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TMI Blog2021 (9) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the additional income was not accrued as the agreement with MDHPL was not materialised. AO has not issued any notice under section 133(6) or summon under section 131 to MDHPL to verify the veracity of the facts to prove it contrary. The AO has not investigated the issue and only insisted on the disclosure made by assessee. As seen that the ld.CIT(A) after considering the submission of assessee, accounts of MDHPL and the fact that no amount on account of marketing fees from the contract of assessee with MDHPL was realised. In our view, there is no infirmity in the order of the ld.CIT(A), which we affirm. In the result, Ground No.2 of the raised by Revenue is dismissed. Addition on protective basis on the stock difference found during the survey - Addition on the basis of additional evidences - HELD THAT:- The assessee explained that the difference was recorded in the books of accounts of Vivid Margi Investment [sister concern of assessee]. The AO made the addition by taking view that the sister concern of assessee is not assessed in his range and it is not ascertainable. We find that the AO has not investigated the fact from sister concern, no notice of summon was issued. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the ld CIT (A) has erred in deleting the addition of ₹ 1,75,00,000/- despite the fact that the assessee neither submitted any sufficient/cogent evidence regarding cancellation of the agreement with MDHPL nor did he retract from the statement recorded u/s 131 on 06.08.2008. 3. On the facts and the circumstances of the case and in law, the ld CIT (A) has erred in deleting the addition of ₹ 1,96,132/- on the basis of additional evidence submitted by the assessee during the appellate proceedings without calling for Remand Report on the said issue, which is in clear violation of Rule 46A of the IT Rules. 4. On the facts and the circumstances of the case and in law, the ld CIT (A) has erred in deleting the addition of ₹ 34,692/- on the basis of additional evidence submitted by the assessee during the appellate proceedings without calling for Remand Report on the said issue, which is in clear violation of Rule 46A of the IT Rules. 5. The appellant craves to add, modify or alter any grounds during the course of appeal proceedings. 2. Brief facts of the case are that the assessee are that the assessee is a Public Limited Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to why the entire undisclosed income not offered, though admitted as additional income during the survey. The assessee filed its reply. In the reply, the assessee stated that they entered into an agreement with Maa Danteshwari Herbal Products Ltd (MDHPL) and offered to tax the amount which was to be received through them. The said deal was not materialised on account of failure on the part of MDHPL as they failed to satisfy the quality norms and the assessee has not earned marketing fees. Since, the assessee has not realised the marketing fees as prescribed in the agreement with MDHPL and hence the assessee has not earned such income. The reply of assessee was not accepted by the AO. The .AO held that agreement executed between assessee and MDHPL prescribed 5 products to be sold and marketed by the assessee, wherein the assessee company in its submission stated about non-fulfilment of condition by MDHPL, one product only Stevia. The assessee has not disclosed about the fate of other products. Further, with regard to non-satisfaction of quality norms, the assessee produced the quality testing report as furnished by the MDHPL dated 25.11.2011 and those got carried out by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of ₹ 43,42,965/- the assessee suo moto disallowed ₹ 2,00,201/- thereby the AO granted set-off. 6. On appeal before the Ld.CIT(A), the assessee filed detailed written submission. The submission of assessee is duly recorded para 3.3 on page no.19 to 43. Against the addition of ₹ 1.75 crore, the assessee submitted that the assessee entered into agreement dated 02.07.2008 with MDHPL for marketing of their herbal product. The assessee incorporated certain terms and conditions of the contract executed between assessee and MDHPL in its submissions and submitted that MDPHL agreed that assessee will give all support for marketing and distribution of its all herbal products by using his market experience, intelligence, distribution network, contract of distribution stockist, retailer and doctors as well as its house product management expertise. And accordingly, MDHPL agreed to pay ₹ 1.75 crore as marketing fees agreement with them. The assessee also referred and relied upon the statement of its official and on the basis of statement it was submitted that when the statement was given, marketing fees of ₹ 1.75 crore have not accrued. The assessee just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by assessee should be presumed to be made first from non-interest bearing funds. The assessee specifically stated that its share capital and reserve as on 31.03.2009 was of ₹ 89.04 crore and the assessee made investment of ₹ 7.69 crore only. Thus, the computation of deduction under section 14A of the Act furnished by assessee was correct. 