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TMI Blog2021 (5) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... gross prof it on application of average GP rate of 10.18% for last 3 years after rejection of books of accounts u/s 145(3) of the Income-tax Act, 1961. 3. The Ld. CIT(A) has erred in deleting the disallowance of Rs. 6,56,774/- and Rs. 2,86,649/- made by the AO on account of employee's contribution towards PF and ESI respectively u/s 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961 on account of payment being made after specified date. 4. The Ld. CIT(A) has erred on facts in deleting the addition of Rs. 2,72,210/- made by the AO on account of discrepancies in seized material at page no.121 of Annexure A-2. 5. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 83,18,322/- made- by the AO on account of non-confirmation of sundry creditors u/s 68 of the Income-tax Act, 1961. 6. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 19,50,000/- estimated on account of gross profit of AC boxes sold out of books." 3. In CO No. 01/Del/2018, following grounds raised by the assessee: "1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or addition of GP was that the assessee could not explain the shortage of cash found during the course of search. The cash as per the books of accounts of the assessee company was shown at Rs. 38,14,104/- as on 13.05.2014 whereas during the course of search cash amounting to Rs. 2,000/- was found at the business premises of the assessee company. According to the AO, the assessee was duty bound to keep books of accounts and cash of the business at the business premises only. The AO stated that assessee cannot keep the cash out of the business / factory premises and in this backdrop since there was a deficit of cash found as on date of search, he rejected the books of accounts of the assessee. 7. The ld. CIT (A) deleted the addition holding that the AO was not justified in rejecting the books of accounts. 8. We have gone through the record and unable to accept with the contention of the AO that the cash has to be necessarily kept at the office premises only disregarding the explanation of the assessee that the amounts have been kept with the Manager owing to the safety of the cash at work premises. Further, we are unable to accept the reason of the Assessing Officer that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company has shown sundry creditors for an amount of Rs. 10,17,93,801/-. Out of the total sundry creditors confirmations could not be received by the AO from following three parties as mentioned by the AO at page 6 of the assessment order, which were having a credit balance of Rs. 83,18,322/-. The AO asked the assessee to furnish the same as per order sheet entry dated 2.12.2016 and 19.12.2016, but the same also could not be furnished by the assessee during the course of assessment proceedings. Therefore, the AO invoked the provisions of section 68 and made an addition of Rs. 83,18,322/- in respect of following three parties: i) M/s. R.G. Industries Rs. 12,90,236/- ii) M/s. Standard Plastics Rs. 13,63,733/- iii) M/s. Bheron Enterprises Rs. 56,64,353/- 14. Before the ld. CIT (A), the assessee submitted as under: "Ld. AO asked the assessee company to furnish confirmations of sundry creditors on 2.12.2016. In respect of following three sundry creditors assessee company could not receive confirmations as such, these could not be submitted during the course of assessment proceedings: 1. M/s. R.G. Industries - Rs. 12,90,236/- 2. M/s. Standard Plastics - Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of the assessee to prove the genuineness of the transactions. PB 182-235 are copies of the purchases bills for purchases made by the assessee from M/s. Standard plastics to prove the genuineness of the transactions and identity of the said party. These bills specify their TIN details and description of the material supplied by them to the assessee company. PB 435-436 is confirmation of account for the period 1.4.2013 to 31.3.2014 given by M/s. Standard Plastics with their PAN details, contact number to prove the genuineness of the transactions with the said party. PB 437-438 is confirmation of account for the period 1.4.2014 to 31.3.2015 given by M/s. Standard Plastics, with their PAN details to prove the genuineness of the transaction with the said party. PB 439 is confirmation of account for the period 1.4.2015 to 31.3.2016 given by M/s. Standard Plastics, with their PAN details to prove the genuineness of the transaction with the said party. PB 440-442 are copies of the acknowledgement of returns of Shri Rohit Gupta, Proprietor of M/s. Standard Plastics for AY 2013-14 to 2015-16, in order to establish their identity, and genuineness of the transactions. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order is as under: "6.1 As mentioned above, impounded documents u/s 133A(3) from the survey premises of the assesseee located at plot no. 92, secgtor-7A, SIDCUL, Haridwar, Utrakhand on 13.05.2014 were found which have been inventoried as annexure LP-1 to LP-7. Page No. 1 to 185 of impounded document LP-2 and page no. 23 to 31 & 35 to 43 of impounded document LP-5 reveal that assessee has manufactured AC boxes and sold to M/s. Anchor Electricals Ltd. It is worthwhile to point out from the page no. 24 to 31 & 35 to 43 of LP-5 that these transactions were recorded on the letter head of M/s. Azure Switchgear Pt. Ltd. It is also noticed from page no. 35 of annexure LP-5 that name of M/s. Electromech was found recorded at the top. "Azure to Electromech" was found written on the impounded documents clearly indicate that the assessee is carrying another unrecorded business. These impounded documents are related to FY 2012-13, 2013-14 & 2014-15. Based on this the assessee was confronted. 