TMI Blog2016 (3) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... see. To that extent, Assessee’s appeals are allowed with reference to allowing of 10B claim in all the impugned AYs. 2007-08 to 2011-12. Addition on Excess Cash - Held that:- If there is enough cash balance on the day which can be explained, there cannot be any excess cash, considering that Assessee has no local sales and no need for generating cash outside the Books of Accounts when the incomes are exempt from tax. In view of that with reference to the addition of cash, we set aside the orders of the AO and CIT(A) on the issue and restore the matter to the file of AO for fresh examination of Assessee’s contentions and adjudication. Decided in favour of assessee for statistical purposes. Excess Stock in the course of search/survey at Hosur - Held that:- At this point of time, it is not possible to examine whether there is an excess stock of granite blocks in the quantity or in the valuation, considering the fact that this value was done with the help of Assessee-company’s officials. It is also contended that so called excess valuation is less than 5% of the total stock available with Assessee and AO accepted the closing stock value as the Books of Accounts were not rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After considering the rival contentions and perusing the submissions made therein, we are of the opinion that there is reasonable cause of filing the appeal belatedly and accordingly, the delay is condoned and said appeal is allowed. 3. Briefly stated, Assessee is in the export of granites. There were search and seizure operations u/s. 132 of the Act carried out in the case of Assessee on 04-02-2011. AY. 2011-12 is the search year, whereas in six earlier years also notices were issued u/s. 153A. In all the impugned assessments, the AO disallowed the claim u/s. 80-IB of the Act. Assessee had two units, one at Hosur in Karnataka and one at Ongole in Andhra Pradesh which are engaged in processing of granite and exporting them. Initially, Assessee s claim of 10B was disallowed in earlier years and ITAT in batch of appeals in the group cases of Madhucon Granites (Assessee), Madhucon Projects for the AYs. 2000-01 to 2006-07 has considered and allowed the claim of 10B by the respective Assessees. In the Assessee s own case in the above said orders from ITA Nos. 666/Hyd/2010 to 685/Hyd/2010 and cross appeals from ITA Nos. 29/Hyd/2012 to 35/Hyd/2012 for AYs. 2000-01 to 2006-07 vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany with regard to export of granite slabs u/s 10B is considered to the extent of cut and polished granite and the same is proportionately allowed. 5.3 Aggrieved against the partial allowance, the appellant preferred an appeal against the 154 order in ITA No. 0320/2013-14. This appeal was disposed off by this office order dated 27.10.2014. 5.4 From the above wordings, the AO appears to have disallowed an amount which is attributable to export of rough blocks. The appellant was therefore asked to furnish the details of all the invoices in course of the appellate proceedings. These details were furnished. The appellant's stand was that even though the goods were described as 'rough granite blocks', they were also dimensional and were cut as per specified dimension and this was not a new point. This aspect was examined by the Hon'ble ITAT and deduction u/s 10B was allowed as evident from para 7 on page 6 of the Hon'ble ITAT order in ITA No.666/Hyd/l0 Others. The relevant portion of this para reads as under: . further, the Chennai Bench of this Tribunal in the case of ACIT Vs M/s Janani Holdings, Chennai in ITA NO.1094/MDS/2010 vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order and stated that Assessee is eligible for deduction u/s. 10B in both Hosur and Ongole units on type-1 and type-2 invoices (where dimensions are mentioned) and directed the AO to disallow the deduction claimed on type-3 invoices (where dimensions were not stated) and passed the orders accordingly from AYs. 2007-08 to 2010-11. However, while disposing off the appeal in 2011-12 subsequently on 31-12-2014, the Ld. CIT(A) re-examined the whole issue and came to a finding that the so called rough granites without dimensions was wrongly categorized by him and he gave a finding that though invoice speaks of rough blocks implying the un-processed, they are actually processed blocks cut into blocks and dimensions can also be found in the packing list issued at the time of shipping. The documents filed were examined and the claim of the appellant is in order. Accordingly, deduction u/s. 10B is therefore to be allowed . While allowing the entire deduction u/s. 10B on all the blocks exported by Assessee, Ld. CIT(A), however noticed that AO allowed the deduction on the income from export of the granite of Hosur unit fully, while deduction on Ongole unit was restricted. Since no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of appeal cannot be admitted, if there are no facts on record. Similar view was also expressed by the Hon'ble Madras High Court in the case of CIT Vs. Southern Group Industries Ltd., [300 ITR 113], where it was held that additional ground could not be considered in the absence of facts on record. In view of this, we are unable to admit the additional grounds and adjudicate the same, as there is no discussion either of the incriminating material or of the earlier proceedings in the orders passed by the authorities. Therefore, additional grounds of appeal are rejected in all the impugned years of Assessee s appeals. 