Shri Anupbhai Amratlal Shah, RAJKOT-GUJARAT V. The Additional Commissioner of Income Tax, Range-2, RAJKOT-GUJARAT

CO 6/RJT/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9302 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI DR
• Assessee Lawyers: S N DIVATIA
• Keywords: Gross profit estimation; Unexplained cash credit; Rejection of books of accounts; Business expenditure; Opportunity of being heard; Additional evidence; Corroborative evidences; Notional interest
• Section: 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO. 681/RJT/2010 / ASSESSMENT YEAR : 2005-06 SHRI ANUPBHAI AMRUTLAL SHAH, C/O. GUJARAT TRADING CO., KANTA STREE VIKAS GRUH ROAD, RAJKOT PAN : AFHPS 6475 H ( / APPELLANT) THE JT. COMMISSIONER OF INCOME-TAX, RANGE-2, RAJKOT / RESPONDENT ITA NO. 781/RJT/2010 / ASSESSMENT YEAR : 2005-06 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE -2, RAJKOT ( / APPELLANT) SHRI ANUPBHAI AMRUTLAL SHAH PAN : AFHPS 6475 H / RESPONDENT C.O. NO. 6/RJT/2011 / ASSESSMENT YEAR 2005-06 SHRI ANUPBHAI AMRUTLAL SHAH RAJOT PAN : AFHPS 6475 H ( / APPELLANT) THE ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-2, RAJKOT / RESPONDENT ! ' #$ / ASSESSEE BY SHRI S.N. DIVATIA, ADVOCATE % ! ' #$ / REVENUE BY DR. J. B. JHAVERI, DR # & ' ! ( / DATE OF HEARING 03.01.2014 ) ! ( / DATE OF PRONOUNCEMENT 09.01.2014 / ORDER .. , / T. K. SHARMA, J. M.: THESE CROSS APPEALS AND CROSS OBJECTIONS BY THE ASSESSEE ARE AGAINST ORDER DATED 08.12.2009 OF CIT(A)-III, RAJKOT FOR THE ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER:- 1. THE LEARNED CIT (APPEALS) ERRED IN RETAINING CE RTAIN ADDITIONS MADE IN THE ASSESSMENT ORDER AND ERRED IN NOT HOLDING THAT THE RETURNED INCOME OUGHT TO BE ACCEPTED AS THE ASSESSED INCOME WITHOUT ANY ADDITIO N / MODIFICATION. 2. TO STATE IN BRIEF THE EARNED CIT ERRED IN (I) HOLDING THAT THE 18% INTEREST WAS THE REASONABL E RATE OF INTEREST AGAINST THE RATE OF INTEREST WHICH THE ASSESSEE PAID. 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 2 (II) HOLDING THE DISALLOWANCE OF RS.18000 CLAIMED A S A BUSINESS EXPENSE (OUT OF CREDIT CARD). (III) HOLDING THE DISALLOWANCE OF RS.13,100 OUT OF COMPUTER EXPENSES. (IV) HOLDING THE ADDITION IN RESPECT OF ALLEGED LOW G.P. TO THE EXTENT OF RS.15,60,234. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDI TION RETAINED IN THE APPEAL ORDER DESERVES TO BE DELETED AND THE RETURNED INCOM E BE ACCEPTED AS THE ASSESSED INCOME. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER AMEND AND / OR WITHDRAW ANY OF THE GROUND STATED HERE ABOVE. 3. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER:- 1. THE LD. CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION UP TO RS.5,51,313/- AND DELETING THE ADDIT ION OF RS.2,25,856/- OUT OF TOTAL ADDITION OF RS.7,77,169/- MADE ON A/C OF DISALLOWAN CE OF INTEREST U/S 40A(2)(B). 2. THE LD. CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.40,135/- MADE ON A/C OF DISALLOWANCE OF INTEREST. 