TMI Blog2018 (10) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such in assessment year under appeal on making above additions, assessee-company would be having positive income and as such assessee-company would be entitled for claiming deduction under section 80HH/80I on such addition even if it may be presumed that such addition could be made or adopted as per original assessment order in the present impugned order. Therefore, considering the totality of the facts and circumstances of the case and the reasons above, we are of the view that addition of ₹ 1,99,80,657/- is unjustified. - Decided in favour of assessee Addition on account of inflated purchases - no inquiry made from the concerned parties or on the documentary evidences filed by assessee-company - Held that:- A.O. merely made part addition of ₹ 42.83 lakhs for inflated purchases. Meaning thereby, A.O. accepted the existence of M/s. Trans-Asia Packaging Ltd., and substantial genuine purchases made by assessee-company from this party. The sole reason given by the A.O. was that purchases have been made through various parties originated from M/s. V.T.R. Container (P) Ltd., However, it appears that no inquiry have been made from any of the intermediary party for mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s. 80HH and 80I claimed by the appellant in the return. This deduction being admissible under the law deserves to be fully allowed. 5. On the facts and in the circumstances of the case the Commissioner of Income Tax (Appeals) has erred in law in confirming various additions/disallowances made by the Assessing Officer as per original assessment order dated 30.3.94. The additions/disallowances having been made without proper material and evidence deserves to be fully deleted. 6. The Commissioner of Income Tax (A) has erred in law in confirming the addition of ₹ 42,83,000/- made by the A.O. on account of inflation of purchases. The purchases made being fully verifiable, deserves to be fully deleted. 2. We have heard the Learned Representatives of both the parties and perused the material available on record. 3. The record reveals that appeal of the assessee-company were dismissed in limine for default vide Order dated 03.06.2003. The assessee-company subsequently filed M.A.No.219/Del./2012 for recalling of the ex-parte Order Dated 03.06.2003. The Tribunal noted that the M.A. is time barred and the same was accordingly dismissed vide Order dated 01.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, which was completed by the auditor. The A.O. on perusal of the material on record noted that assessee-company during the course of proceedings has not been able to show convincing proof of existence of M/s. V.T.R. Containers (P) Ltd., as an independent unit, engaged in the sale/purchase, in normal course of business. Assessee-company was required to produce complete confirmation along with G.I.R and full address of M/s. V.T.R. Containers (P) Ltd. It was further required to provide telephone numbers, names and addresses of the Directors with their identity proof. However, no evidence has been filed. Copy of the account of M/s. V.T.R. Containers (P) Ltd., was filed which is stamped in the same name. However, no confirmation were provided. Further details were also not produced. It was simply stated by the assessee-company that matter being seven years old, the required documents or identity of the persons concerned could not be ascertained. The A.O. referred Order under section 263 and did not accept the explanation of assessee-company. 5. The A.O. as regards genuineness of the sale/purchase transactions noted that no purchase or sale registers or bills or books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. The A.O, therefore, noted that there is inflation in the purchases to the extent of ₹ 42.83 lakhs which represents understated income of the assessee-company. The assessee11 company was required to explain the discrepancy. The A.O. noted that assessee-company did not explain the issue. Therefore, the amount of ₹ 42.83 lakhs was added back to the income of the assessee-company on account of inflation of purchases. 5.3. The A.O. as regards production noted that assessee-company did not file separate manufacturing accounts along with the return of income. A separate trading account with respect to own manufacturing activity was produced. A loss in the manufacturing amounting to ₹ 35,34,617/- was claimed which were disallowed by the A.O. The assessee-company was required to produce Excise Records so as to verify the veracity of the production. In the absence of complete details, the A.O. disallowed ₹ 35,34,617/-. He has also noted that since proper books of account have not been maintained along with records, therefore, books of account of the assessee-company were rejected under section 145 of the I.T. Act. 5.4. The A.O. as regards other disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of unverifiable purchases of ₹ 42,83,000/-, assessee-company contended that the purchases are verifiable and party has genuinely exists. Since profit on sales have been taxed, therefore, there cannot be any sales without purchases. Therefore, addition is wholly unjustified. The Ld. CIT(A) also rejected this contention and confirmed the addition in the absence of the adequate evidence on record. 8. We have heard the Learned Representatives of both the parties and perused the material available on record. 9. On ground Nos. 1 to 5, assessee-company challenged the addition of ₹ 1,99,80,660/- taken as per original assessment order, challenged the disallowance of manufacturing expenses of ₹ 35,34,616/- as per original assessment order and refusal of the authorities below in not allowing the deduction under section 80HH and 80I on the additions. 10. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that no appeal was filed against the Order under section 263 of the I.T. Act. Therefore, additions made in the original assessment order, stands deleted on passing the Order under section 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this assessment order, which have been set aside by the Ld. CIT under section 263 of the I.T. Act. Therefore, none of the additions remain in operative. He has further submitted that in return of income (PB-2) assessee-company has claimed setoff of brought forward losses and allowance of previous year amounting to ₹ 1,21,77,466/-. He has also filed details of all the additions made in the original assessment order to show that even all the additions on merit were unjustified. The contention of Learned Counsel for the Assessee had been on two folds i.e., no addition can be made which is based on addition made in the original assessment order because that order was set aside by the Ld. CIT. Further on all the additions even if maintained, assessee-company would be entitled for deduction under section 80HH and 80I of the I.T. Act. Therefore, entire addition is liable to be deleted. 11. On the other hand, Ld. D.R. relied upon the Orders of the authorities below. 12. After considering the rival submissions, we are of the view that addition of ₹ 1,99,80,660/- as per original assessment order is unjustified and inappropriate. The A.O. has passed the original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness activities prior to 01.04.1990 and as such in assessment year under appeal on making above additions, assessee-company would be having positive income and as such assessee-company would be entitled for claiming deduction under section 80HH/80I on such addition even if it may be presumed that such addition could be made or adopted as per original assessment order in the present impugned order. Therefore, considering the totality of the facts and circumstances of the case and the reasons above, we are of the view that addition of ₹ 1,99,80,657/- is unjustified. We, accordingly, set aside the order of the authorities below and delete the addition of ₹ 1,99,80,657/-. Learned Counsel for the Assessee also filed details on addition made by the A.O. in the original assessment order and claimed that even such additions are wholly unjustified. Since we have deleted the addition and that addition made in the original assessment order could not be subject matter of addition in the impugned order as it done by the A.O. by merely adopting the assessed income as per original assessment order, which is set aside under section 263 of the I.T. Act, therefore, there is no need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 09.11.2015 (supra) found existence of M/s. V.T.R. Container (P) Ltd., as genuine and addition have been deleted. In the present case, the A.O. even do not make any addition on account of bogus sales. The profit on the sales have been assessed to tax. The A.O. simply noted that purchases are made through various sister concerns, therefore, it was inflated purchases. However, the A.O. did not dispute the genuineness of the documentary evidences filed by assessee-company on record to prove genuineness of the purchases. The A.O. merely made part addition of ₹ 42.83 lakhs for inflated purchases. Meaning thereby, A.O. accepted the existence of M/s. Trans-Asia Packaging Ltd., and substantial genuine purchases made by assessee-company from this party. The sole reason given by the A.O. was that purchases have been made through various parties originated from M/s. V.T.R. Container (P) Ltd., However, it appears that no inquiry have been made from any of the intermediary party for making the sales to the assessee-company. The A.O. forgot to note that when he taxed the income on sales, he should believe that sales could not be made without any purchases. Since the A.O. did not dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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