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TMI Blog2012 (10) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... onal books - Subsequently audited books of accounts were furnished before AO after rectify the discrepancy – AO’s ground was that only after these discrepancies are pointed out and subsequent changes were made – Held that:-The entire explanation of the assessee has held that section 68 can be invoked only if some amount of money credited and there is no explanation or the explanation of the assessee is false. No amount was credited to the account of the assessee. The assessee submitted audited books of account subsequent to the mistake pointed out by the AO. Therefore invoking of section 68 by the AO is not correct. Issue decides against revenue - ITA Nos.1207,1208,1226 & 1227(Mds)/2010 - - - Dated:- 13-7-2012 - SHRI N.S.SAINI AND SHRI V.DURGA RAO, JJ. Department by : Shri Shaji P Jacob, IRS, CIT Assessee by : Shri T.Banusekar, F.C.A. ORDER PER V.DURGA RAO, JUDICIAL MEMBER.- These cross appeals by the assessee and the Revenue relating to the assessment years 2005-06 and 2006-07 arise out of the orders dated 30-4-2010 passed by the Commissioner of Income-tax(Appeals)-II, Coimbatore. 2. First we shall take up the appeal filed by the assessee for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and also the teething trouble faced at the time of restarting the unit after a long gap when the unit was lying idle has to be taken note of while computing the production of yarn and consumption of electricity. The Assessing Officer allowed a production loss for around 1200 hours for all the above factors in para No.7 of his order. The Assessing Officer passed the assessment order based on four assumptions: (i) Number of units consumed (4842760 units), (ii) Consumption is calculated at 5 units per kg. of 40 s yarn, (iii) Sale rate is adopted at Rs. 85/- and (iv) the gross profit is adopted at 8.12%. The learned Commissioner of Income-tax(Appeals), after considering the entire facts and circumstances of the case and the submissions of the assessee, held that as per Form 3CD of the relevant assessment year the gross profit to turnover ratio was 2.57% for the assessment year 2005-06 and 7.52% for the assessment year 2006-07 respectively. Considering the issue in totality the Commissioner of Income-tax(Appeals) was of the view that it will meet the ends of justice if the GP rate is adopted at 5% (being the average of 2.57% plus 7.52%), instead of 8.12% adopted by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l filed by the Revenue in ITA No.1226(Mds)/2010 for the assessment year 2005-06, the Revenue has raised ground Nos.2 and 3 with regard to the GP addition adopted by the CIT(A) at 5%. In this regard the learned departmental representative strongly supported the order passed by the Assessing Officer. 9. We have heard both the parties. This ground of appeal raised by the assessee against the order of the learned CIT(A) adopting the GP rate at 5%, the facts and the reasons discussed in detail in the appeal filed by the assessee for the same assessment year and we confirmed the order of the learned CIT(A). We, therefore, dismiss this ground of appeal raised by the Revenue. 10. The fourth ground of appeal raised by the Revenue is in respect of the claim of Rs.69,97,391/-. The facts in brief are that during the course of the assessment proceedings the AO has observed that the ledger account copy of the firm in the books of M/s.Rishab Trading Co. for the financial year 2004-05 showed nil opening balance. The total debits in the account is Rs.47,491/- and the total credits is Rs.6,21,000/-, resulting in a debit balance of Rs.5,73,509/-. However it was seen that the assessee had been mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the AO has made an addition of Rs.74,75,000/- under section 68 of the Act. 14. On being aggrieved, the assessee carried the matter in appeal. The assessee has submitted before the ld. CIT(A) that the amount of Rs.74,75,000/- received from M/s. Kalavathy Finance Ltd. through cheque on behalf of Rishab Trading Co. Gurusikh Trading Co., the payment is genuine and the identity of the person from whom such cheques were received is not in dispute. Therefore, the assessee has discharged the onus cast on him and the addition made in this respect is not warranted. The learned CIT(A) after calling the remand report from the AO and after examining the details, observed that ledger folio of Kalavathy Finance Ltd. in the assessee s books of accounts also contain this receipt details. As the assessee had agents for its business activity and those agents procured the orders from various parties on behalf of the assessee, the assessee cannot be expected to account for the receipts (security deposit from such parties in their respective names). The accounting of the receipts from the source(M/s.Kalavathy Finance Ltd.) on behalf of the agents is sufficient. With the above observation the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal raised by the Revenue is dismissed. 17. In the result the Revenue s appeal is dismissed. 18. Next we will take up the assessee s appeal in ITA No.1208(Mds)/2010 for the assessment year 2006-07. The facts in brief relating to the addition of Rs.16,30,178/- are that the assessee did not maintain proper stock records. The AO was adopted the same basis of stock valuation as per the assessee s submission on 24-12-2007. During the appellate proceedings impounded materials were perused and from that it could be noticed by the CIT(A) that the total sale of fabric during the relevant assessment year was 48,03,596 mtrs. However, the AO adopted a figure of 5774446 mtrs. This required correction. Consequently the working will be as follows: The amount of fabric converted from 563400 kgs of yarn is (as submitted in assessee s letter before AO on 24-12-2007) (at the conversion rate of 8/kg (i.e.) 5,63,400 x 8) 4507200 mtrs The fabric sold as per the ledger folio 4803596 mtrs. Difference 296396 mtrs. Rate adopted as in assessee s submission/ Asst.Order/Remand Report Rs.5.50/metre (Sale value @ Rs.12-/ - conversion charges @ 6.5 per mtr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s.Senthil Mills in the books of M/s.Naamusee Traders. The assessee even failed to file confirmation letter before the Assessing Officer, from M/s.Neha Furnishings Pvt. Ltd. and M/s.Gurusikh Trading Co. nor obtained copy of assessee s ledger folio in their books of account. Accordingly, the AO made an addition of Rs.7,41,881/-. 20. During the course of appellate proceedings the assessee s counsel admitted that no invoice was produced before the Assessing Officer in respect of the transaction involving M/s. Neha Furnishing Co. and M/s.Gurusikh Trading Co. He also submitted that the assessee did not press the ground in respect of the addition of ₹ 39,566/- relating to M/s.Gurusikh Trading Co. Even during the course of appellate proceedings the assessee did not produce supporting evidence either in the form of invoice or subsequent payment details. The learned Commissioner of Income-tax(Appeals) confirmed the view taken by the Assessing Officer in respect of M/s.Neha Furnishings Ltd. and M/s.Gurusikh Trading Co. and consequently the addition of ₹ 7,49,233/- was sustained. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. 21. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the books earlier, but adjusted during the course of auditing accounts. These invoices are from limited companies incorporated under the Companies Act having a corporate form and the transactions are genuine. The AO has not disproved the transaction and also not held that the purchases are bogus. These transactions are not cash transactions coming within the scope of section 68 of the Act. The journal entry passed in the account of the third party is not a cash entry but a general entry which cannot be considered for invoking section 68. The ld. CIT(A) after considering the entire explanation of the assessee has held that section 68 can be invoked only if a sum, (i.e., an amount of money) found credited and there is no explanation about the source or the explanation is false. In the present case no cash receipt was involved and section 68 has no application. 25. On being aggrieved, the Revenue carried the matter in appeal before the Tribunal. 26. The learned DR supported the order of the AO. On the other hand the learned counsel for the assessee strongly supported the order passed by the ld.CIT(A). 27. We have heard both the sides, perused the records and gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X
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