Income Tax Appellate Tribunal - Ahmedabad
Hasmukhlal Mohanlal Telwala,Huf, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B" AHMEDABAD
Before Shri D.K. Tyagi, Judicial Member and
Shri A.N.Phauja, Accountant Member
ITA No.3540/ Ahd/2008
Assessment Year:2005-06
Date of hearing:3.3.11 Drafted:7.3.11
Income Tax Officer, V/s. Hasmukhlal Mohanlal
W ard-9(2), Aa yakar Telwala HUF, Prop. H.
Bhavan, Room No.421, Tex,78, Surpapur
Majuragate, Surat Industrial Estate, A.K.
Road, Surat
PAN No. AAAHH7473N
(Appellant) .. (Respondent)
Appellant by :- Shri P.R.Ghosh, SR-DR
Respondent by:- Shri K.K. Shah, AR
ORDER
PER D.K. Tyagi, Judicial Member:-
This is a Revenue appeal against the order of Commissioner of Income- tax(Appeals)-V, Surat in appeal No.CAS-V/144/2007-08 dated 28-08-2008 for the assessment year 2005-06.
2. The Revenue has taken following two grounds:-
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deleting the addition of Rs.8,49,268/- made by the A.O on account of cash depositing, without appreciating the facts of the case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deleting the addition of Rs.1,85,012/- made by the A.O on account of fall in G.P. without giving any specific reason and ignoring the facts of the case."
2. First ground relates to deletion of addition of Rs.8,49,268/- made by Assessing Officer on account of cash deposited. The brief facts are that the ITA No.3540/Ahd/2008 A.Y. 2005-06 ITO Wd-9(2), SRT v. Hasmukhlal M Telwala HUF Page 2 assessee is a manufacturer getting his work done on a job work basis. He does not have his own manufacturing facilities. The assessee's case was selected for scrutiny and accordingly the assessee was asked to produce books of account and other records. However, it was stated by assessee that since all his records were washed out in deluge in August, 2006 and he was unable to produce the records. Considering this facts and circumstances, Assessing Officer called for bank statement and from there he calculated the deposits made in the bank. During the year under consideration, taking a cue from the bank deposits, it was observed that the assessee has shown the total turnover of Rs.6,01,58,624/-, whereas total deposits in bank were amounting to Rs.749,28,900/-. After considering the increase and decrease of creditors and debtors, the Assessing Officer found that there was still difference of Rs.34,60,813/-. The assessee was asked for explanation as to why this excess deposit should not be considered as his income. The assessee replied was that a sum of Rs.21,10,045/- was on account of cheques return, which were re- deposited, whereas sum of Rs.13.50 lakh was on account of deposit received from its sister concern. However, according to AO the assessee could not substantiate this claim and therefore he added said income as income of assessee u/s.68 of the IT Act. Aggrieved by this order of AO assessee want in appeal before first appellate authority, during the course of appellate proceedings, he produced bank statement showing each individual credits and debits and also produced details of cheques deposited, cheques returned un-cleared and cheques re-deposited date-wise, duly reconciled whereas regards to deposit in respect of sister company, cheques the assessee produced sister concern's accounts showing such entries therein along with their bank statement. Ld. CIT(A) treated this is as additional evidence and after giving opportunity to the Assessing Officer admitted the same and called for remand report on this additional evidence from the Assessing Officer. The AO in his remand report submitted that in respect of sum of Rs.13.50 lakh assessee had produced details from its sister concern and same were found explained by him. As regards to cheques retuned and re-deposited AO found that out of total cheques returned amounting to Rs.21,10,813/- and sum of Rs.12,61,045/- were only re-deposited in the form of cheques and balance amount were deposited in the form of cash. Assessee's comments were taken on this remand report of the AO and after taking into account, the assessment order, remand report and the reply of assessee. Ld. CIT(A) deleted this addition.
ITA No.3540/Ahd/2008 A.Y. 2005-06ITO Wd-9(2), SRT v. Hasmukhlal M Telwala HUF Page 3
3. Aggrieved by this order of Ld. CIT(A) now Revenue is in appeal before Tribunal in respect of sum of Rs.8,49,268/-, which were deposited in cash by the assessee in its bank account. At the time of hearing, Ld. SR-DR submitted that as amount of Rs.8,49,268/- was deposited in cash and same could not be assumed that this sum was out of those returned cheques only and therefore Ld. CIT(A) should have confirmed the addition to this extent.
