9911796707
TMI Blog2015 (2) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been done in the present case. - Decided in favour of assessee. Disallowance of sundry creditors - CIT(A) deleted the addition - Held that:- CIT(A) on 10.01.2013 had written a letter to ITO Hardwar wherein he had asked the A.O. to confirm as to whether the confirmations were placed in the file or not. We find that A.O. on 10.01.2013 itself had confirmed to Ld. CIT(A) Dehradun that the necessary confirmation were there in the file. Regarding argument of Ld. D.R. that assessee itself had stated that confirmations could not be filed vide its letter dated 23.11.2012, we find that the date of confirmations obtained by Ld. CIT(A) from A.O. is vide letter dated 10.01.2013 which is after the date of submissions and we find that A.O. had confirmed the fact that confirmations were on record and a copy of letter written by Ld. CIT(A) and reply submitted by ITO, Ward I on 10.01.2013 is placed on record. As the addition was made only on account of non confirmation of balances by creditors and therefore, grievance of revenue is removed with the finding of A.O. vide letter dated 10.01.2013 that the same were available in the file and therefore, we do not find any infirmity in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete address . Therefore the confirmations filed by the assessee are not reliable. 3. That the order of the Ld. CIT(A) be set-aside and that of the AO be restored. ii) I.T.A.No. 2418/Del/2013: 1.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the entire addition of ₹ 3,69,73,180/- made by Ld. A.O. and that too by holding that sufficient opportunity of hearing was provided by Ld. AO. 2. That in any view of the matter and in any case, the action of Ld. CIT(A) in sustaining the part of total addition of ₹ 3,69,73,1801- made by Ld. A.O. is bad in law and again t the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the disallowance of ₹ 5,20,5501- u/s 40(a)(ia) of the Income Tax Act, 1961. 4. That in any view of the matter and in any case, the action of Ld. CIT(A) in confirming the disallowance of ₹ 5,20,5501- u/s 40(a)(ia) is bad in law and against the facts and circumstances of the case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no stamping of Chunigi or Chowki of Trade Tax department.' In the ledger copy of machinery the payment have been show from Canara Bank which bank account is not appear in the balance sheet. 8. Assessees have no ESI registration in support of labour engaged and payment to them an also no any bills voucher filed in support of wages payment shown in P L Account. 9. For verification of business activities the ITI of this office has visited the business premises which address provided by the assessee and reported that the business of the assessee has shifted from this building. 10. In support of his business discontinuation no intimation for business discontinuation and sales of machinery has been filed by the assessee. 11. Major purchase has been shown by the assessee from M/s Laxmi Enterprises who is the partner of the assessee firm and doing business of manufacturing of electrical items mentioned in the Audit reports of M/s Laxmi Enterprises, and not claimed deduction U/S 80re as the same is not situated under notified area. 12. On confirmation from the party from whom purchase shown by the assessee major difference found in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed credits. 5. The A.O. further made disallowances for violations provisions of Section 40(a)(ia) for payments made by assessee on account of job work and freight charges. Aggrieved, the assessee filed appeal before Ld. CIT(A) and made various submissions. The assessee explained complete process of manufacture of goods and also field various submissions. The crux of submissions as reproduced in Ld. CIT(A) s order are reproduced below: 2. The raw material used in every step of manufacturing has been pasted in front of the manufacturing step. Also, we are submitting the bill of material required for the product of difference specification as Annexure 2. 3. The excise search/survey was conducted at the appellant premises at F 15, Industrial Area, Haridwar Road wherein the Panchnama recorded the items and records seized from the aforesaid premise of the appellant which includes Raw material register, stock register, invoice book etc. Also, a statement of the person in-charge of the factory at the time the survey was also recorded. The type and quantum of the records seized further substantiate the appellants' contention and claim that manufacturing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore to expedite the manufacturing process the appellant gets job work done for the same. Further, Torrid Core is not readily available in the market. A sample of Torrid Core (T-IO) is enclosed herewith as Annexure 8 your verification. 