3. THE LD. CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION UP TO RS.15,60,234/- AND DELETING THE ADDI TION OF RS.50,01,265/- OUT OF TOTAL ADDITION OF RS.65,61,499/- MADE ON A/C OF LOW GP. 4. THE LD. CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.50,000/- MADE ON A/C OF LOW HOUSE HO LD WITHDRAWAL. 5. THE LD. CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.20,07,340/- MADE ON A/C OF UNEXPLAIN ED CASH CREDIT. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A)-III, RAJKOT MAY KINDLY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY KIN DLY BE RESTORED BACK TO THE ABOVE EXTENT. 4. THE GROUND NO. 1 OF ASSESSEES APPEAL IS GENERAL IN NATURE, THEREFORE NEEDS NO ADJUDICATION. 5. THE FACTS RELATING TO THE CONTROVERSY INVOLVED I N GROUND NO.2(I) OF ASSESSEES APPEAL AND GROUND NO.1 OF THE REVENUES APPEAL ARE THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER MADE ADDITION OF RS.7,77,169/- U/ S 40A(2)(B) OF THE INCOME-TAX ACT, 1961. THIS ADDITION WAS MADE ON THE GROUND THAT INT EREST PAID BY THE ASSESSEE @ 24% TO VARIOUS PERSONS COVERED U/S 40A(2)(B) IS TOO EXC ESSIVE, AND THEREFORE, THE ASSESSING OFFICER ALLOWED THE INTEREST @12%. IN THE IMPUGNED ORDER, THE LD. CIT(A) RESTRICTED THE ADDITION TO RS.5,51,313/- AND DELETED THE ADDITION OF RS.2,25,856/-, FOLLOWING THE DECISIONS OF ITAT RAJKOT BENCH IN THE CASE OF PRABH UDAS ODHAVJI KOTAK IN ITA 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 3 NO.964/RJT/2004 DTD. 13.10.2005 AND SHRI VIJAY PRAB HUDAS KOTAK & OTHERS IN ITA NO.333 & 524/RJT/2003. AGGRIEVED WITH THE ORDER OF LD. CIT(A), BOTH THE SIDES ARE IN APPEAL BEFORE THIS TRIBUNAL. 5.1 IN RESPECT OF THESE TWO GROUNDS, WE HAVE HEARD BOTH THE SIDES. IN THE IMPUGNED ORDER, LD. CIT(A) AFTER APPRECIATING THE FACTS THAT THE COST OF LOAN TO BE TAKEN FROM THE BANK IS HIGH BECAUSE OF LEGAL CHARGES, DOCUMENT CHA RGES ETC., AND THEREFORE, UNSECURED LOANS AT HIGHER RATE OF INTEREST HAS BEEN TAKEN KEEPING IN VIEW THE BUSINESS EXPEDIENCY. THE VIEW TAKEN BY THE LD. CIT(A) IN RES TRICTING THE DISALLOWANCE OF INTEREST U/S 40A(2)(B) IS AS PER THE RATIO OF TWO DECISIONS OF ITAT RAJKOT BENCH IN THE CASE OF PRABHUDAS ODHAVJI KOTAK (SUPRA). WE, THEREFORE, UPH ELD THE ORDER OF LD. CIT(A). THE GROUND NO.2(I) OF THE ASSESSEES APPEAL AND GROUND NO.1 OF REVENUES APPEAL ARE DISMISSED. 6. GROUND NO.2(II) OF ASSESSEES APPEAL IS AGAINST CONFIRMING THE DISALLOWANCE OF RS.18,000/-. 6.1 WE HAVE HEARD BOTH SIDES. IN THE IMPUGNED ORDER , THE LD. CIT(A) CONFIRMED THIS DISALLOWANCE ON THE GROUND THAT THAT CREDIT CARD EX PENSES PAID BY THE ASSESSEE ARE NOT OPEN FOR VERIFICATION. NEITHER BEFORE BOTH THE AUTH ORITIES BELOW NOR BEFORE US, THE ASSESSEE HAS PRODUCED THE SUPPORTING EVIDENCES; THE REFORE, THE VIEW TAKEN BY THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.18,000/- I S UPHELD. THIS GROUND OF APPEAL IS REJECTED. 7. GROUND NO.2 (III) OF ASSESSEES APPEAL IS AGAINS T CONFIRMING THE DISALLOWANCE OF RS.13,100/- OUT OF COMPUTER EXPENSES. 