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TMI Blog2014 (11) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerns i.e. trading of Sony products and trading of ITC products was too marginal and merits to be accepted being fall in market trend especially, where the assessee has maintained complete stock records vis-à-vis purchases, sales, opening stock and closing stock - In the absence of any evidence found to establish that the assessee had made any sales outside the books of account and the stock being completely tallied, there was no merit in the addition. In the absence of any defects being pointed out in the books of account maintained by the assessee merely because there was a fall in the GP rate as compared to the preceding year and the nature of the trade being carried on by the assessee being sale and purchase of gold jewellery, where the rates of gold had increased, there was no meir in the rejection of books of account and the estimation of profits – Decided in favour of assessee. Valuation of the closing stock – Held that:- The CIT(A) has rightly given a finding that the AO had not controverted the valuation of the stock shown in the books of account which was valued on the basis of the last purchase price - no evidence of out of books investment in stock-in-trade had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 22,46,288/- made on account of difference in valuation of closing stock. 2. On the facts and circumstances of the case, the Ld.CIT(A) has ignored the fact that during assessment proceedings, assessee could not clarified how the stock shown in the books of accounts was correctly valued as per the method regularly followed by it and the stock shown to the bank was on estimate basis. 3. The appellant craves leave to amend, add, alter the above grounds, if felt necessary, later. 5. The brief facts of the case are that the assessee was engaged in trading in Sony electronic items, confectionary, snacks and distributor of Indian Tobacco Co. During the year under consideration, the assessee had originally filed return of income declaring income of ₹ 29,92,971/- on 29.09.2009. Thereafter, the assessee filed a revised return declaring total income of ₹ 30,21,556/-. During the course of assessment proceedings, the Assessing Officer noted that the assessee had shown gross profit and net profit @ 1.58% and 0.94% respectively on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less rates and incurred the loss. The explanation of the assessee was that it was not regularly trading in the said items and hence suffered the loss. However, the said loss was compensated and over all position was profit was the claim of the assessee. The Assessing Officer rejecting the same, disallowed loss of ₹ 2,88,500/-. The assessee had also advanced certain amount to M/s. Sarvo Kabra, an associate concern and on the said advances, no interested was charged. The said fact was reported in audit report and the Assessing Officer asked the assessee to explain as to why interest relatable to such advances should not be disallowed. The Assessing Officer disallowed a sum of ₹ 12,996/- on this account. 7. The CIT(A) after considering the submissions of the assessee and remand report submitted by the Assessing Officer, noted that the plea of the assessee vis- -vis fall in GP rate was on account of no government Tender sale during the year was without any documentary proof and the assessee having failed to explain the fall in GP, the addition on this account was held to be warranted. It was further noted by the CIT(A) that the GP in the case of trading of ITC Dealershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation of the CIT(A) was that Assessing Officer has not controverted the valuation of the stock given in the books of account which according to the appellant has been valued at the last purchase price. No evidence of out of books investment in stock-in-trade has been brought on record by the Assessing Officer. The appellant has stated that valuation given to the bank was on estimated basis. The CIT(A) also noted that the stock statement submitted to the bank does not indicate rate but it only shows quantity of items and their value. Such variation in stock list given to the bank and stock as per the books of account, as per the CIT(A), could not be the basis for making the addition on account of stock. Thus, the addition of ₹ 22,46,288/- was deleted by the CIT(A). 8. As regards other addition of trading addition of ₹ 16,04,408/- was confirmed by the CIT(A). But further addition such as addition of ₹ 1,40,440/- on account of NP rate and ₹ 2,88,500/- on account of disallowance of trading loss was held to be not warranted. The addition made on account of disallowance of interest of ₹ 12,996/- was upheld by the CIT(A). 9. The assessee is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was fall in GP, there was no merit in any trading addition. 12. The learned Departmental Representative for the Revenue however, placed reliance on the order of CIT(A) in respect of the issue raised in the assessee s appeal. The learned Departmental Representative for the Revenue placed reliance on the order of the Assessing Officer and pointed out that since there was the difference in the valuation of stock which in turn was hypothecated to the bank, addition was warranted in the hands of the assessee. 13. The learned Authorized Representative for the assessee in respect of the issue raised in Revenue s appeal placed reliance on the order of the CIT(A). 14. We have heard the rival contentions and perused the record. The assessee vide grounds of appeal No.1 and 2 has raised the issue against rejection of books of account under section 145(3) of the Act and estimation of profit by applying GP rate resulting in addition of ₹ 16,04,408/-. The assessee is carrying on three lines of business i.e. trading in food grains, trading in electric items i.e. dealer of Sony products and trading in ITC products. The assessee claims that it was maintaining three sets of books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de any sales outside the books of account and the stock being completely tallied, we find no merit in the aforesaid addition. 15. The Hon ble Gauhati High Court in the case of Aluminium Industries (P) Ltd. Vs. CIT had held that merely because the profits were low in the instant year was not material to justify addition of profits in the absence of any finding recorded about any serious defects in the maintenance of the books of account. 16. The Chandigarh Bench of the Tribunal in the case of Babu Jewellers Vs. ITO in relation to the addition made in trading account observed as under: 12. The Hon ble Punjab Haryana High Court in CIT vs. Om Overseas (2009) 315 ITR 185 (P H), have laid down the proposition that in the absence of any specific defect being pointed out in the books of account, there is no justification for the rejection of accounts and making the addition by applying the high GP rate than the one declared by the assessee. 13 14. The Hon ble Gauhati High Court in the case of Pyarelal Mittal vs. Asstt. CIT (2007) 211 CTR (Gau) 512 : (2007) 291 ITR 214 (Gau) held that where the method of accounting followed was not faulty and there was no suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was on estimate basis. The learned Departmental Representative for the Revenue has failed to controvert the said findings of the CIT(A). Accordingly, we find no merit in the addition made by the Assessing Officer and the grounds of appeal raised by the Revenue are dismissed. 19. The last issue remaining in the present appeal is with regard to the disallowance of interest of ₹ 12,996/- which has been raised by the assessee vide ground No.3. The said advance was given to a sister concern and the explanation of the assessee was that it had not utilized any interest bearing funds to make the said advance as it had sufficient interest free funds available to it. Further, the Assessing Officer has failed to bring on record any nexus between the interest bearing funds and the advances made by the assessee. In the absence of the same, we find no merit in the said disallowance of interest being attributable to such advances made by the assessee. We direct the Assessing Officer to delete the addition of ₹ 12,996/-. The Ground of appeal No.3 raised by the assessee is allowed. 20. In the result, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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