9. Declaration under Notification 50/2003 with the Department of Excise has been filed by the appellant. Copy of the same is attached herewith for your reference as Annexure 9. Thus from our above submissions it is evident that manufacturing activities l1'ere being carried on by the appellant at the aforesaid premises and there is no ambiguity in the appellants' contention and its claim for deduction under 80 IC. The fact that the appellant was carrying on manufacturing activities at F 15, Industrial Area, Haridwar has been duly substantiated with the documentary evidence being submitted herewith and thus deduction u/s 80IC is tenable and cannot be disallowed. 6. Ld. CIT(A) obtained remand report form A.O. the relevant observation of A.O. in the remand report as noted by Ld . CIT(A) in his order is reproduced below: It is further submitted that the assessee firm vide its written submission dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of freight inwards account was furnished during the course of assessment proceedings and are available on the assessment file. 4. As regards the point no. 4 of the assessment order we shall like to submit that some of the purchases were made at Faridabad and some at Haridwar, however all the bills have the same VAT No of buyer Laxmi Electronics, Haridwar which proves that all the purchases pertain to the Haridwar Unit irrespective of whether the purchases have been made at Faridabad or Haridwar, thus no negative inference can be drawn from the same. 5. As regards the point no. 5 of the assessment order, we shall like to submit that the copies of the VAT returns showing the details of input credit output were submitted during the course of assessment proceedings and a complete ledger account in respect of VAT Payable was also submitted The Ld ITO has now enclosed the copies of the same for your kind considerations vide point no. 5. Moreover the VAT assessment order has been passed in which the details of VAT input Output are mentioned. The Copy of the VAT assessment order has already been submitted along with our submission dated 10.01.2013. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur goodself vide Anuex-S submitted along with the submissions dated 10.01.2013. The Copy of this letter is also already on Assessment File as confirmed by Ld I. T. 0. in his comments dated 23/01/2013. 11. As regards the point no. 1 I regarding the purchases made from the firm M/s Laxmi Enterprises we shall like to submit that the during the assessment year under consideration the appellant has made purchases from various parties and Laxmi enterprises is one of them. Further we shall mention that the Firm M/s Laxmi Enterprises has been manufacturing the item which is required as a raw material for the manufacturing of Mounted PCB by the appellant Firm. Therefore the purchases made by the appellant firm from the firm M/s Laxmi enterprises are normal business transactions. 12. As regard the point no. 12 of the assessment order we shall like to submit that the detailed reply has already been given or this vide our submission dated 23.11.2012. Practically there were no differences in the purchases and the same has been explained at length by us in our earlier submissions. 13. As regards the point no. 1 3 we shall like to submit that we have made purchases of raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10257138/- 2. M/s Electronic Component Tuners 21075707/- 4203217/- 16872490/- 3. M/s Indotech Magnetics 11934542/- 4088922/- 7845620/- 4. M/s Ramakrishna Electro components (P)Ltd. 17051808/- 16679213/- 372595/- 5. M/s Apex Industries 1625337/- Nil 1625337/- Total 3,69,73,180/- Consequently the Ld. Assessing Officer made an addition of ₹ 3,69,73,180/- to the income of the appellant being the amount equals to the purchases claimed and purchases confirmed by the parties. The appellant firm has not been provided the opportunity to reconcile the facts figures and to clarify the above differences. Though it is mentioned in the assessment order that a show cause notice dated 21.12.2011 was issued but no such notice has been served on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12605259 12605299 Nil 2 M/s. Electronic Component Tuners 21075707 17824370.71 1205513.17 16731930.42 17937443.59 -113072.88 3 M/s. Indotech Magnetics 11934542 9442915.59 809528.00 8803357.00 9667969 -169969.41 4 M/s. Ramakrishna Electro Components P.Ltd. 17051808 13660059.00 26059.00 13636605.00 13660059.00 2605.00 5 M/s. Apex Industries 1625337 2313275.04 nil 2347231 2347231 -33955.96 The above table clearly explains that the amount calculated by the Ld. Assessing officer as purchases claimed is not the actual amount reflected in the books of M/s Laxmi electronics as well the led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r account of the party. M/s Apex industries confirmed NIL sales as entire sales made by it is to Plot No. 36 New DLF Industrial Area Faridabad only. Therefore it is evident from the above facts that the amount claimed by the appellant has been wrongly calculated by the Ld. Assessing officer and actually there is no difference between amount of purchases as shown by us and amount of sales shown by the above parties except for a few reconciliation entries which are given in the reconciliation attached with the Confirmation from parties. Further the Ld. Assessing officer also failed to appreciate the fact the amount confirmed by the parties is the closing net balance of amount billed by them to F-i 5 industrial Area Haridwar only and not the entire sales made by them to M/s Laxmi Electronics during the financial year 2008-09. The amount confirmed by them is not inclusive of the amount billed by them to Plot No. 36 New DLF Industrial Area Faridabad. (b) As per the ledger account of the party submitted by them there is no difference between the purchases claimed by the appellant and as confirmed by the parties. (c) Therefore it is established from the above facts that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h this office letter dated 10.01.20l3 and the Ld. AO did confirm that the said confirmations were available on record. In view of this fact, the addition made is deleted since it was made on a wrong premise. 