TMI Blog2016 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ee rightly deleted the additions. We do not see any error or infirmity in the order passed by the CIT(A). Hence we inclined to uphold the CIT(A) order - Decided against revenue. Additions towards suppressed turnover and related gross profit - Held that:- AO stated that the average sales price is less than the purchase price for the above period. We do not see any merits in the findings of the AO for the reason that additions cannot be made based on the average selling price of a particular period and apply it to the remaining period by stating that there was a difference in selling price for the particular period. Unless, A.O. analyse the total financial results of the period including opening stock, purchases, sales and closing stock, no additions can be made on the basis of a part period by taking the average selling price. In the present case on hand, the AO has not pointed out any defects in the quantity of product sold by the assessee. The AO is mainly harping upon the selling price of the particular period by stating that the sale price of the product sold is less than the purchase price. In the present case on hand, the assessee is in the business of trading in steel and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the Assessing Officer noticed that the assessee has shown creditors in his books of accounts. Therefore, requested to furnish the confirmation letters from the creditors. In response to notice, the assessee has filed confirmation letters in respect of 12 trade creditors and for the remaining creditors no confirmation has been filed. In the absence of confirmation letters, the Assessing Officer was of the opinion that the assessee has not proved the genuineness of the transactions and also creditworthiness of the creditors. Therefore, made additions of ₹ 1,02,50,870/-. 3. The Assessing Officer noticed that the gross profit declared by the assessee for the year under consideration is quite less, when compared to the nature of business carried out by the assessee. Therefore, requested to furnish the complete details to sales and purchase along with opening and closing stock details with necessary bills vouchers in support of the trading results declared in the return of income. The assessee neither furnished the books of accounts nor appeared before the Assessing Officer to justify his financial results. In the absence of any sales and purchase bills, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on his own analysis of the financial results without any materials to show that there was a suppression of sales. The financial results for the period should be considered in total and not for a particular month. Though there is a reduction in the sales price when compared to the purchase price for the month, it was happened because of sales of non moving and obsolete items and also cut lengths. Therefore, the selling price of the product naturally will be less when compared to the average purchase price of the product. For this reason, the Assessing Officer cannot estimate the suppressed sales turnover based on the selling price of the good stock. As regards the disallowance of expenditure, the assessee submitted that it has furnished bills vouchers in respect of freight charges along with lorry freight receipts. In respect of other expenditure like salary, stationery expenses, etc., in few cases the expenditure are supported by self made vouchers, therefore, the Assessing Officer was not correct in disallowing such expenditure. 5. The CIT(A) during the course of appellate proceedings, forwarded the submissions made by the assessee to the Assessing Officer for his comments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the remaining period, by holding that the sale price declared by the assessee is less than the purchase price. The CIT(A) further held that it is obvious in certain cases that the sale price may be less than the purchase price, because of various reasons in the business. In the present case, the assessee contention is that it has sold obsolete and non moving stock and also cut lengths, therefore, the price of these product is always less when compared to the purchase price. To avoid further losses in the business, he sold goods at price which is less than the purchase price. For this reason, the Assessing Officer cannot estimate the turnover based on the purchase price. With these observations, he directed the Assessing Officer to delete the additions. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 7. The Ld. D.R. submitted that the CIT(A) failed to consider the facts mentioned by the Assessing Officer in the remand report in respect of the 5 creditors, in whose cases either there is no confirmation from the creditors or there is a difference in closing balance shown in the books of the creditors. The D.R. further submitted that the CIT(A) ought to have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters issued by the parties. On perusal of the confirmation letters issued by the assessee, we find that in the case of two parties, where there was a difference in closing balances, the assessee has explained the difference in closing balance and submitted that the difference in balances in sundry creditors is not closing balance and it is opening balance difference. Therefore, the Assessing Officer cannot make additions towards opening balance difference during the year under consideration. We find force in the arguments of the assessee for the reason that on perusal of such confirmation letters and also reconciliation furnished by the assessee, we noticed that the creditors have been explained before the Assessing Officer and also explained the reasons why the difference is appeared in the creditors balance. The CIT(A) after considering the submissions made by the assessee rightly deleted the additions. We do not see any error or infirmity in the order passed by the CIT(A). Hence we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. 10. The next issue arises for our consideration is additions towards suppressed turnover and related gross profit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he market trend is going down. Therefore, based on the selling price, the AO cannot estimate the sales turnover for the part period by taking into account the remaining period sales. The CIT(A) after considering the explanations furnished by the assessee, rightly deleted the additions made by the Assessing Officer. We do not see any error or infirmity in the order passed by the CIT(A) and hence, we inclined to uphold the order passed by the CIT(A) and reject the ground raised by the revenue. 12. The next issue arises for our consideration is adhoc disallowance on 30% of expenditure. The AO has disallowed 30% expenditure for the reason that the assessee has not produced proper bills vouchers in support of the expenditure debited in the P L account. The A.O. was of the opinion that some of the expenditure were supported by self made vouchers and some are not supported by any bills vouchers, therefore, disallowed 30% of such expenditure and made addition of ₹ 7,99,216/-. It was the contention of the assessee that it has submitted bills vouchers in respect of freight charges. The other expenditure such as salary bonus, travelling, coolie and labour and other general ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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