DCIT,CENTRAL CIRCLE - 7, HYDERABAD vs. M/S MIDWEST GRANITE PRIVATE LIMITED., HYDERABAD

The brief facts of the case are that the assessee is a Private Limited company engaged in the business of manufacturing, processing and trading in Granite and Marble Slabs. Search and Seizure operations U/s. 132 of the Act was conducted in the assessee’s Group on 24/7/2008. Subsequently, notice U/s. 153A of the was issued on 17/7/2009 calling for return of income for the AYs 2003-04 to 2008- 09. In response, the assessee company filed its return of income for all the relevant AYs on 13/10/2009. Subsequently, assessments were completed U/s. 143(3) r.w.s 153 of the Act wherein the Ld. AO made additions. On appeal, the ld. CIT (A) granted part relief to the assessee aggrieved by which, both the assessee and the Revenue are now in appeal before us.

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The Revenue has raised three grounds in its appeal however, the crux of the issue is that the ld. CIT (A) has erred in deleting the addition made by the ld. AO of Rs. 1,82,90,500/- towards unexplained cash receipts.

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The Revenue has raised three grounds in its appeal however, the crux of the issue is that the ld. CIT (A) has erred in upholding the

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The Revenue has raised four grounds in its appeal however, the cruxes of the issue are that:-

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The Revenue has raised four grounds in its appeal however, the cruxes of the issue is that:-

The assessee has raised several grounds in its appeal however, the cruxes of the issues are that:-

The Revenue has raised four grounds in its appeal however, the cruxes of the issue is that:-

Ground No.(i): Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs. 55,025/-.

During the course of assessment proceedings pursuant to search it was observed by the Ld. AO from the special audit report that the assessee company had paid Rs. 55,025/- towards Motor Vehicle Tax and Registration Charges with respect to purchase of Ford Ikon car and the same the was claimed as revenue expenditure. However, the Ld. AO was of the view that the expenditure is capital in nature as it goes to increase the cost of the car the utilization of which gives enduring benefit to the assessee. Therefore, the Ld. AO disallowed the entire

Ground No.(iii): Sustaining 50% of the addition amounting to Rs. 37,29,714/- (50% of Rs. 74,59,428) made towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act.

During the course of assessment proceedings subsequent to search it was observed by the Ld. AO that the assessee has paid an amount of Rs. 37,04,860/- to M/s. Block Makers Enterprises and Rs. 37,54,568/- to M/s. Sai Rock Enterprises aggregating to Rs. 74,59,428/- wherein the relatives of the Directors of the assessee- company Smt. K. Ranganayakamma and Smt. V. Prameela Rani are proprietrix respectively. On query, Smt. K. Ranganayakamma had stated that she had undertaken the work of processing granite stones from the assessee company by way of contract and the contract receipt was included in the computation of income and tax was paid U/s. 44AD of the Act. However, the Ld. AO opined that since the assessee was not obliged to maintain books of account as per section 44AD of the Act and accordingly she has not maintained her books of account, there was no documentary evidence to prove that she has undertaken and carried

Having observed so, the Ld. CIT (A) further opined that activities such as cutting, squaring and dressing of granites were certainly carried out, may be, by outside parties without which the granite blocks could not have been exported and therefore, certain expenses were incurred by the assessee towards these activities. Therefore, the Ld. CIT (A) allowed 50% of the aggregate expense of Rs. 74,59,428/- incurred by the assessee and thereby granted part relief.

Before us, the Ld. AR submitted that the entire disallowance made by the ld. AO was only for the reason that the proprietorship concerns to whom assessee had made payment had not maintained books of account. The ld. AR further submitted that when section 44AD of the Act provides that books of account need not be maintained, then there is no obligation on the part of the proprietorship firm to maintain the

We have heard the rival submissions and carefully perused the materials on record. From the facts of the case it is apparent that both the Revenue Authorities has not looked into the scope, volume and nature of work carried out by the proprietorship firm. Further, it is evident that the Ld. CIT (A) has accepted that certain work was carried out for processing the granites otherwise the granite slabs could not be exported. From this, it is evident that the entire disallowance made by the Ld. AO and partly sustained by the Ld. CIT (A) is based on surmises and conjectures and without examining the quantum of work performed by the proprietorship firms. Moreover, when the proprietorship concerns were no required to maintain books of accounts as per Section 44AD of the Act, Revenue cannot take any adverse inference for those proprietorship concerns in not maintaining the books of accounts. It is a settled legal position that additions made on the basis of presumption is not sustainable in law. Therefore, we do not find any merit in the disallowance made by the ld. AO which was partly sustained by the Ld.

