TMI Blog2019 (10) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... ld.CIT(A) for re-adjudication. Disallowance of foreign travel expenses - HELD THAT:- As emerges out from the record that the expenses were incurred on travel of Smt.Sayraben Bagrecha for a trip to Hong Kong. She is not an employee. No evidence of technical, professional qualification of Smt.Sayraben was filed. Therefore, the assessee failed to establish that these expenses were incurred for the purpose of business. Considering the finding recorded by the ld.Revenue authorities, we do not find any merit in these grounds of appeal in both the years. Profit estimation - Non rejection of books of accounts - HELD THAT:- income has to be computed in accordance with the method of accountancy followed by an Assessee i.e. cash or mercantile, such method has to be followed keeping in view the Accounting Standard notified by the Central Government from time to time. Sub clause 3 provides a situation, that is, if the Assessing Officer is unable to deduce the true income. On the basis of method of accountancy followed by an Assessee than he can reject the book result and the assessee s income according to his estimation or according to his best judgment. The Assessing Officer in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in deleting the addition of ₹ 8,95,670/- made on account of disallowance of cash payment to contractors. 2. The ld.CIT(A)has erred in law and on facts in deleting the addition of ₹ 67,08,014/- made on account of shortage of stock of yarn. 3. A perusal of the above quantum which have been deleted by the ld.CIT(A) in both the years would reveal that tax effect by virtue of order of the ld.CIT(A) in these appeal is less than ₹ 50 lakhs in each year. Though, these appeals were heard on 30.7.2019, but before the pronouncement of the order, the CBDT has issued instruction bearing no.17 of 2019 dated 8.8.2019,vide which it has prohibited subordinate authorities from challenging order of the CIT(A) where tax effect by virtue of relief given by the CIT(A) is less than ₹ 50 lakhs. 4. After perusal of the above CBDT Instruction, we are of the view that the present appeal of the Revenue falls within the purview of the CBDT Instruction cited (supra). It is not in dispute that tax effect on the disputed addition is not more than ₹ 50 lakhs, and therefore, keeping in view the above CBDT circular and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or labour payments have been disallowed. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 9. The ld.counsel for the assessee fairly conceded that the detailed analysis with regard to this issue has been made by the AO right from Asstt.Year 2004-05. It is travelled upto the Tribunal in the Asstt.Year 2007-08 and 2008-09 vide IT(SS)A.No.98 99/Ahd/2013. The Tribunal has upheld the disallowance. He placed on record copy of the Tribunal s order dated 16.2.2018. The ld.DR also relied upon the order of the Tribunals in the earlier years. 10. On due consideration of the above facts and circumstances, and in the light of the Tribunal s order and the stand taken by the assessee, we do not find any error in the finding of the ld.CIT(A) on this issue in both the years. Hence, this ground of appeal is rejected in both the assessment years. In other words, ground no.1 of ITA No.572/Ahd/2013 and ground no.1 of CO No.148/Ahd/2013 are rejected. 11. Ground no.3 in IT(SS)A.No.572/Ahd/2013 is connected with ground no.2 in CO No.148/Ahd/2013. 12. The grievance of the assessee in both these grounds is that the ld.CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtage Bodyline Impex Pvt. Ltd 34252.66 1342.53 1 3.92 Dixcy Textile Pvt. Ltd.(Tirupur) 159226.57 8078.00 I 5.07 Ram International 43239.00 4153.00 i 9.60 V S International Pvt.Ltd.(Gurgaon) 72620.72 1879.00 2.59 i 3.8 In view of what is stated herein above, the learned Assessing Officer has failed to appreciate that loose paper found during the course of search reflects actual shortages of the goods for 70,787.94 kgs and not sales outside the Books of Account. She ought to have appreciated that - (i) In the process of converting grey cloth into finished fabric, shortages are bound to happen and shortages shown by appellant is within the agreed ratio of shortages with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esumption that such shortages are sold outside Books of Account which cannot be accepted. It is treaty of the law that no addition can be made on presumption without bringing any corroborative evidence more particularly when documents found during the course of search, entries recorded in Tally Software before the date of search along with the statement of Director and sales orders of third party clearly suggests that appellant has rightly claimed 70,787.94 kgs as shortages. (vi) It is an undisputed fact that Annexure - A/61 seized from the premises of appellant refers to inward, outward of goods pertaining to job work activity carried out by Assessee. Even Assessing Officer has accepted that the transactions noted in loose paper referred to job work activity carried out by Assessee. In view of such facts whenever Assessee has received goods from third party as job work, third party has direct control on goods sent to Assessee for job work activity and its subsequent receipt and whenever any material is received less in comparison with agreed terms and conditions of receipt of finished goods, they would definitely claim loss from Assessee. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be branded as a speaking order. At this stage, we would like to make reference to the judgment of Full Bench of the Hon ble Punjab Haryana High Court in the case of Roadmaster Industries of India P.Ltd. Vs. ACIT, 303 ITR 138 (P H) wherein Hon ble Court has considered large number of judgments at the end of Hon ble Supreme Court as well as at the end of Hon ble High Courts in order to propound why reasons are necessary in support of conclusions of any adjudicating authority. In order to appraise ourselves as well as to the ld.First Appellate Authority about the importance of assigning reasons, we deem it appropriate to take note of the following finding from this judgment: 4. On a perusal of impugned order, even the counsel for the revenue could not dispute that the order passed by the CIT cannot be termed to be a speaking order which could stand in judicial scrutiny. As to whether in exercise of quasi-judicial powers, the authorities are required to pass orders by giving reasons in support thereof is well-settled by a series of judgments by the Hon'ble Supreme Court of India. 5. In Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y action by the executive authority invested with the judicial power. (p. 866) 8. In Mahabir Prasad Santosh Kumar v. State of UP AIR 1970 SC 1302, Hon'ble the Supreme Court while quashing the cancellation of the petitioner's licence by the District Magistrate, observed : . . . Recording of reasons in support of a decision on a disputed claim by a quasi-judicial authority ensures that the decision is reached according to law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency. A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim. If the order is subject to appeal, the necessity to record reasons is greater, for without recorded reasons the appellate authority has no material on which it may determine whether the facts were properly ascertained, the relevant law was correctly applied and the decision was just. (p. 1304) 9. In Woolcombers of India Ltd. v. Woolcombers Workers' Union AIR 1973 SC 2758, Hon'ble the Supreme Court quashed the award passed by the Industrial Tribunal on the ground that it was not suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary Courts of law and Tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the stand point of policy and expediency. 35. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decisions are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of such an order is based on the power of judicial review which is possessed by the High Court under article 226 and the Supreme Court under article 32 of the Constitution. These Courts have the power under the said provisions to quash by certiorari a quasi-judicial order made by an Administrative Officer and this power of review can be effectively exercised only if the order is a speaking order. In the absence of any reasons in support of the order, the said Courts cannot examine the correctness of the order under review. The High Court and the Supreme Court would be powerless to interfere so as to keep the administrative officer within the limits of the law. The result would be that the power of judicial review would be stultified and no redress being available to the citizen, there would be insidious encouragement to arbitrariness and caprice. If this requirement is insisted upon, then, they will be subject to judicial scrutiny and correction. (p. 1) 13. Keeping in view the above settled principles of law and applying the same in the facts and circumstances of the present case, we are of the view that the order passed by the CIT does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5%. According to the AO, there is no reason for showing net loss after search, and therefore, he estimated net profit at 4% on the sales and made addition f ₹ 1,83,94,205/-. Dissatisfied with action of the AO, the assessee carried the matter in appeal. The ld.CIT(A) has confirmed the addition by recording the following finding: 7.3 Arguments of the appellant have been carefully considered. It is found that during the year, appellant has filed return declaring total loss of ₹ 5,18,136/-. The total turnover during the year is of ₹ 45,98,55,131/-. The reasons given by appellant such as increase in cost of power and gas, increase hi consumption of colour chemicals and higher interest cost can affect NP to some extent, but it is not acceptable that these factors alone will result in NP of -1.34%. Moreover, various defects have been pointed out by AO in the books of accounts maintained by appellant. Even during the course of search, discrepancy in the stock and cash was found/Shortage in finished goods, fabric and yarn claimed by appellant was not found to be fully verifiable. Keeping in view all these facts, I hold that rejection of books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts than on the basis of the book result, income cannot be determined and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for estimating such income. 26. In the light of the above, we have perused the impugned order, and find that the ld.CIT(A) has not dealt any of the submissions made by the assessee. Simple reason assigned by the AO is that net profit was higher during the accounting period before the search; whereas after the search it has come down. Both the authorities have not taken into consideration whether any justifiable reasons are there for such lowering down of the profit. Since, order of the ld.CIT(A) is totally silent on this aspect, and she has not discussed the submissions of the assessee, therefore, we deem it appropriate to set aside this issue to the file of the ld.CIT(A) for re-adjudication. 27. In the result, both the appeals of the Revenue are dismissed. Appeals of the assessee for the Asstt.Year 2009-10 and cross objection are partly allowed. Pronounced in the Open Court on 21st October, 2019. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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