TaxTMI 
TaxTMI 
2012 (1) TMI 298
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....arned Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in making disallowance of Rs. 5,118/- being 1/5th of vehicle expenses and depreciation on vehicle. 3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in making disallowance of Rs. 3,849/- being 1/5th of telephone expenses." 3. The assessee is an individual filed its return of income for the assessment year 2005-06 declaring a total income of Rs. 2,09,573/- on 30.09.2005 along with audited accounts. The return was initially processed under section 143(1) of the Act and subsequently the case was taken up for scrutiny and the assessment was completed on 30.11.2007 under section 143(3) of the Act. 3.1 The assessee is engaged in the business of trading of art silk cloth and the turnover for the previous year was Rs. 1,44,86,532/- and declared gross profit at 9.38% as against 8.97% disclosed in the immediately preceding year. During the course of assessment proceedings, the ld. AO issued notice under section 133(6) of the Act to nine suppliers/credito....
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....in balance sheet. This is proved beyond doubt that such trade credits are not genuine one and purchase are not established. That is why it is most reasonable and justifiably to add an amount of Rs. 12,86,373/- in the total income' of the assessee." 3.2 The details of such creditors are as under:- Sr. No. Name of creditor M/s. Aashirvad Textiles Credit balance as on 31.03.2005 1 M/s. Aashirvad Textiles 48490 2 M/s. Komal Silk Traders, 48590 3 M/s. New Light Creation 47520 4 M/s. Rajeshwari Silk Mills 49277 5 M/s. Vaishali Sarees 57297 6 M/s. Ganesh Silk Fabrics 46332 7 M/s. Guru Krupa Textiles 45840 8 M/s. Image Fashion 51410, 9 M/s. Jagdamba Silk Mills 53321 25476 10 M/s Jay Duraga Textiles 11 M/s Jay Gajanan Textile 37256 12 M/s. Jain Fabrics 47720 13 M/s. Japan Textiles 26822 14 M/s. Jay Bhawani Synthetics 43950 15 M/s. Karisma Fabrics 46451 16 M/s Kashish Sarees 44130 17 M/s. Khusbu Textiles 47734 18 M/s. Mahavir Silk Mills 50049 19 M/s. Maruti Textiles 27430 20 M/s. Nikita Fabrics 49324 21 M/s. Priya Textiles 37147 22 ....
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....by the AR, who has basically beaten around the bush, and has argued in very general and vague manner against the action taken by the AO. In his detailed arguments as reproduced in pages 13-14, it has been explained by the AO as to why the entire sum of Rs. 12,86,373 was to be disallowed and treated as the unexplained income/investment of the Assessee. It is for such reason that the ratio of Vijay Proteins (Supra) cannot be applied to the Assessee's case, quite contrary to the plea taken by the AR. The AO's action is therefore sustained, and the addition of the sum of Rs. 12,86,373 is confirmed." 5. During the course of hearing, the ld. A.R. submitted before us that the ld. AO did not doubt the purchase made by the assessee since they were duly recorded in the stock register and accounted in the books of accounts. He further submitted that the assessee had made payments to the creditors by cheque. Since the purchase of cloth was made through agents who acted as intermediaries between the manufacturer of the cloth and the assessee, blank cheques were given to the agents, who, in turn, handed over the same to the actual sellers of the cloth. Therefore, the assessee did not ha....
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..... A.R., considering the ratio of the case decided by the ITAT, Ahmedabad Bench in the case of Vijay Protiens Ltd. (supra) will be squarely applicable, the ld. CIT(A) has not made a categorical finding regarding as to why this case will not be applicable to the facts of the assessee's case but simply brushed it aside with the comment "In his detailed arguments as reproduced in pages 13-14, it has been explained by the AO as to why the entire sum of Rs. 12,86,373 was to be disallowed and treated as the unexplained income/investment of the Assessee. It is for such reason that the ratio of Vijay Proteins (Supra) cannot be applied to the Assessee's case, quite contrary to the plea taken by the AR. The AO's action is therefore sustained, and the addition of the sum of Rs. 12,86,373 is confirmed". 7.1 Considering the facts and circumstances of the case and the findings of the ld. AO and following the ratio of the decision in the case of Vijay Proteins (supra) and in the cases of M/s. Bholanath Poly Fab P. Ltd. -vs- ITO in ITA No.137/Ahd/2009 and M/s. Raj Exports -vs- ACIT in ITA No.1827/Ahd/2005 and M/s. Sanket Steel Traders -vs- ITO in ITA No.2801/Ahd/2008, relied on by the ld. ....