4. Ld. Authorized Representative on the other hand relied on the order of Ld. CIT(A).
5. Heard both the parties. Perused the records and find that while giving relief to the assessee Ld. CIT(A) has observed as under:-
"I have gone through the contention of the appellant as well as that of the AO. So far as 'cheques deposits' is concerned, since the same has been reconciled and no fault found therein, the addition made in this regard stands deleted and therefore addition of Rs.12,61,045/- is deleted. As regard cash deposit is concerned on appreciation of facts it is seen that the amount of cash deposited is in line with the cheques retuned. In the business it not uncommon that where the cheques are returned the parties concerned would ask for cash payment since the probability of other cheques also getting bounced could not be denied. Further it is also not in dispute nor the AO has found any fault with is that the amount of total cash deposited in this regard was matching with the amount of cheques returned. Since the deposit of cheques match with the amount of cheques returned and based on such cash deposits only the other balance sheet figures are matching the probability of preponderance goes in favour of the assessee. Hence I am also in agreement with the appellant that when the turnover is reconciled with the total deposits and total withdrawals even if the amount of cash deposit is considered as otherwise the turnover in any case would get reduced by the amount of cheques returned and therefore in either case the total turnover would match only when both cash deposit and cheques returned are considered in tandem. Thus considering the overall facts of the case I am of considered view that appellant has explained the difference and that no addition could be envisaged on this account and as such addition in respect of balance Rs.8,49,268/- is also deleted."
Since at the time of hearing above finding of Ld. CIT(A) has remained un- controverted, we are not inclined to interfere with the order of the Ld. CIT(A) and same is hereby upheld. This ground of appeal by Department is dismissed.
ITA No.3540/Ahd/2008 A.Y. 2005-06ITO Wd-9(2), SRT v. Hasmukhlal M Telwala HUF Page 4
6. The second ground relates to deletion of addition of Rs.1,85,012/- made by Assessing Officer on account of fall in gross profit. During the assessment proceedings, the Assessing Officer observed that in the year under consideration the assessee's GP margin had drop from 3.5% in previous years to 2.92% thus there was a fall in margin by 0.64%. The assessee could not produce any material before Assessing Officer to substantiate his claim. Thus in absence of cogent evidence produced before the AO the AO made addition of Rs.3,85,012/- computed on the basis of difference in GP margin vis-à-vis total turnover. Before CIT(A), assessee gave comparative chart of manufacturing expenses and submitted that it is getting its work done from the outsiders and since the parties from whom he got his work done increased there was a decline in GP margin. According to assessee in the preceding previous year total manufacturing cost per meter of cloth worked out to Rs.3,575 per mt. as per against which the cost in the year under consideration was working out to 3.93 per mt. Further, it was also submitted that its turnover of the current year increased from 4,87,10,736/- to Rs.6,01,58,264/- which also led to a reduction in margin. Ld. CIT(A) was of the view that in support of its submission that cost of manufacturing was more this year no documentary evidence was filed. He, however, taking into consideration the fact that during the year total turnover of the assessee increased from Rs.4,87,10,736/- to Rs.6,01,58,264/- found it reasonable to restrict this addition at Rs.2 lakh. Thus, giving relief to the assessee to the extent amount of Rs.1,85,012/-. Aggrieved by this order Revenue is in appeal before us.
7. At the time of hearing, Ld. SR-DR placing reliance on the order of Assessing Officer submitted that the order passed by Ld. CIT(A) may kindly be set aside and that of Assessing Officer be restored.
8. The Ld, Authorized Representative on the other hand submitted that there was a small fall of 0.64% and the same was due to rise in the cost of manufacturing cost per meter. Since lump sum addition on account of GP is already accepted no further addition of GP may be confirmed. He further submitted that addition on GP is made without there being material defects in the books of account.
9. Heard both the parties and perused the records. We find that Assessing Officer has made addition of Rs.3,85,012/- due to fall in GP margin by 0.64% during ITA No.3540/Ahd/2008 A.Y. 2005-06 ITO Wd-9(2), SRT v. Hasmukhlal M Telwala HUF Page 5 the year under appeal in comparison to the earlier year and the Ld. CIT(A) has restricted this addition to Rs.2 lakh taking into consideration the increase in turnover of the assessee from Rs.4,87,10,736/- to Rs.6,01,58,265/- during the year. Some reductions of margin in gross profit is attributable to such increase of turnover. Therefore we are not inclined to interfere with the order passed by Ld. CIT(A) and the same is hereby upheld. The submission of Ld. Authorized Representative are being ignored as assessee is not in appeal against the order of Ld. CIT(A). This ground of Revenue is also dismissed.
10. In the result, Revenue's appeal is dismissed.
Order pronounced in Open Court on 11/03/2011
Sd/- Sd/-
(A.N.Phauja) (D.K. Tyagi)
(Accountant Member) (Judicial Member)
Ahmedabad,
Dated : 11/03/2011
*Dkp
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)-V, Surat
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad