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2015 (12) TMI 841 - ITAT AHMEDABAD

2015 (12) TMI 841 - ITAT AHMEDABAD - TMI - Addition made u/s.2(22)(e) - CIT(A) deleted the addition - Held that:- Not inclined to agree with the quantum of addition made by the Id.A.O. He has taken accumulated profits of M/s. K.V. Fashions Pvt. Ltd. as on 31.3.2009. Perusal of copy of account of M/s. K.V. Fashions Pvt. Ltd. in the books of the appellant i.e. M/s. Kamal Process reveals that the appellant has received the last installment of ₹ 13,00,000/- on 23.10.2008. As per the provisions .....

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of these facts, it can be said that M/s. K.V. Fashions Pvt. Ltd. was having accumulated profit of ₹ 37,613/- at the end of October, 2008. This way the accumulated profit as on 23.10.08 can at the most be taken at ₹ 37,613/-. In view of above facts, I hold that M/s. K.V. Fashions Pvt. Ltd. was having accumulated profit of ₹ 37,613/- at the date of payment of loan of ₹ 13,00,000/- on 23.10.2008 and accumulated profits to the extent of ₹ 37,613/- can only be taxed as .....

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sundry creditors, ₹ 11,63,551/- as advances from customers and ₹ 15,75,923/- as unpaid expense] during the year under consideration. This finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue.

Rejection of book of account - Held that:- CIT(A) has not upheld the book of account on the ground tha .....

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essee. The ld.CIT(A) relied on the judgement of CIT vs. Vikram Plastic (1998 (8) TMI 43 - GUJARAT High Court). The AO has proceeded to reject the book of accounts on the ground that the yield shown by the assessee was not correct since in the subsequent year, the assessee has shown yield at 96.63% for AY 2010-11. We find that the AO has noted the fact that the certificate dated 12/11/2011 was given to the assessee by one Shri G.G.Shroff, B.Sc. (Hons) M.Sc. Tech. (Bom.). The assessee has also enc .....

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by the A.O. is apparently wrong. The facts available on records indicate that the appellant manufactured 7,77,184 mtrs of cloth on his own account. This cloth was sold for a sale consideration of ₹ 1,86,31,031/-. This way the average selling price of cloth manufactured by the appellant works out to ₹ 23.96 per meter (18631031 / 777184). Thus the cost of production of cloth cannot be more than ₹ 23.96 per meter. It is seen that the A.O. has taken cost of production at ₹ 1 .....

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ealistic value of suppression - Decided against revenue.

Addition made on account of fall in G.P. Ratio - CIT(A) deleted the addition - Held that:- AO himself has stated in his order that since the addition in respect of suppression of production and disallowance of interest u/s.36(1)(iii) of the Act has been made, therefore the ground raised is ill-conceived. We find that the AO, however, proceeded to make the addition of ₹ 24,33,112/- and decided not to make separate addition .....

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ls)-XI, Ahmedabad [ CIT(A) in short] dated 22/10/2012 pertaining to Assessment Year (AY) 2009-10. The Revenue has raised the following grounds of appeal:- i) The ld.CIT(A) has erred in law and on f acts in deleting the addition made u/s.2(22)(e) of the Act to the extent of ₹ 1,88,065/-. ii) The ld.CIT(A) has erred in law and on facts in deleting the addition of ₹ 3,08,041/- made out of interest expenses u/s.36(1)(iii) of the Income Tax Act. iii) The ld.CIT(A) has erred in law and on .....

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in G.P. Ratio. vi) On the facts and circumstances of the case, the ld.Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. vii) It is, therefore, prayed that the order of the Ld.Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) w .....

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l. The ld.CIT(A), out of addition of ₹ 2,25,678/- made on account of deemed dividend, deleted the addition of ₹ 1,88,065/-, deleted disallowance of interest of ₹ 3,08,041/- and also deleted the addition of suppression of production of ₹ 33,59,168/-. The ld.CIT(A) also held that the AO was not justified in rejecting the books of accounts. Aggrieved by the order of the ld.CIT(A), the Revenue is now in appeal before us. 3. First ground of appeal is against the deletion of ad .....

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rd and gone through the orders of the authorities below. We find that the ld.CIT(A) has given finding on fact in para-3.2 of his order as under:- 3.2 I have carefully considered the rival contentions. It is seen that the A.O. had discussed in detail about the basic conditions as laid down u/s.2(22)(e) and how the same are fulfilled in the case of the appellant. Such discussion has been made by the A.O. in para 3.2 of the assessment order. During the appellate proceedings the appellant contended .....

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n the instant case the appellant has failed to file documentary evidence to prove that M/s. K.V. Fashion Prints Pvt. Ltd. had given advance to the appellant in the ordinary course of business or whether giving advance was substantial part of its business. In view of above, I am inclined to agree with the contentions of the Id. A.O. that provisions of sec.2(22)(e) are attracted in the case of the appellant. However, I am not inclined to agree with the quantum of addition made by the Id.A.O. He ha .....

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indicate that M/s. K.V. Fashions Pvt. Ltd. started its business from 1.10.2008. During the year under consideration M/s. K.V. Fashions Pvt. Ltd. has earned a profit of ₹ 2,25,678/-. This way it can be said that M/s. K.V. Fashions has earned a monthly profit of ₹ 37,613/- (Rs.2,25,678 / 6). In view of these facts, it can be said that M/s. K.V. Fashions Pvt. Ltd. was having accumulated profit of ₹ 37,613/- at the end of October, 2008. This way the accumulated profit as on 23.10.0 .....

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ground of appeal is partly allowed. 4.1. The aforesaid finding on fact of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, ground No.1 of Revenue s appeal is rejected. 5. Second ground of appeal is against deletion of addition of ₹ 3, .....

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s capital. The total interest paid by the assessee is ₹ 3,08,041/-. The assessee has given loans and advances of ₹ 1,17,30,982/-. 5.1. On the contrary, the ld.counsel for the assessee submitted that the finding of the AO is misplaced. She relied on the order of the ld.CIT(A) and submitted that the assessee was having sufficient interest-free funds. The ld.counsel for the assessee further submitted that it is evident from the finding of the AO that he has not established any nexus bet .....

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onsideration. This finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue s appeal is rejected. 7. Third ground of appeal is against rejection of book of account. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in rejecting the books of account. The ld.Sr.DR submitted that the AO has observed that column .....

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nformation is given to the extent available. 7.1. Therefore, the ld.Sr.DR submitted that the AO is justified in rejecting the book of account as the true profit could not be computed. 7.2. On the contrary, ld.counsel for the assessee opposed the submissions of the ld.Sr.DR and placed reliance on the order of the ld.CIT(A). She submitted that due to nature of business, it was certified by the Auditor of the assessee that the maintenance of stock register was not possible. 8. We have heard the riv .....

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unts or in the details furnished by the appellant. The ld.CIT(A) observed that the AO has not found any specific details either in the book of accounts or in the details furnished by the assessee. The ld.CIT(A) relied on the judgement of Hon ble Jurisdictional High Court rendered in the case of CIT vs. Vikram Plastic (239 ITR 161-Guj.). The AO has proceeded to reject the book of accounts on the ground that the yield shown by the assessee was not correct since in the subsequent year, the assessee .....

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y upheld. Thus, ground No.3 of Revenue s appeal is rejected. 9. Fourth ground of appeal is against deletion of addition of ₹ 33,59,168/- made on account of suppression of production. The ld.Sr.DR relied on the order of AO. 9.1. On the contrary, ld.counsel for the assessee relied on the order of the ld.CIT(A). 10. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO made the addition on the basis that in t .....

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