TMI Blog2022 (2) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... the GP declared by the assessee on the total sales for the year under consideration. Reasonable and adequate opportunity of hearing shall be provided to the assessee before deciding the matter afresh. Disallowance of interest made by the A.O - HELD THAT:- CIT (A) completely overlooked the fact that the assessee is having capital balance of ₹ 29,19,242/-. The assessee is having building amounting to ₹ 12,28,000/- the other assets of the assessee are comprising the PNB Bonds, Mutual Funds and PPF. The assumption of the ld.CIT(A) that all these assets are financed through unsecured loans does not hold any strength as it is the matter of very common knowledge that Bonds, Mutual Funds and PPF carry very lower rate of interest and unsecured loans carry very high rate of interest hence, no prudent businessman will invest his higher interest rate borrowed funds in the lower fixed income investments hence these investment must have been made out of the capital balance of the assessee and investment in M/s Kanoria Enterprises must have been made out of the unsecured loans and interest incurred on these loans deserves a complete allowance. As regards the suspected excessive i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 660/- in relation to the unsecured loan of ₹ 8,01,109/-. The unsecured loan was a borrowed capital fully utilized for the purpose of the business and was fully allowable u/s 36(1)(iii) and/or u/s 37(1) of the Act. The disallowance so made and confirmed being contrary to the provisions of law and facts, therefore, kindly be allowed in full. 4. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B and 234C of the Act. The appellant totally denies its liability of charging. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full. 5. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee was engaged in the Wholesale Trading of Ghee, Edible Oil, Vanaspati Ghee etc. in the name and style of M/s Kanoria Enterprises. The assessee filed his return of income on 28.02.2009 declaring total income of ₹ 2,45,980/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on record that the difference between the declared sales and the sales as per VAT return was consignment sale made by the assessee on behalf of the consigner (an independent party), therefore, the additions so made were completely contrary to the provisions of law and the facts and evidences available on record. It was submitted that there was a difference of ₹ 66,35,957/- which was overlooked by the A.O. while framing the original assessment order. It was further submitted that this difference in the total turnover was actually a consignment sale which the assessee carried out on the instructions of the Principal i.e. M/s Kedia Overseas Ltd. and M/s R.R Oils, Navi Mumbai and M/s Bhatinda Chemicals. As per the ld. AR, the consignment sale was not considered as part of total sales of the assessee. The ld. AR has further submitted that the assessee has, besides submitting Tax Audit Report to the Income tax Department has also to submit VAT Audit Report U/s 73 of the Rajasthan Value Added Tax Act, 2003 to the Sales Tax Department. In the said report so submitted, this fact has been clearly mentioned in Part IV of the VAT Audit Report. The ld. AR has stressed upon Annexure &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.00 and resulting income may be added to the assessed income. 7. On the contrary, the ld. DR has refuted the arguments of the ld. AR and submitted that in this case, the original assessment u/s 143(3) of the Act was completed at income of ₹ 3,25,980/-. However, it was observed by the RAP that the turnover declared by assessee in the return submitted before the sales Tax Authorities and in Income Tax return varied and the assessee failed to disclosed turnover of ₹ 66,35,957/-, therefore, the order u/s 263 was passed by the Commissioner of Income Tax giving specific direction to the A.O. to verify the total turnover from the books of accounts and also to verify the genuineness of the loss claimed by the assessee. Thus, during the course of reassessment proceedings u/s 263/143(3) of the Act, the assessee was called to prove the difference in turnover of ₹ 66,35,957/-. Since the assessee failed to support his claim, therefore the A.O. completed the assessment proceedings by adding the total suppressed sales of ₹ 66,35,957/- and consequently, the claim of loss claimed at ₹ 2,63,600/- was also not proved, thus, the same was also not allowed. However, dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. From the records, we have meticulously gone through the submissions made by both the parties and as per the records placed before us, it is true that the assessee could not prove the difference of ₹ 66,35,957/- on account of consignment sale because of the reasons mentioned in the above paras of our order. However, we are of the view that whether the purported sale is consignment sale or ordinary sale is immaterial at this stage as even if we treat the said sales undertaken by the assessee as ordinary sale instead of consignment sale then also the entire sales cannot be treated as an income of the assessee. In this regard, we draw strength from the decision in the case of CIT Vs President Industries (supra) wherein the Coordinate Bench had held that entire sales could not be added as income of assessee but addition could be made only to the extent of estimated profits embedded in sales. Further in the case of K Venkatesh Vs ITO (supra) wherein the Hon ble High Court upheld the order of Tribunal by holding that it not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts i.e. personal set of books and business set of books. The assessee is having closing balance of unsecured loans of ₹ 8,01,109/-, which is at page No. 1 of paper book and investment in Kanoria Enterprises stood at ₹ 20,43,238/-. We also observed that the statement of affair as on 31.03.2009 was filed before the authorities below, thus, it is evidently clear that entire capital of ₹ 20.43 lakhs in Kanodia Enterprises was sourced from the unsecured loan of ₹ 8.01 lakhs which is much lower than the total capital invested in the said proprietary. Further investment in the fixed assets, cash in hand, etc and some amount of shares, etc. with the help of the capital of ₹ 29.19 lakhs. In absence of any contrary evidence, it cannot be said that the unsecured loan so taken were utilized elsewhere then making investment in the said proprietary. We further observed that all these amounts were taken from the market with the help of the finance broker to whom finance charges were also paid. The genuineness of the loan so taken is not under dispute and therefore the AO was also satisfied in absence of any addition made u/s 68 of the Act. It is not the allegation th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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