TMI Blog2013 (9) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... ed payment/deposit - interest paid by the assessee to the sales tax department on arrears of sales tax/purchase tax was an admissible deduction - Following CIT Vs. Western Indian State Motors [1988 (3) TMI 22 - RAJASTHAN High Court] and CIT vs. Lachhman Das Mathura [1980 (1) TMI 63 - ALLAHABAD High Court ] – the addition was directed to be deleted. Deletion of Deduction u/s 80IB - Consideration of interest of FDR for calculating deduction u/s 80IB – Income from Business – profit from Duty Entitlement Passbook Scheme (DEPB) and Duty Drawback Scheme – Held that:- Following M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] - Duty drawback, rebate etc. should not be treated as adjustment (credited) to cost of purchase or manufacture of goods - They should be treated as separate items of revenue or income and accounted for accordingly - for the purposes of AS-2, Cenvat credits should not be included in the cost of purchase of inventories - duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un Trading Company amounting to Rs. 22,48,71,920/- which were found to be bogus in the form of accommodation entries. Therefore, 25% of the purchase price accounted for in books of account through invoices in the name of these two suppliers will not be allowed as expenditure, wich will come to Rs. 5,62,17,980/- and will be considered part of total income while computing total income of the assessee company. (ii) The above disallowance is not in the nature of profit derived, which is eligible or 80IB deduction and, hence while computing 80IB deduction, the above disallowance of Rs. 5,62,17,980/- is not to be considered as forming part of the business profits eligible for 80IB deduction. (iii) While working out 80IB deduction, the trading profits of Rs. 14,17,500/- are to be excluded from deduction under section 80IB. (iv) The interest income amounting to Rs. 6,38,558/- is not to be considered for allowing 80IB deduction. 2.2 Accordingly, AO framed the assessment under these directions and as the above concerns were held to be accommodation entities, AO disallowed 25% of the purchases amounting to Rs. 5,62,17,980/- following ITAT judgment in the case of M/s. Vijay Proteins Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO as that of the prevailing market rate of those days in the case of similar items or materials. The G.P. rate, the net profit as worked out by the appellant in the computation of income as per audited statement and as per its books of accounts has not in dispute here. Similarly, the sale figures and the expenditure incurred by the appellant for earning such income has not been doubted by the AO. Once the sale/income or profit has been accepted, the corresponding expenditure has also to be accepted. The only area doubtful, according to the AO is in the case of the two parties from whom the appellant has made the said purchases. This cannot be a sufficient and justifiable ground for making the said addition for the simple reason that there can be no sales without corresponding purchases. In the case of Nishant Housing Development Vs. ACIT 52/ITD/103 (Patna Branch) it was specifically held that if any addition is made on the ground of expenditure incurred the source of which is to be treated as unexplained, then similar amount will have to be simultaneously allowed as expenditure to earn that income. Similarly, in the case of Kamal Kumar Sararia vs. CIT reported in 73 Taxman 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount from accommodation entities. Consequent to survey the facts emerged that said two concerns i.e. M/s. Kumar Bansal Traders Pvt. Ltd. and M/s. Varun Trading Company were held to be non existing companies. The raw material though is accepted to be purchased by the assessee in cash from market however supporting bills were obtained by way of accommodation bills from these two entities operated by shri Atul Bansal. Thus it was in the hands of the assessee to inflate the purchases prices in the accommodation bills. AO in these circumstances was correct in drawing an analogy from the case of Vijay Protiens (supra) conforming to the directions of Adl. CIT. AO, therefore, following this case disallowed a part of purchase price i.e. 25% of such raw material purchased. CIT (A) without appreciating these facts deleted the addition holding that the cost of purchases debited by the assessee was comparable to market rates. 5.1. Apropos the second issue about disallowance of interest on delayed payment of the sale tax, Ld. DR contends that in the relevant sales tax law the late payment of sales tax dues is termed as penalty, therefore, the amount was rightly disallowed being infraction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in detailed just to show that both my sales and purchase are genuine and unchallengeable since they carry lot of documents evidence with them. In view of the foregoings your honour it is an established fact that the purchases made by the assessee are genuine. 6.2. Thus it is not the case of the revenue that goods were used at Delhi only, it is important to note they were transported to Agartalla factory. Relevant documents about transportation were produced. Likewise manufactured goods also sold by transporting them by Indian Airlines. The quantities of purchases and sales have been otherwise accepted. (i) The assessment has been framed only on the directions issued by Adl, CIT which in turn only relied on the basis of information of the investigation wing, there is neither independent investigation nor appreciation of facts. (ii) Assessee has demonstrated better trading results, sales and other record has been accepted by AO, no other mistake have been found in the books of accounts. (iii) No enquiry or investigation has been carried out by AO to controvert the statement of Director. Simillarly nothing has been brought on record as to what happened to the survey and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n address. Without bringing on record type of efforts undertaken to find them, who inquired and what report in this behalf was available on record, nothing has been referred by AO. iv. Ld DR has neither filed any paper book, evidence nor made any arguments on these infirmities in the assessment proceedings and cross confirmation of additions in the case of said Atul Bansal. v. Thus the entire basis of additions is on assumptions, some unverified information accepted on face value and by applying an ITAT judgment in the case of Vijay Proteins, which is clearly distinguishable. vi. Purchases are duly accounted for, entered in regular stock registers maintained on quantitative basis, no objection has been raised on such quantities. Purchases are through account payee cheques, corroborated by transport receipts and other supporting documents. vii. The reliance on Vijay Proteins case is misplaced as in that case the purchases were not supported by transport receipt and in some cases services were denied by the transporters. In assessee s case these adverse facts are conspicuously absent. viii. Thus the impugned additions are summarily made, disallowing 25% of purchases only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re produced. For further verification the assessee produced gate pass, Avak Chithi (receipt note) and weight note. The assessee produced laboratory report and sample report. It pointed out the difference paid or recovered in view of reports. The assessee produced R.G. 4 Form to show the details entered as per Excise Rules. The assessee pointed out the production and purchase of raw materials. The assessee submitted the details about the transaction, truck number, etc. Thus, the assessee produced relevant materials to show purchase of materials and their use in production. The Assessing Officer had accepted the existence of GI in case of AI for the assessment year 1985-86. The Tribunal appreciated all these facts in arriving at a conclusion. It clearly appeared that matter had been disposed of on appreciation of evidence and when a matter has been decided by the Tribunal on appreciation of evidence, it cannot be said that that raises a question of law. The Tribunal pointed out that at best it could be inferred that these parties were set up by somebody else and the reasons could be manifold for that. It was very much surprising that in the instant case the Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing adverse has been found in the books of accounts. iv. All the purchases are through account payees cheques, transportation vouchers to Agartalla factory, likewise all the sales are accepted by AO, supported by Indian Airlines transportation vouchers. Purchases are supported by form ST-38 issued by Excise and Trade Department. Nothing adverse has been found in this behalf. v. AO has relied on the ITAT judgment in the case of Vijay Proteins case (supra) which in our view is distinguishable as in that case there were no transport vouchers and some transporters denied having transported such goods. These adverse facts are conspicuously missing in this case. In our view Hon ble Gujrat High Court judgment in the case of Adinath Industires and P H High court in the case of Leader Valves(supra) helps assesses case. vi. AO has only created a suspicion that purchase rates may have been inflated as it was possible for assessee. In our considered view it amounts to a surmise. In order to bring home his point, some instance of such inflation should have been pointed by AO. Suspicions howsoever strong cannot partake the character of proof. vii. Even if part rejection of assesses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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