6.2 In view of the reply furnished by the assessee company, the loose sheets reflecting production of AC boxes is treated as undisclosed business of the assessee company. Therefore, the assessee was ask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Talwar the proprietor of Electromech Industries started his business activities in the premises of the assessee company from December, 2012 onward and worked from there till December, 2013. The assessee company had not derived any income from Electromech Industries. Electromech Industries used only a part of the premises of the assessee company and not utilized any kind of machinery. The assessee company also manufacture wire and cables in main part of the premises Plot No. 92, Sector 1, HE, SIDCUL, Ranipur, Haridwar in which Mr. Mohit Talwar also use a portion of the premises. Total sales of the manufacturing from this unit was arrived of Rs. 52,74,378/- (including in total turnover of Rs. 3918,92,823/- in assessment year 2014-15) and expenses there on worked out of Rs. 19,83,938/-. Manufacturing unit of the assessee company had no relation with Electromech Industries as such no expenses should be disallowed out of the expenses of the unit. 6.5 From the above, the assessee company vehemently contested that the above impounded documents reflect the job work carried out by M/s. Electromech in its premises. It has been considered but found not tenable on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 & 2014-15, the addition on gross profit will be made in every year related to the year in which relevant impounded document found, i.e. FY 2012-13, 2013-14 & 2014-15. Further, the initial investment of purchases of AC boxes was taken as two months of purchases in the AY 2013-14. Purchases of a year was worked to Rs. 78,00,000/- (no. of pieces = 500 x sale price of single piece - 52 x average days in a year = 300). Thus, the two months' purchase was worked to Rs. 13,00,000/- (purchases of a year = Rs. 78,00,000/12 x 2 months). Similarly, on the basis of profit of Rs. 13/- and purchases of Rs. 52/- per piece, sales of a year was worked to Rs. 97,50,000/- (no. of pieces = 500 x sale price of single piece = 65 x average days in a year = 300). On the basis of estimate made during preceding year, the gross profit on sales is worked to Rs. 19,50,000/- (Sale of a year = Rs. 97,50,000 x 20%). 6.9 On the basis of this estimate, this extrapolated for the years of which impounded documents have been found. This was confronted to the assessee vide note sheet noting dated 30.12.2016. I am of the view that the Gross profit of the year of Rs. 19,50,000/- should be treated as income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Electromech Industiees, belongs to them only. Assessee company categorically denied any business interest in business carried out by father of Shri Mohit Talwar under the name M/s. Electromech Industries. It was also explained that neither any investment was made by the assessee company in the said business of Mr. Talwar, nor any income of any nature was received by assessee from them. It was explained that Mr. Talwar carried out his business activities from the said portion from December, 2012 to December, 2013 only. However, Ld. AO also relied on the statement recorded during the course of survey of one Mr. Brajesh Ojha, who was one of the worker of the assessee company drawing a salary of Rs. 5,000/- per month, which has also been incorporated at page 9 to 19 in the impugned assessment order. A bare perusal of this statement shall reveal that this statement cannot be relied upon for the reasons that first of all it is a statement of some casual labour of the assessee company and secondly, none of the document found relate to assessee company, since these documents found were relating to M/s. Electromech Industries only. In most of the replies given Shri Brajesh Ojha has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not belong to the assessee does not arise. Assessee has explained in detail during the course of assessment proceedings, that only a portion of his premises was provided to M/s. Electromech Industries in a friendly manner and was used by the said party for only a year or so and the said party in fact was just storing some of its not usable material there, which was sent by the said party to the assessee's premises from their premises wherefrom the said M/s. Electromech Industries was doing actual business. These documents do not reflect any sale / purchase of any nature, and therefore, to make any addition on the basis of any such document and that too in the hands of the assessee company is contrary to law and facts. Therefore, such an observation of the Ld. AO drawn from such dumbed documents, may kindly be excluded from consideration. 2. Ld. AO stated that there is no rent income from M/s. Electromech Industries was credited in the P&L A/c of the assessee. In reply it is submitted that when the small portion of the assessee premises was given to some friend in a friendly manner by the director of the assessee company, there was no question of charging of any rent for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted assessee company allowed M/s. Electromech Industries to use a small portion of its factory premises just for some storage purpose and for not doing any business from the said premises. No electricity, water etc. or any other amenity was being used by the said party in the small portion occupied by them. Therefore, when no business was run by the said party from the said portion occupied for a small period, there does not appear to be any reason for showing the same as some business was being done by the said party from the said place of the assessee. 5. Ld. AO stated that no other expenses related to said factory premises was found debited by M/s. Electromech Industries. In reply it is submitted that when no other facility was provided by the assessee to M/s, Electromech Industries, except allowing to use a small portion, there was no question of any expense found debited by M/s. Electromech Industries. It is submitted, that even still there was some doubt in the mind of the Ld. AO he could have passed the information to the assessing officer of M/s. Elecrromech Industries, for further needful action in their hands. But to make addition just on whims and surmises, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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