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TMI Blog2022 (2) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... ect and tangible evidences made available on record that it was a case of consignment sale made by the appellant on behalf of the consigner-appellant (an independent party) and for any other valid reasons. Hence, the addition so made being completely contrary to the provisions of the law and the facts and evidences available on record, the addition so made kindly be deleted in full or alternatively, kindly be reduced only to the extent of the reasonable amount of commission/profit thereon. 3. Rs. 2,63,660/-: The ld. CIT(A) erred in law as well as in the facts of the case in confirming the disallowance of the interest made by the AO of Rs. 2,63,660/- in relation to the unsecured loan of Rs. 8,01,109/-. The unsecured loan was a borrowed capital fully utilized for the purpose of the business and was fully allowable u/s 36(1)(iii) and/or u/s 37(1) of the Act. The disallowance so made and confirmed being contrary to the provisions of law and facts, therefore, kindly be allowed in full. 4. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B and 234C of the Act. The appellant totally denies its liability of charging. The interest so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,421/- and the sales as per the VAT return of Rs. 23,26,52,378/-). In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the revenue authorities. It was further submitted that the ld. CIT(A) has grossly erred in law as well as in facts of the case in confirming the impugned addition made by the AO being the difference between the declared sales and the sales as per the VAT return thereby completely ignoring the direct and tangible evidences made available on record. It was further submitted that the assessee has manifestly proved on record that the difference between the declared sales and the sales as per VAT return was "consignment sale" made by the assessee on behalf of the consigner (an independent party), therefore, the additions so made were completely contrary to the provisions of law and the facts and evidences available on record. It was submitted that there was a difference of Rs. 66,35,957/- which was overlooked by the A.O. while framing the original assessment order. It was further submitted that this difference in the total turnover was actually a consignment sale which the assessee carried out on the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it attributable on the total unrecorded sales consideration can only be subject to income tax and in this regard, the ld. AR has relied upon the decision in the case of K Venkatesh vs Income Tax Officer (2016) 47 CCH 0447 Banglore Tribunal and CIT v President Industries (2000) 158 CTR 372 (Guj). Lastly it was submitted that the assessee had declared Net profit Rate of 0.30% on total sales. After detailed examinations, the A.O. had accepted the GP and NP Rate declared by the assessee. Therefore, at best the NP Rate may be applied on the `Consignment Sales' of Rs. 66,35,957.00 and resulting income may be added to the assessed income. 7. On the contrary, the ld. DR has refuted the arguments of the ld. AR and submitted that in this case, the original assessment u/s 143(3) of the Act was completed at income of Rs. 3,25,980/-. However, it was observed by the RAP that the turnover declared by assessee in the return submitted before the sales Tax Authorities and in Income Tax return varied and the assessee failed to disclosed turnover of Rs. 66,35,957/-, therefore, the order u/s 263 was passed by the Commissioner of Income Tax giving specific direction to the A.O. to verify the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not signed by the Sales Tax Department and in this regard, the ld AR has submitted that the Sales Tax Department never gives back the signed Audit Report as receipt of submission of the Vat Audit Report, thus in that eventuality, the A.O. being the investigator, should have written the Sales Tax Department to find out the veracity of the claim of the assessee as this was the most important aspect of the process which the A.O. has completely ignored. 9. We have considered the rival contentions and carefully perused the material placed on record. From the records, we have meticulously gone through the submissions made by both the parties and as per the records placed before us, it is true that the assessee could not prove the difference of Rs. 66,35,957/- on account of consignment sale because of the reasons mentioned in the above paras of our order. However, we are of the view that whether the purported sale is "consignment sale" or "ordinary sale" is immaterial at this stage as even if we treat the said sales undertaken by the assessee as ordinary sale instead of consignment sale then also the entire sales cannot be treated as an income of the assessee. In this regard, we draw s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We observed from perusal of the impugned order that the ld. CIT(A) confirmed the addition made by the AO on two counts i.e. the assessee not utilized the entire interest bearing borrowed funds for the purpose of making investment in M/s Kanodia Enterprises and the interest of Rs. 2,63,659/- appears to be very high. In this regard, we observed that the entire interest bearing funds were not utilized for the purpose making investment in M/s Kanodia Enterprises and the assessee is admittedly, maintaining two sets of accounts i.e. personal set of books and business set of books. The assessee is having closing balance of unsecured loans of Rs. 8,01,109/-, which is at page No. 1 of paper book and investment in Kanoria Enterprises stood at Rs. 20,43,238/-. We also observed that the statement of affair as on 31.03.2009 was filed before the authorities below, thus, it is evidently clear that entire capital of Rs. 20.43 lakhs in Kanodia Enterprises was sourced from the unsecured loan of Rs. 8.01 lakhs which is much lower than the total capital invested in the said proprietary. Further investment in the fixed assets, cash in hand, etc and some amount of shares, etc. with the help of the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th as it is the matter of very common knowledge that Bonds, Mutual Funds and PPF carry very lower rate of interest and unsecured loans carry very high rate of interest hence, no prudent businessman will invest his higher interest rate borrowed funds in the lower fixed income investments hence these investment must have been made out of the capital balance of the assessee and investment in M/s Kanoria Enterprises must have been made out of the unsecured loans and interest incurred on these loans deserves a complete allowance. As regards the suspected excessive interest, we are of the view that this is the misconception of the ld.CIT(A) as he is comparing the closing balances of unsecured loans with total amount of interest paid. Out of the total amount of Rs. 2,63,659/-, Rs. 15,790/- were paid as brokerage for arranging the loans. Rs. 53,049/- were paid to the HDFC Bank Ltd and remaining interest of Rs. 1,94,820/- were paid to various parties who were not related to the assessee and all the payment have been made through banking channels only. Therefore, considering the totality of facts and circumstances of the case, we found merit in the contention of the ld. AR and therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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