7.1 WE HAVE HEARD BOTH THE SIDES. THE ASSESSING OFF ICER MADE THIS DISALLOWANCE AS THE ASSESSEE FAILED TO PRODUCE RELEVANT BILLS. BEFO RE US, THE LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT THE SAME IS NOT TRACEABLE. IN THIS VIEW OF THE MATTER, WE DECLINE TO INTERFERE. THIS GROUND OF APPEAL IS REJECTED. 8. GROUND NO.2 OF REVENUES APPEAL IS AGAINST DELE TING THE ADDITION OF RS.40,135/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST. THE AS SESSING OFFICER HAS DISCUSSED THIS 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 4 ISSUE ON PAGE NO.2 AT PARAGRAPH NO.4 OF THE ASSESSM ENT ORDER. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS PAYING INTEREST , BUT HAS ADVANCED INTEREST FREE LOAN TO THE SAME PERSON TO WHOM INTEREST HAS BEEN P AID IN THE PROPRIETARY CONCERN AND IN ONE CASE, SAME WAS CLAIMED TO BE ADVANCE TO A FR IEND OF THE ASSESSEE BUT NO INTEREST HAS BEEN CHARGED ON THE SAME. THE ASSESSEE HAS ADVANCED RS.1,14,456/- TO FALGUNI A. SHAH, RS.15,000/- TO ANUP A. SHAH (HUF) AND RS.2,05,000/- TO ONLINE BUSINESS SYSTEM. THESE THREE INTEREST FREE LOANS, T HE ASSESSING OFFICER CALCULATED INTEREST @12% AND MADE ADDITION OF RS.40,135/-. 8.1 ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE C ONTENDED THAT THE ASSESSEES CAPITAL IN HIS PERSONAL BOOKS OF ACCOUNTS AS ON 31. 03.2005 IS ABOUT ONE CRORE RUPEES. THE ASSESSEE DOES NOT PAY ANY INTEREST IN HIS PERSO NAL BOOKS OF ACCOUNTS, AND NO INTEREST IS BEING PAID IN PERSONAL BOOKS OF ACCOUNT S. THE FUNDS ON WHICH INTEREST WAS PAID FROM BOOKS OF M/S. GUJARAT TRADING CO. HAVE BE EN UTILIZED FOR THE BUSINESS PURPOSE OF THE PROPRIETARY CONCERN. THERE IS A HUGE CREDIT BALANCE IN THE CAPITAL ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF M/S. GUJAR AT TRADING CO. FURTHER, THE DEBIT OF RS.2,05,000/- BEING THE AMOUNT GIVEN TO ONLINE BUSI NESS SYSTEM WAS A DEPOSIT TO THAT PARTY FOR OBTAINING A FRANCHISEE, WHICH THE AMOUNT ULTIMATELY THE ASSESSEE HAS NOT BEEN ABLE TO RECOVER. THUS, THIS WAS A BUSINESS ADVANCE, AND THEREFORE, NO DISALLOWANCE WAS CALLED FOR. AFTER CONSIDERING THESE SUBMISSIONS, T HE LD. CIT(A) DELETED THE ADDITION FOR THE DETAILED REASON GIVEN IN PARAGRAPH 4.2 OF THE I MPUGNED ORDER, WHICH READS AS UNDER:- 4.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSMENT OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. IT I S NOTICED THAT ADVANCES TO FALGUNI A SHAH, RS.114456 AND RS.15000/- TO ANUP A. SHAH (HUF) HAS BEEN MADE BY THE APPELLANT OUT OF THE CAPITAL AVAILABLE IN PERSONAL BOOKS OF ACCOUNTS, AND THEREFORE, NO DISALLOWANCE OF INTEREST IS CALLE D FOR. SIMILARLY, ADVANCE TO ONLINE BUSINESS SYSTEM RS.205000/- IS A BUSINESS AD VANCE GIVEN TO OBTAIN FRANCHISEE, AND THEREFORE, NO DISALLOWANCE OF INTER EST ON THIS ADVANCE ALSO CALLED FOR. KEEPING IN VIEW THE ABOVE FACTS, THE DISALLOWA NCE OF RS.40135/- MADE BY THE ASSESSING OFFICER IS HEREBY ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 8.2 AT THE TIME OF HEARING BEFORE