TMI Blog2017 (5) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... luing in opening and closing stock. The assessee has adopted the same method of inventory since last 15 years. The net sales for the year under appeal are higher than the preceding year. - Decided against revenue Addition u/s 68 - Held that:- It is undisputed fact that these credits were received during F.Y. 1997-98 and 1998-99. The Assessing Officer has made addition by invoking the provisions of Section 68 of the Act in the year under consideration. These amounts were opening balance at the first day of F.Y. under consideration, hence provision of Section 68 of the Act are not attracted. At the most, addition could have been made by invoking the provisions of Section 41(1) of the Act. The assessee itself has written back these loans amounts and paid taxes for the assessment year 2013-14. Considering all these facts, we do not find any infirmity in the order of the ld. CIT(A) - Decided against revenue Addition on account of differenence between gross turnover as per sales tax return and gross turnover as per balance sheet - CIT-A deleted addition - Held that:- D.R. was not able to controvert the finding recorded by the ld. CIT(A) with regard to clerical mistake while prepari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account are rejectable. 1(d) observing that books of account have not been rejected by the A.O., whereas in the assessment order repeated at many places specific defects have been pointed out in the books of account eg. Valuation of various types of valves in closing stock etc. 2(a) deleting the addition of ₹ 38,75,000/- made by the A.O. U/s 68 of the IT Act on account of bogus unsecured loans without appreciating the fact that assessee failed to prove the identity, genuineness and creditworthiness of persons/concerns from whom said unsecured loans were received. 2(b) ignoring the fact that assessee action of treating these unsecured loans as his income during A.Y. 2013-14,itself proves that these were bogus unsecured loans and it was an adjustment made by the assessee. 2(c) admitting the additional evidence furnished by the assessee despite the fact that during the assessment proceedings in spite of ample opportunities provided to the assessee to produce the confirmation to prove the genuineness of said loans, he failed to furnish the same before the A.O. 3. deleting the addition of ₹ 3,47,186/- made on account of different between gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n comparison to the preceding year. The sales prices were not increased correspondingly. In some of the products, even the sale price decreased in comparison to the preceding year. Moreover, the appellant s turnover increased from 11.60 crores to ₹ 14.25 crores in comparison to the preceding year and due to increase in turnover also, the selling prices were lower to withstand competition. The books of account of the appellant were audited by the C.A. The Assessing Officer has not found any defect in the books of account and in absence of any specific defect, the audited books of account were not rejected then the Assessing Officer was not justified in calculating the gross profit. 5. The ld. CIT(A) after considering the submissions had deleted the addition made by the Assessing Officer. The relevant paragraph of the ld. CIT(A) s order is reproduced hereunder:- I have carefully gone through the detail submissions and case laws cited by the Ld. AR and the report of the Ld. AO. The Ld. AO has objected the admission and consideration of additional evidences filed during the course of appellate proceedings. The Ld. AR in his written submission mention above has stated as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not satisfied about the correctness or completeness of the accounts of the assessee, or - Where the method of accounting provided in section 145(1) or accounting standards as noticed u/s 145(2), have not been regularly followed by the assessee, The assessing Officer may make an assessment in the manner provided in section 144. The Ld. AO on page No. 2 of his order has mentioned as under:- In response to the notices, the assessee s authorized representative Sh. R.C. Garg C.A. attended and submitted the requisite details, information, documents and clarification sought for vide notices u/s 143(2) 142(1) and as per order sheet entries. The Authorized Representative of the assessee was heard and the case was discussed with him. The AR produced the books of account, bills/ vouchers in support of the return of income which were verified on test check basis. The assessee company is engaged in manufacturing of metal alloys valves. I find that the Ld. AO has verified on test check basis the books of accounts produced before him but not found any fault in the figures of purchases, sales, wages and manufacturing expenses. The Ld. AO has not recorded any reason i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 and the assessee has furnished complete details of stock as required by the statute. There is no finding that the actual cost of raw material purchased by the assessee was less than what was declared in account books. There is no finding that actual cost of wages and manufacturing expenses was less than what was declared in account books. No particular expenditure shown in the books of accounts has been disallowed by the Ld. AO. There is no finding by the Ld. AO that actual quantity of finished goods produced by the assessee was more than what it was shown in the books of accounts. There is no finding by the Ld. AO that finished product was sold by the assessee at a price higher than what was declared in accounts books. It is a well settled law that the assessment cannot be made on the basis of presumption, suspicion or surmises. This principle is reflected in the following judicial pronouncements: Umacharan Shaw Bros v. CIT (37ITR 271) (SC) Dhakeshwari Cotton Mills v. CIT (26 ITR 775) (SC) Sheonarain Dulichand v. CIT (72 ITR 766) (All.) The appellant s case is covered by the above mentioned Judgement of the Hon ble Delhi High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the appellant, finding of the Ld. AO, the position of the book results duly audited by a qualified Chartered Accountant and position of law emerging out of the above referred Judgements, I am of the considered opinion that the addition was made without any factual basis and on the basis of suspicion, conjectures and surmises. Accordingly the same is not sustainable and the addition of ₹ 1,50,17,636/- made on account of lower gross profit is deleted. The grounds of appeal are allowed. 