TMI Blog2018 (11) TMI 1647X X X X Extracts X X X X X X X X Extracts X X X X ..... ified investment on purchases price at ₹ 29,95,775/- considered the same for addition as unexplained expenditure as against the amount of ₹ 20,30,568/- computed by the AO. CIT(A) further observed that in view of decision of ITAT in the case of Vijay Proteins Ltd., for AY 1991-92 where the peak amount of purchase at ₹ 10,08,844/- on 10.05.1997 is less than the confirmed addition, hence, the total addition was confirmed at ₹ 29,95,775/- and balance addition out of ₹ 1,33,16,116/- was deleted. We find that these findings of the CIT(A) are correct as the CIT(A) has considered its findings by following the decision of Tribunal in the case of Vijay Proteins Ltd., (Supra) and allowed the set off of peak amount worked out by the AO at ₹ 10,08,444/-. No infirmity in the order of CIT(A) in confirming the addition at ₹ 29,95,75/- as against the addition made by the AO at ₹ 1,33,16,112/-, therefore, the appeal of the Revenue in respect of Ground No.1 is dismissed. Addition on account under valuation of closing stock - HELD THAT:- As gone through the orders and the findings of the CIT(A) and do not find any reason the interfere with the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Hon ble Gujarat High Court the disallowance upheld by the CIT(A) are required to be deleted, accordingly same is deleted. This Ground of appeal of the assessee is therefore allowed. - I.T.A. No.487/RJT/2005, C.O.No.454/RJT/2005 Assessment Year : 1998-99 - - - Dated:- 26-11-2018 - Shri C.M.Garg, Judicial Member And Shri O.P.Meena, Accountant Member Assessee by: Shri Vimal Desai A.R. Revenue by: Shri Jitendra Kumar CIT (DR) ORDER O. P. Meena, 1. These cross appeal filed by the Revenue and Assessee are directed against order of learned Commissioner of Income Tax(Appeals)-II, Rajkot(in short the CIT (A) ) dated 16.02.2015 pertaining to Assessment Year 1998-99 which in turn has arisen from order passed by the Deputy Commissioner Income Tax, Circle-2(1), Rajkot(in short the AO ) dated 13.03.2001 under section 143(3) of Income Tax Act,1961 (in short the Act ). 2. Ground raised by Revenue read as follows: 1. The learned CIT(A), Rajkot erred in law and on facts in directing to delete the addition of ₹ 1,33,16,112/- made on account of unexplained investments. 2. The ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced which have reproduced in para 2.12 at page 2 to 12 of the appellate order. After examining the facts of the case, the ld.CIT(A) observed in para 2.2 that the AO has discussed the reason for rejection of books of accounts in details. The reason for the AO s finding that the purchases were not indeed made from M/s.Santoshi Bhandar are also given in details. The appellant has broadly reiterated the same argument which here taken before the AO the details of enquiries conducted by the AO and other Authorities are well described in the assessment order. The preponderance of the evidences available in appellants case lead to only one conclusion that the purchases from M/s.Santoshi Bhandar were not made indeed. 6. In view of these findings of the AO, the action for rejection of books of accounts was confirmed. Similarly, the method adopted by the AO for quantification of disallowance for inflation of purchase price and the additions for unaccounted investment for purchase was not found to be scientific. The AO has estimated the inflation purchase price by taking the average cost of purchase from other parties and has worked out the unaccounted investment for purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is without going into the actual benefit derived by the assessee from such unaccounted purchase of oil cake and without bringing on record any material justifying disallowance of 25% of eh purchase price. It is, therefore, contended on behalf of the assessee that it would be unfair and unreasonable applying the findings given by the Tribunal for A.Y.1991-92. We in principle agree with the pleadings of the ld. counsel for the assessee in this behalf. In our considered opinion following factors need consideration for ascertaining the actual costs of the oil cake used against the fake bills:- (1) As noted above, the assessee company itself was running oil mill. The oil cake thus brought in against the fake bills, could either be of its own generation in oil mill or purchased locally from other parties without billing. The cost of oil cake from its own oil mill or prevalent market rate as reported in the papers could indicate the cost price of such oil cake. Further the quality of oil cake will also vary depending upon the quality of oil seeds used. This factor has to be taken into consideration while ascertaining the costs of the oil cake used; (2) It coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds is not possible since the various purchases of the appellant are of different commodities some solids, some liquids. In view of this facts, the prorata quantification of transportation expenses is to be done in the ratio of total purchases during the year and the purchases claimed from M/s.Santoshi Bhandar. Octroi is chargable @0.25 of bill amount. The rates are seen in some other bill produced by the appellant. The packing materials used for packing of groundnut oil cake are of the capacity of 75 per kg. The total number of bags comes to 141747. The quantitative details of closing stock filled with the return of income shows rate of old bags at Rs..5 per bag. The saving on account of bags is estimated at Rs..5 per bag. On basis of these parameters, the benefits under various heads are quantified as under: 9. Therefore, in the light of guidance given by ITAT on the method of working out of quantum of inflation of purchase price in case of bogus supplier the benefit derived by the appellant was worked out as under : The total purchases during the year is ₹ 27,42,62,952/-. The total purchases from M/s.Santoshi Bhandar is claimed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted investment in purchases, therefore, it was held that unaccounted investment for purchases was covered by the confirmed addition of ₹ 29,95,775/- sustained out of bogus purchases and no addition was required to be made separately for unaccounted investment in purchase, accordingly the addition of ₹ 1,33,16,112/- made on account of unaccounted investment for purchase was deleted, accordingly this ground appeal is deleted. 