US, RELYING UPON THE REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE LD. DR CONTENDED THAT THE ADDITION OF RS.40135/- WAS MADE BY THE ASSESSING OFFICER ON SOU ND FOOTINGS AND THE LD. CIT(A) IS 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 5 NOT JUSTIFIED IN DELETING THE SAME. AS AGAINST THI S, LD COUNSEL OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). THE L D. COUNSEL OF THE ASSESSEE EXPLAINED THAT LOOKING TO THE CAPITAL AVAILABLE IN PERSONAL BOOKS OF ACCOUNTS AS ON 31.03.2005 WHICH IS ABOUT ONE CRORE RUPEES, NO DISA LLOWANCE OUT OF INTEREST FREE ADVANCE GIVEN TO THREE PARTIES IS CALLED FOR. 8.3 RIVAL SUBMISSIONS WERE CONSIDERED. THE LD. DR H AS NOT DISPUTED THE AVAILABILITY OF INTEREST FREE ADVANCE IN PERSONAL BOOKS OF ACCOU NTS OF THE ASSESSEE AS ON 31.03.2005. THE ADVANCE TO FALGUNI A SHAH RS.114456 /- AND RS.15000 TO ANUP A SHAH (HUF) WERE MADE BY THE ASSESSEE OUT OF CAPITAL BALANCE AVAILABLE IN THE PERSONAL BOOKS OF ACCOUNTS AND THEREFORE NO DISALLOWANCE IS CALLED FOR. THE ADVANCE TO ONLINE BUSINESS SYSTEM RS.205000/- IS A BUSINESS ADVANCE G IVEN TO OBTAIN FRANCHISEE. THEREFORE, ON THIS ADVANCE ALSO NO NOTIONAL INTERES T CAN BE CHARGED. LOOKING TO THE CONSPICUOUS FACTS OF THE CASE AS BROUGHT ON RECORD BY THE LD. CIT(A) IN THE IMPUGNED ORDER, WE ARE CONVINCED THAT THERE WAS NO NECESSITY TO WORK OUT THE NOTIONAL INTEREST AND MADE DISALLOWANCE OF RS.40135/-. THE VIEW TAKEN BY THE LD. CIT(A) IN THE IMPUGNED ORDER IN THIS REGARD IS UPHELD AND GROUND OF THIS A PPEAL IS REJECTED. 9. NOW WE TAKE UP THE GROUND NO.2 (IV) OF ASSESSEE S APPEAL AND GROUND NO.3 OF REVENUES APPEAL. IN THE ASSESSMENT ORDER, THE ASS ESSING OFFICER MADE ADDITION OF RS.65,61,499/- ON ACCOUNT OF LOW GROSS PROFIT BY RE JECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME-TAX ACT. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE ON PAGE NO.3 IN PARAGRAPH 9 OF THE ASSESSMENT ORDER. THE BA SIC FACTS WHICH ARE NOTICED BY THE ASSESSING OFFICER ARE THAT THERE IS A SHORT FALL IN GROSS PROFIT BY 3.75% FOR THE ASSESSMENT YEAR IN COMPARISON TO THE GROSS PROFIT S HOWN IN LAST ASSESSMENT YEAR AS UNDER:- A.Y. GROSS PROFIT 2004-05 8.02% 2005-06 4.30% 9.1 BEFORE THE ASSESSING OFFICER, THE ASSESSEE EXPL AINED THAT SHORT FALL IN GROSS PROFIT IS DUE TO THE FACT THAT LESS PURCHASE DISCOUNT WAS RECEIVED IN CURRENT YEAR AS COMPARED TO LAST ASSESSMENT YEAR I.E. AY 2004-05. THIS REASO NING WAS NOT ACCEPTED BY THE 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 6 ASSESSING OFFICER. FURTHER, DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE Q-TALL Y OF ITEMS, WHICH THE ASSESSEE FAILED TO PRODUCE ON THE GROUND THAT THEY HAVE NO SOFTWARE TO FILE ITEM-WISE VALUE OF ALL THE GOODS. THE ASSESSING OFFICER FOUND THIS EXPLANATION UNREALISTIC. 