Ground No.(iv): Addition of Rs. 29,21,000/- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure.

During the course of search proceedings, a noting containing the details of payment made to Sri K.V. Ramakrishna Reddy was found and seized which indicated the total payment of Rs. 146.88 lakhs. With respect to the relevant assessment year it was observed the payment made to Sri K.V. Ramakrishna Reddy was Rs. 29,21,000/- out of which Rs. 12 lakhs was paid by cash, Rs. 13 lakhs by way of cheque and Rs. 4.21 lakhs in the form of various expenditure. The Ld. AO opined that the above said paid to Sri K.V. Ramakrishna Reddy is the unaccounted money of the assessee. He further observed that the cheque payment made could not be reconciled with the books of account. Therefore, he rejected the explanation offered by the assessee and treated the same as unaccounted expenditure in the hands of the assessee company. On appeal, the ld. CIT (A) directed the ld. AO to verify the explanation offered by the assessee and thereafter decide the matter. Aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before us now.

As explained before the Ld. Revenue Authorities, Ld. AR submitted that out of Rs. 29,21,000, payment was made through cheque and Rs.

Ground No.(v): Addition of Rs.1,24,940/- towards levy of interest U/s. 234A of the Act.

At the outset, the Ld. AR submitted that the due date of filing of the income tax return for the AY 2003-04 was extended up to 30.11.2003 as per section 119 of the Act and the assessee had filed the return of income within such due date on 27/11/2003. However, the Ld. AO had levied interest U/s. 234A of the Act for default in furnishing the return of income. Since these facts are not verified by the Ld. AO as well as not addressed by the ld. CIT (A), we remit back the matter to the file of the Ld. AO for fresh consideration. Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act.

Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs.73,877/-.

This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iii): Sustaining 50% of the addition amounting to Rs. 36,14,465/- (50% of Rs. 72,28,930/-) made towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act.

This ground is identical to the ground no.(iii) raised by the assessee in the appeal for the AY 2003-04 hereinabove except for the fact that the quantum of payment made to M/s. Block Makers Enterprises is Rs. 35,93,864/- and to M/s. Om Sai Enterprises is Rs. 36,35,066/- aggregating to Rs.72,28,930/-. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iv): Addition of Rs. 28,10,000/- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure.

This ground is identical to the ground no.(iv) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also except for the fact that the quantum of payment, expenditure incurred and investment made differs as follows:-

Ground No.(v): Addition of Rs. Rs.4,08,155/- towards levy of interest U/s. 234A of the Act.

At the outset, the Ld. AR submitted that the due date of filing of the income tax return for the AY 2004-05 was extended up to 01.11.2004 as per section 119 of the Act and the assessee had filed the return of income within such due date on 01/11/2004. However, the Ld. AO had levied interest U/s. 234A of the Act for default in furnishing the return of income. Since these facts are not verified by the Ld. AO as well as not addressed by the ld. CIT (A), we remit back the matter to the file of the Ld. AO for fresh consideration. Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act.

Deletion of the addition made by the ld. AO of Rs. 1,82,90,500/- towards unexplained cash receipts.

During the course of search proceedings certain documents were seized from the residence of Sri N. Tirupati Rao, former Director of assessee-company (Midwest Granite Private Limited) containing details of cash receipts of M/s. Sam (Srilankan company). It was also observed that the assessee-company was the majority share holder of M/s. Sam. On query, Mr. N. Tirupati Rao stated that this amount was accounted in the books of M/s. Sam. Since Mr. N. Tirupati Rao did not produce the books of account of M/s. Sam the Ld. AO added the same in the hands of the assessee company as unexplained cash credit U/s. 68 of the Act. On appeal, the ld. CIT (A) after examining the issue in detail and obtained the remand report from the ld. AO deleted the addition by observing as follows:

Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs. 2,79,950/-.

This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iii): Sustaining 50% of the addition amounting to Rs. 35,87,076/- (50% of Rs. 71,74,152) made towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act.

