TaxTMI 
TaxTMI 
2018 (2) TMI 1520
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.... in deciding the appeal without admitting the additional evidence filed under rule 46A. 2. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the trading addition of Rs. 11,99,984/- by disallowing 15% of the entire purchases of Rs. 79,99,891/- alleging the same to be unverifiable but at the same time accepting the sales declared by the assessee and ignoring the fact that the g.p. rate declared during the year is better than the earlier years. 3. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the disallowance of Rs. 73,714/- u/s 40(a)(ia) without considering the fact that the recipient of this amount has included the same in its income and paid the tax on the same. 4. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming an addition of Rs. 3,83,757/- by considering the peak of cash deposit and withdrawal from the bank account as unexplained. He has further erred in confirming the addition ignoring that these are regular bank accounts of the assessee and all the deposits in the bank account is verifiable from the cash book maintained by the ass....
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....ll not take into account any evidence produced under sub-rule (I) unless the Assessing Officer has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals)] or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty whether on his own motion or on the request of the Assessing Officer under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271 (I)(c) (ii) In view of the provisions of Rule 46A of the I.T. Rules, the additional evidences could be admitted only if the case of the assessee falls in any of the four clauses as mentioned in Sub-Rule-1 of Rule 46A. It was claimed by the AR that sufficient opportunities were not ....
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.... the Commissioner (Appeals) shall not be entitled to produce before him any evidence, whether oral or documentary, other than the evidence adduced by him before the AO. After making such a general statement, exceptions have been carved out that in certain circumstances it would be open to the Commissioner (Appeals) to admit additional evidence. Therefore, additional evidence can be produced at the first appellate stage only when conditions stipulated in rule 46A are satisfied and a finding is recorded. The conditions prescribed in rule 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in rule has to be strictly complied with so that rule is meaningfully exercised and of exercised in a routine or cursory manner. A distinction should be recognized and maintained between a case where the assessee invokes rule 46A to adduce additional evidence before the Commissioner (Appeals) and a case where the Commissioner (Appeals), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under subsection (4) of section 250. It is only w....
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....e did not respond to the show cause notices issued by him and thus he completed the assessment ex-parte u/s 144 on the basis of material already available on record. 2. In appellate proceedings, assessee vide letter dt. 09.03.2016 (PB 12A) requested for admission of additional evidences under Rule 46A. It was submitted that assessee is suffering from heart disease since 2010 and in FY 2010-11, he was diagnosed with TB also. The treatment of TB was started and due to this he could not give attention to the various notices issued by AO and was dependent on his counsel. The medical documents were also filed. However, on receipt of order it was gathered that counsel did not appear before the AO as and when required and thus the assessment was completed u/s 144. On suggestion of counsel, assessee filed an appeal. However, it was seen that he was not giving enough time for preparation of the case and thus assessee changed the counsel. Affidavit of assessee in this regard is at PB 13A. 3. The Ld. CIT(A) called for remand report. In remand report dt. 15.04.2016 (PB 14A-16A), AO submitted that no documentary evidence has been filed regarding contention of assessee that he ....
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....ess. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its preparation shall result in miscarriage of justice, then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order. Difference lies in the nature of mistaken and scope of rectification, depending on if it is of fact or law. But the root from which the power flows is the anxiety to avoid injustices. It is either statutory or inherent. The latter is available where mistake is of the Court. In Administrative Law, the scope is still wider. Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order. 7. In the present case, assessee has given an explanation which prevented him for submitting the documents before the AO. The same were submitted before the Ld. CIT(A). The Ld. CIT(A) also called a remand report. Thus, opportunity has been given to the AO to examine the additional evidences filed. Once this course is adopted which is as per Rule ....
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....g Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. The ld. CIT(A) held that large number of opportunities were provided by the A.O. to the assessee. It is noted from the financial statements of the assessee that for the F.Y. 2012-13 and 2013-14, the assessee was having total turnover of Rs. 92,01,799/- and Rs. 57,26,420/- respectively. Various notices were issued by the Assessing Officer to file the details but no compliance was made by the assessee. In view of the above facts and circumstances, the Bench find that there are no any contrary material in the order of the ld. CIT(A), therefore, we uphold the order of the ld. CIT(A) on this issue. Accordingly, this ground of assessee's appeal is dismissed. 8. The 2nd ground of the appeal is against confirming the trading addition of Rs. 11,99,984/- by disallowing 15% of the entire purchases of Rs. 79,99,891/-. The ld. CIT(A) has dealt the issue by holding as under: 3.1.2 Determination: (i) During the course of as....
