TMI Blog2010 (1) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... elied in grounds of appeal along relevant paragraphs of assessment order and appellate order. These orders were extensively considered in respect of various issues arising herein. 3. The first issue in appeal by the revenue for all the years except assessment year 2000-01 is against the deletion of addition made on account of job charges received by the assessee. 3.1 During the course of search two loose papers were found which were marked as pages 18-19 of Annexure A-I of the Punchanama. The said papers are report of processing charges received which contains the details of various types of cloth processed, lot no. pieces, metre, and rate charged along with amount of processing charges and excise duty thereon. The said papers pertain to the report for the period 1.4.2003 to 3.1.2004. The AO noted that as per the said seized papers, the average rate charged by the assessee was ₹ 10.20 per mtr. The AO noted the cloth processed in metres for each years and the job charges received in this regard. The AO held that where the average rate recorded by the assessee was less than the average rate as per the seized papers, and if there is lesser amount realized by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is less than 1% of total production. It cannot be said that this is the correct rate for whole year for all parties and all transactions. The transactions with the parties are by account payee cheques and are verifiable. . Therefore, this sample rate cannot be applied to the whole year. Such an estimation is not bonafide and genuine but is a wild guess work. If at all the AO wanted to estimate the correct profits after rejecting the accounts, some bonafide and reasonable basis must have been adopted. It is now an established law that even after rejecting the accounts, the estimation should be fair hones and reasonable. The estimation done by the AO does not fall in this category. Therefore, I am of the opinion that the basis adopted by the AO for making this additions is beyond the purview of law and I therefore, delete the whole of the addition of ₹ 18,31,666/- Similar findings were given in respect of all other years. 3.4 Shri Siddharth Mukherjee, the learned DR, submitted that the assessment is framed after search was conduced. During the search proceedings, the material found reveals that the average job charges by the assessee were more than the average rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded in the books of account or unrecorded, no addition is justified. Even after the search was conducted not a single evidence is found to hold that the actual receipt by the assessee is much more than that of recorded in the books of account or in the bills issued in this behalf. Therefore, the learned CIT(A) is justified in deleting the presumptive addition. 4. The next issue in appeal for the assessment years 19992000, 2001-02 and 2004-05 is against the deletion of addition made u/s 68 on account of share capital received by the assessee. 4.1 The AO noted that during the year, the assessee has taken share application in which the identity and creditworthiness of the share applicants has not been furnished. Therefore, the amount received by the assessee as share application money is to be added as unexplained cash credit u/s 68 of the Act. 4.2 Before the learned CIT(A), the assessee is stated to have filed copy of share application, confirmation of the share applicants and their bank statement to prove the identity of share applicants, the genuineness of the transactions and PA numbers. Learned CIT(A), therefore deleted the addition 4.3 The learned DR submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n entertain any evidence which were not produced before the AO. Even under sub-rule (4) of Rule 46A, the CIT(A) can direct a production of any document to enable him to dispose of the appeal and when he examines such additional evidence, it do not amount to violation of Rule 46A. Apart from the said fact, after the evidence were filed and such evidence is available to the revenue in the form of paper book filed by the assessee, no comments has been offered on behalf of the AO. Since the assessee has filed the confirmation letters along with PAN and bank statement, the assessee has proved the identity and creditworthiness of the shareholders and also genuineness of the transactions. We, therefore, confirm the action of the learned CIT(A), in this regard. 5. The next issue in appeals and cross-objections for all the years is in respect of disallowance out of various administrative expenses like vehicle, repairs and maintenance, general, telephone and printing and stationery expenses. The AO noted that the details of such expenses were called for as per the notices u/s 142(1), dated 4.7.2006. The AO noted that the bills and invoices were not produced for verification. He accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PF authorities before the due date of filing the return of income, the disallowance is not called for. 7. The next ground of appeal in assessment years 2001-02 is against deletion of disallowance being the purchase held to be bogus. 7.1 The AO observed that the assessee has made purchases from Pooja Dyes Chem. The AO held that the said party is involved only in giving bills but not supplying any material. The AO also observed that the said party has actually admitted during the assessment proceedings for other cases that he has merely issued the bills and if he cheques are received, cash is returned to the party. 7.2 The matter was carried to CIT(A), who while deleting the same, observed as under :: 5.3 I have considered the reasons mentioned by the AO as well as submissions of the AR. It is mentioned by the AO that in the case of third party, these persons have accepted that they are issuing bills an not actually supplying the goods. It is not mentioned as to in respect of which party such admission was made and whether such admission was with reference to that party only or for the appellant also. The AR of the appellant has contended that there are more than one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was contended that the claims were less than 0.006% of job charges for the assessment year 2004-05 and 0.05% for the assessment year 2005-06. 8.3 The matter traveled to CIT(A) who deleted the addition by holding as under : 6.2 I have considered the rival arguments/submission on this point and find no merit in the disallowance made by the AO. The claims to the extent claimed by the appellant are quite reasonable considering the nature and volume of the appellant s business. These are deducted from payments made invoice to invoice. On the other hand, the observations of the AO, that no explanation was furnished is not found to be correct. Looking to the volume of business, such deduction by the customers are not un expected and the same are also marginal. I, therefore delete this addition 8.4 After considering the rival submissions, we find that the relevant information called for by the AO during the assessment proceedings were furnished by the assessee. The same was further corroborated during the appellate proceedings so as to point out to whom the claim was made and in respect of which job carried on by the assessee. The payments from job works received have been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te this addition 9.4 On consideration of facts and arguments advanced, we find that since the matter has been restored back to the file of the AO to verify the facts stated, the AO cannot have any grievance. We therefore, decline to interfere in the findings of learned CIT(A). 10. The next grounds of appeal for assessment year 2005-06 is against the deletion of addition of ₹ 7,90,000/- made under section 69B being shortage of cash found at the time of search. 10.1 The AO noted that the cash as per cash book as on 30.6.2004 was ₹ 8,29,256/- but on actual verification the cash found was ₹ 3,8350/-. Thus, there is shortage of cash of ₹ 7,90,906/-. The assessee could not offer any explanation to the discrepancy. The AO, therefore, added the amount as income u/s 69B of the Act. 10.2 The learned CIT(A) held that shortage in cash found is not an income and is beyond the purview of section 69B of the Act. Accordingly, the addition was deleted. 10.3 We have considered rival submissions. Section 69B is extracted herein : Amount of investments, etc., not fully disclosed in books of account. 69B. Where in any financial year the assessee has made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention it was rejected on the ground that the assessee has not proved the nexus between the shortage on account of cash found and acquisition of excess stock. As regards the third contention, the learned CIT(A) held that the disclosure is made on different account i.e. commission and hence in absence of nexus between the disclosure made and the excess stock found the contention is to be rejected. However, he sustained the addition of ₹ 7,90,000/- and deleted the addition of ₹ 2,10,000/- out of the total addition of ₹ 10 lakhs. Whereas the revenue is in appeal, the assessee filed cross-objection against he sustenance of addition. 11.4. We have heard the parties. The contention of the learned DR is that the assessee failed to co-relate or explain the source of stock found. The addition was rightly made by the AO 11.5. The learned AR reiterated the submissions as made before the CIT(A). 11.6. After hearing both the parties and on perusal of the record, we find that in the statement recorded u/s 132(4) in answer to question no.2, the assessee admitted unaccounted income of ₹ 25 lakhs. The assessee was further asked to bifurcate the income head-wise. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
