9911796707
TMI Blog2018 (5) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... nt out that if the deduction u/s 80IC of the Act is allowed to the assessee whether this addition would be tax neutral or not. Furthermore, in fact the other party would be chargeable to tax at a higher rate than whatever tax payable by the assessee on profits of her Dehradun unit. CIT(A) has given a reason that there is no loss to the revenue and there is no direct benefit to the assessee with respect to this addition. We also find that if any addition is made in the profit of taxfree units same will increase the reduction under respective section applicable to that unit. In view of this we do not find any infirmity in the order of ld CIT(A) in deleting the above addition wholly. Disallowance u/s 40a(ia) -non deduction of tds on job work charges - Held that:- The assessee has deposited the tax deducted at source on the full amount to M/s. KB Singh Enterprise in the month of June, 2009 i.e. before the due date of filing of the return of income for Assessment Year 2009-10. In view of this decision of the Hon'ble Delhi High Court in CIT Vs. Rajinder Kumar (2013 (7) TMI 454 - DELHI HIGH COURT) the ground No. 1 of the cross objection is allowed and AO is directed to delete the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of ₹ 3,15,117/- under rule 8(D)(2)(iii) and donation paid and that too without giving adequate opportunity of hearing. 3. That having regards to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in treating the interest income of ₹ 67,80,459/- as Income from Other Sources instead of business income as claimed by the assessee and accordingly made the addition. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance/addition which is bad in law and against the facts and circumstances of the case and the same are not sustainable on various legal and factual grounds. 4. Brief facts of the case shows that assessee is an individual carrying on business as proprietor of M/s. Superior Fabrics. The assessee has also shown income from house property and capital gain from sale of house property. Assessee filed her return of income on 30.09.2009 at ₹ 5472734/-. During the year the assessee has business at Delhi, Ghaziabad and Dehradun. In Delhi and Ghaziabad assessee is carrying on trading activities, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer computed the profit at Dehradun unit disallowing the job work expenses of ₹ 2076219/- paid to KB Singh Securities where TDS was not paid in time and further the bills were in the name of sister concern. Further, disallowances were made of ₹ 193489/- u/s 40A(3) of the Act. Therefore, accordingly, he computed the profit of Dehradun Unit at ₹ 49063194/- against profit shown by the assessee of ₹ 46793495/-. Further, the ld Assessing Officer disallowed the purchases of ₹ 2.02 crores stating that assessee is purchasing goods at Delhi Unit from the party to which the same goods have been sold by its Dehradun Unit. Accordingly, the difference in purchase price at Delhi Unit and sale price of Dehradun Unit, he held that it is an over invoice purchase and hence, a sum of ₹ 20265026/- was added. He made a further addition of ₹ 50778113/- on account of cheque issued but not presented by the parties. He further held that income from interest in FDR and other interest of ₹ 6780459/- is income from other sources. With respect to the business loss of Ghaziabad unit where the net profit of the assessee is shown to be ₹ 4802714/- wherein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing process to prove the manufacturing. He referred to the order of the ld Assessing Officer extensively and submitted that there are valid reasons to show that the assessee is not carrying on manufacturing activities. 9. The ld AR vehemently submitted that nothing specific was brought on record of the ld AO and therefore, there is no reason to reject the books of account by the ld AO. He vehemently supported the order of the ld CIT(A). he further submitted that to reject the books of account the ld AO should have pointed out sum patent mistakes in the books of account. The ld AR on section 80IC referred to the various pages of the paper book filed to show that the manufacturing activities carried on by the assessee are duly evidenced and also certified by another govt authority i.e. Central Excise. He further referred to the various findings of the ld CIT(A) and submitted that claim of the assessee has been examined in detail and therefore, should be allowed. He further submitted that in Assessment Year 2008-09 the claim of the assessee was examined and allowed. Further, for Assessment Year 2010-11 also the claim of the assessee was examined and allowed. In view of this he subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO is not satisfied about the correctness or completeness of the account. ( b) The method of accounting as provided in section 145(1) and (2) has not been regularly followed. ( c) The AO can make the assessment in a manner provided in section 144. No defect or discrepancy in my books of account has been found. Correctness or completion of the account is not under challenge. The provision of section 145(1) or (2) have also been followed and therefore the provisions of section 145(3) are not applicable in my case. In any case I have been directed to explain as to why the department should not treat the following' ( a) Such liabilities has been settled outside