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A.P. Processors, Delhi and others Versus ACIT, Circle-30 (1) New Delhi and others

2015 (7) TMI 847 - ITAT DELHI

Trading addition - CIT(a) deleted the addition - Held that:- We find that there was no basis for the AO to adopt a G.P. rate of 15% when the fact remains that in the previous year it was only 12.03% which means that this year the profit rate is in any way is 14.25% which is more than the previous year. Further there was no basis for the AO to estimate the receipt at ₹ 4,12,50,000/- in the absence of any allegation that any receipts have been suppressed or there is any error in the profit r .....

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ld that:- As during the course of assessment proceedings, the assessee vide letter dated 17.12.2009 had provided a copy of the printed chart for leading dyeing house i.e. Creative Dyeing & Printing Mills (P) Ltd. to compare the wastage claimed by the assessee. From the perusal of the said schedule of that company, the rate of shrinkage is much higher than the rate which was claimed by the assessee. The ld. AR pointed out that each processing unit has its own percentage of shrinkage but comparabl .....

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ld. CIT (A) erred in confirming the said disallowance without assigning any reason and it has to be deleted and we order accordingly - Decided in favour of assessee.

Disallowance u/s 40A(3) - CIT(a) deleted the addition - Held that:- AO has made addition of ₹ 49,566/- on the ground that the assessee has incurred expenses exceeding ₹ 20,000/- in cash to the extent of ₹ 2,47,828/- and so, 20% of the said sum i.e. ₹ 49,566/- was disallowed under section 40A(3) of .....

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he absence of these findings, the ld. CIT (A) rightly observed that the contention of the assessee is justified and the addition of ₹ 49,566/- made on this ground is deleted.- Decided in favour of assessee.

Addition on account of income from other sources as receipts from insurance company - CIT(a) deleted the addition - Held that:- Documents in the paper book are placed in paper book which are intimation to the Fire Department, copy of the insurance policy, report of the survey .....

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ddition has been rightly deleted by the CIT(A)- Decided in favour of assessee.

Disallowance of depreciation on machinery - Held that:- The facts recorded by the AO are incomplete because he has not taken in to consideration subsequent letter from M/s Gopal Fabricators Pvt. Ltd. (the machine supplier). A letter dated 17th November, 2009, whereby the supplier has confirmed that the machines are sent for ready to use and it takes only 5 to 7 hours for their engineers to install and guide .....

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o the effect informing ignorance of the date of supply and who installed the machine. Thereafter, we find that the supplier has come forward with certain documents in their possession to correct themselves and bring evidence to prove the fact in issue and these evidences are on record. - Decided in favour of assessee.

Disallowance on account of rent, invoking the provisions of section 40(a)(ia) - non deduction of TDS - Held that:- Both AO and CIT(A) have ignored the fact that the liab .....

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attract TDS because it did not cross the monetary limit of ₹ 1,20,000/- for the year under consideration, so the addition made by the AO and confirmed by the CIT (A) is not as per law. In view of the above, we set aside the impugned order and delete the addition of ₹ 1,90,000/- Decided in favour of assessee.

Disallowance of additional depreciation on account of new machinery purchased - Held that:- the activity of processing done by the assessee was "manufacturing". It wa .....

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Sh. Pankaj Gupta, Partner of the assessee firm as unexplained credit - Held that:- We find that before the AO, Mr. Pankaj Gupta (Partner) has led evidence in support of this amount of ₹ 11,00,000/-. This amount, according to him, was received from his father, Shri Om Prakash Gupta, who is an income tax payer for the last 30 years. To prove the identity, creditworthiness and genuineness of the transaction, the source i.e. Shri Om Prakash Gupta’s confirmation affidavit, assessment order pas .....

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irmed the addition. We find that the assessee firm having discharged its burden of proof, the onus was on the AO, thereafter to either accept the same or disprove the evidence produced by the assessee by cogent materials or the impugned addition is bad in the eyes of law and has to necessarily go. Thus we delete the addition of ₹ 11,00,000/- Decided in favour of assessee.

