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DCIT, Central Circle-4, Surat Versus M/s Indian Polyfins Ltd.

2016 (4) TMI 468 - ITAT AHMEDABAD

Addition on account of unexplained increase in the wages and salary as compared to the increase in production - CIT(A) deleted the addition - Held that:- Lease rental were paid and TDS were deducted and in the ledger account, copy of lease rentals were shown under the head service charges. The copy of the account and details were also furnished. These details were sent to the Assessing Officer for his comments vide letter dated 23.03.2010 and 19.08.2010. Before the CIT(A), the assessee has also .....

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rved that there was increase in production during the year under consideration and the gross profit rate was also better. The CIT(A) also held that the addition could not be made merely because of increase in wages was not proportional to increase in production. Accordingly, he rightly deleted the addition in question by observing that the Assessing Officer was not justified in disallowing the wages and making such addition in question. - Decided in favour of assessee - ITA No. 711/Ahd/2011 - Da .....

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g the addition at ₹ 38,34,000/- made on account of unexplained increase in the wages and salary as compared to the increase in production. 2. On the facts and circumstance of the case and in law, the Ld. CIT(A) erred in law and in facts in deleting the addition at ₹ 38,34,000/- made on account of unexplained increase in the wages and salary as compared to the increase in production, holding that only because increase in wages is not proportional to the increase in production, the add .....

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sessing Officer may be restored. 2. The brief facts of the case are that the assessee is a firm engaged in the business of art silk cloth sarees. The assessee purchases grey cloth from local viewers and sells the same after getting processed from dyeing and printing mills. During the year under consideration, the assessee has shown gross profit of ₹ 33,16,757/- on total sales of ₹ 3,84,56,001/- which comes to 8.62% as against the gross profit of ₹ 28,90,990/- on the turnover of .....

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only by 23.49%. The Assessing Officer further observed that the assessee has not purchased any new water jet machinery and not taken any machinery on rent or lease. He also observed that the assessee has incurred the expenditure in cash, there was no revenue stamp on such receipts and those expenses were not found to be verifiable. He, therefore, treated the increase in expenses of 23.49% as reasonable and balance 25.51% as unreasonable. Accordingly, the Assessing Officer has made an addition of .....

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