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2015 (12) TMI 973 - PUNJAB AND HARYANA HIGH COURT

2015 (12) TMI 973 - PUNJAB AND HARYANA HIGH COURT - TMI - Excess wastage claimed - Tribunal had disallowed 50% of the wastage claimed by the assessee - Held that:- It is a question of fact adjudicated by the Tribunal which is a plausible view. In such circumstances, no interference is called for with the findings recorded by the Tribunal as held that we are in agreement with the stand of the CIT(A), still since the survey was made on 5.3.2004 and assessee made the claim of 22689.656 kg. as wasta .....

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000/- in place of ₹ 20,12,092/- made by the learned Assessing Officer, because firstly, upto 5.3.2004 no disallowance was made by the learned Assessing Officer himself, and secondly the steep increase in the wastage is not supported by any evidence like consequential increase in production etc. Lastly,if not the least, the Assessing Officer has not made blind addition and before 5.3.2004 it was allowed - Decided against assessee

Deduction under Section 80HHC - Held that:- Deduct .....

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e burden to prove these facts was on the assessee and not on the Revenue. - Decided against assesseee

Deduction on account of interest received on FDRs under Section 80HHC - Held that:- Tribunal while rejecting the aforesaid contention recorded as on the plea that in the impugned order on the ground that the learned CIT(A) erred in not allowing the deduction as claimed under section 80HHC of the Act. The claim of the assessee is that the deduction of ₹ 1,07,941/- under Section 8 .....

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part of business income. - Decided against assesseee - ITA No.818 of 2008 - Dated:- 1-10-2015 - MR. AJAY KUMAR MITTAL AND MR. RAMENDRA JAIN, JJ. For The Appellant : Mr. S.K.Mukhi, Advocate For The Respondent : Mr. Rajesh Katoch, Advocate Ajay Kumar Mittal,J. 1. The appellant-assessee has filed this appeal under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 11.7.2008, Annexure A.1 passed by the Income Tax Appellate Tribunal, Chandigarh 'B' Bench (in .....

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assessee then either the addition is to be confirmed or deleted in toto and thus the partial confirmation by the ITAT is bad in law. II. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that appellant was not entitled to the deduction under section 80HHC on the surrendered amount though utilized for the business of the appellant without placing any evidence against the assessee on record and without rebutting the evidenc .....

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n view of established principles of law? 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee is a limited company based at Ludhiana. It is engaged in the business of manufacturing and trading of hosiery knitted cloth and garments. A survey operation under Section 133A of the Act was conducted on 5.3.2004 at the business premises of the assessee. During the course of survey operation, the assessee surrendered an amount of  .....

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essing Officer. The assessee was asked to furnish reply as to why there was unusual increase in wastage of 8897.267 kgs. in the last 26 days of the financial year after the survey operation. The assessee filed reply. The Assessing Officer on the basis of the record of earlier years disallowed the entire amount of wastage and calculated the wastage on the basis of his whims and fancies. The Assessing Officer also disallowed deduction under Section 80HHC of the Act on the surrendered amount of  .....

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of the manufacturing process duly depicted in the regular books of account being audited and for which no defect had been pointed out by the Assessing officer nor he had rejected the books of account under Section 145 of the Act. However, the CIT(A) confirmed the action of the Assessing officer in not allowing deduction under Section 80HHC of the Act regarding the amount surrendered of ₹ 20 lacs and that of the interest on FDRs having maintained for the purpose of taking limits from the B .....

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92/- to ₹ 10,06,000/-. Thus the Tribunal partly allowed the appeal filed by the revenue and dismissed the cross objections filed by the assessee. Hence the instant appeal by the assessee. 3. We have heard learned counsel for the parties. 4. Question No.I relates to excess wastage claimed by the assessee. The Tribunal had disallowed 50% of the wastage claimed by the assessee. According to the learned counsel for the assessee, no addition could have been made without rejecting the books of a .....

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by the Assessing Officer. The vouching of the wastage would be with regard to sale etc. but that by itself would not entitle the assessee to claim any excess amount thereunder. The relevant finding recorded by the Tribunal while adjudicating this issue is very material which reads thus:- 3. The next ground raised by the revenue is that the learned CIT (A) erred in deleting the addition of ₹ 20,12,092/- made on account of excess wastage, claimed by the assessee. The contention on behalf of .....

