9911796707
TMI Blog2013 (11) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchases and sales were furnished and no discrepancies, whatsoever, was noticed in the same and the addition of RS.1,50,00,000/- has been made purely on surmises and conjectures. (c) That the Authorities below were not justified to invoke the provisions of section 145(3) of the Income Tax Act without pointing out any defect in the books of accounts or vouchers or other records and the Authorities below were not justified to proceed to make lump sum trading addition of RS.1,50,00,000/- to cover the alleged possible leakage. 1(a) That the Authorities below were not justified to make addition of Rs.23,43,565/- u/s 40A(3) of the Income Tax Act on the basis of cash found during the survey on 29.04.2008 which was relevant to A. Y. 2009-10 and not A. Y. 2008-09, the year under appeal, ignoring the detailed explanation regarding reconciliation of cash found with reference to cash balance as per the books of account. (b) That the Authorities below were not justified to make addition of Rs.63,771/D+Rs.84.702/- + RS.27,250/- aggregating to RS.175,273/- u/s 40A(3) of the Income Tax Act being cash payments towards capital expenses and not claimed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars Amount in Rs. As per return of income Amount in Rs. As per trial balance Difference with reference to the trial balance in Rs. Sales 750295400 748074147.96 +2221252.04 Purchases 736464263 73885163.40 -2387390.4 Closing Stock 89166223 89206002.85 -38668,75 Scrap sale 1087924 1093092 -5157 Profit and loss from share investment 64680336 65200546.45 -520210.45 From the above chart it is clearly evident that there is a difference between the sales purchases and closing stock booked by the appellant in its books of accounts and shown in the trial balance. This shows that the books of accounts maintained by the appellant do not reflect correct affairs of its business. iii) The appellant has shown gross profit @9.03% as against 20.21 % in A.Y. 2006-07 and 12.95% in A.Y. 2007-08. Thus, there is a huge drop in the gross profit as compare to earlier years. The appellant has not submitted any' plausible reason for such a huge decline in the gross profit. Therefore. the books of accounts of the appellant were not found reliable. iv) It was also seen that appellant was not maintaining quantitative details of purchase, sales a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The submission made by the appellant before Assessing Officer as well as before me is not addressing the defects and deficiencies found in the books of accounts of the appellant at the time of survey in cash found and differences in trial balance. "Similarly, the increase in expenses was exceptionally high which was not found justifiable. The appellant'-s contention that number of stores had increased from 20 to 64. It is seen that most of the stores were opened in the month of July, August, September and October 2007 and the increase was exceptionally high in expenses. Therefore, increase in number of stores cannot justify increase in expenses under the head legal and professional, travelling and conveyance. miscellaneous expenses, advertisement and entertainment, selling and distribution etc. It is also seen that cash deficit found during the course of survey was claimed to be utilized for giving advance Lo farmers and to Sh. Munish Hemrajanai, MD in F. Y. 2006-07. However. there were no records in the books of accounts about such payment or cash in F. Y. 2006-07 and 2007-08.This clearly suggest that appellant's books do not reflects correct state of affairs and same cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the authorities below and deleted the addition made in this regard. Hence, he submitted that the considering the above ITAT order the present appeal of the assessee needs to be treated as covered and hence, allowed. 7.1 Ld. Departmental Representative on the other hand submitted that every year the case depends upon the facts of the case. Just because the tribunal has allowed the assessee's appeal for A.Y. 2009-10 it does not signify that assessee's appeal for asstt. year 2008-09 is also covered. He supported the orders of the authorities below. 8. We have carefully considered the submissions and perused the records. We find that Tribunal for asstt. year 2008-09 has allowed the assessee's appeal after adjudicating as under:- "7.3 We have carefully considered the submissions. We note that assessee has maintained proper books of accounts and the system of accounting and management under the ERP system. It has been duly submitted by the assessee that the observation that there is difference in value of opening and closing stock is not correct, the same is evident from the audited balance sheet of the assessee company. Assessee also produced reconciliation of opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butted the shortcomings noted in the appellate order. In our considered opinion, the assessee has maintained proper books of accounts and there is no case for invoking section 145(3) of the I.T. Act. We further find that case laws relied upon by the Ld. Departmental Representative were with regard to rejection of books in the particular facts of the case. Hence, they are not applicable here. Therefore, we set aside the order of the lower authorities and decide the issue in favour of the assessee." 