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TMI Blog2015 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... is the position, this cannot be added because liability still exists. In such circumstances, we delete the addition. - Decided in favour of assessee. Disallowance under section 40A(3) - Held that:- We find that the AO has rejected the books of account and estimated the profit and these purchases are included in the estimated sales of ₹ 1,57,84,783 /-. Once the books of account are rejected and profit is estimated on the disputed turnover/purchases, no further disallowance can be made by invoking the provisions of section 40A(3) of the Act - Decided in favour of assessee. - IT APPEAL NOS. 1881 (KOL.) OF 2009 & 133 (KOL.) OF 2010, C.O. NO. 20 (KOL.) OF 2010 - - - Dated:- 13-8-2014 - MAHAVIR SINGH AND SHAMIM YAHYA, JJ. For The Appellant : K.L. Bhowmick, Advocate For The David Z. Chawngthu, CIT, DR ORDER Mahavir Singh, Judicial Member - These appeals by assessee and revenue, and Cross Objection by assessee are arising out of common order of CIT(A)-XXXIII, Kolkata in Appeal No. 112/CIT(A)-XXXIII/Wd-1,Hal/08-09 dated 28.08.2009. Assessment was framed by ITO, Ward-1, Halida u/s. 144 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 145(3) of the Act and for that detailed reasoning have been given in the assessment order. The CIT(A) also confirmed the action of AO rejecting the book results based on sound reasoning. The assessee has not challenged the rejection of book results and accepted the same as it is. The AO after rejecting the book results considered the total turnover of the assessee at ₹ 1,55,40,533/-, eventually which was enhanced by CIT(A) at ₹ 1,57,84,783/-, as admitted by assessee, and directed the AO to apply gross profit rate in terms of the direction vide para 3.3 as under: 3.3. It may be pointed out here that during the course of appeal proceedings the A/R submitted that the total turnover of the assessee was ₹ 1,57,84,783/-. This was claimed to include income from repair with spare parts amounting to ₹ 15,05,000/. This shows that the amount of sales included in the original disclosed turnover of ₹ 42,05,763/- included Mobile electric/ goods sales of not just ₹ 12 lakhs as claimed by the assessee to justify the higher disclosed gross profit rate. Even if it is assumed that the total repair with spare part was included in the disclosed turnover it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the same is supportive of the order of CIT(A). Hence, the same is also dismissed. 6. The second issue raised by revenue is against the order of CIT(A) deleting the addition made by AO of RIP at ₹ 1,39,941/- as unexplained investment. For this, revenue has raised following ground no.2: 2. That the unadjusted profit should be negative (-Rs.4,59,222/-), instead of positive (Rs1,57,614/-) as worked out by the Ld. CIT(A). Hence the Ld. CIT(A) has erred in deleting the addition made treating the RIP's of ₹ 1,39,941/- as unexplained investment and 2nd appeal is suggested on this ground also. 7. We have heard rival submissions and gone through facts and circumstances of the case. We find that the CIT(A) has only telescoped the RIP investment of ₹ 1,39,941/- against the left out of unadjusted profit of ₹ 1,57,641/-. The CIT(A) has allowed telescoping by observing as under: It is seen from the said letter that it no where mentions that the RIP's have been purchased from funds given as loan. It only mentions that the RIPs have been placed as security against loan. If the margin money for the loan is to be provided by the bank itself then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Bishnu Priya Mobile = ₹ 17,840/- (2) Rudra Enterprise = ₹ 18,250/- (3) Neosa Elec (P) Ltd. = ₹ 46,479/- (4) Several Small parties = ₹ 24,107/- Total ₹ 1,06,676/- Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO. Aggrieved, now assessee is in appeal before us. 11. We find that these trade creditors/sundry creditors exist in the Balance Sheet of the assessee and there is no write off made by the assessee or no claim made by the assessee. Once this is the position, this cannot be added because liability still exists. In such circumstances, we delete the addition and allow this issue of assessee's appeal. 12. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO by invoking the provisions of section 40A(3) of the Act. For this, assessee has raised following ground no.2: 2. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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