TMI Blog2015 (12) TMI 1564X X X X Extracts X X X X X X X X Extracts X X X X ..... There was no disclosure on account of excess cash during the course of survey. Accordingly we confirm the order of the ld CIT(A) on both the grounds. Disallowance U/s 40 (a)(ia) - Held that:- The interest of ₹ 3,21,952/- was not payable as on 31/3/2009, therefore, the case laws referred by the assessee is squarely applicable. However, remaining interest amount of ₹ 27,81,388 was paid to M/s India Bulls Bank ltd. against the purchase of machinery. The ld CIT(A) had rightly capitalized the interest payment with the cost of plant and machinery and accordingly, was allowed depreciation on it. The assessee’s argument that there was no extension of existing business during the year is not substantiated with any evidence when interest cost is 27.81 lacs, then addition of assets is in crores, therefore, it is extension of business. Accordingly, we uphold the order of the ld CIT(A). - ITA No. 595/JP/2013 - - - Dated:- 14-12-2015 - Laliet Kumar (Judicial Member) And T. R. Meena (Accountant Member) For the Assessee : P. C. Parwal (CA) For the Revenue : O. P. Bhateja (Add.CIT) ORDER T. R. Meena (Accountant Member) This is an appeal filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods were not sold to them and bills and challan could not be issued. The ld Assessing Officer after considering the assessee s reply has held that a perusal of the diary showed that these were details or orders of the customers to whom goods had been sold and dispatched.. There was a clear mention of details of goods sold, however, there was no indication of sale price. On verification with bills it was seen that sale bills had not been issued in respect of all these sales of goods. It is general practice in this line of trade to sale the goods without raising bills for the same because of high rate of sales tax/VAT. An exercise had been done and verification of each entry of diary had been made with the sale bills by the Assessing Officer. It was noticed that bills had not been issued in respect of following notings of the sale, which is as under:- Date Description of goods sold Quantity in number 01-04-2008 Dining table chair 2 02-04-2008 Bed set 1 03-04-2008 Bed set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bathroom mirror 1 Study chair 2 Study table 1 He further held that the assessee company was engaged in the sales outside the books of account. Shri Sudhir Gupta, director of the assessee company admitted in reply to question No. 3 of his statement recorded during survey proceedings that stock register had not been maintained in respect of business of the assessee company Further in reply to question Nos. 7 to 11, he accepted that valuation of closing stock is made on the basis of average rates of a particular item and there was no perfect basis or evidence for adopting a particular rate for a particular item. The ld Assessing Officer on the basis of these discrepancies has held that books of account of the assessee are not reliable and provisions of Section 145(3) is squarely applicable. Therefore, he rejected the book result. The total turnover of the assessee was estimated at 5.5 crores against ₹ 4,99,54,718/- shown by the assessee and GP rate has been applied @ 24.12%, which has been disclosed during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered for tax. He further submitted that in the diary marked annexure A-8, the orders received towards supply of the furniture is noted. It is but natural that in business all the orders may not be executed. The A.O. has verified each of the order booked with the sales invoice. Only in respect of 18 orders, the sales invoice is not issued as no goods were supplied against these orders since the same was not executed. The lower authorities have no material to presume that goods were supplied against these orders. Therefore, estimating the turnover of the assessee at ₹ 5,50,00,000/- as against ₹ 4,99,54,718/- declared by the assessee is arbitrary and without any basis. Even if it is assumed that goods were supplied against these orders, the fair sales value of such item is only at ₹ 11,67,000/-. Therefore, estimating the sales at ₹ 5,50,00,000/- is excessive and unreasonable. The ld AR has further submitted that the Assessing Officer has applied GP rate of 24.12% on the sales estimated by him. The G.P. rate of 24.12% is after considering the excess stock. After excluding the excess stock, the G.P. rate is 18.64%. Therefore, addition made by A.O. are confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing amount. 1. GE Money Finance Ltd. ₹ 10096/- 2. India Bulls bank Ltd. ₹ 2781388/- 3. Cholamandlam DBS Fin. Ltd. ₹ 77508/- 4. Reliance Capital ltd. ₹ 110478/- 5. Tata Capital ₹ 123870/- Total ₹ 31,03,340/- The Assessing Officer gave reasonable opportunity of being heard to the assessee but he was not convinced with the reply of the assessee, therefore he made disallowance U/s 40(a)(ia) of the Act and made addition of ₹ 31,03,340/-. 8. Being aggrieved by the order of the ld Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing as under:- 9. As section 40(a)(ia) is very clear that where the amount is debited in the P L account but no TDS has been deducted, deduction of that amount cannot be allowed. It is not disputed by the appellant that TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue attains clarity. Thus out of ₹ 31,03,340 interest of ₹ 3,21,952/- is upheld disallowed U/s 40(a)(ia) and balance ₹ 27,81,388 is disallowed as capital expenditure allowing depreciation available on plant and machinery to it. The A.O. to compute accordingly. 9. Now the assessee in appeal before us. The ld AR of the assessee has submitted that the ld Assessing Officer made total disallowance of ₹ 31,03,340/- U/s 40(a)(ia) of the Act. However, the ld CIT(A) confirmed the addition of ₹ 3,21,952/- U/s 40(a)(ia) of the Act and balance amount of ₹ 27,81,388/- paid to India Bulls bank Ltd. by treating it as capital expenditure on the ground that the same is for the purchase of machinery. Therefore, it is to be added to the cost of machinery. He further argued that Special Bench of ITAT in the case of M/s Merilyn Shipping Transport Vs ACIT (2012) 16 ITR (Trib) 1 has held that Section 40(a)(ia) of the Act cannot be invoked in respect of amount actually paid within previous year without deduction of tax at source. After this decision, the Hon ble Gujarat High Court in the case of CIT Vs Sikandar Khan N Tunvar 357 ITR 312 and Calcutta High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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