AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 220
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....s are not reliable/verifiable, failing which the rejection of books of account cannot translate into a trading addition. Such a view has been taken by the Hon'ble ITAT in A.Y. 2011-12 in the case of the assessee which has been followed by the ld. CIT(A). 3. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) is justified in deleting the trading addition of Rs. 45,96,781/- without appreciating the facts that the AO by applying provision of section 145(3) and comparing earlier year results applied reasonable and justifiable G.P. Rate. 4. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs. 9,706/- made by the AO for depositing employee's contribution to PF & ESI beyond the prescribed time limit provided in respective Acts. 5. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) is justified in holding that employee's contribution to PF & ESI are governed by the provision of Section 43B and not be Section 36(10(va) r.w.s. 2(24(ix) of the I.T. Act.'' 2.1 In the Revenue's appeal, it is noted that the Ground No. 1,....
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....ellant accounts are audited and statutory audit report has been filed which has not been disputed. Further, it is also pointed out that Hon'ble ITAT in A.Y. 2011-12 has granted a relief to the appellant for the same issue. Copy of Hon'ble ITAT order and relevant finding have been reproduced supra. Under these facts and circumstances of the case, I am of the view that AO's action to reject books of account is not tenable. The consequent addition of Rs. 45,96,781/- is thus deleted. Appellant gets a relief in Gr. No. 1 and 2.'' 2.3 During the course of hearing, the ld. DR supported the order of the AO. 2.4 On the other hand, the ld.AR supported the order of the ld. CIT(A) and filed the following written submission. ''2.3 Submission of the assessee. 2.3.1 The entire trading addition made by the ld AO is based on his finding wherein he rejected books of account on the ground non maintenance of stock records and wrong consideration of the GP of immediately preceding year at 22% of turnover as against the actual GP 20.83% of turnover (Kindly refer assessment order of AY 2012-13 (PB pg 115)) A. Rejection of books of accounts:- The assessee is engage....
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....the provisions of section 145(3) of Income Tax Act, there must be finding of the AO that books of account are not correct or incomplete or the assessee is not following the proper method of accounting regularly or not following the accounting standards notified by Central Government. In the case of the assessee, there is no such finding of the ld AO. D) Regarding defects pointed by the AO we may submit as under: - 1. Stock register/raw material register not maintained The assessee is purchasing material which is supported by purchase bills. The sale of the assessee is 100% export sales and are subject to verification. No defect in purchase bills and sales bills was found by the ld AO. The wages is fully supported by wages register. Further the wages of the assessee is supported by deposit of PF and ESI. When the costs as well as sales are 100% subject to verification than books of account cannot be rejected merely for want of stock register. The assessee has explained the reason for non maintenance of the stock register. The assessee explained that it is practically not possible for assessee to maintain stock register; therefore, the assessee is ....
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....the appeal filed by the assessee. Accordingly, we hereby direct the AO to delete the addition. The ground raised in this appeal is allowed. 4) The assessee maintains books of account regularly on mercantile system of accounting. The books of account are audited by Chartered Accountant under Income Tax Act and they have certified that the books of account of the assessee reports true and fair profit (PB 4). The 100% receipts of the assessee are verifiable as the assessee's turnover is 100% export turnover and there is no allegation of the ld AO that the assessee has suppressed the receipts/turnover. The Purchases and direct expenses of the assessee are fully vouched and in most of the cases the payment is through account payee cheques. No defect in purchase bills was found by the ld AO. The wages is fully supported by wages register and all the required details n this regard has been submitted to ld AO. The AO has accepted the purchases and direct cost. There is no allegation of the AO that the assessee has debited bogus expenses or expenses are inflated. The ld AO has also accepted the figure of opening and closing stock. When all the component of the trading account is ve....
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....petition in market and also that huge loss caused in particular transaction, neither the rejection of books of account was justified nor resort to substitution of estimated GP by rule of thumb merely for making certain additions. We are, therefore, of the opinion that the findings arrived at by the Tribunal suffers from basic defect of not applying its mind to the existing material which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of account. We are, therefore, unable to sustain the order of the Tribunal." 5) The defects pointed out by the AO are not defect at all. The true profit can be deduced from the books of account maintained by the assessee. The assessee is maintaining proper books of account, and following the accounting policies and accounting standards regularly. Each case has to be considered on its own peculiar facts, having regard to the nature of business. Action of the assessing officer clearly demonstrates that he could not gather any details or find a....
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....te. No provision either in the Act or in the rules requiring an assessee carrying business of this nature, to maintain a stock register, as a part of its accounts has been brought to notice. As regards non-production of stock register, the assessee has given an explanation which has been accepted not only by the CIT(A) but also by the Tribunal and both of them have given a concurrent finding of fact that maintaining stock register was not feasible considering the nature of the business being run by the assessee which was engaged in the business of manufacturing readymade garments by purchasing fabric which was then subjected to embroidery, dyeing and finishing and then converted into readymade garments by stitching. Sec. 145(3) therefore could not have been applied by the AO to the present case. As regards failure of the assessee to produce the persons to whom payments were made by the assessee for fabrication, embroidery and dyeing and finishing, etc., the AO was at liberty to summon any or all of them in case he wanted to verify the genuineness of the payments made to them. No such course of action was, however, adopted by him. Failure of the assessee to produce those persons cou....
