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TMI Blog2012 (7) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing the income of the appellant at Rs.90,00,378/-. 2. Without prejudice to the above and in alternative, the appellant begs to submit that the Ld. CIT (A) has erred in not allowing the benefit of set off of cash available as per the books amounting to Rs.28,44,815/- out of income disclosed during the course of survey. 3. Without prejudice to the above and in alternative, the appellant begs to submit that the Ld. CIT (A) has erred in making addition of Rs.14,01,186/- on account of excess stock. 4. The Ld. CIT (A) has erred in law and or on facts in estimating the GP @ 9% and thereby confirming the addition to the extent of Rs.13,48,592/-. 5. The Ld. CIT (A) has erred in law and/ or on facts in confirming the action of the A.O. in charging interest u/s. 234B of the Act. 6. The Ld. CIT (A) has erred in law and /or in facts in initiating the penalty u/s. 271(1)(c) of the Act. 4. Since the facts and issues involved in both the appeals are connected the appeals have been heard together and are being disposed of by a single order for the sake of convenience. 5. The assessee is a private limited company engaged in the business of processing of raw seeds of vegetable. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings wherein it was submitted that the disclosure made at the time of survey for the cash payments recorded in the diary also included payment of Rs. 28,44,815/- out of the cash in hand as per the books of accounts. The same was recorded in rough cash book but the entry in computerised books remained to be made. It was observed by CIT (A) that the AO had not discussed this submission in the assessment order. CIT (A) observed that on the date of survey no claim or mention regarding part of the payment being out of cash on hand in the books was made. Even after the survey and before filing the return of income i.e. in a duration of more than 8-9 months, no such intimation was given to the Department or the AO. The explanation that the payment was out of cash on hand in the books was not acceptable as it was considered to be an afterthought and lacking credibility by CIT (A). Apart from this it was observed by CIT (A) that the entries in the diary and the ledger accounts of the parties as per books, filed by the assessee did not match. He observed that the payment dates as per the diary were completely different from the payment dates in the ledger accounts. Even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956, Managing Director is defined u/s. 2(26) is a person who is a director with power of Management entrusted to him by virtue of an agreement with the Company or of a resolution passed by the Shareholders at the General Meeting or by the Board. The day to day management is entrusted to the Managing Director who can exercise powers of Management without referring to the Board. A Managing Director can not be equated with an ordinary director. As seen from the recorded statement it is stated that Shri Sharad Shah is a Managing Director and Shri Dharmesh Shah (Director), looks after the Accounts work. In light of these facts, the explanations made before us that the Directors were technical directors and were not aware about the financial matters does not inspire confidence. The Directors in reply to the question posed had stated that the amount was paid in cash to the creditors out of unaccounted income of the current year. No claim was made during the course of survey or even 8-9 months from the end of survey that the payments have been made out of the cash balance available as per books of accounts. This claim was made first time during the course of assessment proceedings vide l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of the directors which was taken on oath no mention has been made about the goods received on approval basis. 15. We have heard the rival contentions and perused the material on record. It is an undisputed fact that the survey party did not distinguish between the excess stock found and the stock as per the books of accounts as the entire stock formed a common pool found at the business premises of the assessee. It is also a fact that the assessee had furnished the details to the AO during the course of assessment proceedings but the same was ignored by the AO. Further, though CIT(A) accepted that the details furnished by the assessee before AO was not considered by him, he neither examined it at his end nor did he asked the AO to furnish his comments. In view of the facts, we remand this issue back to the file of the AO with a direction to allow the credit for the same if the contention of the assessee is found correct. This ground of the assessee is therefore allowed for statistical purposes. 16. The next ground is with respect to estimating Gross profit at 9% and thereby confirming the addition to the extent of Rs 13,48,592/-: 17. The AO noted that against the total s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 26-12- 2006, which was not examined by the A.O. on merits. At remand report stage also, despite specifically asking the A.O. to examine the submission on merits, it has not been done. Books of accounts were rejected by A.O. on the ground that payment to creditors were partly outside the books of accounts or there was excess stock found on the date of survey. However, rejection of books of accounts on such grounds does not justify complete ignoring of specific evidences filed, i.e. particular accounts such as radish red, onion bunch etc. showing the rates of purchase and sale of seeds, names and addresses of parties to explain fall in G.P. In the statement filed on 26-12-2006, loss of Rs.10.9 lakh is explained in the particular seed accounts namely red radish, onion, tuar and cattle feed. These accounts contained all details such as rates, names of parties etc. Details supplied by appellant were thus sufficient for making further verification. If the A.O. did not make further verification, the same cannot be held against appellant. Thus, loss to the extent of Rs.10.9 lakh, which contributed to the total G.P. fall stood explained and is accepted. However, no evidence regarding old ..... X X X X Extracts X X X X X X X X Extracts X X X X
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