Disallowance of deduction under section 80IB - Held that:- assessee in this regard has filed evidences befor .....

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The assessee having made the claim has to prove that it is eligible as per section 80IB. There is no reason why the same has not been adjudicated and if the assessee fulfills all the conditions necessary to qualify for the claim prescribed u/s 80IB then the deduction needs to be allowed, so in view of the aforesaid facts and circumstances, it would be ideal if the issue is remitted back to the file of AO to examine the claim of the assessee afresh - Decided in favour of assessee for statistical .....

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to give credit to prepaid taxes in accordance to law.- Decided in favour of assessee for statistical purposes. - ITA No. 3803/Del/2010,ITA No. 4117/Del/2010 - Dated:- 17-7-2015 - Shri N.K.Saini and Shri A. T. Varkey, JJ. For the Petitioner : Shri Ved Jain, Advocate and Ms. Rano Jain, CA For the Respondent : Shri B.R.R. Kumar, Sr. DR ORDER PER A. T. VARKEY, JUDICIAL MEMBER These are cross appeals filed by the assessee and the revenue against the order of the Ld. CIT(A)-XXII, New Delhi dated 16.06 .....

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s erred both on facts and in law in confirming the action of AO in disallowing an amount of ₹ 1,90,000/- on account of rent, invoking the provisions of section 40(a)(ia) of the Act. 3(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of AO in not allowing additional depreciation of ₹ 9,96,715/- on account of new machinery purchased. (ii) That the above said disallowance was made despite the fact that the asse .....

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r section 80IB of the Act, despite the assessee being eligible for the same. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming addition of ₹ 74,500/- made by AO on account of fabric shrinkage, despite fact that the AO has made the additions arbitrarily in adhoc manner. 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of ₹ 6,098/- made by AO. .....

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leave to add, amend or alter any of the grounds of appeal. 3. The grounds raised by the revenue reads as under:- (i) The Ld. CIT(A) erred in law and on the facts in deleting the addition of ₹ 3,13,379/- made by the AO as trading addition. (ii) The Ld. CIT(A) erred in law and on the facts in restricting the addition of ₹ 2,36,009/- to the extent of ₹ 74,500/- made by the AO on account of undisclosed stock. (iii) The Ld. CIT(A) erred in law and on the facts in deleting the addit .....

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5,34,123/- was filed on 29.10.2007. Notice u/s. 143(2) of the Income Tax Act 1961, (herein after the Act), was issued on 24.9.2008. In compliance thereto and subsequent notices, A.R. of the assessee along with partners etc. have attended and produced books of accounts consisting of cash book, ledger and vouchers of purchase and sales and job work which was examined and checked on test check basis. The AO notes that required details called for have been filed and placed on record. However, the A .....

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d assessee has preferred cross appeals before us. REVENUE S APPEAL (ITA NO.4117/DEL/2010) 5. First of all, we will deal with the revenue s appeal (ITA No.4117/Del/2010). Ground no 1, i.e. with regard to deletion of addition of ₹ 3,13,379/- made by the assessing officer as trading addition. 5.1 Facts in brief on this count are that the assessee stated before AO that it continues to derive income from dyeing of textiles as job work charges. During the year under consideration, total job work .....

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Further, it was also noticed by the AO that the assessee has also executed some work done by outsourcing the same to other concerns on job work sub-contract basis and for this purposes expense of ₹ 97,34,241/- has been debited in the P&L account as against earlier years expenses of ₹ 31,18,647/-. Thus, according to AO, there is increase of job work expenses of about 212%. The AO observed that the assessee has not maintained any record for the goods sent for outsourced job work an .....

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, the revenue is in appeal against the said deletion ordered by the ld. CIT (A). 5.2 The ld DR contended that for execution of job work, no proper record was kept by the assessee for material received and returned after job work has been executed by it. The AO has taken note that the payment of job work charges which are outsourced are mostly in cash, though each time shown below as ₹ 20,000/-. The valuation of work in process and valuation about the same has not been accepted by the AO. T .....

