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2019 (12) TMI 861 - AT - Income TaxAddition on account of undisclosed sale of scrap - Addition sustained by the CIT(A) without admitting the additional evidence submitted by the assessee - HELD THAT:- We find that as per RG-1, the assessee has shown various quantities of scrap with job workers. Therefore, there are entries in the RG-1 regarding the scrap with job workers and the AO has taken these quantities from the RG-1. It is not in dispute that in the Stock Register i.e. RG-1, the assessee has shown scrap with various job workers. However, complete details of job workers are not appearing in the stock register due to the format as provided under the excise rules. When the AO asked the assessee to explain the difference of the scrap of sale shown by the assessee in the books of accounts as well as the scrap shown in the RG-1, the assessee has initially explained the reasons for difference which is reproduced by the AO Excise Duty is leviable because of the reasons that the assessee is a manufacturer of the goods and not the job workers. On further show cause notice issued by the AO regarding partywise details of job work and other relevant materials on the issue, the assessee again filed the replies as well as details. We find that as per the assessment proceeding sheet, the AO has clearly stated that requisite details were filed by the assessee except against Query Nos. 9,25 & 26. The AO has then again asked the assessee to produce the relevant details regarding query Nos. 9,25, & 26. The first query of the AO was about the details of excise duty paid on scrap and sale of scrap as per books of accounts. The second query was regarding furnishing the details of increase in purchase costs and decrease in the sale price. The second query was not related to scrap sale. As regards the first query, the details were produced by the assessee and the AO thereafter has not raised any further query and nothing is appearing in the proceeding sheet. However, the AO finally made the addition of the differential amount which assessee has claimed that the scrap remained with the job workers. When the assessee has produced all the relevant documentary evidence in support of the claim and also filed an application under Rule 46A of Income Tax Rules with the CIT(A) then rejecting the said application by the ld. CIT(A) only on the ground that the assessee has not produced the said evidence before the AO despite sufficient opportunities is not justified particularly when all the material was forwarded to the AO alongwith written submissions for the remand report. Once the AO was asked to submit the remand report then the evidence produced by the assessee was also required to be examined by the AO. In the case in hand, the AO has not submitted any remand report as pointed out by ld. CIT(A) while passing the impugned order. Therefore, non-furnishing of remand report cannot taken against the assessee rather it is a ground for taking adverse inference that the evidence produced by the assessee is not disputed by the AO. Accordingly, in view of the above facts and circumstances of the case, we set aside the orders of the authorities below qua this issue and consequently the addition made by the AO on account of unaccounted scrap sale is deleted. Disallowance u/s 14A - HELD THAT:- It is clear from the details given by the AO that during the year under consideration there is a substantial reduction in the investment in the shares. There is a sale of shares of more than ₹ 2.00 crores during the year and therefore, it is clear that the source of investment made during the year is sale proceeds of the existing investment in the shares. Assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. The sale proceeds of shares of Oil India Ltd are much more than the investment in shares of ONGC. Further as per funds available with the assessee, it is clear that assessee's own funds are many times more than the investment in shares. Therefore, in these undisputed facts, no disallowance is called for on account of interest expenditure. As regards the disallowance of indirect administrative expenditure, we find that there is churning in the investment portfolio during the year under consideration as the assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. Therefore, there is a process of decision making at the highest level of management of the assessee for selling the shares of Oil India Ltd. and purchase of shares of ONGC. Hence the disallowance on account of indirect administrative expenditure being 5% of average investment is justified. Accordingly, the addition made by the AO u/s 14A is sustained to the extent of ₹ 1,07,094/-.
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