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TMI Blog2018 (2) TMI 1520X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed the same. Therefore, the Bench find no merit in the contention of the ld. AR of the assessee. Disallowance u/s 40(a)(ia) - Held that:- The assessee has admitted that he has not deducted tax at source on account of payment of ₹ 73,714/-. In view of the above, the Bench find no any contrary material in the order of the ld. CIT(A), therefore, we uphold the same. Hence, this ground of appeal of assessee stands dismissed. Addition considering the peak of cash deposit and withdrawal from the bank account as unexplained - Held that:- Assessing Officer comes to a finding that withdrawn amount was used or spent by the assessee for any other investment or expenditure than the benefit of peak of such credit, in such circumstances, may not be available. No specific reason was recorded regarding the utilization of cash withdrawal by the assessee from its bank accounts in some investment or expenditure. In view of the above and considering the totality of the facts and circumstances of the case, the Bench find no any contrary material in the order of the ld. CIT(A), therefore, we uphold the same. Hence, this ground of appeal of assessee stands dismissed. Disallowance of ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same in its income and paid the tax on the same. 4. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming an addition of ₹ 3,83,757/- by considering the peak of cash deposit and withdrawal from the bank account as unexplained. He has further erred in confirming the addition ignoring that these are regular bank accounts of the assessee and all the deposits in the bank account is verifiable from the cash book maintained by the assessee. 5. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the disallowance of deduction of ₹ 56,256/- made under Chapter VIA of the Act. 4. The issue involved in ground No. 1 of the appeal is that the ld. CIT(A) without admitting the additional evidences decided the appeal. In this regard, the ld CIT(A) has dealt the issue by holding as under: (i) I have duly considered the assessment order, the submissions of the appellant, the remand report of the AO and its rejoinder by the AR. It may be mentioned that the additional evidences filed by the AR were not admitted by me before sending the same to the AO for obtaining its comments, as specifically stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the request of the Assessing Officer under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271 (I)(c) (ii) In view of the provisions of Rule 46A of the I.T. Rules, the additional evidences could be admitted only if the case of the assessee falls in any of the four clauses as mentioned in Sub-Rule-1 of Rule 46A. It was claimed by the AR that sufficient opportunities were not provided by the AO to produce these evidences. It is to be noted that this contention of the AR is not correct as it is evident from the assessment order and the remand report of the AO that a large number of opportunities were provided by the AO. The contention of the appellant that its AR did not made compliance before the AO during the course of assessment proceedings is also devoid of any merit as the appellant has not filed any affidavit from its earlier AR in this regard. (iii) It may be mentioned that the Hon ble Delhi High Court in the case of Manish Build well 204 Taxman 106 observed as under: Rule 46A is a provision which is invoked, on the other hand, by the assessee who is in an appeal before the Commissioner (Appeals). Once the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction should be recognized and maintained between a case where the assessee invokes rule 46A to adduce additional evidence before the Commissioner (Appeals) and a case where the Commissioner (Appeals), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under subsection (4) of section 250. It is only when the exercises his statutory suo motu power under the above subsection, that the requirements of rule 46A need not be followed. On the other hand, whenever the assessee, who is in appeal before him, invokes rule 46A, it is incumbent upon the Commissioner (Appeals) to comply with the requirements of rule strictly. (iv) It is noted from the financial statements of the appellant placed on record that for the financial years 2012-13 and 2013-14, the appellant was having total turnover of ₹ 92,01,799/- and ₹ 57,26,420/- respectively. These facts clearly prove that the appellant want to take undue advantage on account of its illness as it was claimed that it was suffering from heart disease and TB when it comes to make compliance before the AO, however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of counsel, assessee filed an appeal. However, it was seen that he was not giving enough time for preparation of the case and thus assessee changed the counsel. Affidavit of assessee in this regard is at PB 13A. 3. The Ld. CIT(A) called for remand report. In remand report dt. 15.04.2016 (PB 14A-16A), AO submitted that no documentary evidence has been filed regarding contention of assessee that he was suffering from illness. The assessee case does not fall in any of the exceptions mentioned in Rule 46A. The AR of the assessee appeared on 11.04.2016 and submitted some bills and sought adjournment till 15.04.2016. However, on this date none attended. Thus, all evidences produced by assessee are liable to be rejected. 