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) Ltd had been shown at ₹ 23,71,588/- and the detail of job work charges received as filed before AO reads as ₹ 23,63,054/-. So, according to the ld. DR, for these defects/differences, as pointed out, the AO has rightly invoked provisions of Section 145(3) by pointing the defects as stated above for rejecting the books of account and estimated profit taking into account profit rate for previous three years on percentage basis. Thus, according to him, the AO has therefore rightly made .....

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377; 3,13,379/- by applying an estimated profit rate of 15% on estimated receipt of ₹ 12,50,000/- after rejecting the books of account of the assessee as against profit of 14.25% in the year under consideration of actual receipt of ₹ 12,29,930/- as compared to profit rate of 12.03% in the preceding assessment year 2006-07 and 17.95% for assessment year 2005-06.. We further find that the learned CIT(A) has dealt with this issue elaborately in para 6.2 starting from page 38 to 42. The .....

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ble to point out any transaction which has been left out between entries in the books of account or that the appellant has sold some of the items at a price what has been disclosed in the books of account or proper particulars, such as bills, vouchers, etc. are not forthcoming. (ii) On the basis of the above held that the books of account cannot be rejected without assigning specific reasons. 5.5 We further note that Ld. CIT(A) also held that the books of account are free from any defect. The CI .....

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ept in mind that the accounts maintained have to be taken as correct unless there are sufficient reasons to indicate that they are unreliable and incorrect which could be clearly pointed out by the AO and an opportunity should be granted to the assessee to explain any defects which he takes note before he rejects the books and invoke section 145 (3) for best judgment assessment. The ld. CIT (A) has taken note that the assessee has maintained proper details of goods received and dispatched to the .....

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o 412 which are copy of manufacturing, trading and profit and loss account, copy of sales register, copies of challans of job work and confirmation of the various bills and details of party wise purchases and their ledger account. We find that there was no basis for the AO to adopt a G.P. rate of 15% when the fact remains that in the previous year it was only 12.03% which means that this year the profit rate is in any way is 14.25% which is more than the previous year. Further there was no basis .....

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the addition of ₹ 2,36,009/- on account of undisclosed closing stock. We find that this ground is common in Revenue s Appeal being Ground No. 2 as well as in Assessee s Appeal being Ground No.6, so we are going to decide this issue together. The ld DR contended that the assessee in his trading account has failed to disclose closing stock of fabric and the AO has pointed out that in the case of purchases from Tulshi Ram Ghanshyam Dass for ₹ 1,61,509/- on 10.02.2007 as one such omissio .....

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ssessee has not maintained any details of the same. After taking into consideration all the fact, the assessee claimed of shrinkage of ₹ 1,49,003/- was restricted to reasonable amount of ₹ 50% and the balance amount of ₹ 74,500/- fabric purchased from Tulsi Ram Ghanshyam Dass of ₹ 1,61,509/- was added in the total income as undisclosed stock of fabric purchased. So the ld DR pleaded that the ld CIT(A) erred in restricting the addition to ₹ 74,500/- which according t .....

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rding to ld. AR, some separate direct deals for sale of dyed fabric which had been sold which was not job-work but sale of finished dyed fabric was undertaken by assessee and executed, for which shrinkage is claimed. So, ld. Counsel submitted that shrinkage was claimed and that was normal, the fabric shrinkage/ wastage did take place in the process. He submitted that this fact had already been brought to the knowledge of the AO by letter filed before the AO in December 2009, wherein it is stated .....

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ading process house Creative Dyeing & Printing Mills (P) Ltd., 14/13, Main Mathura Road, Faridabad, so that it could give an idea of shrinkage rate which happens in this trade. He submitted that as per their standard shrinkage pattern, the claim of assessee was quite lower and reasonable and each unit claimed its own percentages but comparable cases could be considered to evaluate the claim of the assessee. He further submitted that in the aforesaid letter, it was requested by the assessee t .....