the books of accounts. ( b) The liabilities does not exist anymore. I am submissions in this regard are many fold. The Incometax does not permit any assumption or presumption. Sweet will also cannot play in income tax proceedings and nor the income tax provide any arbitrary treatment. Nothing has been brought on record so far to conclude firstly that the assesse has settled the liability outside the books and secondly the liabilities do not exist anymore. At least we have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account U/s 145(3) of the Income-tax Act, 1961 (scanned ordersheets above of this report may kindly be referred). This shows that assessee was confronted regarding the issue and duly show caused for the same as well. Therefore, the contention of the assessee that No show cause letter was issued by the Ld. AO before rejecting books of accounts, as such assessee was under a bonafide impression that the Id. AO is satisfied with the books and bills / voucher produced. is incorrect and may kindly be rejected. 9. In the course of the appeal proceedings, the AR of the appellant filed the following submissions. Kindly refer to the order sheet entry dated 15.12.2011 whereby we have been directed to file details and explanation in respect of three points. Necessary compliance is as under: 1. So far as the account of cheques issued but not presented is concerned, the same is an old account carried out from the earlier year. Opening balance was ₹ 57830819- out of which cheques of rupees 8307976/- were encashed in this year leaving a balance ofRs. 50778113/-. This being an old account coming from the last year as per the balance sheet and accepted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act. The provisions laid down in section 145(3) is reproduced here as under. 145. (1) Income chargeable under the head Profit and gains of business or profession or Income from other sources shall, subject to the provisions of subsection (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. ( 2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assesses or in respect of any class of income. ( 3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1J or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment order in the manner provided in section 144. 10.1 From the above provisions of section 145(3), it is evident that this section can be invoked only if the Assessing Officer is not satisfied about the correctness or completeness of the accounts .offhe- appettant. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant settled her liabilities outside the books of accounts or that the liabilities did not exist or that such liabilities were fictitious. In the absence of any such finding, this observation of the Assessing Officer is based on doubts, surmises and conjectures. In case, if the Assessing Officer found that there was a cessation of liabilities in some manner, the same should have been dealt with by invoking and applying the provisions of sec. 41 of the IT Act, 1961 but no such action was found to be taken by the Assessing Officer. I have also examined the order sheets recorded by the Assessing Officer dated 30.11.2011 and 15.12.2011 and find that there was no such reason which can be made the basis for rejecting the books results declared by the appellant. 10.4 In the course of the assessment proceedings, the Assessing Officer pointed out to a discrepancy in the books of the appellant stating that the raw materials purchased was entered in a stock book a day prior to the receipt of goods on frequent basis. I have examined the issue and considered the submissions made by the appellant. In spite of pointing out the above discrepancy, the Assessing Officer did not bring on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the use of labourers were provided by M/s. KB Singh Enterprises Security. The Assessing Officer doubted the bills pertaining to M/s. KB Singh Enterprises Security, the bills were raised in the name of the appellant as M/s. Super Fabrics Private Ltd. instead of M/s. Superior Fabrics and therefore the Assessing Officer opined that the expenses were not incurred by the appellant. According to the Assessing Officer, the appellant neither had machinery, nor the labour and most of the purchases were made from the sister concern and were recorded prior to the date of receipt of goods i.e. the bill date. It was also observed by the Assessing Officer that the appellant did not show the use of cotton cloth in the process of manufacturing and the purchase of cotton cloth was made from one party M/s. Texco India only and no payment was made to them during the year against the purchases made. It was also observed by the Assessing Officer that the inventory of finished goods was shown at zero on regular intervals and no details of wastage was found to be recorded. The sale of finished/manufactured goods to M/s. Trimurti Petro Chemicals and the re-purchase of the same from them by the appellant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has explained that in the stock register, the date mentioned for raw material is the date of bill and not the date of receipt of goods. It is important to point out that in the same submission, the assessee agreed that there is hardly any time left of one or two days when the supplier send the material, raises the bill and receipt of goods by assessee. This admission atleast prove that the stock register is not maintained in a proper manner so as to give a correct picture of availability of raw material as on the date of utilization thereof towards consumption for production. 