4. In response to the remand report, assessee vide his reply (PB 17A) submitted that he has produced the medical treatment prescriptions to the AO on 11.04.2016. All the evidences in support of the addition made are placed in the paper book containing 102 pages. The AO did not examine the same simply because AR of the assessee reached late on 15.04.2016 and the AO by that time has already prepared and signed the report. 5. The Ld. CIT(A) held that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to set it right by recalling its order. 7. In the present case, assessee has given an explanation which prevented him for submitting the documents before the AO. The same were submitted before the Ld. CIT(A). The Ld. CIT(A) also called a remand report. Thus, opportunity has been given to the AO to examine the additional evidences filed. Once this course is adopted which is as per Rule 46A, it is not appropriate on part of the Ld. CIT(A) not to consider the same. The decision of Delhi High Court in case of Manish Build Well 206 Taxman 106 is in a different fact situation where the assessee invokes Rule 46A and prayed for admission of additional evidence but the Ld. CIT(A) without calling a remand report from the AO decided the issue. As against this, in the present case, CIT(A) has called a remand report but the AO without giving his finding on the merit of the case has submitted that the evidences produced may not be accepted. This contention of the AO is accepted by the Ld. CIT(A) though on the basis of these papers he has worked out the peak balance and reduced the addition without considering the cash book furnished by the assessee in support of the transaction made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the ld. CIT(A) on this issue. Accordingly, this ground of assessee s appeal is dismissed. 8. The 2nd ground of the appeal is against confirming the trading addition of ₹ 11,99,984/- by disallowing 15% of the entire purchases of ₹ 79,99,891/-. The ld. CIT(A) has dealt the issue by holding as under: 3.1.2 Determination: (i) During the course of assessment proceedings, the appellant was required to produce its books of accounts, which were not produced and therefore the purchases made by the appellant remained unverifiable. In view of the bogus/unverifiable purchases, the AO disallowed 25% of purchases amounting to ₹ 79,99,891/- and made addition of ₹ 19,99,973/-. During appellate proceedings, it was submitted that it was maintaining complete books of accounts on day to day basis and these are supported by bills and vouchers. It has also filed the copies of its purchase bills. However since the additional evidences submitted by the appellant at the appellate stage are not admitted, therefore no cognizance could be given to the additional evidences filed before me for the first time. It is noted that in the cases of bogus / unverifiable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year is better than the G.P. rate of 14.61% declared in last year G.P. Rate of 14.50% declared in AY 09-10. It is a settled law that, no trading addition is called for if the result declared is better as compared to the result declared in earlier year. Thus, when the overall amount of profit declared by the assessee is better as compared to the results declared in earlier years, disallowance of 15% of purchases made by the CIT(A) is unwarranted be deleted. For this reliance is placed on t he following cases:- CIT Vs. Vaibhav Gems Ltd. (2014) 112 DTR 84 (Raj.) (HC) dt. 21.08.2014 While the past history becomes the relevant basis but if the AO wishes to tinker with the basis of past records, then some flaw has to be found by the AO in making some addition. Tribunal has come to a conclusion that in the immediate past assessment year, the Tribunal itself has applied G.P. rate of 2.60% whereas in the present year under consideration, the G.P. rate has been declared at 4.85%. AO was unable to point out as to what are the distinguishing features in between the two assessment years. No substantial question of law arises. CIT Vs. Gupta K.N. Construction