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TMI Blog2017 (4) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Income Tax Act, 1961 (hereinafter referred as the Act) was framed vide order dated 26/3/2015. While framing the assessment, the Assessing Officer made addition on account of disallowance of interest at Rs. 8,15,533/-, addition U/s 68 of the Act at Rs. 99,48,209/-, lump sum disallowance out of expenses at Rs. 3,00,000/- and disallowance of deduction claimed U/s 80IB of the Act at Rs. 7,23,299/-. 5. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who after considering the submissions, partly allowed the appeal. While partly allowing the appeal, the ld. CIT(A) deleted the addition made by invoking the provisions of Section 68 of the Act. However, confirmed the addition made on account of deduction U/s 80IB of the Act and restricted the disallowance of Rs. 2.00 lacs out of Rs. 3.00 lacs as made on disallowance of lump sum trading addition. 6. Now the revenue is in appeal and the assessee is in C.O. before us. The ld Sr.DR has supported the order of the Assessing Officer and vehemently argued that the ld. CIT(A) was not justified in deleting the addition. He submitted that as per the certificate of the banker, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer objected to the same being on plain paper and signed by Mrs. Mukesh Mundra whereas the name printed on the same was of Shri Ashok Mundra. In response to further queries by the Assessing Officer, the assessee submitted foreign inward remittance certificate from the bank, the Assessing Officer did not accept the same holding that it was issued by the Central Bank of India and the beneficiary was M/s Nirmal Glasstech and not Shri Nirmal Mundra. Further, the Assessing Officer held that the Authorized Representative did not furnish either the balance sheet or the cash flow and only furnished an affidavit stating that the amount was received as financial assistance. It was concluded that the addition made in the capital account of Shri Nirmal Mundra is the unaccounted money of the assessee firm M/s Nirmal Glasstech Pvt. Ltd. and the same was treated as the income of the assessee under section 68 of the I.T. Act, 1961. It was further held that since nothing has been mentioned regarding interest the same can also be treated as gift received and can be added as the income of the assessee under section 56 of the I.T. Act, 1961. In the present proceedings, the Authorized Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover of HKD Rs. 21,37,76,249/- have also been submitted and the amount appears in the balance sheet as 'amount due to a director'. In the remittance certificate of the bank, the purpose has been shown as financial assistance and it was submitted that this financial assistance is interest free and has not been repaid so far. Thus, the documents evidencing the remittance include the foreign inward remittance certificate of HSBC Bank, remittance advice and certificate from Central Bank of India where the amount has been received containing the entire details of the transaction. The documents in respect of the party forwarding this financial assistance include confirmation of Mrs. Mukesh Mundra, affidavit of Nirmal Mundra, balance sheet of Gem Export Ltd. duly showing the entry and bank account of Gem Export Ltd. In view of the details as above which support the creditworthiness and the details of transaction, the amount received as financial assistance by Shri Nirmal Mundra appears to be genuine. The Assessing Officer disallowed the amount in absence of further details even though the bank certificate and confirmation had been provided to him in the assessment proceedings and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the initial assessment year. There are two limbs of this beneficial provision. The first is that the deduction is available for ten consecutive assessment years. It means that once the assessee starts claiming the deduction then the benefit shall be available for continuous ten years without any break and gap. The assessee does not have an option to omit certain years and spread over the period of deduction for more than ten consecutive assessment years. The second limb is that the window to take benefit of the deduction opens from the initial assessment years. The opening of the window begins in the initial assessment year. It is, however, not mandatory under the existing law to claim the benefit of deduction necessarily in the initial assessment year. If the assessee has loss in the initial assessment year or the immediately succeeding year(s), the assessee may start claiming the deduction from the assessment year in which profits are earned. Once the cycle of claiming deduction has started, then the assessee has no option to go beyond ten consecutive assessment years reckoning from the year in which deduction was claimed for the first time. (ii)It is a beneficial provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of section 80E, where it is laid down that the deduction shall be allowed in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year. No such language has been used by the legislature in sub-section (3) of section 80-IB of the Act. Thus, the appellant was well justified to start claiming deduction from assessment year 2003-04. (vii) As per section 80-I(5), the deduction shall be allowed in respect of the assessment year relevant to the previous year in which manufacturing or production began (initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year. (viii) In sub-section (2) of 80-IA it is specifically laid down that the deduction shall be for the first five assessment years. From the provisions of the Act referred to above, the legislature had made it specifically clear that the initial assessment year necessarily forms part of the tax holiday period. The language of sub- section (3) of section 80-IB is liberal enough to allow the assessee to start claiming deduction from a year later than the initial assessment year. Comparisons of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit. The sales and purchases of the assessee are duly supported by the bills and vouchers. No expense in cash has been incurred in violation of the provisions of section 40A(3)of the Act. In running business, there is always need to incur some expenses in cash and it does not entitle the lower authorities to take an adverse view regarding the declared profits. The lower authorities have not pointed out any expense debited in the trading or profit and loss account which is not for the purposes of the business of assessee. The AO has not rejected the books of the assessee by invoking provision of section 145(3). The Rajasthan High Court in case of CIT Vs. Maharaja Shree Umed Mills Ltd. 192 ITR 565 has held that fall in gross profit rate cannot be looked into when AO has not rejected the books of account of the assessee and without making this as a base, it could not be said that the expenditure had been inflated. Hence, the lump sum trading addition made by the AO and confirmed by CIT(A) is uncalled for. 2. The position of the sales and the gross profit for the year as compared to the earlier years is tabulated as under:- A.Y. Turnover Gross Profit G.P. Rate 2010-11 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual stock position was not in dispute. The previous year's books of accounts were not found to be incorrect. In the face of these undisputed facts and circumstances, the Tribunal could not have interfered with the order of CIT (A). In doing so, it had ignored all admitted facts in the face of which there was no occasion for the AO to have resorted to estimate method. There being no dispute about the sales and purchases, non maintenance of stock register lost its significance so far as arriving at GP rate is concerned. Therefore, the CIT(A) was right in his reasoning about admitted state of affairs. Resorting to estimate of GP rate was founded on no materiality. Mere deviation in GP rate cannot be a ground for rejecting books of accounts and entering realm of estimate and guesswork. Lower GP rate shown in the books of accounts during current year and fall in GP rate was justified and also admitted by the AO as well as CIT(A) as well as the Tribunal. Therefore fall in GP rate lost its significance. Having accepted the reason for fall in GP rate namely stiff competition in market and also that huge loss caused in particular transaction, neither the rejection of books of accounts w ..... 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