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Income Tax Appellate Tribunal, DELHI BENCHES : SMC-I : NEW DELHI
Before: SHRI R.S. SYAL
ORDER This appeal by the assessee is directed against the order passed by the CIT(A) on 29.01.2014 in relation to the assessment year 2010-11.
The assessee has raised three grounds, namely, reducing the gross loss of Rs.16,04,026/- to nil; disallowance of Rs.10,000/- out of expenses on estimate basis; and addition of Rs.10 lac on estimate basis.
Briefly stated, the facts of the case are that the assessee is a limited company which filed its return declaring nil income.
During the course of assessment proceedings, the AO observed that there was a gross loss of Rs.16.04 lac shown by the assessee against the sales of Rs.33.39 lac, which was roughly 50% of sales. It was seen that the assessee had shown receipts of Rs.36.63 lac under the head ‘Rent’, etc., which, in the opinion of the AO, had no nexus with the trading activities.
He, therefore, proceeded to recast the assessee’s Trading, Profit and loss account as under:-
Op. Stock Rs.23,62,467/- Sales Rs.32,39,927/- Purchase Rs.30,02,358/- Closing Stock Rs.21,16,409/- Stores Rs. 1,54,631/- Power Rs.12,57,874/- Excise Duty Rs. 1,83,031/- Gross Loss Rs.16,04,026/- Rs. 69,60,362 Rs. 9,60,362 Gross Loss Rs.16,04,026/- Net Loss Rs.35,47,224/- Rent Rs.1,20,000/- 2
Interest Rs.9,69,242/- Depreciation Rs.3,55,796/- Sale Promotion Rs. 1,390/- Conveyance Rs. 12,071/- Other expenses Rs. 28,641/- Repair and Machinery Rs. 34,431/- Other expenses Salary, Telephone, insurance, etc. Rs. 4,21,627/- ----------------- Rs.35,47,224/- Rs.35,47,224/-
The AO noticed that the assessee could not justify consumption of raw material with production, sales, opening stock and closing stock of finished goods. The assessee had claimed expenses aggregating to Rs.42,101/-. In the absence of any cash memos and bills, etc., the AO made disallowance of Rs.10,000/-. Thereafter, he proceeded to compute the total income as under :-
Net Loss Rs.35,47,224/- Deduct: (i) Gross loss shown Rs.16,04,026/- Rs.16,04,026/- reduced to NIL (ii) Disallowance of expenses as claimed and as Para 4 Rs. 10,000/- Rs.16,14,026/- Loss (-) Rs.19,33,198/-
With the above observations, taxable income for the year was determined as under:-
Income from rent interest, etc., as Rs.36,63,228/- per facts in para 3 (-) Loss in manufacturing marketing of packing material as per facts in Para 4 Rs.19,33,198/- Rs.17,30,030/- Add i) The assessee had shown closing stock of Rs.21,16,409/- in trading account as against Rs.31,16,409/- as shown in balance sheet. By showing (in correct) amount of closing stock in trading account, the assessee had understated net income as per P&L A/c, hence, the difference of Rs.10,00,000/- is added to the taxable income. (Addition Rs.10,00,000/-) Rs.10,00,000/- Assessed Income Rs.27,30,030/-
The assessee remained unsuccessful to the extent of the issues raised in this appeal.
I have heard the rival submissions and perused the relevant material on record. The ld. AR contended that the recasting of the Trading and Profit & Loss Account by the AO was totally baseless inasmuch as most of the figures taken by him did not tally with the audited accounts furnished by the assessee. As regards the addition of Rs.10 lac, the ld. AR contended that the AO had wrongly taken the figure of closing stock in trading account and balance sheet, whereas there was actually no difference. To support such contention, the ld. AR also drew my attention towards pages 26, 27, 27A, etc., claimed to be elaboration of figures from the audited accounts.
The ld. DR could not point out as to how some of the figures, pointed out by the ld. AR, were taken by the AO for computing the total income. In view of the fact that there is so much mismatch in the figures taken by the AO with the audited accounts, I am unable to uphold the impugned order under these circumstances. In my considered opinion, the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of AO. I order accordingly and direct him to make the assessment afresh after allowing a reasonable opportunity of hearing to the assessee.
In the result, the appeal is allowed for statistical purposes.
The order pronounced in the open court on 23.02.2017.