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TMI Blog2012 (11) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 3. We shall take up the appeal of the revenue first. Following two issues are common in both the years, which we prefer to dispose of first. (a) Addition on account of low GP. (b) Addition of Sales tax subsidy receipts. 3.1 The first issue relates to the addition made on account of reduction in the Gross Profit rate. During the course of assessment proceedings, the AO compared the rate of Gross Profit (GP) declared by the assessee in these two years with that declared in the earlier years and noticed that there was a drop in the rate of GP in the instant years. Though the assessee furnished detailed explanations substantiating the reduction in the GP rate, yet the AO was not convinced with the same and accordingly added the amount relating to the GP rate difference. The said addition was deleted by Ld CIT(A) and hence the revenue is in appeal before us. We have heard both the parties on this issue and carefully perused the record and the order of Ld CIT(A). We notice that the Ld CIT(A) has considered this issue in detail and has taken a just view of the matter. For the sake of convenience, we extract below the relevant observations made by Ld CIT(A) in his ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant did file quantitative records along with the tax audit report in form No.3CD before the AO and the AO has not found any discrepancy in the same. After having considered the facts of the case as well as the rival submissions, I am of the firm view that it is not a case wherein provisions of section 145(3) for rejection of book results can be validly invoked." The Ld. CIT (A) has dealt in detail further on this issue by considering the caselaws relied on by the assessee and explanation given by the assessee. The moot point on this issue, in our opinion, is that the AO did not find any defect in the books of account maintained by the assessee nor did he find false with the explanation furnished by the assessee with regard to the deduction in the gross profit. Further, as pointed out by Ld CIT(A), the AO has reached the conclusions without taking into account the quantity details furnished by the assessee along with the Tax audit report. There cannot be any dispute that the book results can be rejected only if it is shown that the books maintained by the assessee are not reliable for deducing correct income. In the instant cases, the AO has not given any such findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03-04. (a) Co-operative development exp paid on behalf of Vasuhdhara Trust. Rs. 16,17,977/- (b) Payment made to Sabarmati Gaushala Rs.12,80,219/- (c) Disallowance of legal expenses. Rs.19,50,500/- (d) Interest payable to NDDB Rs.28,06,502/- 5.1. The first issue relates to disallowance of amount paid to Vasundhara Trust to carry out research and development activities. The Ld CIT(A) noticed that the assessee is empowered to carry out Research and Development Activities in collaboration with other organizations. He also noticed that the impugned payment has been made to Vasundhara Trust for carrying out the research activities. Accordingly, he deleted the impugned addition. It was brought to our notice that the Tribunal has considered an identical issue in the assessee's own case in ITA No.1349/AHD/2006 relating to the Assessment Year 2002-03, wherein the Tribunal has upheld the decision of Ld. CIT (A) in deleting the addition. For the sake of convenience we extract below the operative portion of the order of the Tribunal". "26. After hearing both the parties and on perusal of the record, we find that clause 18 of section 3 of the bye-laws of the assessee society does not empow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant could not link up the expenditure incurred on semen purchase with its business activity is without any merit in it. The appellant's Ground No.5 is allowed." We notice that the Ld CIT(A) has given a finding that there is a business connection in incurring the impugned expenditure. Before us, no material was placed by the department to controvert the said finding of Ld CIT(A). Hence, we uphold the order of Ld CIT(A) on this issue. 5.3 The next issue relates to disallowance of legal expenses of Rs.19,50,000. The AO disallowed expenses claimed under the head "Legal expenses" amounting to Rs.24,50,000/-. He also disallowed the consultancy charges of Rs.19,50,000/- paid to M/s.Chiryu Consultancy, as the assessee could not file confirmation letter and also the basis for charging such a high amount. Before the Ld CIT(A), the assessee submitted that legal expenses of Rs.24,50,000/- already includes the amount of Rs.19,50,000/- paid to Chirayu Consultancy. Accordingly, the assessee submitted that, since the claim of Rs.24.50 lakhs pertaining to legal expenses was disallowed, the disallowance of Rs.19.50 lakhs has led to double addition which is not permissible under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essive in nature. Before us, the Ld A.R filed copies of bill, confirmation letter, copy of payment voucher and copy of acknowledgement of return filed by them. The assessee claims that the said professionals have directly sent these documents to the assessing officer. However, the AO has made the impugned addition for want of confirmation letters, which means that the said documents might not have reached the AO in time. We do not find any merit in the observation of the Ld CIT(A) that the said payments are excessive in nature, as normally the amount payable to the professionals are fixed on the basis of services rendered by them. We notice that the Ld CIT(A) has not judged the impugned payments vis-à-vis the services rendered by them. Accordingly, we are of the view that this issue needs to be considered afresh at the end of the AO. Accordingly we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO with a direction to examine this issue afresh in accordance with law. Needless to mention, the assessee should be given proper opportunity of being heard. 8. In the result, the appeal of the revenue and the appeal of the assessee relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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