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TMI Blog2019 (9) TMI 1336X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on facts and in law in adopting the amount of unrecorded sales at Rs. 1,42,40,278/- (Rs. 1,27,14,534/- net of excise) on the basis of the papers found in search conducted by the Central Excise Department as against the unaccounted sales of Rs. 92,89,856/- (Rs. 82,94,514/- net of excise) worked out by the assessee on the basis of these papers. 1.1. The Ld. CIT(A) has further erred on facts and in law in applying the g.p rate of 3.61% on the alleged unrecorded sales of Rs. 1,42,40,278/- instead of applying g.p rate of 3.43% declared by the assessee on the unaccounted sales of Rs. 92,89,856/- (Rs. 82,94,514/- net of excise), thereby confirming the addition to the extent of Rs. 5,14,074/-. 2. The ld. CIT(A) has erred on facts and in law in estimating the investment in the unaccounted purchases at Rs. 11,86,494/-, thereby making the addition for the same. 3. The ld. CIT(A) has erred on facts and in law in confirming the entire disallowance of Rs. 9,400/- u/s 40(a)(ia) on account of non deduction of tax at source on interest paid to Sh. Ramesh Chand Bansal by not accepting the contention of assessee that in view of the amendment made in this section w.e.f 01.04.2015 which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon. The highest gross profit rate in the last 7 years is 3.61% in AY 2007-08. Therefore, it would be reasonable to restrict the addition to Rs. 5,14,074/- i.e., 3.61% of the estimated sales of Rs. 1,42,40,278/-. Further, as only income earned on the unaccounted sales can be added, addition for unaccounted purchases is inevitable as without unaccounted purchases, unaccounted sales in logically not possible. Accordingly, at Para 5.5, considering the average unaccounted sales at Rs. 1,48,31,178/- and cycle of 6 times in a year, 1/6th of unaccounted sales i.e., Rs. 24,71,863/- is added on account of unexplained investment in purchases which was bifurcated into Rs. 11,86,494/- for AY 2010-11 and Rs. 12,85,369/- for AY 2011-12. In view of the above additions, there is no rational is left for the lump sum addition made. Further, the AO has not found any other instance of sales or out of book purchases other than that found by the Excise Department and that estimated by Sales Tax Department. These discrepancies have already been considered. Therefore, the lump sum addition of Rs. 5 lakhs is deleted. Against the said findings, the assessee is now in appeal by way of cross-objection. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment on the basis of intelligence gathered by them and non-conduct of stock taking does not make any direct sustainable impact on the facts of the case and accordingly he rejected the same. 7. I note that the entire case of the Revenue is based upon recovery of the so called incriminating evidence from the residential premises of one of the Directors. They have not adduced any evidence to connect these documents with the activities of the manufacturing unit. No further investigations stand made by them from the persons concerned with the production of the goods in the assessee's factory and their clearances. Further, there is no identification of the transporters or the recipient of the goods, thus establishing that the appellant had actually cleared the goods in a clandestine manner. Though, Revenue is not expected to prove its case of clandestine activities to the hilt but the evidences produced by the Revenue should be, at least, to an extent so 5 as to inspire confidence in the prosecution's case. In the present case, I note that no further investigations except the recovery of certain incriminating documents from the residential premises of the assessee's director read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld CIT(A). 11. During the course of hearing, the AR submitted that an amendment has been made by the Finance Act, 2014 w.e.f. 01.04.2015 in Section 40(a)(ia) whereby it is provided that 30% of any sum payable to a resident shall be disallowed if tax is not deducted at source under Ch. XVIIB as against the 100% disallowance presently made. The purpose of this amendment was explained in the memorandum as under:- "the disallowance of whole of the amount of expenditure results into undue hardship and therefore In order to reduce the hardship, it is proposed that in case of non-deduction or nonpayment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed." 12. The Finance Minister while introducing the amendment in Para 207 of the Budget Speech has stated as under:- "207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of Rs. 7,51,322/-. In our view it will be tied of justice if the disallowance is only restricted to 30% of Rs. 7,51,322/-." 16. We have heard the rival contentions and pursued the material available on record. In the instant case, there is no dispute that the assessee is liable to deduct TDS on interest payment to Shri Ramesh Chand and non-deduction of the TDS will entail disallowance u/s 40(a)(ia) of the Act. However, in view of the consistent position taken by the Coordinate Benches of the Tribunal wherein the amendment in section 40(a)(ia) has been held retrospective in nature, the disallowance is restricted to 30% of the total amount. In the result, the crossobjection is partly allowed. 17. Now, coming to ground no. 4 in assessee's cross-objection. Briefly, the facts of the case are that the AO observed that the assessee has debited Rs. 1,67,455/- towards telephone expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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