Income Tax Appellate Tribunal - Chandigarh
Jain Rice Mills, Kurukshetra vs Assessee on 31 March, 2016
I N T H E I N C O M E T A X AP P EL L AT E T R I BU N A L
D I VI S I O N B EN C H , C H AN D I G A R H
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms.RANO JAIN, ACCOUNTANT MEMBER
ITA No. 701/CHD/2012
Assessment Year: 2007-08
M/s Jain Rice Mills, Vs The JCIT,
Amin Road, Kurukshetra Range,
Kurukshetra. Kurukshetra.
PAN: AAEFJ0706E
(Appellant) (Respondent)
Appellant by : Shri Rakesh Jain
Shri Gunjeet Singh
Respondent by : Shri S.K.Mittal, DR
Date of Hearing : 28.03.2016
Date of Pronouncement : 31.03.2016
O R D E R
PER BHAVNESH SAINI,JM This appeal by assessee has been directed against the order of ld. CIT(Appeals) Karnal dated 16.03.2012 for assessment year 2007-08.
2. We have heard ld. Representatives of both the parties, perused the material on record and considered the findings of the authorities below.
3. The ld. counsel for the assessee did not press ground No. 1(a) of the appeal, the same is therefore, dismissed as not pressed.
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4. The remaining grounds of appeal from ground No. 1(b) to ground No. 6 read as under :
1.(b) The action of the CIT(A) in upholding the Assessment order for an addition of Rs 44,28,447/- attributable to under billing of Paddy is being challenged on facts and law and even the quantum of additions are being contested.
2. The action of the CIT(A) in upholding the Assessment order for an addition of Rs 1,98,202/- attributable to invoking the Provisions of Section 40A(2) is being challenged on facts and law and even the quantum of additions are being contested.
3. The action of the CIT(A) in upholding the Assessment order for an addition of Rs 7,75,001/- attributable to bad debts is being challenged on facts and law and without considering the Ratio - Decendi of the decision of Vijaya Bank (Supreme Court).
4. The action of the CIT(A) in upholding the Assessment order for an addition of Rs 33,00,029/- attributable to sale of Rice Bran at the lower rate is being challenged on facts and law and even the quantum of additions are being contested.
5. The action of the CIT(A) in upholding the Assessment order for an addition of Rs 147478.40/-( being 10% of Rs 14,74,784/-
) attributable to adhoc disallowance for the Wages expenses is being challenged on facts and law and even the quantum of additions are being contested.
6. The action of the CIT(A) in upholding the Assessment order for various additions without examining the impact for the 'Surrendered amount' of Rs 40,00,000/- and the 'telescoping effect' thereof in the additions sustained." 3
5. The facts of the case are that assessee firm has been engaged in the business of manufacturing and sale of rice, trading of paddy and rice and milling of paddy on job work basis. The assessee filed return of income at Rs. 77,314/- which was revised declaring net loss of Rs. 3,92,016/- due to claim of interest payable to the partners. The survey action under section 133A of the Income Tax Act was carried out at the business premises of the assessee firm on 19.01.2007. The assessee declared additional income of Rs. 40 lacs to cover up alleged discrepancies in the books of account, loose papers, documents and stock etc. detected during survey. During the assessment proceedings, the Assessing Officer noted that the additional income of Rs. 40 lacs declared and credited in the Profit & Loss Account and after excluding the same, there is a trading loss of Rs. 39,22,687/-. The Assessing Officer further noted that assessee had been declaring marginal income year after year which shows that assessee has been suppressing its income in earlier years as well.
6. The Assessing Officer referred to document D-1 and D-2 which were impounded during survey. These documents revealed undisclosed entries which were not entered in the books of account. The total undisclosed cash received as per these documents worked out to Rs. 95,91,294/-. The Assessing Officer noted that assessee has not filed any explanation with reference to this 4 unaccounted cash received except to say that same are covered by additional income of Rs. 40 lacs surrendered during the course of survey. The Assessing Officer added the peak of credits of entries recorded in these documents which worked out to Rs. 6,03,692/- and added to the income of the assessee as undisclosed income pertaining to rice trading since assessee failed to offer any explanation in this regard.
