TMI Blog2015 (8) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ot mentioned anything about on the spot inquiry by the inspector,that there was change in office of the FAA,that the new FAA passed the order where he mentioned about the inquiry conducted by the inspector,that the ledger accounts of the parties show that the assessee had paid the money to the creditors in subsequent years.Once the payment to the creditors is proved by necessary documentary evidences there is no justification for sustaining the order of the FAA.Therefore,reversing his order,we decide grounds in favour of the assessee. Ad-hoc disallowance of expenditure - Held that:- AO had made a disallowance of 20%of the expenses incurred under five heads.Out of the five heads four are related with motor car and telephone.We agree that element of personal use of car and telephone cannot be ruled out. However,to meet the end of justice disallowance is restricted to 10% for the four items i.e. except the welfare expenses. - Decided partly in favour of assessee. - ITA No.2944/Mum/2013, ITA No.3671/Mum/2013 - - - Dated:- 5-8-2015 - Sh. A. D. Jain and Rajendra, JJ. For The Assessee : Shri Rahul Sarda AR For The Revenue : Shri S. S. Rana-DR PER RAJENDRA, AM Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the creditors were cleared off in the subsequent years, through account payee cheques, and hence addition made u/ s 41 (1) may be deleted. 5. Without prejudice to above, the Ld. CIT (A) erred in confirming the addition of Rs. 2, 17, 31,574/- u/s 41(1) and also computing the income by estimating the G. P. by rejecting the books, and hencesame would lead to double addition. 6. The Ld. CIT(A) erred in confirming the adhoc disallowance @ 20 % of Rs. 1,20,526/- on account of Motor car expenses, Motor car insurance, Depreciation on car, Telephone expenses, staff welfare expenses, etc. 7. The Ld. CIT (A) erred in con fuming the various disallowances and also separately estimating the G. P. 8. On merits the appellant denies its liability to the levy of penal interest u/ s. 234A, 234B and 234C. 9. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal. Assessee, an individual, is Proprietor of Mannat Enterprise and is engaged in the trading of textile and iron steel items. She filed her return on 13.09.2008, declaring income of ₹ 1.93 lakhs. The AO completed the assessment on 30.12.2010, u/s.143(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be indulged in a practice of routing the unaccounted money through illegal ways and channelizing them to be looked like genuine transactions. She was also found to be in possession of some cheque books which were signed by various parties without mentioning any date and amount. Keeping in view these findings of the survey as well as the low gross profit disclosed by the assessee, the A. O. proceeded to verify the genuineness of the transactions of purchases and sales shown by the assessee. In this regard, he issued notices u/s 133(6) of the Act to various parties out of which many notices were returned by the postal authority citing various reasons such as wrong address , incomplete address , left etc. The assessee therefore was called upon by the A. O. to produce the said parties along with their books of account for verification which the assessee failed to do. Although the assessee filed confirmations of some parties, the A. O. found the same to be unreliable for the various discrepancies specifically pointed out by him which the assessee again failed to explain. Before the A. O., the assessee produced computer generated bank book which contained number of entries of withdr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has submitted that the GP rate of 20% applied by the authorities below to estimate the income of the assessee from textile business is on the higher side keeping in view that the overall GP rate in the range of 1 to 1.5% declared by the assessee in the earlier years was accepted by the A. O. It is however observed that the assessment only for the A. Y. 2006-07 was completed by the A. O. u/s 143(3) of the Act and a perusal of copy of the relevant order placed at page 347 348 of the paper book shows that the issue relating to trading results was not at all discussed by the A. O. in the said order. Even the basic details relating to the trading results shown by the assessee such as quantum of purchases and sales etc. were not given in the said order. In the absence of such details or any discussion whatsoever made by the A. O. in the assessment order passed u/s 143(3) of the Act for A. Y. 2006-07, we are of the view that the assessment order for A. Y. 2006-07 cannot be taken as basis to estimate the income of the assessee for the year under consideration. 11. At the time of hearing before us, the ld. Counsel for the assessee has relied on the order of the Tribunal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be gathered by him from the information collected from the market. Having regard to all these facts of the case, we are of the view that it would be fair and reasonable to adopt a GP rate of 5% in respect of business of the assessee of trading in iron and steel products. We therefore modify the impugned order of the ld. CIT(A) on this issue and direct the A. O. to recompute the income of the assessee by applying GP rate of 15 5 % in respect of textile business and iron and steel business respectively. The relevant grounds of the assessee are thus partly allowed. Respectfully, following the above order, we direct the AO to compute the income of the assessee by adopting GP rate of 15% and 5% respectively for the textile business and for the iron and steel business. Effective Ground of appeal, filed by the AO, is partly allowed in his favour. ITA No.2944/Mum/2013: 3. First effective ground of appeal(GOA-2 3)filed by the assessee also pertain to GP rate of both the businesses. As stated earlier, the FAA had estimated the GP rates of textile business and iron Steel business at 15.20% and 3% respectively. 3.1. Respectfully, following the order of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors were not available on given addresses, that the FAA had called for a remand report from the AO with regard to the claim made by the assessee about payment made to the creditors in subsequent years, that in the remand report the AO had not mentioned anything about on the spot inquiry by the inspector, that there was change in office of the FAA, that the new FAA passed the order where he mentioned about the inquiry conducted by the inspector, that the ledger accounts of the parties show that the assessee had paid the money to the creditors in subsequent years. Once the payment to the creditors is proved by necessary documentary evidences there is no justification for sustaining the order of the FAA. Therefore, reversing his order, we decide grounds no.4-5 in favour of the assessee. 5. Next ground of appeal is about ad-hoc disallowance of ₹ 1.20 lakhs. During the assessment proceedings, the AO found that the assessee had claimed expenditure of ₹ 6. Lakhs under various heads including motor car expenses, telephone expenses etc. As per the AO the assessee had not maintained proper vouchers. He held that personal use of Car and Telephone could not be denied. He dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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