10. The last grievance of the assessee is regarding addition on account of violation of provisions of Section 40(a)(ia) of the Act. Ld. CIT(A) has upheld the addition by holding as under: 6.0 The fourth ground challenges the addition of s.5,20,550/- made U/S 40(a)(ia) of the Act. The Ld. ARs have averred as under:- Against tile Additions of ₹ 5,20,550/- being disallowance of freight outward ₹ 392550/- Job -Work Expenses of ₹ 1,28,000/- claimed in the Balance Sheet as 011 31.03.2009 by the Appellant: a) In the above matter I shall like to submit as under: The Ld. Assessing officer has made an addition to the income u/s 40 (a)(ia) of the income Tax Act 1961 on the ground that there are some amounts debited under the head Freight Outward to the tune of ₹ 3,92,550/- ₹ 1,28,000/- under the head Job Work on which the appellant should have deducted the TDS as mentioned u/s 40 (ia) (ii) of the Act. As re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was ₹ 2,76,886/-. He further submitted that plant and machinery included double sided PCB Machine worth ₹ 40,000/- and one wave soldering machine worth ₹ 3.68 lacs and one automatic cut and bend machine worth ₹ 21,000/-. It was submitted that the assessee had declared a turnover of ₹ 17.33 crores which is not possible with such type of machinery and, therefore, it was submitted that the unit was only a paper unit. To further strengthen his argument that the unit was only a paper unit he invited our attention to paper book page 23 and submitted that production process flow chart as filed by assessee with only 3 items of plant and machinery installed at the premises were not commensurate to the production process chart as depicted by assessee. It was submitted that the assessee had no electricity connection and had claimed ₹ 16.52 lacs on account of diesel and oil for genset which itself was not possible for a very small plant machinery. 13. Ld. D.R. further submitted that the assessee had claimed an expenditure of ₹ 22.73 lacs on account of R D activities and in this respect, took us to paper book page 157 and submitted that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no such confirmations by A.O. either in remand report or otherwise. Therefore, the findings of Ld. CIT(A) are perverse and need to be reversed. Ld. D.R. after arguing the case, wanted to file written submissions also for which Ld. A.R. had no objection provided he was also provided an opportunity to reply to written submissions. Therefore, Ld. D.R. and Ld. A.R. were permitted to file written submissions. 15. Ld. A.R. on the other hand submitted that Ld. CIT(A) has made factual findings as to the fact that assessee was a manufacturing unit. He further submitted that Ld. CIT(A) had asked for certain other details, which were submitted and Ld. CIT(A) after obtaining remand report, had allowed deduction u/s 80-IC of the Act. Inviting our attention to copy of audit report placed at page 154-155, Ld. A.R. submitted that it is clearly mentioned in the audit report that the assessee was into manufacturing of PCB Electronic items. He further submitted that the assessee was a registered unit with District Industries Centre, Roorkee and submitted that the fact that premises of the assessee were searched by Excise Department further proves that assessee was into manufacturing acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly. 17. Arguing upon the 2nd ground of appeal, Ld. A.R. submitted that the A.O. had made addition on account of sundry creditors as notices u/s 133(6) were received back which was deleted by Ld. CIT(A) on the basis of confirmation by A.O. that confirmations from creditors were available in the file. Ld. A.R. invited our attention to page 72-75 where it had submitted the detailed reconciliations before Ld. CIT(A). He further took us to paper book pages 101-135 where copies of balance confirmations along with copies of ledger account of creditors were placed. It was submitted that vide letter dated 10.01.2013 the A.O. had confirmed to Ld. CIT(A) about the fact of confirmations being on record and therefore, Ld. CIT(A) on the basis of letter received from A.O., had deleted the additions. Without prejudice to the above, the Ld. A.R. submitted that even if disallowances are upheld, the addition of income will be deemed to accrue from industrial undertaking and such income was again qualified for deduction under section 