7. The Assessing Officer noted that assessee sold 18212.5 qtls. super fine paddy at an average rate of Rs. 482/- to Rs. 548/- to M/s Vijay Traders, Commission Agent, Delhi and @ Rs. 537/- to Rs.548/- to M/s Akash Enterprises, Delhi, whereas the same paddy was purchased at rates varying Rs. 666/- to Rs. 841/- pr quintal from 07.04.2006 to 07.01.2007. The Assessing Officer further noted that as late as on 06.01.2007 and 07.01.2007, super fine paddy weighing 1318.49 qtl. was purchased @ Rs. 775/- to 778/- per quintal from M/s Bala Sundri Rice Mills, Indri. In view of these facts, Assessing Officer asked the explanation of the assessee that super fine paddy was shown to be sold at 75% of the prevailing price of super fine paddy in the market which resulted in claim of loss of Rs. 44,28,447/- on purchase and sale of super fine paddy weighing 18212.50 qtls which was purchased at the average rate of Rs. 754/- pr quintal for Rs. 1,37,32,225/- and was claimed to be sold from 31.01.2007 to 31.03.2007 for 5 Rs. 93,03,778/- only. The Assessing Officer rejected the contention of the assessee and held that the assessee suppressed the sale value of super fine paddy subsequent to the date of survey in order to set off the additional income declared during the course of survey. The Assessing Officer, therefore, made addition of Rs. 44,28,447/-.
7(i) This addition was challenged before ld. CIT(Appeals) and it was submitted that assessee maintained proper books of account and confirmations of most of the parties have been filed. The payments are got verified from the bank accounts. All the dispatch of the goods were also cross-verified from the delivery challans, stock register and transit bill and statutory sales tax papers alongwith goods transfer through the vehicle etc. The summons were issued to the transporters who have also complied with the notice. Even payment and sales of paddy and rice bran were verified from the books of account of the purchasers. All parties with whom the dealings have been made are assessed to tax and also maintained proper books of account. The Assessing Officer made the addition on account of paddy by adopting market rate of Rs. 754/-. On the other hand, Assessing Officer accepted sale of 592.93 qtls. made by assessee at the average rate of Rs. 650/- executed at the prevailing market rate and also completely ignored by the Assessing Officer. 6
8. The ld. CIT(Appeals) confirmed the rejection of the books of account under section 145(3) as was made by Assessing Officer on account of survey conducted in the case of assessee and incriminating documents found during the course of survey and surrender made by the assessee. As regards the addition on merit, ld. CIT(Appeals) noted that assessee has shown the sale price at lesser amount as against the purchase made of the same superfine paddy at a higher rate. The ld. CIT(Appeals) also noted that Assessing Officer has verified from the Anaj Mandi, Kurukshetra that paddy was never less than Rs. 732/- per quintal whereas assessee has sold the superfine paddy at a lesser rate. The ld. CIT(Appeals) did not accept contention of the assessee that assessee maintained proper books of account and all the payments are verified through the bank accounts alongwith delivery challans and stock register etc. The ld. CIT(Appeals) also noted that in earlier year also, very meager income have been shown on this account. It was also noted that assessee in collision with these parties, have shown lesser consideration and accordingly, confirmed the addition of Rs. 44,28,447/- on which assessee has raised ground No. 1(b) of the grounds of appeal.
9. The Assessing Officer also noted that assessee has purchased 1979.31 quintals superfine paddy from sister concern M/s Atma Ram Daman Kumar, Kurukshetra 7 from 14.10.2006 to 31.10.2006 @ Rs. 840/- per quintal amounting to Rs. 16,62,891/- including bardana VAT etc. However, from the cash-book of M/s Atma Ram Daman Kumar who have purchased paddy from M/s Atma Ram Nem Kumar on the same dates as above much below the rate of Rs. 840/-. The details are noted in the impugned orders which vary from Rs. 729/- to Rs. 762/- . It was, therefore, noted that the assessee inflated the purchases in violation of provisions of Section 40A(2) of the Income Tax Act and incurred excessive and unreasonable cost of the paddy purchases and accordingly, made the addition of Rs. 1,98,202/-. The assessee filed reply before Assessing Officer alongwith four bills of paddy of M/s Rajesh Kumar Jaswant Kumar, Commission Agent but Assessing Officer noted that genuineness of these bills cannot be verified. The assessee reiterated the same submissions before ld. CIT(Appeals) and it was submitted that Assessing Officer has ignored that VAT is not included in the cost price and that surrender is already made of Rs. 40 lacs for discrepancies. Therefore, no further addition is liable to be made. The ld. CIT(Appeals) did not accept contention of the assessee and noted that assessee made purchases from sister concern at higher price and accordingly confirmed the addition and dismissed this ground of appeal of the assessee on which assessee has raised ground No. 2 of the grounds of appeal. 8
10. The Assessing Officer further noted that assessee has incurred bad debts of Rs. 7,75,001/- in respect of three parties namely M/s P.Lal Traders, Hodel, M/s Ratna Rice Industries P. Ltd. and M/s Sohan Rice Mills, Amritsar. It was noted that these debts were incurred in financial year 2000-01, yet till date assessee failed to file any documentary evidence in respect of any efforts made to recover these bad debts. Further parties failed to appear in office of the Assessing Officer, therefore, bad debts have not been proved. ITO, Ward-2, Patiala also reported that these entries are not appearing in the balance sheet of M/s Ratna Rice Industries. The Assessing Officer as per information obtained from the parties under section 131 also noted that no balance is outstanding against the assessee firm and accordingly, bad debts were disallowed and addition was made. The assessee submitted before ld. CIT(Appeals) that bad debts have been written off as irrecoverable in the accounts of the assessee, therefore, same is allowable deduction. There is no liability on the part of the assessee to prove that every possible effort has been made to recover bad debts. The ld. CIT(Appeals), however, did not accept contention of the assessee because the parties have confirmed that nothing was outstanding in respect of the assessee firm in their books of account as on 31.03.2007. The assessee is in ground No. 3 of the appeal on this issues.
