TMI Blog2012 (11) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... d, expenditure claimed cannot be disallowed - ground raised by the assessee in its Cross Objection is allowed. - ITA No.125/HYD/2011 & CO No.88/Hyd/12 - - - Dated:- 27-7-2012 - SHRI CHANDRA POOJARI AND SHRI SAKTIJIT DAY, JJ. Department by : Shri K. Viswanatham Assessee by : Shri M. Fakhruddin ORDER PER SAKTIJIT DEY, J.M.: The appeal filed by the Revenue and Cross Objection by the assessee are directed against the order dated 15-11- 2010 passed in appeal No.130/ITO-4(2)/CIT(A)-V/2009- 10 and it pertains to the assessment year 2007-08. 2. The Revenue raised following effective grounds before us:- 1. The CIT (A) erred in facts and in law in deleting the addition of Rs.21,84,024/- on estimated GP at 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee are not fully supported by proper bills and vouchers, the books of accounts of the assessee cannot be treated as correct and complete and are not reliable to arrive at a correct income. Therefore, he rejected the books of accounts by applying the provisions of section 145(3). The AO found that the gross profit declared by the assessee on the admitted sales comes to 31.15%. The AO completed the assessment by estimating the gross profit at the rate of 40% on the sales admitted by the assessee and added the differential income of Rs.21,84,024/-. The AO further disallowed an amount of Rs.1,05,722/- u/s 40(a)(ia) of the Act. The assessee being aggrieved of the additions made to its total income, filed an appeal before the CIT (A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., were not properly supported by vouchers. Sales were also not properly vouched and the same were supported only by cash memos. There is every chance of inflating expenses and suppression of sales made. Accordingly, books of accounts were rejected by the lower authorities. After considering the totality of facts and the circumstances of the case and earlier year s GP rate and discrepancy in the books of account, we direct the AO to estimate the gross profit at the rate of 35% of the total turnover instead of 40% made by him. Following the ratio of the aforesaid order, we direct the AO to estimate the profit at the rate of 35% on total turnover. 6. In view of the above, the appeal of the Revenue is allowed in part. 7 In Cross Ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements etc., for verification of the AO. The AO found from the P L A/c that the assessee has debited an amount of Rs.1,64,92,813 towards purchases against an admitted sales turnover of Rs.2,45,86,179/-. The AO when asked the assessee to submit the bills and vouchers in support of purchases of chicken .......... etc., the assessee submitted that as the purchases of these items are made by some time vendors, no regular bills are not available. Similarly, so far as sales are concerned, the assessee submitted that number of items sold every day is counted and sales are recorded. The AO observing that the accounts of the assessee are not fully supported by proper bills and vouchers. The books of accounts of the assessee cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive portion of the order passed by the ITAT dated 19-11-2010 is extracted hereunder:- // para -4 // Following the ratio of the aforesaid order, we direct the AO to estimate the profit at the rate of 35% on total turnover. xx. In view of the above, the appeal of the Revenue is allowed in part. // In Cross Objection, the assessee has challenged disallowance of expenditure of Rs.1,05,722/- paid by the assessee to M/s Khan Sons towards advertising charges by applying the provisions of section 40(a)(ia) of the Act. The AO while completing the assessment, disallowed he aforesaid claim of expenditure on the ground that the assessee has not deducted tax at source while making payment of Rs.1,05,722/-. It is seen from the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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