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2016 (3) TMI 186 - ITAT AHMEDABAD

2016 (3) TMI 186 - ITAT AHMEDABAD - TMI - Addition on account of unaccounted sales - Assessee’s main source of turnover is commission and compensation as well as services, fabrication and erection work - Held that:- Looking to the total financial exposures of the company in lieu of gross turnover, profit for the year, share capital reserve and surplus etc. and above all when all the books of accounts are audited then raising doubt on a transaction which has been carried out in the normal course .....

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₹ 4,42, 831/-. When the goods are three years old and are of no regular use by the company and also the fact that there is no other sale of products of the company then certainly this transaction would have occurred in a normal course of business. We do not find any reason in disbelieving the assessee. We, therefore, delete the addition - Decided in favour of assessee

Proportionate disallowance of interest relating to investments meant for earning exempt income - Held that:- Ass .....

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or various years in assessee’s own case, we are of the that no disallowance should have been made for interest in the case of assessee and we delete the same - Decided in favour of assessee - ITA No. 821/Ahd/2010, ITA No. 551/Ahd/2013 - Dated:- 29-2-2016 - Shri Kul Bharat, JM And Manish Borad, AM For the Appellant : Shri M. K. Patel, AR For the Respondent : Shri Dinesh Singh, Sr.DR ORDER Per Manish Borad, Accountant Member These two appeals filed by the assessee namely -ITA No.821/Ahd/2010 is di .....

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A No.821/Ahd/2010 is in relation to quantum issue whereas ITA No.551/Ahd/2013 is in regard to penalty imposed u/s 271(1)(c) of the Act. 3. First we take up ITA No.821/Ahd/2010. Concise grounds of appeal are as under :- 1. That on facts and in law, the learned CIT(A) has grievously erred in confirming the disallowance of interest of ₹ 3,58,015/- attributable to investment in shares . 2. That the learned CIT(A) has grievously erred in law and on facts, in confirming the addition of Rs . 3,50 .....

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after on 8/9/2003 the assessee revised the return of income showing total income at Rs.NIL after setting off of unabsorbed depreciation of ₹ 49,61,407/-. The case was selected for scrutiny assessment and notices u/s 143(2) & 142(1) of the Act were issued alongwith questionnaire and served upon the assessee. Various details as required by Assessing Officer were filed during the assessment proceedings and assessment was completed on 30.3.2005 after making additions of ₹ 14,67,097/- .....

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7/- made by Assessing Officer and confirmed the disallowance on account of interest of ₹ 3,58,015/- made on account of proportionate interest attributable to investment in shares. In regard to the additions referred above at ₹ 3,62,747/- for unaccounted sales and ₹ 3,58,015/- on account of proportionate disallowance of interest -assessee is now in appeal before the Tribunal. 6. First we take up addition on account of unexplained sales. The ld. AR submitted that during the year .....

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77; 41,700/- was made to M/s Crystal Engineering and remaining stock was sold to sister concern M/s Kanisha Steels for ₹ 4,01,131/-. Ld. AR further submitted that complete item-wise details of the sales of ₹ 4,42,831/- were submitted during assessment proceedings including description of items. Details of parties to whom sold along with justification report of works manager and it was fact that sold goods were old and were lying for more than three years and non-moving and, therefore .....

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ressed and accordingly made addition of ₹ 3,26,747/- which was thereafter restricted by ld. CIT(A) to ₹ 3,50,000/-. From the financial records of the assessee we observe that assessee is a limited company and is regularly filing its return and accounts are audited under the Companies Act, 1956 as well as under Income-tax Act, u/s 44AB. Assessee s gross turnover for the year under appeal was approximately 10.31 crores and profit before tax shown at ₹ 48.94 lacs. From perusal of .....

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h includes other income also. Assessee s main source of turnover is commission and compensation as well as services, fabrication and erection work. 9. We are further of the view that looking to the total financial exposures of the company in lieu of gross turnover, profit for the year, share capital reserve and surplus etc. and above all when all the books of accounts are audited then raising doubt on a transaction which has been carried out in the normal course of business then it was not corre .....

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ds are three years old and are of no regular use by the company and also the fact that there is no other sale of products of the company then certainly this transaction would have occurred in a normal course of business. We do not find any reason in disbelieving the assessee. We, therefore, delete the addition of ₹ 3,50,000/- and allow this ground of the appeal. 10. Now we take up ground no.2 regarding disallowance of ₹ 3,58.015/- attributable to investments in shares. Ld. AR submitt .....

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o use of interest bearing funds for these investments. Ld. AR further submitted that in assessee s own case for Asst. Year 1984-85 similar issue was taken in ITA No.2007/Ahd/1998 and the ground raised by Revenue was dismissed by the co-ordinate bench by observing as under :- 6. We have considered the rival submissions, facts and materials on record. In our view, if the income from the dividend is a part of business income of the assessee only because it is to be assessed under different head the .....

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isallowance of interest was deleted. Ld. AR further submitted that no satisfaction was recorded by the Assessing Officer by way of proving that interest bearing funds in previous years have been utilized for the purpose of investments in shares. 12. The ld. DR along with relying on the order of ld. CIT(A) also referred to the decision of Hon. Calcutta High Court in the case of Dhanuka & Sons vs. CIT(Central)-1, [2011] 12 taxmann.com 227 (Cal) wherein it was observed that it was for the asses .....

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und is for proportionate disallowance of interest attributable to the investment in shares which gives exempt income to the assessee. From perusal of records, we find that during the year under appeal no major investment has been made and most of the investments appearing in the balance sheet seems to have been acquired in past many years which is evident from various orders of co-ordinate bench in assessee s own case for Asst, Year 1984-85, 1990-91, 1991-92 and also as submitted by assessee tha .....

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for the Assessing Officer to determine the amount of such expenditure incurred in relation to the exempt income and it was a duty casted upon the Assessing Officer to take relevant information from the assessee which may relate to the year under assessment or for the previous year and to extract the related evidences to support his observations that interest bearing funds had not been utilized in a particular year for making investment in shares and the interest during the year under appeal has .....

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on-user of borrowed funds) - Assessment year 2006-07 - For relevant year, assessee filed its return declaring exempt income being interest on bonds, exempted under section 10(15) and dividend income exempt under section 10(23D) - Assessing Officer having invoked provisions of section 14A. disallowed one per cent of interest expenses incurred for earning exempt income -Tribunal deleted said disallowance - Whether in view of fact that assessee had sufficient funds for making investments and it had .....

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percent of interest expenses incurred for earning exempt income, • In appellate proceedings, the Tribunal deleted the disallowance made by the Assessing Officer. • On revenue's appeal: HELD • If was noted from records that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the ex tent of ₹ 195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not used the borro .....

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xempt income of ₹ 14 crores, the assessee could point out that 6.12 crores (rounded oil) was earned by 'S' project which was under construction for which no expenditure had been claimed and for the remaining income of ₹ 7.88 crores which consists of dividend and tax free interest, no part of expenditure appears to have been made towards the investment activity as emerging from the material. According to the respondent, the total investment from the huge surplus is comparative .....

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t of above decision of Hon. Jurisdictional High Court in the case of Torrent Power Ltd. (supra), we find that assessee is having a capital reserve and surplus basis of ₹ 9.25 crores and the brought forward investment as on 31.3.2002 is ₹ 3.66 crores and it can be easily inferred from the figures that assessee was having sufficient source of capital and reserve and surplus which might have been utilized for the investments. In lack of any other evidence brought on record by the Revenu .....

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