9.2 FINALLY, THE ASSESSING OFFICER NOTICED THAT THE RE IS A DIFFERENCE IN SALES OF RS.1236821/-, THE RECONCILIATION FILED BY THE ASSES SEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER, FOR WHICH THE ASSESSING OFFICER ISSUED NOTICES U/S 133(6) OF THE INCOME-TAX ACT TO FOUR PARTIES WHICH REMAIN UNSERVE D AND THE DIFFERENCE IN ACCOUNTS WERE ALSO NOTICED, THEREFORE, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT AND AFTER TAKING AVERA GE GROSS PROFIT OF LAST THREE YEARS, APPLIED GROSS PROFIT RATE OF 12% AND ADDED THE AMOU NT OF RS.6561499/- FOR LOW GROSS PROFIT. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESS EE TOOK FOLLOWING PLEA/ARGUMENTS:- I) BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB OF THE AC T. II) THE Q-TALLY WERE FURNISHED AFTER MAKING SOME EF FORTS IN THE SOFTWARES. III) FILED CONFIRMATION OF ALL THE PARTIES TO WHOM NOTICES U/S 133(6) OF THE ACT REMAIN UNSERVED AND ARGUED THAT Q-TALLY AND CONFIRM ATIONS COULD NOT BE FILED AS CASE WAS GETTING TIME-BARRED AND SUFFICIEN T OPPORTUNITIES WERE NOT PROVIDED. 9.3 IN PARAGRAPH 7.2 OF THE IMPUGNED ORDER, LD CIT (A) OBSERVED THAT NEW ADDITIONAL EVIDENCES WERE FILED, THEREFORE VIDE HIS OFFICE LET TER DATED 29.02.2008 HE ASKED THE ASSESSING OFFICER UNDER RULE 46A REGARDING ADMISSIB ILITY OF THE SAME AND ALSO COMMENTS ON THE NEW/ADDITIONAL EVIDENCES BY 15.10.2 008. THEREAFTER, LD. CIT(A) ISSUED REMINDERS VIDE LETTER DATED 25.11.2008, 06.04.2009 AND 24.07.2009. HOWEVER, NO REMAND REPORT WAS SUBMITTED BY THE ASSESSING OFFICE R. THEREAFTER, THE LD. CIT(A) ISSUED FINAL REMINDER ON 04.11.2009 TO SUBMIT THE REMAND R EPORT BY 16.11.2009. DESPITE THIS FINAL REMINDER ALSO, NO REMAND REPORT WAS RECEIVED AFTER LAPSE OF 12 MONTHS. THEREFORE, THE LD. CIT(A) DECIDED THE APPEAL ON THE BASIS OF M ATERIAL AVAILABLE, AFTER ADMITTING THE ADDITIONAL EVIDENCES WHICH ACCORDING TO HIM FALLS I N THE CATEGORY OF CLAUSE (C) AND (D) UNDER RULE 46A AND CONFIRMED THE ADDITION OF RS.156 0234/- AND DELETED THE BALANCE ADDITION OF RS.5001265 FOR THE DETAILED REASON GIVE N IN PARAGRAPH 7.3, WHICH READS AS UNDER:- 7.3 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. KEEPING IN VIEW THE EVIDENCES 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 7 AVAILABLE, IT IS NOW EVIDENT THAT THE DEFECTS POINT ED OUT BY THE ASSESSING OFFICER HAVE BEEN RECONCILED BY THE APPELLANT IN THE APPELL ATE PROCEEDINGS THAT THE CONFIRMATIONS OF THE THREE PARTIES TO WHOM PAYMENTS HAVE BEEN MADE BY CHEQUE IS FOUND TO BE CORRECT, AND THEREFORE, THE TRANSACT IONS ARE CONSIDERED AS GENUINE. Q-TALLY FILED ALSO SHOWS EXTEND OF PROFIT/LOSS ON E ACH ITEM AND SAME IS CONSIDERED WHILE DECIDING THE SHORTFALL. IT IS ALSO FOUND THAT THE DIFFERENCE IN SALES ON ACCOUNT OF CURRENCY DIFFERENCE IS FOUND RECONCIL ED. HOWEVER, VARIOUS FACTORS SHOW THAT BOOKS ARE NOT RELIABLE, BECAUSE OF EXPLAN ATION GIVEN BY THE APPELLANT IN PAPER-BOOK FILED ON 01.09.2008 IS AN EXERCISE IN ARITHMETIC AND WORKING OF GROSS PROFIT IS SHOWN AT 4.13%, WHICH IS LOWER THAN THE GROSS PROFIT OF 4.30% ALREADY SHOWN IN THE BOOKS OF ACCOUNTS. THE ANALYSI S OF Q-TALLY FILED BY THE APPELLANT WAS MADE AND IT IS FOUND THAT IN CASE OF THE FOLLOWING ITEMS, THE APPELLANT HAS SHOWN LOSS EXCEEDING RS.1 LAKHS, FOR WHICH NO REASONABLE EXPLANATION IS ON RECORD. THEREFORE ARE OTHER ENTRI ES ALSO LESS THAN RS.1 LAKHS SHOWING LOSS FOR WHICH ALSO NO EXPLANATION ON RECOR D, HENCE, BOOKS OF ACCOUNTS ARE HELD TO BE INCORRECT AND RELIABLE. 