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73 115154.531 on behalf of the assessee is that on average 20 to 30% wastage is allowable in such type of business whereas there is increase of 9% in the impugned assessment year that too within the allowable limit. We have considered the rival submissions and perused the material available on the file. On perusal of quantitative tally of garments finished goods as on 5.3.2004. It was found that there is wastage of 22679.656 kilograms whereas the tally as on 31.3.2004 increased to 31,586.923 kil .....

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4 (Garments) Cutting Waste Particulars Quantity (Kg.) Particulars Quantity (Kg) Opening stock 3300.00 Sale 12770.000 Garments 22689.656 Closing stock 13219.656 Total 25989.656 25989.656 Quantitative details of closing stock as on 31.4.2004 (Garments) Particul ars Quantity (Pcs) Quantity (Kg.) Particulars Quantity (Pcs) Quantity (Kg) Opening stock 4550 1706.25 Sale Local 166981 62617.875 Finished goods 298646 143576.923 Sale Bison 39795 14923.125 Sale Export 45914 17217.750 Cutting Waste 31585.92 .....

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8 182708 If the aforesaid details are analysed, it is seen that the learned Assessing Officer in the body of the assessment order itself has admitted that for the first 340 days of the relevant financial year, the average wastage per day comes to 66.734 kg. while in the last 25 days, the wastage comes to 355.89 kg. per day. Admittedly, there is a steep rise in the wastage addition can be made on such basis. As claimed by the assessee, this wastage is due to change in the fashion and the specifie .....

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and of particular parties and also the use of garments i.e. the garments used by small children are having excess wastage due to fashion and design etc., therefore, the excess wastage itself cannot be the only basis for addition. Even otherwise, unless and until the accounts are defective and not rejected, the excess wastage itself cannot be considered to be the basis for addition. Though, in principle, we are in agreement with the stand of the CIT(A), still since the survey was made on 5.3.2004 .....

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e the addition to 50% of the total i.e. ₹ 10,06,000/- in place of ₹ 20,12,092/- made by the learned Assessing Officer, because firstly, upto 5.3.2004 no disallowance was made by the learned Assessing Officer himself, and secondly the steep increase in the wastage is not supported by any evidence like consequential increase in production etc. Lastly,if not the least, the Assessing Officer has not made blind addition and before 5.3.2004 it was allowed. We are making it clear that the a .....

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. Learned counsel for the assessee submitted that the assessee was entitled to deduction under Section 80HHC of the Act and the Assessing Officer should have allowed the same. Reliance was placed on judgments in CIT vs. Suman Paper and Boards Limited, (2009) 314 ITR 119 (Guj.) and CIT vs. Margaret's Hope Tea Co. Limited, (1993) 201 ITR 747 (Cal.). 8. On the other hand, learned counsel for the revenue relied upon decisions of this Court in Sangeeta Tools Pvt. Limited vs. CIT, Aayakar Bhawan, .....

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ve perused the impugned order and considered the arguments advanced from both sides. The learned appellate Commissioner has relied upon the decision of the Hon'ble High Court as decided in the case of Rani Paliwal vs.CIT (268 ITR 220 (P&H) on the issue of treatment of interest. As far as to the treatment of ₹ 20 lakhs, surrendered during the course of survey, admittedly, these amounts have not been assessed under the head profit and gains business, therefore, the Assessing Officer .....

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It is not the case of the assessee that it was a forced surrender. In view of these facts, the assessee cannot claim the same due to the nature of agreed addition/agreed surrender, consequently, this cross objection of the assessee is having no merit. 10. The Tribunal had recorded a finding of fact that the amount of ₹ 20 lacs which was surrendered during the course of survey was never assessed under the head income from business or profession and thus the same was not available for compu .....

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e was entitled to claim deduction under Section 80I or 80IA of the Act in the block assessment. In Margaret's Hope Tea Co. Limited's case (supra), the assessee's main activity was the cultivation, manufacture and sale of tea. The cash credits account had appeared in the assessee's books of account. The Tribunal was held justified in holding that the cash credits appearing in the books of account should be treated as income of the assessee from its tea business and not as income f .....

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stocks represented export income. The assessee was unable to give any explanation. There could be no presumption that additional amount surrendered represented income from exports. Deduction under Section 80HHC of the Act can be claimed only on showing facts which made the assessee eligible for the deduction. The burden to prove these facts was on the assessee and not on the Revenue. 8. The judgment relied upon is on its own facts and not in respect of claim for deduction under Section 80HHC of .....

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