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2018 (5) TMI 1824 - AT - Income TaxAddition on account of income booked in the Profit & Loss Account in excess of cash available - Held that:- Once the assessee has surrendered an income of ₹ 20,00,000/- due to the incriminating material found during the survey then the application of the same income if less than the amount surrendered by the assessee would not lead to the situation that assessee had surrendered less amount than it ought to have surrendered. AO has made an addition on the ground that the assessee has spent only ₹ 9,21,903/- and, therefore, the balance amount is liable to be taxed as surplus cash. CIT (A) has deleted this addition by considering the fact that there is no basis of such addition made by the AO. We do concur with the finding of the CIT (A) that the surplus cash, if any, is computed by the AO to the extent of the surrendered amount cannot be considered as an additional income liable to tax. Addition on account of understatement of scrap sale - scrap sale as found in the loose papers - Held that:- Date of scrap sale as found in the loose papers is also a relevant factor to ascertain the said transaction belongs to the lot of the scrap sale and rate prevailing during the said period. Therefore, the rate of a particular item of scrap sale as found in the loose papers and the rate as recorded in the bills and books of accounts can be verified and then only to the extent of the same rate and same item of scrap sale will be considered for making the addition on account of under billing. Hence, in view of the facts and circumstances of the case, we set aside this issue to the record of the AO for proper verification of the facts and identify the particular item of scrap sale found recorded in the loose papers impounded during the course of survey and then apply the same rate in respect of the scrap sale of the same item which is shown by the assessee sold at the rate as mentioned in the corresponding bill. Trading addition - AO rejected the books of account u /s 145(3)- assessee surrendered an income which was included by the AO while computing the GP rate to be applied for the year under consideration - Held that:- There is no quarrel on the point that after rejection of books of account, the only course of action left with the AO is to estimate the income of the assessee by applying a proper and reasonable basis. The GP rate of earlier year is no doubt a reasonable and proper basis for estimation of income. However, the AO instead of applying the undisputed and noncontroversial GP rate of the earlier year, has considered only the GP rate which was computed after including the surrendered income of the assessee of the preceding year. Therefore, we find that the basis applied by the AO is not proper and appropriate and, therefore, we do not find any error or illegality in the order of ld. CIT (A) in deleting the said addition. Addition made on account of freight receipts - AO on the analyses of loose papers found that the assessee has received unaccounted cash @ 22.25% which is the difference between the billed amount and actual freight mutually determined with the transporters - Held that:- when the assessee has admitted the over-inflated claim of freight charges as found in the loose papers for the months of April to August in respect of the payment made to one transporter, namely, Haryana Rajasthan Roadlines, the said rate of inflated expenses on account of freight charges can be applied in respect of the freight charges claimed by the assessee paid to Haryana Rajasthan Roadlines. Therefore, to the extent of freight paid to the said transporter, the inflated rate as applied by the assessee is justified but not in respect of the other transporter when there is no material or other record to show such an arrangement between the assessee and other transporter. Accordingly, we set aside this issue to the record of the AO to verify the other freight charges and only to the extent of freight charges to Haryana Rajasthan Roadlines this difference rate can be applied. Disallowance of interest under section 36(1)(iii) - Held that:- Disallowance made by the AO on account of interest expenses due to loan given to M/s. International Engineering & Manufacturing Services Pvt. Ltd., a sister concern of the assessee, without charging interest was considered by this Tribunal in assessee’s own case for the assessment year 2003-04. The revenue has not disputed the fact that there is no fresh loan given by the assessee during the year under consideration to the sister concern. Therefore, when the disallowance made by the AO on this account was already decided in favour of the assessee by the ld. CIT (A) and thereafter by this Tribunal, then following the earlier order of the Tribunal, we do not find any error or illegality in the impugned order of the ld. CIT (A) qua this issue. Disallowance on account of travelling expenses - expenses incurred are personal in nature - Held that:- AO has not disputed that the expenditure was incurred on the travelling of the Director and, therefore, in the absence of any fact or material to show that the visits undertaken by the Director of the assessee was personal and not for the purpose of business of the assessee, such an adhoc disallowance of ₹ 50,000/- is not justified.
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