TMI Blog2014 (11) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... noticing that the name of Assessee was not reflected by them as debtor, considered the entire amount reflected under the head sundry creditors by the Assessee which also included various other persons, as the income of the Assessee – but, CIT(A) on the basis of the examination of only 5 persons has deleted the entire addition - there is no finding of CIT(A) with respect to the non reflection of the Assessee as debtor by the 3 creditors – the matter is required to re readjudicated – Decided in favour of revenue. Addition u/s 40(a)(ia) – Held that:- The AO in the absence of any details by the Assessee considered the aggregate payment ₹ 13,01,617/- made on account of fabrication, labour, painting and plumbing charges as not allowable u/s 40(a)(ia) of the Act – assessee has submitted that Assessee was not liable to deduct TDS u/s 194C as Assessee being individual and in the immediately preceding year the turnover of the Assessee was less than 40 lacs - the factual aspects needs verification – thus, the matter is remitted back to the AO for fresh decisio – Decided in favour of assessee. - I.T.A. No. 619 /AHD/2010 & C.O. No. 156/AHD/2013 - - - Dated:- 14-11-2014 - Shri G. C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the facts and circumstances of the case. Regarding Ground No, 2, considering the gross profit as net profit and thereby disallowing entire indirect expenses, it is seen that most of expenses are in nature of routine business expenses. The expenses include expenses incurred on audit fees, bank charges, depreciation, rent, salary, vehicle, telephone etc. Audit fees is required to be incurred as the gross receipts of the appellant exceeds ₹ 40.00 lacs. Bank charges are debited by the bank. Salary is paid to the administrative staff of the appellant. Telephone and vehicle is necessary for carrying on the business. In view of the same it would not be correct to disallow the said expenses. It is also a fact that the books of accounts were not produced for verification before the AO. Therefore the probability of incurring expenses for non-business purpose cannot be ruled out. Total addition made by the AO by considering the gross profit as net profit works out at ₹ 4,95,418. Considering the totality of facts and circumstances of the case, it would meet the ends of justice if the profit is estimated as under: Gross receipt shown by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors are stated at page 4 of the A.O s order). He was therefore of the view that the entries shown in the name of sundry creditors were prima facie wrong. He therefore applying the provision of Sections 68 r.w.s. 41(1) of the Act considered the entire amount of ₹ 47,00,145/- as the income of the Assessee. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who after considering the submissions of the Assessee and the remand report deleted the addition by holding as under:- 11.1 The Appellant has contended that the creditors are on account of sale of goods and nothing else. The Appellant has bought material from the said parties for its business. The Appellant has also made payments to the said parties in the subsequent years. Necessary proof discharging the payment liability has been produced before me. The Appellant also produced the confirmation of the parties confirming the outstanding balance from the Appellant. Affidavits of the creditors were filed. It was submitted that it is not a case of cessation or remission of liability. None of the creditors have waived their right to receive the money. Despite the assessment is completed U/s. 144, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /balance confirmation, and (2) Creditors who had filed only balance confirmation. 11.2 From the above observations of the AO it is seen that the creditors shown by the appellant as outstanding are genuine. The creditors are for expenses for which the appellant has to make payments. The AO has confirmed that the outstanding balances do remain to be recovered from the assessee as on 31.03.2009. In view of the same the addition made by the AO invoking provisions of section 41(1) r.w.s. 68 is directed to be deleted. 9. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 10. Before us ld. D.R. submitted that during the course of assessment proceedings, the Assessee was asked to produce the details and confirmation of the creditors which Assessee did not furnish. Further on verification of the return of income of the 3 creditors, A.O noticed that the name of the Assessee as sundry debtors was not appearing in their balance sheet and therefore the A.O was fully justified in considering the liability of Assessee to be non existent and therefore A.O was fully justified in making the addition. The ld. D.R. further submitted that simply on the basis of the examinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Needless to state the A.O shall grant adequate opportunity of hearing to the Assessee. In the result, this ground of Revenue is allowed for statistical purposes. 12. In the result, the appeal of the Revenue is partly allowed for statistical purposes. 13. The ground raised by the C.O reads as under:- 1. That the learned CIT(A)- Valsad, has erred both in law and on the facts of the case in estimating G.P. additions at ₹ 6,81,690/- instead of accepting declared income of ₹ 2,76,308/-. 2. That the books of accounts of the appellant was Audited U/s 44AB of the IT Act 1961 and there was no any adverse comments by the Auditor in his Tax Audit Report and without appreciating the facts of the case the books of accounts are rejected and an order was passed U/s 144 was bad in law, illegal and void, hence the book results declared by the assessee may be accepted. 3. That the learned A.O. has accepted the Gross Profit and rejected the indirect expenses of the appellant, which are necessary for running the business of the appellant. Further on the basis of facts of the case, the G.P. additions of ₹ 4,95,418/- was bad in law and without considering past records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions made by Assessee. He therefore submitted that the matter may be remitted to the file of CIT(A) for fresh adjudication. The ld. D.R. on the other submitted that the Assessee did not submit the required details before A.O and therefore A.O had disallowed the expenses. He therefore submitted that the matter may be remitted to the file of A.O. 18. We have heard the rival submissions and perused the material on record. We find that the A.O in the absence of any details by the Assessee considered the aggregate payment ₹ 13,01,617/- made on account of fabrication, labour, painting and plumbing charges as not allowable u/s 40(a)(ia) of the Act. We also find that CIT(A) has also summarily dismissed the ground of the Assessee. Before us, ld. A.R. has submitted that Assessee was not liable to deduct TDS u/s 194C as Assessee being individual and in the immediately preceding year the turnover of the Assessee was less than 40 lacs. We find that there is no finding of CIT(A) or A.O on the aforesaid submission. We are therefore of the view that the aforesaid factual aspects needs verification. We therefore remit the issue to the file of A.O to decide the issue after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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