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inkage was claimed. It was pointed out by the ld. Counsel that there was no trading of fabric in past/last year and it is a single transaction. According to him, the rate of shrinkage is quite normal and without anything contrary to the suggest otherwise, it needed to be accepted by the AO. The ld. AR submitted that on going through the order of the CIT (A) on page 42 in para 6.3, it can be noted that the CIT (A) has not given any reason for confirming this addition. Ld. AR further submitted tha .....

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on surmises and conjectures and there was no reason given whatsoever why it was restricted to 50%. Accordingly, he pleaded that the addition confirmed by the CIT (A) without assigning any reason on this ground is unjustified and the same may be deleted. 6.2 We have heard both the parties and have perused the records, we find that the AO has made an addition of ₹ 2,36,009/- comprising of two figures i.e. ₹ 74,500/- being 50% of the shrinkage of fabric totaling ₹ 1,49,003/- and & .....

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5,843/- from the total bill of ₹ 1,61,509/- of M/s. Tulsi Ram Ghanshyam Das & Co.. This fact is supported by the invoices of M/s. Tulsi Ram Ghanshyam Das Bill & Co. No.1752 dated 10.02.2007 and the copy of account is placed at paper book page 222-223 where purchases of ₹ 1,56,567 have been duly entered. The assessee has also filed before the AO details of the purchases party wise, a copy of which is placed in the paper book at page 407 at item no.41 is entered in the name of .....

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h the ld. CIT (A) and this ground of Revenue is dismissed. 6.3 However, the ld. CIT(A) has confirmed an addition of ₹ 74,500/- made by the AO on account of shrinkage which is ground of appeal 6 in assessee s appeal. The ld. AR submitted that on going through the order of the ld. CIT (A) on page 42 in para 6.3, it can be noted that the ld. CIT (A) has not given any reason for confirming this addition. Ld. AR further submitted that the ld. CIT (A) in the last para at page 24 has also stated .....

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whatsoever why it was restricted to 50%. So, therefore, the ld. AR pleads that 50% disallowance should also be deleted. 6.4 We find that the assessee this year had not only done job-work for consumers but has undertaken manufacturing also, i.e. it bought gray fabric from market and thereafter dyed it and sold the finished dyed fabric as a product on its own account; and it is common knowledge that on dyeing the fabric shrinks. The assessee has brought to the knowledge of the authorities below th .....

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stomers and the assessee has not claimed the said shrinkage. However, during the year under consideration, we find that as stated before, assessee firm has made some purchase of fabric which they dyed and then sold it to the customers. The figures given in the assessment order is as under :- Fabric Purchase (Mtrs) Sale (Mtrs) Shortage % of Shortage Cambric 26980.10 24523.40 2456.70 9.10% Crape 55017.95 49188.80 5829.15 10.59% We find that the AO has allowed shrinkage of 50% of the claim and for .....

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an the rate which was claimed by the assessee. The ld. AR pointed out that each processing unit has its own percentage of shrinkage but comparable costs can be considered to evaluate this fact. We find that without any basis, the AO has made the disallowance of 50% and he has not brought any kind of comparables to substantiate his disallowance whereas we find assessee has brought in similar company whose claim of shrinkage has been much higher. In the absence of any evidence to the contrary, the .....

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addition of ₹ 49,566/- made by the assessing officer on account of expenditure u/s 40A(3) of the Act. 7.1 The ld DR contended that the assessee had made purchases from M/s. Jubaid Enterprises and Ravi Textiles, so the AO called for information u/s 133(6) of the Act, however the notice returned back un-served with the remarks No such firm . According to ld. DR, the assessee had shown purchases from M/s. Jubaid to the tune of ₹ 89,130/- and M/s. Ravi Textiles at ₹ 1,58,698/-. The .....

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that the assessee purchased goods from two parties aggregating to ₹ 2,47,828/-; and made payment in cash; and no payment at a time on a day was below ₹ 20,000/-. He pointed out that the AO has not doubted the genuineness of purchase but has only found fault in cash payment. So, according to him, the genuine transaction undertaken by the assessee on a single day payment to each party is below ₹ 20,000/- so, is not hit by the provisions of section 40A(3) of the Act, so the addit .....