8. Coming to the main issue of allowing deduction u/s. 10B, as already stated above, the issue of allowing of 10B has already been crystallised by the orders of the ITAT in Assessee s own case in earlier years upto AY. 2006-07 dt. 28-12-2012. Vide para 7 8, the issue was considered and allowed as under: 7. As per the latest circular No. 729 dated 1.11.1995 cutting and polished granite is eligible for deduction u/s. 80HHC of the Act as they find mention in 12th Schedule of Income-tax Act, 1961. On the reason that it was mentioned in the director's repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for deduction u/s. 10B, the fact of which was already acknowledged by the CIT(A) in the order for AY 2011-12. However, in AYs. 2007-08 to 2010-11, Ld. CIT(A) in his own way categorized the export of rough granite blocks into dimensional blocks and un-dimensional blocks and restricted the deduction to so called type-3 un-dimensional blocks. Even though Ld. CIT(A) deviated from the issue in analyzing the nature of rough granite blocks exported, however, he made amends in the order for AY. 2011-12 and allowed the deduction in all the granite blocks being exported by Assessee, subject to examination of eligibility of Ongole unit. This unit is also established much earlier and Assessee was allowed deduction on this unit also upto AY. 2006-07. Consequently, the direction of the CIT(A) asking the AO to examine the eligibility of Ongole unit is superfluous. Therefore, allowing Assessee s ground on this issue, we direct the AO to allow the deduction of Ongole unit as claimed by Assessee. To that extent, Assessee s appeals are allowed with reference to allowing of 10B claim in all the impugned AYs. 2007-08 to 2011-12. 10. There are two more issues in AY. 2011-12, other than claim of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of M/s. Varalakshmi Granites Pvt. Ltd another group company. It was the submission that Assessee has entered the relevant vouchers subsequently and the entries were examined and cash pertains to the business. It is also submitted that Assessee being an export oriented company, the income of which is exempt u/s. 10B, there is no need for keeping any extra cash in the business premises. There are no local sales and entire money pertains to withdrawals from the bank to be paid for staff salaries and labour payments. He submitted that this aspect that cash balance pertain the books can be examined by the AO, since CIT did not allow necessary examination even though relevant details were furnished by him. 11.2. Considering Assessee s plea and documents placed on record, we are of the opinion that this contention of Assessee has not been examined by the AO as well as by the CIT(A). If there is enough cash balance on the day which can be explained, there cannot be any excess cash, considering that Assessee has no local sales and no need for generating cash outside the Books of Accounts when the incomes are exempt from tax. In view of that with reference to the addition of cash, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that excess cash and excess stock would increase the profit of the unit and consequent rejection u/s. 10B is eligible and relied on the decision of ITAT, Hyderabad in the case of DCIT Vs. Planet Online Pvt. Ltd., in ITA No. 1016/Hyd/2007. Ld. CIT(A) however, did not agree on the reason that stock of raw-materials and work in progress has tallied and difference arose only on finished goods and rejects. It was also noted that quantification and measurements were also done by Assessee-company s officials themselves. Accordingly, he rejected the contentions. Before us, while contending that the excess stock if any should be correctly valued, Ld. Counsel also made alternate plea that the same amount is eligible for deduction u/s. 10B and the same is ordered. There is no issue on quantification of stock which Assessee would be getting benefit in the later year as opening stock. 13. After considering the rival contentions, we are of the opinion that at this point of time, it is not possible to examine whether there is an excess stock of granite blocks in the quantity or in the valuation, considering the fact that this value was done with the help of Assessee-company s officials. ..... 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