TMI Blog2017 (1) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot form the basis for the addition of such sundry creditor. Similarly what policy is being adopted by MBC for recognizing the sales Revenue has no bearing to the facts of the case. On perusal of the ledger of MTA, we find that the accounts were settled in the year under consideration. - Decided in favour of assessee Addition on account of non disclosure of income from interest - AO made the addition on account of difference in the net profit shown by assessee in its profit and loss account and profit shown in the computation of income - Held that:- On perusal of audited profit and loss a/c of assessee along with computation of income, we find that assessee in its profit and loss a/c has not shown any remuneration to the partners but same was shown in the profit and loss account appropriation. However the amount shown in the computation of income was after deduction of partner’s remuneration. Therefore, mismatch in figure was observed. Therefore after considering the submission of the assessee, we find no difference between amount of profit shown in the profit and loss account and in the computation of income. As such, we find no infirmity in the order of Ld. CIT(A). - Decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the different orders of Commissioner of Income Tax (Appeals)-XXXVI, Kolkata dated 29.10.2012 31.07.2013. Assessment was framed by JCIT, Range-56, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 30.12.2010 for assessment year 2007-08. Penalty levied by ACIT, Circle-56, Kolkata u/s 154/271(1) of the Act vide his order dated 12.07.2012. Shri Rakesh Goyal, Ld. Departmental Representative appeared on behalf of Revenue and Shri V.N.Purohit, Ld. Authorized Representative appeared on behalf of assessee. 2. Both appeals are heard together and are being disposed of by way of consolidated order for the sake of convenience. First we take up Revenue s appeal in ITA No.1933/Kol/2012. 3. Facts in brief are that assessee is a partnership firm and acting as stockist of lottery tickets of M/s Tiger Associates (MTA for short). The assessee for the year under consideration filed its return of income declaring total income of ₹ 29,97,712/-. Thereafter the case was selected under scrutiny and accordingly notice u/s. 143(2) was issued and assessment was completed u/s. 143(3) of the Act at a total income of ₹ 7,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k only net sales. Considering the facts and circumstances, Ld. CIT(A) deleted the addition made by AO by observing as under:- I have considered both the rival arguments. Best Co. confirmed that they dispatched materials of ₹ 6,75,99,577.00 but they did not debit the party as per their accounting policy. But the Appellant accounted for the same by crediting M/s best Co. immediately after receiving the bill and challan. In my opinion when a party receive and accept bills and challans of other party then a liability is created on the party who received the bills as well the challns. In this case the Appellant accepted the bill and credited Best Co., is normal way of accounting. I do not find any mistake in the Appellant s accounting system. Even Best Co. by not debiting the Appellant did not reduce the liability. In the event of any dispute the liability would fall on the Appellant on the date when they accepted the bill and challan. Their argument about the return of goods sold till the draw date does not reduce the liability of the Appellant. On careful consideration on the order passed by the AO, arguments submitted by the AR and confirmation of the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2007 was existing as a liability towards M/s. Best company. There is no evidence that could be produced by the Ld. AR that the assessee firm indeed had any liability as on 01.04.2007 to M/s. Best Company. There is no brought forward liability as on 01.04.2007 from earlier years. ii) Why did the ledger copy of account of M/s. Tiger Associates in the books of the assessee firm for the F. Y.2007-08 not shown any credit entry (through Transfer) as on 01.04.2007 despite the assessee's claim that the liability to M/s. Best company was transferred to M/s. Tiger Associates as on 01.04.2007. iii) Why did the ledger copy of account of the assessee firm in the books of M/s. Best company not show any debit entry for ₹ 7,20,74,2881- as on 01.04.2007 towards the alleged liability of the former to the latter and an immediate credit entry of ₹ 7,20,74,2881- on 01.04.2007 on account of the alleged transfer of liability to M/s. Tiger Associates? It is reiterated that the copy of ledger account of the assessee sent by M/s. Best Company on 09.03.2012 has not shown any such entries. iv) The AO during the course of assessment was not supplied with any details of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR could not produce the books of accounts of the assessee firm. He admitted vide order sheet dated 07-02-2012 that no such entries were passed in the ledger of M/s. Best Company and M/s. Tiger Associates in the books of accounts of the assessee firm. He also could not explain the reasons as to why the assessee firm extinguished its liability to M/s. Best Company only to create another liability of ₹ 7,20, 74,288/- on 01.04.2007 in the account of M/s. Tiger Associates. The Assessing Officer did state on page 3 in the first paragraph of submissions on point nO.1 as follows:- Since both the parties namely M/s. Best company and M/s. Tiger Associates have not shown any debit entry on account of the alleged liability as on 01.04.2007 in their respective ledger account of M/s. Arti Bright company there is no reason to accept the assessee's claim that any liability to M/s. Best Company or M/s. Tiger Associates to the tune of ₹ 6,99,16,984/- as on 31.03.2007 did actually exist and that its liability to M/s. Best Company as on 01.04.2007 was transferred to M/s. Tiger Associates. Accordingly the entire liability of ₹ 6, 77,59,680/- [Rs. 6, 99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foregoing discussion, we find that the addition was made by AO on account of difference in the amount of sundry creditors as on 01.04.2007 for ₹ 6,75,99,577/-. At the outset, we find that the impugned sundry creditor is arising out of purchase of lottery tickets which were purchased in the immediate preceding year. We find that the balance of sundry creditor was brought forward in the year under consideration from the previous financial year. As such, we find that the corresponding purchase in relation to impugned sundry creditor was booked by the assessee