2022 (9) TMI 403

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....r, the value of closing stock was estimated at Rs. 7,91,44,234/- and resultant difference of Rs. 79,33,003/- was proposed to be treated as unexplained investment and a show cause was issued to the assessee, during the course of assessment proceedings. In response the assessee submitted that the value of the garments were taken on the basis of tag price whereas in the books of accounts, the same is valued at cost and where the last year G.P. rate of 10.81% is reduced, the physical stock comes to Rs. 672.61 lacs and difference is only Rs. 6.63 lacs. It was further submitted that the direct expenses such as job work cartage, freight inward, fabrication material were omitted to be taken as part of trading account and where the same taking into consideration amounting to Rs. 10.94 lacs, the stock as per books will be excess by Rs. 4.31 lac which is very negligible keeping in view the percentage of total stock found and which could be due to minor difference in gross profit during the period as compared to last year. The submissions so filed by the assessee were considered but not found fully acceptable to the AO. As per the AO, there is a difference of Rs. 4,31,000/- as excess stock adm....

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.... duly considered the entirety of facts and circumstances of the case and has rightly worked out the profits, applying the gross profit rate as declared by the assessee, on the stock which after proper reconciliation has been found excess in the books of accounts as compared to physical stock and thereby lending credence to the finding that the said stock has been sold outside the books of accounts. Nothing has been brought on record to rebut the said findings of the Ld. CIT(A) and therefore, we do not see any justifiable basis to interfere with the finding of the Ld. CIT(A) and the same is hereby confirmed and the ground of appeal taken by the assessee is dismissed. 8. Ground No. 2 relates to sustenance of addition of Rs. 2,92,875/- out of total addition of Rs. 12,59,466/- made by the AO u/s. 36(1)(iii) of the Act. 9. In this regard, briefly the facts of the case are that during the course of search, cash of Rs. 7,40,050/- was physically found and as per the books of account prepared till 31.10.2017, cash in hand of the business comes to Rs. 1,12,37,807/- and accordingly assessee was issued a show cause as to why the said sum should not be brought to tax. In response, the ass....

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....s purposes. Further, where the taxing authorities have applied average rate of 12% on such funds being utilized for non-business purposes, we do not find any infirmity in the said finding of the Ld. CIT(A) and the same is hereby confirmed and the ground of appeal taken by the assessee is dismissed. 12. In ground No. 3, the assessee has challenged the sustenance of addition of Rs. 9 lac u/s. 40(a)(ia) of the Act. In this regard, briefly the facts of the case are that the AO during the course of assessment proceeding issued a show cause on the basis of statement of Shri Shah Niwaz Rehman recorded during the course of search as to why the provisions of section 40(a)(ia) r.w.s. 69C should not be invoked. In response, the assessee submitted that it deals in wide variety of readymade products and sales are dependent upon choice of the customers and additional work like alteration, fitting and embroidery work is also requested by its customers for which workers are hired on casual basis. As per assessee, the amounts of expenses incurred in the form of casual wages are debited to embroidery expenses account and expenses relating to material used are debited to fabrication material accou....

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.... and payment made to him was liable to be subjected to TDS and given that no TDS has been deducted on a sum of Rs. 30 laces, the AO disallowed a sum of Rs. 9 lacs invoking provisions of section 40(a)(ia) of the Act. 13. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) and reiterated the submission made before the AO. The Ld. CIT(A) specifically referring to the statement of Shri Shah Nawaz recorded on 1.11.2017 held that in the said statement Shri Shah Nawaz clearly admitted that he works on contract and he is a contractor having 20 to 25 Karigar and given the fact that the assessee has not been able to rebut the statement of Shri Shah Nawaz, the AO has rightly held that there was nothing to prevent Shri Shah Nawaz to act as a contractor apart from employment and therefore, the disallowance made by the AO was upheld. Against the said findings, the assessee is in appeal before us. 14. During the course of hearing, the Ld. AR submitted that Shri Shah Nawaz was an employee and not a contractor. It was submitted that merely basis his statement, the addition has been made by the AO and which has been sustained by the Ld. CIT(A). It was submitted tha....