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11. The Assessing Officer in the assessment order also noted that the yield of rice bran returned at 8.44% of paddy milled 134269 quintals is correct. The assessee has shown the sale of rice bran 13890 qtls. at lower rate i.e. Rs. 422.41 per quintal, whereas market rate was Rs. 660/- per quintal. The assessee valued closing stock at 1200 qtls. rice bran at Rs. 6,60,000/- at the rate of Rs. 550/- per quintal which is much higher than the sale rate at Rs. 422.41 per quintal and comparable cases would prove that assessee has sold rice bran at much lower than the market rate to incur heavy loss to cover up surrender of Rs. 40 lacs. The chart of valuation of comparable case is reproduced in the impugned order. The assessee was show caused as to why sale of rice bran may not be added to the taxable income @ Rs. 660/- and suppression of sales was calculated at Rs. 33,00,029/-. The assessee submitted that sale price of rice bran depends on contents of oil, quality of paddy and method of milling i.e. kacha rice and sela rice. Purchase Register of rice bran of M/s Goya Ago called for under section 131 of the Income Tax Act. Perusal of the Register shows that assessee sold rice bran at almost uniform rate of Rs. 4,10,415- and Rs. 435/- per quintal through out the year. The Assessing Officer adopted the rate of Rs. 660/- per quintal to be reasonable in view of the comparable cases and made the addition of Rs. 33,00,029/-.
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12. The assessee challenged the addition before ld. CIT(Appeals) and it was submitted that Assessing Officer has accepted the valuation of closing stock at Rs. 550/- per quintal and assessee had already made surrender of Rs. 40 lacs therefore, no addition should be made. The ld. CIT(Appeals) did not accept the contention of the assessee and on the same reasoning as have been given by the Assessing Officer, confirmed the addition. The assessee is on ground No. 4 challenging the confirmation of the addition.
13. The Assessing Officer also considered other expenses in assessment order including the wages which is claimed by assessee at Rs. 14,74,784/-. The Assessing Officer noted that these expenses are not explained with reference to the original vouchers and mode of payment, therefore, disallowance should be made. The assessee claimed that these expenses have been supported by internal vouchers. The Assessing Officer, however, did not accept contention of the assessee and in view of the documents found during the course of search, disallowed 25% of the wages expenses and made addition of Rs. 5,64,479/-. The assessee challenged the addition before ld. CIT(Appeals) and it was submitted that addition is unjustified. The wages were incurred for loading and unloading of rice and paddy, stocking of paddy etc. Payments are made at regular intervals. The addition is, therefore, not 11 justified. The ld. CIT(Appeals) in principle confirmed the addition. However, considering it to be excessive in nature, restricted the disallowance to 10% of the expenditure claimed and confirmed the addition of Rs. 1,47,478/- on which assessee is in ground No. 5.
14. The assessee on ground No. 6 challenged the order of ld. CIT(Appeals) in confirming the above additions without giving telescoping benefit of Rs. 40 lacs being surrendered amount.
