2019 (10) TMI 1168 - AT - Income Tax

Addition on account of sale of alleged shortage in stock - GP rate application - HELD THAT - AO worked out the difference of stock on estimate basis and did not point out any specific item which was sold outside of the books of accounts. CIT(A) also passed the impugned order in a slip shod manner, he simply stated that the A.O. worked out the difference during the course of assessment proceedings and applied the GP rate shown by the assessee. Explanation of the assessee wherein it was stated that the stock was lying in heaps in the ground and was taken in the round figures and even the rates of purchase were taken in round figures was not rebutted, therefore it appears that the calculation of the stock at the time of search was not accurate and particularly when the A.O. had not rejected the books of accounts then the addition made by the A.O. and sustained by the Ld. CIT(A) on estimate basis was not justified, accordingly the same is deleted. Disallowance of the salary paid - Excess salary debited by assessee - HELD THAT - Assessee was having four employees namely Shri Kuldeep Kumar (Salesman), Shri Manish Sharma (Salesman), Shri Dalip (Peon) and Shri Sahil Goel and there was one Driver for Vehicle No. 3443, which is evident from the details furnished by the assessee before the A.O. and the Ld. CIT(A) i.e; copies of the ledger account which are placed at page no. 22 23 of the assessee s paper book. In our opinion the disallowance made by the A.O. and sustained by the CIT(A) on this basis that only two persons were stated to be employed in the statement during the course of search was not justified particularly when the assessee mentioned the names of the persons who were regularly employed, in its ledger account. In the present case, the books were accepted by the A.O., therefore, when the books of accounts were accepted which clearly show the name of the persons to whom monthly salary was paid total of which for the year under consideration was at ₹ 3,46,000/- then the disallowance made by the A.O. and sustained by the Ld. CIT(A) was not justified. Accordingly the same is deleted.

Summary

Issues Involved:
1. Validity of the CIT(A)'s order.
2. Estimation of foreign tour expenses.
3. Estimation of household expenses.
4. Addition on account of Gross Profit on alleged short stock.
5. Disallowance of salary expenses.

Issue-wise Detailed Analysis:

1. Validity of the CIT(A)'s order:
The appellant contended that the order of the CIT(A) was against the facts of the case and bad in law. This ground was deemed general and did not require specific comments.

2. Estimation of foreign tour expenses:
The grievance related to the addition of ?60,000/- for foreign tour expenses. The assessee submitted additional evidence under Rule 29 of the ITAT Rules, 1963, similar to the preceding Assessment Year 2015-16, where the ITAT had set aside the issues for fresh adjudication. The Tribunal, following its previous order, restored the issue to the Assessing Officer (A.O.) for fresh adjudication.

3. Estimation of household expenses:
The grievance pertained to the addition of ?1,56,960/- for household expenses. Similar to the foreign tour expenses, the assessee submitted additional evidence, and the Tribunal restored the issue to the A.O. for fresh adjudication, following its order for the Assessment Year 2015-16.

4. Addition on account of Gross Profit on alleged short stock:
The A.O. found a stock discrepancy of ?5,64,441/- during a search and added ?20,200/- as Gross Profit. The assessee argued that the stock was estimated and not accurately weighed, leading to discrepancies. The Tribunal noted that the A.O. worked out the difference on an estimate basis without specific evidence of sales outside the books. The Tribunal found the addition unjustified and deleted it, as the A.O. had not rejected the books of accounts.

5. Disallowance of salary expenses:
The A.O. disallowed ?2,86,000/- out of ?3,79,000/- claimed as salary, accepting only ?93,000/- based on the presence of two employees during the search. The assessee contended that four employees were present, but only two were available during the search. The Tribunal found the disallowance unjustified, noting that the books of accounts, which listed all employees, were accepted by the A.O. The Tribunal deleted the disallowance.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, restoring the issues of foreign tour and household expenses to the A.O. for fresh adjudication and deleting the additions for Gross Profit on alleged short stock and disallowed salary expenses.