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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 ..... d - HELD THAT:- The Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT [ 2015 (9) TMI 238 - DELHI HIGH COURT] has held that if there is no exempt income, there can be no question of making any disallowance u/s14A of the Act. Similar view has been taken in CIT vs. Holcim India P. Ltd. [ 2014 (9) TMI 434 - DELHI HIGH COURT] . 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. Rejection of books of account - addition of extra profit on sale of goods manufactured outside the books of account and unexplained investment in such outside production - HELD THAT:- Valuation of stock given by the assessee in its balance sheet is as per the regular method of stock valuation followed by the assessee. It, therefore, transpires that the difference in the amounts of stocks as per bank and annual accounts has arisen because of valuation and not quantitative details and further the value declared in the annual accounts is not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. - Appeal of the Revenue is dismissed and that of the assessee is partly allowed. - ITA No.556/PUN/2013, ITA No.823/PUN/2013 - - - Dated:- 19-7-2019 - SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For the Appellant : Shri Sunil Ganoo For the Respondent : Ms. Kesang Y. Sherpa, CIT ORDER PER R.S. SYAL, VP : These two cross appeals one by the assessee and the other by the Revenue arise out of the order passed by the Commissioner of Income-tax (Appeals) on 08-02-2013 in relation to the assessment year 2009-10. 2. The first ground of the assessee s appeal is against the confirmation of disallowance amounting to ₹ 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 expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 such transporter. Further,exception carved out in the Rule applies where the payment is made by the assessee to his agent for making further payment in cash and not for the self consumption by the agent. Since no principal-agent relation exists between the assessee and transporters to whom the assessee made payments in violation o fsection 40A(3) of the Act, it is held that the assessee cannot get shelter of clause (k) of Rule 6DD. We, therefore, uphold the impugned order on this score. 6. The only other ground which has been raised by the assesseein its appeal is against the confirmation of disallowance of ₹ 12,71,000/- made by the AO u/s.14A read with Rule 8D. 7. The facts apropos this ground are that the assessee made investment in shares. The AO observed that no disallowance was offered u/s.14A of the Act. Invoking the provisions of Rule8D(2)(iii), the AO computed disallowance amounting to ₹ 12,71,000/- at % of investments. The ld. CIT(A) sustained the disallowance. 8. Having heard both the sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at99,61,635. The differential production at 99,53,106 was held to have been made outside the books of account. He converted it into sale value at ₹ 72,14,01,130/-. After allowing deduction towards the Resin value and Chemical value, the AO calculate dextra profit from manufacturing of such sale outside the books of account at ₹ 11,31,54,083/-. In addition, it was further opined that the assessee made unexplained investment in such undeclared production at ₹ 2,49,96,544/-. These two amounts of ₹ 11.31crore and odd and ₹ 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 electricity justified carrying out manufacturing activity outside books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw materials to final product, it is seen that the assessee submitted that it was just a standard in a particular situation which varied from situation to situation. We also concur with the contention of the assessee that there cannot be any yard stick of ratio of raw material to output. Variation arises in such standard ratio because of several reasons, such as, quality of products required, normal wastage, abnormal wastage, disruption in manufacturing process, seasonal reasons, at al. The thing which is pertinent to note is that if the AO was coming to the conclusion of the assessee having manufactured goods outside the books of accounts, there should have been some material to substantiate the same. The assessee has maintained proper stock registers and is subjected to excise duty. There is nothing on record that the Excise Department or Sales-tax Department, for that purpose, did not accept the figures of manufacturing or sales as tendered by the assessee. In case of Excise duty levy, movement of goods is strictly monitored. No manufacturer can remove the manufactured goods without paying excise duty, for which entries in necessary registers are made. Here is a case in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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