TaxTMI 
TaxTMI 
2018 (11) TMI 1647
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.... 2. The ld. CIT(A) has erred in law and on facts in directing to delete the addition of Rs. 22,04,897/- made on account of under valuation of closing stock. 3. The ld.CIT(A) Rajkot has further erred in law and on facts in directing to delete the addition of Rs. 8,437/- made on account of motor car expenses and depreciation. 4. It is therefore, prayed that the order of the ld. CIT(A)-III Rajkot may be set aside and that of the A.O. may kindly be restored back." ITA No.487/RJT/2005 for A.Y. 1998-99 by Revenue : 3. Ground No.1 to 4 states that the CIT(A), Rajkot erred in law and on facts in directing to delete the addition of Rs. 1,33,16,112/-. 4. Brief facts of the case are that the assessee is running business of manufacturing, processing, trading, exporting in rape seed oil cake and such allied goods. The Assessing Officer found that during the year under consideration, the assessee has shown purchase of 10,631 MT ground nut oil cake for total purchase price of Rs. 6,65,80,561/- from M/s.Santoshi Bhandar, Berhamur, Orissa. On enquiries, he found that M/s.Santoshi Bhandar has indeed not sold any goods to th....
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....e from other parties and has worked out the unaccounted investment for purchase @ 20% of total purchases made. In the assessment order, the AO has mentioned that he has adopted the 20% rate for unaccounted investment for purchases in view of the order of the ITAT, Ahmedabad in the case of Vijay Proteins Ltd., vs. ACIT for A.Y. 1991-92 [1996] 55 TTJ (Ahd.). 7. On careful consideration of the ITAT order, in the case of Vijay Proteins Ltd., (supra) it was found that the ITAT had estimated the inflation of expenditure @ 25% of bogus purchases shown from 33 parties in the same order, no separate addition was confirmed on account of unaccounted investment made for purchase of said goods from the third party. The Tribunal has held that since the peak of purchase was lower than the amount of disallowances made for inflation of purchase cost, no separate addition should be made for unaccounted investment in purchase from third party. The CIT(A) further observed that it is important to note that the appellants case is quantified only at Rs. 20,30,568/- whereas the unaccounted investment for purchase from third party is quantified at Rs. 1,33,16,112/- @ 20% total p....
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.... seeds used. This factor has to be taken into consideration while ascertaining the costs of the oil cake used; (2) It could also be considered how far the purchase price of oil cake relating to the said fake bills has been inflated to reduce the taxable income. The assessee claimed transportation charges and brokerage on the said purchases from Rajasthan but the same being found nongenuine has been disallowed and the findings given by the lower authorities in this behalf has already been confirmed by us earlier. Further the assessee is required to pay 4% sales-tax on local purchase of oil cake but in the purchase made from outside, the assessee was required to pay CST 1% and that was included in the purchase price itself and not charged separately. Thus by raising such fake bills from outside parties, the assessee was benefited by 4% of the purchase price in avoiding the local sales-tax. Further purchase of oil cake from outstation would involve its packing in gunny bags. The gunny bag accommodates 60 Kg. of oil cakes. Therefore, total number of gunny bags used is required to be ascertained looking to the tota....
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....ethod of working out of quantum of inflation of purchase price in case of bogus supplier the benefit derived by the appellant was worked out as under : " The total purchases during the year is Rs. 27,42,62,952/-. The total purchases from M/s.Santoshi Bhandar is claimed at Rs. 6,65,80,561/- which comes to 24.27% of the total purchases. The benefits under various heads are quantified as under: Nature of benefit Amount of benefit Sales-tax Purchase-tax @2% of Rs. 66580561/- Rs. 1331611/- Transportation 24.27% of total transport expenses debited to P&L A/c. at Rs. 3250009/- Rs. 788978/- Octroi @0.25% of purchases of Rs. 66580561/-. Rs. 166451/- Packing Materials: 141747 bags @ Rs. 5/- per bag. Rs. 708735/- Rs. 29,95,775/- &....
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....antoshi Bhandar, Berhamur, Orissa has been discussed. It was noted by the AO that the Sales Tax Department of Orissa has submitted an information u/s.133(6) of the Act which clearly mentioned that M/s.Santoshi Bhandar's not entitled to deal with Ground Nut Oil Cake for resale in Orissa or in course of interstate trade or commerce and address of this concern is not that which is mentioned by the assessee. The enquiry conducted from DCIT, Berhamur Circle has revealed that M/s.Santoshi Bhandar was being in the business of hardware and not ground nut oil cake or oil cake. The telephone number got printed by the assessee in the bill of M/s.Santoshi Bhandar is also found bogus. The Inspector's report submitted by the DCIT, Berhamur District, Gangam, nor there was any transporter named as Rairba Career at Aska Road Bhrhamur. In view of these facts collected by the AO, the Director of the assessee company Shri Pankaj B.Damani was examined on oath 01.03.2000 of which relevant extract of statement has been reproduced by the AO at page 10 & 11 of the assessment order from which it is evident the Director of the company was not able to explain the purchases from S....