15. We have heard ld. Representatives of both the parties. The ld. counsel for the assessee reiterated the submissions made before authorities below and referred to PB-1/29 which is surrender letter made for surrendering additional income of Rs. 40 lacs in assessment year under appeal to cover up al alleged discrepancies in the books of account, loose papers, documents, stock by-product and other records. PB- 1/19 is Profit & Loss Account in which assessee actually surrendered Rs. 40 lacs as Miscellaneous Income for the purpose of taxation. PB-2/1 is the details of paddy superfine in assessment year under appeal to show that opening stock was having valuation of Rs. 650/- per quintal and purchases have been made @ Rs. 665/- per quintal. The ld. counsel for the assessee further referred to PB-2/9 to 11 which is details of purchase account of paddy superfine in support of the same contention that average purchase rate was Rs. 650/- to 12 Rs. 665/- per quintal. The ld. counsel for the assessee, therefore, submitted that the higher rates mentioned in the impugned orders are totally wrong. He has referred to PB-2/27-29 to show that the selling of superfine paddy was Rs. 511/- on average basis as against the wrong figures taken by the Assessing Officer. He has submitted that the rates varying of this commodity because of the yield obtained and it being perishable in nature and processing of the commodity. He has submitted that paddy cannot be held for a long period therefore, rates given by the Assessing Officer are totally incorrect. He has referred to PB-3/25 which is list of sundry creditors for preceding financial year 2005-06 in which assessee was having sundry creditors in a sum of Rs. 2.10 Cr. He has referred to PB-1/22 which is list of sundry creditors at the end of the financial year i.e. 2006-07 in a sum of Rs. 25.15 lacs. He has submitted that assessee sold stock of superfine paddy at the lesser rate because assessee was in need of money to clear the creditors. These facts would prove that assessee after realizing the amount of sale consideration, has immediately paid to the creditor. PB-2/8 is the paddy superfine account prior to survey and after survey and submitted that same rates have been shown which have been wrongly taken by the Assessing Officer at different figures. He has submitted that since paddy cannot be held for a long period, therefore, it was sold immediately and in support of the 13 contention, filed study on "Rice Knowledge Bank" on record to prove that higher moisture contents result in more losses. The ld. counsel for the assessee submitted that all these reasons have not been considered by the authorities below and additions have been made without any justification. The ld. counsel for the assessee further submitted that Assessing Officer made further addition on account of rice bran sold at the lesser price. He has relied upon order of ITAT Chandigarh Bench in the case of Shakti Rice and General Mills, Kurukshetra Vs ITO in assessment year 2007-08 in ITA 764/2011 and ITA 726/2011 dated 30.03.2012 in which one of the party, as considered by Assessing Officer to be comparable case in the case of M/s Shiv Ganesh Industries, Shahbad, has been considered by authorities below and the ld. CIT(Appeals) held Rs. 450/- per quintal to be reasonable rate of sale of rice bran. The assessee's appeal as well as departmental appeal have been dismissed by the Tribunal confirming the rate of Rs. 450/- per quintal. The ld. counsel for the assessee further submitted that for making addition under section 40A(2), no comparable case have been cited and this addition is already covered by the surrendered amount.
15(i) The ld. counsel for the assessee, with regard to bad debts submitted that it was old amount not being coming from the parties. Therefore, it was written off 14 irrecoverable in the books of account of the assessee which fact have not been disputed by the Assessing Officer. These amounts pertain to three parties which were coming from financial year 2000-01 and since no amount is recovered therefore, it was written off as irrecoverable. He has referred to PB-2/3 to 7 which is assessment order for preceding assessment year 2006-07 under section 143(3) dated 26.12.2008 in which all the three parties namely M/s P. Lal Traders, M/s Ratna Rice Industries and M/s Sohan Rice Mills have been considered by Assessing Officer from whom no amount was being recovered, therefore, Assessing Officer added the interest @ 12%. He has submitted that the assessee preferred appeal before ITAT Chandigarh Bench and the Tribunal in ITA 122 of 2008 allowed the appeal of the assessee vide order dated 23.06.2009,copy of the same is filed at PB-2/77-79. He has further submitted that Assessing Officer did not confront any material collected during the course of assessment proceedings, therefore, no addition could be made against the assessee and also relied upon decision of the Supreme Court in the case of T.R.F. Ltd. Vs CIT 323 ITR 397. The ld. counsel for the assessee further submitted that wages have been disallowed without any justification and is adhoc in nature. The ld. counsel for the assessee submitted that all additions are, therefore, liable to be deleted and the same are also covered by the surrendered amount of Rs. 40 lacs and in alternate 15 contention, submitted that if all the additions are maintained, it would give GP rate of 9.93% which is highly unreasonable, excessive and exorbitant and against the history of the assessee. He has given comparative chart of GP and NP for preceding year sales which is reproduced as under :
JAIN RICE MILL Comparative Gross profit rate & Net Profit rate for the impugned year, 3 preceding year & 1 succeeding year A.Y. Sales Purchases Gross G.P. Net N.P. Closing Profit Rate Profit Stock Rate 2004-05 78368611.52 70296982.37 4705096.26 6.00% 38282,97 0.05% 22932803.50 2005-06 72368611.52 58696866.86 47316640.19 6.49% 43855.17 0.06% 17848850.00 2006-07 91059991.44 94969012.21 5436860.93 5.97% 32675.49 0.04% 31135547.25 .2007-08 98219163.58 67905865.56 1597013.77 1.63% 77313.75 0.08% 9801905.00 (Impugned year 2008-09 971614480.00 74916930.33 6651604.62 5.36% 66268.34 0.07% 25200998.00
16. The ld. counsel for the assessee, therefore, submitted that even if some addition is liable to be made when books of account have been rejected, slightly higher GP rate may be applied for the purpose of making the addition. On the other hand, ld. DR relied upon orders of the authorities below.
