TMI Blog2018 (11) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Therefore, in absence of any such finding by AO in the assessment order on in the remand proceedings, we do not find any infirmity in the order of the CIT (Appeals) in deleting the above addition. Decline in gross profit rate - Held that:- The book results have been discarded by the learned assessing officer despite there is comparative yield and burning loss in consonance with earlier financial years. On the reading of the order of learned assessing officer, it is apparent that without rejecting the books of accounts the book results have been enhanced by the learned assessing officer. If the assessing officer wanted to reject the books of accounts of the assessee then it is mandatory that he should have pointed out latent, patent, and glaring defects in the books of accounts. In absence of it the addition to the gross profit cannot be sustained. Over and above the books of accounts are audited and there is no finding of the assessing officer that system of accounting followed by the assessee is such which does not result into deducing the correct financial result there from. In view of this we uphold the order of the learned commissioner appeals in deleting the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the addition of ₹ 1,16,047/- made by the Assessing Officer on account of valuation of closing stock without appreciating the full facts of the case, as during the course of assessment proceedings, the AO noticed that the closing stock was valued by the assessee on the basis of valuation of closing stock of Runner Riser made by the sister concern of the assessee namely M/s Doaba Rolling Mills(P) Ltd. Meerut Road. Muzaffarnagar and since the assessee failed to submit any reasonable basis for changing the valuation of closing stock. 2. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 5,00,000/- made by the Assessing Officer on account of low G.P. without appreciating the full facts of the case, as the explanations furnished by the assessee were not convincing and after considering the facts circumstances of the case, the G.P. declared by the assessee was not accepted. 3. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 50,000/- made by the Assessing Officer on account of unverifiable expenses without appreciating the full facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al filed by the learned AO the deletion of the following addition is contested:- a. addition of ₹ 116047 made by the assessing officer on account of valuation of closing stock without appreciating the fact that the valuation of closing stock of Runner Riser in the case of the assessee sister concern was valued at the rate of ₹ 1 2900 per metric ton whereas in the instant case the same was valued and the rate of ₹ 9 723.24 permit return without furnishing any reasonable cause for the same b. addition of ₹ 5 00000/ on account of low cross profit without appreciating the full facts of the case c. addition of ₹ 5 0000/ on account of unverifiable expenses without appreciating the full facts of the case d. addition of ₹ 1 0802164/ under section 68 of the income tax act as unexplained unsecured loan is assessee failed to prove genuineness of the loan and ignoring the judicial precedent. 4. On the first issue of addition on account of valuation difference, the assessing officer has made addition of ₹ 1 16047/- to the closing stock on the basis of the valuation of the closing stock of runner riser made by the sister concern of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 5 lakhs for decline in gross profit rate. During this year, the assessee has declared a gross profit of 17.82% against the gross profit of 18.11% in the immediately preceding previous year. Therefore, apparently the gross profit of the assessee has come down. The assessee was asked to furnish the details of the turnover vis a vis gross profit rate of past three years and give reasons for the downfall. Before the assessing officer, no plausible explanation was provided and therefore the AO made an addition of ₹ 5 lakhs. The addition was agitated before the Commissioner of Income tax (Appeals) it was contested that addition has been made purely on the basis of presumption where the yield and burning loss was fully verifiable and in conformity to earlier years. The sales and purchase of the finished goods and raw materials are on credit base and are fully verifiable. The learned commissioner Appeals deleted the addition holding that when the books of accounts are verified and the sale and purchase of finished goods and raw materials are also verifiable and are in conformity with the yield and the process loss the addition is not sustainable. 9. The learned department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before the learned CIT appeal, restricted the addition to the extent of ₹ 50,000. The revenue challenges the deletion of the part addition by the learned CIT appeal. 13. The learned departmental representative supported the order of the AO and the learned authorised representative supported the order of the learned CIT Appeal. 14. We have carefully considered the rival contention and perused the orders of the lower authorities. The learned commissioner appeals upheld the addition on principle basis however, he found that it is on the higher side and therefore he restricted it to ₹ 50,000 out of ₹ 1 lakh disallowed by the learned AO. Even otherwise, we are of the view that those expenses should have been disallowed for which assessee failed to produce cogent evidence. Such instances should have been noted by the learned assessing officer and disallowance to that extent should have been made. The disallowance made by the learned AO is merely based on estimation. Such ad hoc disallowance as such cannot be sustained. Therefore, we do not find any infirmity in the order of the learned commissioner appeals in deleting the addition of ₹ 50,000. The groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as the they have sold goods to assessee and paid money to them. With respect to the creditworthiness of the parties it is apparent that those parties are of purchase and from the creditors account the amount has been transferred to security deposit account. As the purchase amount has not been doubted the genuineness of the transaction of the transfer of security deposit from the creditors account also cannot be doubted. It is apparent that during the course of appellate proceedings the learned CIT appeal has obtained to remand report from the assessing officer on the various submission and details furnished by the assessee. Same were also confronted to the assessee and obtained the rejoinder to the remand report. The assessee has submitted the detail chart mentioning the name and address of all the parties along with the permanent account number and amount of credit balance with the assessee company. The confirmations were also filed. Even otherwise when the learned assessing officer has allowed the creditors to continue without disallowing the purchases made from those creditors, part of which is transferred to the security deposit account, it is unusual to state that the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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