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2015 (12) TMI 841 - AT - Income TaxAddition made u/s.2(22)(e) - CIT(A) deleted the addition - Held that - Not inclined to agree with the quantum of addition made by the Id.A.O. He has taken accumulated profits of M/s. K.V. Fashions Pvt. Ltd. as on 31.3.2009. Perusal of copy of account of M/s. K.V. Fashions Pvt. Ltd. in the books of the appellant i.e. M/s. Kamal Process reveals that the appellant has received the last installment of ₹ 13,00,000/- on 23.10.2008. As per the provisions of sec.2(22)(e) the accumulated profits for the purpose of 2(22)(e) is to be taken as on 23.10.2008 and not as on 31.3.2009 as adopted by the Id. A.O. The facts available on record further indicate that M/s. K.V. Fashions Pvt. Ltd. started its business from 1.10.2008. During the year under consideration M/s. K.V. Fashions Pvt. Ltd. has earned a profit of ₹ 2,25,678/-. This way it can be said that M/s. K.V. Fashions has earned a monthly profit of ₹ 37,613/- (Rs.2,25,678 / 6). In view of these facts, it can be said that M/s. K.V. Fashions Pvt. Ltd. was having accumulated profit of ₹ 37,613/- at the end of October, 2008. This way the accumulated profit as on 23.10.08 can at the most be taken at ₹ 37,613/-. In view of above facts, I hold that M/s. K.V. Fashions Pvt. Ltd. was having accumulated profit of ₹ 37,613/- at the date of payment of loan of ₹ 13,00,000/- on 23.10.2008 and accumulated profits to the extent of ₹ 37,613/- can only be taxed as per the provisions of sec.2(22)(e). Accordingly, addition to the extent of ₹ 37,613/- is confirmed. The appellant will get a relief of ₹ 1,88,065/- (Rs. 2,25,678 - 37,613). - Decided against revenue. Disallowance of interest on partner s capital as well as secured and unsecured loans - CIT(A) deleted the addition - Held that - CIT(A) has given a finding in para-4.7 of his order that the assessee has got huge interest-free funds of ₹ 5,12,26,212/- Rs.4,84,86,738/- as sundry creditors, ₹ 11,63,551/- as advances from customers and ₹ 15,75,923/- as unpaid expense during the year under consideration. This finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Rejection of book of account - Held that - CIT(A) has not upheld the book of account on the ground that during the course of assessment proceedings the assessee has furnished details of sales and purchase, quantitative monthly summary of grey cloth and finished cloth sales. The details of income and expenditure were also available on record. The AO has not found any specific details either in the book of accounts or in the details furnished by the appellant. The ld.CIT(A) observed that the AO has not found any specific details either in the book of accounts or in the details furnished by the assessee. The ld.CIT(A) relied on the judgement of CIT vs. Vikram Plastic (1998 (8) TMI 43 - GUJARAT High Court). The AO has proceeded to reject the book of accounts on the ground that the yield shown by the assessee was not correct since in the subsequent year, the assessee has shown yield at 96.63% for AY 2010-11. We find that the AO has noted the fact that the certificate dated 12/11/2011 was given to the assessee by one Shri G.G.Shroff, B.Sc. (Hons) M.Sc. Tech. (Bom.). The assessee has also enclosed the test report dated 8/12/2011 of Ahmedabad Textile Industries Research Association (ATIRA). The AO has not conducted any enquiry on the facts given by the assessee and, therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld.- Decided against revenue. Addition made on account of suppression of production - CIT(A) deleted the addition - Held that - The cost of suppressed production at the rate of ₹ 211.9 per meter as adopted by the A.O. is apparently wrong. The facts available on records indicate that the appellant manufactured 7,77,184 mtrs of cloth on his own account. This cloth was sold for a sale consideration of ₹ 1,86,31,031/-. This way the average selling price of cloth manufactured by the appellant works out to ₹ 23.96 per meter (18631031 / 777184). Thus the cost of production of cloth cannot be more than ₹ 23.96 per meter. It is seen that the A.O. has taken cost of production at ₹ 17,39,12,483 cost of raw material of ₹ 12,56,95,265/- direct manufacturing expenses of ₹ 4,82,17,218/- . These expenses include, expenses incurred on job work also. Since, in the case of job work, cloth is not produced, considering these expenses for the purposes of suppression of production has given an erroneous figure. These facts, clearly indicate that the A.O. had adopted erroneous figures for working out the value of suppression which has resulted into disproportionate or unrealistic value of suppression - Decided against revenue. Addition made on account of fall in G.P. Ratio - CIT(A) deleted the addition - Held that - AO himself has stated in his order that since the addition in respect of suppression of production and disallowance of interest u/s.36(1)(iii) of the Act has been made, therefore the ground raised is ill-conceived. We find that the AO, however, proceeded to make the addition of ₹ 24,33,112/- and decided not to make separate addition in respect of fall in GP rate. Therefore, this ground is not arising out of the assessment order and, hence, rejected. - Decided against revenue.
