AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 1305
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....ncluding that unrecorded sales of Rs. 15,00,000/- have not been considered while calculating gross profit. b) That addition of Rs. 2,52,300/- made by Assessing Officer is based on assumptions & presumptions and without any materials on record. 3. a) That on the facts & circumstances of the case, ld. CIT(A) has grossly erred in confirming addition of Rs. 93,327/- u/s 41(1) of the Act, by treating following sundry creditors as bogus, non-existent and unverifiable. i) Anup Kumar C/o Modern Hospital, Hoshiarpur. Rs. 37,440/- ii) Ganesh Pharmaceutial & Surgical, Dharamshala Rs. 10,000/- iii) Civil Surgeon, Hoshiarpur. Rs. 45,887/- b) That on the facts & circumstances of the case, ld. CIT(A) has erred in confirming that provisions of section 41(1) of the Act have rightly been invoked to creditors amounting to Rs. 93,327/- which are still outstanding in books of account. Addition confirmed of Rs. 93,327/- u/s 41(1) of the Act is illegal and bad in law." 2. The facts of the case are that the assessee is a partnership firm engaged in the business of trading in medical equipment. For the year, the assessee filed its return declaring income of Rs. 36,750/-. The AO, inter-alia, ma....
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.... above referred cases by invoking the provisions of section 41(1) of the Act. 4. The assessee submitted before the AO that Rs. 37,440/- were still due to Anup Kumar of Modern Hospital. As regards Rs. 10,000/- due to M/s Ganesh Pharmaceutical & Surgical, Dharamsala it was submitted that the amount was received as advance towards supply of goods, which were still to be supplied. As regards Rs. 45,887/- credited in the account of Civil Surgeon, Hoshiarpur, it was explained that the credit was on account of bad accounting, since the amount received from some other party was inadvertently credited to the Civil Surgeon, Hoshiarpur. 5. Regarding party nos. 1 & 2, the AO observed that the explanation was not tenable, since the assessee through his counsel had admitted that the amount had not been confirmed by the creditors. Regarding party no.3, the AO observed that the explanation of the assessee was a concocted one, since no documentary evidence had been furnished by the assessee. 6. While making the addition, the AO observed that the explanation offered by the assessee was not satisfactory; that it was abundantly clear from the reply of the assessee that he had shown his inability to....
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....t; that this onus had also not been discharged in the case of Shri Anup Kumar; that in the other two cases, the assessee could not substantiate his submissions with the help of any documentary evidence; that if the assessee itself says that some wrong entry has been made in the case of Civil Surgeon, Hoshiarpur, the assessee has to establish it with documentary evidence, which the assessee failed to do; that the assessee also could not establish that some sales had been affected in future to M/s Ganesh Pharmaceuticals & Surgicals; and that this clearly established that the liability shown in these cases either did not exist, or the creditors had discharged the assessee from its liability. According to the ld. CIT(A), the provisions of section 41(1) of the Act had rightly been invoked by the Assessing Officer in the case of the three creditors. 9. The ld. Counsel for the assessee has reiterated the stand of the assessee as taken before the Authorities below. 10. The ld. DR, on the other hand, has placed strong reliance on the impugned order. 11. Apropos party no.1, i.e., Anup Kumar of Modern Hospital, Hoshiarpur, who has outstanding credit of an amount of Rs. 37,440/-, this party....
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....editor party did not respond in the enquiry proceedings before the AO, the assessee could not substantiate his submission and that no documentary evidence had been filed. Here again, the entry has been standing in the assessee's books over the years and it has not been challenged in the initial year of such entry. Therefore, the facts not having undergone any change in the year under consideration, no conclusion of cessation of liability can be arrived at. As such, this addition is deleted. 15. So far as regards party no. 3, i.e., Civil Surgeon, Hoshiarpur, the assessee maintained that it was a wrong entry and that this credit balance was on account of bad accounting, since the debtor had inadvertently been credited to some other account, which had been corrected in the next year. This party also did not respond in the enquiry made by the AO. The ld. CIT(A) confirmed the addition. 16. The fact that the entry was statedly a wrong entry does not stand disputed by the Taxing Authorities, since they had not disputed the fact that this entry was rectified in the next year. As such, existing over the years, this entry has not been earlier decided against the assessee. Accordingly, th....
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....d sales, came to 12.50%, as follows:- ASS ITT. YEAR. SALE GROSS PROFIT RA TIO 2008-2009 39,04,780/- 5, 22, 478/- 13.38% 2009-2010 42,24,445/- 6,48,446/- 15.35% 2010-2010 58,41,552/- 7,30,194/- 12.50% 19.2. As regards the observation that addition of Rs. 2,52,300/- being 16.82% of Rs. 15,00,000/- was to be made, it was submitted:- a. That as G.P. of 16.82% had been wrongly calculated and the correct G.P came to 12.50%. b. That no addition on this account was called for, since the unrecorded sale in itself included gross profit. c. That G.P of Rs. 7,30,194/- was a balancing figure, since stocks of Rs. 13,88,739/- were stocks physically verified at the year end. d. That all sales/purchases were duly supported by bills. Also, all expenses shown in trading account were duly supported by bills. e. That the assessee was dealing in different items with different varieties, on which, G.P rate was not the same G.P depends in product mix sold during the year. G.P ratio of two years cannot remain the same because of different product mix sold in different years, which was clear from the fact that G.P % in A.Y 2008-09 was 13.38% whereas in A.Y-2009-1....
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....not ignore the figure of unrecorded sales while making audit. It appears to me that the plea taken by the assessee during appellate as well as assessment proceedings is an afterthought. When the mistake of the assessee was detected the assessee took the plea that even the auditors failed to consider the unrecorded sales but the GP has been shown correctly after including unrecorded sales. This plea of the assessee is beyond any truth as the GP ratio after taking into consideration the unrecorded sales should increase substantially whereas it is other way round if the plea of the assessee is accepted. I am also of the opinion that the rejection of books of accounts is not necessary in the present facts and in the circumstances of the case. The question was that as to whether the unrecorded sales surrendered during the course of survey have been considered while working out GP or not. When it has been clearly established by the Assessing Officer by referring to the audit report and even to the reply of assessee that sales detected during survey have not been taken into account, the assessee came with the face saving plea that the auditors failed to add back the unrecorded sales where....