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....a limited company has been consistently following a particular method of accounting. Its accounts are audited both under the Companies Act as well as under s. 44AB. Such audited accounts are being filed with the Registrar of Companies as well as with the IT Department for more than 7 years. The Revenue has scrutinized the accounts and the method of accounting regularly employed and adopted by the assessee year after year have not been found fault with. Auditors of the company both under the Companies Act and the IT Act have been consistently certifying that the assessee has been regularly following the method of accounting and that the annual profits can be properly deduced from such method of accounting employed by the assessee. The auditors over the years have also been certifying that the accounts are regularly maintained and are complete in the sense that there is no significant omission therein. This finding has been accepted by different AOs over a period of seven years. Though the principles of res judicata do not apply to income-tax proceedings, each assessment year being a unit by itself, yet in cases, when a fundamental aspect permeating through the different assessment y....
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....n Soap Factory, the profit of this assessee is very low. Manufacturer of soap where stock register could be maintained SC S.N. Nama Sivayam Chettiar vs CIT 38 579 ITR • 1943-44-GP 3.5% whereas in previous two year it was 9% & 8% Absence of voucher Turnover was enhanced by AO Grains purchased from India and sold in Colombo giving profit 20% to 39% Bombay Kishin Chand Chella Ram Vs CIT 114 671 ITR • Finding that true profit cannot be deduced from books of account. Sales not properly recorded with identifiable details B) Submissions against the trading addition of Rs. 45,96,781/- by applying G.P. rate of 22% as against the declared G.P. rate of 19.44% i. The GP chart of Garment business of assessee was as under:- A.Y Turnover Gross Profit G.P. % 2009-10 12,64,97,166 2,79,13,048 22.07% 2011-10 13,15,51,098 2,89,41,458 22.00% 2011-12 14,89,74,562 3,13,81,219 21.06% 2012-13 18,12,47,076 3,77,51,735 20.83% 2013-14 17,94,82,619 3,48,89,395 19.44% ....
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....ed in same proportionate due to stiff completion with China. (iii) The ld AO has not cited any comparable case of GP. Thus the addition was made only on the basis of past history of the assessee without considering the inflation in cost and change in international scenario and change in product quality. The humble appellant prays your kind honor to kindly to sustain the findings of ld CIT(A) who has set aside the rejection of books made by the ld AO and deleted the trading addition made by Ld AO. '' 2.5 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the AO during the course of assessment proceeding noted that the assessee had neither maintained day today stock register nor any detail pertaining to the day today consumption of raw material or production of finished. For want of complete details the AO invoked the provisions of section 145(3) of the Act and made the trading addition of Rs. 45,96,781/- by applying the g.p. rate of 22% on the turnover of Rs. 17,94,82,618/- as against g.p. rate of 19.43% shown by the assessee. In first appeal, the ld. CIT(A) has deleted the addition by obs....
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....The appellant has stated that all the payments on account of PF have been made before the due date of filing of return of income and therefore, no disallowance could be made on this account. Further reliance has been placed on the decision of Hon'ble Rajasthan High Court in the case of Commissioner of Income Tax, Udaipur vs Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (2013) 35 Taxmann.com 616 and also in the case of CIT vs State Bank of Bikaner and Jaipur 265 CTR 471. In view of the above discussion, I find that it is not disputed that the payments on account of PF & ESIC have not been deposited by the appellant. Further in view of the above judgements of the Hon'ble Supreme Court which has been subsequently followed by the Jurisdictional High Court, I find that there is no justification in the action of the AO in making a disallowance on account of delay in deposition of PF & ESIC. These payments have been made before the due date of filing of return and therefore, such addition are directed to be deleted. Appellant gets a relief in Gr.No.3.'' 3.3 During the course of hearing, the ld. DR supported the order of the AO. 3.4 On the other hand, the ld.AR of the as....
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.... the following decisions:- 1. Allied Motors Pvt. Ltd. Vs. CIT 224 ITR 677 (SC); 298 ITR 141 (Kar), 2. (ii) 2015 (1) TMI 974 - Gujarat high court in the case of CIT V/s Noble Detective & Security Services Pvt. Ltd Appeal No. 251 of 2007 and 3. CIT v/s Aimil Ltd & Ors (2010) 229 CTR (Del) 418. 2) The Hon'ble ITAT Jaipur Bench in the case of ACIT Circle-6, Jaipur Vs Kanhaiya Lal Kalyanmal ITA No 135,760 & 136/JP/2013 vide order dated 26/01/2014 has held as under:- 4. However, this addition has been deleted by Ld. CIT(A) by following the settled position of law on this issue. It is a settled position of law that even if the employees contribution is paid belatedly, but before the due date of filing of the return, it cannot be disallowed under section 36(1)(va) of the Act. Admittedly, the payments were made before filing of return of income in all the years. Ld. CIT(A) has relied on the Tribunal's order rendered in the case of this assessee for A.Y. 2005-06. A copy of this order is also available in the assessee's paper book. 5. Before us both the parties have reiterated their earlier arguments. The Ld. D.R. did not deny the fact tha....