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2016 (7) TMI 906 - ITAT AHMEDABAD

2016 (7) TMI 906 - ITAT AHMEDABAD - TMI - Addition made on account of low GP - sole objection of the AO was that the assessee has not been maintaining stock register and also order placement registers - Held that:- According to the ld.CIT(A), the assessee has been maintaining stock register on-line. Its accounts are subject to inspection under direct control of drug authorities, which could not be conducted without maintenance of proper stock records. As far as fall in GP is concerned, the ld.CI .....

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llowed. In other words, if those services could be availed from the open market at a lower rate, then, excess payment is to be disallowed. In the present case, the assessee has paid commission to four persons. The objection of the AO is that they are simple graduates and they could not earn this much of income. But I failed to understand the reasoning of the AO, because, he has not given any basis for doubting the capability of all four persons. AO has not referred any material as to how service .....

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finding of the CIT(A), do not find any reason to interfere in it. - Disallowance of misc. expenses - CIT(A) deleted such disallowance on the ground that misc. expenses claimed by the assessee are only 0.16% of the turnover - Held that:- CIT(A) was satisfied that the assessee has not debited any personal expenditure or other expenditure, which are not linked with the business in the misc. expenses. After considering the smallness of the expenditure and the reason assigned by the ld.CIT(A) no .....

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before the Tribunal against the order of the ld.CIT(A)-IV, Surat dated 16.11.2010 passed for the Asstt.Year 2007-08. 2. In brief, the grievance of the Revenue relates to deletion of the following additions/disallowance made by the AO: 1. Disallowance of Commission ₹ 9,99,500/- 2. Addition on account of low GP ₹ 12,06,924/- 3. Disallowance of loss due to flood ₹ 10,86,016/- 4. Disallowance out of various expenses ₹ 35,687/- 5. Addition on account of Keyman Insurance ͅ .....

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en lost due to flood in the city of Surat. The assessee had to destroy stock of ₹ 1,18,58,134/- as per notification issued by the Government. Against this loss of stock, the assessee could recover a sum of ₹ 1,07,72,118/- from the insurance company. The assessee has suffered a loss of profit of stock destroyed. There were lots of competition and other problems faced by the assessee. The ld.AO was not satisfied with the explanation of the assessee. He observed that the assessee had no .....

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ne through the assessment order, reasons of the A.O. for rejecting the books of accounts, submissions of the appellant and evidences. It is seen that the only reason for not accepting the book results was non-maintenance of stock registers; purchase registers and goods receipt registers. No other discrepancies had been pointed out by the A.O. on the other hand. The appellant has given cogent reasons for fall in G.P rate It is seen that the reason given by the AO. i.et nonmaintenance of stock reg .....

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y because the G.P. ratio has decreased, books cannot be rejected. Books of accounts can be rejected only if specific discrepancies are observed and this remains unreconciled. In the case of the appellant, the method of accounting as accepted in previous years by the Department has been followed and no specific discrepancies have been pointed out by the A.O and therefore there was no reason for rejecting the book of accounts of the appellant and estimating profits. The addition made on account of .....

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O. According to the ld.CIT(A), the assessee has been maintaining stock register on-line. Its accounts are subject to inspection under direct control of drug authorities, which could not be conducted without maintenance of proper stock records. As far as fall in GP is concerned, the ld.CIT(A) was satisfied with the explanation given by the assessee. After taking into consideration all these facts and circumstances, I do not find any reason to interfere in the order of the ld.CIT(A) on this issue. .....

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ion given to them is on the higher side. On appeal, the ld.CIT(A) has deleted the disallowance. 7. Before me, the ld.counsel for the assessee contended that all the persons to whom commission was paid were born before 1983. They are major. They are graduates and they were assisting the business of the assessee. In the last year, such disallowance was deleted by the ld.CIT(A), and the Revenue did not prefer any appeal. 8. On the other hand, ld.DR relied upon the order of the AO. 9. I have duly co .....

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sion to four persons. The objection of the AO is that they are simple graduates and they could not earn this much of income. But I failed to understand the reasoning of the AO, because, he has not given any basis for doubting the capability of all four persons. AO has not referred any material as to how services rendered by them could be availed at a lower rate from the market. The ld.CIT(A) has rightly deleted the addition, therefore, I do not find any merit in this ground of appeal of Revenue. .....

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alue of stock destroyed must be equal to the amount of claim admitted by the insurance company. The ld.First Appellate Authority did not concur with this conclusion of the AO on the ground that, if this type of plea is being accepted, then, there could not be any loss to any concern. The acceptance of the insurance company could not be a guiding factory for gauging the loss of any assessee. After taking into consideration the finding of the CIT(A), I do not find any reason to interfere in it. 12 .....

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e not linked with the business in the misc. expenses. After considering the smallness of the expenditure and the reason assigned by the ld.CIT(A), I do not find any reason to interfere with the order of the ld.CIT(A) on this issue. This ground is rejected. 14. In the next ground of appeal, the grievance of the Revenue is that the ld.CIT(A) has erred in deleting the disallowance of Keyman Insurance - premium amounting to ₹ 2,66,744/-. 15. Brief facts of the case of the assessee is that asse .....

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e case of CIT Vs. Gem Art, 22 taxmann.com 243 (Guj). On the other hand, the ld.DR relied upon the order of the AO. 17. I have considered rival contentions and gone through the record carefully. The order of the Hon ble Gujarat High Court in the case of Gem Art (supra) is very brief order, but directly on the point. The relevant part of his order read as under: 3. The only point raised by the Revenue in this appeal is whether the Tribunal below committed substantial error of law in holding the th .....

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any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than (a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or (b) any sum received under a Keyman insurance policy; or (c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual ca .....

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