DCIT, Ludhiana V. M/s Jain Udhay Apparels Pvt. Ltd., Ludhiana

ITA 111/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5125 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GULSHAN RAJ
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI. SANJAY GARG, JUDICIAL, MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.111/CHD/2017 ASSESSMENT YEAR: 2011-12 THE DY. CIT VS. M/S JAIN UDHAY APPARELS PVT. LTD . CENTRAL CIRCLE-III 36-38, SUNDER NAGAR, LUDHIANA LUDHIANA PAN NO. AAICS6040D CROSS OBJECTION NO. 45/CHD/2017 (IN ITA NO. 111/CHD/2017) ASSESSMENT YEAR : 2011-12 M/S JAIN UDHAY APPARELS PVT. LTD. VS. THE DY. CIT 36-38, SUNDER NAGAR, LUDHIANA CENTRAL CIRCLE-III LUDHIANA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. ASHWANI KUMAR SHRI. ADITYA KUMAR DEPARTMENT BY : SHRI. GULSHAN RAJ DATE OF HEARING : 24/01/2018 DATE OF PRONOUNCEMENT : 19/03/2018 ORDER PER DR. B.R.R.KUMAR, AM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AN D CROSS OBJECTION FILED BY THE ASSESSEE. 2. THE CROSS OBJECTION FILED IS BARRED BY 116 DAYS. THE ASSESSEE EXPLAINS THAT THE DELAY IS DUE TO MISPLACEMENT OF FILES AND UNDER THE BONAFIDE BELIEVE THAT THE CROSS OBJECTION HAS BEEN SENT FOR FILING WITH T HE REGISTRY. THE EXPLANATION OF THE ASSESSEE CAN BE ACCEPTABLE AND THE DELAY IS HER EBY CONDONED. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A)-5, LUDHIANA HAS ERRED IN RESTRI CTING THE ADDITION OF RS. 1,70,85,936/- TO RS. 81,19,207/- MADE ON ACCOUNT OF UNDER INVOICING OF SALE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE SURRENDERED ADDITIONAL INCOME OF RS. 75,00,000/- ON ONE HAND AND HAS 2 DECLARED A NET LOSS OF RS. 63.18 LACS. THERE IS A F ALL IN G.P. TO 10.16% VIS--VIS 16.03% AND 17.06% DURING THE EARLIER PREVIOUS YEAR AND THE CLA IM OF OLD STOCK WAS BOGUS. THIS CLEARLY INDICATES THAT THE ASSESSEE HAS SUPPRESSED ITS SALE S BY UNDER INVOICING THE SALES BILLS. 2. THAT THE LD. CIT(A)-5, LUDHIANA HAS ERRED IN RESTRI CTING THE ADDITION OF RS. 2,60,000/- TO RS./ 1,50,000/- MADE ON ACCOUNT OF TRAVELLING EXPENSE OF DIRECTORS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE PROPER VOU CHERS FOR THESE EXPENSES. 3. THAT THE LD. CIT(A)-5, LUDHIANA HAS ERRED IN RESTRI CTING THE ADDITION OF RS. 1,00,000/- TO RS. 50,000/- MADE ON ACCOUNT OF VEHICLE EXPENSE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS. 4. THE ASSESSEE HAS RAISED FOLLOWING GROUND IN ITS CROSS OBJECTION : 1. THAT THE LD. CIT(A)-5, LUDHIANA HAS ERRED IN LAW AN D ON THE FACTS OF THE CASE:- A) BY ARBITRARILY AND WRONGLY SUSTAINED PARTLY THE ADD ITION FOR RS. 81,19,207/- OUT OF TOTAL ADDITION OF RS. 1,70,85,936/- MADE ON ACCOUNT