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2019 (7) TMI 170 - AT - Income TaxMethod of valuation of stock prescribed u/s 145A - difference sales as per print out taken from computer and sales declared in the audited books of accounts - VAT/MVAT netted sales figure - HELD THAT:- Assessee through this working u/s 145A brought to the notice of CIT(A) that there will be no impact on income chargeable to tax vide exclusive method followed by it for accounting for sales, MVAT/CST and stocks , which stood already disclosed/reported to Revenue vide tax-audit report as well while filing computation of income in return of income filed with Revenue. The income tax return along with computation of income filed with Revenue as well tax-audit report were all before the AO during the course of assessment proceedings. Under these factual matrix of the case before us, we do not find any justification and merits in the contention of the revenue and we are of the considered view that proper explanations were given by the assessee during the course of the assessment as well appellate proceedings before the CIT(A) CIT(A) rightly deleted the additions as were made by the AO. - Revenue vide ground no.1 is dismissed. Additions on account of mismatch of closing stock - survey proceedings conducted by Revenue u/s 133A - HELD THAT:- Assessee on its part has duly submitted complete details and in our considered view CIT(A) has rightly deleted the addition as were made by the AO on estimated basis. However , the DR has pointed out that the closing stock for AY 2006-07 was 90,928 Kg of different types of chemicals dealt in by the assessee as on 31.03.2006, while for AY 2007-08 , the opening stock as on 01.04.2006 was taken as 92,788 Kg. of chemicals instead of taking closing stock of preceding year as opening stock and to this extent owing to specific defect being pointed out by learned DR , we are remitting the matter back to the file of AO for limited verification of this differential in closing stock of AY 2006-07 and opening stock of AY 2007-08 and for make additions to income accordingly, if any as per mandate of the applicable provisions of the 1961 Act. Addition on account of low GP ratio declared by the assessee - HELD THAT:- AO has brought on record comparative analysis of GP ratio of competitor from the same locality. AO has also noted abnormal increase in certain expenses as well several discrepancies and inconsistencies in accounts maintained by the assessee. The economies of scale ought to have increased GP ratio and profitability owing to increased turnover but instead GP ratio and profitability fell. These are special circumstances which are against the normal business patterns and are especially within the knowledge of the assessee which assessee ought to have duly explained. The onus was on the assessee to demolish the findings of the AO and its own results against normal business patterns with the cogent evidences but the assessee has given general replies and hence the assessee failed to discharge the onus as was on the assessee. Hence we are inclined to set aside appellate order passed by Ld.CIT(A) and confirm additions as were made by the AO in its assessment order. Addition u/s 69C - HELD THAT:- Additions owing to fall in GP ratio in preceding para‟s of this order. We have observed that learned CIT(A) held that there is no differential in books of accounts vis-a-vis statement furnished by the assessee. CIT(A) had observed that the assessee had furnished statement in which commission exceeding ₹ 50000/- was shown and hence there is no differential if the commission upto ₹ 50000/- is also taken into account. We have observed that the Ld. CIT(A) has rightly made additions by disallowing commission expenses of ₹ 1,07,762/- on which no income-tax was deducted at source by invoking provisions of Section 40(a)(ia). The powers of learned CIT(A) are co-terminus with powers of the AO. The assessee also could not controvert this position even before us and only bald aversions are made and no serious averments are made. Thus we affirm appellate order passed by Ld. CIT(A). The grounds raised by both the parties stand dismissed Addition of differential in transportation charges - HELD THAT:- Assessee has not made any serious contentions to support its case and only bald averments are made . In the absence thereto of any serious challenge to the well reasoned appellate order passed by CIT(A) and as per material on record, we confirm the additions as sustained by CIT(A) . The differential in transportation charges as were observed by authorities below could not be explained by the assessee even before us. We also note that Revenue has not raised any challenge to part relief granted by learned CIT(A) to the assessee. Addition of expenses by disallowing 25% of the certain expenses - HELD THAT:- DR supported the orders of authorities below. After hearing both the parties and after carefully going through orders of authorities below and material on record, we are of the view that the assessee could not bring on record cogent material to prove/substantiate its contention that these expenses were incurred wholly and exclusively for the purposes of the business of the assessee. Thus, proper supporting/explanation and justification of incurring these expenses wholly and exclusively for the purposes of business of the assessee is not forthcoming. The onus was on the assessee which it failed to discharge. The personal usage of these expenses for the benefit of partners/family members of the partners cannot be ruled out. We donot find any merit in the appeal of the assessee which stand dismissed. Disallowance of depreciation on car - additions to the income of the assessee by disallowance of 25% on depreciation on car - HELD THAT:- No serious contentions were raised by the assessee even before tribunal to substantiate /justify that car was wholly and exclusively used for the purposes of the business of the assessee . It is also observed that car is registered in the individual name of partners and personal usage of the car for benefit of partners/family members cannot be ruled out and hence this addition is sustained. Disallowance of expenses towards warehousing charges and Hamali Charges - HELD THAT:- The assessee has now filed an second appeal before tribunal and we find that no serious contentions were raised before us by learned counsel for the assessee before the tribunal to substantiate and justify allowing the entire warehousing expenses. DR supported the orders of authorities below. After hearing both the parties and carefully going through the material on record, we find no reason to deviate from the decision taken by the CIT(A) and we affirm the order of learned CIT(A) and sustain the disallowance as proper and satisfactory explanation of incurring of these expenses are not submitted by the assessee. Hamali Charges - CIT(A) held the said disallowance to be reasonable. The assessee has filed second appeal and no serious contentions were raised by assessee before us to prove/substantiate that these expenses are duly supported by documentary evidences and were genuine/bonafide expenses incurred wholly and exclusively for the purposes of business. We have no reason to deviate from the decision taken by the Ld. CIT(A) which we affirm Addition u/s 41 - cessation of liability - HELD THAT:- The entire purchases were added by the AO u/s 41(1) towards cessation of liability despite the fact that substantial amount towards purchases made was paid within the previous year through banking channel. The said confirmation from M/s Anil Enterprises reflecting purchases made during the year and payments made during the year by the assessee duly certified by said M/s Anil Enterprises for relevant period . In any case, we have confirmed the additions vide this order towards low GP ratio as the assessee is consistently showing abysmally low GP for which no satisfactory explanation is offered by assessee. Thus, we decide this issue in favour of the assessee and dismiss the ground raised by the Revenue. The assessee succeeds on this ground and additions as was sustained by learned CIT(A) stood deleted., while part relief granted by learned CIT(A) stood affirmed.
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