2022 (11) TMI 1440 - ITAT JAIPUR

Application of enhanced GP rate - correctness of the application of the GP rate of 3.25% by the AO - HELD THAT:- Generally the result of the subsequent year cannot be applied in the preceding (current) year. Interestingly, whereas Rellan Motors declared GP of 3.92% in that year, the assessee declared (revised) GP rate of around 4%. Secondly a perusal of the orders does not show that the assessee was ever confronted with the material used against him. Hence no reliance can be placed on so called comparable case. Before the CIT(A), we find that the assessee has furnished detailed reason at pages 4 onwards pointing out several facts making the said case of Rellan Motors as completely distinguishable.

On the other hand the trading results as declared in AY 2010-11 were accepted. The Hon’ble Rajasthan HC in the case of CIT v/s Gotan Lime Khaniz Udyog [2001 (7) TMI 19 - RAJASTHAN HIGH COURT] has held that where the accounts are rejected, it is not always necessary for the AO to make addition over and above the declared income, if considering the books of accounts, past history and material collected by the AO, no interference is warranted. Thus, we don’t find any justification on the application of enhanced GP rate of 3.25% which is completely without furnishing any justified grounds hence, the GP rate as declared by the assessee at 1.68% is hereby accepted. Therefore, the authorities below were completely unjustified in applying higher GP rate of 3.25%.

Suppression of sale - We find nothing on the record to justify the case of suppression of sale i.e., though amount was received but was not recorded. Moreover, to effect the sale to such an extent, corresponding purchases of the vehicles are also required by the assessee, however, neither the claimed purchases have been discussed nor it is alleged so.

At the best it was a case of mere suspicion which was not substantiated with the help of strong evidences, wherein the revenue has completely failed. Thus, the enhancement of the sale (due to suppression) and application of GP rate of 3.25% is not approved and the resultant addition to the extent of Rs. 2,26,41,521/- is hereby deleted. However, in the peculiar facts of the case and the reasoning adopted by the authorities below, we uphold the rejection of the accounts and taking an overall view of the entire matter it is felt justified that an ad hoc addition of Rs. 2,00,000/- shall cover up the possible leakage of the income, if any. This ground No. 1 of the appeal is therefore partly allowed.

Estimation of sales - Estimating and considering advance from customers as ‘’SALES’’ & applying ‘’GROSS PROFIT %’’ thereon - HELD THAT:- Before us, the ld.AR vehemently contended the contradictory approach by the AO in different years even though the facts & circumstances are the same and the method & manner of the receipts of the sale proceeds and accounting thereof, are same being consistently followed by the assessee. He also strongly contended that is was not a case of deferred sale and further contended that because of the different approach adapted by the AO in the years under consideration, it has resulted into distorted picture of the income of not only of the given year but also of the other years and also resulted into multiple additions because suitable credit of the sale already booked has not been given. We are in agreement with these contentions however, the ld. CIT(A) rejected the contentions mechanically. It is noticed that similar allegation of deferment of sale was made by the AO in AY 2010-11 also though no quantification was made however, in our order dated 09-11-2022 in ITA no.396/JP/15,we have rejected such contention and the approach. Similarly, the allegation of suppression of sale and enhancement made of 4.14% and application of GP rate of 3.25% have also been rejected by us deleting the resultant addition for the reasoning given in ground of appeal no.1. Since the facts of the case are identical in this year also hence, our findings and the decision therein shall equally apply here also. Accordingly, the impugned addition of Rs. 62,98,437/- is hereby deleted. This ground No. 2 of the appeal is therefore allowed.

TDS u/s 194A - Disallowance of Interest u/s 40(a)(ia) - interest expenses for repayment of loan -AO observed that the assessee has not deducted TDS on the payments made to the said parties - HELD THAT:- Though various contentions have been raised to convince that it was not a case of making disallowance u/s 40(a)(ia) r/w S.194A however we shall confine ourselves to only one argument that where the payee had already paid the taxes, no further disallowance can be made. It is noticed that all the payees are public limited companies or corporations being M/s Maruti Udhyog Ltd. is the Public Limited Companies. Moreover, M/s Sundaram Finance, AU Finance and Mahindra & Mahindra Finance are Non-Banking Finance Corporation, which are renowned companies of their field. They must have already filled the return of income and paid tax due thereon considering the subjected amount paid to them of Rs. 6,96,201/- in their respective declared income.

Therefore, no disallowance should have been made in view of the binding decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. [2007 (8) TMI 12 - SUPREME COURT] which, has very categorically held and rather prohibited the department to make recovery of the taxes again.

Now, the second proviso to S.40(a)(ia) has taken care of a situation where payee has already paid taxes, no disallowance should be made. We are satisfied that the authorities below were not justified in making the impugned disallowance hence the same is directed to be deleted.