TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1686
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....Ltd. The company was engaged in the business of manufacturing of Flexible Packaging, Laminate, Open Top Sanitary Cans and General line metal Cans. By virtue of order of Hon'ble Punjab & Haryana High Court dated 06.01.1994, Asian Closures Limited got merged with the assessee company w.e.f. 20.03.1992. Further by virtue of another order of Hon'ble Punjab & Haryana High Court dated 28.07.1995, M/s. Trans Asia Packaging Ltd. was also merged with the assessee company w.e.f. 01.04.1992. 3. The original assessment of all three companies were made independently. In the assessment order passed by the Assessing Officer, certain additions and disallowances were made against which, each of these companies filed appeal before CIT(A). 4. In the meantime, a liquidation petition was filed by Gujarat State Financial Services on 16.10.1997 and an order was passed by the Hon'ble Punjab & Haryana High Court for winding up of the company and appointed a Liquidator w.e.f. 07.01.1999. During the liquidation, CIT(A) took up all the abovesaid appeals and in the absence of any proper representation from the liquidator all the appeals were dismissed vide order dated 29.03.2001. Thereafter, the ....
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....ded the appeal and has deleted the various additions and disallowances made by the AO. 9. Now aggrieved by the order of the CIT(A), Revenue is in appeal in all the three assessment years. 9.1 During the proceedings before us, Ld. DR vehemently argued against the order passed by the CIT(A) deleting additions made by the AO in the assessment order. The ld. DR has also filed the Written Submissions on each ground in respect of each assessment year. In the Written Submissions the Revenue has mostly reiterated the facts brought on record by the AO and the Ld. DR also argued on legal ground in favour of the Revenue. 10. In this assessment year, the Revenue has raised the following Grounds of Appeal. 1. The Ld. CIT(A) has erred in law and on facts in deleting the various additions and disallowances made by AO on different counts particularly on accounts of bogus sales/purchases, unexplained investments in purchases and disallowance out of expenses without appreciating the discrepancies detected on audit of the accounts u/s142(2A) by special auditor and the facts brought on record by AO. 2. On the facts and in the circumstances of the case, Ld. CIT(A) is legally not correct in holdi....
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.... AO itself has not estimated the profit after rejecting the books of account. The AO has made various additions and disallowances itself as is evident from the assessment order. Thus, the contention of the Revenue that CIT(A) should have applied a presumptive rate of tax under section 44AD is not correct. Further section 44AD itself was introduced in the Income Tax Act by the Finance Act, 1994 w.e.f. 01.04.1994. This section was appliable in respect of civil contractor and not to any other business. Accordingly, the contention of the Revenue that CIT(A) should have applied section 44AD of the Act is otherwise not legally tenable. Further the AO after rejecting the books of accounts has made individual disallowances on the basis of findings recorded by him. Thus it is the findings on the basis of which each of the addition or disallowances have been made are to be considered even after rejection of the books of accounts. Considering the same, the CIT(A) has adjudicated independently each of the addition / disallowance taking into consideration the observations of the AO in the assessment order and the explanation, evidences submitted by the Assessee and material available on record.....
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..... Ground No 3 is regarding deduction under section 80HH and 80-1 of the Act. The AO has disallowed the claim on the ground that it is not possible to verify the claim of the appellant under section 80HH and 80l of the Act. The AO has simply relied upon the original assessment order which stood set asided by the ITAT. 18. On this issue we note that the assessee has submitted detailed explanation regarding its claim of deduction under section 80HH and 80l of the Act. The appellant company was incorporated on 18.01.1985 under the Companies Act as M/s. Asian Can Ltd. which was subsequently changed to M/s. Asian Consolidated Industries Ltd. w.e.f. 16.10.1992. The company was engaged in the business of manufacturing of Flexible Packaging, Laminate, Open Top Sanitary Cans and General line metal Cans, at its office situated at 35th Mile, Delhi-Jaipur Highway, Village Chirhera, Tehsil Bawal, Dist. Rewari. The appellant being an industrial undertaking supported its commercial production since 19.08.1988 which was established in the backward area and therefore entitled to the benefit of section 80HH and 80l of the Act. In order to substantiate its claim, assessee has filed all the relevant d....
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....e, the Ld. CIT(A) has erred in law and on facts in accepting the books of account of M/s Asian Closures Ltd (amalgamated with Asian Consolidated Industries Ltd), rejected by the AO u/s 145 of the Income-tax Act, 1961 without appreciating the facts brought on records by AO particularly that the assessee failed to provide evidences/tangible proof for the manufacturing of cans or any component. 5. The Ld. CIT(A) has erred in law and on facts in deleting the profit declared by M/s Asian Closures Ltd (amalgamated with Asian Consolidated Industries Ltd) of Rs. 14,36,833/-, made by AO as income from undisclosed sources by rejecting the books of accounts of the assessee. 6. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 27,04,001/- made by the AO in M/s Asian Closures Ltd (amalgamated with Asian Consolidated Industries Ltd) on account of manufacturing, in want of any evidence. 7. The Ld. CIT(A) has erred in law and on facts in restricting the disallowance of administrative and selling expenses to Rs. 3,73,497/- instead of Rs. 32,34,967/-disallowed by the Assessing Officer initially in M/s Asian Closures Ltd (amalgamated with Asian Consolidated Indust....
