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2016 (8) TMI 992 - ITAT AHMEDABAD

2016 (8) TMI 992 - ITAT AHMEDABAD - TMI - G.P. determination - rejection of books of accounts - Held that:- As in the given circumstances, where the assessee has shown better GP rate and no major defect has been pointed in the books of account, ld. Assessing Officer erred in rejecting books of account and therefore, no addition is sustainable by applying estimated GP rate @ 20%. We find no reason to interfere with the finding with regard to the issue of deleting the addition on account of GP rat .....

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cial statements are audited u/s 44AB of the Act and the disallowance made by lower authorities is fairly on an estimate basis, we find no reason for such disallowance and, therefore, we delete the same. - Addition made u/s 69 for unexplained investment - Held that:- As the assessee’s financial statements have been accepted by the Revenue for Asst. Year 2007- 08 and addition made during the year under appeal emanates out of the opening balance of the capital account only and there is no evide .....

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im of TDS shall be accompanied by return in the form prescribed u/s 139 of the Act. Moving further when we go through the Rule 37BA(4) we find that credit for tax deducted at source and paid to the account of Central Government shall be granted on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority and the information provided in the return of income. Now when we link up the provisions of section 148 of the Act with Rule 41(2) and Rule 37BA .....

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re the ld. Assessing Officer then the TDS credit ought to have been allowed. - ITA No.1567/Ahd/2012, ITA No.1712/Ahd/2012 - Dated:- 21-7-2016 - Shri Rajpal Yadav, JM, & Shri Manish Borad, AM For The Appellant : Shri M. K. Patel, AR For The Respondent : Shri Prasoon Kabra, Sr.DR ORDER PER Manish Borad, Accountant Member. These cross appeals are directed against the order of ld. CT(A)-XI, Ahmedabad dated 2.5.2012 in appeal No.CIT(A)- XI/395/Wd-6(4)/11-12 passed against order u/s 143(3) r.w.s. .....

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ciation of the facts of the case. In view of facts and submissions filed as well as legal position, the entire estimated addition on account of gross profit requires to be deleted. 2. The learned CIT(A) has further erred in estimating the addition of G.P. at 20% of alleged unverified purchases of ₹ 7,74,687/- as against estimation of G.P. @ 20% of total turnover as made by the AO. In view of facts of the case and more particularly the nature of business of the appellant, the entire additio .....

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ding F.Y, particularly when the Assessee had not maintained regular books of accounts for the preceding year and had merely submitted copies of unaudited P&L A/c and balance sheet. (II) The CIT(A) has erred in law and on facts in holding that the bookresult of the Assessee were acceptable and the addition made on account of suppressed gross profit was not tenable. (III) The CIT(A) has erred in law and on facts in directing to allow credit for TDS to the Assessee ignoring the provisions of Ru .....

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an individual running sole proprietary concern in the name of M/s Gayatry Caterers, engaged in providing catering services. Notice u/s 148 of the Act was issued on 21.10.2010 on the basis of information that TDS was deducted in on the contract payment of ₹ 1,66,54,360/- for asst. year 2008-09 but no return of income was filed by the assessee. Assessee did not respond on few occasions against notice u/s 148 of the Act but finally furnished the return of income on 19/10/2011 declaring total .....

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9,229/- Further assessee s claim of credit of TDS of ₹ 3,96,191/- was denied by ld. Assessing Officer observing that the same cannot be allowed as per Rule 41 of the IT Rules as it was not a claim with valid return of income filed u/s 139 of the Act. 3. Aggrieved, assessee went in appeal before ld. CIT(A) wherein the appeal was partly allowed and now both the assessee and the Revenue are in appeal before the Tribunal. 4. First we take ground nos. 1 & 2 of assessee s appeal in ITA No.15 .....

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estimated addition on account of gross profit requires to be deleted. 2. The learned CIT(A) has further erred in estimating the addition of G.P. at 20% of alleged unverified purchases of ₹ 7,74,687/- as against estimation of G.P. @ 20% of total turnover as made by the AO. In view of facts of the case and more particularly the nature of business of the appellant, the entire addition ought to have been deleted. The appellant craves leave to add, amend, alter, modify or delete any of the abov .....

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ment proceedings it was observed by ld. Assessing Officer that no proper supporting was available with the assessee in relation to expenditure of ₹ 7,74,687/- relating to purchase of milk, curd, vegetables, fruits, etc. purchased in cash and similarly, expenditure on consumption of cooking gas was not verifiable. Ld. Assessing Officer also observed that assessee s main client was Cadila Laboratories Ltd. but the assessee failed to furnish a copy of agreement entered into by him with the sa .....

