TMI Blog2016 (8) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... nly if it is shown that the assessee has incurred any expenditure outside the books of account. In the instant case, we notice that the assessing officer has not brought any material on record to show that the assessee has made any payment through illegal sources to cover up the amount of under invoicing. Thus the assessing officer has entertained belief that the assessee has made the payments through illegal channels, only on the basis of presumptions. In our view the presumptions so entertained would not satisfy the condition prescribed in sec. 69C, viz., the assessee incurred any expenditure, source of which was not explained.In view of the foregoing discussions, we are of the view that the Ld CIT(A) was not justified in confirming the addition made u/s 69C of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Deduction claimed u/s 80IB - A.R contended that the interest income should be netted off against the interest expenditure and accordingly the deduciton u/s 80IB should be worked out - Held that:- The netting off sought by the assessee could be given, if it is shown that there is nexus between the bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was alleged that the difference amount of the purchase price was sent to the suppliers through illegal channels. Consequent thereto, the Customs officials have issued show cause notice to the assessee. They also recorded statements from one of the partners of the firm on 16.1.2007 and again on 07.2.2008. It is stated that the partner of the firm confessed in both the statements that they are indulging in under invoicing of imports. Accordingly, the AO took the view that the assessee is indulging in under invoicing of imports and the difference amount was paid in cash through illegal channels. The AO further noticed that the Gross Profit ratio and Net Profit ratio declared by the assessee were not consistent over the years. The AO further noticed that the assessee has incurred major portion of expenses by way of cash. The AO worked out the ratio of expenses incurred by way of cash at 12.7% of the total expenses. On these reasoning, the AO came to the conclusion that the books of accounts of the assessee are not reliable and accordingly rejected the same. The Assessee had declared Gross profit at 7.07%, 15.40% and 5.36% respectively in AY 2005- 06, 2006-07 and 2007-08. The AO accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , even though the allegation of Central Excise and Customs department extends to the preceding and succeeding years. 9. We have heard rival contentions on this issue and perused the record. We notice that the assessing officer has given mainly two reasons to reject the books of accounts. The first reason is the show cause notice issued by the Central Excise and Customs department. The assessee has submitted that the show cause notice was mere allegation and so far they have not concluded the proceedings by implicating the assessee. The said statement was not controverted by Ld D.R. We further notice that the assessing officer has also not conducted any independent enquiry in this matter. Even though it is alleged that the difference between the actual import value and invoiced value was sent out of India in the illegal route, the same appears to be a mere allegation, i.e., neither the Customs department nor the assessing officer has brought on record any material to support the said allegation. We notice that the AO did not make any enquiry to substantiate the said allegation. Hence, there is merit in the contentions of the assessee that, mere show cause notice issued by the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,338/- came to be confirmed by Ld CIT(A). 14. The Ld A.R submitted that the assessing officer was not justified in making addition on the basis of show cause notice issued by the Customs department. He submitted that the Customs department has informed that the documents named relied upon documents are available with them, but the AO did not choose to call for or examine them. He submitted that the assessing officer did not make any independent enquiry before making this addition. He submitted that the valuation is being determined by the Customs department only for the purpose of collection of Customs duty and the same does not establish that the assessee has paid money outside the books of account. He submitted that the Hon ble Bombay High Court has held in the case of CIT Vs. The Central Provinces Manganese Ore Co. Ltd (296 ITR 217 @ 220) that the market price determined by the Customs authorities could not be a ground to make additions. He submitted that the DRI authorities have conducted search at the premises of the assessee and they did not unearth any incriminating documents, excess stock or any document evidencing alleged payments made outside the books of accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice that the assessing officer has not brought any material on record to show that the assessee has made any payment through illegal sources to cover up the amount of under invoicing. Thus the assessing officer has entertained belief that the assessee has made the payments through illegal channels, only on the basis of presumptions. In our view the presumptions so entertained would not satisfy the condition prescribed in sec. 69C, viz., the assessee incurred any expenditure, source of which was not explained. 18. The Ld A.R has also contended that the various documents/statements relied upon by the assessing officer do not pertain to the year under consideration. It is further stated that the statement given by the partner on two occasions have been retracted within short period of time. Accordingly, we find merit in the contentions of the assessee that the assessing officer could not have placed reliance on those documents/statements. Further, the Hon ble Bombay High Court has held in the case of The Central Provinces Manganese Ore Co. Ltd (supra) has held that the market value determined by the Customs authority for imposing Customs duty could not be a ground to make additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, but did not claim the same as deduction. During the course of assessment proceedings, the assessee lodged the claim for deduction of the same u/s 43B of the Act. Since the claim was made without filing revised return of income, the AO as well as the Ld CIT(A) rejected the claim, by following the decision rendered by Hon ble Supreme Court in the case of Goetz India Vs. CIT (284 ITR 323). 24. We heard the parties on this issue. The Hon ble Supreme Court, in the above said case, has held that the decision rendered by it does not impinge upon the powers of the Tribunal to consider and admit additional ground. Further, the Hon ble jurisdictional High Court has held in the case of CIT Vs. Pruthvi Brokers Shareholders Pvt Ltd (349 ITR 336) that additional ground could be admitted by the appellate authorities. Accordingly, we admit this additional ground. However, since this claim has not been examined by the AO, we restore this issue to his file for examination and for taking appropriate decision. The order of Ld CIT(A) passed on this issue stands modified accordingly. 25. The next two issues relate to the interest charged u/s 234C and 234D of the Act. The assessee is aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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