TMI Blog2012 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... above the market prices in form of bonus to farmers – Held that:- As the components of bonus paid was not clearly bifurcated and defects in the books of accounts with regards to cash credit, creditors, shortage etc. such GP ration is justified. - I.T.A.No. 84/Ind/2005, I.T.A.No. 130/Ind/2005, I.T.A.No. 383/Ind/2005, I.T.A.No. 451/Ind/2005 - - - Dated:- 13-7-2012 - SHRI JOGINDER SINGH AND SHRI R.C.SHARMA, JJ. Assessee by : Shri Rajendra Sodani, Adv. Department by : Shri R. A. Verma, Sr. DR ORDER PER R. C. SHARMA, A.M. These are cross appeals by the assessees and Revenue against the order of CIT(A) for the assessment year 2001-02. 2. Common grounds have been taken in both the appeals even though different assessees are there, for the sake of convenience and brevity all these appeals are disposed of by this consolidated order. 3. Rival contentions have been heard and records perused. Facts in brief in case of Shri Sandeep Chopra are that the assessee was trading in foodgrains. During the course of assessment by rejecting assessee s books of account, the Assessing Officer made addition on account of shortage in closing stock of soyabean wheat. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was finally completed within nearly two months time on 29.03.04. The second important aspect which also leads to the same conclusion is the service of detailed show-cause notice dtd. 12.03.04 on 16.03.04 and thereafter barely two weeks time was left before the limitation period expired as mentioned in para-2 of the 1 appeal order also. The third fact which leads to this conclusion, that the time available both for the AO and the appellant to examine and present the case respectively was very limited and the issues involved were many, involving substantial amount of revenue, as the AO in his comments dtd.25.10.04 against submission made by the appellant pertaining to ground no.13,15,16 and 19 has conceded unequivocally that addition to the extent of Rs.17,21,222/-( Rs.4,21,222/- + Rs.2.00 lakhs + Rs.7.00 lakhs + Rs.4.00 lakhs) were not called for. Thus, the conclusion is inevitable that the appellant did not get full and proper opportunity to explain his case before the AO which lead to substantial addition of more than Rs.1.10 crores. 7. Now the specific grounds of appeal are taken up and decided as under. 8. On careful consideration of the facts of the case and the AO's fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no fuel at all was purchased by the appellant for running of such vehicle nor any other expenses for running of the vehicle were incurred before 31.03.01. Thus, even if appellant's version regarding delivery of the vehicle being taken on 30.03.01 is accepted, there are no evidences to establish the user of such vehicle for the purpose of business and in such facts, the AO's action in disallowing the claim of depreciation is found to be fully justified and in order and is accordingly upheld. It may be observed that mere fact that such vehicle was registered with the RTO on 31.03.01, when the formalities regarding payment of such vehicle were completed on 11.04.01, alone cannot be sufficient to establish the . fact that vehicle was actually used for the purposes of business. Once that be so, the claim of the appellant for depreciation which has to based on actual user for business purpose has to be necessarily rejected and addition is confirmed at Rs.31,175/-. 10. Coming to the next item of disallowance of misc. expenses at Rs.9,575/-, it is seen that such disallowance was necessitated as the appellant failed to explain the nature of such expenses. In appeal. hearing, such groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her as they are inter-connected each other, The AO has discussed these issue in para-14 15 of the assessment order. On careful consideration of the explanation offered by the appellant, the same is found to carry sufficient force as merely because the draft was purchased in the name of J.S. Parbhani, in advance, without knowing the exact bill amount, the appellant's version was not required to be altogether rejected by the AO resulting into double addition as rightly contended by the appellant. Once the facts of the transactions are examined, in the light of the explanation offered by the appellant, there is absolutely no case for making either the addition for Rs.40,000/- or for further addition for Rs.49,580/-. The AO's has admitted that the amount of Rs.40,000/- for which draft was purchased in the name of J.S. Parbhani was duly accounted for. Thus, there is discrepancy to the extent of not recording balance amount of purchase for Rs.9,580/-. The explanation offered by the appellant that this amount was retained for future adjustment of quality different cannot be accepted, in so much as once a bill was received, it was incumbent on the part of the appellant to have made prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly AO's action is confirmed. 