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rease in GP vis-à-vis average of last three years GP calculated at 15.82%. Further ld.CIT(A) also observed that estimation of 20% GP by Assessing Officer was without any comparable case and prescribed procedure. However, in relation to the expenditure of ₹ 7,74,687/- incurred by assessee on various consumable items namely milk, curd, vegetables, fruits, cooking gas etc. which were supported by merely self-made vouchers, 20% disallowance of ₹ 7,74,687/- was sustained and accord .....

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iers of milk, curd, vegetables, butter etc. as there is no fixed supplying for the same. Therefore, ld. CIT(A) erred in sustaining the disallowance of ₹ 1,54,937/-. 7. On the other hand, ld. DR supported the order of Assessing Officer. 8. We have heard the rival contentions and perused the material on record. We find that assessee has raised ground nos. 1 & 2 but the sole grievance is addition of ₹ 1,54,937/- sustained by ld. CIT(A) by disallowing 20% unverifiable purchase of  .....

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course u/s 139 of the Act. Along with return of income audit report u/s 44AB of the Act was also attached and TDS certificate from Gujarat State Petroleum Corporation, Cadila Health Care Ltd. and Erhardt + Leimer (India) Pvt. Ltd., copy of agreement with Cadila Health Care Ltd. and copy of bank statement, were filed before ld. Assessing Officer. We further observe that no major defect was pointed out by ld. Assessing Officer except for the unverifiable purchases of ₹ 7,74,687/- for purcha .....

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is 15.28% (12.95% + 16.69% + 16.20% ÷ 3), GP declared by the assessee for the year under appeal is 15.82% which is better in comparison to average GP rate. Further as regards unverifiable purchases of ₹ 7,74,687/- we find force in the submission of ld. AR that these purchases relate to buying of milk, curd, vegetables fruits, cooking gas and other day to day expenditure needed in the course of running catering business and such purchases are normally made from different suppliers on .....

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sessing Officer. Therefore, in the given circumstances, where the assessee has shown better GP rate and no major defect has been pointed in the books of account, ld. Assessing Officer erred in rejecting books of account and therefore, no addition is sustainable by applying estimated GP rate @ 20%. We find no reason to interfere with the finding with regard to the issue of deleting the addition on account of GP rate. However, with regard to the addition of ₹ 1,54,937/- on account of 20% dis .....

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authorities is fairly on an estimate basis, we find no reason for such disallowance and, therefore, we delete the same. Accordingly, ground no.1 & 2 of assessee s appeal are allowed and ground no.2 of Revenue s appeal is dismissed. 10. Now we take up remaining grounds of Revenue s appeal in ITA No.1712/Ahd/2012. 11. Ground No.(I) of Revenue - The CIT(A) has erred in taw and on facts in accepting the explanation of the Assessee that the opening capital appearing in the balance sheet was broug .....

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while examining the same, ld. Assessing Officer observed that brought forward opening balance of capital account of proprietary concern was shown at ₹ 60,85,758. Ld. Assessing Officer also observed that assessee has not filed return of income as well as financial statement for Asst. Year 2006-07 and 2007-08 and, therefore, accepted the opening w.d.v. of assets motor car at ₹ 3,63,313/- and opening bank balance of ₹ 7,55,750/- and treated the remaining amount of ₹ 49,66,6 .....

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on account of opening capital which was duly recorded in the books of account and, therefore, addition made was bad in law and ld. CIT(A) has rightly deleted the same. 14. We have heard the rival contentions and perused the material on record. Through this ground Revenue has challenged the action of ld. CIT(A) deleting the addition made u/s 69 of the Act for unexplained investment at ₹ 49,66,695/-. We find that ld. CIT(A) has deleted the impugned addition of ₹ 49,66,695/- by observi .....

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of motor car of ₹ 3,63,313/- against this opening capital and the resultant figure of ₹ 49,66,695/- has been added by the A.O. u/s.69 of I.T. Act. 3.3 Taking entirety of facts in view, I am inclined to agree with the contentions of the Id.A.R. for the following reasons. The A.O. had made impugned addition u/s.69 of IT. Act, it will be pertinent to discuss provision of this section first. The value of unexplained investment made by the assessee in F.Y. immediately preceding A.Y. can .....

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appellant is discussed in the following paras. (i) it is seen that A.O. had made addition against opening capital of the appellant. This makes it very clear that the A.O. has not detected any investment made by the appellant during the year under consideration. Accordingly, the first eligibility criterion of section 69 as mentioned above is not fulfilled. (ii) It is also a matter of fact that the appellant is maintaining the books of accounts and opening capital amount of ₹ 60,85,758/- has .....

