TMI Blog1990 (10) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... grants-in-aid as capital receipt and accepted the assessee 's plea that it was not taxable income when on the other hand, he accepted that the unutilised amount of grant-in-aid is taxable and the assessee had offered for taxation of unutilised grants-in-aid in the revised profit and loss account. 3. The facts of the case are that the assessee company is a subsidiary company of U.P. Handloom Corpn. Ltd. The assessee company is aU.P.StateGovernment Undertaking established for the development of Handloom industry in District Bijnor andMeerut. The business of the assessee is purchase and sale of yarn (controlled and uncontrolled). The assessee company purchases handloom cloth from weavers as per specifications and designs given by the company. This handloom cloth so purchased, is sold to the various agencies on wholesale and retail through its holding company U.P. Handloom Corporation Ltd.,Kanpur. At first, the assessee did not file the return, so notice under s. 148 was issued by ITO. The assessee filed return without audited books of account, statement of the case, etc. It is an admitted fact that the accounts of the assessee had not been audited in respect of any of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yarn to weavers, taking cloth from them, and payment for such services, entirely unverifiable thus not only payment, or quality of cloth involved is unverifiable but even the exact period of such transactions is not known and whether these were so written at the time of transactions or they really reflect the transactions w.e.f. the period stated therein. IV. There are instances where subsequent dates are entered prior to the following dates, viz., 6th of a month recorded before 5th of the same month. V. Questionnaire issued by this office remains unanswered. VI. The assessee insisted to avoid this office in the Remand Report but seems most willing to appear before you. Reason for this is I. Reluctance in compliance. II. Not furnishing answers to questionnaire asked and keeping a dumb/started expressions. III. Admitting the deficiencies in entirety orally, but not accepting them in writing (This is for the simple reason, that, here before me, the assessee had no answers or very ridiculous explanations)." It was observed that the books had been written to suit a state of affairs after the actual transaction had been taken place. The CIT(A) was of the view that the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, these credit entries could not have been taken into account by the assessee for working out its profit. Since the assessee had not submitted any balance sheet for the year under consideration, he was of the view that it was not possible to know whether all the transactions had been taken into account by it. While the various debits in the controlled cloth purchases account on account of the aforesaid adjustments were clearly indicated in the purchases of controlled cloth account appearing at pp. 79, 80 and 533 to 537, the corresponding credit entries in this regard were not traceable in the ledger. In these circumstances the ledger for the years ending31st March, 1982, as also31st March, 1983were retained by the CIT(A). The assessee filed another computation of income for the year ending31st March, 1982in which income has been disclosed at Rs. 11,47,476.94 as against the income of Rs. 3,88,772.14 shown before the Assessing Officer. It was admitted by the assessee before the CIT(A) that the transaction totalling Rs. 12,31,800.73 being credits in yarn distribution account had not been taken into account with the result that the profit had been understated to that exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .30 The Assessing Officer was not satisfied with the assessee's explanation and he had taken this amount into consideration while estimating the assessee's income at Rs. 40 lakhs. The assessee had not produced the details of claim of interest and the claim of Rs. 223,996,396 before the CIT(A). Therefore, on examination of ledger for that year the CIT(A) observed that the appellant had debited the transfer of goods account by a sum of Rs. 23,96,396.30 and had credited the accounts of U.P. Handloom Corporation Ltd. by a sum of Rs. 15,04,800 of Handloom Intensive Development Project, Dhampur by Rs. 5,14,328 and of Handloom Intensive Development Project, Maunath Bhanjan by Rs. 3,77,267.50. In this way, the entries in the books of account were at variance with the claim made and details filed before the Assessing Officer. He was of the view that if the goods had been purchased from Dhampur and Maunath Bhanjan centres as originally claimed, why their accounts have been credited. What entries were made in respect of Headquarter and other centres. Unless the assessee establish this contra entries in goods account, either by way of sale or closing stock, the adjustment entry made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as come up in appeal. 8. The CIT(A) found discrepancy in the maintenance of the books of account. He has observed that he himself examined the books of account of the assessee cursorily and in the absence of statutory audit of the account, he held that there is no dispute that the statement of income as furnished by the assessee cannot be relied upon as giving true and correct income for these years. For example, he has mentioned the amendments of income made by the assessee which are as under: Asst. year Profit as per P L a/c submitted return of income Further amounts added Income returned Revised income as per P L a/c submitted during earlier proceedings Revised income submitted before the CIT(A) 1 2 3 4 5 6 . Rs. Rs. Rs. Rs. Rs. 1980-81 7,85,085 1,008 7,86,053 7,40,142 10,00,481 1981-82 14,28,192 6,166 14,34,360 15,65,826 20,01,595 1982-83 Return not submitted but as per P L A/c for asst. yr. 1983-84 the income for the year . . 3,88,772 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. But in the present case without caring the legal principles of law laid down, the Revenue authorities have made arbitrary additions. Alternatively, it was submitted that even if there were defects in the accounts of the assessee, these have been removed and final Profit Loss Account, Balance sheet and reconciliation statement have been prepared. These entries and adjustments in the final Profit Loss Account can be verified. Therefore, the matter should be sent back. As against this, the learned Department Representative Smt. Neena Kumar supported the action of the CIT(A) and submitted that the CIT(A) had pointed out the defects and irregularities in the various accounts of the assessee. He, after submission of the revised Profit Loss Account and reconciliation, took the job himself for test-check. He cursorily looked at the books of account. But he was not able to make the adjustments and entries. Therefore, the method employed by the assessee was such that in that method, income cannot be properly deduced therefrom. Then the Assessing Officer was left with no alternative but to make estimate of its income. In the circumstances, the estimate made by the Revenue authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee and method employed by it, therefore, we set aside the order of the CIT(A) on this point also and send the matter back to the file of the ITO for deciding afresh. In this way, the assessee's as well as the Department's grounds are allowed for statistical purposes. 12. In the assessee's appeals, next common ground relates to the rejection of claim under ss. 80J and 80HH. The claim of the assessee for deduction under ss. 80J and 80HH was made by way of additional ground for the first time before the CIT(A). The CIT(A) has admitted the claim under s. 80J on the ground that this claim had been put before the Assessing Officer and had been commented upon by him. However, for additional ground of appeal in respect of claim under s. 80HH, he was of the view that the claim under s. 80HH is not a claim similar to the claim under s. 80J as the claim has been made only in respect of some of the units which are located in the backward areas and not all units of the assessee. It was also observed that the computation had been made by the Chartered Accountant in respect of the claim under s. 80HH on the basis of unaudited accounts in proportion to the sales of various centres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Addl. CIT vs. Gurjargravures (P) Ltd. 1978 CTR (SC) 1 : (1978) 111 ITR 1 (SC). 16. The learned counsel for the assessee submitted before us that since the assessee company is a Government Undertaking, therefore, the claim should be admitted and exemption admissible to the assessee should be allowed since there is no personal benefit to any individual. Against this, the learned Departmental Representative supported the action of the learned CIT(A). 17. We have considered the rival submissions. Keeping in view the fact that the assessee company is a Government Undertaking and there cannot be any personal benefit to any individual and the tax goes from one head of the Government to another head of the Government. Therefore, we set aside the findings of the CIT(A) on this point also and admit the claim of the assessee. This issue is also sent back to the file of the ITO for deciding afresh after giving an opportunity to the assessee. 18. Regarding ground No. 1(ii) of the Revenue for the asst. yr. 1981-82 that the CIT(A) has worked out the assessee's income at Rs. 25,07,761 as against Rs. 20,55,820 worked out by the Assessing Officer without appreciating that the depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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