TMI Blog2013 (4) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... cided partly in favour of assessee. Disallowance of godown rent - Held that:- As no evidence whatsoever has been filed by the assessee to show that any godown was actually used for the purpose of the business or any rent for godown was actually paid. We therefore find no justifiable reason to interfere with the impugned order of the ld. CIT(A) confirming the disallowance made by the A.O. on account of godown rent - Decided against assessee. Disallowance of telephone expenses, staff welfare expenses and motor car expenses including depreciation - Held that:- Assessee has not raised any material contention on this issue except stating that the disallowance of 20% of the total expenses made by the A.O. and confirmed by the ld. CIT(A) is on the higher side and the same may be restricted at certain reasonable level. It is, however, observed that a similar disallowance of 20% was made by the A.O. out of conveyance, traveling and telephone expenses claimed by the assessee in the immediately preceding year i.e. 2006-07 for personal and unverifiable element involved therein and nothing has been brought on record before us to show that the same was challenged by the assessee. We theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account for cross verification. Although the assessee failed to comply with the said requirements, she filed confirmation letters of certain parties. The A.O. however found the said confirmations to be un-reliable as the same did not bear proper letter pad, date, seal and name designation of the authorized signatory. He also noted that the pen and ink used to sign the said confirmations was almost the same. He further noted that some of the confirmations filed by the assessee even did not bear the complete address of the concerned parties. When these discrepancies were brought by the A.O. to the notice of the assessee, the later could not offer any satisfactory explanation. Even in the computer generated bank book produced by the assessee, number of entries of deposits and withdrawals were found to be without any narration against the same. The assessee also failed to explain the said entries. As noted by the A.O. in the assessment order, the assessee was also found in the earlier years to be indulging in the practice of routing the unaccounted money through illegal means and channelizing them to be looked like a genuine transactions. Keeping in view all these adverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even otherwise whatever confirmations filed by the assessee were found to be unreliable by the A.O. during the course of assessment proceedings by pointing out specific discrepancies which the assessee had failed to explain satisfactorily. He also taken note of the fact that there was a failure on the part of the assessee to produce the concerned parties for cross verification before the A.O. He therefore held that the A.O. was fully justified in rejecting the books of account of the assessee and in estimating her income by applying higher GP rates. Accordingly the trading addition made by the A.O. was confirmed by the ld. CIT(A). 5. The ld. counsel for the assessee submitted that the defects pointed out by the A.O. in the assessment order were not sufficient to justify the rejection of the books of account of the assessee. He submitted that all the parties relating to iron and steel business of the assessee had submitted their confirmations and all the notices u/s 133(6) of the Act stated to be returned by the A.O. were pertaining only to the textile business. He contended that estimation of income of the assessee from iron and steel business by applying higher GP rate thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by the A.O. to doubt the genuineness of purchases and sales shown by the assessee and the same altogether with adverse findings of the survey and low GP rate disclosed by the assessee were sufficient to reject the books of account of the assessee. As regards the GP rate of 20% adopted for textile business, he submitted that the comparative GP rates in this connection were furnished by the A.O. in the remand report submitted to the ld. CIT(A) which show that the GP rate of 20% applied in respect of textile business was quite reasonable. As regards the GP rate of 10% applied in respect of iron and steel business, he submitted that although the comparative GP rates in this regard were not specifically pointed out by the A.O. in the remand report, the GP rate of 10% was applied on the basis of information gathered from the market. 8. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the assessee is in the business of dealing in iron and steel products and textile products and on the total turnover of the said business amounting to ₹ 20.56 crores, gross profit of ₹ 20.61 lacs was disclosed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eover, both the iron and steel business and textile business were carried on by the assessee under the name and style of his proprietary concern M/s Mannat Enterprises and the copy of balance sheet and P L account of the said proprietary concern placed at page 1 to 25 of the assessee s paper book shows that only one set of books of account was maintained by the assessee for both iron and steel business and textile business. It is therefore not possible to accept the books of account of the assessee in respect of iron and steel business and reject the same in respect of textile business as sought to be contended by the ld. Counsel for the assessee. Even otherwise, some of the material defects pointed out by the A.O. as well as adverse findings of the survey were related to the overall business activities of the assessee which fully justified the rejection of combined books of account maintained by the assessee for iron and steel and textile business. 10. Having held that the rejection of the books of account of the assessee by the authorities below is fully justified in the facts and circumstances of the case, the next issue that arises for our consideration is relating to the es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich may be taken at round figure of 15%. 12. As regards the GP rate to be applied in respect of iron and steel trading business, the ld. Counsel for the assessee has relied on the decision of the coordinate Bench of the Tribunal in the case of Inel Trading Company (supra) submitting that the low GP rate of 1.82% was applied in that case in respect of iron and steel business. It is however observed that although a GP rate of 1.82% was mentioned in the said order in respect of business of trading in iron and steel business, the income of the assessee in that case was finally estimated by the Tribunal by applying certain net profit rate. Moreover, as already noted by us, the facts involved in the present case are peculiar inasmuch as the assessee was found to be indulged in a practice of routing the unaccounted money through illegal ways and channelizing them to be looked like a genuine transactions. It is observed that while applying GP rate of 10% in respect of business of dealing in iron and steel, the reliance was placed by the A.O. on the comparative GP rates shown in the range of 5 to 10%. However, as admitted by the A.O. in the remand report forwarded to the ld. CIT(A), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r expenses including depreciation. 16. In the P L account filed along with the return of income, the assessee had debited the following expenses:- Personal nature of expenses: (i) Motor car expenses : Rs.1,10,910/- Motor car insurance : ₹ 76,189/- Depreciation or motor car : Rs.4,65,301/- ----------------- Rs.6,52,400/- (ii) Telephone expenses : ₹ 50,135/- (iii) Staff Welfare expenses : Rs.1,18,333/- ---------------- Rs.8,20,868/- ----------------- During the course of assessment proceeding, the claim of the assessee for the aforesaid expenses was verified by the A.O. and on such verification, he found that the said expenses were not fully supported by proper bills/vouchers. He also found that the said expenses were incurred through self made vouchers and there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