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s account based ofPsthese books of accounts. The balance sheet and profit and loss account was filed by the appellant alongwith income tax return. The impugned figure of ₹ 60,85,7587- which represents opening capital balance is duly recorded in the books of accounts as well as balance sheet of the appellant. In view of these facts, it can easily be said that opening capital balance is duly recorded in the books of accounts' and accordingly as per second eligibility condition of section .....

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Y. 2006-07 and 2007-08 the appellant has not furnished its return of income and accordingly opening balance shown by the appellant in balance sheet is not verifiable. In view of these facts, the A.O. made the impugned addition. However, it is seen that for the A.Y. 2006-07 and 2007-08, the A.O. had issued notice u/s.148 and the appellant had furnished income-tax returns for these years along-with audited balance sheets. Perusal of balance sheet for the A.Y. 2007-08 reveals that closing balance i .....

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it will be appropriate to make these additions in that year and not in the current A.Y. i.e. A.Y. 2008-09. 3.5 It is further seen that A.O. had given credit of opening bank balance of ₹ 7,55,750/- and w.d.v. of motor car of ₹ 3,63,313/- against opening capital balance of the appellant. I am not in agreement with this working also. It is seen that audited balance sheet for the A.Y. 2005-06 was available before the A.O. during the assessment proceedings. In this balance sheet, appellan .....

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s the opening balance under the head sundry debtors for the current A.Y. This corresponds to closing balance of sundry debtors of ₹ 44,05,856/- as on 31-03-2007. This figure is also declared in in the balance sheet for A.Y. 2007-08. Since sundry debtors also corresponds to earlier year, accordingly, in my considered view, no adverse inference can be drawn in the current A.Y. 3.7 1 further place reliance on the case of Mohanlal Pukhraj v/s. DCIT (2005) 1(11) 1 TCL 160 (Ahd.Tri.) wherein it .....

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e as on 31- 03-2005 at ₹ 17,62,694/-. The appellant has further earned profits of ₹ 9.93 lacs and ₹ 14.51 lacs in the A.Y. 2006-07 and 2007-08 respectively. These facts reveals that appellant has accumulated profits year after year and that was sufficient reason of having an opening capital balance of ₹ 60,85,758/- in the A.Y. 2008-09. The A.O. has not considered these materials facts before making the addition. 3.9 In view of above facts, I am of the firm view that addit .....

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9 of the Act read as under:- 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of s .....

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hich takes its source from previous financial year and ld. Assessing Officer has taken the basis of opening capital of ₹ 60,85,758/- from the audited financial statement of assessee shown at Schedule-A of the audited balance sheet and has partly considered the opening capital explained to the extent of opening w. d. v. of motor car of ₹ 3,63,313/- and opening bank balance of ₹ 7,55,750/-. There is no mention of any other investment which is not recorded in the books of account. .....

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nly addition made for asst. year 2007-08 relates to unverifiable purchases. Had there been any unexplained investment in the previous year i.e. asst. year 2007-08 then ld. Assessing Officer might have extracted such information and had made addition thereof. 18. We are, therefore, of the view that as the assessee s financial statements have been accepted by the Revenue for Asst. Year 2007- 08 and addition made during the year under appeal emanates out of the opening balance of the capital accoun .....

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e provisions of Rule 37BA(4) of the I T Rules, and also ignoring the fact that the Assessee had not filed a valid return of income. 20. Ld. DR supported the order of Assessing Officer. 21. On the other hand, ld. AR submitted that TDS of ₹ 3,96,191/- was deducted on the contract receipts received by the assessee during the year and the same were claimed against tax liabilities for the year but was not allowed by ld. Assessing Officer by following the provisions of Rule 41 of IT Rules with t .....

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TDS of ₹ 3,96,191/-. We find that ld. CIT(A) has allowed the ground of assessee s appeal and has directed the Assessing Officer to give credit of TDS of ₹ 3,96,191 vide para 5.3 of his appellate order. 23. Before going further let us first go through the provisions of Rule 37BA and Rule 41 of IT Rules which are as follows :- Rule -37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the per .....

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rce, as the case may be, shall be given to the other person and not to the deductee : Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).] (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to .....

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tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of- (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person autho .....

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3) Where any part of the total income of a person making a claim for refund of tax consists of dividends or any other income from which tax has been deducted under the provisions of sections 192 to 194 [, section 194A and section 195], the claim shall be accompanied by the certificates prescribed under section 203. (4) The claim under sub-rule (1) may be presented by the claimant in person or through a duly authorised agent or may be sent by post. 24. Also the provisions of section 148 of the Ac .....

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levant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :] [Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice serve .....

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e deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of subsection (2) of section 143, but before the expiry of the time .....

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