17. We have considered the rival submissions and perused the material on record. It is not in dispute that assessee made surrender of Rs. 40 lacs during the course of survey to cover up all discrepancies in the 16 books of account, loose papers, documents, stock, by- products and other records. The assessee also surrendered the same amount in Profit & Loss Account as Miscellaneous income for the purpose of taxation. The ld. counsel for the assessee from the Paper Book-2 pointed out that the opening stock of superfine paddy is valued at Rs. 650/- per quintal and purchases have also been @ Rs. 665/- per qtl. Therefore, average rate of the purchases comes to Rs. 650/- to Rs. 665/- per quintal and average selling rate was also Rs. 511/- per quintal. These documents filed in the books of account have not been disputed by the ld. DR through any material on record, therefore, rates given by the Assessing Officer in the assessment order of sale and purchase of superfine paddy would be incorrect. Further, the Assessing Officer referred to document D-1 and D-2 which were impounded during the course of survey and found that there were undisclosed cash received, therefore, peak of the credit of the entries recorded in these documents were added in a sum of Rs. 6,03,692/-, however it was deleted by ld. CIT(Appeals) because the same would be covered by the surrendered amount ( The Assessing Officer in the computation took this figure at Rs. 6,05,090/-). The assessee also explained that the price of the superfine paddy depends upon yield, perishable item in nature and its process and since paddy cannot be held for a long time therefore, rates would depend on the same at the time of sale or purchase. The 17 assessee also filed study by Rice Knowledge Bank in support of the same. The assessee maintained books of account and confirmation of the parties were filed. Payments are stated to be made through banking channel and stock have been maintained at the same rate. The dispatch of the goods and purchases by the parties have not been disputed. Therefore, these facts would show that the survey party was satisfied with the surrender of Rs.40 lacs on account of discrepancies in the books of account of the assessee. Therefore, no further additions should have been made against the assessee. The ld. counsel for the assessee further explained that on account of huge sundry credits appearing in the books of account of the assessee in preceding assessment year, assessee sold the superfine paddy at a lower rate to clear the debts. This fact is clearly proved from the list of the sundry creditors of earlier years and in assessment year under appeal. Therefore, explanation of the assessee is accepted that paddy was sold at slightly lower rate because of the business exigencies. The ld. counsel for the assessee also filed a chart in the Paper Book to show that rate of the purchases of superfine paddy before and after survey was at the same rate. Therefore, explanation of the assessee should have been considered in proper perspective and huge additions should not be made against the assessee.
1817(i) Further, as regards rice bran sold by assessee, the Assessing Officer considering the comparable cases in the case of M/s Garg Rice Mills, M/s Aggarwal Rice Mills and M/s Shiv Ganesh Industries, adopted the reasonable rate of Rs. 660/- per quintal for the purpose of making addition against the assessee. The ld. counsel for the assessee, however, relied upon decision of the ITAT Chandigarh Bench in the case of Shakti Rice & General Mills (supra) in which the authorities below have considered one of the similar case, in the case of M/s Shiv Ganesh Industries, Shahbad and ld. CIT(Appeals) directed to adopt the reasonable rate of Rs. 450/- per quintal on sale of rice bran which have been confirmed by the Tribunal by dismissing cross appeals. Therefore, on that account also, it is clear that Assessing Officer has adopted very higher figure of sale of rice bran. Therefore, this addition is also liable to be deleted substantially.
