegation made by the Assessing Officer that such companies do not have creditworthiness to enter into large scale transaction of sale and purchase is factually incorr....
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....ve been disturbed. In this behalf, learned counsel for the assessee also drew our attention to the orders of the Assessing Officer, as per which the assessee had shown the total turnover of Rs. 1,03,44,054, on which gross profit rates declared was 68.94% as compared to sales of Rs. 21,18,994 in the previous year. The Assessing Officer accepted the aforesaid figures and categorically observed as under: "The GP rate as well as the sales has been substantially increased during the year in comparison to the last year. Sales trading results are not disturbed." 3. This finding of Assessing Officer remained undisturbed before the CIT(A) as well and has been accepted by the ITAT. Proceeding on this basis, the ITAT observed that the sales, purch....
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....aw and to demonstrate that the payment is hit by Explanation 37(1) of the Act. 12. This Court in the case of CIT v. Enchante Jewellery Ltd. [2013] 40 taxmann.com 216 (Delhi) has held as follows: "2. The facts are that the assessee used to manufacture and trade in gold jewellery. Its return for the assessment year 2001-02 was selected for scrutiny and notice under Section 143(2) was issued and served upon the assessee. During the assessment proceedings the Assessing Officer disallowed Rs. 1,04,000/- paid by the assessee as interest on customs duty demand. The assessee contended that he used to import jewellery manufacturing machinery under Export Promotion Capital Goods Scheme (EPCG Scheme) at a concessional rate with an export obligation....
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....an allowable business expenditure. Therefore, the addition made by the A.O. is deleted." 3. The Revenue's appeal before the Tribunal was that the disallowance directed to be set aside by the CIT (A) was not justified since the amount paid was penal in nature. The Tribunal considered the submissions and held that there was no infirmity in the order of the CIT (A) and the amount paid was not penal in nature as much as it was as per the declared policy of the government and occasioned by the failure of the assessee to meet its obligations. The amount being interest was compensatory and not penal according to the Tribunal. 4. The counsel for the Revenue attacked the reasoning of the Tribunal contending that since the assessee availed ....