ACIT, UTTAR PRADESH vs. SH. BANARASI DASS, SAHARANPUR

2 ITA-4986 & 5204/D/2012 ITA No.5204/Del/2012 – Assessee’s appeal in the case of Late Smt. Saroj ITA No.5204/Del/2012 ITA No.5204/Del/2012 Assessee’s appeal in the case of Late Smt. Saroj Assessee’s appeal in the case of Late Smt. Saroj Assessee’s appeal in the case of Late Smt. Saroj Rani : Rani :- Rani : Rani :

Ground No.1 of the assessee’s appeal is as under:-

Learned counsel for the assessee submitted that the GP addition was partly sustained by the learned CIT(A) by applying a GP rate of 10% as against 9.67% declared by the assessee and thereby confirming the part addition of `1,03,270/- in the income of the assessee. He submitted that the Assessing Officer has applied a GP rate of 12% in this case which was found to be very excessive. Learned counsel for the assessee submitted that the assessee has made a surrender of `4.5 lakhs separately and the credit thereof has been allowed by the CIT(A) while determining the GP addition in this case. He submitted that during the year, the assessee has declared higher sales of `3.12 crores and the GP rate of 8.23% as against the sales of `2.05 crores and GP rate of 8.30% in the immediately preceding year. He submitted that there was no valid reason for sustaining any GP addition in this case.

Learned DR has opposed the submissions of the learned counsel for the assessee. He submitted that it was a survey case and the accounts were not found proper and Assessing Officer has given various reasons for making the GP addition by applying a GP rate of 12% on the declared sales of the assessee. He referred to the relevant portion of the assessment order in support of the case of the Revenue.

We have considered the rival submissions and have perused the order of the Assessing Officer and learned CIT(A). We find that learned CIT(A) has passed a well-reasoned order in this case. He has considered the history of the assessee for the relevant year and past two assessment years and has applied a GP rate of 10% as against the GP rate of 12% applied by the Assessing Officer. The assessee was able to declare higher sales at `3.12 crores during the relevant period as against `2.05 crores in the immediately preceding year with almost same rate of GP as compared to the last year. Learned CIT(A) has rightly allowed credit of `4.50 lakhs amount surrendered by the assessee during the course of survey and has sustained the balance addition of `1,03,270/-. There being no mistake in the order of learned CIT(A) on this issue, the same is confirmed and ground Nos.1, 1.1 & 1.2 of the assessee are dismissed.

Ground No.2 of the assessee’s appeal is as under:-

Learned counsel for the assessee submitted that the rent of the business premises was enhanced from `30,000/- to `60,000/- during

We have considered the rival submissions and have perused the order of the Assessing Officer and learned CIT(A). We find that the assessee has paid the rent of `60,000/- for the business premises for the whole year as against the rent amount of `30,000/- paid for the same premises in the immediately preceding year. In reply to a specific query from the Bench, learned counsel for the assessee submitted that the rent was revised after more than five years during the relevant period. The Revenue could not controvert the submissions of the assessee that the fair market rent of the business premises was still more than the amount paid by the assessee. In these facts of the case, we are of the view that there was no justification for sustaining the addition of `15,000/- on account of rent paid and the addition made is deleted and ground No.2 of the assessee’s appeal is allowed.

Ground No.3 of the assessee’s appeal is as under:-

We have heard the parties. We find that the learned CIT(A) has confirmed the disallowance of `6,400/- out of total customer welfare expenses of `42,536/-. We find that the expenses under this head has increased two-fold in comparison to the immediately preceding assessment year. The disallowance sustained by the CIT(A) could not be said to be excessive and accordingly is confirmed and ground No.3 of the assessee’s appeal is dismissed.

Ground No.4 of the assessee’s appeal is as under:-

We have heard the parties. We find that the disallowance of car expenses and car depreciation at 15% of the total expenses and depreciation claimed by the assessee could not be said to be excessive and therefore, there being no merit in the ground of appeal No.4 of the assessee, the same is dismissed.

We have heard the parties. We find that the learned CIT(A) has confirmed the disallowance of `10,000/- only out of total travelling expenses of `1,62,519/-. The Assessing Officer has recorded that these expenses were not fully vouched and the assessee conceded before the Assessing Officer that no vouchers were maintained and that assessee also failed to furnish details of persons, purpose and place of travel. In these facts, we hold that the disallowance was rightly sustained and therefore, the order of learned CIT(A) on this issue is confirmed. Ground No.5 is accordingly dismissed.

Ground No.6 reads as under:-

We have heard the parties. We find that the disallowance of `10,000/- was sustained by the learned CIT(A) out of generator and repair expenses totaling to `99,915/-. We find that learned CIT(A) has given reasons for sustaining the small disallowance of `10,000/- out of this head of expenses. There being no justification for interfering in the order of learned CIT(A) on this count, the same is confirmed and ground No.6 of the assessee’s appeal is dismissed.

Ground No.7 of the assessee’s appeal is as under:-

We have heard the parties. We find that disallowance of `31,482/- was sustained by learned CIT(A) out of sales promotion expenses of `48,300/-, shop expenses of `65,428/-, packing expenses of `49,143/- and office expenses of `47,015/- totaling to `2,09,886/-. We find that learned CIT(A) has passed a well-reasoned order on this issue and his order does not deserve any interference. Accordingly, the order of learned CIT(A) on this issue is confirmed and ground No.7 of the assessee’s appeal is dismissed.