OF UN DER INVOICING OF STOCKS/SALES AND LOW G.P. RATE. B) BY ARBITRARILY AND WRONGLY SUSTAINED PARTLY THE ADD ITION FOR RS. 1,50,000/- OUT OF TOTAL ADDITION OF RS. 2,60,000/- ON ACCOUNT OF EXCESSIVE TRAVELLING EXPENSES OF DIRECTORS ON ADHOC BASIS. C) BY ARBITRARILY AND WRONGLY SUSTAINED PARTLY THE ADD ITION FOR RS. 50,000/- OUT OF TOTAL ADDITION OF RS. 1,00,000/- ON ACCOUNT OF VEHICLE EX PENSES ON ADHOC BASIS . 5. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SE IZURE OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 CONDUCTED O N 01/03/2011 IN THE CASE OF JAIN UDHAY GROUP OF CASES. DURING THE SEARCH THE AS SESSEE SURRENDERED ADDITIONAL INCOME OF RS. 75,00,000/- UNDER SECTION 132(4) OF THE INCOME TAX ACT UNDER THE FOLLOWING HEADS : DIFFERENCE IN STOCK RS. 30,00,000/- UNDISCLOSED / UNREALIZED / DEBTORS / SALES RS. 40,0 0,000/- UNEXPLAINED DOCUMENTS / EXPENSES RS. 5,00,000/- 6. THE ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS. 1,70,85,936/- AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION AFTER APPLYING RATE OF RS. 84/- PER KG. AS THE UNDER INVO ICING PRICE TAKING INTO CONSIDERATION AVERAGE SALE PRICE OF RS. 240/- ON TH E TOTAL SALE OF CLOTH OF 203404 KGS MADE DURING THE MONTH OF MARCH 2011. 7. THE LD. CIT(A) HAS GIVEN A RELIEF OF RS. 89,66,7 29/- ON THE GROUNDS THAT THE ASSESSEE HAS MADE CASH SALES AT AN AVERAGE RATE OF RS. 117/- PER KG AND BY ADOPTING THE VALUE OF RS. 240/- TAKEN UP BY THE ASS ESSING OFFICER THE UNDER INVOICING OF SALES TO THE EXTENT OF RS. 123/- PER K G IS SUSTAINABLE ON THE SALE OF 51375 KG. AND UNDER INVOICING RS. 55/- PER KG ON 32 731 KGS OF CLOTH SOLD TO SISTER CONCERN AT THE AVERAGE RATE OF RS. 185/-. 3 8. THE REVENUE IS IN APPEAL AGAINST THE RELIEF GRAN TED OF RS. 89,66,729/- AND THE ASSESSEE IS IN APPEAL AGAINST THE SUSTENANCE OF RS. 81,19,207/-. 9. THE REASONING OF THE LD. CIT(A) IS AS UNDER: GROUND NO. 1 PERTAINS TO THE ADDITION OF RS. 1,70,8 5,936/-ON ACCOUNT OF UNDER INVOICING OF STOCKS AND LOW G.P. RATE. THE AO HAS M ENTIONED THAT AT THE TIME OF SEARCH ON 01.03.2011 INVENTORY OF 178478 KG OF KNIT TED CLOTH WAS FOUND WHICH WAS VALUED AT RS. 4,54,33,772/- AFTER CONSIDERING THE R EPLY OF THE ASSESSEE, GIVING THE AVERAGE RATE OF RS. 254/- PER KG. FURTHER THE ASSES SEE PURCHASED KNITTED CLOTH WEIGHING 170774 KG FOR RS. 4,04,57,369/- DURING THE MONTH OF MARCH 2011, GIVING AVERAGE RATE OF RS. 237/- PER KG. AO FURTHER MENTIO NS THAT DURING THE MONTH OF MARCH, 2011, THE ASSESSEE HAS SOLD 203404 KGS OF KN ITTED CLOTH FOR RS. 3,17,50,073/- GIVING AVERAGE SALE RATE OF RS. 156/- PER KG. BASED UPON THE ABOVE FIGURES, THE AO CONCLUDED THAT THE