8. The Ld. CIT(A) after considering the submission of assessee, deleted the addition of ₹ 1.75 crore by taking view that ₹ 1.75 crore was receivable from MDHPL in the current year, the assessee has shown that there was no materialisation of deal with the MDHPL and the assessee has not realised the sale forecast for that year, accordingly addition of ₹ 1.75 crore is not sustainable. For addition on account of difference in cash, the Ld.CIT(A) held that assessee has filed copy of petty cash book balance as on 05.08.2008, which indicates that balance was ₹ 1,15,026/- and considering the balance, the addition of ₹ 34,692/- was deleted. On the additions of ₹ 1,96,132/-, the ld CIT(A) held that in the stock statement of Vivid Margi Investment P Ltd, the stock is duly accounted. For other addition u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited. The Ld.AR relied upon the following decision: CIT v/s Reliance Utilities Powers Ltd. (313 ITR 340) BOM E.D.Sasoon Co Ltd. v/s CIT (26 ITR 27) SC, Pullangode Rubber Produce Co.Ltd v/s State of Kerala (91 ITR 18 SC, D.R.Construction v/s ITO (ITA No.2735/Ahd/2010. 11. We have considered the rival submission of both the matters and perused the material available on record. As noted above, the AO made disallowance under Rule 8D 2(ii) of ₹ 39,42,764/- and disallowance under Rule 8D2(iii) of ₹ 400,201/-. The ld. CIT(A) deleted disallowances after appreciating the fact that reserve and surplus available with the assessee are in far excess than the investment made by assessee and by relying upon the decision of CIT Vs. Reliance Utilities Power Ltd., (supra). The Hon ble Bombay High Court in Reliance Utilities powers Ltd (supra) held if there are funds available both, interest free and interest bearing, then a presumption would arise that investment would be out of interest free funds generated or available with the company. We find that the interest free funds available with the assessee are in far excess than the investment made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The Ld.CIT(A) accepted the contention of the assessee that no such income was accrued out of the contract between the assessee and the MDHPL. The Ld.AR for the assessee submits that once it is proved that no income is accrued out of the contract that MDHPL, the assessee has no occasion to include such income which is never earned by the assessee. 14. We have considered the rival submission of both the parties and have gone through the orders of Lower Authorities. We find that the AO made addition solely on the basis of statement of official of assessee, recorded during the survey action. We find that while giving the brake up of additional income, the official of the assessee clearly states that amount of ₹ 1.75 crore pertains to the agreement entered by assessee with MDHPL on 02.07.2008. The survey was carried out only after 33 days of execution of marketing agreement of assessee with MDHPL. The assessee offered only amount of ₹ 7.77 lakhs, brake up of which pertains to Purchase made from Mittal Trading and Kiran Sales Corporation. The additional income of ₹ 7.77 lakhs offered by assessee is accepted without any variation. The AO made addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted those difference, deleted the additions. In alternative submissions the ld AR for the assessee submits that the bench may take appropriate call on the issue in accordance with law. 18. We have considered the rival submission of both the parties and found that the AO made addition by taking view that there was a difference in stock found during the survey. The assessee explained that the difference was recorded in the books of accounts of Vivid Margi Investment [sister concern of assessee]. The AO made the addition by taking view that the sister concern of assessee is not assessed in his range and it is not ascertainable. We find that the AO has not investigated the fact from sister concern, no notice of summon was issued. We find that the Ld.CIT(A) after considering the accounts and invoices of Vivid M. Investment that these stocks were duly accounted in the said concern deleted the protective addition. In our view, the Ld.CIT(A) took a reasonable view after verifying the facts. We further find that the assessee made a mere protective addition and not clarified on whom the substantive addition is made. Hence, we affirm the order of ld CIT(A). In the result this ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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