6. Now the revenue is in appeal before us. The ld. CIT D.R. has relied on the order of the Assessing Officer. At the outset of hearing, the ld AR of the assessee has relied on the order of the ld. CIT(A) and pleaded that the ld. CIT(A) has considered all the relevant issues. 7. We have heard the rival contentions of both the parties, perused the material available on the record and also gone through the orders of the lower authorities. The Assessing Officer adopted a method, which is not in accordance with the accounting standard. Further, none of the items in the closing stock was found to be valued at the lower rate than the opening stock rate and the ld. CIT(A) has recorded tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidence under Rule 46A shall not be admitted. The AO further elaborated the opportunities given to the assessee to produce the confirmations to prove the genuineness of the said two loans. The A.O. further states that the assessee s case was earlier scrutinized in A.Y. 2005-06. Since, there was no scrutiny between A.Y. 1105-06 to 2011-12, the genuineness of these unsecured loans could not be questioned. The AO further states that since these unsecured loans have been written by the said two companies in earlier years i.e. FY 2003-04 and 2006-07 and therefore, these credit entries cannot be considered to be genuine in the year under consideration. In reply to the remand report the appellant submitted as under: That the Ld. AO has simply objected to the admission of additional evidence under Rule 46A of the I. T. Rules 1962 on the ground that sufficient and ample opportunity was provided to the assessee during the course of assessment proceedings to submit the details / clarifications and evidences. It is further stated in the remand report that vide order sheet entry dated 17.09.2013, the assessee was asked to submit the loan confirmations from the said two parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suo moto offered the said loans as income in A.Y. 2013-14 and paid the tax thereon as evident from the audited Balance Sheet as on 31.03.2013 filed before the Ld. AO as well during the course of appellate proceedings. I am inclined to agree with the contention/ submission of the Ld. AR of the appellant that same income cannot be taxed twice. The appellant company has already offered the said loans as income in AY 2013-14, the addition of the same to the income of A.Y. 2011-12 is unjustified. I have considered the submissions of the appellant as well as the findings of the Ld. AO. Keeping into consideration the various case laws of the higher appellate authorities and the Hon ble Courts I incline to agree with the contention of the appellant that the Ld. AO is not justified in making the addition u/s 68 of the Act. Accordingly, addition of ₹ 38,75,000/- u/s 68 of the Act is deleted. Hence, this ground of appeal is allowed 10. The ld. CIT D.R. has vehemently supported the order of the Assessing Officer. On the contrary, the ld AR of the assessee has reiterated the arguments as made before the ld. CIT(A) and prayed to uphold the order. 11. We have heard the rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of the CST-1 form for the 4th quarter, which shows the gross sales turnover for the 4lh quarter at ₹ 4,64,28,104/-. The appellant submits that the correct gross sales turnover for the 4th quarter was ₹ 4,64,28,104 but there was a mistake while preparing the VAT-10 return of 4th quarter in which the sales within state of ₹ 3,47,186/- has been added twice. The AR also explained that the CST-1 form filed for the 4th quarter gives the correct figure of gross sales turnover of ₹ 4,64,28,104/-. I have carefully considered the observations of the Ld. AO in the assessment order and the above written submission of the appellant. The Ld. AR has filed copies of assessment order reveived from Rajasthan sale tax department which proves that sales turnover figure appearing in the audited P L account is correct. I find that this is a clerical mistake while preparing the VAT-10 return of 4th quarter. The mistake is apparent from record and the Ld. AO should not have taken adverse view of the matter. I, therefore, delete the said addition of ₹ 3,47,186/-. Accordingly, this ground is allowed. 13. The ld. CIT D.R. has relied on the order of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on doubtful presumption/assumption using either this or that . As regards the doubtful under valuation of closing stock, it may be mentioned here that the appellant company has valued the closing stock as per the valuation method consistently followed by it since the beginning of the business and this has not been disputed by the A.O. anywhere in the assessment order. Further, as per the submissions and evidences placed by the appellant company, the appellant has valued its closing stock at a higher rate than the valuation of opening stock. Further, the A.O. has not made any finding about the rate at which the appellant should have made the valuation of its closing stock. In my view, if the A.O. was not satisfied with the rate at which the valuation of closing was made by the appellant, then he should have worked the rate at which the closing stock should have been valued. Admittedly, he has not given any such rate the A.O. was not sure as to whether there was any under valuation. Moreover, the only under valuation of closing stock cannot be made a basis for rejection of duly regularly maintained and audited books of accounts. The A.O. was also not sure as to whether there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng addition made of ₹ 1,48,52,972/- also deserves to be deleted particularly in view of the fact that the gross profit declared during the assessment year under appeal is better than the gross profit declared in the immediately preceding assessment year and also keeping in-view the fact that profit in the business depend upon various factors like market competition, public demand and other surrounding factors and admittedly, the A.O. has also not given any comparable case of other assessees who is in the line of same business and declared the gross project as applied by the A.O. in the case of the appellant. Therefore, the trading addition made by the A.O. amounting to ₹ 1,48,52,972 deserves to be deleted and I order accordingly. Thus, all the grounds of appeal are allowed. 16. We have heard both the sides on this issue. We find that the provisions of Section 145(3) of the Act were invoked without any basis. It was based only on assumptions and presumptions. Assessee has not undervalued the closing stock nor any specific defect was found in claim of expenses debited to the P L account. Considering all these facts and circumstances of the case, we do not find any in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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