TMI Blog2022 (7) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee for the year under consideration. Based on this comparative analysis, the claim of the assessee for freight/transportation charges for the year under consideration thus was higher by 10% of the turnover; and, in our opinion, it would be fair and reasonable to disallow the claim of the assessee for freight/transportation expenses being about 10% of the total turnover of the assessee for the year under consideration. We accordingly modify the impugned order of the learned CIT(A) and restrict the disallowance made by him on account of freight/transportation charges - Decided against revenue. Bogus liabilities in respect of certain creditors - HELD THAT:- The entire liability appearing in the name of the concerned four creditors was fully settled by the assessee in the subsequent year by making payments through proper banking channel and keeping in view this undisputed position, it was held by the learned CIT(A) that the genuineness of the said creditors could not be doubted merely because notices issued by the Assessing Officer to them under Section 133(6) of the Act could not be served. It is thus clear that this issue was decided by the learned CIT(A) in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment in the subsequent year, no addition on account of the same could be made in the preceding year on account of unexplained cash credit. CIT(A) deleted the addition made by the Assessing Officer under Section 68 of the Act; and, keeping in view all the facts of the case, we find no infirmity in the impugned order of the learned CIT(A) on this issue warranting any interference. The same is accordingly upheld and the Ground No.6 of the Revenue s appeal is dismissed. Disallowance under Section 40(a)(ia) - Additional evidence was filed by the assessee to show that TDS was duly made from the payment of dumper hire charges and the same was also paid before the due date of filing of return - CIT-A deleted the addition - HELD THAT:- It is observed that the tax at source from the payment of dumper hire charges in question was found to have been deducted and paid by the assessee before the due date of filing of return of income for the year under consideration and on the basis of this finding, CIT(A) deleted the disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act by following the decision of Virgin Creations ( 2011 (11) TMI 348 - CALCUTTA HIGH COURT] wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.13,45,000/- 3. Haryana Kotputlli Roadlines Rs.16,05,796/- 4. Baba Naryandas Transportation Co. Rs.11,45,200/- 5. Agra Ahmedabad Roadlines Rs.14,25,451/- 6. Baba Haridas Transport Co. Rs.17,58,221/- 7. Haryana Public Roadways Rs.15,65,880/- 8. Chaudhary Freight Carrier Rs.12,57,000/- Total Rs.1,22,57,102/- 3.1 Since there was no proof submitted by the assessee regarding any tax deducted at source from the above transport charges and the liability for the said charges was outstanding unusually for a long time, the assessee was called upon by the Assessing Officer to support and substantiate the same by filing confirmation letters of the concerned parties. Although the assessee filed such confirmations, the Assessing Officer on verification done through the Inspector found that some pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant paid them in cash in subsequent year where each individual cash payment was below Rs. 20,000/-. This set of facts is highly improbable on the test of human probabilities and surrounding circumstances. More so, when the payees have also not confirmed this. Under the circumstances, I am of the view that the appellant has failed to discharge the onus in respect of impugned liabilities and corresponding expenses and therefore the A.O. was justified in not accepting the same. 3.3 The learned CIT(A), however, did not accept the methodology adopted by the Assessing Officer while making addition of entire amount to the total income of the assessee on this issue and restricted the addition of Rs. 1,22,57,102/- made by the Assessing Officer to Rs.54,53,224/- for the following reasons given in paragraph No.7.3.2 of his impugned order:- 7.3.2 As regards the quantum of addition, I am not in agreement with methodology adopted by the A.O. The A.O. has simply added the outstanding liabilities standing in the name of impugned 8 transporters without keeping in mind that the said liabilities were on account of freight expenses. This methodology is incorrect as trading liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intained. The facts and findings of the present case clearly suggest that this is a fit case for rejection of books and estimation of income. I, therefore, hold that the books of accounts of the appellant are reliable and it is not possible to determine correct income therefrom. I therefore proceed to determine the income of the appellant. The appellant has reported N.P. Ratio of 1.61% which cannot be accepted in the given situation of large unverifiable freight expenses. I am of the view that N.P. Ratio of 4% would be justified in the appellant's case looking the nature and scale of business. The appellant has declared gross receipts of Rs.22,82,64,234/-. The net profit @ 4% thereon comes to Rs.91,30,559/-. As against this, the appellant has shown net profit of Rs.36,77,345/-. Resultantly, addition of Rs. 54,53,224/- is required to be made on the basis of rejection of books. The A.O. is directed to replace the addition of Rs.1,22,57,102/- by Rs. 54,53,224/-. This ground of appeal is partly allowed. 3.4 Still aggrieved by the order of the learned CIT(A) the assessee has preferred this appeal before the Tribunal. 4. We have heard the arguments of both the sides and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71,85,094 1.68 21,51,47,519 50.25 4.1 Although the learned Counsel for the assessee has submitted that the net profit rate of 1.68% declared by the assessee for the year under consideration was well comparable with the net profit rate of 1.54%, 1.60% and 1.68% declared for AYs 2008-09, 2010-11 and 2011-12 respectively, we find that the GP rate of 11.80% declared by the assessee for the year under consideration was lower than the GP rate declared by the assessee for AY 2008-09, 2010-11 and 2011-12. No doubt, the turnover of the assessee in AY 2008-09 being substantially lower than that of the year under consideration, we are of the view that it would not be fair and proper to take the figures for AY 2008-09 for comparison. Moreover, the issue before us is relating to the claim of the assessee on account of freight/transportation charges and it would, therefore, be fair and proper to consider and compare the freight expenses claimed by the assessee for the immediately succeeding two years i.e. AYs 2010-11 and 2011-12, wherein the turnover of the assessee was comparable to that of the year under consideration. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said parties as well as proof of payment made to them, the assessee failed to comply with the same. The Assessing Officer, therefore, treated the liabilities shown to be payable by the assessee to the concerned four creditors aggregating to Rs.37,85,407/- as bogus and addition to that extent was made by him to the total income of the assessee. 