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TMI Blog2020 (2) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... iance to statutory notices issued by the AO, the assessment was completed by invoking the provisions of section 144 and determining the income at Rs. 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 and management of the company vested with the official liquidator appointed and all the records/works of the company were taken over by the liquidator. The Hon'ble Punjab & Haryana High Court, vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 1,28,88,715/-. As discussed above, the appellant had gone into liquidation w.e.f. 07.01.1999 and its works/factory premises were taken over by the official liquidator along with books of accounts and records. The appellant has filed statement of affairs as on 07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 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 in the material used for making cans, the demand was shifted from the tin containers to the plastic and poly pack containers/packing materials and this led to the decline in the turnover of the appellant company as can be seen from the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 plastic/can the turnover as well as the margin of the assessee company started declining and the company ran into financial trouble in 1997 and, subsequently, gone into liquidation also could not be controverted by the ld. DR. In view of the above discussion and in view of the detailed reasoning given by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted by the AO. Accordingly, the addition of Rs. 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 the Revenue is dismissed. 13. Ground No.3 reads as under:- "3. The ld.CIT(A) has erred on facts and in law in allowing deduction u/s 80HH amounting to Rs. 56,49,212/- and deduction u/s 80I amounting to Rs. 70,61,553/- when the assessee company has not furnished evidence to justify the claims and also in the absence of production of supporting details/books of accounts." 14. Facts of the case, in brief are that the AO, during the course of assessment proceedings, noted that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovt, 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 and Rule 18B of I.T. Rules, 1962. Appellant has also established that it has employed more than 10 employees during the year and has retrenched 79 employees during the year out of 131 employees and permission granted for retrenchment of the workers by the specified authority is also placed on record. All these evidences established that appellant was engaged in the manufacturing activity during the year and has affected sales of the manufactured items to the tune of Rs. 6,80,89,063/- during the year. It is seen that Assessing Officer has not brought any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind, 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 basis as to how he has arrived at the profit derived from the industrial undertaking for working out deduction. We find, the ld.CIT(A) allowed the claim of deduction u/s 80HH and 80I the reasons of which has already been reproduced in the preceding paragraphs. We do not find any infirmity in the order of the CIT(A). From the various details furnished by the assessee in the paper book, which were filed before the AO and the CIT(A), we find substantial details were filed before the lower authorities to prove that manufacturing activity of the assessee company were situa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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