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TMI Blog2012 (9) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... the survey operation carried out that the purported closing stock which may have been in the hands of the buyers already or were to be booked as sales to be shown against the purchases has already been part of the books of account would at best result into bringing into tax the purported margin on the gross in the sales when the main ingredient leading to computation of gross rate of margin is purchase, sales and stock. Therefore, addition on account of valuation of closing stock, bogus liabilities, dis-allowance u/s.40A(3) and investment in purchase corresponding to unaccounted sales are rightly deleted. The Books of account could not be changed as per the finding of the Assessing Officer. It is considered fair that the rate of gross profit margin at 13% on the purported suppressed sales as have been computed and confirmed by the CIT(A) to be restricted at 12% to meet the ends of justice – Decided partly in favor of assessee. - ITA No.210/CTK/2012 & ITA No.287/CTK/2012 C.O.No.24/CTK/2012 (filed by the assessee) - - - Dated:- 29-6-2012 - Shri K.K. Gupta, and Shri K.S.S. Prasad Rao, JJ. For the assessee: Shri J.M. Pattnaik, AR For the Department: Shri A. Bhattacharjee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase ratio and has treated such unexplained investment relatable to unrecorded purchases of Rs.40,87,365 as deemed income u/s.69 of the I,T.Act. To this extent, the finding of the Ld. Authority in deleting such unexplained investment is grossly erroneous. 03. Whether the Ld. First appellate Authority was justified to ignore the application of statutory provisions of section 40A(3) for cash payment for Rs.3,58,474 to the different parties in respect of purchase of various goods by the assessee. 4. The assessee has filed Cross objection on the appeal filed by the Revenue, supporting the impugned order of the learned CIT(A) to the extent he deleted the additions. 5. The brief facts as brought on record as supported by the contentions of the rival parties hereto on the respective submissions are that the assessee is a proprietorship concern dealt with retail sale of wooden furniture by directly purchasing from wooden furniture houses on wholesale basis and also purchase wooden furnitures from Carpenters. The assessee has also a workshop for repairing of furnitures. The appellant has two shop rooms i.e. 1) A.D. Market, Link Road, Cuttack 2) Dhabalgiri, Jajpur and one work s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of stock Rs. 6,18,100.00 (iv) Excess assets over liability Bogus liability (Sundry Creditor) by invoking Sec-133(6) of IT Act Rs.7,37,566.00 (v) Bogus liability (Sundry creditor) by invoking Sec-133(6) of the IT Act Rs.14,53,129.00 (vi) Disallowance U/s. 40A(3) of the IT Act payment in shape of cash by violating Rule-6 DD of the IT Rule. Rs.3,58,474.00 (vii) Not disclosing interest income on fixed deposits and interest on refund amount Rs. 49,218.00 Rs.65,46,640.00 5.1. Aggrieved, the assessee appealed before the Commissioner of Income-tax. After considering the facts and circumstances of the case, deleted the addition to the extent of Rs. 12,25,245 (investment in purchases corresponding to unaccounted sales), Rs.6,18,000 (violation of closing stock), Rs.7,37,566 (bogus liability) Rs.14,53,129(bogus liability) Rs.3,58,474 (disallowance U/s. 40A(3) and confirmed the addition in respect of non-disclosure of interest, thereby allowing the appeal partly. But, he upheld the rate of gross profit adopted by the A.O. 5.2. The learned AR of the assessee submitted before us that the learned CIT(A) has upheld th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the percentage of the gross profit rate which the learned CIT(A) has confirmed therefore, he ought to have given reason for deletion of the other expenses disallowed by holding that estimation on the basis of sales suppressed found at the time of survey ought to have been incurred by claiming these expenses. He, therefore, prayed that as per the grounds raised by the Assessing Officer before the Tribunal may be considered in its entirety. 7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we are inclined to agree with the findings of the learned CIT(A) to the extent that it was the survey operation which resulted in finding by the learned CIT(A) that the suppressed sales are not undisclosed income of the assessee. The technical accounting of the closing stock and the advances received from the prospective buyers whether could be shown in the closing stock when the period for purchase and sales exceeded one year was not accepted by the Assessing Officer. The learned CIT(A) therefore thought it fit on the basis of facts brought on record in his order in pursuant to the survey op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ap of an year is without any basis should be confirmed at the returned income and accepted by the Assessing Officer and learned CIT(A) at 13%. We do not find any infirmity in the contention thereof insofar as when the facts have been deliberated upon by the respective authorities at length, there was no reason assigned to enhance the rate of gross profit margin specifically when the learned CIT(A) was liberal enough to delete the other additions on the very facts and circumstances which the AO had considered for enhancing the rate only for these sales and not for the others. We consider it fair that the rate of gross profit margin at 13% on the purported suppressed sales as have been computed and confirmed by the learned CIT(A) to be restricted at 12% to meet the ends of justice. We direct accordingly. In this view of the matter, the learned DR who has tried to correlate the expenditures deleted after having estimated the income becomes an exercise in futility insofar as the expenditures were disallowed for the impugned Assessment Year and the sales were computed suppressed after a gap of 11 months. There is no link between the two therefore cannot be considered in isolation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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