TMI Blog2020 (2) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) while reducing the GP rate to 8.75% as against 10.73% taken by the AO, we do not find any infirmity in the same. Accordingly, the order of the CIT(A) on this issue is upheld and the ground raised by the Revenue is dismissed. Addition on account of Gross Profit ratio @ 10.35% - amalgamation of M/s Asian Closures Ltd. into the assessee company in the absence of production of supporting details/books of accounts - CIT-A deleted the addition - HELD THAT:- We do not find any infirmity in the order of the CIT(A). He has given a finding that due to change in technology and due to substantial fall in sales during the year as compared to preceding years, the turnover and GP rate has gone down. Nothing contrary was brought to our notice to controvert the above finding given by the CIT(A). In view of the above and in view of the detailed reasoning given by the ld. CIT(A) on this issue, the ground raised by the Revenue is dismissed. Deduction u/s 80HH and deduction u/s 80I - assessee company has not furnished evidence to justify the claims and also in the absence of production of supporting details/books of accounts - HELD THAT:- From the various details furnished by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p sanitary cans and general line metal cans. It filed her return of income on 30.11.1996 declaring total income at ₹ 1,44,21,917/-. The case was selected for scrutiny and due to non-compliance to statutory notices issued by the AO, the assessment was completed by invoking the provisions of section 144 and determining the income at ₹ 5,20,74,960/-. The assessee moved an application before the PCIT u/s 264 who set aside the assessment order back to the file of the AO for making the assessment denovo after giving reasonable opportunity of being heard to the assessee. 2.1 During the course of assessment proceedings, the AO noted that despite opportunities granted, the assessee was not able to produce the books of account and other relevant documents to support the various claim made in the return and accompanied financial accounts. He noted that in this case, a liquidation petition was filed by M/s Gujrat State Financial Services Ltd. and an order was passed by Hon ble Punjab Haryana High Court for winding up of the company and a liquidator was appointed with effect from 07.01.1999. Consequent to the above, order, it was explained by the assessee, that the control an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, the ld.CIT(A) restricted such GP percentage to 8.75% as against 10.73% adopted by the AO by observing as under:- I have considered the submission of the appellant and observation of the AO made in the assessment order on the issue. It is seen that the appellant company was engaged in the business of manufacturing of Flexible Packaging Laminates, Open Top Sanitary Cans, General line Metal Containers and trading activity. By virtue of the orders of Hon ble Punjab Haryana High Court at Chandigarh dated 06.01.1994 and 28.07.1995, the companies M/s Asian Closures Ltd. and M/s Trans Asia Packaging Ltd. were amalgamated with the appellant company w.e.f. 20.03.1992 and 01.04.1992 respectively. The Assessing Officer has rejected the books of accounts of the appellant u/s 145(3) of the I.T. Act on the ground that appellant has failed to produce books of accounts, bills and vouchers to support the audited financial statements and in the past also certain discrepancies were found in the books of appellant, therefore, Assessing Officer estimated gross profit @10.73% i.e. average of GP shown in 1995-96 and GP shown in the current year and added ₹ 1,28,88,715/-. As discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floor is not burnt and a DDR No. 30 was registered in the Police Station Kasola Distt. Rewari. Further this office has no records of the company and this office has already possession of the factory unit handed over to you on 10.06.2014 on your entire satisfaction. In view of the above events, it cannot be held that appellant has not produced books of accounts deliberately. The events suggests that the books of accounts were in the possession of the Official Liquidator and the same were not received by the appellant when the possession of the company was taken over by the present management from the Office Liquidator, therefore, the observation of the AO that appellant has failed to produce books of accounts are contrary to the facts available on record. It cannot be attributed that appellant company had not produced books of accounts but it was its constraints that it was not able to produce its books of accounts due to facts and circumstances discussed above. It is seen that appellant company was engaged in the business of manufacturing of Flexible Packaging Laminates, Open Top Sanitary Cans and General Line Metal Cans. Due to change in the technology and the revolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that estimation of profit cannot be made merely on the ground that the assessee has earned low gross profit as compared to earlier years. So far as non-production of books of account are concerned, it is an admitted fact that such records were not handed over to the assessee by the Official Liquidator and the possession was given to the assessee on as is where is and whatever there is basis. The letter of the Official Liquidator addressed to the assessee company has been reproduced by the CIT(A) in the body of the appeal order and nothing has been produced before us to controvert the same. Since the books of account were in the possession of the Official Liquidator and the same were not received by the assessee at the time of handing over of the possession, therefore, the allegation of the AO that the assessee failed to produce the books of account are contrary to the facts as the assessee cannot be expected to do an impossible task. Further, had the profit percentage of the assessee been higher, then, the assessee company would not have gone into financial trouble. The observation of the ld.CIT(A) that due to change in the technology and use of plastic material/poly pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas in the year under consideration, the sales have been shown at ₹ 2,66,69,544/- which itself shows that the sales of the appellant company were declining and it affected the margins of the appellant company. The appellant has submitted the Audited Balance Sheet of the company and same has been certified by the Auditors. AO has not pointed out any defects in the books results of the appellant company, therefore, the gross profit declared by the said company @ 9.69% has to be accepted by the AO. Accordingly, the addition of ₹ 1,76,015/- made by the AO by taking the GP @ 10.35% is deleted. 11. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal. 12. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). He has given a finding that due to change in technology and due to substantial fall in sales during the year as compared to preceding years, the turnover and GP rate has gone down. Nothing contrary was brought to our notice to controvert the above finding given by the CIT(A). In view of the above and in view of the detailed reasoning given by the ld. CIT(A) on this issue, the ground raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch prove that manufacturing activity of appellant company were situated in backward area and for that the appellant has filed the notification issued by the Central Government. The appellant has also filed document stating that earlier this area was part of Mahendragarh District which was subsequently merged with Rewari District. The manufacturing activity of the appellant company is situated at Village Chirhara, Village Code 062687 which is part of Bawal Tehsil of Rewari District. The appellant has also filed letter issued by Department of Industries, Govt, of India for granting industrial license to the appellant for manufacturing of the cans which is part of the submission made by the appellant. The appellant has also been allowed certain Sales Tax exemption by Haryana Govt, for setting up industry in backward area. The evidences furnished by the appellant establishes that appellant company s unit was situated in backward area and it has manufactured the Flexible Packaging Laminates, Open Top Sanitary Cans and General Line Metal Cans. The appellant has also filed the certificates from the Chartered Accountant as required in Form 10CCB and Form 10C as provided under Rule 18BBB an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Y. 1991-92, vide ITA No.4873/Del/1998, order dated 5th October, 1998, he submitted that under identical circumstances, the Tribunal has allowed the claim of deduction u/s 80HH and 80IB, therefore, the order of the CIT(A) on this issue be upheld and the ground raised by the Revenue should be dismissed. 18. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the decision of the Tribunal in assessee s own case for A.Y. 1991-92. We find, the AO, in the instant case, rejected the claim of deduction u/s 80HH and 80I on the ground that the assessee did not furnish any evidence to justify these claims and the basis on which the same has been worked out. According to him, the profit derived from industrial undertaking is not verifiable in the absence of books of account and whether any manufacturing activity took place during the year and to what extent is not ascertained in the books of account and other connected records. It is also his allegation that no separate manufacturing and trading account has been prepared and the assessee has not given the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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