9911796707
TMI Blog2014 (11) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... account of unaccounted commission on the sales. CIT(A) has deleted the addition. 2. Now the revenue is in appeal by taking the following grounds of appeal: 1. "The order of the ld. CIT(A) is erroneous and contrary to facts and law. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 1,23,31,637/- made by the AO on account of unaccounted of consignment sales. 2.1The ld. CIT(A) ignored the finding recorded by the AO and the fact that the assessee itself had conceded during the assessment proceedings that the income in question has not been included in the profit & loss account. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 20,39,828/- made by the AO on account of unaccounted commission received by the assessee. 3.1The ld. CIT(A) ignored the findings recorded by the AO and the fact that the assessee itself has conceded during the assessment proceedings that the income in question has not been included in the profit and loss account. 4. The appellant craves leave to add, to alter, or demand any ground of the appeal raised above at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. However, the AO is not entitled to make a pure guess & make estimation without reference to any evidence or any material at all. There must be something more than mere suspicion to support such addition. The Hon'ble Supreme Court has reconfirmed the earlier stand in the case of CIT vs. K.Y. Pilliah & Sons (1967) 64 ITR 411 (SC), where it has been decided that any lump sum add back to the trading result if found justified must be done in proper exercise of discretion objectively & judiciously on the basis of relevant material. Regarding the 'AO being not satisfied about the correctness or completeness of the assessee's accounts, the Calcutta High Court's judgment in the case of Ashoke Refractories (P) Ltd. vs. CIT (2005) 279 ITR 457 is relevant. In the said case, the Hon'ble High Court held that in order to reject the accounts, the AO has to come to an opinion that the income cannot be property deduced from the accounts so maintained. In order to arrive at such conclusion, it must be shown that the AO has taken into consideration relevant factors and not omitted to consider the material before him. 3.4 The above scope of the provisions of section 145 conclusively establishes th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee reconciled the purchases booked by M/s Jainsons with the sales booked by the assessee, which is ignored by the AO. The AO has neither rejected the explanation nor commented adversely thereon. Though the AO has referred to some differences in the parties' accounts, these were never brought to the notice of the assessee for explanation/reconciliation. In any case, it is observed that the discrepancies pointed by the AO are fully reconcilable. The reconciliation would be as under: Amount (Rs.) Purchase booked by Jainsons 3,77,66,309/- Less: Consignment sale by Jaintex to Jainsons 7 5,01,762/- 3,02,64,547/- Less: Sales Tax not included in sale 5,96,183/- Sale booked by Jaintex Apparels Pvt. Ltd. 2,96,68,364/- 3.6 The AO has wrongly assumed that the commission @ 15% might have been earned on purchased goods. As pointed out by the appellant, the commission is on consignment sales, which does not tantamount to presumption of purchase. Moreover, there are two variable rates of commission, one on regular consignment sales and other on discount sales. The rate of 15% was on discount sales, as will be evident from the letter dated 24.1.2003. The assessee has given the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esa's Oil Mills vs. State of Kerala (1970) 76 ITR 365 and by the Assam High Court in the case of Tolaram Daga vs. CIT (1966) 59 ITR 632. Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable and incorrect. The AO has to prove satisfactorily that the books of accounts are unreliable or incorrect or incomplete before he can reject the accounts and this can be done by showing that important transactins are omitted or if proper particulars and vouchers are not forthcoming or the accounts do not include entries relating to a particular class of business. When a return is furnished and accounts are put in support of that return, the account should be taken as the basis for assessment. They should not be rejected because they are complicated. The procedure of the AO is of judicial nature and in making the assessment he should proceed on judicial principles. If evidence is produced by the assessee in support of its return it should be accepted unless it is rebutted by admissible evidence and not by mere hearsay. 3.9 Thus for all these reasons and as the assessee has produced s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has already been filed and is available at pages 46 and 47 of the Paper Book." 6. After considering all the aspects of the case, we find that assessee was regularly employing the system of accounting as per the Accounting Standard. The AO was not justified and rejecting the books of account by holding that the correctness and completeness of the account was not satisfied. The addition for consignment sales not included in the turnover of the assessee is against the guidelines issued by the Institute of the Chartered Accountant's of India. The goods received on consignment basis belongs to consigner and assessee was entitled for commission thereon. Keeping these facts in view, we find no merits in this ground of revenue's appeal. Hence, the same is dismissed. 7. In the ground no. 3 the issue is with regard to the deletion of the addition of commission worked out on unaccounted sales as held by the AO. Since in the earlier para we have confirmed the deleting of the addition made on unaccounted consignment sales as held by the CIT(A), therefore, this ground for unaccounted commission on the consignment sales becomes infructuous. Keeping these facts in view this ground of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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