C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable case for higher GP then his action to make the trading addition cannot be approved. CIT vs. Babulal Agarwal (2014) 97 DTR (Raj) 284 (HC) G.P. shown in the present year at 7.43% was reasonably higher than the previous years, and could not have been dubbed as fanciful or palpably baseless. When the CIT(A) has deleted the addition in the trading result on relevant considerations and further, when ITAT has concurred with the CIT(A), no substantial question of law arise and appeal was thus dismissed. Thus, where the GP rates shown by assessee in current year was higher than last year's profit declared by the assessee, profit declared by assessee cannot be rejected. M/s Oscar Exports Vs ITO ITA No. 203/JP/08 order dated 19-09- 2008 It was held that when the estimation is made, the immediate preceding year is the nearest year where the assessee has declared the GP rate of 10%. The assessee has declared the GP rate of 14.32% during the impugned year which is better than the gross profit declared in the immediate preceding year. Therefore, though the books of accounts are rejected yet no addition is called for on account of trading. Addl. CITVs. V. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or his business by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party does not appear before the AO pursuant to the notice or even has stopped the business, the claim of the assessee on that account cannot be discarded as non-existent. CIT Vs. Amarpali Jewels (P.) Ltd. 65 DTR 196 (Raj.)(HC) It is essentially for the taxing authorities to decide as to what should be the % rate of GP that should be applied on particular yearly turnover of the assessee. It is a matter of discretion to be exercised on settled practice applicable to business standards and which is prevalent in commercial world. Thus, in a case, where books of accounts are rejected u/s 145(3) addition made by disallowing 25% of unverifiable purchases is reduced by applying a G.P. rate by accepting the factual explanation of assessee, the same would not involve any substantial issue of law as such the Court in its appellate jurisdiction u/s 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee is good or bad, or whether it was rightly accepted or not. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses as bogus was wrong as the consumption stood fully proved and the existence of selling parties could not be denied. It upheld the basis of valuation of closing stock of work-in-progress and hence deleted the additions of ₹ 1,48,93,286 made by the AO on account of bogus purchases. It was held that the purchase of scrap could not be termed bogus for the reason that in the subsequent assessment year, the purchases from these very parties stood accepted by the Department to a very substantial extent. No sale invoices were found to be undervalued or the purchases inflated. The extraordinary profit in respect of goods sold and as recorded in the books of account which ought to have been taken favourably qua the assessee, was considered adverse by the Assessing Officer by adopting an erroneous approach. The assessee s contention that out of total purchases of non-ferrous metals of ₹ 2.44 crores, the Assessing Officer had treated purchases worth ₹ 1.49 crores only as bogus and it was impossible to manufacture the goods shown to have been manufactured by it out of the remaining purchases if the Assessing Officer s conclusion was accepted also found favour with the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to prove the genuineness of the purchases. 6. 186 CTR 718 (MP) - VISP Pvt. Ltd.- Same view was taken as in case of Indian woolen 7. 227 ITR 391 (Raj) - Golcha Properties P Ltd 8. 250 ITR 575 (Del) - Law Medica 9. 240 ITR 322 (KER) - Beena Metals 10. 229 ITR 181 (MP) - System India Casting 11. 50 DTR 502 (ITAT, Jaipur) - Deepak Dalela 12. 49 ITR 112 (SC) - Shri Lekha Banerjee 13. 288 ITR 10 (SC) - Kachawala Gems In view of the above, where the assessee filled the appeal /CO may kindly be dismissed and where revenue filled appeal may kindly be allowed. 