9911796707
TMI Blog2012 (10) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... laring a total loss of Rs.1,15,634/-. Thereafter a survey under section 133A of the Act was conducted on 16-2-2007. Based on the survey the assessment was reopened. The following additions are made:- 1. Income from suppressed sale of yarn Rs. 38,18,131/- 2. Disallowance under section 40A(3) Rs. 9,56,300/- 3. Unexplained credit under section 68 Rs. 74,75,000/- The Assessing Officer has made a total addition of Rs.1,21,33,797/-. 4. Aggrieved, the assessee filed an appeal before the learned Commissioner of Income-tax(Appeals) challenging the addition of Rs. 38,18,131/- (income from suppressed sale of yarn) and Rs. 74,75,000/- (unexplained cash credit under section 68 of the Act). The assessee submitted before the Commissioner of Income-tax(Appeals) with regard to suppressed sale of yarn that for computing a quantitative tally of yarn produced and sold, the Assessing Officer adopted a norm of five units of electricity to produce one kilo of yarn. Based on this norm, the Assessing Officer calculated the production at 968552 kgs. of yarn. On the basis of this production, the Assessing Officer determined the suppressed quantity of sale of yarn at 553192 kgs., the value of which was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition is to be deleted. On the other hand, the learned departmental representative strongly supported the order of the Assessing Officer and submitted that the entire addition is to be sustained. 7. We have heard both the sides, perused the records of the case and gone through the orders of the authorities below. During the assessment proceedings the Assessing Officer has observed that the assessee has not maintained proper books of accounts and therefore he rejected the books of account and invoked the provisions of section 145(3) of the Act and the same was confirmed by the learned Commissioner of Incometax( Appeals). Thereafter, the Assessing Officer adopted the G.P. rate at 8.12% (average of 8.72% and 7.52%, admitted by the assessee for the previous year and the succeeding year). The assessee objected to the G.P. rate on the ground that comparison of GP rate of other companies in similar line of business quoted by the Assessing Officer could not be made for the reason that some of them dealt with synthetic yarn, bed sheet, etc., whereas the assessee dealt with cotton yarn. As per Form 3CD of the relevant assessment years, the gross profit to turnover ratio was 2.57% for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be treated as unexplained credit under section 68 of the Act. 11. The ledger account copy of the firm in the books of M/s.Gurusikh Trading Co. for the financial year 2004-05 showed no transactions. However, it was seen that the assessee has maintained ledger accounts admitting a balance of Rs.40 lakhs. This sum of Rs.40 lakhs was stated by the assessee as a security deposit received through M/s.Kalavathy Finance Ltd. The assessee's explanation was cross checked with M/s.Kalavathy Finance Ltd. And found that none of the transactions for the financial year 2004-05 related to M/s.Gurusikh Trading Co. Therefore, the sum of Rs.40 lakhs was proposed to be treated as unexplained credit under section 68 of the Act. 12. During the course of the assessment proceedings the assessee has submitted before the AO that the amount of Rs.74,75,000/- received from M/s.Kalavathy Finance Ltd. By cheques only. These amounts were transferred to M/s.Gurusikh Trading Co. and M/s.Rishab Trading Co. through journal entries on the instruction of broker M/s.Vijay Daima. As we have already explained, if such journal entries are to be disregarded, the credit would have stood in the name of M/s.Kalavathy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below. The case of the assessee is that the assessee has received Rs.74,75,000/- from M/s.Kalavathy Finance Ltd. The above amount was received by the assessee as a security deposit on behalf of M/s.Gurusikh Trading Co. of Rs.40 lakhs, Rishab Trading Co. of Rs.34,75,000/-, to whom the assessee is supplying fabric. The case of the AO is that the assessee has received these amounts from M/s.Kalavathy Finance Ltd., which is jot doubted. Only his objection is that there is no entry in the books of accounts of M/s.Kalavathy Finance Ltd. in respect of two parties, viz, Rishab Trading Co. and Gurusikh Trading Co. It is explained by the assessee before the AO that the amount received from M/s.Kalavathy Finance Ltd. through banking channel and these amounts were transferred to M/s.Gurusikh Trading Co. and M/s. Rishab Trading Co. through journal entries on the instruction of the broker M/s.Vijay Daima. However, the AO has not believed the explanation of the assessee. The addition was made by invoking section 68 of the Income-tax Act, 1961. Before the CIT(A) the assessee has submitted all the details and also explained the purpose for which this amount are received and also filed confirmatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to the conclusion that the unexplained investment in stock of 2,96,396 mtrs. x 5.50 = 16,30,178, as against the unaccounted investment estimated by the AO of Rs.38,73,263/-. The ld. CIT(A) discussed the issue in detail in his order in page 14 para 7.7. No material was brought to our notice that the calculation made by the CIT(A) is not correct. This ground of appeal raised by the assessee is therefore dismissed. 19. Another ground raised by the assessee is in respect of the addition of Rs.7,41,881/-. The facts in brief are that transactions with M/s.Neha Furnishings Ltd. of Rs. 7,41,881/- and with M/s.Gurusikh Trading Co. of Rs. 39,566/- were noticed. The Assessing Officer has observed that on an examination of both the sets of books of account of M/s. Neha Furnishing Pvt. Ltd.it was noticed that there was an entry dated 7-3-2006 under the caption 'purchase' for a sum of Rs. 7,41,881/- in the second set of book. The same is not found in the first set. The assessee did not produce any supporting evidence in this regard before the Assessing Officer. In respect of M/s.Gurusikh Trading Co. on examination of both the sets of books of account it was noticed that there was journal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced before us. Even before us nothing was submitted. We, therefore, find no reason to interfere with the order of the learned Commissioner of Income-tax(Appeals). Therefore, we confirm the order of the Commissioner of Income-tax(Appeals). This ground raised by the assessee is dismissed. 23. Insofar as Revenue's appeal in ITA No.1227(Mds)/2010 for the assessment year 2006-07 is concerned, the second ground of appeal raised by the Revenue is in respect of deletion of addition of Rs.7,49,503/-. 24. The facts in brief are that during the course of the assessment proceedings the AO has observed that in the books of account furnished in April, 2007 relating to the financial year 2005-06 the bills of purchase the sales produced certain discrepancies were found. The assessee firm was asked to clarify discrepancies in respect of Jayman Textiles Pvt. Ltd. of Rs.7,49,233/-. It was submitted before the AO that the books furnished to the department was actually the provisional books and that the audited books which was subsequently furnished on 17-7-2007 did not reflect the above discrepancies. For the difference pointed out in respect of JaymanTextiles the assessee has inserted an entry of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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