18. We may also note here that assessee has filed comparative chart of GP and NP of assessment year under appeal as well as of preceding and subsequent years to show that NP rate is higher as compared to earlier years but there is huge fall in GP rate. When books of account have been rejected by the authorities below therefore, instead of making huge additions of Rs. 44,28,447/- and Rs. 33,00,029/-, it would have been reasonable and appropriate for the authorities below to 19 compute the income of the assessee reasonably considering history of the assessee. Therefore, in our view, it would have been better for the authorities below to apply higher GP rate to compute reasonable income of the assessee instead of making huge additions against the assessee, particularly in view of the fact that the explanation of the assessee, as noted above, clearly show that the additions on account of superfine paddy and rice bran were not wholly justified. When all these additions are taken into consideration, it would give the profit rate of 9.93% as explained by assessee which would be totally unjustified considering history of the assessee. The explanation given by the assessee clearly show that both these additions were wholly inappropriate and were unjustified because rates given by the authorities below were totally different and unreasonable.
19. Considering the totality of the facts and circumstances and history of the assessee, we are of the view that instead of making addition of Rs. 44,28,447/- and Rs. 33,00,029/-, it would be appropriate that when books of account have been rejected, the authorities below should apply slightly higher GP rate for the purpose of computing income of the assessee in order to meet the ends of justice. We, accordingly, set aside and modify the orders of authorities below deleting the above additions and direct the Assessing Officer to 20 adopt GP rate of 3% against the sales declared by the assessee and compute the income of the assessee accordingly. These grounds are, therefore, partly allowed.
19(i) As regards addition made of Rs. 1,98,020/- under section 40A(2) of the Act, Assessing Officer has not cited any comparable case for the purpose of making addition and further addition of Rs. 1,47,478/- on account of 10% disallowance out of wages expenses is also wholly inappropriate because the assessee has already made surrender of Rs. 40 lacs. We may also note here that when we have directed the authorities below to apply profit rate of 3% for the purpose of computing income of assessee after rejection of the books of account, these additions would not be warranted because the application of higher GP would take care of the same. We rely upon decision of the Allahabad High Court in the case of Banwari Lal Banshidhar 229 ITR 229 in which it was held that "When GP rate is applied, it wo u l d take care of other d i s a l l o wa n c e of expenses". We, accordingly, set aside the orders of authorities below and delete the addition of Rs. 1,98,202/- and Rs. 1,47,478/-. These grounds of appeal of the assessee are accordingly, allowed.
19(ii) As regards the addition made on account of bad debts of Rs. 7,75,001/-, the authorities below noted that assessee has incurred bad debts in respect of M/s 21 P.Lal Traders Rs. 2,28,333/-, M/s Ratna Rice Industries Rs.3,42,898/- and M/s Sohal Rice Mills Rs.2,03,770/-. The authorities below noted that assessee has not proved that what efforts have been made for recovery of these bad debts. Further, as per information received by Assessing Officer, there were no such balances appearing in their cases. After amendment in Section 36(1)(vii), the assessee need not to prove as to what efforts have been made for recovery of the bad debts. Mere write off of the bad debts as irrecoverable in the accounts of the assessee for the previous year is enough. We rely upon decision of the Hon'ble Supreme Court in the case of T.R.F.Ltd. (supra). The ld. counsel for the assessee also referred to assessment order of preceding assessment year 2006-07 in the Paper Book under section 143(3) in which Assessing Officer considered the same parties having same amount outstanding against them and made disallowance of interest @ 12%. This addition was deleted by the Tribunal. Therefore, there is no question of authorities below in noting that there is no such balance appearing as outstanding against them. Therefore, there was no justification to make this addition. We accordingly, set aside orders of authorities below and delete the addition of Rs. 7,75,001/-. This ground of appeal is therefore, allowed.
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20. Considering above discussion, we delete the additions on ground Nos. 2, 3 and 5 and on ground No. 1(b) and 4, additions made by authorities below are deleted. However, Assessing Officer is directed to compute income on these grounds of appeal by applying GP rate of 3% as directed above. We make it clear that the ultimate income computed by the Assessing Officer shall not be less than the surrendered amount of Rs. 40 lacs during the course of survey.
21. In the result, appeal of the assessee is partly allowed.
Order pronounced in the Open Court.
Sd/- Sd/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31st March,2016. 'Poonam' Copy to:
The Appellant, The Respondent, The CIT(A), The CIT,DR Assistant Registrar, ITAT/CHD