SHRI GUNJAN AGRAWAL,SURAT vs. THE INCOME TAX OFFICER, WARD-1(2)(2), (ERSTWHILE ITO, WARD-2(2), ), SURAT

Per contra, the ld.Sr.Departmental Representative relied on 6. the order of the ld.CIT(A).

We have heard the rival submissions. We find that the 7. addition made by the AO is on the basis of memorandum of records which is not periodical performance and such facts have been clearly stated by the assessee during the course of assessment proceedings. It is seen that the process cloth received by the assessee in the month of April 2007 is more by 8308 metres whereas in the subsequent month i.e. May 2007 the same is less by equal quantity i.e. 8308 metres which is only account of difference in notings made by the assessee. Therefore, considering the small amount and the mere entry of memorandum which could not be tallied month to month as some part of the quantity is received in

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the next month. Therefore, the addition of Rs.53,645/- made by the AO is accordingly deleted.

Ground No.2 and 3 relates to confirming the addition of 8. Rs.18,943/- as unaccounted investment in grey cloth and addition of Rs.2,78,191/- unaccounted investment in grey cloth on the ground that there is a deficit in the quantity of goods sent to job worker against the goods received from them. The AO noticed that the memorandum or records for the first firs three months shows the monthwise details of grey cloth purchases, sales sent to mill consumed at mill and balance lying at mill on the basis of which the AO has inferred that the assessee has made unaccounted purchases of grey cloth to the tune of Rs.8,02,657/- so as to avail the excess processed cloth from mills and accordingly added the same to the total income of the assessee.

Being aggrieved, the assessee carried the matter before the 9. ld.CIT(A). During the appellate proceedings, a remand report was obtained from the AO in respect of additional evidences filed under Rule 46A of the Income Tax Rules. The ld.CIT(A) considered the remand report of the AO and observed that out of 12 parties, the bills and challans were verified by the AO during the

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proceedings in the case of eight parties and in the case of four parties namely M.L.Silk Mills, K., A.T.F, G.G. notices were returned unserved. The AO has worked out the quantity of grey cloths required for excess cloth of 82662 metres which includes the average shortage @ 10.27% and the value of this unaccounted purchases @9.71 works out to Rs.8,02,657/-. It was submitted that the assessee has received the delivery of goods of grey cloth through challans of 54050.75 metres in the first three months. On the basis of remand report, the ld.CIT(A) has deleted the addition of Rs.3,43,889/- and confirmed addition in respect of four parties at Rs.1,80,943/-. Similarly, addition of Rs.2,78,191/- was also confirmed as the explanation furnished by the assessee was not found convincing, accordingly, addition of Rs.4,59,134/- was confirmed out of total addition of Rs.8,02,657/- made by the AO.

Being aggrieved, the assessee filed appeal before this 10. Tribunal. The ld.Counsel submitted that the ld.CIT(A) has confirmed the addition in respect of four parties which could not be traced out and held that transaction with these four parties amounting to Rs.1,80,943/- is not genuine. Similarly, the addition for shortage of cloth to the extent of 28650 metres of grey cloth

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valued at Rs.2,78,191/- has also been confirmed by the ld.CIT(A). It was submitted that the findings given by the ld.CIT(A) are not correct as the assessee has given complete details of such consumption before the AO and during the remand proceedings. However, in the alternative, it was submitted that the assessee has shown Gross Profit @ 6.95%during the year consideration whereas in the preceding assessment year the gross profit disclosed by the assessee was at 7.39%. Therefore, it was submitted that at the most Gross Profit addition could be made for the unaccounted transaction in the grey cloths.

Per contra, the ld.Sr.DR supported the order of ld.CIT(A). 11.

We have heard the rival submissions and perused the 12. material available on record. We find that the deficit in the quantity of goods sent by the assessee for the job work against the goods received from job workers is not fully explained. The ld.CIT(A has examined the details during the remand proceedings and confirmed addition in respect of parties which we are not count traceable. However, it is also to be noted that the entire deficit in the quantity of goods sent for job work and received could not be added in totality. Therefore, we are of the

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considered opinion to accept the alternative plea of the ld.Counsel that addition could be made in respect by applying Gross Profit rate of 7.39% (rounded off 8%) disclosed by the assessee in preceding year on the addition of (Rs.1,80,943 + Rs.2,78,191). Therefore, the addition of Rs.36,730/- is confirmed and balance is deleted, accordingly ground no.2 and 3 of the appeal is partly allowed.

In the result, appeal of the assessee is partly allowed. 13.

The order pronounced in the open court on 02.05.2019. 14.

Sd/- Sd/- (H.S.SIDHU) (O.P.MEENA) (�याियकसद�यतथा/JUDICIAL MEMBER) (लेखासद�यकेसम� /ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 2nd May, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat