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TMI Blog2019 (7) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance amounting to Rs. 28,18,584/- made by the Assessing Officer (AO) u/s.40A(3) of the Income-tax Act,1961 (hereinafter called 'the Act'). 3. Briefly stated, the facts of the case are that the assessee is engaged in the manufacturing of various types of PVC pipes and fittings. During the course of assessment proceedings, the AO observed that the assessee made payments to transporters inviolation of the provisions of section 40A(3) of the Act. On being called upon to explain the reasons, the assessee submitted that his case was covered under Rule 6DD(k) of Income-tax Rules, 1962(hereinafter also called `the Rules'). The AO found that the prescription of Rule 6DD(k) applies only where the payment is made by any person to his agent who, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to his agent who, in turn, is required to pay in cash for goods or services on behalf of the principal,then such payment made by the principal to the agent would notbe hit by section 40A(3) of the Act. 5. Adverting to the facts of the instant case, we find that the assessee has made payments in violation of section 40A(3) tocerta in transporters who are not his agents. The ld. AR canvasseda view that since the transporters were representing the assesseein supplying the goods, they assumed the character of agents. In our considered opinion, such a contention is a farfetchedpr oposition. Delivering goods by a transporter on behalf of the assessee to customers is one thing, which is entirely different from paying freight by the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be no question of making any disallowance u/s14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. No contrary decision has been brought to our notice by the ld. DR. In view of the fact that the assessee did not earn any exempt dividend income during the year, we hold that no disallowance can be sustained u/s 14A of the Act. We, therefore,overturn the impugned order to this extent. This ground is, thus,allowed. 10. All the grounds taken by the Revenue in its appeal are against not accepting the rejection of books of account by the ld.CIT(A) in addition to the deletion of addition of Rs. 11,31,54,083/- on account of extra profit on sale of goods manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition, it was further opined that the assessee made unexplained investment in such undeclared production at Rs. 2,49,96,544/-. These two amounts of Rs. 11.31crore and odd and Rs. 2.49 crore and odd were added by the AO.The ld. CIT(A) concurred with the submissions advanced on behalf of the assessee and overturned the action of the AO inrejecting the books of account and as the sequitur, deleted both the additions. The Revenue is aggrieved by such deletion of additions. 12. Having heard both the sides and gone through the relevant material on record, it is seen that the AO rejected books of account mainly on the ground that value of stock submitted tobank was higher than that reflected in the books of account; and consumption of more elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gular method of valuation. Once the value reflected by the assessee in its annual accounts has been accepted by the AO, in our considered opinion, no addition can be made simply on the ground that the assessee declared high ervalue to the banks. Our view is fortified by the judgment of the Hon'ble jurisdictional High Court in CIT Vs. Acrow India Ltd.(2008) 298 ITR 448 (Bom.). Reliance of the ld. DR on V. Rajan vs. CIT (1974) 96 ITR 64 (Mad) is inconsequential in as much as in that case the explanation of the assessee was that stock in hand was actually inflated for the purpose of getting a higher loan from bank. Contrariwise, the case under consideration is that of estimation of stock value by the assessee at the time of furnish in gstateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m month tomonth or did not match with the manufacturing shown by the assessee, cannot be a reason to infer that the assessee wasengaged in carrying out manufacturing activity outside books of account. 16. The Special Bench of the Tribunal in Shanker Rice Company Vs. ITO 2000 72 ITD 139 (Amritsar)(SB) considered almost similar situation in which addition was made by the AO on the presumption of suppressed manufacturing. The Special Bench of the Tribunal reversed the action of the AO in rejecting the books of account on the ground that such books of account were audited and the statutory registers were maintained which were accepted by the Excise and Taxation Department etc. The facts of the instant case are almost similar to those as consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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