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2016 (8) TMI 776 - HC - Income TaxRejection of book result - estimation of sale and G.P - Held that - The books of accounts of the assessee were periodically checked by the revenue authorities. It appears that in the subsequent year i.e. in assessment year 199596, the same G.P. rate has been accepted by the Department. It is a fact that the cost of raw materials has increased. It is also seen that 100% goods are sold to its sister concern and therefore the question of GP does not arise. The A.O. could not find that the assessee had sold finished goods at a lesser price to its sister concern. In our opinion, low profits and absence of regular stock register are not sufficient reasons for rejection of the accounts of assessee. Hence, the CIT (A) and Tribunal were justified in deleting the addition. Both the authorities below have considered the materials placed before them and we see no reason to interfere with the same. - Decided in favour of assessee Disallowance u/s.40A(2)(b) being paid by the assessee to the Excise Department on behalf of its sister concern - Held that - The assessee company exclusively marketed its product through its sister concerns namely Babul Marketing and Babul Agencies. Accordingly assessee company collected excise duty and paid the same to the Central Excise Department as against the collected dues from these parties. The excess payment was made. The assessee route collection and payment of excise duty through its trading and profit and account. In this view of the situation, we find that there is no infirmity in the decision of CIT (A) vide which such disallowance has been deleted as the present addition is not falling within the ambit of section 40(A) (2)(b)
Issues Involved:
1. Challenge to ITAT order regarding deletion of addition by CIT (A) and estimating sale and G.P. 2. Challenge to ITAT order regarding deletion of disallowance of claim u/s.80IA based on specific grounds. 3. Challenge to ITAT order regarding deletion of disallowance made by AO under Section 40A(2)(b). 4. Challenge to ITAT order regarding deletion of disallowance made by AO under Section 80IA based on plant and machinery value and employment criteria. Analysis: 1. The first issue pertains to Tax Appeal No.1249 of 2007 challenging the ITAT order on the addition made by the AO. The High Court found that the assessee maintained proper records, which were verified by the A.O. The A.O. accepted the same G.P. rate in the subsequent year, and the cost of raw materials had increased. As all goods were sold to the sister concern, the question of GP did not arise. The Court held that low profits and absence of regular stock register were not sufficient reasons for rejection of accounts, upholding the deletion of the addition by CIT (A) and Tribunal. 2. The second issue involves Tax Appeal No.1250 and Tax Appeal No.1253 of 2007 challenging the ITAT order on disallowance of claim u/s.80IA. The Tribunal held that workers employed by labor contractors should be counted towards the required number of workers. Citing relevant case law, the Tribunal concluded that the assessee fulfilled the condition for deduction under section 80IA. The High Court agreed with the Tribunal's findings, emphasizing that the grant of depreciation on excluded items from plant and machinery was irrelevant. 3. The third issue concerns Tax Appeal No.1251 of 2007 challenging the ITAT order on disallowance under Section 40A(2)(b). The Tribunal upheld the deletion of disallowance, noting that the excess payment made to the Excise Department was part of the assessee's routine collection and payment process. The High Court concurred with the Tribunal's decision, dismissing the revenue's ground of appeal. 4. The fourth issue relates to Tax Appeal No.1252 of 2007 challenging the ITAT order on disallowance under Section 80IA based on plant and machinery value and employment criteria. The Tribunal directed the AO to recompute the value of plant and machinery based on a specific decision, and the High Court agreed with this direction, upholding the Tribunal's decision in favor of the assessee. In conclusion, the High Court dismissed all appeals, ruling in favor of the assessee and against the Department in each case based on detailed analysis and legal considerations presented in the judgments.
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