ASSESSEE HAS SOLD CLOTH BELOW AVERAGE COST PRICE DURING THE MONTH OF MARCH, 2011 AND THERE WAS UNDER INVOIC ING OF SALE BY RS. 98 PER KG (RS 254-156) IN RESPECT OF THE STOCK FOUND AS ON 01 .03.2011 AND BY RS. 80 PER KG(RS. 236-156) IN RESPECT OF CLOTH PURCHASE DURING THE MONTH OF MARCH, 2011. THE AO ALSO MENTIONS THAT THE ASSESSEE HAS MADE CASH SA LES OF RS. 7.31 LACS WHICH WERE UN-VERIFIABLE AND FURTHER THAT THE SALE OF RS. 60.47 LAC HAS BEEN MADE TO THE SISTER CONCERN OF THE ASSESSEE. AS PER AO, THE GENU INENESS OF SUCH SALES ON VERY LOW RATE TO THE SISTER CONCERN IS NOT FREE FROM DOU BT. THE ASSESSEE WAS ISSUED A SHOW CAUSE BY THE AO AS TO WHY THE AVERAGE COST RAT E MAY NOT BE APPLIED TO SUCH UNDER INVOICED SALES. THE ASSESSEE IN REPLY SU BMITTED THAT MAJORITY OF STOCK OF CLOTH AS ON 01.03.2011 WAS OLD AND LEFT OVER, NO T USEFUL FOR MANUFACTURING OF GARMENTS AND THEREFORE, FRESH CLOTH WAS PURCHASED I N THE MONTH OF FEB AND MARCH, 2011 ONWARD. AS PER THE ASSESSEE, THE VALUAT ION OF KNITTED CLOTH WAS DONE AS PER FIFO BASIS IN RESPECT OF CLOSING STOCK ON TH E BASIS OF PURCHASE BILLS. IT WAS ARGUED THAT THE FRESH STOCK HAVE GOOD MARKET PRICE HOWEVER, THE LEFT OVER STOCK ARE SOLD AT DISCOUNT WHICH IS A KNOWN UNIVERSAL FAC T. IT WAS FURTHER ARGUED THAT DURING THE YEAR THE ASSESSEE HAS CLEARED ITS OLD ST OCK OF KNITTED CLOTH IN THE MONTH OF MARCH, 2011 SO AS TO LESSEN THE FINANCIAL AND OT HER COST BURDEN OF KEEPING THE HUGE STOCK IN HAND. AS PER THE SUBMISSIONS, ASSESSE E HAD HUGE INTEREST COST AND BANKS WERE PRESSING FOR DEPOSIT OF FUNDS, THEREFORE , THE ASSESSEE RESORTED TO SELLING THE OLD STOCK AT WHATEVER PRICE WAS AVAILAB LE IN MARKET. THE REPLY OF THE ASSESSEE WAS NOT FOUND CONVINCING BY THE AO WHO OBS ERVED THAT THERE WAS A FALL IN G.P ALSO. ON CONFRONTING WITH THESE FACTS BY THE AO DURING THE ASSESSMENT, THE ASSESSEE SUBMITTED THAT THE TURNOVER OF THE COMPANY HAD INCREASED FROM RS. 1842.58 LACS TO RS. 3437.34 LACS WHICH COULD BE POS SIBLE BY MAKING THE SALES AT LOWER MARGIN. THE ASSESSEE SUBMITTED THAT THOUGH TH ERE WAS FALL IN GP PERCENTAGE BUT AMOUNT WISE THERE WAS INCREASE IN GR OSS PROFIT FROM RS. 296.21 LACKS TO RS. 349.13 LACS GIVING AN INCREASE OF RS. 52.92 LACS. IT WAS ARGUED THAT ALL THE PURCHASES AND SALES ARE DULY SUPPORTED BY THE B ILLS AND NO DISCREPANCY OF THE SAME WAS FOUND DURING SEARCH EXCEPT THAT THE AS SESSEE COULD NOT EXPLAIN THE DIFFERENCE IN VALUATION OF CLOSING STOCK, (WHIC H AS PER ASSESSEE WAS MAINLY DUE TO ESTIMATED VALUATION) FOR WHICH SUFFICIENT AM OUNT WAS SURRENDERED TO COVER UP LEAKAGE OF REVENUE. THE AO FOUND THE EXPLANATION UNACCEPTABLE AND OBSERVED THAT