9911796707
TMI Blog2025 (4) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny assessment and various notices were issued. In response, the assessee filed partial information before the AO who made the following additions: i. estimation of gross profit at 5% on purchases and disallowance of 25% expenses Rs. 74,85,796/-, ii. unexplained credit u/s. 68 of the Act of Rs. 18,77,688/-, iii. sundry creditors and unexplained Rs.8,83,31,369/- & iv. capital work-in-progress Rs.15,87,000/- Thus, the AO determined the total income at Rs. 9,99,73,873/- and demanded tax thereon. 3. Aggrieved against the assessment order, the assessee filed an appeal before the CIT(A) who has partly allowed the appeal and partly confirmed the additions. 4. Aggrieved against the appellate order, both the assessee and Revenue are in appeal before us raising the following respective Grounds of appeal: ITA No.1214/Ahd/2024 - Assessee's Appeal "1. Ld. CIT(A)-NFAC erred on facts and in law in confirming addition of Rs. 4,17,662/- u/s.68 of the Act in respect of Sundry Creditors, without appreciating explanations and submissions of Appellant. It is submitted that, as per para.17 of the Notice issued u/s.142(1) dated 23/09/2019, Ld. A.O. asked for contra confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eating the same as unexplained credits of Sundry Creditors, without appreciating the facts of the case?" 3. "The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary". 4."It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored". 5. We have heard the rival submissions at length and perused the materials available on record. First we deal with the Revenue appeal. 6. Regarding Ground No.1, namely deleting the addition of estimation of gross profit (GP) at 5% and disallowance of expenses estimated at 25%. It is observed that the actual GP is 1.18% as per the audited financial statement filed by the assessee. The decrease in GP is due to increase the raw material prices, while the sale prices remained the same. The quantity details and supporting documents submitted by the assessee were not fully verified by the AO, thereby estimated the GP at 5% on the purchase value, which is not logical and deviate from the accounting principles, thereby the CIT(A) deleted the estimated addition made by the AO by observing as follows: "4.4 In the assessment order, the AO has not mentioned w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of sundry creditors outstanding with contra confirmations from the parties by issuing the show cause notice. The assessee failed to reply to the SCN. Therefore, the AO found the total purchase of Rs. 14,38,41,692/-, out of which, total creditors pending as on 31.03.2017 was Rs. 8,83,16,199/- which is 61.39% of the total purchase and the same is not reliable figure. Therefore, Ld. AO made the same as addition u/s.68 of the Act. 7.1 During the appellate proceedings, the assessee shown the following current liabilities in the balance sheet: SUNDRY CREDITORS Rs. AAGAM CORRUPACK INDUSTRIES 81,000 ARDOR GLOBAL PVT LTD 33,51,339 ARDOR INTERNATIONAL LTD 2,27,18,349 CAPITAL TRADERS 3,31,62,758 CHEM EDGE INTERNATIONAL PVT LTD 66,37,576 HIMANSHUBHALA SHAH 40,711 KB TRANSPORT 1,65,200 NAVKAR AGENCY 60,000 POOJA R SHAH 45,000 SIDDHI COMPUTAX 1,06,750 SWAPNESH ENTERPRISE 2,19,47,516 TOTAL 8,83,16,199 Out of 11 creditors, details of six creditors and its running accounts were produced by the assessee. After verification of the same, Ld. CIT(A) deleted the additions relating to six creditors. But for the remaining five creditors, no ledger or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undry creditors of above Rs. 3 Lakhs transaction. During the appellate proceedings, the assessee filed a ledger accounts of all the five creditors, wherein the opening balance as on 01.04.2016 being outstanding as per accounts and balance sheet, no addition could be made for the year under consideration. Since, these being the running account of the business transaction, the addition made on this count is not sustainable in law. In other words, no addition u/s.68 of the Act is warranted in the case of the assessee on account of opening balance in the books of accounts. In view of this matter, we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition of Rs. 4,17,661/-. In the result, Ground No.1 of the assessee is allowed. 10. Ground No.2 is regarding CIT(A) confirming the addition of Rs. 18,77,688/- u/s.68 of the Act. The assessee in his paper book from Page Nos. 49 to 70 produced the copy of the confirmation, ITR and also re-payment made by cheques, more particularly, in the case of Hetal H Shah at Page No.55 produced the ledger copy of the repayment of Rs. 3 Lacs on 21.12.2017 by cheque payment from HDFC Bank. Further, copy of ITR was also filed. Similarl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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