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2015 (1) TMI 1442 - ITAT AHMEDABADNegative cash balance - assessee’s main argument was that as per the cash book in “blue colour bind” there was introduction of cash in the name of Anwar Ali H. Lakhani which has covered up the discrepancy which was found in the original cash book - assessee had not shown the transfer of cash tallied with the books of the assessee firm - whether the cash book in “blue colour” which was later on placed before the AO can be considered as an evidence to determine the correct income of the Assessee? - HELD THAT:- Cash book which was submitted by the assessee subsequently was required to be examined by the AO. The AO is free to confirm the veracity of that cash book so that the question of negative cash can be decided in an authenticated manner. The cash book stated to be in blue colour should not therefore be disregard in summarily manner merely on the ground that it was prepared after the inquiries were raised by the Department. We are not able to satisfy ourselves that there was a regular transfer of fund from the books of account of the partner to the accounts of the assessee-firm or in the books of R.H. Patel & Co. and that there was no shortage of the cash balance in the books of the assessee-firm. Rather, this is a factual aspect which can be ascertained at any point of time by examining the relevant books of accounts; hence, for this limited purpose we hereby refer this issue back to the stage of the AO so that the assessee can demonstrate that there was genuine transfer of funds introduced by the partner and that there was no shortage of the cash as alleged by the Revenue Department. For this limited purpose the matter is restored back; hence this ground of the Revenue may be treated as allowed for statistical purpose only. Unexplained cash credits - stand taken by the assessee of having made sales to the said parties in the next year is nothing but an afterthought by the assessee to furnish his self servicing submission /details in the appellate proceedings - HELD THAT:- AR has explained that there was some parties who came forward with advance with a guarantee from the assessee to supply the iron in the subsequent years; therefore, the assessee has received the advance and duly credited in its books of account. In the subsequent year sales were executed and duly reflected in the books of account. Since, the said amount has already been taxed by the assessee in the next year; therefore, there was no justification on the part of the AO to disbelieve the action of the assessee. Impugned addition was made on a wrong premise, especially when the assessee has demonstrated that the sales were executed in the subsequent year. - Decided against revenue Addition on account of low gross profit - as argued assessee’s sales have increased by more than 65%, which has also resulted into a better net profit on which the assessee had paid the tax - HELD THAT:- Marginal decrease in the gross profit ratio was properly explained by the assessee; hence the AO was not justified in making the impugned addition. The admitted factual position is that the turnover had gone up from 5.39 crore of the last year to the turnover of the year under consideration at 8.91 crore. Further, during the course of hearing, we have inquired from learned DR about the assessment record, specifically the position of the notices issued u/s.133(6) of IT Act to certain parties. Learned DR has placed before us a separate folder of the notices issued u/s.133(6) of IT Act and on perusal we have noted that there were few compliances made by those parties to whom the sales were executed by the assessee. Hence, according to us the allegation of non verification of sales was not absolutely corrected. Earning of profit generated through unaccounted purchases and sales thereon detected by the sales tax department - HELD THAT:- compilation an English translation of the sales tax assessment order is placed. According to which an investigation was carried out at the business premises in the presence of partners, Sri Anwar Lakhani. Further it was noted that the Trader i.e., the Assessee was not able to explain cash in hand of ₹ 25,282/-, stock in trade of ₹ 6,39,239/- and suspense sales of ₹ 3,35,335/-. In that order, it was also held that there was existence of unaccounted purchases which were not proved. After applying gross profit margin the unaccounted purchase amounting to ₹ 12,87,102/- was taxed. We are of the view that in a situation when an another authority has given a finding that there were unaccounted purchases then it is not fair to disregard those finding of the Sales Tax Department. Sales tax penalty - HELD THAT:- a penalty was imposed by the Sales Tax Department; hence, the expenditure being penal in nature is not admissible as per law. We are not convinced by the argument of learned AR; that it was compensatory in nature as it was paid as an advance payment of tax; because no such evidence was placed before us. TDS u/s 194C - Addition u/s 40(a)(i)(ia) - HELD THAT:- Situation when there was no evidence of existence of any contract between the assessee and those transporters and the goods were transported to the assessee at the behest of the supplier then the assessee was not under an obligation to deduct the tax at source at the time of payment to truck drivers/owners. We, therefore, reverse the findings of the authorities below and direct to delete the addition. Addition on account of excess claim of salary and wages and kharajat expenses made - HELD THAT:- Merely on the basis that the some of the amounts or names were not recorded in the salary register, the impugned disallowance should not have been made. The AO was required to investigate the basis of the total salary paid as claimed in the profit and loss account. The assessee’s explanation was that the salary register was maintained for “office staff” but in addition to that the salary was also paid to other staff such as accounting staff, etc, hence the total expenditure was claimed in the profit and loss account. This fact has not been contradicted by Revenue Department before us. Likewise, in the case of payment of Wages etc we have seen that the AO as well as CIT(A) both have made the disallowance merely on an estimation without appreciating the explanation of the assessee. According to us, such an estimation was uncalled for, hence we hereby reverse the same.
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