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TMI Blog2013 (8) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenses claimed can disallow a part of expenses after recording finding of facts. He has every right to call for explanation and in view of non explanation he is empowered to make reasonable disallowance keeping in view the facts and circumstances of each case - Assessing Officer is directed to obtain the vouchers/bills of these expenses and ascertain the genuineness of the same and disallow amounts under these heads if any on a reasonable and authentic basis - Decided in favour of Revenue. - I.T.A. No.1310/Del/2010 - - - Dated:- 19-7-2013 - Shri R. P. Tolani And Shri T. S. Kapoor,JJ. For the Appellant : Shri Bhim Singh, Sr. DR. For the Respondent : Shri Ashwani Taneja, Advocate. ORDER Per TS Kapoor, AM:- This is an appeal filed by the revenue against the order of Ld CIT(A) dated 28.2.2010. The grounds raised by the revenue are as under:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in holding the rejection the books of accounts u/ s 145(3) invalid disregarding the fact that the manufacturing results shown by the assessee firm were not accurate and the numerous discrepancies were detected by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal. 2. The brief facts of the case are that the case of the assessee was selected for scrutiny. During assessment proceedings, the Assessing Officer after observing manufacturing process of assessee who is in the business of manufacturing of soap had arrived at the conclusion that books of accounts were not reliable and therefore he rejected the books and made the following additions:- 1. Rs. .22,19,007/- on account of fall in GP ratio from 13.52 to 11.96%. 2. Rs. .28,82,006/- on account of suppression of production. 3. Rs. .13,79,544/- on account of improper documentation/non availability of documents on account of freight, octroi and cartage. 4. Rs. .5,77,944/- out of rebate expenses being equal to 1/5th of total expenses in the absence of proper vouchers. 5. Rs. .4,95,629/- out of wages being 1/4th of total expenses in the absence of vouchers. 6. Rs. .3,50,.182/- on account of Dalali expenses in the absence of documentary evidence. 7. Rs. .1,27,366/- on account of wrapping expenses being 1/4th of total expenses in the absence of supporting bills. 8. Rs. .1,38,635/- being repair maintenance expenses being 1/4th of total expenses in the absence of support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere fact that profits were low compared to the earlier year is not a circumstance or material to justify an estimate in the circumstances of the case and the books of accounts could not be rejected on the ground that they did not disclose the true profits for the year in question. (i) Pt. Bros. vs CIT 26 ITR 159 (P H) (ii) CIT vs K.S. Bhatia 269 ITR 257 (P H). 6 ITA No1310/Del/2010 Keeping in view the above discussion, the A.O.'s action in effecting the manufacturing addition of RS.22,19 ,007/- being without merits on both facts and law, stands cancelled. Suprression of production: "I have carefully considered the submissions of the Ld. AR. and perused the order of assessment. I tend to concur with the contentions of the Ld. AR. that since the AO. coul~ not find any defect in the books of accounts and vouchers, trading practice accepted in the earlier years by her predecessors could not be but accepted. On identical basis, the additions on account of the yield were made in the earlier years both in the appellant's own case and the sister concern, M/s Puneet Udyog, which were finally settled in favour of the appellant by the Ld. Jurisdictional Tribunal. The issue having be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment records and I find that there is nothing on record which may lead to the alleged disallowance under this head. The expenditure has been accepted as a routine trading practice exercise by the prudent businessman like the present assessee. I have again reexamined the details and vouchers of all expenses under the head "Dalali" and find no defect in them, duly audited as they are, without any dispute or challenge to their authenticity on the records. Therefore, these cannot be disallowed u/s 37(1), as no business can be carried on without such expenditure. Therefore, the arbitrary disallowance of Rs. 3,50,182/- stands deleted. Wrapping Expenses:- "I have carefully considered the submissions of the Ld. A.R. and perused the order of assessment. It is found that on records there is no evidence which may establish the AR's allegation that the counsel of the assessee had made such admission. Thus the whole finding of the AO being perverse and incorrect, and the disallowance being purely adhoc, has no bags to stand upon, and hence it is deleted. Repair Maintenance Expenses:- "I have carefully considered the submissions of the Ld. A.R. and perused the order of assessment. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. Therefore, the order of Ld CIT(A) in respect of these additions needs to be upheld. 8. The Ld DR on the other hand, relied upon the order of Assessing Officer and argued that findings in respect of one year cannot be applied to another year as under the provisions of Income Tax Act, each year is a separate year and rule of res judicata do not apply to income tax proceedings. He further argued that the findings of the Tribunal for earlier years cannot be applied to this year as the Hon'ble Tribunal had decided on the basis of facts and circumstances of that year. Therefore, he argued that Ld Assessing Officer has rightly made the disallowance. 9. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that in the assessment year 2005-06 and 2006-07 the Assessing Officer has rejected the books of accounts by discussing manufacturing process and items involved in the manufacturing after downloading from internet. The relevant findings of Assessing Officer are as under:- "In view of the above facts it is clearly made out that the manufacturing results shown by the assessee are not accurate as the output ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances being same, respectfully following the ITAT order, we are also of the opinion that books of accounts were wrongly rejected and addition on account of suppression of production was wrongly made. In view of the above, the ground No.1 3 of appeal are dismissed. 13. As regards ground No. 2 relating to addition on account of fall in GP ratio, we observe that Assessing Officer did not find any discrepancy in the submissions of assessee regarding increase in prices of raw material and decrease in prices of finished goods. He did not point out any defect in the stock register or in the prices of raw material and finished goods as claimed by the assessee. Therefore, in our opinion, the Ld CIT(A) has rightly deleted this addition on account of fall in GP rate. In view of the above, ground No.2 is also dismissed. 14. As regards ground No. 4 to 7, we observe that Assessing Officer had made the addition as the assessee had not produced proper vouchers and bills in support of expenses claimed by him, Therefore, the Assessing Officer held that genuineness of the expenses was not proved and therefore a part of expenses were disallowed. The Ld CIT(A) without making any finding of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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