ASSESSEE HAS NOT GOT ANY OLD STOCK AN D THE PURCHASES HAVE BEEN ' MADE THREE TO FOUR MONTHS BACK ONLY AND GAVE A DISC OUNT OF RS. 5 PER KG OUT OF AVERAGE COST PRICE OF RS. 245 (I.E. 254+237=491/2) IN RESPECT OF STOCK FOUND AS ON 01.03.2011 AND PURCHASED DURING THE MONTH OF MARCH, 2011. THE AO APPLIED A RATE OF RS. 240/KG ON THE TOTAL SALE OF CLOTH OF 20 3404 KG MADE DURING THE MONTH OF MARCH, 2011 & ASSESSED THE UNDER INVOICING ON TH E SALE OF KNITTED CLOTH AT RS.84 PER KG TOTALING TO RS.1,70,85,936 (I.E. RS. 84 PER KG X 203404 KG). THE AO ACCORDINGLY, MADE ADDITION OF RS. 1,70,85,936/- ON ACCOUNT OF UNDER INVOICING OF SALE WHICH AS PER AO WILL ALSO INCREASE THE GP RATE. THE FACTS OF THE CASE, THE BASIS OF ADDITION MADE BY THE A.O. AND THE ARGUMENTS OF THE AR DURING THE APPELLATE PROCEEDINGS HAVE BEEN CONSIDERED. THE AR ARGUED THAT THE MAIN REASON STATED BY THE AO FOR PRESUMING UNDER INVOICI NG IS THAT THE CASH SALES MADE DURING MARCH 2011 ARE UNVERIFIABLE AND THE SALES OF RS . 60 . 47 LACS HAVE BEEN MADE TO SISTER CONCERN WHICH ARE DOUBTFUL. ON THESE OBSERVATIONS THE AR HAS ARGUED THAT THE MAJORITY OF THE STOCK SOLD DURI NG MONTH OF 4 MARCH, 2011 CONSISTED OF CLOTH IN HAND FOUND AS ON 01.03.2011 WHICH WAS OLD , IN LOTS AND LEFT OVER OF CLOTHS, FADED CLOTH IN OLD TEXTURE / DESIGN & DIFFERENT COLORS ACCUMULATED OVER A NUMBER OF YEAR THUS NOT BE USED IN THE MANUFACTURING OF QUALITY GARMENTS FOR NEXT SUMMER/PRE WINTER SEASONS . AS PER AR, FOR THE NEW SEASON FRESH CLOTH WAS PURCHASED IN FEB/MARCH, 2011 . IT IS ARGUED THAT TO CLEAR THE LEFTOVERS STOCK, CLEARANCE SALES ETC ARE ORGANISED BY MANUFACTURER AND TRADERS OF CLOTH IN THE LINE OF BUSINESS OF ASSESSEE . DURING THIS YEAR THE ASSESSEE HAS CLEARED ITS OLD STOCK IN MARCH, 2011 SO AS TO LESSEN THE FI NANCIAL BURDEN. THE AR ARGUED THAT COPY OF EXTRACT OF SALE REGISTER AND SOME BILL S SHOWING SALES AT LOWER RATE WERE FILED WITH THE AO, WHO HAS NOT FOUND ANY DEFEC TS IN THE SAME. FURTHER TO LESSEN THE INTEREST COST THE ASSESSEE CLEARED THE C LOTH AT ANY RATE AT WHICH IT COULD BE SOLD IN THE MARKET IRRESPECTIVE OF COST. T HE AR SUBMITTED, THE CREDIT LIMIT PEAK AT RS.684.37 LACS AS ON 12.03.2011 WAS BROUGHT DOWN TO RS.487.83 LACS ON 31.03.2011 WHICH WAS POSSIBLE ONLY BY MAKING SALES OF OLD KNITTED CLOTH IN HAND AT WHATEVER RATE IT FETCHED. REGARDING THE FALL IN GP THE AR HAS ARGUED THAT SINCE THERE WAS INCREASE IN TURN OVER WHICH ALMOST DOUBLE D DURING THE YEAR, LEADING TO FALL IN GP WHICH IS NORMAL PHENOMENA. IT WAS FURTHE R ARGUED THAT THE CASE OF THE SISTER CONCERN TO WHICH SALES AT THE AVERAGE RATE O F 185 PER KG WERE MADE, WAS ALSO BEING ASSESSED