2015 (9) TMI 15

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.... solitary ground in its cross objection. ''1. Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the action of the ld AO in disallowing of Rs. 2,33,735/- u/s 40(a)(ia) of the I. T. Act, 1961.'' 3.1 The ground No.1 of the Revenue pertains to deletion of trading addition of Rs. 14,33,722/-. Brief facts of the case are that the assessee company is engaged in the business of construction of residential/ commercial projects at its own and on a collaboration basis. The assessee company has filed a return declaring income of Rs. 1,451,54,980/- on 28- 09- 2009. The case of the assessee company was scrutinized u/s 143(3) of the Act. The assessee company had shown trading results as under:- A.Y. Sales Gross profit Gross profit rate Net profit Net profit rate 2009-10 219441873 33676978 15.35% 8053978 3.67% 2008-09 102346109 14826281 14.37% 2784703 2.72% 2007-08 83772100 4486120 5.35% 2973994 3.35%   The AO asked the assessee company to produce the books of account alongwith the supporting bills and vouchers. The assessee company produced the supporting bills and vouchers before the AO who has observed as under:- (i) On examin....

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....-12-2011 indicating therein following reasons. (i) The books of account of the accounts are maintained during the course of business. The account of the company stands audited under the Companies Act as well as u/s 44AB of I. T. Act (ii) The assessee company submitted that all the details for purchase of raw materials like bajri, rodi and water etc. are maintained and in the business of construction activity it is not possible to obtain 100% vouchers from registered dealers. The total purchases made during the year are at Rs. 4,40,81,824/- and they are fully supported by vouchers. (iii) The assessee company submitted that the company has to carry out construction activities and it is not possible to maintain stock register of raw materials like cement, bajri, rodi, steel and other items used in finishing it. However, the company has maintained complete details of purchases. The closing stock and opening stock is taken after physical verification. The assessee company submitted that mere nonmaintenance of stock register is not a defect of such nature of construction business and it does not attract application of provisions of Section 145 of the Act. (iv) The assessee company su....

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....easible to maintain the stock register given the nature of business. In the present case, the AO has not brought on record any material discrepancy in the books of accounts by way of suppression of sales, inflation of expenditure or incorrect valuation of the closing stock. It is also observed that the appellant had maintained details of closing stock as on 31-03-2009 on the basis of the valuation done by a technical consultant who was also registered valuer by the Income Tax Department. This valuation was relied on by the Chartered Accountant while auditing the accounts and determining the value of the closing stock u/s 44AB. Given these facts, it is held that the books of accounts cannot be rejected light heartedly without pointing out any specific defects. Reliance is placed on the following cases. (a) Hon'ble Jodhpur Tribunal in the case of Haridas Parikh vs. ITO, 113 TTJ 274. (b) Hon'ble Tribunal, Hyderabad Bench A in the case of Vishal Infrastructure Ltd. vs. ACIT, 104itd 537. In the aforementioned case, the Hon'ble Bench held that non-maintenance of record does not give a license to the AO to reject the books of account. There was no justification in i....

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...., 272 ITR 467 (vii) Haridas Parikh vs. ITO (2008) 113 TTJ 274 (Jodh.) (ix) ITO vs. Bothra International (2008)117 TTJ 672(Jd.) 3.6 We have heard the rival contentions and perused the materials available on record. It emerges from the record that the AO failed to conduct any further enquiry as to rejection of books of account of the assessee. The rejection of books of account by the AO does not appear to be justifiable and the G. P. addition made is also not sustainable in view of the fact that the assessee has shown better gross profit and net profit rate on increased turnover. Thus we find no reason to interfere in the order of the ld. CIT(A) which is sustained. Therefore, the Ground No. 1 of the Revenue is dismissed. 4.1 The ground No. 2 of the Revenue relates to allowing credit of TDS deducted on the renal receipts which does not belong to the assessee company. 4.2 The facts of the case are that the AO observed that the assessee company had transferred rent amount of Rs. 28,51,962/- to M/s. A. G. & Company due to sale of property to it and the rent was received by the assessee company till Dec. 2008. The AO observed that the rent received on that property from 01-01-2009 wa....

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....urjani Brands (P) Ltd. vs. ITO (ITA No. 6708/Mum/2010) is fully applicable in the case of the assessee. Once the actual recipient of the income i.e. M/s. A. G. & Company has paid taxes on the rental income then it cannot be taxed twice by disallowing the TDS in the hands of the assessee company. Thus we find no reason to interfere in the order of the ld. CIT(A) which is sustained. Therefore, the Ground No. 2 of the Revenue is dismissed. 5.1 Now we take up the C. O. of the assessee wherein the solitary issue of the assessee is as under:- ''1. Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the action of the ld AO in disallowing of Rs. 2,33,735/- u/s 40(a)(ia) of the I. T. Act, 1961.'' 5.2 Briefly, in this case the AO observed that the advertisement expenses of Rs. 14,86,679/- was debited by the assessee in profit and loss account and TDS was deducted by the assessee @ 1.03% even on the payments made to parties other than individual and HUF. The AO observed that applicable rate of TDS on payment to parties not being individual and HUF on account of advertisement expenses for the assessment year 2009-10 was 1.33%. According to the AO, it was a s....