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TMI Blog2015 (9) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio. Another submission of the ld. A.R. that due to typographical error the closing stock in quantitative terms of the raw material has been shown at 82,458 kg seems to be correct when seen in the light of the submission of the quantitative details which were submitted to the A.O. On perusing the statement it is seen that the closing stock of yarn is 57,369.865 kg whereas the closing stock which is erroneously shown as 82,458 kg. The mistake in quantitative terms has been reconciled by the ld. A.R. by demonstrating that the closing stock should have been derived after considering the sale of yarn of 25,088 kg which is also reflected in the profit and loss account. Before us, Revenue has not brought any material on record to controvert the submissions of ld. A.R. A.O has compared the gross profit with the net profit and computing the working of closing stock with the incorrect quantity and thereby making the addition therefore in the present case is uncalled for and therefore we are of the view that no addition on account of closing stock is called for. We thus direct its deletion. - Decided in favour of assessee. Disallowance on account of weaving majuri expenses - Held that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity of hearing to the Assessee. - Decided in favour of assessee in part. - I.T.A. No. 33/AHD/2010 - - - Dated:- 28-8-2015 - SHRI RAJPAL YADAV AND SHRI ANIL CHATURVEDI, JJ. For The Appellant : Shri Tushar Hemani For The Respondent : Shri D.C. Mishra, Sr. D.R. PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. This appeal filed by the Assessee is against the order of CIT(A)-II, Surat dated 04.09.2009 for A.Y. 2006-07. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a partnership firm stated to be engaged in the business of manufacturing of grey cloth. Assessee filed its return of income for A.Y. 2006-07 on 29.12.2006 declaring total income at Rs. Nil. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 31.12.2008 and the total income was determined at ₹ 21,58,020/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 04.09.2009 granted partial relief to the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us and has raised the following grounds:- 1. On fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he under valuation of stock at ₹ 27,38,931/- and enhanced the trading result by ₹ 27,38,931/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who confirmed the action of A.O by holding as under:- 6. I have carefully considered the findings and the observations of the AO on one hand, and the written submission of the A-R on the other. I have also examined the asst. records in the presence of the then AO who framed the asst. order. Firstly, I find that the return of Income and the audit report is placed on top of the file, whereas, it should have been the first document in the file and hence, at the bottom, on the basis of which the asst. proceedings would have been initiated by the issue of notices u/s.l43(2)and 142(1) and the questionnaire. It thus appears that the file has been tampered with. Secondly, a copy of the written submission allegedly furnished before the A.O which has been enclosed to the written submission in appellate proceedings is undated, whereas, in the asst. records it is shown to be dated 18.11.2008. The two letters have other differences as well. The copy of the letter furnished by the AR in appellate proceedings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Therefore such fluctuations ought to have been established to be genuine either by the purchase bills or by the stock register, none of which were produced before the AO. Simply furnishing a series of tables which have not been corroborated or authenticated by the relevant books of account and bills and vouchers, cannot be accepted as sufficient evidence in support of the claim made by the Assessee 6.2Given such facts and circumstances of the case as discussed above in considerable detail, I have come to the inevitable conclusion that the AO was fully justified in rejecting the book results u/s. 145(3) and in making the addition on account of undervaluation of closing stock of ₹ 27,38,931, which is confirmed. 6. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us. 7. Before us, ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further submitted that A.O has mistaken the net profit ratio of 9.75% as the gross profit ratio whereas in reality the gross profit ratio for the year under consideration is 29.84% and in support of which the pointed to page 66 of the paper book being the Annexure to the Tax Audit Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that the A.O in the order has noted that Assessee has earned a gross profit of 9.75% as against the gross profit of 6.69% in the immediate preceding year. However on perusing the particulars of accounting and the ratio which are Annexure to the Tax Audit Report and are placed at page 66 of the paper book, it is seen that the auditor had shown the net profit ratio for the year under consideration at 9.75% and the gross profit ratio at ₹ 29.84%. We thus find that A.O has proceeded on an incorrect basis as he had compared the net profit of a year with the gross profit of another year whereas the correct way would have been that he should have compared the gross profit ratio for both the years. If the gross profit ratio for the year under consideration is compared with that of immediate preceding year, it appears that there is no fall in the gross profit ratio. Another submission of the ld. A.R. that due to typographical error the closing stock in quantitative terms of the raw material has been shown at 82,458 kg seems to be correct when seen in the light of the submission of the quantitative details which were submitted to the A.O and which is placed at page 17 to 19 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had claimed labour charges of ₹ 2.16 crores against the job-work receipts of ₹ 2.29 crores. The Assessee had produced the labour payment register from where the AO found that the signatures of particular labourers were entirely different from one month to another. Many entries were made in the same handwriting, etc, etc. It was submitted that the Assessee had no regular employees/labourers Who switched over from one employer to another. The AO however rejected the Assessee's submission and disallowed 10% of the expenses, whicft was restricted by the CIT(A) to 5%. The IT AT placed reliance on the earlier cases of Pravinbhai R. Shah(HUF) and Bharatkurnar Ramnikial Mehta, and on the ground that the labourers were in the unorganised sector, and the' fact that they were migrant labourers, and that the labour charges were, duly recorded, and that, no defect was pointed out in the bookstand mainly because the GP ratio was not abnormal, deleted the addition confirmed by the CIT(A). In the case of our Assessee, no register or record was produced before the AO, no explanation was furnished in course, of the asst, proceedings except for submitting that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adhoc disallowance of 20% was unwarranted and as an alternate he submitted that if at all some disallowance was felt necessary than a reasonable disallowance as felt appropriate by the Hon ble Tribunal be made. The ld. D.R on the other hand supported the order of A.O and ld. CIT(A). 12. We have heard the rival submissions and perused the material on record. In the present case, the A.O has disallowed labour expenses on adhoc basis. We further find that ld. CIT(A) has noted that Assessee did not produce register or records of the labour charges paid before the A.O. Before us, ld. A.R. has submitted that there is change in the constitution of the income and therefore the ratio of labour expenses as compared to earlier year would not be proper. He has also submitted that the disallowance of 20% made by the A.O is on a higher side and a reasonable disallowance may be made. Considering the totality of facts and circumstances we are of the view that in the absence of any finding of the authorities that the expenses are bogus in nature, we are of the view that the ends of justice shall be met if addition is restricted to 10% of the expenses as against the 20% made by A.O. We thus dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sampling brochure. He submitted that both the advances were genuine and for the purpose of business and the business nexus has been established. He further submitted that Assessee has own funds which is more than 8.52 times of the funds advanced by the Assessee and therefore in the absence of any nexus, the presumption would be that the amounts have been advanced out of interest free funds. He therefore submitted that the addition be deleted. The ld. D.R. on the other hand supported the order of A.O and ld. CIT(A). 16. We have heard the rival submissions and perused the material on record. From the details of loans and advances which is reproduced by ld. CIT(A) at page 8 of the paper book, it is seen that the amount (excluding the TDS receivable) which has been advanced by the Assessee is ₹ 41,36,507/-. Before us, it is Assessee s contention that it has sufficient own interest free funds. During the course of hearing a specific query was put to ld. A.R. and he was asked about the date on which the aforesaid advances were advanced and also the availability of own funds in the year in which the amounts were advanced to which ld. A.R. submitted that the required information i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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