11. The Bench have heard both the sides on this issue. The ld. CIT(A) held that the assessee has not produced its books of accounts, therefore, the purchases made by the assessee remained unverifiable. The Coordinate Bench of the ITAT, Jaipur Bench in the case of Anuj Kumar Varshney Ors. had decided that 15% of such bogus/unverifiable purchases can be disallowed and the ld. CIT(A) had followed the same. Therefore, the Bench find no merit in the contention of the ld. AR of the assessee. Accordingly, we uphold the order of the ld. CIT(A) in this regard. Hence, this ground of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- to the auditor. It was claimed by the appellant that it has deducted tax on brokerage of ₹ 38,182/- paid to Sh. Ashok Dhamani and has also deducted tax at source on account of interest payment wherever the interest paid was more than ₹ 5,000/- During the appellate proceedings, it was submitted by the AR that the deduction of tax at source is verifiable from the TDS return filed by the appellant which is on the record of the department. (iv) As the appellant has admitted that it has not deducted tax at source on account of payment of ₹ 73,714/- , the disallowances made by the AO u/s 40(a) (ia) of the Act is hereby sustained. Regarding the remaining expenses, the AO is directed to obtain the TDS return from the TDS Wing of the Income Tax Department and allow the claim of the appellant wherever TDS was made in respect of the payments under consideration. 13. While pleading on behalf of the assessee, the ld AR has submitted as under: 1. The AO observed that assessee has incurred brokerage expenses of ₹ 38,182/-, interest expenses of ₹ 4,28,283/- and legal consultancy charges of ₹ 94,714/- which were liable to TDS. However, since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on brokerage of ₹ 38,182/- paid to Shri Ashok Dhamani and also deducted tax at source on account of interest payment of more than ₹ 5,000/-. The assessee has admitted that he has not deducted tax at source on account of payment of ₹ 73,714/-. In view of the above, the Bench find no any contrary material in the order of the ld. CIT(A), therefore, we uphold the same. Hence, this ground of appeal of assessee stands dismissed. 16. In the 4th ground of the appeal, the issue involved is confirming the addition of ₹ 3,83,757/- by considering the peak of cash deposit and withdrawal from the bank account as unexplained. The ld. CIT(A) has dealt the issue by holding as under: 3.3.2 Determination: (i) The brief facts of the case are that during the assessment proceedings, it was observed by the AO that the appellant has made cash deposit of ₹ 17,24,150/- in Allahabad Bank and ₹ 5,000/- in Union Bank on various dates as mentioned on page 6 7 of the assessment order. Since, the appellant has not filed any explanation for the same, the AO made addition of ₹ 17,24,150/- to the income of the appellant. (ii) During the appellate proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO regarding the utilization of cash withdrawal by the appellant from its bank accounts in some investment or expenditure. Therefore, in view of the above referred decision of jurisdictional High Court in the case of Sind Medical Store vs. CIT (Supra), the benefit of peak credit theory could be allowed to the appellant. As per the chart, enclosed to this order as Annexure-A, submitted by the appellant, the peak credit balance was to the tune of ₹ 3,83,757/- as on 27.01.2011 and not ₹ 2,53,857/- as stated by the appellant. Therefore, addition of ₹ 3,83,757/- is hereby sustained as undisclosed income of the appellant. However, the AO is directed to examine the peak deposit chart i.e. Annexure-A with the bank statements of the appellant and to rectify the mistake, if any, in the said chart. 17. The ld. AR of the assessee has reiterated the arguments as made before the ld. CIT(A) and further submitted as under: 1. The AO observed that assessee has deposited cash of ₹ 17,24,150/- in Allahabad Bank on various dates and ₹ 5,000/- in Union Bank of India on 16.04.2010. Since assessee has not filed any explanation for the same, he treated the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,150/- on various dates in Allahabad Bank. The ld. CIT(A) has held that the assessee has filed copy of bank account and relevant pages of cash book where this account was incorporated as additional evidence which were not admitted in. He also held that in the case of Sind Medical Stores vs. CIT, the Hon ble jurisdictional High Court held that this court in CIT vs. Ishwardas Mutha (2004) 270 ITR 597 (Raj.) also accepted the contention to take into account, the peak credit theory. When any amount is paid, later withdrawn from the bank, would be available for recycling and rotation, unless otherwise established as invested elsewhere by the Revenue. It was held that the assessee was entitled to the benefit of peak credit which ought to have been allowed instead of making separate addition of entire amount. However, it was observed that it the Assessing Officer comes to a finding that withdrawn amount was used or spent by the assessee for any other investment or expenditure than the benefit of peak of such credit, in such circumstances, may not be available. No specific reason was recorded regarding the utilization of cash withdrawal by the assessee from its bank accounts in some inves ..... X X X X Extracts X X X X X X X X Extracts X X X X
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