9911796707
TMI Blog2014 (1) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... n the issues, the CIT (A) granted relief. The revenue is before us by taking the following grounds of appeal :- "1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.5,44,752/- made by the AO on account of low G.P. 2. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting addition of Rs.29,00,000/- on account of excess unexplained stock found on the date of survey on 20.2.2001 on a faulty logic that the excess stock is included in the closing stock as on 31.3.2001, as such inclusion in the closing stock as on 31.3.2001 does not explain the excess stock as on 20.2.2001. 3. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.6,00,000/- on account of unexplained investment in Plant & Machinery and factory building. 4. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.14,78,431/- on account of unexplained purchases / investments. 5. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.8,20,908/- on account of bogus expenses, 6. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of irregular method of accounting from which true profit cannot be deducted' etc. The A.O. did not record any finding to the above effects apart from mentioning that the G.P. rate has declined from 12.5% to 11.82% compared to other years. So, I cannot uphold the action of the A.O. in rejecting the books of accounts on this ground alone. 5.13 The A.O. has also mentioned that the appellant failed to produce documentary evidence for excess purchases and expenses shown in the new trading account drawn by him as on the date of survey i.e. 19.02.2001. I have perused the assessment records and looked into the appellant's submissions before the A.O. wherein the invoices for purchases and the purchase account for the period from 01.04.2000 to 31.03.2001 have been duly produced before the A.O. The A.O. has not recorded any specific finding to the effect that any of the purchases or expenses shown by the appellant are bogus in nature by conducting any enquiries in regard to the same. The appellant has reconciled the purchase account drawn as per audited accounts till the date of survey vis-à-vis the purchases reflected in the trading account prepared at the time of survey. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant from year to year, the closing inventory of stock is drawn at the end of the accounting year after physical verification which is subject to audit also. This stock has been correctly reflected in the manufacturing account and is duly supported by purchase of raw materials, cost of goods sold and actual turnover. So no adverse inference can be drawn in this respect which may result in rejection of books of accounts. I find considerable force in the arguments of the appellant. It is also noted that the A.O. has not brought any material facts to establish that the production of goods or turnover as reported by the appellant suffered from any defects and as a result, the closing stock inventory as declared by the appellant cannot be challenged in absence of any adverse finding supported by cogent reason. So this reason adopted by the A.O. to reject the books of accounts also cannot be sustained. I have also considered the judicial authorities quoted by the A.O. and the A/R of the appellant in support of their contentions. 5.15 The case of Action Electricals vs. DCIT (2002), 258 ITR 188 (Del) relied upon by the A.O. is different from the facts of the case of the appellant because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to fierce market competition and also that in the year under consideration, 8% deduction of M/s Bata India Ltd. has been taken as direct expenses as in the previous year the same has been taken as indirect expenses. In our considered view, this explanation of assessee explains the minor fall in the gross profit rate, therefore, we uphold the order of the CIT (A). This ground is dismissed. 5. In the ground nos.2 and 3, the issue involved is deleting the addition of Rs.29 lacs made on account of excess unexplained stock found at the time of survey and deleting the addition of Rs.6 lacs on account of unexplained investment in the plant and machinery and factory building. The ld. DR relied on the order of the AO and ld. AR relied on the order of CIT (A). The CIT (A) has deleted these issues as under :- "5.10 I have considered the above submissions of the learned A/R of the appellant and the facts brought out in the assessment order by the A.O. It is observed that as a result of survey u/s 133A conducted at the business premises of the appellant, excess stock of Rs.29,00,000/- was found over and above the stock reflected in the regular books of accounts and unexplained investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of explanation before him that the 'excess stock' was already included in 'closing stock' as on 31-03-2001 which had the effect of increasing the G.P. by the same amount of Rs.29,00,000/-. 5.11 As regards the 'unexplained investment' in 'plant & machinery and 'office building' of Rs.6,00,000/- surrendered during survey, the appellant explained before the A.O. that the same was included in the P&L A/c under the schedule 'other income' and the following journal entry was passed in the account : Factory Building : Dr. Rs.5,00,000/- Plant & Machinery: Dr. Rs.1,00,000/- To Indirect Income: Cr. Rs.6,00,000/- Thus, the surrender of 'unexplained investment' of Rs.6,00,000/- duly stands credited in the P&L A/c against which no expenditure has been debited in the P&L A/c. The A.O. failed to appreciate this point also and wrongly made an addition of Rs.6,00,000/- to the total income of the appellant as 'unexplained investment' u/s 69 of I.T. Act, 1961." "6. In this ground, the appellant has objection of Rs.29,00,000/- on account of alleged unexplained investment in stock. 6.1 While adjudicating in ground no.(i) & (ii), it has been already held that the excess stock of Rs.29,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss account and the action of AO has led to double addition which has been rightly deleted by the CIT (A). Keeping these facts in view, we find no merits in the ground nos.2 and 3 of revenue's appeal. 7. In the ground no.4, the issue involved is deleting the addition of Rs.14,78,431/- on account of unexplained purchases/investment made by the AO. The CIT (A) has dealt the issue as under :- "8.3 I have considered the above submissions of the learned account of the appellant and the facts revealed in the assessment order passed by the A.O. It is observed that the purchase was wrongly taken at Rs.3,49,64,390/- as arrived at by the A/R of the appellant in the trading account prepared by the survey party as on the date of survey i.e. 19.02.2001, because the purchase returns were incorrectly added to the purchase figure. The appellant submitted the purchase account as reflected in the audited accounts along with necessary evidences before the A.O. and this revealed that he purchase account drawn by taking into account purchases upto 25.01.2001 worked out as under : Purchase of Raw Materials : Rs.3,37,12,481.80 Purchase of Packing materials : Rs. 10,51,908.10 Rs.3,47,64,389. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controvert the finding given by the CIT (A) that the copies of the purchase invoices of raw material and packaging material was produced before the AO and even before the CIT (A). The AO has failed to establish that purchases shown till 19.02.2001 were having any discrepancy or included any bogus entries, therefore, the AO has wrongly recorded that assessee has failed to furnish the evidences with regard to the additional quantum of purchases reflected in the new trading account as on 19.02.2001. In view of these facts, we find no fault in the order of CIT (A) and we sustain the same on this issue. This ground is dismissed. 9. In the ground no.5, the issue is regarding the deletion of addition of Rs.8,20,908/- on account of bogus expenses. The CIT (A) has deleted this issue by holding as under :- "9.4 I have considered the above submissions of the learned A/R of the appellant and the facts mentioned in the assessment order by the A.O. It is noticed that the appellant incurred the expenses at Sl. Ns. 5 to 9 as noted in para 91 of this order in the normal course of business and the details of such expenses along with relevant accounts were furnished before the A.O. for examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any specific reason for making disallowance of such expenses apart from saying that the documentary evidences in support of such expenses were not furnished. As a result, I am unable to sustain the disallowance of Rs.17,428/- on account of 8% STD cost (BATA)." 10. After hearing both the sides, we find that the assessee has submitted details of the expenses before the AO. The AO has not made any enquiry to check the genuineness of these expenses. The AO disallowed only on the ground that necessary document evidences in support of such expenses could not be produced. However, there was no specific finding about non-accepting of such expenses. Since there is no specific finding of the AO with regard to any of the expenses to be bogus, we find no merits in this ground of revenue's appeal on this issue and we sustain the order of CIT (A) on this issue. This ground is dismissed. 11. In the ground no.6, the issue involved is deleting part addition made on account of bad debt written off. In the ground no.1 in cross objection, the sustenance of part addition is challenged. The CIT (A) has dealt this issue in paras 10 & 11 which read as under :- "10.5 I have considered the above submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. As a result, I direct the A.O. to allow the claim of bad debts written off in respect of the following debts:- a) M/s Seema Agencies : Rs.1,26,860/- b) M/s Dynasty International : Rs.1,55,556/- c) M/s Priyanshu Industries : Rs.3,42,893/- d) M/s Choti Hatti : Rs.3,42,,777/- Rs.9,68,086/- 10.7 As regards, the debt of Rs.2,00,000/- outstanding against M/s Dees Marketing, it has been submitted that the appellant paid Rs.2,00,000/- to this party for advertising on media of the appellant's products. But, unfortunately this party is absconding and the company is not able to recover this amount. Therefore, this expense is a business loss and the deductions should be allowed u/s 28 of I.T. Act for computing the business profit. 10.8 However, I am not convinced with the submission of the A/R of the appellant in this regard because this debt cannot be written off within the meaning of Section 36(1)(vi) read with Section 36(2) of I.T. Act on the ground that this debt was not taken into account for computation of income of any previous year. 10.9 The deduction u/s 28 also cannot be allowed treating the same as business loss unless the appellant could establish that all ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 12 to 15 of his order and CIT (A) has discussed this issue in para 11 at pages 21 to 28 of his order. The assessee has submitted copies of account of the parties. The explanation was also provided with reference to the difference in the account of Bata India. The copies of account were also submitted and the detailed explanation was also submitted before the AO which is placed at pages 171 to 173 of the paper book. In this explanation, the assessee has explained difference in all the 13 persons. The CIT (A) has deleted this addition by holding as under :- "11.4 I have considered the above submissions of the Ld. A/R of the appellant and the facts brought out in the assessment order by the A.O. It is observed that the A.O. noted certain discrepancies in the opening and closing balances of some parties (as highlighted in the assessment order) according to the books of accounts of the appellant vis-à-vis the books of accounts of such parties. During the course of assessment proceedings. The appellant furnished the necessary explanations against each such party by producing the respective ledger account and confirmation of accounts in most of the cases. The differences in open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant before 31.03.2000. However, the appellant credited the account of M/s Bata India Ltd. With the same amount on maturity of these hudis which was after 31.03.2000. This explained the discrepancy in the account balances of Bata India Ltd. & the appellant to a large extent. 11.6 Before me, the A/R of the appellant submitted the reconciliation of accounts of Bata India Ltd. As per the books of the appellant as incorporated in the submissions which clearly indicate that there is only a minor unreconciled difference of Rs.74,204/- which was shown as less recoverable from Bata India Ltd. However, the A.O. is at liberty to examine this point and take appropriate action in accordance with law to tax any undisclosed income for the relevant A.Y. relating to F.Y. 1999- 2000 in which the transactions actually arose. 11.7 Similarly there are difference of old opening Dr. Balance of Rs.2,765/- outstanding against M/s Benlon India Ltd. And of Rs.5,461/- Cr balance, in the case of M/s B.D. Trading Co. for trading transactions carried out in earlier year. I find no reason to tax such differences in old opening Dr./Cr. Balance which arose out of transactions in earlier years. 11.8 Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
