TaxTMI 
TaxTMI 
2015 (1) TMI 1442
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....as not allowed the opportunities to the Assessing Officer to examine such account and to assign findings thereon, as envisaged under Rule 46A of the I.T. Rules. [b] the Ld.CIT(A) has not appreciated that furnishing of 'current capital account' of the partners showing huge cash balances is nothing but the negative cash balances ofRs. 1,95,00,000/-" 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 24.12.2007 were that the assessee is in the business of trading of iron and iron scrap. A return of income was filed declaring Rs. 11,98,650/-. From the records, it was noted by the AO that a survey was conducted by the Enforcement Wing of the Sales Tax Department. According to AO, the said department had detected unaccounted stock of Rs. 6,39,239/- and unaccounted sales of Rs. 3,41,335/-. It has also been noted by the AO that the Sales Tax Department had passed the necessary order to that effect. Further, Sales Tax Department had also levied a penalty of Rs. 98,239/- vide an order dated 25th April, 2005, as noted by the AO. The AO has scrutinized the cash book and thereupon noted that there was a debit balance of Rs. 1,93,61,5....
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....is amount of Rs. 1,95,50,000/- is to be taxed, otherwise, in normal course the first part of the issue under consideration, that is, negative balance shown in cash book to the tune of Rs. 1,93,61,599/- would have been the quantum of taxation. Hence, finally an amount of Rs. 1,95,50,000/- is added to the total income of the assessee which is the consequential effect of negative balance in original cash book and after introducing the cash which was unknown or undisclosed one. For this addition, penalty u/s. 271(1)(c) is initiated for concealment and furnishing inaccurate particulars of income." 3. When the matter was carried before the First Appellate Authority, the issue was decided in Assessee's favour in the following manner: "There were basically three sets of accounts, which were crucial to the issue of introduction of unaccounted cash of Rs. 1,95,50,000/-. The first was the cash book of the Assessee, the second was the current account of Shri Anwar Ali Lakhani held with the Assessee firm, and the third was the cash book of M/s R.H. Patel & Co., the proprietorship concern of the Assessee. I have examined all the three very carefully. With regard to the cash book of t....
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.... Assessee, totaling Rs. 1,95,50,000/- stood satisfactorily explained. The AO therefore, is directed to delete the addition of the sum of Rs. 1,95,50,000/-" 4. From the side of the Revenue, learned DR, Smt. Sonia Kumar appeared and placed strong reliance on the observation of the AO. Her first objection was that the assessee has not maintained the correct books of account. At the time of sales tax survey negative cash was found as per the cash book impounded, which was later on covered up by producing another cash book which was not an authentic document. She has also pleaded that cash introduction by one Sri Anwar Ali H. Lakhani has also not been explained. Because, the assessee had not shown the transfer of cash tallied with the books of the assessee firm. She has pleaded that learned CIT(A) has ignored all those facts and wrongly deleted the addition. 4.1 On the other hand, from the side of the respondent-assessee, learned AR, Mr. Tushar Hemani appeared and argued that the copy of cash book of Amir Traders was duly placed before the AO to demonstrate that there was shortage of cash. Learned AR has also pointed out that as per the ledger account of Anwar Ali H. Lakhani in th....
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.... an authority not to agree with the evidence or statement filed, but it is expected to give reason for such an disagreement. Merely on the ground that a statement has been prepared afterwards should not be a reasonable basis to reject that explanation, commented by the Hon'ble Court. It is expected to give reason to reject the explanation given through the support of a cash book/statement after examining the facts and figures narrated therein. By placing reliance on this legal proposition as laid down by the Hon'ble Jurisdictional High Court we are of the view that cash book which was submitted by the assessee subsequently was required to be examined by the AO. The AO is free to confirm the veracity of that cash book so that the question of negative cash can be decided in an authenticated manner. The cash book stated to be in blue colour should not therefore be disregard in summarily manner merely on the ground that it was prepared after the inquiries were raised by the Department. 5.2 After holding the legal position as above, we have noted that the AO had examined the balance-sheet of Sri Anwar Lakhani for the Financial Year 2003-04 and noted that there was a capital which was....
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....hat the assessee had shown cash entries in the name of 21 persons as "advance from the customers". The AO incorporated in the assessment order the list of those 21 persons. A query was raised and in compliance it was informed that the assessee is engaged in the business of trading of iron scrap on wholesale as well as on retail basis. It was informed that in respect of sales from few retailers the advance was received during the year under consideration at the fag end of the year and the sale was executed in the subsequent year. The sales so executed in the subsequent year were offered to tax in that year. However, the AO was not convinced and in his opinion certain sales were made after a long gap of five months and in some of the cases the parties were not found at the address given hence disbelieved the explanation of the assessee. According to him, the assessee has introduced its own money in the name of small retailers. The impugned amount of Rs. 13,29,575/- was taxed in the hands of the assessee. 7. When the matter was carried before the First Appellate Authority, learned CIT(A) has held in favour of the assessee as under: "10. I have carefully considered both the....
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....e was no such market practice in iron trading to take advance from the customers. She has also pleaded that there were no other instances of advance received from other customers except these 21 parties as detected by the AO. She has also argued that the unexplained cash credit was required to be taxed in the year under consideration. 9. From the side of the respondent-assessee, learned AR has explained that there was some parties who came forward with advance with a guarantee from the assessee to supply the iron in the subsequent years; therefore, the assessee has received the advance and duly credited in its books of account. In the subsequent year sales were executed and duly reflected in the books of account. Since, the said amount has already been taxed by the assessee in the next year; therefore, there was no justification on the part of the AO to disbelieve the action of the assessee. Learned AR has also placed reliance on an order of Hon'ble Gujarat High Court pronounced in the case of CIT Vs. Vishal Exports Overseas Limited (Tax Appeals No.2471, 2473, 2475, 2476 of 2009 order dated 3rd of July, 2012 wherein vide paragraph 5 an observation was made as under: "5.....
