TMI Blog2017 (6) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 : Shri. Kailash Kanojiya ORDER PER: SHAMIM YAHYA This appeal by the revenue is directed against order of Ld. CIT-A dated 26.03.2014 and pertains to assessment year 2009-10. 2. The grounds of appeal read as under: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in holding that the rejection of books is not justified, when there are facts on record which lead to the satisfaction of the AO that the accounts maintained by the assessee are not correct. 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AIR/ITS details was not included in the total income of the assessee. From the above observations, the Assessing Officer was of the opinion that the assessee's closing stock had not been properly valued. While working the valuation of closing stock, only basic value of the goods had been taken 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 report and only valuation in money terms had been furnished. No stock register was also produced. He was not in possession of any documentary evidence towards many of the expenses claimed to have been incurred The Assessing Officer was of the opinion that in view of the many defects as pointed out in the books of accounts, non furnishing of details, non production of stock register, non produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the business. From the assessment order, it appears that the assessee did not furnish the details of expenditure incurred in respect of the foreign tour on account of trade fair. This can, however, lead to the disallowance of the expenditure per se. However, this cannot be a ground for rejecting the books of accounts of the business. One of the grounds considered for rejecting the books of accounts is that in the closing stock of Kanpur branch, 15,502 pairs of closing stock of the value of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven no basis for such estimation. He has simply stated that such estimation of addition would be good enough to take care of the defects pointed 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 allowed as a deduction in computing the business income of the assessee in view of the provisions of sec.40(a)(ia) of the LT. Act, 1961. The said expenditure is, therefore, to be disallowed by the A.O. As regards the interest income of ₹ 6,000/-, the assessee has submitted that the said interest income is in respect of interest earned on the security deposit maintained by the appellant with Reliance Energy. The said interest has been adjusted by Reliance Energy in its bill for the month of Month 2008. The copy of the bill is enclosed at pg- 145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all in the gross profit ratio as compared to earlier year. 8. The learned 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. We find that the finding of the learned CIT-A are convincing and do not require any interference on our part. Furthermore even after rejecting the books of account the assessing officer has not found it suitable to make any addition of gross profit ratio. He has made an addition of lump sum amount of ₹ 50 lakh. Learned CIT-A is quite correct that when the gross profit ratio compares favourably with the past data no addition for gross profit is warranted, much less an ad hoc addition of ₹ 50 lakh. This addition has been solely based 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 expe ..... 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