Issues Involved:
1. Deletion of addition under section 2(22)(e) of the Act 2. Deletion of addition under section 36(1)(iii) of the Income Tax Act 3. Rejection of books of account by the Assessing Officer 4. Deletion of addition made on account of suppression of production 5. Deletion of addition made on account of fall in G.P. Ratio 6. Appeal against the order of the Commissioner of Income Tax (Appeals) 7. General grounds Deletion of addition under section 2(22)(e) of the Act: The Revenue appealed against the deletion of an addition made under section 2(22)(e) of the Act. The Commissioner of Income Tax (Appeals) partly allowed the appeal, reducing the addition. The Appellate Tribunal upheld the decision, stating that the appellant failed to provide evidence that the lending of money was a substantial part of the business of the company. The Tribunal confirmed the reduced addition based on accumulated profits and the date of the loan payment. Deletion of addition under section 36(1)(iii) of the Income Tax Act: The Revenue appealed the deletion of an addition under section 36(1)(iii) of the Income Tax Act. The Commissioner of Income Tax (Appeals) found that the assessee had sufficient interest-free funds, and the Appellate Tribunal upheld this decision. The Tribunal noted the substantial interest-free funds available to the assessee, leading to the rejection of the Revenue's appeal on this ground. Rejection of books of account by the Assessing Officer: The Revenue contested the rejection of the books of account by the Assessing Officer. The Commissioner of Income Tax (Appeals) upheld the decision based on the details provided by the assessee regarding sales, purchases, and other financial aspects. The Appellate Tribunal found no reason to interfere with this decision, as the Assessing Officer did not establish any significant discrepancies in the details furnished by the assessee. Deletion of addition made on account of suppression of production: The Revenue challenged the deletion of an addition made on account of suppression of production. The Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on factual findings. The Tribunal found errors in the calculation of the cost of suppressed production by the Assessing Officer, leading to the rejection of the Revenue's appeal on this ground. Deletion of addition made on account of fall in G.P. Ratio: The Revenue raised an issue regarding the deletion of an addition made on account of a fall in the Gross Profit Ratio. The Appellate Tribunal noted that the Assessing Officer had already made other additions, and hence, decided not to make a separate addition for the fall in the Gross Profit Ratio. As this ground did not arise from the assessment order, the Tribunal rejected this appeal. Appeal against the order of the Commissioner of Income Tax (Appeals) and General Grounds: The Appellate Tribunal dismissed the Revenue's appeal, upholding the decisions of the Commissioner of Income Tax (Appeals) on various grounds. The Tribunal found no merit in the Revenue's contentions and rejected the appeal. This detailed analysis covers the various issues raised in the legal judgment, providing a comprehensive overview of the decisions made by the Appellate Tribunal in each case.
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