1) LOSS INCURRED IN MASOOR DAL - 150240 2) LOSS SHOWN IN CRANK CASE ASSY. COMP. - 423144.58 3) LOSS SHOWN IN CRANK CASE ASSY. COMP/EXT. - 752879.12 4) LOSS SHOWN IN BRAVO 5 PORT CYLINDER 2 MM - 298017 5) COUNTER SCALE POLLAND - 205246 6) LABLE (GUFRAN) - 30000 7) PP/HDPE BAGS 24 X 34 - 111000 8) NASNOCET ORANGE ERN - 177500 9) ACRYOL DEEP BLUE DSL - 202500 10) SLIDER BLK W/PIN SET OF 3 RED - 751739 11) AUTO HOODS 2/S - 157935 12) AUTO HOODS COVER 25 EX BROWN - 253228 13) AUTO HOODS COVER 25 EX WHITE - 448140 14) AUTO HOODS COVER 25 EX BROWN - 431172 15) MASOOR DAL - 329200 AS SUCH, THE ASSESSING OFFICERS ACTION IN REJECTIN G BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT IS HELD CORRECT AND VALID AND SAME IS UP HELD. HOWEVER, THE ADOPTION OF 12% GROSS PROFIT FOR MAKING ADDITION BY THE ASSESSI NG OFFICER IS NOT FOUND SUPPORTED BY THE VARIOUS FACTS. THE ASSESSING OFFIC ER HAS TAKEN AVERAGE GROSS PROFIT OF LAST 3 YEARS TO ARRIVE AT THE FIGURE OF 1 2%. AT THE BEST, THE LAST YEARS GROSS PROFIT CAN BE TAKEN FOR COMPUTATION FOR THIS YEARS GROSS PROFIT AT 8.02% AND SHORTFALL OF 3.72% (8.02 4.30). AS FAR AS THE EXP LANATION OF LESS REALIZATION IS FOUND TO BE ACCEPTABLE, WHICH COMES TO 1.89% AND AF TER DEDUCTING THE SAME FROM SHORTFALL OF 3.72 1.89, THE UNEXPLAINED DIFF ERENCE REMAINS AT 1.83%. AS THERE IS NO REASONABLE EXPLANATION FOR THE ABOVE SH ORTFALL OF 1.83%, THE ADDITION OF RS.1560234/- IS BEING CONFIRMED AND REST OF ADDI TION OF RS.5001265/- (6561499 1560234) IS HEREBY ORDERED TO BE DELETED . THIS GROUND OF APPEAL IS PARTLY ALLOWED. AGGRIEVED WITH THE ORDER OF LD. CIT(A), BOTH THE S IDES ARE IN APPEAL BEFORE THIS TRIBUNAL. 9.4 AT THE TIME OF HEARING BEFORE US, ON BEHALF OF THE ASSESSEE SHRI S.N. DIVATIA, ADVOCATE, APPEARED AND POINTED OUT THAT BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THE ADDITIONAL EVIDENCES. THE LD. CIT(A) CALLED FOR REMAND REPORT. SINCE THE ASSESSING OFFICER WAS NOT SUBMITTING THE REMAND REPORT, THE L D. CIT(A) REJECTED THE EXPLANATION OF THE ASSESSEE ON DOUBTS AND SUSPICION WITHOUT VERIFY ING THE Q-TALLY FILED BY THE 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 8 ASSESSEE. HE SUBMITTED THAT THE ASSESSEE IS A 100% EXPORTER. IN MOST OF THE TIME HE MAKES PURCHASES ON RECEIPT OF EXPORT ORDER, THEREFO RE IN FEW CASES THE ASSESSEE INCURRED LOSSES. THE LOSS SO INCURRED IS ALSO LIABL E AS BUSINESS EXPENDITURE. IT IS ONLY ON ACCOUNT OF EARNING LOW PROFIT OR INCURRING LOSS IN FEW TRANSACTIONS, THE GP DECLARED IN THE ASSESSMENT YEAR UNDER APPEAL IS LOW AS COMPARED TO LAST YEAR. HE SUBMITTED THAT EACH AND EVERY ENTRY IN THE BOOKS OF ACCOUNTS IS SUPPORT ED BY DOCUMENTARY EVIDENCE. THE ASSESSING