M/S SILVEX & CO. (INDIA) LTD.,JAIPUR vs. INCOME TAX OFFICER, WARD-7-2, JAIPUR

Per contra, the ld. DR supported the rejection of books of account 10. by the lower authorities and thereby estimation of profit too and

43 ITA No. 900 & 901/JP/2018 M/s Silvex & Co. (India) Ltd. supported the arguments advanced in the respective order of the lower authorities on the issue.

We have considered the rival contention and perused the orders of 11. the authorities and the material available on record arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their contentions. ITA No 900/JP/2018 Ground of Appeal No. 1:-

We have considered the rival submissions and perused the material available on record. During the course of assessment proceedings the Assessing Officer has pointed out certain defects in the books of accounts including the discrepancies in “current year and previous year figures” of Balance Sheet filled in the form of return of income, besides it was alleged that the assessee failed to submit the stock register to the satisfaction of the Assessing Officer. Before us, the ld. Counsel has tried to answer the discrepancies in the figures of two Balance Sheets i.e. the current as well as immediately previous preceding year. Regarding the stock register, it is an admitted fact by the assessee that the stock register was not maintained in the desired format which leads to entertaining doubts on the stock figures furnished by the assessee. In view of these facts, we are in agreement with the lower authorities that the books of

44 ITA No. 900 & 901/JP/2018 M/s Silvex & Co. (India) Ltd. accounts are liable to be rejected. Accordingly, the application of provisions of section 145(3) as invoked by the AO, is hereby upheld.

In ground of appeal No. 2, the assessee has challenged the trading additions of Rs. 57,05,309/- made by AO and upheld by ld. CIT(A) by applying the GP rate of 6.71% as against 5.77% declared by the assessee. The ld. AR submitted that the turnover of the assessee had substantially increased in the year under consideration as compared to the immediately preceding previous years. Though the GP in money terms also increased from 3.29 crores to 3.50 crores however, there is a slight fall in the GP rate which has gone down from 5.92% of the immediately preceding previous year to 5.77% in the year under appeal. The ld. AR relied upon the decision of the Hon’ble Jurisdictional High Court in the case of Gotton Lime KhanijUdhyog reported in 256 ITR 243 to support his contention where in the decision stated supra, it is held that the rejection of books of accounts need not necessarily lead to any addition to the income. The ld. AR further submits that the discrepancies pointed out in the figures filled in the form of return of income filed were fully reconciled and there remained no difference on that score, therefore, it has been prayed that even if the provisions of section 145(3) are invoked, no addition should be made.

On the other hand, the ld. DR has supported the orders of the lower authorities and filed a gist of cases wherein the GP rate higher than the rate applied in the case of the assessee was upheld by Hon’ble High Court. Accordingly, the ld. DR requested for the confirmation of the addition made by the Assessing Officer.

45 ITA No. 900 & 901/JP/2018 M/s Silvex & Co. (India) Ltd.

In rejoinder, the ld. AR submits that the case laws relied upon by the ld. DR are distinguishable on facts and had also filed a chart narrating therein the differentiating points that with the appellant’s case thus these cases are not applicable in the present case and prayed that no addition should be made.

After considering the arguments, we are of the considered view that the assessee is having progressive history of trading results where the turnover has increased as compared to previous years coupled with the increase in gross profit in monetary terms. However, the fact remains that the assessee has failed to furnish the stock register to the satisfaction of the AO, therefore the value of stock is not subject to verification. In view of these facts and looking to the circumstances of the case, we are of the considered view that the GP rate applied by the AO is on a higher side and by considering the quantum increase of gross profit in the trading operations and further considering the possibility of revenue leakage by imperfections in the stock register, we uphold an addition of Rs. 3 lacs in the trading results to meet the end of justice. In the result these grounds of appeal are partly allowed.