4.3 The AO has also observed that vide Bill No.60 dated 24.12.2008, the assessee has sold 40 nets (Size 11x11) and 50 nets (size 4 x 4 14) to M/s Trimurti Petrochemical Pvt. Ltd. whereas as per production/sale register, the assessee had only 50 nets as on 23.12.2008 with her. In light of this, the AO held that the assessee has actually purchased the finished product from Superior Calltech Pvt. Ltd. and then sold to Trimurti Petrochemical Pvt. Ltd. without any value addition. The assessee has submitted that she had actually purchased Coated Polyster net from Superior Calltech Pvt. Ltd. whereas the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f admitted that purchases made from M/s. Super Caltech Pvt. Ltd. and sales made to M/s. Trimurti Petro Chemical Pvt. Ltd. admittedly were different products. Therefore, the action of the Assessing Officer in rejecting the books of account of the appellant by invoking the provisions of section 145(8) of the Act is not based on well founded ground is held as bad in law. Therefore the book results are admitted for the purpose of computation of income. 14. Regarding the disallowance made by the Assessing Officer u/s 80 IC of the Act, to carry on the discussion further, at the outset, one has to elaborate the provisions of sec.80IC and for this purpose, an extract of sec. 80IC of the Act is reproduced below. Special provisions in respect of certain undertakings or enterprises in certain special category states ( 2), there shall; in accordance with the subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits arid gains, as specified in sub-sectfon (3). ( 2) This section applies to any undertaking or enterprises;- ( a) Which has begun or begins to manufacture or produce any artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the North- Eastern States. ( 3) The deduction referred to in sub-section (1) shall be- ( i) in the case of any undertaking or enterprises referred to in sub-clauses (i) and (iii) of clause (a) or sub clause (i) and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for the assessment years commencing with the initial assessment year; ( ii) in the clause of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment and thereafter twenty five percenter thirty percent where the assessee is a company) of the profit and gain. ( 4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely;- (i) it is not formed by splitting up, or the reconstruction, of a business already in existence; Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such undertaking as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( vi) Integrated Infrastructure Development Centre means such centres, which the Board, may, by notification in the Official Gazette, specify, in accordance with the scheme framed and notified by the Central Government; ( vii) Software Technology Park means any part set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry; ( ix) Substantial Expansion means increase 'in the investment in the plant and machinery by at least fifty percent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of previous year in which the substantial expansion is undertaken; ( x) Theme Park means such park, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. 15. In the course of the appeal proceedings, the appellant also submitted a copy of the number 177/2004 (S0741)(F. No: 142/47/2003-TPL) dated 28.06.2004 issued by the Central Board of Direct Taxes which notified the khasra numbers in respect of tehsils or sub-tehsils in the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. KB Singh Enterprises showing that the payments were made through cheques other than a nominal payment of ₹ 60,000/- in cash was furnished by the appellant. Copies of the transport documents for transport of raw materials purchased to Dehradun and bills for transport of finished manufactured goods from Dehradun which were sold were furnished. Copies of corresponding purchase and sale bills which bears the stamp of the govt, agencies justify the transportation of raw material and finished goods. After examining all the above evidences brought on record by the appellant, the Assessing Officer did not rebut anyone of them in his remand report, rather the Assessing Officer himself admitted that the items procured by the appellant as raw material and sold by the appellant as a finished product were different which substantially prove that the appellant carried on the manufacturing activities during the year under consideration from her factory located at khasra no. 1388, Langha Road, Industrial Area, Charbha, Vikas Nagar, Dehradun. 15.2 On perusal of the above evidences, material on record, it is found that the appellant is engaged in the manufacture of PVC Pre Garnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussion that the product is different from the raw material, it is seen that the manufacturing of PVC Pre Garnished Anti IR Camouflage Net falls under the definition of manufacture or production . The Assessing Officer has made an incorrect observation regarding the activity undertaken by the appellant. He also did not bring any adverse material on record contrary to that of the appellant and formed an opinion without any basis to substantiate his view. The Assessing Officer did not point out any discrepancies in the different stages of flow chart submitted by the appellant to state that she was not engaged in the manufacture of PVC Pre Garnished Anti IR Camouflage Net. In the absence of any such finding or reason, it is unjustified to deny the business activity undertaken by the appellant. 15.5 In the course of the appeal proceedings, on perusal of the flow chart, it is seen that it clearly explained the procedure and the final product manufactured by the appellant. In the order, the Assessing Officer had stated that the appellant was not having sufficient machinery for undertaking any manufacturing but from the flow chart and the procedures demonstrated by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to deny the claim of the appellant. He has not issued summons u/s 131 of the IT Act, 1961 or issued a commission to enquire about the appellant s manufacturing activity at Dehradun. In the absence of any such finding, it is unjustified to disallow the claim of the appellant u/s 80IC. In my considered opinion, the appellant is running a unit in a notified area which is approved and periodically inspected by the various government agencies like Industries Department, Central Excise Department etc. The appellant periodically is filing the returns to the Central Excise Department regarding this manufacturing activity, a sample of the same placed on record. These agencies did not point out any irregularities or discrepancies regarding the appellant s business activity, instead affirmed the existence of a new unit where the appellant is manufacturing PVC Pre Garnished Anti IR Camouflage Net. It is also a point to mention that the Assessing Officer checked the books of accounts of the appellant in the remand proceedings but he did not point out any defect or discrepancy which can be said of a nature to rebut the claim of the appellant. 15.7 There are certain basic conditions to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnished Anti IR Camouflage Net which is not covered under Schedule 13 of the Income Tax Act. 16. To sum up in the present case, it is seen that the appellant s new unit is set up in a notified industrial area of Uttranchal and commenced production with effect from 25.02.2008 which has been certified by the department of Industries, Govt, of Uttranchal. The appellant has filed her return of income within the specified time limit u/s 139(1) of the IT Act, 1961 i.e. 30.09.2009. The appellant submitted an audit report in Form 3CB u/s 44AB of the IT Act, 1961. This audit report is also supported by an audit report u/s 80IC in Form 10CCB duly signed by the Chartered Accountant. Flowever, the Assessing Officer, some how doubted the claim of the appellant u/s 80IC and did not consider any of the submissions made by the appellant in support of her case and simply without any cogent reason denied the claim. An assessment cannot be based on surmises and the Assessing Officer has not brought on record any adverse material contrary to that of the appellant to say that the appellant's claim u/s 80IC was not genuine. Without giving any such finding, denial of the claim of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.53 crores and that party sold the same goods to the Delhi Unit of the assessee for ₹ 16.55 crores. The claim of the assessee was that the said party was engaged in several services such as procuring the order and Liasoning with defense department. It was further explained that if the services of that party had not been availed, assessee would not have got this supply contract. Even otherwise, if the sale price is taken at ₹ 16.55 crores then the full profit would have been tax free u/s 80IC of the Act. The ld AO rejected the contention and made an addition of ₹ 20265026/- in the hands of the assessee. 13. Before the ld CIT(A) assessee reiterated the same submissions. The ld AO submitted a remand report in detail to which the assessee submitted a rejoinder and the ld CIT(A) deleted the addition vide para No. 28 of the order. 14. The revenue agitated this ground before us and reiterated what is stated in the order of the ld Assessing Officer and in the remand report. 15. The ld AR vehemently supported the order of the ld CIT(A). 16. We have carefully considered the rival contentions. The ld CIT(A) in para No. 25.1 to 28 as under:- 25. Ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant would file an affidavit from M/s. Trimurti Petrochemical Allied Services Pvt. Ltd. to support the services rendered by them, if required. The appellant also requested the Assessing Officer to summon the directors of the said Company in case of any doubt as there was no malafide intention on the appellant to reduce the taxable income and if there would be any intention to avoid any tax this transaction would not have been taken place. However the Assessing Officer did not believe the submission made by the appellant and made the impugned addition of ₹ 2,02,65,026/- (Rs. 16,55,86,576-14,53,21,550) being the difference between purchases shown at Delhi office and sales made from Dehradun office. According to Assessing Officer, the appellant could have at the best paid commission for any such service rendered by such M/s Trimurti Petrochemical Allied Services Pvt. Ltd. 26. In the remand report submitted A.O stated as under. 