11. Being aggrieved, the Revenue has filed this appeal before us challenging the deletion of addition of unaccounted purchases amounting to ₹ 1,33,16,112/- and cross objection by the assessee challenging the addition sustained by the CIT(A) at ₹ 29,95,775/-. 12. The ld.CIT-DR referred the page 21 to 25 of the assessment order wherein the defects in the books of accounts pointed out by the AO and bogus purchases shown in the name of M/s.Santoshi Bhandar, Berhamur, Orissa has been discussed. It was noted by the AO that the Sales Tax Department of Orissa has submitted an information u/s.133(6) of the Act which clearly mentioned that M/s.Santoshi Bhandar s not entitled to deal with Ground Nut Oil Cake for resale i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is on the basis of later received from CTO-Sales Tax Office, Berhamur. It is to be noted that CTO has mentioned that party genuine and its sales tax assessment is pending. It was submitted that the Sales Tax Department has also made the detailed verification and accepted the genuineness of the purchases during the course of assessment proceedings the statement of Shri P.B.Damani, Director was also recorded wherein he has confirmed that Ground Nut Oil Cake has been purchased and payments have been made by cheques, hence, the transactions are genuine. The CIT(A) has worked out the investment of purchase price in terms of benefit derived by the appellant of ₹ 29,95,775/- and also allowed the peak amount of purchase at ₹ 1,10,08,844/- on the basis of examination of impounded purchase register as describing against the investment cost of purchases worked out at ₹ 29,95,775/-. 14. We have heard the rival submissions and perused the material available on record and considered the relevant facts. The perusal of the assessment order reveals that the AO found that the books of accounts maintained by the assessee were defective as the AO found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. The AO further quantified investment in of purchases at ₹ 20,30,568/- as unexplained expenditure u/s.69C of the Act in respect of the aforesaid purchases by considering the rate of 191 per metric ton in respect of 10631.250 metric ton purchases. However, the CIT(A) found that the method adopted by the AO for quantification of disallowance for inflation of purchase price and addition for unaccounted investment for purchases is not scientific. Therefore, the CIT(A) considering the findings of ITAT in the case of Vijay Proteins(supra) observed that if 20% of total purchases of ₹ 1,33,16,112/- is considered then the appellant s addition would be at ₹ 20,30,568/- including peak amount, therefore, the CIT(A) has quantified the investment in purchase by taking purchase additions @ 20% of ₹ 6,65,80,561/- which worked out at ₹ 1,33,16,112/- and transportation expenses @ 24.27% in the ratio of total purchases with respect to total expenses which worked out to ₹ 7,88,978/-. Similarly octroi @ 2.05 of purchase of ₹ 6,65,80,561/- was calculated at ₹ 1,66,451/- and packing material considered for 5 per pack at ₹ 7,08,735/-. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the AO has not considered the credit received for supply of goods of inferior quality and weight difference. On examination of these facts, the CIT(A) noted that the value of Gunny Bags at ₹ 2242/- to be reduced for per metric ton and also noted that the amount of rape sheet difference of ₹ 32,912/- rape sheet Kharjat ₹ 66,068/- and rape sheet weight difference of ₹ 1,01,03,376/- and valued Gunny Bags of₹ 2242/- were not considered by the AO, accordingly the addition of₹ 11,26,513/- in the closing stock was deleted. The CIT(A) further found that the assessee has valued goods on basis of cost which is correct. Accordingly, addition of ₹ 9,85,032/- on account of value of closing stock of GEMDOC was held to be invalid and hence same was deleted. Similarly, the CIT(A) has also deleted the addition of ₹ 54,992/- under valuation of stock in respect of Empty Tins at ₹ 54,992/- and ground nut cake OGS was reduced from ₹ 5,58,696/- to ₹ 4,61,663/- whereas the addition on under valuation stock in ground nut cake was enhanced from ₹ 41,382/- to ₹ 45,520/- and the stock of Haxin of ₹ 29,413/- was confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g stock of ground nut cake at ₹ 41,382/- whereas the CIT(A) has noted that this should be at ₹ 45,520/-, accordingly the valuation in respect of this item was enhanced to ₹ 45,520/-. Similarly, addition on ground nut OGS was analysed by the CIT(A) and the stock of same was determined at ₹ 4,31,663/- and the addition of under valuation in respect of these items of the difference was deleted. Similarly, the addition of ₹ 29,413/- on account of under valuation in closing stock of Haxin was confirmed. Thus, we find that the CIT(A) has analysed the submissions of the assessee as well as findings of the AO and after arrived at a fair reasonable valuation of closing stock, hence the findings of the CIT(A) in reducing the closing stock to ₹ 5,61,588/- from ₹ 27,66,485/- is therefore upheld. Consequently, Ground No.2 of the Revenue appeal is therefore dismissed and resultantly the Ground No.4 of the Cross Objection is also to be dismissed. 21. Ground No.3 relates to deleting the addition of ₹ 8,437/- made on account of Motor Car Expenses and Depreciation. 22. The ld.CIT-DR has relied on the AO whereas the ld.Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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