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.... by applying the difference of 1.43% of two gross profit ratio. 12. When the matter was carried before the First Appellate Authority, learned CIT(A) has allowed the issue in assessee's favour as under: "18. I find that the AO dealt with the matter in a very summary manner. Even though she may have been right prima facie in rejecting the book results on the basis of her initial findings, there was no ground for making any addition on account of low GP. The GP was just not low by any standard. The facts brought out by the AR clearly show that there was an all round development and increase in the Assessee's business, and hence in the profits, resulting in higher payment of taxes. Percentages can often be misleading. When the denominator is high the percentage automatically becomes low. In this case, the turnover had increased 65 times and it was inevitable that there would be a fall in the GP ratio which fell only by the narrow margin of 1.43%, a fall was fully justified given such facts of the case. The AO has pointed out the matter concerning the unverifiable sales, but has not brought on record the relevant facts in their totality; who were the parties to whom lett....
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....reproduced below: "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-Tax (Appeals) has erred in confirming the addition of Rs. 1119227- made by the AO as the earning of profit generated through unaccounted purchases and sales thereon detected by the sales tax department. Therefore, the same may kindly be deleted." 18. It was observed by the AO that there was a survey by the "Enforcement Wing of Sales Tax Department" on 3rd of January, 2005. During the course of Sales Tax survey certain unaccounted purchases to the tune of Rs. 12,37,102/- were found. On the basis of the gross profit of the assessee the Sales Tax Department had estimated the sales at Rs. 13,99,024/-. On that basis, the STO has passed the order. On those lines, the AO has held that on the said sales there was an element of gross profit of Rs. 1,11,922/- which was taxed in the hands of the assessee. 19. When the matter was carried before the First Appellate Authority, learned CIT(A) has confirmed the addition as under: "14. I have carefully considered the action taken by the AO, as also the written submissions of the AR. To begin with, I am of th....
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....as unable to explain the stock and certain sales. In fact certain previous bills were raised which were not duly considered by the said Department. He has concluded that the impugned addition was made merely on an estimated profit on estimated purchases as well as on estimated sales. The addition being based upon estimation deserves to be deleted. 21. From the side of the Revenue, learned DR has supported the view taken by learned CIT(A). 22. Heard both the sides. Perused the record. Before us in the compilation an English translation of the sales tax assessment order is placed. According to which an investigation was carried out at the business premises in the presence of partners, Sri Anwar Lakhani. Further it was noted that the Trader i.e., the Assessee was not able to explain cash in hand of Rs. 25,282/-, stock in trade of Rs. 6,39,239/- and suspense sales of Rs. 3,35,335/-. In that order, it was also held that there was existence of unaccounted purchases which were not proved. After applying gross profit margin the unaccounted purchase amounting to Rs. 12,87,102/- was taxed. We are of the view that in a situation when an another authority has given a finding that there w....
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....ed the names of the parties as follows: "(i) Mamta roadlines Rs. 162311/- (ii) Shreenath Transport Rs. 118200/- (iii) Shreeji Roadlines Rs. 164865/- (iv) Maruti Roadlines Rs. 61900/- (v) Raj Roadways Rs. 61900/- (vi) Ambica Transport Rs. 63100/- Rs. 732181/- 30. According to AO, the assessee has not deducted TDS on the impugned contractual payment nor filed any TDS return. According to him, the Assessee had failed to deduct the tax on the payment made to truck owners/transporters; therefore, violated the provisions of Section 40(a)(ia) of IT Act. The expenditure was claimed of Rs. 7,32,181/- was disallowed. 31. When the matter was carried before the Appellate Authority, learned CIT(A) has discussed the provisions of Section 194C of IT Act and thereupon held that the AO was justified in invoking the provisions of Section 40(a)(ia). Learned CIT(A) has also rejected the alternate plea of the assessee that the amount which was below Rs. 20,000/- should not be disallowed because there was no requirement of deduction of tax at source. According to this alternate argument a sum of ....
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.... (ii) Ekonkar Dashmesh Transport Company and others Vs. CBDT and others, (1955) 219 ITR 511 (Mad) and (iii) Anant Mill Co. Ltd. Vs. CIT, (1995) 212 ITR 72 (iv) Merilyn Shipping And Transport, 136 ITR 23 and (v) Gujarat Road Lines Vs. ITO, ITA No.3023/Ahd/2008 order dated 30.03.2012 of ITAT Ahmedabad "D" Bench." 35. The Respected Co-ordinate Bench has placed reliance on a decision of Hon'ble Madras High Court pronounced in the case of CIT Vs. Pompher Shipping Corporation Ltd., 282 ITR 3 (Madras). We have noted that the fact of this case are rather more convincing because in a situation when there was no evidence of existence of any contract between the assessee and those transporters and the goods were transported to the assessee at the behest of the supplier then the assessee was not under an obligation to deduct the tax at source at the time of payment to truck drivers/owners. We, therefore, reverse the findings of the authorities below and direct to delete the addition. This ground of the Cross Objection is allowed. 36. Ground No.4 is reproduced below: "4. On the facts and in the circumstances of the case, the learned Commissioner of ....