WITH THE SAME AO BUT NO ADDITIO N ON ACCOUNT OF VERY LOW RATE OF PURCHASE OR PURCHASES MADE OUTSIDE BOOKS OF ACCOUNTS ETC., WAS MADE BY THE AO, THEREFORE, THE SALES MADE TO THE SISTER CONCERN SHOULD NOT BE DOUBTED. IT IS FURTHER ARGUED BY THE AR THAT THE AO HAS NOT POINTED OUT EVEN A SINGLE DISCREPANCY IN THE BOOKS OF ACCOUNTS OR SALE BILLS ETC., ISSUED DURING THE MONTH OF MARCH, 2011. THE AR HAS FILED THE DETAILS OF THE PURCHASES MADE DURING THE MONTH OF MARCH, 2011 AND PARTY WISE LEDGER OF S ALES MADE DURING THE MONTH OF MARCH, 2011. IT IS ARGUED THAT A PERUSAL OF THE SAME SHOWS THAT THE RECEIPTS ARE MOSTLY THROUGH BANKS AND THE PARTIES ARE IDENTIFIAB LE EXCEPT IN RESPECT OF CASH SALES WHICH ARE 51374 KGS DURING THE MONTH OF MARCH , 2011 AT TOTAL VALUE OF RS. 60,35,510/- GIVING AN AVERAGE RATE OF RS.117 PER KG . THE SALES MADE TO THE SISTER CONCERN DURING THE MONTH OF MARCH, 2011 ARE 32731 K GS FOR RS. 60,48,103/- GIVING AN AVERAGE RATE OF RS. 185 PER KG. THERE MAY BE MERIT IN THE ARGUMENT OF THE AR THAT T HE AO HAS NOT BROUGHT ON RECORD ANY INSTANCE WHERE THE FACT OF UNDER INVO ICING WAS NOTICED BY WAY OF CALLING THE INFORMATION FROM THE PARTIES TO WHOM TH E SALES WERE MADE. BUT THIS ARGUMENT DOES NOT HOLD GOOD FOR CASH SALES WHERE TH E PARTIES ARE NOT IDENTIFIABLE. HOWEVER, IN RESPECT OF IDENTIFIABLE P ARTIES, THE SALES BELOW THE COST PRICE WAS A GOOD REASON FOR INITIATING THE INQUIRY AND MAKING VERIFICATION FROM THE PARTIES, TO FIND OUT THE TRUE RATE OF SALES MADE BY THE ASSESSEE. IN RESPECT OF THESE PARTIES, THE ARGUMENT OF THE AR THAT IF THE AO WAS HAVING ANY DOUBT REGARDING THE SALE PRICE THEN HE WAS REQUIRED TO CALL INFORMA TION FROM THE PARTIES TO WHOM SALES WERE MADE, CARRIES WEIGHT. IN THE ABSENCE OF ANY POSITIVE EVIDENCE FOUND DURING THE SEARCH OR BROUGHT ON RECORD BY THE ASSES SEE OFFICER DURING THE COURSE OF ASSESSMENT, IT CANNOT BE ASSUMED THAT THERE WAS UNDER INVOICING OF SALES TO THE IDENTIFIABLE PARTIES WHEN THE ASSESSEE IS PRODU CING THE COMPLETE DETAILS AND BILLS FOR THE SALES. THE AR ARGUED THAT THE AO HAS ARBITRARILY AND WRONGLY REJECTED THE BOOKS AND MADE ADDITION BY RESORTING TO MATHEMA TICAL CALCULATIONS ON PRESUMPTION THAT SALES CANNOT BE MADE BELOW COST. T HE AO DID NOT MAKE ANY INDEPENDENT ENQUIRY OF THE ALLEGED UNDER INVOICED S ALES IF ANY MADE TO SISTER CONCERN & OTHER CUSTOMERS. AS PER AR, THERE IS NO T HUMB RULE THAT GP RATE EARNING SHOULD BE CONSTANT YEAR AFTER YEAR AND THAT IN HOSIERY TRADE, THERE IS ALWAYS LEFT OVER STOCK WHICH PILES UP OVER A PERIOD OF TIME AND LOSES THEIR VALUE OVER A TIME GAP. IT IS FURTHER ARGUED THAT THE ASSE SSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNTS ALONG WITH BILLS & VOUCHERS AND QUANTIT Y WISE STOCK TALLIES WHICH ARE DULY AUDITED UNDER THE PROVISIONS OF COMPANIES ACT AND INCOME TAX ACT. AFTER CAREFUL CONSIDERATION OF THE FACTS MENTIONED BY THE AO AND THE SUBMISSIONS / ARGUMENTS OF THE AR, THE CONCLUSION O F THE AO WITH REGARD TO DOUBTING THE SALE PRICE ARE FOUND TO HOLD GOOD IN R ESPECT OF CASH SALES AND ALSO TO THE SALES MADE TO THE SISTER CONCERN. THE ARGUME NTS OF THE AR ARE FOUND ACCEPTABLE ONLY IN RESPECT OF OTHER CUSTOMERS WHERE THE DETAILS WERE AVAILABLE WITH THE AO BUT NOTHING HAS BEEN BROUGHT ON RECORD TO SUBSTANTIATE THE ALLEGATION OF UNDER INVOICING OF SALES TO THOSE PARTIES. AS PE R THE DETAILS FILED DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAD MADE CASH S ALES AT AN AVERAGE RATE OF RS. 117 PER KG AND BY ADOPTING THE VALUE OF RS. 240 TAKEN UP BY THE AO, THE 5 UNDER INVOICING OF SALES TO THE EXTENT OF RS. 123 P ER KG IS FOUND SUSTAINABLE FOR CASH SALES AND ACCORDINGLY, THE ADDITION TO THE EXT ENT OF RS. 63,19,002/- (RS.123 X 51374 KG) IS CONFIRMED IN RESPECT OF CASH SALES. TH E AVERAGE RATE IN RESPECT OF SALES TO SISTER CONCERN IS RS. 185/- AND THE UNDER INVOICING WHICH CAN BE ATTRIBUTED BY ADOPTING THE RATE TAKEN BY THE AO COM ES TO RS. 55 PER KG AND ACCORDINGLY, THE ADDITION TO THE EXTENT OF RS. 18,0 0,205/-(RS.55 X 32731KG) IS CONFIRMED IN RESPECT OF SALES MADE TO SISTER CONCER N. THE BALANCE ADDITION MADE BY THE AO ON ACCOUNT OF UNDER INVOICING IS NOT FOUN D SUSTAINABLE AND THUS THE APPELLANT GETS A RELIEF OF RS. 89,66,729/-. 10. BEFORE US THE LD. DR RELIED UPON THE ORDER OF T HE ASSESSING OFFICER, WHILE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) TO THE EXTENT OF THE RELIEF GRANTED. IT WAS FURTHER ARGUED THAT THE ENTIRE ADDITION OUGHT TO HAVE BEEN DELETED. HE HAS ALSO REFERRED TO THE DECI SION OF COORDINATE BENCH OF ITAT CHANDIGARH IN ITA NO. 551/CHD/2015 DT. 17/10/2 017 IN THE CASE OF JAIN UDHAY FABRICS PVT. LTD. FOR THE A.Y. 2011-12, REGAR DING THE VALUATION OF THE STOCK. IT WAS HELD WHEREIN EVEN AFTER APPLYING THE RATE AS RECOMMENDED BY THE ASSESSING OFFICER AT RS. 253/- PER KG (PARTICULAR T O THAT ASSESSEE) THE VALUE OF THE STOCK COMES FAR BELOW WHICH WAS REFLECTED BY THE AS SESSEE IN ITS BOOKS OF ACCOUNTS. 11. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD PLACED BEFORE US. THE ASSESSING OFFICER HAS APPLIED RATE OF RS. 240/- PER KG ON THE SALE OF 203 404 KG CLOTHES AND DETERMINE UNDER INVOICING @ RS. 84/- PER KG ON THE TOTAL OF 2 03404 KG CLOTHES. THE ASSESSEE HAS SOLD IN CASH OF RS. 51374 KGS CLOTHES DURING TH E MONTH OF MARCH 2011 AT THE AVERAGE RATE OF RS. 117/- PER KG. THE LD. CIT(A) AF TER COMPLETELY EXAMINING IN DETAIL THE PURCHASES MADE DURING THE MONTH OF MARCH 2011 AND PARTY WISE LEDGER OF SALES AND AFTER EXAMINATION OF THE RECEIP TS WHICH HAVE BEEN THROUGH BANKS HAS RIGHTLY ADOPTED THE VALUE OF RS. 240/- PE R KG AND UNDER INVOICING OF THE SALE TO THE EXTENT OF RS. 123/- PER KG HAS BEEN DETERMINED CORRECTLY ON THE CASH SALES PART. HENCE WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE LD. CIT(A) WITH REGARD TO THE SALE PRICE IN RESPECT OF CASH SALES ONLY. THE DECISION OF THE CIT(A) IS ACCEPTABLE IN RESPECT OF CASH SALES M ADE BY THE ASSESSEE AT AN AVERAGE RATE OF RS. 117/- PER KG AGAINST THE VALUE OF RS. 240/- TAKEN UP BY THE ASSESSING OFFICER AND DETERMINING THE UNDER INVOICI NG OF THE SALES. HOWEVER WE ARE NOT IN AGREEMENT WITH THE OBSERVATION OF THE LD . CIT(A) REGARDING THE SALE MADE TO THE SISTER CONCERN AS THE PRICE AT WHICH TH E SALES WERE MADE TO SISTER CONCERN WAS NOT LESS THAN THE AVERAGE SALES PRICE. THUS ASSESSEE GETS RELIEF OF RS. 18,00,205/-. 6 12. AS A RESULT ON THIS GROUND THE APPEAL OF THE RE VENUE STANDS DISMISSED WHEREAS THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLOWED. 13. GROUND NO. 2 & 3 OF THE APPEAL OF THE REVENUE A ND GROUND NO. 1B & 1C OF THE CROSS OBJECTION OF THE ASSESSEE PERTAINS TO THE DISALLOWANCE ON ACCOUNT OF TRAVELLING & VEHICLE EXPENSES: 14. THE ASSESSEE HAS INCURRED RS. 25.80 LACS TOWARD S TRAVELLING EXPENSES. THE ASSESSING OFFICER HAS DISALLOWED RS. 2,60,000/-(10% ) AS THE VOUCHERS OF EXPENDITURE DO NOT CONTAIN THE DETAILS OF EXPENSES INCURRED AND PURPOSE OF TRAVEL. 15. LD. CIT(A) HAS RESTRICTED THE AMOUNT OF RS. 260 000/- TO RS. 150000/- AND ALLOWED RELIEF OF RS. 110000/- ON THE GROUNDS THAT SOME OF THE EXPENSES ARE BOOKED AS CASH PAYMENTS AND ALSO TO IMPREST ACCOUNT . SIMILARLY THE LD. CIT(A) HAS GIVEN RELIEF OF RS. 50,000/- OUT OF THE RS. 1.0 0 LACS DISALLOWED BY THE ASSESSING OFFICER ON THE TOTAL AMOUNT OF RS. 4,13,250/- CLAIM ED BY THE ASSESSEE. BEFORE US THE LD. AR SUBMITTED THAT RS. 5,00,000/- HAS ALREADY BEEN OFFERED FOR EXPENSES HENCE NO FURTHER DISALLOWANCES ARE REQUIRE D. THE ASSESSING OFFICER MAY GO THROUGH THE COMPUTATION OF INCOME TO VERIFY THIS FACT AND MAY ALLOW AFTER DUE VERIFICATION. THEREFORE GROUND NO. 2 & 3 OF THE REVENUES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 16. AS A RESULT, GROUND NO. 2 & 3 OF THE APPEAL OF THE REVENUE AND GROUND NO. 1B & 1C OF THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED AND CROSS OBJECTION OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19/03/2018 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR