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TMI Blog2014 (1) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the addition of Rs.58,44,127/- made on account of low gross profit, after rejecting the books of accounts of the assessee. 3. In the cross-objection, the sole issue involved is that the ld.CIT(A) erred in upholding the disallowance of RS.20,04,133/- by invoking the provisions of section 40(a)(ia) of the Act, 1961 and further the assessee has raised the ground that in case the addition of Rs.58,44,127/- deleted by the ld.CIT(A) is restored by the Tribunal, then the addition of Rs.20,04,133/- on account of non-deduction of TDS cannot be sustained relying on the rejection with the books of accounts and, hence the same should be deleted. 4. Brief facts of the case are that the AO found that during the year under consideration as per Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of freight charges to the following parties:- (i) T.Hirachand - Rs.16,22,118 (ii) Chande Road Lines - Rs. 1,98,833 (iii) Mehul Roadways, Anmol Roadways, etc. - Rs. 1,83,182 Total - Rs.20,04,133 Therefore, by invoking the provisions of section 40a(ia) of the Act, disallowed the entire expenditure of freight of Rs.20,04,133/- and made addition of the same to the income of the assessee. 5. The assessee filed an appeal before the CIT(A). The CIT(A) observed that the contention of the assessee is that fall in the over all GP was on account of commencing own production for the first time during the year; the GP in job-work charges taken separately is 25.41% during the year, as against 21.09% in the preceding year; the fall in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ld.CIT(A) has not dealt with the objections of the AO while deleting the addition on account of low GP. He pointed out from the assessment order that the ld.AO has observed that the assessee has not produced complete set of books of account for verification and that the correctness and completeness of the books of account cannot be verified. The AO has further noted that the Audit Report in Form 3CD, the auditor has himself admitted in Col.28 of the report that no proper stock register has been maintained for stock. He further submitted that the AO has also observed that during the year, the assessee simultaneously carried out both the units of job work as well as own production and that assessee has not maintained separate sets of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of coal from outside and paid freight on the same. Coal is used in the process of cloth and the same is inevitable in job work as well as own production. However, in the books of account, the assessee has not debited any expense in relation to freight charges paid in respect of the coal used in job-works. Therefore, it was the submission of the ld.DR that the ld.CIT(A), without meeting the observations of the AO, was not justified in holding that all the books of accounts were produced before the AO and that fall in GP is explained to the attributable to commencing own production during the year and that the AO did not controvert this explanation of the assessee. 8. On the other hand, the ld.AR has argued that as per the provisions of IT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it has been provided that if the recipient of the amount shows the amount as its income and pays tax thereon, then no disallowance of expenditure can be made in the hands of the assessee. 9. We have heard the rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, the assessee is engaged in the business of process house and trading in cloth during the year under consideration. The AO rejected the books of account of the assessee and estimated gross profit at the rate 18.11% in place of 9.06% and thereby made addition of Rs.58,44,127/-. On appeal, the ld.CIT(A) after considering the explanation of the assessee deleted the addition made by the AO. 9.1. The ld.DR contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that proper books of account were either not maintained or not produced. Further, the ld.DR has submitted that on verification of accounts from various parties, only difference was found in respect of account of one party; namely, M/s.K.Bhavesh Textiles. As per the ld.DR, the assessee has shown less purchase of s.1,23,550/- from the said party and in place of the said party, the assessee has shown the said purchases from M/s.Ganesh Textiles. We find that it is not the case of the Revenue that the assessee has shown purchase at a less amount than the actual purchase made by it. Mere finding of the Revenue is that the assessee instead of showing purchases of Rs.1,23,550/- from M/s.K.Bhavesh Textiles has shown purchases from M/s.Gane ..... X X X X Extracts X X X X X X X X Extracts X X X X
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