This ground is identical to the ground no.(iii) raised by the assessee in the appeal for the AY 2003-04 and 2004-05 hereinabove except for the fact that the quantum of payment made to M/s. Block Makers Enterprises is Rs. 35,91,504/- and to M/s. Om Sai Enterprises is Rs. 35,82,648/- aggregating to Rs.71,74,152/-. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iv): Addition of Rs. 11,41,000 /- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure.

This ground is identical to the ground no.(iv) raised by the assessee in the appeal for the AY 2003-04 and 2004-05 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also except for the fact that the quantum

Ground No.(v): Addition of Rs. Rs. 4,52,390/- towards levy of interest U/s. 234A of the Act.

At the outset, the Ld. AR submitted that the assessee had filed its return of income within the due date i.e., 30.10.2005 and the return was processed U/s. 143(1) on 20/07/2006. Thereafter, assessment was made U/s. 143(3) on 24/12/2007. It was therefore pleaded that there was no default in furnishing the return of income by the assessee hence interest levied by the Ld. AO U/s. 234A of the Act for Rs. 4,52,390/- is not justifiable. The ld. DR could not controvert to the submission of the ld. AR. After hearing both sides, we find it appropriate to remit the matter to the file of the Ld. AO for fresh consideration as the issue is neither verified by the Ld. AO nor addressed by the Ld. CIT (A). Needless to mention that if there is no

Ground No.(vi): The ld. CIT (A) has erred in directing the Ld. AO to verify the source for acquiring land amounting to Rs. 20 lakhs though all details of payment were submitted before the Ld. AO.

During the course of assessment proceedings pursuant to search it was noticed by the ld. AO from the seized material (page 121 of Annexure-A/MGPL/OFF/2) that the assessee had paid Rs. 93,58,000/- for the proposed acquisition of land. Out of the amount of Rs. 93,58,000/- an amount of Rs. 20 lakh was shown as paid by M/s. Nova Granite (India) Pvt Ltd., (Group Company of the assessee) on behalf of the assessee-company. Since the incremental value of the land for Rs. 20 lakh was not disclosed in the balance sheet of the assessee company for the AY 2004-05 to 2006-07 the Ld. AO opined that the amount of Rs. 20 lakh is the unaccounted investment of the assessee. Accordingly, the Ld. AO made addition of Rs. 20 lakh in the hands of the assessee as unaccounted investment. When the matter came up before the Ld. CIT (A), after examining the issue he held that “these are matters of details of facts, which required to be examined in detail and arrive at correct conclusions. There is no place for surmises in the place of truth or facts. Since both the companies are Group Concerns and assessed by same A.O., examination of information in detail, may not be

Before us, the Ld. AR submitted that the entire details of payment made for Rs. 20 lakhs through Demand Draft by M/s. Nova Granite (India) Pvt Ltd., to various parties on behalf of the assessee-company were all submitted before the Lower Authorities (paper book page no. 172), however both the Revenue Authorities without examining the same arrive at the respective conclusions. The ld. AR therefore argued that such attitude of the Revenue brings great hardship to the assessee in taking the matter back and forth. Thereafter, the ld. AR pleaded for granting relief to the assessee. The ld. DR could not controvert to the submission of the Ld. AR.

After hearing both parties, we find merit in the submission of the ld. AR. The assessee has filed a voluminous paper book containing 1 to 392 pages wherein the Counsel of the assessee has vouched as under:

When the assessee had made such detailed submission before the

Ground No.(vii): Ld. CIT (A) has erred in sustaining the addition of Rs. 75,285/- made by the Ld. AO towards difference in sale.

During the course of assessment proceedings pursuant to search it was observed by the Ld. AO that the sales amount as per ledger form in seized material was shown at Rs. 35,15,80,854/- whereas assessee has declared in his P & L Account submitted before the Revenue as Rs. 34,93,05,557/-. Since the assessee was not able to explain the difference amount of Rs. 22,75,275/- the Ld. AO treated the same as unaccounted sales and brought to tax. Before the ld. CIT (A), the assessee reconciled the deference to the extent of Rs. 22,00,012/-. Therefore, the ld. CIT (A) granted relief to that extent and sustained the balanced amount of Rs. 75,285/-. Since the assessee could not reconcile the difference amount of Rs. 75,285/- before the Ld. Revenue Authorities and before us, at this stage, we do not have any other option but to sustain the addition of Rs. 75,285/-. Accordingly, we do not find it necessary to interfere with the order of the Ld. CIT (A) on this issue.

