TaxTMI 
TaxTMI 
2016 (4) TMI 353
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....s. 3. That the learned CIT (A) has erred in confirming the disallowance out of Repairs & renovation of Rs. 40,00,000 which was voluntarily admitted as income on account of Repairs & renovation of showroom made during the year during Survey operations. 4. That the learned CIT (A) has erred in confirming the non -allowance of Depreciation on account of Repairs & renovation of Rs. 40,00,000 on account of Repairs & renovation of showroom made during the year, which were held to be Capital in nature." 2. The ground No.1 is against the confirmation of addition of Rs. 3,01,352/- by the ld CIT(A) on account of reduction in gross profit of 6% during the period from 24.02.2009 to 31.03.2009. 3. Brief fact of the case of this ground is that a survey operation was carried out at the premises of the appellant on 24.02.2009. During the course of survey unaccounted stock of Rs. 3,80,50,000/-, unexplained excess cash of Rs. 9,50,000/-, unexplained repairs expenditure of Rs. 40 lacs and unaccounted building expenses of Rs. 70 lacs was found. Based on this the assessee surrendered an amount of Rs. 5 crores during the survey as his accounted income. Assessee credited miscellaneous income in the....
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.... concern amounting to Rs. 50,00,000/- in the post survey period. If this transaction is excluded, the GP rate in the pre and post survey period comes to almost the same, i.e., 30%. When asked to explain the reasons behind fall in profitability, the appellant submitted that the entire transaction with its sister concern should be viewed in totality rather than being confined to the sale of plain cloth amounting to Rs. 50 lacs during the post survey period. Elaborating this, the appellant stated that it had taken an interest free loan of Rs. 6 crores from its sister concern on which it had not been paying any interest. If interest @ 12% had been charged by its sister concern from the appellant on this transaction, it would have to pay paid an amount of Rs. 12 lacs on account of interest. This amount is much more than what the appellant would have received from its sister concern, even if it had sold plain cloth at such a price to its sister concern which would have yielded a gross profit rate of 30% in that transaction. More precisely, the appellant that sold plain cloth to the tune of Rs. 50 lacs to its sister concern in the post survey period. Applying a GP rate of 30% on this tran....
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.... period the appellant had continued getting the same GP from its sister concern as it was getting pre survey period, the gross profit in its transaction with this sister concern in the post survey period should have been 7% instead of 1% shown by the appellant. The difference i.e. 6% is applied to the total sale of plain cloth in the post survey period to the sister concern amounting to Rs. 50,22,546/-, which gives an addition of Rs. 3,01,352/-. The addition made by the AO is confirmed to this extent. The ground of appeal is thus partly allowed." 6. We find no infirmity in the order of ld CIT(A) in confirming the addition to the extent of Rs. 3,01,352/- on sale made to sister concern as the assessee could not explain the fall in gross profit on distress sale made by assessee to its sister concern. The plea of safeguarding itself from the clutches of slow down and of wastages is not supported by evidence. Merely disclosure of sales figures and sales tax return does not prove or disprove the gross profit declared by the assessee. The rates charged by the assessee on sale of goods to sister concern at no profit no loss but the sale them at cost is stated the commercial expediency of ....
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....ival contentions. The fact is that during the course of survey the assessee has disclosed Rs. 5 crores out of which the addition to the building was stated to be of Rs. 70 lacs. The moment the disclosure of Rs. 5 crores is accepted then the investment in the building is also required to be accepted. The principle is that the statement of any person should be accepted or rejected in toto. In this statement the assessee has offered income of Rs. 5 crore which has been taxed by the AO. Further the application of this income has not been accepted. Because of the reason that provision of section 69B does not contain identical provision as contained in section 69C of the act. For the purposes of allowance of depreciation AO has not stated that any conditions mentioned in section 32 of the Act has not been met with. Neither AO has put any question to the assessee about the ownership of the assets, user of those assets and consequent allowance of deprecation thereon. In absence of this disallowance of depreciation cannot be made. According to us the ld CIT (A) and AO both erred in applying the provisions of section 69C on the issue of unaccounted investment in construction of building. The....