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TMI Blog2018 (9) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing any cogent evidence on record - Decided in favour of assessee Addition on account of credit card expenses - CIT-A deleted the addition by observing that the Assessing Officer has not made any specific discussion or recorded any categorical finding regarding the credit card expenses - Held that:- Observation of the Ld. CIT (A) is correct. It is seen that the Assessing Officer has not pointed out even a single discrepancy in the details which were furnished before him by the assessee in respect of the credit card expenses. Therefore, in absence of any defect having been pointed out by the Assessing Officer, no disallowance could have been legally made. Therefore, we find no reason to interfere on this issue also and we uphold the order of the Ld. CIT (A) and dismiss the ground raised by the department. Addition on account of unconfirmed unsecured loans - Held that:- CIT (A) has given a categorical finding that the balance of ₹ 20,50,000/- pertains to unsecured loans which were brought forward from earlier assessment years and there was no transaction/s of raising fresh unsecured loans during the year under consideration. This fact is also verifiable from Form 3C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had also failed to produce books of accounts, in absence of details of closing stock, the Assessing Officer was of the opinion that in such nature of trade, the normal profit varied between 5% to 7% and he proceeded to make an addition of ₹ 37,13,384/- being 2% of the turnover to the income of the assessee. The Assessing Officer also made an ad hoc disallowance of expenses to the tune of ₹ 2,94,521/- and a further disallowance of ₹ 1,80,265/- under Trade Mark, discount and miscellaneous expenses. A further addition was made of ₹ 5 lakh on account of credit card expenses and ₹ 20,50,000/- on account of unconfirmed unsecured loans. The assessment was completed at an income of ₹ 77,42,820/-. The aggrieved assessee approached the Ld. Commissioner of Income Tax (A) and challenged the disallowances/additions. The Ld. Commissioner of Income Tax (A)deleted the addition on account of 2% of gross profit as well as deleted the addition on account of credit card expenses, unsecured loans and also a part of the ad hoc disallowances amounting to ₹ 2,94,521/-. 2.1 Now aggrieved, the department is before the ITAT and has challenged the deletion by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 2.88% . In such circumstances, when there is no substantial fall in GP rate and has only increased over the years, addition on account of low GP rate cannot be made. It was also submitted that in all the preceding years, assessments have been made u/s 143(3) of the Act. The Ld. AR submitted that the Assessing Officer had made addition of ₹ 37,13,384/- only on the ground of understatement of gross profit in comparison to other traders in the same industry, without giving any such specific instance. The Ld. AR submitted that audited financial statements were available before the AO and that no defects in the said financial statements and auditor s report have been pointed out by the Assessing Officer. The Ld. AR submitted that the method of accounting employed by the assessee is being consistently followed in all the assessment years and the financial statements as well as books of accounts for preceding years were duly accepted and no addition due to difference in GP rate was made. She submitted that the addition is merely on the basis of guesswork and estimations of the Assessing Officer. 4.1 Coming to the addition of ₹ 5 lakh on account of credit card expenses, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed by CIT(A) and the assessee has not raised any further appeal against the said disallowance. Therefore, this ground relates to only ad hoc disallowances of expenses of Salary and Labour Charges which were deleted by the Ld. CIT (A). She submitted that it is to be appreciated that the expenses relating to salary and labour charges cannot be said to have any element of personal nature. 5. We have heard the rival submissions and perused the material available on record. As far as the deletion of addition on account of trading result is concerned, it is seen that GP rate in assessment year 2009-10 was 2.72%, 2.79% in assessment year 2010-11 and 2.88% in the present assessment year i.e. 2011-12. Thus, it is observed that there is no substantial fall in the GP rate and the same has been increasing continuously. We also note that nothing specific has been brought on record by the Assessing Officer before making addition of extra 2% on account of GP rate. The Assessing Officer has not given any reasons for enhancing the gross profit rate except for mentioning that in the nature of business being carried on by the assessee, the net profit rate would vary between 5% and 7%. Alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years and there was no transaction/s of raising fresh unsecured loans during the year under consideration. This fact is also verifiable from Form 3CD which has been filed by the assessee along with the tax audit report. The Ld. Sr. DR has also not been able to negate this factual finding of the Ld. CIT (A). Therefore, on facts, we find no reason to interfere on this issue also and we uphold the order of the Ld. CIT (A) and dismiss the ground raised by the department. 5.3 The last challenge of the department is against the deletion of addition of ₹ 2,94,521/- being ad hoc disallowance out of salary, labour charges, repair and maintenance and staff welfare expense and the Ld. CIT (A) has deleted the amounts pertaining to salary and labour charges by holding that the expenses on salary and labour charges cannot involve any element of personal nature. Thus, the Ld. CIT (A) has only deleted ₹ 2,09,712/- out of ₹ 2,94,521/- and the balance amount of ₹ 84,809/- stands confirmed by the Ld. CIT (A). However, the department has challenged the entire amount of ₹ 2,94,521/- as having been deleted by the Ld. CIT (A) which is factually incorrect. We agree w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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