TMI Blog2012 (6) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial auditor reporting that there was no discrepancies in the books of accounts maintained - Held that:- When Assessing officer himself got the accounts audited from special auditors u/s 142(2A) then he cannot ignore the audit report submitted by the special auditors. If the special auditor points out any discrepancies with regard to allocation of expenditure and correctness of books of accounts, then it is open to the assessing officer to reject the books of accounts and resort to estimation. Therefore the AO is not correct in re-allocating the common expenditure on the basis of ratio of export turnover to total turnover by rejecting the books of accounts. Dis-allowance of unpaid liability u/s 43B - assessee contended that service tax, and provision for leave encashment which is future liability are not covered within the meaning of any tax or duty u/s 43B - Held that:- Section 43B covers any sum payable by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force. Therefore service tax liability is covered u/s 43B and non -payment of same within the stipulated time attracts dis-allowances. Similarly, Leave encashment is allowed as dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport profit and the same has been confirmed by the learned CIT, Appeals which is not correct and not justified. 7. The Assessee Company has already submitted the lower authorities that it is maintaining separate set of books of accounts for the turnover relating to Domestic as well as 100% EOU of the company. It has properly allocated the expenses as per the accepted method of accounting and the same practice is being followed by the company year by year, adhering to the principles of consistent accounting practices. 8. The learned Commissioner of Income Tax (Appeals) erred in confirming the Order of the Assessing Officer wherein the above sum of ₹ 1,11,73,133/- has been disallowed from the Export Turnover claimed by the Assessee Company which is not correct and not justified. Hence, the disallowance may please be deleted. 3. The brief facts of the case are that the assessee is Public Limited Company filed its return of income for the assessment year under consideration declaring total income of ₹ 31,71,911/-. The Assessing Officer completed the assessment u/s 143(3) and computed the taxable income at ₹ 2,20,17,601/- after disallowing certain expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count within the stipulated time. It is submitted that the delay in remittance of TDS deducted in the January, 2006 and February, 2006 happened by oversight and requested not to disallow the same u/s. 40(a)(ia). 8. The Assessing Officer has also disallowed an amount of ₹ 13,88,511 u/s. 40(a)(ia) on the contention that no TDS has been deducted on the payments made to the following parties: S. No. Particulars of Payments Amount (Rs.) 1. CDSL (India) Ltd. 24,323 2. Stick Lables 11,04,385 3. Sree Printers 92,090 4. Images Multi Pvt. Ltd. 1,10,200 5. Chiran Fort Club 57,513 Total 13,88,511 9. The AR of the assessee submitted that any disallowances made will increase the exemption u/s 10B and will have no impact on the disallowance made. The assessee relied on the decision of ITAT Hyderabad A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-TIOL-89-ITAT-DEL) held that it is a settled proposition that when the assessee is claiming exemption under section 10A and assessee's profit from eligible business by the AO is recomputed the deduction under section 10A is also to be allowed on the recomputed profit under section 10A. ( c ) Delhi Tribunal in the case of M/s. International Gold Co. Ltd. v. Income tax officer 2010-TIOL-652-ITAT- MUM) held that even if the disallowance is sustained, it will only go to increase the business profits of the assessee which is exempt under section 10A as per the decision of the Hon'ble Bombay High Court in the case of Gemplus Jewellery India Ltd and allowed the assessee's appeal. ( d ) Hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd [[2010] 233-CTR (Bom)-24 : 42-DTR-73] held that exemption under section 10A - profits and gains derived from exports - Addition on account of disallowance of employer's and employees' contribution towards PF/ESIC -Disallowance of the PF/ESIC payments has been made because of the statutory provisions i.e. Sec. 43B in the case of the employer's contribution and Sec. 36(1)(v) r.w.s. 2(24)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication on expenditure incurred and paid during the year itself without deduction of TDS. In the present case all the payments are being paid and none of the payments are shown as payable and hence disallowances made u/s 40(a)(ia) is deleted. Accordingly the ground of the assessee is allowed. 16. Ground No. 5 -Not pressed before us hence dismissed as not pressed. 17. Ground Nos. 6 to 8 -Regarding disallowances of ₹ 1,11,73,133/- from export profit. 