7. Addition of ₹ 2,02,65,206/- on account of suppression of profit made through sham transaction in conigence with Trimurti Petrochemical Allied Services Pvt. ltd. 7.1 During the course of assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mh Alied Services Pvt. Ltd. has made total sales of ₹ 16,04,52,850/-. To verify the contention of assessee, quantitative details of sale made by Superior Fabric Dehradun and purchases made by Superior Fabrics Delhi Unit during the year under consideration was looked into. Following is the abstract of quantitative details of sale purchase by both the units:- Details of sales of Dehradun Unit for the F.Y. 2008-09 A.Y. 2009-10 Item name Quantity Rate Amount Camouflage net (Big) 4012 30500 122366000 Camouflage net (Small) 1843 8750 16126250 138492250 Debit notes 6793500 5855 Scrap sales 35800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net 1843 8750 16126250 1843 9102 16774986 Total 5855 138492250 5855 144075746 According to above, the Delhi unit of assessee has made purchases of5855 Camouflage net (Big Small sizes) for ₹ 14,40,75,746/- which infact was sold for a sum of ₹ 13,84,92,250/-. It is important to point out that there is no dispute on the fact the transaction has been routed through M/s Trimurti Petrochemicals Alied Services Pvt. Ltd. and excess cost of ₹ 55,83,496/- (Rs.14,40,75,746/- - ₹ 13,84,92,250/-) has been incurred in routing the transaction. Thus, undoubtedly through this sham transaction, the assessee has reduced profit to the extent of ₹ 55,83,496/- and it is requested that addition to this exent may kindly be confirmed. 7.5 There is another issue for the remaining quantity which is as under:- Item name Quantity sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53,21,550/-) was the excessive expenditure claimed by Delhi Unit. It is respectfully submitted that Dehradun Unit of the appellant which is entitled to claim deduction u/s 80IC equal to the 100% of its profits, sold the product namely Camoufage Net for an aggregate amount of ₹ 14,53,21,550/- to M/s Trimurti Petro Chemical Allied Services P. Ltd., which in turn were purchased by Delhi unit of the appellant from M/s Trimurti Petro Chemical Allied Services P. Ltd. at ₹ 16,55,86,576/-. There is no loss to the revenue in this transaction. In fact, Had the sales been made directly from Dehradun Unit at ₹ 16,55,86,576/-, entire profits would had qualified for deduction u/s 80IC. In fact, there was immense contribution by M/s Trimurti Petro Chemical Allied Services P. Ltd. in terms of various activities and services rendered by M/s Trimurti Petro Chemical Allied Services P. Ltd. such as help in producing orders from Defense Department, licensing and getting the goods approved by way of inspection at Delhi. It was explained to Ld. A.O. vide letter dated 15.12.2011 (PB 606-608) that but for the valuable contribution of M/s Trimurti Petro Chemical Allied Services P. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly from the appellant s Dehradun unit to Defence there would have been a larger profit to Dehradun unit and that would be with no tax effect. Therefore the appellant is not benefitted in any manner by making a sale to M/s Trimurti Petrochemical Allied Services Pvt. Ltd. and purchasing the same again at her Delhi office to make a sale to Defence since the appellant was to make supplies to Defence directly. I have also seen that M/s Trimurti Petrochemical Allied Services Pvt. Ltd. had paid tax on the income earned from these transactions. In fact, there was no loss to revenue and there was no direct benefit to the appellant in any manner. Therefore I do not find any reason to sustain the addition either of ₹ 2.02 cr. as made by the Assessing Officer in the impugned Assessment order or to restrict the addition to the extent of ₹ 55,83,496/- and ₹ 6,35,910/- as suggested by the Assessing Officer in Remand Report. As the appellant had shown the sales of what has been manufactured by her from Dehradun unit to M/s Trimurti Petrochemical Allied Services Pvt. Ltd. and any sales made in the earlier year has no relevancy to consider the same in the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceeding, the AO has observed that the assessee has paid a sum of ₹ 20,76,219/- to M/s K.B. Singh Enterprises Security on which tax at source has been deducted but deposited in June, 2009. Vide present submission, the assessee has claimed that as the tax has been deposited in June, 2009 i.e. before the due date or filing of return, disallowance U/s 40(a)(ia) was not called for. 5.2 Kind attention is invited to the provision of section 40(a)(ia], according to which any sum on which tax is deductible / deducted and is not paid upto the prescribed date is disallowable. The relevant clause (ia) of section 40(a) of the Income-tax Act, 1961 is reproduced below:- ( ia) Any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or after deduction, has not been paid- ( A) In a case where the tax was deductible and was so deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 01.06.2008 amounting to ₹ 2,81,700/- has been raised in the name of Superior Farbics Dehradun and all other bills pertain to M/s Superior Fabrics Pvt. Ltd. Thus, the observation of AO is not contradicted by the present evidence. The assessee has though also furnished a clarificatory letter issued by K.B. Singh Enterprises Security (at page 756) according to which, the name of Superior Fabrics Pvt. Ltd. is stated to be inadvertently mentioned. However, this document does not prove that labourrers were actually supplied and has also worked in the Dehradun Unit of assessee and not in Superior Fabrics Pvt. Ltd. which is also situated in Dehradun (as per copy of bills filed in paper book). In view of this, the AO has rightly disallowed the expenses and it is requested that the entire addition should be confirmed U/s 37(1) of the Income-tax Act, 1961. 