Ground No.8 & 8.1 of the assessee’s appeal read as under:-

Learned counsel for the assessee submitted that the assessee has paid interest at the rate of 15% to its family members which was very reasonable and therefore, learned CIT(A) was not right in confirming the allowable interest rate of 12% and in confirming the addition of `1,14,315/-. Learned DR submitted that there was no justification for paying higher rate of interest at 15% to the family members of the assessee.

We have considered the rival submissions and have perused the order of the Assessing Officer and learned CIT(A). We find that the rate of interest at 15% paid to the family members of the assessee could not be called excessive and seems to be reasonable. The case pertains to the assessment year 2009-10 and considering the prevailing market rate of lending, we are of the view that the interest paid at the rate of 15% was justified. Therefore, the addition of `1,14,315/- sustained by the CIT(A) is deleted and ground No.8 & 8.1 of the assessee’s appeal are allowed.

Ground No.1 of the Revenue’s appeal is as under:-

Learned DR has relied on the order of the Assessing Officer. Learned counsel for the assessee has relied on the order of learned CIT(A).

We have heard the parties. We find that learned CIT(A) has passed a well-reasoned order on this issue while directing the application of GP rate of 10% as against 12% applied by the Assessing Officer. The facts of this case are similar to the facts of the case in the case of Saroj Rani for the same assessment year 2009-10 and, in the foregoing paragraphs of this order, we have recorded reasons for sustaining the action of the learned CIT(A) in applying the GP rate of 10% in the case of Smt. Saroj Rani and, accordingly, we hold that there is no merit in ground No.1 of the Revenue’s appeal, which is dismissed.

Ground No.2 reads as under:-

Learned DR has relied on the order of the Assessing Officer and learned counsel for the assessee has relied on the order of the CIT(A).

We have heard the parties. We find that learned CIT(A) has passed a well-reasoned order on this issue and the disallowance was partly deleted by the CIT(A) as was not found excessive in the facts of the case and was mainly verifiable. In these facts of the case, we hold that no interference is called for in the order of learned CIT(A). Accordingly, the order of learned CIT(A) on this issue is confirmed and ground No.2 of the Revenue’s appeal is dismissed.

Ground No.3 of the Revenue’s appeal is as under:-

Learned DR submitted that due enquiry in this case was not made and, therefore, the issue of addition made on account of unexplained trade creditors should be restored for re-examination at the level of the Assessing Officer. Learned counsel for the assessee submitted that the correct amount of trade creditors was `6,24,082/- and not `10,72,891/- as mentioned by the Revenue in its ground of appeal. He submitted that all the amounts were received by cheque and learned CIT(A) has called for the remand report which was duly submitted by the Assessing Officer. A copy of the remand report has been filed in the compilation before the Tribunal.

We have considered the rival submissions and have perused the order of the Assessing Officer and learned CIT(A). We find that the correct amount of trade creditors was `6,24,082/- and not `10,72,891/- as mentioned by the Assessing Officer. We find that rectification application was moved by the assessee and the Assessing Officer on 06.02.2012 has passed an order u/s 154 and has reduced the addition to `6,24,082/-. This amount pertains to three parties. We find that the assessee has filed copy of accounts of the three trade parties from whom purchases were made during the year at the time of assessment proceedings. The payments were made through account payee cheques. The assessee has explained that bills and goods received notes were available on record to prove the genuineness of the creditors. The creditor parties have sent their confirmation letters to the Assessing Officer and the learned CIT(A) has recorded that the Assessing Officer in the remand report dated 18.09.2012 has also confirmed this fact and no defects in the confirmation of accounts of the aforesaid creditors have been pointed out by the Assessing Officer. Learned CIT(A) has concluded that once the aforesaid creditors have confirmed the closing balance which was not disputed by the Assessing Officer, there is no basis left for making the addition. In these facts of the case, since the balances were on account of purchases made in the normal course of business by the assessee and payments were made through account payee cheques and the assessee was able to produce the bills and goods received notes before the Assessing Officer and the creditors have sent their confirmation letters to the Assessing Officer and that no defects in the confirmation of copies of accounts received from the aforesaid creditors have been pointed out by the Assessing Officer and that the creditors have confirmed the closing balance which could not be disputed by the Assessing Officer, we hold that the CIT(A) was justified in holding that there was no basis left for making the 11 ITA-4986 & 5204/D/2012 addition. Accordingly, the order of learned CIT(A) on this issue is confirmed and ground No.3 of the Revenue is dismissed.

Ground No.4 of the Revenue’s appeal reads as under:-

We have heard the parties. We find that the learned CIT(A) has passed a well-reasoned order on this issue. The CIT(A) has recorded that the total family expenses debited by the assessee were `2,70,000/- which was held as adequate to meet the requirements of the assessee’s family consisting of self, wife and son and, therefore, we hold that learned CIT(A) was justified in deleting the addition of `70,000/- made on account of low household expenses and ground No.4 of the Revenue is accordingly dismissed.

In the result, the appeal of the assessee Smt. Saroj Rani in is partly allowed and the appeal of the Revenue in Shri Banarasi Dass is dismissed. Decision pronounced in the open Court on 12th October, 2015.