9911796707
TMI Blog2018 (8) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,37,65,829/- in the preceding years i.e., A.Ys. 2009-2010 and 2008-2009 respectively. As per details of sales filed along with the return, sales of Rs. 3,01,26,654/- for the year under consideration, included the amount of Rs. 1,57,79,080/- being written off. Assessee was asked to explain the same. It was submitted that the impugned sum related to the creditors which had been written off and added to the amount of sales and in support furnished details which have been reproduced by the A.O. as under : Details of calculation of write off Name of the parties Balance as on 01.04.2009 Amount written off Balance as on 31.03.2010 M/s. Deewan Steels 19,94,665 19,94,665 NIL M/s. Nandi Steels 38,14,845 15,88,960 22,25,885 M/s. Noni Steels (P) Ltd., 14,85,406 14,85,406 NIL Patiala Enterprises 13,43,240 13,43,240 NIL Shreejee Enterprises 16,02,447 16,02,447 NIL M/s. Timi Steels 51,22,042 51,22,042 NIL M/s. Steel India 26,42,320 26,42,320 NIL Total 1,57,79,080 1,57,79,080 2.1. According to the A.O. if the amount of Rs. 1,57,79,080/- added to the sales was excluded from the gross profit of Rs. 19,47,068/- (as shown by the assessee) there wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . considering the total factual matrix above, disallowed the gross loss of Rs. 1,38,32,012/- and treated the same as undisclosed income of assessee and added the same to the income of the assessee. 3. The assessee filed written submissions before Ld. CIT(A) which is reproduced in the impugned order in which the assessee briefly reiterated the same facts as were submitted before A.O. and also submitted that books of account of assessee are audited and supported by vouchers. There is no contravention of provisions of Section 145 of the I.T. Act. The assessee complied all the notices of the A.O. and support the loss suffered by assessee through evidence and material. The A.O. did not bring any evidence against the assessee on record. The records of the assessee have been accepted by independent authorities like Sales Tax/Excise etc., The copies of the returns and their orders were filed on record and Independent Authorities accepted the book results of the assessee. The assessee has credited the above written off amount of the creditor in the books of account and shown as income. Even if written-off amount is shown separately, it has no impact on income. Merely because assessee's tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent authority who_have accepted the same. The appellant has filed plethora of evidences with copy of copy of VAT invoices of such rejected material on which VAT was charged in support of claim of loss that substantial material was sold @ Rs. 15000/- per piece as against Rs. 49,500/- per piece. The explanation of the appellant that though sales declined substantially but wages which were subject to ESI/PF and other direct expenses did not decline in the same ratio is also held as plausible when such expenses are properly verified by AO. Copy of few mails to the parties about their sub-standard/inferior quality is also on record. Thus there is nothing wrong in writing off disputed liabilities in the year in which sub-standard material was sold and this is also correct that had the appellant not written off than there would have been huge loss. All the liabilities are outstanding in the earlier year and accepted under scrutiny hence they are carried forwarded to current year. In any case such written off does not justify the rejection of loss though supply of substandard material by creditor justify the reason loss. The crux of the exercise of AO is to disallow the gross loss. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the same ratio. Thus in the light of the above, it held that the AO was not justified to make addition of Rs. 1,38,32,012/-. The same is directed to be deleted. Grounds of appeal Nos. 1 to 3 are allowed. 4. In result, the appeal is allowed." 4. We have heard the Learned Representatives of both the parties and perused the material available on record. 5. The Ld. D.R. relied upon the order of the A.O. and submitted that explanation of assessee is an afterthought and the income declared under section 41(1) should not have been added to the sales. When the liability of the creditor is ceased to exist, the creditor's amount would be added to the income of the assessee and not to the sales amount. The C.A. of the assessee prepared a fabricated trading account. 6. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and filed complete details pertain to assessment year under appeal as well as of the earlier orders and also filed copies of the purchase bills of the parties who have supplied materials to the assessee along with copy of the income tax returns, VAT returns and Excise records for preceding A.Ys. 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed the Learned Counsel for the Assessee to prepare re-casted Trading & P & L A/c and if the amount in question written off (creditor) of Rs. 1.57 crores is excluded from sales in Trading Account and taken to the P & L A/c, according to Learned Counsel for the Assessee net profit will remain the same. In the second alternative contention, Learned Counsel for the Assessee further recasted the Trading & P & L A/c and if the entire amount of Rs. 1.57 crores is excluded from Trading & P & L A/c and taken directly to the computation of income, there would be loss of Rs. 1,53,09,443/- and ultimately, it would have no impact on the computation of income of the assessee. Learned Counsel for the Assessee was directed to produce details of bills, vouchers, VAT returns and VAT orders for earlier years to explain that assessee made genuine purchases. Learned Counsel for the Assessee as per the directions, filed details of the same on record and demonstrated that assessee made genuine purchases in the earlier years which have been written off in assessment year under appeal. The purchases have been accepted by the VAT Authorities as well as submitted to the Excise Authorities. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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