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h the two firms are not genuine. However, he made the disallowance because the cash transaction is hit by Section 40A(3) of the Act. However, we note that the ld. CIT (A) rightly points out that the AO does not mention the details of specific payments which in his opinion are hit by the provisions of section 40A(3) of the Act, i.e. the date of payments, bill number, mode of payment, amount of payment, name of the party etc. In the absence of these findings, the ld. CIT (A) rightly observed that .....

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aimed loss from fire in the premises on 17.04.2006 of ₹ 1,29,513/-. So the assessee was asked by the AO to furnish details of loss by fire and in compliance thereof, the assessee filed details of loss by fire for ₹ 6,80,513/-. The AO took note of the fact that out of ₹ 5,51,580/- has been received from the insurance company and so the balance amount was debited in P&L A/c. According to Ld DR, since the fire incident was on 17.04.2006, the assessee was required to prove avai .....

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. before the fire, which was burnt down. According to ld. DR, the assessee just created documents to claim loss from insurance company. The AO has observed that the assessee has shown total losses on account of goods destroyed for fire for ₹ 5,73,413/- and received ₹ 5,51,580/- on account of receipts from insurance company which is income for the assessee from other sources. Therefore, the AO has rightly added the amounted received from the insurance company to the extent of ₹ .....

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essee maintaining any stock register. The assessee has asserted that since the assessee was not the owner of the fabric but the goods were received in the factory and all relevant documents such as challans and sales bills were produced before the AO. However, the AO disbelieved all these evidences and added the amount received from insurance company to the total income of the assessee, which, according to him, was rightly deleted by the ld. CIT (A), which does not need any interference. 8.3. We .....

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uring the assessment proceedings along with FIR lodged before the Police; and report of Verifier (Valuation and Loss Assessor). The ld. CIT(A) has observed that the AO has disbelieved all these evidences in the absence of stock register and the loss claimed by the assessee. The CIT(A) took note that the assessee was not the owner of the fabric but the goods were received in the factory and all relevant documents such as challans and sales bills were produced before the AO to substantiate its cla .....

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in the paper book are placed in paper book page 415 to 453 which are intimation to the Fire Department, copy of the insurance policy, report of the surveyor, correspondence with the insurance company, ledger account of the parties whose goods were destroyed in the fire. In the absence of any proof being adduced or basis to prove that the fire incident was fabricated to claim insurance, the ld. CIT (A), after taking note of the evidences produced by the assessee to establish the fire incident and .....

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ground no. 1, is about confirmation of disallowance of an amount of ₹ 1,36,578/- on account of depreciation on machinery. The ld. AR for assessee, Shri Ved Jain contended that a new machinery for Rs.l8,21,040/- was purchased from M/S Gopal Fabricators vide bill dated 26.03.07 and it was received at the appellant's factory on 28.03.07 and the engineer Mr. John Mathews of M/s. Gopal Fabricators, who was stationed at Delhi/Faridabad, installed the said machinery that day itself. And on 29 .....

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talled the machine at appellant's factory on 29.03.07; and further informed that since some delay took place in dispatch of machine, damages were claimed by the appellant from it i.e. M/s Gopal Fabricates vide letter dated 30.03.07, though the machine was started on 29.03.07. According to Ld AR, when third party verification was there on record and there is no iota of evidence before AO to disbelieve all these evidence on record, disallowance was unwarranted. According to him, the AO has ima .....

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When the machinery supplier as well as machinery purchaser both are confirming the fact, since there being no other evidence to contradict the same before AO, such an act of disallowance of the normal depreciation claimed of Rs.l,36,578/- is not justified. And, according to him, the Ld. CIT(A) has simply confirmed the decision of AO without giving any reason, which is not valid and legal, so the claim of the assessee be allowed. 10.1 On the other hand, the ld DR supported the order of the autho .....

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uced by the assessee before the AO. We find that the findings recorded by the AO and CIT(A) are factually incorrect. The facts recorded by the AO are incomplete because he has not taken in to consideration subsequent letter from M/s Gopal Fabricators Pvt. Ltd. (the machine supplier). The Ld AR took our attention to paper book pages 18 to 20 which are the copies of the purchase invoices dated 26.03.2007 of the machine from M/s Gopal Fabricators Pvt. Ltd. At page 21 of P.B. is letter dated 17th No .....

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started on 29th March, 2007 and has also given the name of the engineer who started this machine viz. Mr. John Mathew. In the said letter the supplier has also made a reference to the complaint made by the appellant company regarding delay in supplying the machinery and it is dated 30th March, 2007 which also according to assessee confirms that the machinery was supplied before 31st March, 2007. Without contradicting the evidence adduced by the assessee, the AO cannot disbelieve the facts stated .....

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tradict the evidences placed before the AO, the impugned action is unwarranted and so we order to delete the addition of ₹ 1,36,578/- and accordingly decide the ground no. 1 in favor of the Assessee. 11. The ground no. 2 is about confirmation of disallowance of an amount of ₹ 1,90,000/- on account of rent, invoking the provisions of section 40(a)(ia) of the Act. 11.1 The ld AR contended that Rent for plant & machinery taken on hire for the period from 01.04.06 to 30.06.06 was pai .....

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t was accounted for and pertaining to the period before 30.06.06 and since no TDS on rent provision was in force on that date, TDS was rightly not deducted. The ld. AR submitted that out of the total sum payable, ₹ 1,00,000/- was paid before 30.06.06 (Rs.50,000/- was paid vide cheque no. 034051 on 28.04.06 and ₹ 50,000/- was paid vide cheque no. 034097 on 06.05.06). Balance amounting to ₹ 90,000/- was also paid by cheque on 09.03.07. The ld. AR pointed out that even the said pa .....

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g to AO, TDS was applicable on full amount U/s 194-I and since the TDS was not deducted, the full expenditure is disallowable. The ld. AR submitted that from the above stated facts, the following four facts emerge :- (a) The rent is for 01.04.06 to 30.06.06 when TDS on rent u/s 194-I was not in operation. (b) Two payments of ₹ 50,000/- each were before 30.06.06 and only balance ₹ 90,000/- was paid after 30.06.06. The minimum TDS attraction limit is ₹ 1,20,000/- p.a. & no TD .....

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ording to the ld. AR, the AO has erred on facts as well as on law to apply sec. 40a(ia) of the Act in this case. The ld. AR pointed out that confirmation from owner of machinery is on record with his PAN No. According to ld. AR, As there is no requirement of TDS in this case, no disallowance is called for and the ld. CIT (A) without appreciating these facts have blindly upheld the decision of AO which is wrong and the addition so made be deleted. 11.3 On the other hand, the ld DR supported the o .....

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round that the payment was made during year ₹ 1,90,000/- and accordingly it was liable for TDS. We find that both AO and CIT(A) have ignored the fact that the liability to deduct TDS on payment of rent on machinery has been introduced by the Taxation Law Amendment Act, 2006 w.e.f. 13.7.2006 as is evident from the Circular No. 1/2007 dated 27.4.2007 issued by the Central Board of Direct Taxes. The payment of this rent by the assessee was for the period from 1st April, 2006 to 30th June, 200 .....

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in favor of the Assessee. 12. The ground no. 3 is about not allowing additional depreciation of ₹ 9,96,715/- on account of new machinery purchased by the AO and confirmed by the Ld. CIT(A). 12.1 Ld. AR submitted that as per Section 32(1)(iia) of the Act provides for claim of additional depreciation @ 20% on the value of machinery purchased during the previous year. The schedule of fixed assets filed with the return, which show addition in machinery at ₹ 49,83,575/- and its 20% works .....

