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TMI Blog2006 (9) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... tification. It is not denied that the gross profit shown by the assessee at 13.58 per cent was better than gross profit shown at 13.33 per cent of the last year. None other defects in the books of account which could show either suppression of sales or inflation of expenses have been pointed out by the Assessing Officer. No doubt, the assessee had not produced or maintained the stock register. This itself could not be a ground for making an ad hoc addition of Rs. 20,000 without pointing out any specific defect or undervaluation of closing stock. No such enquiry was made by the Assessing Officer. Thus, we do not find any justification to interfere with the order of the CIT(A). The same is upheld and this ground of appeal is rejected. Disallowance out of telephone and travelling expenses - HELD THAT:- We modify the order of the CIT(A) and direct the Assessing Officer to disallow 1/7th out of telephone expenses alone. Similarly, the disallowance out of travelling and conveyance expenses @ 1/7th not exceeding the disallowance made by the Assessing Officer would meet the ends of justice. We modify the order of the CIT(A) and direct the Assessing Officer to restrict the disallowance to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er issued summons under section 131 to confirm whether such credits were genuine. One Sh. Arjan Dass in whose name an amount of Rs. 50,000/- was shown outstanding appeared before the Assessing Officer and stated that he has not given any loan to anybody during and before the financial year 2000-01. Summons Issued to Sh. Vipan Kumar and Smt. Kanchan Gupta were returned unserved . The Assessing Officer, therefore, held that such credits standing in the names of these persons for more than three years were not genuine and accordingly, made the addition. In case of one Sh. Ashok Mahajan, the summons issued by the Assessing Officer had not been returned unserved , but none appeared before the Assessing Officer on the date fixed for hearing. The Assessing Officer, therefore, treated the amount of Rs. 56,948/- standing in his name for more than three years as income of the assessee. As regards Sh. Dharamvir Gupta, the summons issued by the Assessing Officer could not be served for want of complete address. Here also, the Assessing Officer treated the amount as unexplained. Aggrieved, the assessee filed an appeal before the CIT(A). It was submitted before the CIT(A) that the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lances brought forward from the year 1995-96. No addition under section 68 could be made because such credits did not appear in the books of account of the assessee for the assessment year under consideration. Similarly, addition under section 41(1) could also not be made because no deduction or allowance in respect of expenses, loss or trading liability had been allowed in the earlier assessment years. Thus, we are of the considered opinion that the learned CIT(A) was justified in deleting the impugned addition. We confirm his order and reject this ground of appeal of the revenue. The next ground of appeal relates to deletion of disallowance of interest of Rs. 2,46,977/- being excess interest paid to depositors covered under section 40A(2)( b ) of the Act. The facts of the case are that the Assessing Officer observed that the assessee had paid interest @ 24 per cent to 16 persons covered under section 40A(2)( b ) of the Act. The Assessing Officer, therefore, restricted the deduction of Interest to 18 per cent and thereby made a disallowance of Rs. 2,46,977/-. 6. Aggrieved, the assessee impugned the disallowance in appeal before the CIT(A). It was submitted before the CIT(A) that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 for the assessment year 2001-02, dated 2-9-2005 and the Tribunal decided the same in favour of the assessee and against the revenue by recording following findings in para 6 of the order : 6. I have heard both the parties and carefully considered the rival contentions with reference to facts, evidence and material on record. The fact that the assessee had claimed interest @ 24 per cent and was allowed by the revenue in the assessment year 2000-01 has not been disputed by the revenue. Therefore, principle of consistency demanded that no addition in respect of the same should have been made for the assessment year under reference. Besides, this issue is squarely covered by the decision of the Tribunal (SMC), Amritsar Bench, in the case of M/s. Rimpy Processors (P.) Ltd. v. Asstt CIT Cir. 5, Amritsar ( supra ) where it was held in para 4 as under : 4. Having heard the rival submissions and perused the relevant material on record, it is noted that the assessee was paying the interest to these persons 24 per cent in the preceding assessment years as well. Page 173 of the paper book is a chart showing Interest to these persons @ 24 per cent in the preceding and succeeding years which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intained any stock register. Further, even auditors had mentioned in the audit report that details of closing stock have not been produced for verification. Thus, the Assessing Officer observed that the value of closing stock could not be correctly worked out in the absence of day-to-day quantitative details. Accordingly, the Assessing Officer made an ad hoc trading addition of Rs. 20,000/- to cover the possible leakage. 11. Aggrieved, the assessee impugned the addition in appeal before the CIT(A). It was submitted that the gross profit shown by the assessee at 13.58 per cent was better than gross profit shown of last year at 13.33 per cent. All purchases and sales were vouched and expenses were also supported by bills and vouchers. Thus, it was submitted that no addition was called for. Accepting the submissions of the assessee, the learned CIT(A) deleted the impugned addition. The Revenue is aggrieved by the order of the CIT(A). Hence, this appeal before us. 12. The learned Departmental Representative heavily relied on the order of the Assessing Officer. 13. The learned counsel for the assessee, on the other hand, relied on the order of CIT(A). 14. We have heard both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any justification for CIT(A) to reduce the disallowance to 1/10th. Thus, we modify the order of the CIT(A) and direct the Assessing Officer to disallow 1/7th out of telephone expenses alone. Similarly, the disallowance out of travelling and conveyance expenses @ 1/7th not exceeding the disallowance made by the Assessing Officer would meet the ends of justice. We modify the order of the CIT(A) and direct the Assessing Officer to restrict the disallowance to 1/7th. These two grounds of appeal are treated as partly allowed. 18. The next ground relates to the direction given by the CIT(A) to drop the penalty proceedings under section 271(1)( c ) of the Act. The facts of the case are that in the course of assessment proceedings, the Assessing Officer found an amount of Rs. 90,000/- being fresh credit in the capital account of the partners. It was submitted before the CIT(A) that the amount of Rs. 50,000/- was withdrawn from the saving bank account and Rs. 40,000/- was an amount surrendered as income in the Income-tax returns as miscellaneous income. However, the Assessing Officer observed that the assessee could not explain the source of miscellaneous income of Rs. 40,000/-. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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