9911796707
TMI Blog2003 (6) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.52 per cent taken by the AO and shown by the assessee itself for asst. yr. 1994-95 ignoring the fact that the fire broke out in the assessee s business premises on 8th June, 1994 and out of total sales shown at Rs. 23,37,919 sales amounting to Rs. 15,15,864 pertain to pre-fire period and sales amounting to Rs. 8,22,055 pertain to post-fire period. For the pre-fire period, the directions of CIT(A) regarding application of GP of 10 per cent is not justified as the GP rate of 22.52 per cent shown by the assessee last year is justifiably applicable. Even for the post-fire period, the GP rate of 22.52 should be applied as GP rate shall not be affected due to this factor. The learned CIT(A) has directed to apply GP rate of 10 per cent because of loss of stock worth Rs. 20 lakhs due to fire ignoring the fact that the assessee has credited the insurance claim of Rs. 20 lakhs in its trading account and thus, there is no reason as to why GP rate should decline. Therefore, learned CIT(A) was not justified in directing to apply GP rate of 10 per cent. 3. The learned CIT(A) has erred in law and on facts in allowing relief of Rs. 1,90,707 out of total disallowance of Rs. 3,30,993 in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 47,62,558 as against opening stock of Rs. 85,69,614. He further took note of the fact that in the immediately preceding assessment year, the assessee has declared a gross profit of Rs. 6,16,252 on the sales of Rs. 27,35,510 giving a GP rate of 22.52 per cent whereas in the year under consideration, the assessee has declared a gross loss of Rs. 3,44,521 on the sales of Rs. 23,37,919. Thus, the assessee had declared negative results in the trading account inspite of the fact that an amount of Rs. 20 lakhs received as insurance claim had been credited to the trading account. In view of the fact that the assessee did not produce books of account, accordingly, it was concluded that the expenses debited to the trading account as well as P L a/c were not verifiable. As such, provisions of s. 145(2) were invoked and considering the amount of closing stock, sales of the assessee-company were estimated at Rs. 50 lakhs and GP rate of 22.52 per cent disclosed by the assessee in the immediately preceding assessment year was applied. As a result, the extra profit worked out was Rs. 11,26,000 (GP rate of 22.52 per cent on estimated sales of Rs. 50 lakhs). 5. In appeal before the first ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 20 lakhs which resulted in a loss of Rs. 1,86,000. It was also contended that there was an increase in the cost of raw material of wood, core, face and chemicals amounting to Rs. 4,97,259. It was also stated that in the year under consideration, the income from sawing charges was only Rs. 1,59,889 as against Rs. 8,36,461 last year. This fact also resulted in a lesser margin in the profit. The average sale rate, it was argued, on the other hand, did not increase proportionately and as a result of this, loss occurred to the assessee. It was stated that in the previous asst. yrs. 1989-90 to 1992-93, the assessee has shown gross loss as well as gross profit. Therefore, the application of GP rate of 22.52 per cent by the AO is highly excessive. 6. Considering these submissions, the CIT(A) concluded that there was no justification for estimation of sales at Rs. 50 lakhs but keeping in mind that the books of accounts were not produced before the AO on the date fixed, he was of the view that it would be reasonable and just if the sales are estimated at Rs. 25 lakhs as against Rs. 23,37,919 declared by the assessee and further, in view of the peculiar circumstances, in the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired from an Ahmedabad firm but even then, he held that there were no details of expenses and disallowed the whole expenses. It is also contended that the expenses claimed were duly supported by vouchers. 11. Considering the submissions, the CIT(A) deleted the addition made to the extent of Rs. 1,90,707. With respect to the expenditure on account of repair of hot press pump amounting to Rs. 1,04,286, he held it to be a capital expenditure entitled for depreciation at the prescribed rate. Aggrieved by this, the Revenue is in appeal before us. 12. Learned Departmental Representative placed reliance on the assessment order and learned authorised representative, on the other hand, relied upon the impugned order. 13. A perusal of the impugned order shows that the CIT(A) on the facts of the case was of the view that part of the expenditure was capital in nature and the remaining revenue in nature. The issue was decided by him in the following manner vide para 4.3 which reads as under: "4.3 I have considered the submissions of the learned counsel and have perused the assessment records. I find that the details of expenses were filed before the AO during the course of assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide of the balance sheet. It was stated that since part of these claims was recoverable, the balance was outstanding in the balance sheet on the asset side as insurance claim recoverable. It was argued that since more than eight years have passed and the insurance companies had not acknowledged the claims, the assessee-company had written off these debts and, accordingly, in these facts, they are allowable to the assessee as per the provisions of s. 36(1)(vii). Since the assessee-company has written off these debts, it was stated that as and when these would be recovered, these will be shown as income. Considering these submissions, the CIT(A) deleted the addition made in the following manner: "5.3 I have considered the submissions of the learned counsel. As per the details in assessment records, it is seen that the insurance claims were made in previous years as under: Claims lodged in financial year 1985-86 6,85,061.78 Claims lodged in financial year 1986-87 4,30,005.58 Claims lodged in financial year 1987-88 88,173.48 (A) 12,03,240.84 Claims received during financial year 1986-87 2,34,018.54 Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) M/s Archana Plywood, A-1/93, Mayapuri Chowk 25,000 (iii) M/s Sekhari Engg. Works, M-13, Indl. Area, Yamunanagar 1,57,925 (iv) M/s Shankar Timber Ind., 3/8, WHS, Furniture Works, Kirtinagar, Delhi 2,96,594 (v) Hindustan Glass Agency, Naka Hindola, Amar Bazar, Lucknow 86,604 (vi) M/s N.D. Israni, DDA Contractor, Kodli Gharoli, Delhi 1,63,579 (vii) M/s Tina Timber Corpn., Saharanpur Road, Yamuna Nagar. 10,000 (viii) M/s AAR Square Enterprises, Vijay Khand, Gomtinagar, Lucknow 1,36,757 The AO could not send enquiry letters in the remaining loans for want of complete addresses. In view of these facts, the AO held that the entire amount of Rs. 29,05,343 should be treated as unexplained income of the assessee-company and was added under s. 68 of the IT Act." 21. With regard to the remaining loans, the AO could not send enquiry letters on account of lack of complete addresses. In view of these facts, the entire amount of Rs. 29,05,343 was treated as unexplained income of the assessee. 22. In appeal before the first appellate authority, it was contended that complete list o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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