in the immediate preceding year which has been allowed in the earlier year. Therefore, in our considered view, the issue of sundry creditor does not pertain to the year under consideration before us. As the issue is not arising for the sundry creditor in the year under consideration, therefore, no disallowance can be made. However on merit as well we find that the MBC has confirmed the value of the tickets sold to the assessee which is exactly matching as shown in the books of account of the assessee. To the contrary, Ld. DR has not brought any defect in the confirmation received from MBC. Simply assessee has booked the sun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention that in the return of income the remuneration was disclosed. Such partial disclosure of facts is contrary to natural justice. I have gone through the order, the remand report and submission of the appellant carefully and direct the Assessing Officer to delete the addition of ₹ 21,23,616.00. This ground is allowed. Being aggrieved by this, Revenue has come up in appeal before us. 11. Before us Ld. DR submitted that the issue of remuneration is to be verified therefore same should be restored to the file of AO. The ld. DR vehemently supported the order of the AO. The Ld. AR for the assessee, on the other hand, relied on the order of Ld. CIT(A). The Ld. AR further drew our attention on page 4 of the paper book where profit and loss account was placed and also further drew our attention on page 25 of the paper book where the computation of income was placed. The ld. AR supported the order of the ld. CIT(A). 12. We have heard the rival contentions of both the parties and perused the materials available on record. From the aforesaid discussion, we find that AO made the addition on account of difference in the net profit shown by assessee in its profit and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation to charge interest from debtors. So, in absence of definite reason of addition I direct the Assessing Officer to delete the addition of ₹ 14,18,161.00. This ground is allowed. Being aggrieved by this, Revenue has come up an appeal before us. 16. Before us Ld. DR submitted that the AO had made an addition of ₹ 14,18,161/- on the ground that the assessee has paid interest of ₹ 14,18,161/- to the Bank but has not charged interest @12% per annum on loans and advances totaling to ₹ 1,59,91 ,359/- given to 20 persons that works out to ₹ 19,18,963/-. The interest bearing funds of the assessee instead of being deployed in the business for the purpose of earning profit has been diverted to its sister concerns and close relatives without any commercial consideration of charging of interest. Two main issues which arise are as follows:- i) Whether the loans given by the assessee to its sister concerns and relatives can be said to be out of the funds of the assessee which are borrowed from the Bank and such borrowed funds have been utilized in non-interest bearing loans and advances? ii) Whether there was any commercial expediency f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, we are of the considered view that the order of the Income-tax Appellate Tribunal calls for no interference by this Court and in any case no substantial question of law arises for consideration in the present appeal. 9. Therefore, it is requested that the order of Ld. CIT (A) may be set aside and tat of the Assessing Officer be restored. On the other hand the Ld. AR relied on the order of Ld. CIT(A). 17. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that AO observed that interest bearing fund has been diverted by assessee to interest free loan. Therefore, interest expense claimed by assessee was disallowed. At this juncture, we find important to reproduce the observation of AO in his order as under:- During the year under consideration, the Sundry Debtors in the Balance Sheet shows ₹ 159,91,359/- from 20 (twenty) parties. The assessee was asked to give why the interest should not be charged from the said parties. Neither the assessee has filed the details of parties, nor was any interest from such parties shown in the P L A/c. Neither the copies of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t percentage of 0.41 was determined. The Authorized Representative draw my attention to the audited Profit Loss Account where the actual sale is ₹ 1,00,27,99,834.00 whereas the Assessing Officer considered the sales at Rw.1,11,16,48,144.00. Moreover, the Assessing Officer mentioned in his remand report to consider the issue on merit without mentioning any reason for such recommendation of on merit . When the basic figure is wrong and the Assessing Officer did not mention the basis of Gross Profit percentage, no merit can be applied. Fr this reason the addition of ₹ 4,84,456.00 on the ground of Gross Profit percentage is deleted. This ground is allowed. Being aggrieved by this, Revenue has come up an appeal before us. 21. At the outset, we find that it is important to reproduce the remand report of AO as under:- The Ld. AO has made an addition of ₹ 4,4,456/- under the head gross profit difference by rejecting the book result U/s 45 of the Income Tax Act, 1961. In the process he has adopted a Gross Profit rate of 0.41% on gross turnover of ₹ 111,16,48,144/- determining GP at ₹ 45,57,757/- as against GP of ₹ 40,73,301/-. IT appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enting the purchase made from the said party. The ld. AR in support of its claim has submitted the ledger copy MVE which is placed on pages 24 to 33 of the paper book. The Ld. DR on the other hand, vehemently relied on the order of Authorities Below. He stated that the assessee was given sufficient opportunities but had not availed the same. Even before Ld. CIT(A) assessee has not submitted the details in respect of credit entries found in the name of MVE in its books of account. Ld. DR vehemently opposed to restore the matter before AO and vehemently relied in the order of authorities below. 27. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that the addition was made by AO on account of non-submission of supporting documents by assessee in respect of credit entries found in the books of account of assessee. Now, before us Ld. AR for the assessee first time submitted that the ledger copy of MVE which constitute the additional documents but the same has not been verified by Authorities Below. Needless to mention that the additional document was not submitted before Authorities Below but it does not mean that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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