Deletion of the addition made by the ld. AO of Rs. 2,81,87,800/- towards unexplained cash receipts.

Since the facts and issue are identical to that of the Revenue’s appeal for the AY 2004-05, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits.

Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs. 1,83,285/-.

This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iii): Sustaining 50% of the addition amounting to Rs. 36,20,477/- (50% of Rs. 72,40,954) made towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act.

This ground is identical to the ground no.(iii) raised by the assessee in the appeal for the AY 2003-04, 2004-05 and 2005-06 hereinabove except for the fact that the quantum of payment made to M/s. Block Makers Enterprises is Rs. 35,88,076/- and to M/s. Om Sai Enterprises is Rs. 36,52,878/- aggregating to Rs.72,40,954/-. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iv): Addition of Rs. 9,000/- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure.

This ground is identical to the ground no.(iv) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year. Further from the order of the ld. AO it is not clear as to what extent to the aggregate amount of Rs. 9,000/- was towards payment made through cheque to Mr. K.V. Ramakrishna Reddy or towards expenditure incurred on behalf of Sri K.V. Ramakrishna Reddy etc. However, it was clarified by the assessee that this amount comprises of payment of Rs. 8,474/- (rounded off as Rs. 9,000) towards tax paid on behalf of Sri. K.V. Ramakrishna Reddy which was duly accounted in the books of accounts of the assessee company by debiting to the personal account of Sri K.V. Ramakrishna Reddy.

Ground No.(v): Addition of Rs. Rs. 29,81,843/- towards levy of interest U/s. 234A of the Act.

At the outset, the Ld. AR submitted that the assessee had filed its return of income within the due date i.e., on 27/11/2006. It was further submitted that for the relevant AY the due date of filing the return of income was extended up to 30/11/2006 as per order U/s. 119 of the Act. It was therefore pleaded that since there was no default in furnishing the return of income by the assessee, interest levied by the Ld. AO U/s. 234A of the Act for Rs. 29,81,843/- is not justifiable. The ld. DR could not successfully controvert to the submission of the ld. AR. After hearing both sides, we find it appropriate to remit the matter to the file of the Ld. AO for fresh consideration as the issue is neither verified by the Ld. AO nor addressed by the Ld. CIT (A). Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act.

Ground No.(vi): The Ld. CIT (A) has erred in upholding the addition made by the Ld. AO of Rs. 39,328/- towards penalty paid to Central Excise Department.

At the outset, the Ld. AR submitted before us that the amount paid to Central Excise Department for Rs. 39,328/- is compensatory in nature and it is not barred by section 37 of the Act. Ld. DR relied on the orders of the Ld. Revenue Authorities.

We find merit in the submission of the ld. AR. Explanation-1 to section 37 prohibits any expenditure incurred by the assessee which is related to an offence or any expense prohibited by law. In the case of the assessee it appears that the expenditure incurred by the assessee with respect to payment made to Central Excise is in regard to non- compliance of the provisions of the Act which is only penal in nature and it is not an act which is prohibited by law or with respect to any offence. Hence, we hereby direct the ld. AO to delete the addition made for Rs. 39,328/-.

Ground No.(vii): The Ld. CIT (A) has erred upholding the addition made by the Ld. AO of Rs. 1,07,898/- towards interest paid for delayed remittance of tax deducted at source.

At the outset, the Ld. AR submitted that the amount of Rs. 1,07,898/- was paid to the Revenue towards delay in remittance of TDS and the Ld. AO disallowed the expenditure by relying on Explanation-1 to section 37 of the Act which was confirmed by the Ld. CIT (A). The Ld.AR argued by stating that the interest paid to the Revenue towards delay in remittance of TDS is neither an offence under the Act nor attributable to any expense prohibited by law. Therefore, Explanatio-1 to section 37 of the Act is not applicable. It was therefore pleaded that the addition made by the ld. AO which is further confirmed by the ld.

We find merit in the submission of the ld. AR. Explanation-1 to section 37 prohibits any expenditure incurred by the assessee which is related to an offence or any expense prohibited by law. In the case of the assessee it appears that the expenditure incurred by the assessee with respect to payment made to the Revenue is in regard to interest paid on the delayed remittance of TDS which is compensatory in nature and is not expense which is prohibited by law or with respect to any offence. Hence, we hereby direct the ld. AO to delete the addition made for Rs. 1,07,898/-.

