TMI Blog2012 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... , SHRI A.N. PAHUJA, JJ. Assessee by Shri Sunil Jain,AR Revenue by Shri R. I .S. Gi ll,DR O R D E R A.N.Pahuja:- These cross appeals filed on 06.01.2011 by the Revenue and on 07.01.2011 by the assessee, against an order dated 14.10.2010 of the ld. CIT(A)-XXVI, New Delhi for the AY 2007-08, raise the following grounds:- I.T.A. No.77/D/2011[Revenue] 1. On the facts and in the circumstances of the case and in law, the order of the ld. CIT(A) is erroneous, perverse, illegal and against the provisions of law which is liable to be set aside. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.8,36,270/- out of total addition of Rs.41,81,345/- made by the AO on account of unverifiable, unvouched cash purchases. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.2,00,42,284/- made by the AO on account of rejection of books of account. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.7,99,960/- made by the AO on account of non-business expense mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. Moreover, the so called purchase register comprising photo copies of receipts of the purchases made in cash, were merely selfgenerated vouchers, having no sale tax or vat number nor any preprinted receipt number. Even the names of the persons ,accepting payments and signatures were missing on these vouchers. Accordingly, while referring to decisions in Girdharlal Goenka Vs. CIT (1989) 179 ITR 122 (Calcutta) and late Smt. Jyothi Chellaram Vs. CIT (1988) 173 ITR 358 (AP) and reply of the assessee in the preceding assessment year, the AO disallowed 25% of the cash purchases of Rs.1,67,25,379/-, resulting in disallowance of Rs. 41,81,345/-.. Besides, the AO added 25% of the purchases of Rs.8,01,69,134/- made by cheques while rejecting the book results, the assessee having failed to furnish a satisfactory reply regarding valuation of stock of human hair or their quality . 3. On appeal, the learned CIT(A) while following the decision of his predecessor for the assessment year 2006-07 restricted the disallowance to 20% of the cash purchases in terms of provisions of section 40A(3) of the Act, holding as under: 4.3 On this issue in the preceding year, the CIT(A)-15, New Delhi v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected and has invoked section 145(2), however, no deficiencies in the books of account have been pointed out. No discrepancy has been pointed out in the stock register. The goods/commodity is of such nature that in term of quality/thinness/colour/length/strength etc. It is to be segregated, washed and then processed. This entails mixing up goods (hair) purchased. In such circumstances the weighted average method of valuation is possibly the most viable method available to the assessee. In the absence of any specific deficiencies in the books of account, I hold that the Assessing Officer was not justified in rejecting the books of account. As the addition of Rs.2,00,42,284/- is found to be without any substance, it is accordingly deleted. 4. The Revenue is now in appeal before us against relief of Rs.8,36,270/- and Rs.2,00,42,284/- given by the ld. CIT(A) while the assessee is in appeal for upholding the disallowance to the extent of Rs. 33,45,075/-.At the outset, the ld. AR on behalf of the assessee while inviting our attention to decision dated 11.3.2011 of the ITAT in the assessee s own case in I.T.A. nos.5198 5559/D/2010 for assessment year 2006-07 submitted that the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at in respect of cash purchases. Thus, the books of account are not complete and correct. In such a situation, there would be no alternative but to estimate the purchases made by the assessee. The assessee has also not furnished any detail comparing the cost per kg. in respect of cash purchases and purchases made by payment of account payee cheques or drafts. Therefore, the disallowance made by the learned CIT(A) has to be considered in the overall situation that the books are not reliable. In such a situation, we are of the view that the learned CIT(A) was right in disallowing 20% of the amount involved in cash purchases, albeit on somewhat different line of reasoning. In so far as cheque purchases are concerned, complete details have been submitted, which have been verified by the Assessing Officer in the remand proceedings. Therefore, there is no reason to disallow any part of the cheque purchases aggregating to Rs.8,50,20,222/-. 5.1 In the year under consideration, indisputably, the facts and circumstances are similar to the facts and circumstances in the AY 2006-07,as pointed out by the ld. CIT(A).In this year also, the assessee prepared internal memos to support the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance in the following terms:- 6.2 In support of the ground of appeal, the learned counsel has stated that the purchase is duly accounted for in the books of account, that the purchases have been accounted for in the stock ledger and that the purchases is duly supported by bills. In the course of the appellate proceedings, the learned counsel was required to state whether Shri Rishi Sood is engaged in the business of trading in human hair, whether similar transaction have been done by him for other parties in this year. In response to these queries it was explained that in assessment year 2007-08, Shri Rishi Sood has done retail trading in hair for Rs.9,90,000/-, out of which sales of Rs.7,99,000/- have been made to be appellant company. On the trading of Rs.9,90,000/- he has shown income @35% at Rs.3,46,500/- u/s 44AF. His PAN is AAOPS 3092 C. 6.3 I have considered the submissions of the learned counsel as well as the facts on record. The sole reasoning of the Assessing Officer for treating the payment as sham purchase and made for other extraneous consideration is observation that purchases are made from sweepers scavenges . It is seen that the company has made purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.4 relates to addition of Rs.7,50,000/- on account of purchase of agricultural land. The Assessing Officer has observed that for the period ending 31.3.2007, the assessee has shown purchase of agricultural land for Rs.7,50,000/- in the schedule of fixed assets. The Assessing Officer further observed that as the assessee had failed to explain the business expediency for which the land was purchased and failed to explain the source of payment of land, the purchase of land was liable to be added as unexplained investment u/s 69C of the Income-tax Act. Against the addition made the learned counsel has drawn my attention to the following:- That the purchase of land is duly accounted for in the books of account as well as the balance sheet as on 31.3.2007. The payment has been made through the bank account of the assessee and in support of the genuineness of the payment, the appellant filed a copy of the purchase deed, copy of the bank draft and bank statement. 7.2 I have considered the submissions of the learned counsel as well as the facts on record. As the purchase of land is reflected in the balance sheet as on 31.3.2007 at a value of Rs.7,50,000/-, there is no justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is in appeal for upholding of disallowance on account of vehicle running and maintenance expenses. The ld.AR while inviting our attention to the aforesaid decision dated 11.03.2011 of the ITAT in the assessee s own case for preceding assessment year contended that similar disallowances were deleted in the preceding assessment year. On the other hand, learned DR supported the findings of the AO. 17. We have heard both the parties and gone through the facts of the case as also the aforesaid decision of ITAT . A co-ordinate Bench while adjudicating identical issues in the preceding year concluded in their decision dated 11.3.2011 as under: 6. The assessee is a private limited company. In the impugned order, it is mentioned that no case has been made out that any of the expenditure for running of the vehicles is un-vouched. However, the learned CIT(A) upheld 20% disallowance out of vehicle running and maintenance expenditure by mentioning that the motor-car was not purchased for the purpose of business and it was for personal use of the director. Therefore, the disallowance was upheld. The assessee relied on the decision of Hon ble Gujarat High Court in the case of Sayaji ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
