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TMI Blog2014 (1) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... not given any basis - The withdrawal of Rs. 1,12,000/- shown by the assessee for the purposes of house hold expenses, appears to be reasonable considering the size of the family - The Assessing Officer was not justified in making the addition on account of house hold expenses and the ld. CIT(A) was not justified in confirming the action of the Assessing Officer - Decided in favour of assessee. Low G.P. rate declared - Held that:- Ld. CIT(A) directed the Assessing Officer to apply the G.P. rate on the basis of the G.P. rate of immediately two assessment years and the maximum G.P. rate i.e. 7.19% declared by the assessee and accepted by the department in the assessment year 2007-08 was directed to be applied - The view taken by the Ld. CIT(A) was justified - Decided against Revenue. Unexplained cash credit - Held that:- The assessee not only filed the confirmation from the cash creditors, whose accounts were squared up but also produced them before the Assessing Officer who recorded their statement - The Assessing Officer could not bring any material on record to substantiate that the credits were from undisclosed income of the assessee - Following Kanhaiyalal Jangid Vs. ACIT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve accepted the house hold expenses declared by the assessee, the addition sustained by the Commissioner of Income Tax (Appeals) under house hold expenses is illegal and against the law looking to the order of Hon'ble Tribunal in case of Pyarelal. 6. That the Commissioner of Income Tax (Appeals) rightly deleted the addition made by the Income Tax Officer arbitrarily and against the law. 3. At the first instance, the learned counsel for the assessee argued ground No. 4 relating to the sustenance of addition of Rs. 19,353/- out of the expenses. 4. The facts related to this issue in brief are that the Assessing Officer during the course of assessment proceedings, noticed that the assessee had shown following expenses in the profit and loss account:- 1. Telephone Expense Rs. 11,552/- 2. Shop Expense Rs. 08,613/- 3. Refreshment Expense Rs. 26,085/- 4. Petrol Expense Rs. 73,439/- 5. Travelling Expense Rs. 57,922/- 6. Car Wash Rs. 15,922/- Total Expenses Rs. 1,93,533/- The Assessing Officer disallowed 20% of the above expenses by giving a general observation that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were justified. However, the Assessing Officer was not satisfied from the explanation of the assessee and estimated the house hold expenses @ Rs. 12,000/- per month totalling to Rs. 1,44,000/- and proposed to make addition of Rs. 57,000/-. However, no addition was made by stating that it is to be telescoped with the trading addition. 12. Being aggrieved, the assessee carried the matter to the ld. CIT(A), who confirmed the action of the Assessing Officer. Now the assessee has filed the cross objection. 13. The learned counsel for the assessee reiterated the submissions made before the authorities below and in his rival submissions, the learned D.R. supported the orders of the authorities below. 14. We have considered the submissions of both the parties. In the present case, it is noticed that the assessee explained that a sum of Rs. 1,12,000/- was withdrawn for house hold expenses, however, the Assessing Officer considered only Rs. 87,000/- for the purposes of house hold expenses and excluded the expenses of Rs. 25,000./-, which were incurred by the assessee for the education of the children. In the present case, the Assessing Officer while estimating monthly expenses @ Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be received. 4. There is difference in the quality of the goods mentioned in the purchase bills and sales bills. The Assessing Officer applied the G.P. rate of 17.22%, which was declared by a comparable case of M/s Tarsem Kumar Company, Sriganganagar. 19. Being aggrieved, the assessee carried the matter to the Ld. CIT(A) and submitted that he had maintained complete quantitative tally of opening and closing stock, copy of the same was furnished to the Ld. CIT(A). As regards to the difference in the balance of the parties from whom goods were purchased, it was submitted that at the time of assessment proceedings, copies of the confirmation could not be received by the assessee and time was sought for filing the same. However, the Assessing Officer passed the assessment order without providing the opportunity even when the case was not getting time barred. The assessee furnished confirmation before the Ld. CIT(A) and explained that the difference was due to different method of accounting of discounts and that the parties made the entries of discount at the time of issuance of bills whereas the assessee entered the discount at the time of payment. The Ld. CIT(A), however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the question may arise that the opportunity was allowed to the assessee but in fact mere opportunity is not sufficient but it must be a clear opportunity to demonstrate against the proposed action. As clear from the fact that even after the specific demand the learned A.O. has supplied the facts only to the extent which goes in his favour and so it cannot be said that the action of the A.O. is covered under the definition of Reasonable Opportunity. In the appeal of R.B. Shreeram Durga Prasad Fatehchand Nursing Dass Vs. Settlement Commission reported in (1989) 176 ITR 169, Hon'ble Supreme Court have held as under:- mere