AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1526
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....on a/c of non-deduction of tax at sources on legal and professional fees paid to M/s Kalani & Company. 2. In respect of Ground No.1 of the assessee's appeal, briefly the facts of the case are that the assessee is engaged in the business of trading and export of precious and semi precious stones. During the year under consideration, it declared G.P. rate of 2.27% on turnover of Rs. 7.51 crores as compared to G.P. rate of 2.48% on turnover of Rs. 18.73 crores declared in the previous year. The AO observed that assessee has not produced purchase bill, sale bill, stock register, ledger, cash book and books of accounts. The assessee submitted details of purchase/sale but the same is not sufficient to verify the trading results. He, therefore, invoked section 145(3) and made trading addition of Rs. 20,51,880/- by applying G.P. rate of 5% after going through G.P offered by the assessee and applied by the AO in the previous assessment years. 2.1 The Ld. CIT(A) upheld the rejection of books of accounts but considering that there is a drastic reduction in turnover as compared to the last year when G.P. rate of 2.48% was declared, she directed to estimate the income by applying G.P. rate o....
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.... been better than 5% but in those years the turnover was more than double, than in this year, which indicated that the business was doing well. In the current year there is drastic reduction in the turnover and scale of business and considering that the Gross profit percentage in the previous year was only 2.48%, it will be reasonable to estimate the same at 4% of the turnover for this year." 2.2 The ld AR submitted that the assessee is maintaining complete books of accounts on day to day basis. These books are duly supported by bills and vouchers. All transaction of purchase and sales are fully verifiable for which details were filed which is accepted by the AO also. The export sales are subject to control of custom authorities and RBI. The sales is accepted by the AO. The quantitative details is available at PB 20-21. During the year, assessee only did the trading activity. No defect in the quantitative details is found. Hence the rejection of books of accounts and the consequent trading addition confirmed by CIT(A) is unjustified. Without prejudice to above, it may be noted that in the immediately preceding year, the G.P. rate declared is 2.48% on turnover of Rs. 18.73 crores.....
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....me months/period atleast before the AO. The decision of Hon'ble Rajasthan High court in case of Malani Ramjivan Jagannath Vs. ACIT 316 ITR 120 (Raj.) doesn't support the case of the assessee. In that case, the quantum and value of purchases and sales had not been in dispute in as much as they were held to be fully vouched. Value of opening stock also cannot be disputed as it came from closing stock of previous year. The inventories of closing stock were also not found to be incorrect. That is to say actual stock position was not in dispute. However, in the instant case, in absence of production of ledgers and bills, there is no finding that the purchase and sales are fully vouched and similarly, there is no finding that the closing stock has been examined by the AO after taking into consideration the opening stock, purchases and sales. Similar, the case of Pr. CIT Vs. Hues India Ltd. 2015-TIOL-2275 (Raj.) and CIT V. Gotan Lime Khaniz Udyog 256 ITR 243 (Raj) doesn't support the case of the assessee. In light of that, we confirm the rejection of books of accounts u/s 145(3) of the Act. 2.4 Now, coming to estimation of profits after rejection of the books, the AO has estimated the g.....
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.... exists and assessee obtained a benefit by way of cessation of liability. He placed reliance on certain judgments of ITAT Mumbai Bench and accordingly confirmed the addition. The finding of the Ld. CIT(A) is given as under: "I have perused the facts of the case, the assessment order and the submissions of the appellant. The AO noticed that the assessee had a very large number of creditors and when the same were examined, it was found that the creditors as listed by the AO had the amounts outstanding from 31.03.2010 onwards. The assessee could not produce any cogent reason for the outstanding for almost more than six years. The assessee has taken the plea of financial crisis for the amounts being outstanding, however, the A.O. found that local purchases are being made continuously and these parties are being regularly paid as well as advances are being given to them. Further the assesse's contention that Reserve Bank controls these payments was found to be incorrect as the Reserve Bank verifies the foreign exchange transactions but does not monitor whether creditors are being made. In view of the above and no convincing explanation of the assessee, the AO did not accept these amoun....
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....mi Diamond & Jewellery vs. ITO 21(1)(1) Mumbai 59 Taxmann.com 430 (Mum) * ITO 13(2)(4) Mumbai vs. Sajjan Kumar Didwani 47 Taxmann.com 381 (mum). 3.2 At the outset, the ld AR of the assessee drawn our reference to the provisions of Section 41(1)(a) which read as under:- (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or Explanation 1.-For the purposes of this sub-section, the expression....