OFFICER WAS NOT SUBMITTED THE REMAND REPO RT BECAUSE HE WAS HAVING NOTHING TO SAY AFTER VERIFYING THE ADDITIONAL EVIDENCES. TH EREFORE, EITHER THE LD. CIT(A) OUGHT TO HAVE ACCEPTED THE PROFIT DECLARED IN THE BOOKS OF A CCOUNTS OR SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ADDITIONAL EVIDENC ES. TO SUM-UP, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HE HAS NO OBJECTION IN CASE THIS ISSUE IS REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION OF THE ENTIRE BOOKS OF ACCOUNTS AFTER CONSIDERING THE ADDITIONAL EVIDENCES WHICH WERE FIL ED BEFORE THE LD. CIT(A). AS AGAINST THIS, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). 9.5 AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS MERELY ON ACCOUNT OF THAT THE ASSESSEE HAS NOT FILED Q-TALLY OF ITEM WHICH THE ASSESSEE FAILED TO PRODUCE ON THE GROUND THAT THEY HAVE NO SOFTWARE TO FILE ITEM-WISE VALUE OF ALL THE GOODS. HOWEVER, BEFORE THE LD. CIT (A) THE ASSESSEE FILED THE SAME. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S 4 4AB. THE ASSESSEE HAS ALSO FILED CONFIRMATION OF ALL THE PARTIES TO WHOM NOTICES U/S 133(6) OF THE ACT REMAIN UNSERVED. Q- TALLY AND CONFIRMATIONS COULD NOT BE FILED ON ACCOU NT OF NON AVAILABILITY OF SUFFICIENT OPPORTUNITIES AS THE CASE WAS GETTING TIME-BARRED. BE THAT IT MAY BE, SINCE NO REMAND REPORT WAS SUBMITTED BY THE ASSESSING OFFICER ON AD DITIONAL EVIDENCES FURNISHED, WE ARE OF THE VIEW THAT IT WILL MEET THE END OF JUSTIC E IF GP ADDITION IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE A SSESSING OFFICER WILL RE-EXAMINE THE BOOKS OF ACCOUNTS IN THE LIGHT OF ADDITIONAL EVIDEN CES FURNISHED BEFORE THE LD. CIT(A) AND RE-ADJUDICATE THE GP ADDITION AFRESH AFTER ALLO WING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 9 10. GROUND NO.4 OF REVENUES APPEAL IS AGAINST DELE TING THE ADDITION OF RS.50,000/- MADE ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL. 10.1 THE ASSESSING OFFICER DISCUSSED THIS ISSUE ON PAGE NO.7 IN PARAGRAPH 11 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS SHOWN HOUSE HOLD EXPENSES OF RS.72,800/-. THIS ADDITION WAS MADE ON THE GROUND THAT THE ASSESSEE F AILED TO FURNISH THE BILL OF ELECTRICITY OF HIS RESIDENCE. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) HAS DELETED THE ADDITION FOR THE DETAILED REASON GIVEN IN PARAGRAPH 9.2 WHICH READS AS UNDER:- 9.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. IT IS NO TICED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING REGARDING LOW HOUSEHOLD E XPENSES. THERE IS NOTHING ON RECORD TO SUGGEST THAT APPELLANT HAS INCURRED MORE EXPENDITURE ON HOUSEHOLD THAN WHAT HAS BEEN SHOWN BY THE APPELLANT TOWARDS H OUSEHOLD EXPENDITURE. CONSIDERING THE STANDARD OF LEAVING, THE WITHDRAWAL AMOUNT OF RS.72800 APPEARS TO BE SUFFICIENT. THERE APPEARS NO REASON FOR MAKIN G SUCH ESTIMATED ADDITION. THE ASSESSING OFFICER HAS NOT VERIFIED THE EXPENSES INCURRED BY THE APPELLANT TOWARDS HOUSEHOLD IN DETAIL AND SAME WAS ALSO