80-IC. 17. Arguing upon assessee s appeal, Ld. A.R. submitted that additions were made by A.O. by considering wrong figures of purchases and ignoring the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Co. Vs ACIT 30 DTR 569 v) DCIT Vs Satish Agarwal Co. 317 ITR 196. vi) BHEIL Vs ITO 74 DTR 132 20. Replying to assessee s appeal, Ld. D.R. submitted that the purchase claimed by assessee were higher in the books of accounts of assessee as compared to confirmations received from respective parties which clearly suggest that assessee had been purchasing for Faridabad Unit and Hardwar Unit and most of the purchases related to Faridabad unit as is apparent from the confirmations and reconciliation submitted by Ld. A.R. Ld. D.R. further submitted that Ld. A.R. has reconciled the figures of purchases by adding the purchases of both units. It was submitted that most of the purchases related to Faridabad unit and not to Hardwar unit. He further submitted that reconciliation of purchases has been submitted by assessee without getting it certified form the parties and without obtaining remand report and without confirmation from the A.O. The claim of Ld. A.R. that even if disallowance is upheld, the increased income will be available for claim u/s 80-IC, Ld. D.R. submitted that no such ground was taken before Ld. CIT(A) and before ITAT and the claim for deduction is also on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actual nature of expenditure. Regarding argument of Ld. D.R. that non submissions of documents seized during excise search action, itself creates doubt about the unit, the Ld. A.R. submitted that the quantum of record seized as noted in the panchnama itself substantiates the appellant s contention and claim of manufacturing activities were being carried out at the aforesaid premises as the survey was carried out by external Government Authority being Central Excise Department. Regarding difference in purchases as argued by Ld. D.R., Ld. A.R. submitted that complete reconciliation of purchases made by assessee with those confirmed by respective creditors/ reply of suppliers was filed during proceedings and in this respect, our attention has invited to written submissions and in the light of above reconciliation statement, it was subitted that all the differences were explained and hence, there was no difference in the balances. As regards the argument of Ld. D.R. that confirmation from sundry creditors was not received, Ld. A.R. stated that the Ld. CIT(A) had held that confirmations were in the file of A.O. on the basis of a letter from A.O., Ld. A.R. submitted that confirmations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory was shifted to F-32 Industrial Area, Hardwar in the month of June 2010. ii) That statement of Shri Gangasharan Gupta owner of premises of F-15 Industrial Area, Hardwar was recorded on 16.11.2011 and in the statement he has admitted that manufacturing activities were carried out in the factory premises. iii) That sales and purchases mentioned in the copy of order passed u/s 25(7) read with Section 31 of VAT Act passed on 28.12.2012 by DC Assessment Commercial Tax Hardwar were matching with the total sales declared by assessee before VAT tax authorities and with the figures shown in the P L account. 24. The argument raised by Ld. D.R. regarding inflated purchases is a matter of reconciliation between the accounts for which Ld. A.R. had submitted detailed submission before Ld. CIT(A) and Ld. CIT(A) had allowed part relief on the basis of such reconciliations. We do not find any merit in the argument of Ld. D.R. that turnover was not commensurate with the amount invested in plant and machinery as there may be a case as in the present case as explained by Ld. A.R. that the process of manufacturing involved more manual work as compared to mechanical wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) from A.O. is vide letter dated 10.01.2013 which is after the date of submissions and we find that A.O. had confirmed the fact that confirmations were on record and a copy of letter written by Ld. CIT(A) and reply submitted by ITO, Ward I on 10.01.2013 is placed on record. As the addition was made only on account of non confirmation of balances by creditors and therefore, grievance of revenue is removed with the finding of A.O. vide letter dated 10.01.2013 that the same were available in the file and therefore, we do not find any infirmity in the order of Ld. CIT(A) with regard to ground No.2. In view of above, ground No.2 is also dismissed. In nutshell appeal filed by revenue is dismissed. 27. Now, coming to appeal filed by assessee we find that assessee has taken two grounds of appeal one of which relates to part confirmation of addition of ₹ 3,69,73,180/- on accounts of partial upholding of disallowance made by A.O. and the other relates to disallowance u/s 40(a)(ia) of the Act. As regards addition on account of difference in confirmations, Ld. A.R. submitted that the assessee was not given necessary opportunity to explain the difference therefore, the reconcilia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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