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2017 (10) TMI 924 - AT - Income TaxAddition made u/s 40A(2)(a) - assessee has purchased spare parts from its associated concern M/s JJA at a price higher than the prevailing market rate - Held that:- AO has determined the rate of profit earned by JJA on the sales made to outside parties without giving effect to the opening and closing stock of the goods held by JJA. In such situation, we are of the considered view that the rate of profit determined by the Assessing Officer is not based on actual figures. After giving effect to the opening and closing stock, we find that profit earned by JJA on the sale of outside party is coming @ 9.42% only whereas the profit margin earned by JJA on the sales made to the assessee is coming @ 10%. As such, there is no significant difference in the amount of profit earned by JJA on the sales made to the assessee as well as the outside party. In view of above, we hold that the addition has been made by Authorities Below on wrong figures of the goods sold by JJA. It was also observed that the ld. DR has not brought anything on record contrary to the argument of ld. AR. Thus, we reverse the order of Ld. CIT(A) in this regard and direct the AO to delete the addition - Decided in favour of assessee Addition of entertainment expense - Held that:- Assessee before us failed to bring any evidence suggesting that the impugned expenses were incurred in connection of assessee’s business. The ld. AR simply produced the credit card statement and copies of ledger to justify the expense incurred by it. However, no business connection was established by Ld. AR. In this view of the matter, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. We order accordingly. This ground of assessee is dismissed. Disallowance on account of inflated purchase - Held that:- AO has not pointed out any difference in the opening and closing balance of the party. Thus, the submission of Ld. AR that the difference has arisen on account of opening and closing balance do not hold good. As per the books of the assessee it has shown purchases during the year worth of ₹ 49,45,610/- whereas Pugalia Automobile has shown sales in its books during the year to the assessee worth of ₹ 47,92,625/-. Thus, it is clear that the difference was observed by the AO on account of difference in the amount of purchase shown by the assessee in its books as well as the amount of sale shown by Pugalia Automobile. Thus, the argument of Ld. AR that the difference pertains to the opening and closing balance of the party is not maintainable. In the background of the above discussions we do not find any infirmity in the order of Ld. CIT(A) and accordingly we uphold the same. Hence, this ground of assessee is dismissed.
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