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he appellant is neither a manufacture nor producing any article or thing and simply earning income from job work of dyeing of clothes. On the said finding, the AO disallowed the entire claim. According to the ld. AR, copy of two Supreme Court decisions were filed before the AO to point out that the textile dyeing and printing on job work basis amounts to manufacturing. According to him, there is no mention about these submissions or case laws in the assessment order and in the impugned CIT (A) o .....

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d that the process of bleaching, dyeing, printing, mercerizing etc. carried on by processor on job work basis in respect of grey cotton fabrics and man-made fabrics belonging to the customer and entrusted by him for processing amounts to manufacturing. According to the ld. AR, this case law is squarely applicable on the issue covered in this ground of appeal. The ld. AR pointed out that the Central Excise Duty was charged on the appellant after Ujagar Prints decision treating him as a manufactur .....

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le fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word 'manufacture'. 12.6 Following this view, the Supreme Court again in the case of CIT vs. Emptee Poly-Yam (P) Ltd. - (2010) 320 ITR 665 in which it was held that the structure, the character, the use and the name of the product are indicia to be taken into account while deciding the question whether the process is a manufacture or not. 12.7 Citing the aforesaid decisions, the ld. AR .....

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Ds to prerecorded CDs and that of twisting of thread to make it fit for specific use, which were held to be manufacturing by the Hon ble Apex Court. 12.8 According to ld. AR, when dyeing, bleaching of grey fabric amount to manufacturing, the view held by the AO without referring to these judgments is not correct. It was brought to our notice that additional depreciation in the case of assessee was claimed and allowed in the earlier year also. However, the AO erred and ld. CIT (A) confirmed the s .....

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s claimed additional depreciation of ₹ 5,30,645/- under section 32(1)(iia) of the Act. The AO disallowed the same on the ground that the assessee is neither a manufacturer or producer of an article or thing and it is only doing job work. The appellant brought to the notice of AO that Hon ble Supreme Court has held that textile dyeing and printing has been held to be manufacturing in the case of Empire Industries Ltd. vs Union of India 162 ITR 846 (S.C). Thereafter, the Hon ble Supreme Cour .....

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ome received from job work/labour charges on work done based on material supplied by the customers qualifies for deduction under s. 80-IB of the IT Act, 1961? (ii) Whether income received from job work/labour charges on work done on material "(supplied by the customers is profits derived from industrial undertaking to be eligible for deduction under s. 80-IB of the IT Act? 12.11 Thus, in view of above case laws, we find that the activity of processing done by the assessee was "manufact .....

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dustries Ltd. (2010) 326 ITR 27 (P&H); (iv) CIT vs. Rane (Madras) Ltd. (1998) 148 CTR (Mad) 404 : (1999) 238 ITR 377 (Mad) and (v) Dy, CIT vs. Harjivandas Juthabhai Zaveri & Anr . (2002) 258 ITR 785 (Guj.) strengthens our aforesaid view. In view of the above detailed discussions and precedents, we hold that assessee is a manufacturer and eligible for deduction u/s 32(1)(iia) of the Act and so we allow the additional depreciation @20% on ₹ 49,83,575/- which comes ₹ 9,96,715/- .....

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itions are by account payee cheques from the side of the said partner. When asked by the AO to prove the genuineness of the said additions, the appellant explained before the AO that the said sum has been received by Sh. Pankaj Gupta from his father Sh. OP Gupta. Confirmation from Sh. Pankaj Gupta as well as from Sh. O.P. Gupta with their PAN number. were filed before the AO. According to the Ld AR all transactions are by cheque & confirmations with PAN number. are there before AO not only f .....

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said total facts. 13.2 Ld AR submitted that even though all the aforesaid evidence was there the AO while concluding the view on this issue in last para of page 14 of the assessment order, has opined that genuineness and creditworthiness of deposit of ₹ 11 lakhs has not been proved within the meaning of section 68 of the Act and added ₹ 11 lakhs as undisclosed income of the firm. 13.3 According to the Ld AR the initial burden under sec 68 is on the appellant to prove (a) the identity .....