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....eld the order of the CIT(A) on the same ground, accordingly, following the rule of consistency, these grounds are also dismissed as such. 24. In Grounds 3, 5, 12 and 13, the AO has added income from undisclosed sources, or disallowed the loss, in the P&L accounts of the companies solely on the basis that the books of account were rejected. Since we have concluded that the books of account were wrongly rejected, the additions of income and disallowance of loss made by the AO cannot be sustained. These grounds are therefore dismissed. 25. Ground No. 2 is regarding disallowance under section 80HH and 80l of the Act, which is similar to the Ground No. 3 in ITA No. 4514/Del/2018 for AY 1993-94, as aforesaid. We have already given a detailed reasoning for upholding the order of the CIT(A) in allowing the deduction under section 80HH and 80l of the Act. For the same reasoning we uphold the order of CIT(A) and this ground of the Revenue is dismissed. 26. Ground No. 6 relating to the Disallowance of manufacturing expenses of Rs. 27,04,001/-by alleging that the assessee had failed to produce necessary evidences to substantiate the claim for such expenses. It is relevant to note here that ....
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.... also manufactured kegs during the period under consideration. For the regular business activity, certain expenditure with respect to administration, selling and distribution ought to have been incurred by the appellant." 29. Considering the factual matrix of the case, contentions of the assessee and observations of the Assessing Officer, I am of the considered view that disallowance of above expenditure at Rs. 32,34,967/- is at a higher side and is ordered to be restricted to 1/10th i.e. Rs. 3,73,497/- of the total expenditure claimed of Rs. 37,34,970/-. As a result, the appellant gets a relief of Rs. 33,61,473/-. 30. In the absence of any contrary facts being brought on record by the Revenue, this ground of revenue is dismissed. 31. Ground No. 8 relating to Disallowance of Preliminary and Public Expenses of Rs. 10,75,500/-. CIT(A) has restricted the addition made by AO of Rs. 10,75,500/- to Rs. 9,67,950 by allowing 1/10th of such expenditure in accordance with the provisions of Section 35D(1) of the Act, which are also reproduced hereunder: "Amortisation of certain preliminary expenses. 35D. (1) Where an assessee, being an Indian company or a person (other than a company w....
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.... once it is established that the assets do not lose their individual identity and can be disassembled after each use and reused again, in such circumstances, each asset is to be taken individually and independent of each other and accordingly depreciation at the rate of 100% is allowable. Thus, as is evident from the facts of the case, each keg is an independent unit/cask/drum in which beer is stored. Each keg has its own separate identity independent of each other and can be dis-assembled after each use and reused again as such in combination with same or different units thereof. The kegs are not an integral part of any other asset. CIT(A) has therefore deleted the disallowance of 75% of the depreciation made by the AO. The CIT(A), while deleting the disallowance has held at Page 15 of the CIT(A) Order that: "I have considered the contentions of the appellant and the basis on which disallowance of depreciation has been made by the Assessing Officer. The assessing officer has considered all the kegs manufactured as one unit and allowed depreciation at the rate of 25% only. Whereas the fact of the matter is that each keg is an independent unit/cask or drum in which beer is stored.....
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....ught on record by the Revenue, this ground of revenue is dismissed. 39. In the result, the Revenue ITA No. 6218/Del/2018 for AY 1994-95 stands dismissed. ITA No. 7501/Del/2018 for AY 1995-96 40. In this appeal, the Revenue has raised the following Grounds of Appeal. 1. Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in accepting the books of accounts of the assessee which had been rejected by the AO u/s 145 of the IT Act on the ground of nonproduction of supporting vouchers/documents which formed the basis of such books of accounts. 2. Whether on the facts and in the circumstances of the case, Ld. CIT (A) has erred in accepting the books of accounts of the assessee despite the fact that the assessee has failed to co-operate during assessment proceedings and comply with the directions of the Hon'ble ITAT given in a common order dated 19-06-2015 in ITA Nos. 4010 to 4023/Del/2013. 3. Whether on the facts and in the circumstances of the case, Ld. CIT (A) has erred in allowing deduction u/s 80HH of the IT Act amounting to Rs. 1,08,85,284/- which the AO had disallowed for want of supporting papers/documents. 4. Whether on the facts and ....
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....and distribution expenses of Rs. 1,99,49,692/- has been disallowed by the AO which comes out to Rs. 1,61,97,155/-. 44. It is noted that the disallowance made by the AO is ad-hoc in nature, based on a ratio of sales. Further, All such expenditure were as per the regular books of accounts and were incurred during the course of normal business activities conducted during the year. 45. Considering the above-mentioned facts and circumstances of the case, CIT(A) has held at Page 35 para 18.5: "18.5 l have gone through the submissions made by the applicant and had also gone through the appellate order of my Ld. predecessor, as referred above. From the findings given in the aforementioned appellate order, my predecessor had duly accepted and allowed the sales made to M/s A.K. Industries in view of the fact that the verification at the address were inconclusive and while passing the assessment order the quantitative tally of the material has not been doubted. Even for calculating average gross profit rate of last three years, during the course of the assessment proceedings for the Assessment Year 1996-97, the sales disclosed at Rs. 75,76,62,243/- for this year has been considered by the....
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....ings in respect of disallowance of interest. Further, on perusal of the appeal order in the case of the appellant for A. Y. 1994-95, it is noted that no such disallowance was made. It is noticed that the AO has not brought out the specific facts on record for disallowance of interest. In view of the above facts, disallowance of interest of Rs. 19,77,840/- by the AO is deleted. Accordingly, this ground of appeal is allowed." 49. In the absence of any contrary facts being brought on record by the Revenue, this ground of revenue is dismissed. 50. Ground No. 7 relates to Disallowance of manufacturing expenses of Rs. 34,41,562/-. AO has disallowed the manufacturing expenses incurred by the assessee by alleging that the assessee had failed to produce necessary evidences to substantiate the claim for such expenses. It is relevant to note here that the assessee is engaged in the business of manufacturing of tin container components and kegs etc. The details with respect to raw material consumed, purchases, work in progress and finished goods has also been given in Form 3CD. However, the AO disallowed the manufacturing expenses which is not only contrary to the facts but also no cogent ma....