opportunity to make a submission is not enough, but it should be a clear opportunity so that the assessee can make an effective representation against the proposed action. In view of the above it is requested that the learned A.O. may please be directed to supply the desired informations to the assessee so that the necessary reply may be filed. Non providing the proper opportunity to the assessee to explain his case is not according to the sentiments of the law and the addition made on the basis of one sided view may please be cancelled. Here I would like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arsem Kumar Company is authorised distributor of M/s Siyaram Mills, a big brand, for two districts even then they could manage to sell the goods equal to the assessee whereas the assessee is dealing in the general goods that also in the open market. You will please appreciate that the policy of the assessee is to increase the turnover by charging the lower margin. One more observation is given by the A.O. on page 6 of the assessment order in which the A.O. has written that for earning the more profit the assessee has introduced bogus creditors and unsecured loans. In this regard, it is stated that from the above it appears that the learned A.O. trying to state that actually the profit of the assessee is low but to increase the same the assessee has introduced bogus creditors and unsecured loans. If it is true then at one hand the A.O. is saying that the assessee is declaring lower profit and on the other hand saying that the profit is increased by unfair means. In view of the above, it is requested that the addition made by the A.O. by applying the G.P. rate of 17.22% on the basis of the comparable case is not based properly. The assessee, by item wise details have shown that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) and submitted that the confirmation of all the creditors were filed and the statements were also recorded by the Assessing Officer except in one case, therefore, the assessee discharged his burden to prove the credits. The assessee also stated before the Ld. CIT(A) as under:- By filing the confirmations and presenting the creditors for statement the assessee has discharged his burden and now it was on the A.O. to bring some material on record to prove that these credits are from some undisclosed source of income of the assessee. Without establishing contrary it is not permitted in law to make addition u/s 68. The view of the assessee is supported by the judgment of the Hon'ble Rajasthan High Court in the case of Kanhaiyalal Jangid Vs. ACIT reported in (2008) 217 CTR 354 in which it was held by the Hon'ble court that assessee having filed confirmation from the creditor and having produced the creditor before the A.O. where the creditor affirmed advancement of loan to assessee, no addition u/s 68 could be made in the hands of assessee on the ground that the creditor could not satisfactorily explain the source of loan. 26. The Ld. CIT(A) after considering the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties are through the commission agent M/s B.K. agency, Surat and the assessee has send the letter to the agent for obtaining the new addresses of these parties. Later on 14.10.2011 the assessee has filed the new addresses of the 4 parties and shown his inability to about the address of the 5th party. After that the learned A.O. has completed the assessment on 31.10.2011 but in the meanwhile neither issued the new notice u/s 133(6) to these parties nor asked the assessee to file the confirmed copies of account of these parties. Had the A.O. asked the assessee to file the confirmations of these parties, the assessee would have filed the same. Any how if your goodself think it necessary now then the copies can be supplied by the assessee. Sir, first of all learned A.O. has issued the show cause for 5 parties whereas made additions for 8 parties. Regarding the addition of the rest three parties A.O. has not given any reason in the order. All these parties are the supplier of the assessee and the assessee is purchasing the goods from these parties. The assessee is purchasing the goods on credit basis. The assessee is maintaining the complete bills of the purchases from these parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee that proper opportunity was not provided, asked the assessee whether, the confirmed copies of accounts from the books of those parties could be provided at this stage. In response to the same, the assessee filed the copies of accounts from all the parties, which revealed that there were slight difference due to different system of accounting of discounts adopted by the assessee and the parties. 32. Ld. CIT(A) after considering the submissions of the assessee, observed that the addition of total amount outstanding to the credit of all the parties could not be added because the assessee was purchasing the goods from those parties on credit basis and sending the payment through banking channels, so it could not be said that those parties were not traceable or the total amounts shown in the name of those parties were bogus. He further observed that the Assessing Officer had no where established that those were the bogus parties or the amount shown in their names, were bogus. The Ld. CIT(A) was of the view that the provisions of Section 68 of the Act were not attracted to the amounts representing purchases made on credit. Reliance was placed on the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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