TMI Blog2016 (3) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... ) wherein he has categorically held that sufficient stock of ready and dyed fabric was actually available with the parent firm M/s Nath International out of which 1,89,517 meters of stock was withdrawn by the partners and was introduced as their capital contribution in the assessee firm. The ld. CIT(A) further held that the findings of the AO that no such stock were available with the said firm is factually incorrect and in view of the above facts noted by the ld. CIT(A) the addition made by the AO cannot be held as sustainable - Decided against revenue Disallowance of rent paid - assessing officer held that the rent paid by the respondent for 4 rental premises out of 7 rental premises occupied by the respondent during the relevant assessment year is not genuine - Held that:- AO mixed two different types of information and wrongly interpreted them and arrived at the conclusion arbitrarily without giving the assessee any opportunity of being heard. From the written submissions of the assessee before the authorities below, it is amply clear that ht property situated at A-1, Sector 26, Noida was used for activities, the property situated at B-114, Sector 5, Noida and Kanodia House, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quilt, cushion covers, curtains, etc. For the relevant year under consideration, the assessee filed return of income on 17.10.2006 declaring an income of ₹ 2,98,38,714/-. Assessment was completed vide order dated 30.12.2008 u/s 143(3) of the Income tax Act, 1961 [for short, 'the Act'] assessing the income of the assessee at ₹ 3,96,49,370/- against the income of ₹ 2,98,38,714/-. Ground No. 1 The ld. AR submitted that the three partners namely, Shri Onkar Nath Agrawal, Shri Praveen Kumar Agrawal and Shri Vipin Kumar Agrawal were regularly maintaining their individual books of accounts and filing their balance sheet/statement of affairs with the Income tax department alongwith their return of income. The AO noticed that the following amounts were found credited in the capital accounts of the partners: Shri Vipin Kumar Agrawal - ₹ 3,00,000/- Shri Praveen Kumar Agrawal - ₹ 3,50,000/- Shri Onkar Nath Agrawal - ₹ 2,00,000/- Not satisfied with the explanation tendered by the assessee, the AO made addition of the aforementioned amounts. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who after verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. Ground No. 2 7. Vide ground No.2, the department has disputed the deletion of addition of ₹ 80,25,560/- by the ld. CIT(A) which was made by the AO on account of unexplained credit in the capital contribution of the assessee firm. The AO accepted the transfer of gray fabric stock of ₹ 36,03,260/- but did not accept the transfer of 1,89,517 mtrs of ready and dyed fabric aggregating to ₹ 80,25,560/-. Observing that the ready and dyed fabric was not actually available with M/s Nath International and therefore and the partners could not have transferred the same to the assessee firm, the AO made the addition of unexplained stock of ₹ 80,25,560/- as unexplained credit. However, in appeal, the ld. CIT(A) recording a finding that the stock of ready and dyed fabric was actually available with M/s Nath International, deleted the addition made by the AO. Aggrieved, the Revenue is in appeal before the Tribunal. 8. The ld. DR supported the action of the AO and submitted that the ld. CIT(A) was not right in allowing relief to the assessee. 9. The ld. AR submitted written broad proposition in support of his oral arguments which have been reproduced v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titative details of cloth/ other material after cutting is separately recorded and the material/ cloth sent for fabrication/quilting is also recorded; d. Separate stock register is maintained for finished goods wherein daily quantitative details of production of each finished items is recorded. 2.8 The fact that M/s. Nath International had sufficient stock of ready/ dyed fabric is evident from the following: Particulars Quantity (Mtr.) Remarks Pg.No. Opening stock of Fabric (Gray and Ready) of. was assessed/; 2,12,821 Accepted in assessment u/s 143(3) for the assessment year 2005-06 32, 139-144, Purchases of Fabric (Gray: 3,97,211 mtrs and Ready: 3,31,452 mtrs) 7,28,663 Not questioned by A.O 32 Opening stock Ready Fabric in February, 06 at Farrukhabad 2,35,907 Out of this 1,89,517 mtrs withdrawn by two partners - ignored by AO 36, 84-85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted, proceeded to draw incorrect conclusion/ inferences merely from the monthly details of stock purchased by M/s. Nath International. The observation of the assessing officer that since M/s. Nath International purchased/ received from dyers only 687 mtrs of Ready Fabric and Dyed Fabric and therefore, was in no position to transfer stock to the respondent is, it is submitted, patently erroneous. 2.14 In coming to the aforesaid erroneous conclusion, the assessing officer, it is submitted, completely ignored to consider the details of stock of Ready Fabric at Farrukhabad and at Noida, discussed supra. On perusal of the said details, it will kindly be noticed that though only 687 mtrs of new stock was received in the month of February, 2006, but M/s. Nath International had following opening stock in that month: Opening stock (Feb, 06) mtrs At Noida (39282.70+9370.80) 48,653 At Farukhabad 2,35,907 Total 2,84,560 2.15 The assessing officer failedto appreciate that out of the aforesaid opening stock already av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AR submitted that the Assessing officer wrongly interpreted the aforesaid two different information and without giving any opportunity of being heard, arbitrarily added the rent paid amounting to ₹ 9,35,100/- for 4 premises to the income of the assessee. The ld. AR detailed the usage of premises in the chart placed at page 165 of paper book. Copy of the rent agreements of all the four premises, copy of ledger account of rent, copy of Sales Tax Registration (form 15 for branch addition with sales tax department), copy of electricity bills paid by the assessee for the premises were placed on record to support his contention. The CIT(A), after examining/verifying the aforesaid details, deleted the disallowance made by the assessing officer, The ld. AR submitted that the AO disallowed an amount of ₹ 9,35,100/- in respect of the four rented premises, whereas actual rent comes to ₹ 7,95,100/- instead of ₹ 9,35,100/-. The ld. DR on the other hand relied on the orders of the AO. 14. On a careful perusal of the assessment order, we find that the AO mixed two different types of information and wrongly interpreted them and arrived at the conclusion arbitrarily ..... X X X X Extracts X X X X X X X X Extracts X X X X
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