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....voke section 41(1) ignoring that in this line of business, the credit period is ranging from three to five years. Further only because assessee has not produced evidences as to the dispute can't be a reason to invoke section 41(1) particularly where the liability to pay the creditor continue to be shown in the books of accounts and the creditor has not been written back. Copies of some of the correspondence between assessee and creditors filed before CIT(A) is at PB 28-39. To bring an amount to tax u/s 41(1), the AO has to prove the same by positive evidence that liability has ceased to exist. This has not been done and therefore section 41(1) is not attracted. It was further submitted that the Ld. CIT(A) presumed that once the assessee could not adduce evidence as to why the creditors were not paid in the normal course, the same amount to cessation of liability. He relied on certain judgments of Mumbai Tribunal but she has not given any finding on the various decisions of High Court relied by the assessee on this issue. The cases relied by CIT(A) are distinguishable on facts in as much as AO has not made any enquiry from these creditors to confirm whether they have given up t....
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....ding for more than six years and not a single payment has been made to these parties against the purchases, no document was submitted which can prove that creditors are existing and further no evidence is furnished for non-payment of these creditors. As per ld CIT(A), the plea of financial crises taken by the assessee cannot be agreed to as regular payments are being made for local purchases. The assessee has not filed any convincing evidence to demonstrate the amounts were still outstanding. Further, ld CIT(A) has held that inspite of several opportunities and specific queries, the assessee has not produced any details of payments, any new address or any further evidence to substantiate if any payment had been made to these parties in any previous years or even till the date of assessment proceedings. 3.4 In our view, the fact that liability is outstanding for couple of years and there is non-payment for one reason or another is not sufficient enough to hold that the liability has ceased to exist or more particularly, in the context of section 41(1), there is remission or cessation of liability. For a liability to be remitted, there has to be a positive act on the part of the cre....
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.... information and latest contact details of the creditors so that the matter may be decided expeditiously. The ground is therefore allowed for statistical purposes. 4. Now we take up the Ground No.3 of the assessee's appeal. Briefly the facts of the case are that the AO observed that assessee paid professional fee of Rs. 50,000/- to M/s Kalani & Co. on which tax is not deducted at source u/s 194J. He therefore, made disallowance u/s 40(a)(ia) of the Act. 4.1 The ld CIT(A) has held that Kerala High Court in case of Thomas George Muthoot Vs. CIT has held that second proviso to section 40(a)(ia) introduced w.e.f. 01.04.2013 is only prospective and further that even if the amount is paid, no relief from the provision of section 40(a)(ia) can be given and her relevant findings are reproduced as under: "I have perused the facts of the case, the assessment order and the submissions of the appellant. The third ground relates to disallowance of Rs. 50,000/- by applying provisions of section 40(a)(ia). The amount relates to payments made to Kalani & company there is no dispute that the appellant had not deducted the TDS and in fact before assessing Officer they submitted that it was an ina....
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....se of CIT Vs. Ansal Land Mark Township Pvt. Ltd. (2015) 377 ITR 0635. Further, Rajasthan High Court in case of CIT Vs. Harish Chand Ahuja 125 DTR 184 with reference to amendment made by the FA, 2010 in section 40(a)(ia) has held that the amendment is curative in nature and the same is to be held retrospective. However, Kerala High Court in case of Thomas George Muthoot Vs. CIT has held that second proviso to section 40(a)(ia) is prospective in nature. Thus, when two views are possible on an issue, the view in favour of the assessee has to be preferred as held by Supreme Court in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192. The ld AR further placed reliance on the following cases where it is held that any amendment made in the Act which is intended to remove unintended and undue hardship should be given retrospective effect:- * CIT Vs. Vatika Township Pvt. Ltd. 367 ITR 466/ 109 DTR 33 (SC) * Allied Motors Pvt. Ltd. Vs. CIT 224 ITR 677 (SC) * CIT Vs. Alom Extrusions Ltd. 319 ITR 306 (SC) 4.3 The ld DR relied upon the order of the lower authorities. 4.4 We have heard the rival contentions and perused the material available on record. Regarding retrospective applicability ....