6.2 The addition of Rs.37,85,407/- made by the Assessing Officer on account of the alleged bogus creditors was challenged by the assessee in an appeal filed before the learned CIT(A) and after considering the submissions made by the assessee as well as the material available on record, the learned CIT(A) deleted the said addition for the following reasons given in paragraph No.7.4.1 of his impugned order:- 7.4.1 I have duly considered the above. The main ground for addition by the A.O. is return of notices u/s. 133(6). In the Mumbai ITAT decision in case of national Tiles Industries Pvt. Ltd. (ITA No. 1074 of 2010) relied upon by the appellant, view has been taken that merely because notices u/s. 133(6) have returned unserved, the creditors cannot be treated as non existing. Further, the appellant has placed on record evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus clear that this issue was decided by the learned CIT(A) in favour of the assessee on merit accepting the genuineness of the concerned four creditors; and, as an alternative, it was also held by him that this addition even otherwise was covered by the trading addition made by him by estimating the income of the assessee by applying net profit rate. Keeping in view all the facts of the case, we find no justifiable reason to interfere with the order of the learned CIT(A) on this issue and upholding the same, we dismiss Ground No.4 of the Revenue s appeal. 7. In Ground No.5, the Revenue has challenged the action of the learned CIT(A) in deleting the addition of Rs.3,01,49,768/- made by the Assessing Officer on account of unexplained gift. 7.1 In the capital account of the assessee with his proprietary concern M/s. Kandla Cargo Carriers, a sum of Rs.3,00,69,570/- was credited and the same was described as gift received by the assessee from his son Shri Mohit Sharma. On verification, the Assessing Officer found that there was no corresponding debit entry appearing in the account of Shri Mohit Sharma. In this regard, it was explained by the assessee that two cheques amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not cleared as on 31-03-2009. All these cheques (cheques received as well as cheques issued) got cleared on 26-09-2009 in the subsequent year. Thus, this was a case where accounting entries were passed in current financial year based on cheques received and cheques issued whereas the actual banking transactions took place in subsequent year. The A.O. contended that in the appellant's balance sheet as on 31-03-2009, the cash and bank balance was Rs. 2,27,12,142/- and therefore cheques on hand of more than 3 crores was not possible. However, the A.O. failed to understand that simultaneously with the receipts, the appellant had issued the cheques of the same amount in favour of the company in which he was a director and passed the accounting entries. Thus, the cheques received were set off by the cheques issued and therefore they were not forming part of the cash and bank balance of the appellant as on 31-03-2009. The another contention of the A.O. that the cash and bank balance as on 31-03-2009 in the company's balance sheet also did not reflect the impugned amount was also erroneous as the entry for the said amount was passed in the Current account of the company which, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions raised by the Assessing Officer to treat the amount in question as unexplained were frivolous and unsustainable. The learned CIT(A) also found that all the corresponding cheques were duly cleared in the immediately succeeding year and since the identity and capacity of the donor as well as genuineness of the relevant transactions involving gift given by son to his father was duly found to be established, the learned CIT(A) deleted the addition made by the Assessing Officer on this issue. At the time of hearing before us, the learned DR has not been able to bring anything on record to rebut or controvert these findings recorded by the learned CIT(A) on appreciation of the details and documents furnished by the assessee and keeping in view the same as well as all the facts of the case, we do not find any justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue; the same is, therefore, upheld and Ground No.5 of the Revenue s appeal is dismissed. 8. In Ground No.6, the Revenue has challenged the deletion by the learned CIT(A) of the addition of Rs.22,56,838/- made by the Assessing Officer on account of unexplaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries (29 taxmann.com 404) that the credit of trading addition against the addition of cash credit should be granted. This submission along with additional evidences was forwarded to the A.O. for his comments. The A.O. simply objected to the admission of additional evidences and contented that the appellant failed to discharge the primary onus. In the rejoinder, the appellant once again reiterated his stand. 7.6.1 I have duly considered the above. It is seen that impugned unsecured loans have been repaid in subsequent year through banking channels and there is no adverse findings on record for such repayment. This being so, the Gujarat HC judgment in case of Chandrashekhar Ayachi (supra) squarely applies to the case of the appellant. It has been held by the jurisdictional high court in the said case that where the department had accepted repayment of loan in subsequent year, no addition for the loan can be made in the year of acceptance. The appellant deserves to succeed on this score. The A.O. failed to conduct any inquiries even in the remand proceedings though the relevant material was present before him. In the absence of any adverse findings, the unsecured loans cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer under Section 68 of the Act; and, keeping in view all the facts of the case, we find no infirmity in the impugned order of the learned CIT(A) on this issue warranting any interference. The same is accordingly upheld and the Ground No.6 of the Revenue s appeal is dismissed. 9. In Ground No.7, the Revenue has challenged the action of the learned CIT(A) in deleting the addition of Rs.9,00,000/- made by the Assessing Officer on account of disallowance under Section 40(a)(ia) of the Act. 9.1 During the year under consideration, the assessee had made payment on account of dumper hire charges amounting to Rs.9,00,000/-. Since no tax at source was found to have been deducted by the assessee from the said payment, the Assessing Officer invoked Section 40(a)(ia) of the Act and made disallowance of Rs.9,00,000/-. 9.2 The disallowance of Rs.9,00,000/- made by the Assessing Officer under Section 40(a)(ia) of the Act was challenged by the assessee in an appeal filed before the learned CIT(A). During the course of appellate proceedings before the learned CIT(A), additional evidence was filed by the assessee to show that TDS was duly made from the payment of dumper hire charges and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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