TMI Blog2001 (7) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with following grounds. Ground 1(4) Without prejudice to the above, the appellant submits that in any case what can be added is profit on such sale and not the whole figure of sale. Ground III(1) The AO erred in charging interest under s. 234B of the Act. (II) Disallowance out of expenses (1) The learned CIT(A) erred in confirming disallowance out of telephone expenses of Rs. 20,422 and car expenses of Rs. 10,364 when there cannot be any personal expenses in case of a company. (2) On the facts and circumstances of the case, the addition is required to be deleted. 2. The AO has noticed that gross profit and net profit rate had substantially declined in asst. yr. 1997-98 in comparison to asst. yr. 1996-97 (G.P. from 20.80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at our production registers are being checked and verified by the Central Excise authority. (e) That the reduction in job charge receipts is due to recession in the market. (f) That though the job charge receipts in terms of value are reduced by about 21.87 per cent, the production is decreased by 13.46 per cent only. (g) That during current year the quantity of cloth manufactured per unit of power is 2.11 meters as against 2.42 meters of last year. Thus there is no significant reduction in production per unit of power. (h) That from the figures mentioned in item (1) above, it is evident that during Calendar year, there is no abnormal rise of ambiguity in any expenditure." The AO further observed as follows: "......... Having re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit report was submitted along with return of income for asst. yr. 1997-98 which is confirmed by first para of order of AO that books of accounts were regularly maintained, that manufacturing operation of the appellant were subject to control of excise department. It has been contended by the authorised representative that full details of all expenses have been submitted before the AO which is evident from para 24 of assessee's letter dt. 7th Dec, 1999. The detailed explanation about the relation in between electric consumption and G.P. rate have been given to AO which are on record. The learned authorised representative also submitted that electric expenses were high as rate per unit of electricity was increased to 3.31 from 2.30 i.e. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained complete books of accounts though admittedly manufacturing account had not been maintained. Yield has been found to be in conformity with yield expected from such units. Considering the totality of the circumstances, there is no justification for the addition. The CIT(A) was justified in deleting the same. The order of the CIT(A) in this regard is hereby confirmed." 5. The learned Departmental Representative submitted that seized documents in case of search of M/s International Fashions on 4/5th Sept., 1997, some records were found which contained unaccounted income of the assessee and from that diary the modus operandi and unaccounted income is established. He strongly supported the order of AO. The learned authorised representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet and P L a/c dealt with by this report are in agreement with the books of accounts. (d) In our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and P L a/c together with notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view: (i) Insofar as it relates to the balance sheet of the company of the state of affairs of the company as at 31st March, 1997; and (ii) Insofar as it relates to the P L a/c of the loss of the company for the year ended on that date." "3. The stock of raw materials, stores and spare parts have been physically verified by the management at reasonable intervals." "5. The dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When reasons for low G.P. and excess expenditure on electricity have been satisfactorily explained by the assessee, the electricity consumption alone is not an aspect by which a person can earn taxable income or profit. We do not find any material on record to justify the conclusion reached upon by the AO for rejection of books of accounts when the assessee maintained complete books of accounts in accordance with the provisions of IT Act, further same were audited by auditor and no adverse observations were pointed out by the auditor. In these circumstances, the lower authorities of Revenue were not justified in making/confirming the addition of Rs. 41,27,406. We, therefore, delete the same. In respect of interest under s. 234B, the AO is d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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