TaxTMI 
TaxTMI 
2017 (6) TMI 283
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....al ground and to modify/amend the ground of appeal at the time of hearing." 2. Briefly stated facts of the case are that the assessee filed her return of income on 30.09.2011 declaring income of Rs. 5,54,64,250/-. The case was selected for scrutiny assessment and the assessment u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') was framed vide order dated 25th March, 2014. While framing the assessment, the Assessing Officer rejected the books of account and applied Gross Profit rate @ 4.30%. Thereby, he made additions of Rs. 32,86,979/- apart from this the Assessing Officer made disallowance u/s 40A(2)(b) of the Act. In respect of salary paid to Shri Manish Sabo, a person specified u/s 40A(2)(b) of the Act of Rs. 3,00,000/- and also made disallowance of interest of Rs. 6,02,824/- on the basis that interest paid on account of advancing money to the sister concerns at lower rate and also made disallowance u/s 40A(2)(b) of the Act amounting to Rs. 5,54,000/- on basis that the amount was paid in cash in excess of the monetary limit. Hence the Assessing Officer made total addition of Rs. 4,68,17,23/- and assessed total income of the assessee at Rs. 6,01,59,....
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....her hand, the ld. AR of the assessee reiterated the submissions as made in the written brief. He submitted that law is well settled in making fair estimation, the Assessing Officer is required to take an exercise on all the direct evidence. He submitted that in the present case, the Assessing Officer had not made a fair estimation in confirmity with the settled position of law. He submitted that past history of the case has been held to be the best guide for fair estimation. In this respect the ld. Counsel for the assessee has relied upon the judgment of the Hon'ble Rajasthan High Court rendered this case of CIT vs. Gupta K.N. Construction Co. (2015) 116 DTR 377 (Raj), Vaibhav Gems 112 DTR 84 (Raj). He submitted that from the comparative chart it is evident that there is a sharp increase in the turnover from 1.09 crore to 1.61 crore which is nearly 47% and for achieving increase in turnover. There is always compromise on margin in support of this contention, the ld. Counsel placed reliance on the judgment of the Hon'ble Rajasthan High Court is the case of CIT vs. Amrapali Jewels (P) Ltd. (2012) 65 DTR 196 (Raj). 6. We have heard the rival contentions of both the parties, perused....
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....e past history of the assessee qua the Gross Profit. He estimated. Gross Profit at 4.12 % which is lower than the Gross Profit of assessment year 2009-10 and 2008-09 where the Gross Profit was 5.13% and 5.34% respectively against turnover of Rs. 154.37 crores and 150.39 crores respectively. Under these facts. we are of the view that the ld. CIT(A) estimated at the lower side of the Gross Profit, it would be fair to adopt Gross Profit at 4.20%. The ld. Assessing Officer is directed to adopt which the Gross Profit at 4.20% and re-compute the trading addition accordingly. Thus ground No. 1 of Revenue's appeal is partly allowed & Ground No. 2 is against deletion of addition of Rs. 1,00,000/-, made by involving the provisions of section 40A(2)(b) of the Act. The ld. Counsel for the assessee reiterated the submissions made in written synopsis. On the contrary, ld. DR supported the orders of the Assessing Officer. He submitted ld. CIT(A) was not justified in deleting the addition. 8. We have heard rival contentions, perused the material available on record. We find ld. CIT(A) has decided the issue by observing as under: "I have gone through assessee's submission and AO's findings....
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....tia v.CIT, (SC) 118 ITr 200 has established that the expression occurring in Section 36(1)(iii) is wider in scope than the expression occurring in Section 57(iii). Thus, meaning thereby that the scope for allowing a deduction under Section 36(1)(iii) would be much wider than the one available under section 57(iii). This phrase, as held by many legal pronouncement, is the most important yardstick for the allowability of deduction u/s 36(1)(iii) of Income Tax Act, 1961. While explaining the meaning of this phrase the Hon'ble Supreme court in the case of S.A. Builders Ltd. Vs. CIT (A), Chandigarh reported in 288 ITR 1 has used the word "commercial expediency". It has been held in several judgments that by using this phrase Hon'ble Supreme Court has given a new dimension and clarified the concept further. In the judgment the Supreme Court has defined commercial expediency as ''an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure, if it was incurred on grounds of commercial expendiency''. Further, fol....
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....new assets, from the date of its acquisition till the date when the asset is put to use, is to be disallowed. Expenditure may either relate to a new unit on expansion of existing business or it may relate to a totally new business apart from existing business. Hon'ble Supreme Court has brought out the following interpretations: 1. Section 36(1)(iii) has to be read on its own terms. It is a code by itself. Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. It does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because all that the section requires is that the assessee must borrow the capital for the purpose of his business. There by meaning that the transaction of borrowing is not the same as the transaction of investment. 2. Explanation 8 to Section 43(1) has not relevance to Section 36(1)(iii). It has relevance only to Sections 32,32A, 33 and 41 which deal with concepts like depreciation. 3. The provisions under section 36(1)(iii) make no distinction between money borrowed to acquire a capital asset and a revenue asset. Under the circumstances of the case and the leg....