TMI Blog2014 (6) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,129/- which was explained by the son of the assessee as return of goods at the time of the survey - The assessee was not in the station at the time of the survey - the statement of the assessee which was recorded u/s. 131 of the Act was rejected by the AO without making any attempt to verify the genuineness of the same - No material was brought on record by the AO to show that there was any error in the statement of the assessee recorded u/s 131 by making due inquiry - the AO was not justified in rejecting a plausible explanation without making necessary inquiry – Revenue could not point out any error in the finding of the CIT(A) which was to the effect that the trial balance prepared at the time of the survey itself shows that some job work charges which were also actually paid by the assessee before survey were not properly recorded in the books of account – thus, there was no reason to interfere with the order of the CIT(A) – Decided against Revenue. Deletion of interest expenses u/s 40A(2)(b) of the Act – Held that:- The assessee claimed deduction for interest payment to five parties on loans taken from them at the rate of 12% - the interest paid by the assessee at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that this would amount to cheating customers and against business ethics and enquiries with M/s. Pioneer Syntex Private Limited, through whom 80% processing of the assessee was done, revealed that there was actual shrinkage of 1.31% on processing. The Assessing Officer, therefore, concluded that the assessee made sales out of unaccounted purchases. He considered the average sale price and book gross profit to determine the investment in unaccounted purchases which worked out at Rs 10,81,573/- and the same was added to the total income of the assessee as unexplained expenditure u/s. 69C of the Act. 4. On appeal filed by the assessee against this order of the Assessing Officer, the Commissioner of Income Tax (Appeals) observed that the assessee has been able to show on the basis of evidence that there was longevity yield on processing of Nylon cloth and that the analysis made by the Assessing Officer on information obtained from M/s. Pioneer Syntex Private Limited was not correct as it did not consider opening and closing stock with the said concern. The Commissioner of Income Tax (Appeals) further observed that even otherwise the addition made by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the order of the Assessing Officer but could not point out any specific error in the order of the Commissioner of Income Tax (Appeals). We find that no material could be brought on record by the Revenue to show that the assessee had actually made any investment in purchases which was not recorded in its books of account. In absence of any such material, we do not find any good reason to interfere with the order of the Commissioner of Income Tax (Appeals). It is confirmed. The ground of appeal of the Revenue is dismissed. 8. Ground no. 2 of the appeal is directed against the order of the Commissioner of Income Tax (Appeals) deleting the addition of Rs 2,02,129/- on account of unaccounted stock found during the course of survey. 9. The brief facts of the case are that the Assessing Officer observed that a survey was conducted in the case of the assessee on 31.01.2006. No day-to-day stock register was maintained by the assessee. Physical stock was found to be Rs 4,74,760/- furnished goods and stock of grey cloth lying at mill was stated to be Rs 2,56,021/-. Therefore, the total stock on physical verification was Rs 7,30,782/-. The survey party prepared trading account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim and show by way of enquiries that the statement made or evidences produced in support thereof were false. The Assessing Officer chose to rely on the statement of the assessee s representative to the exclusion of assessee s own statement and evidences. The Commissioner of Income Tax (Appeals) observed that in view of the discussions made, it is held that the stock difference is reconciled and there was no excess stock with the assessee. Therefore, he deleted the addition. 11. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, during the course of survey conducted on 31.01.2006, stock of Rs 7,30,782/- was found on physical verification. As per the trading account prepared at the time of survey, value of stock as per books was arrived at Rs 5,28,652/-. Thus, there was excess stock of Rs 2,02,129/- which was explained by the son of the assessee as return of goods at the time of the survey. The assessee was not in the station at the time of the survey. On his return, a statement of the assessee was recorded u/s. 131 of the Act and in that statement, the assessee pointed out that certain job c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses u/s. 40A(2)(b) of the Act. 16. The brief facts of the case are that the Assessing Officer observed that the interest was paid at the rate of 12% to persons mentioned u/s. 40A(2)(b) of the Act. He considered it as unreasonable because cash credits were available at 9% to 10%. In reply to show cause notice, the assessee submitted before the Assessing Officer that bank loan rates range from 15% to 18% and involved further expenses in the nature of insurance premium, visit charges, valuation charges, document charges, stamp duty etc. and therefore, unsecured loan on 12% interest was reasonable. It was also submitted that this does not create any charge on the assessee. The reply did not find favour with the Assessing Officer. According to him, cash credit limits from Nationalized Banks were available at 9% to 10% rate of interest and therefore, he considered 9% as the reasonable market rate and restricted the interest claimed by the assessee to that extent and made addition for the balance amount of interest of Rs 1,03,836/-. 17. On appeal, the Commissioner of Income Tax (Appeals) observed that bank loans which are against security and entail additional expenses are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs 46,670/- made on account of disallowance of various expenses of Rs 93,340/-. 23. The brief facts of the case are that the Assessing Officer made addition of Rs 93,340/- on account of disallowance out of various expenses like telephone expenses, petrol expenses, vehicle repair and maintenance expenses, car insurance, car depreciation and office expenses. According to the Assessing Officer, no log book/register is maintained by the assessee for usage of vehicle. Office expenses related to coffee/tea, cold drink etc. for which no vouchers had been prepared. The Assessing Officer disallowed 20% of the expenses as being nonbusiness in nature. 24. On appeal, the Commissioner of Income Tax (Appeals) observed that the assessee has not been able to dislodge the findings of the Assessing Officer that not all expenses are incurred for the purposes of business. At the same time, such expenses are required to be incurred for the purposes of business. Accordingly, the Commissioner of Income Tax (Appeals) observed that in his opinion ends of justice will be met if the disallowance was restricted to 10% and directed the Assessing Officer to give relief accordingly. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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