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2016 (5) TMI 28 - ITAT VISAKHAPATNAM

2016 (5) TMI 28 - ITAT VISAKHAPATNAM - TMI - Additions towards sundry creditors - Held that:- During the course of hearing, the assessee has filed a paper book, wherein submitted the ledger account copies of the respective creditors along with confirmation letters 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 balan .....

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asons 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 - 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 .....

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and, 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 iron. The iron and steel prices are prone to ups and downs depending upon the demand in the market. The sale price of the product sometimes may be less than the purc .....

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by self made vouchers, the relevance of such expenditure cannot be ruled out in the business of the assesee. The fact remains same even before us. The revenue has not brought on record any evidence to show that the findings of the facts recorded by the CIT(A) is incorrect. Therefore, we do not see any reasons to interfere with the order passed by the CIT(A). - I.T.A.No.52/Vizag/2013 - Dated:- 18-3-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appella .....

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assessment year 2008-09 on 17.9.2008 declaring total income of ₹ 2,12,950/-. The case has been selected for scrutiny as per the guidelines issued by the CBDT and accordingly, notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') were issued. As stated by the Assessing Officer in the assessment order, the assessee not cooperated for the assessment proceedings by filing the required information despite giving enormous opportunities of hearing. In .....

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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. Ther .....

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rd and noticed that for the month of Nov 07, Jan 08, Feb 08 & Mar 08 the sale price is less than the purchase price of the goods traded. Therefore, directed the Inspector of Income Tax attached to his office to cause enquiries with the persons from whom the assessee has sold goods to enquire about selling price. The Inspector of Income Tax, after causing such enquiries issued a report. Based on that report, the Assessing Officer came to the conclusion that the average sales prices declared b .....

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arly, the Assessing Officer noticed that the assessee has claimed various expenditures. Therefore, requested to furnish the bills & vouchers in support of expenditure claimed in the profit & loss account. Since, the required information is not furnished by the assessee, the Assessing Officer has disallowed 30% of expenditure and added back to the total income of the assessee. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the .....

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icer has not considered the confirmation letters filed during the course of assessment proceedings. Similarly, the assessee further submitted that in respect of estimation of suppressed sales is concerned, the Assessing Officer has estimated the suppressed sales for the month of Nov 07, Jan 08, Feb 08 & Mar 08, based 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 to .....

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lowance 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 Off .....

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s not furnished any confirmation letters even in the remand proceedings, therefore, the Assessing Officer has submitted that wherever difference is there, the difference should be confirmed and also wherever confirmation has not been filed, such credits should be confirmed. As regards the addition of suppressed turnover and related gross profit addition is concerned, the Assessing Officer reiterated the findings made in the assessment order. Similarly, with regard to the disallowance of 30% expe .....

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(A) held that additions cannot be made solely based on the fact that the assessee has not filed confirmation letters. Similarly, the CIT(A) has restricted the additions made towards disallowance of 30% expenditure to ₹ 1 lakh. While doing so, the CIT(A) held that though some of the expenditure are supported by self made vouchers, the relevance of such expenditure in the business of the assessee cannot be ruled out. The CIT(A) further held that the Assessing Officer cannot disallow salary a .....

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ssessee 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 purc .....

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fference in closing balance shown in the books of the creditors. The D.R. further submitted that the CIT(A) ought to have confirmed the addition to the extent of ₹ 9,72,630/- in respect of 5 creditors, out of the additions of ₹ 1,02,50,870/-, as the credits are not proved as genuine which is evident from the remand report submitted by the Assessing Officer. The D.R. further submitted that the CIT(A) erred in deleting the additions of ₹ 36,45,403/- and ₹ 65,982/- towards s .....

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ions to ₹ 1 lakh out of the 30% disallowance made by the Assessing Officer. The D.R. further argued that excluding lorry freight, the CIT(A) should have uphold additions made by the Assessing Officer in respect of other expenditure, as these expenditure are supported by self made vouchers and the assessee even during the remand proceedings not substantiated the claim of expenditure with any material evidences. 8. On the other hand, the Ld. A.R. of the assessee strongly supported the order .....

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377; 9,72,630/- in respect of 5 creditors, there was no confirmation from the parties or there was a difference in the closing balances certified by the sundry creditors. It was the contention of the assessee that it has submitted confirmation letters and also reconciled the difference shown in the debtors books of accounts to its books of accounts. During the course of hearing, the assessee has filed a paper book, wherein submitted the ledger account copies of the respective creditors along wit .....

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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 .....

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purchase price of the products. The Assessing Officer has made his own analysis and as per his analysis, the selling price of the goods sold by the assessee is less than the purchase price in the relevant period. According to the Assessing Officer, the assessee has not explained the reasons for selling the goods at lower than the purchase price. It was the contention of the assessee that it has sold the obsolete and non moving stock and also cut lengths of steel products and the prices of these .....

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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 .....

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upon the demand in the market. The sale price of the product sometimes may be less than the purchase price when the 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 .....

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