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2013 (4) TMI 573 - AT - Income TaxReopening of assessment - Credit appearing in the capital account brought to tax under other sources - Held that - Assessee could not substantiate her claim with any material that the cash credit found in the capital account represent business transactions that too relating to exports. D.R further contention that the claim of the assessee that the said cash credit represents export profits, the same cannot be allowed as deduction during the year under consideration as it is a profit of an earlier year merits here. Further the assessee has to satisfy various conditions prescribed under sec. 80HHC in order to avail deduction under that section. The assessee, without demonstrating compliance of all the conditions, simply seeks deduction u/s 80HHC. Under these circumstances, no infirmity in the decision of the CIT(A) in confirming the action of the AO in assessing the same under the head income from other sources . Addition relating to shortage of stock - assessee is only disputing the value to be adopted for 6141 bags placing reliance on the claim of High seas sales made to her sister concern and accordingly claims that the sales value declared in the documents relating to high seas sales viz., Rs.1,62,11,217/- should be considered as the income - Held that - CIT(A) did not accept the theory of high sea sales and accordingly determined the value of 6141 bags, on the basis of average sales rate, at Rs.1,85,60,113/- finds merit as the transaction of alleged high seas sales have been entered with the sister concern of the assessee, the alleged transactions of high seas sales/purchases have not been recorded in the books of the assessee as well as in the books of the sister concern, the high seas sales invoice as well as high seas sales agreement are self- generated documents within the control of the assessee and hence lacks credence. No external documents were brought on record in support of claim - uphold the order of CIT(A) on this issue. Disallowance of claim of payments relating to group gratuity scheme - Held that - It is well settled proposition of law that the re-opening of the assessment u/s. 148 is only for the benefit of the Revenue as held by in CIT vs. Sun Engineering Works P. Lt., 1992 (9) TMI 1 - SUPREME Court . Admittedly, the assessee did not claim the payment made to group gratuity scheme during the course of original assessment proceedings. Hence assessee cannot claim the same in the reassessment proceedings Denial of deduction u/s. 80HHC - Held that - Considering the cases of A.C.G. Associated Capsules Pvt. Ltd. 2012 (2) TMI 101 - SUPREME COURT OF INDIA & Topman Exports Vs. CIT 2012 (2) TMI 100 - SUPREME COURT OF INDIA wherein held held that 90% of not the gross rent or gross interest but only net interest or net rent which has been included in the profits of the business of the assessee as computed under the head profits and gains of business is to be deducted under clause (1) of Explanation (baa) to sec. 80HHC of the Act for determining the profits of the business requires fresh examination at the end of the assessing officer in the light of various decisions cited supra. Denial of deduction u/s. 80IB - Held that - The assessee failed to show that she is eligible for deduction under sec. 80IB of the Act, even after exclusion of incidental incomes, which are not related to the manufacturing activity. Accordingly, confirm the order of the CIT(A) on this issue.
Issues involved:
1. Addition of credit appearing in the capital account. 2. Addition relating to shortage of stock. 3. Disallowance of claim of payments relating to group gratuity scheme. 4. Denial of deduction under Section 80HHC of the Income Tax Act. 5. Denial of deduction under Section 80IB of the Income Tax Act. 6. Validity of reopening of assessment when earlier reopened assessment was pending in appeal. 7. Non-consideration of additional income relating to high sea sales offered by the assessee. Issue-wise detailed analysis: 1. Addition of credit appearing in the capital account: The assessee explained that the credit amount of Rs. 14,96,230/- in the capital account represented profits from business transactions of earlier years (1998-99 and 1999-2000) which were omitted. The Assessing Officer (AO) assessed this amount as "income from other sources" and denied the deduction under Section 80HHC. The CIT(A) confirmed this addition. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to substantiate the claim that the credit represented business transactions related to exports and did not comply with the conditions under Section 80HHC. 2. Addition relating to shortage of stock: The AO noticed a shortage of 6894 bags, which was 21.50% of total purchases, and considered it excessive. The assessee claimed the shortage was due to driage and transit loss. The AO compared the shortage with other cases and found it significantly higher. The AO limited the shortage claim to 1.8% for imported items and 5% for local purchases, resulting in an addition of Rs. 1,71,31,400/-. The CIT(A) increased this to Rs. 1,85,60,113/- based on the standard weight of 6141 bags. The Tribunal upheld the CIT(A)'s decision, rejecting the assessee's claim of high sea sales to a sister concern due to lack of credible evidence and non-recording of transactions in the books. 3. Disallowance of claim of payments relating to group gratuity scheme: The assessee claimed a deduction of Rs. 1,01,111/- for payment to a group gratuity scheme, which was omitted in the original return. The AO and CIT(A) rejected this claim, stating it could only be made through a revised return, citing the Supreme Court decision in Goetze India Ltd. vs. CIT. The Tribunal upheld this decision, noting that reopening under Section 148 is for the benefit of the Revenue. 4. Denial of deduction under Section 80HHC: The AO recomputed the deduction under Section 80HHC by correcting errors such as including export incentives in total turnover and not setting off losses from manufactured goods. The CIT(A) confirmed this. In the second reopening, the AO excluded 90% of processing charges following the Supreme Court decision in CIT Vs. K. Ravindranathan Nair. The Tribunal directed the AO to re-examine the deduction in light of recent judicial decisions, including Avani Exports vs. CIT and ACG Associated Capsules Ltd. 5. Denial of deduction under Section 80IB: The AO denied the deduction under Section 80IB as the assessee had no profit from manufacturing activities after excluding incidental incomes. The CIT(A) confirmed this. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to show eligibility for the deduction after exclusion of incidental incomes. 6. Validity of reopening of assessment when earlier reopened assessment was pending in appeal: The Tribunal noted that no argument was advanced by the assessee on this issue and dismissed the grounds related to it. 7. Non-consideration of additional income relating to high sea sales offered by the assessee: The assessee offered additional income related to high sea sales in response to a second notice under Section 148. The CIT(A) rejected this, stating that the omission should have been corrected through a revised return under Section 139(5). The Tribunal agreed, noting that the additional income related to deficit stock already contested in the first reassessment and upheld the CIT(A)'s decision. Conclusion: The Tribunal partly allowed the appeals for statistical purposes, directing the AO to re-examine the deduction under Section 80HHC in light of judicial decisions and confirming the CIT(A)'s decisions on other issues.
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