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2017 (6) TMI 184 - ITAT MUMBAI

2017 (6) TMI 184 - ITAT MUMBAI - TMI - Rejection of books of account - G.P. addition - Held that:- CIT-A has given a finding that the gross profit rate for assessment year 2008 - 09 was 17.47% while the gross profit in the assessment year 2009-10 is 17.43%. Hence there is a very negligible fall in the gross profit which doesn't warrant any adverse inference. Furthermore learned CIT-A has given elaborate finding on all the adverse findings of the assessing officer. - Finding of the CIT-A are .....

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upon conjecture and surmises have rightly been found by the learned CIT- A to be not sustainable. Even thereafter in the above order learned CIT-A has sustained some addition /disallowance being expenditure of ₹ 2,33,214 under section 40 (a)(ia). No infirmity in order of learned CIT-A. - Decided against revenue - ITA no.4304/Mum./2014 - Dated:- 1-6-2017 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI PAWAN SINGH, JUDICIAL MEMBER For The Assessee : Shri. Yogesh. A.Thar For The Revenue : Sh .....

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t. 2) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in deleting the addition of ₹ 47,66,786/- out of ₹ 50,00,000/- made by the AO on account of various discrepancies leading to the rejection of books of account". 3) The appellant prays that the order of the AO should be restored and order of the CIT(A) should be set aside". 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necess .....

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or reasons given in Para 2.2 of the order, was of the opinion that the G.P. rate for the A.Y. 2008-09 worked out to 17.85%. The assessee was, therefore, asked to explain reasons for fall in G.P. rate. Vide a written reply dated 18/11/2011, it was submitted that there was no change in the G.P. rate. The A.O. did not find the submission of the assessee acceptable. He has noted in the assessment order that the assessee did not file all the details called for as a result of which it was not possible .....

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r tickets. The A.O. also observed that there was discrepancy in the valuation of closing stock and purchases of raw materials of ₹ 86,705/- and ₹ 15,109/- did not appear in the list of closing stock or in sales details, meaning thereby, that these items had been shown in the purchases only. Further, from the figures of closing stock of Kanpur branch, it was seen by the A.O. that there were ₹ 15,502 pairs of finished stock whose value has been stated at ₹ 89,03,020/- as pe .....

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and expenses like, consumable store, cooliage and cartage, forwarding charges, establishment expenses, electricity charges etc. were not considered at all for the valuation of the finished goods or semi-finished goods. In the branch office, where the purchases raw/semi-finished/finished leather as raw material is made, no quantitative details of the raw materials purchased had been furnished by the assessee and the Chartered Accountant also failed to furnish the said details in the Tax Audit rep .....

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method of valuation of closing stock, non deduction of tax at source in respect of the various payments made, non recording of purchase made on 31/03/2009 either in sale or closing stock, fall in G.P., different parameters for working of comparative gross profit in different years, the book results of the assessee could not be accepted and the credit profits of the business could not be determined. He, therefore; applied the provisions of sec.145 of the I.T. Act, 1961. 4. The A.O. has concluded .....

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option is to estimate his profit. Looking to the facts of the case and the various defects as pointed out, it will be fare to make an addition of ₹ 50,00,000/- to the returned income of the assessee firm. This will take care all the defects point out in the above paras. 5. Upon assessee s appeal Ld. CIT-A held as under:- I have considered the facts of the case and the submissions made by the assessee. I find that the Assessing Officer has questioned the gross profit percentage of the asse .....

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a variation in the acceptable range in the different years depending on the facts and circumstances and the quantum and characteristics of the business in the different years. It is not the case of the Assessing Officer that major discrepancies in the purchases and sales or in the expenditures claimed have been found. Non-deduction of tax at source on certain expenditures incurred is only a technical fault which leads to a technical disallowance. This, however, does not affect the actual G.P. of .....

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77; 89,03,020/- was available which give the cost of each pair of footwear at ₹ 574.31. However, no pair costing ₹ 574.31 was found in the closing stock statement. As against this, the assessee has explained that ₹ 574.31 was the average value of all the pairs of footwear available in the closing stock. It does not mean that each pair of footwear would cost ₹ 574.31. The assessee has given a point-wise explanation on the discrepancies pointed out by the Assessing Officer. .....

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ed was produced and only purchase book was produced. The assessee was asked to produce the ledger, cash book, journal, stock register and books audited along with the vouchers of last fortnight of March, 2009. As per the order sheet noting on 18/10/2011, the ledger, cash book and voucher of March, 2009, second fortnight were produced which were test checked by the A.O. No thereafter, there is no noting which would suggest that the A.O. required the assessee to furnish the journal again. Thereaft .....

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the submissions made by the assessee, in my opinion, this is not a fit case for the rejection of the book results of the assessee, the A.O has himself noticed that it will not be correct to apply high rate of gross profit to arrive at the correct profit and there is no other case similar in nature whose parameters could be applied to this case to arrive at the gross profit rate. Thereafter, the Assessing Officer has made an ad-hoc addition of ₹ 50,00,000/- to the returned income of the as .....

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d out by him. This approach of making the addition, in the facts and circumstances of the case, is not correct. Having held so, I find that the assessee has admitted that tax has not been deducted at source on the expenditure of ₹ 2,33,214/- in respect of import/export documentation charges paid to M/s. Venuta Agencies India although tax was required to be deducted at source on such expenditure under the provisions of the Act. Hence, the expenditure of ₹ 2,33,214/- shall not be allow .....

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h 2008. The copy of the bill is enclosed at pg- 145 of the PB. Thus, the said income of ₹ 6000/- has been adjusted by the Appellant to reduce its claim for electricity expenses during the year. Hence, in totality, the appellant has rightly offered the interest income of ₹ 6000/- to tax by way of claiming less expenditure and as such there is no income of the appellant which has not been offered to tax as claimed by the Appellant. I have perused the electricity bill for the month of M .....

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addition of this amount of ₹ 6,000/- is to be made to the total income of the assessee. As regards the expenditure on trade fair, out of the total expenditure claimed of ₹ 43,16,701/-, the Assessing Officer has, after verifying the expenditure, reported that the expenditure of ₹ 41,83,3821- has been incurred on trade fairs. He has, however, observed that expenditure of ₹ 1,33,319/- seems to have been incurred towards personal expenses and is disallowable. He has, however .....

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