19. In the course of the appeal proceedings, the AR of the appellant filed the following submissions. Ld. A.O. has disallowed job work charges of ₹ 20,76,210/- (vide Para-3 at Page-29 of the assessment order) on the ground that the said expenses represents security charges paid to M/s. K.B Enterprises on whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems that the Assessing Officer did not appreciate the probability of a mistake and ignored this fact totally. Moreover it is not the case of the Assessing Officer that M/s. Superior Fabrics Pvt. Ltd. is also working from the above said address whereas infact the appellant s unit is Superior Fabrics which only functions from the said address. The appellant furnished a copy of the ledger account of M/s. KB Enterprise Security for the period 01.04.2008 to 31.03.2009 which show that the bills were credited and the amount was paid to them. It was observed by the Assessing Officer that where the amount has been credited/paid upto February, 2009, the amount of TDS was required to be deposited by the end of financial year i.e. 31.03.2009. Fie stated that as per the TDS return filed by the appellant, an amount of ₹ 8,56,815/- has been paid/credited on 31.03.2009 to M/s. KB Singh Enterprises Security and as such in accordance to sub-clause A of clause (ia) of sec. 40(a), the benefit of payment deposit of tax by due date can only be given to the extent of this amount. The appellant credited/or made payment before 28.02.2009 for an amount of ₹ 11,58,685/- and deposited the tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deducted and paid before the due date of filing of the return. He referred to para No. 18 of the order of the ld CIT(A) where this fact is mentioned. 21. The ld DR supported the order of lower authorities. 22. We have carefully considered the rival contentions and it is apparent that the assessee has deposited the tax deducted at source on the full amount to M/s. KB Singh Enterprise in the month of June, 2009 i.e. before the due date of filing of the return of income for Assessment Year 2009-10. In view of this decision of the Hon'ble Delhi High Court in CIT Vs. Rajinder Kumar (supra) the ground No. 1 of the cross objection is allowed and ld Assessing Officer is directed to delete the disallowance of ₹ 1185685/- u/s 40a(ia) of the Act. 23. The second ground of cross objection is with respect to the confirmation of disallowance of ₹ 315117/- u/s 14A of the Act. 24. Brief facts of the case shows that the ld Assessing Officer has recalculated the income of Ghaziabad Unit at ₹ 58382404/- against the loss shown by the assessee of ₹ 1977745/-. The ld Assessing Officer has held that interest income is chargeable to tax under the head income from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L A/c of the Ghaziabad Unit, the assessee has brought over the gross profit of ₹ 7,087/- on total turnover of ₹ 16,84,630/-. Further, other income such as interest on FDR/Bank A/c and also rent have also been credited in P L A/c and net profit of ₹ 48,02,714/- has been shown. Since despite providing ample opportunities, the assessee did not produce evidences with regard to purchase/sale and also bills vouchers for expenses at Ghaziabad Unit, the AO disallowed the entire expenses to the tune of ₹ 19,77,745/-. 35. In the written submissions the appellant submitted that she had enclosed in the paper book, the registers, bills and vouchers and therefore the very basis for disallowance of ₹ 19,77,745/- did not exist and prayed to be deleted. In the rejoinder the appellant reiterated that the disallowance made of ₹ 19,77,745/- be deleted since the Assessing Officer mentioned that bills and vouchers in this regard are verifiable. With regard to the observations made in the remand report for disallowing the interest of ₹ 25,17,394/-, the appellant stated that interest had been paid in respect of the borrowed funds used in Dehradun and Ghaz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id since the appellant paid interest of ₹ 25,17,394/- which included interest of ₹ 19,20,389/-. The balance interest debited by the appellant was in respect of Ghaziabad Unit. Assessee had also declared interest income in her Ghaziabad unit amounting to ₹ 67.80 lacs. In view of these fact no disallowance is attracted u/s 14A read with rule 8D(2)(ii). However, since the assessee is silent with regard to disallowance proposed by the Assessing Officer under rule 8D(2)(iii) amounting to ₹ 3,05,117/- and donation paid of ₹ 10,000/-, I therefore, restrict the addition made by the Assessing Officer to the extent of ₹ 3,05,117/- + ₹ 10,000/-, out of total addition made of ₹ 19,77,745/-. Therefore, the addition is restricted to the amount of ₹ 3,15,117/- and direct the Assessing Officer to pass a consequential order accordingly. 25. The ld AR relied upon the submission made before the ld CIT(A). 26. The ld DR supported the order of the ld CIT(A) and submitted that donation expenditure cannot be allowed to the assessee and further as assessee has earned tax free income the disallowance u/s 14A is correctly made. 27. We have ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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