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TMI Blog2012 (7) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the partners Rs.7,90,000 (c) Suppression of the gum utilised for the manufacture of corrugated boxes u/s. 69C of the Act Rs.7,94,420 (d) Cash credit in the name of Priyanka Gadodia Rs.10,75,000 (e) Difference in the value of closing stock Rs. 82,229 3. On appeal against the said additions made by the assessing officer, the CIT(A) gave partial relief in relation to the additions made by the assessing officer, on account of (i) excise duty payment; (ii) consumption of gum; and (iii) difference in closing stock, but sustained the other two additions in toto. Aggrieved by the order of the CIT(A), assessee is in second appeal before us. 4. First effective grievance of the assessee in this appeal is with regard to addition of Rs. 7,90,000 being credits in the capital accounts of the three partners, Shri Rajiv Garg, Shri Ajay Garg and Shri Piyush Gadodia of Rs. 1,00,000; Rs. 3,50,000 and Rs. 3,40,000 respectively. 5. Learned counsel for the assessee, reiterating the contentions urged before the lower authorities submitted that two of the three partners have advanced money from their personal savings, whereas the third partner, Shri Piyush Gadodia has rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , besides genuineness of the transactions of introduction of capital investment, cannot be doubted, in the facts and circumstances of the present case. In support of these contentions, reliance is also placed on the following decisions- (a) Addl. CIT v. Unique Builders [2004] 2 SOT 589 (Kol.) (SMC) (b) Asstt. CIT v. S.S. Pharmaceuticals (P.) Ltd. [2003] 87 ITD 119 (All.). (c) Rohini Builders v. Dy. CIT [2001] 117 Taxman 25 (Ahd.) (Mag.) (d) Smt. Neerudevi Kothari v. ITO [2001] 116 Taxman 224 (Jodh) (Mag) 6. The Learned Departmental Representative on the other hand, strongly supported the order of the CIT(A) and submitted that the assessee has not discharged the onus that lies on it to prove the credit-worthiness of the partners and the genuineness of the transactions, in relation to the investments claimed to have been made by them. 7. We have considered the rival submissions and perused the orders of the lower authorities and other material on record. We have also gone through the written submissions of the assessee on this issue. We find that since the amounts in question have been brought into the firm by the partners themselves, there is no dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is submitted that even though the CIT(A) has relied on certain decisions in support of his conclusion against the assessee, the ratio of those decisions is not applicable to the facts of the present case inasmuch as in those cases, the Revenue has discharged the onus of proof that lies on it in turn by making necessary investigation, whereas in this case, the Department has not discharged its onus to reject the explanation given by the assessee to substantiate the claim made by it. In doubting the source of funds of the creditors in the bank from which cheques were issued to the assessee, and making a doubt a ground for disbelieving the credit, the CIT(A) is demanding the source of source. It is submitted that the assessee has discharged the burden of proving its source by giving the PAN number of the creditor and furnishing copies of relevant accounts, the assessing officer did not carry out any enquiry to disbelieve the source of funds of creditor in her bank account. In the circumstances, he submitted that the impugned addition made by the assessing officer and sustained by the CIT(A) is not justified. In support of his contentions, reliance is placed on the decisions of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,520 kgs. was of pasting gum. He noted that assuming that pasting gum of 1574 kgs. was utilised for manufacturing boxes, the sales of which amounted to Rs.1,41,91,193, on that basis, the consumption of gum for sales of Rs.1,81,84,487 in the subsequent year would be 2,016 kgs. But, such consumption is shown at 51,296 kgs. He noted that the same would be the position, if it is presumed that corrugation gum was utilized for manufacturing during the year. He further noted that it cannot be accepted that gum of a different variety was used and starch, which do not find place in the purchase details, was utilized in the manufacture of boxes. Taking into consideration, the consumption of gums in the preceding two assessment years and such consumption in the succeeding year and comparing the same with the turnover shown during those years, he arrived at average consumption figure of 40,478 kgs. He held that gum of that quantity was utilsied for manufacturing boxes by the assessee during the current previous year. Since consumption of gum is shown in the books at 1,574 kgs., he held that the assessee has made further consumption of gums at 38,904 kgs. (40,478 kgs. - 1,574 kgs.) during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission regarding production of equivalent of 23,18,498 3 ply boxes during the previous year and working out a value of Rs. 2,02,122/-towards consumption of gum for producing the said quantity of boxes and the resultant unexplained amount at Rs. 1,79,126/-are concerned, the same have no merit and cannot be accepted, since the appellant has not produced any supporting material / documents for such comparison and moreover, it has not maintained / kept any quantitative details as admitted in the tax audit report filed with the return. In my view, having regard to the ration of the value of consumption of gums to the total turnover during the earlier two asst. years and after considering the entire facts and circumstances of the case, it would be fair and reasonable to estimate the cost of consumption of gums during the current previous year at Rs. 5,00,000/-. Since the appellant has shown consumption of gums in its books at Rs. 32,141/- only, the difference of Rs. 4,67,586/-, shall be added to the income of the appellant towards excess consumption of gums made during the previous year." Aggrieved by the addition sustained by the CIT(A), assessee is in second appeal before us. 15. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lower authorities. We have also gone through the written submissions of the assessee on this issue. We find that the addition made on account of consumption of gum was purely on estimate basis. The assessee has submitted elaborate analysis and working before the CIT(A), and copy thereof is also furnished before us in the paper-book at pages 55 and 56 thereof. Considering totality of facts and circumstances of the case and the submissions of the assessee before us, we find that the addition sustained by the CIT(A) is on higher side, and it would be reasonable and meet the ends of justice, if the addition on this count is restricted to a round sum figure of Rs.3 lakhs, as against Rs. 4,67,586 sustained by the CIT(A). Assessee's grounds on this issue are allowed in part. 18. The next effective grievance of the assessee relates to the addition of Rs. 82,229 made on account of difference in the valuation of the closing stock. 19. Facts in brief in relation to this addition are that the assessee in the return, while valuing the closing stock of kraft paper, gum and stitching wire, has adopted the cost price of these items at Rs. 12.25, Rs. 17.63 and Rs. 37.80 respectively. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of CIT v. K.G. Khosla (supra)". 22. The next ground of the assessee is with regard to the additional ground taken by the assessee claiming deduction under S. 80-IB of the Act. The same, with its sub-grounds read as follows: "6(a) The learned CIT(A) is not justified in holding that the additional ground in regard to the deduction u/s. 80IB is liable to be rejected; the learned CIT(A) is not justified in barring substantial justice on purely technical grounds. (b) The learned CIT(A) ought to have held that the principles of res judicata are not applicable to the income tax proceedings and that the assessee failed to make claims u/s. 80IB in the earlier assessment years cannot be a bar to make the claim in this year. (c) The learned CIT(A) has erred in holding that the assessee has not furnished all the relevant particulars of the relevant year for claiming deduction u/s. 80IB of the IT Act. 23. Learned counsel for the assessee submitted that the CIT(A) has rejected the assessee's claim for deduction made before him on two grounds. In the first place he held, by distinguishing the decision of the Hon'ble Bombay High Court in the case of CIT v. Western Rolling Mills (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee for not making claim for relief under S.80IB of the Act. There is no such valid reason in the instant case for not having made the claim either in the return for the year under appeal or in any of the earlier years. The CIT(A) has discussed this issue in para 10.5 of his appellate order. We find no infirmity in the reasoning given by him. We accordingly uphold the order of the CIT(A) in this behalf and reject the grounds of the assessee on this issue. 26. The next ground of the assessee in this appeal reads as follows- "The learned CIT(A) should have accepted the plea of telescoping of the alleged unexplained expenditure with the cash credits sustained." 27. We have heard the parties and perused the order of the CIT(A) on the issue involved in the above ground of appeal. We find that the CIT(A) has dealt with this issue and rejected the plea of the assessee for telescoping in the following manner- "10.4........It is only when sales or profit in case of an assessee is estimated, then the assessee may make a claim for telescoping the addition on these accounts against credits. But it cannot make a plea for telescoping unexplained expenditure incurred during a previ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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