9. First we deal with the issue of cash deficit found and expenditure disallowed for violation of section 40A(3). We find that the cash deficit in this case was found during the course of survey which was carried out at the business premises by the assessee on 29.4.2008. We note that regarding the cash deficit found during the course of survey, assessee has submitted before the Tribunal in ITAT's order for A.Y. 2009-10 that there was no case of any cash deficit and reconciliation statement were duly furnished to the AO. However, the AO has not disputed the correctness of the same. This aspect was noted by the tribunal and Tribunal observed that assessee has claimed that there was no case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified the payments which were exceeding Rs. 20,000/- which have been said to be incurred in contravention of section 40A(3). Further, as regards, the other expenditure on electric items & air conditioners, we find considerable cogency in the assessee's counsel submission that these related to capital purchase and hence, cannot be treated as payments in violation of section 40A(3). Thus, we find that there is no case of addition of section 40A(3) with regard to purchases that were made on account of capital items. However, we find that for making any addition in this regard it was incumbent upon the lower authorities to make out the detailed list of expenditure which was found to be in violation of section 40A(3). This aspect has been treated in a sweeping manner by noting that most of the payments were exceeding Rs. 20,000/- and hence in contravention of section 40A(3). 10.2 In this regard, ld. Counsel of the assessee submitted that as noted by the lower authorities these payments were outside the books of accounts. Hence, he pleaded that when the payments were made out of the books, then there is no question of payment in contravention of section 40A(3). We find that this aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at orders of the authorities below on this issue is silent with regard to the submissions of the assessee on this aspect. Hence, we note that the point taken by the authorities below that assessee's books are not reliable as there is difference between the trial balance impounded and accounts shown by the assessee is not sustainable. 13. Now we come to the contention of the AO that gross profit has gone down to 9.03% against 20.21%in A.Y. 2006-07 and 12.95% in A.Y. 2007-08. Thus there is huge drop in the gross profit as compared to earlier years. AO has observed that assessee has not submitted any plausible reason to such decline in the gross profits. Therefore, the books of accounts of the assessee were not found reliable. In this regard, we note that the decline in profit as compared to the previous assessment year is only 3.92%. This cannot be considered to be a huge drop in gross profit. 13.1 The finding of the AO and the LD. CIT(A) that assessee has not submitted any plausible reasons for such a huge decline in the gross profit is also not correct. The assessee has given a detailed reasoning before the AO and also before the LD. CIT(A). These have not been controverted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned for chain of stores. That all the purchases, sales, transfers to individual stores from Head Office etc. are automatically recorded in the financial books as well as stock records. That the Company has system of verification of physical stock with respect to inventory as per the records on periodical basis. That these were duly verified by the Survey Party of the Department through Survey U/s. 133A of the I.T. Act. Since the main scope of survey was the verification of stock and in this case no discrepancy was noted by the survey party of the department. That all purchases and sales were duly vouched with the supported bills and vouchers. That the assessee has not pointed out any item of purchase and sales which were not supported with vouchers and bills. That in fact the AO has completed the assessment on the basis of the details furnished and did not require assessee company to produce the books of accounts and accordingly the AO has rejected the books of accounts without examining the same. That the sales and purchases were as per VAT returns and is a matter of record. That the theft and shop lifting in the departmental stores is a common practice and is prevalent not only i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncrease in expenditure is a natural outcome. This aspect of the submissions has not been controverted by the authorities below. Without considering or commenting upon the assessee's submissions, in this regard, it has been concluded by the AO and the LD. CIT(A) that assessee's books of accounts are not properly maintained and hence they were liable for rejection. This in our considered opinion is not sustainable. 16.2 In the background of the aforesaid discussion, we find that assessee has given proper explanation to all the shortcomings and deficiencies noted by the AO. These submissions have been made before the AO as well as LD. CIT(A). The submissions of the assessee have not been countered by the authorities below. In this view of the matter, we find that the reasons for rejection of books of accounts by the authorities below are not cogent and hence, not sustainable. 16.3 Now we come to the basis of lumpsum addition of Rs. 1.5 crores made by the AO. In this regard, assessee has duly submitted before the Ld. LD. CIT(A), that the AO has rejected the books of accounts u/s. 145(3) of the I.T. Act which is without any basis or justification or even without examination of the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