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....nvestment cost of purchases worked out at Rs. 29,95,775/-. 14. We have heard the rival submissions and perused the material available on record and considered the relevant facts. The perusal of the assessment order reveals that the AO found that the books of accounts maintained by the assessee were defective as the AO found that the production register of SEGN on 11.05.1997 entry has been erased, similarly, entry dated 12.05.1997, 13.05.1997 were also erased. Further, the production register also revealed that as against 10000 kg of SEGN raw oil of which production was shown of 9500 kg which was prima-facie unbelievable, because in normal course production cannot be in round figure which is major defect of books of accounts maintained by the assessee. Further, the AO also noticed that register maintained by the assessee are defective on which rewriting and re-indicating is appearing. Further the Annexure 3CD4 & 3CD5 were also not satisfied by the auditors, signature on these Annexure are bearing of P.B.Damani on behalf of the company whereas in audit and its Annexures signature for the Director Shri S.P.Damani along with Shri P.P.Damani wee appeari....
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....of Rs. 6,65,80,561/- which worked out at Rs. 1,33,16,112/- and transportation expenses @ 24.27% in the ratio of total purchases with respect to total expenses which worked out to Rs. 7,88,978/-. Similarly octroi @ 2.05 of purchase of Rs. 6,65,80,561/- was calculated at Rs. 1,66,451/- and packing material considered for 5 per pack at Rs. 7,08,735/-. Accordingly the CIT(A) has quantified investment on purchases price at Rs. 29,95,775/- considered the same for addition as unexplained expenditure as against the amount of Rs. 20,30,568/- computed by the AO. The CIT(A) further observed that in view of decision of ITAT in the case of Vijay Proteins Ltd., for AY 1991-92 where the peak amount of purchase at Rs. 10,08,844/- on 10.05.1997 is less than the confirmed addition, hence, the total addition was confirmed at Rs. 29,95,775/- and balance addition out of Rs. 1,33,16,116/- was deleted. We find that these findings of the CIT(A) are correct as the CIT(A) has considered its findings by following the decision of Tribunal in the case of Vijay Proteins Ltd., (Supra) and allowed the set off of peak amount worked out by the AO at Rs. 10,08,444/-. In the light of the....
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.... deleted the addition of Rs. 54,992/- under valuation of stock in respect of Empty Tins at Rs. 54,992/- and ground nut cake OGS was reduced from Rs. 5,58,696/- to Rs. 4,61,663/- whereas the addition on under valuation stock in ground nut cake was enhanced from Rs. 41,382/- to Rs. 45,520/- and the stock of Haxin of Rs. 29,413/- was confirmed. In view of these facts the total addition on account of under valuation of closing stock was reduced from 2,27,66,485/- to Rs. 5,61,588/-. 18. Being aggrieved, the Revenue has filed this appeal against the deletion of closing stock of Rs. 22,04,897/- out of Rs. 27,66,485/-. The ld.CIT-DR has heavily relied upon the orders of the AO. 19. Per contra, the ld.Counsel for the assessee supported the order of the CIT(A). 20. We have heard the rival submissions and perused the material on record. It is seen that the AO held that some of the items of closing stock have been valued at a price lower than cost and accordingly worked out under valuation of closing stock at Rs. 27,66,485/- and made addition to the total income. However, in appeal the assessee has claimed that the AO has not....
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....sp; Consequently, Ground No.2 of the Revenue appeal is therefore dismissed and resultantly the Ground No.4 of the Cross Objection is also to be dismissed. 21. Ground No.3 relates to deleting the addition of Rs. 8,437/- made on account of Motor Car Expenses and Depreciation. 22. The ld.CIT-DR has relied on the AO whereas the ld.Counsel for the assessee has supported the order of the CIT(A). 23. We have considered the facts and find that the CIT(A) has correctly deleted the said addition, therefore no interference is required, accordingly, this Ground of appeal is therefore dismissed. 24. In the result, appeal of the Revenue in respect of Ground No.1 to 3 are accordingly dismissed. Cross Objection No.457/Rjt/2005 AY1998-99 by Assessee: 25. Ground No.1 to 3 relates to increasing addition on account of investment in purchase price at Rs. 29,95,775/-. 26. We have heard the rival submissions and perused the material on record and find that this ground in cross objection has been covered by the Ground No.1 of the appeal of the Revenue which we have dismissed, therefore in the light of findings given therein, these grounds of ap....