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2020 (2) TMI 1228 - AT - Income TaxGross profit estimation - absence of production of supporting details/books of accounts by the assessee company - CIT-A reducing the estimated gross profit of the assessee company from 10.73% to 8.75% - HELD THAT:- Since the books of account were in the possession of the Official Liquidator and the same were not received by the assessee at the time of handing over of the possession, therefore, the allegation of the AO that the assessee failed to produce the books of account are contrary to the facts as the assessee cannot be expected to do an impossible task. Further, had the profit percentage of the assessee been higher, then, the assessee company would not have gone into financial trouble. The observation of the ld.CIT(A) that due to change in the technology and use of plastic material/poly plastic/can the turnover as well as the margin of the assessee company started declining and the company ran into financial trouble in 1997 and, subsequently, gone into liquidation also could not be controverted by the ld. DR. In view of the detailed reasoning given by the CIT(A) while reducing the GP rate to 8.75% as against 10.73% taken by the AO, we do not find any infirmity in the same. Accordingly, the order of the CIT(A) on this issue is upheld and the ground raised by the Revenue is dismissed. Addition on account of Gross Profit ratio @ 10.35% - amalgamation of M/s Asian Closures Ltd. into the assessee company in the absence of production of supporting details/books of accounts - CIT-A deleted the addition - HELD THAT:- We do not find any infirmity in the order of the CIT(A). He has given a finding that due to change in technology and due to substantial fall in sales during the year as compared to preceding years, the turnover and GP rate has gone down. Nothing contrary was brought to our notice to controvert the above finding given by the CIT(A). In view of the above and in view of the detailed reasoning given by the ld. CIT(A) on this issue, the ground raised by the Revenue is dismissed. Deduction u/s 80HH and deduction u/s 80I - assessee company has not furnished evidence to justify the claims and also in the absence of production of supporting details/books of accounts - HELD THAT:- From the various details furnished by the assessee in the paper book, which were filed before the AO and the CIT(A), we find substantial details were filed before the lower authorities to prove that manufacturing activity of the assessee company were situated in the backward area and, for that, the assessee has filed the Notification filed by the Central Government. He has also filed documents substantiating Sales-tax exemption of Haryana Government for setting up industry in backward area. The manufacturing of flexible packaging laminates, open top sanitary cans and general line metal cans is also not in dispute. The certificate from the auditor was also furnished before the AO. The assessee has substantiated that it has employed more than ten employees during the year and has retrenched 79 employees out of 131 employees and permission granted for retrenchment of the workers by the competent authority. Thus, in our opinion, the assessee has substantiated with evidence regarding the manufacturing activity undertaken by him in the backward area and fulfillment of all conditions for claim of deduction u/s 80HH and 80I. In the order for A.Y. 1991-92, the Tribunal had given the observation that the assessee company is entitled to deduction u/s 80HH and 80I. However, it was not claimed because it was a case of loss. In this view of the matter and in view of the detailed reasoning given by the CIT(A) on this issue, we find no infirmity in his order on this issue. Accordingly the same is upheld and the ground raised by the Revenue is dismissed.
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