TMI Blog2020 (5) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Amount charged in excess from sister / related concern - HELD THAT:- A.O. without pointing out any specific difference in the rates made the addition by taking the average rate although the variation was only 0.64% even the explanation of the assessee that different rates were prevailing at different point of time when sales were made to the outsider was not considered. Addition made by the A.O. and sustained by the Ld. CIT(A) was not justified, accordingly, the same is deleted. - Decided in favour of assessee. - ITA NO. 995/Chd/2017 - - - Dated:- 20-3-2020 - Shri. N.K. Saini, VP And Shri, Sanjay Garg, JM For the Assessee : Shri Sandeep Vijh, C.A For the Revenue : Shri Arvind Sudarshan (JCIT DR) ORDER PER N.K. SAINI, VICE PRESIDENT This is an appeal filed by the Assessee against the order of the Ld. CIT(A), Palampur (H.P) dt. 06/03/2017. 2. The Registry has pointed out that the appeal is barred by limitation by one day. The assessee filed application dt. 14/08/2017 for condonation of delay stating therein as under: Re: Condonation of Delay in filing the Appeal for Assessment Year 2010-11. ITA No. 995/Chandi/2017 Respected Sir, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in upholding the action of the assessing officer in holding that profits to the extent of 2% of sales at ₹ 16,41,874/- were not eligible for deduction u/s 80CC in view of the provisions of section 801C. The Learned Commissioner of Income Tax (Appeals) has not appreciated that the Assessing Officer had presumed providing of technical know how by related concern. There is no material on record to suggest such an allegation. The submissions on the issue as well as the legal position have also not been appreciated. 2.(b) The action of Assessing Officer in excluding a sum of ₹ 16,41,874/-for the purposes of section 80IC without appreciation that adequate opportunity to rebut the charge was not allowed during the asstt. proceedings. The addition of ₹ 16,41,874/- is bad on account of violation of the principles of natural justice also. 3. The Learned Commissioner of Income tax (Appeals) has erred in upholding the addition of ₹ 1,68,593/- on account of amount stated to be charged in excess from sister/related concern in respect of sale of goods. The submissions made on the issue have not been properly appreciated. 5. Ground No.1 is general in nature whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to ₹ 43,27,395/- are to be deducted as profit arising there from has already been held not to be eligible for deduction under section 80-IC of the I.T. Act, 1961 as per Paragraphs 5.1 to 5.6. Thus, the profits which are held to be not eligible for deduction under section 80-IC, on this account, comes to ₹ 16,41,874/- (8,64,21,123 - 43,27,395 = 8,20,93,728 x 2% = 16,41,874). Therefore, addition of ₹ 16,41,874/- is made to the total taxable income of the assessee. Deduction under section 80-IC of the I.T. Act, 1961 shall not be available on this amount of profit. 7. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under: The first part of the third ground of appeal is that the learned assessing officer has erred in holding that profits to the extent of 2% of sales (excluding sale of insulated copper wire) at ₹ 16, 41,874/-are not eligible for deduction u/s 80-IC in view of the provision of section 80-1 A( 10). The basic ingredient of invoking section 801 A (10) is missing in this case and no alteration to the income eligible for deduction u/s 80-IC could therefore be done. The assessee firm is in the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfronted to the assessee and as such the addition made in violation of the principles of natural justice deserves to be deleted on this score itself. 8. Ld. CIT(A) after considering the submissions of the assessee sustained the addition by observing as under: I have considered the facts of the case, the reasoning of Ld. AO and the written submissions of the appellant. Upon careful consideration of the issue, it is held that Ld AO has rightly invoked provisions of section 80IA(10) of the Act in view of the facts of the case. No salary/interest has been paid to partners. The explanation of the appellant that no remuneration was paid to the partners as there was no provision in the Partnership Deed for the same is not acceptable as it is not normal to have such a Partnership Deed. The Partnership Deed has been deliberately drawn in a manner to inflate the profits from the eligible business. On one side, it is stated that no expense was incurred by the appellant on payment of technical know how or technical advice as its partner Sh. Mohinder Sethi provided the technical support and on the other hand no remuneration has been paid to him. About 35% of the sales have been made ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad come down as compared to the preceding years which increased the Net Profit and this explanation was given to the A.O. during the course of assessment proceedings. It was also stated that due to fall in the ratio of depreciation and interest to the sale also improved the net profit ratio which were ignored by the A.O. It was also submitted that the initial assessment years i.e; A.Y. 2007-08 the similar issue was raised by the A.O. during the course of assessment proceedings to the said assessment year the reference was made to page no. 33 of the assessment order dt. 29/12/2009 passed under section 143(3) of the Act for the assessment year 2007-08 wherein after considering the similar explanation no disallowance was made by the A.O. It was further submitted that for the A.Y. 2008-09 as well as 2009-10 the A.O. accepted the submission of the A.O. and no disallowance was made on a similar issue and even in the subsequent year no such addition had been made. The reference was made to page no. 79 to 86 of the assessees compilation which are copy of the assessment order for the assessment year 2012-13 to 2014-15. It was stated that even on the basis of principles of consistency the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal. 18. Ld. Counsel for the assessee submitted that the difference in sales was only to the extent of 0.64% which is negligible. It was submitted that the rates mentioned by the A.O. were the average rate and the A.O. selected only certain transaction without confronting the same to the assessee therefore the addition made by the A.O. and sustained by the Ld. CIT(A) was in violation of principles of natural justice. 19. In his rival submission the Ld. DR supported the orders of the authorities below. 20. After considering the submissions of both the parties it appears that the A.O. without pointing out any specific difference in the rates made the addition by taking the average rate although the variation was only 0.64% even the explanation of the assessee that different rates were prevailing at different point of time when sales were made to the outsider was not considered. We therefore are of the view that the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified, accordingly, the same is deleted. 21. In the result, appeal of the assessee is allowed. (Order pronounced in the open Court on 20/03/2020) - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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