TMI Blog2014 (3) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... he non-genuineness of the shortage claimed, the estimated disallowance is set aside - Revenue could not point out any defect or any error in the order of CIT(A) that loss cannot increase to 5% to 6% from 1 to 2% as declared in earlier years - Since revenue could not bring out any discrepancy – thus, the CIT(A) has rightly deleted the addition – Decided against Revenue. Restriction of disallowance u.s 14A of the Act r.w. Rule 8D of the Act – Held that:- The AO made disallowance of expenses related to exempted income by applying Rule 8D of the I. T. Rules, 1962 for the reasons that the assessee has not added back any expense qua exempted income - the CIT(A) has considered that the AO has not recorded any satisfaction or proved any link to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and chemicals, commission agent and exporter of iron ore fines. The AO during the course of assessment proceedings noticed from audit report Form No. 3CA column 17 that the assessee company has declared shortage of iron ore fines of 12564.829 MT on purchases of 283866 MTs and sales at 249819MT with a closing stock of 60827MT. The AO noted that the shortage declared by the assessee is at 4.42% of purchases and 5.02% of sales. The AO further noted that in the immediately preceding year, the shortage of purchases and sales were at 2.06% and 2.04% respectively. The assessee replied to the AO that the shortage is due to losses in transit by road, rail or in port which are due to wholes and gaps in the wagon and also during the loading and unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the audited accounts filed by the assessee, it was noted that that there has been a shortage in iron ore fines to the extent of 12564.829 MT of value of Rs. 2,50,43,164/- which in cornparison to the Assessrnent Year 2008-09 was on the higher side. The A.R. explained that the material iron ore fine are substances which are like dust format. It was explained that there is no fixed criteria for determining the loss on account of iron ore fines as it was due to the conditions of transit losses, port losses, ground loss and moisture loss that cumulatively at the end of the year the shortage is determined. A.R. explained that the purchases have not been doubted by the Assessing Officer and neither the sales and the entire sale of the iron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of shortage year to year. The percentage of the loss can vary from case to case, year to year and from place to place. The main criteria for the Assessing Officer are to establish that the loss/shortages claimed by the assessee is excessive and bogus which he has failed to do so. The assessee is procuring material during the whole year in different quantities at different times and accordingly sales are made so the findings of the Assessing Off cer that the percentage of the loss is higher in comparison to the previous assessment year is not tenable as the percentage of losses can vary on different purchases and sales made in the same year on account of many reasons as already mentioned. The entire sales of the assessee of iron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19/- by not applying the formula as per Rul;e 8D correctly as applied by the Assessing Officer. C.O. of assessee: 1. That on the facts and in the circumstances of the case, the action of the Ld. CIT(A) to confirm addition of Rs.170719/- u/s. 14A read with Rule 8D is bad in law. 2. That on the facts and circumstances of the case and material evidences on record, the action of the Ld. CIT(A) to make addition of Rs.170719/- u/s. 14A, read with Rule 8D even after finding that there was no proximate link of expenditure with exempt and further there was no satisfaction recorded by the Assessing Officer is erroneous, unjustified and excessive. 5. We have heard rival submissions and gone through facts and circumstances of the case. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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