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2017 (2) TMI 909 - ITAT MUMBAIAddition on account of purchases of machinery alleged to be not genuine by invoking provisions of Section 69C - AO has disallowed the purchase of machinery only on the basis of statement of Proprietor of Siddhivinayak Steel which was made before the Sales Tax Department - Held that:- CIT(A) has recorded a categoric finding to the effect that since assessee has not claimed any expenditure in respect of investments made in Rolling Mill and he has fully explained the source of payment which was made from the cash credit account of Karnataka Bank, there is no reason to disallow the same. The CIT(A) also observed that neither AO has recorded the statement of Siddhi Vinayak Steel u/s.131 nor has allowed the cross examination to the assessee. With regard to genuineness of Rolling mill so purchased, the CIT(A) has also recorded a finding to the effect that said Rolling mill was set up and fully operational on which excise duty were also paid on production. Therefore the purchase of the Rolling Mill cannot be doubted and the additions cannot be made merely on the basis of the statement of Shri. Pramod Kumar Singh, the proprietor of M/s. Siddhivinayak Steel which too was made before the sales Tax Department. After giving detailed finding from para 6.3.2 to 5.3.11, the CIT(A) has deleted the addition. The finding so recorded by CIT(A) are as per material on record. Learned DR has not controverted the finding so recorded by CIT(A). Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance / addition made u/s.69C of the IT Act. Addition by treating the sale of scrap as unaccounted sales - Held that:- CIT(A) has recorded the categorical finding to the effect that generation of scrap was @4.88% equivalent to 234.84 M/Ts. The said quantity was developed as scrap and sold at ₹ 33,93,42/- which was reflected in sales. Therefore, the question of any addition did not arise. However, the AO has wrongly taken the sale price of scrap at the rate of finished goods which was ₹ 52,939/- M/T. The CIT(A) had also recorded a finding to the effect that similar type of scrap was developed in earlier years and the sale value have been accepted by the department. However, AO has not given any reason for taking the value of scrap and sale at the rate on which finished goods were sold. We also found that during the year scrap generated was as per norms prescribed by Director General of Foreign Trade, standard input / output norms as per survey No.C-692 has notified by DGFT in the handbook (Volume-2) 2002-07. According to this notification scrap sale is allowed at 5%, however, scrap of the assessee was 4.88% which is within the limit as mentioned in the above notification. The CIT(A) has also recorded a finding to the effect that sale of scrap has been recorded in RG-1 which has also been verified by the excise department. Detailed finding so recorded by CIT(A) at para 5.3 have not been controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding so recorded by CIT(A) which is as per material on record. Accordingly ground taken by Revenue is dismissed. Disallowance u/s 14A - Held that:- During the year under reference the totaI interest paid on borrowed funds of ₹ 1,30,10,812/- while disallowing the expenses u/s 14A the Assessing Officer under Rule 8D(2) has considered disallowances of ₹ 3,25,224/- under Sub rule (ii) and ₹ 24,200/- under sub rule (iii). We found that no expenses were incurred on the Investments made in shares. Therefore no expenses is disallowable particularly the interest payment on borrowed fund have no link with investments made. At para 7.3 CIT(A) has given detailed finding and restricted the disallowance of other expenditure to the extent of ₹ 24,200/-. The detailed finding so given at para 7.3 by the CIT(A) has not been controverted by learned DR by bringing any positive material on record, accordingly, we do not find any reason to interfere in the order of CIT(A) for restricting the disallowance u/s.14A to the extent of ₹ 24,200/-.
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