Ground of appeal No. 3 :- We have heard the rival submissions and material available on record. Assessee has failed to deduct tax at source on the interest payment made to financial companies as well as some short deduction of tax was made. It was contended that the recipient companies are tax payers and had included the interest paid by the assessee in their return of income filed

46 ITA No. 900 & 901/JP/2018 M/s Silvex & Co. (India) Ltd. and paid tax thereon. However, the assessee has failed to furnish the evidence in this regard, therefore, the claim of the assessee could not be taken as proved. We thus upheld the addition of Rs. 2,39,196/-.

With regard to the remaining disallowance of Rs. 90,000/- made on account of short deduction of tax, it is seen that the assessee has complied with the provisions of TDS and made deduction though at a lower rate. The Hon’ble Calcutta High Court in the case of S.K. Tekriwal reported in 90 DTR page 26 has held that if the assessee has deducted the tax under wrong impression by applying wrong provisions of TDS the section 40A(ia) cannot be invoked. This view is also taken by the coordinate bench of ITAT, Jaipur in the case of M.C. Sharma Associates & Consultants Pvt. Ltd. in ITA No. 1028/JP/11. Thus by respectfully following the decisions of Hon’ble High Court and ITAT, the disallowance of Rs. 90,000/- made is hereby deleted. Thus the assessee gets a relief of Rs. 90000/- in this ground No. 3 of the appeal.

Ground of Appeal No. 4:-

The AO has made a disallowance of Rs. 8,020/- claimed by the assessee as expense for TDS demand and Rs. 10,295/- towards TDS penalty which according to AO and ld. CIT(A) were not allowable as expenditure. During the course of appellate proceedings, the ld. AR reiterated the same arguments which were made before the lower authorities and no new fact is brought on record in support of the claim that the expenditure of TDS demand and penalty are allowable expenditures. Looking to these facts, we are in agreement with the lower authorities that TDS demand and

47 ITA No. 900 & 901/JP/2018 M/s Silvex & Co. (India) Ltd. penalty being disallowable expenditures since the same are charged for violation of provisions of law, therefore, the same cannot be allowed as expenses. As a result, this ground is dismissed. In the result, appeal is partly allowed.

ITA No 901/JP/2018

Ground of Appeal No. 1 to 2.1:-

The facts involved in these grounds of appeal are identical to the facts involved in ITA No. 900/JP/2018 wherein we have made a detailed discussion on the issue and after considering the rival submissions trading addition of Rs. 3 lacs is confirmed. As the arguments put forth by both the parties are the same for this year also and facts being identical, therefore looking to the entirety of the facts and for the reasons given in the aforesaid appeal, we hereby uphold the addition of Rs. 2,00,000/- to meet the end of justice. As a result, these grounds of appeal are partly allowed.

Ground of Appeal No. 3 &3.1:- During the course of hearing the ld. AR of the assessee has not pressed these grounds, therefore the same is dismissed.

Ground of Appeal No. 4:-

Taking into facts and circumstances of the case, AO has made a disallowance of Rs. 11,709/- claimed by the assessee as expense for TDS

48 ITA No. 900 & 901/JP/2018 M/s Silvex & Co. (India) Ltd. demand which according to AO and ld. CIT(A) were not allowable as expenditure. During the course of appellate proceedings, the ld. AR reiterated the same arguments which were made before the lower authorities and no new fact is brought on record in support of the claim that the expenditure of TDS demand is allowable expenditure.we are of the opinion with the lower authorities that TDS demand being disallowable expenditure since the same is created for violation of provisions of law, therefore, the same cannot be allowed as expenses. As a result, this ground is dismissed.

In the result, the appeals are partly allowed.

Order pronounced in the open Court on 28/10/2022. Sd/- Sd/- ¼jkBksMdeys'kt;UrHkkbZ½ ¼ MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;dlnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28/10/2022. *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-M/s Silvex Company (India) Ltd., Jaipur. 2. izR;FkhZ@The Respondent- ITO, Ward -7(2), Jaipur. 4. vk;djvk;qDr@CIT(A) 5. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZQkbZy@Guard File {ITA No. 900 & 901/JP/218} vkns'kkuqlkj@By order, सहायकपंजीकार@Aेेज. त्महपेजतंत