Ground no.:(i) Deletion of the addition made by the ld. AO of Rs. 2,21,88,016/- towards unexplained cash receipts.

Since the facts and issue are identical to that of the Revenue’s appeal for the AY 2004-05 & 2005-06, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits.

Ground no.:(ii) Disallowance of additional depreciation of Rs. 12,89,185/-.

During the course of assessment proceedings pursuant to search, it was observed by the Ld. AO that the assessee had claimed additional

At the outset, on perusing the orders of the Ld. CIT (A), we find that the Ld. CIT (A) while deciding the issue with respect to deduction U/s. 10B of the Act in the case of the assessee for the assessment year 2008-09 relied on the Circular No.729 dated 1/11/1995 issued by the CBDT the crux of which is as follows:-

Based on the above Circular and the activity of the assessee being cutting, polishing and sizing of the granites, the ld. CIT (A) held that it amounts to manufacturing activity / production of goods as envisaged under the Act. Accordingly, the Ld. CIT (A) granted relief to the assessee

Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs. 2,75,880/-.

This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iii): sustaining 50% of the addition amounting to Rs. 18,66,217/- (50% of Rs. 37,32,434/-) made by the Ld. AO towards inflated expenditure on Granite processing and dressing charges U/s. 37(1) of the Act.

This ground is identical to the ground no.(iii) raised by the assessee in the appeal for the AY 2003-04 and 2004-05 hereinabove except for the fact that the quantum of payment made to M/s. Block Makers Enterprises is Rs. 31,94,762/- and to M/s. Om Sai Enterprises is Rs. 5,37,672/- aggregating to Rs.37,32,434/-. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iv): Addition of Rs. 24,59,000/- towards payment made to Sri K.V. Ramakrishna Reddy as unaccounted expenditure.

This ground is identical to the ground no.(iv) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year. Further from the order of the ld. AO it is not clear as to what extent to the aggregate amount of Rs. 24,59,000/- was towards payment made through cheque to Mr. K.V. Ramakrishna Reddy or towards expenditure incurred on behalf of Sri K.V. Ramakrishna Reddy, purchase of granites etc. However, it was clarified by the assessee that the payment was duly accounted in the books of accounts of the assessee company and we failed to understand as to what prevented the Revenue to verify the same.

Ground No.(v): Addition of Rs. Rs. 8,21,732/- towards levy of interest U/s. 234A of the Act.

At the outset, the Ld. AR submitted that the assessee had filed its return of income within the due date i.e., on 30/11/2007. It was further submitted that for the relevant AY the due date of filing the return of income was extended up to 29/02/2008 as per order U/s. 119 of the Act. It was therefore pleaded that since there was no default in furnishing the return of income by the assessee, interest levied by the Ld. AO U/s. 234A of the Act for Rs. 8,21,732/- is not justifiable. The ld. DR could not successfully controvert to the submission of the ld. AR. After hearing both sides, we find it appropriate to remit the matter to the file of the Ld. AO for fresh consideration as the issue is neither verified by the Ld. AO nor addressed by the Ld. CIT (A). Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act.

Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs. 1,32,595/-.

This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iii): Addition of Rs. Rs. 54,96,657/- towards levy of interest U/s. 234A of the Act.

At the outset, the Ld. AR submitted that the assessee had filed its return of income within the due date i.e., on 26/09/2008. It was therefore pleaded that since there was no default in furnishing the return of income by the assessee, interest levied by the Ld. AO U/s. 234A of the Act for Rs. 54,96,657/- is not justifiable. The ld. DR could not successfully controvert to the submission of the ld. AR. After hearing both sides, we find it appropriate to remit the matter to the file of the Ld. AO for fresh consideration as the issue is neither verified by the Ld. AO nor addressed by the Ld. CIT (A). Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A of the Act.

Ground No.(iv): The Ld. CIT (A) has erred upholding the addition made by the Ld. AO of Rs. 49,360/- towards prior period expenses.

The Ld. AO disallowed an amount of Rs. 49,360/- by holding that it relates to prior period. The Ld CIT (A) after examining the issue observed that the Ld. AO had brought out entire information on record.

