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2016 (5) TMI 28 - AT - Income TaxAdditions towards sundry creditors - Held that:- During the course of hearing, the assessee has filed a paper book, wherein submitted the ledger account copies of the respective creditors along with confirmation letters issued by the parties. On perusal of the confirmation letters issued by the assessee, we find that in the case of two parties, where there was a difference in closing balances, the assessee has explained the difference in closing balance and submitted that the difference in balances in sundry creditors is not closing balance and it is opening balance difference. Therefore, AO cannot make additions towards opening balance difference during the year under consideration. We find force in the arguments of the assessee for the reason that on perusal of such confirmation letters and also reconciliation furnished by the assessee, we noticed that the creditors have been explained before the Assessing Officer and also explained the reasons why the difference is appeared in the creditors’ balance. The CIT(A) after considering the submissions made by the assessee rightly deleted the additions. We do not see any error or infirmity in the order passed by the CIT(A). Hence we inclined to uphold the CIT(A) order - Decided against revenue. Additions towards suppressed turnover and related gross profit - Held that:- AO stated that the average sales price is less than the purchase price for the above period. We do not see any merits in the findings of the AO for the reason that additions cannot be made based on the average selling price of a particular period and apply it to the remaining period by stating that there was a difference in selling price for the particular period. Unless, A.O. analyse the total financial results of the period including opening stock, purchases, sales and closing stock, no additions can be made on the basis of a part period by taking the average selling price. In the present case on hand, the AO has not pointed out any defects in the quantity of product sold by the assessee. The AO is mainly harping upon the selling price of the particular period by stating that the sale price of the product sold is less than the purchase price. In the present case on hand, the assessee is in the business of trading in steel and iron. The iron and steel prices are prone to ups and downs depending upon the demand in the market. The sale price of the product sometimes may be less than the purchase price when the market trend is going down. Therefore, based on the selling price, the AO cannot estimate the sales turnover for the part period by taking into account the remaining period sales. The CIT(A) after considering the explanations furnished by the assessee, rightly deleted the additions - Decided against revenue. Adhoc disallowance on 30% of expenditure - Held that:- CIT(A) restricted the additions to ₹ 1 lakh by holding that though this expenditure are supported by self made vouchers, the relevance of such expenditure cannot be ruled out in the business of the assesee. The fact remains same even before us. The revenue has not brought on record any evidence to show that the findings of the facts recorded by the CIT(A) is incorrect. Therefore, we do not see any reasons to interfere with the order passed by the CIT(A).
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