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TMI Blog2010 (12) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... T. The notices under Section 142(1)/143(2) alongwith questionnaire were issued and were served upon the assessee. On examination of audited accounts, the AO noticed that the assessee has disclosed closing stock of ₹ 1,80,75,953. The AO required the assessee to furnish the details in the shape of list of opening and closing balances. Apart from above, the assessee was also required to produce the books of account including stock register. In response to above, queries, neither the assessee furnished item-wise details nor documentary evidence i.e. copy of invoices and bills of sale as on 31.3.2007 or before. The assessee has also not produced stock register as required by the Department. Thereafter, another show cause notice dated 3rd December,2009 was issued to the assessee. In response to above query, the assessee has furnished a written reply dated 10th December,2009 stating therein vide para 4, which is as under : 4. Due to huge variety/quality of cloth the assessee has not maintained any stock register, valuation of closings tock has been made on 31.3.2007 by the Directors of the company. From the above reply, the AO reached at a conclusion that the assessee has not k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee is slightly better as compared to the gross profit rate of earlier year. (vi) That the AO has not pointed out any defect in the books of accounts produced by the assessee and in fact he has accepted the same while framing the assessment. In support of the above contentions, the assessee relied on the following decisions : 1. Himachal Shoddy Mills Pvt. Ltd. vs. Dy.CIT (1994) 50TTJ (Del.); 2. ITO vs.Gobind Steel Rolling Mills (1991) 54 Taxman 72 (Chandigarh); 3. Garg India Pvt. Ltd. vs. ITO (1983) 16 TTJ (Allahabad); 4. ITO vs. Amarnath Ram Kumar (1995) 81 Taxman 148(Chandigarh) 5. Ram Pyare Satish Kumar vs. ITO (1997) 59TTJ (Del.) 352. 5. The ld.CIT(A) deleted the addition observing as under: The contentions of the A.R. was that the assessee maintained proper bills and vouchers and books of account and the same were audited by the chartered accountant. No defect was pointed out by the auditors. The assessee was dealing in enormous number of items of different varieties and qualities. The goods were purchased in thans and bales but the same were sold in different quantities according to the requirement of customers. Therefore, it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the method of accounting since past years. It is a fact that the G.P. shown in the year under consideration was higher than the G.P. of the corresponding preceding year. This fact was explained by the assessee during assessment proceedings also. Contents of the assessment order reveal that the A.O. did not find any defect in the books of account maintained and produced before him. It appears that the addition was made in a causal manner. No material was gathered and placed on the record which could form a cogent evidence to arrive at the conclusion that the assessee suppressed either quantity or value of closing stock. The assessee furnished copy of assessment order dated 203.2009 of the Trade Tax Department. It was noticed that the book results were accepted by the Trade Tax Department of the State Government without finding any defect in quantity, value, sales or purchases of the taxable goods. I have gone through the facts of the cases, cited by the assessee and also the facts of the case under consideration. The Hon'ble jurisdictional High Court have held in the case of Mascot (India) Tools and Forgings (P) Ltd. 320 ITR 116 (All) that the company was a manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low. It is relevant to state that Shri Pramod Bajaj, ld.D.R. submitted that the ld.CIT(A) has not correctly appreciated the facts of the case as mentioned in the assessment order. He also submitted that the facts of the case laws cited by the assessee in support of the submissions made before the ld.CIT(A) are different than the facts of the case of the assessee. He, therefore, submitted that the order of the ld.CIT(A) may be reversed and restore that of the AO. Shri J.J.Mehrotra, C.A., ld. Counsel for the assessee reiterated the submissions made before the lower authorities. 7. After considering the entire facts and circumstances of the case, we are of the view that the only ground of addition is that the assessee did not maintain stock register. In the instant case, the AO has not made any effort to carry out necessary investigation of the case and establish that there was either suppression of sales or undervaluation of closing stock. There is no material on record to justify the addition. In fact, the AO has not brought any material on record to arrive at the finding that the value of stock was not disclosed correctly. We find that the sales declared by the assessee were sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the ld.representatives of both the parties, we find that the ld.CIT(A) was justified in restricting the disallowance to 10% of the expenses claimed. The disallowance made by the AO at the rate of 25% was on higher side, particularly when he has not quoted any single instance when the car and telephone were used for non business purposes. In fact, the AO has made an ad hoc disallowance at the rate of 25% of the expenses claimed by the assessee under the above heads. Thus, considering the entire facts and circumstances of the present case, we do not see any valid ground for interfering with the order of the ld. CIT(A) on this issue and accordingly we uphold the same and dismiss ground no.2 of the appeal. 12. Ground no.3 of the appeal reads as under : 3. The CIT(A) has erred in law and on facts in deleting the addition of ₹ 51,341/-made by the Assessing Officer on account of Traveling expenses, Generator expenses and Packing expenses without appreciating the facts of the case and the material brought on record by the Assessing Officer. 13. During the course of assessment proceedings, the AO noticed that the asessee has claimed expenses under so many heads. The AO r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. 16. Ground no.4 of the appeal reads as under : 4. The CIT(A) has erred in law and on facts in deleting the addition of ₹ 1,00,000/- made by the Assessing Officer on account of advertisement expenses without appreciating the facts of the case and the material brought on record by the Assessing Officer. 17. While framing the assessment, The AO made a disallowance of ₹ 1 lac out of Advertisement Expenses observing that the assessee is a wholesale distributor of Raymonds Ltd. Company and either all the advertisements have been made by Raymonds Company or on behalf of Raymonds Company by the assessee-company. During the course of hearing, the assessee also could not produce any proof in the shape of vouchers. 18. On appeal, the ld.CIT(A) deleted the disallowance on the ground that It is the duty of the AO to establish that the claim was not genuine by gathering material on record during assessment proceedings. Mere mentioning that the assessee did not incur these expenses cannot be any basis for making such addition. 19. After hearing the ld.representatives of both the parties, we do not find any merit in this ground of appeal. We find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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