Ground No.(v): The Ld. CIT (A) has erred in upholding the addition made by the Ld. AO of Rs. 9,212/- towards interest paid for delayed remittance of tax deducted at source.

On this issue the Ld. AR submitted that the assessee has requested that the matter may be remitted back to the file of the Ld. AO for re-computation of the interest and the ld. DR did not seriously objected to the submission of the Ld. AR. Therefore, in the interest of justice we remit the matter back to the file of the ld. AO for de novo consideration.

Ground No.(i) Deduction under section 10B of the Act for Rs. 11,48,84,461/-.

During the course of scrutiny assessment proceedings it was observed by the Ld. AO that the assessee has claimed deduction U/s. 10B of the Act. On perusing the issue the Ld. AO opined that the

On appeal, the Ld. CIT (A) granted relief to the assessee due to the following reasons:-

We do not find any infirmity on the order of the ld. CIT (A) on this issue. The CBDT Circular No. 729 dated 1/11/1995 has made it clear that dressing of the granite, cutting them into smaller pieces, polishing the granite amounts to manufacturing or production as envisaged under the Act. Further, as observed by the Ld. CIT (A), transfer of the licence from another entity alone may will not constitute reconstruction or reconstitution of the company. Therefore, we do not find it necessary to interference with the order the ld. CIT (A) on this issue. Hence, the appeal of the Revenue on this issue is devoid of merits.

Ground No. (ii): Disallowance of additional depreciation of Rs. 12,89,185/-.

Since the issue is already adjudicated on the identical facts in the Revenue’s appeal for the AY 2006-07 hereinabove, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits on the issue.

Ground No.(i):- Addition made by the ld. AO without incriminating materials found at the time of search.

Since the assessee has withdrawn this ground, the ground does not survive for adjudication.

Ground No.(ii): Disallowance of expenditure incurred towards life tax and registration charges amounting to Rs. 2,62,520/-.

This ground is identical to the ground no.(ii) raised by the assessee in the appeal for the AY 2003-04 hereinabove. Hence, the same decision shall hold good as the facts are identical for the relevant assessment year also.

Ground No.(iii): The Ld. CIT (A) has erred in sustaining the disallowance made by the Ld. AO to the extent of Rs. 14,53,922/- towards foreign exchange fluctuation.

During the course of assessment proceedings pursuant to search that the assessee had claimed foreign exchange fluctuation expenses of Rs. 14,53,922/- as deduction towards purchase of Hydraulic machine from Sandvik Mining. The Ld. AO opined that the aforesaid expense is attributable towards the purchase of capital asset and therefore, it cannot be allowed as revenue expenses accordingly he disallowed the amount of Rs. 14,53,922/- as allowable deduction. On appeal, the Ld. CIT (A) upheld the order of the Ld. AO. However, granted depreciation on the same.

At the outset, we do not find any infirmity in the order of the Ld. CIT (A) by virtue of section 43A of the Act. Therefore, we do not find it necessary to interfere in the order of the Ld. CIT (A).

Ground No.(iv): The Ld. CIT (A) has erred in directing the Ld. AO to verify the addition made of Rs. 11,21,400/- on account of sale of scrap and thereafter grant relief if the claim of the assessee has merit.

While completing the assessment, the ld. AO observed from the material seized that the assessee has sold scrap of 52,900 kg at a rate of Rs. 21/- per kg along with Radiator and Cooler and realised an amount of Rs. 11,21,400/-. The ld. AO added the same to the income of the assessee only for the reason that during the survey proceedings assessee had admitted it as not recorded in the books of accounts. When the matter cropped up before the Ld. CIT (A), the assessee

Ground No.(i) Deduction under section 10B of the Act for Rs. 14,22,28,086/-.

Since the issue is already adjudicated on the identical facts in the Revenue’s appeal for the AY 2008-09 hereinabove, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits on the issue.

Ground No. (ii): Disallowance of additional depreciation of Rs. 66,53,865/-.

Since the issue is already adjudicated on the identical facts in the Revenue’s appeal for the AY 2006-07 and 2008-09 hereinabove, the same decision holds good. Accordingly, the appeal of the Revenue is devoid of merits on the issue.

In the result, all the assessee’s appeals are partly allowed for statistical purposes and the Revenue’s appeals are dismissed.