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.... disallowing 25% of the purchases, rather appropriate G.P. Rate is to be applied considering the past history of the case & other surrounding circumstances. The position of the G.P. Rate declared by the assessee as compared to earlier year is as under:- A.Y. Sales Gross Profit G.P. Rate 2011-12 1,27,12,846 18,67,361 14.68% 2010-11 99,94,807 14,60,532 14.61% 2009-10 2,10,06,499 30,46,728 14.50% From the above table, it can be noted that G.P. Rate of 14.68% declared during the year is better than the G.P. rate of 14.61% declared in last year & G.P. Rate of 14.50% declared in AY 09-10. It is a settled law that, no trading addition is called for if the result declared is better as compared to the result declared in earlier year. Thus, when the overall amount of profit declared by the assessee is better as compared to the results declared in earlier years, disallowance of 15% of purchases made by the CIT(A) is unwarranted & be deleted. For this reliance is placed on t he following cases:- CIT Vs. Vaibhav Gems Ltd. (2014) 112 DTR 84 (Raj.) (HC) dt. 21.08.2014 While the past history becomes the r....
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....orking out the gross profit. Accordingly, it applied G.P. rate declared & accepted at 2.51% in earlier year. Hon'ble High Court held that as the G.P. rate of 2.51% was applied in A.Y. 99-00 & that having been upheld by the Tribunal, the order of the Tribunal for A.Y. 00- 01 was justified. Kansara Bearings P. Ltd Vs. ACIT 270 ITR 235 (Raj) dt. 01.05.2003 It was held that the last year's profits declared by assessee is the best guide for application of profit rate and when the GP shown in the last year was better and AO has not given any comparable case for higher GP then his action to make the trading addition cannot be approved. CIT vs. Babulal Agarwal (2014) 97 DTR (Raj) 284 (HC) G.P. shown in the present year at 7.43% was reasonably higher than the previous years, and could not have been dubbed as fanciful or palpably baseless. When the CIT(A) has deleted the addition in the trading result on relevant considerations and further, when ITAT has concurred with the CIT(A), no substantial question of law arise and appeal was thus dismissed. Thus, where the GP rates shown by assessee in current year was higher than last year's profit declared by ....
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....nity to the appellant to produce these parties for verification of the claim, but none of them appeared before the AO. Accordingly, he made the addition by treating the claim as fictitious. It was held that in respect of purchases in cash, the assessee having failed to produce any of the parties except the bills alleged to be raised by those concerns, the Tribunal was justified in disbelieving those transactions. However, in respect of another party, payment was not made by cash but by account payee cheques and encashed through the bankers. If an assessee took care to purchase the materials for his business by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party does not appear before the AO pursuant to the notice or even has stopped the business, the claim of the assessee on that account cannot be discarded as non-existent. CIT Vs. Amarpali Jewels (P.) Ltd. 65 DTR 196 (Raj.)(HC) It is essentially for the taxing authorities to decide as to what should be the % rate of GP that should be applied on particular yearly turnover of the assessee. It is a matter of discretion to be exercised on settled prac....
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....n the trading result & therefore addition on account of low G.P. Rate is to be deleted. Commissioner of Income-Tax v. Leader Valves P. Ltd. 285 ITR 0435 (P&H) The assessee was engaged in the business of manufacture and sale of various types of valves, cocks and boiler fittings, etc. AO invoking the provisions of section 145 of the Income-tax Act, 1961, assessed its income at Rs. 2,10,63,154 which included bogus purchases to the tune of Rs. 1,48,93,287. CIT(A) held that the books of account of the assessee were fully verifiable, that section 145 need not have been invoked and the addition for purchases as bogus was wrong as the consumption stood fully proved and the existence of selling parties could not be denied. It upheld the basis of valuation of closing stock of work-in-progress and hence deleted the additions of Rs. 1,48,93,286 made by the AO on account of bogus purchases. It was held that the purchase of scrap could not be termed bogus for the reason that in the subsequent assessment year, the purchases from these very parties stood accepted by the Department to a very substantial extent. No sale invoices were found to be undervalued or the purchases inflate....
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.... which either 25% or 100% were held justified. He relied on the following case laws: 1. 58 taxamnn.com 44 (Guj)- Vijay Protins - disallowance of 25% of bogus purchases was held justified 2. 316 ITR 274 (Guj) - Sanjay Oil Cakes Ind. - disallowance of 25% of bogus purchases was held justified 3. 72 taxmann.com 289 (Guj) N.K. Industries - disallowance of 25% of bogus purchases was held justified 4. 2017-TIOL-23-SC-IT-NK Protins Ltd- Hon'ble Supreme Court held disallowance of 100% of bogus purchases was justified 5. 178 CTR 420 (Raj) -Indian woollen Carpet Factory- held that onus is on assessee to prove the genuineness of the purchases. 6. 186 CTR 718 (MP) - VISP Pvt. Ltd.- Same view was taken as in case of Indian woolen 7. 227 ITR 391 (Raj) - Golcha Properties P Ltd 8. 250 ITR 575 (Del) - Law Medica 9. 240 ITR 322 (KER) - Beena Metals 10. 229 ITR 181 (MP) - System India Casting 11. 50 DTR 502 (ITAT, Jaipur) - Deepak Dalela 12. 49 ITR 112 (SC) - Shri Lekha Banerjee 13. 288 ITR 10 (SC) - Kachawala Gems In view of the above, where the assessee filled the appeal /CO may ....
