9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (9) TMI 406 - AT - Income TaxDeduction u/s 80IC - New manufacturing unit - whether the profits earned by Parwanoo Unit really represented profits from manufacturing activity at Parwanoo Unit or not. - AO observed that that the Unit at Parwanoo does not appear to have been established physically. Therefore, the assessee was asked to show cause as to why deduction claimed u/s 80IC of the Act should not be disallowed. - Held that - The major objection of the Assessing Officer was that in such a short period of four months without the help of technical people, it was not possible to achieve the said turnover. We do agree with the Ld AR that assessee had every document to support that unit was established and we also agree with Ld AR that turnover was intimated to Sales tax authorities but the important question remains whether the entries of sales and purchases were any book entries or actual entries. The doubt of book entries is further corroborated by the fact that out of turnover of ₹ 1,34,39,000/- during the year an amount of ₹ 1,06,53,550/- remained invested in sundry debtors and out of purchases of ₹ 51,19,374/- an amount of ₹ 33,48,468/- remained unpaid upto 31.3.2005. Though Ld CIT(A) has mentioned that money was received from debtors but the fact remains that turnover was made hurriedly in a period of four months that to without realizing the debtors. The profiles of buyers of assessee needs to be investigated to ascertain as to whether these persons actually dealt in the goods purchased from the assessee and further sellers profiles also needs to be investigated to ascertain as to whether they really dealt into the items sold by them to assessee. - Decided in favor of revenue for statistical purpose.
Issues Involved:
1. Whether the order of Ld CIT(A) was erroneous and contrary to facts and law. 2. Whether the Ld CIT(A) erred in deleting the addition of Rs. 78,56,533/- on account of disallowance of deduction u/s 80IC of the Income Tax Act, 1961. Issue 1: Erroneous Order of Ld CIT(A) The revenue contended that the order of Ld CIT(A) was erroneous and contrary to facts and law. The Assessing Officer (AO) observed several discrepancies in the assessee's claim of deduction u/s 80IC, including the small number of employees at the Parwanoo unit, the significant turnover generated in a short period, and the lack of detailed records of employees and manufacturing activities. The AO concluded that the Parwanoo unit was not an independent unit but an extension of the Delhi unit, and thus disallowed the deduction. The Ld CIT(A), however, allowed the deduction, stating that the AO's conclusions were based on surmises and conjectures without any incriminating material. The Ld CIT(A) found that the accounts of both units were duly audited and independent, and all statutory conditions for deduction u/s 80IC were fulfilled. Issue 2: Deletion of Addition on Account of Disallowance of Deduction u/s 80IC The AO disallowed the deduction u/s 80IC, arguing that the Parwanoo unit did not fulfill the statutory conditions for the deduction. The AO noted that the Parwanoo unit had only four employees and minimal plant and machinery, making it improbable to achieve the claimed turnover. Additionally, the AO highlighted that the Director, Mr. Sankalp Srivastava, did not draw any remuneration from the Parwanoo unit, raising doubts about the unit's independent operations. The Ld CIT(A) disagreed with the AO, stating that the assessee provided satisfactory explanations and supporting documents, including rent agreements, sales tax registration, and invoices for fixed assets. The Ld CIT(A) emphasized that the AO accepted the revenue figures but arbitrarily disallowed the deduction. The Ld CIT(A) concluded that the Parwanoo unit was a legitimate manufacturing unit and allowed the deduction. Tribunal's Analysis and Decision: The Tribunal examined the evidence and arguments presented by both parties. It noted that the assessee had provided various documents supporting the establishment of the Parwanoo unit, such as lease deeds, sales tax returns, and registration certificates. However, the Tribunal also observed that the major turnover was achieved with minimal plant and machinery and a small workforce, raising doubts about the genuineness of the manufacturing activities. The Tribunal found that the Ld CIT(A) did not adequately address the AO's concerns about the improbability of achieving such a high turnover with limited resources. Additionally, the Tribunal noted that the Ld CIT(A) did not confront the AO with the confirmations from the major buyers, which constituted a significant portion of the turnover. Given these discrepancies, the Tribunal concluded that the case required further investigation to ascertain the genuineness of the transactions and the actual manufacturing activities at the Parwanoo unit. The Tribunal directed the AO to re-adjudicate the case, conduct proper inquiries from buyers and sellers, and provide the assessee with an opportunity to be heard. Conclusion: The Tribunal allowed the revenue's appeal for statistical purposes, directing the AO to conduct a thorough investigation and re-adjudicate the case to determine the eligibility of the deduction u/s 80IC.
|