18. The AR of the assessee submitted that the Assessing Officer has disallowed a sum of ₹ 1,11,73,133/- towards common expenditure incurred towards export business on the ground that the assessee has not deducted common expenditure towards export business. The assessee submits that, it has maintained separate books of accounts for domestic and export business. It has properly allocated the expenses as per the accepted method of accounting and the same is being followed year by year adhering the consistent principles of accounting. The assessee further submitted that, the assessing officer himself get the accounts audited u/s 142(2A) from special auditors and obtained the special audit report. The special auditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer has in turn rejected the assessee books of accounts and resorted to estimation on purely surmises, suspicious and conjecture manner without any evidence with him to suspect the books of accounts. Books of accounts can be rejected and estimation can be made only when the assessing officer finds out any mistakes in the books of accounts maintained by the assessee. When there are no mistakes in the books of accounts and books of accounts are in verifiable manner, the assessing officer cannot reject the books of accounts and resort to best judgment assessment. More over in the instant case the assessing officer himself got the accounts audited from special auditors u/s 142(2A) cannot ignore the audit report submitted by the special auditors. If the special auditor points out any discrepancies with regard to allocation of expenditure and correctness of books of accounts, then it is open to the assessing officer to reject the books of accounts and resort to estimation. In the present case, he cannot do so as he himself referred the case for special audit and obtained the audit report from special auditors without pointing out any discrepancies in the books of accounts. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by the Assessee. 9. The Assessing Officer has erred while disallowing a sum of ₹ 2,08,94,401/- from the Export Profit claimed by the Assessee Company on the contention that common expenditure relating to the export and domestic business are not deducted from export profit and the same has been confirmed by the CIT(A) which is not correct and not justified. 10. The Assessee Company has already submitted the lower authorities that it is maintaining separate set of books of accounts for the turnover relating to Domestic as well as 100% EOU of the company. It has properly allocated the expenses as per the accepted method of accounting and the same practice is being followed by the company year by year, adhering to the principles of consistent accounting practices. 11. The learned CIT(A) erred in confirming the Order of the Assessing Officer wherein the above sum of ₹ 2,08,94,401/- has been disallowed from the Export Turnover claimed by the Assessee Company which is not correct and not justified. Hence, the disallowance may please be deleted. 23. The brief facts of the case are that the assessee is a Public Limited Company filed its return of income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 490, Value Added Tax RFID amounting to ₹ 4,348 and Service Tax RFID amounting to ₹ 11,051 on the ground that statutory liabilities are not paid under the provisions of section 43B of the LT Act . 29. The assessing officer made disallowance of ₹ 11,94,471 relating to filing fee to RoC for increase in Share Capital of ₹ 6,50,000, payments made to Arun Shourie in connection with purchase of stamp duty towards increase in share capital (Rs. 1,95,000), legal advice charges and other expenses amounting to ₹ 50,561 and ₹ 2,98,910 respectively on the ground that expenditure incurred for raising share capital amounts to capital expenditure without considering explanation offered by assessee. 30. The assessing officer made disallowance of ₹ 2,08,94,401 relating to the expenditure incurred for 100% EOU on the ground that no proper separate books of accounts are not maintained without considering the books produced by the assessee before assessing officer. 31. Ground Nos. 1 2 regarding disallowances u/s 43B and 40(a)(ia) and cascading effect on deduction u/s 10B. 32. Identical issue was dealt with by us in Para Nos. 10 and 11 of this orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Having consented for disallowances during assessment proceedings the appellant cannot take a plea that the AO has erred in disallowing the same. Once the assessee gives his consent for addition he has lost his right of appeal. The DR placed his reliance on the order of Tribunal, Hyderabad Bench in the case of Sri. D. Rajaram (HUF) in ITA. No. 718/Hyd/202. It was further submitted that moreover section 43B very clearly covers even service tax which is a statutory liability. The provisions of section 43B which state that any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force . The DR submitted that service tax is a tax levied is also covered u/s 43B. 37. The DR further submitted that the assessee has claimed provision for leave encashment which was not allowed as deduction under the provisions of income tax act and it is against accounting standards, therefore prayed to uphold the order of the CIT(A). 38. We have heard both the parties and perused the material on record and carefully considered assessment order and CIT(A) order. Admittedly the assessee has not paid the service as required under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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