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TMI Blog2019 (12) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... ) erred in confirming the addition of Rs. 1,66,18,640/- made by AO on account of alleged undisclosed sale of scrap which remains with job workers. 4. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the addition of Rs. 2,74,358/- made by the AO by applying provisions of Section 14A of I.T. Act on account of investment made in shares and mutual fund.'' 2.1 The Ground Nos. 1, 2 and 3 are regarding the addition made by the AO on account of undisclosed sale of scrap which was sustained by the ld. CIT(A) without admitting the additional evidence submitted by the assessee. 2.2 The assessee is a company and engaged in the business of manufacturing and job work of automobile components including ball bearings. The assessee filed its return of income on 24-09-2013 declaring total income of Rs. 6,75,51,674/-. During the course of assessment proceeding the AO noted that as per RG-1 stock register, the assessee has shown the sale of scrap at Rs. 3,31,02,840/- whereas the assessee in its books of accounts has shown the sale of scrap at Rs. 1,64,84,200/-. Therefore, the AO observed that the assessee has shown sale of scrap less by Rs. 1,66,18,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was forwarded to the AO for remand report. No remand report was filed by the AO. The ld. CIT(A) finally confirmed the addition made by the AO on this account. 2.4 Before us, the ld.AR of the assessee submitted that during the course of assessment proceeding , the assessee produced various replies and there is no allegation in the assessment order that any of the queries raised by the AO or any documents required by the AO were not submitted by the assessee. The ld.AR of the assessee has referred to the proceeding sheets of the assessment and submitted that the AO after receiving replies to the queries as well as documents, has not raised further query on this issue but only asked to file relevant details in respect of Query Nos. 9, 25 & 26. Thus apart from the details sought under Query Nos. 9,25 & 26, no other query was raised by the AO. The ld.AR has pointed out that the assessee has duly produced all the relevant details regarding these queries which are also available on record and filed in the paper book. Thus when the AO was satisfied and has not raised any further query or asked the assessee to produce any particulars and supporting evidence then the disallowance of clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars of job workers. Therefore, the stock register itself shows that scrap was with the job workers and it is not a sale to the job workers but it remained with the job workers as practice in this trade. The AO has not doubted the sale of scrap by the assessee generated from the job work done for the outside parties. Therefore, it is an arrangement between the parties that scrap generated during the job work will remain with the job workers. It is pertinent to note that excise duty is paid on such scrap as per excise laws and said amount of scrap is specifically shown in the RG-1 as required under the excise laws. The ld.AR of the assessee further submitted that the assessee has produced the confirmations from the job workers as well as the financial accounts of the sister concern M/s. Alankar Automotive Pvt. Ltd who had received the amount of rs69,52,939/- out of the job work receipt of Rs. 82,43,556/-. Thus the said party was doing job work for the assessee and also showing the sales /stock of scrap generated during the course of job work. The production of these evidences clearly establishes that the scrap generated during the course of job work by job workers remained wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,66,18,640/- shown by the assessee as scrap but claimed as generated during the course of job work by the job workers and it remained with them. We find that as per RG-1, the assessee has shown various quantities of scrap with job workers. Therefore, there are entries in the RG-1 regarding the scrap with job workers and the AO has taken these quantities from the RG-1. It is not in dispute that in the Stock Register i.e. RG-1, the assessee has shown scrap with various job workers. However, complete details of job workers are not appearing in the stock register due to the format as provided under the excise rules. When the AO asked the assessee to explain the difference of the scrap of sale shown by the assessee in the books of accounts as well as the scrap shown in the RG-1, the assessee has initially explained the reasons for difference which is reproduced by the AO at page 2 in his assessment order, as under:- ''3. Sale of Scrap:- During the course of assessment proceeding it was found that RG-1 register sale of scrap was shown at Rs. 3,31,02,840/- whereas the assessee has shown sale of scrap in its books of accounts at Rs. 1,64,84,200/-. Therefore, it was observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was not related to scrap sale. As regards the first query, the details were produced by the assessee and the AO thereafter has not raised any further query and nothing is appearing in the proceeding sheet. However, the AO finally made the addition of the differential amount which assessee has claimed that the scrap remained with the job workers. An identical issue was considered by this Tribunal in assessee's own case in ITA No. 758/JP/2012 for the Assessment Year 2009-10 vide order dated 26-06-2015 wherein this Tribunal has held as under:- ''(v) Apropos scrap generation, there is no evidence at all to show that vendors or sub-vendors returned the scrap which was sold by the appellant outside the books of account. As evident, the job workers had not returned the scrap to the appellant, sub vendors including M/s. Alankar Automobiles (P) Ltd. had shown income from sale of scrap of Rs. 3,30,000/- in its books of account. There being no evidence on the record to suggest that these sub-vendors had ever returned the scrap to assessee, no adverse inference can be drawn against the appellant merely on surmise and conjectures.'' During the year under consideration, one of the job w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RG-1 for the excise purposes and therefore, it is not the first time that the assessee has adopted this practice. Accordingly, in view of the facts and circumstances of the case, when the assessee has produced all the relevant documentary evidence in support of the claim and also filed an application under Rule 46A of Income Tax Rules with the ld. CIT(A) then rejecting the said application by the ld. CIT(A) only on the ground that the assessee has not produced the said evidence before the AO despite sufficient opportunities is not justified particularly when all the material was forwarded to the AO alongwith written submissions for the remand report. Once the AO was asked to submit the remand report then the evidence produced by the assessee was also required to be examined by the AO. In the case in hand, the AO has not submitted any remand report as pointed out by ld. CIT(A) while passing the impugned order. Therefore, non-furnishing of remand report cannot taken against the assessee rather it is a ground for taking adverse inference that the evidence produced by the assessee is not disputed by the AO. Accordingly, in view of the above facts and circumstances of the case, we set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial reduction in the investment in the shares. There is a sale of shares of more than Rs. 2.00 crores during the year and therefore, it is clear that the source of investment made during the year is sale proceeds of the existing investment in the shares. We find that the assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. The sale proceeds of shares of Oil India Ltd are much more than the investment in shares of ONGC. Further as per funds available with the assessee, it is clear that assessee's own funds are many times more than the investment in shares. Therefore, in these undisputed facts, no disallowance is called for on account of interest expenditure. 3.5.1 As regards the disallowance of indirect administrative expenditure, we find that there is churning in the investment portfolio during the year under consideration as the assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. Therefore, there is a process of decision making at the highest level of management of the assessee for selling the shares of Oil India Ltd. and purchase of shares of ONGC. Hence the disallowance on account of indirect administrative e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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