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2016 (9) TMI 1144 - AT - Income TaxDeduction u/s 80IC - allegation that sales have been inflated in order to claim deduction u/s 80IC of the Act - Held that:- A.O held that the assessee has not been able to explain the source of cash deposits in his bank account of ₹ 7,77,86,000/- and he added the same u/s 68 of the Act as unexplained and consequently, he dismissed claim of deduction u/ 80IC of the Act on this amount i.e. ₹ 7,77,86,000/-. Since by the earlier part of the order we have held that the rejection of books of accounts was not in accordance with the provisions of section 145(3) of the Act, thus the impugned cash sales cannot be treated as income from other sources and deduction u/s 80IC of the Act cannot be denied on the amount of such cash sales. However, we cannot ignore that the A.O had no occasion to examine the details and documents filed by the assessee. Consequently, the action of the A.O in rejecting the books of accounts and treating cash sales as income from other sources and denying deduction u/s 80IC of the Act is set aside and the A.O is directed to examine and verify the claim of the assessee regarding cash sales, for deduction u/s 80IC of the Act. We also direct the A.O to verify and examine the cash sales in the light of commercial tax payment, raw material consumed and stock register verification, if any, after considering the submissions of the assessee and after providing due opportunity of hearing for the assessee. - Decided in favour of assessee for statistical purposes. Addition u/s 68 in respect of cash sales proceeds deposited in the bank account - Held that:- We observe that the authorities below categorically noted that the assessee did not submit copy of bank statement with HDFC Bank with which the impugned proceeds of cash sales was deposited. Per contra, it is contended by the ld. Counsel of the assessee that the assessee submitted all relevant documents including copy of the bank statement with HDFC bank during assessment proceedings. Further move the impugned cash sales can be verified from the respective purchasers and other related offices including the commercial tax deptt. The disallowance of cash sales and not treating the amount 2% of total sales as income from eligible unit have been made without considering the entire relevant evidence and explanation of the assessee and the issue of cash sales detailed verification and examination of all related documentary and circumstantial evidence. The AO shall also consider the percentage of the consumption of fuel and raw materials in proposition to finished goods and will also take into consideration the percentage of gross profit ratio of other similar unit, if any, in the similar factual conditions. We may point out that without considering the relevant evidence, details and explanation alongwith earlier and subsequent year financial results and GP ratio of the assessee and similar unit in similar location the Aon cannot make disallowance and addition and it is also on the assessee to justify and explain the situations wherein huge cash sales was made and cash was deposited to bank account which is 40 KM away from the office of the assessee. The assessee may also submit all other relevant details pertaining to transportation, commercial tax payment and purchasers to establish its claim of cash sales. With there observations issue restored to the file of the AO for de novo adjudication. No disallowance u/s 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 can be made for A.Y 2008-09 and addition made by the AO in this regard is not sustainable and consequently we dismiss the same
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