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2016 (12) TMI 558 - AT - Income TaxGP addition - rejection of books - estimation of income - Held that:- The Assessee has also admitted that the purchases made of milk in the month of March have been recorded in the month of April and this practice has been followed regularly. The milk has been purchased in cash and in most of the cases no invoices were available therefore the affairs of the assessee are not open for verification. Under these circumstances the AO has rightly invoked the provision of section 145(3) of the Act which is upheld. As regards the estimation of income, it is noted from the records that the assessee has declared the total turnover of ₹ 5.93 crores which was estimated by the AO at ₹ 6.5 crores and reduced by ld. CIT(A) to ₹ 6.25 crores. The estimation made by AO is solely for the reason that certain sales against free coupons issued is not recorded for which it is explained that the free coupons were issued as a marketing strategy and free distribution of the material could not be forming part of the sales and the corresponding receipts from the dealers as security deposits is separately kept under the head “Security Deposits”. Therefore there is no occasion for recording the same under the head “Sales”. Under these circumstances the turnover declared by the assessee should not be disturbed more particularly when the assessee’s record are subject to examination by Central Excise and VAT authorities who have not doubted the turnover declared in the year under appeal. Determination of GP rate - the turnover of the assessee has been on increasing trend and it is an established principal of marketing that the turnover would be increased by lowering the profit margins. In this case certain deficiencies were pointed out by the AO including the recording of purchases of the month of March in April for which it was explained that same process is applied every year and if the effect of the purchases recorded in the month of April for the purchases made in month of March of preceding assessment year vis-à-vis the purchases of the month of March of the year under appeal recorded in subsequent assessment year is considered the resultant figure is worked out at ₹ 2,32,659/- by which at the most the profit is deflated. Thus GP of preceding assessment year is to be applied on the declared turnover of ₹ 5,93,59,027/- (5,93,59,027x 14.70% = 87,25,776) which has resulted into the GP of ₹ 87,25,776/- as against the GP declared at ₹ 81,77,000/- shown by the assessee and accordingly an addition of ₹ 5,48,776/- ( ₹ 87,25,776 minus ₹ 81,77,000) is hereby confirmed to cover up all the possible leakage of the revenue Addition on forfeited security deposit which has not been shown as income - Held that:- During the course of hearing assessee referred to the computation of total income of the assessee's paper book wherein depreciation chart is showing a sum of ₹ 14,18,501/- as sales and was reduced from the written down value of plant & machinery. It is contended that the assessee has claimed depreciation on such deep freezers and the amount of security forfeited has been reduced from the written down value and the depreciation was claimed on such reduced value. Therefore, there is no occasion to declare such receipts separately in the Profit & Loss Account. After verification of these facts from the assessee's paper book page 99, it is found that as against the total amount of ₹ 14,20,581/-(as per AO’s order page 11) assessee has reduced the value of plant & machinery by ₹ 14,18,501/- therefore the same is hereby directed to be deleted and the balance amount of ₹ 2,080/- is hereby upheld. - Decided partly in favour of assessee Non deduction of tds on interest paid - addition u/s 40(a)(ia) - Held that:- It is noted from the record that the tax was not deducted on the payment of interest however the assessee has submitted the certificate in Form 26A duly signed by a chartered accountant stating that the due tax on such interest has been paid by the recipient. The Finance Act, 2012 has made an amendment in section 40(a)(ia) through which a proviso was inserted w.e.f. 01.04.2013 wherein it has been cleared that the recipient has paid the tax and assessee is not deemed to be in default under the first proviso to sub section 1 of section 2001 then for the purpose of section 40(a)(ia) it shall be deemed that the assessee has deducted and paid tax on such sum subject to furnishing on the certificate by the chartered accountant. Thus no deduction could be made u/s 40(a)(ia) if the assessee is not declared as assessee in default u/s 201(1) for which the necessary certificate is claimed to have been furnished before the lower authorities. Therefore direct the AO to verify this fact and if the claim of the assessee is found correct, no disallowance be made on this account. Hence Ground of the assessee is set aside to the file of the AO for making necessary verification and this ground of the assessee is allowed for statistical purposes.
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