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....y in respect of amount of Rs. 73,714/-, no tax was deducted at source and hence the disallowance made under this head be restricted to Rs. 73,714/-. (iii) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is an admitted tact that the appellant has not deducted tax at source in respect of payment of Rs. 73,714/-. It was stated that, however, it has deducted tax at source in respect of payment of Rs. 18,500/- to the auditor. It was claimed by the appellant that it has deducted tax on brokerage of Rs. 38,182/- paid to Sh. Ashok Dhamani and has also deducted tax at source on account of interest payment wherever the interest paid was more than Rs. 5,000/- During the appellate proceedings, it was submitted by the AR that the deduction of tax at source is verifiable from the TDS return filed by the appellant which is on the record of the department. (iv) As the appellant has admitted that it has not deducted tax at source on account of payment of Rs. 73,714/- , the disallowances made by the AO u/s 40(a) (ia) of the Act is hereby sustained. Regarding the remaining expenses, the AO is directed to obtain the TDS ....
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....ala (2014) 150 ITD 323 as the amendment was made to remove the undue hardship. In view of above, disallowance of Rs. 73,714/- made u/s 40(a)(ia) be directed to be deleted. 14. On the contrary, the ld Sr. DR has relied on the orders of the authorities below. 15. The Bench have heard both the sides on this issue. The ld. CIT(A) held that the assessee has not deducted tax at source in respect of payment of Rs. 73,714/-. The assessee has deducted tax on brokerage of Rs. 38,182/- paid to Shri Ashok Dhamani and also deducted tax at source on account of interest payment of more than Rs. 5,000/-. The assessee has admitted that he has not deducted tax at source on account of payment of Rs. 73,714/-. In view of the above, the Bench find no any contrary material in the order of the ld. CIT(A), therefore, we uphold the same. Hence, this ground of appeal of assessee stands dismissed. 16. In the 4th ground of the appeal, the issue involved is confirming the addition of Rs. 3,83,757/- by considering the peak of cash deposit and withdrawal from the bank account as unexplained. The ld. CIT(A) has dealt the issue by holding as under: "3.3.2 Determination: (i) The brief ....
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....benefit of peak credit which ought to have been allowed instead of making separate addition of entire amount. However, it was observed that it the Assessing Officer comes to a finding that withdrawn amount was used or spent by the assessee for any other investment or expenditure than the benefit of peak of such credit, in such circumstances, may not be available. (iv) In the instant case under consideration, no specific finding was recorded by the AO regarding the utilization of cash withdrawal by the appellant from its bank accounts in some investment or expenditure. Therefore, in view of the above referred decision of jurisdictional High Court in the case of Sind Medical Store vs. CIT (Supra), the benefit of peak credit theory could be allowed to the appellant. As per the chart, enclosed to this order as Annexure-A, submitted by the appellant, the peak credit balance was to the tune of Rs. 3,83,757/- as on 27.01.2011 and not Rs. 2,53,857/- as stated by the appellant. Therefore, addition of Rs. 3,83,757/- is hereby sustained as undisclosed income of the appellant. However, the AO is directed to examine the peak deposit chart i.e. Annexure-A with the bank statements of the....
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....from the bank account itself. The chart showing the deposit in the bank account and the source of such deposit is at PB 6A-7A. In view of above, the addition of Rs. 3,83,757/- confirmed by CIT(A) be directed to be deleted. 18. On the contrary, the ld Sr. DR has relied on the orders of the authorities below. 19. The Bench have heard both the sides on this issue. It is undisputed fact that the assessee has deposited Rs. 17,24,150/- on various dates in Allahabad Bank. The ld. CIT(A) has held that the assessee has filed copy of bank account and relevant pages of cash book where this account was incorporated as additional evidence which were not admitted in. He also held that in the case of Sind Medical Stores vs. CIT, the Hon'ble jurisdictional High Court held that this court in CIT vs. Ishwardas Mutha (2004) 270 ITR 597 (Raj.) also accepted the contention to take into account, the peak credit theory. When any amount is paid, later withdrawn from the bank, would be available for recycling and rotation, unless otherwise established as invested elsewhere by the Revenue. It was held that the assessee was entitled to the benefit of peak credit which ought to have been allowed instead....