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2018 (11) TMI 1647 - AT - Income TaxUnexplained investments - disallowance for inflation of purchase price - HELD THAT:- CIT(A) found that the method adopted by the AO for quantification of disallowance for inflation of purchase price and addition for unaccounted investment for purchases is not scientific. Therefore, the CIT(A) considering the findings of ITAT in the case of Vijay Proteins [1996 (1) TMI 144 - ITAT AHMEDABAD-C] observed that if 20% of total purchases is considered then the appellant’s addition would be at ₹ 20,30,568/- including peak amount, therefore, the CIT(A) has quantified the investment in purchase by taking purchase additions @ 20% of ₹ 6,65,80,561/- which worked out at ₹ 1,33,16,112/- and transportation expenses @ 24.27% in the ratio of total purchases with respect to total expenses which worked out to ₹ 7,88,978/-. Similarly octroi @ 2.05 of purchase of ₹ 6,65,80,561/- was calculated at ₹ 1,66,451/- and packing material considered for 5 per pack at ₹ 7,08,735/-. Accordingly the CIT(A) has quantified investment on purchases price at ₹ 29,95,775/- considered the same for addition as unexplained expenditure as against the amount of ₹ 20,30,568/- computed by the AO. CIT(A) further observed that in view of decision of ITAT in the case of Vijay Proteins Ltd., for AY 1991-92 where the peak amount of purchase at ₹ 10,08,844/- on 10.05.1997 is less than the confirmed addition, hence, the total addition was confirmed at ₹ 29,95,775/- and balance addition out of ₹ 1,33,16,116/- was deleted. We find that these findings of the CIT(A) are correct as the CIT(A) has considered its findings by following the decision of Tribunal in the case of Vijay Proteins Ltd., (Supra) and allowed the set off of peak amount worked out by the AO at ₹ 10,08,444/-. No infirmity in the order of CIT(A) in confirming the addition at ₹ 29,95,75/- as against the addition made by the AO at ₹ 1,33,16,112/-, therefore, the appeal of the Revenue in respect of Ground No.1 is dismissed. Addition on account under valuation of closing stock - HELD THAT:- As gone through the orders and the findings of the CIT(A) and do not find any reason the interfere with the same. Similarly, the CIT(A) after analysed details of Empty Tins and confirmed the addition of ₹ 54,992/- on account of valuation in closing stock of Empty Tins. AO worked out closing stock of ground nut cake at ₹ 41,382/- whereas the CIT(A) has noted that this should be at ₹ 45,520/-, accordingly the valuation in respect of this item was enhanced to ₹ 45,520/-. Similarly, addition on ground nut OGS was analysed by the CIT(A) and the stock of same was determined at ₹ 4,31,663/- and the addition of under valuation in respect of these items of the difference was deleted. Similarly, the addition of ₹ 29,413/- on account of under valuation in closing stock of Haxin was confirmed. Thus, we find that the CIT(A) has analysed the submissions of the assessee as well as findings of the AO and after arrived at a fair reasonable valuation of closing stock, hence the findings of the CIT(A) in reducing the closing stock to ₹ 5,61,588/- from ₹ 27,66,485/- is therefore upheld Addition on account of Motor Car Expenses and Depreciation - HELD THAT:- CIT(A) has correctly deleted the said addition, therefore no interference is required, accordingly, this Ground of appeal is therefore dismissed. Addition on account of telephone expenses - HELD THAT:- CIT(A) has observed that the personal use of telephone by Directors of the company is imperative, further the expenditure is neither authorized by AGM nor is shown as perquisite in the hands of appellant whereas the relying on the case of Hon’ble Gujarat High Court in the case of Sayaji Iron and Engineering and Company [2001 (7) TMI 70 - GUJARAT HIGH COURT] submitted that the disallowance upheld by the CIT(A) are required to be deleted, accordingly same is deleted. Therefore, this ground of appeal of the assessee is allowed Addition on account of Motor Car Expenses and Depreciation - CIT(A) confirmed the addition to the expenditure of 1/6th total car expenses, accordingly, the disallowance out of Motor Car Expenses were reduced from ₹ 25,312/- to ₹ 16,875/- - HELD THAT:- Hon’ble Gujarat High Court in the case of Sayaji Iron and Engineering and Company vs. CIT [2001 (7) TMI 70 - GUJARAT HIGH COURT] submitted that no disallowance on account of personal use can be made in the case of company. We are therefore of the considered opinion that following the decision of Hon’ble Gujarat High Court the disallowance upheld by the CIT(A) are required to be deleted, accordingly same is deleted. This Ground of appeal of the assessee is therefore allowed.
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