NOT B ROUGHT ON RECORD TO SUGGEST OTHERWISE. THEREFORE, IN ABSENCE OF EXISTENCE OF AN Y MATERIAL ON RECORD INDICATING MORE EXPENDITURE DONE BY THE APPELLANT T OWARDS HOUSEHOLD EXPENSES, THE ADDITION OF RS.50000/- MADE BY THE ASSESSING OF FICER IS BASED ON SURMISES AND CONJECTURES, AND THEREFORE, DEVOID OF ANY MERIT S AND DESERVES TO BE DELETED. ACCORDINGLY, THE ADDITION OF RS.50000/- MADE BY THE ASSESSING OFFICER IS HEREBY ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALL OWED. 10.2 IN RESPECT OF THIS GROUND, WE HAVE HEARD BOTH THE SIDES. IT IS PERTINENT TO NOTE THAT THIS ADDITION HAS BEEN MADE ON DOUBTS AND SUSPICION ; THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) IN THIS REGARD IS UPHELD. THIS GROUND O F APPEAL IS REJECTED. 11. THE GROUND NO.5 OF REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS.20,07,340/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT. THE LD. COUNSEL OF THE ASSESSEE EXPLAINED THESE ARE SUNDRY CREDITORS AND N OT CASH CREDITS. SINCE THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS O F THE PURCHASES, HE SHOULD HAVE ACCEPTED THE SUNDRY CREDITORS. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER THE LD. CIT(A) HAS DELETED THIS ADDITION FOR THE DETAILED R EASON GIVEN IN PARAGRAPH 8 ON PAGE NO. 8 OF THE IMPUGNED ORDER I.E. ALLOWING THE BENEF IT OF TELESCOPY. WHILE ADJUDICATING THE GP ADDITION, WE HAVE RESTORED THE SAME TO THE FILE OF THE ASSESSING OFFICER, THEREFORE IN THE INTEREST OF JUSTICE THIS ADDITION IS ALSO RESTO RED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL EXAMINE THE NATURE OF THESE CREDITS I.E. WHETHER THESE ARE SUNDRY CREDITS OR CASH CREDI TS. THE ASSESSEE SHALL ALSO PRODUCE 681 & 781-RJT-2010 & CO 6-RJT-2011 - SH ANUPBHAI AMRUTLAL SHAH 10 NECESSARY EVIDENCES IN THIS REGARD AND THE ASSESSIN G OFFICER WILL EXAMINE THE SAME AND THEREAFTER RE-ADJUDICATE THIS ADDITION OF RS.20 ,07,340/- AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH THE S IDES. 12. THE GROUNDS RAISED BY THE ASSESSEE IN HIS CROSS -OBJECTIONS ARE IN SUPPORT THE RELIEF ALLOWED BY THE LD. CIT(A) IN THE IMPUGNED OR DER. IN VIEW OF OUR DECISION IN CROSS- APPEALS, THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE RENDERED INFRUCTUOUS; THEREFORE NEEDS NO ADJUDICATION. 13. IN THE RESULT, BOTH THE APPEALS, I.E. BY THE AS SESSEE AND REVENUE, ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES; AND CROSS-OBJECTI ONS FILED BY THE ASSESSEE ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- SD/- (B. R. JAIN) (T. K. SHARMA) $( #*% / ACCOUNTANT MEMBER #*% /JUDICIAL MEMBER *$+ ,*-/ ORDER DATE 09.01.2014 /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- SHRI ANUPBHAI AMRUTLAL SHAH, C/O. GUJA RAT TRADING CO., RAJKOT 2. /RESPONDENT- (1) JCIT/ACIT, RANGE-2,RAJKOT & ( 2) DCIT, CIRCLE -2, RAJKOT 3. #-2- & 3 / CIT-II, RAJKOT 4. & 3 - / CIT (A)-III, RAJKOT 5 . 678 , , / DR, ITAT, RAJKOT 6 . 89 :; / GUARD FILE. *$+ #$ / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.