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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 ..... sed on the details furnished by the assessee before CIT (A), CIT (A) was satisfied with the explanation of loss to the extent of Rs 10.9 lacs that contributed to the fall in GP. The assessee however did not provided satisfactory explanation for increase in direct expenses neither before CIT(A) nor before us. - Order of CIT(A) upheld. - I.T.A. No. 626/AHD/2009, I.T.A. No. 707/AHD/2009 - - - Dated:- 25-5-2012 - SHRI G.C.GUPTA, SHRI ANIL CHATURVEDI, JJ. By Revenue : Shri, B.L. Yadav, Sr. D.R. By Assessee : Shri S.N. Divatia. ORDER PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. These are the two cross appeals one filed by the Revenue and the other filed by the assessee against the order of Ld. CIT (A)-IV, Baroda dated 29-12-2008 for the Assessment Year 2004-05. 2. The Revenue s ground of appeal reads as under:- On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in scaling down the addition from 12.39% to 9% and allowing relief of Rs.16,38,667/- overlooking the fact that book results were rejected during the assessment proceedings on the A.O s finding that repayments were not completely accounted for in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Return of Income the additional income attributable to survey declaration was shown at Rs 51,44,583/-. The A.O. thus observed that the disclosure made during the course of survey was not fully shown in the Return of income and expenses had also been adjusted against the disclosure. The AO held that as no proper explanation was furnished by the assessee with respect to the payments of Rs 75,99,192/- found in the diary during the course of survey, the same was added to the total income. Aggrieved by the action of AO in considering the entire amount as income the assessee preferred appeal before CIT (A). 6. Before CIT (A) it was submitted by the Assessee that the reasons for disclosure of Rs 51,44,583/- were made before the AO but the same were ignored. The Assessee further stated that the cash balance available as per the computerised books of accounts on the date of survey was Rs. 29,39,815/- out of which Rs 28,44,815/- was utilised for making payment to the creditors noted in the diary found at the time of survey. The assessee thus submitted that instead of Rs 75,99,192/- admitted to have been paid to the creditors outside the books, only Rs 51,44,583/- was actually paid out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The A.R. therefore urged that the addition made by A.O. be deleted. In the alternative, it was submitted that instead of making the full addition of Rs. 75,99,192, the same should be restricted to the peak amount. 9. On the other hand the learned D.R. submitted that the AO was right in treating the entire amount as undisclosed income. It was submitted that in the statement of the directors which was taken on oath, the Directors had admitted that the payments were made to the creditors in cash out of the income of the current year. It was also stated that the statement that the amount was paid out of the cash in hand as per the books of accounts is an after thought as nothing was stated after the survey and before filing the return of income. 10. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the statement of Directors namely Shri Sharadbhai Shah and Shri Dharmesh Shah were recorded u/s 131 on the date of survey. From the copy of the English translation of the statement recorded and placed at page 47 on the paper book, it can be seen that Shri Sharad Shah is the Managing Director of the Company and Shri Dharmesh Shah is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs 14,01,186/- on account of excess stock: 12. During the course of assessment proceedings, the Assessee filed a letter wherein it was submitted that the stock of goods included goods worth Rs 9,98,400/- received from Pragneshkumar Mafatbhai Patel on approval basis and were lying with it when the survey was carried out. It was therefore contended that the same should be excluded from the total income. The AO did not discuss the assessee s claim. The CIT (A) also rejected the claim of the assessee for the reason that no mention of it was made by the Directors in the statement given at the time of survey. CIT(A) was of the view that the claim of the kind made by the assessee lacks authenticity and it is very easy to obtain an accommodation entry later from an agriculturist. Aggrieved by the decision of CIT (A) the Assessee is in appeal before us. 13. The Ld. A.R. submitted that the translation of the confirmation received from Pragneshkumar Patel is filed on page 57 of the paper book alongwith the list of farmers from whom the goods were received. It was submitted that in the absence of any evidence that the explanation of the assessee is wrong, the explanation of the assessee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order, also mentioned in this order in para-3 above. Showing of additional income disclosed during survey under a particular head in the return of income is not a valid reason to reject the books of accounts. That there was difference between the actual stock found during the survey and the stock worked out on the basis of books is also not a valid reason to reject the books of accounts. However, recording of lesser amount of money repaid to the depositors in the books of accounts, as compared to the actuals does reflect on the aspect of proper maintenance, completeness and correctness of the books of accounts. Thus, to a certain extent conditions for invocation of section 145 (3) i.e. the accounts being incorrect existed. Due to the diary found during the survey, appellant had to declare additional income. Assessing Officer s observation is that normal trading profits were therefore understated to offset such additional income. For comparing G.P., additional income disclosed during the survey cannot be considered, since it is a single year phenomenon distinguishable from regular treading results. After excluding survey disclosures, G.P. in A.Y. 2004-05is lower, i.e. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess where the fluctuations are normal in the type of business which the assessee is into and therefore the rate of Gross profit could not therefore be the same as in past. He therefore urged that the total addition be deleted. 21. On the other hand, the Ld. D.R. submitted that since the assessee has failed to furnish any verifiable evidence regarding lowering of GP, addition made on this account by the AO be sustained. 22. We have heard rival contentions and perused the material on record. It is an undisputed fact that the assessee submitted to AO the detailed explanation with respect to fall in GP. However the same was not examined by the AO. Based on the details furnished by the assessee before CIT (A), CIT (A) was satisfied with the explanation of loss to the extent of Rs 10.9 lacs that contributed to the fall in GP. The assessee however did not provided satisfactory explanation for increase in direct expenses neither before CIT(A) nor before us. In view of the totality of the facts, we are in agreement with the conclusion reached by the CIT (A) and feel that there is no need to interfere with his decision. In the result this ground of appeal of the assessee and the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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