TaxTMI 
TaxTMI 
2005 (12) TMI 236
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....ired, the assessee produced books of account consisting of cash book, ledger, Jama nakal bahi bills and vouchers which were examined by the AO on test-check basis. The AO made various additions, some of them were either deleted in full or part by the learned CIT(A). That is why both the parties are aggrieved and have filed these appeals. 4. Ground No. (i) of the assessee's appeal and Ground No. (iii) of Departmental appeal relate to the same issue, so these are discussed and decided together. The relevant facts of this issue are that the assessee after purchasing the grey cloth and got it processed from outside parties. The grey cloth usually has to pass through a series of processes, i.e., mercerising, dyeing, padding and finishing, before it can be sold. The finished goods is known as 'Poplin' in the market. The total turnover in this year, i.e., 1993-94 was Rs. 1,03,98,892 on which a GP rate of 10.35 per cent was declared. In asst. yr. 1992-93, i.e., the immediately preceding year, GP rate was 12.30 per cent on total sales of Rs. 39,00,706. The auditors had mentioned in the audit report that the assessee had not maintained quantitative stock details which fact impel....
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....urther elaborate his point, learned Authorised Representative submitted that the assessee could achieve such a quantum growth in the turnover of this year by reducing the selling prices, which lead to fall in GP rate but enhancing the profits in absolute rupee terms as the net profit in this year was Rs. 77,198 whereas in the immediately preceding assessment year, it was only Rs. 44,467. He also explained that the cases of Vimal Industries, Mohan Mills and Champalal Nemichand, which were compared by the AO with the assessee's case, in fact, are not at all comparable as Mohan Mills and Champalal Nemichand are in printing business, Vimal Industries deals in rubiya and saree falls, Maharaja Umaid Textile and M.R. Textiles have their own complete in-house process. It was also mentioned that during the year under appeal, the assessee allowed total discount of Rs. 2,39,242 on sales of Rs. 1 crore plus, whereas in the asst. yr. 1992-93 he allowed only Rs. 1.12,448 on sales of 39 lakhs plus, which led to fall in GP rate on account of net pricing policy. He also attributed the fall in the GP rate to the increase in purchase price and corresponding increase in the sale price, which ultim....
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....es of this case fall under the above exception. In our opinion the assessee has been able to explain the fall in GP rate, by referring to steep increase in turnover, which he could achieve by reducing the selling price and paying more discount. He maintained quantitative details of grey cloth and finished goods. All the processes involved right from washing to finishing are got done from outside parties. The learned Authorised Representative demonstrated the whole series of process involved by referring to marked lot number to the Thans, to demonstrate and explain that the cloth remained the same throughout. He also demonstrated the expenses involved for each process in a series. Therefore, we are convinced that the GP rate declared by the assessee cannot be disturbed. The learned CIT(A) has accepted the claim of the assessee in principle but he applied his own magic number of 11 per cent simply on ad hoc basis. Therefore, we are of the considered opinion that no addition in this account can be made without any specific defects having been pointed out in the books of account of the assessee, which according to us gave a correct picture of his income. Hence, we accept the ground tak....
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..... The payment in question was made during the financial year 1993-94 relevant to asst. yr. 1994-95 through account payee cheque. The statement of one Shri Mool Chand, stated to be the main man behind the concern M/s Sangam Enterprises, was recorded. He accepted that no such work of dyeing was done by M/s Sangam Enterprises, but it was got done from other firms. The AO was not satisfied and disallowed the impugned amount. The learned CIT(A), however, allowed this claim of the assessee with the reasoning that the assessee had paid this amount through account payee cheque and there is no evidence that this money was received back. 18. It has been submitted by learned Departmental Representative that the payment of dyeing charges to M/s Sangam Enterprises has not been proved on record and, therefore, this expenditure cannot be allowed. On the other hand, learned Authorised Representative Shri Bhansali has supported the order of the learned CIT(A) and has submitted that the assessee had really made the impugned payment in the name of the said concern and had also got the processing from it. 19. We have carefully considered the rival submissions in the light of the available record. We....
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....is shortage comes to 2.95 per cent of total processed cloth. This shortage was considered by learned AO to be excessive. When the assessee was confronted, he claimed that he received 2.443 metres less from the sellers, 2,500 metres was utilized in making samples, shade cards, cutting, etc. and that if these are also considered the shortage would actually be only 28,185 metres which will give 2.60 per cent of shortage. The AO accepted the claim of the assessee with regard to 2.443 metres of cloth but did not accept the claim of 2,500 metres. The AO relied on various other cases wherein shortage ranged between 1.34 per cent to 1.86 per cent. However, the AO applied (rate) of 2 per cent to calculate the shortage and made an addition of Rs. 93,000. The learned CIT(A), in his turn, deleted this addition by considering the declared shortage in cloth by way of shrinkage as reasonable. The Department is aggrieved. 22. We have heard rival submissions and perused the evidence on record. 23. Smt. Swati Joshi, the learned Departmental Representative, has relied on the assessment order and has further submitted that the cases relied upon by learned AO are comparable cases with the case of the....
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....see's appeal. This ground has been dismissed. 26. Ground No. (iv) of this appeal relates to deletion of disallowance of Rs. 51,460 from out of expenditure on the "Dalali". 27. The assessee had debited a sum of Rs. 2,48,561 on account of 'Dalali' payment under the head selling and distribution expenses. This Dalali amount included two amounts of Rs. 25,730 each which were shown to have been paid to Shri Roshan Lal and Shri Om Prakash at the rate of 0.25 per cent on sales of Rs. 1,02,91,792. The AO wanted to know the nature and genuineness of these payments. The assessee explained that these two persons helped in boosting the sales. These persons were not employed on fix salary but were paid a commission to give them incentive for the work assigned to them. The AO did not accept the explanation and made an addition of Rs. 51.460. On appeal, the learned CIT(A) accepted the claim of the assessee because the sales of the assessee has increased manifold in this year and this amount was really paid to these persons. 28. We have heard the rival submissions and perused the evidence on record. 29. The claim of the assessee seems to be justified as the assessee adduced evidenc....
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....18,000. This issue could have been resolved by learned AO by referring this statement to assessee and by allowing the assessee to cross-examine him. It appears that nothing of that sort was done by learned AO. Therefore, the claim of the assessee has been rightly allowed by the learned CIT(A). There is no scope for our interference in this finding. 33. In the result, the appeal of the Department stands dismissed. ITA No. 532/Jp/1998; Asst. yr. 1995-96 34. This is an appeal of the Department against the order of the CIT(A), dt. 23rd July, 1998, for asst. yr. 1995-96. 35. The assessee had shown a GP rate 96 per cent on a turnover of Rs. 1,74,53,112. 36. The first ground of appeal relates to deletion of the trading addition of Rs. 4,18,800. 37. The facts relating to this issue remain identical in this year also. Admittedly, the impugned addition was made on similar reasoning as that of asst. yr. 1993-94, mutatis mutandis. Therefore, on the basis of similar reasoning we uphold the finding of learned CIT(A). This ground of appeal cannot be allowed and the same is dismissed. 38. Ground No. (ii) of the Departmental appeal relates to deletion of an addition of Rs. 70,000 added on ac....