19. Coming to the next addition of Rs. 4.00 lakhs, the AO has in a way has conceded that the deposit made on 18.09.00 may be accepted as out of the draft dtd.14.09.00. But he has still doubted the deposit made on 29.08.00 as Mahagujarat intimated the date of such draft to be 31.08.00. This approach of the AO is not found to be justified, in as much as, when the appellant has offered adequate explanation and even the draft number given by the appellant tallies with draft number mentioned in the bank pay-in-slip depositing such draft in the bank account of the appellant, there was no reason to further disbelieve the version of the appellant. It may also be mentioned that the AO should not always proceed on the premises that whatever information is provided by the third parties is sacrosanct and gospel truth. He should apply his independent mind and appraise the details and evidences in an unbiased and proper way and arrive at the proper conclusion. If he finds that the explanation offered by the appellant appears to be reasonable and there are some doubts remaining vis-a-vis the information supplied by the third party, it is his duty to take up the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qual amount. Thus, the addition for the balance of Rs.1,56,000/- is also not found to be at all called for and is accordingly deleted. 21. Now coming to the next addition of Rs. 1.50 lakhs for unaccounted earnest money deposit, it has to be necessarily held that AO's findings to the effect that the appellant has not disclosed this amount in the balance-sheet has definite merits. But once the explanation offered by the appellant is considered, that an amount of Rs.1.00 lakhs was paid by DD on 08.10.99, as earnest money and balance was directly deducted from his account, no addition on this score can be upheld for the year under consideration, as there is no evidence on record to the affect that the appellant has paid any amount to Mahabeej on account of earnest money during the year under consideration. It is true, that as rightly observed by the AO, the appellant's contention are not found to be fully convincing in so much as if the appellant's version is true, then this amount was necessarily required to be reflected on the asset side of the balance-sheet as earnest money deposit with Mahabeej. Here it may be mentioned that it has already been observed and held that the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to the observation made in para-5.12, which are very pertinent to this issue also. The AO had no valid reason for disbelieving the version of the appellant and in any case even if the AO's version on facts is required to be upheld, then also no addition to the income of the appellant can be made simply on the basis that Mahabeej has shown some payment to be made to the appellant which is not accounted for by him in his books of accounts keeping in view the findings and observations made in para 5.13. Further, if Mahabeej has debited an amount of Rs.54,OOO/- for quality difference, as contended by appellant, no addition can be made on that score, as the profit would be in fact be reduced to that extent. If such transfer entry is passed by Mahabeej without proper intimation relating to some branch adjustment also, no addition on that score can be made to the appellant's account. In the result, entire addition of Rs.5,22,OOO/- is deleted. 24. Once the issues raised in grounds of appeal are decided, the major issue relating to addition of unexplained cash credit at Rs. 72,94,537/- is taken up. It has to be observed that the major portion of the assessment order running from page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Inspector were illiterate farmers and certain inconsistency in replies, therefore could not have been ruled out. The AO was required to take a very broad view on appreciation of the entire facts of the case and the evidence collected by him as well documents and evidences produced by the appellant. Thus, the addition made by the AO in the present form in the matter of unexplained cash credit cannot be at all sustained both on facts and in law. 29. It will be pertinent to observe that appellant has contended that AO has made addition in respect of outstanding amounts in the name of various payments, more than once. The AO has however agreed for such a mistake in respect of one farmer only. Once a clear picture has emerged on analysis of counter contentions and facts on record and further considering the fact that substantial amount of gross profit addition, as discussed here in after, is directed to be added to the income of the appellant, it not considered necessary to analyze counter contentions in respect of each and every farmers separately. 30. Finally, in course of examination of the appeal proceedings, it clearly emerged that the purchase price recorded by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the law. 33. No appeal lies against the initiation of penalty proceedings and accordingly the last ground is hereby rejected. 34. In the result, appeal is partly-allowed. 35. Against the above order of CIT(A), both assessee and Revenue are in appeal before us. 36. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that the assessee was trading in foodgrains. In the course of assessment, the Assessing Officer found many discrepancy in the books of account, so he made various additions on different counts. He also made disallowance of part of expenditure claimed by the assessee. Part of the disallowance was deleted by the ld.CIT(A) after giving detailed observation narrated hereinabove. The addition made on account of creditors, difference in stock etc. were also deleted by the ld.CIT(A) after sustaining addition by estimating gross profit rate at 15 % on the sales estimated at Rs. 1.90 crores in place of actual sales disclosed by the assessee at Rs. 1,79,68,258/-. From the record, we found that the during the year, the assessee had shown gross profit of 6.95% as compared to gross profit of 1.95 % a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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