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e AO, proves beyond doubt his identity. And it has not been doubted by the AO. And in order to prove the (b) Genuineness of Transaction, i.e. that the transaction must have taken place for proving that the money has flown in reality, it was brought to the notice of the AO that the firm has received cheques from Mr. Pankaj Gupta, partner and Mr. Pankaj Gupta by account payee cheques from his father Sh. Om Prakash Gupta. Both bank pass book of the assessee/appellant firm, Pankaj Gupta, Shri Om Pra .....

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d on CIT Vis Sh. Shakti Timbers (1998) 229 ITR 505(MP), wherein the Hon ble High Court has held that where the partner of the firm has introduced his capital in the firm and the partner is a separate tax payee, it was the partner to explain the source of deposit and the amount cannot be added as income of the firm u/s 68 of the Act. The Ld AR cited the following cases to buttress his said view :- (i) Narayandar Kedarnath vis CIT 22 ITR 18 (Bombay) . (ii) Suganchand Chandanmal vs ITO (1997) Tax L .....

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ted that in this case as the deposit is by the partner who is a separate tax payer, in the assessment of firm no addition was called for. 13.5 In the instant case, according to Ld AR, the firm received the money by its partner Mr. Pankaj Gupta. Mr. Pankaj Gupta received the cheque from Mr. Om Prakash Gupta (father). Both are available and have confirmed the transactions with PAN No. & bank a/c details. Under the provisions of law, asking source of source is not justified. However Mr. Om Prak .....

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e onus laid by law and without anything contrary on record, merely on doubt, the AO has discarded all the evidence before him. This by any standard is not justified and the addition of Rs.l1 lakhs so made needs to be deleted. 13.6 On the other hand, the ld DR supported the order of the authorities below and does not want us interfere in the same. 13.7 We have heard both the parties and have perused the records, we find that the AO made an addition of ₹ 11,00,000/- on account of addition to .....

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on the same are both legally as well as factually wrong. It is a case of the partnership firm and Mr. Pankaj Gupta is one of the Partner. Mr. Pankaj Gupta is being assessed individually and the firm has received the amount from its partner. The partner has confirmed the amount and has also given the source of the said amount and corroborated the same. Thus there is no reason for making an addition in the hands of the firm as held in CIT vs Rameshwar Aass Suresh Pal Cheeka 208 CTR 459 (P&H); .....

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t, assessment order passed in his case and computation, balance sheet for the last 10 years were filed before the AO including the balance sheet of the firm, Jagan Nath Tea Co. from where this money has been paid by the father to his son. Copy of the purchase ledger, copy of bank account of M/s. Jagan Nath Tea Co. were also filed and he personally appeared before the AO. However, we find that the AO and the CIT(A) have simply ignored all these evidences and merely on surmises and conjectures wit .....

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e should take steps to initiate action against the source of source i.e. in this case, Shri Om Prakash Gupta in accordance to law and not make the addition on the assessee/appellant. In view of the above detailed discussions and precedents cited, we delete the addition of ₹ 11,00,000/- and accordingly decide the ground no. 4 in favor of the Assessee. 14. The ground no. 5 is about not allowing deduction under section 80IB of the Act, claimed by the assessee. While rejecting the claims of th .....

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/s. 80-IB at the time of filing the return of income and has not furnished any reason for this omission. c) The assessee filed the return of income on 29.10.2007, notice u/s. 143(2) was issued on 24.9.2008. The assessee has not submitted any reasonable and sufficient cause for the reason why he claimed for deduction only on 17.12.2009, i.e. at the fag end of the assessment proceedings. The AO was not having sufficient time to verify the claim made by the assessee. 14.1 Before the assessment proc .....

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AO has not adjudicated this issue and the ld. CIT (A) has not allowed the deduction claimed u/s 80IB during appellate proceedings by stating that the claim was submitted before the AO at the fag end of the assessment proceedings. The assessee having made the claim has to prove that it is eligible as per section 80IB. There is no reason why the same has not been adjudicated and if the assessee fulfills all the conditions necessary to qualify for the claim prescribed u/s 80IB then the deduction ne .....

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