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TMI Blog2012 (5) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... died but the ld. Representative of the assessee produced the photocopy of accounts before the Assessing Officer and transaction was found genuine. In respect of Shri Jawahar Mishra & Shri Ashutosh Tripathi, the amount was through banking channel and the Assessing Officer did not dispute this fact. Thus, in the light of detailed discussions made by the CIT(A), we find that the CIT(A) has rightly deleted the addition made by the Assessing Officer under section 68 of the Act. Order of the CIT(A) is confirmed on the issue. Addition on account of refund of security - Held that:- CIT(A) has rightly deleted the addition as the said amount was security deposit and not against the payment of contract work. There is no error in the order of CIT(A). Therefore, order of the CIT(A) is confirmed on the issue. Thus, ground raised by the Revenue in its appeal is dismissed. - ITA No. 330/Agr/2005, C.O. No. 79/Agr/2005 (In ITA No.330/Agr/2005) - - - Dated:- 4-5-2012 - Bhavnesh Saini (Judicial Member) And A. L. Gehlot (Accountant Member) For the Revenue : A. K. Sharma, Jr. D.R. For the Assessee : P. K. Sehgal, Advocate ORDER A. L. Gehlot (Accountant Member) The appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work, unilateral inferences and for theoretical consideration and even pointing out any specific defect/anomaly. 3. That the learned CIT(A)-I, Agra has erred both in law and on facts in invoking the provisions of section 145 of I.T. Act, 1961 over the assessee s case. As the assessee has maintained the correct and complete accounts, which were duly audited and were produced for verification and the income of the assessee being computed in accordance with the method of accounting regularly employed therefore such action of the learned CIT(A)-I, Agra is arbitrary, unjust and is untenable. 4. That the net profit rate shown @ 5.32% by the assessee being quite reasonable looking to the type and volume of the business and the same being explained with reference to the detailed audited books of accounts and records, it should have been accepted and further the same being accepted by the Assessing Officer, thus the learned CIT (A), Agra has been arbitrary and unjust in applying flat net profit rate of 7% solely on the basis of suspicion, guess work and for theoretical consideration. 5. That there being no material of whatsoever nature in support of the net profit rate applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,620/- 2. Shri Trilok Jain ₹ 1,10,575/- 3. Shri Vijay Singh ₹ 1,25,540/- 5. To examine the outstanding balance of above parties, the Assessing Officer issued notice under section 133(6) of the Income Tax Act, 1961 ( the Act hereinafter) which were returned by Postal Authorities unserved with the remark that the persons are not working at the given address but they are residing in nearby town known as Kiraoli but their addresses were not known. In the case of Shri Vijay Singh the person was not found on the address given. In addition to above, the Assessing Officer has also noticed that the assessee has also shown liabilities in respect of the under mentioned sub-contractors :- 1. Shri Jawahar Mishra ₹ 1,98,900/- 2. Shri Ashutosh Tripathi ₹ 1,93,875/- 6. The Assessing Officer made addition under section 68 of the Act of the above amount totaling to ₹ 8,04,510/-. 7. The Assessing Officer has also noticed that the assessee has violated section 40A(3) of the Act and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 20,000/-. However the fact remains that all the expenses had been incurred by the appellant in cash and the vouchers were prepared. The identities of the recipients could not be established. The cross verification of the payments made was not possible from the books of account and vouchers maintained by the appellant. Even the ballast material was purchased on credit but the payments were made in cash. One of the creditors could not be produced and hence the balances appearing in his hands were not subject to verification. The other creditors who were produced did not have any books of account etc. Under the facts and circumstances of the case, I am of the view that even though the provisions of section 40A(3) are not applicable strictly speaking yet the books of account have been maintained in a manner that true profit can not be determined from the account so maintained. It is a case where the A.O. was not satisfied about the correctness and completeness of the accounts of the assessee. The provision of section 145 clearly applicable to the facts of the case. The appellant had shown net profit of ₹ 4,43,575/- on gross receipts of ₹ 77,57,501/-. Net profit comes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no payment exceeding ₹ 20,000/-, we do not find any error in the order of CIT(A). The order of CIT(A) on the issue is confirmed. However, the CIT(A) noticed that the assessee did not maintain proper books of account. The true profit cannot be determined as from the account so maintained by the assessee the CIT(A) found that the proviso to section 145 of the Act is clearly applicable to the facts of the case. The CIT(A) asked the assessee to issue show cause why net profit rate of 8% should not be applied. The CIT(A), after considering the assessee s submission, applied 7% net profit rate and directed the Assessing Officer to recompute the total income accordingly. We find that the assessee did not maintain proper books of account. We notice that the facts recorded by the Assessing Officer that the assessee incurred all expenses in cash and vouchers were hand made by which identity of the payees cannot be established. The cross verification was not possible from the books of account and voucher. Apart from this fact, the Assessing Officer noticed that huge outstanding balances were shown in the name of suppliers and sub-contractors. In the remand report, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been pointed out by any of the parties. Therefore, order of the CIT(A) on the issue is confirmed. Thus, ground no.2 of Revenue s appeal and ground nos.1 to 6 raised in Cross Objection by the assessee are dismissed. 10. In respect of deletion of addition of ₹ 8,04,510/-/- made by the Assessing Officer under section 68 of the Act, we notice that the CIT(A), after party-wise detailed discussions from page nos.9 to 12, found that the assessee has discharged the burden of section 68. The statements of the parties were recorded. In the case of Shri Tapesh Jain Shri Trilok Jain, they have appeared before the Assessing Officer where the creditors have accepted that they have supplied goods on commission basis to the assessee. Both the creditors have confirmed balance against their names. In respect of Shri Vijay Singh, it was informed and noted by the CIT(A) that he has died but the ld. Representative of the assessee produced the photocopy of accounts before the Assessing Officer and transaction was found genuine. In respect of Shri Jawahar Mishra Shri Ashutosh Tripathi, the amount was through banking channel and the Assessing Officer did not dispute this fact. Thus, in the ..... 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