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TMI Blog2023 (10) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the creditworthiness of the creditors is not in doubt and same cannot be doubted without any adverse positive material. CIT(A) rightly noted that it is not the case of AO that the old balances standing in the names of the creditors were money belonging to the assessee. Ground No. 1 of revenue is dismissed. Unexplained interest expenses paid to sundry creditors - HELD THAT:- CIT(A) has granted relief to the assessee by observing that the AO has no facts in record to show that opening loans from creditors were bogus therefore, the addition on account of new loan has also been deleted. Consequently, the disallowance of interest payment cannot be sustained. We are unable to see any valid reason to interfere with the conclusion drawn by the ld CIT(A) in deleting the interest payment to the creditors. Rejection of books of accounts - Estimation of GP - HELD THAT:- We note that the AO mentioned major expenses like electricity, job work and bank charges have increased. CIT(A) further noted that if there was doubt in his mind of AO regarding such expenses then he should have make some basic enquiry before resorting to drastic step of rejecting the books of account. The ld C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the ld assessee s representative (AR) supporting the first appellate order and submitted that the ld CIT(A) has conducted detailed enquiry before granting relief to the assessee and thereafter, rightly held that the persons from whom new loans were taken from three existing creditors having substantial opening advance to the assessee therefore, in view of their PAN and tax returns and copies of bank statements no addition can be made in the hands of the assessee. 5. On careful consideration of the above submission from assessment order and first appellate order noted that after considering the detailed explanation and submissions of assessee as well as documentary evidence in support thereto the ld CIT(A) granted relief to the assessee with the following observations and findings:- 5.3 I have carefully considered the matter. The persons from whom new loans were taken were existing creditors having substantial opening advance to assessee. From evidences on record, they were PAN card holders and existing tax assessees. So, their identities are not in doubt. The only issue to be seen is their creditworthiness. From a perusal of assessment order, it is seen that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans were advance mainly on account of interest on old loans paid by the assessee and the same interest was re-invested with the assessee for earning interest income. Therefore, factual finding recorded by the ld CIT(A) do not require any interference as the reinvestment of interest received by creditors goes to show that the creditworthiness of the creditors is not in doubt and same cannot be doubted without any adverse positive material. The ld CIT(A) rightly noted that it is not the case of AO that the old balances standing in the names of the creditors were money belonging to the assessee. Therefore, we are unable to see any valid reason to interfere with the findings recorded by the ld CIT(A) hence, we upheld the same. Accordingly, ground No. 1 of revenue is dismissed. 7. Apropos ground No. 2 the ld Sr. DR submitted that the Ld. CIT(A) has erred in deleting the addition made by AO amounting to Rs. 7,23,982/- on account of interest expenses paid to the parties i.e. sundry creditors treated as unexplained. 8. Replying to the above the ld AR supported the first appellate order and submitted that from the relevant part of the first appellate order we note that the ld CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On careful perusal of facts and arguments placed before me, I am of the view that the action of the Assessing Officer is totally unsustainable. In the submission given before the Assessing Officer, assessee had given plausible explanation for the fall in profit margin. It had been explained to the Assessing Officer that contracts were awarded in financial year 2015-16 to 2016-17 and due to passage of time, material cost had escalated. The assessee also had pointed out that VAT rate at time of tender was 6%. But GST rate w.e.f. 01.07.2017 increased to 12%. If the Assessing Officer had doubted the profit margin, he should have carried out some inquiries. Rates of N.P and G.P. as compared to earlier years cannot be sole reason to reject the books of accounts in absence of other facts showing short disclosure of receipt or bogus claim of expenses. In the assessment order, the Assessing Officer mentioned major expenses like electricity, job work and bank charges have increased. In this regard, it may be stated that if the Assessing Officer have suspicion regarding over-billing of those expenses, he should have made some basic inquiry before resorting to drastic step of rejecting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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